<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 21, 1997
REGISTRATION NO. 333-26407
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
OUTDOOR SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 86-0736400
(State or other jurisdiction of incorporation) (I.R.S. Employer Identification No.)
</TABLE>
------------------------
2502 N. BLACK CANYON HIGHWAY
PHOENIX, ARIZONA 85009
(602) 246-9569
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
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:
<TABLE>
<S> <C>
GABRIEL DUMITRESCU, ESQ. R.W. SMITH, JR., ESQ.
WILLIAM B. SHEARER, JR., ESQ. PIPER & MARBURY L.L.P.
POWELL, GOLDSTEIN, FRAZER & MURPHY LLP 36 SOUTH CHARLES STREET
191 PEACHTREE STREET, N.E., 16TH FLOOR BALTIMORE, MARYLAND 21201
ATLANTA, GEORGIA 30303 (410) 539-2530
(404) 572-6600
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Section 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
SUBJECT TO COMPLETION
DATED MAY 21, 1997
13,000,000 SHARES
[OUTDOOR SYSTEMS LOGO]
COMMON STOCK
------------------
Of the shares of Common Stock offered hereby (the "Offering") 12,000,000
shares are being sold by Outdoor Systems, Inc. (the "Company") and 1,000,000
shares are being sold by the Selling Stockholders named herein under "Principal
and Selling Stockholders." The Company will not receive any of the proceeds from
the sale of Common Stock by the Selling Stockholders.
The Common Stock is quoted on the Nasdaq National Market under the symbol
"OSIA." On May 6, 1997, the last reported sale price for the Common Stock, as
reported on the Nasdaq National Market, was $32.00 per share. See "Price Range
of Common Stock."
Following the Offering, the Company intends to offer $300 million aggregate
principal amount of Senior Subordinated Notes (the "Notes") by a separate
Prospectus (the "Notes Offering" and, together with the Offering, the
"Offerings"). The consummation of the Offering is not contingent upon the
completion of the Notes Offering.
------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 13 HEREOF.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
============================================================================================================
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO DISCOUNTS AND TO SELLING
PUBLIC COMMISSIONS COMPANY(1) STOCKHOLDERS
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Per Share................................... $ $ $ $
- ------------------------------------------------------------------------------------------------------------
Total(2).................................... $ $ $ $
============================================================================================================
</TABLE>
(1) Before deducting expenses of the offering payable by the Company estimated
at $750,000.
(2) The Company and certain of the Selling Stockholders have granted the
Underwriters a 30-day option to purchase up to an additional 1,950,000
shares of Common Stock solely to cover over-allotments, if any. To the
extent that the option is exercised, the Underwriters will offer the
additional shares at the Price to Public shown above. If the option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions, Proceeds to Company and Proceeds to Selling Stockholders will
be $ , $ , $ and $ , respectively. See
"Underwriting."
------------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, and subject to
the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made at the offices
of Alex. Brown & Sons Incorporated, Baltimore, Maryland, on or about
, 1997.
ALEX. BROWN & SONS
INCORPORATED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CIBC WOOD GUNDY SECURITIES CORP.
MONTGOMERY SECURITIES
PRUDENTIAL SECURITIES INCORPORATED
THE DATE OF THIS PROSPECTUS IS , 1997.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY
NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH
OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE> 3
[INSIDE COVER PAGE CONTAINS PHOTOGRAPHS OF VARIOUS BILLBOARDS ADVERTISING
PRODUCTS FOR POLO RALPH LAUREN, SAKS FIFTH AVENUE, ENERGIZER BATTERIES, ANNE
KLEIN AND TIME WARNER MOVIE STUDIOS.]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET PRICE OF
THE COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE
COMMON STOCK OFFERING AND MAY BID FOR AND PURCHASE SHARES OF THE COMMON STOCK IN
THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN PERSONS PARTICIPATING IN THIS
OFFERING MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
NASDAQ IN ACCORDANCE WITH RULE 103 UNDER REGULATION M. SEE "UNDERWRITING."
<PAGE> 4
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. Unless otherwise indicated, all information in
this Prospectus gives effect to two three-for-two Common Stock splits effected
in the form of stock dividends paid on July 22, 1996 and November 22, 1996, and
assumes no exercise of the Underwriters' over-allotment option. The discussion
below includes certain Acquisitions (as defined) that, if not already completed,
are scheduled to occur concurrently with or after consummation of the Offering.
The "Acquisitions" consist of the Completed Acquisitions (as defined), the
pending acquisition (the "3M Media Acquisition") of the outdoor advertising
operations ("3M Media") of Minnesota Mining and Manufacturing Company ("3M"),
and the pending acquisition (the "Van Wagner Acquisition" and, together with the
3M Media Acquisition, the "Pending Acquisitions") of all of the outstanding
common stock of Van Wagner Communications, Inc. ("Van Wagner"). The "Completed
Acquisitions" means, collectively, 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. 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 Pending Acquisitions, and "market" in the
United States refers to the geographic area constituting a Designated Market
Area as defined by The A.C. Nielsen Company and in Canada refers to Census Metro
Area as defined by Statistics Canada.
THE COMPANY
Outdoor Systems is the largest outdoor advertising company in North America
and upon completion of the Pending Acquisitions will operate approximately
96,500 bulletin, poster, transit, mall and other advertising display faces in 45
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
Pending Acquisitions, 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.
- ---------------
"3M Media" is a trademark of Minnesota Mining and Manufacturing Company.
3
<PAGE> 5
<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>
4
<PAGE> 6
<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) If the Pending Acquisitions are not consummated, the Company will have 7,849
bulletins, 23,846 30-sheet posters, 3,219 8-sheet posters, 1,333 mall and
airport posters, and 27,700 transit display faces, for a total of 63,947
display faces. In addition, the Company may be required to make divestitures
in certain markets in order to receive antitrust clearance for the Pending
Acquisitions. See "Risk Factors -- Possible Non-Consummation of the Pending
Acquisitions."
(3) Includes 141 wall murals and 51 "Spectacular" signs.
RECENT DEVELOPMENTS
Since the Company's initial public offering on April 24, 1996, the Company
has completed 14 acquisitions of outdoor advertising businesses or assets for an
aggregate of more than $860 million, including the Gannett Outdoor Acquisition
for approximately $700 million. In addition, the Company has entered into
binding contracts to purchase two additional outdoor advertising businesses with
operations in 58 metropolitan markets for approximately $1.2 billion. There is
no assurance that the Pending Acquisitions will be consummated or that the 3M
Media Acquisition will not be delayed due to required antitrust clearance or
other factors. The Offering is not conditioned on the consummation of the
Pending Acquisitions. See "Risk Factors -- Possible Non-Consummation of the
Pending Acquisitions."
Completed Acquisitions
- - 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.
5
<PAGE> 7
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.
- - 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 easement. 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 assignment of license agreements.
6
<PAGE> 8
- - Other Completed Acquisitions. 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").
Pending Acquisitions
- - 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.
- - Van Wagner Acquisition. On April 11, 1997, the Company entered into a Stock
Purchase Agreement (the "Van Wagner Stock Purchase Agreement") to purchase the
stock of Van Wagner for approximately $170 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 will provide the Company with high profile display
faces in Times Square and west Los Angeles which will complement its 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.
Each Pending Acquisition is subject to various conditions, including
clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"). The applicable waiting period under the HSR Act with
respect to the Van Wagner Acquisition expired on May 16, 1997 and the Company
expects to consummate the Van Wagner Acquisition as soon as practicable. 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
7
<PAGE> 9
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 Pending Acquisitions and
the fees and expenses associated with the Pending Acquisitions and the
acquisition financing through (i) the proceeds of the Offering, (ii) 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") and (iii) the net
proceeds of the Notes Offering. If the Company does not complete the Notes
Offering, a portion of the purchase price of the 3M Media Acquisition will be
financed through bridge loans ("Bridge Loans") of up to $300 million under a
senior subordinated credit facility (the "Subordinated Credit Facility") to be
entered into concurrently with the closing of the 3M Media Acquisition.
The Company believes that its experienced and sales-oriented management
team is an important asset in the successful implementation of its operating
strategy. William S. Levine, Chairman, Arthur R. Moreno, President and Chief
Executive Officer, Wally C. Kelly, Senior Vice President of Sales, Bill M.
Beverage, Chief Financial Officer, and Robert M. Reade, Vice President, Real
Estate, together possess approximately 110 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 OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company................... 12,000,000 shares
Common Stock offered by the Selling Stockholders...... 1,000,000 shares
Common Stock to be outstanding after the Offering..... 52,330,631 shares(1)
Use of proceeds....................................... To pay a portion of the purchase
price of the Pending Acquisitions.
See "Use of Proceeds."
Nasdaq National Market symbol......................... OSIA
</TABLE>
- ---------------
(1) Excludes 6,261,497 shares of Common Stock issuable upon exercise of options,
of which 4,484,214 are exercisable immediately, and 248,392 shares of Common
Stock issuable in settlement of Incentive Units.
THE NOTES OFFERING
Following the Offering, the Company intends to offer $300 million aggregate
principal amount of the Notes, the proceeds of which will be used to fund a
portion of the purchase price of the 3M Media Acquisition or to retire
indebtedness under the Subordinated Credit Facility. The Notes will be offered
by the Company exclusively pursuant to a separate Prospectus. The consummation
of the Offering is not contingent upon the completion of the Notes Offering.
8
<PAGE> 10
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 of 1933, as amended (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 in the Common
Stock offered hereby are cautioned that reliance on any forward-looking
statement involves risks and uncertainties, and that although the Company
believes that the assumptions on which the forward-looking statements contained
herein are based are reasonable, any of those assumptions could prove to be
inaccurate, and as a result, the forward-looking statements based on those
assumptions also could be incorrect. The uncertainties in this regard include,
but are not limited to, those identified in the risk factors discussed 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.
9
<PAGE> 11
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 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
(assuming the sale of the shares of Common Stock offered hereby at a price of
$32.00 per share) and the application of the net proceeds therefrom, as if each
had occurred at the beginning of the period. The summary unaudited consolidated
pro forma balance sheet as of March 31, 1997 has been prepared as if the Pending
Acquisitions, the Bank Financing and the Offerings and the application of the
net proceeds therefrom 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
---------------------------------------
THREE MONTHS
YEAR ENDED ENDED MARCH 31,
DECEMBER 31, 1996 1997
----------------- ----------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues(1)......................................... $ 601,409 $140,901
Direct advertising expenses............................. 310,163 74,066
General and administrative expenses..................... 34,502 8,798
Depreciation and amortization........................... 111,353 26,569
Gain on Denver Disposition.............................. 7,344 --
Operating income........................................ 152,735 31,468
Interest expense........................................ 143,150 35,834
Income (loss) before extraordinary loss................. 5,365 (2,643)
Net loss................................................ (12,415) (2,643)
OTHER DATA:
EBITDA(2)............................................... $ 256,744 $ 58,037
EBITDA margin(3)........................................ 42.7% 41.2%
After-tax cash flow(4).................................. $ 113,304 23,926
Capital expenditures.................................... 39,146 11,421
Number of advertising displays(5)....................... 96,528 98,828
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
--------------------------
PRO FORMA
AS
ACTUAL ADJUSTED
---------- ----------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital..................................................... $ 25,601 $ 50,845
Total assets........................................................ 1,038,845 2,276,266
Total debt.......................................................... 706,428 1,551,428
Stockholders' equity................................................ 288,456 650,294
</TABLE>
- ---------------
(1) 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.
(2) "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.
(3) "EBITDA margin" is EBITDA stated as a percentage of net revenues.
(4) "After-tax cash flow" is defined as income before extraordinary loss plus
depreciation and amortization expense, and deferred tax expense and excludes
the gain on the Denver Disposition. After-tax cash flow is presented here
not as a measure of operating results and does not purport to represent cash
provided by operating activities. After-tax cash flow should not be
considered in isolation or as a substitute for measures of performance
prepared in accordance with generally accepted accounting principles such as
net income and cash provided by operating activities.
(5) Does not include approximately 125,000 subway advertising display faces in
New York City.
10
<PAGE> 12
SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
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 Historical 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 MARCH
YEARS ENDED DECEMBER 31, 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
Net income (loss) attributable to common
stockholders............................ (263) 307 (6,905) (130) 691
Net income (loss) per common share(3)..... $ (0.01) $ 0.01 $ (0.19) $ (.01) $ .02
Shares used in computing per share
computations(4)......................... 21,096,379 25,424,078 35,263,336 25,366,144 46,030,680
OTHER DATA:
EBITDA(5)................................. $ 24,287 $ 30,255 $ 72,065 $ 8,008 $ 28,748
EBITDA margin(6).......................... 46.6% 46.7% 41.6% 47.3% 35.9%
After-tax cash flow(7).................... $ 7,497 $ 12,829 $ 39,286 $ 3,338 $ 12,326
Capital expenditures...................... 4,924 7,070 9,046 1,194 5,140
Number of advertising displays............ 11,900 12,700 61,600(8) 12,700 63,900(8)
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
YEARS ENDED DECEMBER 31, 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(9)... 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>
11
<PAGE> 13
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 "Prospectus
Summary--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) Weighted average share amounts have been adjusted to reflect the
three-for-two Common Stock splits effected in the form of stock dividends
paid on each of July 22, 1996 and November 22, 1996.
(5) "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.
(6) "EBITDA margin" is EBITDA stated as a percentage of net revenues.
(7) "After-tax cash flow" is defined as income before extraordinary loss plus
depreciation and amortization expense, and deferred tax expense and
excludes the gain on the 1994 disposal and the Denver Disposition.
After-tax cash flow is presented here not as a measure of operating results
and does not purport to represent cash provided by operating activities.
After-tax cash flow should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
generally accepted accounting principles such as net income and cash
provided by operating activities.
(8) Does not include approximately 125,000 subway advertising display faces in
New York City and the Pending Acquisitions and, with respect to the year
ended December 31, 1996, does not give effect to the Completed 1997
Acquisitions.
(9) Direct advertising expenses for 3M Media include direct advertising and
selling and marketing expenses.
12
<PAGE> 14
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the shares
of Common Stock offered by this Prospectus.
Substantial Leverage. Upon completion of the Pending Acquisitions, the
Bank Financing and the Offerings and the application of the net proceeds
therefrom, the Company's total indebtedness will be approximately $1.6 billion,
representing approximately 70% 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 (the "1996 Notes Indenture") governing the
Company's $250 million 9 3/8% Senior Subordinated Notes due 2006 (the "1996
Notes") include, and the indenture that will govern the Notes (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."
Possible Non-Consummation of the Pending Acquisitions. The consummation of
the Pending Acquisitions is subject to various conditions, including, in the
case of the 3M Media Acquisition, clearance under the HSR Act. There is no
assurance that the Pending Acquisitions will be consummated or that the 3M Media
Acquisition 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
13
<PAGE> 15
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.
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 Pending Acquisitions, 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.
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 net revenues for the Pending Acquisitions 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. While Baltimore is not a municipality in which the Company conducts
business, there can be no assurance that other local or state governments will
not enact similar ordinances or statutes to limit outdoor advertising of tobacco
in the future.
It also recently has been reported that certain cigarette manufacturers who
are defendants in numerous class action suits throughout the United States have
proposed an out of court settlement with respect to such suits that could
potentially include restrictions on billboard advertising by these and other
cigarette manufacturers. There can be no assurance as to the effect of these
regulations, potential legislation or settlement discussions 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.
14
<PAGE> 16
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.
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 minimum of
approximately $570 million of 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
Indebtedness and Other Commitments -- 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 Pending Acquisitions 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
15
<PAGE> 17
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 or upgrading of existing structures. Some local government entities,
including municipalities or townships in 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 takings, there can be no assurance that the Company
would be permitted to relocate these displays under existing state and local
regulations.
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. A federal Canadian law banning tobacco
advertising was recently overturned by the courts. A federal bill has been
introduced to prohibit tobacco advertising (including outdoor advertising)
subject to specific exemptions. The bill is pending and is subject to amendment
because of the controversial and political nature of the provisions. It is
anticipated that new legislation may be introduced to regulate or restrict
tobacco advertising. Currently the tobacco industry is operating under a
voluntary advertising code.
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 lowering of outdoor advertising rates in markets
affected by this type of legislation.
16
<PAGE> 18
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 Pending Acquisitions 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.
Control by Executive Officers and Directors. Upon consummation of the
Offering, the Company's executive officers, directors and their respective
affiliates will beneficially own (including for this purpose options exercisable
within 60 days after the date of this Prospectus and shares over which such
persons have voting control) approximately 36.9% 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 and Selling
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.
17
<PAGE> 19
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 12,000,000 shares of
Common Stock offered by it hereby are estimated to be approximately $368 million
(or approximately $398 million if the Underwriters' over-allotment option is
exercised in full), after deducting estimated underwriting discounts and
commissions and offering expenses and assuming an offering price of $32.00 per
share (the last reported sale price of the Common Stock on the Nasdaq National
Market on May 6, 1997).
The Company intends to use such proceeds to pay a portion of the purchase
price of the Pending Acquisitions. Until completion of the Pending Acquisitions,
the Company will use such net proceeds to reduce indebtedness outstanding under
the Company's Senior Credit Facility or will invest such proceeds in short-term
interest bearing securities. To the extent the Pending Acquisitions are not
consummated, the Company will use the net proceeds of the Offering for general
corporate purposes which may include repayment of existing indebtedness or other
acquisitions.
If the Notes Offering is consummated, the net proceeds therefrom will be
used to pay a portion of the purchase price of the 3M Media Acquisition or to
repay amounts outstanding under the Subordinated Credit Facility.
The Company will not receive any proceeds from the sale of Common Stock by
the Selling Stockholders.
PRICE RANGE OF COMMON STOCK
The Common Stock is quoted on the Nasdaq National Market under the symbol
"OSIA." The following table sets forth, for the periods indicated, the high and
low sales prices for the Common Stock as reported by the Nasdaq National Market.
Prior to April 24, 1996, the day on which the Common Stock was first publicly
traded, there was no public market for the Common Stock.
<TABLE>
<CAPTION>
1996 HIGH LOW
------ ------
<S> <C> <C>
Second Quarter (beginning April 24, 1996)........................ $16.78 $ 9.33
Third Quarter.................................................... $31.50 $15.25
Fourth Quarter................................................... $33.00 $23.00
</TABLE>
<TABLE>
<CAPTION>
1997 HIGH LOW
------ ------
<S> <C> <C>
First Quarter.................................................... $33.88 $21.75
Second Quarter (through May 6, 1997)............................. $33.25 $24.13
</TABLE>
On May 6, 1997, the last reported sale price per share for the Common Stock
on the Nasdaq National Market was $32.00 per share.
DIVIDEND POLICY
The Company has not declared or paid dividends on the Common Stock and does
not anticipate paying dividends in the foreseeable future. The Company intends
to retain any future earnings to repay senior indebtedness or reinvest in the
Company. In addition, the Company's debt instruments place limitations on the
Company's ability to pay dividends or make any other distributions on the Common
Stock. See "Description of Indebtedness and Other Commitments." Any future
determination as to the payment of dividends will be subject to such
prohibitions and limitations, will be at the discretion of the Company's Board
of Directors and will depend on the Company's results of operations, financial
condition, capital requirements and other factors deemed relevant by the Board
of Directors.
18
<PAGE> 20
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company (i) as of March 31, 1997 and (ii) pro forma giving effect as of March
31, 1997 to the Pending Acquisitions, the Bank Financing and the Offerings and
the application of the estimated net proceeds therefrom (assuming an offering
price of $32.00 per share). See "Use of Proceeds" and "Unaudited Consolidated
Pro Forma Financial Information."
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
------------------------
ACTUAL PRO FORMA
-------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Current maturities of long-term debt............................... $ 31,700 $ 31,700
-------- ----------
Long-term debt:
Senior Credit Facility........................................... 424,667 969,667
1996 Notes....................................................... 250,000 250,000
Notes(1)......................................................... -- 300,000
Other............................................................ 61 61
-------- ----------
Total long-term debt.......................................... 674,728 1,519,728
-------- ----------
Common stockholders' equity:
Common Stock, $0.01 par value.................................... 402 522
Additional paid in capital....................................... 316,988 685,479
Accumulated deficit.............................................. (24,584) (31,357)
Treasury stock (at cost) 11,475,554 shares....................... (4,053) (4,053)
Foreign currency translation adjustment.......................... (297) (297)
-------- ----------
Total common stockholders' equity(2).......................... 288,456 650,294
-------- ----------
Total capitalization..................................... $994,884 $ 2,201,722
======== ==========
</TABLE>
- ---------------
(1) Assumes the issuance of $300 million aggregate principal amount of Notes
pursuant to the Notes Offering. If the Notes Offering is not consummated,
$300 million of indebtedness will be incurred under the Subordinated Credit
Facility. See "Description of Indebtedness and Other Commitments -- The
Subordinated Credit Facility."
(2) Actual amounts exclude 6,436,497 shares of Common Stock issuable upon
exercise of options outstanding at March 31, 1997, of which 4,659,214 were
exercisable, and 248,392 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 175,000 shares of Common Stock being sold by
one of the Selling Stockholders in the Offering.
19
<PAGE> 21
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 and the application of the net proceeds
therefrom, as if such events had occurred at the beginning of the period. The
unaudited pro forma consolidated balance sheet as of March 31, 1997 has been
prepared as if the Pending Acquisitions, the Bank Financing and the Offerings
and the application of the net proceeds therefrom 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.
20
<PAGE> 22
OUTDOOR SYSTEMS, INC.
UNAUDITED CONSOLIDATED PRO FORMA BALANCE SHEET
MARCH 31, 1997
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
HISTORICAL
---------------------------------------
PENDING PRO FORMA
------------------------- PENDING
3M MEDIA VAN WAGNER ACQUISITIONS TOTAL
COMPANY ACQUISITION ACQUISITION ADJUSTMENTS PRO FORMA
----------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS............................... $ 95,471 $ 46,771 $ 7,985 $ 1,071(1) $ 151,298
PROPERTY AND EQUIPMENT -- Net................ 849,653 128,771 7,978 675,123(1) 1,661,525
INTANGIBLE ASSETS -- Net..................... 60,825 12,288 320,000(1) 393,113
DEFERRED FINANCING COSTS..................... 23,157 -- 29,463(1) 41,332
(11,288)(2)
OTHER ASSETS................................. 9,739 1,946 13,880 4,515(2) 28,998
(1,082)(1)
---------- -------- ------- ---------- ----------
TOTAL........................................ $ 1,038,845 $177,488 $ 42,131 $1,017,802 $2,276,266
========== ======== ======= ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES.......................... $ 69,870 $ 19,444 $ 9,489 $ (3,850)(1) $ 100,453
5,500(1)
---------- -------- ------- ---------- ----------
LONG-TERM DEBT:
1993 Notes................................. 15 -- -- -- 15
Senior Credit Facility..................... 424,667 -- -- 545,000(1) 969,667
1996 Notes................................. 250,000 -- -- -- 250,000
Notes...................................... -- -- -- 300,000(1) 300,000
Other...................................... 46 -- 40,420 (40,420)(1) 46
---------- -------- ------- ---------- ----------
Total long-term debt..................... 674,728 -- 40,420 804,580 1,519,728
---------- -------- ------- ---------- ----------
OTHER LONG-TERM LIABILITIES.................. 3,734 -- 1,720 (1,720)(1) 3,734
---------- -------- ------- ---------- ----------
DEFERRED INCOME TAXES........................ 2,057 9,763 110 (9,873)(1) 2,057
---------- -------- ------- ---------- ----------
Total liabilities........................ 750,389 29,207 51,739 794,637 1,625,972
---------- -------- ------- ---------- ----------
NET ASSETS (LIABILITIES) TO BE ACQUIRED...... -- 148,281 (9,608) (138,673) --
---------- -------- ------- ---------- ----------
COMMON STOCKHOLDERS' EQUITY:
Common stock............................... 402 -- -- 120(1) 522
Additional paid-in capital................. 316,988 -- -- 368,491(1) 685,479
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 -- -- 361,838 650,294
---------- -------- ------- ---------- ----------
TOTAL........................................ $ 1,038,845 $177,488 $ 42,131 $1,017,802 $2,276,266
========== ======== ======= ========== ==========
</TABLE>
21
<PAGE> 23
OUTDOOR SYSTEMS, INC.
NOTES TO UNAUDITED CONSOLIDATED PRO FORMA BALANCE SHEET
AT 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 Completed 1997 Acquisitions, the Pending
Acquisitions, the Bank Financing and the Offerings.
<TABLE>
<CAPTION>
DEBIT
(CREDIT)
---------
<C> <S> <C>
1. Entry records the Pending Acquisitions, the Bank Financing and the Offerings:
Sale of 12,000,000 shares of Common Stock at $32.00 per share:
Common Stock................................................................. $ (120)
Additional paid in capital................................................... (368,491)
Increase debt as follows:
Senior Credit Facility....................................................... (545,000)
Notes........................................................................ (300,000)
Elimination of historical net assets (liabilities) of Pending Acquisitions... 138,673
Change in assets and liabilities resulting from allocation of purchase price:
Intangibles.................................................................. 320,000
Property and equipment....................................................... 675,123
Increase in deferred financing costs......................................... 29,463
Increase in current assets................................................... 1,071
Accrual for estimated severance costs related to the Pending Acquisitions.... (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............. (1,082)
$ 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>
22
<PAGE> 24
OUTDOOR SYSTEMS, INC.
UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMPLETED ACQUISITIONS
--------------------------------- PENDING ACQUISITIONS
GANNETT -------------------------
OUTDOOR OTHER 3M MEDIA VAN WAGNER
COMPANY ACQUISITION(1) TRANSACTIONS(2) ACQUISITION ACQUISITION
----------- -------------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
REVENUES:
Outdoor advertising -- net............. $ 167,047 $156,896 $23,447 $ 211,310 $29,894
Other income........................... 6,069 201 5,893 -- 652
----------- -------- ------- -------- -------
Net revenues..................... 173,116 157,097 29,340 211,310 30,546
----------- -------- ------- -------- -------
OPERATING EXPENSES:
Direct advertising..................... 87,593 106,205 12,174 139,223 18,012
General and administrative............. 13,458 22,126 6,942 12,427 4,502
Depreciation and amortization.......... 22,384 11,369 814 15,382 2,541
----------- -------- ------- -------- -------
Total operating expenses......... 123,435 139,700 19,930 167,032 25,055
----------- -------- ------- -------- -------
GAIN ON DENVER DISPOSITION.............. 7,344 -- -- -- --
----------- -------- ------- -------- -------
OPERATING INCOME........................ 57,025 17,397 9,410 44,278 5,491
INTEREST EXPENSE (INCOME)............... 32,489 -- 363 (2,059) 2,792
----------- -------- ------- -------- -------
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY LOSS..................... 24,536 17,397 9,047 46,337 2,699
INCOME TAXES (BENEFIT).................. 10,200 -- -- -- --
----------- -------- ------- -------- -------
INCOME (LOSS) BEFORE EXTRAORDINARY
LOSS................................... 14,336 17,397 9,047 46,337 2,699
EXTRAORDINARY LOSS...................... (17,780) -- -- -- --
----------- -------- ------- -------- -------
NET (LOSS) INCOME....................... (3,444) 17,397 9,047 46,337 2,699
LESS STOCK DIVIDENDS, ACCRETIONS AND
DISCOUNT ON REDEMPTIONS................ 3,461 -- -- -- --
----------- -------- ------- -------- -------
NET (LOSS) INCOME ATTRIBUTABLE TO COMMON
STOCKHOLDERS........................... $ (6,905) $ 17,397 $ 9,047 $ 46,337 $ 2,699
=========== ======== ======= ======== =======
NET (LOSS) INCOME PER COMMON AND
EQUIVALENT SHARE:
Income (loss) before extraordinary
loss................................. $ 0.31
Extraordinary loss..................... (0.50)
-----------
NET (LOSS) INCOME PER COMMON SHARE...... $ (0.19)
===========
WEIGHTED AVERAGE NUMBER OF SHARES....... 35,263,336
===========
<CAPTION>
SUPPLEMENTAL ADJUSTMENTS
PURCHASE ----------------------------
ACCOUNTING COMPLETED PENDING PRO
ADJUSTMENTS TOTAL ACQUISITIONS ACQUISITIONS 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 $(14,114)(6) $(38,930)(6) 310,163
General and administrative............. 59,455 (13,608)(6) (11,345)(6) 34,502
Depreciation and amortization.......... $ 58,863(3) 111,353 111,353
---------- ----------- --------- --------- -----------
Total operating expenses......... 58,863 534,015 (27,722) (50,275) 456,018
---------- ----------- --------- --------- -----------
GAIN ON DENVER DISPOSITION.............. 7,344 7,344
---------- ----------- --------- --------- -----------
OPERATING INCOME........................ (58,863) 74,738 27,722 50,275 152,735
INTEREST EXPENSE (INCOME)............... 109,565(4) 143,150 143,150
---------- ----------- --------- --------- -----------
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY LOSS..................... (168,428) (68,412) 27,722 50,275 9,585
INCOME TAXES (BENEFIT).................. (37,179)(5) (26,979) 11,089(7) 20,110(7) 4,220
---------- ----------- --------- --------- -----------
INCOME (LOSS) BEFORE EXTRAORDINARY
LOSS................................... (131,249) (41,433) 16,633 30,165 5,365
EXTRAORDINARY LOSS...................... (17,780) (17,780)
---------- ----------- --------- --------- -----------
NET (LOSS) INCOME....................... (131,249) (59,213) 16,633 30,165 (12,415)
LESS STOCK DIVIDENDS, ACCRETIONS AND
DISCOUNT ON REDEMPTIONS................ 3,461 3,461
---------- ----------- --------- --------- -----------
NET (LOSS) INCOME ATTRIBUTABLE TO COMMON
STOCKHOLDERS........................... $(131,249) $ (62,674) $ 16,633 $ 30,165 $ (15,876)
========== =========== ========= ========= ===========
NET (LOSS) INCOME PER COMMON AND
EQUIVALENT SHARE:
Income (loss) before extraordinary
loss................................. $ (0.95) $ 0.04
Extraordinary loss..................... (0.38) (0.38)
----------- -----------
NET (LOSS) INCOME PER COMMON SHARE...... $ (1.33) $ (0.34)
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES....... 47,263,336 47,263,336
=========== ===========
</TABLE>
23
<PAGE> 25
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 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>
ACQUISITIONS
AMORTIZATION -------------------
ASSETS PERIOD COMPLETED PENDING TOTAL
-------------------------------------------- ------------ --------- ------- -------
<C> <S> <C> <C> <C> <C>
Advertising structures...................... 20 years $31,796 $45,194 $76,990
Goodwill.................................... 30 years 1,312 10,667 11,979
------- ------- -------
Total..................................................... 33,108 55,861 88,969
Amount recorded in financial statements................... 12,183 17,923 30,106
------- ------- -------
Pro forma adjustment...................................... $20,925 $37,938 $58,863
======= ======= =======
</TABLE>
(4) Entry records interest expense and amortization of
deferred financing fees on the debt issued in connection
with the Acquisitions less interest on the debt redeemed
in 1996, as follows:
<TABLE>
<CAPTION>
ACQUISITIONS
-------------------
COMPLETED PENDING TOTAL
--------- ------- --------
<C> <S> <C> <C> <C>
Interest expense:
Senior Credit Facility.................................. $ 27,723 $45,235 $ 72,958
1996 Notes.............................................. 14,063 -- 14,063
Notes................................................... -- 28,125 28,125
Less interest on the debt redeemed in 1996......... (7,823) -- (7,823)
Less interest on Van Wagner debt assumed by selling
shareholders..................................... -- (2,792) (2,792)
Amortization of deferred financing costs........... 2,817 2,217 5,034
-------- ------- --------
Total interest expense.................................. $ 36,780 $72,785 $109,565
======== ======= ========
</TABLE>
24
<PAGE> 26
OUTDOOR SYSTEMS, INC.
NOTES TO UNAUDITED CONSOLIDATED PRO FORMA
STATEMENTS OF OPERATIONS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ACQUISITIONS
--------------------
COMPLETED PENDING TOTAL
--------- -------- --------
<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%................................................. $(12,504) $(24,675) $(37,179)
======== ======== ========
(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 alloca-tions not
considered attributable to operations sold, as follows:
</TABLE>
<TABLE>
<CAPTION>
ACQUISITIONS
-------------------
COMPLETED PENDING
--------- -------
<C> <S> <C> <C> <C>
Direct Advertising:
Elimination of production and sales
overhead functions................................. $13,073 $19,182
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........................... 14,114 38,930
------- -------
General and Administrative:
Elimination of national office function, accounting
and administrative personnel....................... 13,608 10,245
Elimination of corporate facility rent allocations.... -- 1,100
------- -------
Total general and administrative................... 13,608 11,345
------- -------
Total......................................... $27,722 $50,275
======= =======
(7) Entry records the income tax effect of pro forma
adjustments at a blended rate of 40%.................... $11,089 $20,110
======= =======
</TABLE>
25
<PAGE> 27
OUTDOOR SYSTEMS, INC.
UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PENDING ACQUISITIONS
OTHER ------------------------- PURCHASE
COMPLETED 3M MEDIA VAN WAGNER ACCOUNTING
COMPANY TRANSACTIONS(1) ACQUISITION ACQUISITION ADJUSTMENTS
----------- --------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
REVENUES:
Outdoor advertising -- net.................. $ 77,216 $ 2,353 $49,505 $ 7,390
Other income................................ 2,864 1,147 -- 426
----------- ------ ------- ------
Net revenues.......................... 80,080 3,500 49,505 7,816
----------- ------ ------- ------
OPERATING EXPENSES:
Direct advertising.......................... 44,615 1,621 33,197 4,711
General and administrative.................. 6,717 1,158 2,744 1,390
Depreciation and amortization............... 11,635 118 3,785 626 $ 10,405(2)
----------- ------ ------- ------ --------
Total operating expenses.............. 62,967 2,897 39,726 6,727 10,405
----------- ------ ------- ------ --------
OPERATING INCOME............................. 17,113 603 9,779 1,089 (10,405)
INTEREST EXPENSE (INCOME).................... 15,922 91 (464) 591 19,694(3)
----------- ------ ------- ------ --------
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY LOSS.......................... 1,191 512 10,243 498 (30,099)
INCOME TAXES (BENEFIT)....................... 500 -- -- -- (7,538)(4)
----------- ------ ------- ------ --------
INCOME (LOSS) BEFORE EXTRAORDINARY LOSS...... 691 512 10,243 498 (22,561)
EXTRAORDINARY LOSS........................... -- -- -- -- --
----------- ------ ------- ------ --------
NET (LOSS) INCOME............................ $ 691 $ 512 $10,243 $ 498 $ (22,561)
=========== ====== ======= ====== ========
NET (LOSS) INCOME PER COMMON AND EQUIVALENT
SHARE:
NET (LOSS) INCOME PER COMMON SHARE........... $ 0.02
===========
WEIGHTED AVERAGE NUMBER OF SHARES............ 46,030,680
===========
<CAPTION>
SUPPLEMENTAL ADJUSTMENTS
----------------------------
COMPLETED PENDING
TOTAL ACQUISITIONS ACQUISITIONS 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 $ (345)(6) $ (9,733)(6) 74,066
General and administrative.................. 12,009 (383)(6) (2,828)(6) 8,798
Depreciation and amortization............... 26,569 26,569
----------- ----- -------- -----------
Total operating expenses.............. 122,722 (728) (12,561) 109,433
----------- ----- -------- -----------
OPERATING INCOME............................. 18,179 728 12,561 31,468
INTEREST EXPENSE (INCOME).................... 35,834 35,834
----------- ----- -------- -----------
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY LOSS.......................... (17,655) 728 12,561 (4,366)
INCOME TAXES (BENEFIT)....................... (7,038) 291(7) 5,024(7) (1,723)
----------- ----- -------- -----------
INCOME (LOSS) BEFORE EXTRAORDINARY LOSS...... (10,617) 437 7,537 (2,643)
EXTRAORDINARY LOSS........................... -- -- -- --
----------- ----- -------- -----------
NET (LOSS) INCOME............................ $ (10,617) $ 437 $ 7,537 $ (2,643)
=========== ===== ======== ===========
NET (LOSS) INCOME PER COMMON AND EQUIVALENT
SHARE:
NET (LOSS) INCOME PER COMMON SHARE........... $ (0.18) $ (0.05)
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES............ 58,030,680 58,030,680
=========== ===========
</TABLE>
26
<PAGE> 28
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 1997 revenues and expenses associated with the
Completed 1997 Acquisitions 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>
ACQUISITIONS
AMORTIZATION -------------------
ASSETS PERIOD COMPLETED PENDING TOTAL
-------------------------------------------- ------------ --------- ------- -------
<C> <S> <C> <C> <C> <C>
Advertising structures...................... 20 years $ 1,007 $11,250 $12,257
Goodwill.................................... 30 years 10 2,667 2,677
------- ------- -------
Total..................................................... 1,017 13,917 14,934
------- ------- -------
Amount recorded in financial statements................... 118 4,411 4,529
------- ------- -------
Pro forma adjustment...................................... $ 899 $ 9,506 $10,405
======= ======= =======
</TABLE>
(3) Entry records interest expense and amortization of
deferred financing fees on the debt issued in connection
with the Acquisitions as follows:
<TABLE>
<CAPTION>
ACQUISITIONS
-------------------
COMPLETED PENDING TOTAL
--------- ------- -------
<C> <S> <C> <C> <C>
Interest expense:
Senior Credit Facility................................... $ 1,391 $11,309 $12,700
-------- ------- --------
Notes.................................................... -- 7,031 7,031
------- --------
Less interest on Van Wagner debt assumed by selling
shareholders...................................... -- (591) (591)
------- --------
Amortization of deferred financing costs............ -- 554 554
-------- ------- --------
Total interest expense................................... $ 1,391 $18,303 $19,694
======== ======= ========
</TABLE>
<TABLE>
<CAPTION>
ACQUISITIONS
-------------------
COMPLETED PENDING TOTAL
--------- ------- -------
<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%................................................... $(711) $(6,827) $(7,538)
======== ======== ========
</TABLE>
27
<PAGE> 29
OUTDOOR SYSTEMS, INC.
NOTES TO UNAUDITED CONSOLIDATED PRO FORMA
STATEMENTS OF OPERATIONS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ACQUISITIONS
-------------------
COMPLETED PENDING
--------- -------
<C> <S> <C> <C>
(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 alloca-tions not
considered attributable to operations sold, as follows:
Direct Advertising:
Elimination of production and sales
overhead functions.................................. $ 345 $ 4,796
Elimination of national sales and marketing costs...... -- 3,937
Elimination of general corporate overhead allocation... -- 1,000
------- -------
Total direct advertising............................ 345 9,733
------- -------
General and Administrative:
Elimination of national office function, accounting and
administrative personnel............................ 383 2,553
Elimination of corporate facility rent allocations..... -- 275
------- -------
Total general and administrative.................... 383 2,828
------- -------
Total.......................................... $ 728 $12,561
======= =======
(7) Entry records the income tax effect of pro forma
adjustments at a blended rate of 40%..................... $ 291 $ 5,024
======= =======
</TABLE>
28
<PAGE> 30
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
Net income (loss) attributable
to common stockholders....... 1,937 (5,748) (263) 307 (6,905) (130) 691
Net income (loss) per common
share(3)..................... $ 0.07 $ (0.26) $ (0.01) $ 0.01 $ (0.19) $ (.01) $ .02
Shares used in computing per
share computations(4)........ 28,267,380 22,228,834 21,096,379 25,424,078 35,263,336 25,366,144 46,030,680
OTHER DATA:
EBITDA(5)...................... $ 20,867 $ 22,653 $ 24,287 $ 30,255 $ 72,065 $ 8,008 $ 28,748
EBITDA margin(6)............... 46.5% 46.1% 46.6% 46.7% 41.6% 47.3% 35.9%
After-tax cash flow(7)......... $ 11,041 $ 10,532 $ 7,497 $ 12,829 $ 39,286 $ 3,338 $ 12,326
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(8) 12,700 63,900(8)
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital................ $ 5,218 $ 13,967 $ 15,022 $ 8,221 $ 36,142 $ 10,492 $ 25,600
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) 288,455
</TABLE>
29
<PAGE> 31
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) Weighted average share amounts have been adjusted to reflect the
three-for-two Common Stock splits effected in the form of stock dividends
paid on each of July 22, 1996 and November 22, 1996.
(5) "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.
(6) "EBITDA margin" is EBITDA stated as a percentage of net revenues.
(7) "After-tax cash flow" is defined as income (loss) before extraordinary loss
and change in accounting principle plus depreciation and amortization
expense, and deferred tax expense and excludes the gain on the 1994 disposal
and the Denver Disposition. After-tax cash flow is presented here not as a
measure of operating results and does not purport to represent cash provided
by operating activities. After-tax cash flow should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles such as net income
and cash provided by operating activities.
(8) Does not include approximately 125,000 subway advertising display faces in
New York City and the Pending Acquisitions and, with respect to the year
ended December 31, 1996, does not give effect to the Completed 1997
Acquisitions.
30
<PAGE> 32
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 PENDING 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.
31
<PAGE> 33
Van Wagner Acquisition. On April 11, 1997, the Company entered into the Van
Wagner Stock Purchase Agreement pursuant to which it will purchase all of the
capital stock of Van Wagner for approximately $170 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 displays and transit management agreements in New York,
Los Angeles, Northern California and Las Vegas. The Van Wagner operations will
be integrated as an acquisition of advertising display inventory. The Company
will eliminate 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 and Van Wagner Acquisitions been implemented as of
January 1, 1996 such annual savings would have been approximately $50.3 million
in 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 Pending Acquisitions. The Company will
incur significant additional costs as a result of the Pending Acquisitions. The
financing of the Pending Acquisitions will significantly increase the Company's
interest expense, adding approximately $845 million to the Company's total
indebtedness assuming completion of the Offerings. Depreciation and amortization
expense will also increase significantly. The Company will record goodwill and
other intangible assets of approximately $320 million in connection with the
Pending Acquisitions, 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 Pending Acquisitions will increase by approximately $676 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 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.
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. 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 $0.1 million for the first three months of 1996, primarily because of
borrowings under the Senior Credit Facility used for the Completed 1997
Acquisitions.
32
<PAGE> 34
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 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 its Senior Credit Facility up to
approximately $530.0 million and incurred bridge loans of $180.0 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 $115.0 million 1993 Notes.
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 loan 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 million of revolving credit
loans and up to $715 million in term loans. See "Description of Indebtedness and
Other Commitments -- Senior Credit Facility" and " -- Amendment to the 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 Pending Acquisitions, 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 application of the
net proceeds therefrom and the consummation of the Pending Acquisitions, the
Company will have approximately $755.0 million and cdn$48.0 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 will have $232.2 million and cdn$28.3 million of
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
33
<PAGE> 35
up to $325.0 million and cdn$35.0 million (approximately $25.0 million based on
current exchange rates).
The Company has also obtained a written commitment from CIBC, Inc. for up
to $300 million principal amount of Bridge Loans. In the event that the Notes
Offering is not consummated prior to or concurrently with the closing of the 3M
Media Acquisition, the Company will fund a portion of the purchase price of the
3M Media Acquisition with Bridge Loans under the Subordinated Credit Facility.
See "Description of Indebtedness and Other Commitments -- The Subordinated
Credit Facility.
34
<PAGE> 36
PRINCIPAL AND SELLING 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 of the Selling Stockholders, (iii) each director of the Company, (iv) 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>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
OF COMMON STOCK OF COMMON STOCK
PRIOR TO THE OFFERING AFTER THE OFFERING++
------------------------ ------------------------
NUMBER PERCENT SHARES NUMBER OF PERCENT
NAME OF BENEFICIAL OWNER OF SHARES OF CLASS BEING OFFERED SHARES OF CLASS
- ---------------------------- ---------- --------- -------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
William S. Levine........... 14,734,240(1) 36.7% 262,500 14,171,740 27.1%
1702 E. Highland, Suite
310
Phoenix, Arizona 85016
Arthur R. Moreno............ 12,051,487(2) 27.2 262,500 11,488,987 20.4
2502 N. Black Canyon
Highway
Phoenix, Arizona 85009
Stephen J. Haberkorn........ 5,511,615(3) 13.7 300,000 5,211,615 10.0
1702 E. Highland, Suite
310
Phoenix, Arizona 85016
Putnam Investments, Inc..... 4,007,831(4) 10.0 4,007,831 7.7
One Post Office Square
Boston, Massachusetts
02109
Wally C. Kelly.............. 462,012(5) 1.1 175,000 287,012 *
Bill M. Beverage............ 42,188(6) * 42,188 *
Robert M. Reade............. 28,125(7) * 28,125 *
Stephen F. Butterfield...... 49,500(8) * 49,500 *
Brian J. O'Connor........... 15,750(9) * 15,750 *
All directors and executive
officers as a group (7
persons).................. 21,951,687(10) 49.0% 20,951,687 36.9%
</TABLE>
- ---------------
++ Assumes no exercise of the Underwriters' over-allotment option.
* Represents less than 1% of the number of outstanding shares of Common Stock.
(1) Includes 5,431,615 shares (5,131,615 shares after the Offering) 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 5,431,615 shares (5,131,615 shares after
the Offering), 301,507 shares are subject to an option granted to Mr. Levine
(now held by Levine Investments Limited Partnership, Mr. Levine's family
partnership) and 1,993,418 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 301,507 shares subject
to the option granted to Mr. Levine. The option for the 301,507 shares of
Common Stock of M-K Link and 9,202,625 shares (8,940,125 shares after the
Offering) 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 100,000 shares of Common Stock
attributed to Mr. Levine are held by William S. and Ina Levine Foundation
(the "Levine Family Foundation") a charitable foundation
35
<PAGE> 37
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 5,431,615 shares (5,131,615 shares after the Offering) 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 5,431,615
shares (5,131,615 shares after the Offering), 1,993,418 shares are subject
to an option granted to Mr. Moreno and 301,507 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 1,993,418 shares subject to
the option granted to Mr. Moreno. Also includes (i) 4,120,139 shares of
Common Stock that may be purchased by Mr. Moreno pursuant to options
granted by the Company that are currently exercisable; (ii) 1,278,617
shares (1,016,117 after the Offering) of Common Stock held by Mr. Moreno
and his wife, as joint tenants; and (iii) 1,221,116 shares held by BRN
Properties Limited Partnership, an Arizona limited partnership of which Mr.
Moreno is the sole general partner.
(3) Represents (i) 5,431,615 shares (5,131,615 shares after the Offering) 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 and (ii) 80,000 shares owned by M-K Link Foundation, a
charitable foundation of which Mr. Haberkorn is President and member of the
Board of Directors. Of the shares held by M-K Link, 2,294,925 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. Mr. Haberkorn also disclaims beneficial
ownership of the shares owned by the M-K Link Foundation. 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
3,757,910 shares and 249,921 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) 2,250 shares of Common Stock owned by Mr. Butterfield's
children, and (ii) 2,250 shares of Common Stock subject to options that are
currently exercisable.
(9) Includes 4,500 shares of Common Stock subject to options that are currently
exercisable.
(10) Includes (i) 301,507 and 1,993,418 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) 4,659,214 shares
(4,484,214 shares after the Offering) 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.
36
<PAGE> 38
DESCRIPTION OF CAPITAL STOCK
As of the date of this Prospectus, the Company's authorized capital stock
consists of 60,000,000 shares of Common Stock, $.01 par value per share, and
12,000,000 shares of preferred stock, $1.00 par value each ("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 Third Amended and Restated
Certificate of Incorporation (the "Certificate of Incorporation") and Amended
and Restated Bylaws (the "By-laws"), each of which was filed as an exhibit to
the registration statement of which this Prospectus is a part.
COMMON STOCK
The Company is authorized to issue 60,000,000 shares of Common Stock, $0.01
par value per share. Following the Offering, 52,330,631 shares of Common Stock
will be issued and outstanding (assuming no exercise of the Underwriters'
over-allotment option). See "Capitalization." 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, and all of the shares of Common Stock sold in the Offering will be,
when issued and paid for, 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. See "Dividend Policy."
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 INDEBTEDNESS AND OTHER COMMITMENTS
The following is a description of the principal agreements that will govern
the indebtedness of the Company following the consummation of the Acquisitions.
The following summaries of certain provisions of the Senior Credit Facility and
the 1996 Notes Indenture are qualified in their entirety by reference to such
documents, a copy of each of which is filed or incorporated by reference as an
exhibit to the registration statement of which this Prospectus is a part. See
"Available Information." Capitalized terms used below and not defined have the
meanings set forth in the respective documents.
THE NOTES
The Notes intended to be offered in the Notes Offering are to be issued
under an indenture (the "Indenture") among the Company, the Subsidiary
Guarantors (as defined) and a trustee to be selected by the Company. The
Indenture will provide for the issuance of up to $300 million aggregate
principal amount of the Notes, which will be general unsecured obligations of
the Company subordinate in right of payment to all existing and future senior
indebtedness of the
37
<PAGE> 39
Company. The Notes will be unconditionally guaranteed, on an unsecured senior
subordinated basis, as to payment of principal, premium, if any, and interest,
jointly and severally, by all of the Subsidiary Guarantors. The Notes will be
pari passu with the 1996 Notes.
The Notes will be redeemable at the option of the Company, in whole or in
part, at any time on or after the fifth anniversary of the date of original
issuance thereof, at the redemption prices set forth in the Indenture plus
accrued and unpaid interest, if any, to but excluding the date of redemption.
Also, on or prior to the third anniversary of the date of original issuance
thereof, the Company may redeem up to 35% of principal amount of the 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 Notes having an aggregate
principal amount of at least $195 million remain outstanding immediately after
any such redemption.
The Indenture will contain covenants, events of default and other
provisions that will be substantially the same as those contained in the 1996
Notes Indenture. See "-- The 1996 Notes" below.
THE 1996 NOTES
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 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 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 certain restrictive covenants, including
limitations on (i) the incurrence of indebtedness; (ii) the payment of dividends
and the making of restricted payments; (iii) transactions with affiliates; (iv)
the existence of liens; (v) the disposition of proceeds of asset sales; (vi)
entering into sale and lease-back transactions; (vii) the making of guarantees
by the Company and its subsidiaries; (viii) transfers and issuances of stock of
its subsidiaries; (ix) the imposition of restrictions on certain payments by the
Company or its subsidiaries; (x) the making of certain investments by the
Company or its subsidiaries; and (xi) certain mergers and consolidations.
The 1996 Notes Indenture contains customary events of default, including,
without limitation, the following: (i) the failure to pay principal or interest
when due; (ii) certain defaults under agreements relating to other indebtedness;
(iii) the material breach of any covenant; (iv) the levy of certain judgments;
and (v) certain bankruptcy, reorganization and insolvency events. The occurrence
of an event of default will permit the holders of the 1996 Notes to accelerate
the 1996 Notes and to pursue other remedies.
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<PAGE> 40
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
million subject to reduction by the amount (up to $275 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 million and subject to
automatic reduction each year commencing in 1998 and continuing through 2002;
(ii) term loans in the aggregate amount of $350 million, payable in quarterly
installments with a final installment due in 2003; and (iii) letter of credit
commitments of $35 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 million (the equivalent of approximately $25
million at current exchange rates), subject to automatic reduction each year
from 1999 to 2002; (ii) term loans to the Canadian Subsidiary (A) payable in
Canadian dollars ("cdn$") in the aggregate amount of cdn$48 million (the
equivalent of approximately $35 million at current exchange rates) payable in
quarterly installments with the final installment due in 2002 and (B) payable in
US dollars ("US$") in the aggregate amount of $40 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 million and for a term
of 30, 60, 90 or 180 days; and (iv) letter of credit commitments of cdn$7
million (but only to the extent there is available Canadian revolving credit
commitment which is not being utilized).
The Canadian revolving credit loans and the cdn$ 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
39
<PAGE> 41
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 exceeds
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 million of
revolving credit loans and (ii) up to $715 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. 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.
THE SUBORDINATED CREDIT FACILITY
The Company has received a commitment from CIBC, Inc. for a Subordinated
Credit Facility under which it may obtain up to $300 million of Bridge Loans in
the event the Notes Offering is not consummated. The Bridge Loans, if made, will
constitute unsecured, senior subordinated indebtedness of the Company. The
following is a summary of the principal terms of the Subordinated Credit
Facility as currently proposed by the Company and CIBC, Inc. There is no
assurance, however, that the terms of the Subordinated Credit Facility that will
be entered into if the Notes Offering is not consummated will not contain terms
and conditions that are substantially different than the proposed terms
summarized below.
Conversion to Term Loans. Subject to the absence of any existing default
or event of default and certain other conditions, the Bridge Loans will be
converted on the first anniversary of the closing of the Bridge Loans (the
"Conversion Date") into term loans (the "Term Loans"), which will mature on the
10th anniversary of the closing date (the "Maturity Date").
Interest. Interest on the Bridge Loans and any Term Loans will be a
variable rate which will fluctuate monthly in relation to the three-month LIBOR,
plus the Applicable Spread. The "Applicable Spread" will be an increasing
percentage per annum which will rise prior to the Conversion Date from the
initial Applicable Spread of 6% to 7.5%. On the Conversion Date, the Applicable
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<PAGE> 42
Spread will increase by 0.5% over the then current Applicable Spread, and will
continue to increase by the same increment after each three-month period
following the Conversion Date, subject to a maximum interest rate of 20% per
annum. The Company will have the option to pay any portion of the interest on
the Bridge Loans and the Term Loans in excess of 15% per annum by issuing
additional Bridge Loan Promissory Notes or additional Term Loan Promissory
Notes, as applicable.
Voluntary Prepayments. The Company may prepay the Bridge Loans without
penalty or premium, in whole or in part. The Term Loans may be prepaid in whole
or in part at a prepayment price initially at 101% of the principal amount
thereof on the first anniversary of the closing date, increasing annually
thereafter to 104% of the principal amount thereof on the fourth and fifth
anniversaries and then declining annually to 100% of the principal amount
thereof on the ninth anniversary of the closing date, plus accrued interest to
the prepayment date.
Mandatory Prepayments. The Company will be required to apply net cash
proceeds from certain asset sales in excess of $5 million to prepay a portion of
the Bridge Loans or Term Loans (collectively, "Loans"), as the case may be, to
the extent that such net cash proceeds are not used to prepay term loans and
revolving credit loans under the Senior Credit Facility, to repurchase 1996
Notes or to make an investment in a related business. The Company will also be
required, subject to compliance with the terms of the Senior Credit Facility, to
apply net proceeds received from the issuance of securities to the prepayment of
the Loans.
Change of Control. Upon a change of control of the Company, each holder of
Bridge Loans may require the Company to purchase all or a portion of such
holder's Bridge Loans at a purchase price equal to 100% of the outstanding
principal amount thereof, plus accrued interest thereon to the date of purchase.
Prior to any purchase of the Bridge Loans, the Company will be required to
either repay its obligations under the Senior Credit Facility or to obtain the
consent of the lenders thereunder.
Covenants. The Subordinated Credit Facility will restrict the ability of
the Company and its subsidiaries to, among other things: (i) incur indebtedness;
(ii) incur liens; (iii) declare dividends, repurchase its capital stock or
prepay, repurchase or make sinking fund payments in respect of any subordinated
indebtedness; (iv) make certain investments; (v) guarantee indebtedness; (vi)
incur indebtedness unless subordinated to the Bridge Loans; (vii) enter into
mergers or consolidations or sell all or substantially all of its business,
property or assets, except for the Pending Acquisitions and in certain other
circumstances; (viii) enter into agreements prohibiting or limiting the ability
of subsidiaries of the Company to pay dividends, transfer property or assets to
the Company or any other subsidiary of the Company; (ix) enter into transactions
with affiliates; (x) sell capital stock of any of the Company's subsidiaries;
(xi) enter into amendments or waivers with respect to the Senior Credit Facility
materially adversely affecting the issuance of the Demand Take Out Notes (as
defined below); (xii) amend its charter documents; (xiii) refinance the Bridge
Loans in part other than through the Demand Take Out Notes (as defined below) or
the Exchange Notes (as defined below), except under certain circumstances; (xiv)
enter into asset sales; (xv) transfer assets to a subsidiary of the Company
other than for payment of fair market value except under certain circumstances;
and (xvi) permit its subsidiaries to guarantee certain indebtedness.
Subordination of Loans and Guarantees of Subsidiaries. The obligations of
the Company and of the Subsidiary Guarantors under the Subordinated Credit
Facility will be subordinated to the rights of holders of senior indebtedness of
the Company and the Subsidiary Guarantors, as the case may be.
Events of Default. The Subordinated Credit Facility will contain customary
events of default, including, without limitation, the following: (i) the failure
to pay principal or interest when due; (ii) certain defaults under agreements
relating to other indebtedness; (iii) the material breach of any covenant,
representation or warranty; (iv) the levy of certain judgments; (v) default
under a guarantee of a Subsidiary Guarantor relating to the Company's
obligations under certain agreements'; (vi) the commencement of a proceeding in
foreclosure with respect to collateral securing
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<PAGE> 43
the Senior Credit Facility; and (vii) certain bankruptcy, reorganization and
insolvency events. The occurrence of an event of default permits the Bridge
Lenders to accelerate the indebtedness under the Subordinated Credit Facility
and to pursue other remedies.
Demand Take Out Notes. The Company will be required to take all reasonable
actions necessary to the extent within its power, upon request by one or more
investment banks (the "Take Out Banks") prior to the Conversion Date, to enable
the Take Out Banks to publicly sell or privately place senior subordinated notes
(the "Demand Take Out Notes"), the proceeds of which are to be used to repay the
Bridge Loans in whole or in part and which will be guaranteed by each subsidiary
of the Company that guarantees the Bridge Loans.
Exchange Notes. At the written request of the holder of any Term Loan, the
Company and each Subsidiary Guarantor will be required to enter into a trust
indenture in substantially the form to be attached as an exhibit to the
Subordinated Credit Facility and to issue notes (the "Exchange Notes")
thereunder in exchange for the same principal amount of Term Loans or portion
thereof being exchanged.
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UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters") have severally agreed to purchase
from the Company and the Selling Stockholders, the following respective numbers
of shares of Common Stock at the public offering price less the underwriting
discounts and commissions set forth on the cover page of the Prospectus:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- -------------------------------------------------------------------------------- ----------
<S> <C>
Alex. Brown & Sons Incorporated.................................................
Donaldson, Lufkin & Jenrette Securities Corporation.............................
CIBC Wood Gundy Securities Corp. ...............................................
Montgomery Securities...........................................................
Prudential Securities Incorporated..............................................
----------
Total................................................................. 13,000,000
==========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all shares of the Common Stock offered hereby if any
of such shares are purchased.
The Company and the Selling Stockholders have been advised by the
Underwriters that the Underwriters propose to offer the shares of Common Stock
to the public at the public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $ per share. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share to certain other dealers. After the
public offering, the offering price and other selling terms may be changed by
the Underwriters.
The Company and certain of the Selling Stockholders have granted to the
Underwriters an option, exercisable not later than 30 days after the date of
this Prospectus, to purchase up to 1,950,000 additional shares of Common Stock
(up to 975,000 shares to be purchased from the Company and up to 975,000 shares
from such Selling Stockholders) at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of Common Stock to be purchased by
it shown in the above table bears to 13,000,000, and the Company and the Selling
Stockholders will be obligated, pursuant to the option, to sell such shares to
the Underwriters. The Underwriters may exercise such option only to cover
over-allotments made in connection with the sale of Common Stock offered hereby.
If purchased, the Underwriters will offer such additional shares on the same
terms as those in which the 13,000,000 shares are being offered.
In connection with the Offering, certain Underwriters may engage in passive
market making transactions in the Common Stock on the Nasdaq National Market
immediately prior to the commencement of sales in the Offering in accordance
with Rule 103 of Regulation M. Passive market making consists of displaying bids
on the Nasdaq National Market limited by the bid prices of independent market
makers and making purchases limited by such prices and effected in response to
order flow. Net purchases by a passive market maker on each day are limited to a
specified percentage of the passive market maker's average daily trading volume
in the Common Stock during a specified period and must be discontinued when such
limit is reached. Passive market making may stabilize the market price of the
Common Stock at a level above that which might otherwise prevail and, if
commenced, may be discontinued at any time.
Subject to applicable limitations, the Underwriters, in connection with the
Offering, may place bids for or make purchases of the Common Stock in the open
market or otherwise, for long or short account, or cover short positions
incurred, to stabilize, maintain or otherwise affect the price of the Common
Stock, which may be higher than the price that might otherwise prevail in the
open market. There can be no assurance that the price of the Common Stock will
be stabilized, or that stabilizing, if commenced, will not be discontinued at
any time. Subject to applicable limitations,
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<PAGE> 45
the Underwriters may also place bids or make purchases on behalf of the
underwriting syndicate to reduce a short position created in connection with the
Offering. The Underwriters are not required to engage in these activities and
may end these activities at any time.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act.
The Selling Stockholders and certain other stockholders of the Company, who
will hold in the aggregate 20,851,687 shares of Common Stock after the Offering
(including currently exercisable options to purchase 4,484,214 shares of Common
Stock) have agreed not to offer, sell or otherwise dispose of any of such Common
Stock for a period of 180 days after the date of this Prospectus without the
prior consent of Alex. Brown & Sons Incorporated.
CIBC Wood Gundy Securities Corp. ("CIBC Wood Gundy") is an affiliate of
CIBC, which is the administrative agent and a lender under the Senior Credit
Facility. Affiliates of CIBC Wood Gundy have committed to provide any necessary
bridge financing in connection with the Pending Acquisitions for which they have
received customary fees. CIBC Wood Gundy has also provided the Company with
financial advisory services in connection with the Pending Acquisitions for
which it will receive customary fees.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Powell, Goldstein, Frazer & Murphy LLP,
Atlanta, Georgia. Certain legal matters will be passed upon for the Underwriters
by Piper & Marbury L.L.P., Baltimore, Maryland.
EXPERTS
The Consolidated Financial Statements of the Company as of December 31,
1996 and 1995 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,
1996 and 1995 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.
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<PAGE> 46
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, New York, New York 10048, and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such materials may be obtained
from the public reference section of the Commission at its Washington address
upon payment of the prescribed fee. The Commission also maintains an Internet
Web Site at http://www.sec.gov. that contains reports and other information
about the Company.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents or information filed by the Company with the
Commission are incorporated in this Prospectus 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) Current Report on Form 10-Q for the quarter ended
March 31, 1997 (File No. 0-28256); (iii) the Proxy Statement for the 1997 Annual
Meeting of Shareholders (File No. 0-28256); (iv) 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); and (v) the description of the Common
Stock contained in Registration Statement on Form 8-A filed on April 19, 1996
(File No. 0-28256).
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 and
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the Offering shall be deemed to be incorporated by reference
in this Prospectus and to be a part hereof from the respective dates of filing
of such documents. Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document incorporated or
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute part of this Prospectus.
The Company undertakes to provide without charge to each person 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.
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<PAGE> 47
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> 48
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 Note 16 as
to which the date is March 26, 1997
F-2
<PAGE> 49
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 and 9):
Common stock, $.01 par value -- authorized, 60,000,000 shares;
issued and outstanding, 21,096,379, 40,155,631 and 40,155,631
shares........................................................... 4 402 402
Additional paid-in capital......................................... -- 316,988 316,988
Accumulated deficit................................................ (24,718) (25,275) (24,584)
Treasury stock at cost -- 11,475,554 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> 50
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 $ .31 $ (.01) $ .02
Extraordinary loss........................... -- -- (.50) -- --
---------- ---------- ---------- ---------- ----------
NET (LOSS) INCOME PER COMMON SHARE............. $ (.01) $ .01 $ (.19) $ (.01) $ .02
========== ========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES.............. 21,096,379 25,424,078 35,263,336 25,366,144 46,030,680
========== ========== ========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 51
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 21,096,379 21,096,379 40,155,631
Stock splits............................. 20,699,260 -- 7,691,862 --
Initial public offering (Note 2)......... -- -- 2,677,390 --
Secondary offering....................... -- -- 8,690,000 --
----------- ----------- ---------- ----------
Balance, end of year..................... 21,096,379 21,096,379 40,155,631 40,155,631
=========== =========== ========== ==========
COMMON STOCK OUTSTANDING: Amount:
Balance, beginning of year............... $ 4 $ 4 $ 4 $ 402
Stock splits............................. -- -- 284 --
Initial public offering (Note 2)......... -- -- 27 --
Secondary offering (Note 2).............. -- -- 87 --
----------- ----------- ---------- ----------
Balance, end of year..................... $ 4 $ 4 $ 402 $ 402
----------- ----------- ---------- ----------
ADDITIONAL PAID-IN CAPITAL:
Balance, beginning of year............... $ -- $ -- $ -- $ 316,988
Stock splits............................. -- -- (284) --
Initial public offering (Note 2)......... -- -- 36,617 --
Secondary offering (Note 2).............. -- -- 283,135 --
Common/preferred stock accretion......... -- -- (2,480) --
----------- ----------- ---------- ----------
Balance, end of year..................... $ -- $ -- $ 316,988 $ 316,988
----------- ----------- ---------- ----------
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> 52
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> 53
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, 3 for 2 and 3 for 2 stock splits on April 17,
1996, July 22, 1996 and November 22, 1996, 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.
F-7
<PAGE> 54
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
h. Use of estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles necessarily requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from these
estimates.
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 $(0.26) and fully diluted earnings (loss)
per share would have been $0.01 and $(0.19), 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 6,024,132 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,
F-8
<PAGE> 55
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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
12,885,000 shares of common stock for which it received proceeds of
approximately $283,222,000 net of underwriting discounts and commissions and
offering expenses 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.
F-9
<PAGE> 56
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
<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.................................. $ .07 $ .23
======== ========
</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.
F-10
<PAGE> 57
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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>
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
F-11
<PAGE> 58
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$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 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.
F-12
<PAGE> 59
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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>
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
F-13
<PAGE> 60
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
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
$0.04 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.
F-14
<PAGE> 61
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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...................... 4,476,204 $0.05 to $0.83
Granted............................................... -- --
Cancelled or expired.................................. -- --
Exercised............................................. -- --
---------
Outstanding at December 31, 1995...................... 4,476,204 $0.05 to $0.83
Granted............................................... 2,065,293 $6.67 to $23.00
Cancelled or expired.................................. -- --
Exercised............................................. (150,000) $0.83
---------
Outstanding at December 31, 1996...................... 6,391,497 $0.05 to $23.00
---------
Exercisable at December 31, 1996...................... 4,326,204 $0.05 to $0.83
---------
</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>
$ 0.05 3,464,706 N/A $ 0.05 3,464,706 $ 0.05
$ 0.83 861,498 N/A $ 0.83 861,498 $ 0.83
$ 6.67 2,052,113 9.3 years $ 6.67 -- --
$ 23.00 13,180 9.7 years $23.00 -- --
--------- ---------
6,391,497 4,326,204
========= =========
</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 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,
F-15
<PAGE> 62
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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-16
<PAGE> 63
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
F-17
<PAGE> 64
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company believes that any resulting liability should not materially affect the
Company's financial position or results of operations.
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-18
<PAGE> 65
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.......... (.07) (.01) .03 .06
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) (.02) (.20) .04
</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.
F-19
<PAGE> 66
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
17. SUMMARY FINANCIAL INFORMATION OF GUARANTORS
The 9 3/8% Senior Subordinated Notes are guaranteed on a senior
subordinated basis by all of the domestic subsidiaries of the Company (the
"Guarantors"). The guarantees are subordinate to the Senior Credit Facility.
Condensed balance sheet and statement of operation data for the guarantor and
non-guarantor subsidiaries are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------------------------------------------
ELIMINATION
GUARANTORS NON-GUARANTORS ENTRIES CONSOLIDATED
---------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Summary Balance Sheet Data:
Current assets.................... $ 72,654 $ 23,157 $ 1,363 $ 97,174
Noncurrent assets................. 726,248 110,114 (81) 836,281
Current liabilities............... 55,062 5,916 54 61,032
Noncurrent liabilities............ 495,561 89,175 (492) 584,244
Stockholders' equity.............. 284,557 38,180 (34,558) 288,179
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
--------------------------------------------------------------
ELIMINATION
GUARANTORS NON-GUARANTORS ENTRIES CONSOLIDATED
---------- -------------- ----------- ------------
<S> <C> <C> <C> <C>
Summary Income Statement Data:
Net revenues...................... $150,970 $ 22,996 $ (850) $173,116
Operating income.................. 52,150 4,875 -- 57,025
Income before income taxes and
extraordinary loss............. 20,908 3,628 -- 24,536
Net (loss) income................. (6,950) 1,792 1,714 (3,444)
Net (loss) income attributable to
common stockholders............ (10,411) 1,792 1,714 (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 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 Manufac-
F-20
<PAGE> 67
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
turing 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
12,000,000 shares of common stock (the "Common Stock Offering") to the public,
pursuant to this registration statement, (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 $300 million aggregate principal amount
of senior subordinated notes (the "Notes Offering").
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.
F-21
<PAGE> 68
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, 1996 and 1995, 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, 1996 and 1995 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> 69
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 $1,767,
$1,500 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 integral part of these financial statements.
F-23
<PAGE> 70
NATIONAL ADVERTISING COMPANY
STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
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> 71
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:
Decrease (increase) in trade
receivables.................... (3,685) (2,566) 1,922 3,618 2,093
(Increase) decrease 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)
(Decrease) increase 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> 72
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.
F-26
<PAGE> 73
NATIONAL ADVERTISING COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 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> 74
NATIONAL ADVERTISING COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 1996 and 1995 consists of the
following:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Signs, principally outdoor advertising structures.......... $272,219 $262,766
Land....................................................... 3,578 3,624
Buildings and leasehold improvements....................... 6,261 6,289
Machinery and equipment.................................... 1,138 1,261
Mobile equipment........................................... 5,457 5,951
Furniture and fixtures..................................... 9,762 8,711
Construction in progress................................... 2,313 4,954
--------- ---------
300,728 293,556
Accumulated depreciation and amortization.................. (173,366) (165,120)
--------- ---------
Property, plant and equipment, net......................... $127,362 $128,436
========= =========
</TABLE>
4. NET ASSETS
Net assets is comprised of the following components at December 31, 1996
and 1995:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Capital........................................................ $ 4,000 $ 4,000
Retained earnings.............................................. 170,886 163,671
Intercompany accounts with affiliates.......................... (29,158) (19,681)
-------- --------
$145,728 $147,990
======== ========
</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 $38,754, $36,775, and $35,441
including contingent rental payments of $3,251, $2,802, and $2,136 for the years
ended December 31, 1996, 1995 and 1994, respectively. Contingent payments are
primarily based on related signage revenues. Land leases are generally entered
into for terms of 10 years or less.
F-28
<PAGE> 75
NATIONAL ADVERTISING COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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>
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 $1,861, $1,711 and $1,793 in
1996, 1995 and 1994, 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 $949, $768, and $711 for
the years ended December 31, 1996, 1995 and 1994, 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 $478, $430, and $425 in 1996, 1995, and 1994,
respectively.
F-29
<PAGE> 76
NATIONAL ADVERTISING COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. INCOME TAXES
The provision for income taxes for the years ended December 31, 1996, 1995
and 1994 is comprised of the following amounts:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Provision for income taxes:
Federal:
Current........................................ $13,225 $13,582 $10,294
Deferred....................................... 2,100 450 1,699
------- ------- -------
15,325 14,032 11,993
State and local:
Current........................................ 3,275 3,366 2,552
Deferred....................................... 522 112 422
------- ------- -------
3,797 3,478 2,974
------- ------- -------
Total provision for income taxes.................... $19,122 $17,510 $14,967
======= ======= =======
</TABLE>
The effective tax rate differs from the U.S. federal statutory rate
principally due to state income taxes and certain non-deductible expenses.
The tax effects of temporary differences which gave rise to deferred income
tax assets and liabilities consisted of the following:
<TABLE>
<CAPTION>
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
Deferred income tax assets:
Accrued vacation.................................... $ 1,017 $ 1,017 $ 945
Lease acquisition costs............................. 1,153 868 677
Allowance for doubtful accounts..................... 711 603 570
Accrued legal....................................... 1,339 1,108 1,108
Accrued workers compensation........................ 1,021 1,194 1,194
Other accrued liabilities........................... 1,614 1,570 1,510
------- ------ ------
Total deferred income tax assets............ 6,855 6,360 6,004
------- ------ ------
Deferred income tax liabilities:
Property, plant & equipment......................... 10,773 7,656 6,734
Other............................................... 143 143 147
------- ------ ------
Total deferred income tax liabilities....... 10,916 7,799 6,881
------- ------ ------
Net deferred income tax liabilities................... $ 4,061 $ 1,439 $ 877
======= ====== ======
</TABLE>
The deferred income tax assets and liabilities have been classified in the
balance sheet as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
Net deferred income tax assets -- current............. $ 5,702 $ 5,492 $ 5,327
Net deferred income tax liabilities -- non-current.... 9,763 6,931 6,204
------ ------ ------
Net deferred income tax liabilities................... $ 4,061 $ 1,439 $ 877
====== ====== ======
</TABLE>
F-30
<PAGE> 77
NATIONAL ADVERTISING COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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
$9,183, $9,058, and $9,305 for the years ended December 31, 1996, 1995 and 1994,
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 $6,432,
$6,240, and $5,284 for the years ended December 31, 1996, 1995 and 1994,
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 $5,227,
$4,281 and $4,537 for the years ended December 31, 1996, 1995 and 1994,
respectively.
Personnel of the Company use certain automobiles owned by 3M. The Company
recognized $993, $930 and $956 in rental expense for 1996, 1995 and 1994,
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 $2,073, $1,962 and $1,249 for the years
ended December 31, 1996, 1995 and 1994.
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.
F-31
<PAGE> 78
NATIONAL ADVERTISING COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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-32
<PAGE> 79
======================================================
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER OR
ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH 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 THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 13
Use of Proceeds....................... 18
Price Range of Common Stock........... 18
Dividend Policy....................... 18
Capitalization........................ 19
Unaudited Consolidated Pro Forma
Financial Information............... 20
Selected Consolidated Financial and
Other Data.......................... 29
Management's Discussion and Analysis
of Results of Operations and
Financial Condition................. 31
Principal and Selling Stockholders.... 35
Description of Capital Stock.......... 37
Description of Indebtedness and Other
Commitments......................... 37
Underwriting.......................... 43
Legal Matters......................... 44
Experts............................... 44
Available Information................. 45
Incorporation of Certain Documents by
Reference........................... 45
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
======================================================
======================================================
13,000,000 SHARES
[OUTDOOR SYSTEMS LOGO]
COMMON STOCK
-------------------
PROSPECTUS
-------------------
ALEX. BROWN & SONS
INCORPORATED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CIBC WOOD GUNDY SECURITIES CORP.
MONTGOMERY SECURITIES
PRUDENTIAL SECURITIES INCORPORATED
, 1997
======================================================
<PAGE> 80
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ---------------------------------------------------------------------------------
<C> <C> <S>
1.1 -- Form of Underwriting Agreement.
4.1 -- Specimen Common Stock Certificate of the Registrant (filed as Exhibit 4.1 to the
Registrant's Amendment No. 2 to Form S-1 Registration Statement No. 333-1582 and
incorporated herein by reference).
5.1 -- Opinion of Powell, Goldstein, Frazer & Murphy LLP.
23.1 -- Consent 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.*
27 -- Financial Data Schedule.
99.1 -- Agreement of Purchase and Sale dated April 30, 1997 by and between the Registrant
and Minnesota Mining and Manufacturing Company. The Exhibit contains a list
briefly identifying the contents of Schedules and Exhibits, some of which have
been omitted. The Registrant agrees to furnish supplementally a copy of any
omitted Schedule or Exhibit to the Commission upon request.*
99.2 -- Stock Purchase Agreement dated April 11, 1997 by and among the Registrant, Van
Wagner Communications, Inc., Richard M. Schaps and Jason Perline. The Exhibit
contains a list briefly identifying the contents of Schedules and Exhibits, some
of which have been omitted. The Registrant agrees to furnish supplementally a
copy of any omitted Schedule or Exhibit to the Commission upon request.*
99.3 -- Signboard Easements Sale Agreement dated March 21, 1997 between the Registrant
and The Burlington Northern and Santa Fe Railway Company. The Exhibit contains a
list briefly identifying the contents of Schedules and Exhibits, some of which
have been omitted. The Registrant agrees to furnish supplementally a copy of any
omitted Schedule or Exhibit to the Commission upon request.*
99.4 -- Asset Purchase Agreement dated as of February 24, 1997 by and between the
Registrant and GRTP, Ltd. The Exhibit contains a list briefly identifying the
contents of Schedules and Exhibits, some of which have been omitted. The
Registrant agrees to furnish supplementally a copy of any omitted Schedule or
Exhibit to the Commission upon request.
99.5 -- Joint Venture Asset Purchase Agreement dated as of February 28, 1997 by and
between the Registrant and Reynolds/Tower Outdoor Sign Joint Venture. The Exhibit
contains a list briefly identifying the contents of Schedules and Exhibits, some
of which have been omitted. The Registrant agrees to furnish supplementally a
copy of any omitted Schedule or Exhibit to the Commission upon request.*
99.6 -- Joint Venture Asset Purchase Agreement dated as of February 28, 1997 by and
between the Registrant and Reynolds/McCrary Joint Venture. The Exhibit contains a
list briefly identifying the contents of Schedules and Exhibits, some of which
have been omitted. The Registrant agrees to furnish supplementally a copy of any
omitted Schedule or Exhibit to the Commission upon request.*
</TABLE>
II-1
<PAGE> 81
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ---------------------------------------------------------------------------------
<C> <C> <S>
99.7 -- Joint Venture Asset Purchase Agreement dated as of February 28, 1997 by and
between the Registrant and RV Outdoor Sign Joint Venture. The Exhibit contains a
list briefly identifying the contents of Schedules and Exhibits, some of which
have been omitted. The Registrant agrees to furnish supplementally a copy of any
omitted Schedule or Exhibit to the Commission upon request.*
99.8 -- Asset Purchase Agreement dated as of January 21, 1997 by and among the Registrant
and Scadron Enterprises, Robert B. Scadron, Jeffrey Scadron and Barry Scadron.
The Exhibit contains a list briefly identifying the contents of Schedules and
Exhibits, some of which have been omitted. The Registrant agrees to furnish
supplementally a copy of any omitted Schedule or Exhibit to the Commission upon
request.*
99.9 -- Asset Purchase Agreement dated as of December 27, 1996 by and among the
Registrant, Villepigue Outdoor Advertising Corporation, Villepigue International
Advertising, Inc., S.B. Properties, Inc., Third & Eighth Realty Corp. and Mobile
Outdoor Media, Inc. The Exhibit contains a list briefly identifying the contents
of Schedules and Exhibits, some of which have been omitted. The Registrant agrees
to furnish supplementally a copy of any omitted Schedule or Exhibit to the
Commission upon request.
99.10 -- Amendment dated as of March 12, 1997 to the Fourth Amended and Restated Credit
Agreement dated as of October 22, 1996 among the Registrant, Mediacom Inc., the
several banks and other financial institutions parties thereto and Canadian
Imperial Bank of Commerce as administrative agent.*
99.11 -- Second Amendment dated as of May 9, 1997 to the Fourth Amended and Restated
Credit Agreement dated as of October 22, 1996, as amended, among the Registrant,
Mediacom Inc., the several banks and other financial institutions parties thereto
and Canadian Imperial Bank of Commerce as administrative agent.
</TABLE>
- ---------------
* Previously filed
II-2
<PAGE> 82
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe it meets all the
requirements for filing on Form S-3 and has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Phoenix, State of Arizona, on the 21st day of
May, 1997.
OUTDOOR SYSTEMS, INC.
By: /s/ WALLY C. KELLY
------------------------------------
Wally C. Kelly
Senior Vice President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons on behalf of
the Registrants and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------- ---------------------------------------- -------------
<C> <S> <C>
ARTHUR R. MORENO* President (Principal Executive Officer) May 21, 1997
- ----------------------------------- and Director
Arthur R. Moreno
WILLIAM S. LEVINE* Chairman of the Board and Director May 21, 1997
- -----------------------------------
William S. Levine
/s/ BILL M. BEVERAGE Secretary, Treasurer and Chief Financial May 21, 1997
- ----------------------------------- Officer (Principal Accounting and
Bill M. Beverage Financial Officer)
BRIAN J. O'CONNOR* Director May 21, 1997
- -----------------------------------
Brian J. O'Connor
STEPHEN F. BUTTERFIELD* Director May 21, 1997
- -----------------------------------
Stephen F. Butterfield
*By: /s/ BILL M. BEVERAGE
- -----------------------------------
Bill M. Beverage
Attorney-in-Fact
</TABLE>
II-3
<PAGE> 83
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ---------------------------------------------------------------------------
<C> <C> <S> <C>
1.1 -- Form of Underwriting Agreement.
4.1 -- Specimen Common Stock Certificate of the Registrant (filed as Exhibit 4.1
to the Registrant's Amendment No. 2 to Form S-1 Registration Statement No.
333-1582 and incorporated herein by reference).
5.1 -- Opinion of Powell, Goldstein, Frazer & Murphy LLP.
23.1 -- Consent 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.*
27 -- Financial Data Schedule.
99.1 -- Agreement of Purchase and Sale dated April 30, 1997 by and between the
Registrant and Minnesota Mining and Manufacturing Company. The Exhibit
contains a list briefly identifying the contents of Schedules and Exhibits,
some of which have been omitted. The Registrant agrees to furnish
supplementally a copy of any omitted Schedule or Exhibit to the Commission
upon request.*
99.2 -- Stock Purchase Agreement dated April 11, 1997 by and among the Registrant,
Van Wagner Communications, Inc., Richard M. Schaps and Jason Perline. The
Exhibit contains a list briefly identifying the contents of Schedules and
Exhibits, some of which have been omitted. The Registrant agrees to furnish
supplementally a copy of any omitted Schedule or Exhibit to the Commission
upon request.*
99.3 -- Signboard Easements Sale Agreement dated March 21, 1997 between the
Registrant and The Burlington Northern and Santa Fe Railway Company. The
Exhibit contains a list briefly identifying the contents of Schedules and
Exhibits, some of which have been omitted. The Registrant agrees to furnish
supplementally a copy of any omitted Schedule or Exhibit to the Commission
upon request.*
99.4 -- Asset Purchase Agreement dated as of February 24, 1997 by and between the
Registrant and GRTP, Ltd. The Exhibit contains a list briefly identifying
the contents of Schedules and Exhibits, some of which have been omitted.
The Registrant agrees to furnish supplementally a copy of any omitted
Schedule or Exhibit to the Commission upon request.
99.5 -- Joint Venture Asset Purchase Agreement dated as of February 28, 1997 by and
between the Registrant and Reynolds/Tower Outdoor Sign Joint Venture. The
Exhibit contains a list briefly identifying the contents of Schedules and
Exhibits, some of which have been omitted. The Registrant agrees to furnish
supplementally a copy of any omitted Schedule or Exhibit to the Commission
upon request.*
99.6 -- Joint Venture Asset Purchase Agreement dated as of February 28, 1997 by and
between the Registrant and Reynolds/McCrary Joint Venture. The Exhibit
contains a list briefly identifying the contents of Schedules and Exhibits,
some of which have been omitted. The Registrant agrees to furnish
supplementally a copy of any omitted Schedule or Exhibit to the Commission
upon request.*
</TABLE>
<PAGE> 84
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ---------------------------------------------------------------------------
<C> <C> <S> <C>
99.7 -- Joint Venture Asset Purchase Agreement dated as of February 28, 1997 by and
between the Registrant and RV Outdoor Sign Joint Venture. The Exhibit
contains a list briefly identifying the contents of Schedules and Exhibits,
some of which have been omitted. The Registrant agrees to furnish
supplementally a copy of any omitted Schedule or Exhibit to the Commission
upon request.*
99.8 -- Asset Purchase Agreement dated as of January 21, 1997 by and among the
Registrant and Scadron Enterprises, Robert B. Scadron, Jeffrey Scadron and
Barry Scadron. The Exhibit contains a list briefly identifying the contents
of Schedules and Exhibits, some of which have been omitted. The Registrant
agrees to furnish supplementally a copy of any omitted Schedule or Exhibit
to the Commission upon request.*
99.9 -- Asset Purchase Agreement dated as of December 27, 1996 by and among the
Registrant, Villepigue Outdoor Advertising Corporation, Villepigue
International Advertising, Inc., S.B. Properties, Inc., Third & Eighth
Realty Corp. and Mobile Outdoor Media, Inc. The Exhibit contains a list
briefly identifying the contents of Schedules and Exhibits, some of which
have been omitted. The Registrant agrees to furnish supplementally a copy
of any omitted Schedule or Exhibit to the Commission upon request.
99.10 -- Amendment dated as of March 12, 1997 to the Fourth Amended and Restated
Credit Agreement dated as of October 22, 1996, among the Registrant,
Mediacom Inc., the several banks and other financial institutions parties
thereto and Canadian Imperial Bank of Commerce as administrative agent.*
99.11 -- Second Amendment dated as of May 9, 1997 to the Fourth Amended and Restated
Credit Agreement dated as of October 22, 1996, as amended, among the
Registrant, Mediacom Inc., the several banks and other financial
institutions parties thereto and Canadian Imperial Bank of Commerce as
administrative agent.
</TABLE>
- ---------------
* Previously filed.
<PAGE> 1
EXHIBIT 1.1
13,000,000 Shares
OUTDOOR SYSTEMS, INC.
Common Stock
(Par Value $.01 per share)
UNDERWRITING AGREEMENT
May __, 1997
ALEX. BROWN & SONS INCORPORATED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CIBC WOOD GUNDY SECURITIES CORP.
MONTGOMERY SECURITIES
PRUDENTIAL SECURITIES INCORPORATED
c/o ALEX. BROWN & SONS INCORPORATED
1 South Street
Baltimore, Maryland 21202
Ladies and Gentlemen:
Outdoor Systems, Inc., a Delaware corporation (the "Company"), and the
Selling Shareholders listed on Schedule II, propose to sell to the several
underwriters (the "Underwriters") named in Schedule I hereto for whom you are
acting as representatives (the "Representatives") an aggregate of 13,000,000
shares of the Company's Common Stock, par value $.01 per share (the "Firm
Shares"), of which 12,000,000 shares will be sold by the Company and 1,000,000
will be sold by the Selling Shareholders. The respective amounts of the Firm
Shares to be so purchased by the several Underwriters are set forth opposite
their names in Schedule I hereto. The Company and certain Selling Shareholders
also propose to sell at the Underwriters' option an aggregate of up to 1,950,000
additional shares of the Company's Common Stock (the "Option Shares") as set
forth below.
As the Representatives, you have advised the Company (a) that you are
authorized to enter into this Agreement on behalf of the several Underwriters,
and (b) that the several
- 1 -
<PAGE> 2
Underwriters are willing, acting severally and not jointly, to purchase the
numbers of Firm Shares set forth opposite their respective names in Schedule I,
plus their pro rata portion of the Option Shares if you elect to exercise the
over-allotment option in whole or in part for the accounts of the several
Underwriters. The Firm Shares and the Option Shares (to the extent the
aforementioned option is exercised) are herein collectively called the "Shares."
Capitalized terms not otherwise defined herein are used as defined in the
Registration Statement (as hereinafter defined). If the Underwriters listed on
Schedule I only include the Representatives, then references herein to the
Representatives shall mean the Underwriters.
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. Representations and Warranties of the Company.
(a) The Company represents and warrants as follows:
(i) A registration statement on Form S-3 (File No. 333-26407)
with respect to the Shares has been prepared by the Company in conformity with
the requirements of the Securities Act of 1933, as amended (the "Act"), and the
Rules and Regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder and has been filed with the
Commission under the Act. The Company has complied with the conditions for the
use of Form S-3. Copies of such registration statement, including any amendments
thereto, the preliminary prospectuses contained therein and the exhibits,
financial statements and schedules, as finally amended and revised, have
heretofore been delivered by the Company to you. Such registration statement,
together with any registration statement filed pursuant to Rule 462(b), herein
referred to as the "Registration Statement," which shall be deemed to include
all information omitted therefrom in reliance upon Rule 430A and contained in
the Prospectus referred to below, has been declared effective by the Commission
under the Act and no post-effective amendment to the Registration Statement has
been filed as of the date of this Agreement. The form of prospectus first filed
by the Company with the Commission pursuant to its Rule 424(b) is herein
referred to as the "Prospectus." Each preliminary prospectus included in the
Registration Statement prior to the time it becomes effective is herein referred
to as a "Preliminary Prospectus." Any reference herein to the Registration
Statement, any Preliminary Prospectus or the Prospectus shall be deemed to refer
to and include the documents incorporated by reference therein, as of the date
of such Registration Statement, Preliminary Prospectus or Prospectus, as the
case may be, and, in the case of any reference herein to any Prospectus, also
shall be deemed to include any documents incorporated by reference therein, and
any supplements or amendments relating to the Shares being issued and sold
pursuant hereto, filed with the Commission after the date of filing of the
Prospectus under Rules 424(b) or 430A, and prior to the termination of the
offering of the Shares by the Underwriters.
(ii) 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 or lease its properties and
conduct its business as described in the Registration Statement; the
subsidiaries listed on Schedule IV hereto (the "Subsidiaries") are the only
- 2 -
<PAGE> 3
subsidiaries of the Company; the Subsidiaries have been duly organized and are
validly existing as corporations in good standing under the laws of their
jurisdiction of organization, with corporate power and authority to own or lease
their properties and conduct their business as described in the Registration
Statement. The Company and the Subsidiaries are duly qualified to transact
business in all jurisdictions in which the conduct of their business requires
such qualification; the outstanding shares of capital stock of the Subsidiaries
have been duly authorized and validly issued, are fully paid and non-assessable;
and all of the shares of capital stock of the Subsidiaries are owned by the
Company (or will be so owned after the Acquisition, free and clear of all liens,
encumbrances and security interests (other than as described in the Registration
Statement), and 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 or ownership interests of the Subsidiaries are
outstanding. Except for the Subsidiaries and investments in securities as
described in the Registration Statement, the Company has no equity or other
interest in, or right to acquire an equity or other interest in, any
corporation, partnership, trust or other entity.
(iii) The outstanding shares of Common Stock of the Company,
including the Shares to be sold by the Selling Shareholders, have been duly
authorized and validly issued and are fully paid and non-assessable; the Shares
to be issued and sold by the Company have been duly authorized and when issued
and paid for as contemplated herein will be validly issued, fully-paid and
non-assessable; and no preemptive rights of stockholders exist with respect to
any of the Shares or the issue and sale thereof.
(iv) The Shares conform with the statements concerning them in
the Registration Statement.
(v) The Commission has not issued an order preventing or
suspending the use of any Prospectus or Preliminary Prospectus relating to the
proposed offering of the Shares nor instituted proceedings for that purpose. The
Registration Statement contains and the Prospectus and any amendments or
supplements thereto will contain all statements which are required to be stated
therein by, and in all respects conform or will conform, as the case may be, to
the requirements of, the Act and the Rules and Regulations. The documents
incorporated by reference in the Prospectus, at the time they were filed or will
be filed with the Commission, conformed or will conform at the time of filing,
in all respects to the requirements of the Securities Exchange Act of 1934 or
the Act, as applicable, and the Rules and Regulations of the Commission
thereunder. Neither the Registration Statement nor any amendment thereto, and
neither the Prospectus nor any supplement thereto, including any documents
incorporated by reference therein, contains or will contain, as the case may be,
any untrue statement of a material fact or omits or will 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; provided, however, that the Company makes no representations or
warranties as to information contained in or omitted from the Registration
Statement or the Prospectus, or incorporated by reference or any such amendment
or supplement or any documents incorporated by reference therein, in reliance
upon, and in conformity with, written information furnished to
- 3 -
<PAGE> 4
the Company by or on behalf of the Selling Shareholders or any Underwriter
through the Representatives, specifically for use in the preparation thereof.
(vi) The consolidated financial statements of the Company and
its subsidiaries, together with related notes and schedules, as set forth or
incorporated by reference in the Registration Statement, present fairly the
consolidated financial position and the consolidated results of operations of
the Company and its subsidiaries at the indicated dates and for the indicated
periods. The financial statements of National Advertising Company ("NAC"),
together with related notes and schedules, as set forth or incorporated by
reference in the Registration Statement, present fairly the financial position
and results of operations of NAC at the indicated dates and for the indicated
periods. The combined financial statements of Gannett Outdoor, together with
related notes and schedules, as set forth or incorporated by reference in the
Registration Statement, present fairly the combined statements of net assets to
be acquired and the combined statements of revenue and direct expenses of net
assets of Gannett Outdoor at the indicated dates and for the indicated periods.
All such financial statements have been prepared in accordance with generally
accepted principles of accounting, consistently applied throughout the periods
involved, and all adjustments necessary for a fair presentation of results for
such periods have been made. The summary and selected financial and statistical
data included or incorporated by reference in the Registration Statement present
fairly the information shown therein and have been compiled on a basis
consistent with the financial statements presented therein.
(vii) The Pro Forma Financial Statements and other pro forma
financial information of the Company included in the Prospectus and incorporated
by reference in the Registration Statement have been prepared in accordance with
the Commission's rules and guidelines with respect to pro forma financial
statements, have been properly compiled on the pro forma basis described
therein, and, in the opinion of the Company, the assumptions used in the
preparation thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions or circumstances referred to
therein.
(viii) The documents filed by the Company with the Commission
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), at the time filed with the Commission, conformed in all material respects
to the requirements of the Exchange Act, and such documents at the time of such
filing did not, and as of the date hereof do not, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary or make the statements therein not misleading.
(ix) There is no action or proceeding pending or, to the
knowledge of the Company, threatened against the Company or the Subsidiaries
before any court or administrative agency or by any regulatory authority which
might result in any material adverse change in the business or condition of the
Company and the Subsidiaries taken as a whole, except as set forth in the
Registration Statement.
(x) The Company and the Subsidiaries have good and marketable
title to all of the properties and assets reflected in the financial statements
(or as described in the Registration
- 4 -
<PAGE> 5
Statement) hereinabove described, subject to no lien, mortgage, pledge, charge
or encumbrance of any kind except those reflected in such financial statements
(or as described in the Registration Statement) or which are not material in
amount. The Company and the Subsidiaries occupy their leased properties under
valid and binding leases conforming to the description thereof set forth in the
Registration Statement.
(xi) The Company and the Subsidiaries have filed all Federal,
State and foreign income tax returns which have been required to be filed and
have paid all taxes indicated by said returns and all assessments received by
them or any of them to the extent that such taxes have become due and are not
being contested in good faith.
(xii) Since the respective dates as of which information is
given in the Registration Statement, as it may be amended or supplemented, there
has not been any material adverse change or any development involving a
prospective material adverse change in or affecting the condition, financial or
otherwise, of the Company and the Subsidiaries taken as a whole or the earnings,
business affairs, management, or business prospects of the Company and the
Subsidiaries taken as a whole, whether or not occurring in the ordinary course
of business, and there has not been any material transaction entered into by the
Company or any of the Subsidiaries other than transactions in the ordinary
course of business and changes and transactions contemplated by the Registration
Statement, as it may be amended or supplemented. The Company and the
Subsidiaries have no material contingent obligations which are not disclosed in
the Registration Statement, as it may be amended or supplemented.
(xiii) Neither the Company nor any of the Subsidiaries is, nor
with the giving of notice, lapse of time or both, will be, in default under its
Certificate of Incorporation or By-Laws or any agreement, lease, contract,
indenture or other instrument or obligation to which it is a party or by which
it or any of its properties is bound and which default is of material
significance in respect of the business or financial condition of the Company
and the Subsidiaries taken as a whole. The consummation of the transactions
contemplated by this Agreement and the Pending Acquisition Agreements (as
hereinafter defined) and the fulfillment of the terms hereof and thereof will
not conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of trust or other
agreement or instrument to which the Company or any of the Subsidiaries is a
party or by which they will become a patty as a result of the Acquisition and
the financing thereof, or of the Charter or By-Laws of the Company or the
Subsidiaries or any order, rule or regulation applicable to the Company or any
of the Subsidiaries of any court or of any regulatory body or administrative
agency or other governmental body having jurisdiction which conflict, breach or
default would be of material significance in respect of the business or
financial condition of the Company and the Subsidiaries, taken as a whole.
(xiv) Each approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory, administrative or
other governmental body necessary in connection with the execution and delivery
by the Company of this Agreement and the consummation of the transactions herein
contemplated (except such additional steps as may be
- 5 -
<PAGE> 6
required by the National Association of Securities Dealers, Inc. (the "NASD") or
may be necessary to qualify the Shares for public offering by the Underwriters
under State securities or Blue Sky laws) has been obtained or made and is in
full force and effect.
(xv) The Company and each of the Subsidiaries hold all
material licenses, consents, authorizations, approvals, orders, certificates and
permits (collectively, "Licenses") of and from, and has made all declarations
and filings with and satisfied all eligibility and other similar requirements
imposed by, all federal, state, local, foreign and other governmental
authorities, all self-regulatory organizations and all courts and other
tribunals, in each case as required for the conduct of the business in which it
is engaged, and each such License is in full force and effect, except to the
extent that the failure to obtain any such License or to make any such
declaration or filing or satisfy any such requirement would not have a material
adverse effect on the business, prospects, financial condition or results of
operations of the Company and the Subsidiaries, taken as a whole.
(xvi) The Company and the Subsidiaries are in compliance with
all applicable federal, state, foreign and local laws and regulations relating
to (i) zoning, land use, protection of the environment, human health and safety
or hazardous or toxic substances, wastes, pollutants or contaminants and (ii)
employee or occupational safety, discrimination in hiring, promotion or pay of
employees, employee hours and wages or employee benefits, except where such
noncompliance would not, singly or in the aggregate, have a material adverse
effect upon the Company and the Subsidiaries taken as a whole.
(xvii) Deloitte & Touche LLP, who have certified the financial
statements of the Company and Gannett Outdoor filed with the Commission as part
of, or incorporated by reference in, the Registration Statement, are independent
public accountants as required by the Act and the Rules and Regulations.
(xviii) Coopers & Lybrand L.L.P., who have certified the
financial statements of NAC filed with the Commission as part of, or
incorporated by reference in, the Registration Statement, are independent public
accountants as required by the Act and the Rules and Regulations.
(xix) The Company has never been, is not now, and immediately
after the sale of the Shares under this Agreement will not be, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(xx) The Shares of the Company to be sold under this Agreement
(subject to the additional approval of the shares, if any, being registered
pursuant to Rule 462(b)) have been approved for listing on the Nasdaq National
Market subject to official notice of issuance.
(xxi) Each of (i) the Agreement of Purchase and Sale (the "3M
Media Purchase Agreement") between the Company and Minnesota Mining and
Manufacturing Company and (ii) the Stock Purchase Agreement among the Company,
Van Wagner Communications, Inc., Richard M. Schaps and Jason Porline (the "Van
Wagner Stock Purchase Agreement" and
- 6 -
<PAGE> 7
together with the 3M Media Purchase Agreement, the Pending Acquisition
Agreements") has been duly authorized, executed and delivered by the Company and
constitutes a valid and legally binding obligation of the Company, enforceable
in accordance with its terms.
(xxii) The Company has no reason to believe that any of the
representations and warranties made to the Company in the Pending Acquisition
Agreements was untrue in any material respect as of the date given or as of the
date hereof or the Closing Date, and the Company reaffirms for the benefit of
the Underwriters the representations and warranties made by the Company in the
Pending Acquisition Agreements.
(xxiii) The Company reaffirms all of the representations and
warranties set forth in subparagraphs (ix) through (xvi) above assuming and
giving effect to the consummation of the transactions (the "Pending
Acquisitions") contemplated in the Pending Acquisition Agreements and assuming
for purposes of such representations and warranties that references to the
Company and the Subsidiaries would include the Company as it will exist after
consummation of the transactions contemplated in the Pending Acquisitions.
(b) Each of the Selling Shareholders severally represents and warrants
as follows:
(i) Such Selling Shareholder now has and at the Closing Date
or the Option Closing Date, as the case may be, will have good and marketable
title to the Shares to be sold by such Selling Shareholder, free of any liens,
encumbrances, equities and claims, and full right, power and authority to effect
the sale and delivery of such Shares; and upon the delivery of and payment for
such Shares pursuant to this Agreement, the Underwriters will acquire good and
marketable title thereto, free of any liens, encumbrances, equities and claims.
(ii) Such Selling Shareholder has full right, power and
authority to execute and deliver this Agreement, the Power of Attorney and the
Custodian Agreement referred to below and to perform his or its obligations
under such Agreements. The execution and delivery of this Agreement and the
consummation by such Selling Shareholder of the transactions contemplated herein
will not result in a breach of any of the terms and provisions of, or constitute
a default under, any indenture, mortgage, deed of trust or other agreement or
instrument to which such Selling Shareholder is a party, or of any order, rule
or regulation applicable to such Selling Shareholder of any court or of any
regulatory body or administrative agency or other governmental body having
jurisdiction.
(iii) Such Selling Shareholder has not taken and will not
take, directly or indirectly, any action designed to result in, or which has
constituted, or which might reasonably be expected to cause or result in,
stabilization or manipulation of the price of the Common Stock of the Company.
(iv) Without having undertaken to determine independently the
accuracy or completeness of either the representations and warranties of the
Company contained herein or the information contained in the Registration
Statement and documents incorporated by reference therein, such Selling
Shareholder has no reason to believe that the representations and warranties
- 7 -
<PAGE> 8
of the Company contained in this Section 1 are not true and correct, is familiar
with the Registration Statement and has no knowledge of any material fact,
condition or information not disclosed in the Registration Statement or the
documents incorporated by reference therein which has adversely affected or may
adversely affect the business of the Company, the Subsidiaries or Gannett
Outdoor; and the sale of the Shares by such Selling Shareholder pursuant hereto
is not prompted by any information concerning the Company or the Subsidiaries
which is not set forth in the Registration Statement or the documents
incorporated by reference therein. The information pertaining to such Selling
Shareholder under the caption "Principal and Selling Stockholders" in the
Prospectus is complete and accurate in all material respects.
(v) No offering, sale or other disposition of any Common Stock
of the Company will be made for a period of 180 days after the date of this
Agreement, directly or indirectly, by such Selling Shareholder otherwise than
hereunder or with the prior written consent of the Representatives.
(vi) The Power of Attorney appointing certain individuals as
such Selling Shareholder's attorney-in-fact to the extent set forth therein and
the Custodian Agreement (as defined in Section 2) have been duly executed and
delivered by such Selling Shareholder and are the valid and binding agreements
of such Selling Shareholder.
In order to document the Underwriters' compliance with the reporting
and withholding provisions of the Tax Equity and Fiscal Responsibility Act of
1982 and the Interest and Dividend Tax Compliance Act of 1983 with respect to
the transactions herein contemplated, each of the Selling Shareholders agrees to
deliver to you prior to or at the Closing Date a properly completed and executed
United States Treasury Department Form W-9 or Form 8709 (or other applicable
from or statement specified by Treasury Department regulations in lieu thereof).
2. Purchase, Sale and Delivery of the Firm Shares.
(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, the Company
agrees to sell to the Underwriters 12,000,000 of the Firm Shares and the Selling
Shareholders agree to sell to the Underwriters 1,000,000 of the Firm Shares and
each Underwriter agrees, severally and not jointly, to purchase, at a price of
$_____ per share, the number of Firm Shares set forth opposite the name of each
Underwriter in Schedule I hereof, subject to adjustments in accordance with
Section 9 hereof. The number of Shares to be purchased by each Underwriter from
the Company and each Selling Shareholder shall be as nearly as practicable in
the same proportion to the total number of Shares being sold by each of the
Company and the Selling Shareholders as the number of Shares being purchased by
each Underwriter bears to the total number of Shares to be sold hereunder.
(b) Certificates in negotiable form for the total number of the Shares
to be sold hereunder by the Selling Shareholders have been placed in custody
with First Union National Bank of North Carolina as custodian (the "Custodian")
pursuant to the Custodian Agreement executed by each Selling Shareholder for
delivery of all Shares to be sold hereunder by the Selling Shareholders. Each of
the Selling Shareholders specifically agrees that the Shares
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<PAGE> 9
represented by the certificates held in custody for the Selling Shareholder
under the Custodian Agreement are subject to the interests of the Underwriters
hereunder, that the arrangements made by the Selling Shareholders for such
custody are to that extent irrevocable, and that the obligations of the Selling
Shareholders hereunder shall not be terminable by any act or deed of the Selling
Shareholder (or by any other person, firm or corporation including the Company,
the Custodian or the Underwriters) or by operation of law (including the death
of a Selling Shareholder) or by the occurrence of any other event or events,
except as set forth in the Custodian Agreement. If any such event should occur
prior to the delivery to the Underwriters of the Shares hereunder, certificates
for the Shares, shall be delivered by the Custodian in accordance with the terms
and conditions of this Agreement as if such event has not occurred. The
Custodian is authorized to receive and acknowledge receipt of the proceeds of
sale of the Shares held by it against delivery of such Shares.
(c) Payment for the Firm Shares to be sold hereunder is to be made in
immediately available funds by wire transfer to the order of the Company for the
Shares to be sold by it and to the order of First Union National Bank of North
Carolina, as Custodian, for the Shares to be sold by the Selling Shareholders,
in each case, against delivery of certificates therefor to the Representatives
for the several accounts of the Underwriters. Such payment and delivery are to
be made at the offices of Alex. Brown & Sons Incorporated, 1 South Street,
Baltimore, Maryland 21202, at 10:00 A.M., Baltimore time, on the third business
day after the date of this Agreement or at such other time and date not later
than three business days thereafter as you and the Company shall agree upon,
such time and date being herein referred to as the "Closing Date." (As used
herein, "business day" means a day on which the New York Stock Exchange is open
for trading and on which banks in New York are open for business and are not
permitted by law or executive order to be closed.) The certificates for the Firm
Shares will be delivered in such denominations and in such registrations as the
Representatives request in writing not later than the third full business day
prior to the Closing Date, and will be made available for inspection by the
Representatives at least one business day prior to the Closing Date.
(d) In addition, on the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company and the Selling Shareholders listed in Schedule III hereto hereby grant
an option to the several Underwriters to purchase the Option Shares at the price
per share as set forth in the first paragraph of this Section 2. The maximum
number of Option Shares to be sold by the Company and each of the Selling
Shareholders is set forth opposite their respective names on Schedule III
hereto. The option granted hereby may be exercised in whole or in part but only
once and at any time upon written notice given within 30 days after the date of
this Agreement, by you, as Representatives of the several Underwriters, to the
Company setting forth the number of Option Shares as to which the several
Underwriters are exercising the option, the names and denominations in which the
Option Shares are to be registered and the time and date at which such
certificates are to be delivered. If the option granted hereby is exercised in
part, the respective number of Option Shares to be sold by the Company and each
of the Selling Shareholders listed in Schedule III shall be determined on a pro
rata basis in accordance with the percentages set forth opposite their names on
Schedule III hereto, adjusted by you in such manner as to avoid fractional
shares. The time and date at
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<PAGE> 10
which certificates for Option Shares are to be delivered shall be determined by
the Representatives but shall not be earlier than three nor later than 10 full
business days after the exercise of such option, nor in any event prior to the
Closing Date (such time and date being herein referred to as the "Option Closing
Date"). If the date of exercise of the option is three or more days before the
Closing Date, the notice of exercise shall set the Closing Date as the Option
Closing Date. The number of Option Shares to be purchased by each Underwriter
shall be in the same proportion to the total number of Option Shares being
purchased as the number of Firm Shares being purchased by such Underwriter bears
to 12,000,000, adjusted by you in such manner as to avoid fractional shares. The
option with respect to the Option Shares granted hereunder may be exercised only
to cover over-allotments in the sale of the Firm Shares by the Underwriters.
You, as Representatives of the several Underwriters, may cancel such option at
any time prior to its expiration by giving written notice of such cancellation
to the Company and the Selling Shareholders listed in Schedule III. To the
extent, if any, that the option is exercised, payment for the Option Shares
shall be made on the Option Closing Date in immediately available funds by wire
transfer to the order of the Company for the Option Shares to be sold by it and
to the order of First Union National Bank of North Carolina, as Custodian, for
the Option Shares to be sold by the Selling Shareholders against delivery of
certificates therefor at the offices of Alex. Brown & Sons Incorporated, 1 South
Street, Baltimore, Maryland 21202.
3. Offering by the Underwriters.
(a) It is understood that the several Underwriters are to make a public
offering of the Firm Shares as soon as the Representatives deem it advisable to
do so. The Firm Shares are to be initially offered to the public at the initial
public offering price set forth in the Prospectus. The Representatives may from
time to time thereafter change the public offering price and other selling
terms. To the extent, if at all, that any Option Shares are purchased pursuant
to Section 2 hereof, the Underwriters will offer them to the public on the
foregoing terms.
It is further understood that you will act as the Representatives for
the Underwriters in the offering and sale of the Shares in accordance with a
Master Agreement Among Underwriters entered into by you and the several other
Underwriters.
4. Covenants of the Company.
(a) The Company covenants and agrees with the several Underwriters and
the Selling Shareholders that:
(i) The Company will (A) prepare and timely file with the
Commission under Rule 424(b) of the Rules and Regulations a Prospectus
containing information previously omitted at the time of effectiveness of the
Registration Statement in reliance on Rule 430A of the Rules and Regulations,
(B) not file any amendment to the Registration Statement or supplement to the
Prospectus or document incorporated by reference therein of which the
Representatives shall not previously have been advised and furnished with a copy
or to which the Representatives shall have reasonably objected in writing or
which is not in compliance with the Rules and Regulations and (C) file on a
timely basis all reports and any definitive proxy or information
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<PAGE> 11
statements required to be filed by the Company with the Commission subsequent to
the date of the Prospectus and prior to the termination of the offering of the
Shares by the Underwriters.
(ii) The Company will advise the Representatives and the
Selling Shareholders promptly of any request of the Commission for amendment of
the Registration Statement or for supplement to the Prospectus or for any
additional information, or of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the use of the
Prospectus or of the institution of any proceedings for that purpose, and the
Company will use its best efforts to prevent the issuance of any such stop order
preventing or suspending the use of the Prospectus and to obtain as soon as
possible the lifting thereof, if issued.
(iii) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary Prospectus
as the Representatives may reasonably request. The Company will deliver to, or
upon the order of, the Representatives during the period when delivery of a
Prospectus is required under the Act, as many copies of the Prospectus in final
form, or as thereafter amended or supplemented, as the Representatives may
reasonably request. The Company will deliver to the Representatives at or before
the Closing Date, four signed copies of the Registration Statement and all
amendments thereto including all exhibits filed therewith, and will deliver to
the Representatives such number of copies of the Registration Statement,
including documents incorporated by reference therein, and of all amendments
thereto, as the Representatives may reasonably request.
(iv) If during the period in which a prospectus is required by
law to be delivered by an Underwriter or dealer any event shall occur as a
result of which, in the judgment of the Company or in the opinion of counsel for
the Underwriters, it becomes necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances existing
at the time the Prospectus is delivered to a purchaser, not misleading, or, if
it is necessary at any time to amend or supplement the Prospectus to comply with
any law, the Company promptly will either (A) prepare and file with the
Commission an appropriate amendment to the Registration Statement or supplement
to the Prospectus or (B) prepare and file with the Commission an appropriate
filing under the Exchange Act which shall be incorporated by reference in the
Prospectus so that the Prospectus as so amended or supplemented will not, in the
light of the circumstances when it is so delivered, be misleading, or so that
the Prospectus will comply with law.
(v) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not later than
15 months after the effective date of the Registration Statement, an earnings
statement (which need not be audited) in reasonable detail, covering a period of
at least 12 consecutive months beginning after the effective date of the
Registration Statement, which earning statement shall satisfy the requirements
of Section 11(a) of the Act and Rule 158 of the Rules and Regulations and will
advise you in writing when such statement has been so made available.
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<PAGE> 12
(vi) The Company will, for a period of five years from the
Closing Date, deliver to the Representatives copies of annual reports and copies
of all other documents, reports and information furnished by the Company to its
stockholders or filed with any securities exchange pursuant to the requirements
of such exchange or with the Commission pursuant to the Act or the Exchange Act.
The Company will deliver to the Representatives similar reports with respect to
significant subsidiaries, as that term is defined in the Rules and Regulations,
which are not consolidated in the Company's financial statements.
(vii) No offering, sale or other disposition of any Common
Stock of the Company or any other securities convertible or exchangeable or
exercisable for Common Stock or derivatives of Common Stock, will be made for a
period of 180 days after the date of this Agreement, directly or indirectly, by
the Company otherwise than hereunder or with the prior written consent of the
Representatives except that the Company may, without such consent, issue shares
upon the exercise of options or the settlement of incentive units outstanding on
the date of this Agreement.
(viii) The Company will use its best efforts to cause the
Pending Acquisitions and the financings related thereto to close in accordance
with the terms described in the Prospectus and to satisfy any and all conditions
required to be satisfied in connection therewith.
(b) Each Selling Shareholder, severally and not jointly, covenants and
agrees with the several Underwriters that:
(i) In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal Responsibility
Act of 1982 and the Interest and Dividend Tax Compliance Act of 1983 with
respect to the transactions herein contemplated, each of the Selling
Shareholders agrees to deliver to you prior to or at the Closing Date a properly
completed and executed United States Treasury Department Form W-9 (or other
applicable form or statement specified by Treasury Department regulations in
lieu thereof).
(ii) Such Selling Shareholder will not take, directly or
indirectly, any action designed to cause or result in, or that has constituted
or might reasonably be expected to constitute, the stabilization or manipulation
of the price of any securities of the Company.
5. Costs and Expenses. The Company will pay all costs, expenses and
fees incident to the performance of the obligations of the Company and the
Selling Shareholders under this Agreement, including, without limiting the
generality of the foregoing, the following: accounting fees of the Company; the
fees and disbursements of counsel for the Company; the cost of printing and
delivering to, or as requested by, the Underwriters copies of the Registration
Statement, Preliminary Prospectuses, the Prospectus, this Agreement, the
Agreement Among Underwriters, the Underwriters' Selling Memorandum, the
Underwriters' Questionnaire, the Invitation Letter; the filing fees of the
Commission; the filing fees and expenses incident to securing any required
review by the NASD of the terms of the sale of the Shares; and the fees and
expenses incurred with respect to the listing of the Shares on the Nasdaq
National Market. The Company shall not, however, be required to pay for any of
the Underwriters' expenses except that, if this Agreement
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<PAGE> 13
shall not be consummated because the conditions in Section 7 hereof are not
satisfied, or because this Agreement is terminated by the Representatives
pursuant to Section 6 hereof, or by reason of any failure, refusal or inability
on the part of the Company to perform any undertaking or satisfy any condition
of this Agreement or to comply with any of the terms hereof on its part to be
performed, unless such failure to satisfy said condition or to comply with said
terms be due to the default or omission of any Underwriter, then the Company
shall reimburse the several Underwriters for reasonable out-of-pocket expenses,
including fees and disbursements of counsel, reasonably incurred in connection
with investigating, marketing and proposing to market the Shares or in
contemplation of performing their obligations hereunder; but neither the Company
nor the Selling Shareholders shall in any event be liable to any of the several
Underwriters for damages on account of loss of anticipated profits from the sale
by them of the Shares.
6. Conditions of Obligations of the Underwriters. The several
obligations of the Underwriters to purchase the Firm Shares on the Closing Date
and the Option Shares, if any, on the Option Closing Date are subject to the
accuracy, as of the Closing Date or the Option Closing Date, as the case may be,
of the representations and warranties of the Company contained herein, and to
the performance by the Company of its covenants and obligations hereunder and to
the following additional conditions:
(a) The Registration Statement and all post-effective amendments
thereto shall have become effective and any and all filings required by Rule 424
and Rule 430A of the Rules and Regulations shall have been made, and any request
of the Commission for additional information (to be included in the Registration
Statement or otherwise) shall have been disclosed to the Representatives and
complied with to their reasonable satisfaction. No stop order suspending the
effectiveness of the Registration Statement, as amended from time to time, shall
have been issued and no proceedings for that purpose shall have been taken or,
to the knowledge of the Company, shall be contemplated by the Commission.
(b) (1) The Representatives shall have received on the Closing Date or
the Option Closing Date, as the case may be, the opinion of Powell, Goldstein,
Frazer & Murphy LLP, counsel for the Company, dated the Closing Date or the
Option Closing Date, as the case may be, addressed to the Underwriters 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 Prospectus. Based upon
appropriate certificates of public officials (which shall be furnished to the
Representatives with the opinion), each of the Subsidiaries listed on Schedule
IV, other than Mediacom Inc. and its subsidiaries (the "U.S. Subsidiaries"), 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 Prospectus.
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<PAGE> 14
(ii) Based upon appropriate certificates of public officials
(which shall be furnished to the Representatives with the opinion), each of the
Company and the U.S. Subsidiaries 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 the Subsidiaries, taken as a whole (a
"Material Adverse Effect").
(iii) The outstanding shares of capital stock of the U.S.
Subsidiaries have been duly authorized and validly issued and are fully paid and
non-assessable, except that such counsel need not express an opinion with
respect to the shares of Decode Communications Group, Inc. and such Advertising
Company of Colorado, Inc.. To the best knowledge of such counsel, the shares of
capital stock of the U.S. Subsidiaries are owned by the Company or one of the
other U.S. Subsidiaries free and clear of all liens, encumbrances and security
interests (other than liens granted by the Company in connection with the Senior
Credit Facility). 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 or ownership interests of the U.S. Subsidiaries are
outstanding.
(iv) The Company has authorized and outstanding capital stock
as set forth under the caption "Capitalization" in the Prospectus; the
authorized shares of its Common Stock have been duly authorized; the outstanding
shares of its Common Stock, including the Shares to be sold by the Selling
Shareholders, have been duly authorized and validly issued and are fully paid
and non-assessable; all of the Shares conform in all material respects to the
description thereof contained in the Prospectus; and the certificates for the
Shares conform to the requirements of the Delaware General Corporation Law.
(v) The Shares, including the Option Shares, if any, to be
sold by the Company pursuant to this Agreement have been duly authorized and
will be validly issued, fully paid and non-assessable when issued and paid for
as contemplated by this Agreement; and no statutory preemptive rights of
stockholders or, to the best of such counsel's knowledge, any other preemptive
rights exist with respect to any of the Shares or the issue and sale thereof.
(vi) The Registration Statement has become effective under the
Act and, to the knowledge of such counsel, no stop order proceedings with
respect thereto have been instituted or are pending or threatened under the Act.
(vii) The Registration Statement, all Preliminary
Prospectuses, the Prospectus and each amendment or supplement thereto filed with
the Commission on or prior to the date of such opinion comply as to form in all
material respects with the requirements of the Act and the applicable rules and
regulations thereunder in effect as of the time of such filing (except that such
counsel need express no opinion as to the financial statements, schedules and
other financial information included therein).
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<PAGE> 15
(viii) Each document incorporated by reference in the
Registration Statement, all Preliminary Prospectuses, the Prospectus and each
amendment or supplement thereto filed with the Commission on or prior to the
date of such opinion complied as to form at the time of such filing in all
material respects with the applicable requirements (if any) of the Exchange Act
and the applicable rules and regulations thereunder in effect as of the date of
such filing (except that such counsel need express no opinion as to the
financial statements, schedules and other financial information included
therein).
(ix) The conditions for the use of Form S-3 as the proper form
for the Registration Statement have been satisfied.
(x) The statements under the captions "Prospectus Summary --
Recent Developments," "Risk Factors -- Restrictions on Tobacco Advertising,"
"Risk Factors -- Regulation of Outdoor Advertising," "Management's Discussion
and Analysis of Results of Operations and Financial Condition -- Liquidity and
Capital Resources," "Description of Capital Stock" and "Description of
Indebtedness and Other Commitments" in the Prospectus and under the caption
"Business -- Government Regulation" in the Company's annual report on Form 10-K,
insofar as such statements are descriptions of documents referred to therein are
fair summaries of the documents so summarized, and insofar as such statements
are summaries of matters of law, such summaries present accurately in all
material respects the information called for with respect to such matters of
law.
(xi) Such counsel does not know of any contracts or documents
required to be filed as exhibits to or incorporated by reference in the
Registration Statement or described in the Registration Statement or the
Prospectus which are not so filed, incorporated by reference or described as
required.
(xii) Such counsel knows of no material legal proceedings or
regulatory or other claims pending or threatened against the Company, the U.S.
Subsidiaries Van Wagner or NAC of a character required to be reflected in the
Prospectus that are not set forth in the Prospectus.
(xiii) The Pending Acquisition Agreements have been duly
authorized, executed and delivered by the Company.
(xiv) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated, and the execution and
delivery of the Pending Acquisition Agreements and the consummation of the
transaction therein contemplated, do not and will not conflict with or result in
a breach of any of the terms or provisions of, or constitute a default under,
the Certificate of Incorporation or By-Laws of the Company, or any agreement or
instrument filed as an exhibit to the Registration Statement or otherwise
identified to such counsel as being material to the Company and the Subsidiaries
in an appropriate certificate of the Company, to which the Company or any of the
U.S. Subsidiaries is a party or by which the Company or any of the U.S.
Subsidiaries may be bound
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<PAGE> 16
(which shall include agreements and instruments by which the Company or any of
the U.S. Subsidiaries may continue to be bound following the consumption of the
Pending Acquisitions) (each a "Contractual Obligation"), and which conflict,
breach or default could reasonably be expected to have a Material Adverse
Effect.
(xv) This Agreement has been duly authorized, executed and
delivered by the Company.
(xvi) Except for approvals, consents, orders, authorizations,
designations, declarations or filings which have been waived, or which have been
obtained or made, no approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in connection with the execution and delivery by
the Company of this Agreement and the consummation by the Company of the
transactions herein contemplated (other than as may be required by the NASD or
as required by State securities and Blue Sky laws as to which such counsel need
express no opinion).
(xvii) The Company is not, and will not become as a result of
the consummation of the transactions contemplated by this Agreement, an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, and has not been an "investment company" at any time since 1988.
In rendering such opinion, Powell, Goldstein, Frazer & Murphy LLP may
rely as to matters governed by the laws of states other than Georgia or Federal
laws on local counsel in such jurisdictions provided that in each case Powell,
Goldstein, Frazer & Murphy LLP shall state that they believe that they and the
Underwriters are justified in relying on such other counsel and such other
counsel's opinion is also delivered to the Underwriters. In addition to the
matters set forth above, such opinion shall also include a statement to the
effect that nothing has come to the attention of such counsel which causes them
to believe that (A) the Registration Statement, as of the time it became
effective under the Act (but after giving effect to any modifications
incorporated therein pursuant to Rule 430A under the Act) and as of the Closing
Date or the Option Closing Date, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
(B) the Prospectus or any supplement thereto, on the date it was filed pursuant
to Rules and Regulations and as of the Closing Date or the Option Closing Date,
as the case may be, contained an untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading (except that such counsel need express no view
as to financial statements, schedules and other financial information included
or incorporated by reference therein). With respect to such statement, Powell,
Goldstein, Frazer & Murphy LLP may state that their belief is based upon the
procedures set forth therein, but is without independent check and verification.
(b) (2) The Representatives shall have received on the Closing Date or
the Option Closing Date, as the case may be, the opinion of Blake Cassels &
Graydon, Ontario counsel to Mediacom Inc., limited to matters of Canadian law,
dated the Closing Date or the Option Closing Date, as the case may be, addressed
to the Underwriters to the effect that:
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<PAGE> 17
(i) Mediacom Inc. is an amalgamated corporation validly
existing under the Canadian Business Corporations Act with all necessary
corporate power and authority to own its property and assets and to carry on its
business now conducted by it. Mediacom Inc. was formed as a result of the
amalgamation of 3284085 Canada Inc. and Mediacom Inc. Prior to such
amalgamation, each of 3284085 Canada Inc. and Mediacom Inc. was duly qualified
as an extra-provincial corporation in all those provinces where it owns, leases
or operates property or conducts business, except to the extent that the failure
to qualify could 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.
(ii) The outstanding shares of capital stock of Mediacom Inc.
have been duly authorized and validly issued and are fully paid. The registered
holders of the outstanding shares of capital stock of Mediacom Inc. are Canadian
Imperial Bank of Commerce (as to 65 common shares, which we understand are
pledged as security for the Senior Credit Facility) and the Company (as to 35
common shares).
(c) The Representatives shall have received on the Closing Date the
opinion of Powell, Goldstein, Frazer & Murphy LLP, counsel for the Selling
Shareholders, dated the Closing Date or the Option Closing Date, as the case may
be, addressed to the Underwriters to the effect that:
(i) The execution and delivery of this Agreement and the
consummation of the sale of Firm Shares by each Selling Shareholder as herein
contemplated do not conflict with or result in a breach of any terms or
provisions of, or constitute a default under any agreement or instrument
identified to such counsel in an appropriate certificate of such Selling
Shareholder, to which such Selling Shareholder is a party or by which such
Selling Shareholder may be bound, which breach could reasonably be expected to
have a materially adverse effect on the ability of such Selling Shareholder to
perform his or its obligations under this Agreement.
(ii) Each Selling Shareholder has full legal right, power and
authority, and any approval required by law (other than as may be required by
State securities and Blue Sky laws or for clearance of the offering with the
NASD, as to which counsel need express no opinion) to sell, assign, transfer and
deliver the Shares to be sold by such Selling Shareholder pursuant to this
Agreement.
(iii) The Custodian Agreement, the Power of Attorney and this
Agreement have been executed and delivered by the Selling Shareholders and the
Custodian Agreement and the Power of Attorney are valid and binding obligations
of such Selling Shareholders enforceable in accordance with their respective
terms, except as enforceability thereof may be limited by bankruptcy,
insolvency, fraudulent conveyance, moratorium or similar laws affecting
creditors' rights generally and by 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).
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<PAGE> 18
(iv) Upon payment for the Firm Shares to be sold by the
Selling Shareholders, and delivery of the stock certificates evidencing such
Firm Shares in accordance with the Underwriting Agreement, the Underwriters
(assuming that they are purchasing the Firm Shares being sold by the Selling
Shareholders in good faith and without actual notice of any adverse claim) will
have acquired valid title to the Shares being sold by each Selling Shareholder
on the Closing Date, free and clear of any adverse claims, any lien in favor of
the Company, and any restrictions on transfer imposed by the Company.
(d) The Representatives shall have received from Piper & Marbury
L.L.P., counsel for the Underwriters, an opinion dated the Closing Date or the
Option Closing Date, as the case may be, substantially to the effect specified
in subparagraphs (iv), (v), (vi), (vii) and (xv) of Paragraph (b)(1) of this
Section 6, and that the Company is a validly organized and existing corporation
under the laws of the State of Delaware. In rendering such opinion Piper &
Marbury L.L.P. may rely as to all matters governed other than by the laws of the
State of Maryland or Federal laws on the opinion of counsel referred to in
paragraph (b) of this Section 6. In addition to the matters set forth above,
such opinion shall also include a statement to the effect that nothing has come
to the attention of such counsel which leads them to believe that (A) the
Registration Statement, as of the time it became effective under the Act (but
after giving effect to any modifications incorporated therein pursuant to Rule
430A under the Act) and as of the Closing Date or the Option Closing Date, as
the case may be, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, and (B) the Prospectus or any supplement
thereto, on the date it was filed pursuant to Rules and Regulations and as of
the Closing Date or the Option Closing Date, as the case may be, contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
(except that such counsel need express no view as to financial statements,
schedules and other financial information included or incorporated by reference
therein). With respect to such statement, Piper & Marbury L.L.P. may state that
their belief is based upon the procedures set forth therein, but is without
independent check and verification.
(e) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, a signed letter from each of Deloitte &
Touche LLP and Coopers & Lybrand L.L.P., dated the Closing Date or the Option
Closing Date, as the case may be, which shall confirm, on the basis of a review
in accordance with the procedures set forth in the letter signed by such firm
and dated and delivered to the Representatives on the date hereof, that nothing
has come to their attention during the period from the date five days prior to
the date hereof, to a date not more than three days prior to the Closing Date or
the Option Closing Date, as the case may be, which would require any change in
their letter dated the date hereof if it were required to be dated and delivered
on the Closing Date or the Option Closing Date, as the case may be. All such
letters shall be in form and substance satisfactory to the Representatives.
(f) The Representatives shall have received on the Closing Date or the
Option Closing Date, as the case may be, a certificate or certificates of the
Chief Executive Officer and the Chief Financial Officer of the Company to the
effect that, as of the Closing Date or the
- 18 -
<PAGE> 19
Option Closing Date, as the case may be, each of them severally represents in
such capacity as follows:
(i) The Registration Statement has become effective under the
Act and no stop order suspending the effectiveness of the Registration Statement
has been issued, and no proceedings for such purpose have been taken or are, to
his knowledge, contemplated by the Commission.
(ii) He does not know of any litigation instituted or
threatened against the Company, any of the Subsidiaries or Van Wagner or NAC of
a character required to be disclosed in the Registration Statement which is not
so disclosed; he does not know of any material contract required to be filed as
an exhibit to the Registration Statement which is not so filed; and the
representations and warranties of the Company contained in Section 1 hereof are
true and correct as of the Closing Date or the Option Closing Date, as the case
may be.
(iii) He has carefully examined the Registration Statement and
the Prospectus and, in his opinion, as of the effective date of the Registration
Statement, the statements contained in the Registration Statement, including any
documents incorporated by reference therein, were true and correct, and such
Registration Statement and Prospectus or any document incorporated by reference
therein did not omit to state a material fact required to be stated therein or
necessary in order to make the statements therein not misleading and, in his
opinion, since the effective date of the Registration Statement, no event has
occurred which should have been set forth in a supplement to or an amendment of
the Prospectus which has not been so set forth in such supplement or amendment.
(g) The Company and the Selling Shareholders shall have furnished to
the Representatives such further certificates and documents confirming the
representations and warranties contained herein and related matters as the
Representatives may reasonably have requested.
(h) The Firm Shares, and Option Shares, if any (including any
additional shares registered pursuant to Rule 462(b)) have been approved for
listing upon official notice of issuance on the Nasdaq National Market.
(i) The Representatives shall have received from each officer and
director of the Company a letter or letters, in form and substance satisfactory
to the Underwriters, pursuant to which such person shall agree not to offer,
sell, sell short or otherwise dispose of any shares of Common Stock of the
Company or other capital stock of the Company, or any other securities
convertible, exchangeable or exercisable for Common Stock or derivative of
Common Stock owned by such person (or as to which such person has the right to
direct the disposition of) for a period of 180 days after the date of this
Agreement, except with the prior written consent of the Representatives.
- 19 -
<PAGE> 20
The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in all
material respects satisfactory to the Representatives and to Piper & Marbury
L.L.P., counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated by
the Representatives by notifying the Company of such termination in writing or
by telegram at or prior to the Closing Date or the Option Closing Date, as the
case may be.
In such event, the Company, the Selling Shareholders and the
Underwriters shall not be under any obligation to each other (except to the
extent provided in Sections 5 and 8 hereof).
7. Conditions of the Obligations of the Company and the Selling
Shareholders. The obligations of the Company and the Selling Shareholders to
sell and deliver the portion of the Shares required to be delivered as and when
specified in this Agreement are subject to the conditions that at the Closing
Date or the Option Closing Date, as the case may be, no stop order suspending
the effectiveness of the Registration Statement shall have been issued and in
effect or proceedings therefor initiated or threatened.
8. Indemnification
(a) The Company and the Selling Shareholders jointly and severally
agree to indemnify and hold harmless each Underwriter and each person, if any,
who controls any Underwriter within the meaning of the Act against any losses,
claims, damages or liabilities to which such Underwriter or such controlling
person may become subject under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained or incorporated by reference in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or (ii) the omission or alleged omission to
state therein a material fact required to be stated or incorporated therein or
necessary to make the statements therein not misleading, and will reimburse each
Underwriter and each such controlling person for any legal or other expenses
reasonably incurred by such Underwriter or such controlling person in connection
with investigating or defending any such loss, claim, damage, liability, action
or proceeding; provided, however, that the Company will not be liable in any
such case to the extent that (i) any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement,
or omission or alleged omission made or incorporated by reference in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Representatives or the
Selling Shareholders specifically for use in the preparation thereof; or (ii)
such statement or omission was contained or made in any Preliminary Prospectus
and corrected in the Prospectus and (A) any such loss, claim, damage or
liability suffered or incurred by any Underwriter (or any person who controls
any Underwriter) resulted from an action, claim or suit by any person who
purchased Shares which are the subject thereof from such
- 20 -
<PAGE> 21
Underwriter in the offering and (B) such Underwriter failed to deliver or
provide a copy of the Prospectus to such person at or prior to the confirmation
of the sale of such Shares in any case where such delivery is required by the
Act. In no event, however, shall the aggregate liability of any Selling
Shareholder for indemnification under this Section 8(a) exceed the lesser of (i)
that proportion of the total of such losses, claims, damages or liabilities
indemnified against equal to the proportion of the total Shares sold hereunder
which is being sold by such Selling Shareholder, or (ii) the net proceeds after
underwriters discounts and commissions received by such Selling Shareholder from
the Underwriters in the offering. In addition, the Selling Shareholders will not
be obligated to make a payment under this subparagraph (a) for any
indemnification claims if and to the extent that payment of such claim is made
by the Company within sixty (60) days after written demand by the Underwriters.
This indemnity agreement will be in addition to any liability which the Company
may otherwise have.
(b) Each Underwriter will indemnify and hold harmless the Company, each
of its directors, each of its officers who have signed the Registration
Statement, the Selling Shareholders, their respective partners and each person,
if any, who controls the Company within the meaning of the Act, against any
losses, claims, damages or liabilities to which any Selling Shareholder, the
Company or any such director, officer, or controlling person may become subject
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
contained or incorporated by reference in the Registration Statement, any
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto,
or arise out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made, and will reimburse any legal or other expenses reasonably
incurred by the Company or any such director, officer, Selling Shareholder,
partner or controlling person in connection with investigating or defending any
such loss, claim, damage, liability, action or proceeding; provided, however,
that each Underwriter will be liable in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission has been made in the Registration Statement, any Preliminary
Prospectus, the Prospectus or such amendment or supplement, in reliance upon and
in conformity with written information furnished to the Company by or through
the Representatives specifically for use in the preparation thereof. This
indemnity agreement will be in addition to any liability which such Underwriter
may otherwise have.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 8, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing. No indemnification provided for in Section
8(a) or (b) shall be available to any party who shall fail to give notice as
provided in this Section 8(c) if the party to whom notice was not given was
unaware of the proceeding to which such notice would have related and was
prejudiced by the failure to give such notice, but the failure to give such
notice shall not relieve the indemnifying party or parties
- 21 -
<PAGE> 22
from any liability which it or they may have to the indemnified party for
contribution or otherwise than on account of the provisions of Section 8(a) or
(b). In case any such proceeding shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party and shall pay as incurred the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel at its own expense.
Notwithstanding the foregoing, the indemnifying party shall pay as incurred the
fees and expenses of the counsel retained by the indemnified party in the event
(i) the indemnifying party and the indemnified party shall have mutually agreed
to the retention of such counsel, (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them, or
(iii) the indemnifying party shall have failed to assume the defense and employ
counsel reasonably acceptable to the indemnified party within a reasonable
period of time after notice of commencement of the action. It is understood that
the indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm for all such indemnified parties. Such
firm shall be designated in writing by you in the case of parties indemnified
pursuant to Section 8(a) and by the Company and the Selling Shareholders in the
case of parties indemnified pursuant to Section 8(b). The indemnifying party
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 party agrees to indemnify the indemnified
party from and against any loss or liability by reason of such settlement or
judgment.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company and the
Selling Shareholders on the one hand and the Underwriters on the other from the
offering of the Shares. If, however, the allocation provided by the immediately
preceding sentence is not permitted by applicable law, then each indemnifying
party shall contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of the Company, the Selling Shareholders and the
Underwriters in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company, the Selling Shareholders and the
Underwriters shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the Company
and the Selling Shareholders bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover page of the
- 22 -
<PAGE> 23
Prospectus. The relative fault 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, the Selling Shareholders or the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
The Company, the Selling Shareholders and the Underwriters agree that
it would not be just and equitable if contributions pursuant to this Section
8(d) were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this Section 8(d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions or proceedings
in respect thereof) referred to above in this Section 8(d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), (i) no Underwriter shall
be required to contribute any amount in excess of the underwriting discounts and
commissions applicable to the Shares purchased by such Underwriter, (ii) 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 and (iii) no Selling Shareholder
shall be required to contribute any amount in excess of (a) the proceeds
received by such Selling Shareholder from the Underwriters in the offering after
deducting underwriting discounts and commissions plus (b) any damages previously
paid by such Selling Shareholder. The Underwriters' obligations in this Section
8(d) to contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it as
an additional defendant in any such proceeding in which such other contributing
party is a party.
9. Default by Underwriters. If on the Closing Date or the Option
Closing Date, as the case may be, any Underwriter shall fail to purchase and pay
for the portion of the Shares which such Underwriter has agreed to purchase and
pay for on such date (otherwise than by reason of any default on the part of the
Company or a Selling Shareholder), you, as Representatives of the Underwriters,
shall use your best efforts to procure within 24 hours thereafter one or more of
the other Underwriters, or any others, to purchase from the Company and the
Selling Shareholders such amounts as may be agreed upon and upon the terms set
forth herein, the Firm Shares or Option Shares, as the case may be, which the
defaulting Underwriter or
- 23 -
<PAGE> 24
Underwriters failed to purchase. If during such 24 hours you, as such
Representatives, shall not have procured such other Underwriters, or any others,
to purchase the Firm Shares or Option Shares, as the case may be, agreed to be
purchased by the defaulting Underwriter or Underwriters, then (a) if the
aggregate number of shares with respect to which such default shall occur does
not exceed 10% of the Firm Shares or Option Shares, as the case may be, covered
hereby, the other Underwriters shall be obligated, severally, in proportion to
the respective numbers of Firm Shares or Option Shares, as the case may be,
which they are obligated to purchase hereunder, to purchase the Firm Shares or
Option Shares, as the case may be, which such defaulting Underwriter or
Underwriters failed to purchase, or (b) if the aggregate number of shares of
Firm Shares or Option Shares, as the case may be, with respect to which such
default shall occur exceeds 10% of the Firm Shares or Option Shares, as the case
may be, covered hereby, the Company and the Selling Shareholders or you as the
Representatives of the Underwriters will have the right, by written notice given
within the next 24-hour period to the parties to this Agreement, to terminate
this Agreement without liability on the part of the non-defaulting Underwriters
or of the Company or of the Selling Shareholders except to the extent provided
in Section 8 hereof. In the event of a default by any Underwriter or
Underwriters, as set forth in this Section 9, the Closing Date or Option Closing
Date, as the case may be, may be postponed for such period, not exceeding seven
days, as you, as Representatives, may determine in order that the required
changes in the Registration Statement or in the Prospectus or in any other
documents or arrangements may be effected. The term "Underwriter" includes any
person substituted for a defaulting Underwriter. Any action taken under this
Section 9 shall not relieve any defaulting Underwriter from liability in respect
of any default of such Underwriter under this Agreement.
10. Notices. All communications hereunder shall be in writing and,
except as otherwise provided herein, will be mailed, delivered or telegraphed
and confirmed as follows: if to the Underwriters, to Alex. Brown & Sons
Incorporated, 1 South Street, Baltimore, Maryland 21202, Attention: Jeff Amling,
Managing Director; if to the Company, to Outdoor Systems, Inc., 2502 North Black
Canyon Highway, Phoenix, Arizona 85009, Attention: William S. Levine, Chairman
of the Board; and if to the Selling Shareholders, First Union National Bank of
North Carolina, 2 First Union Center, Charlotte, North Carolina 28288-1154, as
Custodian, with a copy to Powell, Goldstein, Frazer & Murphy LLP, 191 Peachtree
Street, N.E., Atlanta, Georgia 30303 Attention: William Shearer, Jr.
11. Termination. This Agreement may be terminated by you by notice to
the Company and the Selling Shareholders as follows:
(a) at any time prior to the earlier of (i) the time the Shares are
released by you for sale by notice to the Underwriters, or (ii) 11:30 A.M. on
the first business day following the date of this Agreement;
(b) at any time after the date hereof and prior to the Closing if any
of the following has occurred: (i) since the respective dates as of which
information is given in the Registration Statement and the Prospectus, any
material adverse change or any development involving a prospective material
adverse change in or affecting the condition, financial or otherwise, of the
Company and the Subsidiaries taken as a whole or the earnings, business affairs,
management or business prospects of the Company and the Subsidiaries taken as a
whole, whether or not arising
- 24 -
<PAGE> 25
in the ordinary course of business, (ii) any outbreak or escalation of
hostilities or declaration of war or national emergency after the date hereof or
other national or international calamity or crisis or change in economic or
political conditions if the effect of such outbreak, escalation, declaration,
emergency, calamity, crisis or change on the financial markets of the United
States would, in your reasonable judgment, make the offering or delivery of the
Shares impracticable or inadvisable, (iii) trading in securities on the New York
Stock Exchange or the American Stock Exchange shall have been suspended or
materially limited (other than limitations on hours or numbers of days of
trading) or minimum prices shall have been established for securities on either
such Exchange, (iv) the enactment, publication, decree or other promulgation of
any federal or state statute, regulation, rule or order of any court or other
governmental authority which in your reasonable opinion materially and adversely
affects or will materially or adversely affect the business or operations of the
Company and the Subsidiaries taken as a whole, (v) declaration of a banking
moratorium by either federal or New York State authorities, (vi) any downgrading
in the rating of the Company's debt securities by any "nationally recognized
statistical rating organization" (as defined for purposes of Rule 436(g) under
the Securities Exchange Act of 1934, as amended); (vii) the taking of any action
by any governmental body or agency in respect of its monetary or fiscal affairs
which in your reasonable opinion has a material adverse effect on the securities
markets in the United States or elsewhere; or (viii) any litigation or
proceeding is pending or threatened against the Underwriters which seeks to
enjoin or otherwise restrain, or seeks damages in connection with, or questions
the legality or validity of this Agreement or the transactions contemplated
hereby; or
(c) as provided in Sections 6 and 9 of this Agreement.
This Agreement also may be terminated by you, by notice to the Company
and the Selling Shareholders, as to any obligation of the Underwriters to
purchase the Option Shares, upon the occurrence at any time prior to the Option
Closing Date of any of the events described in subparagraph (b) above or as
provided in Sections 6 and 9 of this Agreement.
13. Successors. This Agreement has been and is made solely for the
benefit of the Underwriters, the Company and the Selling Shareholders and their
respective successors, executors, administrators, heirs and assigns, and the
officers, directors and controlling persons referred to herein, and no other
person will have any right or obligation hereunder. The term "successors" shall
not include any purchaser of the Shares merely because of such purchase.
14. Miscellaneous. The reimbursement, indemnification and contribution
agreements contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof, by or on behalf of the
Company or its directors or officers or by or on behalf of a Selling Shareholder
and (c) delivery of and payment for the Shares under this Agreement.
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.
- 25 -
<PAGE> 26
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Maryland.
- 26 -
<PAGE> 27
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company, the Selling
Shareholders and the several Underwriters in accordance with its terms.
Very truly yours,
Outdoor Systems, Inc.
By:
-----------------------------------
William S. Levine
Chairman
Selling Shareholders
Levine Investments Limited Partnership
By: William S. Levine
BRN Properties Limited Partnership
*
----------------------------------------
By: Arthur R. Moreno
M-K Link Investments Limited
Partnership
*
----------------------------------------
By: Stephen J. Haberkorn
*
----------------------------------------
Wally C. Kelly
* By:
----------------------------------------
William S. Levine, as Attorney-in-Fact
- 27 -
<PAGE> 28
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
ALEX. BROWN & SONS INCORPORATED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
CIBC WOOD GUNDY SECURITIES, CORP.
MONTGOMERY SECURITIES
PRUDENTIAL SECURITIES INCORPORATED
As Representatives of the
several Underwriters listed
on Schedule I
By ALEX. BROWN & SONS INCORPORATED
By
-----------------------------
Authorized Officer
- 28 -
<PAGE> 29
SCHEDULE I
Schedule of Underwriters
Number of Firm Shares
Underwriter to be Purchased
----------- ---------------
Alex. Brown & Sons Incorporate.............................................
Donaldson, Lufkin & Jenrette Securities Corporation........................
CIBC Wood Gundy Securities, Inc............................................
Montgomery Securities......................................................
Prudential Securities Incorporated.........................................
Total............................13,000,000
- 29 -
<PAGE> 30
SCHEDULE II
Schedule of Selling Shareholders
Number of Firm Shares
Selling Shareholder to be Sold
- ------------------- ----------
Levine Investments Limited Partnership...........................262,500
BRN Properties Limited Partnership...............................262,500
M-K Link Investments Limited Partnership.........................300,000
Wally C. Kelly...................................................175,000
Total........................1,000,000
- 30 -
<PAGE> 31
SCHEDULE III
SCHEDULE OF OPTION SHARES
<TABLE>
<CAPTION>
Maximum Number of Percentage of Total
Name of Seller Option Shares to be Sold Number of Option Shares
-------------- ------------------------ -----------------------
<S> <C> <C>
Outdoor Systems, Inc. 975,000 50%
Levine Investments Limited 487,500 25%
Partnership
BRN Properties Limited 487,500 25%
Partnership
</TABLE>
- 31 -
<PAGE> 32
SCHEDULE IV
Subsidiaries
OS Baseline, Inc., an Arizona corporation
Outdoor Systems Painting, Inc., an Arizona corporation
OS Advertising of Texas Painting, Inc., a Texas corporation
Bench Advertising Company of Colorado, Inc. *
Decade Communications Group, Inc.
Mediacom Inc., a Canadian corporation
C.D. Maintenance Services Limited **
Outdoor Advertising Sales Limited **
Transtop Manufacturing Limited **
E.L. Ruddy Company (Ontario) Limited **
Ad Outdoor Signs Limited **
New York Subways Advertising Co., Inc.
OS Bus, Inc.
- ----------------------
* Subsidiary of Decade Communications Group, Inc.
** Subsidiary of Mediacom Inc.
- 32 -
<PAGE> 1
[Powell, Goldstein, Frazer & Murphy LLP Letterhead]
May 20, 1997
Outdoor Systems, Inc.
2502 North Black Canyon Highway
Phoenix, Arizona 85009
Re: Registration Statement on Form S-3 (Reg. No. 333-26407)
Gentlemen:
We have served as counsel for Outdoor Systems, Inc., a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended, pursuant to the Company's Registration
Statement on Form S-3 filed with the Securities and Exchange Commission (the
"Commission") on May 2, 1997 (the "Registration Statement"), of a proposed
public offering of 13,000,000 shares (the "Firm Shares") of common stock, par
value $.01 per share (the "Common Stock"), of the Company of which (i)
12,000,000 shares are to be offered by the Company and (ii) 1,000,000 shares are
to be offered by certain selling stockholders (the "Selling Stockholders"). In
addition, the Company and certain of the Selling Stockholders propose to grant
to Alex. Brown & Sons Incorporated, Donaldson, Lufkin & Jenrette Securities
Corporation, CIBC Wood Gundy Securities Corp., Montgomery Securities, Prudential
Securities Incorporated and the other underwriters to be named in the
Registration Statement (the "Underwriters") an option to purchase up to an
additional 1,930,000 shares of Common Stock (the "Option Shares") to cover
over-allotments, if any. The Firm Shares and the Option Shares are hereinafter
referred to as the "Shares".
We have examined and are familiar with the Registration Statement,
Amendment No. 1 to the Registration Statement filed with the Commission on May
8, 1997, Amendment No. 2 to the Registration Statement in the form proposed to
be filed today with the Commission, the proposed form of Underwriting Agreement
among the Underwriters, the Company and the Selling Stockholders and originals
or copies (certified or otherwise identified to our satisfaction) of such
documents, corporate records and other instruments relating to the incorporation
of the Company and to the authorization and issuance of the Shares as we have
deemed necessary and advisable.
Based upon the foregoing and having regard for such legal considerations
that we have deemed relevant, it is our opinion that the Shares to be offered by
the Selling Stockholders are, and the Shares to be offered by the Company when
issued and delivered against payment therefor in accordance with the
Underwriting Agreement will be, legally and validly issued, fully paid and
non-assessable.
<PAGE> 2
Outdoor Systems, Inc.
May 20, 1997
Page 2
We do hereby consent to the reference to our firm under the heading "Legal
Matters" in the Prospectus contained in the Registration Statement and to the
filing of this opinion as Exhibit 5 thereto.
Very truly yours,
POWELL, GOLDSTEIN, FRAZER & MURPHY LLP
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Amendment No. 2 to Registration Statement No.
333-26407 of Outdoor Systems, Inc. of our report dated February 14, 1997, except
for Note 16 as to which the date is March 26, 1997, appearing in the Prospectus,
which is part of such Registration Statement and to the reference to us under
the headings "Selected Consolidated Financial and Other Data" and "Experts" in
such Prospectus.
We also consent to the incorporation by reference in this Amendment No. 2
to Registration Statement No. 333-26407 of Outdoor Systems, Inc. of our report
dated July 25, 1996 relating to the financial statements of Gannet Outdoor
appearing in the Prospectus included in the Registration Statement on Form S-3
(File No. 333-9713).
DELOITTE & TOUCHE LLP
Phoenix, Arizona
May 20, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Amendment No. 2 to Registration
Statement No. 333-26407 on Form S-3 of Outdoor Systems, Inc. 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, 1996 and 1995 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
May 20, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1,000
<CASH> 4,921
<SECURITIES> 0
<RECEIVABLES> 0
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<CURRENT-ASSETS> 95,471
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0
0
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</TABLE>
<PAGE> 1
Exhibit 99.4
ASSET PURCHASE AGREEMENT
dated as of February 24, 1997
by and between
OUTDOOR SYSTEMS, INC.
AND
GRTP, LTD.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. DEFINITIONS...................................................... 1
2. PURCHASE AND SALE OF THE ASSETS; CLOSING......................... 1
2.1 Agreement to Purchase and Sell.......................... 1
2.2 Purchased Assets........................................ 1
2.3 Agreement to Assume Certain Liabilities................. 2
2.4 Excluded Liabilities.................................... 3
2.5 Closing................................................. 3
2.6 Purchase Price.......................................... 3
2.7 Transactions at the Closing............................. 4
2.8 Third Party Consents.................................... 4
2.9 Joint Venture Assets.................................... 5
3. REPRESENTATIONS AND WARRANTIES OF SELLER......................... 5
3.1 Organization and Good Standing.......................... 5
3.2 Authority; No Conflict.................................. 5
3.3 Solvency................................................ 6
3.4 Books and Records....................................... 6
3.5 Structures.............................................. 6
3.6 Permits................................................. 6
3.7 Site Leases and Advertising Contracts................... 6
3.8 Real Property........................................... 7
3.9 Title, Encumbrances..................................... 7
3.11 Taxes................................................... 7
3.12 Compliance with Legal Requirements...................... 8
3.13 Legal Proceedings; Orders............................... 8
3.14 Other Contracts......................................... 8
3.15 Insurance............................................... 8
3.16 Environmental Matters................................... 8
3.17 Intangible Property..................................... 9
3.18 Relationships with Affiliates........................... 9
3.19 Brokers or Finders...................................... 9
3.20 Employee Benefit Matters................................ 9
3.21 HSR Compliance.......................................... 10
3.22 Seller's Formation...................................... 10
3.23 Disclosure.............................................. 11
4. REPRESENTATIONS AND WARRANTIES OF BUYER.......................... 11
4.1 Organization and Good Standing.......................... 11
4.2 Authority; No Conflict.................................. 11
4.3 Certain Proceedings..................................... 11
4.4 Brokers or Finders...................................... 12
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
5. COVENANTS OF SELLER................................................ 12
5.1 Access and Investigation.................................. 12
5.2 Due Diligence............................................. 12
5.3 Operation of the Purchased Assets......................... 12
5.4 Negative Covenant......................................... 12
5.5 Required Approvals........................................ 12
5.6 Notification.............................................. 13
5.7 No Negotiation............................................ 13
5.8 Tax Clearance............................................. 13
5.9 Leases.................................................... 13
6. COVENANTS OF BUYER................................................. 13
6.1 Required Approvals........................................ 13
6.2 Best Efforts.............................................. 13
6.3 Imprints.................................................. 13
6.4 Notification.............................................. 14
6.5 Office Lease.............................................. 14
6.6 Transfer Taxes............................................ 14
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE................ 14
7.1 Accuracy of Representations............................... 14
7.2 Seller's Performance...................................... 14
7.3 Consents.................................................. 14
7.4 Additional Documents...................................... 15
7.5 No Proceedings............................................ 15
7.6 No Prohibition............................................ 15
7.7 No Material Adverse Change................................ 15
7.8 Due Diligence............................................. 15
7.9 Bank Lien................................................. 15
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE............... 15
8.1 Accuracy of Representations............................... 15
8.2 Buyer's Performance....................................... 16
8.3 Additional Documents...................................... 16
8.4 No Proceedings............................................ 16
8.5 No Prohibition............................................ 16
9. TERMINATION........................................................ 16
9.1 Termination Events........................................ 16
9.2 Effect of Termination..................................... 17
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
10. INDEMNIFICATION; REMEDIES........................................ 17
10.1 Indemnification and Payment of Damages by Seller........ 17
10.2 Indemnification and Payment of Damages by Buyer......... 17
10.3 Procedure for Indemnification -- Third Party Claims..... 18
10.4 Procedure for Indemnification -- Other Claims........... 18
10.5 Survival/Limitations.................................... 19
11. GENERAL PROVISIONS............................................... 19
11.1 Expenses................................................ 19
11.2 Headings; Construction.................................. 19
11.3 Public Announcements.................................... 19
11.4 Availability of Equitable Remedies...................... 19
11.5 Notices................................................. 20
11.6 Further Assurances...................................... 21
11.7 Waiver.................................................. 21
11.8 Entire Agreement and Modification....................... 21
11.9 Assignments, Successors, and No Third-Party Rights...... 21
11.10 Accounts Receivable..................................... 21
11.11 Severability............................................ 21
11.12 Risk of Loss............................................ 21
11.13 Post-Closing Access..................................... 22
11.14 Applicable Law.......................................... 22
11.15 Counterparts............................................ 22
</TABLE>
iii
<PAGE> 5
EXHIBITS
<TABLE>
<S> <C> <C>
Exhibit A - Definitions
Exhibit B - Assignment of Contracts
Exhibit C - Assignment of Permits
Exhibit D - Assignment of Site Leases
Exhibit E - Bill of Sale, Assignment and Assumption Agreement
Exhibit F - Leases
</TABLE>
SCHEDULES
<TABLE>
<S> <C> <C>
Schedule 2.2(a) - Structures/Permits/Management Agreements
Schedule 2.2(b) - Site Leases
Schedule 2.2(d) - Joint Venture Agreements
Schedule 2.2(x) - Excluded Assets
Schedule 2.3 - Assumed Liabilities
Schedule 2.9 - Purchase of Joint Venture Assets
</TABLE>
DISCLOSURE SCHEDULE
<TABLE>
<S> <C>
Part 3.2(b) Part 3.10
Part 3.2(c) Part 3.11(a)
Part 3.5 Part 3.13
Part 3.6 Part 3.14
Part 3.7 Part 3.16
Part 3.9(b) Part 3.18
Part 3.20
Part 3.21
</TABLE>
iv
<PAGE> 6
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is entered into as of
February 24, 1997, by and between OUTDOOR SYSTEMS, INC., a Delaware corporation
("Buyer"), and GRTP, LTD., a Texas limited partnership ("Seller"). (Buyer and
Seller are sometimes herein referred to individually as a "Party" and
collectively as the "Parties".)
RECITALS
Seller is engaged in the business of owning and operating outdoor signs
and billboards and otherwise providing outdoor advertising services in the
metropolitan Dallas/Fort Worth area (the "Business"). Seller desires to sell and
assign certain outdoor advertising assets to Buyer, and Buyer desires to
purchase such assets and to assume certain liabilities associated with such
assets, pursuant to the terms, conditions, limitations and exclusions contained
in this Agreement.
AGREEMENT
The Parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the terms listed on Exhibit A attached
hereto have the meanings specified or referred to in Exhibit A.
2. PURCHASE AND SALE OF THE ASSETS; CLOSING
2.1 AGREEMENT TO PURCHASE AND SELL. Subject to the terms and conditions
of this Agreement, Seller hereby agrees to grant, sell, assign, transfer, convey
and deliver all right, title and interest in and to the Purchased Assets, free
and clear of any liens, title claims, Encumbrances or Security Interests (except
as otherwise specifically permitted pursuant to the provisions of this
Agreement), and Buyer hereby agrees to buy and acquire the Purchased Assets from
Seller, and to assume the Assumed Liabilities upon the terms and conditions set
forth in this Agreement.
2.2 PURCHASED ASSETS. The Purchased Assets are all of the assets of
Seller used in the Business, including:
(a) All of the billboard displays and other out-of-home
advertising structures (including rights to walls), including, without
limitation, those set forth and described in Schedule 2.2(a) attached hereto,
together with all components, fixtures, parts, appurtenances, and equipment
attached to or made a part thereof that are existing, under construction or for
which Seller has any rights (collectively, the "Structures");
<PAGE> 7
(b) All leases, licenses, easements, other rights of ingress
or egress, and all other grants of the right to place, construct, own, operate
or maintain the Structures on land, buildings and other real property owned by
third parties, and all rights therein (collectively, the "Site Leases"),
including, without limitation, those Site Leases listed on Schedule 2.2(b);
and all state and local licenses or permits/tags which Seller has with respect
to the Structures and, to the extent assignable, all other Governmental
Authorizations that are required for the operation of the Structures,
(collectively, the "Permits"), including, without limitation, those Permits
listed on Schedule 2.2(b);
(c) All rights under existing and pending sales and
advertising contracts associated with the Structures, and all rights to the
advertising copy displayed on the Structures as of the Closing Date
(collectively, the "Advertising Contracts"), including, without limitation,
those Advertising Contracts listed on Schedule 2.2(a) attached hereto;
(d) All rights and interests in joint venture arrangements,
however organized, engaged in the outdoor advertising business ("Joint Venture
Agreements"), including, without limitation, those Joint Venture Agreements
listed on Schedule 2.2 (d);
(e) All rights and interests in agreements to manage
structures on behalf of third parties ("Management Agreements"), including,
without limitation, those listed on Schedule 2.2(b);
(f) The Office Lease;
(g) All pertinent Books and Records;
(h) All tangible personal property, including furniture,
equipment, computer hardware and software, owned by Seller and used in the
operation of the Business, save and except those items listed on Schedule
2.2(x);
(i) All Intangible Property used in connection with the
Business except the trade name "Reynolds"; and
(j) All rights (including any benefits arising therefrom),
causes of action, claims and demands of whatever nature (whether or not
liquidated) of Seller relating to the Purchased Assets, including, without
limitation, condemnation rights and proceeds, and all rights against suppliers
under warranties covering any of the Purchased Assets.
Notwithstanding the foregoing, the Purchased Assets shall not include the assets
listed on Schedule 2.2(x) (collectively, "Excluded Assets").
2.3 AGREEMENT TO ASSUME CERTAIN LIABILITIES. At the Closing, Buyer
shall assume and agree to discharge and perform all liabilities and obligations
that are set forth on Schedule 2.3 or arise or are attributable to events
occurring on or after the Closing Date pursuant to the Site Leases, the
Advertising Contracts, the Joint Venture Agreements, the Management Agreements
and the Office Lease (the "Assumed Liabilities") but to the extent and only to
the extent that:
(a) Such obligations are performable on or after the Closing
Date; and
(b) Such obligations are attributable to periods arising on or
after the Closing Date.
2
<PAGE> 8
2.4 EXCLUDED LIABILITIES. All claims against and liabilities and
obligations of Seller not specifically assumed by Buyer pursuant to Section 2.3,
including, without limitation, the following claims against and liabilities of
Seller (the "Excluded Liabilities"), are excluded, and shall not be assumed or
discharged by Buyer, and shall be discharged in full when due by Seller:
(a) Any liabilities to the extent not attributable to the
Purchased Assets;
(b) Any liability of Seller for Taxes arising prior to or from
the sale of the Purchased Assets under this Agreement other than Transfer Taxes.
(c) Any liabilities for or related to indebtedness of Seller
to banks, financial institutions, or other Persons;
(d) Any liabilities of Seller for or with respect to any
employees of Seller, including, without limitation, any liabilities pursuant to
any compensation, collective bargaining, pension, retirement, severance,
termination, or other benefit plan, agreement or arrangement; and
(e) Any other liabilities of Seller that are attributable to
or arise from facts, events, or conditions that occurred or came into existence
prior to the Closing.
2.5 CLOSING. The purchase and sale of the Purchased Assets (the
"Closing") provided for in this Agreement will take place at the offices of
Strasburger & Price, L.L.P., in Dallas, Texas on February 28, 1997 or such later
time and place as the Parties may agree. The effective time of the Closing shall
be 11:59 p.m., Eastern Standard Time, on the Closing Date.
2.6 PURCHASE PRICE. In consideration for the Purchased Assets, Buyer
shall assume the Assumed Liabilities, and pay an amount (the "Purchase Price")
equal to Thirty Million Fifty Thousand Dollars ($30,050,000). The Purchase
Price shall be subject to adjustment as follows:
(a) The following items shall be prorated between Seller and
Buyer as of the Closing Date with respect to the Purchased Assets: power and
utility charges, real and personal property taxes, rents (including percentage
rents) prepaid leases and security deposits under Site Leases and payments and
security deposits under Advertising Contracts. Prorations will be on a
dollar-for-dollar basis based on the number of days of display before and after
the Closing. Percentage rents shall be prorated as of the Closing Date. Any
prorations not determined at the Closing shall be prorated on the basis of the
most current information available at Closing. On the Closing Date, Seller shall
provide to Buyer a list of items and the prorations required by this Section
2.6(a) ("Preliminary Adjustment") and the Purchase Price shall be adjusted
accordingly. Seller agree to furnish Buyer with any documents or records in
Seller's possession that may be needed for Buyer to confirm the adjustment and
prorations in this Section 2.6(a).
(b) Within ninety (90) days after the Closing Date, Buyer will
prepare and provide to Seller the final calculations of adjustments to the
Purchase Price (the "Closing Date Adjustment"). On the 120th day after the
Closing Date, all required refunds or payments under this Section 2.6, shall be
made on the basis of the Closing Date Adjustment.
3
<PAGE> 9
(c) The parties agree to cooperate with each other in
determining and reaching an agreement in writing on the allocation of the
Purchase Price among the Purchased Assets on or prior to Closing.
2.7 TRANSACTIONS AT THE CLOSING. The following transactions shall take
place at the Closing:
(a) Seller shall enter into (as applicable) (and in the case
of certain Leases, Reynolds) and deliver to Buyer: (i) the Bill of Sale, (ii)
the Assignment of Contracts, (iii) the Assignment of Site Leases, (iv) the
Assignment of Permits, (v) the Leases, (vi) all applicable Tax Clearances, and
(vii) other instruments of transfer, evidence of consent and all other related
documents as may be necessary to evidence or perfect the sale, assignment,
transfer, and conveyance of good title to all of the Purchased Assets, in each
case free and clear of all Security Interests and Encumbrances. Seller shall
also deliver to Buyer all Books and Records, including the originals of the
Advertising Contracts and Site Leases.
(b) Buyer shall deliver to Seller the Purchase Price, as
adjusted pursuant to Section 2.6, by wire transfer of immediately available
funds.
(c) Buyer shall enter into (as applicable) and deliver to
Seller: (i) the Bill of Sale, (ii) the Assignment of Contracts, (iii) the
Assignment of Site Leases, (iv) the Assignment of Permits, (v) the Leases, and
(vi) other assumption agreements, instruments and other documents as may be
necessary to evidence the assumption by Buyer of the Assumed Liabilities.
(d) The Parties shall also deliver to each other the
agreements, instruments, opinions, certificates, and other documents referred to
in this Agreement.
2.8 THIRD PARTY CONSENTS. To the extent that Seller's rights under any
Advertising Contract, Site Lease or other interest in the Purchased Assets may
not be assigned without the consent of a third party and such consent has not
been obtained, this Agreement shall not constitute an agreement to assign the
same if an attempted assignment would constitute a breach thereof or be
unlawful, and Seller and Buyer, to the maximum extent permitted by law and any
terms of or limitations relating to such asset, shall use their Best Efforts to
obtain for Buyer the benefits thereunder, and shall cooperate to the maximum
extent permitted by law and any terms of or limitations relating to such asset
in any reasonable arrangement designed to provide such benefits to Buyer,
including any sublease or subcontract or similar arrangement, and if Buyer has
obtained such benefits, Buyer shall discharge Seller's obligations thereunder
arising from and after the Closing Date, except for those obligations arising
because of Seller's breach.
4
<PAGE> 10
2.9 JOINT VENTURE ASSETS. The parties agree that:
(a) in lieu of acquiring Seller's interest in the Joint
Venture Agreements, Buyer, at its option, may purchase at the Closing all of the
assets of each underlying joint venture for the purchase prices set forth on
Schedule 2.9 and upon such other terms and conditions mutually satisfactory to
the parties thereto; and
(b) in such event, the Joint Venture Agreements shall be
excluded from the Purchased Assets and Assumed Other Contracts, and the Purchase
Price shall be adjusted downward as set forth on Schedule 2.9.
3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING. Seller is a limited partnership and
the General Partner is a limited liability company, each of which is duly
organized, validly existing and in good standing under the laws of the State of
Texas. Seller's predecessor is a corporation, duly organized, validly existing
and in good standing under the laws of the State of Delaware. Seller has the
full power and authority to conduct the Business as it is now being conducted,
to own or use the Purchased Assets, and to perform all its obligations. Seller
has delivered to Buyer true and complete copies of its Organizational Documents,
as currently in effect. Each of Seller, the General Partner and Seller's
predecessor is duly qualified to do business and in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification necessary.
3.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Seller, enforceable against it in accordance with its terms. Upon
the execution and delivery by Seller of any documents to be executed at Closing
pursuant to this Agreement (collectively, the "Closing Documents"), such Closing
Documents will constitute the legal, valid, and binding obligations of Seller,
as applicable, enforceable against it in accordance with its terms. Seller has
the absolute and unrestricted right, power and authority to execute and deliver
this Agreement and the Closing Documents to which it is a party and to perform
its obligations thereunder. The execution, delivery and performance of this
Agreement has been specifically authorized by the general partner and sole
limited partner of Seller. Reynolds Outdoor, Inc. is the sole limited partner of
Seller and Reynolds owns all of the outstanding capital stock of Reynolds
Outdoor, Inc. Reynolds Texas Properties, LLC is the sole general partner of
Seller.
(b) Except as set forth in Part 3.2(b) of the Disclosure
Schedule, neither the execution and delivery by Seller of this Agreement nor the
consummation or performance by Seller of any of the Contemplated Transactions
will:
(i) conflict with, violate or result in a breach of
(A) any provision of the Organizational Documents of Seller; (B) to
Seller's Knowledge, any Legal Requirement or
5
<PAGE> 11
any Order to which Seller, the Business or any of the
Purchased Assets or Real Property may be subject; (C) to Seller's
Knowledge, any Governmental Authorization held by Seller or that
otherwise relates to the Business, the Purchased Assets or Real
Property; or (D) any material Contract to which Seller is a party or by
which Seller or the Purchased Assets may be bound; or
(ii) contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person the right
to declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or modify, any
interest or rights of Seller in or to the Purchased Assets or Real
Property; or result in the imposition or creation of any Encumbrance
upon or with respect to any of the Purchased Assets or Real Property.
(c) Except as set forth in Part 3.2(c) of the Disclosure
Schedule, Seller is not and will not be required to give any notice to or obtain
any Consent from any Person in connection with the execution and delivery of
this Agreement or the consummation or performance of any of the Contemplated
Transactions.
3.3 SOLVENCY. By consummating the transactions contemplated hereby,
Seller does not intend to hinder, delay or defraud any of Seller's present or
future creditors or those of Seller's predecessor. Before giving effect to the
transactions contemplated hereby, Seller and Seller's predecessor have been
paying its debts as they become due in the Ordinary Course of Business and,
after giving effect to the transactions contemplated hereby, each will have paid
or discharged all of its debts (or made adequate provision for the payment
thereof).
3.4 BOOKS AND RECORDS. The books of account, and other Books and
Records of Seller and Seller's predecessor maintained in connection with the
Purchased Assets are complete and correct in all material respects and have been
maintained in accordance with sound business practices.
3.5 STRUCTURES. Schedule 2.2(a) contains a complete and correct
description of the ownership of the Structures. Except as set forth in Part 3.5
of the Disclosure Schedule, to Seller's Knowledge, each Structure (i) is located
entirely on property covered by a Site Lease or is located entirely on the Real
Property, and (ii) complies in all material respects with the terms of the
Permits pertaining to it.
3.6 PERMITS. Except as set forth in Part 3.6 of the Disclosure
Schedule, the Permits constitute all material licenses, permits, registrations
and approvals necessary to operate the Business. Seller is, and Seller's
predecessor was, in material compliance with the terms of the Permits. Seller is
not aware of any fact or event which constitutes a material violation of any
Permit, and Seller and Seller's predecessor have not received written notice
that any Governmental Body issuing any Permit intends to cancel, terminate,
modify or amend any Permit.
3.7 SITE LEASES AND ADVERTISING CONTRACTS. Seller has delivered to
Buyer true and complete copies of the Advertising Contracts and the Site Leases.
Except as set forth on Part 3.7 of the Disclosure Schedule, all sales made to
advertisers in connection with the Structures have been made pursuant to
Advertising Contracts. The Site Leases and the Advertising Contracts are in full
6
<PAGE> 12
force and effect, and are binding upon the parties thereto. Except as set forth
in Part 3.7 of the Disclosure Schedule, to the Knowledge of Seller, (x) no
default by Seller or any other party (including Seller's predecessor) has
occurred under the Site Leases or Advertising Contracts, and (y) no event,
occurrence or condition exists which (with or without notice or lapse of time or
the happening of any further event or condition) would become a default by
Seller thereunder or would entitle any other party to terminate a Site Lease or
Advertising Contract, to make a claim or set-off against Seller or otherwise to
amend such Site Lease or Advertising Contract or prevent such Site Lease or
Advertising Contract from being renewed in accordance with its terms. Neither
Seller nor Seller's predecessor has received any written notice of default,
termination or non-renewal under any Site Lease or Advertising Contract.
3.8 REAL PROPERTY. Seller has indefeasible record title to the Real
Property, such title being a fee interest in the Real Property. Neither Seller
nor Seller's predecessor has granted or agreed to grant to any Person (except to
Buyer pursuant to the Leases) any option, agreement or other right to purchase,
sell, lease or occupy any of the Real Property.
3.9 TITLE, ENCUMBRANCES.
(a) Seller has good title to all of the Purchased Assets, and
there are no existing agreements, options, commitments or rights with, of or to
any Person to acquire any of the Purchased Assets or any interest therein. All
of the Purchased Assets are owned by Seller free and clear of all Encumbrances
and Security Interests except for Permitted Liens and the Bank Lien.
(b) Except as set forth in Part 3.9(b) of the Disclosure
Schedule, none of the Structures, Site Leases or the Real Property are or will
be, to the Knowledge of Seller, subject to zoning, use, or building code
restrictions that will prohibit the continued effective ownership, leasing or
other use of such assets as currently owned and used by Seller or the lease of
the Real Property to Buyer pursuant to the Leases. Neither Seller nor Seller's
predecessor has received any notice of pending or Threatened claims,
Proceedings, planned public improvements, annexations, special assessments,
rezonings or other adverse claims affecting the Site Leases or the Real
Property.
3.10 NO UNDISCLOSED LIABILITIES. Except as set forth in Part 3.10 of
the Disclosure Schedule, neither Seller nor Seller's predecessor has any
material liabilities or obligations of any nature relating to the Purchased
Assets.
3.11 TAXES. With respect to the Purchased Assets and the Real Property:
(a) Seller and Seller's predecessor have filed or caused to be
filed all Tax Returns that are or were required to be filed by each of them
pursuant to applicable Legal Requirements. Seller and Seller's predecessor have
paid, or made provision for the payment of, all Taxes that have or may have
become due pursuant to those Tax Returns or otherwise, or pursuant to any
assessment received by Seller or Seller's predecessor, except such Taxes, if
any, as are listed in Part 3.11(a) of the Disclosure Schedule and are being
contested in good faith.
(b) No unpaid Taxes create an Encumbrance (other than
Permitted Liens) on the Purchased Assets or the Real Property.
7
<PAGE> 13
(c) Buyer shall not be liable for any Taxes of Seller or
Seller's predecessor as a result of the Contemplated Transactions.
3.12 COMPLIANCE WITH LEGAL REQUIREMENTS. Seller and Seller's
predecessor have complied with all Legal Requirements applicable to their
respective ownership or use of the Purchased Assets and Real Property, except
for noncompliances or failures that, individually or in the aggregate, would not
be reasonably expected to have a Material Adverse Effect.
3.13 LEGAL PROCEEDINGS; ORDERS. Except as set forth in Part 3.13 of the
Disclosure Schedule, there is no Proceeding pending or, to the Knowledge of
Seller, Threatened against Seller or Seller's predecessor or affecting any of
the Purchased Assets or the Real Property, and there is no Order to which
Seller, Seller's predecessor, the Purchased Assets or the Real Property is
subject.
3.14 OTHER CONTRACTS Seller is not a party to or bound by any Other
Contract, except for the Office Lease, the Joint Venture Agreements, the
Management Agreements and as disclosed in Part 3.14 of the Disclosure Schedule.
Seller has delivered to Buyer true and complete copies of the Assumed Other
Contracts. The Assumed Other Contracts are in full force and effect, and are
binding upon the parties thereto. Except as set forth in Part 3.14 of the
Disclosure Schedule, to the Knowledge of Seller, (x) no default by Seller or any
other party (including Seller's predecessor) has occurred under the Assumed
Other Contracts, and (y) no event, occurrence or condition exists which (with or
without notice or lapse of time or the happening of any further event or
condition) would become a default by Seller thereunder or would entitle any
other party to terminate an Assumed Other Contract, to make a claim or set-off
against Seller or otherwise to amend such Assumed Other Contract or prevent such
Assumed Other Contract from being renewed in accordance with its terms. Neither
Seller nor Seller's predecessor has received any written notice of default,
termination or non-renewal under any Assumed Other Contract.
3.15 INSURANCE. Seller maintains in full force and effect policies of
fire and other casualty, liability, title and other forms of insurance covering
the Purchased Assets, the Real Property and the Business, and the operation
thereof, of the types and with the amounts of coverage as are consistent with
industry standards for outdoor advertising businesses comparable to the
Business.
3.16 ENVIRONMENTAL MATTERS. Except as set forth in Part 3.16 of the
Disclosure Schedule, with respect to the Purchased Assets and the Real Property
and the use or operation thereof: to Seller's Knowledge, (i) Seller and Seller's
predecessor are, and have been, in material compliance with all Environmental
Laws; (ii) Seller and Seller's predecessor have timely filed all material
reports, obtained all required approvals and permits relating to the Business,
and generated and maintained all material data, documentation and records under
any applicable Environmental Laws; (iii) to the Knowledge of Seller, there has
not been any release of the Hazardous Materials at or in the vicinity of the
Business, including the Real Property, or in areas for which Seller or Seller's
predecessor would have responsibility under Environmental Laws; (iv) neither
Seller nor Seller's predecessor has received any written notice from any
Governmental Body or private or public entity advising it that it is or may be
responsible for response costs with respect to a Release, a threatened Release
or clean up of Hazardous Materials produced by, or resulting from, its Business,
operations or processes; and (v) Seller has delivered to Buyer true and complete
copies and results of any reports, studies, analyses,
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tests, or monitoring possessed by Seller or Seller's predecessor pertaining to
Hazardous Materials in, on, or under the properties included in the Purchased
Assets or the Real Property.
3.17 INTANGIBLE PROPERTY. Seller uses, and Seller's predecessor used,
no Intangible Property in connection with the operation of the Purchased Assets
except for the Permits, the Books and Records, the trade name "Reynolds", and
licenses for commonly available software programs under which Seller is
currently the licensee.
3.18 RELATIONSHIPS WITH AFFILIATES. Except as set forth on Part 3.18 of
the Disclosure Schedule, Seller is not, and Seller's predecessor has not been, a
party to any contract with an Affiliate of Seller or Seller's predecessor
relating to the Purchased Assets, the Real Property or the Business. None of
Seller, Seller's predecessor or any of their respective Affiliates is the owner
(of record or as a beneficial owner) of an equity interest or any other
financial or profit interest in, a Person (other than Seller or Seller's
predecessor) that has business dealings or a material financial interest in any
transaction with Seller or Seller's predecessor involving the Purchased Assets,
the Real Property or the Business.
3.19 BROKERS OR FINDERS. Neither Seller nor Seller's predecessor has
incurred any obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement.
3.20 EMPLOYEE BENEFIT MATTERS. Except as disclosed on Part 3.20 of the
Disclosure Schedule, with respect to each of Seller and Seller's predecessor:
(a) Each does not maintain and has never maintained an
"employee benefit pension plan", within the meaning of ERISA Section 3(2), that
is or was subject to Title IV of ERISA.
(b) Each does not have and has not ever had any past, present
or future obligation or liability to contribute any "multiemployer plan", as
defined in ERISA Section 3(37).
For purposes of this Section 3.20 the terms "Seller" and "Seller's predecessor"
shall be deemed to include any other corporation, trade, business or other
entity, other than Seller or Seller's predecessor, which would together with
Seller or Seller's predecessor, respectively, now or in the past, constitute a
single employer within the meaning of Section 414 of the IRC.
3.21 HSR COMPLIANCE.
(a) None of the Seller, its Partners nor Reynolds is a person
(or included in a person), that has total assets of $10 million or more or
annual net sales of $10 million or more, within the meaning of, and all as
determined in accordance with, the HSR Act. Seller has consulted with its
counsel in determining and making such representation.
(b) Attached hereto as Part 3.21 of the Disclosure Schedules
as the following financial statements (collectively, "Financial Statements"):
(a) unaudited financial statements for the fiscal year ended December 31, 1996
for the Seller's predecessor and (b) the most recently regularly prepared
balance sheet of the Seller's
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predecessor, being the unaudited balance sheet of the Seller's predecessor as of
and for the one month ended January 31, 1997. The Financial Statements have been
prepared in accordance with the accounting principles normally used by the
Seller's predecessor on a consistent basis throughout the periods covered
thereby. Seller does not have its own balance sheet or an annual financial
statement.
3.22 SELLER'S FORMATION.
(a) Seller was formed on February 19, 1997 (the "Formation
Date"). Pursuant to the Agreement of Limited Partnership dated February 19, 1997
between the General Partner and the Limited Partner (the "Acquisition
Agreement"), Seller acquired all of the assets and liabilities of Seller's
predecessor related to the Business (the "Acquisition"). Seller has heretofore
delivered to Buyer accurate and complete copy of the Acquisition Agreement.
Prior to the Acquisition, Seller had conducted no business and incurred no
liabilities, other than in connection with its formation, and all such
liabilities have been paid or discharged.
(b) The execution and delivery of the Acquisition Agreement
and the consummation of the transactions contemplated thereby (including,
without limitation, the Acquisition) were duly and validly authorized by all
necessary action on the part of the parties thereto. The Acquisition Agreement
was duly and validly executed by each of the parties thereto and constituted the
valid and binding agreement of each party thereto, enforceable against each such
party in accordance with its terms.
(c) Neither the execution and delivery of the Acquisition
Agreement by the parties thereto nor the consummation or performance of any of
the transactions contemplated thereby by the parties thereto:
(i) conflicted with, violated or resulted in a breach
of (A) any provision of the Organizational Documents of Seller or
Seller's predecessor; (B) to Seller's Knowledge, any Legal Requirement
or any Order to which Seller, Seller's predecessor, the Business or any
of the Purchased Assets or Real Property may have been subject; (C) to
Seller's Knowledge, any Governmental Authorization held by Seller or
Seller's predecessor or that otherwise relates to the Business, the
Purchased Assets or Real Property; or (D) any material Contract to
which Seller or Seller's predecessor was a party or by which Seller,
Seller's predecessor or the Purchased Assets may have been bound; or
(ii) contravened, conflicted with, or resulted in a
violation or breach of any provision of, or gave any Person the right
to declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or modify, any
interest or rights of Seller or Seller's predecessor in or to the
Purchased Assets or Real Property; or resulted in the imposition or
creation of any Encumbrance upon or with respect to any of the
Purchased Assets or Real Property.
(d) All notices and Consents required from any Person in
connection with the execution and delivery of the Acquisition Agreement or the
consummation or performance of any of the transactions contemplated thereby were
given or obtained as required.
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3.23 DISCLOSURE. No representation or warranty of Seller in this
Agreement and no statement in the Disclosure Schedule omits to state a material
fact necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware.
4.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Upon the execution and delivery by Buyer of the Closing Documents to which Buyer
is a party, such Closing Documents will constitute the legal, valid, and binding
obligations of Buyer, enforceable against Buyer in accordance with their
respective terms. Buyer has the absolute and unrestricted right, power, and
authority to execute and deliver this Agreement and the Closing Documents and to
perform its obligations under this Agreement and the Closing Documents to which
Buyer is a party.
(b) Neither the execution and delivery of this Agreement by
Buyer nor the consummation or performance of any of the Contemplated
Transactions by Buyer will give any Person the right to prevent, delay, or
otherwise interfere with any of the Contemplated Transactions pursuant to (i)
any provision of Buyer's Organizational Documents; (ii) any resolution adopted
by the board of directors or the stockholders of Buyer; (iii) any Legal
Requirement or Order to which Buyer may be subject; or (iv) any material
Contract to which Buyer is a party or by which Buyer may be bound. Buyer is not
and will not be required to obtain any Consent from any Person in connection
with the execution and delivery of this Agreement or the consummation or
performance of any of the Contemplated Transactions.
4.3 CERTAIN PROCEEDINGS. There is no pending Proceeding that has been
commenced against Buyer and that challenges, or may have the effect of
preventing, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. Except as set forth on Part 4.3 of the Disclosure
Schedule, to Buyer's Knowledge, no such Proceeding has been Threatened in
writing and no event has occurred or circumstance exist that may give rise to or
serve as a basis for the commencement of any Proceeding.
4.4 BROKERS OR FINDERS. Buyer has not incurred any obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
5. COVENANTS OF SELLER
5.1 ACCESS AND INVESTIGATION. Between the date of this Agreement and
the Closing Date, Seller will, and will cause its Representatives to, afford
Buyer and its Representatives reasonable
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access during normal business hours to Seller's personnel, properties, Books and
Records, and other documents and data relating to the Purchased Assets and the
Business, and furnish Buyer and its Representatives with copies of the same.
5.2 DUE DILIGENCE. Buyer shall have the right, and Seller shall afford
access to Buyer and its Representatives, at all reasonable times upon advance
notice to perform due diligence on the Purchased Assets and the Business from
the date hereof through and including the date that occurs seven (7) calendar
days after the date hereof (the "Due Diligence Period").
5.3 OPERATION OF THE PURCHASED ASSETS. Between the date of this
Agreement and the Closing Date, Seller will:
(a) operate the Business only in the Ordinary Course of
Business;
(b) use its Best Efforts to maintain the Purchased Assets, and
maintain the relations and good will with advertisers, landlords and others
associated with the operation of the Business; and
(c) confer with Buyer concerning any new Advertising Contract,
Site Lease or Other Contract which involves a term of more than three (3) months
or payment of amounts in excess of $50,000.
5.4 NEGATIVE COVENANT. Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, Seller will
operate the Business consistent in all material respects with past practice,
except as otherwise provided in this Agreement.
5.5 REQUIRED APPROVALS AND CONSENTS. As promptly as practicable after
the date of this Agreement, Seller will make all filings required by Legal
Requirements to be made by it in order to consummate the Contemplated
Transactions and use its Best Efforts to obtain such of the Consents identified
in Section 3.2(c) for the transfer of the Purchased Assets.
5.6 NOTIFICATION. Between the date of this Agreement and the Closing
Date, Seller will promptly notify Buyer in writing if Seller become aware of any
fact or condition that causes or constitutes a material breach of any of
Seller's representations and warranties as of the date of this Agreement, or if
Seller become aware of the occurrence after the date of this Agreement of any
fact or condition that would (except as expressly contemplated by this
Agreement) cause or constitute a material breach of any such representation or
warranty had such representation or warranty been made as of the time of
occurrence or discovery of such fact or condition. During the same period,
Seller will promptly notify Buyer of the occurrence of any material breach of
any covenant of Seller in this Section 5 or of the occurrence of any event that
may make the satisfaction of the conditions in Section 7 impossible or unlikely.
5.7 NO NEGOTIATION. Until the earlier of March 31, 1997 or such time,
if any, as this Agreement is terminated pursuant to Section 9, neither Seller
nor any Affiliate will, nor will it permit its Representatives to, directly or
indirectly solicit, initiate, or encourage any inquiries or proposals from,
discuss or negotiate with, provide any non-public information to, or consider
the merits of any
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unsolicited inquiries or proposals from, any Person (other than Buyer or its
Representatives) relating to or affecting any transaction involving the sale of
the Purchased Assets.
5.8 TAX CLEARANCE. Seller shall obtain all certificates of clearances
for Taxes ("Tax Clearances"), if any, required by the State of Texas and
applicable local jurisdictions, or, if such Tax Clearances are required but not
available at the Closing, certificates from the State of Texas and such local
jurisdictions certifying as to the payment by or on behalf of Seller of all
Taxes due on or prior to a date not more than thirty (30) days prior to the
Closing Date (it being agreed and understood that, notwithstanding the
foregoing, if any Tax Clearances are not obtained prior to the Closing, Seller
shall obtain such Tax Clearances after the Closing and shall be responsible for,
and shall discharge in full, all liabilities and obligations therefor).
5.9 LEASES. Seller agrees to enter into, or to cause Reynolds to enter
into, a Lease with Buyer for each location listed on Exhibit F for a term of 25
years.
6. COVENANTS OF BUYER
6.1 REQUIRED APPROVALS. As promptly as practicable after the date of
this Agreement, Buyer will make all filings required by Legal Requirements to be
made by it to consummate the Contemplated Transactions.
6.2 BEST EFFORTS. Between the date of this Agreement and the Closing
Date, Buyer will use its Best Efforts to cause the conditions in Sections 7 and
8 to be satisfied; provided that this Agreement will not require Buyer to
dispose of or make any change in any portion of its business or to incur any
other burden to obtain a Governmental Authorization.
6.3 IMPRINTS. No later than 150 days after the Closing, Buyer shall
remove from all Structures included in the Purchased Assets all imprints used by
Seller containing Seller's trade name; provided, however, until the earlier of
(i) such removal or (ii) the expiration of such 150- day period, Buyer may
display Seller's trade names on such Structures.
6.4 NOTIFICATION. Between the date of this Agreement and the Closing
Date, Buyer will promptly notify Seller in writing if Buyer becomes aware of any
fact or condition that causes or constitutes a breach of any of Buyer's
representations and warranties as of the date of this Agreement, or if Buyer
becomes aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement) cause
or constitute a breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. During the same period, Buyer will promptly notify
Seller of the occurrence of any breach of any covenant of Buyer in this Section
6 or of the occurrence of any event that may make the satisfaction of the
conditions in Section 8 impossible or unlikely.
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6.5 OFFICE LEASE. Reynolds, Tommy Reynolds and Sandy Disbrow shall be
permitted to continue to use their current office space and supporting office
equipment (such as copiers, fax machine, etc) until the expiration of the
current term of the Office Lease; provided, however, that such use is for office
purposes and that such use does not interfere with Buyer's use of the remainder
of the premises.
6.6 TRANSFER TAXES. Buyer agrees to pay any Transfer Taxes, and such
taxes, if any, shall not be considered a liability of Seller for any purpose,
including, without limitation, for purposes of Section 2.4(b).
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Purchased Assets and to take the
other actions required to be taken by Buyer at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Buyer, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS. Seller's representations and
warranties in this Agreement must have been accurate as of the date of this
Agreement, and must be accurate in all material respects as of the Closing Date
as if made on the Closing Date, and Buyer shall have received a certificate of
an executive officer of Seller, dated as of the Closing Date, as to such
accuracy.
7.2 SELLER'S PERFORMANCE. The covenants and obligations that Seller is
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing must have been performed and complied with in all material respects,
and Buyer shall have received a certificate of an executive officer of Seller,
dated as of the Closing Date, as to such compliance.
7.3 CONSENTS. Each of the Consents required pursuant to Section 3.2 (c)
must have been obtained and must be in full force and effect. These shall
include, without limitation, the consents of Seller's joint venture partners
under the Joint Venture Agreements, and the joint venture partners' waivers of
any rights of first refusal, with respect to the Contemplated Transactions.
7.4 ADDITIONAL DOCUMENTS. Each of the following documents must have
been delivered to Buyer:
(a) an opinion of Strasburger & Price, L.L.P dated the Closing
Date, in form and substance reasonably satisfactory to Buyer;
(b) the deliveries required from Seller in Section 2.7; and
(c) such other documents as Buyer may reasonably request for
the purpose of (i) evidencing the satisfaction of any condition referred to in
this Section 7, or (ii) otherwise facilitating the consummation or performance
of any of the Contemplated Transactions.
7.5 NO PROCEEDINGS. Since the date of this Agreement, there must not
have been commenced and pending or Threatened by any Person or any Proceeding
(i) involving any challenge to, or seeking damages or other relief in connection
with, any of the Contemplated Transactions,
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(ii) that prevents, makes illegal, or otherwise materially interferes with any
of the Contemplated Transactions or seeks to do any of the foregoing, or (iii)
that involves any material claim against Seller.
7.6 NO PROHIBITION. There must not be in effect any Legal Requirement
or any injunction or other Order that prohibits or restricts the consummation of
the Contemplated Transactions, including, without limitation, HSR Act
compliance.
7.7 NO MATERIAL ADVERSE CHANGE. There shall not have been a Material
Adverse Change since the date hereof.
7.8 DUE DILIGENCE. Buyer's due diligence investigation and review of
the Business with respect to the Purchased Assets, the Real Property, the
Business and the Assumed Liabilities shall not reveal any fact or circumstance
not disclosed to Seller in the Disclosure Schedule prior to the execution hereof
which in Buyer's judgment, exercised in good faith, would cause or be likely to
cause a Material Adverse Change to the value of the Purchased Assets.
7.9 BANK LIEN. The Bank Lien and any liens other than Permitted Liens
shall have been released.
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE
Seller's obligation to sell the Purchased Assets and Seller's
obligations to take the other actions required to be taken by Seller at the
Closing is subject to the satisfaction, at or prior to the Closing, of each of
the following conditions (any of which may be waived by Seller, in whole or in
part):
8.1 ACCURACY OF REPRESENTATIONS. Buyer's representations and warranties
in this Agreement must have been accurate as of the date of this Agreement and
must be accurate in all material respects as of the Closing Date as if made on
the Closing Date, and Seller shall have received a certificate of an executive
officer of Buyer, dated as of the Closing Date, as to such accuracy.
8.2 BUYER'S PERFORMANCE. The covenants and obligations that Buyer is
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing must have been performed and complied with in all material respects,
and Seller shall have received a certificate of an executive officer of Buyer,
dated as of the Closing Date, as to such compliance.
8.3 ADDITIONAL DOCUMENTS. Buyer must have caused the following
documents to be delivered to Seller:
(a) an opinion of Powell, Goldstein, Frazer & Murphy, dated
the Closing Date, in form and substance reasonably acceptable to Seller;
(b) the deliveries required from Buyer in Section 2.7; and
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(c) such other documents as Seller may reasonably request for
the purpose of (i) evidencing the satisfaction of any condition referred to in
this Section 8, or (ii) otherwise facilitating the consummation of any of the
Contemplated Transactions.
8.4 NO PROCEEDINGS. Since the date of this Agreement, there must not
have been commenced and pending or Threatened any Proceeding (i) involving any
challenge to, or seeking damages or other relief in connection with, any of the
Contemplated Transactions, or (ii) that prevents, makes illegal, or otherwise
materially interferes with any of the Contemplated Transactions or seeks to do
any of the foregoing.
8.5 NO PROHIBITION. There must not be in effect any Legal Requirement
or any injunction or other Order that prohibits or restricts the consummation of
the Contemplated Transactions.
9. TERMINATION
9.1 TERMINATION EVENTS. This Agreement may, by notice given prior to or
at the Closing, be terminated:
(a) by mutual consent of Buyer and Seller;
(b) (i) by Buyer if any of the conditions in Section 7 has not
been satisfied as of the Closing Date or if satisfaction of such a condition is
or becomes impossible (other than through the failure of Buyer to comply with
its obligations under this Agreement) and Buyer has not waived such condition on
or before the Closing Date; or (ii) by Seller, if any of the conditions in
Section 8 has not been satisfied as of the Closing Date or if satisfaction of
such a condition is or becomes impossible (other than through the failure of
Seller to comply with its obligations under this Agreement) and Seller has not
waived such condition on or before the Closing Date; or
(c) by Buyer, on the one hand, or Seller, on the other hand,
if the Closing has not occurred (other than through the failure of the other
Party seeking to terminate this Agreement to comply fully with its obligations
under this Agreement) on or before March 31, 1997, or such later date as the
Parties may agree upon.
9.2 EFFECT OF TERMINATION. Each Party's right of termination under
Section 9.1 is in addition to any other rights it may have under this Agreement.
If this Agreement is terminated pursuant to Section 9.1, all further obligations
of the Parties under this Agreement will terminate, except that the obligations
in Sections 11.1, 11.3 and 11.4 will survive; provided, however, that if this
Agreement is terminated by a Party because of the breach of the Agreement by the
other Party or because one or more of the conditions to the terminating Party's
obligations under this Agreement is not satisfied as a result of the other
Party's failure to comply with its obligations under this Agreement, the
terminating Party's right to pursue all legal and equitable remedies, separately
or simultaneously, (including specific performance) will survive such
termination unimpaired.
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10. INDEMNIFICATION; REMEDIES
10.1 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER. Seller will
indemnify and hold harmless Buyer, stockholders, controlling Persons, and
Affiliates (collectively, the "Seller Indemnified Persons") for, and will pay to
the Seller Indemnified Persons the amount of, any loss, liability, claim,
damage, expense (including reasonable costs of investigation and defense and
reasonable attorneys' fees), whether or not involving a third-party claim
(collectively, "Damages"), arising, directly or indirectly, from or in
connection with:
(a) any material breach of any representation or warranty made
by Seller in this Agreement, the Disclosure Schedule, or any other certificate
or document delivered by Seller pursuant to this Agreement;
(b) any breach by Seller of any covenant or obligation of
Seller in this Agreement or any certificate or document delivered by Seller
pursuant to this Agreement;
(c) the failure of Seller to satisfy and discharge any
Excluded Liabilities, except only the Assumed Liabilities; and
(d) the failure of Seller to comply with bulk sales or other
similar laws in any applicable jurisdiction;
provided, however, that any claim for Damages pursuant to this Section 10.1
must be made on or before the first anniversary of the Closing Date.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer will
indemnify and hold harmless Seller and its stockholders, controlling Persons,
and Affiliates (collectively, the "Buyer Indemnified Persons") for, and will pay
to the Buyer Indemnified Persons the amount of any Damages arising, directly or
indirectly, from or in connection with:
(a) any material breach of any representation or warranty made
by Buyer in this Agreement or in any certificate or document delivered by Buyer
pursuant to this Agreement; and
(b) any breach by Buyer of any covenant or obligation of Buyer
in this Agreement including, without limitation, any failure to pay Assumed
Liabilities after the Closing.
10.3 PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS.
(a) Promptly after receipt by an Indemnified Person under
Section 10.1 or 10.2, of notice of any claim against it, such Indemnified Person
will, if a claim is to be made against an Indemnifying Party under such Section,
give notice to the Indemnifying Party of the commencement of such claim, but the
failure to notify the Indemnifying Party will not relieve the Indemnifying Party
of any liability that it may have to any Indemnified Person, except to the
extent that the Indemnifying Party demonstrates that the defense of such action
is prejudiced by the Indemnifying Party's failure to give such notice.
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(b) If any claim referred to in Section 10.3(a) is brought
against an Indemnified Person and it gives written notice to the Indemnifying
Party of such claim, the Indemnifying Party may, at its option, assume the
defense of such claim with counsel satisfactory to the Indemnified Person and,
after written notice from the Indemnifying Party to the Indemnified Person of
its election to assume the defense of such claim, the Indemnifying Party will
not, as long as it diligently conducts such defense, be liable to the
Indemnified Person under this Article 10 for any fees of other counsel or any
other expenses with respect to the defense of such claim, subsequently incurred
by the Indemnified Person in connection with the defense of such claim, other
than reasonable costs of investigation. If the Indemnifying Party assumes the
defense of a claim, (i) no compromise or settlement of such claims may be
effected by the Indemnifying Party without the Indemnified Person's consent
unless (A) there is no finding or admission of any violation of Legal
Requirements or any violation of the rights of any Person, and (B) the sole
relief provided is monetary damages that are paid in full by the Indemnifying
Party; and (ii) the Indemnified Person will have no liability with respect to
any compromise or settlement of such claims effected without its consent.
Subject to Section 10.3(c), if notice is given to an Indemnifying Party of any
claim and the Indemnifying Party does not, within twenty days after the
Indemnified Person's notice is given, give notice to the Indemnified Person of
its election to assume the defense of such claim, the Indemnifying Party will be
bound by any determination made in such Proceeding or any compromise or
settlement effected by the Indemnified Person.
(c) Notwithstanding the foregoing, if an Indemnified Person
determines in good faith that there is a reasonable probability that a claim may
adversely affect it or its affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
Indemnified Person may, by notice to the Indemnifying Party, assume the
exclusive right to defend, compromise, or settle such claim, but the
Indemnifying Party will not be bound by any determination of a claim so defended
or any compromise or settlement effected or expenses incurred without its
consent (which consent may not be unreasonably withheld).
10.4 PROCEDURE FOR INDEMNIFICATION -- OTHER CLAIMS. A claim for
indemnification for any matter not involving a third-party claim shall be
asserted by written notice to the Indemnifying Party from whom indemnification
is sought.
10.5 SURVIVAL/LIMITATIONS.
(a) The parties hereto agree that (i) the covenants and
agreements contained in Sections 10.1 and 10.2 and in Article 11 hereto shall
survive the Closing without limitation (unless expressly limited by their
terms), and (ii) all other covenants, agreements, representations and warranties
contained herein shall survive until the first anniversary following the Closing
Date.
(b) Seller's obligation to indemnify the Seller Indemnified
Persons for Damages pursuant to Section 10.1 hereof is subject to the following
limitation: in no event shall Seller's obligation to indemnify the Seller
Indemnified Persons exceed Three Million Dollars ($3,000,000).
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11. GENERAL PROVISIONS
11.1 EXPENSES. Except as otherwise expressly provided in this
Agreement, each Party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, brokers or finders, counsel, and accountants. In the
event of termination of this Agreement, the obligation of each Party to pay its
own expenses will be subject to any rights of such Party arising from a breach
of this Agreement by another Party.
11.2 HEADINGS; CONSTRUCTION. The headings of Sections in this Agreement
are provided for convenience only and will not affect its construction or
interpretation. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
11.3 PUBLIC ANNOUNCEMENTS; CONFIDENTIALITY. Any public announcement or
similar publicity with respect to this Agreement or the Contemplated
Transactions will be issued, if at all, at such time and in such manner as Buyer
and Seller agree in writing, provided that the parties shall reasonably
cooperate in such announcements, and provided further that nothing contained
herein shall prevent any party from at any time furnishing information required
by a Governmental Body. Unless consented to by Buyer and Seller in advance or
required by Legal Requirements, prior to the Closing, each Party shall, and
shall cause their respective Representatives to, keep this Agreement strictly
confidential and may not make any disclosure of this Agreement to any Person.
11.4 AVAILABILITY OF EQUITABLE REMEDIES. The Parties acknowledge and
agree that (i) a breach of the provisions of this Agreement could not adequately
be compensated by money damages, and (ii) any Party shall be entitled, either
before or after the Closing, in addition to any other right or remedy available
to it, to an injunction restraining such breach and to specific performance of
this Agreement, and no bond or other security shall be required in connection
therewith.
11.5 NOTICES. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed by certified mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
Party may designate by notice to the other Parties):
If to Seller, to:
Mr. George T. Reynolds III
GRTP, Ltd.
2911 Turtle Creek Boulevard
Suite #880
Dallas, Texas 75219
Telephone No.: (214) 559-3844
Facsimile No.: (214) 552-7041
19
<PAGE> 25
With a copy to:
Strasburger & Price, L.L.P.
901 Main Street
Suite 4300
Dallas, Texas 75202
Attention: Mike Joplin, Esq.
Telephone No.: (214) 651-4300
Facsimile No.: (214) 651-4330
If to Buyer, to:
Outdoor Systems, Inc.
2502 North Black Canyon Highway
Phoenix, Arizona 85009
Telephone No.: (602) 246-9569
Facsimile No.: (602) 433-2482
Attention: William S. Levine
and
William S. Levine
1702 E. Highland Avenue, Suite 310
Phoenix, Arizona 85016
Telephone No.: (602) 248-8181
Facsimile No.: (602) 248-0884
With a copy to:
Powell, Goldstein, Frazer & Murphy
191 Peachtree Street, NE, 16th Floor
Atlanta, Georgia 30303
Attention: William B. Shearer, Jr., Esq.
Telephone No.: (404) 572-6600
Facsimile No.: (404) 572-6999
11.6 FURTHER ASSURANCES. The Parties agree (i) to furnish upon request
to each other such further information, (ii) to execute and deliver to each
other such other documents, and (iii) to do such other acts and things, all as
the other Party may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to in this Agreement.
11.7 WAIVER. Neither the failure nor any delay by any Party in
exercising any right, power, or privilege under this Agreement or the documents
referred to in this Agreement will operate as a waiver of such right, power, or
privilege, and no single or partial exercise of any such right, power, or
privilege will preclude any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or privilege.
11.8 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the Parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the
20
<PAGE> 26
agreement between the Parties with respect to its subject matter. This Agreement
may not be amended except by a written agreement executed by the Party to be
charged with the amendment.
11.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. No Party may
assign any of its rights under this Agreement without the prior consent of the
other Parties except that Buyer may assign any of its rights under this
Agreement to any affiliate of Buyer. This Agreement will apply to, be binding in
all respects upon, and inure to the benefit of the Parties, and their
successors, by liquidation or otherwise, and their permitted assigns. Nothing
expressed or referred to in this Agreement will be construed to give any Person
other than the Parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement.
11.10 ACCOUNTS RECEIVABLE. Buyer agrees to forward to Seller any
payments that Buyer may receive with respect to any accounts receivable of
Seller.
11.11 SEVERABILITY. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
11.12 RISK OF LOSS. Material risk of loss or damage to the Purchased
Assets from any cause whatsoever prior to the Closing shall be borne by Seller,
and after the Closing shall be borne by Buyer.
11.13 POST-CLOSING ACCESS. Buyer agrees that all Books and Records
delivered to Buyer by Seller pursuant to this Agreement shall be maintained open
for inspection by Seller at any time during regular business hours upon
reasonable notice for a period of six (6) years (or for such longer period as
may be required by applicable Legal Requirements) following the Closing and
that, during such period, Seller, at its expense, may make such copies thereof
as it may reasonably desire. Seller agrees that all books and records relating
to the Purchased Assets and retained by Seller shall be maintained open for
inspection by Buyer at any time during regular business hours for a period of
six (6) years (or for such longer period as may be required by applicable Legal
Requirements) following the Closing and that, during such period, Buyer, at its
expense, may make such copies thereof as it may reasonably desire. Nothing
contained in this Section 11.13 shall obligate any Party hereto to make
available any books and records if to do so would violate the terms of any
Contract or Legal Requirement to which it is a party or to which it or its
assets are subject.
11.14 APPLICABLE LAW. This Agreement shall be governed and controlled
as to validity, enforcement, interpretations, construction, effect and in all
other respects by the internal laws of the State of Texas applicable to
contracts made in that State. The parties hereto agree to submit exclusively to
any federal or state court located in the State of Texas any dispute or
controversy arising out of or relating to this Agreement.
11.15 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
21
<PAGE> 27
IN WITNESS WHEREOF, the Parties have executed, sealed and delivered
this Agreement as of the date first written above.
BUYER:
OUTDOOR SYSTEMS, INC.
By:
-----------------------------------
Arte Moreno
President
SELLER:
GRTP, LTD.
By: Reynolds Texas Properties LLC,
General Partner
By:
-----------------------------------
George T. Reynolds, III
President
22
<PAGE> 28
EXHIBIT A
DEFINITIONS
"ADVERTISING CONTRACTS" -- as defined in Section 2.2(c).
"AFFILIATES" -- when used with reference to a specified Person, any
other Person that directly, or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with the Specified
Person. For purposes of this definition of Affiliate, "control" means the
possession, directly or indirectly, of the power to direct or to cause the
direction of management and policies of the Person in question, whether through
the ownership of voting securities or by contract or otherwise.
"ASSIGNMENT OF CONTRACTS" -- the Assignment and Assumption of Contracts
in the form of Exhibit B attached hereto.
"ASSIGNMENT OF PERMITS" -- the Assignment and Assumption of Permits in
the form of Exhibit C attached hereto.
"ASSIGNMENT OF SITE LEASES" -- the Assignment and Assumption of Site
Leases in the form of Exhibit D attached hereto.
"ASSUMED LIABILITIES" -- as defined in Section 2.3.
"ASSUMED OTHER CONTRACTS" -- the Office Lease, the Joint Venture
Agreements and the Management Agreements.
"BANK LIEN" -- that certain security interest and lien in the Purchased
Assets held by Bank One.
"BEST EFFORTS" -- the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances.
"BILL OF SALE" -- the Bill of Sale, Assignment and Assumption Agreement
in the form of Exhibit E attached hereto.
"BOOKS AND RECORDS" -- All of Seller's books and records relating to
the Purchased Assets, including, without limitation, all Site Lease files,
Advertising Contract files, Permit files, maintenance and other records for the
Structures, logs, advertiser, customer and supplier lists.
"BUYER" -- as defined in the first paragraph of this Agreement.
"CLOSING" -- as defined in Section 2.5.
"CLOSING DATE" -- the date and time as of which the Closing actually
takes place.
A-1
<PAGE> 29
"CLOSING DOCUMENTS" -- as defined in Section 3.2(a).
"CONFIDENTIAL INFORMATION" -- any information concerning the businesses
and affairs of Seller that is not generally available to the public.
"CONSENT" -- any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS" -- all of the transactions contemplated by
this Agreement, including: (a) the purchase of the Purchased Assets by Buyer
from Seller and assignment to and assumption by Buyer of the Assumed
Liabilities, (b) the execution and delivery by Buyer and Seller of the Leases,
and (c) the performance by Buyer and Seller of their respective covenants and
obligations under this Agreement.
"CONTRACT" -- any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"DAMAGES" -- as defined in Section 10.1.
"DEEDS" -- limited warranty deeds (or the statutory equivalent thereof
with covenants against grantor's acts only), in recordable form, with respect to
the Owned Real Property.
"DISCLOSURE SCHEDULE" -- the disclosure schedule, delivered by Seller
to Buyer concurrently with the execution and delivery of this Agreement.
"DUE DILIGENCE PERIOD" -- as defined in Section 5.2.
"ENCUMBRANCE" -- any charge, claim, condition, equitable interest,
lien, option, pledge, security interest, right of first refusal, or restriction
of any kind, including any restriction on use, transfer, receipt of income, or
exercise of any other attribute of ownership.
"ENVIRONMENT" -- soil, land surface or subsurface strata, surface
waters, groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"ENVIRONMENTAL LAW" -- any Legal Requirement pertaining to
environmental discharges, Release, emissions or spills or the manufacture, sale,
processing, handling, transportation, storage or disposal of any Hazardous
Materials, or relating to any environmental processes or condition, including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), the Clean Air Act, the Clean Water Act, the Resource
Conservation and Recovery Act ("RCRA"), the Endangered Species Act, the Federal
Insecticide, Fungicide and Rodenticide Act, the Hazardous Materials
Transportation Act, the Surface Mining Control and Reclamation Act, the
Emergency Planning and Community Right to Know Act, the Safe Drinking Water Act,
the Toxic Substances Control Act, the Coastal Zone Management Act, the National
Environmental Policy Act, the Noise Control Act. As used in this Agreement,
Environmental Laws shall mean any of such laws or regulations as the same exist
now or at the Closing Date.
A-2
<PAGE> 30
"ERISA" -- the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"EXCLUDED ASSETS" -- as defined in Section 2.2.
"EXCLUDED LIABILITIES" -- as defined in Section 2.4.
"GENERAL PARTNER" -- Reynolds Texas Properties, LLC.
"GOVERNMENTAL AUTHORIZATION" -- any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY" -- any federal, state, local, municipal, foreign,
or other government; or governmental or quasi-governmental authority of any
nature (including any governmental agency, branch, department, official, or
entity and any court or other tribunal).
"HAZARDOUS MATERIALS" -- any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, and specifically including petroleum and all derivatives
thereof or synthetic substitutes therefor and asbestos or asbestos-containing
materials.
"HSR ACT" -- the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and any regulations and rules promulgated thereunder.
"JOINT VENTURE AGREEMENTS" -- as defined in Section 2.2(e).
"INDEMNIFIED PERSON" -- any of the Seller Indemnified Persons or the
Buyer Indemnified Persons, as the context requires.
"INDEMNIFYING PARTY" -- the Buyer or the Seller, as the context
requires.
"INTANGIBLE PROPERTY" -- All right, title and interest in and to the
goodwill and other intangible property (except for Seller's corporate or trade
names and trade logos) used in connection with the Purchased Assets, all
licenses, permits and authorizations pertaining to the Purchased Assets or the
right to own and operate the Purchased Assets and all right, title and interest
in and to (i) any intellectual property used in connection with the Purchased
Assets, and (ii) all records and data relating specifically to the Purchased
Assets.
"IRC" -- the Internal Revenue Code of 1986, as amended from time to
time, or any successor law, and regulations issued by the IRS pursuant to the
Internal Revenue Code or any successor law.
"IRS" -- the United States Internal Revenue Service and, to the extent
relevant, the United States Department of the Treasury.
A-3
<PAGE> 31
"KNOWLEDGE" -- a Person will be deemed to have "Knowledge" of a
particular fact or other matter only if such Person is actually aware of such
fact or other matter without making any independent inquiry or investigation. A
Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving as a director,
officer, partner, executor, or trustee of such Person (or, in the case of
Seller, any of Seller's Partners) (or in any similar capacity) has Knowledge of
such fact or other matter.
"LEASES" -- those leases pertaining to the Real Property leased by
Seller, and the real property leased by Reynolds, to Buyer substantially in the
form of Exhibit F and on the terms further described on Exhibit F.
"LEGAL REQUIREMENT" -- any federal, state, local, municipal, foreign,
international, multinational, or other administrative Order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"LIMITED PARTNER" -- Reynolds Outdoor, Inc.
"MANAGEMENT AGREEMENTS" -- as defined in Section 2.2(e).
"MATERIAL ADVERSE CHANGE" -- a change that will probably cause a
Material Adverse Effect.
"MATERIAL ADVERSE EFFECT" -- a material adverse effect on the Business,
the Purchased Assets, or the Real Property or operations or conditions
(financial or otherwise) relating thereto, taken as a whole.
"OFFICE LEASE" -- that certain Office Lease for office space in Dallas,
Texas between Reynolds Outdoor, Inc. and Summer Springs Joint Venture Limited
Partnership dated February 19, 1989, as amended April 20, 1989 and September 2,
1993.
"ORDER" -- any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" -- an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" if such action is
consistent with the past custom and practices of such Person and is taken in the
ordinary course of the normal day-to-day operations of such Person (including
with respect to quantity and frequency).
"ORGANIZATIONAL DOCUMENTS" -- (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and (e) any amendment
to any of the foregoing.
A-4
<PAGE> 32
"OTHER CONTRACT" -- any Contract (other than a Site Lease, Management
Contract or Advertising Contract) relating to or affecting the Purchased Assets,
the Real Property, or the operation thereof (i) under which Seller has or may
acquire any rights, (ii) under which Seller has or may become subject to any
obligation or liability, or (iii) by which Seller or any of the Purchased Assets
or the Real Property is or may become bound.
"PARTNERS" -- the General Partner and the Limited Partner.
"PARTY" -- as defined in the first paragraph of this Agreement.
"PERMITS" -- as defined in Section 2.2(d).
"PERMITTED LIENS" -- liens for taxes not yet delinquent, mechanic's,
materialmen's and similar liens which have arisen in the ordinary course of
business, and purchase money security interests.
"PERSON" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"PROCEEDING" -- any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"PURCHASE PRICE" -- as defined in Section 2.6.
"PURCHASED ASSETS" -- as defined in Section 2.2.
"REAL PROPERTY" -- as defined in Schedule 2.2(x).
"RELEASE" -- any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"REYNOLDS" -- George T. Reynolds, III, a resident of Highland Park,
Dallas County, Texas.
"REPRESENTATIVE" -- with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"SECURITY INTEREST" -- any mortgage, pledge, lien, encumbrance, charge
or other security interest or option or right of any third party with respect
thereto.
"SELLER" -- as defined in the first paragraph of this Agreement.
"SELLER'S PREDECESSOR" -- Reynolds Outdoor, Inc.
"SITE LEASES" -- as defined in Section 2.2(b).
A-5
<PAGE> 33
"STRUCTURES" -- as defined in Section 2.2(a).
"TAX" -- shall mean all tax (including income tax, capital gains tax,
value added tax, sales tax, property tax, transfer tax or intangibles tax), levy
assessment, tariff, duty, deficiency or other fee and any related charge or
amount (including fine, penalty and interest) imposed, assessed or collected by
or under the authority of any Governmental Body.
"TAX CLEARANCES" -- as defined in Section 5.9.
"TAX RETURN" -- any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"TRANSFER TAXES" -- any sales, use or transfer taxes arising from the
transfer of the Purchased Assets from Seller to Buyer hereunder.
"THREATENED" -- a claim, Proceeding or dispute will be deemed to have
been "THREATENED" if any demand or statement has been made or any notice has
been given that would lead a prudent Person to conclude that such a claim,
Proceeding or dispute is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
A-6
<PAGE> 34
SCHEDULE 2.2(x)
1. All of the real property owned in fee by Seller, and all buildings,
facilities, fixtures, leasehold and other improvements located therein (other
than the Structures), listed on the attached list.
2. All accounts receivable of Seller.
<PAGE> 35
SCHEDULE 2.9
<TABLE>
<CAPTION>
Total Adjustment to
Purchase Price Purchase Price
Joint Venture for Assets Payable to GRTP, Ltd.
------------- ---------- ---------------------
<S> <C> <C>
RV Outdoor Sign Joint Venture $1,500,000 ($ 750,000.00)
Reynolds/McCrary Joint Venture 332,615 ( 166,307.50)
Outdoor Sign Joint Venture 376,095 ( 188,047.50)
</TABLE>
<PAGE> 1
EXHIBIT 99.9
================================================================================
ASSET PURCHASE AGREEMENT
dated as of December 27, 1996
by and among
OUTDOOR SYSTEMS, INC.
VILLEPIGUE OUTDOOR ADVERTISING CORPORATION,
VILLEPIGUE INTERNATIONAL ADVERTISING, INC.,
S.B. PROPERTIES, INC.,
THIRD & EIGHTH REALTY CORP
AND
MOBILE OUTDOOR MEDIA, INC.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
1. DEFINITIONS............................................... 1
2. PURCHASE AND SALE OF THE ASSETS; CLOSING.................. 1
2.1 Agreement to Purchase and Sell................... 1
2.2 Purchased Assets................................. 1
2.3 Agreement to Assume Certain Liabilities.......... 2
2.4 Excluded Liabilities............................. 3
2.5 Closing.......................................... 3
2.6 Purchase Price................................... 3
2.7 Transactions at the Closing...................... 4
2.8 Third Party Consents............................. 4
3. REPRESENTATIONS AND WARRANTIES OF SELLER.................. 4
3.1 Organization and Good Standing................... 4
3.2 Authority; No Conflict........................... 5
3.3 Solvency......................................... 5
3.4 Books and Records................................ 6
3.5 Structures....................................... 6
3.6 Permits.......................................... 6
3.7 Site Leases and Advertising Contracts............ 6
3.8 Owned Real Property.............................. 6
3.9 Title, Encumbrances.............................. 6
3.10 No Undisclosed Liabilities....................... 7
3.11 Taxes............................................ 7
3.12 Compliance with Legal Requirements............... 7
3.13 Legal Proceedings; Orders........................ 7
3.14 Other Contracts.................................. 7
3.15 Insurance........................................ 7
3.16 Environmental Matters............................ 7
3.17 Intangible Property.............................. 8
3.18 Relationships with Affiliates.................... 8
3.19 Brokers or Finders............................... 8
3.20 Employee Benefit Matters......................... 8
3.21 HSR Act.......................................... 8
3.22 Disclosure....................................... 8
4. REPRESENTATIONS AND WARRANTIES OF BUYER................... 9
4.1 Organization and Good Standing................... 9
4.2 Authority; No Conflict........................... 9
4.3 Certain Proceedings.............................. 9
4.4 Brokers or Finders............................... 9
i
<PAGE> 3
5. COVENANTS OF SELLER.............................................. 9
5.1 Access and Investigation................................ 9
5.2 Due Diligence........................................... 10
5.3 Operation of the Purchased Assets....................... 10
5.4 Negative Covenant....................................... 10
5.5 Required Approvals...................................... 10
5.6 Notification............................................ 10
5.7 No Negotiation.......................................... 10
5.8 Tax Clearance........................................... 11
6. COVENANTS OF BUYER............................................... 11
6.1 Required Approvals...................................... 11
6.2 Best Efforts............................................ 11
6.3 Imprints................................................ 11
6.4 Notification............................................ 11
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE.............. 11
7.1 Accuracy of Representations............................. 12
7.2 Sellers' Performance.................................... 12
7.3 Consents................................................ 12
7.4 Additional Documents.................................... 12
7.5 No Proceedings.......................................... 12
7.6 No Prohibition.......................................... 12
7.7 No Material Adverse Change.............................. 12
7.8 Due Diligence........................................... 12
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE............. 13
8.1 Accuracy of Representations............................. 13
8.2 Buyer's Performance..................................... 13
8.3 Additional Documents.................................... 13
8.4 No Proceedings.......................................... 13
8.5 No Prohibition.......................................... 13
9. TERMINATION...................................................... 13
9.1 Termination Events...................................... 13
9.2 Effect of Termination................................... 14
10. INDEMNIFICATION; REMEDIES........................................ 14
10.1 Indemnification and Payment of Damages by Seller........ 14
10.2 Indemnification and Payment of Damages by Buyer......... 15
10.3 Procedure for Indemnification -- Third Party Claims..... 15
10.4 Procedure for Indemnification -- Other Claims........... 16
10.5 Survival/Limitations.................................... 16
ii
<PAGE> 4
11. GENERAL PROVISIONS............................................... 16
11.1 Expenses................................................ 16
11.2 Bulk Sales Waiver and Indemnification................... 16
11.3 Public Announcements.................................... 16
11.4 Availability of Equitable Remedies...................... 16
11.5 Notices................................................. 17
11.6 Further Assurances...................................... 18
11.7 Waiver.................................................. 18
11.8 Entire Agreement and Modification....................... 18
11.9 Assignments, Successors, and No Third-Party Rights...... 18
11.10 Accounts Receivable..................................... 18
11.11 Severability............................................ 18
11.12 Risk of Loss............................................ 19
11.13 Post-Closing Access..................................... 19
11.14 Headings; Construction.................................. 19
11.15 Applicable Law.......................................... 19
11.16 Counterparts............................................ 19
EXHIBITS
Exhibit A - Definitions
Exhibit B - Allocation of Purchase Price
Exhibit C - Assignment of Advertising Services Agreements
Exhibit D - Assignment of Permits
Exhibit E - Assignment of Site Leases
Exhibit F - Bill of Sale, Assignment and Assumption Agreement
SCHEDULES
Schedule 2.2(a) - Billboard Displays
Schedule 2.2(b) - Site Leases
Schedule 2.2(c) - Real Property
Schedule 2.2(d) - Advertising Contracts and Permits
Schedule 2.2(e) - Permits
Schedule 2.3 - Assumed Liabilities
DISCLOSURE SCHEDULE
Part 3.2 Part 3.11(a) Part 3.16
Part 3.5 Part 3.13 Part 3.18
Part 3.6 Part 3.14 Part 3.20
Part 3.7
Part 3.9(b)
Part 3.10
iii
<PAGE> 5
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is entered into as of
December 27, 1996, by and among OUTDOOR SYSTEMS, INC., a Delaware corporation
("Buyer"), VILLEPIGUE OUTDOOR ADVERTISING CORPORATION, a New York corporation,
VILLEPIGUE INTERNATIONAL ADVERTISING, INC., S.B. PROPERTIES, INC. THIRD & EIGHTH
REALTY CORP, and MOBILE OUTDOOR MEDIA, INC., (referred to collectively as the
"Sellers"). (Buyer and Sellers are sometimes herein referred to individually as
a "Party" and collectively as the "Parties".)
RECITALS
Sellers are engaged in the business of owning and operating outdoor
signs and billboards and otherwise providing outdoor advertising services in the
metropolitan New York area (the "Business"). Sellers desire to sell and assign
certain outdoor advertising assets to Buyer, and Buyer desires to purchase such
assets and to assume certain liabilities associated with such assets, pursuant
to the terms, conditions, limitations and exclusions contained in this
Agreement.
AGREEMENT
The Parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the terms listed on Exhibit A attached
hereto have the meanings specified or referred to in Exhibit A.
2. PURCHASE AND SALE OF THE ASSETS; CLOSING
2.1 AGREEMENT TO PURCHASE AND SELL. Subject to the terms and conditions
of this Agreement, Sellers hereby agree to grant, sell, assign, transfer, convey
and deliver all right, title and interest in and to the Purchased Assets, free
and clear of any liens, title claims, Encumbrances or Security Interests (except
as otherwise specifically permitted pursuant to the provisions of this
Agreement), and Buyer hereby agrees to buy and acquire the Purchased Assets from
Seller, and to assume the Assumed Liabilities upon the terms and conditions set
forth in this Agreement.
2.2 PURCHASED ASSETS. The Purchased Assets are all of the assets of
Sellers used in the Business, including:
(a) All of the billboard displays and other out-of-home
advertising structures (including rights to walls) set forth and described in
Schedule 2.2(a) attached hereto, together with all components, fixtures, parts,
appurtenances, and equipment attached to or made a part thereof that are
existing, under construction or for which Sellers have any rights (collectively,
the "Structures");
<PAGE> 6
(b) All leases, licenses, easements, other rights of ingress
or egress, and all other grants of the right to place, construct, own, operate
or maintain the Structures on land, buildings and other real property owned by
third parties, and all rights therein (collectively, the "Site Leases"), which
Site Leases are listed on Schedule 2.2(b);
(c) All of the real property owned in fee by Sellers and any
rights therein, and all buildings, facilities, structures, fixtures, leasehold
and other improvements located therein, listed on Schedule 2.2(c);
(d) All rights under existing and pending sales and
advertising contracts associated with the Structures, and all rights to the
advertising copy displayed on the Structures as of the Closing Date
(collectively, the "Advertising Contracts"), which Advertising Contracts are
listed on Schedule 2.2(d) attached hereto;
(e) All state and local licenses or permits/tags which Sellers
have with respect to the Structures and, to the extent assignable, all other
Governmental Authorizations that are required for the operation of the
Structures, (collectively, the "Permits"), which Permits are listed on Schedule
2.2(e);
(f) All pertinent Books and Records;
(g) All tangible personal property, including furniture,
vehicles, equipment, computer hardware and software, owned by Sellers and used
in the operation of the Business;
(h) All Intangible Property used in connection with the
Business except the tradename Villepigue; and
(i) All rights (including any benefits arising therefrom),
causes of action, claims and demands of whatever nature (whether or not
liquidated) of Sellers relating to the Purchased Assets, including, without
limitation, condemnation rights and proceeds, and all rights against suppliers
under warranties covering any of the Purchased Assets.
2.3 AGREEMENT TO ASSUME CERTAIN LIABILITIES. At the Closing, Buyer
shall assume and agree to discharge and perform all liabilities and obligations
that are set forth on Schedule 2.3 or arise or are attributable to events
occurring on or after the Closing Date pursuant to the Site Leases and the
Advertising Contracts (the "Assumed Liabilities") but to the extent and only to
the extent that:
(a) Such obligations are performable on or after the Closing
Date; and
(b) Such obligations are attributable to periods arising on or
after the Closing Date.
2.4 EXCLUDED LIABILITIES. All claims against and liabilities and
obligations of Sellers not specifically assumed by Buyer pursuant to Section
2.3, including, without limitation, the following claims against and liabilities
of Sellers (the "Excluded Liabilities"), are excluded, and shall not be assumed
or discharged by Buyer, and shall be discharged in full when due by Seller:
(a) Any liabilities to the extent not attributable to the
Purchased Assets;
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(b) Any liability of Sellers for Taxes arising prior to or
from the sale of the Purchased Assets under this Agreement;
(c) Any liabilities for or related to indebtedness of Sellers
to banks, financial institutions, or other Persons;
(d) Any liabilities of Sellers for or with respect to any
employees of Seller, including, without limitation, any liabilities pursuant to
any compensation, collective bargaining, pension, retirement, severance,
termination, or other benefit plan, agreement or arrangement; and
(e) Any other liabilities of Sellers that are attributable to
or arise from facts, events, or conditions that occurred or came into existence
prior to the Closing.
2.5 CLOSING. The purchase and sale of the Purchased Assets (the
"Closing") provided for in this Agreement will take place at the offices of
Ferber Greilsheimer Chan & Essner, 530 Fifth Avenue, New York, New York, on
January 9, 1997 or such later time and place as the Parties may agree. The
effective time of the Closing shall be 12:01 a.m., Eastern Standard Time, on the
Closing Date.
2.6 PURCHASE PRICE. In consideration for the Purchased Assets, Buyer
shall assume the Assumed Liabilities, and pay an amount (the "Purchase Price")
equal to Twenty-Seven Million Dollars ($27,000,000). The Purchase Price shall be
subject to adjustment as follows:
(a) The following items shall be prorated between Sellers and
Buyer as of the Closing Date with respect to the Purchased Assets: power and
utility charges, real and personal property taxes, rents (including percentage
rents) and security deposits under Site Leases and payments and security
deposits under Advertising Contracts. Prorations will be on a dollar-for-dollar
basis based on the number of days of display before and after the Closing.
Percentage rents shall be prorated as of the Closing Date. Any prorations not
determined at the Closing shall be prorated on the basis of the most current
information available at Closing. On the Closing Date, Sellers shall provide to
Buyer a list of items and the prorations required by this Section 2.6(a)
("Preliminary Adjustment") and the Purchase Price shall be adjusted accordingly.
Sellers agree to furnish Buyer with any documents or records in Sellers'
possession that may be needed for Buyer to confirm the adjustment and prorations
in this Section 2.6(a).
(b) Within ninety (90) days after the Closing Date, Buyer will
prepare and provide to Sellers the final calculations of adjustments to the
Purchase Price (the "Closing Date Adjustment"). On the 120th day after the
Closing Date, all required refunds or payments under this Section 2.6, shall be
made on the basis of the Closing Date Adjustment.
(c) The parties agree that the Purchase Price shall be
allocated as set forth in Exhibit B attached hereto for completing the Form 8594
required to be filed with the IRS.
2.7 TRANSACTIONS AT THE CLOSING. The following transactions shall take
place at the Closing:
(a) Sellers shall deliver to Buyer (i) the Bill of Sale, (ii)
the Assignment of Advertising Contracts, (iii) the Assignment of Site Leases,
(iv) the Assignment of Permits, (v) the
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Deeds, (vi) all applicable Tax Clearances, and (vii) other instruments of
transfer, evidence of consent and all other related documents as may be
necessary to evidence or perfect the sale, assignment, transfer, and conveyance
of good title to all of the Purchased Assets, in each case free and clear of all
liens, Security Interests, pledges, charges, and Encumbrances. Sellers shall
also deliver to Buyer all Books and Records, including the originals of the
Advertising Contracts and Site Leases.
(b) Buyer shall deliver to Sellers the Purchase Price, as
adjusted pursuant to Section 2.6, by wire transfer of immediately available
funds.
(c) Buyer shall deliver to Sellers such assumption agreements,
instructions and other documents as may be necessary to evidence the assumption
by Buyer of the Assumed Liabilities.
(d) The Parties shall also deliver to each other the
agreements, instruments, opinions, certificates, and other documents referred to
in this Agreement.
2.8 THIRD PARTY CONSENTS. To the extent that Sellers' rights under any
Advertising Contract, Site Lease or other interest in the Purchased Assets may
not be assigned without the consent of a third party and such consent has not
been obtained, this Agreement shall not constitute an agreement to assign the
same if an attempted assignment would constitute a breach thereof or be
unlawful, and Sellers and Buyer, to the maximum extent permitted by law and any
terms of or limitations relating to such asset, shall use their Best Efforts to
obtain for Buyer the benefits thereunder, and shall cooperate to the maximum
extent permitted by law and any terms of or limitations relating to such asset
in any reasonable arrangement designed to provide such benefits to Buyer,
including any sublease or subcontract or similar arrangement, and if Buyer has
obtained such benefits, Buyer shall discharge Sellers' obligations thereunder
arising from and after the Closing Date, except for those obligations arising
because of Sellers' breach.
3. REPRESENTATIONS AND WARRANTIES OF SELLER
The Sellers jointly and severally represent and warrant to Buyer as
follows:
3.1 ORGANIZATION AND GOOD STANDING. Each of the Sellers is a
corporation duly organized, validly existing and in good standing under the laws
of its incorporation, with full power and authority to conduct the Business as
it is now being conducted, to own or use the Purchased Assets, and to perform
all its obligations. Each of the Sellers has delivered to Buyer true and
complete copies of its respective Organizational Documents, as currently in
effect. To Seller's knowledge, each of the Sellers is duly qualified or licensed
and in good standing to do business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary.
3.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of each Seller, enforceable against each of them, respectively, in
accordance with its terms. Upon the execution and delivery by each of the
Sellers, as applicable, of any documents to be executed at Closing pursuant to
this Agreement (collectively, the "Closing Documents"), such Closing Documents
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will constitute the legal, valid, and binding obligations of each of the
Sellers, as applicable, enforceable against each of them in accordance with
their respective terms. Each of the Sellers has the absolute and unrestricted
right, power and authority to execute and deliver this Agreement and the Closing
Documents to which each is a party and to perform its obligations thereunder.
The execution, delivery and performance of this Agreement has been specifically
authorized by the Directors and shareholders of each Seller.
(b) Except as set forth in Part 3.2 of the Disclosure
Schedule, neither the execution and delivery by the Sellers of this Agreement
nor the consummation or performance by the Sellers of any of the Contemplated
Transactions will:
(i) conflict with, violate or result in a breach of
(A) any provision of the Organizational Documents of the Sellers; (B)
to the Seller's knowledge, any Legal Requirement or any Order to which
the Sellers or any of the Purchased Assets may be subject; (C) to the
Seller's knowledge, any Governmental Authorization held by the Sellers
or that otherwise relates to the Purchased Assets; or (D) any material
Contract to which any of the Sellers is a party or by which any of the
Sellers may be bound; or
(ii) contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person the right
to declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or modify, any
interest or rights of Sellers in or to the Purchased Assets; or result
in the imposition or creation of any Encumbrance upon or with respect
to any of the Purchased Assets.
(c) Except as set forth in Part 3.2 of the Disclosure
Schedule, none of the Sellers is or will be required to give any notice to or
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the Contemplated
Transactions.
3.3 SOLVENCY. By consummating the transactions contemplated hereby,
Sellers do not intend to hinder, delay or defraud any of Sellers' present or
future creditors. Before giving effect to the transactions contemplated hereby,
Sellers have been paying their debts in the Ordinary Course of Business and,
after giving effect to the transactions contemplated hereby, Sellers will have
paid or discharged all of their respective debts (or made adequate provision for
the payment thereof) in the Ordinary Course of Business.
3.4 BOOKS AND RECORDS. The books of account, and other Books and
Records of Sellers maintained in connection with the Purchased Assets are
complete and correct in all material respects and have been maintained in
accordance with sound business practices.
3.5 STRUCTURES. Except as set forth in Part 3.5 of the Disclosure
Schedule, Sellers own all of the Structures. Except as set forth in Part 3.5 of
the Disclosure Schedule, to Seller's knowledge, each Structure (i) is located
entirely on property covered by a Site Lease or is located entirely on the Owned
Real Property, and (ii) complies in all material respects with the terms of the
Permits pertaining to it.
3.6 PERMITS. Except as set forth in Part 3.6, to Seller's knowledge,
the Permits constitute all material licenses, permits, registrations and
approvals necessary to operate the Business. The
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Sellers are in material compliance with the terms of the Permits. The Sellers
are not aware of any fact or event which constitutes a material violation of any
Permit, and Sellers have not received written notice that any Governmental Body
issuing any Permit intends to cancel, terminate, modify or amend any Permit.
3.7 SITE LEASES AND ADVERTISING CONTRACTS. Sellers have delivered to
Buyer true and complete copies of the Advertising Contracts and the Site Leases.
Except as set forth on Part 3.7 of the Disclosure Schedule, all sales made to
advertisers in connection with the Structures have been made pursuant to
Advertising Contracts. The Site Leases and the Advertising Contracts are in full
force and effect, and are binding upon the parties thereto. Except as set forth
in Part 3.7 of the Disclosure Schedule, to the knowledge of the Sellers, (x) no
default by Sellers or any other party has occurred under the Site Leases or
Advertising Leases, and (y) no event, occurrence or condition exists which (with
or without notice or lapse of time or the happening of any further event or
condition) would become a default by Sellers thereunder or would entitle any
other party to terminate a Site Lease or Advertising Contract, to make a claim
or set-off against Sellers or otherwise to amend such Site Lease or Advertising
Contract or prevent such Site Lease or Advertising Contract from being renewed
in accordance with its terms. None of the Sellers have received any written
notice of default, termination or non-renewal under any Site Lease or
Advertising Contract.
3.8 OWNED REAL PROPERTY. Sellers have good and marketable record title
to the Owned Real Property, such title being a fee interest in the Owned Real
Property. Sellers have not received any notice of pending or Threatened claims,
Proceedings, planned public improvements, annexations, special assessments,
rezonings or other adverse claims affecting the Owned Real Property.
3.9 TITLE, ENCUMBRANCES.
(a) Except as set forth on Part 3.9(a) of the Disclosure
Schedule, Sellers own or have good title to all of the Purchased Assets, and
there are no existing agreements, options, commitments or rights with, of or
to any Person to acquire any of the Purchased Assets or any interest therein.
All of the Purchased Assets, including the Owned Real Property, are owned free
and clear of all Encumbrances except for Permitted Liens.
(b) Except as set forth in Part 3.9(b) of the Disclosure
Schedule, none of the Structures, Site Leases or the Owned Real Property are or
will be, to the Knowledge of the Sellers, subject to zoning, use, or building
code restrictions that will prohibit the continued effective ownership, leasing
or other use of such assets as currently owned and used by Sellers.
3.10 NO UNDISCLOSED LIABILITIES. Except as set forth in Part 3.10 of
the Disclosure Schedule, Sellers have no material liabilities or obligations of
any nature relating to the Purchased Assets.
3.11 TAXES. With respect to the Purchased Assets and the Real Property:
(a) Sellers have filed or caused to be filed all Tax Returns
that are or were required to be filed by Sellers, pursuant to applicable Legal
Requirements. Sellers have paid, or made provision for the payment of, all Taxes
that have or may have become due pursuant to those Tax Returns or otherwise, or
pursuant to any assessment received by Seller, except such Taxes, if any, as are
listed in Part 3.11(a) of the Disclosure Schedule and are being contested in
good faith.
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(b) No unpaid Taxes create an Encumbrance (other than
Permitted Liens) on the Purchased Assets or the Owned Real Property.
(c) Buyer shall not be liable for any Taxes of Sellers as a
result of the Contemplated Transactions.
3.12 COMPLIANCE WITH LEGAL REQUIREMENTS. Sellers have complied with all
Legal Requirements applicable to Sellers' ownership or use of the Purchased
Assets, except for noncompliances or failures that, individually or in the
aggregate, would not be reasonably expected to have a Material Adverse Effect.
3.13 LEGAL PROCEEDINGS; ORDERS. Except as set forth in Part 3.13 of the
Disclosure Schedule, there is no Proceeding pending or, to the Knowledge of the
Sellers, Threatened against any of the Sellers or affecting any of the Purchased
Assets, and there is no Order to which any the Sellers or the Purchased Assets
is subject.
3.14 OTHER CONTRACTS None of the Sellers is a party to or bound by any
Other Contract, except as disclosed in Part 3.14 of the Disclosure Schedule.
3.15 INSURANCE. Sellers maintain in full force and effect policies of
fire and other casualty, liability, title and other forms of insurance covering
the Purchased Assets and the Business, and the operation thereof, of the types
and with the amounts of coverage as are consistent with industry standards for
outdoor advertising businesses comparable to the Business.
3.16 ENVIRONMENTAL MATTERS. Except as set forth in Part 3.16 of the
Disclosure Schedule, with respect to the Purchased Assets and the use or
operation thereof: to their knowledge, (i) Sellers are, and have been, in
material compliance with all Environmental Laws; (ii) Sellers have timely filed
all material reports, obtained all required approvals and permits relating to
the Business, and generated and maintained all material data, documentation and
records under any applicable Environmental Laws; (iii) to the Knowledge of
Sellers, there has not been any release of the Hazardous Materials at or in the
vicinity of the Business or in areas for which Sellers would have responsibility
under Environmental Laws; (iv) none of the Sellers has received any written
notice from any Governmental Body or private or public entity advising it that
it is or may be responsible for response costs with respect to a Release, a
threatened Release or clean up of Hazardous Materials produced by, or resulting
from, its Business, operations or processes; and (v) Sellers have delivered to
Buyer true and complete copies and results of any reports, studies, analyses,
tests, or monitoring possessed by Sellers pertaining to Hazardous Materials in,
on, or under the properties included in the Purchased Assets.
3.17 INTANGIBLE PROPERTY. Sellers use no Intangible Property in
connection with the operation of the Purchased Assets except for the Permits,
the Books and Records, the trade names "Villepigue", and licenses for commonly
available software programs under which Sellers are the licensee.
3.18 RELATIONSHIPS WITH AFFILIATES. Except as set forth on Part 3.18 of
the Disclosure Schedule, Sellers are not a party to any contract with an
Affiliate of Sellers relating to the Purchased Assets or the Business. Neither
Sellers nor any Affiliate of Sellers are the owner (of record or as a
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beneficial owner) of an equity interest or any other financial or profit
interest in, a Person (other than the Sellers) that has business dealings or a
material financial interest in any transaction with Sellers involving the
Purchased Assets, or the Business.
3.19 BROKERS OR FINDERS. Sellers have not incurred any obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
3.20 EMPLOYEE BENEFIT MATTERS. Except as disclosed on Part 3.20 of the
Disclosure Schedule, with respect to each Seller:
(a) Seller does not maintain and has never maintained an
"employee benefit pension plan", within the meaning of ERISA Section 3(2), that
is or was subject to Title IV of ERISA.
(b) Seller does not have and has not ever had any past,
present or future obligation or liability to contribute any "multiemployer
plan", as defined in ERISA Section 3(37).
For purposes of this Section 3.20 the term Seller shall be deemed to include any
other corporation, trade, business or other entity, other than Sellers, which
would together with the Sellers, now or in the past constitute a single employer
within the meaning of Section 414 of the IRC.
3.21 HSR ACT. None of the Sellers is a person (or included in a
person), that has total assets of $10 million or more or annual net sales of $10
million or more, within the meaning of, and as determined in accordance with,
the HSR Act.
3.22 DISCLOSURE. No representation or warranty of Sellers in this
Agreement and no statement in the Disclosure Schedule omits to state a material
fact necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
4.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware.
4.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Upon the execution and delivery by Buyer of the Closing Documents to which Buyer
is a party, such Closing Documents will constitute the legal, valid, and binding
obligations of Buyer, enforceable against Buyer in accordance with their
respective terms. Buyer has the absolute and unrestricted right, power, and
authority to execute and deliver this Agreement and the Closing Documents and to
perform its obligations under this Agreement and the Closing Documents to which
Buyer is a party.
(b) Neither the execution and delivery of this Agreement by
Buyer nor the consummation or performance of any of the Contemplated
Transactions by Buyer will give any
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Person the right to prevent, delay, or otherwise interfere with any of the
Contemplated Transactions pursuant to (i) any provision of Buyer's
Organizational Documents; (ii) any resolution adopted by the board of directors
or the stockholders of Buyer; (iii) any Legal Requirement or Order to which
Buyer may be subject; or (iv) any material Contract to which Buyer is a party or
by which Buyer may be bound. Buyer is not and will not be required to give any
notice to or obtain any Consent from any Person in connection with the execution
and delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions.
4.3 CERTAIN PROCEEDINGS. There is no pending Proceeding that has been
commenced against Buyer and that challenges, or may have the effect of
preventing, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. Except as set forth on Schedule 4.3, to Buyer's
Knowledge, no such Proceeding has been Threatened in writing and no event has
occurred or circumstance exist that may give rise to or serve as a basis for the
commencement of any Proceeding.
4.4 BROKERS OR FINDERS. Buyer has not incurred any obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
5. COVENANTS OF SELLER
5.1 ACCESS AND INVESTIGATION. Between the date of this Agreement and
the Closing Date, Sellers will, and will cause their Representatives to, afford
Buyer and its Representatives reasonable access during normal business hours to
Sellers' personnel, properties, Books and Records, and other documents and data
relating to the Purchased Assets and the Business, and furnish Buyer and its
Representatives with copies of the same.
5.2 DUE DILIGENCE. Buyer shall have the right, and Sellers shall afford
access to Buyer and its Representatives, at all reasonable times upon advance
notice to perform due diligence on the Purchased Assets and the Business from
the date hereof through and including the date that occurs seven (7) calendar
days after the date hereof (the "Due Diligence Period").
5.3 OPERATION OF THE PURCHASED ASSETS. Between the date of this
Agreement and the Closing Date, Sellers will:
(a) operate the Business only in the Ordinary Course of
Business;
(b) use their Best Efforts to maintain the Purchased Assets,
and maintain the relations and good will with advertisers, landlords and others
associated with the operation of the Business; and
(c) confer with Buyer concerning any new Advertising Contract,
Site Lease or Other Contract which involves a term of more than three (3) months
or payment of amounts in excess of $50,000.
5.4 NEGATIVE COVENANT. Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, Sellers will
operate the business consistent in all material respects with past practice,
except as otherwise provided in this Agreement.
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5.5 REQUIRED APPROVALS AND CONSENTS. As promptly as practicable after
the date of this Agreement, Sellers will make all filings required by Legal
Requirements to be made by them in order to consummate the Contemplated
Transactions and use their Best Efforts to obtain such of the Consents
identified in Section 3.2 for the transfer of the Purchased Assets.
5.6 NOTIFICATION. Between the date of this Agreement and the Closing
Date, Sellers will promptly notify Buyer in writing if Sellers become aware of
any fact or condition that causes or constitutes a material breach of any of
Sellers' representations and warranties as of the date of this Agreement, or if
Sellers become aware of the occurrence after the date of this Agreement of any
fact or condition that would (except as expressly contemplated by this
Agreement) cause or constitute a material breach of any such representation or
warranty had such representation or warranty been made as of the time of
occurrence or discovery of such fact or condition. During the same period,
Sellers will promptly notify Buyer of the occurrence of any material breach of
any covenant of Sellers in this Section 5 or of the occurrence of any event that
may make the satisfaction of the conditions in Section 7 impossible or unlikely.
5.7 NO NEGOTIATION. Until the earlier of January 20, 1997 or such time,
if any, as this Agreement is terminated pursuant to Section 9, neither Sellers
nor any Affiliate will, nor will they permit their respective Representatives
to, directly or indirectly solicit, initiate, or encourage any inquiries or
proposals from, discuss or negotiate with, provide any non-public information
to, or consider the merits of any unsolicited inquiries or proposals from, any
Person (other than Buyer or its Representatives) relating to or affecting any
transaction involving the sale of the Purchased Assets.
5.8 TAX CLEARANCE. Sellers shall obtain all certificates of clearances
for Taxes ("Tax Clearances"), if any, required by the State of New York or, if
such Tax Clearances are required but not available at the Closing, certificates
from the State of New York certifying as to the payment by or on behalf of
Sellers of all Taxes due on or prior to a date not more than thirty (30) days
prior to the Closing Date (it being agreed and understood that, notwithstanding
the foregoing, if any Tax Clearances are not obtained prior to the Closing,
Sellers shall obtain such Tax Clearances after the Closing and shall be
responsible for, and shall discharge in full, all liabilities and obligations
therefor).
6. COVENANTS OF BUYER
6.1 REQUIRED APPROVALS. As promptly as practicable after the date of
this Agreement, Buyer will make all filings required by Legal Requirements to be
made by it to consummate the Contemplated Transactions.
6.2 BEST EFFORTS. Between the date of this Agreement and the Closing
Date, Buyer will use its Best Efforts to cause the conditions in Sections 7 and
8 to be satisfied; provided that this Agreement will not require Buyer to
dispose of or make any change in any portion of its business or to incur any
other burden to obtain a Governmental Authorization.
6.3 IMPRINTS. No later than 150 days after the Closing, Buyer shall
remove from all Structures included in the Purchased Assets all imprints used by
Sellers containing Sellers' trade name; provided, however, until the earlier of
(i) such removal or (ii) the expiration of such 150- day period, Buyer may
display Sellers' trade names on such Structures.
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6.4 NOTIFICATION. Between the date of this Agreement and the Closing
Date, Buyer will promptly notify Sellers in writing if Buyer becomes aware of
any fact or condition that causes or constitutes a breach of any of Buyer's
representations and warranties as of the date of this Agreement, or if Buyer
becomes aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement) cause
or constitute a breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. During the same period, Buyer will promptly notify
Sellers of the occurrence of any breach of any covenant of Buyer in this Section
6 or of the occurrence of any event that may make the satisfaction of the
conditions in Section 8 impossible or unlikely.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Purchased Assets and to take the
other actions required to be taken by Buyer at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Buyer, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS. Sellers' representations and
warranties in this Agreement must have been accurate as of the date of this
Agreement, and must be accurate in all material respects as of the Closing Date
as if made on the Closing Date, and Buyer shall have received a certificate of
an executive officer of Sellers, dated as of the Closing Date, as to such
accuracy.
7.2 SELLERS' PERFORMANCE. The covenants and obligations that Sellers
are required to perform or to comply with pursuant to this Agreement at or prior
to the Closing must have been performed and complied with in all material
respects, and Buyer shall have received a certificate of an executive officer of
each Seller, dated as of the Closing Date, as to such compliance.
7.3 CONSENTS. Except as set forth in Part 7.3 of the Disclosure
Schedule, each of the Consents required pursuant to Section 5.5 must have been
obtained and must be in full force and effect.
7.4 ADDITIONAL DOCUMENTS. Each of the following documents must have
been delivered to Buyer:
(a) an opinion of Ferber Greilsheimer Chan & Essner dated the
Closing Date, in form and substance reasonably satisfactory to Buyer;
(b) the deliveries required from Sellers in Section 2.7; and
(c) such other documents as Buyer may reasonably request for
the purpose of (i) evidencing the satisfaction of any condition referred to in
this Section 7, or (ii) otherwise facilitating the consummation or performance
of any of the Contemplated Transactions.
7.5 NO PROCEEDINGS. Since the date of this Agreement, there must not
have been commenced and pending or Threatened by any Person other than one
affiliated with TDI or threatened in writing by a Person affiliated with TDI any
Proceeding (i) involving any challenge to, or seeking damages or other relief in
connection with, any of the Contemplated Transactions, (ii) that
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prevents, makes illegal, or otherwise materially interferes with any of the
Contemplated Transactions or seeks to do any of the foregoing, or (iii) that
involves any material claim against Seller.
7.6 NO PROHIBITION. There must not be in effect any Legal Requirement
or any injunction or other Order that prohibits or restricts the consummation of
the Contemplated Transactions, including, without limitation, HSR Act
compliance.
7.7 NO MATERIAL ADVERSE CHANGE. There shall not have been a Material
Adverse Change since the date hereof.
7.8 DUE DILIGENCE. Buyer's due diligence investigation and review of
the Business with respect to the Purchased Assets, the Business and the Assumed
Liabilities shall not reveal any fact or circumstance not disclosed to Sellers
in the Disclosure Schedule prior to the execution hereof which in Buyer's
judgment, exercised in good faith, would cause or be likely to cause a Material
Adverse Change to the value of the Purchased Assets.
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE
Sellers' obligation to sell the Purchased Assets and Sellers'
obligations to take the other actions required to be taken by Sellers at the
Closing is subject to the satisfaction, at or prior to the Closing, of each of
the following conditions (any of which may be waived by Seller, in whole or in
part):
8.1 ACCURACY OF REPRESENTATIONS. Buyer's representations and warranties
in this Agreement must have been accurate as of the date of this Agreement and
must be accurate in all material respects as of the Closing Date as if made on
the Closing Date, and Sellers shall have received a certificate of an executive
officer of Buyer, dated as of the Closing Date, as to such accuracy.
8.2 BUYER'S PERFORMANCE. The covenants and obligations that Buyer is
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing must have been performed and complied with in all material respects,
and Sellers shall have received a certificate of an executive officer of Buyer,
dated as of the Closing Date, as to such compliance.
8.3 ADDITIONAL DOCUMENTS. Buyer must have caused the following
documents to be delivered to Seller:
(a) an opinion of Powell, Goldstein, Frazer & Murphy, dated
the Closing Date, in form and substance reasonably acceptable to Sellers;
(b) the deliveries required from Buyer in Section 2.7; and
(c) such other documents as Sellers may reasonably request for
the purpose of (i) evidencing the satisfaction of any condition referred to in
this Section 8, or (ii) otherwise facilitating the consummation of any of the
Contemplated Transactions.
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8.4 NO PROCEEDINGS. Since the date of this Agreement, there must not
have been commenced and pending or Threatened any Proceeding (i) involving any
challenge to, or seeking damages or other relief in connection with, any of the
Contemplated Transactions, or (ii) that prevents, makes illegal, or otherwise
materially interferes with any of the Contemplated Transactions or seeks to do
any of the foregoing.
8.5 NO PROHIBITION. There must not be in effect any Legal Requirement
or any injunction or other Order that prohibits or restricts the consummation of
the Contemplated Transactions.
9. TERMINATION
9.1 TERMINATION EVENTS. This Agreement may, by notice given prior to or
at the Closing, be terminated:
(a) by mutual consent of Buyer and Sellers;
(b) (i) by Buyer if any of the conditions in Section 7 has not
been satisfied as of the Closing Date or if satisfaction of such a condition is
or becomes impossible (other than through the failure of Buyer to comply with
its obligations under this Agreement) and Buyer has not waived such condition on
or before the Closing Date; or (ii) by Sellers, if any of the conditions in
Section 8 has not been satisfied of the Closing Date or if satisfaction of such
a condition is or becomes impossible (other than through the failure of Sellers
to comply with their respective obligations under this Agreement) and Sellers
have not waived such condition on or before the Closing Date;
(c) by Buyer, on the one hand, or Sellers, on the other hand,
if the Closing has not occurred (other than through the failure of other Party
seeking to terminate this Agreement to comply fully with its obligations under
this Agreement) on or before January 31, 1997, or such later date as the Parties
may agree upon; or
9.2 EFFECT OF TERMINATION. Each Party's right of termination under
Section 9.1 is in addition to any other rights it may have under this Agreement.
If this Agreement is terminated pursuant to Section 9.1, all further obligations
of the Parties under this Agreement will terminate, except that the obligations
in Sections 11.1 and 11.2 will survive; provided, however, that if this
Agreement is terminated by a Party because of the breach of the Agreement by the
other Party or because one or more of the conditions to the terminating Party's
obligations under this Agreement is not satisfied as a result of the other
Party's failure to comply with its obligations under this Agreement, the
terminating Party's right to pursue all legal and equitable remedies, separately
or simultaneously, (including specific performance) will survive such
termination unimpaired.
10. INDEMNIFICATION; REMEDIES
10.1 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER. The Sellers,
jointly and severally, will indemnify and hold harmless Buyer, stockholders,
controlling Persons, and affiliates (collectively, the "Seller Indemnified
Persons") for, and will pay to the Seller Indemnified Persons the amount of, any
loss, liability, claim, damage, expense (including reasonable costs of
investigation and
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defense and reasonable attorneys' fees), whether or not involving a third-party
claim (collectively, "Damages"), arising, directly or indirectly, from or in
connection with:
(a) any material breach of any representation or warranty made
by Sellers in this Agreement, the Disclosure Schedule, or any other certificate
or document delivered by Sellers pursuant to this Agreement;
(b) any breach by Sellers of any covenant or obligation of
Sellers in this Agreement or any certificate or document delivered by Sellers
pursuant to this Agreement;
(c) the failure of Sellers to satisfy and discharge any
Excluded Liabilities, except only the Assumed Liabilities; and
(d) the failure of Sellers to comply with bulk sales or other
similar laws in any applicable jurisdiction.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer will
indemnify and hold harmless Sellers and partners, controlling Persons,
affiliates and heirs (collectively, the "Buyer Indemnified Persons") for, and
will pay to the Buyer Indemnified Persons the amount of any Damages arising,
directly or indirectly, from or in connection with:
(a) any material breach of any representation or warranty made
by Buyer in this Agreement or in any certificate or document delivered by Buyer
pursuant to this Agreement; and
(b) any breach by Buyer of any covenant or obligation of Buyer
in this Agreement including, without limitation, any failure to pay Assumed
Liabilities after the Closing.
10.3 PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS.
(a) Promptly after receipt by an Indemnified Person under
Section 10.1 or 10.2, of notice of any claim against it, such Indemnified
Person will, if a claim is to be made against an Indemnifying Party under such
Section , give notice to the Indemnifying Party of the commencement of such
claim, but the failure to notify the Indemnifying Party will not relieve the
Indemnifying Party of any liability that it may have to any Indemnified Person,
except to the extent that the Indemnifying Party demonstrates that the defense
of such action is prejudiced by the Indemnifying Party's failure to give such
notice.
(b) If any claim referred to in Section 10.3(a) is brought
against an Indemnified Person and it gives written notice to the Indemnifying
Party of such claim, the Indemnifying Party may, at its option, assume the
defense of such claim with counsel satisfactory to the Indemnified Person and,
after written notice from the Indemnifying Party to the Indemnified Person of
its election to assume the defense of such claim, the Indemnifying Party will
not, as long as it diligently conducts such defense, be liable to the
Indemnified Person under this Article 10 for any fees of other counsel or any
other expenses with respect to the defense of such claim, subsequently incurred
by the Indemnified Person in connection with the defense of such claim, other
than reasonable costs of investigation. If the Indemnifying Party assumes the
defense of a claim, (i) no compromise or settlement of such claims may be
effected by the Indemnifying Party without the Indemnified Person's consent
unless (A) there is no finding or admission of any violation of Legal
Requirements or any
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<PAGE> 19
violation of the rights of any Person, and (B) the sole relief provided is
monetary damages that are paid in full by the Indemnifying Party; and (ii) the
Indemnified Person will have no liability with respect to any compromise or
settlement of such claims effected without its consent. Subject to Section
10.3(c), if notice is given to an Indemnifying Party of any claim and the
Indemnifying Party does not, within twenty days after the Indemnified Person's
notice is given, give notice to the Indemnified Person of its election to assume
the defense of such claim, the Indemnifying Party will be bound by any
determination made in such Proceeding or any compromise or settlement effected
by the Indemnified Person.
(c) Notwithstanding the foregoing, if an Indemnified Person
determines in good faith that there is a reasonable probability that a claim may
adversely affect it or its affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
Indemnified Person may, by notice to the Indemnifying Party, assume the
exclusive right to defend, compromise, or settle such claim, but the
Indemnifying Party will not be bound by any determination of a claim so defended
or any compromise or settlement effected without its consent (which may not be
unreasonably withheld).
10.4 PROCEDURE FOR INDEMNIFICATION -- OTHER CLAIMS. A claim for
indemnification for any matter not involving a third-party claim shall be
asserted by written notice to the Indemnifying Party from whom indemnification
is sought.
10.5 SURVIVAL/LIMITATIONS.
(a) The parties hereto agree that (i) the covenants and
agreements contained in the Agreement and any document delivered pursuant hereto
and the representations and warranties contained in Sections 3.1, 3.2(a), 3.3,
3.8, 3.9(a), 4.1, 4.2(a), 3.11, 3.16, 3.19, and 3.20 shall survive until 90 days
after the expiration of all applicable statutes of limitation with respect to
the subject matter thereof, and (iii) all other representations and warranties
shall survive until the first anniversary following the Closing Date.
(b) The Sellers' obligation to indemnify the Sellers
Indemnified Persons for Damages pursuant to Section 10.1 hereof is subject to
the following limitation: (i) in no event shall the Sellers' obligation to
indemnify the Sellers Indemnified Persons exceed 3.5 Million Dollars.
11. GENERAL PROVISIONS
11.1 EXPENSES. Except as otherwise expressly provided in this
Agreement, each Party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, brokers or finders, counsel, and accountants. In the
event of termination of this Agreement, the obligation of each Party to pay its
own expenses will be subject to any rights of such Party arising from a breach
of this Agreement by another Party.
11.2 BULK SALES WAIVER AND INDEMNIFICATION.
11.3 PUBLIC ANNOUNCEMENTS; CONFIDENTIALITY. Any public announcement or
similar publicity with respect to this Agreement or the Contemplated
Transactions will be issued, if at all, at
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<PAGE> 20
such time and in such manner as Buyer and Sellers agree in writing, provided
that the parties shall reasonably cooperate in such announcements, and provided
further that nothing contained herein shall prevent any party from at any time
furnishing information required by a Governmental Body. Unless consented to by
Buyer and Sellers in advance or required by Legal Requirements, prior to the
Closing, each Party shall, and shall cause their respective Representatives to,
keep this Agreement strictly confidential and may not make any disclosure of
this Agreement to any Person.
11.4 AVAILABILITY OF EQUITABLE REMEDIES. The Parties acknowledge and
agree that (i) a breach of the provisions of this Agreement could not adequately
be compensated by money damages, and (ii) any Party shall be entitled, either
before or after the Closing, in addition to any other right or remedy available
to it, to an injunction restraining such breach and to specific performance of
this Agreement, and no bond or other security shall be required in connection
therewith.
11.5 NOTICES. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
Party may designate by notice to the other Parties):
If to Sellers, to:
Mr. Kent H. Villepigue
Villepigue Outdoor Advertising Corporation
49-62 Van Dam Street
Long Island City, New York 11101
Telephone No.: (718) 392-1500
Facsimile No.: (718) 482-9433
With a copy to:
Ferber Greilsheimer Chan & Essner
530 Fifth Avenue
New York, N.Y. 10036-5101
Attention: David I. Ferber, Esq.
Telephone No.: (212) 944-2200
Facsimile No.: (212) 944-7630
If to Buyer, to:
Outdoor Systems, Inc.
2502 North Black Canyon Highway
Phoenix, Arizona 85009
Telephone No.: (602) 246-9569
Facsimile No.: (602) 433-2482
Attention: William S. Levine
and
William S. Levine
1702 E. Highland Avenue, Suite 310
Phoenix, Arizona 85016
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<PAGE> 21
Telephone No.: (602) 248-8181
Facsimile No.: (602) 248-0884
With a copy to:
Powell, Goldstein, Frazer & Murphy
191 Peachtree Street, NE, 16th Floor
Atlanta, Georgia 30303
Attention: William B. Shearer, Jr., Esq.
Telephone No.: (404) 572-6600
Facsimile No.: (404) 572-6999
11.6 FURTHER ASSURANCES. The Parties agree (i) to furnish upon request
to each other such further information, (ii) to execute and deliver to each
other such other documents, and (iii) to do such other acts and things, all as
the other Party may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to in this Agreement.
11.7 WAIVER. Neither the failure nor any delay by any Party in
exercising any right, power, or privilege under this Agreement or the documents
referred to in this Agreement will operate as a waiver of such right, power, or
privilege, and no single or partial exercise of any such right, power, or
privilege will preclude any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or privilege.
11.8 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the Parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the Parties with
respect to its subject matter. This Agreement may not be amended except by a
written agreement executed by the Party to be charged with the amendment.
11.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. No Party may
assign any of its rights under this Agreement without the prior consent of the
other Parties except that Buyer may assign any of its rights under this
Agreement to any affiliate of Buyer. This Agreement will apply to, be binding in
all respects upon, and inure to the benefit of the Parties, and their
successors, by liquidation or otherwise, and their permitted assigns. Nothing
expressed or referred to in this Agreement will be construed to give any Person
other than the Parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement.
11.10 ACCOUNTS RECEIVABLE. Buyer agrees to forward to Sellers any
payments that Buyer may receive with respect to any accounts receivable of
Sellers (except for any payment with respect to an Advertising Contract that has
been prorated in favor or Buyer pursuant to Section 2.6 hereof).
11.11 SEVERABILITY. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
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<PAGE> 22
11.12 RISK OF LOSS. Material risk of loss or damage to the Purchased
Assets from any cause whatsoever prior to the Closing shall be borne by Seller,
and after the Closing shall be borne by Buyer.
11.13 POST-CLOSING ACCESS. Buyer agrees that all Books and Records
delivered to Buyer by Sellers pursuant to this Agreement shall be maintained
open for inspection by Sellers at any time during regular business hours upon
reasonable notice for a period of six (6) years (or for such longer period as
may be required by applicable Legal Requirements) following the Closing and
that, during such period, Sellers, at their expense, may make such copies
thereof as it may reasonably desire. Sellers agree that all books and records
relating to the Purchased Assets and retained by Sellers shall be maintained
open for inspection by Buyer at any time during regular business hours for a
period of six (6) years (or for such longer period as may be required by
applicable Legal Requirements) following the Closing and that, during such
period, Buyer, at its expense, may make such copies thereof as it may reasonably
desire. Nothing contained in this Section 11.13 shall obligate any Party hereto
to make available any books and records if to do so would violate the terms of
any Contract or Legal Requirement to which it is a party or to which it or its
assets are subject.
11.14 HEADINGS; CONSTRUCTION. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All words used in this Agreement will be construed to be of
such gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
11.15 APPLICABLE LAW. Except as to matters pertaining to the Owned Real
Property, which matters shall be governed by the laws of the State of New York,
this Agreement shall be governed and controlled as to validity, enforcement,
interpretations, construction, effect and in all other respects by the internal
laws of the State of Delaware applicable to contracts made in that State. The
parties hereto agree to submit exclusively to any federal or state court located
in the State of Delaware any dispute or controversy arising out of or relating
to this Agreement, except for any dispute or controversy relating to Owned Real
Property and which is governed by the laws of the State of New York, which shall
be submitted to any federal or state court located in the State of New York.
11.16 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
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<PAGE> 23
IN WITNESS WHEREOF, the Parties have executed, sealed and delivered
this Agreement as of the date first written above.
BUYER:
OUTDOOR SYSTEMS, INC.
By: __________________________________
Title: _______________________________
SELLERS:
VILLEPIGUE OUTDOOR ADVERTISING
CORPORATION
By: __________________________________
Title: _______________________________
VILLEPIGUE INTERNATIONAL
ADVERTISING, INC.
By: __________________________________
Title: _______________________________
S.B. PROPERTIES, INC.
By: __________________________________
Title: _______________________________
THIRD & EIGHTH REALTY CORP.
By: __________________________________
Title: _______________________________
MOBILE OUTDOOR MEDIA, INC.
By: __________________________________
Title: _______________________________
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EXHIBIT A
DEFINITIONS
"ADVERTISING CONTRACTS" -- as defined in Section 2.2(c).
"AFFILIATES" -- when used with reference to a specified Person, any
other Person that directly, or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with the Specified
Person. For purposes of this definition of Affiliate, "control" means the
possession, directly or indirectly, of the power to direct or to cause the
direction of management and policies of the Person in question, whether through
the ownership of voting securities or by contract or otherwise.
"ASSIGNMENT OF ADVERTISING CONTRACTS" -- the Assignment and Assumption
of Advertising Contracts in the form of Exhibit C attached hereto.
"ASSIGNMENT OF PERMITS" -- the Assignment and Assumption of Permits in
the form of Exhibit D attached hereto.
"ASSIGNMENT OF SITE LEASES" -- the Assignment and Assumption of Site
Leases in the form of Exhibit E attached hereto.
"ASSUMED LIABILITIES" -- as defined in Section 2.3.
"BEST EFFORTS" -- the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances.
"BILL OF SALE" -- the Bill of Sale, Assignment and Assumption Agreement
in the form of Exhibit E attached hereto.
"BOOKS AND RECORDS" -- All of Sellers' books and records relating to
the Purchased Assets, including, without limitation, all Site Lease files,
Advertising Contract files, Permit files, maintenance and other records for the
Structures, logs, advertiser, customer and supplier lists.
"BUYER" -- as defined in the first paragraph of this Agreement.
"CLOSING" -- as defined in Section 2.5.
"CLOSING DATE" -- the date and time as of which the Closing actually
takes place.
"CLOSING DOCUMENTS" -- as defined in Section 3.2(a).
"CONFIDENTIAL INFORMATION" -- any information concerning the businesses
and affairs of Sellers that is not generally available to the public.
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"CONSENT" -- any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS" -- all of the transactions contemplated by
this Agreement, including: (a) the purchase of the Purchased Assets by Buyer
from Sellers and assignment to and assumption by Buyer of the Assumed
Liabilities, and (b) the performance by Buyer and the Sellers of their
respective covenants and obligations under this Agreement.
"CONTRACT" -- any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"DAMAGES" -- as defined in Section 10.1.
"DEEDS" -- limited warranty deeds (or the statutory equivalent thereof
with covenants against grantor's acts only), in recordable form, with respect to
the Owned Real Property.
"DISCLOSURE SCHEDULE" -- the disclosure schedule, delivered by Sellers
to Buyer concurrently with the execution and delivery of this Agreement.
"DUE DILIGENCE PERIOD" -- as defined in Section 5.2.
"ENCUMBRANCE" -- any charge, claim, condition, equitable interest,
lien, option, pledge, security interest, right of first refusal, or restriction
of any kind, including any restriction on use, transfer, receipt of income, or
exercise of any other attribute of ownership.
"ENVIRONMENT" -- soil, land surface or subsurface strata, surface
waters, groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"ENVIRONMENTAL LAW" -- any Legal Requirement pertaining to
environmental discharges, Release, emissions or spills or the manufacture, sale,
processing, handling, transportation, storage or disposal of any Hazardous
Materials, or relating to any environmental processes or condition, including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), the Clean Air Act, the Clean Water Act, the Resource
Conservation and Recovery Act ("RCRA"), the Endangered Species Act, the Federal
Insecticide, Fungicide and Rodenticide Act, the Hazardous Materials
Transportation Act, the Surface Mining Control and Reclamation Act, the
Emergency Planning and Community Right to Know Act, the Safe Drinking Water Act,
the Toxic Substances Control Act, the Coastal Zone Management Act, the National
Environmental Policy Act, the Noise Control Act. As used in this Agreement,
Environmental Laws shall mean any of such laws or regulations as the same exist
now or at the Closing Date.
"ERISA" -- the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"EXCLUDED LIABILITIES" -- as defined in Section 2.4.
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<PAGE> 26
"GOVERNMENTAL AUTHORIZATION" -- any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY" -- any federal, state, local, municipal, foreign,
or other government; or governmental or quasi-governmental authority of any
nature (including any governmental agency, branch, department, official, or
entity and any court or other tribunal).
"HAZARDOUS MATERIALS" -- any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, and specifically including petroleum and all derivatives
thereof or synthetic substitutes therefor and asbestos or asbestos-containing
materials.
"HSR ACT" -- the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and any regulations and rules promulgated thereunder.
"INDEMNIFIED PERSON" -- any of the Seller Indemnified Persons or the
Buyer Indemnified Persons, as the context requires.
"INDEMNIFYING PARTY" -- the Buyer or the Sellers, as the context
requires.
"INTANGIBLE PROPERTY" -- All right, title and interest in and to the
goodwill and other intangible property (except for Sellers' corporate or trade
names and trade logos) used in connection with the Purchased Assets, all
licenses, permits and authorizations pertaining to the Purchased Assets or the
right to own and operate the Purchased Assets and all right, title and interest
in and to (i) any intellectual property used in connection with the Purchased
Assets, and (ii) all records and data relating specifically to the Purchased
Assets.
"IRC" -- the Internal Revenue Code of 1986, as amended from time to
time, or any successor law, and regulations issued by the IRS pursuant to the
Internal Revenue Code or any successor law.
"IRS" -- the United States Internal Revenue Service and, to the extent
relevant, the United States Department of the Treasury.
"KNOWLEDGE" -- a Person will be deemed to have "Knowledge" of a
particular fact or other matter only if such Person is actually aware of such
fact or other matter without making any independent inquiry or investigation. A
Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving as a director,
officer, partner, executor, or trustee of such Person (or in any similar
capacity) has Knowledge of such fact or other matter.
"LEGAL REQUIREMENT" -- any federal, state, local, municipal, foreign,
international, multinational, or other administrative Order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"MATERIAL ADVERSE CHANGE" -- a change that will probably cause a
Material Adverse Effect.
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"MATERIAL ADVERSE EFFECT" -- a material adverse effect on the Business,
the Purchased Assets, or the Owned Real Property or operations or conditions
(financial or otherwise) relating thereto, taken as a whole.
"ORDER" -- any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" -- an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" if such action is
consistent with the past custom and practices of such Person and is taken in the
ordinary course of the normal day-to-day operations of such Person (including
with respect to quantity and frequency).
"ORGANIZATIONAL DOCUMENTS" -- (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and (e) any amendment
to any of the foregoing.
"OTHER CONTRACT" -- any Contract (other than a Site Lease or
Advertising Contract) relating to or affecting the Purchased Assets, the Real
Property, or the operation thereof (i) under which Sellers have or may acquire
any rights, (ii) under which Sellers have or may become subject to any
obligation or liability, or (iii) by which Sellers or any of the Purchased
Assets or the Real Property is or may become bound.
"OWNED REAL PROPERTY" -- the real property referenced in Section
2.2(c).
"PARTY" -- as defined in the first paragraph of this Agreement.
"PERMITS" -- as defined in Section 2.2(d).
"PERMITTED LIENS" -- liens for taxes not yet delinquent, for
mechanic's, materialmen's and similar liens which have arisen in the ordinary
course of business, purchase money security interests, or for other liens which
are immaterial in amount or character.
"PERSON" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"PROCEEDING" -- any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"PURCHASE PRICE" -- as defined in Section 2.6.
"PURCHASED ASSETS" -- as defined in Section 2.2.
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"RELEASE" -- any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"REPRESENTATIVE" -- with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"SECURITY INTEREST" -- any mortgage, pledge, lien, encumbrance, charge
or other security interest or option or right of any third party with respect
thereto.
"SELLER" -- as defined in the first paragraph of this Agreement.
"SITE LEASES" -- as defined in Section 2.2(b).
"STRUCTURES" -- as defined in Section 2.2(a).
"TAX" -- shall mean all tax (including income tax, capital gains tax,
value added tax, sales tax, property tax, transfer tax or intangibles tax), levy
assessment, tariff, duty, deficiency or other fee and any related charge or
amount (including fine, penalty and interest) imposed, assessed or collected by
or under the authority of any Governmental Body.
"TAX CLEARANCES" -- as defined in Section 5.9.
"TAX RETURN" -- any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"THREATENED" -- a claim, Proceeding or dispute will be deemed to have
been "THREATENED" if any demand or statement has been made or any notice has
been given that would lead a prudent Person to conclude that such a claim,
Proceeding or dispute is likely to be asserted, commenced, taken, or otherwise
pursued in the future.
A-5
<PAGE> 1
Exhibit 99.11
SECOND AMENDMENT
SECOND AMENDMENT, dated as of May 9, 1997 (this "Amendment"), to the
Fourth Amended and Restated Credit Agreement, dated as of October 22, 1996 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among OUTDOOR SYSTEMS, INC. (the "Company"). MEDIACOM, INC. (the
"Canadian Borrower": together with the Company, the "Borrowers"), the several
banks and other financial institutions from time to time parties thereto (the
"Lenders"). CANADIAN IMPERIAL BANK OF COMMERCE, as Canadian Administrative
Agent, and CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY, as US
Administrative Agent (in such capacity, the "US Administrative Agent": together
with the Canadian Administrative Agent, the "Agents").
W I T N E S S E T H:
WHEREAS, the Borrowers, the Lenders and the Agents are parties to the
Credit Agreement; and
WHEREAS, the Borrowers have requested that the Lenders and the Agents
agree to amend certain provisions of the Credit Agreement, and the Lenders and
the Agents are agreeable to such request upon the terms and subject to the
conditions set forth herein:
NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, and for the valuable consideration the receipt of which is
hereby acknowledged, the Borrowers, the Lenders and the Agents hereby agree as
follows:
1. Definitions. All terms defined in the Credit Agreement shall
have such defined meanings when used herein unless otherwise defined herein.
2. Amendment to Definition. The definition of "Permitted
Acquisitions" is hereby amended by deleting the amount "$250,000,000" that
appears therein and replacing it with the amount "$375,000,000".
3. Pro Forma Adjustments. In accordance with the provisions of the
second provisos to the definitions of "Senior Leverage Ratio" and "Total
Leverage Ratio" the Lenders hereby consent and agree to the pro forma
adjustments described in Schedule I hereto.
4. Amendment of Subsection 8.2(f). Subsection 8.2(f) of the Credit
Agreement is hereby amended to read in its entirety as follows:
"(f) Subordinated Indebtedness, provided that (i) any additional
Senior Subordinated Notes issued after March 6, 1997 shall be issued prior to
July 31, 1997 and (ii) prior to the issuance of any such additional Senior
Subordinated Notes, the
<PAGE> 2
Company shall have demonstrated, by written certificate delivered to the
US Administrative Agent, compliance with the financial covenants set
forth in subsection 8.1 determined on a projected pro forma basis,
after giving effect to such issuance and the application of the proceeds
thereof, for the period of four consecutive fiscal quarters of the
Company most recently completed prior to the date of such issuance for
which financial statements are available for the purposes hereof, as if
such issuance and application of proceeds had occurred on the first day
of such four-quarter test period; and"
5. Consent to Commitment Increase. (a) The Lenders hereby consent to the
increase of the US Revolving Credit Commitments after March 12, 1997 by up to
US$275,000,000 in the aggregate by one or more (but not necessarily all) of the
Lenders having US Revolving Credit Commitments, provided that (i) in the event
of any such increase, each Lender having a US Revolving Credit Commitment that
is increased thereby shall have agreed to such increase of its US Revolving
Credit Commitment and (ii) the aggregate amount of all such increases shall be
limited to US$275,000,000 less the amount (the "Sub Debt Reduction Amount") by
which the aggregate principal amount of additional Subordinated Indebtedness
issued after March 12, 1997 and on or prior to July 31, 1997 exceeds
US$200,000,000. In furtherance of the foregoing the Lenders hereby consent to
the automatic amendment of Schedule 1.1A to the Credit Agreement to reflect any
such increase in accordance with the foregoing or any decrease required by
clause (c) below.
(b) Any such increase in a US Revolving Credit Commitment (a
"Commitment Increase") by any Lender (an "Increased Lender") shall have the
following effect during the interim period from the date of the first such
Commitment Increase to and including the date (the "Final Adjustment Date")
that is the earlier of July 31, 1997 and the first date of issuance of
additional Subordinated Indebtedness during the period from March 12, 1997
through July 31, 1997 (and any affected provisions of the Credit Agreement
shall be deemed to be appropriately modified):
(i) Borrowings. US Revolving Credit Loans made after such
Commitment Increase shall be made first by the US Revolving Credit
Lenders pro rata based on their US Revolving Credit Commitment
Percentages in effect immediately prior to the first such Commitment
Increase (the "Existing Commitment Percentages") until the Lenders other
than any Increased Lender have no remaining availability under their US
Revolving Credit Commitments, and thereafter such Loans shall be made by
Increased Lenders (pro rata based upon their respective Commitment
Increases) to the extent of remaining availability under their
applicable Commitment Increases (such Loans made only by Increased
Lenders, "New Commitment Loans").
(ii) Repayments. Repayments of US Revolving Credit Loans shall
be applied first to New Commitment Loans (pro rata if held by more than
one Increased Lender) and then, pro rata based on the Existing
Commitment Percentages, to the remaining
<PAGE> 3
US Revolving Credit Loans, provided that if any such payment is
insufficient to pay all US Revolving Credit Loans then due and unpaid at
the time of such payment, such payment shall be applied pro rata based
on outstanding principal amounts in accordance with the third sentence
of subsection 4.8(a) of the Credit Agreement.
(iii) Interest and Fees. Interest shall be applied by the US
Administrative Agent in a manner that reflects any differences in
interest rate applicable to any non-pro rata borrowings or repayments
made as described above, and payments of commitment fees in respect of
the US Revolving Credit Commitments will be made ratably according to
the Lenders' respective Available US Revolving Credit Commitments then
in effect.
(c) The Increased Commitments shall on the Final Adjustment Date
automatically be reduced (pro rata, if held by more than one Increased Lender)
by the Sub Debt Reduction Amount. On the Final Adjustment Date, after giving
effect to any prepayments from the proceeds of any additional Subordinated
Debt, if any, issued on such Date, the Borrower shall prepay all then
outstanding US Revolving Credit Loans (subject to payment of breakage costs, if
any, payable under subsection 4.12 of the Credit Agreement) and reborrow pro
rata from all the Lenders having US Revolving Credit Commitments an amount
equal to the lesser of (i) the aggregate amount of US Revolving Credit Loans
outstanding immediately prior to such prepayment and (ii) the aggregate amount
of the US Revolving Credit Commitments then in effect. Unless the Borrower
shall have given the required notice for a borrowing of Eurodollar Loans in
accordance with subsection 2.4 of the Credit Agreement, all Loans pursuant to
such reborrowing shall be borrowed as ABR Loans. Such reborrowing, and all
borrowings, prepayments, continuations and conversions of all US Revolving
Credit Loans thereafter, shall be made pro rata according to the US Revolving
Credit Commitments then in effect.
(d) The provisions of this paragraph 5 shall supersede in their
entirety the provisions of paragraph 3 of the Amendment, dated as of March 12,
1997, to the Credit Agreement.
6. Application of Additional Subordinated Indebtedness. Notwithstanding
any applicable provision of the Credit Agreement to the contrary, the proceeds
of additional Subordinated Indebtedness issued after the date hereof as
permitted by subsection 8.2(f) of the Credit Agreement shall be applied first,
promptly after receipt thereof by the Company, to the repayment (without any
commitment reduction) of US Revolving Credit Loans to the extent of the amount
thereof outstanding on such date of repayment, with the remainder of such
proceeds to be retained by the Company to be used for its general corporate
purposes, including acquisitions permitted under the Credit Agreement.
7. Conditions to Effectiveness. This Amendment shall become effective
on and as of the date that the US Administrative Agent shall have received
counterparts of
<PAGE> 4
this Amendment, duly executed and delivered by a duly authorized officer of
each of the Borrower, each Guarantor, the Agents and the Majority Lenders.
8. Limited Amendment. Except as expressly amended herein, the Credit
Agreement shall continue to be, and shall remain, in full force and effect. This
Amendment shall not be deemed to be a waiver of, or consent to, or a
modification or amendment of, any other term or condition of the Credit
Agreement (including, without limitation, the financial covenants set forth in
subsection 8.1) or any other Loan Document or to prejudice any other right or
rights which the Lenders may now have or may have in the future under or in
connection with the Credit Agreement or any of the instruments or agreements
referred to therein, as the same may be amended from time to time.
9. Counterparts. This Amendment may be executed by one or more of the
parties hereto in any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
10. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
<PAGE> 5
5
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered by their respective duly authorized officers as of the
date first above written.
OUTDOOR SYSTEMS, INC.
by: /s/
----------------------------------
Title: Chairman
MEDIACOM, INC.
By: /s/
----------------------------------
Title: Chairman
CANADIAN IMPERIAL BANK OF
COMMERCE, NEW YORK AGENCY, as
US Administrative Agent
By:
----------------------------------
Title:
CANADIAN IMPERIAL BANK OF
COMMERCE, as Canadian Administrative
Agent and as a Lender
By:
----------------------------------
Title:
CIBC INC., as a Lender
By:
----------------------------------
Title:
<PAGE> 6
CANADIAN IMPERIAL BANK OF
COMMERCE, NEW YORK AGENCY, as a
Lender
By: /s/
--------------------------------
Title:
Authorized Signatory
BANK OF AMERICA NATIONAL TRUST &
SAVINGS ASSOCIATION
By:
---------------------------------
Title:
BANK OF AMERICA CANADA
By:
---------------------------------
Title:
THE FIRST NATIONAL BANK OF BOSTON
By:
---------------------------------
Title:
BANQUE PARIBAS
By:
---------------------------------
Title:
By:
---------------------------------
Title:
PARIBAS BANK OF CANADA
By:
---------------------------------
Title:
<PAGE> 7
7
PARIBAS CAPITAL FUNDING LLC
By: /s/
___________________________________
Title:
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By: ___________________________________
Title:
THE BANK OF NOVA SCOTIA
By: ___________________________________
Title:
By: ___________________________________
Title:
By: ___________________________________
Title:
BANK ONE, ARIZONA, NA
By: ___________________________________
Title:
CORESTATES BANK N.A.
By: ___________________________________
Title:
DRESDNER BANK CANADA
By: ___________________________________
Title:
<PAGE> 8
7
PARIBAS CAPITAL FUNDING LLC
By:
___________________________________
Title:
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By: /s/
___________________________________
Title:
THE BANK OF NOVA SCOTIA
By: ___________________________________
Title:
By: ___________________________________
Title:
By: ___________________________________
Title:
BANK ONE, ARIZONA, NA
By: ___________________________________
Title:
CORESTATES BANK N.A.
By: ___________________________________
Title:
DRESDNER BANK CANADA
By: ___________________________________
Title:
<PAGE> 9
8
DRESDNER BANK AG NEW YORK & GRAND
CAYMAN BRANCHES
By: /s/
--------------------------------
Title: Assistant Vice President
By: /s/
---------------------------------
Title: Assistant Treasurer
FLEET NATIONAL BANK
By:
---------------------------------
Title:
THE FUJI BANK LIMITED, LOS ANGELES
AGENCY
By:
---------------------------------
Title:
GOLDMAN SACHS CREDIT PARTNERS, L.P.
By:
---------------------------------
Title:
THE LONG TERM CREDIT BANK OF JAPAN,
LTD. LOS ANGELES AGENCY
By:
---------------------------------
Title:
MELLON BANK, N.A.
By:
---------------------------------
Title:
MELLON BANK CANADA
By:
---------------------------------
Title:
<PAGE> 10
9
THE MITSUBISHI TRUST AND BANKING
CORPORATION, LOS ANGELES AGENCY
By: _____________________________________
Title:
NORWEST BANK ARIZONA N.A.
By: /s/
_____________________________________
Title:
CAPTIVA FINANCE LTD.
By: _____________________________________
Title:
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY
By: _____________________________________
Title:
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By: _____________________________________
Title:
SENIOR HIGH INCOME PORTFOLIO, INC.
By: _____________________________________
Title:
<PAGE> 11
ML CBO IV (CAYMAN) LTD.
BY: PROTECTIVE ASSET MANAGEMENT,
L.L.C. AS COLLATERAL MANAGER
By: /s/
-------------------------------------
Title: President
Protective Asset Management, L.L.C.
OCTAGON CREDIT INVESTORS LOAN
PORTFOLIO (A UNIT OF THE CHASE
MANHATTAN BANK)
By:
-------------------------------------
Title:
RESTRUCTURED OBLIGATIONS
BACKED BY SENIOR ASSETS B.V.,
AS ASSIGNEE
BY ITS MANAGING DIRECTOR
ABN TRUST COMPANY (NEDERLAND)
By:
-------------------------------------
Title:
PILGRIM AMERICA PRIME RATE TRUST
By:
-------------------------------------
Title:
PRIME INCOME TRUST
By:
-------------------------------------
Title:
THE TRAVELERS INSURANCE COMPANY
By:
-------------------------------------
Title:
<PAGE> 12
PUTNAM HIGH YIELD TRUST
By: /s/
-------------------------------------
Title: Vice President
CRESCENT/MACH I PARTNERS, L.P.
BY: TCW ASSET MANAGEMENT, ITS
INVESTMENT MANAGER
By:
-------------------------------------
Title:
INTEGON LIFE INSURANCE CORPORATION
BY: TCW ASSET MANAGEMENT COMPANY,
ITS ATTORNEY IN FACT
By:
-------------------------------------
Title:
OCCIDENTAL LIFE INSURANCE COMPANY
OF NORTH CAROLINA
BY: TCW ASSET MANAGEMENT COMPANY,
ITS ATTORNEY IN FACT
By:
-------------------------------------
Title:
CONTINENTAL CASUALTY COMPANY
By:
-------------------------------------
Title:
UNION BANK OF CALIFORNIA NA
By:
-------------------------------------
Title:
<PAGE> 13
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By: /s/
------------------------------------
Title: Sr. Vice Pres.-Portfolio Mgr.
MERRILL LYNCH PRIME RATE PORTFOLIO
BY: MERRILL LYNCH ASSET
MANAGEMENT, L.P., AS INVESTMENT
ADVISOR
By:
------------------------------------
Title:
INDOSUEZ CAPITAL FUNDING II, LIMITED
BY: INDOSUEZ CAPITAL, AS PORTFOLIO
ADVISOR
By:
------------------------------------
Title:
