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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-K
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FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-13275
OUTDOOR SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
DELAWARE 86-0736400
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
2502 N. BLACK CANYON HIGHWAY
PHOENIX, ARIZONA 85009
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
(602) 246-9569
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock, $.01 par value New York Stock Exchange
9 3/8% Senior Subordinated Notes due 2006 New York Stock Exchange
Guarantees of 9 3/8% Senior Subordinated Notes due
2006 New York Stock Exchange
8 7/8% Senior Subordinated Notes due 2007 New York Stock Exchange
Guarantees of 8 7/8% Senior Subordinated Notes due
2007 New York Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing sale price of Common Stock on March 13, 1998
as reported by the New York Stock Exchange, was approximately $2,747.7 million.
The number of shares of the Registrant's Common Stock outstanding at March
13, 1998 was 121,123,367.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive proxy statement for the Registrant's
Annual Meeting of Stockholders to be held on May 21, 1998 are incorporated by
reference herein.
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CONTENTS
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PAGE
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PART I
ITEM 1. BUSINESS
GENERAL..................................................... 1
INDUSTRY OVERVIEW........................................... 1
BUSINESS STRATEGY........................................... 2
MARKETS..................................................... 3
INVENTORY................................................... 4
EMPLOYEES................................................... 5
SALES AND SERVICE........................................... 5
CUSTOMERS................................................... 5
PRODUCTION.................................................. 6
COMPETITION................................................. 7
GOVERNMENT REGULATION....................................... 7
ITEM 2. PROPERTIES.................................................. 9
ITEM 3. LEGAL PROCEEDINGS........................................... 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......... 9
ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY........................... 10
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS...................................... 11
ITEM 6. SELECTED FINANCIAL DATA..................................... 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................ 13
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISKS.................................................... 18
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................. 19
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE................................. 43
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.......... 43
ITEM 11. EXECUTIVE COMPENSATION...................................... 43
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT............................................... 43
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 43
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K...................................................... 43
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PART I.
ITEM 1. BUSINESS
GENERAL
Outdoor Systems, Inc. (the "Company") is the largest out-of-home media
company in North America, operating, as of December 31, 1997, approximately
98,300 bulletin, poster, mall and transit advertising display faces in 90
metropolitan markets in the United States and 13 metropolitan markets in Canada
and approximately 125,000 subway advertising display faces in New York City. The
Company has operations in 50 of the 50 largest United States markets and 13 of
the 15 largest Canadian markets.
Since going public in April of 1996, the Company has effected four
three-for-two stock splits of the Common Stock. All applicable information in
this report, including the Consolidated Financial Statements and the Notes
thereto, have been adjusted to reflect these stock splits on a retroactive basis
for all periods presented.
INDUSTRY OVERVIEW
The outdoor advertising industry has experienced increased advertiser
interest and revenue growth in recent years. Outdoor advertising generated total
revenues of approximately $2.1 billion in 1997, or approximately 1.1% of the
total advertising expenditures in the United States, while the out-of-home
advertising industry, consisting of transit and in-store advertising displays in
addition to outdoor advertising, generated revenues in excess of $4.0 billion in
1997, according to estimates by the Outdoor Advertising Association of America
("OAAA"). Outdoor advertising's 1997 revenues represent growth of approximately
8.8% over estimated total revenues for 1996, which compares favorably to the
growth of total U.S. advertising expenditures of approximately 6.6% during the
same period.
Advertisers purchase outdoor advertising for a number of reasons. Outdoor
advertising offers repetitive impact and a relatively low cost
per-thousand-impressions, a commonly used media measurement, as compared to
television, radio, newspaper, magazine and direct mail marketing. Accordingly,
because of its cost-effective nature, outdoor advertising is a good vehicle to
build "mass market" support. In addition, outdoor advertising can be used to
target a defined audience in a specific location and, therefore, can be relied
upon by local businesses concentrating on a particular geographic area where
customers have specific demographic characteristics. For instance, restaurants,
motels, service stations and similar roadside businesses may use outdoor
advertising to reach potential customers close to the point of sale and provide
directional information. Other local businesses such as television and radio
stations and consumer products companies may wish to appeal more broadly to
customers and consumers in the local market. National brand name advertisers may
use the medium to attract customers generally and build brand awareness. In all
cases, outdoor advertising can be combined with other media such as radio and
television to reinforce messages being provided to consumers.
The outdoor advertising industry has experienced significant changes due to
a number of factors. First, the entire "out-of-home" advertising category has
expanded to include, in addition to traditional billboards and roadside
displays, displays in shopping centers and malls, airports, stadiums, movie
theaters and supermarkets, as well as on taxis, trains, buses and subways.
Second, while the outdoor advertising industry has experienced a decline in the
percentage of total revenues represented by its tobacco category, it has
increased its visibility with and attractiveness to local advertisers as well as
national retail, entertainment and consumer product-oriented companies. Third,
the industry has benefited significantly from improvements in production
technology, including the use of computer printing, vinyl advertising copy and
improved lighting techniques, which have facilitated a more dynamic, colorful
and creative use of the medium. This technological advance has permitted the
outdoor advertising industry to respond more promptly and efficiently to the
changing needs of its advertising customers and to increase its participation in
multi-media campaigns. Lastly, the outdoor advertising industry has benefited
from the growth in automobile travel time for business and leisure due to
increased highway congestion and continued demographic shifts of residences and
businesses from the cities to outlying suburbs. According to the Federal Highway
Administration, it takes 14% more time to commute to work and the drivers and
vehicles per household are growing at rates, three and six
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times, respectively, of the population growth rate. The Company believes that
the foregoing trends have resulted in increased consumer exposure to existing
billboard structures at a time when other media have been fragmenting their
audiences as the number of broadcast and cable networks and other narrowly
targeted formats has increased.
An expanding opportunity within the out-of-home advertising industry is
transit advertising. Local governments are providing transit amenities to
enhance their service and image to local transit users. To finance these transit
amenities, municipalities issue contracts for advertising displays on bus
shelters, subways and buses to private enterprises. Under these contracts, the
private party constructs and maintains the amenities, which it can use for
advertising displays. The primary benefits of privatizing transit advertising
are the avoidance of capital expenditures by the municipality, the prospect of
additional revenue for the municipality from a portion of the advertising
revenue, the consistent quality that a coordinated transit program can provide
and the benefits of regular cleaning and maintenance undertaken by private
enterprises.
The outdoor advertising industry is comprised of several large outdoor
advertising and multi-media companies with operations in multiple markets, as
well as many smaller and local companies operating a limited number of
structures in a single or a few local markets. While the industry has
experienced some consolidation within the past few years, the OAAA estimates
that, as of December 31, 1997, there were approximately 600 companies in the
outdoor advertising industry operating approximately 396,000 bulletin and poster
display faces. The Company expects the trend of consolidation in the outdoor
advertising industry to continue.
BUSINESS STRATEGY
The Company's primary objective is to be the leading provider of
out-of-home advertising services in each of its major markets. The Company's
successful operating strategy, focusing on superior sales and service, optimal
management of its inventory, centralized administration, low overhead and
strategic acquisitions, has enabled it to improve the historical operating
results in each of its existing markets. Management intends to apply this
strategy to each of its newly-acquired markets.
- - Superior Sales and Service. The Company seeks to gain market share in each of
its markets through an intensive focus on customer sales and service, quality
displays and competitive pricing. The Company has recruited and trained a
skilled sales force that is motivated by a program of commission-based
compensation and supported by a network of experienced local managers who
operate under a centrally coordinated marketing plan. Each of the Company's
markets has a general manager who is actively engaged in sales. In addition,
the Company seeks to attract and retain advertisers through creative
advertising layouts, timely installation and rotation of displays and rapid
response to customer needs.
- - National Sales Force. The Company's markets generally possess demographic
characteristics that are attractive to national advertisers, allowing the
Company to combine several of its markets into single contracts so that
advertisers with national and regional campaigns can simplify their purchasing
process while presenting their messages in multiple markets. The Company seeks
to gain national market share by providing advertisers easy access to all of
the Company's markets through one of its four national sales offices.
- - Optimal Inventory Management. The Company seeks to balance advertising rate
growth with optimal occupancy of its displays in order to maximize revenues.
The Company's variety of outdoor advertising displays in its geographically
diverse markets permits flexibility in pricing and packaging its display
inventory.
- - Centralized Administration. The Company has consolidated substantially all of
its administration, accounting, sales management and leasing management
functions into its Phoenix headquarters and four regional offices. This
centralization allows the Company to focus local efforts on customer service
and sales and to exercise greater control over administrative costs and
expenses.
- - Strategic Acquisitions. The Company pursues strategic acquisitions in
existing and new markets to achieve increased operating efficiencies, greater
geographic diversification and increased market penetration. The Company is
primarily interested in further expansion in the 50 largest United States and
ten largest Canadian markets, because these markets typically generate greater
outdoor market revenues, readily attract national advertisers, provide a
better basis for regional advertising, attract quality management and offer
opportunities to gain a larger market share from competitive media.
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MARKETS
The Company's markets generally possess demographic characteristics that
are attractive to national advertisers, allowing the Company to combine several
of its markets into single contracts so that advertisers with national and
regional campaigns can simplify their purchasing process while presenting their
messages in multiple markets. Each market also has unique local industries,
businesses, sports franchises and special events that are frequent users of
outdoor advertising. The following table sets forth certain information with
respect to the Company's outdoor markets as of December 31, 1997:
<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 2,979 262 264 2,710 7,079
Los Angeles......................................... 2 1,613 2,961 -- 473 2,912 7,959
Chicago............................................. 3 756 -- 640 162 -- 1,558
Philadelphia........................................ 4 23 -- -- 116 498 637
San Francisco....................................... 5 213 1,005 563 196 1,528 3,505
Boston.............................................. 6 -- -- -- 130 -- 130
Washington D.C...................................... 7 -- -- -- 195 -- 195
Dallas.............................................. 8 849 -- -- 127 -- 976
Detroit............................................. 9 656 1,342 91 138 1,000 3,227
Houston............................................. 10 1,047 -- -- 114 -- 1,161
Atlanta............................................. 11 933 1,679 -- 101 650 3,363
Seattle............................................. 12 -- -- -- 89 -- 89
Cleveland........................................... 13 70 -- -- 107 -- 177
Minneapolis......................................... 14 54 -- -- 155 -- 209
Miami-Ft. Lauderdale................................ 15 404 -- -- 168 -- 572
Tampa-St. Petersburg-Sarasota....................... 16 881 -- -- 116 -- 997
Phoenix............................................. 17.. 673 1,516 659 79 1,490 4,417
Sacramento-Stockton-Modesto......................... 18 446 1,271 -- 91 -- 1,808
Denver.............................................. 19 227 784 -- 156 5,266 6,433
St. Louis........................................... 20 466 833 1 10 -- 1,310
Pittsburgh.......................................... 21 -- -- -- 78 -- 78
Baltimore........................................... 22 -- -- -- 61 -- 61
San Diego........................................... 23 109 541 -- 106 680 1,436
Orlando............................................. 24 466 -- -- 93 -- 559
Portland, OR........................................ 25 17 -- -- 33 -- 50
Indianapolis........................................ 26 137 -- -- 59 -- 196
Hartford-New Haven.................................. 27 151 831 -- 25 -- 1,007
Cincinnati.......................................... 28 104 -- -- 60 -- 164
Salt Lake........................................... 29 61 -- -- 35 -- 96
Charlotte........................................... 30 145 -- -- 27 -- 172
Milwaukee........................................... 31 -- -- -- 32 -- 32
Raleigh-Durham...................................... 32 33 -- -- 20 -- 53
Nashville........................................... 33 248 -- -- 38 -- 286
Kansas City......................................... 34 242 840 -- 72 -- 1,154
Columbus, OH........................................ 35 104 -- -- 12 -- 116
San Antonio......................................... 36 85 -- -- 36 -- 121
Greenville, SC...................................... 37 -- -- -- 20 -- 20
Grand Rapids........................................ 38 56 568 -- 16 180 820
Norfolk............................................. 39 -- -- -- 57 -- 57
New Orleans......................................... 40 345 1,042 428 38 214 2,067
Memphis............................................. 41 77 -- -- 27 -- 104
Buffalo............................................. 42 116 -- -- 54 -- 170
Albuquerque......................................... 43 99 -- -- 27 -- 126
Providence.......................................... 44 -- -- -- 33 -- 33
Harrisburg.......................................... 45 -- -- -- 29 -- 29
Fresno.............................................. 46 125 892 -- 64 -- 1,081
Oklahoma City....................................... 47 -- -- -- 58 -- 58
Scranton............................................ 48 -- -- -- 10 -- 10
Louisville.......................................... 49 296 1,052 243 38 224 1,853
Winston-Salem....................................... 50 35 -- -- 16 -- 51
Birmingham.......................................... 51 154 -- -- 28 -- 182
West Palm Beach..................................... 52 219 -- -- 54 -- 273
Dayton.............................................. 53 123 -- -- 24 -- 147
Albany.............................................. 54 -- -- -- 107 -- 107
Jacksonville........................................ 55 178 -- -- 20 -- 198
Richmond, VA........................................ 56 -- -- -- 5 -- 5
Charleston, SC...................................... 57 181 -- -- 16 -- 197
Little Rock......................................... 58 -- -- -- 26 -- 26
Flint............................................... 59 86 423 32 21 -- 562
Tulsa............................................... 60 -- -- -- 6 -- 6
Wichita............................................. 61 -- -- -- 10 -- 10
Mobile.............................................. 62 -- -- -- 22 -- 22
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MALL AND TOTAL
MARKET 30-SHEET 8-SHEET AIRPORT DISPLAY
MARKET RANK BULLETINS POSTERS POSTERS POSTERS TRANSIT FACES
------ ------ --------- -------- ------- -------- ------- -------
UNITED STATES (CONTINUED):
<S> <C> <C> <C> <C> <C> <C> <C>
Knoxville........................................... 63 78 -- -- 12 -- 90
Toledo.............................................. 64 -- -- -- 12 -- 12
Syracuse............................................ 65 -- -- -- 62 -- 62
Austin.............................................. 66 -- -- -- 6 -- 6
Green Bay........................................... 67 -- -- -- 14 -- 14
Las Vegas........................................... 68 156 -- -- 31 -- 187
Roanoke............................................. 70 49 -- -- 20 -- 69
Des Moines.......................................... 71 -- -- -- 28 -- 28
Honolulu............................................ 72 -- -- -- 551 -- 551
Rochester........................................... 73 -- -- -- 78 3,715 3,793
Shreveport.......................................... 74 41 -- -- 16 -- 57
Omaha............................................... 75 52 -- -- 15 -- 67
Tucson.............................................. 78 170 6 338 -- 10 524
Rio Grande.......................................... 82 316 -- -- -- -- 316
Columbia, SC........................................ 83 158 -- -- 24 -- 182
El Paso............................................. 84 81 -- -- -- -- 81
Chattanooga......................................... 85 63 -- -- 36 -- 99
Jackson, MS......................................... 87 76 -- -- 20 -- 96
Ft. Myers........................................... 96 108 -- -- 39 -- 147
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 -- 1,136 -- 13,750
------ ------ ------ ----- ------ ------
UNITED STATES TOTAL(1)............................ 28,750 21,534 3,357 6,700 21,077 81,418
------ ------ ------ ----- ------ ------
CANADA:
Toronto............................................. 1 287 1,452 -- 47 3,557 5,343
Montreal............................................ 2 137 747 -- 75 1,823 2,782
Vancouver........................................... 3 2 -- -- 68 276 346
Ottawa.............................................. 4 19 172 -- -- 809 1,000
Edmonton............................................ 5 5 294 -- -- 548 847
Calgary............................................. 6 476 119 -- 38 648 1,281
Quebec City......................................... 7 193 327 -- 35 290 845
Winnipeg............................................ 8 109 246 -- -- 349 704
Hamilton............................................ 9 19 303 -- 80 598 1,000
London.............................................. 10 -- 53 -- -- -- 53
Kitchener........................................... 11 -- 72 -- -- -- 72
St. Catharines...................................... 12 7 91 -- -- -- 98
Halifax............................................. 13 17 169 -- 26 214 426
Other............................................... N/A 361 1,116 -- 81 480 2,038
------ ------ ------ ----- ------ ------
CANADA TOTAL...................................... 1,632 5,161 0 450 9,592 16,835
------ ------ ------ ----- ------ ------
TOTAL(1).......................................... 30,382(2) 26,695 3,357 7,150 30,669 98,253
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(1) Display faces do not include 125,000 subway advertising display faces in New
York City.
(2) Includes 141 wall murals and 51 "Spectacular" signs.
INVENTORY
The Company operates five standard types of outdoor advertising billboards
and displays:
- - Bulletins generally are 14 feet high and 48 feet wide (672 square feet). The
advertising copy is either hand painted onto panels at the facilities of the
outdoor advertising company in accordance with design specifications supplied
by the advertiser, and then attached to the outdoor advertising structure, or
is printed with computer-generated graphics on a single sheet of vinyl that is
"wrapped" around the structure. On occasion, to attract more attention, some
of the panels may extend beyond the linear edges of the display face and may
include three-dimensional embellishments. Because of their greater impact and
higher cost, bulletins are usually located on major highways.
- - 30-sheet posters generally are 12 feet high by 25 feet wide (300 square feet)
and are the most common type of billboard. Advertising copy for 30-sheet
posters consists of lithographed or silk-screened paper sheets supplied by the
advertiser that are pasted and applied like wallpaper to the face of the
display, or single
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sheets of vinyl with computer-generated advertising copy that are wrapped
around the structure. 30-sheet posters are concentrated on major traffic
arteries.
- - Junior (8-sheet) posters usually are 6 feet high by 12 feet wide (72 square
feet). Displays are prepared and mounted in the same manner as 30-sheet
posters, except that vinyl sheets are not typically used on junior posters.
Most junior posters, because of their smaller size, are concentrated on city
streets and target pedestrian traffic.
- - Mall and airport posters are displayed in backlighted cases. The displays are
generally constructed, owned and maintained by the outdoor advertising company
under a contract with a governmental entity or a shopping mall owner who
receives a share of the advertising revenues.
- - Transit displays include displays on bus shelters, subways and bus benches.
Bus shelters and benches are usually constructed, owned and maintained by the
outdoor advertising company under a contract with the municipality or transit
authority which receives a share of the shelter's advertising revenues. Bus
shelter displays are enclosed within glassed, backlighted cases on sides of a
pedestrian shelter at an urban bus stop on city rights of way. Subway displays
are located within subway stations and walkways as well as in subway trains.
Advertisements appear on lithographed or silk-screened posters supplied in a
single sheet by the advertiser. Transit displays are an attractive medium to
advertisers using "vertical" advertising copy, such as magazines and movie
posters, because the advertising copy is easily adapted for use in transit
shelters, and because of the proximity of the display to consumers.
Billboards generally are mounted on structures owned by the outdoor
advertising company and located on sites that are either owned or leased by it
or on which it has acquired a permanent easement. Billboard structures, bus
shelters and benches are durable, have long useful lives and do not require
substantial maintenance. When disassembled, they typically can be moved and
relocated at new sites.
EMPLOYEES
The Company had approximately 1,360 and 1,490 employees at December 31,
1996 and 1997, respectively.
SALES AND SERVICE
The Company devotes considerable time and resources to recruiting, training
and coordinating the activities of its sales force. Sales personnel are
compensated primarily on a commission basis to maximize the incentive to
perform. Arturo R. Moreno, President, Chief Executive Officer and a member of
the Board of Directors, and Wally C. Kelly, Senior Vice President, are the
Company's two principal officers responsible for day-to-day operations, and have
an aggregate of approximately 44 years of experience in the outdoor advertising
industry, virtually all of which has been spent in sales and management
positions.
CUSTOMERS
Advertisers usually contract for outdoor displays through advertising
agencies, which are responsible for the artistic design and written content of
the advertising as well as the choice of media and the planning and
implementation of the overall campaign. The Company pays commissions to the
agencies for advertising contracts that are procured by or through those
agencies. Advertising rates are based on a particular display's visual exposure
(or number of "impressions" delivered) in relation to the demographics of the
particular market and its location within that market. The number of
"impressions" delivered by a display is measured by the number of vehicles
passing the site during a defined period and is weighted to give effect to such
factors as its proximity to other displays, the speed and viewing angle of
approaching traffic, the national average of adults riding in vehicles and
whether the display is illuminated. The number of impressions delivered by a
display is verified by independent auditing companies.
The size and geographic diversity of the Company's markets allows it to
attract national advertisers by providing the opportunity to package displays in
several of its markets in a single contract allowing a national advertiser to
simplify the purchasing process and simultaneously present its message in
several markets.
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National advertisers generally seek wide exposure in major markets and therefore
tend to make larger purchases. The Company competes for national advertisers
primarily on the basis of price, availability and service.
The Company also focuses its efforts on local sales. Local advertisers tend
to have smaller advertising budgets and require greater assistance from the
Company's production and creative personnel in designing and producing
advertising copy. In local sales, the Company often expends more sales efforts
on educating customers regarding the benefits of outdoor media and helping
potential customers develop an advertising strategy using outdoor advertising.
While price and availability are important competitive factors, service and
customer relationships are also critical components of local sales.
Tobacco revenues have historically accounted for a significant portion of
outdoor advertising revenues. In the 1990s, due to a declining population of
smokers, societal pressures, consolidation in the tobacco industry and price
competition from generic brands, the leading tobacco companies substantially
reduced their expenditures for outdoor advertising. Because tobacco advertisers
often utilized some of the industry's prime inventory, the decline in
tobacco-related advertising expenditures made this space available for other
advertisers, including those that had not traditionally utilized outdoor
advertising. As a result of this decline in tobacco-related advertising revenues
and the increased use of outdoor advertising by other advertisers, the range of
the Company's advertisers has become quite diverse, with no single category of
advertisers accounting for more than 11.1% of net revenues in 1997. The
following table illustrates the diversity of the Company's advertising base:
NET REVENUES BY CATEGORY
<TABLE>
<CAPTION>
PERCENTAGE
OF
NET REVENUES
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<S> <C>
Retail/Consumer Products.................................... 11.1%
Travel and Entertainment.................................... 8.5
Automotive.................................................. 8.0
Tobacco..................................................... 7.6
Media....................................................... 6.9
Restaurants................................................. 3.7
Health...................................................... 3.6
Liquor...................................................... 3.2
Banking..................................................... 2.6
Beer........................................................ 2.4
Realtors.................................................... 1.7
Beverages -- Soft Drinks.................................... 1.5
Hotels...................................................... 1.2
Miscellaneous............................................... 38.0
-----
Total............................................. 100.0%
=====
</TABLE>
PRODUCTION
The Company possesses internal production facilities and staff to perform
the full range of activities required to develop, create and install outdoor
advertising. Production work includes creating the advertising copy design and
layout, painting the design or coordinating its printing and installing the
designs on its displays. The Company usually provides its full range of
production services to local advertisers and to
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advertisers that are not represented by advertising agencies, since national
advertisers and advertisers represented by advertising agencies often use
preprinted designs that require only installation. However, the Company's
creative and production personnel frequently are involved in production
activities even when advertisers are represented by agencies by developing new
designs or adapting copy from other media for use on billboards. The Company's
artists also assist in the development of marketing presentations,
demonstrations and strategies to attract new advertisers.
With the increased use of vinyl and pre-printed advertising copy furnished
to the outdoor advertising company by the advertiser or its agency, outdoor
advertising companies are becoming less responsible for labor-intensive
production work since vinyl and pre-printed copy is typically produced by the
advertiser or its agency and can be installed quickly. The Company believes that
this trend over time will reduce operating expenses associated with production
activities.
COMPETITION
The Company competes in each of its markets with other outdoor advertising
operations as well as other media, including broadcast and cable television,
radio, print and direct mail marketers. In addition, the Company also competes
with a wide variety of "out-of-home" media, including advertising in shopping
centers and malls, airports, stadiums, movie theaters and supermarkets, as well
as on taxis, trains, buses and subways. Advertisers compare relative costs of
available media and cost-per-thousand impressions, particularly when delivering
a message to customers with distinct demographic characteristics. In competing
with other media, outdoor advertising relies on its low cost per-thousand
impressions and its ability to reach a broad segment of the population in a
specific market or to target a particular geographic area or population with a
particular set of demographic characteristics within that market.
The outdoor advertising industry is highly fragmented, consisting of
several large outdoor advertising and media companies with operations in
multiple markets as well as smaller and local companies operating a limited
number of structures in a single or a few local markets. Although some
consolidation has occurred over the past few years, according to the OAAA, as of
December 31, 1997, there were approximately 600 companies in the outdoor
advertising industry operating approximately 396,000 bulletin and poster display
faces. In several of its markets, the Company encounters direct competition from
other major outdoor media companies. The Company believes that its strong
emphasis on sales and customer service and its position as a major provider of
advertising services in each of its markets enable it to compete effectively
with the other outdoor advertising companies, as well as other media, within
those markets.
GOVERNMENT REGULATION
U.S. Regulations. The outdoor advertising industry is subject to
governmental regulation at the federal, state and local level. Federal law,
principally the Highway Beautification Act of 1965, encourages states, by the
threat of withholding 10% of the federal appropriations for the construction and
improvement of highways within such states, to implement state legislation to
prohibit billboards located within 660 feet of, or visible from, interstate and
primary highways except in commercial or industrial areas where off-site signage
is permitted provided it meets spacing and size restrictions. Most of the states
have implemented regulations at least as restrictive as the Highway
Beautification Act, prohibiting the removal of billboards from federally aided
highways without compensation.
The states and local jurisdictions have, in some cases, passed additional
and more restrictive regulations on the construction, repair, upgrading, height,
size and location of outdoor advertising structures adjacent to federally-aided
highways and other thoroughfares. Such regulations, often in the form of
municipal building, sign or zoning ordinances, specify minimum standards for the
height, size and location of billboards. In some cases, the construction of new
billboards or relocation of existing billboards is prohibited. Some
jurisdictions also have restricted the ability to enlarge or upgrade existing
billboards, such as converting from wood to steel or from nonilluminated to
illuminated structures, and/or restrict the reconstruction of billboards which
are substantially destroyed as a result of storms or other causes. From time to
time governmental authorities order the removal of billboards by the exercise of
eminent domain. Thus far, the Company believes it has been able
7
<PAGE> 10
to obtain satisfactory compensation for any of its structures removed at the
direction of governmental authorities, although there is no assurance that it
will be able to continue to do so in the future.
Amortization of billboards has also been adopted in varying forms in
certain jurisdictions. In theory, amortization permits the billboard owner to
operate its billboard as a non-conforming use for a specified period of time
during which it is to recover its investment, after which it must remove or
otherwise conform its billboard to the applicable regulations at its own cost
without any compensation. Several municipalities in the Company's markets,
including municipalities or townships in Denver, Houston, Jacksonville, Kansas
City and St. Louis, currently have amortization ordinances or regulations.
Ordinances requiring the removal of a billboard without compensation, whether
through amortization or otherwise, are being challenged in various state and
federal courts with conflicting results. In some cities, amortization ordinances
or regulations are not being enforced or have been held unconstitutional.
However, no assurance can be given as to the effect on the Company of the
enforcement of existing laws or regulations, or of new laws and regulations that
may be adopted in the future.
In recent years, there have been efforts to restrict billboard advertising
of certain products, including tobacco and alcohol. Congress has passed no
legislation at the federal level except legislation requiring health hazard
warnings similar to those on cigarette packages and print advertisements. In
1996, the Food and Drug Administration promulgated rules which, among other
things, would limit certain types of outdoor advertising by tobacco companies.
While certain of these regulations have been declared invalid by a lower court
ruling, appeals are likely and there can be no assurance that further
developments resulting in a validation or implementation of these or similar
regulations will not occur. Outdoor advertising of tobacco products also may be
affected by city or state regulations. For example, in 1995, the Court of
Appeals for the Fourth Circuit upheld the validity of a Baltimore city ordinance
restricting the placement of outdoor advertisements of cigarettes and alcohol in
publicly visible locations, such as billboards, signboards and sides of
buildings. Subsequently, the United States Supreme Court declined to review an
appeal of the case. Restrictions similar to the Baltimore ordinance are also
being contemplated or introduced in other states or municipalities around the
country, including New Jersey, New York City, San Francisco, Chicago and Los
Angeles. While Baltimore is not a municipality in which the Company conducts
business, there can be no assurance that additional local or state governments
will not enact similar ordinances or statutes to limit outdoor advertising of
tobacco in the future in markets in which the Company operates. Certain states
in which the Company operates have historically prohibited the outdoor
advertising of distilled spirits. In California and Phoenix, Arizona, transit
shelter advertising posters on public rights of way are prohibited from
displaying tobacco and/or alcohol advertising. San Francisco has adopted an
ordinance banning all tobacco and alcohol advertising on public property, but
has "grandfathered" existing sales contracts through 2002. For each of the past
three years, the California legislature has considered proposed legislation
which would ban, or substantially limit, all outdoor advertising of tobacco.
While that legislation has not been passed, the proponents have publicly stated
they will continue to attempt to have such proposal enacted. It is uncertain
whether additional legislation of this type will be enacted on the national
level or in any of the markets in which the Company operates.
It also has been reported that certain cigarette manufacturers who are
defendants in numerous class action suits throughout the United States have
reached agreement with Attorneys General of various states for an out of court
settlement with respect to such suits that would, among other things, prohibit
outdoor advertising by the tobacco industry. The settlement is subject to
various conditions including approval and implementing legislation by the United
States Congress. There can be no assurance as to the effect of this settlement
agreement and potential legislation on the Company's business and on its net
revenues and financial position.
In addition, the states of Florida, Mississippi and Texas have entered into
separate settlements of litigation with the tobacco industry. These settlements
are not conditioned on federal government approval and provide for the
elimination of all outdoor advertising of tobacco products. 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
8
<PAGE> 11
Company's outdoor advertising markets or limit the ability of industry
participants to increase rates for some period of time. Any such consequence
could have a material adverse effect on the Company.
Canadian Regulations. Outdoor advertising in Canada is subject to
regulation at the federal, provincial and municipal levels. These regulations
may prohibit advertising of certain products on outdoor signs in certain
locations. For example, in Ontario, billboards and posters advertising liquor
may not be placed within 200 meters of a primary or secondary school.
Additionally, Canadian federal legislation was enacted in April, 1997 which
effectively prohibits substantially all outdoor tobacco advertising. While this
legislation is being challenged, there can be no assurance that such challenge
will be successful. In addition, the placement of outdoor billboards is
primarily regulated at the provincial and local level. For example, Quebec
regulates the placement of advertising adjacent to highways, as well as the
language used on outdoor signs.
General. To date, regulations in the Company's markets have not materially
adversely affected its operations. However, the outdoor advertising industry is
heavily regulated and at various times and in various markets can be expected to
be subject to varying degrees of regulatory pressure affecting the operation of
advertising displays. Accordingly, although the Company's experience to date is
that the regulatory environment is not prohibitive, no assurance can be given
that existing or future laws or regulations will not materially adversely affect
the Company.
ITEM 2. PROPERTIES
Outdoor Advertising Sites. The Company owns parcels of real property that
serve as sites for its outdoor displays. In addition, the Company possesses
perpetual easements on parcels of real property owned by third parties on which
it has placed outdoor displays. The majority of the Company's advertising
display sites are leased.
The Company's leases are for varying terms ranging from monthly or annual
periods to terms of ten years or longer, and many provide for renewal options.
There is no significant concentration of displays under any one lease or subject
to negotiation with any one landlord.
Office and Production Facilities. The Company's principal executive and
administrative offices are located in Phoenix, Arizona, in a facility owned by
the Company. A portion of this facility also is used for painting, poster
prepasting and related production activities. Additionally, the Company owns the
majority of the office and production facilities from which it operates in its
United States and Canadian metropolitan markets.
See also "Item 1 -- Business -- Markets."
ITEM 3. LEGAL PROCEEDINGS
The Company is party either as plaintiff or defendant to various actions,
proceedings and pending claims, in the ordinary course of business. Litigation
is subject to many uncertainties and it is possible that some of the legal
actions, proceedings or claims referred to above could be decided against the
Company. Although the ultimate amount for which the Company or its subsidiaries
may be held liable with respect to matters where the Company is defendant is not
ascertainable, the Company believes that any resulting liability will not
materially affect the Company's financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
9
<PAGE> 12
ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
YEARS WITH
NAME AGE POSITION COMPANY
---- --- -------- ----------
<S> <C> <C> <C>
William S. Levine.......... 66 Chairman of the Board and Director 18
Arthur R. Moreno........... 51 President, Chief Executive Officer and Director 14
Wally C. Kelly............. 41 Senior Vice President 14
Robert M. Reade............ 58 Vice President 6
Bill M. Beverage........... 47 Treasurer, Secretary and Chief Financial Officer 7
</TABLE>
Mr. Levine, a founder and principal stockholder of the Company, has been
Chairman of the Board and a director of the Company since its formation. Mr.
Levine has 18 years of experience in the outdoor advertising industry. He is an
owner and officer of numerous privately-owned firms and commercial real estate
operations. Since 1990, Mr. Levine has dedicated a substantial portion of his
time to the Company's affairs.
Mr. Moreno has served as the Company's President and Chief Executive
Officer and has been a director of the Company since April 1984. Mr. Moreno has
25 years of experience in the outdoor advertising industry. From 1981 to 1984,
Mr. Moreno served as President and General Manager of Gannett Outdoor of New
Jersey. From 1979 to 1981, he was President and General Manager of Gannett
Outdoor of Kansas City (Missouri). From 1973 to 1981, Mr. Moreno worked in
Phoenix as a Vice President of Sales for Gannett Outdoor and its predecessor
company. Mr. Moreno is also a director of Ugly Duckling, Inc.
Mr. Kelly has been the Company's Senior Vice President since 1984. Mr.
Kelly has 19 years of experience in the outdoor advertising business. From 1979
to 1984, Mr. Kelly worked for Whiteco Metrocom, Inc. in Tucson (1979 to 1981) as
Sales Manager and in Chicago as Vice President of National Sales (1982 to 1984).
Mr. Reade has been Vice President of the Company since May 1997. He served
as the Company's Director of Real Estate from April 1993 to May 1997 and was a
consultant to the Company from 1992 to April 1993. Mr. Reade has 28 years of
experience in the outdoor advertising industry. From 1987 to 1990, Mr. Reade
served as President and Chief Operating Officer of a major convenience store
chain and from 1985 to 1987 was Real Estate Manager of such chain. In 1985, Mr.
Reade served as Vice President, Sales and Marketing for Gannett Outdoor Group in
New York and from 1970 to 1985 he was General Manager for Gannett Outdoor and
its predecessor company in Phoenix.
Mr. Beverage has served as the Company's Controller since 1992, its
Treasurer and Secretary since May 1993, and its Chief Financial Officer since
October 1995. Mr. Beverage has 19 years of experience in the accounting
departments of various outdoor advertising companies. From 1990 to 1992, he
served as the Company's Atlanta real estate manager. From 1988 until 1990, he
worked for Outdoor Today, Inc. in Atlanta (which was acquired by the Company in
1990) as a consultant and as its accounting manager. Prior to 1988, he worked
for five years for Turner Outdoor Advertising in Atlanta and for four years for
Creative Displays in Atlanta. From 1976 to 1979, he was an auditor for Arthur
Young & Co. (now known as Ernst & Young).
Executive officers of the Company are elected by the Board of Directors on
an annual basis and serve at the discretion of the Board of Directors.
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<PAGE> 13
PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company effected the initial public offering of its Common Stock on
April 24, 1996 at a price of $2.96 per share, as adjusted for all subsequent
stock splits. The Company's Common Stock is currently traded on the New York
Stock Exchange under the symbol "OSI". From April 24, 1996 to September 1, 1997,
the Common Stock was quoted on the Nasdaq Stock Market under the symbol "OSIA".
The following table sets forth, for the periods indicated, the high and low
sales prices per share of the Common Stock as reported by the New York Stock
Exchange or the Nasdaq Stock Market, as applicable.
<TABLE>
<CAPTION>
1996 HIGH LOW
---- ------ ------
<S> <C> <C>
2nd Quarter (from April 24, 1996)........................ $ 7.46 $ 2.96
3rd Quarter.............................................. 14.00 6.78
4th Quarter.............................................. 14.67 10.22
</TABLE>
<TABLE>
<CAPTION>
1997 HIGH LOW
---- ------ ------
<S> <C> <C>
1st Quarter.............................................. $15.06 $ 9.67
2nd Quarter.............................................. 17.00 11.44
3rd Quarter.............................................. 18.08 15.42
4th Quarter.............................................. 26.29 17.25
</TABLE>
On March 13, 1998, the last reported sales price of the Common Stock on the
New York Stock Exchange was $29.875 per share. As of March 13, 1998, there were
64 shareholders of record of the Common Stock.
The Company's Senior Credit Facility prohibits the payment of cash
dividends and other distributions until certain financial ratios are achieved.
11
<PAGE> 14
ITEM 6. SELECTED FINANCIAL 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, 1997. The financial statements of the Company as of December
31, 1996 and 1997 and for the three years in the period ended December 31, 1997
together with the report of Deloitte & Touche LLP, independent auditors are
included elsewhere herein. The data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements, including
the Notes thereto, appearing elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
1993 1994 1995 1996 1997
----------- ----------- ----------- ----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Net revenues(2)........................ $ 49,151 $ 52,077 $ 64,813 $ 173,116 $ 471,004
Operating Expenses:
Direct advertising expenses.......... 23,721 24,433 30,462 87,593 237,175
General and administrative
expenses........................... 2,777 3,357 4,096 13,458 28,563
Depreciation and amortization........ 10,421 9,165 9,970 22,555 75,327
Gain on the Atlanta and Denver
Dispositions......................... -- 4,325 -- 7,344 --
Operating income....................... 12,232 19,447 20,285 56,854 129,939
Foreign currency translation (gain)
loss................................. -- -- -- (171) 2,093
Interest expense....................... 11,894 16,393 17,199 32,489 87,150
Income (loss) before extraordinary item
and change in accounting
principle(3)......................... 111 1,333 2,768 14,336 22,211
Net income (loss)...................... (3,176) 1,333 2,768 (3,444) 15,438
Net income (loss) attributable to
common stockholders.................. (5,748) (263) 307 (6,905) 15,438
Basic net income (loss) per share...... (.14) (.01) .01 (.10) .14
Diluted net income (loss) per share.... (.11) (.01) .01 (0.09) .13
Shares used in basic per share
computations......................... 40,277,554 37,729,530 47,466,853 67,672,701 109,096,011
Shares used in diluted per share
computations......................... 50,014,877 47,466,853 57,204,176 79,342,506 122,432,867
OTHER DATA:
EBITDA(4).............................. $ 22,653 $ 24,287 $ 30,255 $ 72,065 $ 205,266
EBITDA margin(5)....................... 46.1% 46.6% 46.7% 41.6% 43.6%
Capital expenditures................... $ 4,387 $ 4,924 $ 7,070 $ 9,046 $ 30,189
Number of advertising displays......... 10,800 11,900 12,700 61,600(6) 98,300(6)
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital........................ $ 13,967 $ 15,022 $ 8,221 $ 36,142 $ 61,229
Total assets........................... 129,433 151,260 138,213 933,455 2,229,157
Total debt............................. 129,812 155,204 142,269 606,409 1,444,159
Common stockholders' equity
(deficiency)......................... (28,811) (29,074) (28,767) 288,179 695,471
</TABLE>
- ---------------
(1) During 1996 and 1997, the Company completed certain acquisitions, including
the Gannett Outdoor Acquisition and the Denver Disposition in 1996, and the
Van Wagner Acquisition and the 3M Media Acquisition in 1997. In December
1994, the Company consummated the Atlanta Disposition. In addition, in 1993
the Company refinanced a substantial portion of its indebtedness with
10 3/4% Senior Notes due 2003 (the "10 3/4% Senior Notes"). Accordingly,
operating results are not necessarily
12
<PAGE> 15
comparable on a year-to-year basis. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Note 2 of the
Consolidated Financial Statements.
(2) Net revenues are gross revenues minus agency commissions, plus other income
of $1.0 million, $0.4 million, $6.1 million and $15.3 million for the years
ended December 31, 1994, 1995, 1996 and 1997, respectively.
(3) Deferred financing costs of $3.3 million, $17.8 and $6.8 million associated
with borrowings which were retired or redeemed were charged as an
extraordinary loss during 1993, 1996 and 1997, respectively.
(4) "EBITDA" is defined as operating income (loss) before depreciation and
amortization expense and, in 1994 and 1996, before the gain on the Atlanta
and Denver Dispositions, respectively. While EBITDA should not be considered
in isolation or as a substitute for net income, cash flows from operating
activities and other income or cash flow statement data prepared in
accordance with generally accepted accounting principles, or as a measure of
profitability or liquidity, management understands that it is customarily
used by certain investors as one measure to evaluate the financial
performance of companies in the outdoor advertising industry.
(5) "EBITDA margin" is EBITDA stated as a percentage of net revenues.
(6) Does not include approximately 125,000 subway advertising display faces in
New York City.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion of the consolidated results of operations of the
Company for the three years ended December 31, 1997 and financial condition at
December 31, 1997 should be read in conjunction with the Consolidated Financial
Statements of the Company and the related notes included elsewhere herein.
GENERAL
The performance of an outdoor advertising business, such as the Company, is
measured by its ability to generate EBITDA. EBITDA is defined as operating
income (loss) before interest, taxes, depreciation and amortization expense and,
with respect to 1996, before the gain on the Denver Disposition. Although EBITDA
is not a measure of performance calculated in accordance with generally accepted
accounting principles, the Company believes that EBITDA is accepted by the
outdoor advertising industry as a generally recognized measure of performance
and is used by analysts who report publicly on the performance of outdoor
advertising companies. Nevertheless, this measure should not be considered in
isolation or as a substitute for operating income, net income, net cash provided
by operating activities or any other measure for determining the Company's
operating performance or liquidity which is calculated in accordance with
generally accepted accounting principles.
Revenues are a function of both the occupancy of the Company's outdoor
advertising display inventory (the amount of time that its display faces contain
advertisements) and the rates that the Company charges for use of its display
faces. Accordingly, the Company focuses its sales efforts on attaining an
optimal "mix" of occupancy and rates in order to maximize revenues, and believes
that there are opportunities for additional improvements to its occupancy and
rate mix with respect to its entire inventory.
Net revenues are gross revenues less commissions paid to advertising
agencies that contract for the use of advertising display faces on behalf of
advertisers plus other income arising from the Company's operations. Advertisers
typically contract for advertising space through agencies, although in some
cases the Company sells advertising space directly to local advertisers. Agency
commissions are typically 15% of gross revenues on local sales and 16 2/3% of
gross revenues on national sales. The Company measures its operating performance
based upon percentages of net revenues rather than gross revenues.
The Company's most significant operating expenses are direct advertising
expenses and general and administrative expenses. Direct advertising expenses
consist of rental payments to property owners for use of land on which
advertising display faces are located, production expenses and selling expenses.
Production expenses consist of salaries for operations personnel and real estate
representatives, materials and supplies used in the preparation and display of
advertising copy, annual permits, property taxes and other similar expenses.
Selling expenses consist of salaries and commissions for salespeople, travel and
entertainment
13
<PAGE> 16
relating to sales, sales administration and other similar expenses. The
Company's general and administrative expenses consist of expenses related to
accounting, administrative functions, insurance, bad debts and other similar
expenses.
The Company had Federal income tax net operating loss carryforwards of
approximately $47.1 million as of December 31, 1997, which will expire over a
period of years beginning in 2003. Although realization is not assured,
management believes, based on operating results in 1997 and its expectations for
the future, that the taxable income of the Company will more likely than not be
sufficient to utilize all of the $47.1 million of net operating loss
carryforwards prior to their ultimate expiration in 2017. However, there can be
no assurances that the Company will generate taxable income in the future.
ACQUISITIONS
3M Media Acquisition. On August 15, 1997, the Company acquired the outdoor
advertising operations of Minnesota Mining and Manufacturing Company ("3M")
through the purchase of the capital stock of National Advertising Company, a
subsidiary of 3M ("3M Media"), for approximately $1.0 billion in cash (the "3M
Media Acquisition"). The 3M Media operations include approximately 29,900
advertising display faces consisting of 20,800 bulletins, 2,400 posters and
6,700 mall advertising display faces in 56 metropolitan markets and
non-metropolitan locations in the United States (net of assets disposed of as
described below).
The Company financed the purchase price of the 3M Media Acquisition and the
fees and expenses associated with the acquisition and the acquisition financing
through (i) proceeds from the offering of 30,375,000 shares of common stock (the
"1997 Common Stock Offering") to the public, completed on May 28, 1997, (ii)
proceeds of an offering of $500 million aggregate principal amount of 8 7/8%
Senior Subordinated Notes due 2007 (the "1997 Notes") completed on June 23, 1997
(the "1997 Notes Offering"), and (iii) borrowings under the Company's Senior
Credit Facility which was amended to provide for a revolving credit facility and
term loans of up to approximately $900 million.
In connection and simultaneously with the 3M Media Acquisition, the Company
sold to Lamar Advertising Company ("Lamar") and another outdoor advertising
company certain outdoor advertising assets the Company acquired from 3M. The
assets sold consisted of approximately 1,800 advertising displays in Atlanta,
Denver, Detroit, Grand Rapids, Houston, New Orleans, Kansas City, Louisville,
Phoenix and Sacramento. The selling price for such assets was approximately $116
million in cash. There was no gain or loss recognized on this sale.
Van Wagner Acquisition. On May 22, 1997, the Company purchased all of the
capital stock of Van Wagner for approximately $170.0 million in cash (the "Van
Wagner Acquisition"). 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 have been integrated as an acquisition of
advertising display inventory.
Gannett Outdoor Acquisition. On August 22, 1996, the Company purchased
substantially all of the assets of Gannett Outdoor (the "Gannett Outdoor
Acquisition"), including the stock of certain indirect subsidiaries of Gannett
Co., Inc. ("Gannett")related to the outdoor division, for approximately $700.0
million in cash. The Company acquired from Gannett a total of approximately
40,000 advertising display faces consisting of 4,100 bulletins, 20,400 posters
and 15,500 transit advertising displays (the Company also acquired approximately
125,000 subway advertising display faces in New York City) in 15 metropolitan
markets in the United States and seven metropolitan markets in Canada.
The Company financed the acquisition through (i) its Senior Credit
Facility, (ii) a Subordinated Credit Facility ("Bridge Loan") and (iii) the
proceeds from the offering of 28,991,250 shares of Common Stock (the "1996
Common Stock Offering") to the public, completed on August 22, 1996, for which
it received proceeds of approximately $283,135,000 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
14
<PAGE> 17
Notes due 2006 (the "1996 Notes"). The proceeds from this offering (the "1996
Notes Offering") were used to repay all borrowings under the Bridge Loan and to
partially repay amounts outstanding under the Senior Credit Facility (see Note 5
to the Consolidated Financial Statements).
Other Acquisitions. See Note 2 to the Consolidated Financial Statements
for information concerning other acquisitions effected by the Company during
1996 and 1997.
RESULTS OF OPERATIONS
Operating results for the twelve months ended December 31, 1996 include the
operations of the Gannett Outdoor Acquisition completed August 22, 1996.
Operating results for the twelve months ended December 31, 1997 include the
operations of the Van Wagner Acquisition completed May 22, 1997, the operations
of the 3M Media Acquisition completed August 15, 1997, and the several other
acquisitions completed during 1997 (the "Other 1997 Acquisitions") (see Note 2
to the Consolidated Financial Statements) (collectively, the "Acquisitions").
COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1997
Gross revenues increased by 171.7% from $194.2 million in 1996 to $527.5
million in 1997. Gross revenues increased approximately 9.8% during 1997
compared to 1996 for markets where the Company operated both in 1997 and 1996.
The balance of the increased revenues were a result of the 3M Media Acquisition,
the Van Wagner Acquisition and the Other 1997 Acquisitions (collectively, the
"1997 Acquisitions") (see Note 2 to the Consolidated Financial Statements).
Agency commissions were 13.6% of gross revenues in 1997 compared to 14.0%
in 1996. Agency commissions were lower in 1997 primarily as a result of slightly
lower proportion of revenues generated through advertising agencies.
Net revenues increased by 172.1% from $173.1 million in 1996 to $471.0
million in 1997, primarily as a result of the increase in gross revenues
combined with an increase of other income from $6.1 million in 1996 to $15.3
million in 1997. Other income increased primarily due to the inclusion of
license fee revenue from perpetual easements acquired in 1997 and the inclusion
in 1997 of a full twelve months of revenues from a printing operation acquired
in connection with the Gannett Outdoor Acquisition.
Direct advertising expenses increased from $87.6 million in 1996 to $237.2
million in 1997. This was primarily a result of the 1997 Acquisitions. As a
percentage of net revenues, direct advertising expenses were approximately 50.6%
in 1996 and 50.4% in 1997.
General and administrative expenses increased from $13.5 million in 1996 to
$28.6 million in 1997. This was primarily a result of the 1997 Acquisitions. As
a percentage of net revenues, general and administrative expenses decreased from
7.8% in 1996 to 6.1% in 1997 because of efficiencies realized from economies of
scale.
As a result of the above factors, EBITDA increased by 184.8% from $72.1
million in 1996 to $205.3 million in 1997.
Depreciation and amortization expenses increased from $22.6 million in 1996
to $75.3 million in 1997, primarily due to the net increase in depreciation due
to the 1997 Acquisitions which was offset in part by certain assets becoming
fully depreciated during 1997. As a percentage of net revenues, depreciation and
amortization expense increased from 13.0% in 1996 to 16.0% in 1997.
Interest expense increased from $32.5 million in 1996 to $87.2 million in
1997, as a result of interest expense related to obligations incurred in
connection with the 1997 Acquisitions. As a percentage of net revenues, interest
expense decreased from 18.8% in 1996 to 18.5% in 1997, primarily due to the
increase in net revenues.
Income before taxes and extraordinary item was approximately $24.5 million
in 1996 and $40.7 million in 1997. Included in 1996 income before taxes and
extraordinary item was a $7.3 million gain on the Denver
15
<PAGE> 18
Disposition. Disregarding the effect of this gain, income before taxes and
extraordinary item increased from $17.2 million in 1996 to $40.7 million in
1997.
The Company recorded an income tax provision of $10.2 million in 1996 and
$18.5 million in 1997. The increase in the reported effective income tax rate
for 1997 is due primarily to the inclusion of a full year of operations of the
Company's Canadian subsidiary.
The Company reported an extraordinary loss of $17.8 million, net of $9.8
million tax benefit, in 1996 and $6.8 million, net of $4.5 million tax benefit
in 1997. Both of these extraordinary losses resulted primarily from, one time
bridge loan commitment costs in connection with the Acquisitions and from a
premium associated with the early redemption of the 10 3/4% Senior Notes.
COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1996
Operating results for 1996 include the operations of the Gannett Outdoor
Acquisition subsequent to August 23, 1996. Gross revenues increased by 160.0%
from $74.7 million in 1995 to $194.2 million in 1996. Approximately 89.8% of
this increase in gross revenues was attributable to the Gannett Outdoor
Acquisition, with the remaining 10.2% of such increase in all other markets
resulting primarily from increased inventory utilization.
Agency commissions increased from $10.3 million in 1995 to $27.1 million in
1996 primarily as a result of the Gannett Outdoor Acquisition. As a percentage
of gross revenues, agency commissions increased from 13.8% in 1995 to 14.0% in
1996 as a result of a slightly higher proportion of revenues generated through
advertising agencies.
Net revenues increased by 167.1% from $64.8 million in 1995 to $173.1
million in 1996, primarily as a result of the increase in gross revenues
combined with an increase of other income from $0.4 million in 1995 to $6.1
million in 1996. Other income increased primarily due to the inclusion of
license fee revenue from perpetual easements acquired in early 1996 and the
inclusion of revenues from a printing operation acquired in connection with the
Gannett Outdoor Acquisition.
Direct advertising expenses increased from $30.5 million in 1995 to $87.6
million in 1996. Approximately 95.8% of this increase was attributable to the
Gannett Outdoor Acquisition. As a percentage of net revenues, direct advertising
expenses were approximately 47.0% in 1995 and 50.6% in 1996.
General and administrative expenses increased from $4.1 million in 1995 to
$13.5 million in 1996. Approximately 99.4% of this increase was due to the
Gannett Outdoor Acquisition with the remaining increase primarily due to
increased provisions for bad debts and increases in incentive and management
compensation in 1996. As a percentage of net revenues, general and
administrative expenses increased from 6.3% in 1995 to 7.8% in 1996.
As a result of the above factors, EBITDA increased by 162.5% (138.2% before
the gain on the Denver Disposition) from $30.3 million in 1995 to $79.4 million
($72.1 million before the gain on the Denver Disposition) in 1996.
Depreciation and amortization expenses increased from $10.0 million in 1995
to $22.4 million in 1996, primarily due to the net increase in depreciation due
to the Gannett Outdoor Acquisition which was offset in part by certain assets
becoming fully depreciated during 1996. As a percentage of net revenues,
depreciation and amortization expense decreased from 15.4% in 1995 to 12.9% in
1996.
Interest expense increased from $17.2 million in 1995 to $32.5 million in
1996, as a result of interest expense related to obligations incurred in
connection with the Gannett Outdoor Acquisition. As a percentage of net
revenues, interest expense decreased from 26.5% in 1995 to 18.8% in 1996,
primarily due to the increase in net revenues.
Income before taxes and extraordinary item was approximately $3.1 million
in 1995 and $24.5 million in 1996. Included in 1996 income before taxes and
extraordinary item was a $7.3 million gain on the Denver
16
<PAGE> 19
Disposition. Disregarding the effect on this gain, income before taxes and
extraordinary item increased from $3.1 million in 1995 to $17.2 million in 1996.
The Company recorded an income tax provision of $0.3 million in 1995 and
$10.2 million in 1996. The low effective tax rate in 1995 is the result of
reversing a $1.1 million valuation allowance for deferred income taxes. See Note
11 to the Consolidated Financial Statements.
The Company reported an extraordinary loss of $17.8 million, net of $9.8
million tax benefit, in 1996. Approximately $11.2 million of this extraordinary
loss is a result of the redemption of the 10.75% Senior Notes, $5.7 million
results from one time financing fees in connection with the Gannett Outdoor
Acquisition and $0.9 million results from the redemption of subordinated notes.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was $36.1 million at December 31, 1996 and
$61.2 million at December 31, 1997. The increase in working capital resulted
primarily from working capital acquired in the 1997 Acquisitions, offset by an
increase in current maturities relating to new debt associated with the 1997
Acquisitions.
Net cash provided by operating activities increased by $41.1 million from
$49.6 million during 1996 to $90.7 million during 1997, primarily due to
increased net income resulting from the 1997 Acquisitions and the effect of a
larger depreciation and amortization expense as a component of net income which
were partially offset by changes in working capital accounts. Net cash used in
investing activities increased from $754.1 million in 1996 to $1,293.8 million
in 1997, primarily due to the 1997 Acquisitions. Net cash provided by financing
activities increased from 714.6 million in 1996 to $1,197.3 million in 1997,
primarily because of proceeds received from the 1997 Common Stock Offering, the
1997 Notes Offering and borrowings under the Senior Credit Facility, all used to
finance the 1997 Acquisitions.
The Company made approximately $30.2 million of capital expenditures during
1997, an increase from approximately $9.0 million during 1996. 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 $30.0 million to $32.0
million in each of the next two years.
During 1997, the Company completed the 1997 Acquisitions. The Company
financed the purchase price of the 1997 Acquisitions and the fees and expenses
associated with the 1997 Acquisitions and the acquisition financing through (i)
proceeds from the 1997 Common Stock Offering, (ii) proceeds from the 1997 Notes
Offering, and (iii) borrowings under the Company's Senior Credit Facility.
The Company believes that internally generated funds and available
borrowings under the Senior Credit Facility will be sufficient 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.
The Company recognizes the need to ensure that its operations will not be
adversely impacted by Year 2000 software failures. The Company has identified
all significant applications that will require modification to ensure Year 2000
compliance (" Year 2000 Compliance"). Internal and external resources are being
used to make the required modifications and test Year 2000 Compliance. The
Company plans on completing the testing process of all significant applications
by December 31, 1998.
In addition, the Company has communicated with others with whom it does
significant business to determine their Year 2000 Compliance readiness and the
extent to which the Company is vulnerable to any third party Year 2000 issues.
However, there can be no guarantee that the systems of other companies on which
the Company's systems rely will be timely converted, or that a failure to
convert by another company, or a conversion that is incompatible with the
Company's systems, would not have a material adverse effect on the Company.
The total cost to the Company of these Year 2000 Compliance activities has
not been and is not anticipated to be material to its financial position or
results of operations in any given year. These costs and the
17
<PAGE> 20
date on which the Company plans to complete the Year 2000 modification and
testing processes are based on management's best estimates, which were derived
utilizing numerous assumptions of future events including the continued
availability of certain resources, third party modification plans and other
factors. However, there can be no guarantee that these estimates will be
achieved and actual results could differ from those plans.
INFLATION
Because a significant portion of the Company's costs are fixed, the Company
does not believe that inflation has had or will have a material adverse effect
on its operations. However, there can be no assurance that a high rate of
inflation in the future will not have an adverse effect on the Company's
operations.
FORWARD-LOOKING STATEMENTS
This report contains certain statements that are "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
When used in this report, the words "estimate", "expect", "anticipate",
"believe" and similar expressions are intended to identify forward-looking
statements. The Company cautions that reliance on any forward-looking statement
involves risk 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 under "Risk Factors" in the
Company's Prospectus dated July 24, 1997 included in the Company's Registration
Statement on Form S-4 (Reg. No. 333-30957).
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not applicable.
18
<PAGE> 21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ 20
Consolidated Balance Sheets as of December 31, 1996 and
1997...................................................... 21
Consolidated Statements of Operations for the Years Ended
December 31, 1995, 1996 and 1997.......................... 22
Consolidated Statements of Common Stockholders' Equity
(Deficiency) for the Years Ended December 31, 1995, 1996
and 1997.................................................. 23
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995, 1996 and 1997.......................... 24
Notes to Consolidated Financial Statements.................. 25
</TABLE>
19
<PAGE> 22
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, 1996 and 1997,
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, 1997. 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, 1996 and 1997, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1997 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Phoenix, Arizona
February 3, 1998, except for the last
paragraph of Note 5, for which
the date is March 17, 1998.
20
<PAGE> 23
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1997
-------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 11,887 $ 5,897
Accounts receivable -- less allowance for doubtful
accounts of $5,398 and $13,850......................... 56,975 119,745
Prepaid land leases....................................... 10,938 28,659
Other current assets, including amounts due from related
parties of $385 and $298............................... 15,737 16,686
Deferred income taxes..................................... 1,637 5,914
-------- ----------
Total current assets.............................. 97,174 176,901
PROPERTY AND EQUIPMENT -- Net............................... 742,144 1,598,011
OTHER ASSETS................................................ 10,155 13,565
DEFERRED FINANCING COSTS -- Net............................. 24,151 40,520
GOODWILL -- Net............................................. 59,831 400,160
-------- ----------
TOTAL....................................................... $933,455 $2,229,157
======== ==========
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 8,323 $ 11,454
Accrued interest.......................................... 7,056 8,940
Accrued expenses and other liabilities.................... 17,653 44,678
Current maturities of long-term debt...................... 28,000 50,600
-------- ----------
Total current liabilities......................... 61,032 115,672
LONG-TERM DEBT.............................................. 578,409 1,393,550
OTHER LONG-TERM OBLIGATIONS................................. 3,552 4,327
DEFERRED INCOME TAXES....................................... 2,283 20,137
-------- ----------
Total liabilities................................. 645,276 1,533,686
-------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 2, 10 and 12)
COMMON STOCKHOLDERS' EQUITY:
Common stock, $.01 par value -- authorized, 200,000,000
shares; issued and outstanding, 90,350,170 and
121,123,367 shares..................................... 904 1,211
Additional paid-in capital................................ 316,486 709,730
Accumulated deficit....................................... (25,275) (9,837)
Treasury stock at cost -- 25,819,997 shares............... (4,053) (4,053)
Foreign currency translation adjustment................... 117 (1,580)
-------- ----------
Total common stockholders' equity................. 288,179 695,471
-------- ----------
TOTAL....................................................... $933,455 $2,229,157
======== ==========
</TABLE>
See notes to consolidated financial statements.
21
<PAGE> 24
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1995 1996 1997
---------- ---------- -----------
<S> <C> <C> <C>
REVENUES:
Outdoor advertising..................................... $ 74,690 $ 194,183 $ 527,547
Less agency commissions................................. 10,294 27,136 71,798
---------- ---------- -----------
Total........................................... 64,396 167,047 455,749
Lease, printing and other revenues...................... 417 6,069 15,255
---------- ---------- -----------
Net revenues.................................... 64,813 173,116 471,004
---------- ---------- -----------
OPERATING EXPENSES:
Direct advertising -- including $139, $139 and $139 to
related parties...................................... 30,462 87,593 237,175
General and administrative -- including $385, $450 and
$450 to related parties.............................. 4,096 13,458 28,563
Depreciation and amortization........................... 9,970 22,555 75,327
---------- ---------- -----------
Total operating expenses........................ 44,528 123,606 341,065
---------- ---------- -----------
GAIN ON DENVER DISPOSITION................................ -- 7,344 --
---------- ---------- -----------
OPERATING INCOME.......................................... 20,285 56,854 129,939
OTHER:
Foreign currency translation (gain) loss................ -- (171) 2,093
Interest expense........................................ 17,199 32,489 87,150
---------- ---------- -----------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY LOSS......... 3,086 24,536 40,696
INCOME TAXES.............................................. 318 10,200 18,485
---------- ---------- -----------
INCOME BEFORE EXTRAORDINARY LOSS.......................... 2,768 14,336 22,211
EXTRAORDINARY LOSS........................................ -- (17,780) (6,773)
---------- ---------- -----------
NET (LOSS) INCOME......................................... 2,768 (3,444) 15,438
LESS STOCK DIVIDENDS, ACCRETIONS AND DISCOUNT ON
REDEMPTIONS............................................. 2,461 3,461 --
---------- ---------- -----------
NET (LOSS) INCOME ATTRIBUTABLE TO COMMON STOCKHOLDERS..... $ 307 $ (6,905) $ 15,438
========== ========== ===========
BASIC AND DILUTED INCOME (LOSS) PER SHARE (Note 1):
Basic:
Income before extraordinary loss........................ $ .01 $ .16 $ .20
Extraordinary loss...................................... -- (.26) (.06)
---------- ---------- -----------
Net income (loss)....................................... $ .01 $ (.10) $ .14
========== ========== ===========
Weighted average number of shares outstanding........... 47,466,853 67,672,701 109,096,011
========== ========== ===========
Diluted:
Income before extraordinary loss........................ $ .01 $ .14 $ .18
Extraordinary loss...................................... -- (.23) (.05)
---------- ---------- -----------
Net income (loss)....................................... $ .01 $ (.09) $ .13
========== ========== ===========
Weighted average number of shares outstanding........... 57,204,176 79,342,506 122,432,867
========== ========== ===========
</TABLE>
See notes to consolidated financial statements.
22
<PAGE> 25
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY (DEFICIENCY)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1995 1996 1997
---------- ---------- -----------
<S> <C> <C> <C>
COMMON STOCK OUTSTANDING: Shares:
Balance, beginning of year................................ 21,096,379 47,467,133 90,350,170
Stock splits.............................................. 26,370,754 --
Stock options exercised................................... -- 337,500 398,197
Initial public offering................................... -- 13,554,287 --
Secondary offering........................................ -- 28,991,250 30,375,000
---------- ---------- -----------
Balance, end of year...................................... 47,467,133 90,350,170 121,123,367
---------- ---------- -----------
COMMON STOCK OUTSTANDING: Amount:
Balance, beginning of year................................ $ 21 $ 47 $ 904
Stock splits.............................................. 26 601 171
Initial public offering................................... -- 60 --
Secondary offering........................................ -- 196 136
---------- ---------- -----------
Balance, end of year...................................... $ 47 $ 904 $ 1,211
---------- ---------- -----------
ADDITIONAL PAID-IN CAPITAL:
Balance, beginning of year................................ $ -- $ (43) 316,486
Stock splits.............................................. (43) (743) (171)
Stock options exercised................................... -- -- 13
Tax benefit from stock options exercised.................. -- -- 1,979
Initial public offering................................... -- 36,617
Secondary offering........................................ -- 283,135 391,423
Common/preferred stock accretion.......................... -- (2,480) --
---------- ---------- -----------
Balance, end of year...................................... $ (43) $ 316,486 709,730
---------- ---------- -----------
ACCUMULATED DEFICIT:
Balance, beginning of year................................ $ (25,025) $ (24,718) $ (25,275)
Common/preferred stock accretion.......................... (1,507) (688) --
Dividend on exchangeable preferred stock.................. (82) -- --
Cash dividends............................................ (872) (293)
Cancellation of put option on common stock................ -- 3,868 --
Net income (loss)......................................... 2,768 (3,444) 15,438
---------- ---------- -----------
Balance, end of year...................................... $ (24,718) $ (25,275) $ (9,837)
---------- ---------- -----------
COMMON STOCK IN TREASURY: Amount
Balance................................................... $ (4,053) $ (4,053) $ (4,053)
---------- ---------- -----------
FOREIGN CURRENCY TRANSLATION ADJUSTMENT:....................
Balance, beginning of year................................ $ -- $ -- $ 117
Unrealized foreign currency translation gain (loss)....... -- 117 (1,697)
---------- ---------- -----------
$ -- $ 117 $ (1,580)
========== ========== ===========
TOTAL COMMON STOCKHOLDERS' EQUITY (DEFICIENCY).............. $ (28,767) $ 288,179 $ 695,471
========== ========== ===========
</TABLE>
See notes to consolidated financial statements.
23
<PAGE> 26
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1995 1996 1997
-------- --------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income......................................... $ 2,768 $ (3,444) $ 15,438
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Extraordinary loss...................................... -- 17,780 6,773
Gain on sale of land.................................... (417) -- --
Gain on disposals....................................... (7,344) --
Loss on foreign currency translation adjustment......... -- (171) 2,093
Deferred taxes.......................................... 90 8,121 12,181
Deferred financing fees................................. 821 1,389 5,469
Depreciation and amortization........................... 9,970 22,555 75,327
Allowance for doubtful accounts......................... 761 2,492 4,129
Other................................................... 363 3,664 727
Changes in net assets and liabilities -- net of effects
from acquisitions and disposals:
Accounts receivable..................................... 4,539 (767) (47,042)
Prepaid expenses and other current assets............... 2,486 74 694
Accrued interest........................................ (84) 2,216 1,899
Accounts payable and other liabilities.................. (1,924) 3,023 12,999
-------- --------- -----------
Net cash provided by operating activities........... 19,373 49,588 90,687
-------- --------- -----------
INVESTING ACTIVITIES:
Acquisition of 3M Media................................... -- -- (894,299)
Acquisition of Gannett Outdoor, net of cash overdraft
acquired................................................ -- (712,545) --
Capital expenditures...................................... (7,070) (9,046) (30,189)
Proceeds from sale of land................................ 769
Other acquisitions........................................ -- (13,991) (337,715)
Net proceeds from disposals............................... -- 3,049 --
Acquisition of perpetual land easements................... -- (21,525) (31,548)
-------- --------- -----------
Net cash used in investing activities............... (6,301) (754,058) (1,293,751)
-------- --------- -----------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt.................. 10,679 846,853 1,538,135
Tender for 10.75% notes................................... -- (128,205) --
Principal payments on debt and capital leases............. (23,977) (269,893) (699,311)
Increase in deferred financing fees....................... (821) (37,483) (33,127)
Cash dividends paid on preferred stock.................... (872) (293) --
Redemption of preferred and exchangeable preferred
stock................................................... -- (16,369) --
Issuance of common stock.................................. -- 320,008 391,572
-------- --------- -----------
Net cash provided by (used in) financing
activities.......................................... (14,991) 714,618 1,197,269
-------- --------- -----------
Effect of exchange rate changes on cash................... -- -- (195)
-------- --------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ (1,919) 10,148 (5,990)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.............. 3,658 1,739 11,887
-------- --------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................... $ 1,739 $ 11,887 $ 5,897
======== ========= ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Interest................................................ $ 16,162 $ 27,519 $ 82,974
======== ========= ===========
Income taxes............................................ $ 227 $ 275 $ 6,853
======== ========= ===========
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
In conjunction with the large acquisitions (Gannett
Outdoor (1996), 3M Media and Van Wagner (1997)),
liabilities were assumed as follows:
Fair value of assets acquired........................... $ -- $ 728,848 $ 1,105,981
Cash paid............................................... -- 707,980 1,081,520
-------- --------- -----------
Liabilities assumed and incurred and issuance of notes
payable................................................. $ -- $ 20,868 $ 24,461
======== ========= ===========
Accretion of common and preferred stock................... $ 1,507 $ -- $ --
======== ========= ===========
Accrued dividends on exchangeable preferred stock......... $ 82 $ -- $ --
======== ========= ===========
Additional obligation on CSX transaction.................. $ -- $ 2,198 $ 523
======== ========= ===========
Write-off of deferred financing costs..................... $ -- $ 3,130 $ --
======== ========= ===========
Note receivable on Denver Disposition..................... $ -- $ 6,440 $ --
======== ========= ===========
</TABLE>
See notes to consolidated financial statements.
24
<PAGE> 27
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 90 metropolitan markets in the United States and 13
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 land easements.................................... 40 years
</TABLE>
c. Deferred financing costs are amortized using the effective interest
method over the terms of the related loans.
d. Goodwill represents the excess purchase price over net assets acquired
and is amortized over 30 years. Amortization expense was $47,000, $713,000 and
$6,128,269 in 1995, 1996 and 1997, 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
land easements and revenues from a printing operation.
f. Income (loss) per share -- Basic income (loss) per common share is
computed based on the weighted average number of common shares outstanding
during each period. Diluted income (loss) per 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
except in those circumstances where such options would be anti-dilutive.
g. Impairment of long-lived assets -- The Company reviews the carrying
values of its long-lived assets and identifiable intangibles for possible
impairment whenever events or changes in circumstances indicate that the
carrying amount of assets to be held and used may not be recoverable. The
adoption of SFAS No. 121 had no effect on the December 31, 1996 consolidated
financial statements.
h. Use of estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles necessarily requires
management to make estimates and assumptions that affect the 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.
25
<PAGE> 28
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
i. Stock-based compensation -- As permitted by SFAS No. 123, Accounting for
Stock-Based Compensation, 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 because the exercise price has been equal to
market price at date of grant. A summary of the pro forma effects on reported
income from continuing operations and earnings per share for 1997 and 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 because no options were issued.
j. New accounting pronouncements -- The Financial Accounting Standards
Board recently issued SFAS No. 128, Earnings per Share ("SFAS No. 128"), SFAS
No. 130, Reporting Comprehensive Income ("SFAS No. 130") and SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information ("SFAS No.
131"). SFAS No. 128 establishes new standards for computing and presenting
earnings per share ("EPS"). The Company adopted SFAS No. 128 during the quarter
ended December 31, 1997, accordingly, EPS has been restated for all periods
presented. SFAS No. 130 and 131 are effective for fiscal years beginning after
December 15, 1997. SFAS. No. 130 changes the reporting of certain items
currently reported in the common stock equity section of the balance sheet. SFAS
No. 131 requires that public companies report certain information about
operating segments in their financial statements. It also establishes related
disclosures about products and services, geographic areas, and major customers.
The Company is currently evaluating what impact SFAS Nos. 130 and 131 will have
on its financial statements.
k. Stock splits -- Since going public in April of 1996, the Company has
effected four three-for-two stock splits of the Common Stock. The consolidated
financial statements and the notes thereto have been adjusted to reflect these
stock splits on a retroactive basis for all periods presented.
l. Reclassifications -- Certain reclassifications were made to the 1995 and
1996 financial statements to conform with the 1997 presentation.
2. OFFERINGS AND ACQUISITIONS
COMPLETION OF INITIAL PUBLIC OFFERING
On April 24, 1996, the Company completed its Initial Public Offering
("IPO") by selling 13,554,297 shares of its common stock. The Company received
proceeds of approximately $36,677,000 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
of Gannett Co., Inc. (the "Gannett Outdoor Acquisition"), 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 Company financed the acquisition through borrowings under its Senior
Credit Facility, a Subordinated Credit Facility ("Bridge Loan") and the 1996
Common Stock Offering for which it received proceeds of approximately
$283,135,000 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
the 1996 Notes Offering were used to repay all borrowings under the Bridge Loan
and to partially repay amounts outstanding under the Senior Credit Facility (see
Note 5).
26
<PAGE> 29
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 million which represents the excess of the purchase price over
the fair value of the assets which is amortized on a straight-line basis over 30
years.
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 land
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 land easements is included in property and equipment and is 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.
UNAUDITED PRO FORMA INFORMATION
The following table summarizes unaudited pro forma operating results for
the Company for the two years 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
======== ========
Basic net income per share.................................. $ .03 $ .11
======== ========
Diluted net income per share................................ $ .03 $ .10
======== ========
</TABLE>
27
<PAGE> 30
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1997 ACQUISITIONS
During 1997, the Company acquired outdoor advertising assets in the
following locations for the following purchase prices (the "1997 Acquisitions"):
<TABLE>
<CAPTION>
DATE ACQUIRED PURCHASE PRICE
------------- --------------
(IN THOUSANDS)
<S> <C> <C>
Villepigue Outdoor - New York January 9 $ 27,261
Atlanta Bus Shelters - Atlanta January 10 6,401
Philbin & Coine, Inc. - Louisville January 22 830
Scadron Enterprises - Chicago February 14 24,528
Murad Communications - Toronto February 28 5,516
Reynolds Outdoor, LP - Dallas February 28 31,651
Ad Outdoor - Halifax March 6 845
Burlington Northern/Santa Fe perpetual
easements - Western and Midwestern states March 26 30,213
3M Transit - Toronto March 31 2,823
Van Wagner - New York & Los Angeles May 22 187,221
Key One - Canada May 29 661
CSX perpetual easements - Atlanta May 31 1,335
May - Los Angeles June 5 1,026
Connell - Dallas June 5 1,011
3M Media* August 15 894,299
Sellex - Toronto August 29 859
Gleason - Atlanta August 31 2,729
Landex - Toronto September 12 1,438
MacDonald & MacDonald - Edmonton September 30 3,839
Gallop & Gallop - Alberta October 31 5,197
Eastern Ontario Billboard Corporation - Ontario November 28 314
Roberts Outdoor - Los Angeles November 14 5,095
Outdoor Media Group - Las Vegas December 1 28,470
----------
$1,263,562
==========
</TABLE>
- ---------------
* Net of proceeds received by the Company upon the simultaneous disposition of
certain assets as described below.
The 1997 Acquisitions have been accounted for using the purchase method of
accounting and the results of operations have been included in the consolidated
financial statements subsequent to the date of acquisition. The acquisitions
resulted in goodwill of $346.5 million which represents the excess of the
purchase price over the fair value of the assets which is amortized on a
straight-line basis over 30 years. The Company is continuing its evaluation of
the fair value of the 1997 acquisitions and further adjustments to the purchase
prices may be made.
As set forth in the table above, on August 15, 1997, the Company acquired
the outdoor advertising operations of Minnesota Mining and Manufacturing Company
("3M") through the purchase of the capital stock of National Advertising
Company, a subsidiary of 3M ("3M Media"), for approximately $1.0 billion in cash
(the "3M Media Acquisition").
28
<PAGE> 31
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company financed the purchase price of the 3M Media Acquisition and the
fees and expenses associated with the acquisition and the acquisition financing
through (i) proceeds from the offering of 30,375,000 shares of common stock (the
"1997 Common Stock Offering") to the public, completed on May 28, 1997, (ii)
proceeds of an offering of $500 million aggregate principal amount of 8 7/8%
Senior Subordinated Notes due 2007 completed on June 23, 1997 (the "1997 Notes
Offering"), and (iii) borrowings under the Company's Senior Credit Facility
which was amended to provide for a revolving credit facility and term loans of
up to approximately $900 million.
In connection and simultaneously with the 3M Media Acquisition, the Company
sold to Lamar Advertising Company ("Lamar") and another outdoor advertising
company certain outdoor advertising assets the Company acquired from 3M. The
assets sold consisted of approximately 1,800 advertising displays in Atlanta,
Denver, Detroit, Grand Rapids, Houston, New Orleans, Kansas City, Louisville,
Phoenix and Sacramento. The selling price for such assets was approximately $116
million in cash, there was no gain or loss recognized on the sale.
The other 1997 acquisitions were financed, primarily, utilizing cash flows
from operations and borrowings under the company's senior credit facility.
UNAUDITED PRO FORMA INFORMATION
The following table summarizes unaudited pro forma operating results for
the Company for the two years ended December 31, 1997, assuming that the 1997
Acquisitions had occurred at the beginning of the applicable year and after
giving effect to financing costs and purchase accounting adjustments.
<TABLE>
<CAPTION>
1996 1997
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Consolidated net revenues................................... $591,583 $605,894
======== ========
Income before extraordinary loss............................ $ 12,308 $ 23,805
======== ========
Net income (loss)........................................... $ (5,472) $ 23,805
======== ========
Income (loss) attributable to common stockholders........... $ (8,933) $ 23,805
======== ========
Basic net income per share.................................. $ (.09) $ .20
======== ========
Diluted net income per share................................ $ (.08) $ .18
======== ========
</TABLE>
The pro forma amounts above include adjustments for the 1997 Acquisitions
only and do not include pro forma adjustments for the Gannet Outdoor Acquisition
which was completed on August 22, 1996.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31:
<TABLE>
<CAPTION>
1996 1997
-------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Advertising structures...................................... $736,731 $1,647,518
Perpetual land easements.................................... 24,428 54,607
Vehicles.................................................... 5,796 11,902
Furniture and fixtures...................................... 8,859 13,639
Buildings................................................... 15,934 19,084
Land........................................................ 15,881 22,093
Other....................................................... 8,963 8,575
-------- ----------
Total....................................................... 816,592 1,777,418
Less accumulated depreciation............................... 74,448 179,407
-------- ----------
Property and equipment -- net............................... $742,144 $1,598,011
======== ==========
</TABLE>
29
<PAGE> 32
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Included in advertising structures are costs allocated to display leases
totaling $163,704 and $528,819, at December 31, 1996 and 1997, respectively.
The Company has granted a security interest in substantially all of its
assets to lenders in connection with the Senior Credit Facility.
4. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities are comprised of the following at
December 31:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Accrued payroll, payroll taxes and severance................ $ 7,118 $ 7,466
Percentage lease payments................................... 2,206 1,990
Other liabilities assumed in Gannett acquisition............ 3,272 --
Other liabilities assumed in 1997 Acquisitions.............. -- 8,174
Customer deposits........................................... 958 7,388
Unearned revenue............................................ 796 3,233
Taxes....................................................... 422 5,696
Other....................................................... 2,881 10,731
------- -------
$17,653 $44,678
======= =======
</TABLE>
5. LONG-TERM DEBT
Long-term debt consists of the following at December 31:
<TABLE>
<CAPTION>
1996 1997
-------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Senior Credit Facility...................................... $356,348 $ 693,034
8 7/8% Senior Subordinated Notes............................ -- 496,124
9 3/8% Senior Subordinated Notes............................ 250,000 250,000
Other....................................................... 61 4,992
-------- ----------
Total....................................................... 606,409 1,444,150
Less current maturities..................................... 28,000 50,600
-------- ----------
Long-term debt -- net....................................... $578,409 $1,393,550
======== ==========
</TABLE>
SENIOR CREDIT FACILITY
The Senior Credit Facility, dated August 15, 1997, consists of 1) a U.S.
Dollar senior revolving line of credit facility of up to $350,000,000 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$69,625,000 including a C$7,000,000 letter of credit
sub-facility; 2) a $450,000,000 Senior Secured U.S. Dollar Term Loan; and, 3)
$50,000,000 Senior Secured Canadian Term Loan. Letters of credit with stated
amounts totaling $28,958,000 have been issued for the Company's account at
December 31, 1997. Availability under the Senior Credit Facility totaled
approximately $178,008,000 at December 31, 1997.
The commitment of the lenders under the United States Revolver will be
reduced annually on December 31st of each year (commencing on December 31, 1999)
through 2003 by $52,500,000 and by $87,500,000 on June 30, 2004. The commitment
under the Canadian Revolver will be reduced annually on December 31st of each
year (commencing on December 31, 1999) through 2003 by C$10,443,750 and by
30
<PAGE> 33
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
C$17,406,250 on June 30, 2004. The United States Term Loan must be repaid in
equal quarterly installments commencing on March 31, 1998, with annual
amortization of $50,000,000 through 1999, $75,000,000 from 2000 through 2003 and
$50,000,000 in equal installments on March 31 and June 30, 2004. The Canadian
Term Loan must be repaid in equal quarterly installments commencing on March 31,
1998, with annual amortization of $1,000,000 through 2001, $8,000,000 during
2002, $15,000,000 during 2003 and $23,000,000 in equal installments on March 31
and June 30, 2004.
The United States and Canadian Revolvers and United States and Canadian
Term Loans bear interest at the ABR or C$ Prime Rate (as defined in the Senior
Credit Facility's terms) (8.5% and 6.125%, respectively, at December 31, 1997)
plus 0.0% to 1.125% or Eurodollar Rate or Applicable BA Discount Rate (as
defined in the Senior Credit Facility's terms) (5.97% and 4.528%, respectively,
at December 31, 1997) plus 0.75% to 2.125%, based on the Company's total
leverage ratio.
The Senior Credit Facility is 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 Senior
Credit Facility is only secured by 65% of the stock of Mediacom. The U.S.
facilities are guaranteed by each of the Company's U.S. subsidiaries, and the
Canadian facilities are guaranteed by the Company and each of the Company's U.S.
subsidiaries.
The Senior Credit Facility, among other things, places limitations on the
Company's acquisitions, dispositions, asset swaps and stock repurchases, and
requires the Company to comply with financial covenants concerning leverage,
interest coverage, fixed charges and minimum cash flows.
9 3/8% AND 8 7/8% 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. In July
1997, the Company completed the sale of $500,000,000 of 8 7/8% Senior
Subordinated Notes due 2007 (the "1997 Notes"). The net proceeds of the 1997
Notes were used in the 3M Media Acquisition.
The 1996 Notes and 1997 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 and 1997 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.
OTHER
In November 1997, the Company issued a note for $4,950,000 in connection
with an acquisition in Los Angeles. The note bears interest at 10% per annum,
payable monthly. The principal is due 2003.
31
<PAGE> 34
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The annual maturities of long-term debt at December 31, 1997 are as
follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
----------------------
<S> <C>
1998........................................................ $ 50,600
1999........................................................ 50,584
2000........................................................ 75,593
2001........................................................ 84,307
2002........................................................ 120,903
Thereafter.................................................. 1,062,163
----------
Total............................................. $1,444,150
==========
</TABLE>
At December 31, 1997, the percentage ownership and ordinary voting power by
Designated Holders (as defined in the Senior Credit Facility) was less than
required. On March 17, 1998, any Event of Default under the Senior Credit
Facility resulting from this provision was waived, and the Senior Credit
Facility was amended to permit percentage ownership and ordinary voting power by
Designated Holders to be at a minimum level which is less than the current
actual percentage ownership and ordinary voting power by Designated Holders.
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>
1996 1997
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <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 11,288
------- -------
Total....................................................... 27,615 11,288
Less related tax benefit.................................... (9,835) (4,515)
------- -------
Total extraordinary loss.......................... $17,780 $ 6,773
======= =======
</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 "10 3/4% Senior Notes"). The aggregate consideration paid by the
Company in the Debt Tender Offer of $1,116.25 per $1,000 principal amount of
10 3/4% 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.
In connection with the 3M Media Acquisition, the Company entered into a
bridge loan financing commitment. Commitment fees aggregated $11,288,000. The
bridge loan financing commitment was
32
<PAGE> 35
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
cancelled in June 1997 after the Company completed the 1997 Notes Offering. No
amounts were borrowed under the Bridge Loan.
7. FINANCIAL INSTRUMENTS
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 fair value of the 1996 Notes and 1997 Notes
were approximately $260,937,500 and $533,750,000, respectively at December 31,
1997. The fair value of the notes was determined based upon quotations from an
investment banker. 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.
8. OTHER EQUITY MATTERS
At December 31, 1995, the Company's redeemable preferred stock totaled
$13,649,000. During 1996, 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 following is a summary of changes in outstanding options:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE
SHARES PRICE
---------- ----------------
<S> <C> <C>
Outstanding at December 31, 1995....................... 10,071,459 $0.00 to $0.37
Granted................................................ 4,646,909 $2.96
Cancelled or expired................................... -- --
Exercised.............................................. (337,500) $0.37
----------
Outstanding at December 31, 1996....................... 14,380,868 $0.00 to $2.96
----------
Granted................................................ 116,625 $13.33 to $16.67
Cancelled or expired................................... (9,493) $2.96 to $13.33
Exercised.............................................. (398,197) $0.37 to $2.96
----------
Outstanding at December 31, 1997....................... 14,089,803 $0.00 to $16.67
----------
Exercisable at December 31, 1997....................... 10,362,864 $0.02 to $14.72
==========
</TABLE>
33
<PAGE> 36
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information concerning currently outstanding
and exercisable options:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------- ------------------------------
WEIGHTED AVERAGE
RANGE OF NUMBER REMAINING WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- --------------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
-- 558,894(1) N/A -- -- --
$ 0.02 7,795,589(2) N/A $ 0.02 7,795,589 $ 0.02
$ 0.37 1,544,622(2) N/A $ 0.37 1,544,622 $ 0.37
$ 2.96 4,078,572 9 $ 2.96 1,012,527 $ 2.96
$13.33 99,000 10 $13.33 -- $13.33
$14.72 10,126 10 $14.72 10,126 $14.72
$16.67 3,000 10 $16.67 -- $16.67
---------- ----------
14,089,803 10,362,864
========== ==========
</TABLE>
Notes:
(1) These options have no exercise price, have no expiration date and are
exercisable only upon termination.
(2) These options are fully exercisable and have no expiration date.
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 (loss) and basic and diluted income (loss) per share for the years ended
December 31, 1996 and 1997 would have been as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1997
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net income (loss) attributable to common stockholders -- as
reported.................................................. $(6,905) $15,438
Net income (loss) attributable to common stockholders -- pro
forma..................................................... $(8,271) $15,302
Basic income (loss) per share -- as reported................ $ (.10) $ .14
Basic income (loss) per share -- pro forma.................. $ (.12) $ .14
Diluted income (loss) per share -- as reported.............. (.09) .13
Diluted income (loss) per share -- pro forma................ (.10) .12
ASSUMPTIONS:
Expected dividend yield..................................... 0% 0%
Expected stock price volatility............................. 62.0% 51.7%
Risk-free interest rate..................................... 6.0% 5.7%
Forfeiture rate............................................. 0% 0%
Average expected life....................................... 3 years 3 years
</TABLE>
10. BENEFIT PLANS
The Company 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, 1995, 1996 and 1997, the
Company charged earnings for compensation expense of $304,000, $159,000 and
$169,000, respectively. In connection with the IPO, effective January 1, 1996,
the
34
<PAGE> 37
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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, 1995, 1996 and 1997, the Company's contributions to the
401(k) plan were $56,000, $63,000 and $75,700, respectively.
11. INCOME TAXES
The provision (benefit) for income taxes is comprised of the following for
the years ended December 31,
<TABLE>
<CAPTION>
1995 1996 1997
---- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal................................................ $ 50 $ 108 $ 483
State -- including franchise taxes..................... 177 182 384
Foreign................................................ -- -- 4,084
---- ------- -------
Total current............................................ 227 290 4,951
Deferred................................................. 91 9,910 13,534
---- ------- -------
Total income tax provisions.............................. $318 $10,200 $18,485
==== ======= =======
</TABLE>
The Company has federal net operating loss carryforwards of approximately
$47,066,000 as of December 31, 1997. These net operating loss carryforwards
expire as follows: $1,131,000 (2003), $3,494,000 (2004), $4,308,000 (2005),
$4,104,000 (2006), $1,193,000 (2007), $3,243,000 (2008), $58,000 (2009), $7,000
(2010), $22,220,000 (2011) and $7,308,000 (2017).
Although realization is not assured, the Company believes, based on
operating results in 1997, and its expectations for the future, that taxable
income of the Company will more likely than not be sufficient to utilize all of
the $47,066,000 net operating loss carryforwards prior to their ultimate
expiration in the year 2017. 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.
35
<PAGE> 38
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of the Company's net deferred tax asset (liability)
as of December 31 are as follows:
<TABLE>
<CAPTION>
1996 1997
------------------- -------------------
NON- NON-
CURRENT CURRENT CURRENT CURRENT
------- -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Deferred tax assets:
Financial statement expenses not currently
deductible for income tax purposes..... $1,637 $ 435 $5,914 $ 140
Tax loss and other credit carryforwards... -- 13,059 -- 10,716
Deferred tax liabilities:
Excess of tax over book depreciation...... -- (15,777) -- (26,425)
Difference in book/tax basis of
goodwill............................... -- -- -- (4,568)
------ -------- ------ --------
Total net asset (liability)....... $1,637 $ (2,283) $5,914 $(20,137)
====== ======== ====== ========
</TABLE>
The following is a reconciliation of the reported effective income tax
rates to the statutory rates:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Statutory rate.............................................. 34% 35% 35%
Impact of adjustment to valuation allowance................. (34) -- --
State income taxes, franchise tax........................... 7 4 4
Other....................................................... 3 3 6
--- -- --
Reported rate............................................... 10% 42% 45%
=== == ==
</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, 1997, minimum annual rentals under all
operating leases for the next five years are as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
----------------------
<S> <C>
1998........................................................ $106,585
1999........................................................ 68,775
2000........................................................ 48,292
2001........................................................ 38,712
2002........................................................ 27,622
</TABLE>
Operating lease expense was $13,533,000, $29,790,000 and $90,196,391 for
1995, 1996 and 1997, respectively.
36
<PAGE> 39
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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
for the next five years as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
----------------------
<S> <C>
1998........................................................ $10,530
1999........................................................ 2,721
2000........................................................ 2,424
2001........................................................ 2,050
2002........................................................ 1,943
</TABLE>
LITIGATION
The Company is party either as plaintiff or defendant to various actions,
proceedings and pending claims, in the ordinary course of business. Litigation
is subject to many uncertainties and it is possible that some of the legal
actions, proceedings or claims referred to above could be decided against the
Company. Although the ultimate amount for which the Company or its subsidiaries
may be held liable with respect to matters where the Company is defendant is not
ascertainable, the Company believes that any resulting liability should not
materially affect the Company's financial position or results of operations.
13. FOREIGN OPERATIONS
The assets and operations of the Company's Canadian subsidiary are included
in these financial statements subsequent to August 22, 1996 and are as follows:
<TABLE>
<CAPTION>
1996 1997
-------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Net revenues:
United States............................................. $150,970 $ 410,008
Canadian.................................................. 22,146 60,996
-------- ----------
Total net revenues.......................................... $173,116 $ 471,004
======== ==========
Income from operations:
United States............................................. $ 52,150 $ 117,070
Canadian.................................................. 4,875 12,869
-------- ----------
Total income from operations................................ $ 57,025 $ 129,939
======== ==========
Assets:
United States............................................. $800,184 $2,083,630
Canadian.................................................. 133,271 145,527
-------- ----------
Total assets................................................ $933,455 $2,229,157
======== ==========
</TABLE>
37
<PAGE> 40
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. BASIC AND DILUTED INCOME (LOSS) PER SHARE
The weighted average number of shares outstanding for 1995, 1996 and 1997
is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1995 1996 1997
----------- ----------- ------------
<S> <C> <C> <C>
Basic weighted average number of shares
outstanding at end of period............. 47,466,853 67,672,701 109,096,011
Dilutive effect of stock options(1)........ 9,737,323 11,669,805 13,336,856
----------- ----------- ------------
Diluted weighted average number of shares
outstanding.............................. 57,204,176 79,342,506 122,432,867
=========== =========== ============
</TABLE>
- ---------------
(1) Stock options were included in 1996 because the Company had net income
before the extraordinary loss.
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>
1996:
Net revenues......................... $16,945 $19,582 $ 41,769 $ 94,820
Operating income..................... 5,447 7,457 18,153 25,797
Net income (loss).................... 777 1,364 (7,220) 1,809
Basic net income (loss) per share.... .00 (.01) (.11) .02
Diluted net income (loss) per
share............................. .00 (.01) (.10) .02
1997:
Net revenues......................... $80,080 $99,564 $131,991 $159,369
Operating income..................... 17,113 26,967 37,528 48,331
Net (loss) income.................... 691 (413) 7,743 7,417
Basic net income (loss) per share.... .01 (.00) .06 .07
Diluted net income (loss) per
share............................. .01 (.00) .06 .06
</TABLE>
The third and fourth quarters of 1996 include the operating results from
the Gannett Outdoor Acquisition and an extraordinary loss from the early
extinguishment of debt of approximately $12.4 million and $4.5 million,
respectively, net of tax.
The second quarter of 1997 includes an extraordinary loss from the early
extinguishment of debt of approximately $6.8 million, net of tax. The third and
fourth quarters of 1997 include the operating results from the 3M Media
Acquisition.
16. CONSOLIDATING FINANCIAL STATEMENTS
The following represents consolidating condensed financial statements of
Outdoor Systems, Inc. and its subsidiaries (the "Subsidiaries") which are
presented because certain of the Subsidiaries have guaranteed the 1996 Notes and
the 1997 Notes. The Subsidiaries included in the consolidating condensed
financial statements presented below are all wholly-owned and constitute all of
the Company's direct and indirect subsidiaries. The 1996 Notes and 1997 Notes
are guaranteed by all of the Company's domestic subsidiaries (the "Guarantors").
The guarantees of the Guarantors of the 1996 Notes and 1997 Notes are full,
unconditional, and joint and several. The only subsidiary which has not
guaranteed the 1996 Notes and 1997 Notes (the "Non-Guarantor") is Mediacom,
Inc., located in Canada. Separate financial statements of the
38
<PAGE> 41
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Guarantors are not presented because management has determined that they would
not be material to investors. There are no significant restrictions on the
Company's ability to obtain funds from the Guarantors. The Company did not have
any foreign subsidiaries prior to 1996.
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATING CONDENSED BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<CAPTION>
THE SUBSIDIARY ELIMINATION
COMPANY GUARANTORS NON-GUARANTOR ENTRIES CONSOLIDATED
-------- ------------ -------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............ $ 9,566 $ 24 $ 2,297 $ -- $ 11,887
Accounts receivable -- net........... 45,775 185 11,015 -- 56,975
Prepaid land leases.................. 7,521 -- 3,417 -- 10,938
Other current assets................. 9,195 114 6,428 -- 15,737
Deferred income taxes................ 1,637 -- -- -- 1,637
-------- ------ -------- -------- --------
Total current assets......... 73,694 323 23,157 -- 97,174
PROPERTY AND EQUIPMENT -- Net.......... 622,675 9,355 110,114 -- 742,144
OTHER ASSETS........................... 10,116 39 -- -- 10,155
DEFERRED FINANCING COSTS............... 24,151 -- -- -- 24,151
GOODWILL -- Net........................ 59,831 -- -- -- 59,831
INVESTMENT IN SUBSIDIARY............... 46,118 -- -- (46,118) --
-------- ------ -------- -------- --------
TOTAL........................ $836,585 $9,717 $133,271 $(46,118) $933,455
======== ====== ======== ======== ========
CURRENT LIABILITIES:
Accounts payable..................... $ 6,686 $ 16 $ 1,621 $ -- $ 8,323
Accrued interest..................... 6,806 -- 250 -- 7,056
Accrued expenses and other
liabilities....................... 13,094 514 4,045 -- 17,653
Current maturities of long-term
debt.............................. 28,000 -- -- -- 28,000
-------- ------ -------- -------- --------
Total current liabilities.... 54,586 530 5,916 -- 61,032
LONG-TERM DEBT......................... 496,015 46 82,348 -- 578,409
OTHER LONG-TERM OBLIGATIONS............ 2,349 1,203 -- -- 3,552
DEFERRED INCOMES TAXES................. (4,544) -- 6,827 -- 2,283
-------- ------ -------- -------- --------
Total liabilities............ 548,406 1,779 95,091 -- 645,276
-------- ------ -------- -------- --------
COMMON STOCKHOLDERS' EQUITY............ 288,179 7,938 38,180 (46,118) 288,179
-------- ------ -------- -------- --------
Total........................ $836,585 $9,717 $133,271 $(46,118) $933,455
======== ====== ======== ======== ========
</TABLE>
39
<PAGE> 42
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
THE SUBSIDIARY NON- ELIMINATION
COMPANY GUARANTORS GUARANTOR ENTRIES CONSOLIDATED
-------- ------------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Outdoor advertising..................... $172,797 $744 $21,492 $ (850) $194,183
Less: Lease agency commissions.......... 24,322 27 2,787 -- 27,136
-------- ---- ------- ------- --------
Total........................... 148,475 717 18,705 (850) 167,047
Lease, printing and other revenues...... 1,778 -- 4,291 -- 6,069
-------- ---- ------- ------- --------
Net revenues.................... 150,253 717 22,996 (850) 173,116
-------- ---- ------- ------- --------
OPERATING EXPENSES:
Direct advertising...................... 74,015 278 14,150 (850) 87,593
General and administrative.............. 11,768 71 1,619 -- 13,458
Depreciation and amortization........... 19,894 138 2,523 -- 22,555
-------- ---- ------- ------- --------
Total operating expenses........ 105,677 487 18,292 (850) 123,606
-------- ---- ------- ------- --------
GAIN ON ATLANTA AND DENVER DISPOSITIONS... 7,344 -- -- -- 7,344
-------- ---- ------- ------- --------
OPERATING INCOME.......................... 51,920 230 4,704 -- 56,854
OTHER:
Foreign currency translation (gain)
loss................................. -- -- (171) -- (171)
Interest expense........................ 31,240 2 1,247 -- 32,489
-------- ---- ------- ------- --------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY LOSS...................... 20,680 228 3,628 -- 24,536
INCOME TAXES.............................. 8,273 91 1,836 -- 10,200
-------- ---- ------- ------- --------
INCOME BEFORE EXTRAORDINARY LOSS.......... 12,407 137 1,792 -- 14,336
EXTRAORDINARY LOSS........................ (17,780) -- -- -- (17,780)
-------- ---- ------- ------- --------
(LOSS) INCOME BEFORE INCOME FROM
SUBSIDIARY.............................. (5,373) 137 1,792 -- (3,444)
INCOME FROM SUBSIDIARY.................... 1,929 -- -- (1,929) --
-------- ---- ------- ------- --------
NET INCOME (LOSS)......................... (3,444) 137 1,792 (1,929) (3,444)
LESS STOCK DIVIDENDS, ACCRETIONS AND
DISCOUNT ON REDEMPTIONS................. 3,461 -- -- -- 3,461
-------- ---- ------- ------- --------
NET (LOSS) INCOME ATTRIBUTABLE TO COMMON
STOCKHOLDERS............................ $ (6,905) $137 $ 1,792 $(1,929) $ (6,905)
======== ==== ======= ======= ========
</TABLE>
40
<PAGE> 43
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATING CONDENSED BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<CAPTION>
THE SUBSIDIARY ELIMINATION
COMPANY GUARANTORS NON-GUARANTOR ENTRIES CONSOLIDATED
---------- ------------ -------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents..... $ 2,556 $ 1,234 $ 2,107 $ 5,897
Accounts receivable -- net.... 108,735 953 10,057 119,745
Prepaid land leases........... 25,518 3,141 28,659
Other current assets.......... 9,540 84 7,062 16,686
Deferred income taxes......... 5,914 5,914
---------- ------- -------- -------- ----------
Total current
assets.............. 152,263 2,271 22,367 176,901
PROPERTY AND EQUIPMENT -- Net... 1,460,397 14,454 123,160 1,598,011
OTHER ASSETS.................... 13,551 14 13,565
DEFERRED FINANCING COSTS........ 40,520 40,520
GOODWILL -- Net................. 405,695 (5,535) 400,160
INVESTMENT IN SUBSIDIARY........ 49,390 $(49,390)
---------- ------- -------- -------- ----------
TOTAL................. $2,121,816 $11,204 $145,527 $(49,390) $2,229,157
========== ======= ======== ======== ==========
CURRENT LIABILITIES
Accounts payable.............. $ 8,501 $ 148 $ 2,805 $ 11,454
Accrued interest.............. 8,551 389 8,940
Accrued expenses and other
liabilities................ 45,320 495 (1,137) 44,678
Current maturities of
long-term debt............. 49,600 1,000 50,600
---------- ------- -------- -------- ----------
Total current
liabilities......... 111,972 643 3,057 $ -- 115,672
LONG-TERM DEBT: ................ 1,297,497 28 96,034 1,393,559
OTHER LONG-TERM OBLIGATIONS..... 4,318 4,318
DEFERRED INCOME TAXES........... 12,558 1,203 6,376 20,137
---------- ------- -------- -------- ----------
Total liabilities..... 1,426,345 1,874 105,467 -- 1,533,686
---------- ------- -------- -------- ----------
COMMON STOCKHOLDERS' EQUITY: ... 695,471 9,330 40,060 (49,390) 695,471
---------- ------- -------- -------- ----------
TOTAL................. $2,121,816 $11,204 $145,527 $(49,390) $2,229,157
========== ======= ======== ======== ==========
</TABLE>
41
<PAGE> 44
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
THE SUBSIDIARY NON- ELIMINATION
COMPANY GUARANTORS GUARANTOR ENTRIES CONSOLIDATED
-------- ---------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Outdoor advertising................... $466,497 $3,294 $62,060 $(4,304) $527,547
Less: Lease agency commissions........ 63,392 295 8,111 71,798
-------- ------ ------- ------- --------
Total.............................. 403,105 2,999 53,949 (4,304) 455,749
Lease, printing and other revenues.... 3,904 11,351 15,255
-------- ------ ------- ------- --------
Net revenues..................... 407,009 2,999 65,300 (4,304) 471,004
-------- ------ ------- ------- --------
OPERATING EXPENSES:
Direct advertising.................... 200,335 1,336 39,808 (4,304) 237,175
General and administrative............ 23,904 159 4,500 28,563
Depreciation and amortization......... 65,717 1,487 8,123 75,327
-------- ------ ------- ------- --------
Total operating expenses...... 289,956 2,982 52,431 (4,304) 341,065
-------- ------ ------- ------- --------
OPERATING INCOME........................ 117,053 17 12,869 -- 129,939
OTHER:
Foreign currency translation (gain)
loss............................... 2,093 2,093
Interest Expense...................... 80,578 2 6,570 87,150
-------- ------ ------- ------- --------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY LOSS.................... 36,475 15 4,206 -- 40,696
INCOME TAXES............................ 14,776 3,709 18,485
-------- ------ ------- ------- --------
INCOME BEFORE EXTRAORDINARY LOSS........ 21,699 15 497 -- 22,211
EXTRAORDINARY LOSS...................... (6,773) (6,773)
-------- ------ ------- ------- --------
NET INCOME (LOSS) BEFORE INCOME FROM
SUBSIDIARY............................ 14,926 15 497 -- 15,438
INCOME FROM SUBSIDIARY.................. 512 (512) --
-------- ------ ------- ------- --------
NET INCOME (LOSS)....................... $ 15,438 $ 15 $ 497 $ (512) $ 15,438
======== ====== ======= ======= ========
</TABLE>
42
<PAGE> 45
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) The information regarding the directors of the Company is incorporated
herein by reference to the information set forth in the table captioned
"Director and Director Nominee Information" and under "Election of
Directors" in the definitive proxy statement of the Registrant for the
Registrant's annual meeting of stockholders to be held on May 21, 1998.
(b) Pursuant to Form 10-K General Instruction G(3), the information
regarding executive officers of the Company has been included in Part I
of this Report under the caption "Executive Officers of the Company."
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is incorporated herein by
reference to the information set forth under the captions "Executive
Compensation" and "Compensation of Directors" in the definitive proxy statement
of the Registrant for the Registrant's annual meeting of stockholders to be held
on May 21, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item 12 is incorporated herein by
reference to the information set forth in the table captioned "Beneficial
Ownership of Common Stock" in the definitive proxy statement of the Registrant
for the Registrant's annual meeting of stockholders to be held on May 21, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item 13 is incorporated herein by
reference to the information set forth in the table captioned "Certain
Transactions" in the definitive proxy statement of the Registrant for the
Registrant's annual meeting of stockholders to be held on May 21, 1998.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are incorporated by reference in or are filed
as a part of this report:
1. Financial statements (included under Item 8).
2. Financial statement schedules.
S-1 Independent Auditors' Report on Schedule
S-2 Schedule II -- Valuation and Qualifying Accounts
3. Exhibits.
43
<PAGE> 46
The following exhibits are incorporated by reference in or filed as a part
of this report:
(b) Reports on Form 8-K.
None
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
3.1 -- Fourth Amended and Restated Certificate of Incorporation
(filed as Exhibit 99.2 to the Registrant's Current Report on
Form 8-K filed on June 4, 1997 (File No. 0-28256) and
incorporated herein by reference).
3.2 -- Amended and Restated Bylaws (filed as Exhibit 3.2 to the
Registrant's Amendment No. 2 to Form S-1 Registration
Statement No. 333-1582 and incorporated herein by
reference).
4.1 -- 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 (Reg. No. 333-1582) and
incorporated herein by reference).
4.2 -- Indenture (filed as Exhibit 4.2 to the Registrant's Form S-1
Registration Statement No. 33-64638 and incorporated herein
by reference).
4.3 -- Indenture dated October 15, 1996, (the "1996 Indenture"), by
and among the Registrant, its United States subsidiaries and
The Bank of New York, as trustee (filed as Exhibit 99.1 to
the Registrant's Current Report on Form 8-K dated October 9,
1996 and incorporated herein by reference).
4.4 -- Indenture dated as of June 23, 1997 (the "1997 Indenture")
among the Registrant, its United States subsidiaries and The
Bank of New York, as trustee, relating to the 8 7/8% Senior
Subordinated Notes due 2007 (filed as Exhibit 4.2 to the
Registrant's Registration Statement on Form S-4 (Reg. No.
333-30957) and incorporated herein by reference).
4.5 -- First Supplemental Indenture to the 1996 Indenture, dated as
of June 23, 1997, by and among the Registrant, the
Guarantors named therein, the Additional Guarantors named
therein and The Bank of New York, as trustee, relating to
the 9 3/8% Senior Subordinated Notes due 2006 (filed as
Exhibit 2.3 to the Registrant's Registration Statement on
Form 8-A (File No. 001-13275) and incorporated herein by
reference).
4.6 -- Second Supplemental Indenture to the 1996 Indenture, dated
as of September 30, 1997, by and among the Registrant, the
Guarantors named therein, the Additional Guarantors named
therein and The Bank of New York, as trustee, relating to
the 9 3/8% Senior Subordinated Notes due 2006 (filed as
Exhibit 2.4 to the Registrant's Registration Statement on
Form 8-A (File No. 001-13275) and incorporated herein by
reference).
4.7 -- Third Supplemental Indenture to the 1996 Indenture dated
January 22, 1998 among the Registrant, the Guarantors named
therein, the Additional Guarantor named therein and The Bank
of New York, as trustee, relating to the 9 3/8% Senior
Subordinated Notes due 2006.
4.8 -- First Supplemental Indenture to the 1997 Indenture, dated as
of September 30, 1997, by and among the Registrant, the
Guarantors named therein, the Additional Guarantors named
therein and The Bank of New York, as trustee, relating to
the 8 7/8% Senior Subordinated Notes due 2007 (filed as
Exhibit 2.7 to the Registrant's Registration Statement on
Form 8-A (File No. 001-13275) and incorporated herein by
reference).
4.9 -- Second Supplemental Indenture to the 1997 Indenture dated
January 22, 1998 among the Registrant, the Guarantors named
therein, the Additional Guarantor named therein and The Bank
of New York, as trustee, relating to the 8 7/8% Senior
Subordinated Notes due 2007.
9.1 -- Voting Agreement dated May 4, 1990, effective April 2, 1989,
between William S. Levine and Rubin Sabin (filed as Exhibit
9.1 to the Registrant's Form S-1 Registration Statement No.
33-64638 and incorporated herein by reference).
9.2 -- Irrevocable Proxy dated as of April 2, 1989, between William
S. Levine and Rubin Sabin (filed as Exhibit 9.2 to the
Registrant's Form S-1 Registration Statement No. 33-64638
and incorporated herein by reference).
</TABLE>
44
<PAGE> 47
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
9.3 -- Amended and Restated Voting Agreement dated as of August 17,
1993, entered into among the Registrant, William S. Levine
and Gregory Riggle (filed as Exhibit 9.3 to the Registrant's
Form S-1 Registration Statement No. 33-64638 and
incorporated herein by reference).
9.4 -- Stockholders' Agreement dated as of April 15, 1996, between
William S. Levine, Arte Moreno and MK-Link Investments
Limited Partnership (filed as Exhibit 9.4 to the
Registrant's Amendment No. 2 to Form S-1 Registration
Statement No. 333-1582 and incorporated herein by
reference).
10.1 -- Fourth Amended and Restated Credit Agreement, dated as of
October 22, 1996, entered into among the Registrant, the
several lenders from time to time parties thereto and CIBC
Inc., as agent (filed as Exhibit 10.1 to the Registrant's
Quarterly Report on Form 10-Q for the period ended September
30, 1996 and incorporated herein by reference).
10.2 -- Amended and Restated Securities Purchase Agreement dated as
of August 17, 1993, entered into among the Registrant, TCW
Special Placements Fund II and TCW Capital, as Investment
Manager pursuant to an Investment Agreement dated as of June
30, 1987 (filed as Exhibit 10.2 to the Registrant's Form S-1
Registration Statement No. 33-64638 and incorporated herein
by reference).
10.3 -- Junior Subordinated Exchange Note dated effective as of
January 1, 1992, issued by the Registrant to Rubin Sabin
(filed as Exhibit 10.3 to the Registrant's Form S-1
Registration Statement No. 33-64638 and incorporated herein
by reference).
10.4 -- Intercreditor and Subordination Agreement dated as of May 4,
1990, among the Registrant, OS Advertising Company of Texas,
Inc., Outdoor Today, Inc., National Westminster Bank USA, as
Agent, Rubin Sabin and Elaine Sabin (filed as Exhibit 10.4
to the Registrant's Form S-1 Registration Statement No.
33-64638 and incorporated herein by reference).
10.5 -- Amended and Restated Intercreditor and Subordination
Agreement dated as of August 17, 1993, entered into between
the Registrant, Gregory Riggle, CIBC Inc. and United States
Trust Company of New York, as trustee (filed as Exhibit 10.5
to the Registrant's Form S-1 Registration Statement No.
33-64638 and incorporated herein by reference).
10.6 -- Administrative Services Agreement dated as of June 1, 1993,
between the Registrant and Camelback Services, Inc. (filed
as Exhibit 10.6 to the Registrant's Form S-1 Registration
Statement No. 33-64638 and incorporated herein by
reference).
10.7 -- Services Agreement dated as of May 1, 1993, between the
Registrant, Williams Manufacturing, Inc. and J & L
Industries, Inc. as amended by the First Amendment thereto
dated April 15, 1996, to be effective as of July 1, 1995
(filed as Exhibit 10.7 to the Registrant's Amendment No. 2
to Form S-1 Registration Statement No. 333-1582 and
incorporated herein by reference).
10.8 -- Amended and Restated Incentive Plan dated effective as of
January 1, 1988, adopted by the Registrant as amended to
date (filed as Exhibit 10.8 to the Registrant's Amendment
No. 2 to Form S-1 Registration Statement No. 333-1582 and
incorporated herein by reference).
10.9 -- Assets Purchase Agreement dated March 15, 1991, among the
Registrant, Naegele Outdoor Advertising, Inc., OS
Advertising Company of Georgia, Inc., and Morris
Communications Corporation, as amended by the First
Amendment to Assets Purchase Agreement dated as of December
23, 1991, among the Registrant, Naegele Outdoor Advertising,
Inc., OS Advertising Company of Georgia, Inc., Morris
Communications Corporation, and OS Advertising Company of
Kentucky, Inc. (filed as Exhibit 10.17 to the Registrant's
Form S-1 Registration Statement No. 33-64638 and
incorporated herein by reference).
10.10 -- Agreement and grant of Option dated as of April 3, 1989,
between the Registrant and Arthur Moreno, as amended by the
First Amendment to Agreement and Grant of Option dated as of
January 1, 1991 (filed as Exhibit 10.23 to the Registrant's
Form S-1 Registration Statement No. 33-64638 and
incorporated herein by reference).
10.10.1 -- Letter Agreement between Registrant and Arte Moreno
regarding Agreement and Grant of Option dated as of April 3,
1989, and First Amendment to Agreement and Grant of Option
dated as of January 1, 1991 (filed as Exhibit 10.10.1 to the
Registrant's Amendment No. 3 to Form S-1 Registration
Statement No. 333-1582 and incorporated herein by
reference).
</TABLE>
45
<PAGE> 48
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.11 -- Option Agreement dated as of January 1, 1991, between the
Registrant and Wally Kelly (filed as Exhibit 10.24 to the
Registrant's Form S-1 Registration Statement No. 33-64638
and incorporated herein by reference).
10.12 -- Senior Note Intercreditor Agreement dated as of August 17,
1993, entered into among TCW Special Placements Fund II, TCW
Capital, acting solely as investment manager pursuant to an
Investment Management Agreement, the Registrant and United
States Trust Company of New York as trustee (filed as
Exhibit 10.26 to the Registrant's Form S-1 Registration
Statement No. 33-64638 and incorporated herein by
reference).
10.13 -- Bank Intercreditor Agreement dated as of August 17, 1993,
entered into among TCW Special Placements Fund II, TCW
Capital acting solely as investment manager pursuant to an
Investment Management Agreement, the Registrant and CIBC
Inc. as agent (filed as Exhibit 10.26 to the Registrant's
Form S-1 Registration Statement No. 33-64638 and
incorporated herein by reference).
10.14 -- Option Purchase Agreement among the Registrant and OS
Advertising Company of Georgia, Inc. and Capitol Outdoor
Acquisition Co., Inc. and Capitol Outdoor Leasing Co., Inc.,
dated as of July 27, 1994, as amended by the First Amendment
to Option Purchase Agreement dated as of December 14, 1994
(filed as Exhibit 1 to the Registrant's Current Report on
Form 8-K dated December 19, 1994 and incorporated herein by
reference).
10.15 -- Asset Purchase Agreement between the Registrant and Eller
Outdoor Advertising Company of Atlanta, dated November 21,
1994 (filed as Exhibit 2 to the Registrant's Current Report
on Form 8-K dated December 19, 1994 and incorporated herein
by reference).
10.16 -- The Registrant's 1996 Omnibus Plan (filed as Exhibit 10.16
to the Registrant's Amendment No. 2 to Form S-1 Registration
Statement No. 333-1582 and incorporated herein by
reference).
10.17 -- Form of Incentive Stock Option Grant to be awarded to each
of Wally C. Kelly and Bill M. Beverage pursuant to the terms
of the Registrant's 1996 Omnibus Plan (filed as Exhibit
10.17 to the Registrant's Amendment No. 2 to Form S-1
Registration Statement No. 333-1582 and incorporated herein
by reference).
10.18 -- Form of Stock Option Grant to be awarded to each of Arte
Moreno, Wally C. Kelly and Bill M. Beverage pursuant to the
terms of the Registrant's 1996 Omnibus Plan (filed as
Exhibit 10.18 to the Registrant's Amendment No. 2 to Form
S-1 Registration Statement No. 333-1582 and incorporated
herein by reference).
10.19 -- Form of Incentive Plan Settlement Participant Election
Agreement to be entered into by each of Wally C. Kelly and
Bill M. Beverage pursuant to the conversion of interests in
the Incentive Plan (filed as Exhibit 10.19 to the
Registrant's Amendment No. 3 to Form S-1 Registration
Statement No. 333-1582 and incorporated herein by
reference).
10.20 -- Asset Purchase Agreement dated July 9, 1996, by and between
the Registrant and Gannett Co., Inc., together with the
Promissory Note and related Guaranty. 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 (filed as
Exhibit 99.1 to the Registrant's Current Report on Form 8-K
dated July 10, 1996 and incorporated herein by reference).
10.21 -- Amendment No. 1 to Asset Purchase Agreement among Gannett
Co., Inc., Combined Communications Corporation, Gannett
Transit, Inc., Shelter Media Communications, Inc., Gannett
International Communications, Inc., and the Registrant dated
as of August 12, 1996 (filed as Exhibit 99.1 to the
Registrant's Current Report on Form 8-K dated August 27,
1996 and incorporated herein by reference).
10.22 -- Amendment No. 2 to Asset Purchase Agreement among Gannett
Co., Inc., Combined Communications Corporation, Gannett
Transit, Inc., Shelter Media Communications, Inc., Gannett
International Communications, Inc., and the Registrant dated
as of August 19, 1996 (filed as Exhibit 99.2 to the
Registrant's Current Report on Form 8-K dated August 27,
1996 and incorporated herein by reference).
</TABLE>
46
<PAGE> 49
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.23 -- Form of Option by Gannett Outdoor Co. of Texas, Inc., in
favor of the Registrant together with the form of Asset
Purchase Agreement by and between the Registrant and Gannett
Outdoor Co. of Texas, Inc. (filed as Exhibit 99.2 to the
Registrant's Current Report on Form 8-K dated July 10, 1996
and incorporated herein by reference).
10.24 -- Senior Subordinated Credit Agreement dated July 9, 1996, by
and among the Registrant, the guarantors named therein, the
lenders named therein, and Canadian Imperial Bank of
Commerce together with the forms of Bridge Note and Term
Note. 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 (filed as Exhibit 99.4 to the Registrant's
Current Report on Form 8-K dated July 10, 1996 and
incorporated herein by reference).
10.25 -- Form of Indenture by and among the Registrant, the
subsidiary guarantors named therein, and a trustee to be
selected by the Registrant (filed as Exhibit 99.5 to the
Registrant's Current Report on Form 8-K dated July 10, 1996
and incorporated herein by reference).
10.26 -- First Supplemental Indenture dated as of August 22, 1996, by
and between the Registrant and United States Trust Company
of New York (filed as Exhibit 99.5 to the Registrant's
Current Report on Form 8-K dated August 27, 1996 and
incorporated herein by reference).
10.27 -- Securities Purchase Agreement dated July 9, 1996, by and
between the Registrant and CIBC WG Argosy Merchant Fund 2,
L.L.C. The Exhibit contains a list briefly identifying the
contents of Schedules and Exhibits which have been omitted.
The Registrant agrees to furnish supplementally a copy of
any omitted Schedule or Exhibit to the Commission upon
request (filed as Exhibit 99.6 to the Registrant's Current
Report on Form 8-K dated July 10, 1996 and incorporated
herein by reference).
10.28 -- Form of Certificate of Designations of Senior Increasing
Rate Cumulative Preferred Stock, Series A (filed as Exhibit
99.7 to the Registrant's Current Report on Form 8-K dated
July 10, 1996 and incorporated herein by reference).
10.29 -- Form of Warrant Agreement by and between the Registrant and
a Warrant Agent to be selected by the Registrant (filed as
Exhibit 99.8 to the Registrant's Current Report on Form 8-K
dated July 10, 1996 and incorporated herein by reference).
10.30 -- Form of Registration Rights Agreement by and among the
Registrant, the guarantors names therein, and the holders
name therein (filed as Exhibit 99.9 to the Registrant's
Current Report on Form 8-K dated July 10, 1996 and
incorporated herein by reference).
10.31 -- Form of Common Stock Registration Rights Agreement by and
between the Registrant and CIBC WG Argosy Merchant Form 2,
L.L.C. (filed as Exhibit 99.10 to the Registrant's Current
Report on Form 8-K dated July 10, 1996 and incorporated
herein by reference).
10.32 -- Underwriting Agreement dated August 19, 1996 by and among
the Registrant and Alex. Brown & Sons Incorporated, CIBC
Wood Gundy Securities Corp. and Donaldson, Lufkin & Jenrette
Securities Corporation (filed as Exhibit 99.3 to the
Registrant's Current Report on Form 8-K dated August 27,
1996 and incorporated herein by reference).
10.33 -- Asset Purchase Agreement between RailCom, Ltd. and the
Registrant dated May 8, 1996 (filed as Exhibit 2.1 to the
Registrant's Current Report on Form 8-K dated May 22, 1996
and incorporated herein by reference).
10.34 -- Purchase and Sales Agreement Between CSX Realty Development
Corporation, The Three Rivers Railway Company, The Atlantic
Land and Improvement Company, Winston-Salem Southbound
Railway Company, Gainesville Midland Railroad Company, and
Richmond, Fredericksburg and Potomac Railway Company and
RailCom, Ltd. dated January 23, 1996, as amended March 29,
1996, and May 21, 1996 (filed as Exhibit 2.2.1 to the
Registrant's Current Report on Form 8-K dated May 22, 1996
and incorporated herein by reference).
10.35 -- Amendment to Purchase Agreement, dated March 29, 1996 (filed
as Exhibit 2.2.2 to the Registrant's Current Report on Form
8-K dated May 22, 1996 and incorporated herein by
reference).
</TABLE>
47
<PAGE> 50
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.36 -- Second Amendment to Purchase Agreement dated May 21, 1996
(filed as Exhibit 2.2.3 to the Registrant's Current Report
on Form 8-K dated May 22, 1996 and incorporated herein by
reference).
10.37 -- Grant of Easement and Agreement dated May 21, 1996 (filed as
Exhibit 2.3 to the Registrant's Current Report on Form 8-K
dated May 22, 1996 and incorporated herein by reference).
10.38 -- Assignment of License Agreements, dated May 21, 1996 (filed
as Exhibit 2.4 to the Registrant's Current Report on Form
8-K dated May 22, 1996 and incorporated herein by
reference).
10.39 -- Assignment and Assumption Agreement dated May 22, 1996
(filed as Exhibit 2.5 to the Registrant's Current Report on
Form 8-K dated May 22, 1996 and incorporated herein by
reference).
10.41 -- Underwriting Agreement dated October 9, 1996 by and among
the Registrant, its United States subsidiaries, CIBC Wood
Gundy Securities Corp. and Alex. Brown & Sons Incorporated
(filed as Exhibit 99.2 to the Registrant's Current Report on
Form 8-K dated October 9, 1996 and incorporated herein by
reference).
10.42 -- 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 (filed as Exhibit 99.1 to the
Registrant's Form S-3 Registration Statement (Reg. No. 333-
26407) and incorporated herein by reference).
10.43 -- 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 (filed as Exhibit
99.2 to the Registrant's Form S-3 Registration Statement
(Reg. No. 333-26407) and incorporated herein by reference).
10.44 -- 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 (filed as Exhibit 99.3 to the
Registrant's Form S-3 Registration Statement (Reg. No.
333-26407) and incorporated herein by reference).
10.45 -- 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
(filed as Exhibit 99.4 to the Registrant's Form S-3
Registration Statement (Reg. No. 333-26407) and incorporated
herein by reference).
10.46 -- 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 (filed as Exhibit
99.5 to the Registrant's Form S-3 Registration Statement
(Reg. No. 333-26407) and incorporated herein by reference).
10.47 -- 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 (filed as Exhibit 99.6 to the
Registrant's Form S-3 Registration Statement (Reg. No. 333-
26407) and incorporated herein by reference).
</TABLE>
48
<PAGE> 51
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.48 -- 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 (filed as Exhibit 99.7 to the
Registrant's Registration Statement on Form S-3 (Reg. No.
333-26407) and incorporated herein by reference).
10.49 -- 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
(filed as Exhibit 99.8 to the Registrant's Registration
Statement on Form S-3 (Reg. No. 333-26407) and incorporated
herein by reference).
10.50 -- 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 (filed as Exhibit
99.9 to the Registrant's Registration Statement on Form S-3
(Reg. No. 333-26407) and incorporated herein by reference).
10.51 -- 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 (filed as
Exhibit 99.10 to the Registrant's Registration Statement on
Form S-3 (Reg. No. 333-26407) and incorporated herein by
reference).
10.52 -- 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 (filed as Exhibit 99.11 to the
Registrant's Registration Statement on Form S-3 (Reg. No.
333-26407) and incorporated herein by reference).
10.53 -- Amendment No. 1 dated as of May 22, 1997 to Stock Purchase
Agreement dated April 11, 1997 by and among Richard M.
Schaps, Jason Perline, Van Wagner Communications, Inc. and
the Registrant (filed as Exhibit 99.1 to the Registrant's
Current Report on Form 8-K dated May 28, 1997 and
incorporated herein by reference).
10.54 -- Underwriting Agreement dated May 22, 1997 by and among the
Registrant, the selling stockholders named therein, Alex.
Brown & Sons Incorporated, Donaldson, Lufkin & Jenrette
Securities Corporation, CIBC Wood Gundy Securities Corp.,
Montgomery Securities and Prudential Securities Corporation
(filed as Exhibit 99.2 to the Registrant's Current Report on
Form 8-K dated May 28, 1997 and incorporated herein by
reference).
10.55 -- Amendment No. 1 dated June 2, 1997 to Underwriting Agreement
dated May 22, 1997 by and among the Registrant, the selling
stockholders named therein, Alex. Brown & Sons Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation, CIBC
Wood Gundy Securities Corp., Montgomery Securities and
Prudential Securities Corporation (filed as Exhibit 99.1 to
the Registrant's Current Report on Form 8-K dated June 4,
1997 and incorporated herein by reference).
10.56 -- Purchase Agreement dated June 17, 1997 among the Registrant,
its United States subsidiaries, CIBC Wood Gundy Securities
Corp., Alex. Brown & Sons Incorporated and Donaldson, Lufkin
& Jenrette Securities Corporation (filed as Exhibit 99.1 to
the Registrant's Registration Statement on Form S-4 (Reg.
No. 333-30957) and incorporated herein by reference).
10.57 -- Registration Rights Agreement dated June 17, 1997 among the
Registrant, the Guarantors named therein, CIBC Wood Gundy
Securities Corp., Alex. Brown & Sons Incorporated and
Donaldson, Lufkin & Jenrette Securities Corporation (filed
as Exhibit 99.2 to the Registrant's Registration Statement
on Form S-4 (Reg. No. 333-30957) and incorporated herein by
reference).
</TABLE>
49
<PAGE> 52
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.58 -- Asset Purchase Agreement dated August 15, 1997, by and
between the Registrant and The Lamar Corporation (filed as
Exhibit 99.2 to the Registrant's Current Report on Form 8-K
dated August 29, 1997 and incorporated herein by reference).
10.59 -- Fifth Amended and Restated Credit Agreement, dated as of
August 15, 1997, among the Registrant, Mediacom Inc., the
several lenders parties thereto and Canadian Imperial Bank
of Commerce, as agent (filed as Exhibit 99.3 to the
Registrant's Current Report on Form 8-K dated August 29,
1997 and incorporated herein by reference).
10.60 -- 1966 Non-Employee Director Stock Option Plan (filed as
Exhibit 99.3 to the Registrant's Registration Statement on
Form S-8 (Reg. No. 333-38589) and incorporated herein by
reference).
10.61 -- Stock Purchase Agreement dated November 7, 1997 among the
Registrant, Salm Enterprises, Inc., Joslyn Stuart and
Hillary Salm. 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.
10.62 -- Asset Purchase Agreement dated November 25, 1997 by and
between the Registrant and Outdoor Media Group, 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.
21.1 -- Subsidiaries of the Registrant
23.1 -- Consent of Deloitte & Touche LLP
27 -- Financial Data Schedule
</TABLE>
50
<PAGE> 53
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized in the City of Phoenix, State of Arizona, on the 18th
day of March 1998.
OUTDOOR SYSTEMS, INC.
By: /s/ WILLIAM S. LEVINE
------------------------------------
William S. Levine
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant in
the capacities and on the dates indicated.
OUTDOOR SYSTEMS, INC.
<TABLE>
<C> <S>
By: /s/ ARTURO R. MORENO Date: March 18, 1998
- --------------------------------------------
Arturo R. Moreno
President and Director
(Principal Executive Officer)
By: /s/ WILLIAM S. LEVINE Date: March 18, 1998
- --------------------------------------------
William S. Levine
Chairman and Director
By: /s/ BILL M. BEVERAGE Date: March 18, 1998
- --------------------------------------------
Bill M. Beverage
Secretary, Treasurer and Chief Financial
Officer
(Principal Financial and Accounting Officer)
By: /s/ BRIAN J. O'CONNOR Date: March 18, 1998
- --------------------------------------------
Brian J. O'Connor
Director
By: /s/ STEPHEN F. BUTTERFIELD Date: March 18, 1998
- --------------------------------------------
Stephen F. Butterfield
Director
</TABLE>
<PAGE> 54
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Outdoor Systems, Inc.
Phoenix, Arizona
We have audited the consolidated financial statements of Outdoor Systems,
Inc. as of December 31, 1996 and 1997, and for each of the three years in the
period ended December 31, 1997, and have issued our report thereon dated
February 3, 1998, except for the last paragraph of Note 5, for which the date is
March 17, 1998; such consolidated financial statements and report are included
elsewhere in this Form 10-K. Our audits also included the financial statement
schedule of Outdoor Systems, Inc., listed in Item 14. This financial statement
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
DELOITTE & TOUCHE LLP
Phoenix, Arizona
March 17, 1998
S-1
<PAGE> 55
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 1995, 1996 AND 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
--------------------
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
DESCRIPTION OF PERIOD EXPENSES OTHER DEDUCTIONS OF PERIOD
----------- ---------- ---------- ------ ---------- ---------
<S> <C> <C> <C> <C> <C>
1995
Allowance for Doubtful
Accounts.................... $1,016 $ 761 $ -- $ (767)(1) $ 1,010
====== ====== ====== ======= =======
1996
Allowance for Doubtful
Accounts.................... $1,010 $2,492 $2,726(2) $ (830)(1) $ 5,398
====== ====== ====== ======= =======
1997
Allowance for Doubtful
Accounts.................... $5,398 $4,129 $5,677(2) $(1,354)(1) $13,850
====== ====== ====== ======= =======
</TABLE>
- ---------------
(1) Represents accounts receivable write-offs.
(2) Amount represents reserve at date of acquisition related to accounts
receivable in the working capital of companies acquired.
S-2
<PAGE> 56
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
3.1 -- Fourth Amended and Restated Certificate of Incorporation
(filed as Exhibit 99.2 to the Registrant's Current Report on
Form 8-K filed on June 4, 1997 (File No. 0-28256) and
incorporated herein by reference).
3.2 -- Amended and Restated Bylaws (filed as Exhibit 3.2 to the
Registrant's Amendment No. 2 to Form S-1 Registration
Statement No. 333-1582 and incorporated herein by
reference).
4.1 -- 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 (Reg. No. 333-1582) and
incorporated herein by reference).
4.2 -- Indenture (filed as Exhibit 4.2 to the Registrant's Form S-1
Registration Statement No. 33-64638 and incorporated herein
by reference).
4.3 -- Indenture dated October 15, 1996, (the "1996 Indenture"), by
and among the Registrant, its United States subsidiaries and
The Bank of New York, as trustee (filed as Exhibit 99.1 to
the Registrant's Current Report on Form 8-K dated October 9,
1996 and incorporated herein by reference).
4.4 -- Indenture dated as of June 23, 1997 (the "1997 Indenture")
among the Registrant, its United States subsidiaries and The
Bank of New York, as trustee, relating to the 8 7/8% Senior
Subordinated Notes due 2007 (filed as Exhibit 4.2 to the
Registrant's Registration Statement on Form S-4 (Reg. No.
333-30957) and incorporated herein by reference).
4.5 -- First Supplemental Indenture to the 1996 Indenture, dated as
of June 23, 1997, by and among the Registrant, the
Guarantors named therein, the Additional Guarantors named
therein and The Bank of New York, as trustee, relating to
the 9 3/8% Senior Subordinated Notes due 2006 (filed as
Exhibit 2.3 to the Registrant's Registration Statement on
Form 8-A (File No. 001-13275) and incorporated herein by
reference).
4.6 -- Second Supplemental Indenture to the 1996 Indenture, dated
as of September 30, 1997, by and among the Registrant, the
Guarantors named therein, the Additional Guarantors named
therein and The Bank of New York, as trustee, relating to
the 9 3/8% Senior Subordinated Notes due 2006 (filed as
Exhibit 2.4 to the Registrant's Registration Statement on
Form 8-A (File No. 001-13275) and incorporated herein by
reference).
4.7 -- Third Supplemental Indenture to the 1996 Indenture dated
January 22, 1998 among the Registrant, the Guarantors named
therein, the Additional Guarantor named therein and the Bank
of New York, as trustee, relating to the 9 3/8% Senior
Subordinated Notes due 2006.
4.8 -- First Supplemental Indenture to the 1997 Indenture, dated as
of September 30, 1997, by and among the Registrant, the
Guarantors named therein, the Additional Guarantors named
therein and the Bank of New York, as trustee, relating to
the 8 7/8% Senior Subordinated Notes due 2007 (filed as
Exhibit 2.7 to the Registrant's Registration Statement on
Form 8-A (File No. 001-13275) and incorporated herein by
reference).
4.9 -- Second Supplemental Indenture to the 1997 Indenture dated
January 22, 1998 among the Registrant, the Guarantors named
therein, the Additional Guarantor named therein and the Bank
of New York, as trustee, relating to the 8 7/8% Senior
Subordinated Notes due 2007.
9.1 -- Voting Agreement dated May 4, 1990, effective April 2, 1989,
between William S. Levine and Rubin Sabin (filed as Exhibit
9.1 to the Registrant's Form S-1 Registration Statement No.
33-64638 and incorporated herein by reference).
9.2 -- Irrevocable Proxy dated as of April 2, 1989, between William
S. Levine and Rubin Sabin (filed as Exhibit 9.2 to the
Registrant's Form S-1 Registration Statement No. 33-64638
and incorporated herein by reference).
9.3 -- Amended and Restated Voting Agreement dated as of August 17,
1993, entered into among the Registrant, William S. Levine
and Gregory Riggle (filed as Exhibit 9.3 to the Registrant's
Form S-1 Registration Statement No. 33-64638 and
incorporated herein by reference).
</TABLE>
<PAGE> 57
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
9.4 -- Stockholders' Agreement dated as of April 15, 1996, between
William S. Levine, Arte Moreno and MK-Link Investments
Limited Partnership (filed as Exhibit 9.4 to the
Registrant's Amendment No. 2 to Form S-1 Registration
Statement No. 333-1582 and incorporated herein by
reference).
10.1 -- Fourth Amended and Restated Credit Agreement, dated as of
October 22, 1996, entered into among the Registrant, the
several lenders from time to time parties thereto and CIBC
Inc., as agent (filed as Exhibit 10.1 to the Registrant's
Quarterly Report on Form 10-Q for the period ended September
30, 1996 and incorporated herein by reference).
10.2 -- Amended and Restated Securities Purchase Agreement dated as
of August 17, 1993, entered into among the Registrant, TCW
Special Placements Fund II and TCW Capital, as Investment
Manager pursuant to an Investment Agreement dated as of June
30, 1987 (filed as Exhibit 10.2 to the Registrant's Form S-1
Registration Statement No. 33-64638 and incorporated herein
by reference).
10.3 -- Junior Subordinated Exchange Note dated effective as of
January 1, 1992, issued by the Registrant to Rubin Sabin
(filed as Exhibit 10.3 to the Registrant's Form S-1
Registration Statement No. 33-64638 and incorporated herein
by reference).
10.4 -- Intercreditor and Subordination Agreement dated as of May 4,
1990, among the Registrant, OS Advertising Company of Texas,
Inc., Outdoor Today, Inc., National Westminster Bank USA, as
Agent, Rubin Sabin and Elaine Sabin (filed as Exhibit 10.4
to the Registrant's Form S-1 Registration Statement No.
33-64638 and incorporated herein by reference).
10.5 -- Amended and Restated Intercreditor and Subordination
Agreement dated as of August 17, 1993, entered into between
the Registrant, Gregory Riggle, CIBC Inc. and United States
Trust Company of New York, as trustee (filed as Exhibit 10.5
to the Registrant's Form S-1 Registration Statement No.
33-64638 and incorporated herein by reference).
10.6 -- Administrative Services Agreement dated as of June 1, 1993,
between the Registrant and Camelback Services, Inc. (filed
as Exhibit 10.6 to the Registrant's Form S-1 Registration
Statement No. 33-64638 and incorporated herein by
reference).
10.7 -- Services Agreement dated as of May 1, 1993, between the
Registrant, Williams Manufacturing, Inc. and J & L
Industries, Inc. as amended by the First Amendment thereto
dated April 15, 1996, to be effective as of July 1, 1995
(filed as Exhibit 10.7 to the Registrant's Amendment No. 2
to Form S-1 Registration Statement No. 333-1582 and
incorporated herein by reference).
10.8 -- Amended and Restated Incentive Plan dated effective as of
January 1, 1988, adopted by the Registrant as amended to
date (filed as Exhibit 10.8 to the Registrant's Amendment
No. 2 to Form S-1 Registration Statement No. 333-1582 and
incorporated herein by reference).
10.9 -- Assets Purchase Agreement dated March 15, 1991, among the
Registrant, Naegele Outdoor Advertising, Inc., OS
Advertising Company of Georgia, Inc., and Morris
Communications Corporation, as amended by the First
Amendment to Assets Purchase Agreement dated as of December
23, 1991, among the Registrant, Naegele Outdoor Advertising,
Inc., OS Advertising Company of Georgia, Inc., Morris
Communications Corporation, and OS Advertising Company of
Kentucky, Inc. (filed as Exhibit 10.17 to the Registrant's
Form S-1 Registration Statement No. 33-64638 and
incorporated herein by reference).
10.10 -- Agreement and grant of Option dated as of April 3, 1989,
between the Registrant and Arthur Moreno, as amended by the
First Amendment to Agreement and Grant of Option dated as of
January 1, 1991 (filed as Exhibit 10.23 to the Registrant's
Form S-1 Registration Statement No. 33-64638 and
incorporated herein by reference).
10.10.1 -- Letter Agreement between Registrant and Arte Moreno
regarding Agreement and Grant of Option dated as of April 3,
1989, and First Amendment to Agreement and Grant of Option
dated as of January 1, 1991 (filed as Exhibit 10.10.1 to the
Registrant's Amendment No. 3 to Form S-1 Registration
Statement No. 333-1582 and incorporated herein by
reference).
10.11 -- Option Agreement dated as of January 1, 1991, between the
Registrant and Wally Kelly (filed as Exhibit 10.24 to the
Registrant's Form S-1 Registration Statement No. 33-64638
and incorporated herein by reference).
</TABLE>
<PAGE> 58
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.12 -- Senior Note Intercreditor Agreement dated as of August 17,
1993, entered into among TCW Special Placements Fund II, TCW
Capital, acting solely as investment manager pursuant to an
Investment Management Agreement, the Registrant and United
States Trust Company of New York as trustee (filed as
Exhibit 10.26 to the Registrant's Form S-1 Registration
Statement No. 33-64638 and incorporated herein by
reference).
10.13 -- Bank Intercreditor Agreement dated as of August 17, 1993,
entered into among TCW Special Placements Fund II, TCW
Capital acting solely as investment manager pursuant to an
Investment Management Agreement, the Registrant and CIBC
Inc. as agent (filed as Exhibit 10.26 to the Registrant's
Form S-1 Registration Statement No. 33-64638 and
incorporated herein by reference).
10.14 -- Option Purchase Agreement among the Registrant and OS
Advertising Company of Georgia, Inc. and Capitol Outdoor
Acquisition Co., Inc. and Capitol Outdoor Leasing Co., Inc.,
dated as of July 27, 1994, as amended by the First Amendment
to Option Purchase Agreement dated as of December 14, 1994
(filed as Exhibit 1 to the Registrant's Current Report on
Form 8-K dated December 19, 1994 and incorporated herein by
reference).
10.15 -- Asset Purchase Agreement between the Registrant and Eller
Outdoor Advertising Company of Atlanta, dated November 21,
1994 (filed as Exhibit 2 to the Registrant's Current Report
on Form 8-K dated December 19, 1994 and incorporated herein
by reference).
10.16 -- The Registrant's 1996 Omnibus Plan (filed as Exhibit 10.16
to the Registrant's Amendment No. 2 to Form S-1 Registration
Statement No. 333-1582 and incorporated herein by
reference).
10.17 -- Form of Incentive Stock Option Grant to be awarded to each
of Wally C. Kelly and Bill M. Beverage pursuant to the terms
of the Registrant's 1996 Omnibus Plan (filed as Exhibit
10.17 to the Registrant's Amendment No. 2 to Form S-1
Registration Statement No. 333-1582 and incorporated herein
by reference).
10.18 -- Form of Stock Option Grant to be awarded to each of Arte
Moreno, Wally C. Kelly and Bill M. Beverage pursuant to the
terms of the Registrant's 1996 Omnibus Plan (filed as
Exhibit 10.18 to the Registrant's Amendment No. 2 to Form
S-1 Registration Statement No. 333-1582 and incorporated
herein by reference).
10.19 -- Form of Incentive Plan Settlement Participant Election
Agreement to be entered into by each of Wally C. Kelly and
Bill M. Beverage pursuant to the conversion of interests in
the Incentive Plan (filed as Exhibit 10.19 to the
Registrant's Amendment No. 3 to Form S-1 Registration
Statement No. 333-1582 and incorporated herein by
reference).
10.20 -- Asset Purchase Agreement dated July 9, 1996, by and between
the Registrant and Gannett Co., Inc., together with the
Promissory Note and related Guaranty. 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 (filed as
Exhibit 99.1 to the Registrant's Current Report on Form 8-K
dated July 10, 1996 and incorporated herein by reference).
10.21 -- Amendment No. 1 to Asset Purchase Agreement among Gannett
Co., Inc., Combined Communications Corporation, Gannett
Transit, Inc., Shelter Media Communications, Inc., Gannett
International Communications, Inc., and the Registrant dated
as of August 12, 1996 (filed as Exhibit 99.1 to the
Registrant's Current Report on Form 8-K dated August 27,
1996 and incorporated herein by reference).
10.22 -- Amendment No. 2 to Asset Purchase Agreement among Gannett
Co., Inc., Combined Communications Corporation, Gannett
Transit, Inc., Shelter Media Communications, Inc., Gannett
International Communications, Inc., and the Registrant dated
as of August 19, 1996 (filed as Exhibit 99.2 to the
Registrant's Current Report on Form 8-K dated August 27,
1996 and incorporated herein by reference).
10.23 -- Form of Option by Gannett Outdoor Co. of Texas, Inc., in
favor of the Registrant together with the form of Asset
Purchase Agreement by and between the Registrant and Gannett
Outdoor Co. of Texas, Inc. (filed as Exhibit 99.2 to the
Registrant's Current Report on Form 8-K dated July 10, 1996
and incorporated herein by reference).
</TABLE>
<PAGE> 59
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.24 -- Senior Subordinated Credit Agreement dated July 9, 1996, by
and among the Registrant, the guarantors named therein, the
lenders named therein, and Canadian Imperial Bank of
Commerce together with the forms of Bridge Note and Term
Note. 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 (filed as Exhibit 99.4 to the Registrant's
Current Report on Form 8-K dated July 10, 1996 and
incorporated herein by reference).
10.25 -- Form of Indenture by and among the Registrant, the
subsidiary guarantors named therein, and a trustee to be
selected by the Registrant (filed as Exhibit 99.5 to the
Registrant's Current Report on Form 8-K dated July 10, 1996
and incorporated herein by reference).
10.26 -- First Supplemental Indenture dated as of August 22, 1996, by
and between the Registrant and United States Trust Company
of New York (filed as Exhibit 99.5 to the Registrant's
Current Report on Form 8-K dated August 27, 1996 and
incorporated herein by reference).
10.27 -- Securities Purchase Agreement dated July 9, 1996, by and
between the Registrant and CIBC WG Argosy Merchant Fund 2,
L.L.C. The Exhibit contains a list briefly identifying the
contents of Schedules and Exhibits which have been omitted.
The Registrant agrees to furnish supplementally a copy of
any omitted Schedule or Exhibit to the Commission upon
request (filed as Exhibit 99.6 to the Registrant's Current
Report on Form 8-K dated July 10, 1996 and incorporated
herein by reference).
10.28 -- Form of Certificate of Designations of Senior Increasing
Rate Cumulative Preferred Stock, Series A (filed as Exhibit
99.7 to the Registrant's Current Report on Form 8-K dated
July 10, 1996 and incorporated herein by reference).
10.29 -- Form of Warrant Agreement by and between the Registrant and
a Warrant Agent to be selected by the Registrant (filed as
Exhibit 99.8 to the Registrant's Current Report on Form 8-K
dated July 10, 1996 and incorporated herein by reference).
10.30 -- Form of Registration Rights Agreement by and among the
Registrant, the guarantors names therein, and the holders
name therein (filed as Exhibit 99.9 to the Registrant's
Current Report on Form 8-K dated July 10, 1996 and
incorporated herein by reference).
10.31 -- Form of Common Stock Registration Rights Agreement by and
between the Registrant and CIBC WG Argosy Merchant Form 2,
L.L.C. (filed as Exhibit 99.10 to the Registrant's Current
Report on Form 8-K dated July 10, 1996 and incorporated
herein by reference).
10.32 -- Underwriting Agreement dated August 19, 1996 by and among
the Registrant and Alex. Brown & Sons Incorporated, CIBC
Wood Gundy Securities Corp. and Donaldson, Lufkin & Jenrette
Securities Corporation (filed as Exhibit 99.3 to the
Registrant's Current Report on Form 8-K dated August 27,
1996 and incorporated herein by reference).
10.33 -- Asset Purchase Agreement between RailCom, Ltd. and the
Registrant dated May 8, 1996 (filed as Exhibit 2.1 to the
Registrant's Current Report on Form 8-K dated May 22, 1996
and incorporated herein by reference).
10.34 -- Purchase and Sales Agreement Between CSX Realty Development
Corporation, The Three Rivers Railway Company, The Atlantic
Land and Improvement Company, Winston-Salem Southbound
Railway Company, Gainesville Midland Railroad Company, and
Richmond, Fredericksburg and Potomac Railway Company and
RailCom, Ltd. dated January 23, 1996, as amended March 29,
1996, and May 21, 1996 (filed as Exhibit 2.2.1 to the
Registrant's Current Report on Form 8-K dated May 22, 1996
and incorporated herein by reference).
10.35 -- Amendment to Purchase Agreement, dated March 29, 1996 (filed
as Exhibit 2.2.2 to the Registrant's Current Report on Form
8-K dated May 22, 1996 and incorporated herein by
reference).
10.36 -- Second Amendment to Purchase Agreement dated May 21, 1996
(filed as Exhibit 2.2.3 to the Registrant's Current Report
on Form 8-K dated May 22, 1996 and incorporated herein by
reference).
10.37 -- Grant of Easement and Agreement dated May 21, 1996 (filed as
Exhibit 2.3 to the Registrant's Current Report on Form 8-K
dated May 22, 1996 and incorporated herein by reference).
</TABLE>
<PAGE> 60
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.38 -- Assignment of License Agreements, dated May 21, 1996 (filed
as Exhibit 2.4 to the Registrant's Current Report on Form
8-K dated May 22, 1996 and incorporated herein by
reference).
10.39 -- Assignment and Assumption Agreement dated May 22, 1996
(filed as Exhibit 2.5 to the Registrant's Current Report on
Form 8-K dated May 22, 1996 and incorporated herein by
reference).
10.41 -- Underwriting Agreement dated October 9, 1996 by and among
the Registrant, its United States subsidiaries, CIBC Wood
Gundy Securities Corp. and Alex. Brown & Sons Incorporated
(filed as Exhibit 99.2 to the Registrant's Current Report on
Form 8-K dated October 9, 1996 and incorporated herein by
reference).
10.42 -- 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 (filed as Exhibit 99.1 to the
Registrant's Form S-3 Registration Statement (Reg. No. 333-
26407) and incorporated herein by reference).
10.43 -- 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 (filed as Exhibit
99.2 to the Registrant's Form S-3 Registration Statement
(Reg. No. 333-26407) and incorporated herein by reference).
10.44 -- 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 (filed as Exhibit 99.3 to the
Registrant's Form S-3 Registration Statement (Reg. No.
333-26407) and incorporated herein by reference).
10.45 -- 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
(filed as Exhibit 99.4 to the Registrant's Form S-3
Registration Statement (Reg. No. 333-26407) and incorporated
herein by reference).
10.46 -- 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 (filed as Exhibit
99.5 to the Registrant's Form S-3 Registration Statement
(Reg. No. 333-26407) and incorporated herein by reference).
10.47 -- 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 (filed as Exhibit 99.6 to the
Registrant's Form S-3 Registration Statement (Reg. No. 333-
26407) and incorporated herein by reference).
10.48 -- 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 (filed as Exhibit 99.7 to the
Registrant's Registration Statement on Form S-3 (Reg. No.
333-26407) and incorporated herein by reference).
</TABLE>
<PAGE> 61
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.49 -- 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
(filed as Exhibit 99.8 to the Registrant's Registration
Statement on Form S-3 (Reg. No. 333-26407) and incorporated
herein by reference).
10.50 -- 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 (filed as Exhibit
99.9 to the Registrant's Registration Statement on Form S-3
(Reg. No. 333-26407) and incorporated herein by reference).
10.51 -- 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 (filed as
Exhibit 99.10 to the Registrant's Registration Statement on
Form S-3 (Reg. No. 333-26407) and incorporated herein by
reference).
10.52 -- 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 (filed as Exhibit 99.11 to the
Registrant's Registration Statement on Form S-3 (Reg. No.
333-26407) and incorporated herein by reference).
10.53 -- Amendment No. 1 dated as of May 22, 1997 to Stock Purchase
Agreement dated April 11, 1997 by and among Richard M.
Schaps, Jason Perline, Van Wagner Communications, Inc. and
the Registrant (filed as Exhibit 99.1 to the Registrant's
Current Report on Form 8-K dated May 28, 1997 and
incorporated herein by reference).
10.54 -- Underwriting Agreement dated May 22, 1997 by and among the
Registrant, the selling stockholders named therein, Alex.
Brown & Sons Incorporated, Donaldson, Lufkin & Jenrette
Securities Corporation, CIBC Wood Gundy Securities Corp.,
Montgomery Securities and Prudential Securities Corporation
(filed as Exhibit 99.2 to the Registrant's Current Report on
Form 8-K dated May 28, 1997 and incorporated herein by
reference).
10.55 -- Amendment No. 1 dated June 2, 1997 to Underwriting Agreement
dated May 22, 1997 by and among the Registrant, the selling
stockholders named therein, Alex. Brown & Sons Incorporated,
Donaldson, Lufkin & Jenrette Securities Corporation, CIBC
Wood Gundy Securities Corp., Montgomery Securities and
Prudential Securities Corporation (filed as Exhibit 99.1 to
the Registrant's Current Report on Form 8-K dated June 4,
1997 and incorporated herein by reference).
10.56 -- Purchase Agreement dated June 17, 1997 among the Registrant,
its United States subsidiaries, CIBC Wood Gundy Securities
Corp., Alex. Brown & Sons Incorporated and Donaldson, Lufkin
& Jenrette Securities Corporation (filed as Exhibit 99.1 to
the Registrant's Registration Statement on Form S-4 (Reg.
No. 333-30957) and incorporated herein by reference).
10.57 -- Registration Rights Agreement dated June 17, 1997 among the
Registrant, the Guarantors named therein, CIBC Wood Gundy
Securities Corp., Alex. Brown & Sons Incorporated and
Donaldson, Lufkin & Jenrette Securities Corporation (filed
as Exhibit 99.2 to the Registrant's Registration Statement
on Form S-4 (Reg. No. 333-30957) and incorporated herein by
reference).
10.58 -- Asset Purchase Agreement dated August 15, 1997, by and
between the Registrant and The Lamar Corporation (filed as
Exhibit 99.2 to the Registrant's Current Report on Form 8-K
dated August 29, 1997 and incorporated herein by reference).
10.59 -- Fifth Amended and Restated Credit Agreement, dated as of
August 15, 1997, among the Registrant, Mediacom Inc., the
several lenders parties thereto and Canadian Imperial Bank
of Commerce, as agent (filed as Exhibit 99.3 to the
Registrant's Current Report on Form 8-K dated August 29,
1997 and incorporated herein by reference).
</TABLE>
<PAGE> 62
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.60 -- 1966 Non-Employee Director Stock Option Plan (filed as
Exhibit 99.3 to the Registrant's Registration Statement on
Form S-8 (Reg. No. 333-38589) and incorporated herein by
reference).
10.61 -- Stock Purchase Agreement dated November 7, 1997 among the
Registrant, Salm Enterprises, Inc., Joslyn Stuart and
Hillary Salm. 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.
10.62 -- Asset Purchase Agreement dated November 25, 1997 by and
between the Registrant and Outdoor Media Group, 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.
21.1 -- Subsidiaries of the Registrant
23.1 -- Consent of Deloitte & Touche LLP
27 -- Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 4.7
THIRD SUPPLEMENTAL INDENTURE TO THE 1996 INDENTURE
THIRD SUPPLEMENTAL INDENTURE, dated as of January 22, 1998 (the "Third
Supplemental Indenture"), to the 1996 Indenture (as defined below), among
OUTDOOR SYSTEMS, INC., a Delaware corporation (the "Company"), the Guarantors
(as defined in the 1996 Indenture), the subsidiary of the Company listed on
Schedule A annexed hereto (the "Additional Guarantor") and THE BANK OF NEW YORK,
a New York banking corporation, as trustee (together with any successor trustee
appointed in accordance with the terms of the 1996 Indenture, the "Trustee").
W I T N E S S E T H:
WHEREAS, the Company has issued its 9-3/8% Senior Subordinated Notes
due 2006 (the "Securities") in the aggregate principal amount of $250,000,000
under and pursuant to the Indenture, dated as of October 15, 1996 among the
Company, the Guarantors named therein and the Trustee, as amended and
supplemented by the First Supplemental Indenture, dated as of June 23, 1997 by
and among the Company, the Guarantors named therein, the Additional Guarantors
named therein and the Trustee and the Second Supplemental Indenture, dated as of
September 30, 1997 by and among the Company, the Guarantors named therein, the
Additional Guarantors named therein and the Trustee (the "1996 Indenture"); and
WHEREAS, the Additional Guarantor has become a Restricted Subsidiary
and pursuant to Section 4.21 of the 1996 Indenture is obligated to enter into
this Third Supplemental Indenture, and thereby become a Guarantor (as defined in
the 1996 Indenture) as provided in Article X of the 1996 Indenture; and
WHEREAS, pursuant to Section 8.01(4) of the 1996 Indenture, the
Company, the Guarantors, the Additional Guarantor and the Trustee may enter into
this Third Supplemental Indenture without the consent of any Holder; and
WHEREAS, all consents and notices required to be obtained and given as
conditions to the execution of this Third Supplemental Indenture pursuant to the
1996 Indenture and all other documents relating to the Securities have been
obtained and given;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I.
AUTHORIZATION; DEFINITIONS
Section 1.01. Third Supplemental Indenture. This Third Supplemental
Indenture is supplemental to, and is entered into in accordance with Section
8.01 of, the 1996 Indenture, and except as modified, amended and supplemented by
this Third Supplemental Indenture, the provisions of the 1996 Indenture are in
all respects ratified and confirmed and shall remain in full force and effect.
Section 1.02. Definitions. Unless the context shall otherwise require,
all terms which are defined in Section 1.01 of the 1996 Indenture shall have the
same meanings, respectively, in this Third Supplemental Indenture as such terms
are given in said Section 1.01 of the 1996 Indenture.
<PAGE> 2
ARTICLE II.
ADDITIONAL GUARANTOR
Section 2.01. Additional Guarantor. Pursuant to Section 10.04 of the
1996 Indenture, the Additional Guarantor (as defined in the Preamble of this
Third Supplemental Indenture) hereby expressly assumes the obligations of, and
otherwise agrees to perform all of the duties of, a Guarantor under the 1996
Indenture, subject to the terms and conditions thereof, as of the date set forth
opposite the name of such Additional Guarantor on Schedule A hereto.
ARTICLE III.
Section 3.01. Effective Date. This Third Supplemental Indenture shall
become effective upon execution and delivery hereof.
Section 3.02. Counterparts. This Third Supplemental Indenture may be
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
Section 3.03. Acceptance. The Trustee accepts the 1996 Indenture, as
supplemented by this Third Supplemental Indenture, and agrees to perform the
same upon the terms and conditions set forth therein as so supplemented. The
Trustee shall not be responsible in any manner whatsoever for or in respect of
the validity or sufficiency of this Third Supplemental Indenture or the due
execution by the Company, the Guarantors or the Additional Guarantor, or for or
in respect of the recitals contained herein, all of which are made by the
Company solely.
Section 3.04. Successors and Assigns. All covenants and agreements in
this Third Supplemental Indenture by the Company, the Guarantors, the Additional
Guarantor or the Trustee shall bind its respective successors and assigns,
whether so expressed or not.
Section 3.05. Severability. In case any provision in this Third
Supplemental Indenture shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
Section 3.06. Governing Law. This Third Supplemental Indenture shall be
governed by and construed in accordance with the internal laws of the State of
New York, without regard to conflicts of laws provisions thereof.
Section 3.07. Incorporation into 1996 Indenture. All provisions of this
Third Supplemental Indenture shall be deemed to be incorporated in, and made a
part of, the 1996 Indenture; and the 1996 Indenture, as amended and supplemented
by this Third Supplemental Indenture, shall be read, taken and construed as one
and the same instrument.
-2-
<PAGE> 3
IN WITNESS WHEREOF, the parties have caused this Third Supplemental
Indenture to be duly executed, all as of the date first above written.
OUTDOOR SYSTEMS, INC.
By: /s/ William S. Levine
------------------------------------
Name: William S. Levine
Title: Chairman of the Board
ATTEST:
/s/ Bill M. Beverage
- ------------------------------------
Bill M. Beverage
Secretary
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
-3-
<PAGE> 4
GUARANTORS:
OUTDOOR SYSTEMS PAINTING, INC.
OS ADVERTISING OF TEXAS PAINTING, INC.
OS BASELINE, INC.
DECADE COMMUNICATIONS GROUP, INC.
BENCH ADVERTISING COMPANY OF
COLORADO, INC.
NEW YORK SUBWAYS ADVERTISING CO.,
INC.
OS BUS, INC.
OUTDOOR SYSTEMS (NEW YORK), INC.
NATIONAL ADVERTISING COMPANY
PACIFIC CONNECTION, INC.
ATLANTA BUS SHELTERS
BY: OUTDOOR SYSTEMS, INC.,
GENERAL PARTNER
By: /s/ William S. Levine
-----------------------------------
Name: William S. Levine
Title: Chairman of the Board
ATTEST:
/s/ Bill M. Beverage
- -------------------------------
Bill M. Beverage
Secretary
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
-4-
<PAGE> 5
ADDITIONAL GUARANTOR:
SALM ENTERPRISES, INC.
By: /s/ William S. Levine
------------------------------------
Name: William S. Levine
Title: Chairman of the Board
ATTEST:
/s/ Bill M. Beverage
- -------------------------------------
Bill M. Beverage
Secretary
THE BANK OF NEW YORK, as Trustee
By: /s/ Sandra Carreker
------------------------------------
Name: Sandra Carreker
Title: Agent
ATTEST:
/s/ Deborah T. Daly
- -------------------------------------
Name: Deborah T. Daly
Title: Agent
-5-
<PAGE> 6
SCHEDULE A
ADDITIONAL GUARANTOR
Name Date
- ---- ----
Salm Enterprises, Inc., a California corporation January 22, 1998
-6-
<PAGE> 1
EXHIBIT 4.9
SECOND SUPPLEMENTAL INDENTURE TO 1997 INDENTURE
SECOND SUPPLEMENTAL INDENTURE, dated as of January 22, 1998 (the
"Second Supplemental Indenture"), to the 1997 Indenture (as defined below),
among OUTDOOR SYSTEMS, INC., a Delaware corporation (the "Company"), the
Guarantors (as defined in the 1997 Indenture), the subsidiary of the Company
listed on Schedule A annexed hereto (the "Additional Guarantor") and THE BANK OF
NEW YORK, a New York banking corporation, as trustee (together with any
successor trustee appointed in accordance with the terms of the 1997 Indenture,
the "Trustee").
W I T N E S S E T H:
WHEREAS, the Company has issued its 8-7/8% Senior Subordinated Notes
due 2007 (the "Securities") in the aggregate principal amount of $500,000,000
under and pursuant to the Indenture, dated as of June 23, 1997, among the
Company, the Guarantors named therein and the Trustee, as amended and
supplemented by the First Supplemental Indenture dated September 30, 1997, among
the Company, the Guarantors named therein, the Additional Guarantors named
therein and the Trustee (the "1997 Indenture"); and
WHEREAS, the Additional Guarantor has become a Restricted Subsidiary
and pursuant to Section 4.21 of the 1997 Indenture is obligated to enter into
this Second Supplemental Indenture, and thereby become a Guarantor (as defined
in the 1997 Indenture) as provided in Article X of the 1997 Indenture; and
WHEREAS, pursuant to Section 8.01(4) of the 1997 Indenture, the
Company, the Guarantors, the Additional Guarantor and the Trustee may enter into
this Second Supplemental Indenture without the consent of any Holder; and
WHEREAS, all consents and notices required to be obtained and given as
conditions to the execution of this Second Supplemental Indenture pursuant to
the 1997 Indenture and all other documents relating to the Securities have been
obtained and given;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
ARTICLE I.
AUTHORIZATION; DEFINITIONS
Section 1.01. Second Supplemental Indenture. This Second Supplemental
Indenture is supplemental to, and is entered into in accordance with Section
8.01 of, the 1997 Indenture, and except as modified, amended and supplemented by
this Second Supplemental Indenture, the provisions of the 1997 Indenture are in
all respects ratified and confirmed and shall remain in full force and effect.
Section 1.02. Definitions. Unless the context shall otherwise require,
all terms which are defined in Section 1.01 of the 1997 Indenture shall have the
same meanings, respectively, in this Second Supplemental Indenture as such terms
are given in said Section 1.01 of the 1997 Indenture.
<PAGE> 2
ARTICLE II.
ADDITIONAL GUARANTOR
Section 2.01. Additional Guarantor. Pursuant to Section 10.04 of the
1997 Indenture, the Additional Guarantor (as defined in the Preamble of this
Second Supplemental Indenture) hereby expressly assumes the obligations of, and
otherwise agrees to perform all of the duties of, a Guarantor under the 1997
Indenture, subject to the terms and conditions thereof, as of the date set forth
opposite the name of such Additional Guarantor on Schedule A hereto.
ARTICLE III.
Section 3.01. Effective Date. This Second Supplemental Indenture shall
become effective upon execution and delivery hereof.
Section 3.02. Counterparts. This Second Supplemental Indenture may be
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
Section 3.03. Acceptance. The Trustee accepts the 1997 Indenture, as
supplemented by this Second Supplemental Indenture, and agrees to perform the
same upon the terms and conditions set forth therein as so supplemented. The
Trustee shall not be responsible in any manner whatsoever for or in respect of
the validity or sufficiency of this Second Supplemental Indenture or the due
execution by the Company, the Guarantors or the Additional Guarantor, or for or
in respect of the recitals contained herein, all of which are made by the
Company solely.
Section 3.04. Successors and Assigns. All covenants and agreements in
this Second Supplemental Indenture by the Company, the Guarantors, the
Additional Guarantor or the Trustee shall bind its respective successors and
assigns, whether so expressed or not.
Section 3.05. Severability. In case any provision in this Second
Supplemental Indenture shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
Section 3.06. Governing Law. This Second Supplemental Indenture shall
be governed by and construed in accordance with the internal laws of the State
of New York, without regard to conflicts of laws provisions thereof.
Section 3.07. Incorporation into 1997 Indenture. All provisions of this
Second Supplemental Indenture shall be deemed to be incorporated in, and made a
part of, the 1997 Indenture; and the 1997 Indenture, as amended and supplemented
by this Second Supplemental Indenture, shall be read, taken and construed as one
and the same instrument.
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<PAGE> 3
IN WITNESS WHEREOF, the parties have caused this Second Supplemental
Indenture to be duly executed, all as of the date first above written.
OUTDOOR SYSTEMS, INC.
By: /s/ William S. Levine
-------------------------------------
Name: William S. Levine
Title: Chairman of the Board
ATTEST:
/s/ Bill M. Beverage
- -------------------------------------
Bill M. Beverage
Secretary
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
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<PAGE> 4
GUARANTORS:
OUTDOOR SYSTEMS PAINTING, INC.
OS ADVERTISING OF TEXAS PAINTING, INC.
OS BASELINE, INC.
DECADE COMMUNICATIONS GROUP, INC.
BENCH ADVERTISING COMPANY OF
COLORADO, INC.
NEW YORK SUBWAYS ADVERTISING CO.,
INC.
OS BUS, INC.
OUTDOOR SYSTEMS (NEW YORK), INC.
NATIONAL ADVERTISING COMPANY
PACIFIC CONNECTION, INC.
ATLANTA BUS SHELTERS
BY: OUTDOOR SYSTEMS, INC.,
GENERAL PARTNER
By: /s/ William S. Levine
------------------------------------------
Name: William S. Levine
Title: Chairman of the Board
ATTEST:
/s/ Bill M. Beverage
- --------------------------------
Bill M. Beverage
Secretary
[SIGNATURES CONTINUED ON FOLLOWING PAGE]
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<PAGE> 5
ADDITIONAL GUARANTOR:
SALM ENTERPRISES, INC.
By: /s/ William S. Levine
------------------------------------
Name: William S. Levine
Title: Chairman of the Board
ATTEST:
/s/ Bill M. Beverage
- ------------------------------------
Bill M. Beverage
Secretary
THE BANK OF NEW YORK, as Trustee
By: /s/ Sandra Carreker
------------------------------------
Name: Sandra Carreker
Title: Agent
ATTEST:
/s/ Deborah T. Daly
- ------------------------------------
Name: Deborah T. Daly
Title: Agent
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<PAGE> 6
SCHEDULE A
ADDITIONAL GUARANTOR
Name Date
- ---- ----
Salm Enterprises, Inc., a California corporation January 22, 1998
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<PAGE> 1
EXHIBIT 10.61
STOCK PURCHASE AGREEMENT
dated as of November 7, 1997
by and among
OUTDOOR SYSTEMS, INC.,
SALM ENTERPRISES, INC.,
JOSLYN STUART,
and
HILLARY SALM
<PAGE> 2
TABLE OF CONTENTS
1. DEFINITIONS............................................................1
2. PURCHASE AND SALE......................................................1
2.1 AGREEMENT TO PURCHASE AND SELL......................................1
2.2 CLOSING.............................................................1
2.3 PURCHASE PRICE......................................................2
2.4 ADJUSTMENT OF THE PURCHASE PRICE....................................2
2.5 TRANSACTIONS AT THE CLOSING.........................................4
3. REPRESENTATIONS AND WARRANTIES OF SELLER...............................4
3.1 ORGANIZATION AND GOOD STANDING......................................4
3.2 AUTHORITY; NO CONFLICT..............................................5
3.3 CAPITALIZATION......................................................5
3.4 FINANCIAL STATEMENTS................................................6
3.5 STRUCTURES..........................................................6
3.6 PERMITS.............................................................6
3.7 SITE LEASES.........................................................6
3.8 ADVERTISING CONTRACTS...............................................7
3.9 ABSENCE OF UNDISCLOSED LIABILITIES..................................7
3.10 OWNED REAL PROPERTY................................................7
3.11 TITLE, ENCUMBRANCES................................................7
3.12 TAXES..............................................................7
3.13 COMPLIANCE WITH LEGAL REQUIREMENTS.................................8
3.14 LEGAL PROCEEDINGS; ORDERS..........................................8
3.15 OTHER CONTRACTS....................................................8
3.16 INSURANCE..........................................................9
3.17 ENVIRONMENTAL MATTERS..............................................9
3.18 INTANGIBLE PROPERTY...............................................10
3.19 RELATIONSHIPS WITH AFFILIATES.....................................10
3.20 BROKERS OR FINDERS................................................10
3.21 LABOR MATTERS.....................................................10
3.22 EMPLOYEE BENEFIT MATTERS..........................................10
3.23 BOOKS AND RECORDS.................................................11
3.24 ABSENCE OF CHANGES................................................11
3.25 ASSETS NECESSARY FOR CONDUCT OF BUSINESS .........................11
3.26 HSR COMPLIANCE....................................................10
3.27 DISCLOSURE........................................................11
3A. REPRESENTATIONS AND WARRANTIES OF EACH SELLER......................11
3A.1 AUTHORITY OF SELLER; NO CONFLICT...................................12
3A.2 TITLE TO SHARES....................................................12
3A.3 BROKERS OR FINDERS.................................................12
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<PAGE> 3
4. REPRESENTATIONS AND WARRANTIES OF BUYER...............................12
4.1 ORGANIZATION AND GOOD STANDING.....................................13
4.2 AUTHORITY; NO CONFLICT.............................................13
4.3 CERTAIN PROCEEDINGS................................................13
4.4 BROKERS OR FINDERS.................................................13
4.5 INVESTMENT.........................................................13
5. COVENANTS OF SELLERS..................................................13
5.1 ACCESS AND INVESTIGATION...........................................13
5.2 OPERATION OF THE COMPANY...........................................14
5.3 NEGATIVE COVENANT..................................................14
5.4 REQUIRED APPROVALS AND CONSENTS ...................................15
5.5 BEST EFFORTS.......................................................15
5.6 NOTIFICATION.......................................................15
5.7 NO NEGOTIATION.....................................................15
5.8 ENCUMBRANCES AND SECURITY INTERESTS................................16
6. COVENANTS OF BUYER....................................................16
6.1 REQUIRED APPROVALS.................................................16
6.2 BEST EFFORTS.......................................................16
6.3 NOTIFICATION.......................................................16
6.4 TAX RETURNS........................................................16
6.5 LOAN...............................................................16
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE...................17
7.1 ACCURACY OF REPRESENTATIONS........................................17
7.2 SELLERS' PERFORMANCE...............................................17
7.3 ADDITIONAL DOCUMENTS...............................................17
7.4 NO PROCEEDINGS.....................................................17
7.5 NO PROHIBITION.....................................................17
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS TO CLOSE.................18
8.1 ACCURACY OF REPRESENTATIONS........................................18
8.2 BUYER'S PERFORMANCE................................................18
8.3 ADDITIONAL DOCUMENTS...............................................18
8.4 NO PROCEEDINGS.....................................................18
8.5 NO PROHIBITION.....................................................19
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<PAGE> 4
9. TERMINATION...........................................................19
9.1 TERMINATION EVENTS.................................................19
9.2 EFFECT OF TERMINATION..............................................19
9.3 RETENTION OF DEPOSIT...............................................19
10. INDEMNIFICATION; REMEDIES.............................................20
10.1 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS.................20
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER...................20
10.3 PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS...............20
10.4 PROCEDURE FOR INDEMNIFICATION -- OTHER CLAIMS.....................21
10.5 SURVIVAL/LIMITATIONS..............................................22
10.6 EXCLUSIVE REMEDY..................................................22
11. GENERAL PROVISIONS....................................................22
11.1 EXPENSES..........................................................22
11.2 PUBLIC ANNOUNCEMENTS..............................................22
11.3 NOTICES...........................................................23
11.4 FURTHER ASSURANCES................................................24
11.5 WAIVER............................................................25
11.6 ENTIRE AGREEMENT AND MODIFICATION.................................25
11.7 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS................25
11.8 SEVERABILITY......................................................25
11.9 POST-CLOSING ACCESS...............................................25
11.10 HEADINGS; CONSTRUCTION.............................................26
11.11 APPLICABLE LAW.....................................................26
11.12 INCORPORATION OF EXHIBITS AND SCHEDULES............................26
11.13 COUNTERPARTS.......................................................26
11.14 ARBITRATION........................................................26
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<PAGE> 5
EXHIBITS
Exhibit A - Definitions
Exhibit B - Promissory Note
Exhibit C - Letter of Credit
Exhibit D - Opinion of Seller's Counsel
Exhibit E - Opinion of Buyer's Counsel
SCHEDULES
Schedule 5.4 - Required Consents
DISCLOSURE SCHEDULE
Part 3.2 Part 3.8(b) Part 3.16
Part 3.5 Part 3.9 Part 3.18
Part 3.6 Part 3.11 Part 3.19
Part 3.7(a) Part 3.12 Part 3.21
Part 3.7(b) Part 3.14 Part 3.24
Part 3.8(a) Part 3.15 Part 3.26
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<PAGE> 6
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is entered into as of
November 7, 1997 by and among JOSLYN STUART, a resident of the state of
California ("Stuart"), and HILLARY SALM, a resident of the state of California
("Salm," and together with Stuart, the "Sellers"), SALM ENTERPRISES, INC., a
California corporation ("Company"), and OUTDOOR SYSTEMS, INC., a Delaware
corporation ("Buyer"). (Buyer and Sellers are sometimes herein referred to
individually as a "Party" and collectively as the "Parties.")
RECITALS
The Company is engaged in the business of owning and operating outdoor
signs, billboards and otherwise providing outdoor advertising services (the
"Business"). Sellers own all of the outstanding capital stock of the Company.
Sellers desire to sell, and Buyer desires to purchase, all of the issued and
outstanding capital stock of the Company, pursuant to the terms and conditions
and subject to the limitations and exclusions contained in this Agreement.
AGREEMENT
The Parties, for and in consideration of the covenants and agreements
herein set forth and 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
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 to Buyer all right, title and interest in and to the Shares, free
and clear of any Encumbrances or Security Interests, and Buyer hereby agrees to
buy and acquire the Shares from Sellers.
2.2 CLOSING. The purchase and sale of the Shares (the "Closing")
provided for in this Agreement will take place, subject to the satisfaction of
the conditions in Sections 7 and 8 hereof, at the offices of Outdoor Systems,
Inc., Phoenix, Arizona, commencing at 10:00 a.m. local time on or before
November 14, 1997 or such later time and place as the Parties may agree in
writing.
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<PAGE> 7
The effective time of the Closing shall be 11:59 p.m., Eastern Standard
Time, on the Closing Date.
2.3 PURCHASE PRICE. In consideration for the transfer of the Shares to
Buyer, Buyer shall pay, subject to the adjustment provisions of Section 2.4,
Five Million Fifty Thousand Dollars ($5,050,000) (the "Purchase Price"), payable
as follows:
(a) Sellers acknowledge receipt on the date hereof of One
Hundred Thousand Dollars ($100,000) as an earnest money deposit ("Earnest Money
Deposit") from Buyer;
(b) $4,950,000 shall be paid to Sellers in the form of an
interest bearing promissory note substantially in the form of Exhibit B attached
hereto ("Promissory Note"), which Promissory Note shall be secured for its
entire term by a letter of credit substantially in the form of Exhibit C
attached hereto ("Letter of Credit");
(c) Sellers and Buyer hereby acknowledge that the Purchase
Price and the payment terms specified herein and as set forth in the Promissory
Note were specifically negotiated to provide Sellers with a deferral of
recognition of income pursuant to the installment sale provisions of the IRC for
the 62 month term of the Promissory Note and to correspondingly provide the
Sellers with interest income at the rate of 10% per annum on the principal sum
of $4,950,000 for the 62 month term of the Promissory Note. For this reason
Buyer agreed that there would be no right of prepayment, in whole or in part, of
the principal sum due and owing under the Promissory Note. Buyer has agreed that
if an Event of Default (as that term is defined in paragraph 2(a) of the
Promissory Note) shall occur, the parties acknowledge that it would be
impractical or extremely difficult to determine with reasonable certainty the
actual damages which Sellers would sustain and have therefore agreed through
negotiation that Buyer shall pay to Sellers the sum of One Thousand Five Hundred
Dollars ($1,500) per day for each and every day from the date of the Event of
Default through the Maturity Date (as that term is defined in the Promissory
Note) of the Promissory Note, not as a penalty, but as and for liquidated
damages resulting form the breach of the obligations of Buyer to pay the
Purchase Price as specified in this Agreement and in accordance with the terms
of the Promissory Note.
Sellers: _______ _______ Buyer: _______
2.4 ADJUSTMENT OF THE PURCHASE PRICE. 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 Company: power and utility
charges, real and personal property taxes, rents (including percentage rents)
and security deposits under Site Leases and payments (including accounts
receivable) 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.
2
<PAGE> 8
(b) The Purchase Price shall be further adjusted ("Preliminary
Adjustment") as follows:
(i) to the extent that the Closing Date Net
Working Capital is a positive amount, the
Purchase Price shall be increased by a
dollar amount equal to the positive balance;
and
(ii) to the extent that the Closing Date Net
Working Capital is a negative amount, the
Purchase Price shall be reduced by a dollar
amount equal to the negative balance.
(c) On the Closing Date, Sellers shall provide to Buyer a list
of items and the prorations required by Section 2.4(a) and a Closing Date
Balance Sheet together with a calculation of the Closing Date Net Working
Capital and the Preliminary Adjustment to the Purchase Price. The Parties agree
that the Company's financial statements shall be converted from a cash basis to
GAAP in order to prepare the Closing Date Balance Sheet and the calculation of
the Closing Date Net Working Capital and the Preliminary Adjustment. The
Preliminary Adjustment to the Purchase Price shall be paid in cash to the
appropriate party at Closing. Sellers agree to furnish Buyer with any documents
or records in Sellers' possession that may be needed for Buyer to confirm the
adjustments in this Section 2.4.
(d) Within ninety (90) days after the Closing Date, Buyer will
prepare and provide to Seller a final Closing Date Balance Sheet together with
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 2.4 shall be made on the basis of the Closing Date
Adjustment and shall be paid in cash to the appropriate party.
(e) If any dispute arises over any amount to be refunded or
paid under this Section 2.4, such refund or payment shall nonetheless be
promptly made to the extent such amount is not in dispute. If any such dispute
cannot be resolved by the Parties, it shall be submitted to a nationally
recognized independent certified public accounting firm reasonably acceptable to
Sellers and Buyer ("Accountant"), and the resolution of such dispute shall be
made by the Accountant. The determination of the Accountant shall be final and
binding upon the parties to this Agreement. Buyer and Sellers shall each pay
one-half of the fees and expenses of the Accountant. Each Party shall otherwise
bear its own costs and expenses associated with the resolution of such dispute,
including the fees and expenses of their respective accountants and attorneys.
2.5 TRANSACTIONS AT THE CLOSING. The following transactions shall take
place at the Closing:
(a) Sellers shall deliver to Buyer (i) the original stock
certificates representing the Shares, endorsed in blank or accompanied by duly
executed assignment documents, (ii) duly
3
<PAGE> 9
executed resignations of each of the officers and directors of the Company,
(iii) the Payoff Letters (as defined in Section 7.3(c)), (iv) all minute books,
corporate and stock records of the Company, (v) evidence satisfactory to Buyer
of the release and termination of all Encumbrances and Security Interests (other
than Permitted Liens) on the assets of the Company and the Shares, and (vi) all
other instruments of transfer and all other related documents, if any, as may be
necessary to evidence or perfect the sale, assignment, transfer, and conveyance
to Buyer of good title to the Shares in accordance with this Agreement.
(b) Buyer shall deliver to Sellers the Promissory Note and the
Letter of Credit.
(c) Buyer or Sellers, as appropriate, shall deliver to the
other(s) the Preliminary Adjustment.
(d) Buyer shall deliver to the Company the Loan (as
hereinafter defined) and the Company shall repay the Shareholder Loan.
(e) The Parties shall also deliver to each other the
agreements, instruments, opinions, certificates, and other documents referred to
or contemplated in this Agreement.
3. REPRESENTATIONS AND WARRANTIES OF SELLERS
The Company and Sellers, jointly and severally, represent and warrant
to Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, with full power and authority to conduct the
Business as it is now being conducted, to own or use its Assets, and to perform
all its obligations. The Sellers have delivered to Buyer true and complete
copies of the Company's Organizational Documents, as currently in effect. The
Company is duly qualified and in good standing to do business in California and
each other jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification necessary,
except where the lack of such qualification would not have a Material Adverse
Effect.
4
<PAGE> 10
3.2 AUTHORITY; NO CONFLICT.
(a) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid, and binding obligation of the Company,
enforceable against the Company in accordance with its terms. Upon the execution
and delivery by the Company of any Closing Documents to be executed at Closing
pursuant to this Agreement, such Closing Documents shall constitute the legal,
valid, and binding obligations of the Company, enforceable against the Company
in accordance with their respective terms. The Company 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 shareholders and directors of the Company.
(b) Except as set forth in Part 3.2(b) of the Disclosure
Schedule, neither the execution and delivery by the Company or the Sellers of
this Agreement nor the consummation or performance by the Company or 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 Company; (B)
to the Company's and Sellers' knowledge any Legal Requirement or any
Order to which the Company or any of its assets may be subject; or (C)
to the Company's and Sellers' Knowledge, any Governmental
Authorizations held by the Company; or
(ii) (A) contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person the right
to declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or modify, any
material Contract to which the Company is a Party or any material
interest or rights of the Company; or (B) result in the imposition or
creation of any Encumbrance or Security Interest upon or with respect
to any of the assets of the Company.
(c) Except as set forth in Part 3.2(c) of the Disclosure
Schedule, the Company 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 CAPITALIZATION. The Company has authorized capital stock consisting
of One Hundred Thousand (100,000) shares of common stock, no par value, of which
Two Thousand Five Hundred (2,500) shares are issued and outstanding. All of the
issued and outstanding shares ("Shares") have been duly authorized, are validly
issued, fully paid, and nonassessable, and are held beneficially and of record
by Sellers as set forth in Part 3.3 of the Disclosure Schedule. There are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require the Company to issue, sell, or otherwise cause to become
outstanding any of its capital stock. There
5
<PAGE> 11
are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Company.
3.4 FINANCIAL STATEMENTS.
(a) Attached hereto as Part 3.4 of the Disclosure Schedule are
the following financial statements of the Company (collectively, the "Financial
Statements"): (i) unaudited balance sheet and statement of income as of and for
the fiscal years ended December 31, 1995, and December 31, 1996, and (ii)
unaudited balance sheets and statement of income (the "Most Recent Financial
Statements") as of and for the nine (9) months ended September 30, 1997 (the
"Most Recent Fiscal Month End") for the Company. The Financial Statements have
been prepared on a cash basis applied on a consistent basis through the periods
covered thereby and present fairly the financial condition of the Company as of
such dates and the results of operations of the Company for such periods.
3.5 STRUCTURES. Part 3.5 of the Disclosure Schedule lists all of the
Structures and each of such Structures is in condition to accept faces and in
adequate condition and repair for its current use.
3.6 PERMITS. Part 3.6 of the Disclosure Schedule lists all Permits held
by the Company. The Permits constitute all material licenses, permits,
registrations and approvals necessary to operate the Structures. Company is in
material compliance with the terms of the Permits. Company has not received
written notice that any Governmental Body issuing any Permit intends to cancel,
terminate, modify or amend any Permit.
3.7 SITE LEASES.
(a) Part 3.7(a) of the Disclosure Schedule contains a list of
all Site Leases. Seller has delivered or made available to Buyer true and
complete copies of the Site Leases. The Site Leases are in full force and
effect, and are binding upon the Parties thereto.
(b) Except as set forth in Part 3.7(b) of the Disclosure
Schedule or as would not have a Material Adverse Effect (a) no default by
Company, or to the Company's and Sellers' Knowledge, any other Party has
occurred under the Site Leases, and (b) no event, occurrence or condition exists
which (with or without notice or lapse of time or the happening of any further
event or condition) would become a default by Company thereunder or would
entitle any other Party to terminate a Site Lease, to make a claim or set-off
against Company or otherwise to amend such Site Lease or prevent such Site Lease
from being renewed (if renewable) in accordance with its terms. Except as set
forth in Part 3.7(b) of the Disclosure Schedule, the Company has not received
any written notice of default, termination or non-renewal under any Site Lease.
6
<PAGE> 12
3.8 ADVERTISING CONTRACTS.
(a) Part 3.8(a) of the Disclosure Schedule contains a list of
all material Advertising Contracts as of the date hereof. Seller has delivered
to Buyer true and complete copies of the Advertising Contracts.
(b) Except as set forth in Part 3.8(b) of the Disclosure
Schedule, all sales made to advertisers have been made pursuant to Advertising
Contracts. The Advertising Contracts are in full force and effect, and are
binding upon the parties thereto. Except as set forth in Part 3.8(b) of the
Disclosure Schedule or as would not have a Material Adverse Effect (a) no
default by Company or, to the Company's and Sellers' Knowledge, any other Party
has occurred under the Advertising Contracts, and (b) no event, occurrence or
condition exists which (with or without notice or lapse of time or the happening
of any further event or condition) would become a default by Company thereunder
or would entitle any other Party to terminate an Advertising Contract, to make a
claim or set-off against Company or otherwise to amend such Advertising
Contract.
3.9 ABSENCE OF UNDISCLOSED LIABILITIES. Except for liabilities and
obligations (a) incurred since the Most Recent Fiscal Month End in the Ordinary
Course of Business, (b) disclosed in Part 3.9 of the Disclosure Schedule or
specifically identified as an undisclosed liability or obligation on any other
section of the Disclosure Schedule, or (c) provided for in the Most Recent
Financial Statements, the Company has no liabilities or obligations of any kind
whatsoever (whether direct, indirect, accrued or contingent) in excess of
$25,000 and there is no existing condition or situation which could reasonably
be expected to result in any such liabilities or obligations ("Undisclosed
Liabilities").
3.10 OWNED REAL PROPERTY. The Company does not own any Real Property.
3.11 TITLE, ENCUMBRANCES. Except as set forth on Part 3.11 of the
Disclosure Schedule, (i) Company owns or has good title to all of its assets,
and (ii) all of such assets are owned by Company free and clear of all
Encumbrances or Security Interests except for Permitted Liens.
3.12 TAXES.
(a) Except as set forth on Part 3.12(a) of the Disclosure
Schedule, the Company has (i) correctly prepared and timely filed all Tax
Returns required to be filed by it in respect of any Taxes, (ii) timely and
properly paid all Taxes that are due and payable, (iii) established on its books
and records reserves that are adequate for the payment of all Taxes not yet due
and payable, and (iv) complied in all material respect with all applicable laws,
rules and regulations relating to the payment and withholding of Taxes and has
timely and properly withheld from employee wages and paid over to the proper
governmental authorities all amounts required to be so withheld and paid over
under all applicable Legal Requirements.
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<PAGE> 13
(b) Except as set forth Part 3.12(b) of the Disclosure
Schedule, no deficiency for any Taxes has been proposed, asserted or assessed
against the Company which has not been resolved and paid in full. The Company
has not waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to an Tax assessment or deficiency.
(c) No Tax Returns with respect to the Company for taxable
periods ended on or after December 31, 1990 have been audited, and no Tax
Returns of the Company are currently the subject of audit. The Company has
delivered or made available to the Buyer correct and complete copies of all Tax
Returns filed by the Company since December 31, 1990.
(d) The Company is not a party to any Tax allocation or
sharing agreement and is not liable for the Taxes of any other Person.
(e) The Company has not been a member of an affiliated group
within the meaning of IRC Section1504.
3.13 COMPLIANCE WITH LEGAL REQUIREMENTS. The Company has complied in
all respects with all Legal Requirements applicable to the Company, except for
such noncompliances that, individually or in the aggregate, would not reasonably
be expected to have a Material Adverse Effect. Except as disclosed in Part 3.13
of the Disclosure Schedule, the Company has not been Threatened in writing to be
charged with or given written notice of any violation of (which has not been
cured), with respect to any violation of Legal Requirements applicable to the
Company.
3.14 LEGAL PROCEEDINGS; ORDERS. Except as set forth in Part 3.14 of the
Disclosure Schedule, there is no Proceeding pending or, to the Knowledge of the
Company and Sellers, Threatened against the Company and there is no Order to
which the Company is subject.
3.15 OTHER CONTRACTS.
(a) Except as disclosed in Part 3.15(a) of the Disclosure
Schedule the Company is not a Party to or bound by (i) any promissory note or
any agreement evidencing indebtedness for money borrowed; (ii) any joint
venture, partnership or Other Contract involving a sharing of profits, losses,
costs or liabilities by the Company with any other person; (iii) any Other
Contract containing covenants that in any way purport to restrict the business
activity of the Company with respect to the Business; (iv) any power of attorney
of the Company that is currently effective and outstanding; (v) any written
warranty, guaranty or other similar undertaking with respect to contractual
performance extended by the Company; and (vi) any lease for Real Property that
is not a Site Lease; (vii) any Other Contract obligating the Company for
payments in excess of Five Thousand Dollars ($5,000) per year which is not
cancelable by the Company without penalty within a thirty (30) day period
("Material Other Contracts"). The Company has delivered or made available to
Buyer true and complete copies of such Material Other Contracts.
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(b) The Material Other Contracts are in full force and effect,
and are binding upon the Parties thereto. Except as set forth in Part 3.15(b) of
the Disclosure Schedule and except as would not have a Material Adverse Effect,
(a) no default by Company or, to the Company's and Sellers' Knowledge, any other
Party has occurred under the Material Other Contracts, and (b) no event,
occurrence or condition exists which (with or without notice or lapse of time or
the happening of any further event or condition) would become a default by
Company thereunder or would entitle any other Party to terminate a Material
Other Contract, to make a claim or set-off against Company or otherwise to amend
such Material Other Contract.
3.16 INSURANCE. Company maintains in full force and effect policies of
fire and other casualty, liability, title and other forms of insurance covering
its 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. All such policies are in full
force and effect, all premiums with respect thereto have been paid, and no
written notice of cancellation or termination has been received by the Company,
or to the Knowledge of the Company and Sellers, Threatened to be given, with
respect to any such policy. Part 3.16 of the Disclosure Schedule lists any
claims pending or for which coverage is disputed under any such insurance
policy.
3.17 ENVIRONMENTAL MATTERS. Except as set forth in Part 3.17 of the
Disclosure Schedule:
(a) To the Knowledge of the Company and Sellers, the Company
is, and at all times has been, in material compliance with, and has not been and
is not in material violation of or liable under, any Environmental Law. There
are no pending, or to the Knowledge of the Company and Sellers, Threatened
claims or Encumbrances resulting from any Environmental, Health, and Safety
Liabilities or arising under or pursuant to any Environmental Law.
(b) Neither the Company nor the Sellers has Knowledge of, nor
has the Company received, any citation, directive, inquiry, notice, Order,
summons, warning, or other communication that relates to any alleged actual or
potential liability with respect to Hazardous Materials.
(c) The Company has delivered to Buyer true and complete
copies and results of any reports, studies, analyses, tests, or monitoring
possessed or initiated by the Company or Sellers pertaining to Hazardous
Materials or Hazardous Activities in, on, or under the properties owned or
leased by the Company.
3.18 INTANGIBLE PROPERTY. Except as set forth in Part 3.18 of the
Disclosure Schedule, Company uses no Intangible Property in connection with the
operation of the Business except for the Permits, the Books and Records, the
trade names "Salm Enterprises" and "Roberts Outdoor Advertising" and licenses
for commonly available software programs under which Company is the licensee.
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3.19 RELATIONSHIPS WITH AFFILIATES. Except as set forth on Part 3.19 of
the Disclosure Schedule, (a) Company is not a Party to any contract with any of
the Sellers or their Affiliates or immediate family members or any other
Affiliate of Company, and (b) neither of the Sellers nor any of their Affiliates
or immediate family members or any other Affiliate of Company is the owner (of
record or as a beneficial owner) of an equity interest or any other financial or
profit interest in, a Person that has business dealings or a material financial
interest in any transaction with Company.
3.20 BROKERS OR FINDERS. Company has not incurred any obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement that will
not be paid by Sellers at Closing from the Purchase Price.
3.21 LABOR MATTERS.
(a) Except as set forth on Part 3.21(a) of the Disclosure
Schedule, (i) the Company is not a party to or bound by, and its employees are
not covered by, any labor or collective bargaining agreement; (ii) there are no
pending or, to the Company and Sellers' Knowledge, Threatened strikes, work
stoppages, slowdowns, lockouts, unfair labor practice charges or complaints,
grievances or arbitrations arising out of a collective bargaining agreement, or
other labor disputes against the Company, and during the past three (3) years,
there has not been any such action or proceeding; (iii) there are no pending or,
to the Company and Sellers' Knowledge, Threatened complaints, charges or claims
against the Company with any Governmental Body regarding the employment or
termination of employment by the Company of any individual; (iv) except as
previously provided to the Buyer, the Company has no written personnel policies
applicable to employees; and (v) no union organization campaign is presently in
progress.
(b) Part 3.21(b) of the Disclosure Schedule lists the names of
all present employees of the Company, the total compensation payable to each,
and accrued sick, personal and vacation days for each (or pay in lieu thereof).
3.22 EMPLOYEE BENEFIT MATTERS. Company does not maintain and has never
maintained any Employee Benefit Plan. As used in this Section 3.22, the term
"Company" shall be deemed to include any other corporation, trade, business or
other entity, other than Company, which would, together with the Company, now or
in the past constitute a single employer within the meaning of IRC Section 414.
3.23 BOOKS AND RECORDS. The books of account, and other Books and
Records of Company are complete and correct in all material respects and have
been maintained in accordance with sound business practices. The Company has
provided Buyer with a true and complete set of the Company's Organizational
Documents and Minute Books.
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3.24 ABSENCE OF CHANGES. Since the Most Recent Fiscal Month End and
except as set forth on Part 3.24 of the Disclosure Schedule, there has not been:
(i) Any Material Adverse Change;
(i) Any change in the shares of capital stock of
the Company that are authorized or in those that are issued and
outstanding, or any grant of options, warrants, or other rights or
convertible or exchangeable securities calling for the issuance
thereof;
(iii) Any declaration, setting aside or payment of
any dividend in respect of the Shares or any other distribution by the
Company;
(iv) Any change in the method of accounting or
accounting practices of Company; or
(v) Any transaction by the Company outside the
Ordinary Course of Business.
3.25 ASSETS NECESSARY FOR CONDUCT OF BUSINESS. After giving effect to
the transfer of the Retained Assets, the Company shall own all the assets and
have all the rights necessary for the conduct of the Business as presently
conducted.
3.26 HSR COMPLIANCE. Neither Company nor any of 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. Sellers have consulted with Sellers' counsel in
determining and making such representation.
3.27 DISCLOSURE. No representation or warranty of Sellers or Company in
this Agreement and no statement in the Disclosure Schedule misstates or omits to
state a material fact necessary to make the statements herein or therein, in
light of the circumstances in which they were made, not misleading.
3A. REPRESENTATIONS AND WARRANTIES OF EACH SELLER
Each of the Sellers, severally and not jointly, represents and warrants
to Buyer as follows with respect to herself:
3A.1 AUTHORITY OF SELLER; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and
binding obligation of the Seller, enforceable against Seller in accordance with
its terms. Upon the execution and delivery by the Seller of any Closing
Documents to be executed at Closing pursuant to this Agreement, such Closing
Documents will constitute the legal, valid, and binding obligations of the
Seller,
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enforceable against Seller in accordance with their respective terms. The
Seller has the absolute and unrestricted right, power and authority to execute
and deliver this Agreement and the Closing Documents to which she is a Party, to
transfer the Shares to Buyer, and to perform her obligations hereunder and
thereunder.
(b) Except as set forth in Part 3A.2 of the Disclosure
Schedule, neither the execution and delivery by the Seller of this Agreement and
the Closing Documents nor the consummation or performance by the Seller of any
of the Contemplated Transactions will:
(i) conflict with, violate or result in a breach
of any Legal Requirement or any Order to which the Seller may be
subject; or
(ii) (A) contravene, conflict with, or result in
a violation or breach of any provision of, or give any Person the right
to declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or modify, any
Contract to which Seller is a party or any interest or rights of Seller
in or to the Shares; or (B) result in the imposition or creation of any
Encumbrance or Security Interest upon or with respect to any of the
Shares.
(c) Except as set forth in Part 3A.2 of the Disclosure
Schedule, the Seller is not and will not be required to give any notice to or
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement or any of the Closing Documents or the consummation or
performance of any of the Contemplated Transactions.
3A.2 TITLE TO SHARES. Seller has, and will have at the Closing Date,
good title to the Shares to be conveyed by Seller as provided in Section 2.1
above, free and clear of any Security Interest or Encumbrances.
3A.3 BROKERS OR FINDERS. Seller has not incurred any obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement that will
not be paid by the Seller at Closing.
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 has been duly and validly executed and
delivered by Buyer and constitutes the legal, valid, and binding obligation of
Buyer, enforceable against Buyer in
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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 thereunder.
(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 conflict with, violate or result in a breach of (i)
any provision of Buyer's Organizational Documents, (ii) any Legal Requirement or
Order to which Buyer may be subject; or (iii) 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 Proceeding pending or, to Buyer's
Knowledge, Threatened that challenges, or may have the effect of preventing, or
otherwise interfering with any of the Contemplated Transactions.
4.4 BROKERS OR FINDERS. Buyer has not incurred any obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement that will
not be paid by the Buyer.
4.5 INVESTMENT. The Buyer is an Accredited Investor.
5. COVENANTS OF SELLERS
5.1 ACCESS AND INVESTIGATION. Between the date of this Agreement and
the Closing Date, Sellers will, and will cause the Company and its
Representatives to, afford Buyer and its Representatives reasonable access
during normal business hours to the Company's personnel, properties, Books and
Records, and other documents and data, and furnish Buyer and its Representatives
with copies of the same.
5.2 OPERATION OF THE COMPANY. Except as otherwise set forth in Schedule
5.2, between the date of this Agreement and the Closing Date, the Company will:
(a) operate only in the Ordinary Course of Business;
(b) use it Best Efforts to maintain the Business, and maintain
the relations and good will with advertisers, landlords, employees, suppliers,
distributors, customers and others associated with the operation of the Company;
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(c) confer on a regular and frequent basis with Buyer and its
Representatives to discuss operational matters and the general status of ongoing
operations; and
(d) promptly notify Buyer of any material changes in the
Business, or the properties, assets, condition (financial or other), results of
operations or prospects of the Company.
5.3 NEGATIVE COVENANT. Except for any repayment of the Shareholder Loan
pursuant to Section 6.5 herein or the transfer of the Retained Assets on or
prior to Closing, and as otherwise expressly permitted by this Agreement,
between the date of this Agreement and the Closing Date, Sellers will not:
(a) take, and will not permit the Company to take, any action
with respect to the Business that is not in the Ordinary Course of Business;
(b) (i) amend or propose to amend the Company's charter or
bylaws; or (ii) split, combine or reclassify its outstanding capital stock or
declare, set aside or pay any dividend or distribution payable in cash, stock,
property or other;
(c) (i) authorize the issuance of, or issue, sell, grant,
pledge or dispose of, or agree to issue, sell, grant, pledge or dispose of, any
additional shares of, or any options, warrants, or rights of any kind to acquire
any shares of, the capital stock of the Company of any class or any debt or
equity securities convertible into or exchangeable for such capital stock, (ii)
sell (including, without limitation, by sale-leaseback), pledge, dispose of or
encumber any assets of the Company or interest therein, or dispositions of
inventory in the Ordinary Course of Business or (iii) redeem, purchase, acquire
or offer to purchase or acquire any shares of its capital stock;
(d) acquire all or any substantial part of the business and
properties or capital stock of any Person, whether by merger, purchase of
assets, or otherwise;
(e) enter into or amend any employment, severance, bonus,
special pay arrangement with respect to termination of employment or other
similar arrangements or agreements with any directors, officers or key
employees;
(f) adopt, enter into or amend any Employee Benefit Plan
except (i) as required to comply with changes in applicable law occurring after
the date hereof and (ii) with respect to all plans, other than in the Ordinary
Course of Business;
(g) incur any indebtedness for money borrowed or guarantee any
such indebtedness or issue or sell any debt securities or make any loans or
advances, or make any capital expenditures;
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(h) grant any general or limited power of attorney, proxy or
other similar delegation of authority, waive, toll or extend any statute of
limitations or compromise or settle any litigation, arbitration or other
disputed matter; and
(i) agree in writing, or otherwise, to take any of the
foregoing actions or any other action which would make any representation or
warranty of Sellers or the Company contained in this Agreement untrue or
incorrect in any material respect as of the Closing Date.
5.4 REQUIRED APPROVALS AND CONSENTS. As promptly as practicable after
the date of this Agreement, Sellers will make, and will cause the Company to
make, any filings required by Legal Requirements to be made by Sellers or
Company in order to consummate the Contemplated Transactions and will obtain or
cause the Company to obtain those Consents identified on Schedule 5.4 hereof
("Required Consents").
5.5 BEST EFFORTS. Between the date of this Agreement and the Closing
Date, Sellers will use their, and will cause Company to use its, Best Efforts to
cause the conditions in Sections 7 and 8 to be satisfied.
5.6 NOTIFICATION. Between the date of this Agreement and the Closing
Date, Seller will promptly notify Buyer in writing if Sellers, or either of
them, 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 or the Company 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 the Closing or such time, if
any, as this Agreement is terminated pursuant to Section 9, neither Sellers nor
any of their Affiliates 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 Shares or the Business.
5.8 ENCUMBRANCES AND SECURITY INTERESTS. On or before Closing, Sellers
agree to pay, or cause the Company to pay, and satisfy all amounts constituting
indebtedness of the Company for money borrowed or owed other than liabilities
included in the Closing Date Net Working Capital and to obtain at or prior to
Closing and deliver to Buyer at the Closing releases of all Encumbrances and
Security Interest on the assets of the Company or the Shares, other than
Permitted Liens.
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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.
6.3 NOTIFICATION. Between the date of this Agreement and the Closing
Date, Buyer will promptly notify Seller in writing if Buyer becomes aware of any
fact or condition that causes or constitutes a breach of any of Buyer's
representations and warranties as of the date of this Agreement, or if Buyer
becomes aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement) cause
or constitute a breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. During the same period, Buyer will promptly notify
Seller of the occurrence of any breach of any covenant of Buyer in this Section
6 or of the occurrence of any event that may make the satisfaction of the
conditions in Section 8 impossible or unlikely.
6.4 TAX RETURNS. After the Closing, Sellers shall have the exclusive
authority and obligation to prepare and file, or cause to be prepared and filed,
all income Tax Returns of the Company for, or with respect to, income Taxes for
all taxable periods ended or prior to the Closing; provided, however, that the
Tax Returns with respect to the income of the Company that relate to the taxable
year or other taxable period which includes the Closing Date shall, to the
extent permitted by applicable law, be prepared by treating all items on such
Tax Returns in a manner consistent with the past practices of the Company with
respect to such items.
6.5 LOAN. At the Closing, Buyer shall loan to Company the sum of Two
Hundred Thousand Dollars ($200,000) (the "Loan"). Buyer agrees that the Company
shall use the Loan to repay at Closing certain loans from the Sellers in the
outstanding principal amount of approximately $200,000 ("Shareholder Loan"). The
calculation of the Closing Date Net Working Capital shall be made after giving
effect to the repayment of the Shareholder Loan and shall exclude the Loan.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Shares 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):
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7.1 ACCURACY OF REPRESENTATIONS. Sellers' representations and
warranties in this Agreement must have been accurate in all material respects as
of the date of this Agreement, and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date, and Buyer shall have
received a certificate of 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, including, without limitation, the obtaining of the Required Consents,
and Buyer shall have received a certificate of Sellers, dated as of the Closing
Date, as to such compliance.
7.3 ADDITIONAL DOCUMENTS. Each of the following documents must have
been delivered to Buyer:
(a) a favorable opinion of counsel to Sellers and the Company
dated the Closing Date, to the effect set forth on Exhibit D;
(b) the deliveries required from Seller in Section 2.5;
(c) documents or records, including payoff letters with
respect to any of the shareholder loans or bank debt in a form and substance
reasonably acceptable to Buyer as may be requested by Buyer (the "Payoff
Loans"); and
(d) such other documents as Buyer may reasonably request for
the purpose of (i) evidencing the satisfaction of any condition referred to in
this Section 7, or (ii) otherwise facilitating the consummation or performance
of any of the Contemplated Transactions.
7.4 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, (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 Sellers,
or either of them, or the Company.
7.5 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.
8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS TO CLOSE
Sellers' obligations to sell the Shares and Sellers' obligations to
take the other actions required to be taken by Sellers at the Closing are
subject to the satisfaction, at or prior to the
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Closing, of each of the following conditions (any of which may be waived by
Seller, in whole or in part):
8.1 ACCURACY OF REPRESENTATIONS. Buyer's representations and warranties
in this Agreement must have been accurate in all material respects as of the
date of this Agreement and must be accurate in all material respects 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) a favorable opinion of counsel to Buyer dated the Closing
Date, to the effect set forth in Exhibit E;
(b) the deliveries required from Buyer in Section 2.5; and
(c) such other documents as Seller may reasonably request for
the purpose of (i) evidencing the satisfaction of any condition referred to in
this Section 8, or (ii) otherwise facilitating the consummation of any of the
Contemplated Transactions.
8.4 NO PROCEEDINGS. Since the date of this Agreement, there must not
have been commenced and pending or Threatened any Proceeding (i) involving any
challenge to, or seeking damages or other relief in connection with, any of the
Contemplated Transactions, or (ii) that prevents, makes illegal, or otherwise
materially interferes with any of the Contemplated Transactions or seeks to do
any of the foregoing.
8.5 NO PROHIBITION. There must not be in effect any Legal Requirement
or any injunction or other Order that prohibits or restricts the consummation of
the Contemplated Transactions.
9. TERMINATION
9.1 TERMINATION EVENTS. This Agreement may, by notice given prior to or
at the Closing, be terminated:
(a) by mutual written consent of Buyer and Sellers;
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(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 Buyer's breach of 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 as of the Closing Date or if satisfaction of such a condition is
or becomes impossible (other than through the breach by Sellers or the Company
of their respective obligations under this Agreement) and Sellers have not
waived such condition on or before the Closing Date; or
(c) by Buyer, on the one hand, or Sellers, on the other hand,
if the Closing has not occurred (other than through the breach by the other
Party seeking to terminate this Agreement of its obligations under this
Agreement) on or before November 14, 1997, or such later date as the Parties may
agree upon in writing.
9.2 EFFECT OF TERMINATION. Each Party's right of termination under
Section 9.1 is in addition to any other rights it may have under this Agreement.
If this Agreement is terminated pursuant to Section 9.1, all further obligations
of the Parties under this Agreement will terminate, except that the obligations
in Section 11.1 will survive; provided, however, 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 breach of
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. The Parties
acknowledge and agree that the failure of Sellers to meet the conditions to
Closing in Section 7.1 hereof because of an event or events occurring in the
ordinary course of business after the date hereof and not within the control of
Sellers shall not be deemed a breach of this Agreement by Sellers.
9.3 RETENTION OF DEPOSIT. If this Agreement terminates or expires for
any reason other than a breach by Sellers in the performance of a Sellers'
obligation under this Agreement, the Earnest Money Deposit shall be retained by
Sellers as liquidated damages, and all parties shall be relieved of and released
from any further liability hereunder except for those obligations specifically
designated to survive termination or expiration of this Agreement. Sellers and
Buyer agree that the Earnest Money Deposit is a fair and reasonable amount to be
retained by Sellers as agreed and liquidated damages in light of Sellers'
removal of the Shares from the market and the costs incurred by Sellers and
shall not constitute a penalty or a forfeiture.
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10. INDEMNIFICATION; REMEDIES
10.1 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLERS.
(a) The Sellers, jointly and severally, will indemnify and
hold harmless Buyer, its stockholders, controlling Persons, and Affiliates
(collectively, the "Seller Indemnified Persons") for, and will pay to the Seller
Indemnified Persons the amount of, any loss, liability, 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:
(i) any breach of any representation or warranty made by
Sellers, or either of them in this Agreement, the Disclosure Schedule, or any
other certificate or document delivered by Sellers, or either of them, pursuant
to this Agreement; and
(ii) any breach by Sellers, or either of them, of any covenant
or obligation of Sellers, or either of them, in this Agreement or any
certificate or document delivered by Seller pursuant to this Agreement.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer will
indemnify and hold harmless Sellers (collectively, the "Buyer Indemnified
Persons") for, and will pay to the Buyer Indemnified Persons the amount of any
Damages arising, directly or indirectly, from or in connection with:
(a) any breach of any representation or warranty made by Buyer
in this Agreement or in any certificate or document delivered by Buyer pursuant
to this Agreement; or
(b) any breach by Buyer of any covenant or obligation of Buyer
in this Agreement or in any certificate or document delivered by Buyer pursuant
to this Agreement.
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 such Indemnified Person gives notice to the
Indemnifying Party of the commencement of a proceeding with respect to such
claim (a "Proceeding"), the Indemnifying Party will be entitled to participate
in such Proceeding and, to the extent that it wishes (unless (i) the
20
<PAGE> 26
Indemnifying Party is also a party to such Proceeding and the Indemnified Person
determines in good faith that joint representation would be inappropriate, or
(ii) the Indemnifying Party fails to provide reasonable assurance to the
Indemnified Person of its financial capacity to defend such Proceeding and
provide indemnification with respect to such Proceeding), to assume the defense
of such Proceeding with counsel satisfactory to the Indemnified Person and,
after notice from the Indemnifying Party to the Indemnified Person of its
election to assume the defense of such Proceeding, the Indemnifying Party will
not, as long as it diligently conducts such defense, be liable to the
Indemnified Person under this Section 10 for any fees of other counsel (other
than in the circumstances provided in subclause (i) above) or any other expenses
with respect to the defense of such Proceeding, other than reasonable costs of
investigation. If the Indemnifying Party assumes the defense of a claim, (i) no
compromise or settlement of any such claim may be effected by the Indemnifying
Party without the Indemnified Person's consent unless (A) there is no finding or
admission of any violation of Legal Requirements or any violation of the rights
of any Indemnified 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 (20) 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
and will be liable for all expenses if it wrongfully failed to assume such
defense.
(c) Notwithstanding the foregoing, if an Indemnified Person
determines in good faith that there is a reasonable probability that a claim may
adversely affect it or its affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
Indemnified Person may, by notice to the Indemnifying Party, assume the
exclusive right to defend, compromise, or settle such claim, but the
Indemnifying Party will not be bound by any determination of a claim so defended
or any compromise or settlement effected without its consent (which may not be
unreasonably withheld) or delayed.
10.4 PROCEDURE FOR INDEMNIFICATION -- OTHER 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 representations and
warranties contained in Sections 3A.1(a), 3A.2, 3.1, 3.2(a), 3.3, 3.11, 3.12,
3.26, 4.1 and 4.2(a) shall survive for the applicable statutes of limitation
with respect to the subject matter thereof, and (ii) all other representations
and warranties shall survive for one (1) year following the Closing Date. Any
claim with respect to a breach of representations and warranties must be made in
a writing to the Indemnifying Party within the survival period specified for
such representations and warranties.
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<PAGE> 27
(b) The obligation of Sellers to indemnify the Seller
Indemnified Persons for Damages pursuant to Section 10.1 hereof arising from a
breach of the representations and warranties described in Section 10.5(a)(i) or
from fraud shall not exceed in the aggregate the Purchase Price. The obligation
of Sellers to indemnify the Seller Indemnified Persons for Damages pursuant to
Section 10.1 hereof arising from a breach of representations and warranties
described in Section 10.5(a)(ii) shall not exceed in the aggregate One Million
Dollars ($1,000,000). Notwithstanding the foregoing, Sellers shall have no
obligation to indemnify the Seller Indemnified Persons hereunder unless Damages
in the aggregate exceed Fifty Thousand Dollars ($50,000) (the "Floor") and then
only for the amount of all Damages in excess of the Floor.
(c) The amount of Damages with respect to which
indemnification is required hereunder shall be reduced by the amount of
insurance proceeds, if any, received with respect thereto by the Indemnified
Person making a claim for such Damages.
10.6 EXCLUSIVE REMEDY. The indemnification provisions in this Section
10 are the exclusive remedy of the Parties for any breach of a representation,
warranty or covenant contained herein.
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. Any sales and other transfer Taxes arising
out of the Contemplated Transactions shall be borne by Buyer.
11.2 PUBLIC ANNOUNCEMENTS; CONFIDENTIALITY. Any public announcement or
similar publicity with respect to this Agreement or the Contemplated
Transactions will be issued, if at all, 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.
11.3 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
22
<PAGE> 28
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:
Joslyn Stuart
c/o Berg and Berg
6001 Annie Oakley Road
Hidden Hills, California 91302
Attention: Ronald S. Berg, Esq.
Telephone No.: (818) 888-1999
Facsimile No.: (818) 888-8899
and
Hillary Salm
c/o Berg and Berg
6001 Annie Oakley Road
Hidden Hills, California 91302
Attention: Ronald S. Berg, Esq.
Telephone No.: (818) 888-1999
Facsimile No.: (818) 888-8899
With a copy to:
Ronald S. Berg, Esq.
Berg and Berg
6001 Annie Oakley Road
Hidden Hills, CA 91302
Telephone No.: (818) 888-1999
Facsimile No.: (818) 888-8899
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
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<PAGE> 29
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 LLP Sixteenth Floor 191
Peachtree Street, N.E.
Atlanta, GA 30303
Attention: William B. Shearer, Jr., Esq.
Telephone No.: (404) 572-6600
Facsimile No.: (404) 572-6999
11.4 FURTHER ASSURANCES.
(a) The Parties and the Company 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, all at
the sole cost and expense of the requesting Party (unless the requesting Party
is entitled to indemnification therefor under Article 10).
(b) In the event and for so long as any Party actively is
contesting or defending against any Proceeding or other claim or demand in
connection with (i) any transaction contemplated under this Agreement or (ii)
any fact, circumstance, occurrence, action, failure to act, or transaction on or
prior to the Closing Date involving Sellers or the Company, including, without
limitation, the renewal of that certain lease for the 8373 Melrose Avenue, West
Hollywood, California ("Melrose Lease"), each of the other Parties will
reasonably cooperate with the contesting or defending Party and his or its
counsel in the contest or defense, make available his or its personnel, and
provide such testimony and access to his or its books and records as shall be
necessary in connection with the contest or defense, all at the sole cost and
expense of the contesting or defending Party (unless the contesting or defending
Party is entitled to indemnification therefor under Article 10). In addition,
Buyer agrees to indemnify and hold harmless each of the Sellers in connection
with any Proceeding arising from Buyer's efforts to renew the Melrose Lease, or
Sellers' assistance in connection therewith pursuant to Section 11.4(b) (unless
Buyer is entitled to indemnification therefor under Article 10).
11.5 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
24
<PAGE> 30
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.
11.6 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, or executed in connection
with, 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.
11.7 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 Party; provided, however, that Buyer may assign its rights and obligations
hereunder to an Affiliate of Buyer or as security for Buyer's lender(s) in
connection with Buyer's Financing Arrangements; provided, further, however, that
no such assignment shall relieve Buyer of its obligations hereunder. This
Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the Parties, their successors, and their permitted assigns. Nothing
expressed or referred to in this Agreement will be construed to give any Person
other than the Parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement.
11.8 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.
11.9 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 (subject in each case to Sellers'
obligations to maintain the confidentiality of such Books and Records). Nothing
contained in this Section 11.9 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.
11.10 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.
11.11 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
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the State of California. The Parties hereto agree to submit exclusively to
jurisdiction any federal or state court located in the State of California any
dispute or controversy arising out of or relating to this Agreement.
11.12 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
11.13 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
11.14 ARBITRATION. Except as otherwise expressly provided in this
Agreement, the Parties have agreed to settle all disputes by arbitration in a
location in the City of Los Angeles mutually acceptable to the Parties before a
single arbitrator pursuant to the rules of the American Arbitration Association.
Arbitration may be commenced at any time by either of the Sellers or the Company
on the one hand or the Buyer on the other by giving written notice to each other
that such dispute has been referred to arbitration under this Section 11.14. The
arbitrator shall be selected by the joint agreement of the Parties, but if they
do not so agree within twenty (20) days after the date of receipt of the notice
referred to above, the selection shall be made pursuant to the rules from the
panels of arbitrators maintained by such Association. Any award rendered by the
arbitrator shall be conclusive and binding upon the parties hereto, except as
otherwise provided for under California law; provided, however, that any such
award shall be accompanied by a written opinion of the arbitrator giving the
reason for the award. This provision for arbitration shall be specifically
enforceable by the parties and the decision of the arbitrator in accordance
herewith shall be final and binding and there shall be no right of appeal
therefrom. The arbitrator shall assess, as part of his award to the prevailing
party, all or such part as the arbitrator deems proper of the arbitration
expenses of the prevailing party (including reasonable attorneys' fees) and of
the arbitrator against the party that is unsuccessful in such claim, defense or
objection. The arbitrator shall submit his award in writing to the Parties
hereto. Nothing contained in this Section 11.14 shall prevent the Parties from
settling any dispute by mutual agreement at any time.
26
<PAGE> 32
IN WITNESS WHEREOF, the Parties have executed, sealed and delivered
this Agreement as of the date first written above.
BUYER:
OUTDOOR SYSTEMS, INC.
By: /s/ William S. Levine
----------------------------------------
Title: Chairman of the Board
-------------------------------------
SELLERS:
/s/ Joslyn Stuart
-------------------------------------------
JOSLYN STUART
/s/ Hillary Salm
-------------------------------------------
HILLARY SALM
COMPANY
SALM ENTERPRISES, INC.
By: /s/ Joslyn Stuart
----------------------------------------
Title: President
-------------------------------------
<PAGE> 33
EXHIBIT A
DEFINITIONS
"ACCREDITED INVESTOR" -- as defined in Regulation D promulgated under
the Securities Act.
"ADVERTISING CONTRACTS" -- all rights under existing and pending sales
and advertising contracts associated with the Structures, including all rights
to the advertising copy displayed on the Structures.
"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.
"BEST EFFORTS" -- the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances.
"BOOKS AND RECORDS" -- All of Company's books and records.
"BUYER" -- as defined in the first paragraph of this Agreement.
"CLOSING" -- as defined in Section 2.2.
"CLOSING DATE" -- the date and time as of which the Closing actually
takes place.
"CLOSING DATE BALANCE SHEET" - the balance sheet of the Company as of
the Closing Date prepared in accordance with GAAP.
"CLOSING DATE NET WORKING CAPITAL" - the net working capital of the
Company without any of the Retained Assets as of the Closing, computed in
accordance with GAAP after giving effect to the Proration.
"CLOSING DOCUMENTS" -- any documents to be executed at Closing pursuant
to this Agreement.
"CONSENT" -- any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
A-1
<PAGE> 34
"CONTEMPLATED TRANSACTIONS" -- all of the transactions contemplated by
this Agreement, including: (c) the purchase of the Shares by Buyer from Sellers,
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.
"DISCLOSURE SCHEDULE" -- the disclosure schedule, delivered by Seller
to Buyer concurrently with the execution and delivery of this Agreement.
"EMPLOYEE BENEFIT PLAN" -- any (a) nonqualified deferred compensation
or retirement plan or arrangement which is an Employee Pension Benefit Plan, (b)
qualified defined contribution retirement plan or arrangement which is an
Employee Pension Benefit Plan, (c) qualified defined benefit retirement plan or
arrangement which is an Employee Pension Benefit Plan (including any
Multiemployer Plan), or (d) Employee Welfare Benefit Plan or material fringe
benefit plan or program.
"EMPLOYEE PENSION BENEFIT PLAN" -- has the meaning set forth in ERISA
Section 3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" -- has the meaning set forth in ERISA
Section 3(1).
"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> 35
"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.
"FINANCIAL STATEMENTS" -- as defined in Section 3.4.
"GAAP" -- United States generally accepted accounting principles as in
effect from time to time.
"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, the Company 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 the Company's corporate or
trade names and trade logos) used in connection with the Business, all licenses,
permits and authorizations pertaining to the Business or the right to own and
operate the Business and all right, title and interest in and to (i) any
intellectual property used in connection with the Business, and (ii) all records
and data relating specifically to the Business.
"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> 36
"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.
"LETTER OF CREDIT" - as defined in Section 2.3(b) hereof.
"LOAN" - as defined in Section 6.5 hereof.
"MATERIAL ADVERSE CHANGE" -- a change that will probably cause a
Material Adverse Effect.
"MATERIAL ADVERSE EFFECT" - a material adverse effect on the Company or
its operations or conditions, financial or otherwise, taken as a whole.
"MOST RECENT FINANCIAL STATEMENTS" -- as defined in Section 3.4.
"MOST RECENT FISCAL MONTH END" -- as defined in Section 3.4.
"MULTIEMPLOYER PLAN" -- as defined in ERISA Section 3(37).
"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> 37
"OTHER CONTRACT" -- any Contract (other than a Site Lease or
Advertising Contract) relating to or affecting the Company (i) under which the
Company has or may acquire any rights, (ii) under which the Company has or may
become subject to any obligation or liability, or (iii) by which the Company or
the Business is or may become bound.
"PARTY" -- as defined in the first paragraph of this Agreement.
"PARTIES" -- as defined in the first paragraph of this Agreement.
"PERMITS" -- all state and local licenses or permits/tags and other
Governmental Authorizations that are required for the operation of the Business,
including the Structures.
"PERMITTED LIENS" -- liens for taxes not yet delinquent, and with
respect to real property, installments of special assessments not yet
delinquent, recorded easements, covenants and other restrictions, and utility
easements, building restrictions, zoning restrictions and other easements and
restrictions which do not impair the current use of the parcel of real property.
"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.
"PROMISSORY NOTE" - as defined in Section 2.3(b).
"PRORATION" - the proration of all the Company's revenues and expenses
without the Retained Assets as of the Closing Date. Revenues and expenses will
be recognized according to GAAP and on the number of days of postings before and
after the Closing Date. For purposes of this definition, one month shall be
deemed to have thirty (30) days and one year shall be deemed to have three
hundred and sixty (360) days.
"PURCHASE PRICE" -- as defined in Section 2.3.
"REAL PROPERTY" -- real property and any rights therein, and all
buildings, facilities, structures, fixtures, leasehold and other improvements
located thereon.
"RELEASE" -- any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
A-5
<PAGE> 38
"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.
"RETAINED ASSETS" -- the furniture and equipment listed in Schedule
A.1, the trade names "Salem Enterprises" and "Roberts Outdoor Advertising" as
well as any cash of the Company in the bank on the close of business the day
immediately preceding the Closing.
"SECURITIES ACT" -- the Securities Act of 1933, as amended.
"SECURITY INTEREST" -- any mortgage, pledge, lien, encumbrance, charge
or other security interest or option or right of any third party with respect
thereto.
"SHARES" -- as described in Section 3.3.
"SHAREHOLDER LOAN" - as defined in Section 6.5 hereof.
"SITE LEASES" -- all leases 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.
"STRUCTURES" -- all of the billboard displays, and other out-of-home
advertising structures, together with all components, fixtures, parts,
appurtenances, and equipment attached to or made a part thereof that are
existing, under construction or for which Company has any rights.
"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 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-6
<PAGE> 1
Exhibit 10.62
ASSET PURCHASE AGREEMENT
dated as of November 25, 1997
by and between
OUTDOOR SYSTEMS, INC.
AND
OUTDOOR MEDIA GROUP, INC.
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TABLE OF CONTENTS
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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..................... 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 RESERVED................................................ 7
3.9 TITLE, ENCUMBRANCES..................................... 7
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......................................... 8
3.15 INSURANCE............................................... 8
3.16 ENVIRONMENTAL MATTERS................................... 8
3.18 RELATIONSHIPS WITH AFFILIATES........................... 8
3.19 BROKERS OR FINDERS...................................... 8
3.20 RESERVED................................................ 8
3.21 HSR COMPLIANCE.......................................... 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
4.5 HSR COMPLIANCE.......................................... 9
4.6 DUE DILIGENCE; RELIANCE ON BUYER'S EXPERTS.............. 10
4.7 DISCLOSURE.............................................. 10
5. COVENANTS OF SELLER.......................................... 10
5.1 ACCESS AND INVESTIGATION................................ 10
5.2 DUE DILIGENCE........................................... 10
5.3 OPERATION OF THE PURCHASED ASSETS....................... 10
5.4 NEGATIVE COVENANT....................................... 10
5.5 REQUIRED APPROVALS...................................... 10
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5.6 NOTIFICATION............................................ 11
5.7 NO NEGOTIATION.......................................... 11
5.8 TAX CLEARANCE........................................... 11
5.8 RESTRICTION COVENANTS................................... 11
6. COVENANTS OF BUYER........................................... 12
6.1 REQUIRED APPROVALS...................................... 12
6.2 BEST EFFORTS............................................ 12
6.3 IMPRINTS................................................ 12
6.4 NOTIFICATION............................................ 12
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE.......... 13
7.1 ACCURACY OF REPRESENTATIONS............................. 13
7.2 SELLER'S PERFORMANCE.................................... 13
7.3 CONSENTS................................................ 13
7.4 ADDITIONAL DOCUMENTS.................................... 13
7.5 NO PROCEEDINGS.......................................... 13
7.6 NO PROHIBITION.......................................... 14
7.7 NO MATERIAL ADVERSE CHANGE.............................. 14
7.8 DUE DILIGENCE........................................... 14
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE......... 14
8.1 ACCURACY OF REPRESENTATIONS............................. 14
8.2 BUYER'S PERFORMANCE..................................... 14
8.3 ADDITIONAL DOCUMENTS.................................... 14
8.4 NO PROCEEDINGS.......................................... 15
8.5 NO PROHIBITION.......................................... 15
9. TERMINATION.................................................. 15
9.1 TERMINATION EVENTS...................................... 15
9.2 EFFECT OF TERMINATION................................... 15
10. INDEMNIFICATION; REMEDIES.................................... 16
10.1 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER....... 16
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER........ 16
10.3 PROCEDURE FOR INDEMNIFICATION - THIRD PARTY CLAIMS..... 16
10.4 PROCEDURE FOR INDEMNIFICATION -- OTHER CLAIMS.......... 17
10.5 SURVIVAL/LIMITATIONS................................... 17
11. GENERAL PROVISIONS........................................... 18
11.1 EXPENSES............................................... 18
11.2 HEADINGS; CONSTRUCTION................................. 18
11.3 PUBLIC ANNOUNCEMENTS................................... 18
11.4 AVAILABILITY OF EQUITABLE REMEDIES..................... 18
11.5 NOTICES................................................ 18
11.6 FURTHER ASSURANCES..................................... 20
11.7 WAIVER................................................. 20
11.8 ENTIRE AGREEMENT AND MODIFICATION...................... 20
11.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS..... 20
11.10 ACCOUNTS RECEIVABLE.................................... 20
11.11 SEVERABILITY........................................... 20
11.12 RISK OF LOSS........................................... 20
11.13 POST-CLOSING ACCESS.................................... 20
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11.14 APPLICABLE LAW......................................... 21
11.15 COUNTERPARTS........................................... 21
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EXHIBITS
Exhibit A - Definitions
Exhibit B - Bill of Sale, Assignment and Assumption Agreement
Exhibit C - Non-Competition Agreement
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SCHEDULES
Schedule 2.2(a)(1) and (2) - Billboard Displays/Structures
Schedule 2.2(b) - Site Leases
Schedule 2.2(c) - Advertising Contracts
Schedule 2.2(d) - Permits
Schedule 2.2(x) - Excluded Assets
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DISCLOSURE SCHEDULE
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
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is entered into as of
November 25, 1997, by and between OUTDOOR SYSTEMS, INC., a Delaware corporation
("Buyer"), and OUTDOOR MEDIA GROUP, INC., a California corporation ("Seller").
(Buyer and Seller are sometimes herein referred to individually as a "Party" and
collectively as the "Parties".)
RECITALS
Seller is engaged in the business of owning and operating outdoor signs
and billboards and otherwise providing outdoor advertising services and related
and unrelated services, including, without limitation: (i) owning and operating
outdoor signs and billboards and otherwise providing outdoor advertising
services in the state of Nevada; and (ii) owning and operating two certain
billboard structures and otherwise providing outdoor advertising services with
respect to these two certain billboard structures listed on Schedule 2.2(a)(2)
hereto in the metropolitan Los Angeles area. The business described in
subclauses (i) and (ii) hereof shall be referred to herein as the "Purchased
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 of Seller 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 the following assets
of Seller:
(a) All of the billboard displays and other out-of-home
advertising structures located in the State of Nevada, including, but not
limited to, those set forth and described in Schedule 2.2(a)(1) attached hereto,
and the two in Los Angeles, California, set forth and described in Schedule
2.2(a)(2) attached hereto, together with all components, fixtures, parts,
appurtenances,
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and equipment attached to or made a part thereof that are existing, under
construction or for which Seller has any rights (collectively, the
"Structures");
(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 those Site Leases 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 those Advertising
Contracts listed on Schedule 2.2(c) attached hereto;
(d) 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 those Permits listed on
Schedule 2.2(d);
(e) All prepaid expenses relating to the Purchased Assets in
existence as of the Closing;
(f) All pertinent Books and Records;
(g) All tangible personal property, including furniture,
vehicles, equipment, computer hardware and software, owned by Seller relating to
the Purchased Assets and listed in Schedule 2.2(g);
(h) All Intangible Property used in connection with the
Purchased Assets; and
(i) All options, rights of first refusal and other rights to
purchase or acquire outdoor advertising assets, including new builds, site
leases and outdoor advertising structures, in the State of Nevada, including
Seller's right of first refusal under that certain Seiler Agreement;
(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 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:
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(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 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;
(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
Buyer in Phoenix, Arizona at 10:00 a.m. on December 1, 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 Eight Million, Four Hundred Thousand Dollars ($28,400,000). 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) and security deposits under Site Leases and accounts receivable
(including credits) and security deposits under Advertising Contracts. The
prorations of revenue and other items shall be based on a thirty (30) day month,
prorated as of the Closing Date. 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
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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.
(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 deliver to
Buyer: (i) the Bill of Sale, Assignment and Assumption Agreement, (ii)
Non-Competition Agreements with each of Jon M. Gunderson and Charles Gunderson
(iii) all applicable Tax Clearances, (iv) evidence of the release of the lien of
the Union Bank of California and appropriate termination statements and (v)
other instruments of transfer, evidence of required consents 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,
except the Permitted Liens. 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, Assignment and Assumption Agreement, and (ii)
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 (at Buyer's cost) 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
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benefits to Buyer, including any sublease, subcontract or similar arrangement,
and if Buyer has obtained such benefits, Buyer shall discharge Seller's
obligations thereunder arising from and after the Closing Date, except for those
obligations arising because of Seller's breach.
3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING. Seller is a corporation duly
organized, validly existing and in good standing under the laws of its
incorporation, with full power and authority to conduct its business as it is
now being conducted, to own or use the Purchased Assets, and to perform all its
obligations in connection with the Purchased Assets. Seller has delivered to
Buyer true and complete copies of its Organizational Documents, as currently in
effect. Seller is duly qualified to do business and in good standing in each
jurisdiction in which the Purchased Assets are owned, leased or operated by it,
except where such failure to be qualified would not have a Material Adverse
Effect on the Purchased Assets or the Purchased Business.
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 Directors and shareholders of
Seller. Part 3.2(a) of the Disclosure Schedule contains a complete list of all
of the holders of the outstanding capital stock 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 any Order to which Seller,
the Purchased Business, or any of the Purchased Assets may be subject;
or (C) to Seller's Knowledge, any Governmental Authorization held by
Seller or that otherwise relates to the Purchased Business or the
Purchased Assets; or
(ii) (A) contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person the right
to declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or modify, any
material Contract to which Seller is a party or any material interest
or rights of Seller
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in or to the Purchased Assets; or (B) result in the imposition or
creation of any Encumbrance upon or with respect to any of the
Purchased Assets.
(c) Except as set forth in Part 3.2(c) of the Disclosure
Schedule, Seller is not and will not be required to give any notice to or obtain
any Consent from any Person in connection with the execution and delivery of
this Agreement or the consummation or performance of any of the Contemplated
Transactions.
3.3 SOLVENCY. By consummating the transactions contemplated hereby,
Seller does not intend to hinder, delay or defraud any of Seller's present or
future creditors. Before giving effect to the transactions contemplated hereby,
Seller has been paying its debts as they become due in the Ordinary Course of
Business and, after giving effect to the transactions contemplated hereby,
Seller will have paid or discharged all of its debts (or made adequate provision
for the payment thereof).
3.4 BOOKS AND RECORDS. The books of account, and other Books and
Records of Seller maintained in connection with the Purchased Assets, are
complete and correct in all material respects and have been maintained in
accordance with sound business practices.
3.5 STRUCTURES. Seller owns 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, (ii) complies in
all material respects with the terms of the Permits pertaining to it and (iii)
is in condition to accept faces and in adequate condition and repair for its
current use.
3.6 PERMITS. Except as set forth in Part 3.6, the Permits constitute
all material licenses, permits, registrations and approvals necessary to operate
the Purchased Assets. Seller is 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 has not received written notice that any
Governmental Body issuing any Permit intends to cancel, terminate, modify or
amend any Permit.
3.7 SITE LEASES AND ADVERTISING CONTRACTS. Seller has delivered to
Buyer true and complete copies of 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 Seller, (x) no
default by Seller or any other party 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 material 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. Seller has not received any written
notice of default, termination or non-renewal under any Site Lease or
Advertising Contract.
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3.8 RESERVED.
3.9 TITLE, ENCUMBRANCES.
(a) Seller has good title to all of the Purchased Assets.
There are no existing agreements, options, commitments or rights with, of or to
any Person to acquire any of the Purchased Assets or any interest therein except
for this Agreement. All of the Purchased Assets are owned by Seller free and
clear of all Encumbrances and Security Interests except for Permitted Liens.
(b) Except as set forth in Part 3.9(b) of the Disclosure
Schedule, none of the Structures or Site Leases 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. Seller has not received any notice of
pending or Threatened claims, Proceedings, planned public improvements,
annexations, special assessments, rezonings or other adverse claims affecting
the Site Leases.
3.10 NO UNDISCLOSED LIABILITIES. Except as set forth in Part 3.10 of
the Disclosure Schedule, Seller has no material liabilities or obligations of
any nature relating to the Purchased Assets or the Purchased Business.
3.11 TAXES. With respect to the Purchased Assets and the Purchased
Business:
(a) Seller has filed or caused to be filed all Tax Returns
that are or were required to be filed by Seller, pursuant to applicable Legal
Requirements. Seller has paid, or made provision for the payment of, all Taxes
that have 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.
(b) No unpaid Taxes create an Encumbrance (other than
Permitted Liens) on the Purchased Assets.
(c) Buyer shall not be liable for any Taxes of Seller as a
result of the Contemplated Transactions.
3.12 COMPLIANCE WITH LEGAL REQUIREMENTS. Seller has complied with all
Legal Requirements applicable to Seller's 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
Seller, Threatened against Seller and affecting any of the Purchased Assets and
there is no Order to which Seller or the Purchased Assets are subject.
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3.14 OTHER CONTRACTS There are no Other Contracts relating to or
binding upon the Purchased Assets or the Purchased Business, except as disclosed
in Part 3.14 of the Disclosure Schedule.
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 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 Purchased 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 Seller's Knowledge: (i) Seller is, and has been, in
material compliance with all Environmental Laws; (ii) Seller has timely filed
all material reports, obtained all material required approvals and permits
relating to ownership and use of the Purchased Assets, and generated and
maintained all material data, documentation and records under any applicable
Environmental Laws relating to the Purchased Assets; (iii) to the Knowledge of
Seller, there has not been any release of the Hazardous Materials at or in the
vicinity of the Purchased Assets; (iv) Seller has not received any written
notice from any Governmental Body or private or public entity advising it that
it is or may be responsible for response costs with respect to a Release, a
threatened Release or clean up of Hazardous Materials relating to the Purchased
Assets; and (v) Seller has delivered to Buyer true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed by
Seller pertaining to Hazardous Materials in, on, or under the Purchased Assets.
3.17 RESERVED.
3.18 RELATIONSHIPS WITH AFFILIATES. Except as set forth on Part 3.18 of
the Disclosure Schedule, Seller is not a party to any contract with any
shareholder of Seller or any Affiliate of Seller or any of its shareholders
relating to the Purchased Assets or the Purchased Business. Neither Seller nor
any of its shareholders nor any Affiliate of Seller or any such shareholder is
the owner (of record or as a beneficial owner) of an equity interest or any
other financial or profit interest in, a Person (other than Seller) that has
business dealings or a material financial interest in any transaction with
Seller involving the Purchased Assets or the Purchased Business.
3.19 BROKERS OR FINDERS. Seller and its shareholders 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 RESERVED.
3.21 HSR COMPLIANCE. Effective as of the Closing, Seller shall be in
compliance with Sellers' obligations pursuant to the HSR Act in connection with
the Contemplated Transactions.
3.22 DISCLOSURE. To Seller's Knowledge, no representation or warranty
of Seller in this Agreement and no statement in the Disclosure Schedule omits to
state a material fact necessary to
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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. The execution, delivery and
performance of this Agreement and the Contemplated Transactions have been
specifically authorized by the Directors of Buyer.
4.3 CERTAIN PROCEEDINGS. There is no pending Proceeding that has been
commenced against Buyer and that challenges, or may have the effect of
preventing, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been
Threatened in writing and no event has occurred or circumstance exist that may
give rise to or serve as a basis for the commencement of any Proceeding.
4.4 BROKERS OR FINDERS. Buyer has not incurred any obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
4.5 HSR COMPLIANCE. Effective as of the Closing, Buyer shall be in
compliance with Buyer's obligations pursuant to the HSR Act in connection with
the Contemplated Transactions.
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4.6 DUE DILIGENCE; RELIANCE ON BUYER'S EXPERTS. Prior to Buyer's
execution and delivery of this Agreement, Buyer has conducted such due diligence
activities and investigations in connection with the Purchased Assets as Buyer
deems reasonable or necessary and, in connection with such activities and
investigations, Buyer has relied on its own financial, legal and other experts
and advisors in arriving at Buyer's decision to execute, deliver and consummate
this Agreement and the Contemplated Transactions. Buyer is not relying on any
representations, warranties or covenants of Seller except as expressly set forth
in this Agreement.
4.7 DISCLOSURE. To the Knowledge of Buyer, no representation or
warranty of Buyer in this Agreement omits to state a material fact necessary to
make the statements in this Agreement, in light of the circumstances in which
they were made, not misleading.
5. COVENANTS OF SELLER
5.1 ACCESS AND INVESTIGATION. Prior to the date of this Agreement and
until the Closing Date, Seller has, and will continue to, cause its
Representatives to, afford Buyer and its Representatives reasonable access
during normal business hours to Seller's personnel, properties, Books and
Records, and other documents and data relating to the Purchased Assets and the
Purchased Business, and furnish Buyer and its Representatives with copies of the
same.
5.2 DUE DILIGENCE. Buyer shall have the right, and Seller shall
continue to afford access to Buyer and its Representatives, at all reasonable
times upon advance notice to perform due diligence on the Purchased Assets and
the Purchased Business through and including Closing (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 Purchased Assets 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 Purchased Assets; 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 Purchased Assets 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
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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 and
before the Closing Date 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 such time, if any, as this Agreement is
terminated pursuant to Section 9, neither Seller nor any Affiliate will, nor
will it permit its Representatives to, directly or indirectly solicit, initiate,
or encourage any inquiries or proposals from, discuss or negotiate with, provide
any non-public information to, or consider the merits of any unsolicited
inquiries or proposals 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 use its Best Efforts to obtain all
certificates of clearances for Taxes ("Tax Clearances"), if any, required by the
State of Nevada certifying as to the payment by or on behalf of Seller of all
sales and business occupational Taxes due on or prior to a date not more than
thirty (30) days after the Closing Date (it being agreed and understood that,
notwithstanding the foregoing, if any Tax Clearances are not obtained by such
date, Seller shall obtain such Tax Clearances as soon thereafter as reasonably
possible and shall be responsible for, and shall discharge in full, all
liabilities and obligations therefor).
5.9 RESTRICTIVE COVENANTS.
(a) For a period of three (3) years after the date hereof,
Seller agrees that, except with the prior written consent of Buyer, Seller will
not, either directly or indirectly, on Seller's behalf or in the service or on
behalf of others, engage in the business of owning and operating outdoor signs
and billboards in the State of Nevada ("Competing Business") and Seller will not
become financially interested in a Competing Business (other than as a holder of
less than five percent (5%) of the outstanding voting securities of any entity
whose voting securities are listed on a national securities exchange or quoted
by the National Association of Securities Dealers, Inc. automated quotation
system).
(b) For a period of three (3) years after the date hereof,
Seller agrees not to solicit, or attempt to solicit, directly or indirectly, on
Seller's own behalf or in the service or on behalf of others, any business from
any customer or actively pursued prospective customer of the Purchased Business
with respect to out-of-home advertising in the State of Nevada.
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(c) For a period of three (3) years after the date hereof,
Seller agrees not to solicit, or attempt to solicit, directly or indirectly, on
Seller's own behalf or in the service or on behalf of others, any Site Lease
(including the two Site Leases located in Los Angeles, California) or any other
real estate location in the State of Nevada used by the Seller from any land
owner (or its or his successors or assigns) who leases to or who was actively
pursued by the Seller.
(d) Seller agrees that Seller will not for a period of three
(3) years after the date hereof, without the prior written consent of Buyer,
disclose or divulge to anyone any confidential knowledge or information of any
type whatsoever relating to the Purchased Business (including without
limitation, the identities of customers of and lessors who lease real property
to the Purchased Business), pricing information, financial data or sales or
marketing techniques. Seller agrees that trade secrets are protected by law and
cannot be disclosed or used at anytime without the prior written consent of
Buyer. The provisions of this paragraph shall not apply to information (i) that
is publicly available through lawful means or lawfully disclosed from a third
party who is not bound by a confidentiality obligation with respect thereto or
(ii) that is required to be disclosed by law. The provisions of this paragraph
as to trade secrets shall survive the term of this Agreement and remain in
effect for so long as the trade secrets remain confidential.
5.10 BEST EFFORTS. Between the date of this Agreement and the Closing
Date, Seller will, at Seller's cost, use its Best Efforts to cause the
conditions in Section 7 to be satisfied.
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, at Buyer's cost, use its Best Efforts to cause the conditions
in Section 8 to be satisfied; provided that this Agreement will not require
Buyer to dispose of or make any change in any portion of its business or to
incur any other burden to obtain a Governmental Authorization.
6.3 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 and before the
Closing Date 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
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breach of any covenant of Buyer in this Section 6 or of the occurrence of any
event that may make the satisfaction of the conditions in Section 8 impossible
or unlikely.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Purchased Assets and to take the
other actions required to be taken by Buyer at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Buyer, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS. Seller's representations and
warranties in this Agreement must have been accurate 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, unless the Contemplated Transactions are
consummated simultaneously with the signing of this Agreement, 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, unless the Contemplated Transactions are consummated simultaneously with
the signing of this Agreement, 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.
7.4 NON-COMPETITION AGREEMENTS. Seller shall deliver a Non-Competition
Agreement executed by each of Jon M. Gunderson and Charles Gunderson.
7.5 ADDITIONAL DOCUMENTS. Each of the following documents must have
been delivered to Buyer:
(a) an opinion of Fisher & Associates 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 Seller is required to deliver
pursuant to this Agreement.
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, (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.
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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 with
respect to the Purchased Assets, the Purchased 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.
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, unless the Contemplated Transactions are consummated
simultaneously with the signing of this Agreement, 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, unless the Contemplated Transactions are consummated simultaneously with
the signing of this Agreement, 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 LLP,
dated the Closing Date, in form and substance reasonably acceptable to Seller;
(b) the deliveries required from Buyer in Section 2.7; and
(c) such other documents as Buyer is required to deliver
pursuant to this Agreement.
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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 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 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 December 31, 1997.
9.2 EFFECT OF TERMINATION. Each Party's right of termination under
Section 9.1 is in addition to any other rights it may have under this Agreement.
If this Agreement is terminated pursuant to Section 9.1, all further obligations
of the Parties under this Agreement will terminate, except that the obligations
in 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.
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10. INDEMNIFICATION; REMEDIES
10.1 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER. Seller will
indemnify, defend, protect 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 material 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.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer will
indemnify, defend, protect 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 material breach by Buyer of any covenant or obligation
of Buyer in this Agreement;
(c) the failure of Buyer to satisfy and discharge the Assumed
Liabilities; and
(d) the Purchased Assets which relate to acts or omissions
occurring from and after the Closing.
10.3 PROCEDURE FOR INDEMNIFICATION - THIRD PARTY CLAIMS.
(e) 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
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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.
(f) 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.
(g) 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,
3.9(a), 3.11, 3.16, 3.19, 3.21, 4.1, 4.2(a), 4.4 and 4.5 shall survive until 90
days after the expiration of all applicable statutes of limitation with respect
to the subject matter thereof, and (ii) all other representations and warranties
shall survive until the first anniversary following the Closing Date.
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(b) Seller's obligation to indemnify the Seller Indemnified
Persons for Damages pursuant to Section 10.1 is subject to the following
limitations:
(i) in no event shall such obligations exceed the
Purchase Price; and
(ii) Seller shall have no such obligation until Buyer
has suffered Damages in excess of $250,000 and then only to the extent
of the Damages in excess of such amount.
11. GENERAL PROVISIONS
11.1 EXPENSES. 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 any action involving Buyer and Seller arising out of or
otherwise relating to this Agreement, the prevailing party shall be entitled to
recover from the other party, in addition to damages, injunctive or other
relief, if any, all costs and expenses (whether or not allowable as "cost" items
by law) reasonably incurred at, before and after trial or on appeal, or in any
bankruptcy or arbitration proceeding, including, without limitation, attorneys'
and witness (expert and otherwise) fees, deposition costs, copying charges and
other expenses.
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
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receipt), provided that a copy is mailed by registered mail, return receipt
requested, or (c) when received by the addressee, if sent by a nationally
recognized overnight delivery service (receipt requested), in each case to the
appropriate addresses and telecopier numbers set forth below (or to such other
addresses and telecopier numbers as a Party may designate by notice to the other
Parties):
If to Seller, to:
Outdoor Media Group, Inc.
26525 Jefferson Avenue
Murrieta, California 92562
Attention: Mr. Jon M. Gunderson, President
Telephone No.: (909) 667-2121
Facsimile No.: (909) 667-9194
With a copy to:
Fisher & Associates
3501 Jamboree Road
North Tower, Sixth Floor
Newport Beach, California 92660-2960
Attention: Paul E. Fisher, Esq.
Telephone No.: (714) 737-2800
Facsimile No.: (714) 737-2805
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: Mr. William S. Levine
and
Mr. 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 LLP
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
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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 Seller any
payments that Buyer may receive with respect to any accounts receivable of
Seller relating to the Purchased Assets.
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 (except loss or damage caused, in whole or in
part, by Buyer) 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 two (2) 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
20
<PAGE> 28
for a period of two (2) 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 by and
construed and enforced in accordance with the laws of the State of California.
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> 29
IN WITNESS WHEREOF, the Parties have executed, sealed and delivered
this Agreement as of the date first written above.
BUYER:
OUTDOOR SYSTEMS, INC.
By: /s/ William S. Levine
-------------------------------------
Title: Chairman of the Board
----------------------------------
Attest:
By: /s/ Bill M. Beverage
----------------------------
Secretary
SELLER:
OUTDOOR MEDIA GROUP, INC.
By: /s/ Jon M. Gunderson
-------------------------------------
Title: President
----------------------------------
Attest:
By: /s/ Jon M. Gunderson
----------------------------
Secretary
22
<PAGE> 30
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.
"ASSUMED LIABILITIES" -- as defined in Section 2.3.
"BEST EFFORTS" -- the commercially reasonable efforts that a prudent
Person desirous of achieving a result would use in similar circumstances.
"BILL OF SALE" -- the Bill of Sale, Assignment and Assumption Agreement
in the form of Exhibit B attached hereto.
"BOOKS AND RECORDS" -- All of Seller's books and records relating to
the Purchased Assets, including, without limitation, all Site Lease files,
Advertising Contract files, Permit files, maintenance and other records for the
Structures, logs, advertiser, customer and supplier lists.
"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 Seller that is not generally available to the public.
"CONSENT" -- any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS" -- all of the transactions contemplated by
this Agreement, including: (a) the purchase of the Purchased Assets by Buyer
from Seller and assignment to and assumption by Buyer of the Assumed
Liabilities, and (b) the performance by Buyer and Seller of their respective
covenants and obligations under this Agreement.
<PAGE> 31
"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.
"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.
"EXCLUDED ASSETS" -- as defined in Section 2.2 and in Schedule 2.2(x).
"EXCLUDED LIABILITIES" -- as defined in Section 2.4.
"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
<PAGE> 32
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 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 exclusively 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 exclusively 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.
"MATERIAL ADVERSE EFFECT" -- a material adverse effect on the Purchased
Business or the Purchased Assets, or operations or conditions (financial or
otherwise) relating thereto, taken as a whole.
"NON-COMPETITION AGREEMENT" - The Non-Competition Agreement in the form
of Exhibit C between Buyer and the individual(s) named therein.
<PAGE> 33
"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 or the
operation thereof (i) under which Seller has any rights as of the Closing, (ii)
under which Seller has any obligation or liability as of the Closing, or (iii)
by which Seller or any of the Purchased Assets is or may become bound as of the
Closing.
"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.
"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.
"RELEASE" -- any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
<PAGE> 34
"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.
<PAGE> 35
SCHEDULE 2.2(x)
The sale of the Purchased Assets from Seller to Buyer pursuant to this
Agreement includes only the Purchased Assets and does not include the Excluded
Assets. The Excluded Assets include all assets, whether tangible or intangible,
of Seller except for the Purchased Assets, including, without limitation, all
structures, site leases, real property, contracts, permits, accounts receivable
and prepaid expenses of all types, books and records, tangible personal property
(including, without limitation, vehicles, stationery, supplies and telephone
numbers), intangible property (including, without limitation, goodwill and the
trade name "Outdoor Media Group") and all other rights of Seller not comprising
the Purchased Assets.
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
JURISDICTION OF
INCORPORATION
NAME OF SUBSIDIARY OR ORGANIZATION
------------------ ----------------
<S> <C>
Outdoor Systems Painting, Inc............................... Arizona
OS Baseline, Inc............................................ Arizona
OS Advertising of Texas Painting, Inc....................... Texas
Decade Communications Group, Inc............................ Colorado
Bench Advertising Company of Colorado, Inc.................. Colorado
New York Subways Advertising Co., Inc....................... Arizona
Mediacom Inc................................................ Canada
Salm Enterprises, Inc. ..................................... California
OS Bus, Inc. ............................................... Georgia
Outdoor Systems (New York), Inc. ........................... New York
National Advertising Company................................ Delaware
Pacific Connection, Inc. ................................... Delaware
Atlanta Bus Shelters........................................ Georgia
</TABLE>
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-05679, Registration Statement No. 333-38589 and Registration Statement No.
333-38591 of Outdoor Systems, Inc. on Form S-8 of our reports dated February 3,
1998, except for the last paragraph of Note 9, for which the date is March 17,
1998, appearing in this Annual Report on Form 10-K of Outdoor Systems, Inc. for
the year ended December 31, 1997.
DELOITTE & TOUCHE LLP
Phoenix, Arizona
March 19, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 5,897
<SECURITIES> 0
<RECEIVABLES> 119,745
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 176,901
<PP&E> 1,598,011
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,229,157
<CURRENT-LIABILITIES> 115,672
<BONDS> 0
0
0
<COMMON> 1,211
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,229,157
<SALES> 0
<TOTAL-REVENUES> 471,004
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 341,065
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 87,150
<INCOME-PRETAX> 40,696
<INCOME-TAX> 18,485
<INCOME-CONTINUING> 22,211
<DISCONTINUED> 0
<EXTRAORDINARY> (6,773)
<CHANGES> 0
<NET-INCOME> 15,438
<EPS-PRIMARY> 0
<EPS-DILUTED> .13
</TABLE>
