<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/x/ Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Outdoor Systems Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
PRELIMINARY COPY
[OUTDOOR SYSTEMS LOGO]
April , 1998
Dear Stockholders:
We are holding the Company's 1998 Annual Meeting of Stockholders on
Thursday, May 21, 1998, at 4:00 p.m., local time, at the Ritz Carlton, 2401 E.
Camelback Road, Phoenix, Arizona. We hope that you will be able to attend the
meeting, and we look forward to seeing you. Matters on which action will be
taken at the meeting are explained in detail in the Notice and Proxy Statement
following this letter.
Whether or not you expect to attend the meeting in person, please complete,
date, sign and return the enclosed proxy in the envelope provided at your
earliest convenience so that your shares will be represented at the meeting. If
you choose to attend the meeting, you may withdraw your proxy and vote your own
shares.
Sincerely,
/s/ William S. Levine
WILLIAM S. LEVINE
Chairman of the Board
/s/ Arturo R. Moreno
ARTURO R. MORENO
President and Chief Executive Officer
<PAGE> 3
PRELIMINARY COPY
OUTDOOR SYSTEMS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 1998
The Annual Meeting of Stockholders of Outdoor Systems, Inc. will be held at
the Ritz Carlton, 2401 E. Camelback Road, Phoenix, Arizona on Thursday, May 21,
1998 at 4:00 p.m., local time, for the following purposes:
1. To elect one Class II director to the Board of Directors to serve
for a term of three years;
2. To vote upon a proposal to amend the Certificate of Incorporation
of the company to increase the number of authorized shares of Common Stock
of the Company from 200,000,000 to 600,000,000 shares; and
3. To transact such other business as may properly come before the
meeting or any adjournment or adjournments thereof.
Only stockholders of record at close of business on April 9, 1998 are
entitled to vote at the meeting.
The mailing address of the Company's principal executive office is 2502 N.
Black Canyon Highway, Phoenix, Arizona 85009.
PLEASE COMPLETE, DATE, SIGN, AND RETURN THE ENCLOSED PROXY SO THAT YOUR
SHARES WILL BE REPRESENTED AT THE MEETING. IF YOU CHOOSE TO ATTEND THE MEETING,
YOU MAY WITHDRAW YOUR PROXY AND PERSONALLY CAST YOUR VOTES.
By Order of the Board of Directors,
/s/ Bill M. Beverage
BILL M. BEVERAGE
Secretary
April , 1997
Phoenix, Arizona
<PAGE> 4
PRELIMINARY COPY
OUTDOOR SYSTEMS, INC.
2052 N. BLACK CANYON HIGHWAY
PHOENIX, ARIZONA 85009
PROXY STATEMENT FOR
THE 1998 ANNUAL MEETING OF STOCKHOLDERS
GENERAL INFORMATION
The following Proxy Statement and the accompanying proxy card, first mailed
to stockholders of Outdoor Systems, Inc. (the "Company") on or about April ,
1998, are furnished in connection with the solicitation by the Board of
Directors of the Company of proxies to be used in voting at the Annual Meeting
of Stockholders of the Company to be held on Thursday, May 21, 1998, at the Ritz
Carlton, 2401 E. Camelback Road, Phoenix, Arizona, and at any adjournment(s)
thereof (the "Meeting").
Any stockholder returning a proxy has the power to revoke it prior to the
Meeting by giving the Secretary of the Company written notice of revocation, by
returning a later dated proxy or by expressing a desire to vote in person at the
Meeting. All shares of the Company's common stock, $.01 par value per share
("Common Stock"), represented by valid proxies received pursuant to this
solicitation and not revoked before they are exercised will be voted in the
manner specified therein. If no specification is made, the proxy will be voted
(i) FOR the election of the nominee for Class II director named in this Proxy
Statement, (ii) FOR the proposed amendment to the Company's Certificate of
Incorporation to increase the number of authorized shares of Common Stock of the
Company from 200,000,000 to 600,000,000 shares, and (iii) in accordance with the
best judgment of the proxy holders on any other matter that may properly come
before the Meeting.
The entire cost of soliciting proxies will be borne by the Company. In
following up the original solicitation of proxies by mail, the Company will
request brokers and others to send proxy forms and other proxy material to the
beneficial owners of the Common Stock and will reimburse them for expenses
incurred in so doing. If necessary, the Company also may use some of its
employees to solicit proxies from the stockholders personally or by telephone.
The Board of Directors of the Company fixed April 9, 1998 as the record
date for the Meeting and, accordingly, only holders of Common Stock of record at
the close of business on that date will be entitled to notice of, and to vote
at, the Meeting. The number of shares of Common Stock outstanding on April 9,
1998 was 121,164,008, each of which is entitled to one vote. The presence in
person or by proxy of stockholders of record holding a majority of share of
Common Stock outstanding and entitled to vote at the Meeting will constitute a
quorum for the transaction of business at the Meeting. Abstentions, broker
non-votes and shares for which authority to vote is withheld are counted as
present in determining whether a quorum exists.
Election of the director nominee named in Proposal 1 hereof requires the
affirmative vote of a plurality of shares of Common Stock voting in person or by
proxy at the Meeting. Shares with respect to which authority to vote is withheld
will not be included in the vote total and will not affect the outcome of the
election. Approval of the amendment to the Certificate of Incorporation
described in Proposal 2 hereof requires the affirmative vote of a majority of
the shares of Common Stock of the Company outstanding and entitled to vote at
the Meeting. Therefore, abstentions and broker non-votes will have the same
effect as votes against Proposal 2.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information as of April 9, 1998
(except as otherwise noted) regarding the amount of Common Stock beneficially
owned by (i) each person known by the Company to beneficially own more than five
percent of the outstanding Common Stock, (ii) each director and director nominee
of the Company, (iii) each of the executives officers of the Company named in
the Summary Compensation Table below, and (iv) all directors and executive
officers of the Company as a group. All shares
<PAGE> 5
shown reflect sole voting and investment power except as otherwise noted. An
asterisk indicates beneficial ownership of less than one percent of the
outstanding Common Stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS
- ------------------------ ------------------ ----------------
<S> <C> <C>
William S. Levine........................................... 25,407,501(1) 21.0%
1702 E. Highland, Suite 310
Phoenix, Arizona 85016
Arturo R. Moreno............................................ 24,528,117(2) 18.8%
2502 N. Black Canyon Highway
Phoenix, Arizona 85009
Putnam Investments, Inc..................................... 13,931,520(3) 11.5%
One Post Office Square
Boston, Massachusetts 02109
FMR Corp.................................................... 7,990,470(4) 6.6%
82 Devonshire Street
Boston, Massachusetts 02109
Brian J. O'Connor........................................... 50,625(5) *
Stephen F. Butterfield...................................... 121,500(6) *
Wally C. Kelly.............................................. 835,621(7) *
Robert M. Reade............................................. 133,317(8) *
Bill M. Beverage............................................ 189,844(9) *
All directors and executive officers as a group (7
persons).................................................. 45,913,719(10) 34.8%
</TABLE>
- ---------------
* Represents less than 1% of the outstanding shares of Common Stock.
(1) Includes 5,352,804 shares of Common Stock owned by M-K Link Investments
Limited Partnership ("M-K Link") over which Mr. Levine shares voting
control with Mr. Moreno and over which Messrs. Levine and Moreno have
certain rights of first refusal with respect to certain private sales. Mr.
Levine disclaims beneficial ownership of the shares owned by M-K Link. Also
includes (i) 150 shares of Common Stock owned by Mr. Levine directly and
(ii) 19,955,547 shares of Common Stock owned by Levine Investments Limited
Partnership, 1702 E. Highland, Suite 310, Phoenix, Arizona 85016. Mr.
Levine is the sole general partner of Levine Investments Limited
Partnership; Mr. Levine, his wife and children are the limited partners.
Mr. Levine disclaims beneficial ownership of such shares and option except
in his capacity as general partner and to the extent of his partnership
interest therein. The remaining 99,000 shares of Common Stock attributed to
Mr. Levine are held by William S. and Ina Levine Foundation (the "Levine
Family Foundation"), a charitable foundation of which Mr. Levine is
President and member of the Board of Directors. Mr. Levine disclaims
beneficial ownership of the shares held by the Levine Family Foundation.
(2) Includes 5,352,804 shares of Common Stock owned by M-K Link over which Mr.
Moreno shares voting control with Mr. Levine and over which Messrs. Levine
and Moreno have certain rights of first refusal with respect to certain
private sales. Mr. Moreno disclaims beneficial ownership of the shares
owned by M-K Link. Also includes (i) 4,485,190 shares of Common Stock owned
by Mr. Moreno directly, (ii) 9,656,348 shares of Common Stock that may be
purchased by Mr. Moreno pursuant to options granted by the Company that are
currently exercisable or that become exercisable within 60 days of April 9,
1998, (iii) 2,286,264 shares of Common Stock held by Mr. Moreno and his
wife, as joint tenants, and (iv) 2,747,511 shares held by BRN Properties
Limited Partnership, an Arizona limited partnership of which Mr. Moreno is
the sole general partner.
(3) Based on Schedule 13G, as amended, filed by Putnam Investments, Inc. with
the Securities and Exchange Commission reporting beneficial ownership as of
December 31, 1997. Each of Putnam Investment Management, Inc. and the
Putnam Advisory Company, Inc., wholly-owned registered
2
<PAGE> 6
investment advisors of Putnam Investments, Inc. having the same address,
also filed a Schedule 13G with the Securities and Exchange Commission
which, as amended, reports beneficial ownership of 13,306,785 shares and
624,735 shares, respectively, as of December 31, 1997.
(4) Based on Schedule 13G filed by FMR Corp. with the Securities and Exchange
Commission reporting beneficial ownership as of December 31, 1997.
(5) Includes 25,313 shares of Common Stock subject to options that are
currently exercisable or that become exercisable within 60 days of April 9,
1998.
(6) Includes (i) 5,062 shares of Common Stock owned by Mr. Butterfield's
children, and (ii) 10,125 shares of Common Stock subject to options that
are currently exercisable or that become exercisable within 60 days of
April 9, 1998.
(7) Represents shares of Common Stock subject to options that are currently
exercisable or that become exercisable within 60 days of April 9, 1998.
Does not include any shares of Common Stock that Mr. Kelly may receive in
settlement of incentive units.
(8) Includes (i) 6,754 shares of Common Stock owned by Mr. Reade and (ii)
63,281 shares of Common Stock subject to options that are currently
exercisable or that become exercisable within 60 days of April 9, 1998.
Does not include any shares of Common Stock that Mr. Reade may receive in
settlement of incentive units.
(9) Represents shares of Common Stock subject to options that are currently
exercisable or that become exercisable within 60 days of April 9, 1998.
Does not include any shares of Common Stock that Mr. Beverage may receive
in settlement of incentive units.
(10) Includes 10,848,875 shares of Common Stock that may be acquired upon the
exercise of options granted by the Company that are currently exercisable
or that become exercisable within 60 days of April 9, 1998. Does not
include shares of Common Stock that may be issued in settlement of
incentive units.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's Certificate of Incorporation provides for three classes of
directors with staggered, three-year terms of office and provides that upon the
expiration of the term of office for a class of directors, the nominees for that
class will be elected for a term of three years to serve until the election and
qualification of their successors or until their earlier resignation, death or
removal from office. The Company's Certificate of Incorporation and its Bylaws
provide that the Board of Directors shall consist of not less than three nor
more than ten directors and authorize the exact number of directors to be fixed
from time to time by resolution of a majority of the Board of Directors. The
Board of Directors has fixed the exact number of members of the Board of
Directors at five. At the Meeting, the nominee is for Class II director. The
Class III and Class I directors have one year and two years, respectively,
remaining on their terms of office. There is currently one vacancy in Class II
of the Board of Directors. The Board of Directors may fill this vacancy at any
time pursuant to the authority vested in it by the Company's Bylaws. Proxies
cannot be voted for a greater number of persons than the one nominee named
below.
It is intended that persons named in the accompanying form of proxy will
vote for the nominee listed below, who is currently a director, unless authority
to so vote is withheld. In the event the nominee refuses or is unable to serve
as director (which is not now anticipated), the shares represented by proxies in
the accompanying form may be voted for the election of a substitute nominee
selected by the persons named in the proxy.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE
NOMINEE FOR CLASS II DIRECTOR.
3
<PAGE> 7
DIRECTOR AND DIRECTOR NOMINEE INFORMATION
NOMINEE FOR DIRECTOR
CLASS II -- TERM EXPIRING 2001
BRIAN J. O'CONNOR Age: 42
Director of the Company since 1993
Mr. O'Connor has been a Senior Vice President of Hutchinson, Shockey, Erley &
Co., which underwrites and trades securities for various local governments in
Arizona and the western United States, since 1997. From 1990 to 1997, he was a
Senior Vice President with Alden Capital Markets, Inc.; from 1988 to 1990, he
was a Senior Vice President with Capital Markets Corporation; from 1987 to 1988,
he was a Vice President for Security Pacific Merchant Bank in Phoenix; and from
1983 to 1987, Mr. O'Connor was with Boettcher & Company, Inc., a regional
investment banking firm specializing in municipal finance.
DIRECTORS CONTINUING IN OFFICE
CLASS III -- TERM EXPIRING 1999
WILLIAM S. LEVINE Age: 66
Director of the Company since 1980
Mr. Levine, a founder 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. Since 1990, Mr. Levine has dedicated a
substantial portion of his time to the Company's affairs.
ARTURO R. MORENO Age: 51
Director of the Company since 1984
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); and 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.
CLASS I -- TERM EXPIRING 2000
STEPHEN F. BUTTERFIELD Age: 45
Director of the Company since 1996
Mr. Butterfield has been President of Student Loan Acquisition Authority of
Arizona, a not-for-profit firm which participates in the secondary market for
student loans, since 1991. From 1988 to 1991, Mr. Butterfield served as
President of Western Loan Marketing Association; from 1987 to 1988, Mr.
Butterfield served as Vice President of Security Pacific Merchant Bank; from
1983 to 1987, he was a partner of Boettcher & Company, Inc., a regional
investment banking firm specializing in municipal finance; and from 1974 to
1983, Mr. Butterfield served in various positions with Young Smith & Peacock, an
Arizona-based municipal bond house.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and greater than 10% stockholders ("Reporting
Persons") to file certain reports ("Section 16 Reports") with respect to
beneficial ownership of the Company's equity securities. Based solely on its
review of the Section 16 Reports furnished to the Company by its Reporting
Persons and, where applicable, any
4
<PAGE> 8
written representation by any of them that no Form 5 was required, all Section
16(a) filing requirements applicable to the Reporting Persons during and with
respect to fiscal year 1997 have been complied with on a timely basis.
DIRECTORS' ATTENDANCE
The Board of Directors of the Company held six meetings during fiscal year
1997. Each director attended all of these meetings and the meetings of any
committee of which he was a member which was held during the fiscal year.
COMPENSATION OF DIRECTORS
Directors of the Company who are also employees receive no separate
compensation for their services as directors of the Company. Pursuant to the
1996 Omnibus Plan (the "1996 Omnibus Plan"), non-employee directors of the
Company, other than Mr. Levine, automatically receive stock options to purchase
5,063 shares of Common Stock at an exercise price equal to the then fair market
value of the Common Stock on the date following each annual meeting of
stockholders. Under this program, during fiscal year 1997, the Company granted
to each of Messrs. O'Connor and Butterfield stock options to purchase 5,063
shares of Common Stock. These options have a term of ten years and become
exercisable on the date immediately following the date of grant.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors is responsible for the overall affairs of the
Company. To assist the Board of Directors in carrying out this responsibility,
the Board has delegated certain authority to two committees, as set forth below.
Audit Committee. The Audit Committee is responsible for reviewing the
Company's accounting controls and recommending to the Board of Directors the
engagement of the Company's outside auditors. The Audit Committee met one time
during fiscal year 1997. The current members of the Company's Audit Committee
are Messrs. O'Connor and Butterfield.
Compensation Committee. The Compensation Committee is responsible for
reviewing and approving the amount and type of consideration to be paid to
senior management and for administering the Company's stock option plans. The
Compensation Committee met one time during fiscal year 1997. The current members
of the Company's Compensation Committee are Messrs. Levine (Chairman), O'Connor
and Butterfield.
The Company does not have a nominating committee.
5
<PAGE> 9
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
awarded to, paid to, or earned by, the Company's Chief Executive Officer, its
Chairman of the Board and each of the three executive officers of the Company,
in addition to the Chief Executive Officer, whose total annual salary and bonus
exceeded $100,000 for the fiscal year ended December 31, 1997 (together, these
persons are sometimes referred to as the "Named Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ----------------------
---------------------- INCENTIVE STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS UNITS OPTIONS COMPENSATION(1)
--------------------------- ---- -------- ---------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Arturo R. Moreno............... 1997 $475,000 $2,598,294 $ -- -- $ 6,216
President and Chief 1996 475,000 1,403,989(2) -- 1,544,143 12,970
Executive Officer 1995 375,000 311,614(2) -- -- 10,337
William S. Levine.............. 1997 450,000(3) -- -- -- --
Chairman of the Board 1996 450,000(3) -- -- -- --
1995 350,000(3) -- -- -- --
Wally C. Kelly................. 1997 435,965 -- -- -- 3,060
Senior Vice President 1996 329,389 -- -- 759,375 2,641
1995 283,987 -- 3,438
Robert M. Reade(4)............. 1997 210,780 -- -- -- 2,096
Vice President 1996 N/A N/A N/A N/A N/A
1995 N/A N/A N/A N/A N/A
Bill M. Beverage............... 1997 180,256 -- -- -- 4,379
Treasurer, Secretary and 1996 101,327 -- 25,000(5) 379,687 3,888
Chief Financial Officer 1995 91,483 -- 10,000 -- 3,300
</TABLE>
- ---------------
(1) The amounts in this column include the following: (i) Company contributions
to a 401(k) plan for fiscal years 1997, 1996 and 1995, respectively, as
follows: Mr. Moreno, $1,425, $1,425 and $1,386; Mr. Kelly, $1,155, $1,155
and $780; Mr. Reade, $--, N/A and N/A; and Mr. Beverage, $1,425, $1,425 and
$1,057; (ii) health insurance premiums paid for fiscal years 1997, 1996 and
1995, respectively, as follows: Mr. Moreno, $2,501, $2,085 and $1,901; Mr.
Kelly, $1,537, $1,450 and $1,413; Mr. Reade, $2,096, N/A and N/A; and Mr.
Beverage, $2,501, $2,085 and $1,901; and life insurance premiums paid for
fiscal years 1997, 1996 and 1995, respectively, as follows: Mr. Moreno,
$2,290, $9,460 and $7,050; Mr. Kelly $368, $576 and $480; Mr. Reade $--, N/A
and N/A; and Mr. Beverage $453, $378 and $342.
(2) (i) The bonus amount for 1997 represents the amount paid subsequent to the
end of fiscal year 1997 by reference to operating results for fiscal year
1997, (ii) the bonus amount for 1996 includes $1,025,804 paid subsequent to
the end of fiscal year 1996 by reference to operating results for fiscal
year 1996 and $378,185 paid in 1996 by reference to operating results for
fiscal year 1995 and (iii) the bonus amount for 1995 represents bonus earned
and paid in fiscal year 1995 in an amount determined by reference to
operating results for fiscal year 1994. For fiscal year 1997, the bonus was
earned and paid pursuant to the Incentive Bonus Plan for the Chief Executive
Officer (the "CEO Bonus Plan"). Pursuant to the CEO Bonus Plan, the Chief
Executive Officer may earn a cash bonus in an amount equal to 1.25% of the
Company's operating income before interest, taxes and depreciation and
amortization expense ("EBITDA") as reflected in the audited financial
statements of the Company for such fiscal year. The Company believes that
EBITDA is accepted by the outdoor advertising industry as a generally
recognized measure of performance and is used by analysts and investors to
evaluate the financial performance of companies in the outdoor advertising
industry. For fiscal years 1996 and 1995, the bonus was based upon an
understanding between the Company and Mr. Moreno that, for so long as Mr.
Moreno was the Chief Executive Officer and President of the Company, Mr.
Moreno could be awarded an annual bonus in an amount equal to 1.25% of the
Company's EBITDA for the immediately preceding fiscal year as reflected in
the Company's audited financial statements. Pursuant to this understanding,
the bonus for a particular fiscal year was awarded at the discretion of the
Board of Directors following a review by the
6
<PAGE> 10
Compensation Committee after the audited financial statements for the
previous fiscal year had been released by the Company's auditors.
(3) Mr. Levine received no salary, bonus or other compensation from the Company
for his services as Chairman of the Board. The amounts shown as annual
compensation represent management fees paid by the Company to two entities
controlled by Mr. Levine for providing Mr. Levine's services to the Company.
See "Compensation Committee Interlocks and Insider Participation."
(4) Mr. Reade was elected as an executive officer of the Company effective April
1, 1997.
(5) Represents the dollar value of incentive units awarded to Mr. Beverage,
which entitles him to receive up to 2,488 shares of Common Stock, based on
the market price of the Common Stock on the date of the grant. The incentive
units were awarded pursuant to the Company's 1996 Omnibus Plan, vest ratably
over a period of four years from the date of grant or earlier upon a change
in control of the Company and entitle Mr. Beverage to receive the shares of
Common Stock subject to the vested incentive units immediately following
termination of employment because of a change in control of the Company and
over a four-year period following termination of employment for any other
reason.
The Company did not grant any stock options or stock appreciation rights
("SARs") to the Named Executives during fiscal year 1997.
The following table sets forth certain information concerning options
exercised during fiscal year 1997 by Named Executives and the value of
unexercised options granted by the Company and held by Named Executives at
December 31, 1997. The Company has no outstanding SARs.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES FISCAL YEAR-END FISCAL YEAR-END(1)
ACQUIRED VALUE --------------------------- ----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ---------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Arturo R. Moreno ....... -- $ -- 9,270,313 1,158,108 $236,268,262 $26,295,224
Wally C. Kelly(2)....... 393,750 4,947,250 645,778 569,531 15,846,919 12,931,389
Robert M. Reade(2)...... -- -- 63,281 189,843 1,436,816 4,310,448
Bill M. Beverage(2)..... -- -- 94,922 284,765 2,155,235 6,465,683
</TABLE>
- ---------------
(1) Computed based upon the difference between the aggregate fair market value
of the shares of Common Stock purchasable upon the exercise of the options
and the aggregate exercise price of the options. For purposes of this table,
the fair market value of the shares of Common Stock is deemed to be $25.67
per share (the closing price per share as reported by the New York Stock
Exchange for December 31, 1997).
(2) Does not reflect incentive units held by Messrs. Kelly, Reade and Beverage
representing the right to receive up to 217,998, 14,605 and 8,359 shares of
Common Stock, respectively, following termination of employment.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors has furnished the
following report on executive compensation for fiscal year 1997.
INTRODUCTION
The Compensation Committee of the Board of Directors reviews and approves
the amount and type of consideration to be paid to senior management and
administers the CEO Bonus Plan and the 1996 Omnibus
7
<PAGE> 11
Plan pursuant to which the Company may grant a variety of equity-based
incentives, including stock options, to its executive officers and key
employees.
The Compensation Committee's policy regarding the compensation of the
Company's executive officers is to establish and maintain compensation levels
that (i) are competitive with those of other media companies and thus enable the
Company to attract and retain highly qualified executives, (ii) reward
executives for individual performance and for the performance of the Company
relative to the performance of other media companies, and (iii) align the
interests of the executives with those of the stockholders.
EXECUTIVE COMPENSATION
The Company's compensation program for executive officers has three key
components: (i) base salary, (ii) performance-based annual cash bonus, and (iii)
equity-based incentives.
Base Salary. The executive officers' base salaries, including the Chief
Executive Officer's base salary, are reviewed and approved by the Compensation
Committee. Base salary decisions with respect to each executive officer take
into account, among other things, the executive's past performance, the
Company's past performance and the executive's contribution thereto, the
executive's level of experience in the industry and the Compensation Committee's
evaluation of salary levels for similarly-situated executives of other media
companies.
Annual Cash Bonus. The Company's executive officers, other than the Chief
Executive Officer, were not eligible to receive cash bonuses for fiscal year
1997. The CEO Bonus Plan, which was adopted by the Company's stockholders at
last year's Annual Meeting of Stockholders, is described below.
Equity-Based Incentives. The Compensation Committee believes that stock
options and other equity-based grants provide a significant incentive for
management and closely align the interests of executives with those of the
stockholders. During fiscal year 1997, the Compensation Committee did not grant
any stock options to executive officers; however it granted stock options to
purchase an aggregate of 102,000 shares of Common Stock to other Company
employees. The stock options vest ratably over a period of four years or earlier
upon a change in control of the Company.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Moreno, the Company's Chief Executive Officer, was paid a base salary
of $475,000 for fiscal year 1997.
In addition, pursuant to the CEO Bonus Plan, which was adopted by the
Company's stockholders at last year's Annual Meeting of Stockholders, for so
long as Mr. Moreno serves as Chief Executive Officer and President of the
Company, Mr. Moreno may be awarded an annual bonus of 1.25% of the Company's
"EBITDA" (operating income before interest, taxes and depreciation and
amortization expense) for the immediately preceding fiscal year as reflected in
the Company's audited financial statements. Pursuant to the Compensation
Committee's recommendation to the Board of Directors based on its review of the
Company's results for fiscal year 1997, the Board of Directors awarded Mr.
Moreno a cash bonus of $2,598,294.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986, as amended, limits the
amount of individual compensation for certain executives that may be deducted by
the employer for federal tax purposes in any one fiscal year to $1 million
unless such compensation is "performance-based." The determination of whether
compensation is performance-based depends upon a number of factors, including
stockholder approval of the plan under which the compensation is paid, the
exercise price at which options or similar awards are granted, the disclosure to
and approval by the stockholders of applicable performance standards, the
composition of the committee making decisions with respect to such compensation,
and certification by the such committee that performance standards were
satisfied. While it is possible for the Company to compensate or make awards
under incentive plans and otherwise that do not qualify as performance-based
compensation deductible under
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<PAGE> 12
Section 162(m), the Company, in structuring compensation programs for its top
executive officers, intends to give strong consideration to the deductibility of
awards.
William S. Levine (Chairman)
Stephen F. Butterfield
Brian J. O'Connor
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
William S. Levine, Chairman of the Board, is currently serving as a member
of the Compensation Committee. The Board of Directors has appointed a
sub-committee of the Compensation Committee to administer the CEO Bonus Plan.
Mr. Levine is not a member of such sub-committee.
The Company is a party to a Services Agreement with Williams Manufacturing,
Inc. ("WMI") and J & L Industries, Inc. ("J & L"), companies controlled by Mr.
Levine, pursuant to which WMI and J & L make at least a majority of Mr. Levine's
business time available to the Company. The Company paid WMI and J & L an
aggregate of $450,000 for fiscal year 1997.
Certain partnerships controlled by Mr. Levine or in which Mr. Levine is a
partner lease certain sites to the Company on which the Company has placed
advertising displays. The Company made aggregate lease payments to such
partnerships of $139,000 in fiscal year 1997 and expects to continue to pay such
amounts at least through the expiration of the terms of the leases in December
2000. The Company believes that these leases are on terms at least as favorable
as would be available with unrelated third parties through arms-length
negotiations.
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<PAGE> 13
PERFORMANCE GRAPH
The Company's Common Stock is currently traded on the New York Stock
Exchange under the symbol "OSI." From April 24, 1996 (the date of the Company's
initial public offering of Common Stock) to September 1, 1997, the Common Stock
was quoted on the Nasdaq Stock Market under the symbol "OSIA." The following
chart and table compare the cumulative total return of the Company's Common
Stock for the period beginning April 24, 1996 and ending December 31, 1997 with
the cumulative total return of the S&P 500 Index, the Nasdaq Stock Market Index
and the Paul Kagan Associates, Inc. Radio/TV Average Index for the same period.
For purpose of the chart and table below, the index value of 1.00 assigned to
the Common Stock on April 24, 1996 was based on the price of the Common Stock to
the public in the Company's initial public offering.
COMPARISON OF CUMULATIVE TOTAL RETURNS AMONG
OUTDOOR SYSTEMS, INC., THE S&P 500 INDEX, THE NASDAQ STOCK MARKET INDEX,
AND THE PAUL KAGAN ASSOCIATES, INC. RADIO/TV AVERAGE INDEX
<TABLE>
<CAPTION>
'PAUL KAGAN
THE NASDAQ ASSOCIATES, INC.
MEASUREMENT PERIOD 'OUTDOOR THE S&P 500 STOCK MARKET |RADIO/TV
(FISCAL YEAR COVERED) SYSTEMS, INC.' INDEX INDEX AVERAGE INDEX'
<S> <C> <C> <C> <C>
4/24/96 1.00 1.00 1.00 1.00
12/31/96 4.22 1.14 1.08 1.13
12/31/97 8.66 1.49 1.33 2.05
</TABLE>
PROPOSAL 2
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION
The Board of Directors adopted an amendment to Article IV, Section A,
Subsection 1(a) of the Company's Certificate of Incorporation to increase the
number of shares of Common Stock which the Company is authorized to issue from
200,000,000 to 600,000,000 shares, subject to the approval of the stockholders
of the Company. The affirmative vote of the holders of a majority of the
outstanding shares of Common Stock is required to approve the proposed
amendment. If the stockholders do not approve the proposed amendment, the number
of authorized shares of Common Stock will remain 200,000,000.
If the proposed amendment is adopted, Subsection 1(a) of Section A of
Article IV of the Company's Certificate of Incorporation would be amended to
read as follows:
(a) 600,000,000 shares of Common Stock, $.01 par value each
(herein referred to as the "Common Stock");
The purpose of the proposed amendment is to provide sufficient shares for
future acquisitions or public offerings, benefit plans, recapitalizations, stock
splits and other corporate purposes. Once authorized, the additional shares of
Common Stock may be issued by the Board of Directors without further action by
the
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<PAGE> 14
stockholders, unless such action is required by law or New York Stock Exchange
or other applicable stock exchange listing requirement. The additional
authorized shares would be a part of the existing class of Common Stock and, if
and when issued, would have the same rights and privileges as the shares of
Common Stock currently issued and outstanding.
Since going public in April 1996, the Company has effected four
three-for-two stock splits of the Common Stock. As of April 9, 1998, 121,164,008
shares of the Common Stock were issued and outstanding and 17,649,949 shares
were reserved for issuance pursuant to stock options, incentive stock units or
other awards made or that may be made pursuant to the Company's 1996 Omnibus
Plan and upon the exercise of other outstanding stock options. Thus, as of April
9, 1998, of the 200,000,000 shares of Common Stock authorized, 61,186,043 shares
remained unissued and unreserved.
Although the Company is not aware of any pending or threatened efforts to
obtain control of the Company, the availability for issuance of additional
shares of Common Stock could enable the Board of Directors to render more
difficult or discourage an attempt to do so. For example, the issuance of shares
of Common Stock in a public or private sale, merger or similar transaction would
increase the number of outstanding shares, thereby diluting the interest of a
party attempting to obtain control of the Company.
Holders of Common Stock do not have preemptive rights to subscribe to
additional securities that may be issued by the Company, which means that
current stockholders do not have a right to purchase any new issue of capital
stock of the Company in order to maintain their proportionate ownership
interest. However, stockholders wishing to maintain their interests may be able
to do so through normal market purchases.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSED AMENDMENT
TO THE CERTIFICATE OF INCORPORATION
INDEPENDENT AUDITORS
The firm of Deloitte & Touche LLP served as the Company's independent
auditors for fiscal year 1997. Representatives of Deloitte & Touche LLP will be
present at the Meeting to respond to appropriate questions and will have an
opportunity to make a statement if they so desire.
The appointment of auditors is a matter for determination by the Board of
Directors for which no stockholder approval or ratification is necessary. The
Board of Directors has selected the firm of Deloitte & Touche LLP to audit the
books of the Company for fiscal year 1998.
STOCKHOLDERS PROPOSALS
Any stockholder of the Company wishing to submit a proposal for action at
the Company's 1999 Annual Meeting of Stockholders and desiring the proposal to
be considered for inclusion in the Company's proxy materials must provide a
written copy of the proposal to the management of the Company at its principal
executive office not later than , 1998, and must otherwise comply
with rules of the Securities and Exchange Commission relating to stockholder
proposals.
GENERAL
The Board of Directors does not know of any other business to come before
the Meeting. If, however, other matters do properly come before the Meeting, it
is the intention of the persons named in the accompanying proxy to vote on such
matters in accordance with their best judgment.
A list of stockholders entitled to be present and vote at the Meeting will
be available for inspection by the stockholders at the offices of the Company,
located at 2502 N. Black Canyon Highway, Phoenix, Arizona 85009, during regular
business hours from May 10, 1998 to the date of the Meeting. The list also will
be available during the Meeting for inspection by the stockholders who are
present thereat.
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<PAGE> 15
The Annual Report of the Company for fiscal year 1997 (which is not part of
the proxy soliciting material) is being mailed with this proxy statement to all
stockholders of record as of the record date for the Meeting.
By Order of the Board of Directors,
/s/ Bill M. Beverage
BILL M. BEVERAGE
Secretary
April , 1998
Phoenix, Arizona
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<PAGE> 16
PRELIMINARY COPY
OUTDOOR SYSTEMS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Stockholders and Proxy Statement, each dated April [ ], 1998, and does
hereby appoint William S. Levine and Arturo R. Moreno, and either of them, with
full power of substitution, as proxy or proxies of the undersigned to represent
the undersigned and to vote all shares of Outdoor Systems, Inc. Common Stock
which the undersigned would be entitled to vote if personally present at the
Annual Meeting of Stockholders of Outdoor Systems, Inc., to be held at the Ritz
Carlton, 2401 E. Camelback Road, Phoenix, Arizona at 4:00 p.m., local time, on
Thursday, May 21, 1998, at any adjournment(s) thereof:
1. TO ELECT BRIAN J. O'CONNOR TO SERVE AS CLASS II DIRECTOR FOR A TERM OF THREE
YEARS.
[ ] FOR the nominee listed above [ ] WITHHOLD AUTHORITY to vote for the
nominee listed above
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE DIRECTOR NOMINEE LISTED ABOVE.
2. TO AMEND THE CERTIFICATE OF INCORPORATION OF THE COMPANY TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMMON STOCK OF THE COMPANY FROM 200,000,000
TO 600,000,000 SHARES.
<TABLE>
<S> <C> <C>
[ ] FOR the proposed amendment to the [ ] AGAINST the proposed [ ] ABSTAIN
Company's Certificate of Incorporation amendment to the Company's
Certificate of Incorporation
</TABLE>
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION.
PLEASE COMPLETE, DATE, SIGN AND RETURN THIS PROXY PROMPTLY.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN ACCORDANCE WITH THE
DIRECTIONS GIVEN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, IT
WILL BE VOTED FOR DIRECTOR NOMINEE LISTED ABOVE AND FOR THE PROPOSAL TO AMEND
THE COMPANY'S CERTIFICATE OF INCORPORATION.
<PAGE> 17
PROXY NUMBER NUMBER OF SHARES Dated: , 1998.
Signature
Signature, if held jointly
Please sign exactly as your name(s)
appear hereon. If shares are held
jointly, each stockholder named should
sign. When signing as attorney,
executor, administrator, trustee or
guardian, give your full title as
such. If the signatory is a
corporation, sign the full corporate
name by a duly authorized officer.
PLEASE COMPLETE, DATE, SIGN AND RETURN
THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
