<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
[X] Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule
14a-11(c) or Rule 14a-12
</TABLE>
Outdoor Systems, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] 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:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
------------------------------------------------------------------------
(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:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] 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:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
[OUTDOOR SYSTEMS LOGO]
April 28, 1999
Dear Stockholders:
We are holding the Company's 1999 Annual Meeting of Stockholders on
Thursday, May 27, 1999, 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 in person.
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
OUTDOOR SYSTEMS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 27, 1999
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 27,
1999 at 4:00 p.m., local time, for the following purposes:
1. To elect two Class III directors to the Board of Directors to serve
for a term of three years; and
2. 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 15, 1999 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 28, 1999
Phoenix, Arizona
<PAGE> 4
OUTDOOR SYSTEMS, INC.
2052 N. BLACK CANYON HIGHWAY
PHOENIX, ARIZONA 85009
PROXY STATEMENT FOR
THE 1999 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 28,
1999, 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 27, 1999, 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 nominees for Class III directors named in this Proxy
Statement and (ii) 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 15, 1999 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 15,
1999 was 184,479,067, each of which is entitled to one vote. The presence in
person or by proxy of stockholders holding of record a majority of the shares 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 nominees named in Proposal 1 hereof requires the
affirmative vote of a plurality of the 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.
BENEFICIAL OWNERSHIP OF COMMON STOCK
The following table sets forth certain information as of April 15, 1999
(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........................................... 34,402,752(1) 18.6%
1702 E. Highland, Suite 310
Phoenix, Arizona 85016
Arturo R. Moreno............................................ 33,690,231(2) 16.9%
2502 N. Black Canyon Highway
Phoenix, Arizona 85009
Putnam Investments, Inc..................................... 23,081,951(3) 12.5%
One Post Office Square
Boston, Massachusetts 02109
FMR Corp.................................................... 17,452,996(4) 9.5%
82 Devonshire Street
Boston, Massachusetts 02109
Brian J. O'Connor........................................... 98,720(5) *
Stephen F. Butterfield...................................... 121,466(6) *
Wally C. Kelly.............................................. 1,556,948(7) *
Robert M. Reade............................................. 309,896(8) *
Bill M. Beverage............................................ 442,148(9) *
All directors and executive officers as a group (7
persons).................................................. 66,223,955(10) 32.8%
</TABLE>
- ---------------
* Represents less than 1% of the outstanding shares of Common Stock.
(1) Includes 4,348,206 shares of Common Stock owned by M-K Link Investments
Limited Partnership and certain transferees thereof (collectively, "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) 225 shares of Common
Stock owned by Mr. Levine directly and (ii) 29,733,321 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 except in his capacity as general partner and to
the extent of his partnership interest therein. The remaining 321,000
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 4,348,206 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) 6,677,785 shares of Common Stock owned
by Mr. Moreno directly, (ii) 15,063,578 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
15, 1999, (iii) 3,429,396 shares of Common Stock held by Mr. Moreno and his
wife, as joint tenants, and (iv) 4,121,266 shares held by BRN Properties
Limited Partnership, an Arizona limited partnership of which Mr. Moreno is
the sole general partner. The remaining 50,000 shares of Common Stock
attributed to Mr. Moreno are held by the Arturo R. and Carole Moreno
Foundation (the "Moreno Family Foundation"), a charitable foundation of
which Mr. Moreno is President and member
2
<PAGE> 6
of the Board of Directors. Mr. Moreno disclaims beneficial ownership of the
shares held by the Moreno Family Foundation.
(3) Based on Schedule 13G, as amended, filed by Putnam Investments, Inc. and
certain of its affiliates with the Securities and Exchange Commission
reporting beneficial ownership as of December 31, 1998. Includes 22,357,588
shares and 724,363 shares reported on the Schedule 13G, as amended, as
beneficially owned by Putnam Investment Management, Inc. and The Putnam
Advisory Company, Inc., respectively, wholly-owned registered investment
advisors of Putnam Investments, Inc. having the same address.
(4) Based on Schedule 13G, as amended, filed by FMR Corp. with the Securities
and Exchange Commission reporting beneficial ownership as of December 31,
1998.
(5) Includes 60,752 shares of Common Stock subject to options that are
currently exercisable or that become exercisable within 60 days of April
15, 1999.
(6) Includes (i) 7,593 shares of Common Stock owned by Mr. Butterfield's
children, and (ii) 37,971 shares of Common Stock subject to options that
are currently exercisable or that become exercisable within 60 days of
April 15, 1999.
(7) Represents shares of Common Stock subject to options that are currently
exercisable or that become exercisable within 60 days of April 15, 1999.
Does not include any shares of Common Stock that Mr. Kelly may receive in
settlement of incentive units.
(8) Includes (i) 52,626 shares of Common Stock owned by Mr. Reade and (ii)
257,240 shares of Common Stock subject to options that are currently
exercisable or that become exercisable within 60 days of April 15, 1999.
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 15, 1999.
Does not include any shares of Common Stock that Mr. Beverage may receive
in settlement of incentive units.
(10) Includes 17,418,637 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 15, 1999. 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 nominees are for Class III directors. The
Class I and Class II 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 two nominees named
below.
It is intended that persons named in the accompanying form of proxy will
vote for the nominees listed below, who are currently directors, unless
authority to so vote is withheld. In the event the nominees refuse or are unable
to serve as directors (which is not now anticipated), the shares represented by
proxies in the accompanying form may be voted for the election of substitute
nominees selected by the persons named in the proxy.
3
<PAGE> 7
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE
NOMINEES FOR CLASS III DIRECTORS.
DIRECTOR AND DIRECTOR NOMINEE INFORMATION
NOMINEES FOR DIRECTORS
CLASS III -- TERM EXPIRING 2002
WILLIAM S. LEVINE Age: 67
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 19 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: 52
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 26 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.
DIRECTORS CONTINUING IN OFFICE
CLASS I -- TERM EXPIRING 2000
STEPHEN F. BUTTERFIELD Age: 46
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.
CLASS II -- TERM EXPIRING 2001
BRIAN J. O'CONNOR Age: 43
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. He was a Senior Vice
President with Alden Capital Markets, Inc. from 1990 to 1997. 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.
4
<PAGE> 8
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 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 1998 have been complied
with on a timely basis.
DIRECTORS' ATTENDANCE
The Board of Directors of the Company held two meetings during fiscal year
1998. 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
7,595 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 1998, the Company granted
to each of Messrs. O'Connor and Butterfield stock options to purchase 7,595
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 four times
during fiscal year 1998. 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 1998. 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, 1998 (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............... 1998 $475,000 $2,525,000(2) $ -- -- $ 3,925
President and Chief 1997 475,000 2,598,294(2) -- -- 6,216
Executive Officer 1996 475,000 1,403,989(2) -- 1,544,143 12,970
William S. Levine.............. 1998 450,000(3) -- -- -- --
Chairman of the Board 1997 450,000(3) -- -- -- --
1996 450,000(3) -- -- -- --
Wally C. Kelly................. 1998 521,915 -- -- 75,000 4,091
Senior Vice President 1997 435,965 -- -- -- 3,060
1996 329,389 -- -- 759,375 2,641
Robert M. Reade(4)............. 1998 213,269 -- -- 60,000 2,096
Vice President 1997 210,780 -- -- -- 2,096
1996 N/A N/A N/A N/A N/A
Bill M. Beverage............... 1998 242,308 -- -- 60,000 2,096
Treasurer, Secretary and 1997 180,256 -- -- -- 4,379
Chief Financial Officer 1996 101,327 -- 25,000(5) 379,687 3,888
</TABLE>
- ---------------
(1) The amounts in this column include the following: (i) Company contributions
to a 401(k) plan for fiscal years 1998, 1997 and 1996, respectively, as
follows: Mr. Moreno, $1,425, $1,425 and $1,425; Mr. Kelly, $1,223, $1,155
and $1,155; Mr. Reade, N/A, N/A and N/A; and Mr. Beverage, $1,425, $1,425
and $1,425; (ii) health insurance premiums paid for fiscal years 1998, 1997
and 1996, respectively, as follows: Mr. Moreno, $2,500, $2,501 and $2,085;
Mr. Kelly, $2,500, $1,537 and $1,450; Mr. Reade, $2,096, $2,096 and N/A; and
Mr. Beverage, $2,500, $2,501 and $2,085; and (iii) life insurance premiums
paid for fiscal years 1998, 1997 and 1996, respectively, as follows: Mr.
Moreno, N/A, $2,290 and $9,460; Mr. Kelly, $368, $368 and $576; Mr. Reade,
N/A, N/A and N/A; and Mr. Beverage, $453, $453 and $378.
(2) The bonus amount (i) for 1998 represents the amount paid subsequent to the
end of fiscal year 1998 by reference to operating results for fiscal year
1998; (ii) for 1997 represents the amount paid subsequent to the end of
fiscal year 1997 by reference to operating results for fiscal year 1997; and
(iii) 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. For
fiscal years 1998 and 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 up to and including 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
year 1996, 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
6
<PAGE> 10
the discretion of the Board of Directors following a review by the
Compensation Committee after the audited financial statements for the
previous fiscal year had been released by the Company's auditors.
(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 3,670 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 following table sets forth certain information regarding stock options
to purchase shares of Common Stock granted by the Company during fiscal year
1998 to the Named Executives. The Company did not grant any stock appreciation
rights ("SARs") during fiscal year 1998.
OPTION GRANTS IN FISCAL YEAR 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------- POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
% OF PRICE APPRECIATION
NUMBER OF TOTAL OF OPTION TERM*
SECURITIES OPTIONS -----------------------------------------
UNDERLYING GRANTED 5% 10%
OPTIONS TO EXERCISE ------------------- -------------------
GRANTED EMPLOYEES OR BASE PRICE PRICE
(# OF IN FISCAL PRICE EXPIRATION PER AGGREGATE PER AGGREGATE
NAME SHARES)(1) YEAR ($/SHARE) DATE SHARE VALUE SHARE VALUE
- ---- ---------- --------- --------- ---------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Arturo R. Moreno........ -- --% $ -- -- $ -- $ -- $ -- $ --
Wally C. Kelly.......... 75,000 6.8% 15.58 1/7/08 16.36 1,227,000 17.14 1,285,500
Robert M. Reade......... 60,000 5.4% 15.58 1/7/08 16.36 981,600 17.14 1,028,400
Bill M. Beverage........ 60,000 5.4% 15.58 1/7/08 16.36 981,600 17.14 1,028,400
</TABLE>
- ---------------
* The dollar gains under these columns result from calculations assuming 5%
and 10% growth rates as set by the Securities and Exchange Commission and
are not intended to forecast future price appreciation of the Common Stock
of the Company. The gains reflect a future value based upon growth at these
prescribed rates.
(1) The indicated options were granted pursuant to the Company's 1996 Omnibus
Plan at an exercise price per share equal to the per share fair market value
of the underlying Common Stock on the date of the grant, have a term of ten
years and become exercisable ratably over a period of four years from the
date of the grant. In the event of a change in control of the Company, all
outstanding options become immediately and fully exercisable, unless
otherwise provided by the Board of Directors prior to the change in control.
7
<PAGE> 11
The following table sets forth certain information concerning options
exercised during fiscal year 1998 by Named Executives and the value of
unexercised options granted by the Company and held by Named Executives at
December 31, 1998. 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....... -- $ -- 14,484,524 1,158,108 $431,691,251 $32,455,620
Wally C. Kelly(2)...... -- -- 1,253,433 971,528 36,310,812 26,852,075
Robert M. Reade(2)..... 42,525 1,191,750 147,318 271,751 4,128,540 6,842,530
Bill M. Beverage(2).... -- -- 284,766 357,302 7,980,465 9,221,545
</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 $30.00
per share (the closing price per share as reported by the New York Stock
Exchange for December 31, 1998).
(2) Does not reflect incentive units held by Messrs. Kelly, Reade and Beverage
representing the right to receive up to 326,997, 21,908 and 12,537 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 1998.
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 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.
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Annual Cash Bonus. The Company's executive officers, other than the Chief
Executive Officer, were not eligible to receive cash bonuses for fiscal year
1998. The CEO Bonus Plan, which was adopted by the Company's stockholders at the
1997 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 1998, the Compensation Committee granted stock
options to purchase an aggregate of 1,108,250 shares of Common Stock to its
employees, including options to purchase 195,000 shares of Common Stock granted
to its executive officers. The stock options were granted at an exercise price
equal to the fair market value of the underlying shares of Common Stock on the
date of the grant, have a term of ten years and become exercisable ratably over
a period of four years from the date of the grant 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 1998.
In addition, pursuant to the CEO Bonus Plan, which was adopted by the
Company's stockholders at the 1997 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 up to and including 1.25% of the
Company's "EBITDA" (operating income (loss) 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 1998, the Board of Directors
awarded Mr. Moreno a cash bonus of $2,525,000.
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 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 1998.
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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 1998 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.
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, 1998 with
the cumulative total return for the same period of the S&P 500 Index and a group
of peers (the "Peer Index") consisting of the following companies: Chancellor
Media Corporation, Clear Channel Communications, Inc., Lamar Advertising Company
and The Ackerly Group, Inc. For purposes 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
AND THE PEER INDEX(1)
OUTDOOR SYSTEMS
<TABLE>
<CAPTION>
OUTDOOR SYSTEMS, INC. THE S&P 500 INDEX PEER INDEX
--------------------- ----------------- ----------
<S> <C> <C> <C>
4/24/96 1.00 1.00 1.00
12/31/96 4.22 1.14 1.08
12/31/97 8.66 1.49 2.50
12/31/98 15.19 1.89 3.35
</TABLE>
- ---------------
(1) Note: In previous years, the Company used the Paul Kagan Associates, Inc.
Radio/TV Average Index as its industry or line-of-business comparison index.
The Paul Kagan Associates, Inc. Radio/TV Average Index is no longer
available. Therefore, the Company has selected the Peer Index to replace the
Paul Kagan Associates, Inc. Radio/TV Average Index.
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<PAGE> 14
CERTAIN TRANSACTIONS
The Company has made an interest-free unsecured loan in the amount of
$400,000 to Wally C. Kelly, Senior Vice President of the Company. As of December
31, 1998, $400,000 remained outstanding under such loan.
See also "Compensation Committee Interlocks and Insider Participation."
INDEPENDENT AUDITORS
The firm of Deloitte & Touche LLP served as the Company's independent
auditors for fiscal year 1998. 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 1999.
STOCKHOLDERS PROPOSALS
Any stockholder of the Company wishing to submit a proposal for action at
the Company's 2000 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 December 31, 1999, and must otherwise comply
with rules of the Securities and Exchange Commission relating to stockholder
proposals.
The proxy or proxies designated by the Company will have discretionary
authority to vote on any matter properly presented by a stockholder for
consideration at the 2000 Annual Meeting of Stockholders but not submitted for
inclusion in the Proxy Statement for such meeting unless notice of the matter is
received by the Company at its principal executive office not later than March
12, 2000 and certain other conditions of the applicable Securities and Exchange
Commission rules are satisfied.
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 16, 1999 to the date of the Meeting. The list also will
be available during the Meeting for inspection by the stockholders who are
present thereat.
The Annual Report of the Company for fiscal year 1998 (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.
THE COMPANY WILL PROVIDE WITHOUT CHARGE UPON THE WRITTEN REQUEST OF ANY
STOCKHOLDER A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION FOR THE FISCAL
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YEAR 1998. REQUESTS FOR COPIES SHOULD BE DIRECTED TO BILL M. BEVERAGE, CHIEF
FINANCIAL OFFICER, TREASURER AND SECRETARY, OUTDOOR SYSTEMS, INC., 2502 N. BLACK
CANYON HIGHWAY, PHOENIX, ARIZONA 85009.
By Order of the Board of Directors,
/s/ Bill M. Beverage
BILL M. BEVERAGE
Secretary
April 28, 1999
Phoenix, Arizona
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- --------------------------------------------------------------------------------
OUTDOOR SYSTEMS, INC.
ANNUAL MEETING OF STOCKHOLDERS
THE RITZ CARLTON HOTEL
2401 E. CAMELBACK ROAD
PHOENIX, ARIZONA
MAY 27, 1999
4:00 P.M.
T FOLD AND DETACH HERE T
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 28, 1999, 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 27, 1999, at any adjournment(s) thereof:
1. TO ELECT WILLIAM S. LEVINE AND ARTURO R. MORENO TO SERVE AS CLASS III
DIRECTORS FOR A TERM OF THREE YEARS.
<TABLE>
<S> <C>
[ ] FOR the nominees listed above [ ] WITHHOLD AUTHORITY
(except as indicated to the contrary below) to vote for the nominees listed above
</TABLE>
Instruction: To withhold authority to vote for one of the nominees, write
that nominee's name in the
space below:
-----------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE DIRECTOR NOMINEES LISTED
ABOVE.
<PAGE> 17
- --------------------------------------------------------------------------------
-- FOLD AND DETACH HERE --
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 THE DIRECTOR NOMINEES LISTED ABOVE.
PROXY NUMBER NUMBER OF SHARES Dated: ________________, 1999.
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.
