UNITED STATES
ECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14C INFORMATION
____________
Information Statement Pursuant to Section 14(c) of the Securities Exchange Act
of 1934
Check the appropriate box:
<checked-box>Preliminary Information Statement
<square>Confidential, for Use of the Commission Only (as
permitted by Rule 14c-5(d)(i))
<square>Definitive Information Statement
LAMAR ADVERTISING COMPANY
(Name of Registrant as Specified in its Charter)
(Name of Person Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
<square>No fee required
<checked-box>Fee computed on table below per Exchange Act Rules
14c-5(g) and 0-11.
(1) Title of each class of securities to which the transaction applies:
Class A Common Stock, $0.001 par value per share (the "Lamar Class
A Common Stock"), of Lamar Advertising Company ("Lamar") to be
issued in connection with the purchase by Lamar of all of the
outstanding capital stock of (a) Chancellor Media Outdoor
Corporation ("Chancellor Outdoor") and (b) Chancellor Media Whiteco
Outdoor Corporation ("Chancellor Whiteco").
(2) Aggregate number of securities to which transaction applies:
26,227,273 shares of Lamar Class A Common Stock.
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: The filing fee of $329,114 is
calculated in accordance with Rule 0-11(c)(1)(i) under the Exchange
Act as one fiftieth of one percent of $1,645,570,000, which is the
aggregate book value as of March 31, 1999 of the (a) 1,000 shares
of Common Stock, $0.01 par value per share, of Chancellor Outdoor
and (b) 1,000 shares of Common Stock, $0.01 par value per share, of
Chancellor Whiteco, to be purchased by Lamar in the transaction.
(4) Proposed maximum aggregate value of the transaction:
$1,645,570,000.
(5) Total fee paid: $329,114.
<square>Fee paid previously with preliminary materials.
<square>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.
<PAGE>
INFORMATION STATEMENT
LAMAR ADVERTISING COMPANY
5551 CORPORATE BOULEVARD
BATON ROUGE, LOUISIANA 70808
Lamar Advertising Company, a Delaware corporation ("Lamar"), is
furnishing this Information Statement (the "Information Statement") to its
stockholders in connection with Lamar's proposed purchase (the "Stock
Purchase") of all of the outstanding common stock of Chancellor Media Outdoor
Corporation ("Chancellor Outdoor") from its parent corporation, Chancellor
Media Corporation of Los Angeles ("Chancellor LA") and all of the outstanding
common stock of Chancellor Media Whiteco Outdoor Corporation ("Chancellor
Whiteco") from Chancellor LA's parent corporation, Chancellor Mezzanine
Holdings Corporation ("Chancellor Mezzanine"), for a combination of $700
million in cash and 26,227,273 shares (the "Lamar Shares") of the Class A
common stock, $0.001 par value per share, of Lamar (the "Class A Common Stock")
to be issued by Lamar upon consummation of the Stock Purchase (the "Share
Issuance").
The Board of Directors of Lamar has fixed the close of business on [July
15, 1999] as the record date (the "Record Date") for the determination of
stockholders entitled to receive notice of and to vote on the Share Issuance.
As of the Record Date, Lamar had outstanding [43,509,817] shares of Class A
Common Stock, each of which is entitled to one vote per share, and 17,700,000
shares of Class B common stock, $0.001 par value per share (the "Class B Common
Stock"), each of which is entitled to ten votes per share. The Share Issuance
requires the affirmative vote of Lamar stockholders holding at least a majority
of the outstanding Lamar Class A and Class B Common Stock.
The Reilly Family Limited Partnership ("RFLP"), holder of 100% of the
Class B Common Stock as of the Record Date, representing approximately 80% of
the total voting power of Lamar, has advised the Lamar Board that it intends to
execute a written consent (the "Written Consent") approving the Share Issuance.
Thus, no further stockholder vote will be necessary and the Written Consent
will be executed in lieu of a special meeting of the stockholders of Lamar.
This Information Statement is first being mailed to stockholders of
record as of the Record Date on or about [July ___, 1999]. In accordance with
the regulations of the Securities and Exchange Commission, the Stock Purchase
and the Share Issuance may not be completed prior to 20 business days following
the date that this Information Statement is mailed to the Lamar stockholders.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
By Order of the Board of Directors
James R. McIlwain
Secretary
Baton Rouge, Louisiana
[July __, 1999]
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Lamar files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). You may inspect and
copy this information at the Commission's public reference facilities in Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, as well as the
Commission's Regional Offices. You may also call the Commission at 1-800-SEC-
0330 for more information about the public reference room, how to obtain copies
of documents by mail or how to access documents electronically on the
Commission's Web site at (http://www.sec.gov).
Commission rules permit Lamar to "incorporate by reference" the
information that it files with the Commission, which means that Lamar may
disclose important information to you in this Information Statement by
referring to documents that it files with the Commission. Certain information
that Lamar currently has on file is incorporated by reference and is an
important part of this Information Statement. Other information that Lamar
will file later with the Commission will automatically update and supersede
this information.
Lamar incorporates by reference the following documents that it has filed
with the Commission pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"):
<circle>Current Report on Form 8-K filed on October 15, 1998, as amended
by Form 8-K/A filed on October 19, 1998 and by Form 8-K/A filed on
June 8, 1999
<circle>Annual Report on Form 10-K for the fiscal year ended December 31,
1998
<circle>Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1999
<circle>Current Report on Form 8-K filed on May 7, 1999
<circle>Current Report on Form 8-K filed on June 10, 1999
<circle>Current Report on Form 8-K filed on July 7, 1999
<circle>All other documents filed by Lamar with the Commission pursuant
to Sections 13(a), 14 or 15(d) of the Exchange Act after the date
of this Information Statement and prior to consummation of the
Stock Purchase.
You may obtain any of the above-listed documents from us or from the
Commission. Documents listed above are available from us without charge,
excluding all appendices unless the appendices have been specifically
incorporated by reference into this Information Statement. Stockholders may
request copies by writing or telephoning us at:
Lamar Advertising Company
5551 Corporate Boulevard
Baton Rouge, Louisiana 70808
Attn: James R. McIlwain
Telephone: (225)926-1000
<PAGE>
TABLE OF CONTENTS
SUMMARY................................................... 1
Purpose of this Information Statement..................... 1
Structure and Terms of the Stock Purchase................. 1
The Companies............................................. 1
The Closing Date.......................................... 2
Reasons for the Stock Purchase............................ 2
Board Recommendation...................................... 2
Other Terms and Conditions to the Stock Purchase.......... 2
Rights of Lamar Stockholders; Dilution.................... 4
Accounting Treatment...................................... 4
Federal Income Tax Consequences........................... 4
COMPARATIVE PER SHARE DATA................................ 5
MARKET PRICES AND DIVIDENDS............................... 6
Lamar..................................................... 6
Chancellor Outdoor........................................ 6
GENERAL................................................... 7
Purpose of this Information Statement..................... 7
Vote Required; Record Date................................ 7
The Written Consent....................................... 7
THE STOCK PURCHASE........................................ 7
The Stock Purchase Agreement.............................. 7
Structure and Terms of the Stock Purchase................. 7
The Voting Agreement...................................... 8
Background of and Reasons for the Stock Purchase.......... 8
Recommendation of the Lamar Board of Directors............ 9
The Closing Date.......................................... 9
Certain Terms of the Stock Purchase Agreement............. 10
Hart-Scott-Rodino Clearance............................... 11
Other Conditions to the Stock Purchase.................... 11
Sellers Indemnification Obligations....................... 13
Conduct of Business by Chancellor Outdoor and Lamar
Pending the Closing...................................... 13
No Solicitation........................................... 14
No Use of Chancellor Name................................. 14
Certain Employee Benefit Matters.......................... 14
Amendment and Termination................................. 14
Fees and Expenses......................................... 15
Rights of Lamar Stockholders; Dilution.................... 15
Appraisal Rights.......................................... 15
Accounting Treatment...................................... 15
Certain Federal Income Tax Consequences................... 15
Federal Securities Law Consequences....................... 16
BUSINESS OF THE COMPANIES................................. 17
Description of the Business of Lamar...................... 17
Description of the Business of Chancellor Outdoor......... 17
PRINCIPAL STOCKHOLDERS OF LAMAR........................... 20
SELECTED FINANCIAL DATA OF LAMAR ADVERTISING COMPANY...... 22
SELECTED FINANCIAL DATA OF CHANCELLOR MEDIA OUTDOOR
CORPORATION............................................... 23
Chancellor Media Outdoor Corporation...................... 23
The Outdoor Advertising Division of Whiteco
Industries, Inc.......................................... 24
Martin Media L.P.......................................... 25
Martin & MacFarlane, Inc.................................. 26
CHANCELLOR MEDIA OUTDOOR CORPORATIONMANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................ 27
LAMAR ADVERTISING COMPANYUNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS......................... 31
ADDITIONAL INFORMATION; INCORPORATION BY REFERENCE........ 37
FURTHER STOCKHOLDER ACTION NOT REQUIRED................... 37
INDEX TO FINANCIAL STATEMENTS................................ F-1
AMENDED AND RESTATED STOCK PURCHASE AGREEMENT AND
RELATED AGREEMENTS........................................ A-1
<PAGE>
SUMMARY
The following Summary is not a complete statement of all of the features or
effects of Lamar's proposed acquisition of Chancellor Outdoor and Chancellor
Whiteco. The more detailed business and financial information contained in, or
incorporated by reference into, this Information Statement qualify this Summary
in its entirety.
PURPOSE OF THIS INFORMATION STATEMENT
Under the Delaware General Corporation Law ("DGCL"), neither the Stock
Purchase nor the Share Issuance is required to be approved by Lamar's
stockholders. However, the rules of the Nasdaq National Market, upon which the
Class A Common Stock is traded, require that the Share Issuance be submitted to
the Lamar stockholders and approved by the holders of at least a majority of
the votes cast on the proposal. In accordance with the DGCL and Lamar's
Certificate of Incorporation, Lamar's Board has decided to obtain the necessary
stockholder vote by a written consent in lieu of a special meeting of
stockholders, and thus under the DGCL, the Share Issuance must be approved by
the holders of at least a majority of the outstanding Lamar Class A and Class B
Common Stock (collectively, the "Lamar Common Stock").
RFLP, holder of 100% of the Class B Common Stock, representing approximately
80% of the voting power of Lamar, has advised the Board that it intends to
execute the Written Consent approving the Share Issuance. Thus, no further
stockholder vote will be necessary and the Written Consent obviates the need to
incur the expense of conducting a formal stockholders' meeting to approve the
Share Issuance. In accordance with the DGCL and regulations promulgated under
the Exchange Act, Lamar has provided this Information Statement to its
stockholders of record as of the Record Date, and the Share Issuance may not be
completed until 20 business days following the date of this Information
Statement. See "The Stock Purchase - The Voting Agreement."
STRUCTURE AND TERMS OF THE STOCK PURCHASE
On June 1, 1999, Lamar and Chancellor LA entered into a Stock Purchase
Agreement and on July 12, 1999, Lamar, Chancellor LA and Chancellor
Mezzanine entered into an Amended and Restated Stock Purchase Agreement (as
amended and restated, the "Stock Purchase Agreement") and related agreements
pursuant to which Lamar will purchase (i) 1,000 shares of the common stock,
$0.01 par value per share, of Chancellor Outdoor, representing all of the
issued and outstanding common stock of Chancellor Outdoor (the "Chancellor
Outdoor Common Stock") and (ii) 1,000 shares of the common stock, $0.01 par
value per share, of Chancellor Whiteco, representing all of the issued and
outstanding common stock of Chancellor Whiteco (the "Whiteco Common Stock"),
for a combination of $700 million in cash and 26,227,273 shares (the "Lamar
Shares") of Class A Common Stock (collectively, the "Purchase Price").
Chancellor Whiteco is currently a wholly-owned subsidiary of Chancellor
Outdoor. Immediately prior to consummation of the Stock Purchase, the Whiteco
Common Stock will be distributed to Chancellor LA and then to Chancellor
Mezzanine. Lamar will purchase the Whiteco Common Stock from Chancellor
Mezzanine and will purchase the Chancellor Outdoor Common Stock from Chancellor
LA. (Chancellor LA and Chancellor Mezzanine are sometimes collectively
referred to herein as the "Sellers").
The Lamar Shares to be issued to Chancellor LA and Chancellor Mezzanine
will constitute in the aggregate approximately 37% of the Class A Common Stock,
and approximately 30% of the Lamar Common Stock, outstanding after such
issuance. However, because of the different voting rights of the Class A and
Class B Common Stock, the Lamar Shares will confer to Chancellor LA and
Chancellor Mezzanine collectively only approximately 10.5% of the total voting
power of Lamar. Following the Share Issuance, RFLP will hold approximately 72%
of the voting power of Lamar. See "The Stock Purchase - Structure and Terms of
the Stock Purchase."
THE COMPANIES
Lamar has operated its outdoor advertising business under the Lamar name
since 1902. As of December 31, 1998, Lamar managed approximately 71,900
outdoor advertising displays in 36 states, and as of June 30, 1999, Lamar
managed approximately 75,700 outdoor advertising displays. Lamar also operates
the largest logo sign business in the United States. (Logo signs are signs
located near highway exits that deliver brand name information on available
gas, food, lodging and camping services.) As of December 31, 1998, Lamar
maintained over 74,700 logo sign displays in 18 states. Lamar also operates
transit advertising displays on bus shelters, bus benches and buses in several
markets. Lamar is located at 5551 Corporate Boulevard, Baton Rouge, Louisiana
70808, telephone (225) 926-1000. See "Business of the Companies - Description
of the Business of Lamar."
Chancellor Outdoor is a wholly-owned subsidiary of Chancellor LA, and an
indirect wholly-owned subsidiary of Chancellor Media Corporation, a Delaware
corporation, which is a large national exclusive radio broadcasting and related
media company. Chancellor Whiteco is currently a wholly-owned subsidiary of
Chancellor Outdoor. Chancellor Outdoor's outdoor advertising portfolio
includes over 42,700 billboards and outdoor displays in 38 states. Chancellor
Outdoor is located at 1845 Woodall Rodgers Freeway, Suite 1300, Dallas, Texas
75201, telephone (214) 979-6700. See "Business of the Companies - Description
of the Business of Chancellor Outdoor."
THE CLOSING DATE
The closing for the Stock Purchase (the "Closing") will take place on the
tenth business day following the satisfaction of the conditions to the
obligations of Lamar and the Sellers as stated in the Stock Purchase Agreement
(the "Closing Date"). See "The Stock Purchase - Hart-Scott-Rodino Clearance"
and " -Other Conditions to the Stock Purchase."
REASONS FOR THE STOCK PURCHASE
Lamar's Board believes that the terms of the Stock Purchase Agreement and
related transactions are fair to, and in the best interests of, Lamar and its
stockholders. The Board believes that the Stock Purchase will improve access
to major metropolitan and regional markets, increase per share earnings and
improve economies of scale. See "The Stock Purchase - Background of and
Reasons for the Stock Purchase."
BOARD RECOMMENDATION
Lamar's Board believes that the Stock Purchase and Share Issuance and
related transactions are in the best interests of Lamar and its stockholders
and has recommended to its stockholders the Share Issuance and the related
transactions as described in this Information Statement. The Board believes
that consummating the Stock Purchase will increase Lamar's prospects for future
success. See "The Stock Purchase - Recommendation of the Lamar Board of
Directors."
OTHER TERMS AND CONDITIONS TO THE STOCK PURCHASE
In addition to the terms described above, the Stock Purchase Agreement and
related documents contain certain other terms and conditions, including the
following:
VOTING AGREEMENT. As a condition to entering the Stock Purchase
Agreement, the Sellers required RFLP to enter into a voting agreement, dated
as of June 1, 1999, and amended and restated as of July 12, 1999, to ensure
the approval of the Share Issuance (the "Voting Agreement"). Pursuant to the
Voting Agreement by and among Lamar, the Sellers and RFLP, RFLP has agreed to
vote its shares of Class B Common Stock in favor of the Share Issuance and any
other transactions contemplated by the Stock Purchase Agreement. The Voting
Agreement prohibits RFLP from, at any time prior to the Closing Date: (i)
converting any shares of Class B Common Stock into Class A Common Stock or
otherwise waiving its right to have each share of Class B Common Stock entitled
to ten votes; (ii) selling, transferring or pledging any of its shares of its
Class B Common Stock; or (iii) entering into any voting arrangement with
respect to its ownership of Class B Common Stock. See "The Stock Purchase -
The Voting Agreement" and "- Certain Terms of the Stock Purchase Agreement."
FINANCING. Prior to the consummation of the Stock Purchase, and to fund the
cash portion of the Purchase Price, the terms of the Stock Purchase Agreement
require that Lamar: (i) by June 16, 1999, obtain and deliver to the Sellers a
commitment letter from Lamar's lenders, committing to fund at least $700
million at Closing specifically for the transactions contemplated by the Stock
Purchase Agreement (the "Commitment Letter"); and (ii) by August 14, 1999,
(A) obtain and deliver to the Sellers definitive agreements, executed and
delivered by Lamar's lenders, and in a form reasonably satisfactory to the
Sellers, to disburse to Lamar at or prior to Closing, an aggregate amount of
cash equal to at least $700 million, and containing no conditions to such
disbursement other than those which are customary in such transactions (the
"Definitive Agreements"), and (B) provide written certification to the Sellers
that Lamar is currently meeting the covenants under its existing credit
facility and that Lamar has no reason to believe that it will be unable to
meet its obligations under the Definitive Agreements. Lamar delivered the
Commitment Letter on June 15, 1999. Should Lamar fail to deliver to the
Sellers the Definitive Agreements and written certification within the time
period provided, the Sellers have the right to terminate the Stock Purchase
Agreement within five calendar days thereafter. See "The Stock Purchase -
Certain Terms of the Stock Purchase Agreement - Financing."
STOCKHOLDERS AGREEMENT. As a condition to the Stock Purchase, Lamar, the
Sellers and RFLP must execute a Stockholders Agreement (the "Stockholders
Agreement"), that provides, among other things, that immediately following the
Closing, Lamar's Board will be increased from eight to ten directors, two of
whom will be designated by the Sellers. The Stockholders Agreement also
requires the Sellers and RFLP to vote their shares of Lamar Common Stock in
favor of the two candidates proposed by the Sellers.
The Stockholders Agreement also prohibits Lamar from taking certain actions
without the Sellers' approval, including: (i) transactions between Lamar and
any affiliate (other than a wholly-owned subsidiary of Lamar); (ii) actions
resulting in a change in control of Lamar (as defined in the Stockholders
Agreement); and (iii) an acquisition or disposition of assets or stock with an
aggregate fair market value of $500 million or more. However, if certain
conditions are met, these restrictions do not apply to, and no special approval
of the Sellers is required for, the complete sale of Lamar, whether by means of
a sale of assets or stock, or by merger.
The Stockholders Agreement, including the Sellers' right to designate two
directors on the Lamar Board, generally will terminate upon the earlier of 10
years from the Closing or at such time as the Sellers hold in the aggregate
less than 10% of the outstanding Lamar Common Stock, on a fully diluted basis.
See "The Stock Purchase - Certain Terms of the Stock Purchase Agreement -
Stockholders Agreement."
REGISTRATION RIGHTS AGREEMENT. The Stock Purchase Agreement also requires
Lamar to execute a registration rights agreement (the "Registration Rights
Agreement") with the Sellers, pursuant to which Lamar will (i) grant to the
Sellers demand registration rights, exercisable at any time after ten months
following the Closing Date, and (ii) at any time after ten months following the
Closing Date as the Sellers may request, prepare and file a shelf registration
statement for use by the Sellers and keep such shelf registration statement
effective for one year. The Registration Rights Agreement also grants the
Sellers the right to include its shares in any registration statement filed by
Lamar to register the offer and sale of Lamar Common Stock by Lamar or other
stockholders (including Lamar's universal shelf registration statement) on
customary terms. See "The Stock Purchase - Certain Terms of the Stock Purchase
Agreement - the Registration Rights Agreement."
HART-SCOTT-RODINO CLEARANCE. The Sellers' obligation to consummate the
Stock Purchase is conditioned upon the expiration or earlier termination of the
requisite waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"). Lamar and Chancellor LA made their
required initial filings under the HSR Act on June 9, 1999, and June 10, 1999,
respectively. These filings were withdrawn and resubmitted on July 12, 1999.
If not earlier terminated or extended, the waiting period will expire on or
about August 11, 1999. If Lamar and the Sellers have not obtained clearance
pursuant to the HSR Act by November 30, 1999, the Sellers have the right to
terminate the Stock Purchase Agreement and hold Lamar in breach of its
obligations under the Stock Purchase Agreement, regardless ofLamar's efforts
to obtain clearance. See "The Stock Purchase - Hart-Scott-Rodino Clearance."
OTHER CONDITIONS TO CLOSING. In addition to Lamar stockholder approval and
HSR Act clearance and the other matters discussed above, the consummation of
the Stock Purchase is also conditioned upon the receipt of any necessary third
party consents or approvals, the Sellers' elimination of any intercompany
receivables, Chancellor LA's purchase of certain outdoor advertising assets
pursuant to a settlement agreement and other customary closing conditions. In
addition, Chancellor LA must, by August 14, 1999, deliver to Lamar a
certificate confirming that all necessary approvals and consents by its senior
lenders to the consummation of the Stock Purchase (the "Approvals Certificate")
have been obtained. Should Chancellor LA fail to deliver the Approvals
Certificate within the time period provided, Lamar has the right to terminate
the Stock Purchase Agreement within five calendar days thereafter. See "The
Stock Purchase - Other Conditions to the Stock Purchase," and "-Amendment and
Termination."
CONDUCT OF BUSINESS PENDING THE STOCK PURCHASE. Prior to the Closing, the
Stock Purchase Agreement requires each of Lamar and Chancellor Outdoor to
conduct its business in the ordinary course consistent with past practice. In
particular, without the prior written consent of Lamar, Chancellor Outdoor may
not take certain extraordinary actions, including amending its charter or
bylaws, acquiring other companies or selling or encumbering a material portion
of its assets (except in the ordinary course of business), amending existing
employee benefit or stock incentive arrangements (except in the ordinary course
of business) or lending material amounts of money. Also, prior to Closing,
Lamar will not be permitted to take any of the actions that would require the
Sellers' approval under the Stockholders Agreement if they were taken following
the Closing. See "The Stock Purchase - Conduct of Business by Chancellor
Outdoor and Lamar Pending the Closing" and "- Certain Terms of the Stock
Purchase Agreement - Stockholders Agreement."
NO SOLICITATION. The Stock Purchase Agreement provides that prior to
Closing, the Sellers and their affiliates, officers, directors, employees,
representatives and agents may not directly or indirectly encourage, solicit,
participate in, initiate or conduct discussions or negotiations with, or
provide any information to any persons concerning any merger, sale of assets,
sale of shares of capital stock or similar transactions involving Chancellor
Outdoor. See "The Stock Purchase - No Solicitation."
AMENDMENT AND TERMINATION. The Stock Purchase Agreement may be amended at
any time upon mutual written agreement of the parties and may also be
terminated by each of the parties under certain customary circumstances. The
Stock Purchase Agreement may also be terminated by the Sellers if clearance
under the HSR Act has not been obtained by November 30, 1999, or if Lamar does
not deliver the Definitive Agreements and required certifications of compliance
to the Sellers by August 14, 1999. Lamar may also terminate the Stock
Purchase Agreement if by August 14, 1999, the Sellers do not deliver the
Approvals Certificate. See "The Stock Purchase - Amendment and Termination."
RIGHTS OF LAMAR STOCKHOLDERS; DILUTION
The rights of the Lamar stockholders will not be altered as a result of the
Stock Purchase, except as those rights are affected by the Stockholders
Agreement. The Stock Purchase will, however, significantly dilute the
interests of Lamar's current stockholders. If the Stock Purchase is completed,
Lamar's current stockholders will own in the aggregate approximately 70% of the
total number of shares of Lamar Common Stock then outstanding, with the Sellers
owning in the aggregate the remaining 30%, and current holders of Class A
Common Stock will own in the aggregate approximately 63% of the total number of
shares of Class A Common Stock then outstanding, with the Sellers owning in the
aggregate the remaining 37%. However, because of the different voting rights
of the Class A and Class B Common Stock, the Lamar Shares will confer to the
Sellers collectively only approximately 10.5% of the total voting power of
Lamar. Following the Share Issuance, RFLP will hold approximately 72% of the
voting power of Lamar. See "The Stock Purchase - Rights of Lamar Stockholders;
Dilution."
ACCOUNTING TREATMENT
For accounting purposes, the Stock Purchase will be accounted for using the
purchase method of accounting. Under the purchase method of accounting, the
purchase price is allocated to the identifiable assets and liabilities acquired
based upon the estimated fair values of such assets and liabilities on the date
of acquisition. Any excess of the fair market value of the consideration given
over the fair market value of the identifiable net assets acquired is reported
as goodwill. See "The Stock Purchase - Accounting Treatment."
FEDERAL INCOME TAX CONSEQUENCES
The Stock Purchase will constitute a taxable transaction to Chancellor LA
and Chancellor Mezzanine and their affiliated group. See "The Stock Purchase -
Certain Federal Income Tax Consequences."
<PAGE>
COMPARATIVE PER SHARE DATA
The following summary presents certain historical unaudited and pro forma
per share data for Lamar. Chancellor Whiteco is currently a wholly-owned
subsidiary of Chancellor Outdoor, and Chancellor Outdoor is a wholly-owned
subsidiary of Chancellor LA, which is an indirect wholly-owned subsidiary of
Chancellor Media Corporation; therefore, neither Chancellor Whiteco nor
Chancellor Outdoor per share data is presented in this analysis. The pro forma
amounts assume that the Stock Purchase took place as of the beginning of the
period presented and was accounted for as a purchase transaction. Lamar's pro
forma amounts represent the combined pro forma results of Lamar and Chancellor
Outdoor. This pro forma information may not be indicative of actual results
for any future period or of the results that would have been achieved had the
Stock Purchase been completed on the date assumed. The data presented in this
table should be read together with the historical financial statements and
related notes thereto included elsewhere, or incorporated by reference, in this
Information Statement.
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1998 MARCH 31, 1999
----------------- ------------------
<S> <C> <C>
Historical - Lamar
Net earnings (loss) per common share...... $ (0.24) $ (0.18)
Loss before cumulative effect of a
change in accounting principle
per common share....................... N/A $ (0.16)
Cash dividends per common share(1)........ N/A N/A
Book value per common share............... $ 7.64 $ 7.50
Pro Forma per common share data
Net earnings (loss) per common share...... $ (1.30) $ N/A
Loss before cumulative effect of a
change in accounting principle
per common share....................... N/A $ (0.31)
Cash dividends per common share........... N/A N/A
Book value per common share............... N/A $ 16.08
</TABLE>
_______________
(1)Lamar has not historically paid cash dividends on its Class A Common
Stock.
<PAGE>
MARKET PRICES AND DIVIDENDS
LAMAR
Lamar Class A Common Stock is traded on the Nasdaq National Market under the
symbol "LAMR." The following table sets forth, for the period indicated, the
high and low sales prices for Lamar Class A Common Stock as reported on the
Nasdaq National Market.
HIGH LOW
---- ---
Fiscal year ended December 31, 1997
First Quarter................. 17.08 11.83
Second Quarter................ 19.08 10.67
Third Quarter................. 21.33 15.83
Fourth Quarter ............... 27.17 17.67
Fiscal year ended December 31, 1998
First Quarter................. 37.50 24.75
Second Quarter................ 36.13 29.88
Third Quarter................. 40.69 26.44
Fourth Quarter................ 37.75 19.63
Fiscal year ended December 31, 1999
First Quarter................. 41.25 33.94
Second Quarter................ 42.50 29.06
On May 28, 1999, the last trading day preceding public announcement of
the Stock Purchase, the closing per share sale price of Lamar Common Stock was
$34.13 and on July 8, 1999, the closing per share sale price of Lamar Class A
Common Stock was $40.69. As of July 8, 1999, there were approximately 198
holders of record of Lamar Class A Common Stock.
Lamar does not plan to declare or pay cash dividends to holders of the
Lamar Class A Common Stock in the foreseeable future. Shares of Lamar's Class
A preferred stock are entitled to preferential dividends in an annual aggregate
amount of $364,903 before any dividends may be paid on the Lamar Class A Common
Stock. In addition, the terms of Lamar's bank credit facilities and other
indebtedness have terms restricting the payment of dividends or other
distributions by Lamar to its stockholders. It is anticipated that any new
credit facility obtained will contain similar limitations.
CHANCELLOR OUTDOOR
Neither the Whiteco Common Stock nor the Chancellor Outdoor Common Stock
is traded on any exchange and there is no established public trading market for
such stock. There are no bid or asked prices available for the Whiteco Common
Stock or the Chancellor Outdoor Common Stock.
<PAGE>
GENERAL
PURPOSE OF THIS INFORMATION STATEMENT
Lamar Advertising Company, a Delaware corporation, is furnishing this
Information Statement (the "Information Statement") to its stockholders in
connection with its proposed purchase (the "Stock Purchase") of all of the
outstanding common stock of Chancellor Media Outdoor Corporation ("Chancellor
Outdoor") from its parent corporation, Chancellor Media Corporation of Los
Angeles ("Chancellor LA") and all of the outstanding common stock of Chancellor
Media Whiteco Outdoor Corporation ("Chancellor Whiteco") from Chancellor LA's
parent corporation, Chancellor Mezzanine Holdings Corporation ("Chancellor
Mezzanine," and together with Chancellor LA, sometimes collectively referred to
herein as the "Sellers"), for a combination of $700 million in cash and
26,227,273 shares (the "Lamar Shares") of the Class A Common Stock, $0.001 par
value per share, of Lamar (the "Class A Common Stock").
VOTE REQUIRED; RECORD DATE
Under the Delaware General Corporation Law (the "DGCL"), neither the
Stock Purchase nor the issuance of the Lamar Shares upon consummation of the
Stock Purchase (the "Share Issuance") is required to be approved by Lamar's
stockholders. However, the rules of the Nasdaq National Market ("Nasdaq"),
upon which the Class A Common Stock is traded, require that the Share Issuance
be submitted to the Lamar stockholders and approved by the holders of at least
a majority of votes cast on the proposal. In accordance with the DGCL and
Lamar's Certificate of Incorporation, Lamar's Board has decided to obtain the
necessary stockholder vote by a written consent in lieu of a special meeting of
stockholders, and thus, under the DGCL, the Share Issuance must be approved by
the holders of at least a majority of the outstanding Class A and Class B
Common Stock (collectively, the "Lamar Common Stock").
The Board of Directors of Lamar has fixed the close of business on [July
15, 1999] as the record date (the "Record Date") for the determination of
stockholders entitled to receive notice of and to vote on the Share Issuance.
As of the Record Date, Lamar had outstanding [43,509,817] shares of Class A
Common Stock, each of which is entitled to one vote per share, and 17,700,000
shares of Class B common stock, $0.001 par value per share (the "Class B Common
Stock"), each of which is entitled to 10 votes per share.
THE WRITTEN CONSENT
The Reilly Family Limited Partnership, a Louisiana limited partnership
("RFLP"), holder of 100% of the Class B Common Stock as of the Record Date,
representing approximately 80% of the total voting power of Lamar, has advised
the Lamar Board that it intends to execute a written consent (the "Written
Consent") approving the Share Issuance. Thus, no further stockholder vote will
be necessary and the Written Consent obviates the need to incur the expense of
conducting a formal stockholders' meeting to approve the Share Issuance. In
accordance with the DGCL and regulations promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), Lamar has provided this
Information Statement on or about July [ ], 1999 to its stockholders of
record as of the Record Date, and the Share Issuance may not be completed until
20 business following the date of this Information Statement. See "The Stock
Purchase - The Voting Agreement."
THE STOCK PURCHASE
THE STOCK PURCHASE AGREEMENT
Lamar and the Sellers will effect the Stock Purchase in accordance with
the terms and the conditions set forth in the Amended and Restated Stock
Purchase Agreement dated as of July 12, 1999 (the "Stock Purchase Agreement"),
a copy of which is attached to this Information Statement as Appendix A. The
following description is necessarily incomplete and is qualified in its
entirety by reference to the Stock Purchase Agreement.
STRUCTURE AND TERMS OF THE STOCK PURCHASE
On June 1, 1999, Lamar and Chancellor LA executed the original Stock
Purchase Agreement and on July 12, 1999, Lamar, Chancellor LA and
Chancellor Mezzanine executed the amended and restated Stock Purchase
Agreement, pursuant to which Lamar will purchase (i) 1,000 shares of the common
stock, $0.01 par value per share, of Chancellor Outdoor (the "Chancellor
Outdoor Common Stock"), representing all of the issued and outstanding common
stock of Chancellor Outdoor, and (ii) 1,000 shares of the common stock, $0.01
par value per share, of Chancellor Whiteco (the "Whiteco Common Stock"),
representing all of the issued and outstanding common stock of Chancellor
Whiteco, for a combination of $700 million in cash and 26,227,273 shares of
Class A Common Stock (collectively, the "Purchase Price"), and Chancellor
Outdoor and Chancellor Whiteco will become wholly-owned subsidiaries of Lamar.
Currently, Chancellor Whiteco is a wholly-owned subsidiary of Chancellor
Outdoor. Due to certain restrictions under the indentures governing Chancellor
LA's subordinated debt, the Stock Purchase has been structured such that,
immediately prior to consummation of the Stock Purchase (the "Closing"),
Chancellor Outdoor will effect a dividend of the Whiteco Common Stock to its
immediate parent corporation, Chancellor LA, and Chancellor LA will in turn
effect a dividend of the Whiteco Common Stock to its immediate parent
corporation, Chancellor Mezzanine (such dividends referred to collectively as
the "Whiteco Dividend"). Upon consummation of the Stock Purchase, Lamar will
purchase the Whiteco Common Stock from Chancellor Mezzanine and in
consideration therefor will pay to Chancellor Mezzanine $10 million in cash
and will issue to Chancellor Mezzanine a number of shares of Class A Common
Stock having an aggregate value of $940 million based on the closing sales
price of the Class A Common Stock on the trading day immediately prior to the
Closing, up to a maximum of 26,227,273 shares. Upon consummation of the Stock
Purchase, Lamar will also purchase the Chancellor Outdoor Common Stock from
Chancellor LA and in consideration therefor will pay Chancellor LA $690 million
in cash and will issue to Chancellor LA a number of shares of Class A Common
Stock, if any, obtained by subtracting the number of shares of Class A Common
Stock issued to Chancellor Mezzanine from 26,227,273.
The Lamar Shares to be issued to the Sellers will constitute in the
aggregate approximately 37% of the Class A Common Stock, and approximately 30%
of the Lamar Common Stock outstanding after such issuance. However, because of
the different voting rights of the Class A and Class B Common Stock, the Lamar
Shares will confer to the Sellers collectively only approximately 10.5% of the
total voting power of Lamar. Following the Share Issuance, RFLP will hold
approximately 72% of the voting power of Lamar.
The Stock Purchase Agreement also contains a post-Closing adjustment in
the event that the net working capital of Chancellor Outdoor (considered before
the Whiteco Dividend) as shown on a closing date balance sheet is greater or
less than $12 million. The closing date balance sheet will be provided within
45 days of the Closing and any required adjustment will be made in cash within
30 days thereafter, but in any event no later than 90 days thereafter if there
is any disagreement regarding the closing date balance sheet.
THE VOTING AGREEMENT
As a condition to entering the Stock Purchase Agreement, the Sellers
required RFLP to enter into a voting agreement dated as of June 1, 1999 and
amended and restated as of July 12, 1999, to ensure Lamar stockholder
approval of the Share Issuance (the "Voting Agreement"). Pursuant to the
Voting Agreement by and among Lamar, the Sellers and RFLP, RFLP has agreed to
vote its shares of Class B Common Stock in favor of the Share Issuance and any
other transactions contemplated by the Stock Purchase Agreement. The Voting
Agreement also prohibits RFLP from, at any time prior to the Closing date: (i)
converting any shares of Class B Common Stock into Class A Common Stock or
otherwise waiving its rights to have each share of Class B Common Stock
entitled to 10 votes; (ii) selling, transferring or pledging any of its shares
of its Class B Common Stock; or (iii) entering into any voting arrangement with
respect to its ownership of Class B Common Stock. The RFLP has advised the
Lamar Board that it intends to vote its Class B Common Stock in accordance with
the Voting Agreement in favor of the Share Issuance and will do so by executing
the Written Consent as soon as practicable following 20 business days after the
date of this Information Statement.
BACKGROUND OF AND REASONS FOR THE STOCK PURCHASE
Lamar's business strategy is to provide high quality local sales and
service, centralized control and decentralized management and a middle market
focus. Its growth strategy is to pursue internal growth and to make strategic
acquisitions to take advantage of the continued consolidation of the outdoor
advertising industry.
The Stock Purchase is part of Lamar's strategic acquisition plan to
increase operating efficiencies, provide geographic diversification and broaden
its market. Since 1983, Lamar has completed over 146 acquisitions of outdoor
advertising businesses, which management believes has improved opportunities
for inter-market cross-selling and economies of scale. Acquiring high-profile
bulletin displays that become available in larger markets also enables Lamar to
leverage its reputation for high quality local sales and services.
On May 3, 1999, Lamar received a letter from Morgan Stanley Dean Witter &
Co. ("Morgan Stanley") and Greenhill & Co., L.L.C ("Greenhill") inviting Lamar
to submit a final binding offer for the Chancellor Outdoor Common Stock by 5:00
p.m. local time on Monday, May 10, 1999. Lamar's Board reviewed the terms of
the proposed stock purchase agreement with its financial, accounting and legal
advisors and discussed various purchase options and prices. On May 10, 1999,
Sean Reilly, Lamar's Vice President of Mergers & Acquisitions, offered in
writing to pay $1.5 billion in cash for Chancellor Outdoor. His letter to
Greenhill referenced some general considerations, including that Lamar would
need to secure additional financing to acquire the Chancellor Outdoor Common
Stock. Chancellor LA did not accept Lamar's offer, and instead pursued an
offer from another bidder.
During the last week of May 1999, Chancellor LA informed Lamar management
that it wanted to reopen negotiations for the sale of Chancellor Outdoor and
asked if Lamar's prior offer was still valid. Lamar amended its offer by
proposing to pay $1 billion in cash and $500 million worth of Class A Common
Stock. Chancellor LA indicated its interest in receiving more of the Purchase
Price in the form of Class A Common Stock and the parties agreed that Lamar
would pay $700 million in cash and issue 26,227,273 shares of Class A Common
Stock to Chancellor LA. As of May 28, 1999, the last trading day before the
public announcement of the Stock Purchase, the closing sale price of the Class
A Common Stock was $34.13 per share, making the total value of the Purchase
Price as of that time approximately $1.6 billion. From May 27, 1999 through
May 31, 1999, representatives of Lamar and Chancellor LA and their respective
legal, financial and accounting advisors participated in various meetings in
which the final terms of the Stock Purchase Agreement were negotiated and legal
and business information was exchanged.
On May 31, 1999, the Lamar Board met to review the final terms of the
proposed Stock Purchase. At this meeting, Lamar's general counsel and
representatives of Jones, Walker, Waechter, Poitevent, Carrere & Denegre,
L.L.P., Lamar's counsel, discussed the terms of the Stock Purchase with Lamar's
Board. After discussion, the Board approved the Stock Purchase Agreement and
related transactions.
On June 1, 1999, Chancellor LA's Board of Directors met and approved the
sale of the Chancellor Outdoor Common Stock pursuant to the Stock Purchase
Agreement and related documents. On June 1, 1999, the Stock Purchase Agreement
and the Voting Agreement were executed, and representatives of Lamar and
Chancellor publicly announced the transactions.
The parties subsequently agreed to restructure the Stock Purchase and on
July 12, 1999, the amended and restated Stock Purchase Agreement and amended
and restated Voting Agreement were executed.
Lamar's Board believes that the terms of the Stock Purchase Agreement and
related transactions are fair to, and in the best interests of, Lamar and its
stockholders. The Board believes that the Stock Purchase will improve access
to major metropolitan and regional markets, increase per share earnings and
improve economies of scale.
RECOMMENDATION OF THE LAMAR BOARD OF DIRECTORS
After careful consideration, the Lamar Board has determined that the
Stock Purchase is advisable and in the best interest of its stockholders, has
approved the Stock Purchase Agreement and the related documents and recommends
that its stockholders vote in favor of the Share Issuance.
THE CLOSING DATE
The Closing will occur and the Stock Purchase will be consummated on the
10th business day (the "Closing Date") following the satisfaction of the
conditions to the obligations of Lamar and the Sellers as stated in the Stock
Purchase Agreement, or at such other time as the Sellers and Lamar may agree in
writing.
CERTAIN TERMS OF THE STOCK PURCHASE AGREEMENT
FINANCING
Prior to the consummation of the Stock Purchase, and to fund the cash
portion of the Purchase Price, the terms of the Stock Purchase Agreement
require that Lamar: (i) by June 16, 1999, obtain and deliver to the Sellers a
commitment letter from Lamar's lenders, committing to fund no less than $700
million at Closing specifically for the transactions contemplated by the Stock
Purchase Agreement (the "Commitment Letter"); and (ii) by August 14, 1999,
(A) obtain and deliver to the Sellers definitive agreements executed and
delivered by Lamar's lenders, reasonably satisfactory to the Sellers, to
disburse to Lamar at or prior to Closing, an aggregate amount of cash equal
to at least $700 million, and containing no conditions to such disbursements
other than those which are customary in such transactions (the "Definitive
Agreements"), and (B) provide written certification that Lamar is meeting
the covenants under its existing credit facility and that Lamar has no reason
to believe that it will be unable to meet its obligations with respect to the
Definitive Agreements.
Lamar delivered the Commitment Letter to Chancellor LA on June 15, 1999.
Should Lamar fail to deliver to the Sellers the Definitive Agreements and
written certification within the time period provided, the Sellers have the
right to terminate the Stock Purchase Agreement within five calendar days
thereafter.
STOCKHOLDERS AGREEMENT
As a condition to the Stock Purchase, Lamar, the Sellers and RFLP must
execute a stockholders agreement (the "Stockholders Agreement"), that provides,
among other things, that immediately following the Closing, Lamar's Board will
be increased from eight to ten directors, two of whom will be designated by
Sellers, and requires the Sellers and RFLP to agree to vote their shares of
Lamar Common Stock in favor of the two candidates proposed by the Sellers (the
"Chancellor Designees"). Lamar has further agreed to cause each Chancellor
Designee (or such other persons as designated by the Sellers as the new
Chancellor Designees in replacement of such persons) to be nominated and
recommended by the Lamar Board for reelection as directors, and to permit at
least one of the Chancellor Designees to serve on each committee of the Lamar
Board (other than Lamar's Executive Committee).
The Stockholders Agreement also prohibits Lamar from taking certain
actions without the Sellers' approval (or, should the Sellers have transferred
the Class A Common Stock to one or more affiliates, the approval of the holders
of at least a majority of the total number of shares held by the Sellers and
their affiliates). The restricted actions include: (i) transactions between
Lamar and any affiliate (other than a wholly-owned subsidiary of Lamar); (ii)
actions resulting in a change in control of Lamar (defined in the Stockholders
Agreement as a change in the makeup of a majority of the Lamar Board or the
failure of the RFLP and the Chancellor holders together to hold more than 50%
percent of the voting power of Lamar); and (iii) an acquisition or disposition
of assets or stock with an aggregate fair market value of $500 million or more.
However, if certain conditions are met, these restrictions do not apply to, and
no special approval of the Sellers is required for, the complete sale of Lamar,
whether by means of a sale of assets or stock, or by merger.
The Stockholders Agreement, including the Sellers' right to designate any
directors on the Lamar Board, will terminate upon the earlier of 10 years from
the Closing or at such time as the Sellers hold in the aggregate less than 10%
of the outstanding Lamar Common Stock on a fully diluted basis.
The terms of the Stockholders Agreement also restrict Sellers' right to
sell any of the Lamar Shares for a period of 12 months following the Closing
and require Lamar to deliver to the Sellers certain financial information
within 80 days of the end of Lamar's fiscal year and within 35 days of the end
of each of Lamar's fiscal quarters. This financial information obligation will
continue (despite any termination of the Stockholders Agreement) for as long as
the Sellers are required to include the Lamar financial information in their
own financial statements.
REGISTRATION RIGHTS AGREEMENT
As a condition to the Closing, Lamar and the Sellers will enter into a
registration rights agreement (the "Registration Rights Agreement"), pursuant
to which Lamar will (i) grant to the Sellers, exercisable at any time after 10
months from the Closing Date, demand registration rights, and (ii) at any time
after 10 months from the Closing Date, upon the Sellers' request, prepare and
file a shelf registration statement for use by the Sellers and keep the shelf
registration statement effective for one year. Under the terms of the
Registration Rights Agreement, the Sellers may not demand that Lamar effect
more than one registration pursuant to its demand registration rights (each a
"Demand Registration") in any 12-month period nor require more than an
aggregate of three Demand Registrations. In addition, Lamar will not be
obliged to (i) cause any Demand Registration to be effective on a date prior to
the first anniversary of the Closing Date, or (ii) cause such a registration
statement to be declared effective during any period during which a shelf
registration statement remains effective. The Registration Rights Agreement
also grants to the Sellers the right to include their shares in any
registration statement filed by Lamar to register the offer and sale of Lamar
Common Stock by Lamar or other stockholders (including Lamar's universal shelf
registration statement) on customary terms.
HART-SCOTT-RODINO CLEARANCE
The obligation of the Sellers to consummate the Stock Purchase is subject
to the expiration or earlier termination of the requisite waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"). Under the HSR Act and the rules and regulations promulgated thereunder
by the Federal Trade Commission (the "FTC"), the Stock Purchase may not be
consummated until (i) notifications have been given and certain information has
been furnished to the FTC and the Antitrust Division of the Department of
Justice (the "DOJ"), and (ii) specific waiting periods have expired or
terminated.
Lamar and the Sellers have each agreed, pursuant to the Stock Purchase
Agreement, to use its reasonable best efforts to file or cause to be filed with
the FTC and the DOJ such notifications as are required to be filed under the
HSR Act and the rules and regulations thereunder, and to respond to any
requests for additional information made by either the FTC or the DOJ.
Accordingly, Lamar and Chancellor LA each filed its Notification and Report
Form with the FTC and DOJ on June 9, 1999, and June 10, 1999, respectively.
These filings were withdrawn and resubmitted on July 12, 1999. If not earlier
terminated or extended, the statutory waiting period is expected to expire on
or about August 11, 1999.
Under the Stock Purchase Agreement, Lamar is required to take all steps
necessary to cause the Stock Purchase to be consummated no later than November
30, 1999. If clearance under the HSR Act has not been obtained by such date,
the Sellers have the right to terminate the Stock Purchase Agreement and hold
Lamar in breach of this obligation, regardless of Lamar's efforts to obtain
clearance. See "The Stock Purchase - Amendment and Termination."
The DOJ and the FTC, as well as state antitrust enforcement agencies,
frequently scrutinize the legality under the antitrust laws of transactions
such as the Stock Purchase. Such scrutiny could result in a requirement that
Lamar divest certain assets in order to obtain HSR Act clearance. Lamar cannot
predict the extent to which any such divestitures may be required. The
termination of the HSR Act waiting period will not preclude DOJ, the FTC or
state antitrust enforcement agencies from challenging the Stock Purchase on
antitrust grounds. Accordingly, at any time before or after the consummation
of the Stock Purchase and notwithstanding the expiration or termination of the
HSR Act waiting period, any federal or state antitrust authorities could take
action under the antitrust laws as they deem necessary or desirable in the
public interest. Such action could include seeking to enjoin the consummation
of the Stock Purchase or seeking divestiture of all or part of the assets of
Lamar or the Sellers. Private parties may also seek to take legal action under
the antitrust laws, if circumstances permit.
OTHER CONDITIONS TO THE STOCK PURCHASE
In addition to the conditions described above, the respective obligations
of Lamar and the Sellers to consummate the Stock Purchase are subject to the
satisfaction of the following conditions:
<circle>No order, decree, statute, rule, regulation or filed complaint,
or notice by a governmental agency of its intention to file any
complaint, seeking an order or decree to restrain, enjoin or prohibit
the consummation of the transactions contemplated under the Stock
Purchase Agreement, to render it ineffective or otherwise impede the
transactions contemplated by the Stock Purchase Agreement shall be in
force.
<circle>Chancellor LA must have obtained all necessary approvals and
consents to the consummation of the transactions contemplated under
the Stock Purchase Agreement from its senior lenders, including
releases from all applicable liens and from all guarantees of each of
Chancellor Outdoor and its subsidiaries. In this regard, Chancellor LA
must, by August 14, 1999 deliver to Lamar a certificate confirming
that all necessary approvals and consents by its senior lenders to
the consummation of the Stock Purchase (the "Approvals Certficate")
have been obtained. Should Chancellor LA fail to deliver the
Approvals Certificate within the time period provided, Lamar has the
right to terminate the Stock Purchase Agreement within five calendar
days thereafter.
The obligations of Lamar to consummate the Stock Purchase are subject to
the satisfaction of the following additional conditions unless waived in
writing by the Sellers:
<circle>Each of the Sellers' representations and warranties contained in
the Stock Purchase Agreement must be true and correct both on June 1,
1999 and as of the Closing, and each of the covenants and agreements
of the Sellers by the Closing must have been duly performed, except in
each case for changes after June 1, 1999 that are contemplated or
expressly permitted by the Stock Purchase Agreement and except for any
breach or failure that would not have a material adverse effect on the
business, operation or financial condition of Chancellor Outdoor and
its subsidiaries taken as a whole.
<circle>Chancellor LA must deliver to Lamar a certificate signed by an
officer of Chancellor LA, dated as of the Closing Date, certifying
that, to the best of the knowledge and belief of such officer, the
conditions to Lamar's obligations to consummate the Stock Purchase
with respect to approval of Chancellor LA's senior lenders, the
accuracy of its representations and warranties and performance of its
covenants have been fulfilled.
<circle>Chancellor Mezzanine must deliver to Lamar certificates signed by
an officer of Chancellor Mezzanine dated as of the Closing Date,
certifying that, to the best of the knowledge and belief of such
officer, the conditions to Lamar's obligations to consummate the stock
purchase with respect to the accuracy of its representations and
warranties and performance of its covenants have been fulfilled.
<circle>The Sellers must have obtained all consents required for the
consummation of the transactions contemplated by the Stock Purchase
Agreement under any material contract, unless the failure to obtain
consent would not have a material adverse effect on the business,
operations or financial condition of Chancellor Outdoor and its
subsidiaries, taken as a whole.
<circle>The Sellers must have delivered, or caused to be delivered, to
Lamar executed affidavits dated no more than 30 days prior to the
Closing Date, certifying that each Seller is not a foreign person in
accordance with the Internal Revenue Code and regulations thereunder.
<circle>As of the Closing, the Sellers must have caused to be eliminated
all intercompany receivables and payables between and among the
Sellers, Chancellor Outdoor and its subsidiaries.
<circle>Chancellor LA must have completed the acquisition of outdoor
advertising assets pursuant to the Compromise Settlement Agreement and
Mutual Release between Chancellor Outdoor, Chancellor Media
Corporation, Randy Burkett and Jeffrey Burkett, dated May 5, 1999, and
the Asset Purchase Agreement between Chancellor Media Whiteco Outdoor
Corporation and Randy Burkett, dated May 5, 1999.
The obligations of the Sellers to consummate the Stock Purchase are
subject to the satisfaction of the following additional conditions unless
waived in writing by Lamar:
<circle>Each of Lamar's representations and warranties contained in
the Stock Purchase Agreement must be true and correct on June 1, 1999
and as of the Closing in all material respects, and each of the
covenants and agreements of Lamar to be performed by the Closing must
have been duly performed in all material respects, except in each case
for changes after June 1, 1999 that are contemplated or expressly
permitted by the Stock Purchase Agreement.
<circle>Lamar must have delivered to Chancellor a certificate signed by
an officer of Lamar, dated as of the Closing Date, certifying that, to
the best of the knowledge and belief of such officer, the conditions
to the Sellers' obligations to consummate the Stock Purchase with
respect to accuracy of its representations and warranties and
performance of its covenants have been fulfilled.
SELLERS' INDEMNIFICATION OBLIGATIONS
The terms of the Stock Purchase Agreement provide that the Sellers'
representations and warranties in the Stock Purchase Agreement survive for 12
months following the Closing Date, except that those representations and
warranties with respect to (i) Chancellor LA's title and ownership of the
Chancellor Outdoor Common Stock and Chancellor Mezzanine's title and
ownership of the Whiteco Common Stock will survive indefinitely, and (ii)
taxes will survive for a period equal to the applicable statute of limitations
for all taxes imposed as a result of a breach by the Sellers of their
representations regarding taxes.
Under the Stock Purchase Agreement, the Sellers agree to indemnify and
hold Lamar and its officers, directors, employees and affiliates harmless from
any damage, claim, liability or expense, including, without limitation,
reasonable attorneys' fees (collectively, "Damages"), arising out of or
relating to the breach of any warranty, representation, covenant or agreement
of the Sellers contained in the Stock Purchase Agreement. Lamar will not be
indemnified for any Damages, however, unless and until the amount of all
Damages exceeds $2,500,000 (the "Threshold Amount"), and then only for those
Damages that exceed the Threshold Amount, and Lamar will not be indemnified for
Damages that exceed a maximum of $25,000,000.
None of Lamar's representations and warranties in the Stock Purchase
Agreement survive the Closing, and Lamar has no similar indemnification
obligations.
CONDUCT OF BUSINESS BY CHANCELLOR OUTDOOR AND LAMAR PENDING THE CLOSING
Chancellor LA has agreed to use commercially reasonable efforts to cause
Chancellor Outdoor and each of its subsidiaries (except as otherwise
contemplated by the Stock Purchase Agreement, or as consented to by Lamar in
writing) to operate its business in the ordinary course, substantially in
accordance with past practice and use commercially reasonable efforts not to
take any action inconsistent with the Stock Purchase Agreement. Unless
specifically consented to by Lamar in writing, Chancellor LA must ensure that
Chancellor Outdoor and each of its subsidiaries do not, except as contemplated
by the Stock Purchase Agreement:
<circle> change or amend its Certificate of Incorporation, Bylaws or
other organizational documents, except as otherwise required by law;
<circle>enter into, extend, materially modify, terminate or renew any
material contract (except in the ordinary course of business) or
settle or otherwise resolve any financial issue, claim or adjustment
under any such contract;
<circle>sell, assign, transfer, convey, lease or otherwise dispose of any
material assets or properties, except in the ordinary course of
business;
<circle>except as otherwise required by law, (i) take any action with
respect to the grant of any severance or termination pay (otherwise
than pursuant to policies or agreements of Chancellor Outdoor or any
of its subsidiaries in effect on June 1, 1999) that will become due
and payable from Chancellor Outdoor or any of its subsidiaries on or
after the Closing Date; or (ii) make any change in the key management
structure of Chancellor Outdoor or any of its subsidiaries,
including, without limitation, the hiring of additional officers or
the termination of existing officers, other than in the ordinary
course of business;
<circle>acquire by merger or consolidation with, or merge or consolidate
with, or purchase substantially all of the assets of, or otherwise
acquire any material assets or business of any corporation,
partnership, association or other business organization or division
of such company;
<circle>make any material loans or advances to any partnership, firm or
corporation, or, except for expenses incurred in the ordinary course
of business, to any individual;
<circle>amend any employee plan, pension plan or welfare plan for its
employees or increase the salary of any management employee, except
in the ordinary course of business;
<circle>alter in any material respect the past practices of Chancellor
Outdoor or any of its subsidiaries with respect to the collection of
receivables or payment of payables; or
<circle>enter into any agreement, or otherwise become obligated, to do
any action prohibited under the Stock Purchase Agreement.
Lamar has agreed that prior to the Closing, it will use commercially
reasonable efforts to operate its business in the ordinary course and
substantially in accordance with past practice and use commercially reasonable
efforts not to take any action inconsistent with the Stock Purchase Agreement.
Unless the Sellers consent in writing, Lamar will not change or amend its
certificate of incorporation, bylaws or other organizational documents, except
as otherwise required by law or take any action that would be prohibited by the
Stockholders Agreement if such actions were taken after the Closing.
NO SOLICITATION
The Stock Purchase Agreement provides that prior to Closing, the Sellers
and their affiliates, officers, directors, employees, representatives and
agents may not directly or indirectly encourage, solicit, participate in,
initiate or conduct discussions or negotiations with, or provide any
information to any persons concerning any merger, sale of assets, sale of
shares of capital stock or similar transactions involving Chancellor Outdoor.
NO USE OF CHANCELLOR NAME
The Stock Purchase Agreement requires Lamar to take all action to cause
the corporate names of Chancellor Outdoor and its subsidiaries to be changed so
that they no longer contain the name "Chancellor," and following the Closing,
to keep Chancellor Outdoor, its subsidiaries and Lamar's affiliates from using
the name "Chancellor" or any similar name for business purposes.
CERTAIN EMPLOYEE BENEFIT MATTERS
The Stock Purchase Agreement provides that, with respect to all persons
who were employees of Chancellor Outdoor and its subsidiaries who continue as
such after the Closing, Lamar will offer the same employee benefits as are
offered by Lamar to its own employees and will cause its employee benefit plans
to recognize all prior service of such employees for the purpose of determining
vesting of benefits, participation, eligibility and benefit accrual, including
service with predecessor employers, to the extent that such service was
recognized under analogous plans of Chancellor Outdoor or any of its
subsidiaries or of the Sellers.
AMENDMENT AND TERMINATION
The Stock Purchase Agreement provides that it may be amended or modified
in whole or in part at any time upon mutual written agreement of the parties.
It also provides that the Stock Purchase Agreement may be terminated at any
time prior to the Closing:
<circle>by mutual written consent of the Sellers and Lamar;
<circle>by either party if consummation of any of the transactions
contemplated by the Stock Purchase Agreement is enjoined,
prohibited or otherwise restrained by the terms of a final, non-
appealable order or judgment of a court of competent jurisdiction;
<circle>by Sellers or Lamar if the other party has materially breached
any representation, warranty, covenant or agreement, or if any such
representation or warranty is untrue in any material respect, in
either case such that the applicable closing condition is not
satisfied, and, if capable of being cured, such breach or failure
has not been cured within 30 days following notice thereof;
<circle>by Lamar, if the Closing has not occurred on or before
December 1, 1999, for reasons other than as a result of Lamar's
breach or the failure of all waiting periods under the HSR Act to
have expired or been terminated; or
<circle>by the Sellers, if the Closing has not occurred on or before
December 1, 1999, other than as a result of the Sellers' breach.
The Stock Purchase Agreement may also be terminated within five calendar
days following August 14, 1999 by (i) the Sellers if Lamar fails to deliver
timely the Definitive Agreements and the certificate of compliance, or (ii) by
Lamar if Chancellor LA fails to deliver timely the required Approvals
Certificate.
FEES AND EXPENSES
Each of Lamar and the Sellers will bear its own expenses incurred in
connection with the Stock Purchase Agreement and the transactions contemplated
in the Agreement, whether or not such transactions are consummated, including,
without limitation, all fees of legal counsel, financial advisors and
accountants, except that all fees paid to Antitrust Authorities in connection
with the notification and reporting requirements of the HSR Act for the
transactions contemplated by the Stock Purchase Agreement will be paid by
Lamar.
RIGHTS OF LAMAR STOCKHOLDERS; DILUTION
The stockholders of Lamar will not be exchanging their shares of Lamar
Common Stock for other securities, and the rights of holders of Class A Common
Stock will not be altered as a result of the consummation of the Stock
Purchase. However, the Stock Purchase will significantly dilute the interests
of current holders of Lamar Common Stock. If the Stock Purchase is completed,
Lamar's current stockholders will own in the aggregate approximately 70% of the
total number of shares of Lamar Common Stock then outstanding, with the Sellers
owning in the aggregate the remaining 30%, and current holders of Class A
Common Stock will own in the aggregate approximately 63% of the total number of
shares of Class A Common Stock then outstanding, with the Sellers owning in the
aggregate the remaining 37%. However, because of the different voting rights
of the Class A and Class B Common Stock, the Lamar Shares will confer to the
Sellers collectively only approximately 10.5% of the total voting power of
Lamar. Following the Share Issuance, RFLP will hold approximately 72% of the
voting power of Lamar.
APPRAISAL RIGHTS
Under the DGCL, Lamar stockholders do not have appraisal rights in
connection with the Stock Purchase or the Share Issuance.
ACCOUNTING TREATMENT
For accounting purposes, the Stock Purchase will be accounted for using
the purchase method of accounting. Under the purchase method of accounting,
the purchase price is allocated to the identifiable assets and liabilities
acquired based upon the estimated fair values of such assets and liabilities on
the date of acquisition. Any excess of the fair market value of the
consideration given over the fair market value of the identifiable net assets
acquired is reported as goodwill.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The summary of tax consequences set forth below is for general
information only and is based on the law as currently in effect. The Stock
Purchase will constitute a taxable transaction to Chancellor LA and its
affiliated group for federal income tax purposes. Generally, for federal
income tax purposes, upon the Whiteco Dividend, Chancellor Outdoor will realize
gain or loss in an amount equal to the difference between the fair marketvalue
of the Whiteco Common Stock and Chancellor Outdoor's adjusted tax basis in the
Whiteco Common Stock. That gain will be recognized by Chancellor Outdoor's
affiliated group upon the sale of the Whiteco Common Stock by Chancellor
Mezzanine to Lamar. In addition, Chancellor LA will recognize gain or loss in
an amount equal to the difference between (i) the aggregate of the cash and the
fair market value of the Class A Common Stock received pursuant to the Stock
Purchase, and (ii) Chancellor LA's adjusted tax basis in the shares of
Chancellor Outdoor Common Stock tendered. Limitations may exist on the
deductibility of losses, if any.
FEDERAL SECURITIES LAW CONSEQUENCES
None of the Lamar Shares received by the Sellers in the Stock Purchase
will be registered under the Securities Act of 1933, as amended (the
"Securities Act"). As a result, the Class A Common Stock received by the
Sellers may be resold only in transactions permitted by the resale provisions
of Rule 144 promulgated under the Securities Act or as otherwise permitted
under the Securities Act.
The obligations of the Sellers to consummate the Stock Purchase are
conditioned upon Lamar's executing the Registration Rights Agreement with the
Sellers. See "The Stock Purchase - Other Terms and Conditions to the Stock
Purchase - Registration Rights Agreement."
<PAGE>
BUSINESS OF THE COMPANIES
DESCRIPTION OF THE BUSINESS OF LAMAR
GENERAL
Lamar has operated its outdoor advertising business under the Lamar name
since 1902. As of December 31, 1998, Lamar managed approximately 71,900
outdoor advertising displays in 36 states, and as of June 30, 1999, Lamar
managed approximately 75,700 outdoor advertising displays. Lamar also operates
the largest logo sign business in the United States. These signs are located
near highway exits and provide brand name information on available gas, food,
lodging and camping services. Lamar also operates transit advertising displays
on bus shelters, bus benches and buses in several markets.
Lamar seeks to continue growing its local advertising business by focused
strategic acquisitions. Lamar has completed over 146 acquisitions of outdoor
advertising businesses since 1983. In addition to acquiring positions in new
markets, Lamar buys smaller outdoor advertising properties within existing or
contiguous markets. During 1998, Lamar increased the number of outdoor
advertising displays that it operates by approximately 70% by acquiring outdoor
advertising assets, including the completion of 40 strategic acquisitions of
outdoor advertising businesses and isolated purchases of outdoor advertising
displays. As of December 31, 1998, Lamar's advertising business covered 102
primary outdoor advertising markets.
OPERATIONS
OUTDOOR ADVERTISING. For the year ended December 31, 1998, Lamar derived
approximately 63% of its outdoor advertising net revenue from the sale of space
on bulletins, which are typically 14 feet high and 48 feet wide. The other 37%
of Lamar's outdoor advertising revenue for the year ended December 31, 1998 was
derived from the sale of space on standardized and junior posters.
Standardized posters are generally 12 feet high and 25 feet wide, and are the
most common type of billboard. Junior posters are usually six feet high and 12
feet wide, with copy typically being applied using wallpaper pasting methods.
Lamar owns the physical structures on which the copy is applied. The
structures are built on locations that Lamar either owns or leases. Bulletin
space is generally sold as individually selected displays for the duration of
the advertising contract or in rotary plans in which the copy is periodically
rotated from one location to another within a given market.
Lamar maintains production staffs in 91 of its markets to perform the
full range of activities required to create and install outdoor advertising,
including creating advertising copy, design and layout, painting the design or
coordinating the printing and installation of the designs on displays.
LOGO SIGNS. Since 1988, when Lamar entered the business of logo sign
advertising, it has become the largest provider of logo sign services in the
United States, operating 18 of the 22 privatized state logo sign contracts.
TRANSIT ADVERTISING. Lamar has recently expanded into the transit
advertising business through the operation of displays on bus shelters, benches
and buses in 14 of its outdoor advertising markets and six other markets.
DESCRIPTION OF THE BUSINESS OF CHANCELLOR OUTDOOR
GENERAL
Chancellor Outdoor, a wholly-owned subsidiary of Chancellor LA and the
parent corporation of Chancellor Whiteco, operates the fifth largest outdoor
advertising company in the United States, owning over 42,700 billboards and
outdoor displays in the United States as of June 30, 1999. It entered the
outdoor advertising business with the acquisition of Martin Media L.P. ("Martin
Media"), Martin & MacFarlane, Inc. ("Martin & MacFarlane") and certain
affiliated companies in July 1998, and further expanded its outdoor presence
with the acquisition of the outdoor advertising division of Whiteco Industries,
Inc. ("Whiteco") in December 1998.
The size and geographic diversity of its markets allow Chancellor Outdoor
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 its purchasing process and simultaneously present its
message in several markets. National advertisers generally seek wide exposure
in major markets and therefore tend to make larger purchases from a company
that owns displays in a number of markets.
OPERATIONS
Chancellor Outdoor derives outdoor advertising revenue from contracts
with advertisers for the rental of outdoor advertising space generally covering
periods of one month up to five years. Rates are based on a particular
display's exposure, or number of "impressions" delivered, in relation to the
demographics of the particular market and/or its location within that market.
Chancellor Outdoor operates the following types of displays: bulletins on
major highways and freeways; thirty-sheet posters (usually 12 feet high and 25
feet wide) concentrated on major traffic arteries; eight-sheet posters (usually
six feet high and 12 feet wide) predominantly located on city streets targeting
pedestrian traffic; transit displays on bus and commuter train exteriors,
commuter rail terminals, interior train cars, bus shelters and subway
platforms; and street furniture displays consisting of back-illuminated display
faces located on bus and tram shelters, newsstands, bicycle racks, information
kiosks, recycling bins and automatic public toilets.
The following table sets forth the outdoor advertising sales offices and
total outdoor advertising displays by each sales office as of June 30, 1999:
TOTAL DISPLAYS
Northern Region:
Chicago, IL...........................................................3,063
Pittsburgh, PA........................................................3,765
Providence, RI..........................................................580
Harrisburg, PA........................................................1,275
Milwaukee, WI.........................................................1,183
Hartford, CT............................................................399
Scranton, PA..........................................................1,014
Albany, NY..............................................................662
Washington, D.C.........................................................594
-----
Total..........................................................12,535
======
Southeastern Region:
Ocala, FL.............................................................3,103
Terre Haute, IN.......................................................1,784
Columbus, OH..........................................................1,261
Rocky Mt., NC.........................................................1,618
Atlanta, GA.............................................................847
Cincinnati, OH..........................................................813
Evansville, IN........................................................1,124
-----
Total..........................................................10,550
======
Southwestern Region:
Dallas, TX............................................................1,734
St. Joseph, MO........................................................2,841
Tyler, TX.............................................................1,745
Amarillo, TX..........................................................1,070
Topeka, KS............................................................1,055
Lubbock, TX.............................................................679
Midland, TX.............................................................695
Abilene, TX.............................................................430
San Angelo, TX..........................................................251
-----
Total..........................................................10,500
======
TOTAL DISPLAYS
--------------
Western Region:
Las Vegas, NV.........................................................1,001
Bakersfield, CA.......................................................1,511
Lancaster, CA...........................................................718
San Bernardino, CA......................................................397
San Diego, CA...........................................................301
Laughlin, AZ............................................................349
Yuma, AZ................................................................222
-----
Total...........................................................4,499
=====
Shelters/Street Furniture:
Las Vegas, NV.........................................................2,291
Denver, CO............................................................1,536
New Orleans, LA.........................................................458
Providence, RI..........................................................370
-----
Total...........................................................4,655
=====
Grand Total....................................................42,739
======
____________________
These displays are subject to regulation at federal, state and local levels.
<PAGE>
PRINCIPAL STOCKHOLDERS OF LAMAR
The following table sets forth as of July 8, 1999, the beneficial ownership
of the Lamar Common Stock, by (i) each stockholder known by Lamar to
beneficially own five percent or more of the Lamar Common Stock, (ii) Lamar's
Chief Executive Officer and each of the other executive officers of Lamar other
than the Chief Executive Officer, (iii) each Lamar director and (iv) all
current executive officers and directors of Lamar as a group. Except as noted
below, all shares indicated as beneficially owned are held with sole voting and
investment power.
<TABLE>
<CAPTION>
Directors, Officers Title of Number of Percent
and 5% Stockholders Class Shares of Class
- -------------------------------- ----------------- ----------------------- --------------
<S> <C> <C> <C>
Kevin P. Reilly, Jr. Class A 307,500(1) *
Class B(2) 17,700,000(3) 100%(4)
Sean E. Reilly Class A 300,000(1) *
Class B 17,700,000(3) 100%(4)
Charles W. Lamar, III Class A 4,835,509(5) 11.1%
Keith A. Istre Class A 51,512(6) *
Gerald H. Marchand Class A 165,125(7) *
Jack S. Rome, Jr. Class A 3,750(8) *
T. Everett Stewart, Jr. Class A 10,000(9) *
Stephen P. Mumblow Class A 0 *
Putnam Investments, Inc. Class A 7,609,810(10) 17.5%
One Post Office Square
Boston, MA 02109
FMR Corp. Class A 4,402,500(11) 10.2%
82 Devonshire Street
Boston, MA 02109
Pilgrim Baxter & Associates, Ltd. Class A 2,997,450(12) 6.9%
825 Duportail Road
Wayne, PA 19087
AMVESCAP PLC Class A 2,419,950(13) 5.6%
11 Devonshire Square
London ECZ2M 4YR
England
All Directors and Executive Class A 5,373,396(14) 12.3%(15)
Officers as a Group (8 Persons) Class B 17,700,000(3) 100%
</TABLE>
____________________
* Less than one percent
(1) Includes 300,000 shares of Class A Common Stock held by RFLP.
(2) Upon the sale of any shares of Class B Common Stock to a person other than
to a Permitted Transferee, such shares will automatically convert into shares
of Class A Common Stock on a share-for-share basis. Permitted Transferees
include (i) Kevin P. Reilly, Sr.; (ii) a descendant of Kevin P. Reilly, Sr.;
(iii) a spouse or surviving spouse (even if remarried) of any individual named
or described in (i) or (ii) above; (iv) any estate, trust, guardianship,
custodianship, curatorship or other fiduciary arrangement for the primary
benefit of any one or more of the individuals named or described in (i), (ii)
and (iii) above; and (v) any corporation, partnership, limited liability
company or other business organization controlled by and substantially all of
the interests in which are owned, directly or indirectly, by any one or more of
the individuals and entities named or described in (i), (ii), (iii) and (iv)
above. Except for voting rights, the Class A and Class B Common Stock are
substantially identical. The holders of Class A Common Stock and Class B Common
Stock vote together as a single class (except as may otherwise be required by
Delaware law), with the holders of Class A Common Stock entitled to one vote
per share and the holders of Class B Common Stock entitled to ten votes per
share, on all matters on which the holders of Lamar Common Stock are entitled
to vote.
(3) Consists of shares held by RFLP, of which Kevin Reilly, the President and
Chief Executive Officer of Lamar, is the managing general partner. Kevin
Reilly's three siblings, Wendell S. Reilly, Sean E. Reilly (a director) and
Anna Reilly Cullinan, are the other general partners of RFLP. The managing
general partner has sole voting power over the shares but dispositions of the
shares require the approval of 50% of the general partnership interests of
RFLP.
(4) Represents 29.0% of the Class A Common Stock if all shares of Class B
Common Stock were converted into Class A Common Stock.
(5) Includes 1,409,967 shares of Class A Common Stock held in trust for Mr.
Lamar's two minor children who reside with him, as to which Mr. Lamar disclaims
beneficial ownership, and 1,500,000 shares of Class A Common Stock held by
CWL3, LLC, as to which Mr. Lamar is deemed the beneficial owner.
(6) Includes 50,200 shares of Class A Common Stock subject to stock options
exercisable within 60 days.
(7) Includes 10,000 shares of Class A Common Stock subject to stock options
exercisable within 60 days.
(8) Consists of 3,000 shares of Class A Common Stock held in trust for Mr.
Rome's two children and 750 shares of Class A Common Stock owned jointly with
J. King Woolf, III, as to which Mr. Rome is considered the beneficial owner.
(9) Consists of 10,000 shares of Class A Common Stock subject to stock options
exercisable within 60 days.
(10) Putnam Investments, Inc. ("PI") shares voting power as to 341,251 of
these shares with The Putnam Advisory Co., Inc. and shares dispositive power
with Putnam Investment Management, Inc. and The Putnam Advisory Co., Inc. as
to 7,068,972 and 540,838 of these shares, respectively. Based on the Schedule
13-G/A for the year ended December 31, 1998 filed by PI with the Commission.
(11) FMR Corp. has sole dispositive power over these shares. FMR Corp. has
sole voting power with respect to 65,200 of the shares. Based on the Schedule
13-G/A for the year ended December 31, 1998 filed by FMR Corp. with the
Commission.
(12) Based on the Schedule 13G for the year ended December 31, 1998 filed by
Pilgrim Baxter & Associates, Ltd. with the Commission.
(13) AMVESCAP PLC shares voting and dispositive power over these shares with
AVZ, Inc., AIM Management Group, Inc., AMVESCAP Group Services, Inc., INVESCO
Inc., INVESCO Capital Management, Inc., INVESCO Management & Research, Inc.,
INVESCO Realty Advisers, Inc., INVESCO North America Holdings, Inc., INVESCO
Funds Group, Inc. and INVESCO (NY) Asset Management, Inc. Based on the Schedule
13-G for the year ended December 31, 1998 filed by AMVESCAP PLC with the
Commission.
(14) Includes 70,200 shares of Class A Common Stock subject to stock options
exercisable within 60 days.
(15) Represents 37.7% of the Class A Common Stock if all shares of Class B
Common Stock were converted into shares of Class A Common Stock.
<PAGE>
SELECTED FINANCIAL DATA
OF
LAMAR ADVERTISING COMPANY
The selected consolidated statement of operations and balance sheet data
presented below are derived from the audited consolidated financial statements
of Lamar for the twelve months ended October 31, 1994, 1995 and 1996 and
December 31, 1997 and 1998 and the unaudited consolidated financial statements
of Lamar for the three months ended March 31, 1998 and 1999. The data
presented below should be read in conjunction with Lamar's consolidated
financial statements and the related notes thereto and Lamar's Management's
Discussion and Analysis of Financial Condition and Results of Operations, which
are incorporated by reference herein.
<TABLE>
<CAPTION>
For the Years Ended
---------------------------------------------------------------- Three Months Ended
October 31, December 31, March 31,
------------------------------------- ---------------------- ----------------------
(Dollars in thousands)
1994 1995 1996 1997 1998 1998 1999
------ ------ ------- ------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Net advertising revenues..... $ 84,473 $ 102,408 $ 120,602 $ 201,062 $ 288,588 $ 58,397 $ 85,766
Operating expenses:
Direct advertising expenses.. 28,959 34,386 41,184 63,390 92,849 20,830 29,764
General & administrative
expenses................... 24,239 27,057 29,466 45,368 60,935 13,216 20,099
Depreciation & amortization.. 11,352 14,942 16,470 48,037 88,572 17,605 31,561
-------- --------- --------- --------- --------- -------- --------
Total operating expenses.. 64,550 76,385 87,120 156,795 242,356 51,651 81,424
-------- --------- --------- --------- --------- -------- --------
Operating income .............. 19,923 26,023 33,482 44,267 46,232 6,746 4,342
-------- --------- --------- --------- --------- -------- --------
Other expense (income):
Interest income.............. (194) (199) (240) (1,723) (762) (107) (686)
Interest expense............. 13,599 15,783 15,441 38,230 60,008 13,326 18,145
Loss (gain) on disposition of
assets..................... 675 1,476 91 (15) (1,152) (317) (336)
Other expense................ 616 655 242 280 219 --- ---
-------- --------- --------- --------- --------- -------- --------
Total other expense........ 14,696 17,715 15,534 36,772 58,313 12,902 17,123
-------- --------- --------- --------- --------- -------- --------
Earnings (loss) before income
taxes & cumulative effect of a
change in accounting
principle..................... 5,227 8,308 17,948 7,495 (12,081) (6,156) (12,781)
Income tax expense (benefit)(1) (2,072) (2,390) 7,099 4,654 (191) (1,565) (2,842)
-------- --------- --------- --------- --------- -------- --------
Net earnings (loss) before
cumulative effect of a change
in accounting principle....... 7,299 10,698 10,849 2,841 (11,890) (4,591) (9,939)
Cumulative effect of a change in
in accounting principle, net
of tax........................ --- --- --- --- --- --- (767)
-------- --------- --------- --------- --------- -------- --------
Net earnings (loss)............. 7,299 10,698 10,849 2,841 (11,890) (4,591) (10,706)
Preferred stock dividends....... --- --- (365) (365) (365) (91) (91)
-------- --------- --------- --------- --------- -------- --------
Net earnings (loss) applicable
to common stock............... $ 7,299 $ 10,698 $ 10,484 $ 2,476 $ (12,255) $ (4,682) $ (10,797)
======== ========= ========= ========= ========= ======== ========
Net earnings (loss) before
cumulative effect of a change
in accounting principle per
common share................. $ 0.14 $ 0.21 $ 0.25 $ 0.05 $ (0.24) $ (0.10) $ (0.16)
======== ========= ========= ========= ========= ======== ========
Net earnings (loss) per common
share........................ $ 0.14 $ 0.21 $ 0.25 $ 0.05 $ (0.24) $ (0.10) $ (0.18)
======== ========= ========= ========= ========= ======== ========
Balance Sheet Data (end of
period):
Cash & cash equivalents......... $ 8,016 $ 5,886 $ 8,430 $ 7,246 $ 128,597 $ 4,041 $ 8,171
Total assets.................... $ 130,008 $ 133,885 $ 173,189 $ 651,336 $ 1,413,377 $ 699,542 $ 1,358,537
Total long-term obligations..... $ 147,957 $ 143,944 $ 130,211 $ 551,865 $ 857,760 $ 600,470 $ 859,063
Stockholders' equity (deficit).. $ (37,352) $ (28,154) $ 19,041 $ 68,713 $ 466,779 $ 68,337 $ 458,905
</TABLE>
____________
(1) The benefit of Lamar's net operating loss carryforward was fully
recognized as of October 31, 1995, resulting in the income tax expense
shown for the twelve months ended October 31, 1996 and December 31,
1997 compared to the income tax benefit for the same period in the
prior years.
____________________
<PAGE>
SELECTED FINANCIAL DATA
OF
CHANCELLOR MEDIA OUTDOOR CORPORATION
AND PREDECESSORS
CHANCELLOR MEDIA OUTDOOR CORPORATION
The following table sets forth selected historical financial data for
Chancellor Outdoor as of and for the periods indicated. The selected
consolidated statement of operations and balance sheet data as of December 31,
1998 and for the period from July 22, 1998 (inception) through December 31,
1998 is derived from the audited consolidated financial statements of
Chancellor Outdoor. The financial data as of and for the three months ended
March 31, 1999 are derived from Chancellor Outdoor's unaudited consolidated
financial statements which, in the opinion of management, include all
adjustments (which consist only of normal recurring adjustments) necessary for
a fair presentation of the financial position and results of operations of
Chancellor Outdoor for such interim period. The data presented below should be
read in conjunction with the consolidated financial statements of Chancellor
Outdoor and the related notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
For the Period For the Three
from Months Ended
July 22, 1998 to March 31, 1999
December 31, 1998 (unaudited)
--------------------- ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues................................... $ 47,605 $ 53,601
Operating expenses............................. 23,505 28,451
Corporate general & administrative expenses.... 1,981 2,825
Depreciation and amortization.................. 25,990 31,396
------------- ------------
Operating loss................................. (3,871) (9,071)
------------- ------------
Other income (expense)......................... 156 (86)
Interest expense............................... (105) (64)
------------- ------------
Loss before income taxes....................... (3,820) (9,221)
Income tax expense (benefit)................... 345 (3,076)
------------- ------------
Net loss....................................... $ (4,165) $ (6,145)
------------- ------------
Balance Sheet Data (end of period):
Cash & cash equivalents........................ $ 2,023 $ 3,620
Total assets................................... $ 1,738,081 $ 1,765,818
Total long-term liabilities.................... $ 100,724 $ 97,408
Equity......................................... $ 1,614,526 $ 1,645,570
</TABLE>
_______________
<PAGE>
The Outdoor Advertising Division of Whiteco Industries, Inc.
The following table sets forth selected historical financial data for
Whiteco as of and for the periods indicated. The selected statement of
operations and balance sheet data as of and for the years ended December 31,
1995, 1996 and 1997, and for the eleven months ended November 30, 1998 is
derived from the audited financial statements of Whiteco. The data presented
below should be read in conjunction with the audited financial statements and
the related notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
For the Eleven
For the Years Ended Months Ended
December 31, November 30,
------------------------------------------- ------------------------
(DOLLARS IN THOUSANDS)
1995 1996 1997 1998
--------- ---------- ---------- ------------------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues......................................... $ 108,447 $ 117,268 $ 126,801 $ 128,603
Less: agency commissions......................... 6,616 8,401 8,703 8,973
---------- ---------- ---------- -------------------
Net revenues................................ 101,831 108,867 118,098 119,630
Cost of revenues................................. 40,659 42,021 45,615 43,665
Selling and administrative expenses.............. 20,056 21,933 24,443 23,719
Depreciation and amortization.................... 8,675 10,502 11,525 10,342
Management fee expense and other................. 2,101 2,248 2,322 2,577
---------- ---------- ---------- -------------------
Income from operations...................... 30,340 32,163 34,193 39,327
Other income, less other expenses................ 1,060 1,131 1,833 ---
Interest expense................................. (38) (18) (4) (35)
Interest income.................................. --- --- --- 134
Gain on sale of properties....................... --- --- --- 1,418
---------- ---------- ---------- -------------------
Net income $ 31,362 $ 33,276 $ 36,022 $ 40,844
========== ========== ========== ===================
Balance Sheet Data (end of period)(1)(2):
Cash & cash equivalents.......................... $ 153 $ 156 $ 250 -NA-
Total assets..................................... $ 66,850 $ 76,814 $ 90,443 -NA-
Total long-term obligations...................... $ --- $ --- $ --- -NA-
Divisional equity................................ $ 65,452 $ 74,604 $ 87,262 -NA-
</TABLE>
____________
(1) A balance sheet as of November 30, 1998 was not prepared; therefore, the
balance sheet data is not provided.
____________________
<PAGE>
Martin Media L.P.
The following table sets forth selected historical financial data for
Martin Media as of and for the periods indicated. The selected statements of
operations and balance sheet data as of and for the years ended December 31,
1994, 1995, 1996 and 1997 and the seven months ended July 31, 1998 is derived
from the audited financial statements of Martin Media. The data presented
below should be read in conjunction with the audited financial statements of
Martin Media and the related notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
For the Seven
Months Ended
For the Years Ended December 31, July 31,
---------------------------------------------------------------------- --------------
1994 1995 1996 1997 1998
------------- ------------- ------------- ------------- --------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Statements of Operations Data:
Revenue............................. $ 29,742 $ 33,733 $ 42,359 $ 48,107 $ 33,791
Cost of revenue..................... 3,987 4,459 5,745 6,091 4,136
------------- ------------- ------------- ------------- --------------
Gross profit................... 25,755 29,274 36,614 42,016 29,655
Operating expenses.................. 16,739 16,862 20,929 21,202 14,364
Depreciation and amortization....... 3,221 3,340 5,365 9,283 11,223
Refinance and acquisition expenses.. --- --- 3,823 9,645 3,276
Management fees and other........... 895 1,111 1,278 1,937 3,174
------------- ------------- ------------- ------------- --------------
Operating income (loss)............. 4,900 7,961 5,219 (51) (2,382)
Other income (expenses):
Interest income................ 85 116 96 66 20
Interest expense............... (4,387) (5,030) (6,022) (8,024) (8,527)
Miscellaneous income........... 408 284 253 1,077 473
Miscellaneous expense.......... --- (93) (11) --- ---
Loss on disposal of assets..... (406) (378) (459) (512) ---
------------- ------------- ------------- ------------- --------------
Net income (loss)........... $ 600 $ 2,860 $ (924) $ (7,444) $ (10,416)
============= ============= ============= ============= ==============
Balance Sheet Data (end of
period)(1):
Cash & cash equivalents............. $ 3,395 $ 5,445 $ 2,662 $ 23 -NA-
Total assets........................ $ 58,406 $ 58,668 $ 77,474 $ 142,074 -NA-
Total long-term obligations......... $ 53,440 $ 47,897 $ 67,415 $ 109,681 -NA-
Partners' capital (deficit)......... $ 822 $ 3,185 $ 1,974 $ (5,470) -NA-
</TABLE>
____________
(1) A balance sheet as of July 31, 1998, was not prepared; therefore, the
balance sheet data is not provided.
____________________
<PAGE>
Martin & MacFarlane, Inc.
The following table sets forth selected historical financial data for
Martin & MacFarlane, Inc. ("Martin & MacFarlane") as of and for the periods
indicated. The selected statements of operations and balance sheet data as of
and for the years ended June 30, 1994 and 1995 and the six months ended
December 31, 1995, the years ended December 31, 1996 and 1997 and the seven
months ended July 31, 1998 is derived from the audited financial statements of
Martin & MacFarlane. The data presented below should be read in conjunction
with the audited financial statements of Martin & MacFarlane and the related
notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
For the Year For the Six For the Year For the Seven
Ended Months Ended Ended Months Ended
June 30, December 31, December 31, July 31,
----------------------- -------------- ----------------------- --------------
1994 1995 1995 1996 1997 1998
------------------------ -------------- ----------------------- --------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Statements of Operations Data:
Revenue $ 14,915 $ 16,169 $ 8,311 $ 16,994 $ 22,535 $ 17,946
Cost of revenue 2,002 2,046 1,066 2,155 2,477 1,370
Gross profit 12,913 14,123 7,245 14,839 20,058 16,576
Operating expense 9,420 10,070 4,982 9,534 11,319 10,526
Depreciation and amortization 1,083 1,100 575 1,317 2,903 3,471
Management fees and other expenses --- --- --- 473 2,210 2,623
Refinance and acquisition expenses --- --- --- 85 884 1,570
--------- --------- ------------ -------- --------- -----------
Operating income (loss) 2,410 2,953 1,688 3,430 2,742 (1,614)
--------- --------- ------------ -------- --------- -----------
Other income (expense):
Interest income --- --- --- 10 15 ---
Interest expense (1,513) (1,313) (552) (1,116) (2,538) (2,244)
Gain (loss) on disposal of assets (204) 2,405 (2) (137) (207) 465
Employee separation expense --- (270) --- --- --- ---
Other income 79 153 125 117 414 537
--------- --------- ------------ -------- --------- -----------
(1,638) 975 (429) (1,126) (2,316) (1,242)
Income (loss before income taxes and
cumulative effect of change in
accounting principle) 772 3,928 1,259 2,304 426 (2,856)
Income tax expense (benefit) 553 1,520 (2,972) 58 23 10
--------- --------- ------------ -------- --------- -----------
Net income (loss) before cumulative 219 2,408 4,231 2,246 403 (2,866)
effect of change in accounting
principle
Cumulative effect of change in
accounting for income taxes (575) --- --- --- --- ---
--------- --------- ------------ -------- --------- -----------
Net income (loss) $ (356) $ 2,408 $ 4,231 $ 2,246 $ 403 $ (2,866)
========== ========= ============= ========= ========== ==============
Balance Sheet Data (end of period)(1)
Cash & cash equivalents $ 451 $ 352 $ 376 $ 11 $ 138 -NA-
Total assets $ 21,579 $ 21,693 $ 20,700 $ 27,105 $ 46,058 -NA-
Total long-term obligations $ 14,149 $ 12,067 $ 8,233 $ 6,947 $ 36,144 -NA-
Stockholders' equity $ 3,309 $ 5,531 $ 9,639 $ 10,285 $ 7,548 -NA-
</TABLE>
____________
(1) A balance sheet as of July 31, 1998, was not prepared; therefore, the
balance sheet data is not provided.
____________________
<PAGE>
CHANCELLOR MEDIA OUTDOOR CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
Chancellor Outdoor was formed on July 22, 1998 and completed the following
transactions between its inception date and March 31, 1999:
<circle>the acquisition of Martin Media, Martin & MacFarlane and certain
affiliated companies (collectively "Martin"), which operated 13,700
billboards and outdoor displays in 12 states serving 23 markets,
for a total purchase price of $615.1 million on July 31, 1998;
<circle>the acquisition of approximately 1,000 billboards and outdoor
display faces from Kunz & Company for a purchase price of $40.3
million on November 13, 1998;
<circle>the acquisition of Whiteco, which operated 22,500 billboards and
outdoor displays in 34 states, for a purchase price of $981.7
million on December 1, 1998; and
<circle>the acquisition of over 5,200 additional billboards and outdoor
displays in various markets for a purchase price of $68.8 million
between September 1998 and March 1999.
The acquisitions were accounted for as purchases. Consequently, the results of
operations of Chancellor Outdoor include the results of operations of the
acquired entities from the respective dates of acquisition.
Following is a breakdown of the results of operations for the periods noted of
Chancellor Outdoor and its significant predecessor entities: Whiteco, Martin
Media and Martin & MacFarlane.
Results of Operations
Chancellor Media Outdoor Corporation
JULY 22, 1998 (INCEPTION) TO DECEMBER 31, 1998 COMPARED TO THE THREE MONTHS
ENDED MARCH 31, 1999
Results of operations for the period July 22, 1998 (inception) through December
31, 1998 are not comparable to the results of operations for the three months
ended March 31, 1999 due to the acquisitions completed during the period and
the effect of seasonal fluctuations.
Net revenues during the period from July 22, 1998 through March 31, 1999
averaged $12.7 million per month and increased from $7.4 million in August 1998
to $18.5 million in March 1999 as a result of the various acquisitions of
billboards and outdoor display faces discussed above, most notably the
acquisition of Whiteco on December 1, 1998. Overall, monthly revenue per
display remained fairly consistent throughout the period, with a slight
seasonal decrease noted during the winter months and a slight decrease in
average rates per display subsequent to the acquisition of Whiteco. Average
rates per display for Martin are higher than Whiteco, as Martin's boards are
generally concentrated in more metropolitan areas.
Operating expenses represented 49.4% of net revenues for the period from July
22, 1998 through December 31, 1998 and 53.1% of net revenues for the three
months ended March 31, 1999. The increase is primarily due to the seasonal
effect of lower occupancy and billing rates during the winter months. Average
monthly operating expenses per display were also slightly higher for the three
months ended March 31, 1999.
Corporate general and administrative expenses increased over the period due to
the acquisitions discussed above and the establishment of the Chancellor
Outdoor Group corporate offices.
Depreciation and amortization expense averaged $7.2 million per month from
August 1998 through March 1999 and increased from $3.8 million in August 1998
to $10.5 million in March 1999 due to the acquisitions discussed above.
For the period from July 22, 1998 through December 31, 1998, income tax expense
was $0.3 million, compared to a benefit of $3.1 million for the three months
ended March 31, 1999. The change was due to an increase in the book loss for
the three months ended March 31, 1999, as compared to the period ended December
31, 1998, which exceeded both the permanent items and the state income tax
expense recorded for the quarter. Since the predecessor companies have a
history of generating taxable income and due to the significant level of
deferred tax liabilities, the likelihood of recognizing the deferred tax assets
generated during the period is considered to be probable.
THE OUTDOOR ADVERTISING DIVISION OF WHITECO INDUSTRIES, INC.
ELEVEN MONTHS ENDED NOVEMBER 30, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Net revenues for the eleven months ended November 30, 1998 aggregated $119.6
million and increased on a monthly basis compared to the year ended December
31, 1997 as a result of acquisitions during 1998 and an increase in monthly net
revenues per display. Monthly net revenues per display increased due to
Whiteco's revenue growth in all of its main product lines, particularly
bulletins. Bulletin sales continued to increase primarily as a result of new
promotions implemented by Whiteco, a new compensation plan and increased sales
training.
Operating expenses as a percentage of net revenues were consistent from period
to period. Cost of revenues was 36.5% of net revenues for the eleven months
ended November 30, 1998 and 38.6% of net revenues for the year ended December
31, 1997. Selling and administrative expenses were 19.8% of net revenues for
the eleven months ended November 30, 1998 and 20.7% of net revenues for the
year ended December 31, 1997. Monthly cost per display for 1998 was consistent
with 1997.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Net revenues for the year ended December 31, 1997 increased 8.5% to $118.1
million compared to $108.9 million for the year ended December 31, 1996. The
increase in net revenues was primarily attributable to acquisitions during 1997
and Whiteco's revenue growth in all of its main product lines, particularly
bulletins. The growth in the bulletin line is primarily the result of new
promotions implemented by Whiteco, a new compensation plan and increased sales
training.
Operating expenses as a percentage of net revenues were relatively consistent
from year to year. Cost of revenues for 1997 increased 8.6% to $45.6 million
compared to $42.0 million in 1996. Selling and administrative expenses for
1997 increased 11.4% to $24.4 million compared to $21.9 million in 1996.
MARTIN MEDIA L.P.
Prior to its acquisition by Chancellor Outdoor, Martin Media completed several
significant transactions during 1998, including the acquisition of over 1,300
billboards and outdoor displays in the Las Vegas and Pittsburgh markets from
Las Vegas Outdoor Advertising, Inc. and POA for a total purchase price of
approximately $22.7 million.
Martin Media began operating approximately 270 display faces owned by Kunz &
Company under a management agreement effective July 31, 1997. On December 23,
1997, Martin Media acquired Connell Outdoor Advertising Company, an outdoor
advertising company with 88 billboards in the Las Vegas market, for $30.0
million.
SEVEN MONTHS ENDED JULY 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Gross profit for the seven months ended July 31, 1998 aggregated $29.7 million
and increased on a monthly basis compared to gross profit for the year ended
December 31, 1997, which totaled $42.0 million, as a result of acquisitions
during 1998 and an increase in monthly gross profit per display due to general
market improvements, particularly in Nevada and Pittsburgh.
Operating expenses remained relatively consistent at 48.4% of gross profit, or
$14.4 million, for the seven months ended July 31, 1998 and 50.5% of gross
profit, or $21.2 million, for the year ended December 31, 1997.
Depreciation and amortization expense per month increased over the period due
to the acquisitions discussed above. Total depreciation expense for the seven
months ended July 31, 1998 and for the year ended December 31, 1997 was $11.2
million and $9.3 million, respectively.
Refinance and acquisition expenses were $3.3 million for the seven months ended
July 31, 1998 and $9.6 million for the year ended December 31, 1997. Martin
Media's administrative functions are performed by MW Sign Corp., its general
partner. Martin Media pays to MW Sign Corp. refinancing fees of 4% of all debt
refinanced and acquisition fees of 4% of the purchase price of acquired
companies.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Gross profit for the year ended December 31, 1997 increased 14.8% to $42.0
million compared to $36.6 million for the year ended December 31, 1996. The
increase in gross profit was primarily attributable to acquisitions during 1997
and general market improvements. The Nevada market experienced the greatest
increase in sales with the average occupancy rate in that market increasing
approximately 19.0%.
Operating expenses for the year ended December 31, 1997 increased 1.3% to $21.2
million compared to $20.9 million for the year ended December 31, 1996.
Depreciation and amortization expense for 1997 increased 73.0% to $9.3 million
compared to $5.4 million in 1996, due to the acquisitions discussed above and
newly constructed billboards.
Refinance and acquisition expenses were $9.6 million for the year ended
December 31, 1997 and $3.8 million for the year ended December 31, 1996.
Martin Media's administrative functions are performed by MW Sign Corp., its
general partner. Martin Media pays to MW Sign Corp. refinancing fees of 4% of
all debt refinanced and acquisition fees of 4% of the purchase price of
acquired companies.
MARTIN & MACFARLANE, INC.
On January 2, 1998, prior to its acquisition by Chancellor Outdoor, Martin &
MacFarlane acquired Newman Outdoor of Texas, Inc., an outdoor advertising
company with over 1,200 billboards and outdoor displays in three markets, for
approximately $12.5 million.
Martin & MacFarlane began operating approximately 730 display faces owned by
Kunz & Company under a management agreement effective July 3, 1997.
SEVEN MONTHS ENDED JULY 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Gross profit for the seven months ended July 31, 1998 aggregated $16.6 million
and increased on a monthly basis compared to gross profit for the year ended
December 31, 1997, which totaled $20.1 million, as a result of acquisitions
during 1998 and an increase in monthly gross profit per display due to general
market improvements, particularly in the California markets.
Operating expenses were 63.5% of gross profit, or $10.5 million, for the seven
months ended July 31, 1998 compared to 56.4% of gross profit, or $11.3 million,
for the year ended December 31, 1997. Martin & MacFarlane typically
experiences its highest occupancy and advertising rates during the months of
May through September. Therefore, margins for the seven months ended July 31,
1998 were less favorable than the margins for the twelve months ended December
31, 1997.
Depreciation and amortization expense per month increased over the period due
to the acquisitions discussed above. Total depreciation expense for the seven
months ended July 31, 1998 and for the year ended December 31, 1997 was $3.5
million and $2.9 million, respectively.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Gross profit for the year ended December 31, 1997 increased 35.2% to $20.1
million compared to $14.8 million for the year ended December 31, 1996. The
increase in gross profit was primarily attributable to acquisitions during 1997
and market growth, particularly Amarillo and Bakersfield.
Operating expenses for the year ended December 31, 1997 increased 18.7% to
$11.3 million compared to $9.5 million for the year ended December 31, 1996,
consistent with the increase in gross profit.
Depreciation and amortization expense for 1997 increased 120.4% to $2.9 million
compared to $1.3 million in 1996, due to the acquisitions discussed above and
newly constructed billboards.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception on July 22, 1998, Chancellor Outdoor's capital
requirements have been financed primarily through cash flows from operations.
Excess cash flow from operations is distributed to Chancellor LA. Operating
activities provided net cash of $22.9 million for the period July 22, 1998 to
December 31, 1998 and $17.5 million for the three months ended March 31, 1999.
Chancellor Outdoor does not maintain a separate credit facility.
RECENTLY-ISSUED ACCOUNTING PRINCIPLE
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities. This Statement establishes accounting and
reporting standards for derivative instruments and hedging activities. SFAS No.
133 is effective for all fiscal quarters of all fiscal years beginning after
June 15, 1999. Management does not anticipate that this Statement will have a
material impact on Chancellor Outdoor's consolidated financial statements.
YEAR 2000 ISSUE
The Year 2000 ("Y2K") issue is whether Chancellor Outdoor's computer
systems will properly recognize date sensitive information when the year
changes to 2000, or "00." Systems that do not properly recognize such
information could generate erroneous data or cause a system to fail.
Chancellor Outdoor has conducted a comprehensive review of its computer
systems to identify the systems that could be affected by the Y2K issue and has
developed an implementation plan. Chancellor Outdoor uses proprietary software
programs for its operations and is in the process of reviewing various
modifications and replacement plans. Chancellor Outdoor estimates that
approximately 75% of its Y2K remediation had been completed as of June 15,
1999. The remaining remediation efforts are expected to be completed by the end
of the third quarter of 1999. Chancellor Outdoor's Y2K implementation plan
also includes ensuring that its computer hardware and other equipment with
embedded chips or processors are Y2K compliant.
Costs associated with ensuring that Chancellor Outdoor's existing systems
are Y2K compliant and replacing certain existing systems are currently expected
to be approximately $0.6 million, of which $0.5 million had been incurred
through June 15, 1999. These costs, in conjunction with investments Chancellor
Outdoor is making in information systems and technology, are expected to reduce
the risks associated with Y2K issues.
The ability of third parties with whom Chancellor Outdoor transacts
business to address their Y2K issues adequately is outside of Chancellor
Outdoor's control. Therefore, there can be no assurance that the failure of
such third parties to address their Y2K issues adequately will not have a
material adverse effect on Chancellor Outdoor's business, financial condition,
cash flows and results of operations. Chancellor Outdoor has begun development
of contingency plans intended to mitigate any possible disruption in business
that may result from certain of Chancellor Outdoor's systems or the systems of
third parties that are not Y2K compliant.
The Y2K cost estimates are subject to change based on further analysis,
and any change in the costs may be material. As solutions are implemented and
new issues are recognized, the focus of Chancellor Outdoor's efforts and costs
to address the Y2K issue may be adjusted. Furthermore, Chancellor Outdoor
cannot guarantee that there will be no Y2K issues in spite of these efforts and
if such modifications and replacements are not made, or are not completed in
time, the Y2K issue could have a material impact on Chancellor Outdoor's
operations.
<PAGE>
LAMAR ADVERTISING COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
The following sets forth unaudited pro forma condensed consolidated
financial information for Lamar. The unaudited pro forma condensed
consolidated statement of operations for the year ended December 31, 1998 gives
effect to the acquisition of Outdoor Communications, Inc. (as filed in Lamar's
Form 8-K/A filed June 8, 1999) and the proposed Stock Purchase as if the
transactions had occurred on January 1, 1998. The unaudited pro forma
condensed consolidated statement of operations for the three months ended March
31, 1999 gives effect to the proposed Stock Purchase as if the transaction had
occurred on January 1, 1998. The unaudited pro forma condensed consolidated
balance sheet as of March 31, 1999 gives effect to the Stock Purchase as if the
transaction had occurred on March 31, 1999.
For purposes of the pro forma financial information: (i) the pro forma
statement of operations of Lamar for the year ended December 31, 1998 (as
adjusted for the Outdoor Communications, Inc. acquisition) has been combined
with the statement of operations of Chancellor Outdoor for the period July 22,
1998 (inception) to December 31, 1998, the statement of operations of Martin
Media for the seven months ended July 31, 1998, the statement of operations of
Martin & MacFarlane for the seven months ended July 31, 1998 and the statement
of income of Whiteco for the eleven months ended November 30, 1998; (ii) the
statement of operations of Lamar for the three month period ended March 31,
1999 has been combined with the statement of operations of Chancellor Outdoor
for the same period, and (iii) the balance sheet of Lamar as of March 31, 1999
has been combined with the balance sheet of Chancellor Outdoor as of March 31,
1999.
The unaudited pro forma condensed consolidated financial statements give
effect to the acquisitions under the purchase method of accounting. The pro
forma adjustments are described in the accompanying notes and are based on
preliminary estimates and certain assumptions that management of Lamar believes
reasonable under the circumstances.
The unaudited pro forma condensed consolidated financial statements have
been prepared by Lamar's management. The unaudited pro forma data is not
designed to represent and does not represent what Lamar's results of operations
or financial position would have been had the Stock Purchase and the
acquisition of Outdoor Communications, Inc. been completed on or as of the
dates assumed, and is not intended to project Lamar's results of operations for
any future period or as of any future date. The unaudited pro forma condensed
consolidated financial statements should be read in conjunction with the
audited and unaudited consolidated financial statements and notes of Lamar,
Chancellor Outdoor, Martin Media, Martin & MacFarlane, Whiteco and Outdoor
Communications, Inc. included elsewhere, or incorporated by reference, herein.
LAMAR ADVERTISING COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
PRO FORMA
LAMAR CHANCELLOR MARTIN MARTIN &
ADJUSTED OUTDOOR MEDIA MACFARLANE WHITECO
FOR THE OCI JULY 22, 1998 TO JAN 1, 1998 TO JAN 1, 1998 TO JAN 1, 1998 TO
ACQUISITION DECEMBER 31, 1998 JULY 31, 1998 JULY 31, 1998 NOV 30, 1998
--------------- ----------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Revenues, net $ 332,754 $ 47,605 $ 29,655 $ 16,576 $ 119,630
--------------- ----------------- -------------- -------------- --------------
Direct advertising expenses 108,781 23,505 14,364 10,526 43,665
General and administrative expenses 69,662 1,981 6,450 4,193 26,296
Depreciation and amortization 112,805 25,990 11,223 3,471 10,342
--------------- ----------------- -------------- -------------- --------------
291,248 51,476 32,037 18,190 80,303
--------------- ----------------- -------------- -------------- --------------
Operating income (loss) 41,506 (3,871) (2,382) (1,614) 39,327
--------------- ----------------- -------------- -------------- --------------
Other expense (income):
Interest income (762) - - (20) - - (134)
Interest expense 80,581 105 8,527 2,244 35
Loss (gain) on disposition of assets (729) - - - - (465) (1,418)
Other expenses 314 (156) (473) (537) - -
--------------- ----------------- -------------- -------------- --------------
79,404 (51) 8,034 1,242 (1,517)
--------------- ----------------- -------------- -------------- --------------
Income (loss) before income taxes (37,898) (3,820) (10,416) (2,856) 40,844
Income tax expense (benefit) (6,368) 345 - - 10 - -
--------------- ----------------- -------------- -------------- --------------
Net income (loss) (31,530) $ (4,165) $ (10,416) $ (2,866) $ 40,844
================= ============== ============== ==============
Preferred stock dividends 365
---------------
Net loss applicable to common stock $ (31,895)
===============
Net loss per common share $ (0.62)
===============
Weighted average number of shares
outstanding 51,361,522
===============
</TABLE>
<TABLE>
<CAPTION>
COMBINED
CHANCELLOR
OUTDOOR ACQUISITION PRO FORMA
12/31/98 ADJUSTMENTS COMBINED
--------------- --------------- ---------------
<S> <C> <C> <C>
Revenues, net $ 213,466 $ (3,810) (6) $ 542,410
--------------- --------------- ---------------
Direct advertising expenses 92,060 (1,993) (6) 198,848
General and administrative expenses 38,920 (2,734) (1) 105,848
Depreciation and amortization 51,026 97,754 (2) 261,585
--------------- --------------- ---------------
182,006 93,027 566,281
--------------- --------------- ---------------
Operating income (loss) 31,460 (96,837) (23,871)
--------------- --------------- ---------------
Other expense (income):
Interest income (154) 154 (3) (762)
Interest expense 10,911 40,046 (4) 131,538
Loss (gain) on disposition of assets (1,883) - - (2,612)
Other expenses (1,166) - - (852)
--------------- --------------- ---------------
7,708 40,200 127,312
--------------- --------------- ---------------
Loss before income taxes 23,752 (137,037) (151,183)
Income tax benefit 355 (44,536) (5) (50,549)
--------------- --------------- ---------------
Net income (loss) $ 23,397 $ (92,501) (100,634)
=============== ===============
Preferred stock dividends 365
---------------
Net loss applicable to common stock $ (100,999)
===============
Net loss per common share $ (1.30)
===============
Weighted average number of shares
outstanding 26,227,273 77,588,795
=============== ===============
</TABLE>
<PAGE>
LAMAR ADVERTISING COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999
(dollars in thousands, except per share data)
<TABLE>
<CAPTION>
CHANCELLOR ACQUISITION PRO FORMA
LAMAR OUTDOOR ADJUSTMENTS COMBINED
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues, net $ 85,766 $ 53,601 $ (847) (6) $ 138,520
-------------- -------------- -------------- --------------
Direct advertising expenses 29,764 28,451 (480) (6) 57,735
General and administrative expenses 20,099 2,825 - - 22,924
Depreciation and amortization 31,561 31,396 5,799 (2) 68,756
-------------- -------------- -------------- --------------
81,424 62,672 5,319 149,415
-------------- -------------- -------------- --------------
Operating income (loss) 4,342 (9,071) (6,166) (10,895)
-------------- -------------- -------------- --------------
Other expense (income):
Interest income (686) - - - - (686)
Interest expense 18,145 64 12,501 (4) 30,710
Loss on disposition of assets (336) - - - - (336)
Other expenses - - 86 - - 86
-------------- -------------- -------------- --------------
17,123 150 12,501 29,774
-------------- -------------- -------------- --------------
Loss before income taxes (12,781) (9,221) (18,667) (40,669)
Income tax benefit (2,842) (3,076) (7,800) (5) (13,718)
-------------- -------------- -------------- --------------
Loss before cumulative effect of a change
in accounting principle $ (9,939) $ (6,145) $ (10,867) $ (26,951)
============== ============== ============== ==============
Loss before cumulative effect of a change
in accounting principle per common share $ (0.16) $ (0.31)
============== ==============
Weighted average number of shares
outstanding 61,143,351 26,227,273 87,370,624
============== ============== ==============
</TABLE>
<PAGE>
LAMAR ADVERTISING COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1999
(dollars in thousands)
<TABLE>
<CAPTION>
CHANCELLOR PRO FORMA PRO FORMA
LAMAR OUTDOOR ADJUSTMENTS COMBINED
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Cash $ 8,171 $ 3,620 $ - - $ 11,791
Net receivables 41,042 29,015 - - 70,057
Other current assets 17,573 18,945 (2,243) (7) 34,275
--------------- --------------- --------------- ---------------
Total current assets 66,786 51,580 (2,243) 116,123
--------------- --------------- --------------- ---------------
Property, plant and equipment, net 521,495 1,213,218 (571,627) (8) 1,163,086
--------------- --------------- --------------- ---------------
Intangibles 752,809 499,852 610,013 (9) 1,862,674
Other assets 17,447 1,168 - - 18,615
--------------- --------------- --------------- ---------------
Total assets $ 1,358,537 $ 1,765,818 $ 36,143 $ 3,160,498
=============== =============== =============== ===============
Current maturities of long-term debt $ 4,165 $ 671 $ - - $ 4,836
Other current liabilities 36,404 22,169 22,000 (10) 80,573
--------------- --------------- --------------- ---------------
40,569 22,840 22,000 85,409
--------------- --------------- --------------- ---------------
Long-term debt 829,288 1,854 700,000 (11) 1,531,142
Deferred income - Long term 1,313 - - - - 1,313
Other liabilities 4,464 - - - - 4,464
Deferred tax liability 23,998 95,554 12,721 (12) 132,273
--------------- --------------- --------------- ---------------
Total Liabilities 899,632 120,248 734,721 1,754,601
--------------- --------------- --------------- ---------------
Stockholders' equity 458,905 1,645,570 (698,578) (13) 1,405,897
--------------- --------------- --------------- ---------------
Total liabilities and stockholders'
equity $ 1,358,537 $ 1,765,818 $ 36,143 $ 3,160,498
=============== =============== =============== ===============
</TABLE>
<PAGE>
LAMAR ADVERTISING COMPANY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
(dollars in thousands)
For purposes of determining the pro forma effect of the Chancellor Outdoor
acquisition on Lamar's Condensed Consolidated Statements of Operations for
the year ended December 31, 1998 and the three months' ended March 31, 1999,
the following adjustments have been made:
<TABLE>
<CAPTION>
12/31/98 03/31/99
--------------- --------------
<S> <C> <C>
(1) To eliminate expenses in Chancellor Outdoor's combined financial
statement related to management fees that would not have existed had
the Stock Purchase taken place at the beginning of the year
General and administrative expenses (2,734) - -
=============== ==============
(2) To record incremental amortization and depreciation
due to the application of purchase accounting.
Depreciation and amortization are calculated using
accelerated and straight line methods over the estimated
useful lives of the assets generally from 5-15 years. 97,754 5,799
=============== =============
(3) To eliminate historical interest income that would not
have existed had the Stock Purchase taken place on
January 1, 1998 154 - -
=============== =============
(4) To eliminate historical interest expense
in Chancellor Outdoor's combined financial statements
and record interest expense related to the debt acquired
and incurred in the Stock Purchase. (A difference of .125% in the
rate of interest would have changed income by $875 and
$216 for the year ended December 31, 1998 and three months
ended March 31, 1999, respectively.)
Historical interest expense (10,911) (64)
Interest expense on debt acquired and incurred in the Stock Purchase. 50,957 12,565
--------------- -------------
40,046 12,501
=============== =============
(5) To record the tax effect on pro forma statements
for the Stock Purchase. (44,536) (7,800)
=============== =============
(6) To record the effect on net revenues and direct expenses of the
divestiture required of Chancellor Outdoor by the Department of Justice
in May 1999.
Net revenues (3,810) (847)
=============== =============
Direct advertising expenses (1,993) (480)
=============== =============
</TABLE>
<PAGE>
The terms of the Stock Purchase Agreement include the issuance of 26,227,273
Class A Common Stock at an average stock price of $36.11 per share and $700
million in cash for a total purchase price of $1,646,992. The acquisition
will be accounted for under the purchase method of accounting. The following
is a summary of the preliminary allocation of the purchase price of the
acquisition:
<TABLE>
<CAPTION>
<S> <C>
Current assets 49,337
Property, plant and equipment 641,591
Goodwill 312,371
Customer lists 132,913
Structure locations 628,649
Other intangibles 35,932
Other assets 1,168
Current liabilities (44,840)
Long-term liabilities (110,129)
--------------------------
1,646,992
</TABLE>
For purposes of determining the pro forma effect of the Stock Purchase on
Lamar's unaudited Condensed Consolidated Balance Sheet as of March 31, 1999,
the following adjustments have been made:
<TABLE>
<CAPTION>
Pro Forma
Adjustments
---------------
<S> <C>
(7) Other current assets
To eliminate historical deferred tax assets not acquired in the
Stock Purchase. (2,243)
===============
(8) Property, Plant and Equipment, net:
To record the decrease in property, plant and equipment
from the allocation of the Purchase Price for the Stock Purchase (571,627)
===============
(9) Intangibles:
To record the increase in intangibles resulting from the
allocation of the Purchase Price of the Stock Purchase. 610,013
===============
(10) Other current liabilities:
To record the increase in the accrual of severance and other liabilities
assumed in the Stock Purchase. 22,000
===============
(11) Long-term debt:
To record the increase in debt related to financing
the Stock Purchase.
Borrowings under the Credit Facility 700,000
===============
(12) Deferred Tax Liability:
To record the increase in the deferred tax liability
created as a result of the application of purchase
accounting. 12,721
===============
(13) Stockholders' Equity
To eliminate Chancellor Outdoor's historical stockholders' equity
as a result of the Stock Purchase. (1,645,570)
To record the issuance of Class A Common Stock as a result
of the Stock Purchase. 946,992
---------------
(698,578)
===============
</TABLE>
<PAGE>
ADDITIONAL INFORMATION; INCORPORATION BY REFERENCE
Additional information about Lamar is available in Lamar's filings
with the Commission. See "Where You Can Find More Information" on the inside
front cover of this Information Statement regarding documents incorporated by
reference into this document.
FURTHER STOCKHOLDER ACTION NOT REQUIRED
Prior to the Closing, the proposed Share Issuance will be approved by the
Written Consent of RFLP, the holder of 100% of the Class B Common Stock,
representing approximately 80% of the total voting power of Lamar. Thus, such
consent is sufficient to approve the Share Issuance and no other vote or
consent of stockholders is required or will be sought in connection with the
Stock Purchase or Share Issuance.
ACCORDINGLY, LAMAR IS NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED
NOT TO SEND LAMAR A PROXY.
By Order of the Board of Directors
James R. McIlwain
Secretary
Baton Rouge, Louisiana
[July ___, 1999]
<PAGE>
INDEX TO FINANCIAL STATEMENTS
CHANCELLOR MEDIA OUTDOOR CORPORATION
Report of Independent Accountants...........................................F-3
Consolidated Balance Sheets as of December 31, 1998 and March 31, 1999
(unaudited)............................................................F-4
Consolidated Statements of Operations for the period from July 22, 1998 to
December 31, 1998, and the three months ended March 31, 1999
(unaudited)............................................................F-5
Consolidated Statements of Equity for the period from July 22, 1998 to
December 31, 1998, and the three months ended March 31, 1999
(unaudited)............................................................F-6
Consolidated Statements of Cash Flows for the period from July 22, 1998 to
December 31, 1998, and the three months ended March 31, 1999
(unaudited)............................................................F-7
Notes to Consolidated Financial Statements..................................F-8
THE OUTDOOR ADVERTISING DIVISION OF WHITECO INDUSTRIES, INC.
Report of Independent Accountants..........................................F-15
Statement of Income for the eleven months ended November 30, 1998..........F-16
Statement of Divisional Equity for the eleven months ended November
30, 1998..............................................................F-17
Statement of Cash Flows for the eleven months ended November 30, 1998......F-18
Notes to Financial Statements..............................................F-19
Independent Auditors' Report...............................................F-22
Balance Sheets as of December 31, 1996 and 1997............................F-23
Statements of Income for the years ended December 31, 1995, 1996 and 1997..F-24
Statements of Cash Flows for the years ended December 31, 1995, 1996
and 1997..............................................................F-25
Notes to Financial Statements..............................................F-26
MARTIN MEDIA L.P.
Report of Independent Accountants..........................................F-29
Statement of Operations for the seven months ended July 31, 1998...........F-30
Statement of Partners' Capital for the seven months ended July 31, 1998....F-31
Statement of Cash Flows for the seven months ended July 31, 1998...........F-32
Notes to Financial Statements..............................................F-33
Report of Independent Public Accountants...................................F-37
Balance Sheets as of December 31, 1997 and 1996............................F-38
Statements of Operations for each of the years ended December 31, 1997,
1996 and 1995..............................................................F-39
Statements of Partners' Capital (Deficit) for each of the years ended
December 31, 1997, 1996 and 1995......................................F-40
Statements of Cash Flows for each of the years ended December 31, 1997,
1996 and 1995..............................................................F-41
Notes to Financial Statements..............................................F-43
MARTIN & MACFARLANE, INC.
Report of Independent Accountants..........................................F-54
Statement of Operations for the seven months ended July 31, 1998...........F-55
Statement of Retained Earnings for the seven months ended July 31, 1998....F-56
Statement of Cash Flows for the seven months ended July 31, 1998...........F-57
Notes to Financial Statements..............................................F-58
Report of Independent Public Accountants...................................F-62
Balance Sheets as of December 31, 1997 and 1996............................F-63
Statements of Income for each of the years ended December 31, 1997 and
1996 and the six-month period ended December 31, 1995.................F-64
Statements of Retained Earnings for each of the years ended December 31,
1997 and 1996 and the six-month period ended December 31, 1995........F-65
Statements of Cash Flows for each of the years ended December 31, 1997
and 1996 and the six-month period ended December 31, 1995.............F-66
Notes to Financial Statements..............................................F-68
Independent Auditors' Report...............................................F-80
Balance Sheet as of June 30, 1995..........................................F-81
Statement of Income for the year ended June 30, 1995.......................F-83
Statement of Retained Earnings for the year ended June 30, 1995...........F-84
Statement of Cash Flows for the year ended June 30, 1995...................F-85
Notes to Financial Statements..............................................F-87
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
June 9, 1999
To the Board of Directors of
Chancellor Media Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, equity and cash flows present fairly, in
all material respects, the financial position of Chancellor Media Outdoor
Corporation (the "Company"), a wholly-owned subsidiary of Chancellor
Media Corporation of Los Angeles, at December 31, 1998, and the results of
their operations and their cash flows for the period from July 22, 1998 through
December 31, 1998, in conformity with generally accepted accounting principles.
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 audit. We conducted our audit of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.
/S/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
<PAGE>
CHANCELLOR MEDIA OUTDOOR CORPORATION
(A WHOLLY-OWNED SUBSIDIARY OF CHANCELLOR MEDIA CORPORATION OF LOS ANGELES)
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31,
DECEMBER 31, 1999
1998 (Unaudited)
------------ -----------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 2,023 $ 3,620
Accounts receivable, net of allowance for uncollectible
accounts of $5,053 and $5,286 27,073 29,015
Prepaid land rent 7,325 10,655
Deferred tax asset 2,122 2,243
Inventories 3,680 3,438
Other current assets 2,119 2,609
---------- ----------
Total current assets 44,342 51,580
---------- ----------
Property and equipment:
Land 16,215 16,909
Advertising structures 1,178,751 1,206,113
Buildings and improvements 10,117 10,251
Equipment and vehicles 9,005 10,328
Construction-in-progress 13,114 17,382
---------- ----------
Total cost 1,227,202 1,260,983
---------- ----------
Accumulated depreciation (20,794) (47,765)
---------- ----------
Net property and equipment 1,206,408 1,213,218
---------- ----------
Intangible assets:
Goodwill 464,359 469,795
Other 27,000 39,673
---------- ----------
Total cost 491,359 509,468
---------- ----------
Accumulated amortization (5,196) (9,616)
Net intangible assets 486,163 499,852
Prepaid land rent, non-current 1,168 1,168
---------- ----------
Total assets $1,738,081 $1,765,818
========== ==========
LIABILITIES AND EQUITY
Current liabilities:
Notes payable, current $ 698 $ 671
Accounts payable 8,799 3,479
Accrued payroll and employee benefits 5,327 7,029
Other accrued liabilities 8,007 11,661
---------- ----------
Total current liabilities 22,831 22,840
Commitments and contingencies - -
Deferred tax liabilities 99,009 95,554
Notes payable, long-term 1,715 1,854
Equity 1,614,526 1,645,570
---------- ----------
Total liabilities and equity $1,738,081 $1,765,818
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CHANCELLOR MEDIA OUTDOOR CORPORATION
(A WHOLLY-OWNED SUBSIDIARY OF CHANCELLOR MEDIA CORPORATION OF LOS ANGELES)
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE THREE
FROM JULY 22, MONTHS ENDED
1998 TO MARCH 31,
DECEMBER 31, 1999
1998 (UNAUDITED)
--------------- --------------
<S> <C> <C>
Revenues $ 52,750 $ 57,992
Less: agency commissions 5,145 4,391
------------ -----------
Net revenues 47,605 53,601
Operating expenses 23,505 28,451
Corporate general and administrative expenses 1,981 2,825
Depreciation and amortization 25,990 31,396
------------ -----------
Loss from operations (3,871) (9,071)
Other (income) expense (156) 86
Interest expense 105 64
------------ -----------
Loss before taxes (3,820) (9,221)
Income tax expense (benefit) 345 (3,076)
------------ -----------
Net loss $ (4,165) $ (6,145)
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CHANCELLOR MEDIA OUTDOOR CORPORATION
(A WHOLLY-OWNED SUBSIDIARY OF CHANCELLOR MEDIA CORPORATION OF LOS ANGELES)
CONSOLIDATED STATEMENTS OF EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE THREE
FROM JULY 22, MONTHS ENDED
1998 TO MARCH 31,
DECEMBER 31, 1999
1998 (UNAUDITED)
--------------- --------------
<S> <C> <C>
Beginning balance $ - $ 1,614,526
Contributions from parent, net 1,618,691 37,189
Net loss (4,165) (6,145)
----------- -----------
$ 1,614,526 $ 1,645,570
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CHANCELLOR MEDIA OUTDOOR CORPORATION
(A WHOLLY-OWNED SUBSIDIARY OF CHANCELLOR MEDIA CORPORATION OF LOS ANGELES)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE THREE
FROM JULY 22, MONTHS ENDED
1998 TO MARCH 31,
DECEMBER 31, 1999
1998 (UNAUDITED)
--------------- --------------
<S> <C> <C>
Net loss $ (4,165) $ (6,145)
--------- ---------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 20,794 26,981
Amortization of intangibles 5,196 4,415
Deferred tax benefit (1,155) (3,576)
Changes in assets and liabilities:
Accounts receivable (1,165) (1,578)
Other assets 1,649 (2,223)
Accounts payable and accrued expenses 1,780 (379)
--------- ---------
Total adjustments 27,099 23,640
--------- ---------
Net cash provided by operating activities 22,934 17,495
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment and construction
of advertising structures (5,344) (8,176)
--------- ---------
Net cash used in investing activities (5,344) (8,176)
--------- ---------
Cash flows from financing activities:
Distributions to parent (15,347) (7,584)
Principal payments on note payable (220) (138)
--------- ---------
Net cash used in financing activities (15,567) (7,722)
--------- ---------
Net increase in cash 2,023 1,597
Cash, at beginning of period - 2,023
--------- ---------
Cash, at end of period $ 2,023 $ 3,620
========= =========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 105 $ 64
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
CHANCELLOR MEDIA OUTDOOR CORPORATION
(A WHOLLY-OWNED SUBSIDIARY OF CHANCELLOR MEDIA CORPORATION OF LOS ANGELES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. ORGANIZATION AND SIGNIFICANT ACQUISITIONS
The Chancellor Media Outdoor Corporation (the "Company"), a wholly-owned
subsidiary of Chancellor Media Corporation of Los Angeles
("CMCLA"), operated approximately 38,000 outdoor advertising display
faces in 37 states as of December 31, 1998. The Company was formed
on July 22, 1998; however, the Company held no assets until the
acquisition of Martin Media, Martin & MacFarlane and certain affiliated
companies on July 31, 1998 and the Company had no results of
operations until August 1, 1998. On June 1, 1999, Chancellor Media
Corporation ("CMC"), the indirect parent of CMCLA, announced that it
had entered into a definitive agreement to sell the Company (see
Note 8). The accompanying consolidated financial statements do not
include any effects related to the proposed transaction.
On July 31, 1998, CMCLA acquired Martin Media L.P., Martin &
MacFarlane and certain affiliated companies ("Martin") for a total
purchase price of $615,117, which consisted of $612,848 in cash and
included various other direct acquisition costs and the assumption of
notes payable of $2,270. As part of the Martin transaction, CMCLA
acquired an asset purchase agreement with Kunz & Company and paid an
additional $6,000 in cash for a purchase option deposit previously paid in
by Martin. Martin operated 13,700 billboards and outdoor displays in 12
states serving 23 markets.
On November 13, 1998, CMCLA acquired approximately 1,000 billboards
and outdoor display faces from Kunz & Company for $40,264 in cash, of
which $6,000 was previously paid as a purchase option deposit in
connection with the Martin acquisition on July 31, 1998. The Company
had previously been operating these properties under a management agreement
effective July 31, 1998.
On December 1, 1998, CMCLA acquired the assets and working capital of
the outdoor advertising division of Whiteco Industries, Inc. ("Whiteco"),
which operated approximately 22,500 billboards and outdoor displays in 34
states, for $981,698 in cash, including various other direct acquisition
costs.
The unaudited 1998 pro forma condensed consolidated results of operations
data, as if the Whiteco and Martin transactions had occurred on July 22,
1998 are as follows:
Net revenues $ 92,990
Net loss (9,856)
The pro forma results are not necessarily indicative of future results.
Between September and December 1998, CMCLA acquired approximately 670
additional billboards and outdoor displays in various markets for
approximately $23,582 in cash.
On January 21, 1999 and February 9, 1999, CMCLA acquired
approximately 4,500 outdoor display faces from Triumph Outdoor Holdings
and certain affiliated companies for $37,006 in cash including working
capital and direct acquisition costs ("the Triumph Acquisition"). In
connection with the Triumph Acquisition, CMCLA paid approximately
$1,000 to an entity controlled by James A. McLaughlin, the President and
Chief Operating Officer of the Company. An additional $700 that
may be paid to such entity is currently held in escrow, subject to
satisfaction of indemnity claims, if any.
Between January and May 1999, CMCLA acquired approximately 250
additional billboards and outdoor displays in various transactions for
approximately $11,900 in cash.
The above acquisitions were accounted for under the purchase method of
accounting. After acquisition, CMCLA pushed down the applicable
stock, assets and/or liabilities of the acquired entities to the Company
as non-cash contributions. The contributions were made at cost
and therefore no related gain or loss was recognized by CMCLA. These
acquisitions are non-cash transactions that are not reflected in the
consolidated statement of cash flows. The accompanying consolidated
financial statements include the results of operations of the acquired
entities from their respective date of acquisition.
A summary of net assets acquired during 1998 follows:
<TABLE>
<CAPTION>
<S> <C>
Cash $ 6,716
Accounts receivable, net 25,908
Other current assets 14,747
Property and equipment 1,221,858
Intangible assets 499,044
Other assets 1,195
Accounts payable and accrued expenses (10,752)
Deferred tax liabilities (98,042)
Other liabilities (13)
----------
Total net assets acquired 1,660,661
==========
Less:
Cash acquired 6,716
Notes payable 2,268
----------
Cash paid for acquisitions by CMCLA $1,651,677
==========
</TABLE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles. All significant
intercompany balances and transactions have been eliminated in
consolidation. Corporate overhead costs related to the Company are
included as expenses in the accompanying financial statements. Management
considers the inclusion of such expenses reasonable. The corporate
overhead expenses may not necessarily be indicative of expenses that would
have been incurred if the Company had operated as a separate
entity.
INTERIM FINANCIAL STATEMENTS
The financial information as of March 31, 1999 and with respect to the
three months then ended is unaudited. In the opinion of management, the
financial statements contain all adjustments, consisting of normal
recurring accruals, necessary for the fair presentation of the results for
such period. The information is not necessarily indicative of the results
of operations to be expected for the fiscal year end.
ADVERTISING CONTRACTS AND REVENUE RECOGNITION
Outdoor advertising revenue is derived from contracts with advertisers for
the rental of outdoor advertising space and is recognized on an accrual
basis ratably over the terms of the contracts, which generally cover
periods of one month up to five years. Costs associated with the outdoor
advertising operations, including contract costs and land rental, are
expensed over the related contract term.
PREPAID LAND LEASES
The majority of the Company's outdoor advertising structures are
located on leased land. Land rent is typically paid in advance for
periods ranging from one to twelve months. Prepaid land leases are
expensed ratably over the related rental term.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation of property and
equipment is computed using the straight-line method over the estimated
useful lives of the assets. Estimated useful lives are as follows:
Advertising structures 15 years
Building and improvements 35 years
Equipment and vehicles 5-10 years
Repaid and maintenance costs are charged to expense as incurred.
GOODWILL AND OTHER INTANGIBLE ASSETS
Intangible assets consist of goodwill, non-compete agreements, municipal
contracts and franchise agreements. Intangible assets resulting from
acquisitions are valued based upon estimated fair values. The Company
amortizes such intangible assets using the straight-line method
over estimated useful lives of 40 years for goodwill, five years for non-
compete agreements and ten years for municipal contracts and franchise
agreements. The Company evaluates the propriety of the carrying
amount of intangible assets and related amortization periods to determine
whether current events or circumstances warrant adjustments to the
carrying value and/or revised estimates of amortization periods. These
evaluations consist of the projection of undiscounted cash flows over the
remaining amortization periods of the related intangible assets.
The projections are based on historical trend lines of actual results,
adjusted for expected changes in operating results. At this time,
the Company believes that no impairment of goodwill or other
intangible assets has occurred and that no revisions to the amortization
periods are warranted.
CASH EQUIVALENTS
The Company considers temporary cash investments purchased with
original maturities of three months or less to be cash equivalents.
DISCLOSURE OF CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates. In the opinion of management, credit risk with respect to
trade receivables is limited due to the large number of diversified
customers and the geographic diversification of the Company's
customer base. The Company performs ongoing credit evaluations of
its customers and believes that adequate allowances for any uncollectible
trade receivables are maintained. At December 31, 1998, no receivable
from any customer exceeded 5% of equity and no customer accounted for more
than 10% of net revenues during the period July 22, 1998 through December
31, 1998.
3. LEASE COMMITMENTS
The Company has long-term operating leases for office space,
equipment and the majority of the land occupied by its outdoor advertising
structures. The leases expire at various dates, generally during the next
ten years, and have varying options to renew and cancel. Rental expense
for operating leases (excluding those with lease terms of one month or
less that were not renewed) was approximately $8,234 for the period July
22, 1998 to December 31, 1998. Future minimum lease payments under
noncancelable operating leases (with initial or remaining lease terms in
excess of one year) as of December 31, 1998 are as follows:
<TABLE>
<CAPTION>
YEARS
- -----
<S> <C>
1999 $ 33,624
2000 35,187
2001 35,836
2002 36,457
2003 36,970
Thereafter 1,259,991
----------
$1,438,065
==========
</TABLE>
4. INCOME TAXES
The Company is a member of a group that files a consolidated
income tax return. For purposes of separate financial statement
presentation, the Company's current and deferred income taxes
have been determined as if the Company were a separate
taxpayer.
Income tax expense for the period from July 22, 1998 to December 31,
1998 consists of the following:
<TABLE>
<CAPTION>
<S> <C>
Current tax expense:
Federal $ -
State 1,500
---------
Total current tax expense 1,500
Deferred tax benefit:
Federal (1,103)
State (52)
Total deferred tax benefit (1,155)
---------
Income tax expense $ 345
=========
</TABLE>
Total income tax expense differed from the amount computed by applying the
U.S. federal statutory income tax rate of 35% to the loss from operations
for the period from July 22, 1998 to December 31, 1998 as a result of the
following:
<TABLE>
<CAPTION>
$ %
----------- -----------
<S> <C> <C>
Computed "expected" tax benefit $ (1,337) (35.0)%
Amortization of goodwill 357 9.3%
Nondeductible meals and entertainment 350 9.2%
State income taxes, net of federal benefit 975 25.5%
--------- ---------
Income tax expense $ 345 9.0%
========= =========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1998
are presented below:
<TABLE>
<CAPTION>
<S> <C>
Deferred tax assets:
Net operating loss carryforwards $ 8,290
Differences in book and tax bases 2,122
---------
Total deferred tax assets 10,412
---------
Deferred tax liabilities:
Property and equipment and intangibles, primarily
related to acquisitions 107,299
---------
Net deferred tax liability $ 96,887
=========
</TABLE>
Deferred tax assets and liabilities are computed by applying the U.S.
federal and state income tax rate in effect to the gross amounts of
temporary differences and other tax attributes, such as net operating loss
carryforwards.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected
future taxable income, and tax planning strategies in making this
assessment.
At December 31, 1998, the Company has tax net operating loss
carryforwards available to offset future taxable income of approximately
$19,700, expiring in the year 2013.
5. CONTINGENCIES
The Company is involved in various claims and lawsuits, which
are generally incidental to its business. The Company is
vigorously contesting all of these matters and believes that the
ultimate resolution of these matters will not have a materially
adverse effect on its consolidated financial position, cash flows or
results of operations.
The Company, together with its consolidated subsidiaries, has
guaranteed certain debt obligations issued by CMCLA of
approximately $4,096,000. In addition to the Company, other
subsidiaries of CMCLA guarantee the debt.
6. STOCK OPTIONS
CMC has established Key Employee Stock Option Plans ("the Employee
Option Plans") which provide for the issuance of stock options to
officers and other key employees of CMC and its subsidiaries. The
Employee Option Plans make available for issuance an aggregate
15,105,000 shares of common stock of CMC.
The total options available for grant were 2,171,939 at December 31,
1998. During 1998, CMC granted options to purchase 360,000 shares of
CMC common stock to an officer of the Company with an exercise
price of $48.375. Options to purchase 300,000 shares of CMC common
stock vest ratably 25% per year for a period of three years with the
first 25% vested on the grant date. Options to purchase 60,000 shares
of CMC common stock vest ratably 25% per year on each of the first
four annual anniversaries of the date of grant. At December 31, 1998,
75,000 shares were exercisable.
The Company applies Accounting Principles Board Opinion No. 25
in accounting for the Employee Option Plans and, accordingly, no
compensation cost for Company employees is recognized in
the consolidated financial statements for stock options which have
exercise prices equal to or in excess of the market value of CMC's
common stock on the date of grant. Had the Company determined
compensation cost based on fair value at grant date for its stock
options under Statement of Financial Accounting Standards No. 123,
the Company's pro forma net loss for the period from July 22,
1998 through December 31, 1998 would have been $5,440. The fair value
for the stock options was estimated at the date of grant using the
Black-Scholes option pricing model assuming a dividend yield of 0%, an
expected volatility of 39.91%, a risk free interest rate of 4.80% and
an expected life of seven years.
7. BENEFIT PLAN
CMC offers substantially all of its and its subsidiaries' employees
voluntary participation in a 401(k) Plan. Through the Company,
CMC may make discretionary contributions to the plans; however, no
such contributions were made by the Company during 1998.
8. SUBSEQUENT EVENT
On June 1, 1999, CMCLA entered into a definitive agreement to
sell the Company to Lamar Advertising Company ("Lamar") for
approximately $1,600,000 in stock and cash. Under the terms of the
agreement, Lamar will pay $700,000 in cash and will issue
approximately 26,227,000 shares of its common stock, valued at
approximately $900,000 based on the value of the stock on May 27,
1999. Following the transaction, CMCLA will own approximately
30% of Lamar's common stock and will have the right to appoint two
members to Lamar's board of directors, increasing the size of the
board to ten members.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
June 9, 1999
To the Board of Directors of
Chancellor Media Corporation
In our opinion, the accompanying statements of income, divisional equity
and cash flows present fairly, in all material respects, the results of
operations and cash flows of The Outdoor Division of Whiteco
Industries, Inc. (the "Division") for the eleven months ended November 30,
1998, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Division's management;
our responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
/S/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
<PAGE>
THE OUTDOOR DIVISION OF WHITECO INDUSTRIES, INC.
STATEMENT OF INCOME
ELEVEN MONTHS ENDED NOVEMBER 30, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
Revenues $ 128,603
Less: agency commissions (8,973)
-----------
Net revenues 119,630
Cost of revenues 43,665
Selling and administrative expenses 23,719
Depreciation and amortization 10,342
Management fee expense 2,164
Other 413
-----------
Income from operations 39,327
Interest expense 35
Interest income (134)
Gain on sale of properties (1,418)
-----------
Net income $ 40,844
===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE OUTDOOR DIVISION OF WHITECO INDUSTRIES, INC.
STATEMENT OF DIVISIONAL EQUITY
ELEVEN MONTHS ENDED NOVEMBER 30, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
Divisional equity at December 31, 1997 $ 87,262
Net income 40,844
Interdivisional transactions, net (21,968)
----------
Divisional equity at November 30, 1998 $ 106,138
==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE OUTDOOR DIVISION OF WHITECO INDUSTRIES, INC.
STATEMENT OF CASH FLOWS
ELEVEN MONTHS ENDED NOVEMBER 30, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities:
Net income $ 40,844
---------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 10,146
Provision for doubtful accounts 299
Gain on sale of assets (1,418)
Changes in assets and liabilities:
Accounts receivable (4,812)
Other assets (5,617)
Accounts payable and accrued expenses 2,088
---------
Total adjustments 686
---------
Net cash provided by operating activities 41,530
---------
Cash flows from investing activities:
Proceeds from sale of assets 558
Expenditures for property and equipment (20,230)
---------
Net cash used in investing activities (19,672)
---------
Cash flows from financing activities:
Interdivisional transactions, net (21,968)
---------
Net cash used in financing activities (21,968)
---------
Net decrease in cash (110)
Cash at beginning of period 250
---------
Cash at end of period $ 140
=========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
THE OUTDOOR DIVISION OF WHITECO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. THE COMPANY AND SALE
The Outdoor Advertising Division of Whiteco Industries, Inc. (the
"Division") owns and operates outdoor advertising signs throughout the
United States. The Division is wholly-owned by Whiteco Industries,
Inc. ("Industries").
During the period covered by the financial statements, the Division
was conducted as an integral part of Industries' overall operations
and separate financial statements were not prepared. These financial
statements have been prepared from Industries' historical accounting
records. Corporate overhead expenses are actual expenses incurred by
the Division; however, the expenses incurred by the Division for
corporate overhead may not necessarily be indicative of expenses that
would have been incurred had the Division been operated as a separate
entity.
On December 1, 1998, Industries entered into an agreement whereby
substantially all of the assets of the Division were purchased and
certain of the liabilities were assumed by Chancellor Media
Corporation of Los Angeles. The accompanying financial statements do
not reflect any adjustments relating to this transaction.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CONTRACTS AND REVENUE RECOGNITION
Outdoor advertising signs are contracted to customers under individual
advertising contracts that primarily run from one month to five years.
Revenue is recognized ratably over the life of the contract. Costs
associated with the outdoor advertising operations, including contract
costs and land rental, are expensed over the related contract term.
PREPAID SIGN COSTS
The majority of the Division's outdoor advertising structures are
located on leased land. Land rent is typically paid in advance for
periods ranging from one to twelve months. Prepaid land leases are
expensed ratably over the related rental term.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost, including interest charges
capitalized during construction. Depreciation on these assets is
computed over various lives under the straight-line method over the
various useful lives. Depreciation expense for the eleven months
ended November 30, 1998 was $10,146.
The estimated useful lives of the various classes of buildings,
improvements and equipment are as follows:
Building and improvements 15-40 years
Advertising structures 5-12 years
Equipment 3-8 years
INCOME TAXES
The Division is part of Industries, which is an "S" corporation and,
as such, federal and most state income taxes are the responsibility of
the stockholder and therefore not reflected on the Division's
financial statements.
DISCLOSURE OF CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
3. LEASE COMMITMENTS
The Division leases office facilities and property under various
operating leases. The Division's primary office premises are leased
from a partnership in which Industries is the general partner. Annual
minimum rental payments under leases that have an initial or remaining
term in excess of one year or leases expected to be renewed at
November 30, 1998 are as follows:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31, RELATED
- ------------------------- PARTY OTHER TOTAL
--------- -------- --------
<S> <C> <C> <C>
1999 $ 224 $ 20,856 $ 21,080
2000 224 20,983 21,207
2001 224 21,094 21,318
2002 224 21,217 21,441
2003 56 21,397 21,453
Thereafter - 566,701 566,701
-------- --------- ---------
$ 952 $ 672,248 $ 673,200
======== ========= =========
</TABLE>
Total lease expense was approximately $20,080 for the eleven months
ended November 30, 1998. Lease expense to related parties was $216
for the eleven months ended November 30, 1998.
4. MANAGEMENT AGREEMENT
In October 1984, the Division entered into an agreement with Metro
Management Associates (the "Partnership"), a partnership in which
several partners are employees of Industries, for the management and
operation of approximately 540 outdoor advertising signs located in
Indiana, Texas, Rhode Island, Missouri, Ohio, Florida, Illinois,
Kentucky, Pennsylvania and Virginia. All revenue and operating
expenses related to the management and operation of the Partnership's
outdoor advertising signs are included in the Division's results of
operations. The Division is required to pay a profit participation
fee to the Partnership which approximates the operating profit of the
management assets and is based upon a fixed monthly fee and a variable
fee based upon revenue. For the eleven months ended November 30,
1998, the Division paid $2,164 to Metro Management in connection with
the agreement. On August 31, 1998, the Partnership entered into an
agreement to sell substantially all of the assets and certain
specified liabilities of the Partnership to Chancellor Media
Corporation of Los Angeles. The management agreement between the
Division and the Partnership was terminated upon the consummation of
the acquisition by Chancellor Media Corporation of Los Angeles on
December 1, 1998.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Whiteco Industries, Inc.
Merrillville, Indiana
We have audited the accompanying balance sheets of the Outdoor
Advertising Division of Whiteco Industries, Inc. as of December 31, 1996 and
1997, and the related statements of income and cash flows for each of the
three years in the period ended December 31, 1997. These financial statements
are the responsibility of the Division's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the Outdoor
Advertising Division of Whiteco Industries, Inc. as of December 31, 1996 and
1997, and the results of its operations and cash flows for each of the three
years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
/S/ BDO SEIDMAN, LLP
BDO Seidman, LLP
Chicago, Illinois
September 17, 1998
<PAGE>
OUTDOOR ADVERTISING DIVISION OF
WHITECO INDUSTRIES, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1996 1997
------------ ------------
<S> <C> <C>
Current assets
Cash............................................. $ 155,781 $ 249,733
Accounts receivable (net of $631,000 and
$1,111,000 allowance for uncollectible
accounts for December 31, 1996 and 1997,
respectively)................................. 9,112,798 10,718,470
Prepaid expenses and other
receivables................................... 2,520,913 2,684,801
Prepaid sign costs............................... 4,880,789 5,064,178
------------ ------------
Total current assets..................... 16,670,281 18,717,182
------------ ------------
Property and equipment
Land, buildings and improvements................. 5,389,827 6,279,957
Advertising signs................................ 134,120,274 150,697,192
Equipment........................................ 4,226,984 4,925,336
------------ ------------
Total cost............................... 143,737,085 161,902,485
Accumulated depreciation......................... 84,300,457 91,601,392
------------ ------------
Net property and equipment......................... 59,436,628 70,301,093
------------ ------------
Other sign costs................................... 707,273 1,424,848
------------ ------------
$ 76,814,182 $ 90,443,123
============ ============
</TABLE>
LIABILITIES AND DIVISIONAL EQUITY
<TABLE>
<CAPTION>
<S> <C> <C>
Current liabilities
Accounts payable................................. $ 505,561 $ 900,145
Customers' advance payments and deposits......... 127,925 70,174
Accrued expenses................................. 1,577,194 2,210,355
------------ ------------
Total current liabilities................ 2,210,680 3,180,674
------------ ------------
Commitments
Divisional equity.................................. 74,603,502 87,262,449
------------ ------------
$ 76,814,182 $ 90,443,123
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
OUTDOOR ADVERTISING DIVISION OF
WHITECO INDUSTRIES, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Revenues....................... $108,447,476 $117,268,324 $126,800,754
Less: Agency discounts......... 6,616,011 8,400,821 8,702,563
------------ ------------ ------------
Net revenues................. 101,831,465 108,867,503 118,098,191
Cost of revenues............... 40,659,116 42,021,229 45,615,461
Selling and administrative
expenses..................... 14,878,784 16,288,955 18,369,034
Corporate overhead expenses.... 5,176,832 5,644,490 6,073,671
Depreciation and
amortization................. 8,675,204 10,501,844 11,525,410
Profit participation fee....... 2,101,620 2,248,329 2,321,884
------------ ------------ ------------
Income from operations before
other income and interest
expense...................... 30,339,909 32,162,656 34,192,731
Other income, less other
expenses..................... (1,060,355) (1,131,033) (1,833,411)
Interest expense............... 38,556 17,927 3,794
------------ ------------ ------------
Net income..................... $ 31,361,708 $ 33,275,762 $ 36,022,348
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
OUTDOOR ADVERTISING DIVISION OF
WHITECO INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------------------------
1995 1996 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income................................... $ 31,361,708 $ 33,275,762 $ 36,022,348
Adjustments to reconcile net income to net
cash provided by operating activities
Provision for depreciation and
amortization........................... 8,675,204 10,501,844 11,525,410
Gain on disposals of assets.............. (795,498) (812,482) (1,488,665)
Increase in accounts receivable.......... (694,344) (1,853,160) (1,605,672)
Decrease (increase) in prepaid expenses
and other receivables.................. (220,881) (1,202,910) (163,888)
Increase in prepaid sign costs and other
sign costs............................. (1,044,722) (815,916) (1,840,672)
(Decrease) increase in accounts payable
and accrued expenses................... (66,319) 869,627 1,027,745
Increase (decrease) in customers' advance
payments and deposits.................. 185,750 (57,825) (57,751)
------------ ------------ ------------
Total adjustments.................... 6,039,190 6,629,178 7,396,507
------------ ------------ ------------
Net cash provided by operating activities.... 37,400,898 39,904,940 43,418,855
------------ ------------ ------------
Cash flows from investing activities
Proceeds from sales of assets.............. 1,352,297 1,115,793 2,474,779
Expenditures for advertising signs......... (26,033,225) (14,713,166) (19,541,162)
Expenditures for property and equipment.... (1,986,847) (2,180,644) (2,895,119)
------------ ------------ ------------
Net cash used in investing activities........ (26,667,775) (15,778,017) (19,961,502)
------------ ------------ ------------
Cash flows from financing activities
Interdivisional transactions............... (11,489,912) (24,124,287) (23,363,401)
------------ ------------ ------------
Net cash used in financing activities........ (11,489,912) (24,124,287) (23,363,401)
------------ ------------ ------------
Net (decrease) increase in cash.............. (756,789) 2,636 93,952
Cash, at beginning of year................... 909,934 153,145 155,781
------------ ------------ ------------
Cash, at end of year......................... $ 153,145 $ 155,781 $ 249,733
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
OUTDOOR ADVERTISING DIVISION OF
WHITECO INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Whiteco Industries, Inc. ("Whiteco") has entered into an agreement to
sell substantially all of the assets and certain liabilities of its Outdoor
Advertising Division (the "Division"). The Division owns and operates outdoor
advertising signs throughout the United States.
During the periods covered by the financial statements, the Division
was conducted as an integral part of Whiteco's overall operations and separate
financial statements were not prepared. These financial statements have been
prepared from Whiteco's historical accounting records. Corporate overhead
expenses are actual expenses incurred by the Division. The Division operated
independently from Whiteco Industries, Inc. However, the expenses incurred by
the Division for corporate overhead may not necessarily be indicative of
expenses that would have been incurred had the Division been operated as a
separate entity.
Contracts and Revenue Recognition
Outdoor advertising signs are contracted to customers under individual
advertising contracts that primarily run from one month to five years. Revenue
is recognized ratably over the life of the contract. Costs associated with the
outdoor advertising operations, including contract costs and land rental, are
expensed over the related contract term.
Prepaid Sign Costs and Other Sign Costs
Prepaid sign costs and other sign costs are primarily land rental
payments relating to future periods. Amortization on these assets was
$1,020,942, $1,075,827 and $939,708 for the years ended December 31, 1995, 1996
and 1997.
Property and Equipment
Land, Buildings and Improvements and Equipment
Land, buildings and improvements and equipment are carried at cost,
including interest charges capitalized during construction. Depreciation on
these assets is computed over various lives under the straight-line method and
amounted to $767,872, $911,890 and $1,092,869 for the years ended December 31,
1995, 1996 and 1997.
Advertising Signs
Advertising sign structures are depreciated by the straight-line method
over lives principally from eight to twelve years. Depreciation of advertising
signs was $6,886,390, $8,514,127 and $9,492,833 for the years ended December 31,
1995, 1996 and 1997.
Income Taxes
The Division is part of Whiteco, which is an "S" corporation and, as
such, federal and most state income taxes are the responsibility of the
stockholder and therefore not reflected on the Division's financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
2. LEASES
The Division leases office facilities and property under various
operating leases. The Division's primary office premises are leased from a
partnership in which Whiteco Industries, Inc. is the general partner. Annual
minimum rental payments under leases that have an initial or remaining term in
excess of one year at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
RELATED
YEAR PARTY OTHER TOTAL
---- -------- -------- ----------
<S> <C> <C> <C>
1998....................................... $224,000 $270,000 $ 494,000
1999....................................... 224,000 131,000 355,000
2000....................................... 224,000 130,000 354,000
2001....................................... 224,000 131,000 355,000
2002....................................... 224,000 131,000 355,000
Thereafter................................. 56,000 962,000 1,018,000
</TABLE>
Total lease expense was approximately $675,000, $646,000 and $665,000
for the years ended December 31, 1995, 1996 and 1997, respectively. Related
party lease expense was $254,000, $230,000 and $117,000 for the years ended
December 31, 1995, 1996 and 1997, respectively.
3. RETIREMENT SAVINGS PLAN
The Division is a part of Whiteco Industries, Inc. ("Whiteco"), who
maintains a qualified plan under Section 401(k) of the Internal Revenue Code.
This plan is available for all employees who have completed one year or more of
continuous service. The plan permits employees to contribute up to 15% of their
annual compensation. The plan allows for discretionary Whiteco contributions.
Currently, Whiteco matches 20% of the employees' contributions, to a maximum of
6% of earnings, and also makes a 1% quarterly matching contribution.
Contributions were $154,160, $171,270 and $177,100 for the years ended December
31, 1995, 1996 and 1997, respectively.
4. MANAGEMENT AGREEMENT
In October 1984, the Division entered into an agreement with Metro
Management Associates (the "Partnership"), a partnership in which several
partners are employees of Whiteco, for the management and operation of
approximately 540 outdoor advertising signs located in Indiana, Texas, Rhode
Island, Missouri, Ohio, Florida, Illinois, Kentucky, Pennsylvania and Virginia.
All revenue and operating expenses related to the management and operation of
the Partnership's outdoor advertising signs are included in the Division's
results of operations. The Division is required to pay a profit participation
fee to the Partnership which approximates the operating profit of the managed
assets and is based upon a fixed monthly fee and a variable fee based upon
revenue. On August 31, 1998, the Partnership entered into an agreement to sell
substantially all of the assets and certain specified liabilities of the
Partnership to Chancellor Media Corporation. The management agreement between
the Division and the Partnership will be terminated upon consummation of the
acquisition by Chancellor Media Corporation.
5. SUBSEQUENT EVENT
On August 31, 1998, Whiteco Industries, Inc. entered into an agreement
to sell substantially all of the assets and certain specified liabilities of the
Division to Chancellor Media Corporation.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
June 9, 1999
To the Board of Directors of
Chancellor Media Corporation
In our opinion, the accompanying statements of operations, partners'
capital and cash flows present fairly, in all material respects, the
operations and cash flows of Martin Media, L.P. (the "Company") for the
seven months ended July 31, 1998, in conformity with generally accepted
accounting principles. 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 audit. We conducted our audit
of these statements in accordance with generally accepted auditing
standards that 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, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable
basis for the opinion expressed above.
/S/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
<PAGE>
MARTIN MEDIA L.P.
STATEMENT OF OPERATIONS
SEVEN MONTHS ENDED JULY 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
Revenue $ 33,791
Cost of revenue 4,136
---------
Gross profit 29,655
Managers' controlled operating expenses 14,364
---------
Income from managers' operations 15,291
Other operating expenses:
Depreciation and amortization 11,223
Refinance and acquisition expenses 3,276
Other 3,174
---------
Operating loss (2,382)
Other income (expenses):
Interest income 20
Other income 473
Interest expense (8,527)
---------
Net loss $ (10,416)
=========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
MARTIN MEDIA L.P.
STATEMENT OF PARTNERS' CAPITAL
SEVEN MONTHS ENDED JULY 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
Balance at December 31, 1997 $ 18,143
Distributions and redemption of partnership units (23,613)
Net loss (10,416)
---------
Balance at July 31, 1998 $ (15,886)
=========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
MARTIN MEDIA L.P.
STATEMENT OF CASH FLOWS
SEVEN MONTHS ENDED JULY 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities: $ (10,416)
Net loss
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation and amortization 11,223
Provision for doubtful accounts 407
Changes in operating assets and liabilities (exclusive of
acquisitions):
Accounts receivable (1,276)
Other current assets (953)
Other assets 20
Accounts payable and accrued expenses (6,026)
----------
Net cash used by operating activities (7,021)
Cash flows from investing activities:
Acquisitions, net of cash acquired (22,667)
Capital expenditures (14,795)
----------
Net cash used in investing activities (37,462)
Cash flows from financing activities:
Deposit received from Chancellor Media Corporation 185,860
Payments on long-term debt (112,456)
Redemption of partnership units (23,612)
----------
Net cash provided by financing activities 49,792
Net increase in cash and cash equivalents 5,309
Cash and cash equivalents at beginning of period 23
----------
Cash and cash equivalents at end of period $ 5,332
==========
Supplemental disclosures of cash flow information:
Interest paid $ 5,313
==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
MARTIN MEDIA L.P.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. NATURE OF BUSINESS
Martin Media L.P. ("Martin" or the "Company"), a California limited
partnership, was formed in December 1984 and operated under the name
of Colorado River Markets until August 1991. The Company has
operating divisions located in Pennsylvania, Ohio , Connecticut,
Washington, D.C., Arizona and Nevada. The Company owns and leases
billboards on a contractual basis nationwide for the purpose of
providing outdoor advertising services. The Company extends credit
in the form of accounts receivable on a short-term basis to
businesses and advertisers doing business in the above noted areas.
On July 31, 1998, Martin and related companies were acquired by
Chancellor Media Corporation for a total purchase price of $615,117,
which consisted of $612,848 in cash and included various direct
acquisition costs and the assumption of notes payable of $2,270. The
accompanying financial statements do not reflect any adjustments
related to this transaction.
2. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting periods. Actual results could
differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers cash and cash equivalents to be all highly
liquid investments purchased with a maturity of three months or less.
INVENTORIES
Inventories are stated at the lower of cost or market using the first
in, first out (FIFO) cost method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated over
estimated useful lives primarily using the straight-line method.
Repairs and maintenance are expensed as incurred. Depreciation
expense for the seven months ended July 31, 1998 was $2,059.
Expenditures which significantly increase asset values are
capitalized. Estimated useful lives are as follows:
<TABLE>
<CAPTION>
YEARS
------------
<S> <C>
Building and improvements 15-31
Posters 7-25
Bulletins 7-25
Shop equipment 3-10
Office furniture and equipment 5-10
Auto and trucks 5-7
</TABLE>
CONTRACTS AND REVENUE RECOGNITION
Outdoor advertising signs are contracted to customers under individual
advertising contracts that primarily run from one month to five years.
Revenue is recognized ratably over the life of the contract. Costs
associated with the outdoor advertising operations, including contract
costs and land rental, are expensed over the related contract term.
INCOME TAXES
Under provision of the Internal Revenue Code and the respective state
taxation codes, partnerships are not subject to income taxes; any income or
loss realized is taxed to the individual partners. Certain states do
impose a minimum tax or franchise fee.
INTANGIBLE ASSETS
Covenants not to compete are recorded at cost and are amortized using the
straight-line method over the contractual period specified. Advertising
rights, permits and licenses, acquisition fees, lease rights and goodwill
are recorded at cost and are amortized using the straight-line method over
five years. Loan fees are amortized over the life of the loan to which
they are associated.
PROFIT-SHARING PLAN
The Company has adopted profit-sharing plans which are qualified under
Section 401(k) of the Internal Revenue Code. All full-time employees with
twelve months of service who are 18 years old or older are eligible to
participate. Each employee may voluntarily contribute up to the lesser of
15% of their pay or $9. The Company has made no contributions to the
plan.
3. SIGNIFICANT ACQUISITIONS
On January 2, 1998, Martin acquired Las Vegas Outdoor
Advertising, Inc., an outdoor advertising company with 90 billboards
and outdoor displays in the Las Vegas market, for approximately
$16,800 in cash plus various other direct acquisition costs.
On July 9, 1998, Martin acquired POA, an outdoor advertising
company with over 1,240 billboards and outdoor displays in the
Pittsburgh market, for approximately $5,867 in cash plus various other
direct acquisition costs.
These acquisitions were accounted for under the purchase method of
accounting and, accordingly, the accompanying statement of operations
includes the results of the acquired companies' operations from the
respective dates of acquisition.
4. COMMITMENTS
The Company leases land, buildings, and equipment in connection with
its outdoor advertising business under operating leases. The leasing
of land relates to the posters and bulletins. The Company also
leases property, equipment and buildings to house and support division
administrative and field offices.
Future annual minimum lease payments are as follows:
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31, TOTAL
- ------------- ---------
<S> <C>
1999 $ 6,397
2000 7,130
2001 7,404
2002 7,658
2003 7,914
Thereafter 353,578
---------
$ 390,081
=========
</TABLE>
Lease expense for the seven months ended July 31, 1998 was
approximately $5,328.
ACQUISITION, PURCHASE AND PURCHASE OPTION
On July 31, 1997, the Company entered into an agreement with Martin &
MacFarlane, Inc. (related party), relative to an agreement Martin &
MacFarlane, Inc. had with another company to purchase certain assets,
to acquire certain assets including sign structures, equipment, and
related intangibles located in the Las Vegas and Colorado River
markets for a total purchase price of $14,350. This purchase
agreement has two segments, the first of which provided for the
purchase of assets during the year ending December 31, 1997 for
$11,273. The second segment of the agreement provides an option to
the Company to purchase additional assets for $3,077. Upon execution
of the option agreement, the Company deposited $464 in good faith
with Martin & MacFarlane, Inc.
PREFERRED PARTNERSHIP UNITS
On December 23, 1997, the Company entered into an agreement to sell
preferred limited partnership units (PPUs), warrants and warrant units
to a select group of purchasers. The Company issued 25,000 PPUs at
$1 each, calling for the holders of the PPUs to receive an initial 14%
preferred rate of return, which escalates on certain dates to a
maximum of 20%. The Company can redeem PPUs for 102% of the PPUs
capital account amount until September 23, 1998 and thereafter to
redeem all outstanding PPUs on December 23, 2006. Warrants to
purchase additional PPUs, based upon terms of the agreement, shall be
issuable upon the 270th day following the purchase date and
quarterly thereafter, if any PPUs shall then be outstanding.
5. RELATED PARTY TRANSACTIONS
Substantially all administrative functions are performed by MW Sign
Co., the general partner. The partnership pays management fees
approximating 4% of gross revenue, refinancing fees of 4% of all debt
refinanced and acquisition fees of 4% of the purchase price of
acquired companies. Total fees paid to MW Sign Co. for the seven
month period ended July 31, 1998 were approximately $1,340 and are
included in other operating expenses.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Martin Media:
We have audited the accompanying balance sheets of Martin Media,
(a California limited partnership) as of December 31, 1997 and
1996 and the related statements of operations, partners' capital (deficit),
and cash flows for each of the three years in the period ended December 31,
1997. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Martin Media, as of
December 31, 1997 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
/S/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Bakersfield, California
February 13, 1998
<PAGE>
MARTIN MEDIA
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
ASSETS
<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Current Assets
Cash and equivalents.........................................$ 23,254 $ 2,661,610
Trade accounts receivable, net of allowance for doubtful
accounts of $142,515 and $100,000 as of December 31,
1997 and 1996, respectively............................... 5,658,379 4,726,301
Current maturities of long-term notes receivable, limited
partners.................................................. 136,030 132,956
Other receivables............................................ 113,514 100,892
Inventories, raw materials................................... 520,725 209,323
Prepaid expenses............................................. 1,566,582 1,085,324
---------- ----------
Total current assets................................. 8,018,484 8,916,406
---------- ----------
Long-Term Notes Receivable, limited partners, less
current maturities........................................... 281,279 317,309
Property and Equipment, net of accumulated depreciation........ 74,863,597 52,367,653
Intangible Assets, net of accumulated amortization............. 58,446,919 15,872,530
Deposit on purchase option..................................... 463,800 --
------------ -----------
$142,074,079 $77,473,898
============ ===========
</TABLE>
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
<S> <C> <C>
Current Liabilities
Current maturities of long-term debt....................... $ 3,690,436 $ 5,339,365
Current maturities of capital lease obligations............ 214,380 135,586
Accounts payable........................................... 627,590 928,712
Accrued expenses........................................... 8,112,132 1,569,048
Unearned income............................................ 219,022 112,961
------------ -----------
Total current liabilities.......................... 12,863,560 8,085,672
------------ -----------
Long-Term Liabilities
Long-term debt, less current maturities.................... 109,232,810 66,752,424
Capital lease obligations, less current maturities... 447,865 662,245
------------ -----------
Total long-term liabilities........................ 109,680,675 67,414,669
------------ -----------
Commitments (Note 10)
Mandatorily Redeemable
Preferred partnership units................................ 25,000,000 --
------------ ----------
Partners' Capital (Deficit).................................. (5,470,156) 1,973,557
------------ ----------
$142,074,079 $77,473,898
============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
MARTIN MEDIA
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Income................................................ $48,106,851 $42,359,472 $33,732,821
Cost of sales......................................... 6,091,333 5,745,308 4,459,240
----------- ----------- -----------
Gross profit................................ 42,015,518 36,614,164 29,273,581
Managers' controlled operating expenses............... 21,201,914 20,929,536 16,861,406
----------- ----------- -----------
Income from managers' operations............ 20,813,604 15,684,628 12,412,175
----------- ----------- -----------
Other operating expenses:
Depreciation and amortization....................... 9,282,574 5,364,835 3,339,377
Management fees..................................... 1,937,326 1,277,431 1,111,350
Refinance and acquisition........................... 9,644,819 3,822,894 --
----------- ----------- -----------
20,864,719 10,465,160 4,450,727
----------- ----------- -----------
Operating income (loss)..................... (51,115) 5,219,468 7,961,448
----------- ----------- -----------
Nonoperating income (expenses):
Interest income..................................... 66,260 96,103 116,154
Interest expense.................................... (8,023,704) (6,022,001) (5,030,100)
Miscellaneous income................................ 1,077,184 252,653 283,597
Miscellaneous expense............................... -- (11,437) (92,682)
Loss on disposal of assets.......................... (512,338) (458,464) (378,358)
----------- ----------- -----------
(7,392,598) (6,143,146) (5,101,389)
----------- ----------- -----------
Net income (loss)........................... $(7,443,713) $ (923,678) $ 2,860,059
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
MARTIN MEDIA
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Balance, beginning of year............................ $ 1,973,557 $ 3,184,665 $ 822,406
Issuance of partnership units....................... -- 5,300,000 --
Redemption of partnership units..................... -- (5,260,230) --
Distributions....................................... -- (327,200) (497,800)
Net income (loss)................................... (7,443,713) (923,678) 2,860,059
----------- ----------- -----------
Balance, end of year.................................. $(5,470,156) $ 1,973,557 $ 3,184,665
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
MARTIN MEDIA
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................. $ (7,443,713) $ (923,678) $ 2,860,059
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization................ 9,282,574 5,364,835 3,339,377
Loss on disposal of assets................... 512,338 458,464 378,358
Changes in operating assets and liabilities
(exclusive of acquisitions):
Increase in accounts receivable........... (932,078) (1,047,834) 223,315
Increase in other receivables............. (12,622) (72,759) 24,091
(Increase) decrease in inventories, raw
materials............................... (311,402) 105,466 35,645
Increase in prepaid expenses.............. (481,258) (136,610) 53,372
Decrease in accounts payable.............. (301,122) (7,055) (195,463)
Increase in accrued expenses.............. 6,543,084 793,490 24,624
Increase in unearned income............... 106,061 84,915 (14,020)
------------ ------------ -----------
Net cash provided by operating
activities.............................. 6,961,862 4,619,234 6,729,358
------------ ------------ -----------
Cash flows from investing activities:
Principal payments on notes receivable............ 32,956 374,740 20,692
Issuance of notes receivable...................... -- (400,000) --
Proceeds from sale of property and equipment...... 49,460 63,801 79,236
Cash paid for acquisitions........................ (67,164,295) (17,200,000) (1,575,000)
Capital expenditures.............................. (7,750,411) (7,114,708) (1,762,978)
Proceeds from sale of investment.................. -- -- 970,482
Purchase option deposit........................... (463,800) -- --
------------ ------------ -----------
Net cash used in investing activities..... (75,296,090) (24,276,167) (2,267,568)
------------ ------------ -----------
Cash flows from financing activities:
Net (payments)borrowings on line-of-credit........ -- (1,395,052) 601,324
Proceeds from issuance of long-term debt.......... 41,014,131 75,915,869 1,006,400
Principal payments on long-term debt.............. (318,259) (57,059,619) (3,522,394)
Distributions to partners......................... -- (327,200) (497,800)
Redemption of partnership units................... -- (5,260,230) --
Issuance of mandatorily redeemable preferred
partnership units.............................. 25,000,000 -- --
Issuance of partnership units..................... -- 5,000,000 --
------------ ------------ -----------
Net cash provided by (used in) financing
activities.............................. 65,695,872 16,873,768 (2,412,470)
------------ ------------ -----------
Net increase (decrease) in cash and cash
equivalents....................................... (2,638,356) (2,783,165) 2,049,320
Cash and cash equivalents at beginning of year...... 2,661,610 5,444,775 3,395,455
------------ ------------ -----------
Cash and cash equivalents at end of year............ $ 23,254 $ 2,661,610 $ 5,444,775
============ ============ ===========
Supplemental disclosures of cash flow
information:
Interest paid................................ $ 8,085,486 $ 6,357,207 $ 5,036,375
============ ============ ===========
Income taxes paid............................ $ -- $ 7,349 $ 800
============ ============ ===========
</TABLE>
<PAGE>
MARTIN MEDIA
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Supplemental disclosures of noncash investing and financing activities:
During the year ended December 31, 1997 long-term debt in the amount
of $84,845,560 was refinanced.
During the year ended December 31, 1996 long-term debt in the amount
of $1,684,215 was incurred to purchase fixed assets and intangible assets.
During the year ended December 31, 1996 notes receivables to
shareholders in the amount of $300,000 were issued for partnership units.
During the year ended December 31, 1995 long-term debt in the amount
of $318,900 was incurred to purchase sign structures.
The accompanying notes are an integral part of these statements.
<PAGE>
MARTIN MEDIA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of business
Martin Media, a California limited partnership (the Company),
was formed in December, 1984 and operated under the name of Colorado River
Markets until August, 1991. The Company has operating divisions located in
Pennsylvania, Ohio, Connecticut, Washington, D.C., Arizona and Nevada.
The Company owns and leases billboards on a contractual basis
nationwide for the purpose of providing outdoor advertising services. The
Company extends credit in the form of accounts receivable on a short-term basis
to businesses and advertisers doing business in the above noted areas.
Significant accounting policies
Basis of accounting
The financial statements are prepared on an accrual basis, which
recognizes income when earned and expenses when incurred.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
Cash and cash equivalents
The Company considers cash and cash equivalents to be all highly liquid
investments purchased with a maturity of three months or less.
Inventories, raw materials
Inventories are stated at the lower of cost or market using the first
in, first out (FIFO) cost method.
Property and equipment
Property and equipment are stated at cost and depreciated over estimated
useful lives primarily using the straight-line method. Repairs and maintenance
and small equipment purchases are expensed as incurred. Expenditures which
significantly increase asset values or extend useful lives are capitalized.
Estimated useful lives are as follows:
YEARS
-----
Buildings and improvements.................................. 15-31
Posters..................................................... 25
Bulletins................................................... 25
Shop equipment.............................................. 3-10
Office furniture and equipment.............................. 5-10
Auto and trucks............................................. 5-7
Income taxes
Under provision of the Internal Revenue Code and the respective state
Taxation Codes, partnerships are not subject to income taxes; any income or loss
realized is taxed to the individual partners. Certain states do impose a minimum
tax (franchise fee).
Intangible assets
Covenants not to compete are recorded at cost and are amortized using the
straight-line method over the contractual period specified.
Organization costs, advertising rights, permits and licenses,
acquisition fees, lease rights and goodwill are recorded at cost and are
amortized using the straight-line method over five years.
Loan fees are amortized over the life of the loan to which they are
associated.
Profit sharing plan
The Company adopted a profit sharing plan which is a qualified pension
trust under Section 401(k) of the Internal Revenue Code. All full-time employees
with twelve months of service who are 18 years old or older are eligible to
participate. Each employee may voluntarily contribute up to the lesser of 15% of
their pay or $9,500. The Company has made no contributions to the plan.
Fair value of financial instruments
The carrying amount of the long-term debt approximates fair value.
Reclassifications
Certain prior year amounts have been reclassified to conform with the
current year presentation.
2. LONG-TERM NOTES RECEIVABLE, LIMITED PARTNERS
Notes receivable, limited partners at December 31, 1997 and 1996
consisted of the following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Barry Heffner, Manager of Pittsburgh Division, prime plus
2%, collateralized by subscription of one unit of Martin
Media, payable $717 per month including interest, due
September 27, 2001........................................ $ 18,758 $ 25,036
Mary Ellen Coleman, Manager of Scranton Division, prime plus
2%, collateralized by subscription of one unit of Martin
Media, payable $717 per month including interest, due
September 27, 2001........................................ 18,975 25,229
Brent Baer, Manager of Washington D.C. Division, 8%,
collateralized by 1/4 of one partnership unit, payable
$838 per month including interest, due December 28,
2001...................................................... 69,894 75,000
Thomas Jones, Manager of Las Vegas Division, 8%,
collateralized by 1/4 of one partnership unit, payable
$838 per month including interest, due December 28,
2001...................................................... 69,894 75,000
David Lamberger, National Sales Manager, 8%, collateralized
by 1/4 of one partnership unit, payable $838 per month
including interest, due December 28, 2001................. 69,894 75,000
Lynn Terlaga, Manager of Hartford Division, 8%,
collateralized by 1/4 of one partnership unit, payable
$838 per month including interest, due December 28,
2001...................................................... $ 69,894 $ 75,000
David Weyrich, 10%, unsecured, payable $833 per month
interest only, due November 27, 1997, paid in full
subsequent to December 31, 1997........................... 100,000 100,000
-------- --------
417,309 450,265
Less current maturities..................................... 136,030 132,956
-------- --------
$281,279 $317,309
======== =========
</TABLE>
Prime rate was 8.5% and 8.25% at December 31, 1997 and 1996, respectively.
3. ACQUISITIONS
During 1997, the Company purchased substantially all the assets and
assumed certain liabilities of three outdoor advertising companies; during 1996,
the Company purchased substantially all of the assets and assumed certain
liabilities of one outdoor advertising company and exchanged partnership
interests and other consideration for substantially all of the assets, and
assumed certain liabilities, for another outdoor advertising company (the
"Exchange"). Funds used to make the acquisitions and facilitate the Exchange
were provided through the Company's credit facility. The majority of the
intangible assets acquired through the acquisitions and Exchange are being
amortized over a five year period. See Note 10 for acquisitions included above
which were acquired from a related party. Acquisitions during 1995 were not
significant.
The acquisitions were accounted for using the purchase method of
accounting and the purchase price was allocated to the various tangible and
intangible assets acquired. For the Exchange, the Company recorded the assets
acquired and liabilities assumed based on the fair value of the partnership
interests granted. Accordingly, the results of operations for the acquisitions,
and the Exchange, have been included in the results of the Company from the
respective effective dates.
A summary of the cash consideration and allocation of the purchase price
as of the acquisition dates are as follows:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Fair value of tangible assets acquired..................... $20,293,392 $ 8,420,000
Fair value of intangible assets acquired................... 46,870,903 11,870,455
Liabilities assumed........................................ -- (2,790,455)
Book value of partnership interests granted................ -- (300,000)
----------- -----------
Cash paid.................................................. $67,164,295 $17,200,000
=========== ===========
</TABLE>
Of the cash paid in 1996, approximately $5 million was utilized to
redeem existing partnership units in connection with the Exchange.
4. PREPAID EXPENSES
Prepaid expenses at December 31, 1997 and 1996 consisted of the
following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Leases...................................................... $1,279,243 $ 903,154
Insurance................................................... 41,541 32,545
Other....................................................... 196,064 124,726
Deposits.................................................... 49,734 24,899
---------- ----------
$1,566,582 $1,085,324
========== ==========
</TABLE>
5. PROPERTY AND EQUIPMENT
Major classes of property and equipment and accumulated depreciation
at December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Land....................................................... $10,578,202 $ 936,954
Buildings and improvements................................. 5,349,404 218,947
Posters.................................................... 26,855,790 25,114,090
Bulletins.................................................. 44,189,355 36,314,244
Shop equipment............................................. 722,278 519,319
Office furniture and equipment............................. 649,696 449,391
Autos and trucks........................................... 1,951,625 1,662,820
Construction in process.................................... 402,892 215,744
----------- -----------
90,699,242 65,431,509
Less accumulated depreciation.............................. 15,835,645 13,063,856
----------- -----------
$74,863,597 $52,367,653
=========== ===========
</TABLE>
See Note 7 for collateralization of property and equipment.
Depreciation expense for the years ended December 31, 1997, 1996 and
1995 was $2,943,826, $2,624,212 and $2,392,186.
During the years ended December 31, 1997, 1996 and 1995, the Company
took down a number of boards located in the Pittsburgh, Scranton, Hartford,
Las Vegas and Cincinnati divisions. These disposals were initiated by management
due to high operating costs and/or high site lease costs, which resulted in
marginal operating results. Losses on board disposals amounted to $515,056,
$440,746 and $418,957 in the years ended December 31, 1997, 1996 and 1995.
6. INTANGIBLE ASSETS
Intangible assets and accumulated amortization at December 31, 1997 and
1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Organization costs......................................... $ 1,238,376 $ 1,238,376
Covenants not to compete................................... 2,452,096 2,452,096
Advertising rights......................................... 2,925,800 1,291,338
Permits and licenses....................................... 10,705,122 2,547,274
Lease rights............................................... 14,307,733 11,970,722
Goodwill................................................... 33,979,535 220,453
Acquisition fees........................................... 3,718,759 1,053,423
Loan fees.................................................. 359,398 1,577,500
----------- -----------
69,686,819 22,351,182
Less accumulated amortization.............................. 11,239,900 6,478,652
----------- -----------
$58,446,919 $15,872,530
=========== ===========
</TABLE>
See Note 7 for collateralization of intangible assets.
Amortization expense for the years ended December 31, 1997, 1996 and
1995 was $6,338,748, $2,740,623 and $947,191.
7. LONG-TERM DEBT
Long-term debt at December 31, 1997 and 1996 consisted of the
following:
<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Canadian Imperial Bank of Commerce, as administrative
agent for lenders, under the Credit Agreement dated July
31, 1997, Term A loan, interest at LIBOR plus 2%,
collateralized by accounts receivable, inventory, sign
structures, and intangible assets, payable quarterly,
due June 2004**......................................... $ 60,000,000 $ --
Canadian Imperial Bank of Commerce, as administrative
agent for lenders, under the Credit Agreement dated July
31, 1997, Term B loan, interest at LIBOR plus 2.25%,
collateralized by accounts receivable, inventory, sign
structures, and intangible assets, payable quarterly,
due December 2005**..................................... 35,000,000 --
Canadian Imperial Bank of Commerce, as administrative
agent for lenders, under the Credit Agreement dated July
31, 1997, Revolving Line of Credit, interest ranging
from prime plus 2% LIBOR plus 2.75%, collateralized by
accounts receivable, inventory, sign structures, and
intangible assets, payable quarterly, due June 2004**... 17,300,000 --
Jackson Poster Advertising, 8%, collateralized by sign
structures, payable $912 per month including interest,
due December 2000....................................... 29,124 37,381
Dominion Signs, 8%, collateralized by sign structures and
personally guaranteed by E. Thomas Martin, payable
$68,475 plus interest annually, due August 1999......... 136,950 205,425
Elaine Perlroth, 7%, collateralized by mortgage, payable
$989 monthly including interest, due November 2008...... 90,381 95,715
Ronco Media, non-interest bearing, uncollateralized,
payable $3,000 monthly, due April 2001.................. 120,000 156,000
Ronald Rieger, non-interest bearing, uncollateralized,
payable $167 monthly, due July 2001..................... 6,667 8,667
Rose Marie Rieger, non-interest bearing, uncollateralized,
payable $167 monthly, due April 2001.................... 6,667 8,667
Daniel H. Bradley, non-interest bearing, uncollateralized,
payable $1,667 monthly, due April 2001.................. 66,667 86,667
Pamela Lynn Rieger, non-interest bearing,
uncollateralized, payable $1,667 monthly, due April
2001.................................................... 66,667 86,667
Kory William Rieger, non-interest bearing,
uncollateralized, payable $1,667 monthly, due April
2001.................................................... 66,667 86,667
Rembrandt Outdoor Services, non-interest bearing,
uncollateralized, payable $608 monthly, due July 2001... 33,456 34,065
Canadian Imperial Bank of Commerce, as administrative
agent for Lenders under the Credit Agreement dated July
15, 1996, Term A Loan, interest at LIBOR plus 2.5%,
collateralized by accounts receivable, inventory, sign
structures, and intangible assets, payable quarterly,
due March 2003**........................................ -- 40,000,000
Canadian Imperial Bank of Commerce, as administrative
agent for Lenders under the Credit Agreement dated July
15, 1996, Term B Loan, interest at LIBOR plus 3%,
collateralized by accounts receivable, inventory, sign
structures, and intangible assets, payable quarterly,
due December 2004**..................................... -- 15,000,000
Canadian Imperial Bank of Commerce, as administrative
agent for Lenders under the Credit Agreement dated July
15, 1996, Revolving Line of Credit, interest ranging
from prime plus 1.25% to LIBOR plus 2.50%,
collateralized by accounts receivable, inventory, sign
structures, and intangible assets, payable annually, due
March 2003**............................................ -- 16,285,868
------------ -----------
112,923,246 72,091,789
Less current maturities................................... 3,690,436 5,339,365
------------ -----------
$109,232,810 $66,752,424
============ ===========
</TABLE>
Aggregate maturities of long-term debt at December 31, 1997 were as
follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------
<S> <C>
1998........................................................ $ 3,690,436
1999........................................................ 7,691,592
2000........................................................ 13,124,365
2001........................................................ 14,545,258
2002........................................................ 15,007,561
Thereafter.................................................. 58,864,034
------------
$112,923,246
============
</TABLE>
** Loan has varying interest rates based on Company performance and
indexes found in Credit Agreement dated July 31, 1997. At December 31, 1997
effective interest rates ranged from 7.1875% to 8.5%.
The Company has entered into interest rate caps primarily to protect
against rising interest exposure of its floating rate long-term debt. The
difference to be paid or received on the cap is included in interest expense as
payments are made or received. At December 31, 1997, the Company had
outstanding interest rate cap agreements with two commercial bank, having a
total notional principal amount of $135,000,000. This agreement effectively
changes the Company's interest exposure on up to $135,000,000 of floating
rate debt to a fixed 6.5% with a floor of 5.5%. The interest rate cap
agreements mature September 1998 ($35,000,000) and September 2000
($100,000,000).
During 1997, the Company sold an interest rate floor for a gain of
$440,000. This gain is included in other income.
The counterparties to the Company's derivative financial instrument
contract are substantial and creditworthy commercial banks which are recognized
market makers. Neither the risks of counterparty nonperformance nor the
economic consequence of counterparty nonperformance associated with these
contracts were considered by the Company to be material.
Interest expense consists of interest on notes payable and the cost
associated with the purchased of the interest rate cap instrument.
Prime rate was 8.5% and 8.25% at December 31, 1997 and 1996,
respectively.
LIBOR rate was 5.9% and 6.5% at December 31, 1997 and 1996,
respectively.
8. LONG-TERM CAPITAL LEASE OBLIGATIONS
The Company leases certain sign structures with lease terms through
July 2000. Obligations under capital leases have been recorded in the
accompanying financial statements at the discounted present value of future
minimum lease payments. The cost and accumulated amortization for such equipment
as of December 31, 1997 was $1,029,200 and $58,321, respectively. Amortization
included in depreciation expense for the year ended December 31, 1997 was
$41,168. Interest paid on these leases was $130,118 for the year ended December
31, 1997.
The future minimum lease payments under these capital leases and the net
present value of the future minimum lease payments are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31:
- ------------
<S> <C>
1998........................................................ $316,628
1999........................................................ 399,627
2000........................................................ 113,280
--------
Total future minimum lease payments......................... 829,535
Less amount representing interest........................... 167,290
--------
Present value of future minimum lease payment............... 662,245
Less current portion........................................ 214,380
--------
Long-term portion........................................... $447,865
========
</TABLE>
9. RELATED PARTY TRANSACTIONS
Transactions occurring between the Company and a related party, which
are not presented elsewhere in these financial statements, are as follows:
Martin and MacFarlane, Inc., a California Corporation (M&M, Inc.),
which has stockholders who are also partners in the Company,
performed substantially all administrative functions for the partnership during
the year ended December 31, 1995 and January 1996. Beginning February 1, 1996,
administrative functions were performed by MW Sign Co., the general partner. The
partnership pays management fees approximating 3% of gross revenue, refinancing
fees of 4% of all debt refinanced and acquisition fees of 4% of the purchased
price of acquired companies. On January 1, 1997, management fees increased to
4% of gross revenue. Total fees paid to M&M, Inc. for the years ended
December 31, 1997 and 1996 amounted to $-0- and $78,263, respectively. Total
fees paid/accrued to MW Sign Co. for the years ended December 31, 1997 and 1996
amounted to $11,231,815 and $5,050,039. Total fees paid to M&M, Inc.
and MW Sign Co. for the year ended December 31, 1995 amounted to $1,111,350.
10. COMMITMENTS
Leases
The Company leases land, buildings, and equipment in connection with
its outdoor advertising business under operating leases. The leasing of land
relates to the posters and bulletins. The Company also leases property,
equipment and buildings to house and support division administrative and field
offices.
Future minimum lease payments under cancelable and noncancelable leases
at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING POSTERS,
DECEMBER 31, BULLETINS BUILDINGS TOTAL
- ------------ ---------- ---------- ----------
<S> <C> <C> <C>
1998............................................. $1,199,353 $ 229,539 $1,428,892
1999............................................. 1,219,818 205,164 1,424,982
2000............................................. 1,244,566 193,264 1,437,830
2001............................................. 1,270,536 183,836 1,454,372
2002............................................. 1,295,506 173,628 1,469,134
Thereafter....................................... 1,670,042 289,380 1,959,422
---------- ---------- ----------
$7,899,821 $1,274,811 $9,174,632
========== ========== ==========
</TABLE>
Certain of the Company's noncancelable lease payments are based on a
percentage of revenue generated from the poster or bulletin rather than having a
minimum rental. The percentage of rent ranges from 15% to 20% of revenue. An
estimate of the future payments under these leases has been included in the
above table under posters, bulletins. Historically, rental payments under these
leases have approximated $1,180,000 annually.
Lease expense for the years ended December 31, 1997, 1996 and 1995 was
as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Land for posters and bulletins................... $8,042,746 $6,817,196 $5,226,956
Buildings........................................ 518,306 549,069 406,277
Equipment, other................................. 27,041 28,198 31,881
---------- ---------- ----------
$8,588,093 $7,394,463 $5,665,114
========== ========== ==========
</TABLE>
Acquisition, purchase and purchase option
On July 31, 1997, the Company entered into an agreement with Martin &
MacFarlane, Inc. (related party), relative to an agreement Martin &
MacFarlane, Inc. had with another company to purchase certain assets, to acquire
certain assets including sign structures, equipment, and related intangibles
located in the Las Vegas and Colorado River markets for a total purchase price
of $14,350,400. This purchase agreement has two segments, the first of which
provided for the purchase of assets during the year ending December 31, 1997 for
$11,273,400. The second segment of the agreement provides an option to the
Company to purchase additional assets for $3,077,000. Upon execution of the
option agreement, the Company deposited $463,800 in good faith with
Martin & MacFarlane, Inc. The option agreement can only be exercised upon
Martin & MacFarlane, Inc. exercising its option to purchase those assets and
other assets it has under option with the seller; the option agreement expires
October 1, 1998.
Preferred partnership units
On December 23, 1997, the Company entered into an agreement to sell
preferred limited partnership units (PPU's), warrants and warrant units to a
select group of purchasers. The Company issued 25,000 PPU's at $1,000 each
($25,000,000), calling for the holders of the PPU's to receive an initial 14%
preferred rate of return, which escalates on certain dates to a maximum of 20%.
The Company can redeem PPU's for 102% of the PPU's capital account amount until
September 23, 1998 and thereafter for 100% of the PPU's capital account amount.
The Company is obligated under the agreement to redeem all outstanding PPU's
on December 23, 2006. Warrants to purchase additional PPU's, based upon terms of
the agreement, shall be issuable upon the 270th day following the purchase date
(December 23, 1997) and quarterly thereafter, if any PPU's shall then be
outstanding.
Credit facilities
On December 23, 1997, the Company entered into an agreement with
Canadian Imperial Bank of Commerce in which their Term B loan maximum borrowing
limit was increased to $40,000,000. As of December 31, 1997, the Company had
$5,000,000 available under the term of the loan.
On July 31, 1997, the Company entered into an agreement with Canadian
Imperial Bank of Commerce, as administrative agent for Lenders under the
credit agreement dated July 31, 1997. Under the terms of this agreement, Swing
Loan is available in the amount of $5,000,000. As of December 31, 1997, the
Company's outstanding obligation was $-0-.
11. SUBSEQUENT EVENTS
Subsequent to December 31, 1997, the Company acquired substantially all
of the assets and assumed certain liabilities of three outdoor advertising
companies at an aggregate purchase price of $18,350,000. Funds used to make
the purchase were provided through the Company's credit facility.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
June 9, 1999
To the Board of Directors of
Chancellor Media Corporation
In our opinion, the accompanying statements of operations, retained
earnings and cash flows present fairly, in all material respects, the
operations and cash flows of Martin & MacFarlane, Inc. (the "Company")
for the seven months ended July 31, 1998, in conformity with
generally accepted accounting principles. 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 audit. We
conducted our audit of these statements in accordance with generally
accepted auditing standards that 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, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
/S/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
<PAGE>
MARTIN & MACFARLANE, INC.
STATEMENT OF OPERATIONS
SEVEN MONTHS ENDED JULY 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
Revenue $ 17,946
Cost of revenue 1,370
----------
Gross profit 16,576
Managers' controlled operating expenses 10,526
----------
Income from managers' operations 6,050
Other operating expenses:
Depreciation and amortization 3,471
Refinance and acquisition expenses 1,570
Other expenses 2,623
----------
Operating loss (1,614)
Other income (expense):
Interest expense (2,244)
Gain on disposal of assets 465
Other income 537
----------
Loss before income taxes (2,856)
Income tax expense 10
----------
Net loss $ (2,866)
==========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
MARTIN & MACFARLANE, INC.
STATEMENT OF RETAINED EARNINGS
SEVEN MONTHS ENDED JULY 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
Balance at December 31, 1997 $ 7,949
Dividends (743)
Net loss (2,866)
---------
Balance at July 31, 1998 $ 4,340
=========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
MARTIN & MACFARLANE, INC.
STATEMENT OF CASH FLOWS
SEVEN MONTHS ENDED JULY 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities:
Net Loss $ (2,866)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 3,471
Provision for doubtful accounts 593
Changes in operating assets and liabilities (exclusive of
acquisitions):
Accounts receivable (1,061)
Other current assets 1,075
Other assets 31
Accounts payable and accrued expenses 502
Other liabilities 91
-----------
Net cash provided by operating activities 1,836
Cash flows from investing activities:
Acquisitions, net of cash acquired (12,500)
Capital expenditures (1,881)
-----------
Net cash used in investing activities (14,381)
Cash flows from financing activities:
Dividends paid (743)
Payments on long-term debt (35,680)
Deposit received from Chancellor Media Corporation 50,000
-----------
Net cash provided by financing activities 13,577
Net increase in cash 1,032
Cash and cash equivalents at beginning of period 16
-----------
Cash and cash equivalents at end of period $ 1,048
===========
Supplemental disclosures of cash flow information:
Interest paid $ 1,913
===========
Income taxes paid $ 4
===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
MARTIN & MACFARLANE, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. NATURE OF BUSINESS
Martin & MacFarlane, Inc. (the "Company") was incorporated on
December 2, 1971 and owns, leases, and manages billboards on a
contractual basis nationwide for the purpose of providing outdoor
advertising services. The Company also owns and operates a
small winery located in Paso Robles, California. The Company
extends short-term credit in the form of accounts receivable to
businesses and advertisers doing business in the above noted areas.
On July 31, 1998, Martin & MacFarlane, Inc. and related companies were
acquired by Chancellor Media Corporation for a total purchase price of
$615,117, which consisted of $612,848 in cash and included various
direct acquisition costs and the assumption of notes payable of
$2,270. The accompanying financial statements do not reflect any
adjustments related to this transaction.
2. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities, disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting periods. Actual results could
differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers cash and cash equivalents to be all highly
liquid investments purchased with a maturity of three months or less.
INVENTORIES
Inventories are stated at the lower of cost or market using the first
in, first out (FIFO) cost method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated over
estimated useful lives primarily using the straight-line method.
Depreciation expense for the seven months ended July 31, 1998 was
$927. Repairs and maintenance are expensed as incurred. Expenditures
which significantly increase asset values are capitalized. Estimated
useful lives are as follows:
<TABLE>
<CAPTION>
YEARS
-----------
<S> <C>
Building and improvements 15-31
Posters 7-25
Bulletins 7-25
Shop equipment 3-10
Office furniture and equipment 5-10
Auto and trucks 5-7
</TABLE>
<PAGE>
CONTRACTS AND REVENUE RECOGNITION
Outdoor advertising signs are contracted to customers under individual
advertising contracts that primarily run from one month to five years.
Revenue is recognized ratably over the life of the contract. Costs
associated with the outdoor advertising operations, including contract
costs and land rental, are expensed over the related contract term.
INCOME TAXES
Effective July 1, 1995, the Company's shareholders elected to
be taxed under the provisions of Subchapter S of the Internal Revenue
Code. Under such election, the shareholders of an "S" Corporation are
taxed individually on their proportionate share of the Company's
taxable income. Therefore, no provision or liability for federal
income tax has been included in these financial statements. State
income taxes are provided based on statutory rates. State income
taxes currently payable and deferred relate primarily to temporary
differences from the use of accelerated methods of depreciation and
the direct write-off method of accounting for bad debts.
INTANGIBLE ASSETS
Covenants not to compete are recorded at cost and are amortized using
the straight-line method over the contractual period specified.
Advertising rights, permits and licenses, acquisition fees, lease
rights and goodwill are recorded at cost and are amortized using the
straight-line method over five years. Loan fees are amortized over
the life of the loan to which they are associated.
PROFIT-SHARING PLAN
The Company has adopted profit-sharing plans which are qualified
under Section 401(k) of the Internal Revenue Code. All full-time
employees with twelve months of service who are 19 years old or older
are eligible to participate. Each employee may voluntarily contribute
up to the lesser of 15% of their pay or $10. The Company has made
no contributions to the plan.
3. DEFERRED INCOME TAXES
For state tax purposes, the applicable states do recognize "S"
corporation status; however, they still impose a tax at the corporate
level, generally at a rate significantly lower than the regular
corporate rate. Deferred tax assets and liabilities relate to
temporary differences associated with state income taxes. Income tax
expense for the seven months ended July 31, 1998 consisted of $10 of
current state income taxes.
4. SIGNIFICANT ACQUISITION
On January 2, 1998, the Company acquired Newman Outdoor of Texas,
Inc., an outdoor advertising company with over 1,200 billboards and
outdoor displays in three markets, for approximately $12,500 in
cash plus various other direct acquisition costs. The acquisition was
accounted for under the purchase method of accounting and,
accordingly, the accompanying statement of operations includes the
results of the acquired operations from the date of acquisition.
5. COMMITMENTS
The Company leases land in connection with its outdoor advertising
posters and panels as well as for office and yard spaces. These are
long-term operating leases which the Company and lessor have the
option to terminate with thirty days notice. Certain leases are
subject to renewal options.
The Company also leases office and shop buildings which are located
at various divisions. A portion of these are long-term leases.
Future annual minimum lease payments at July 31, 1998 are as follows:
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31,
- -------------
<S> <C>
1999 $ 6,147
2000 6,850
2001 7,114
2002 7,358
2003 7,603
Thereafter $ 339,712
----------
$ 374,784
==========
</TABLE>
Certain of the Company's noncancelable lease payments are based
on a percentage of revenue generated from the poster or bulletin
rather than having a minimum rental. The percentage of rent ranges
from 15% to 20% of revenue.
Lease expense for the seven months July 31, 1998 was $2,782.
ACQUISITION, PURCHASE AND PURCHASE OPTION
On July 31, 1997, the Company entered into an agreement with
another company to acquire certain assets, including sign structures,
equipment, and related intangibles located in Nevada, Arizona, and
California for a total purchase price of $60,000. This purchase
agreement has two segments, the first of which provided for the
purchase of assets totaling $20,500. Simultaneously, and as part of
the master agreement, the Company entered into an agreement with
Martin Media (related party) to sell them those assets located in
their geographical area, primarily the Las Vegas and Colorado River
markets, for $11,273. The Company's net acquisition price under the
first segment of the agreement was $9,227.
The second segment of the agreement provides an option for the Company
to purchase additional assets for $39,500. As part of this
transaction, the Company has also provided Martin Media with an option
to purchase the assets located in the Las Vegas and Colorado River
markets for $3,077. The Company's net acquisition price for assets to
be received under the second segment of the agreement was $36,423.
Upon execution of the option agreement, the Company deposited $6,000
in good faith with the seller. Similarly, Martin Media deposited
$464 with the Company resulting in a net deposit of $5,536. The
option agreement expired on October 1, 1998.
The Company contracts with M.W. Sign Company, a company wholly-owned
by related shareholders, to provide the Company with management
services at 4% of gross revenue. Management fees of $1,841 were paid
to M.W. Sign Company during the seven months ended July 31, 1998 and
are included in other operating expenses.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
Martin & MacFarlane, Inc.:
We have audited the accompanying balance sheets of Martin & MacFarlane,
Inc., (a California corporation), as of December 31, 1997 and 1996, and the
related statements of income, retained earnings and cash flows for each of the
two years in the period ended December 31, 1997 and six months in the period
ended December 31, 1995. 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 audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Martin &
MacFarlane, Inc. as of December 31, 1997 and 1996 and the results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1997 and six months in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
/S/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Bakersfield, California
February 13, 1998
<PAGE>
MARTIN & MACFARLANE, INC.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
ASSETS
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Current Assets
Cash and equivalents............................................... $ 138,294 $ 10,519
Trade accounts receivable, less allowance for doubtful
accounts of $96,051 and $100,000 at December 31, 1997 and 1997.. 2,973,646 1,836,944
Current maturity of note receivable.............................. 6,856 6,206
Other receivables................................................ 78,723 331,419
Inventories...................................................... 1,764,872 1,104,190
Prepaid expenses................................................. 928,416 565,971
Current deferred income taxes.................................... 1,441 1,500
----------- -----------
5,892,248 3,856,749
----------- -----------
Note Receivable.................................................... 24,381 31,083
Property and Equipment, net of accumulated depreciation............ 23,527,457 20,187,460
Intangible Assets, net of accumulated amortization................. 11,053,092 3,007,566
Other Assets
Deposits......................................................... 24,197 22,047
Deposit on Purchase Option....................................... 5,536,200 --
----------- -----------
5,560,397 22,047
----------- -----------
$46,057,575 $27,104,905
=========== ===========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C> <C>
Current Liabilities
Bank overdraft.................................................. $ 166,083 $ 523,360
Current maturities of long-term debt............................ 690,718 7,460,727
Note payable, bank.............................................. -- 800,000
Accounts payable................................................ 543,648 465,372
Accrued expenses................................................ 391,069 444,798
Distributions payable........................................... 61,832 61,658
Unearned income................................................. 506,348 84,530
Income taxes payable............................................ 6,408 33,205
----------- -----------
2,366,106 9,873,650
----------- -----------
Long-Term Debt, less current maturities........................... 36,041,494 6,835,699
----------- -----------
Deferred Income Taxes............................................. 102,375 111,008
----------- -----------
Commitments (Note 13)
Stockholders' Equity
Common stock, no par or stated value, authorized 150,000
shares, issued and outstanding 82,443 shares, stated at 1,113,070 1,113,070
Retained earnings.............................................. 6,434,530 9,171,478
----------- -----------
7,547,600 10,284,548
----------- -----------
$46,057,575 $27,104,905
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
<PAGE>
MARTIN & MACFARLANE, INC.
STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1997 AND 1996
AND SIX MONTH PERIOD ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- ----------
<S> <C> <C> <C>
Revenues............................................... $22,535,117 $16,994,368 $8,311,295
Cost of sales.......................................... 2,476,991 2,155,013 1,065,709
----------- ----------- ----------
Gross profit................................. 20,058,126 14,839,355 7,245,586
Managers' controlled operating expenses................ 11,318,791 9,534,848 4,982,152
----------- ----------- ----------
Income from managers' operations............. 8,739,335 5,304,507 2,263,434
----------- ----------- ----------
Other operating expenses
Depreciation and amortization expense................ 2,902,472 1,316,520 575,291
Management fees...................................... 2,210,351 472,931 --
Refinance and acquisitions........................... 884,083 85,175 --
----------- ----------- ----------
5,996,906 1,874,626 575,291
----------- ----------- ----------
Operating income............................. 2,742,429 3,429,881 1,688,143
----------- ----------- ----------
Other income (expense)
Interest income...................................... 15,302 9,773 --
Interest expense..................................... (2,537,908) (1,115,772) (552,412)
Other income......................................... 414,138 117,025 125,286
Loss on disposition of assets........................ (207,372) (136,875) (1,744)
----------- ----------- ----------
(2,315,840) (1,125,849) (428,870)
----------- ----------- ----------
Income before income taxes............................. 426,589 2,304,032 1,259,273
Income tax (expense) benefit........................... (23,458) (57,653) 2,972,317
----------- ----------- ----------
Net income................................... $ 403,131 $ 2,246,379 $4,231,590
=========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
MARTIN & MACFARLANE, INC.
STATEMENTS OF RETAINED EARNINGS
YEARS ENDED DECEMBER 31, 1997 AND 1996
AND SIX MONTH PERIOD ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- ----------
<S> <C> <C> <C>
Balance, beginning of period........................... $ 9,171,478 $ 8,526,046 $4,418,120
Net income........................................... 403,131 2,246,379 4,231,590
Dividends............................................ (3,140,079) (1,600,947) (123,664)
----------- ----------- ----------
Balance, end of period................................. $ 6,434,530 $ 9,171,478 $8,526,046
=========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
MARTIN & MACFARLANE, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996
AND SIX MONTH PERIOD ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------ ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income......................................... $ 403,131 $ 2,246,379 $ 4,231,590
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................... 2,902,472 1,316,520 575,291
Loss on disposition of assets................... 207,372 136,875 1,744
Changes in operating assets and liabilities
(exclusive of acquisitions):
Increase in accounts receivable................. (1,136,702) (410,142) 119,579
(Increase) decrease in other receivables........ 252,697 (312,755) 59,985
Increase in inventory........................... (660,682) (220,401) (115,754)
Increase in prepaid expenses.................... (362,445) (135,739) 200,316
Decrease in deferred income tax asset........... 59 -- --
(Increase) decrease in other
assets -- deposits............................ (2,150) (5,000) 3,124
Increase (decrease) in bank overdraft........... (357,277) 523,360 --
Increase (decrease) in accounts payable......... 78,276 (60,260) (126,935)
Increase (decrease) in accrued expenses......... (53,555) 169,057 (8,073)
Increase (decrease) in unearned income.......... 421,818 1,185 (73,536)
Increase (decrease) in income taxes payable..... (26,797) 9,835 (868,116)
Increase (decrease) in deferred income taxes.... (8,633) 7,826 (2,961,731)
------------ ----------- -----------
Net cash provided by operating
activities............................... 1,657,584 3,266,740 1,037,484
------------ ----------- -----------
Cash flows from investing activities:
Increase in purchase option deposit................ (5,536,200) -- --
Proceeds from certificates of deposit.............. -- -- 200,000
Proceeds from sale of investments.................. -- 11,859 --
Proceeds from sale of property and equipment....... 107,400 217,320 14,082
Cash paid for acquisitions......................... (10,723,930) (5,849,000) (240,000)
Capital expenditures............................... (2,646,168) (748,741) (201,925)
Issuance of notes receivable....................... -- (38,901) (50,000)
Principal payments on notes receivable............. 6,052 1,612 --
Principal payments on notes receivable,
shareholder..................................... -- 50,000 --
------------ ----------- -----------
Net cash used in investing activities...... (18,792,846) (6,355,851) (277,843)
------------ ----------- -----------
Cash flows from financing activities:
Proceeds from notes payable........................ 21,459,216 5,500,000 809,400
Net (payments) borrowings on line of credit........ (950,000) 800,000 (50,000)
Principal payments on notes payable................ (106,100) (1,975,159) (1,677,500)
Distributions to shareholders...................... (3,140,079) (1,600,947) (123,664)
------------ ----------- -----------
Net cash provided by (used in) financing
activities............................... 17,263,037 2,723,894 (1,041,764)
------------ ----------- -----------
Net increase (decrease) in cash and cash
equivalents........................................ 127,775 (365,217) (282,123)
Cash and cash equivalents at beginning of year....... 10,519 375,736 657,859
------------ ----------- -----------
Cash and cash equivalents at end of year............. $ 138,294 $ 10,519 $ 375,736
============ =========== ===========
Supplemental disclosures of cash flow information:
Interest paid...................................... $ 2,634,036 $ 1,093,501 $ 563,494
============ =========== ===========
Payment of income taxes............................ $ 50,255 $ 47,818 $ 857,530
============ =========== ===========
</TABLE>
Supplemental disclosures of non cash financing activities:
During the year ended December 31, 1997 long term debt in the amount
of $18,245,035 was refinanced.
During the year ended December 31, 1996, long-term debt in the amount
of $783,285 was incurred to purchase property and equipment and
intangible assets.
The accompanying notes are an integral part of these statements.
<PAGE>
MARTIN & MACFARLANE, INC.
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of business
Martin & MacFarlane, Inc. (the Company) was incorporated December 2,
1971. The Company owns, leases, and manages billboards on a contractual basis
nationwide for the purpose of providing outdoor advertising services. The
Company also owns and operates a small winery located in Paso Robles,
California. The Company extends short-term credit in the form of
accounts receivable to businesses and advertisers doing business in the above
noted areas.
Significant accounting policies
BASIS OF ACCOUNTING
The financial statements are prepared on an accrual basis, which
recognizes income when earned and expenses when incurred.
CHANGE IN ACCOUNTING PERIOD
Pursuant to the adoption by the Company of S Corporation status
for income tax purposes, the Company changed from a fiscal year end to
a calendar year end for the period ending December 31, 1995, as required by the
Internal Revenue Service, to coincide with shareholders' tax year end.
Therefore, the reporting periods for the financial statements cover the years
ended December 31, 1997 and 1996 and six month period ended December 31, 1995.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers cash and cash equivalents to be all highly
liquid investments purchased with a maturity of three months or less.
Throughout the year, the Company may have amounts in banks in excess of
federally insured limits and as of December 31, 1997, the Company held funds
in one financial institution in excess of federally insured limits in the
amount of $115,360.
INVENTORY
Inventory is valued at the lower of cost or market. Valuation is
determined using the first-in, first-out method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated over estimated
useful lives on a straight-line or accelerated basis. Repairs and maintenance
and small equipment purchases are expensed as incurred. Expenditures which
significantly increase asset values or extend useful lives are capitalized.
Estimated useful lives in years are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings and improvements.................................. 15-31
Posters..................................................... 7-25
Bulletins................................................... 7-25
Shop equipment.............................................. 3-10
Office furniture and equipment.............................. 5-10
Autos and trucks............................................ 3-7
Irrigation equipment........................................ 7-30
Vineyards................................................... 10-25
</TABLE>
INTANGIBLE ASSETS
Goodwill is amortized using the straight-line method over primarily
five year periods.
Covenants not to compete are amortized using the straight-line method
over the contractual period specified, which ranges from five to ten years.
Advertising rights, permits and licenses, and lease rights are amortized
using the straight-line method over five years.
INCOME TAXES
Effective July 1, 1995, the Company's shareholders elected to be
taxed under the provisions of Subchapter S of the Internal Revenue Code. Under
such election, the shareholders of an "S" Corporation are taxed individually on
their proportionate share of the Company's taxable income. Therefore,
no provision or liability for federal income tax has been included in these
financial statements. State income taxes are provided based on statutory rates.
State income taxes currently payable and deferred relate primarily to temporary
differences from the use of accelerated methods of depreciation and the direct
write-off method of accounting for bad debts.
PROFIT SHARING PLAN
The Company adopted a profit sharing plan which is a qualified
pension trust under Section 401(k) of the Internal Revenue Code. All full time
employees with twelve months of service who are 19 year old or older are
eligible to participate. Each employee may voluntarily contribute up to the
lesser of 15% of their pay or $9,500. The Company has made no matching
contributions to the plan.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the long-term debt approximates fair value.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the
current year presentation.
2. ACQUISITIONS
During 1997, the Company purchased substantially all of the
assets and assumed certain liabilities of three outdoor advertising companies;
during 1996, the Company purchased substantially all of the assets and
assumed certain liabilities of four outdoor advertising companies.
Concurrently with one of the 1996 acquisitions, the Company exchanged
the assets acquired and liabilities assumed for similar assets and liabilities
of another outdoor advertising company to enable the Company to expand
its existing market share in that locality. The exchange was recorded at the
fair market value of the assets acquired. Funds used to make the acquisitions
were provided through the Company's credit facility. The majority of
the intangible assets acquired are being amortized over a five year period.
See Note 13 for acquisitions included above, which also includes a related
party.
The acquisitions were accounted for using the purchase method of
accounting and the purchase price was allocated to the various tangible and
intangible assets acquired. Accordingly, the results of operations for the
various acquisitions have been included in the results of the Company
from the respective effective dates.
A summary of the cash consideration and allocation of the purchase price
as of the acquisition dates are as follows:
<TABLE>
<CAPTION>
1997 1996
----------- ----------
<S> <C> <C>
Fair value of tangible assets acquired.................. $ 2,756,703 $3,302,000
Fair value of intangible assets acquired................ 9,199,897 2,597,000
Liabilities assumed..................................... (1,232,670) (50,000)
----------- ---------
Cash paid............................................... $10,723,930 $5,849,000
=========== ===========
</TABLE>
3. NOTE RECEIVABLE
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Ferguson Henderson Investments, 10%, secured by real
property, payable $806 monthly, due November 10, 2001..... $31,237 $37,289
Less current maturity....................................... 6,856 6,206
------- -------
$24,381 $31,083
======= =======
</TABLE>
4. INVENTORIES
Inventories are as follows at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Raw material................................................ $ 244,328 $ 139,309
Winery:
Materials and grape production costs...................... 198,033 138,266
In process................................................ 746,996 494,817
Finished goods............................................ 529,953 299,240
Tasting room, miscellaneous and resale.................... 45,562 32,558
---------- ----------
$1,764,872 $1,104,190
========== ==========
</TABLE>
5. PREPAID EXPENSES
Prepaid expenses consist of the following at December 31, 1997 and
1996:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Leases...................................................... $798,887 $505,539
Insurance................................................... 15,256 13,258
Miscellaneous............................................... 114,273 47,174
-------- --------
$928,416 $565,971
======== ========
</TABLE>
6. PROPERTY AND EQUIPMENT
Major classes of property and equipment and accumulated depreciation are
as follows at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Outdoor Advertising
Buildings and improvements............................... $ 870,719 $ 593,537
Posters.................................................. 8,072,315 7,510,907
Bulletins................................................ 18,486,149 15,656,034
Shop equipment........................................... 458,691 329,493
Office furniture and equipment........................... 224,069 211,215
Autos and trucks......................................... 1,414,986 1,268,485
Land..................................................... 838,807 571,107
Construction in process, boards.......................... 363,913 178,736
----------- -----------
30,729,649 26,319,514
Less accumulated depreciation............................ 9,497,838 8,334,374
----------- -----------
21,231,811 17,985,140
----------- -----------
Winery
Buildings and improvements............................... $ 864,672 $ 844,850
Irrigation and wells..................................... 45,752 45,752
Vineyards................................................ 316,981 278,219
Landscaping.............................................. 26,194 26,194
Auto..................................................... 23,800 19,500
Vineyard equipment....................................... 129,356 125,502
Winery equipment......................................... 859,375 707,482
Office furniture and equipment........................... 50,349 40,749
Land..................................................... 376,133 376,133
----------- -----------
2,692,612 2,464,381
Less accumulated depreciation............................ 992,798 873,402
----------- -----------
1,699,814 1,590,979
----------- -----------
Corporate
Buildings and improvements............................... $ 699,474 $ 689,293
Office furniture and equipment........................... 18,647 18,647
Land..................................................... 41,448 42,783
----------- -----------
759,569 750,723
Less accumulated depreciation............................ 163,737 139,382
----------- -----------
595,832 611,341
----------- -----------
$23,527,457 $20,187,460
=========== ===========
</TABLE>
Depreciation expense for the years ended December 31, 1997 and 1996 and
the six months ended December 31, 1995 was $1,468,013, $1,086,108, and $522,293,
respectively.
7. INTANGIBLE ASSETS
Intangible assets and accumulated amortization are as follows at
December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
----------- ----------
<S> <C> <C>
Loans fees.................................................. $ 278,750 $ --
Goodwill.................................................... 5,339,883 438,965
Covenants not to compete.................................... 353,079 203,079
Advertising rights.......................................... 1,553,639 708,100
Permits and licenses........................................ 2,365,719 377,567
Lease rights................................................ 3,193,624 1,877,001
----------- ----------
13,084,694 3,604,712
Less accumulated amortization............................... 2,031,602 597,146
----------- ----------
$11,053,092 $3,007,566
=========== ==========
</TABLE>
Amortization expense for the years ended December 31, 1997 and 1996 and
the six months ended December 31, 1995 was $1,434,459, $230,412, and $52,998,
respectively.
8. LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Canadian Imperial Bank of Commerce, as administrative
agent for lenders under the Credit Agreement dated July
31, 1997, Term A loan, interest at LIBOR plus 2.75%,
collateralized by accounts receivable, inventory, sign
structures, and intangible assets, payable quarterly,
due June 2004**......................................... $30,000,000 $ --
Canadian Imperial Bank of Commerce, as administrative
agent for lenders under the Credit Agreement dated July
31, 1997, Revolving Line of Credit, interest ranging
from prime plus 2% or LIBOR plus 2.75%, collateralized
by accounts receivable, inventory, sign structures, and
intangible assets, payable quarterly, due June 2004**... 3,400,000 --
Canadian Imperial Bank of Commerce, as administrative
agent for lenders under the Credit Agreement dated July
31, 1997, Swing Loan, interest ranging from prime plus
2% or LIBOR plus 2.75%, collateralized by accounts
receivable, inventory, sign structures, and intangible
assets, payable at termination date, due June 2004**.... 1,455,565 --
Palmer Outdoor Advertising, Inc., 10.5%, collateralized by
sign structures, equipment, and inventory, payable
$10,266 monthly including interest, due January 2002.... 406,349 --
Anthony E. and Laverne L. Brum, 7%, collateralized by deed
of trust, payable $1,742 monthly including interest, due
August 2004............................................. 111,067 --
American Commercial Bank, 8%, collateralized by vehicle,
payable $394 monthly including interest, due March
2001.................................................... 13,443 --
American Commercial Bank, 8%, collateralized by vehicle,
payable $474 monthly including interest, due March
2001.................................................... 16,176 --
William H. and Jannette L. Kunz, 12.25%, uncollateralized,
payable $6,631 monthly including interest, due May
2010.................................................... 505,043 --
LarMark, Inc., non-interest bearing, unsecured, due
January 1998............................................ 425,000 --
Virgil and Ruth Rose, 7%, collateralized by deed of trust,
payable $931 monthly including interest, due February
2026.................................................... 137,315 138,822
Paragon Outdoor Advertising, non-interest bearing,
uncollateralized, payable $608 monthly, due July 2001... 26,157 33,456
Gaechter Outdoor Advertising, non-interest bearing,
uncollateralized, payable in decreasing annual
installments ranging from $28,000 to $21,600, due August
2001.................................................... 96,000 124,000
Ken Lyons and Michael Burkett, non-interest bearing,
uncollateralized, payable $710 monthly, due May 2001.... 29,097 37,613
Pesenti Winery, noninterest bearing, collateralized by
sign structure, payable $1,500 per year, due December
2003.................................................... 9,000 10,500
Advanced Outdoor, noninterest bearing, collateralized by
sign structures, payable $9,500 per month, due December
1998.................................................... 102,000 214,000
Antelope Valley Bank, 8.5%, collateralized by vehicle,
payable $466 monthly including interest, payable August
2001.................................................... -- 21,471
Don Enger and Clayton Enger, 8.5%, collateralized by deed
of trust, payable $256 monthly including interest, due
July 2001............................................... -- 11,648
Massachusetts Mutual Life Insurance Co., 11.05%,
unsecured, payable $500,000 per year beginning November
11, 1994, interest payable quarterly, due November
1999.................................................... -- 1,500,000
Massachusetts Mutual Life Insurance Co., 10.9%, unsecured,
payable $687,500 per year, interest payable quarterly,
due August 1999......................................... -- 2,062,500
Massachusetts Mutual Life Insurance Company, 11.55%,
unsecured, payable $500,000 per year beginning June 1,
1996, interest payable quarterly, due June 2002......... -- 3,000,000
Bank of Santa Maria, interest at prime plus 2.5%,
collateralized by deed of trust, payable $1,188 per
month including interest, due May 2002.................. -- 119,695
Bank of Santa Maria, 9.5%, collateralized by vehicle,
payable $1,168 per month including interest, due August
1997.................................................... -- 4,244
Alta and Fred Higginbotham, 8%, collateralized by deed of
trust, payable $150 per month, due January 2000......... -- 6,771
Estates Trust, Inc., 9%, collateralized by deed of trust
and personally guaranteed by E. Thomas Martin, payable
$862 per month including interest, due October 2009..... -- 78,578
Barbara Lehmann, 10%, collateralized by deed of trust,
interest payable monthly, due March 1998................ -- 20,000
Christine and Alice Henderson, 9%, collateralized by deed
of trust, payable $805 per month including interest, due
April 2011.............................................. -- 96,034
Central Coast Federal Land Bank, 7.5%, collateralized by
winery deed of trust, products and crops inventory and
accounts receivable, payable $7,126 per month including
interest, due November 2015............................. -- 797,081
Central Coast Production Credit Association, 9.75%,
collateralized by winery accounts receivable and
inventory, interest payable quarterly, due January
1999.................................................... -- 150,000
Canadian Imperial Bank of Commerce, interest at LIBOR plus
2.5%, collateralized by the Amarillo Division's accounts
receivable, inventory, sign structures and intangible
assets and personally guaranteed by E. Thomas Martin and
David Weyrich, interest payable monthly, due May
1997**.................................................. -- 5,500,000
Central Coast Production Credit Association, interest at
prime plus 1.5%, collateralized by winery equipment,
payable $5,590 monthly including interest, due August
2000.................................................... -- 198,165
Homer Hensley and Rick Hensley, 8.5%, collateralized by
deed of trust, payable $1,231 monthly including
interest, due January 2001.............................. -- 50,813
Paragon Outdoor Advertising, 8%, collateralized by sign
structures, payable $2,636 monthly including interest,
due July 2001........................................... -- 121,035
----------- -----------
36,732,212 14,296,426
Less current maturities................................... 690,718 7,460,727
----------- -----------
$36,041,494 $ 6,835,699
=========== ===========
</TABLE>
Aggregate maturities of long-term debt at December 31, 1997 are as
follows:
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31,
------------
<S> <C>
1998........................................................ $ 690,718
1999........................................................ 5,676,502
2000........................................................ 6,189,260
2001........................................................ 6,937,451
2002........................................................ 10,084,059
Thereafter.................................................. 7,154,222
-----------
$36,732,212
===========
</TABLE>
** Loan has varying interest rates based on Company performance
and indexes found in the Credit Agreement dated July 31, 1997. At December 31,
1997 the effective interest rates ranged from 7.1875% to 8.5%.
The Company has entered into an interest rate cap primarily to
protect against rising interest exposure of its floating rate long-term debt.
The difference to be paid or received on the cap is included in interest expense
as payments are made or received. At December 31, 1997, the Company had
outstanding interest rate cap agreements with two commercial banks having a
total notional principal amount of $50,000,000. This agreement effectively
changes the Company's interest exposure on $50,000,000 of floating rate
debt to a fixed 6.5% with a floor of 5.5%. The interest rate cap agreement
matures September 18, 2000.
During 1997, the Company sold an interest rate floor for a gain
of $220,000. This gain is included in other income.
The counterparties to the Company's derivative financial instrument
contract are substantial and creditworthy commercial banks which are
recognized market makers. Neither the risks of counterparty nonperformance nor
the economic consequence of counterparty nonperformance associated with these
contracts were considered by the Company to be material.
Interest expense consists of interest on notes payable, management fees
and the cost associated with the purchase of the interest rate cap instrument.
Prime rate was 8.5% and 8.25% at December 31, 1997 and 1996,
respectively.
LIBOR rate was 5.938% and 5.625% at December 31, 1997 and 1996,
respectively.
9. NOTE PAYABLE, BANK
Note payable, bank is as follows at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Heritage Oaks Bank, interest at prime plus .5%,
uncollateralized, interest payable monthly, due May
1997...................................................... $ -- $800,000
======== ========
</TABLE>
Prime rate was 8.25% at December 31, 1996.
10. DISTRIBUTIONS
In January, May, August, and October 1997 and January, May, August, and
October 1996 and in July and October 1995, the Company declared a $.75
per share cash distribution for 82,443 shares outstanding. At December 31, 1997
and 1996, $61,832 and $61,658 were payable January 1, 1998 and 1997,
respectively. Subsequent to conversion of the Company to an
S-corporation, effective July 1, 1995, the Company began making
distributions equal to approximately 49% of estimated taxable income to its
shareholders to cover their tax liabilities. Distributions during the year ended
December 31, 1997, amounted to $3,140,079, including a $2,000,000 special
distribution occurring as a result of an acquisition. Distributions during the
year ended December 31, 1996, related to 1995 and 1996 taxable income, amounted
to $1,353,618.
11. DEFERRED INCOME TAXES
For state tax purposes, the applicable states do recognize "S"
Corporation status; however, they still impose a tax at the corporate level,
generally at a rate significantly lower than the regular corporate rate.
Deferred tax assets and liabilities relate to temporary differences associated
with state income taxes.
Income tax expense (benefit) for the years ended December 31, 1997 and
1996 and six months ended December 31, 1995 consisted of the following:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -----------
<S> <C> <C> <C>
Current.............................................. $23,458 $49,827 $ 24,170
Deferred............................................. -- 7,826 (2,996,487)
------- ------- -----------
Income tax expense (benefit)......................... $23,458 $57,653 $(2,972,317)
======= ======= ===========
</TABLE>
Components of deferred income tax balances at December 31, 1997 and
1996 consisted of:
<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
Current deferred tax assets.......................... $ 1,441 $ 1,500
======== ========
Long-term deferred tax liabilities................... $102,375 $111,008
======== ========
</TABLE>
Deferred income taxes arise primarily from temporary differences due to
use of accelerated depreciation methods for income tax purposes and the
straight-line method and the use of the allowance method of accounts receivable
for financial reporting purposes.
12. RELATED PARTY TRANSACTIONS
Through February 1, 1996 the Company provided management
services to Martin Media, a company having common shareholders/partners, at a
rate approximating 3% of Martin Media's gross revenue. Management fees of
$78,263 were received by the Company from Martin Media during the year
ended December 31, 1996.
Subsequent to December 31, 1995, and effective February 1, 1996, the
Company divested itself of all management and administrative employees and
contracted with M.W. Sign Company, a company wholly owned by E. Thomas Martin
and David Weyrich, to provide the Company with management services at
3% of gross revenue. As of January 1, 1997, management fees increased to 4% of
gross revenue. Management fees of $895,281 and $472,931 were paid to M.W. Sign
Company during the years ended December 31, 1997 and 1996, respectively.
13. COMMITMENTS
Leases:
The Company leases land in connection with its outdoor
advertising posters and panels as well as for office and yard space. The
Company also leases office and shop buildings which are located in different
geographic areas within the various divisions. A portion of these are long-term
leases.
Lease expense for the years ended December 31, 1997 and 1996 and six
months ended December 31, 1995 was $4,748,420, $2,333,218 and $1,064,875,
respectively.
Future minimum lease payments under noncancellable leases at December
31, 1997 are as follows:
<TABLE>
<CAPTION>
POSTERS,
YEARS ENDING DECEMBER 31, BUILDINGS BULLETINS TOTAL
- ------------------------- --------- ---------- ---------
<S> <C> <C> <C>
1998.............................................. $ 19,533 $ 162,400 $ 181,933
1999.............................................. 19,944 162,400 182,344
2000.............................................. 19,944 162,400 182,344
2001.............................................. 21,285 162,400 183,685
2002.............................................. 21,732 162,400 184,132
Thereafter........................................ 48,897 454,400 503,297
-------- ---------- ---------
$151,335 $1,266,400 $1,417,735
======== ========== ==========
</TABLE>
On August 1, 1995, the Company entered into a lease with Outdoor
Systems Company of Kansas City. Under the terms of the lease Outdoor Systems
leased 87 outdoor advertising structures from the Company for $12,500
per month. The agreement terminated December 31, 1997.
Acquisition, purchase and sales options
On July 31, 1997, the Company entered into an agreement with
another company to acquire certain assets, including sign structures, equipment,
and related intangibles located in Nevada, Arizona, and California for a total
purchase price of $60,000,000. This purchase agreement has two segments, the
first of which provided for the purchase of assets totaling $20,500,000.
Simultaneously, and as part of the master agreement, the Company
entered into an agreement with Martin Media (related party) to sell them those
assets located in their geographical service area, primarily the Las Vegas and
Colorado River markets, for $11,273,400. The Company's net acquisition
price under the first segment of the agreement was $9,226,600.
The second segment of the agreement provides an option for the
Company to purchase additional assets for $39,500,000. As part of this
transaction, the Company has also provided Martin Media with an option
to purchase the assets located in the Las Vegas and Colorado River markets for
$3,077,000. The Company's net acquisition price for assets to be
received under the second segment of the agreement will be $36,423,000.
Upon execution of the option agreement, the Company deposited
$6,000,000 in good faith with the seller. Similarly, Martin Media deposited
$463,800 with the Company resulting in a net deposit of $5,536,200. The option
agreement expires October 1, 1998. Should the Company not exercise the option,
the seller holds an option agreement whereby it can repurchase the assets
originally sold to the Company and assets owned by the Company in and around
the Bakersfield area.
As part of the option agreement, the Company will manage those
assets covered by the option agreement. The payment for the use of these assets
through the option period will approximate $285,000 per month. Revenue earned
through the managed assets is subject to the 4% management fee paid to M.W.
Sign, Inc.
Credit facility
On July 31, 1997, the Company entered into an agreement with
Canadian Imperial Bank of Commerce, as administrative agent for Lenders under
the credit agreement dated July 31, 1997. Under the terms of this agreement, the
Term B Loan is available to fund future acquisitions in the amount of
$20,000,000. As of December 31, 1997, the Company's outstanding
obligation was $-0-.
14. SUBSEQUENT EVENTS
Subsequent to December 31, 1997, the Company acquired
substantially all of the assets and assumed certain liabilities of one outdoor
advertising company at an aggregate purchase price of $12,500,000. Funds used
to make the purchase were provided through the Company's existing credit
facility.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Martin & MacFarlane, Inc.
Paso Robles, California
We have audited the accompanying balance sheet of Martin & MacFarlane,
Inc. as of June 30, 1995 and the related statements of income, retained earnings
and cash flows for the year then ended. These financial statements are the
responsibility of Martin & MacFarlane, Inc.'s management. Our responsibility is
to express an opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Martin & MacFarlane,
Inc. as of June 30, 1995 and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
BARBICH LONGCRIER HOOPER & KING
ACCOUNTANCY CORPORATION
By: /s/ GEOFFREY B. KING, CPA
Geoffrey B. King, CPA
Bakersfield, California
August 25, 1995
<PAGE>
MARTIN & MACFARLANE, INC.
BALANCE SHEET
JUNE 30, 1995
ASSETS
<TABLE>
<CAPTION>
1995
-----------
<S> <C>
Current Assets
Cash and equivalents (Note 7)............................. $ 351,705
Restricted cash (Note 6).................................. 306,154
Certificates of deposit................................... 200,000
Investments............................................... 8,400
Trade accounts receivable, less allowance for doubtful
accounts of $100,000................................... 1,546,381
Other receivables......................................... 78,649
Inventories (Note 2)...................................... 768,035
Prepaid expenses (Note 3)................................. 630,548
Current deferred income taxes (Note 10)................... 145,554
-----------
4,035,426
-----------
Property and Equipment, net of accumulated depreciation
(Notes 4, 7 and 8)........................................ 16,872,469
-----------
Intangible Assets, net of accumulated amortization (Note5).. 764,898
-----------
Other Assets................................................ 20,171
-----------
$21,692,964
===========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C>
Current Liabilities
Current maturities of long-term debt (Note 7)............. $ 1,848,465
Note payable, bank (Note 8)............................... 200,000
Accounts payable.......................................... 652,567
Accrued expenses.......................................... 319,021
Dividends payable (Note 9)................................ 26,451
Unearned income........................................... 156,881
Income taxes payable (Note 10)............................ 891,486
-----------
4,094,871
-----------
Long-Term Debt, less current maturities (Note 7)............ 8,857,936
-----------
Long-Term Deferred Income Taxes (Note 10)................... 3,208,967
-----------
Commitments (Note 13)
Stockholders' Equity
Common stock, no par or stated value, authorized 150,000
shares, issued and outstanding 82,443 shares (Note 9).. 1,113,070
Retained earnings......................................... 4,418,120
-----------
5,531,190
-----------
$21,692,964
===========
</TABLE>
The accompanying notes are an integral part of this balance sheet.
<PAGE>
MARTIN & MACFARLANE, INC.
STATEMENT OF INCOME
YEAR ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
1995
-----------
<S> <C>
Income...................................................... $16,168,763
Cost of sales............................................... 2,045,552
-----------
Gross profit...................................... 14,123,211
Managers' controlled operating expenses..................... 10,070,408
-----------
Income from managers' operations.................. 4,052,803
-----------
Other operating expenses
Depreciation and amortization expense..................... 1,100,305
-----------
Operating income.................................. 2,952,498
-----------
Other income (expense)
Interest expense.......................................... (1,313,456)
Other income.............................................. 152,804
Gain on disposition of assets............................. 2,405,522
Employee separation expense............................... (269,803)
-----------
Income before income taxes.................................. 3,927,565
Income tax expense (Note 10)........................... 1,519,542
-----------
Net income........................................ $ 2,408,023
===========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
MARTIN & MACFARLANE, INC.
STATEMENT OF RETAINED EARNINGS
YEAR ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
1995
----------
<S> <C>
Balance, beginning of year.................................. $2,195,593
Net income................................................ 2,408,023
Dividends (Note 9)........................................ (185,496)
----------
Balance, end of year........................................ $4,418,120
==========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
MARTIN & MACFARLANE, INC.
STATEMENT OF CASH FLOWS
YEAR ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
1995
-----------
<S> <C>
Cash flows from operating activities:
Net income................................................ $ 2,408,023
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 1,100,305
Gain on disposition of assets.......................... (2,405,522)
Increase in deferred income taxes...................... 469,749
Changes in operating assets and liabilities:
Increase in accounts receivable........................ (57,463)
Increase in other receivables.......................... (66,187)
Decrease in inventory.................................. 11,117
Decrease in prepaid expenses........................... 34,520
Increase in other assets............................... (9,065)
Increase in accounts payable........................... 5,887
Decrease in accrued liabilities........................ (176,570)
Increase in unearned income............................ 30,106
Increase in income taxes payable....................... 820,732
-----------
Net cash provided by operating activities......... 2,165,632
-----------
Cash flows from investing activities:
Proceeds from sale of investments......................... 5,000
Increase in certificates of deposit....................... (200,000)
Proceeds from sale of fixed assets........................ 2,656,384
Capital expenditures...................................... (736,258)
Construction of capital improvements...................... (281,102)
Principal payments on loans and notes receivable.......... 32,000
Purchase of intangible assets............................. (310,001)
-----------
Net cash provided by investing activities......... 1,166,023
-----------
Cash flows from financing activities:
Proceeds from notes payable............................... 1,007,317
Principal payments on notes payable....................... (3,946,286)
Dividends paid............................................ (185,496)
-----------
Net cash used in financing activities............. (3,124,465)
-----------
Net increase in cash and cash equivalents................... 207,190
Cash and cash equivalents at beginning of year.............. 450,669
-----------
Cash and cash equivalents at end of year.................... $ 657,859
===========
Unrestricted cash........................................... $ 351,705
Restricted cash............................................. 306,154
-----------
$ 657,859
===========
Supplemental disclosures of cash flow information:
Interest paid............................................. $ 1,339,278
===========
Payment of income taxes................................... $ 229,061
===========
</TABLE>
Schedule of noncash investing:
The Company entered into an exchange agreement with
National Outdoor Media (3M) during the year ended June 30, 1995. In
accordance with the terms of the exchange agreement, the Company
traded boards in Kansas City, Missouri to 3M in exchange for posters and
bulletins in Bakersfield, California and Kansas at a value of $1,033,850
and $2,614,150 cash.
The accompanying notes are an integral part of this statement.
<PAGE>
MARTIN & MACFARLANE, INC.
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of business
Martin & MacFarlane, Inc. (the Company) was incorporated
December 2, 1971. The Company owns, leases, and manages billboards on
a contractual basis nationwide for the purpose of providing outdoor advertising
services. The Company also owns and operates a small winery located in
Paso Robles, California. The Company extends credit in the form of
accounts receivable to businesses and advertisers doing business in the above
noted areas.
Significant accounting policies
BASIS OF ACCOUNTING
The financial statements are prepared on an accrual basis, which
recognizes income when earned and expenses when incurred.
CASH AND CASH EQUIVALENTS
The Company considers cash and cash equivalents to be all highly
liquid debt instruments purchased with a maturity of three months or less. As of
June 30, 1995, the Company held funds of $646,293 in one financial
institution.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Bad debts are recognized under the allowance method of accounting which
is based on an average of actual write-offs in past years.
INVESTMENTS
Investments in marketable equity securities are carried at the lower of
cost or market. Decline in market values below cost, which are temporary in
nature, are not recognized as losses until the decline in value is deemed
permanent or until the security is sold.
INVENTORY
Inventory is valued at the lower of cost or market. Valuation is
determined using the first-in, first- out method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated over estimated
useful lives on a straight-line or accelerated basis. Repairs and maintenance
and small equipment purchases are expensed as incurred. Expenditures which
significantly increase asset values or extend useful lives are capitalized.
Estimated useful lives in years are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Buildings and improvements.................................. 15-31
Posters..................................................... 7-25
Bulletins................................................... 7-25
Shop equipment.............................................. 3-10
Office furniture and equipment.............................. 5-10
Autos and trucks............................................ 3-7
Irrigation equipment........................................ 7-30
Vineyards................................................... 10-25
</TABLE>
INTANGIBLE ASSETS
Goodwill is recorded at cost and is amortized using the straight-line
method over a forty year period.
Covenants not to compete are recorded at cost and are amortized using
the straight-line method over the contractual period specified, which ranges
from five to ten years.
INCOME TAXES
Effective July 1, 1993, as required by professional standards, the
Company adopted Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes. Deferred income taxes are provided on timing
differences between financial statement and taxable incomes. Timing differences
arise primarily from the use of the accelerated methods of depreciation, the
direct write-off method of accounting for bad debts, and the carryforward of net
operating losses for income tax purposes. Determination of current or long-term
status of the asset or liability is based upon when the particular timing
difference reverses.
2. INVENTORIES
Inventories are as follows at June 30, 1995:
<TABLE>
<CAPTION>
1995
--------
<S> <C>
Raw material................................................ $ 84,383
Winery:
Materials and grape production costs...................... 141,255
In process................................................ 162,669
Finished goods............................................ 359,060
Tasting room, miscellaneous and resale.................... 20,668
--------
$768,035
========
</TABLE>
3. PREPAID EXPENSES
Prepaid expenses consist of the following at June 30, 1995:
<TABLE>
<CAPTION>
1995
--------
<S> <C>
Leases...................................................... $519,079
Insurance................................................... 36,600
Miscellaneous............................................... 74,869
--------
$630,548
========
</TABLE>
4. PROPERTY AND EQUIPMENT
Major classes of property and equipment and accumulated depreciation are
as follows at June 30, 1995:
<TABLE>
<CAPTION>
1995
-----------
<S> <C>
Outdoor Advertising
Buildings and improvements................................ $ 500,731
Posters................................................... 5,987,468
Bulletins................................................. 13,850,302
Shop equipment............................................ 278,749
Office furniture and equipment............................ 191,692
Autos and trucks.......................................... 1,063,156
Land...................................................... 414,472
Construction in process, boards........................... 69,038
-----------
22,355,608
Less accumulated depreciation............................. 7,105,290
-----------
15,250,318
-----------
Winery
Buildings and improvements................................ 664,515
Irrigation and wells...................................... 45,752
Vineyards................................................. 278,219
Landscaping............................................... 26,194
Auto...................................................... 19,500
Vineyard equipment........................................ 119,142
Winery equipment.......................................... 320,720
Office furniture and equipment............................ 37,604
Land...................................................... 206,133
-----------
1,717,779
Less accumulated depreciation............................. 755,093
-----------
962,686
-----------
Corporate
Buildings and improvements................................ $ 654,970
Office furniture and equipment............................ 267,308
Land...................................................... 42,783
-----------
965,061
Less accumulated depreciation............................. 305,596
-----------
659,465
-----------
$16,872,469
===========
</TABLE>
Depreciation expense for the year ended June 30, 1995 was $1,021,709.
5. INTANGIBLES
Intangible assets and accumulated amortization are as follows at June
30, 1995:
<TABLE>
<CAPTION>
1995
----------
<S> <C>
Goodwill.................................................... $ 438,965
Covenants not to compete.................................... 69,000
Advertising rights.......................................... 136,100
Permits and licenses........................................ 168,567
Lease rights................................................ 335,001
----------
1,147,633
Less accumulated amortization............................... 382,735
----------
$ 764,898
==========
</TABLE>
Amortization expense for the year ended June 30, 1995 was $78,596.
6. RESTRICTED CASH
Restricted cash at June 30, 1995 consisted of the following:
<TABLE>
<CAPTION>
1995
--------
<S> <C>
Cash, interest bearing account, holdback account, held for the mutual
benefit of the Company and National Advertising Company,
by Chicago Title & Trust Company, until released by joint order of
the parties. Cash is to be released within twelve months of the
June 30, 1995 balance sheet date. Cash subsequently received
July 7, 1995...................................................... $306,154
========
</TABLE>
7. LONG-TERM DEBT
Long-term debt consists of the following at June 30, 1995:
<TABLE>
<CAPTION>
1995
-----------
<S> <C>
Federal Land Bank, 5.75% and 6.73%, at 1995 and 1994,
collateralized by first trust deed, payable $3,510 per
month including interest, due May 1, 2011................. $ 410,068
Massachusetts Mutual Life Insurance Co., 11.05%, unsecured,
payable $500,000 per year beginning November 11, 1994,
interest payable quarterly, due November 15, 1999......... 2,500,000
Massachusetts Mutual Life Insurance Co., 10.9%, unsecured,
payable $687,500 per year beginning August 15, 1992,
interest payable quarterly, due August 15, 1999........... 3,437,500
Massachusetts Mutual Life Insurance Company, 11.55%,
unsecured, payable $500,000 per year beginning June 1,
1995, interest payable quarterly, due June 1, 2002........ 3,500,000
Boatmen's First National Bank, interest at prime plus 1.5%,
collateralized by first deed of trust, payable $1,420 per
month including interest, due July 8, 2002................ 91,056
Citizens Bank of Paso Robles, interest at prime plus 2.5%,
collateralized by first trust deed, payable $1,188 per
month including interest, due May 13, 2002................ 124,134
Sierra Outdoor, 8%, collateralized by bulletins, payable
$940 per month including interest, due April 15, 1996..... 9,065
Citizens Bank of Paso Robles, interest at 9.5%,
collateralized by vehicle, payable $555 per month
including interest, due August 15, 1997................... 12,962
Citizens Bank of Paso Robles, interest at 9.5%,
collateralized by vehicle, payable $613 per month
including interest, due August 15, 1997................... 14,206
Alta and Fred Higginbotham, 8%, collateralized by deed of
trust, payable $150 per month, due January 1, 2000........ 8,544
Estates Trust, Inc., 9%, collateralized by deed of trust,
payable $862 per month including interest, due October 1,
2009...................................................... 82,916
Barbara Lehmann, 10%, collateralized by deed of trust,
interest payable monthly, due March 30, 1998.............. 20,000
Christine and Alice Henderson, 9%, collateralized by deed of
trust, payable $805 per month including interest, due
April 8, 2011............................................. 97,450
Pesenti Winery, non-interest bearing, collateralized by sign
structure, payable $1,500 per year, due December 15,
2003...................................................... 13,500
Advanced Outdoor, non-interest bearing, collateralized by
sign structures, payable $8,500 per month, due December
10, 1998.................................................. 357,000
Advanced Outdoor, non-interest bearing, collateralized by
sign structures, payable $1,000 per month, due October 1,
1997...................................................... 28,000
-----------
10,706,401
Less current maturities..................................... 1,848,465
-----------
$ 8,857,936
===========
</TABLE>
Prime rate was 9% at June 30, 1995.
Aggregate maturities of long-term debt at June 30, 1995 are as follows:
<TABLE>
<CAPTION>
YEARS ENDING
JUNE 30,
------------
<S> <C>
1996........................................................ $ 1,848,465
1997........................................................ 1,853,095
1998........................................................ 1,850,465
1999........................................................ 1,775,319
2000........................................................ 1,728,146
Thereafter.................................................. 1,650,911
-----------
$10,706,401
===========
</TABLE>
8. NOTE PAYABLE, BANK
Note payable, bank is as follows at June 30, 1995:
<TABLE>
<CAPTION>
1995
--------
<S> <C>
Citizens Bank of Paso Robles, interest at 8.5%,
collateralized by certificate of deposit, annually
renewable on April 3, interest payable monthly, due April
3, 1996................................................... $200,000
========
</TABLE>
Prime rate was 9% at June 30, 1995.
9. DIVIDENDS PAYABLE
In July 1994, October 1994 and January 1995, the Company
declared a $.50 per share cash dividend, for 82,443 shares outstanding. In May
1995 the Company declared a $.75 per share dividend, for 82,443 shares
outstanding. At June 30, 1995 $26,451 was payable July 1, 1995.
10. DEFERRED INCOME TAXES
Income tax expense for the year ended June 30, 1995 is computed under
SFAS 109 and consisted of the following:
<TABLE>
<CAPTION>
FEDERAL STATE TOTAL
---------- -------- ----------
<S> <C> <C> <C>
Current........................................... $ 808,602 $241,191 $1,049,793
Deferred.......................................... 657,023 100,162 757,185
Tax benefit of net operating loss carryforward.... (251,439) (35,997) (287,436)
---------- -------- ----------
Income tax expenses............................... $1,214,186 $305,356 $1,519,542
========== ======== ==========
</TABLE>
Components of deferred income tax balances at June 30, 1995 consisted
of:
<TABLE>
<CAPTION>
FEDERAL STATE TOTAL
----------- -------- ---------
<S> <C> <C> <C>
Current deferred tax assets....................... $ 136,254 $ 9,300 $ 145,554
========== ======== ==========
Long-term deferred tax liabilities................ $2,539,860 $669,107 $3,208,967
========== ======== ==========
</TABLE>
Deferred income tax liabilities arise primarily from timing differences
due to use of accelerated depreciation methods for income tax purposes and the
straight-line method for financial reporting purposes. Deferred income tax
assets arise primarily from the application of federal and state net operating
loss carryovers.
At June 30, 1995, the Company had alternative minimum tax
credits in the amount of $16,837, available to offset future taxes. Tax credits
are included in deferred tax assets.
11. RELATED PARTY TRANSACTIONS
The following transaction occurring between the Company and a
related party, which is not presented elsewhere in these financial statements,
is as follows:
Martin Media, which has partners who are also stockholders in the
Company, contracts the Company to perform management duties. Martin
Media pays a management fee to the Company which is approximately 3% of
Martin Media's gross revenue. Management fees of $986,356 were received from
the partnership during the fiscal year ending June 30, 1995.
12. PROFIT SHARING PLAN
Discretionary contributions under a defined contribution profit sharing
plan, which are determined by the Company's Board of Directors, have
been accrued to a trust for the benefit of qualified employees in the amount of
$50,000 for the year ended June 30, 1995. All costs are funded currently.
13. COMMITMENTS
The Company leases land in connection with its outdoor
advertising posters and panels as well as for office and yard spaces. These are
long-term operating leases which the Company and lessor have the option
to terminate with thirty days notice.
Lease expense for the year ended June 30, 1995 was $2,218,480.
The Company leases office and shop buildings which are located
at various divisions. A portion of these are long-term leases.
Future minimum lease payments under noncancellable leases at June 30,
1995 are as follows:
<TABLE>
<CAPTION>
Years ending June 30,
<S> <C>
1996...................................................... $ 47,747
1997...................................................... 22,665
1998...................................................... 18,711
1999...................................................... 19,944
2000...................................................... 19,944
Thereafter................................................ 121,830
--------
$250,841
========
</TABLE>
<PAGE>
APPENDIX A
TABLE OF CONTENTS
PAGE
Article 1. PURCHASE AND SALE OF SHARES 1
Section 1.1. Dividend of Whiteco Shares 1
Section 1.2. Purchase and Sale of Chancellor Shares 2
Section 1.3. Purchase Price 2
Section 1.4. Closing 2
Section 1.5. Purchase Price Adjustment 3
Article 2. REPRESENTATIONS AND WARRANTIES OF SELLERS 4
Section 2.1. Corporate Organization and Authority of Chancellor
Mezzanine and Chancellor LA 4
Section 2.2. No Conflict 5
Section 2.3. Corporate Organization of the Company 5
Section 2.4. Capital Stock of the Company 5
Section 2.5. Subsidiaries 6
Section 2.6. Capitalization of Subsidiaries of the Company 6
Section 2.7. Pro Forma Financial Statements 6
Section 2.8. Contracts; No Defaults 7
Section 2.9. Intellectual Property 8
Section 2.10. Owned Real Property 9
Section 2.11. Litigation and Proceedings 9
Section 2.12. Employee Benefit Plans 9
Section 2.13. Labor Relations 11
Section 2.14. Legal Compliance 11
Section 2.15. Environmental Matters 11
Section 2.16. Taxes 12
Section 2.17. Governmental Authorities; Consents 13
Section 2.18. Interest in Competitors, Suppliers, and Customers 13
Section 2.19. Insurance 13
Section 2.20. Brokers' Fees 13
Section 2.21. Events Subsequent to March31, 1999 13
Section 2.22. Chancellor Mezzanine Securities Act Representations 14
Section 2.23. Chancellor LA Securities Act Representations 15
Section 2.24. Divesture Assets 16
Article 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER 16
Section 3.1. Corporate Organization and Authority of Purchaser 16
Section 3.2. No Conflict 17
Section 3.3. Litigation and Proceedings 17
Section 3.4. Governmental Authorities; Consents 17
Section 3.5. Brokers' Fees 17
Section 3.6. Capital Structure 17
Section 3.7. SEC Documents; Financial Statements 18
Section 3.8. Legal Compliance 19
Section 3.9. Interest in Competitors, Suppliers and Customers 19
Section 3.10. State Takeover Statutes 19
Section 3.11. Events Subsequent to March31, 1999 19
Section 3.12. Securities Act Representations 19
Section 3.13. Commitment Letters 20
Article 4. COVENANTS AND AGREEMENTS OF SELLERS 21
Section 4.1. Preliminary Transactions 21
Section 4.2. Conduct of Business 21
Section 4.3. Inspection 22
Section 4.4. HSR Act 22
Section 4.5. No Solicitations 22
Section 4.6. No Solicitation or Hiring 23
Section 4.7. Registration Rights Agreement and Stockholders
Agreement 23
Section 4.8. Requests for Information 23
Section 4.9. Necessary Lender Approvals 23
Article 5. COVENANTS AND AGREEMENTS OF PURCHASER 24
Section 5.1. HSR Act 24
Section 5.2. No Use of "Chancellor" Name 24
Section 5.3. Investigation; Purchaser Acknowledgment 24
Section 5.4. No Solicitations or Hiring 25
Section 5.5. Stockholder Consent 25
Section 5.6. Definitive Documentation 26
Section 5.7. Conduct of Business 26
Section 5.8. Registration Rights Agreement and Stockholders
Agreement 26
Section 5.9. Inspection 27
Article 6. JOINT COVENANTS AND AGREEMENTS 27
Section 6.1. Confidentiality 27
Section 6.2. Support of Transaction 27
Section 6.3. [Intentionally Left Blank] 28
Section 6.4. Tax Matters 28
Section 6.5. Certain Employee Benefits Matters 30
Article 7. CONDITIONS TO OBLIGATIONS 33
Section 7.1. Conditions to Obligations of Purchaser and Sellers 33
Section 7.2. Conditions to Obligations of Purchaser 33
Section 7.3. Conditions to the Obligations of Sellers 34
Article 8. TERMINATION 35
Section 8.1. Termination 35
Section 8.2. Effect of Termination 36
Section 8.3. Other Termination 36
Article 9. INDEMNIFICATION 36
Section 9.1. Survival of Representations 36
Section 9.2. Indemnification 36
Section 9.3. Conduct of Proceedings 37
Section 9.4. Sole Remedy; Time Limitation 37
Article 10. CERTAIN DEFINITIONS 37
Article 11. MISCELLANEOUS 43
Section 11.1. Waiver 43
Section 11.2. Notices 43
Section 11.3. Termination of Subscription Agreement 44
Section 11.4. Assignment 45
Section 11.5. Rights of Third Parties 45
Section 11.6. Expenses 45
Section 11.7. Construction 45
Section 11.8. Captions; Counterparts 45
Section 11.9. Entire Agreement 45
Section 11.10. Amendments 46
Section 11.11. Publicity 46
Section 11.12. Dispute Resolution 46
<PAGE>
SCHEDULES
Schedule 2.2: No Conflict
Schedule 2.4: Capitalization of the Company
Schedule 2.5: Subsidiaries of the Company
Schedule 2.6: Capitalization of Subsidiaries of the Company
Schedule 2.7: Pro Forma Financial Statements
Schedule 2.8: Contracts; No Defaults
Schedule 2.9: Intellectual Property
Schedule 2.10: Owned Real Property
Schedule 2.11: Litigation and Proceedings
Schedule 2.12: Employee Benefits Plans
Schedule 2.13: Labor Relations
Schedule 2.14: Legal Compliance
Schedule 2.15: Environmental Matters
Schedule 2.16: Taxes
Schedule 2.17: Governmental Authorities; Consents
Schedule 2.18: Transactions with Affiliates
Schedule 2.21: Events Subsequent to March 31, 1999
Schedule 3.4: Purchaser Governmental Authorities; Consents
ANNEXES
Annex A: Description of Divestiture Assets
Annex B: Description of Burkett Assets
Annex C: [Intentionally Left Blank]
Annex D: Registration Rights Agreement
Annex E: Stockholders Agreement
Annex F: [Intentionally Left Blank]
Annex G: Voting Agreement
AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
dated as of
July 12, 1999
by and among
LAMAR ADVERTISING COMPANY
AS PURCHASER
and
CHANCELLOR MEZZANINE HOLDINGS CORPORATION
and
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
AS SELLERS
<PAGE>
AMENDED AND RESTATED
STOCK PURCHASE AGREEMENT
This Amended and Restated Stock Purchase Agreement (this
"AGREEMENT") is entered into by and among LAMAR ADVERTISING COMPANY, a
Delaware corporation ("PURCHASER"), CHANCELLOR MEZZANINE HOLDINGS
CORPORATION, a Delaware corporation ("CHANCELLOR MEZZANINE"), and
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES, a Delaware corporation
("CHANCELLOR LA" and, collectively with Chancellor Mezzanine, "SELLERS"),
as of this 12th day of July, 1999.
RECITALS:
WHEREAS, Chancellor LA is the sole record and beneficial owner of
one thousand (1,000) shares (the "COMPANY SHARES") of the common stock, par
value $0.01 per share, of Chancellor Media Outdoor Corporation, a Delaware
corporation (the "COMPANY"), which Company Shares constitute all of the
issued and outstanding shares of the capital stock of the Company;
WHEREAS, the Company is the sole record and beneficial owner of
one thousand (1,000) shares (the "WHITECO SHARES" and, together with the
Company Shares, the "CHANCELLOR SHARES") of the common stock, par value
$0.01 per share, of Chancellor Media Whiteco Outdoor Corporation, a
Delaware corporation and a wholly owned subsidiary of the Company
("WHITECO"), which Whiteco Shares constitute all of the issued and
outstanding shares of the capital stock of Whiteco;
WHEREAS, pursuant to that certain Stock Purchase Agreement dated
as of June 1, 1999 (the "ORIGINAL AGREEMENT"), Chancellor LA agreed to sell
to Purchaser, and Purchaser agreed to purchase from Chancellor LA, the
Company Shares, upon the terms and subject to the conditions set forth in
the Original Agreement;
WHEREAS, the parties desire to amend certain provisions of the
Original Agreement pursuant to this Agreement, with this Agreement being
deemed to amend and restate the Original Agreement in its entirety; and
WHEREAS, certain capitalized terms used herein have the meanings
assigned to them in Article 10 hereof.
AGREEMENT:
In consideration of the mutual covenants and agreements contained
herein, and other good and valuable consideration, the receipt and adequacy
of which is hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1.
PURCHASE AND SALE OF SHARES
Section 1.1 DIVIDEND OF WHITECO SHARES. On the Closing Date, and
immediately prior to the Closing, (i) the Company will effect a dividend to its
immediate parent corporation, Chancellor LA, of the Whiteco Shares and (ii)
Chancellor LA will cause the Whiteco Shares to be distributed as a dividend
to Chancellor Mezzanine. Such dividends are referred to herein
collectively as the "DIVIDEND."
Section 2.1 PURCHASE AND SALE OF CHANCELLOR SHARES. Upon the terms and
subject to the conditions contained herein, on the Closing Date and immediately
after the Dividend is effected, (i) Chancellor Mezzanine will sell, convey
and transfer to Purchaser, and Purchaser will purchase and acquire from
Chancellor Mezzanine, the Whiteco Shares, and (ii) Chancellor LA will sell,
convey and transfer to Purchaser, and Purchaser will purchase and acquire
from Chancellor LA, the Company Shares.
Section 1.3 PURCHASE PRICE. Upon the terms and subject to the conditions
contained herein, on the Closing Date, (a) as consideration for the Whiteco
Shares, Purchaser will (i) pay to Chancellor Mezzanine Ten Million Dollars
($10,000,000) and (ii) issue to Chancellor Mezzanine the number of shares
of Class A Common Stock, par value $0.001, of Purchaser ("PURCHASER CLASS A
COMMON STOCK") as shall represent an aggregate value of Nine Hundred Forty
Million Dollars ($940,000,000), valued based on the closing price of such
shares on the Nasdaq National Market on the trading day immediately prior
to the Closing Date, but in no event more than 26,227,273 of such shares
(the "LAMAR MEZZANINE SHARES") and (b) as consideration for the Company
Shares, Purchaser will (i) pay to Chancellor LA Six Hundred Ninety Million
Dollars ($690,000,000) (the "CASH CONSIDERATION") and (ii) issue to
Chancellor LA the number of shares of Purchaser Class A Common Stock, if
any, obtained by subtracting the number of Lamar Mezzanine Shares from
26,227,273 (the "LAMAR LA SHARES" and, collectively with the Lamar
Mezzanine Shares, the "LAMAR SHARES"), subject to the adjustments set forth
in Section 1.5 hereof (the "TOTAL CONSIDERATION").
Section 1.4 CLOSING.
(a) The consummation of the purchase and sale of the
Chancellor Shares (the "CLOSING") shall take place at 10:00 a.m., local
time, on the tenth (10th) Business Day following the satisfaction of the
conditions to the obligations of the parties set forth in Article 7 hereof,
at the offices of Sellers, 1845 Woodall Rodgers Freeway, Suite 1300,
Dallas, Texas, or at such other time or place as Sellers and Purchaser may
agree in writing (the day on which the Closing takes place being referred
to herein as the "CLOSING DATE").
(b) at the Closing, (i) Chancellor Mezzanine shall deliver or
Cause to be delivered to purchaser (a) one or more stock certificates
Evidencing the whiteco shares, duly endorsed in blank or accompanied by a
Stock power duly executed in blank, and (b) the other documents required to
Be delivered by Chancellor Mezzanine pursuant to Article 7 hereof, and
(Ii) chancellor la shall deliver or cause to be delivered to purchaser (a)
One or more stock certificates evidencing the company shares, duly endorsed
In blank or accompanied by a stock power duly executed in blank, and (b)
The other documents required to be delivered by chancellor la pursuant to
Article 7 hereof.
(c) At the Closing, Purchaser shall (i) deliver or cause to
be delivered to Chancellor Mezzanine one or more stock certificates
evidencing the Lamar Mezzanine Shares, (ii) deliver or cause to be
delivered to Chancellor LA one or more stock certificates evidencing the
Lamar LA Shares, if any, (iii) pay to Chancellor LA the Cash Consideration
(prior to giving effect to any adjustment provided for in Section 1.5
hereof) by intrabank transfer or wire transfer of immediately available
funds to an account designated in writing by Chancellor LA and (iv) deliver
to each Seller the documents required to be delivered by Purchaser to such
Seller pursuant to Article 7 hereof.
Section 1.5 PURCHASE PRICE ADJUSTMENT.
(a) As soon as reasonably practicable following the Closing
Date, and in any event within forty-five (45) calendar days thereof,
Chancellor LA shall prepare and deliver to Purchaser (i) a consolidated
balance sheet of the Company as of the Closing (after giving effect to the
Preliminary Transactions but prior to giving effect to the Dividend) which
shall be audited by PriceWaterhouseCoopers LLP ("PWC"), together with the
related audit report of such firm (the "CLOSING BALANCE SHEET"), and (ii) a
calculation of the Net Working Capital of the Company as set forth on the
Closing Balance Sheet (the "CLOSING DATE NET WORKING CAPITAL"). The
Closing Balance Sheet shall be prepared in accordance with United States
generally accepted accounting principles ("GAAP") consistent with the
preparation of the Pro Forma Balance Sheet, and shall fairly present the
consolidated financial position of the Company as of the Closing. "Net
Working Capital" shall mean (i) current assets of the Company, MINUS (ii)
current liabilities of the Company. Current liabilities of the Company
shall (A) include, without limitation, any severance payments provided on
SCHEDULE 2.13 which have been paid, or will be paid, by the Company or its
Subsidiaries and which are accrued and incurred after the Closing but prior
to the time of the calculation of Closing Date Net Working Capital pursuant
to this Section 1.5(a), and (B) exclude, without limitation, any liability
of the Company or its Subsidiaries, including, but not limited to, any
liability for Taxes and severance payments, which Chancellor LA has agreed
to or is otherwise obligated to pay. Notwithstanding the foregoing, in
calculating Net Working Capital, all intercompany payables and receivables
between Chancellor LA, the Company and its Subsidiaries shall be
disregarded.
(b) upon delivery of the Closing Balance Sheet, Chancellor LA
Will provide purchaser with access to its records and will use commercially
reasonable efforts to provide purchaser and its accountants access to the
Work papers of pwc, to the extent reasonably related to purchaser's
evaluation of the closing balance sheet and the calculation of the closing
date net working capital. The purchaser may dispute the calculation of the
Closing Date Net Working Capital or any element of the Closing Balance
Sheet relevant thereto, by notifying Chancellor LA of such disagreement in
writing, setting forth in detail the particulars of such disagreement,
within thirty (30) calendar days after its receipt of the Closing Balance
Sheet; provided that the basis of any such dispute shall be limited to the
failure of the calculation of Closing Date Net Working Capital or any
amount reflected on the Closing Balance Sheet to have been determined in
accordance with gaap applied on a basis consistent with this section 1.5.
In the event that purchaser does not provide such a notice of disagreement
within such thirty (30) calendar day period, purchaser shall be deemed to
have accepted the Closing Balance Sheet and the calculation of the Closing
Date Net Working Capital delivered by Chancellor LA, which shall be final,
binding and conclusive for all purposes hereunder. In the event any such
notice of disagreement is timely provided, purchaser and Chancellor LA
shall use commercially reasonable efforts for a period of thirty (30)
calendar days (or such longer period as they may mutually agree) to resolve
any disagreements with respect to the calculation of the Closing Date Net
Working Capital. If, at the end of such period, they are unable to resolve
such disagreements, then the Chicago, Illinois office of Ernst & Young LLP
(or such other independent accounting firm of recognized national standing
as may be mutually selected by purchaser and Chancellor LA) (the "Auditor")
shall resolve any remaining disagreements. The Auditor shall determine as
promptly as practicable, but in any event within thirty (30) calendar days
of the date on which such dispute is referred to the Auditor, whether the
Closing Balance Sheet was prepared in accordance with the standards set
forth in Section 1.5(a) and (only with respect to the remaining
disagreements submitted to the Auditor) whether and to what extent (if any)
the Closing Date Net Working Capital requires adjustment. The fees and
expenses of the Auditor shall be paid one-half by Purchaser and one-half by
Chancellor LA. The determination of the Auditor shall be final, conclusive
and binding on the parties. The date on which the Closing Date Net Working
Capital is finally determined in accordance with this Section 1.5(b) is
hereinafter referred as to the "DETERMINATION DATE."
(c) The "ADJUSTMENT AMOUNT," shall mean the difference
between (i) the Closing Date Net Working Capital, and (ii) Twelve Million
Dollars ($12,000,000) (the "MINIMUM NET WORKING CAPITAL"). If the Closing
Date Net Working Capital exceeds the Minimum Net Working Capital, then,
promptly and in any event within five (5) Business Days following the
Determination Date, Purchaser shall pay to Chancellor LA, by wire transfer
of immediately available funds to an account designated in writing by
Chancellor LA, the Adjustment Amount, together with interest on such amount
from the Closing Date to the date of payment at the prime rate of interest
(the "APPLICABLE RATE") published in the "Money Rates" column of the
Eastern Edition of THE WALL STREET JOURNAL (or the average of such rates if
more than one rate is indicated) on the Closing Date. If the Minimum Net
Working Capital exceeds the Closing Date Net Working Capital, then,
promptly and in any event within five (5) Business Days following the
Determination Date, Chancellor LA shall pay to Purchaser, by wire transfer
of immediately available funds to an account designated in writing by
Purchaser, the Adjustment Amount, together with interest on such amount
from the Closing Date to the date of payment at the Applicable Rate.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers, jointly and severally, represent and warrant to
Purchaser that as of the date of this Agreement (provided, however, that
any representation or warranty made herein that relates (i) solely to
Chancellor Mezzanine is being made solely by Chancellor Mezzanine or (ii)
solely to Chancellor LA is being made solely by Chancellor LA):
Section 2.1 CORPORATE ORGANIZATION AND AUTHORITY OF CHANCELLOR
MEZZANINE AND CHANCELLOR LA.
(a) Chancellor Mezzanine has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
State of Delaware and has the corporate power and authority to enter into
and perform its obligations under this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized and approved by
the Board of Directors of Chancellor Mezzanine, and no other corporate
proceeding on the part of Chancellor Mezzanine is necessary to authorize
this Agreement or the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by Chancellor Mezzanine and,
assuming this Agreement constitutes a valid and binding agreement of each
of Purchaser and Chancellor LA, constitutes a legally valid and binding
obligation of Chancellor Mezzanine, enforceable against Chancellor
Mezzanine in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar
laws affecting creditors' rights generally and subject, as to
enforceability, to general principles of equity.
(b) Chancellor LA has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the state of
Delaware and has the corporate power and authority to enter into and
perform its obligations under this agreement. The execution and delivery
of this agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized and approved by the board of
Directors of Chancellor LA, and no other corporate proceeding on the part
of Chancellor LA is necessary to authorize this agreement or the
transactions contemplated hereby. This agreement has been duly and validly
executed and delivered by Chancellor LA and, assuming this agreement
constitutes a valid and binding agreement of each of purchaser and
Chancellor Mezzanine, constitutes a legally valid and binding obligation of
Chancellor LA, enforceable against Chancellor LA in accordance with its
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights
generally and subject, as to enforceability, to general principles of
equity.
Section 2.2. NO CONFLICT. Except as set forth on SCHEDULE 2.2, the
execution and delivery of this Agreement by each of Chancellor Mezzanine and
Chancellor LA and the consummation of the transactions contemplated hereby
do not and will not violate any provision of, or result in the breach of:
(a) any law, rule or regulation of any Governmental Authority, any Contract
listed pursuant to Section 2.8(a), or any order, judgment or decree
applicable to such entity, the Company or any Subsidiary of the Company, or
terminate or result in the termination of any such Contract, or result in
the creation of any Lien, charge or encumbrance upon any of the properties
or assets of such entity, the Company or any Subsidiary of the Company, or
constitute an event which, after notice or lapse of time or both, would
result in any such violation, breach, acceleration, termination or creation
of a Lien; or (b) the Certificate of Incorporation, Bylaws or other
organizational documents of such entity, the Company or any Subsidiary of
the Company.
Section 2.3. CORPORATE ORGANIZATION OF THE COMPANY. The Company has been
duly incorporated and is validly existing as a corporation in good standing
under the laws of the State of Delaware and has the corporate power and
authority to own or lease its properties and to conduct the Business as it
is now being conducted. The copies of the Certificate of Incorporation and
Bylaws of the Company previously delivered by the Company to Purchaser are
true, correct and complete. The Company is duly licensed or qualified and
in good standing as a foreign corporation in each jurisdiction in which the
ownership of its property or the character of its activities is such as to
require it to be so licensed or qualified, except where the failure to be
so licensed or qualified would not have a material adverse effect on the
business, operations or financial condition of the Company and its
Subsidiaries, taken as a whole.
Section 2.4 CAPITAL STOCK OF THE COMPANY. The Company Shares constitute
all the issued and outstanding shares of capital stock of the Company. The
Company Shares have been duly authorized and validly issued and are fully
paid and nonassessable and were not issued in violation of any preemptive
rights. There are no options, warrants, agreements, arrangements, or other
rights relating to the capital stock of the Company or other securities
exercisable or exchangeable for any capital stock of the Company that
either (i) obligates the Company to issue, sell, transfer, repurchase,
redeem or otherwise acquire or vote any shares of its capital stock, or
(ii) restricts the transfer of its capital stock. Chancellor LA is the
sole record and beneficial owner of the Company Shares and owns the Company
Shares free and clear of any Liens other than the Liens described on
SCHEDULE 2.4 hereto.
Section 2.5 .SUBSIDIARIES. Set forth on SCHEDULE 2.5 is a list of all
Subsidiaries of the Company. Each Subsidiary of the Company has been duly
formed and is validly existing under the laws of the jurisdiction of its
formation and has the corporate or limited liability company power and
authority, as applicable, to own or lease its properties and to conduct its
business as it is now being conducted. The Company has previously
provided, or shall provide prior to the Closing, to Purchaser copies of the
organizational documents of each Subsidiary of the Company, and such copies
are true, correct and complete. Each such Subsidiary is duly licensed or
qualified and in good standing in each jurisdiction in which its ownership
of property or the character of its activities is such as to require such
Subsidiary to be so licensed or qualified, except where the failure to be
so licensed or qualified would not have a material adverse effect on the
business, operations or financial condition of the Company and its
Subsidiaries, taken as a whole. The jurisdiction of incorporation or
organization of the Subsidiaries of the Company are set forth on
SCHEDULE 2.5 hereto.
Section 2.6. CAPITALIZATION OF SUBSIDIARIES OF THE COMPANY.
(a) EXCEPT AS SET FORTH ON SCHEDULE 2.6 or in the last
sentence of this Section 2.6, (i) each Subsidiary of the Company including,
without limitation, Whiteco, is wholly-owned of record and beneficially by
the Company or another wholly-owned Subsidiary of the Company, and (ii) the
ownership interests of the Company in each such Subsidiary are owned of
record and beneficially by the Company, free and clear of any Liens other
than Liens described on SCHEDULE 2.6 hereto. Except as set forth on
SCHEDULE 2.6, there are no options, warrants, agreements, arrangements or
other rights relating to, or other securities exercisable or exchangeable
for, any capital stock or other equity security of any Subsidiary of the
Company that either (i) obligates any Subsidiary of the Company to issue,
sell, transfer, repurchase, redeem or otherwise acquire or vote any shares
of capital stock of any Subsidiary of the Company, or (ii) restricts the
transfer of the capital stock of any Subsidiary of the Company.
(b) The Whiteco Shares constitute all the issued and
outstanding shares of capital stock of Whiteco. The Whiteco Shares have
been duly authorized and validly issued and are fully paid and
nonassessable and were not issued in violation of any preemptive rights.
On the Closing Date, immediately prior to the Closing (after giving effect
to the Dividend), Whiteco, which, as of the date hereof, is a wholly-owned
Subsidiary of the Company, will be a wholly-owned Subsidiary of Chancellor
Mezzanine.
Section 2.7. PRO FORMA FINANCIAL STATEMENTS. Attached as SCHEDULE 2.7
hereto are (i) the unaudited consolidated balance sheet of the Company as of
March 31, 1999 (the "PRO FORMA BALANCE SHEET"), which has been adjusted to
give effect to the Preliminary Transactions, including any accruals for
Taxes associated therewith, as if such transactions had been consummated on
such date, and (ii) the unaudited consolidated statement of operations of
the Company for the twelve-month period ended March 31, 1999, which has
been adjusted to give effect to the Preliminary Transactions as if such
transactions had been consummated on April 1, 1998 (the "PRO FORMA
STATEMENT OF OPERATIONS"). The Pro Forma Balance Sheet was prepared in
accordance with the books and records of Chancellor LA and its Subsidiaries
and fairly presents the assets and liabilities of the Company as of
March 31, 1999, after giving effect to the Preliminary Transactions as if
the Preliminary Transactions had been consummated on such date, and the Pro
Forma Statement of Operations was prepared in accordance with the books and
records of Chancellor LA and its Subsidiaries and fairly present the
results of operations of the Company for the twelve-month period ended
March 31, 1999, after giving effect to the Preliminary Transactions as if
such transactions had been consummated on April 1, 1998, to the extent
required by GAAP, subject to the notes and ancillary information included
in such financial statements.
Section 2.8. CONTRACTS; NO DEFAULTS.
(a) SCHEDULE 2.8 contains a listing of all Contracts
described in clauses (i) through (xi) below to which the Company or any of
its Subsidiaries is a party, other than any such Contract (A) which will be
terminated at or prior to the Closing, or (B) as to which the Company and
its Subsidiaries will have no further liability following the Closing.
True, correct and complete copies of contracts referred to in
clauses (i)-(xi) below have been delivered to or made available to
Purchaser and its agents and representatives.
(i) Each Contract providing for the performance of
services or the delivery of goods and/or materials by or to the
Company or any of its Subsidiaries entered into outside the ordinary
course of business of the Company and its Subsidiaries and which
provides for consideration to be furnished to or by the Company or any
of its Subsidiaries of value in excess of $150,000 in any one year;
(ii) Each note, debenture, other evidence of
Indebtedness, guarantee, loan, credit or financing agreement or
Instrument or other contract for money borrowed, including any
Agreement or commitment for future loans, credit or financing;
(iii) Each lease, rental or occupancy agreement
involving aggregate payments in excess of $150,000 in any one year;
(iv) each material licensing agreement or other
Contract with respect to patents, trademarks, copyrights, or other
Intellectual property, including agreements with current or former
Employees, consultants, or contractors regarding the appropriation or
The nondisclosure of intellectual property (as hereinafter defined)
Other than customary employee, vendor and other non-disclosure
Agreements;
(v) Each collective bargaining agreement or other
Contract to or with any labor union or other employee representative
of a group of employees relating to wages, hours, and other conditions
of employment;
(vi) Each joint venture agreement, partnership
Agreement, or limited liability company agreement;
(vii) Each material distribution, franchise, license,
sales, commission, consulting or agency agreement for advertising to
be provided to the Company or its Subsidiaries, excluding Advertising
Contracts, providing for annual payments in excess of $150,000, which
are not cancelable on thirty (30) calendar days' notice;
(viii) Each material option to buy any property, real or
Personal, or material options to sell any owned real property or
Personal property;
(ix) Each Contract (except personal property leases and
construction contracts) involving expenditures or liabilities in
excess of $250,000, or otherwise material to the Business; and
(x) Each material contract containing covenants
Limiting the freedom of the company or its subsidiaries to engage in
The business or compete with any person other than in connection with
Any license agreements to which chancellor la is a party (other than
Provisions in any lease that limit the type of advertising messages or
Advertising that may be displayed on outdoor advertising structures or
The types of advertisers);
(xi) Each written employment or severance agreement
pertaining to the Business to which either the Company or any of its
Affiliates is a party with any employee which may not be terminated at
will, or by giving notice of thirty (30) calendar days or less,
without cost or penalty.
(b) EXCEPT AS SET FORTH ON SCHEDULE 2.8, no condition exists
or event has occurred which, with notice or lapse of time or both, would
constitute a default by the Company or any of its Subsidiaries under the
Contracts listed pursuant to paragraph (a) of this Section 2.8, or, to the
best knowledge of the Company, any other party thereto.
(c) Except as set forth on SCHEDULE 2.8, to the Company's
knowledge, all of the Contracts set forth on SCHEDULE 2.8 are valid and in
full force and effect. The Company and its Subsidiaries have duly
performed all of their material obligations under such Contracts to the
extent those obligations to perform have accrued, and no violation of, or
default or breach under, such Contracts by the Company or its Subsidiaries,
or, to the Company's knowledge, any other party has occurred, and neither
the Company nor its Subsidiaries, nor, to the Company's knowledge, any
other party has repudiated any provisions thereof. Since November 30,
1998, to the Company's knowledge, the Company and its Subsidiaries have
performed, in all material respects, their obligations under the
Advertising Contracts and agreements for Leased Real Property, to the
extent those obligations to perform have accrued.
Section 2.9. INTELLECTUAL PROPERTY. SCHEDULE 2.9 lists each material
patent, registered trademark, service mark or trade name or registered
copyright and applications for any of the foregoing (collectively,
"INTELLECTUAL PROPERTY"), held by the Company or any of its Subsidiaries
and used in the operation of the Business. The Contracts listed on SCHEDULE
2.8 include all material license or sublicense agreements entered into by the
Company or any of its Subsidiaries in connection with the conduct of the
Business with respect to any patent, trademark, service mark, logo, trade name
or copyright to which the Company or any of its Subsidiaries is a party and
which is material to the operation of the Business, as presently being
conducted. Except as set forth on SCHEDULE 2.9, to the best knowledge of
the Company, (i) the Company or one of its Subsidiaries has good title to,
or has the right to use pursuant to license, sublicense, agreement or
permission each such item of Intellectual Property owned or used by it,
free and clear of any Liens other than Permitted Liens, and (ii) there is
no claim of infringement pending or threatened against the Company or any
of its Subsidiaries relating to any item of Intellectual Property used in
the operation of the Business, as presently conducted.
Section 2.10. OWNED REAL PROPERTY.
(a) SCHEDULE 2.10 lists all Owned Real Property. The Company
or one of its Subsidiaries has (or at the Closing will have) good and
marketable fee simple title to all Owned Real Property, subject only to any
(i) Permitted Liens, (ii) Lien constituting a lease, sublease or occupancy
agreement that gives any third party any right to occupy any portion of the
Owned Real Property, and (iii) Lien reflected on any survey or in any title
report made available to Purchaser prior to the date of this Agreement.
(b) Except as set forth on SCHEDULE 2.10, there are no
pending or, to the knowledge of Chancellor LA, threatened condemnation
proceedings with respect to any portion of Owned Real Property, or
litigation or administrative actions relating to any portion of Owned Real
Property.
(c) All owned real property and the improvements thereon are
supplied with utilities and other services necessary for the operation of
such facilities as currently operated.
Section 2.11. LITIGATION AND PROCEEDINGS. Except as set forth on
SCHEDULE 2.11, there are no lawsuits, actions, suits, claims or other
proceedings at law or in equity, or to the knowledge of the Company,
investigations, before or by any court or Governmental Authority or before any
arbitrator pending or, to the knowledge of the Company, threatened, against
the Company or any of its Subsidiaries (a) in which the relief sought
includes damages in excess of $100,000 in any individual case, (b) seeking as
of the date hereof to delay, limit or enjoin the transactions contemplated by
this Agreement, or (c) that would materially impair the ability of Chancellor
Mezzanine, Chancellor LA, the Company or its Subsidiaries to perform their
obligations hereunder. Except as set forth on SCHEDULE 2.11, there is no
unsatisfied judgment, order or decree requiring payment in excess of $100,000
or any open injunction binding upon the Company or any of its Subsidiaries.
Neither the Company nor any of its Subsidiaries is in default with respect
to or subject to any judgment, order, writ, injunction or decree of any
court or governmental agency in any material matter.
Section 2.12. EMPLOYEE BENEFIT PLANS.
(a) DEFINITIONS. The following terms, when used in this
Section 2.12, shal have the following meanings. Any of these terms may,
unless the context otherwise requires, be used in the singular or the
plural depending on the reference.
(i) EMPLOYEE PLANS. "Employee Plans" shall mean all
Multiemployer Plans, Pension Plans and Welfare Plans.
(ii) ERISA. "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended.
(iii) MULTIEMPLOYER PLAN. "Multiemployer Plan" shall
mean any "multiemployer plan," as defined in Section 4001(a)(3) of
ERISA, (A) to which the Company or any of its Subsidiaries maintains,
administers, contributes or is required to contribute, and (B) which
covers any employee or former employee of the Company or any of its
Subsidiaries (with respect to their relationship with such entities).
(iv) PBGC. "PBGC" shall mean the Pension Benefits
Guaranty Corporation.
(v) PENSION PLAN. "Pension Plan" shall mean any
"employee pension benefit plan" as defined in Section 3(2) of ERISA
(other than a Multiemployer Plan) (A) which the Company or any of its
Subsidiaries maintains, administers, contributes to or is required to
contribute to, and (B) which covers any employee or former employee of
the Company or any of its Subsidiaries (with respect to their
relationship with such entities).
(vi) WELFARE PLAN. "Welfare Plan" shall mean any
"employee welfare benefit plan" as defined in Section 3(1) of ERISA,
(A) which the Company or any of its Subsidiaries maintains,
administers, contributes to or is required to contribute to, and (B)
which covers any employee or former employee of the Company or any of
its Subsidiaries (with respect to their relationship with such
entities).
(b) DISCLOSURE. SCHEDULE 2.12 contains a complete list of
Employee Plans.
(c) REPRESENTATIONS. Chancellor LA represents and warrants
as follows:
(i) PENSION PLANS
(A) Except as set forth on SCHEDULE 2.12, each
Pension Plan and each related trust agreement, annuity contract
or other funding instrument which is intended to be qualified and
tax-exempt under the provisions of Code Sections 401(a) and
501(a) has been determined by the Internal Revenue Service to be
so qualified and tax-exempt or application for such determination
has been made.
(B) EXCEPT AS SET FORTH ON SCHEDULE 2.12, each
Pension Plan and each related trust agreement, annuity contract
or other funding instrument is in material compliance with its
terms and, both as to form and in operation, with the
requirements prescribed by any and all statutes, orders, rules
and regulations which are applicable to such plans, including
without limitation ERISA and the Code.
(C) The Company does not sponsor, and has not
sponsored at any time during the five (5) year period ending on
the Closing Date, a Pension Plan that is subject to Title IV of
ERISA. None of the Company, nor any of its Subsidiaries has
incurred any material liability, directly or indirectly, for
breach of any provision of ERISA.
(ii) MULTIEMPLOYER PLANS. None of the Company,
Chancellor Mezzanine, Chancellor LA or any Subsidiary of any of the
foregoing, has been a participating employer in, or has assumed any
liabilities under, a Multiemployer Plan at any time during the five
(5) year period ending on the Closing Date.
(iii) WELFARE PLANS. Except as set forth on SCHEDULE
2.12, each Welfare Plan is in material compliance with its terms and,
both as to form and operation, with the requirements prescribed by any
and all statutes, orders, rules and regulations which are applicable
to such Welfare Plan, including without limitation ERISA and the Code.
Section 2.13. LABOR RELATIONS. SCHEDULE 2.13 contains a list of all
collective bargaining agreements to which the Company or any of its
Subsidiaries is a party and all written employment or severance agreements
pertaining to the Business to which either the Company or any of its
Affiliates is a party with respect to any employee, which may not be
terminated at will, or by giving notice of thirty (30) calendar days or less,
without cost or penalty, to employ or terminate executive officers or other
personnel, or that will result in the payment by, or the creation of, any
commitment or obligation (absolute or contingent) to pay on behalf of
Purchaser, Chancellor Mezzanine, Chancellor LA, the Company or any
Subsidiaries of the Company, any severance, termination, "golden parachute"
or other similar payments as a result of the consummation of the transactions
contemplated hereby. Chancellor LA has delivered or made available to
Purchaser true, correct and complete copies of each such Contract, as
amended to date. Except as set forth on SCHEDULE 2.13, in the last twelve
(12) months, neither the Company nor its Subsidiaries have experienced any
attempt by organized labor or its representatives to make the Company or its
Subsidiaries conform to demands of organized labor relating to its
employees or enter into a binding agreement with organized labor that would
cover the employees. Except as set forth on SCHEDULE 2.13, there is no
labor strike or labor disturbance pending or, to Chancellor LA's knowledge,
threatened against the Company or its Subsidiaries, and in the past three
(3) years the Company and its Subsidiaries have not experienced a work
stoppage or other labor difficulty. The Company and its Subsidiaries are
in material compliance with all applicable laws respecting employment
practices, employee documentation, terms and conditions of employment and
wages and hours and, to Chancellor LA's knowledge, neither the Company nor
its Subsidiaries has engaged in any unfair labor practice. There is no
unfair labor practice charge or complaint against the Company or its
Subsidiaries pending, or to the knowledge of Chancellor LA, threatened
before the National Labor Relations Board or any other domestic or foreign
government agency arising out of the conduct of the business of the Company
or its Subsidiaries.
Section 2.14. LEGAL COMPLIANCE. Except with respect to matters set forth
on SCHEDULE 2.14, and compliance with Environmental Laws (as to which certain
representations and warranties are made pursuant to Section 2.15), the
Company and each of its Subsidiaries is in compliance with all laws
(including rules and regulations thereunder) of federal, state, local and
foreign governments (and all agencies thereof) applicable thereto, except
where such instances of noncompliance would not have a material adverse
effect on the business, operations or financial condition of the Company
and its Subsidiaries, taken as a whole.
Section 2.15. ENVIRONMENTAL MATTERS. Except as set forth on SCHEDULE
2.15, (i) the Company and each of its Subsidiaries is in compliance with all
Environmental Laws, except where such instances of noncompliance would not
have a material adverse effect on the business, operations or financial
condition of the Company and its Subsidiaries, (ii) neither the Company nor
any of its Subsidiaries has any liability under any Environmental Law which
is material to the business, operations or financial condition of the
Company and its Subsidiaries, (iii) no notices of any violation or alleged
violation of any Environmental Law relating to the operations or properties
of the Company or any of its Subsidiaries have been received by the Company
or any of its Subsidiaries, (iv) to the knowledge of Chancellor LA, there
are no circumstances, based on currently available information, that are
reasonably likely to prevent such compliance, except where such instances
would not have a material adverse effect on the business, operations or
financial condition of the Company and its Subsidiaries, (v) to the
knowledge of Chancellor LA, there are no underground storage tanks, above-
ground storage tanks, or polychlorinated biphenyls located on, in or under
Owned Real Property or real property leased by the Company or its
Subsidiaries, except in compliance with Environmental Laws, except where
such instances would not have a material adverse effect on the business,
operations or financial condition of the Company and its Subsidiaries, and
(vi) no hazardous substances, wastes or materials, as defined by
Environmental Laws, have been stored, released, recycled or disposed of,
on, under or at any such property such that the property is currently
subject to a lawful order by a Governmental Authority that requires
remediation of such property, except where such instances would not have a
material adverse effect on the business, operations or financial condition
of the Company and its Subsidiaries.
Section 2.16. TAXES. Except as set forth on SCHEDULE 2.16:
(a) the Company and each of its Subsidiaries have timely
filed all income tax returns required to be filed by it (subject to any
applicable extensions). Each affiliated group with which the Company or
its Subsidiaries files a consolidated, combined or unitary tax return has
timely filed all such income tax returns that it was required to file
(subject to any applicable extensions) for each taxable period during which
the Company or its Subsidiaries was a member of the group;
(b) Each of the Company and its Subsidiaries has duly paid in
full (or there has been paid on its behalf) or will have established (or
there will have been established on its behalf) an adequate reserve on the
Closing Balance Sheet for all Taxes that are payable or may become payable
by the Company or its Subsidiaries (i) in respect of any taxable period
ending on or before the Closing Date and (y) for any taxable period that
begins before the Closing Date and ends thereafter, to the extent such
Taxes are attributable to the portion of such period ending on the Closing
Date under the terms of Section 6.4(b);
(c) The Company and each Subsidiary has withheld and paid
over all taxes required to have been withheld and paid over on or before
the Closing Date, and complied with all information reporting and backup
withholding requirements required to be complied with on or before the
Closing Date, including maintenance of required records with respect
thereto, in connection with amounts paid or owing to any employer,
creditor, independent contractor or other third party. There are no liens
on any of the assets of the Company or any of its Subsidiaries with respect
to taxes, other than liens for taxes not yet due and payable or for taxes
being contested in good faith through appropriate proceedings and for which
reserves have been or will be established on the Closing Balance Sheet in
accordance with GAAP;
(d) None of the Company or any of its Subsidiaries has waived
any law or regulation fixing, or consenting to the extension of, any period
of time for assessment of any Taxes which waiver or consent is currently in
effect. None of Chancellor Mezzanine, Chancellor LA or any of their
stockholders has waived any law or regulation fixing, or consenting to the
extension of, any period of time for assessment of any Taxes of the Company
or any of the Subsidiaries which waiver or consent is currently in effect.
There is no pending examination or proceeding by any authority or agency
with respect to the Company or any Subsidiary relating to the assessment or
collection of Taxes;
(e) There will not be as of the closing date any outstanding
Balances of deferred gain or loss accounts related to deferred intercompany
Transactions with respect to the company or its subsidiaries under treasury
Regulation section 1.1502-13. As of the closing date, neither the company
Nor any of its subsidiaries will have any obligation or will have any
Obligation that could arise under any tax sharing agreement between it and
Another entity; and
(f) None of the Company, any of its Subsidiaries or any
stockholders of the Company has made or will become obligated to make, as a
result of the sale of the Company Shares or the Whiteco Shares, any
payments that would be nondeductible by the Company or its Subsidiaries (in
whole or in part) pursuant to Section 280G of the Code.
Section 2.17. GOVERNMENTAL AUTHORITIES; CONSENTS. Assuming the truth and
completeness of the representations and warranties of Purchaser contained
in this Agreement, no consent, approval or authorization of, or
designation, declaration or filing with, any Governmental Authority or
other third party is required on the part of Chancellor Mezzanine or
Chancellor LA with respect to each of such parties' execution or delivery
of this Agreement or the consummation of the transactions contemplated
hereby, except for (i) applicable requirements of the HSR Act, or (ii) as
otherwise disclosed in SCHEDULE 2.17.
Section 2.18. INTEREST IN COMPETITORS, SUPPLIERS, AND CUSTOMERS. Except
as set forth on SCHEDULE 2.18 attached hereto, to the knowledge of Chancellor
LA, no stockholder, officer, or director of Chancellor Media Corporation or any
Affiliate of any such stockholder, officer, or director has any ownership
interest in any competitor, supplier, or customer of the Company or any
property used in the operation of the Business.
Section 2.19. INSURANCE. All material assets and properties of the
Company and its Subsidiaries are covered by valid and currently effective
insurance policies or programs of self-insurance in such types and amounts as
are consistent with customary practices and standards of companies engaged in
businesses similar to that of the Company and its Subsidiaries.
Section 2.20. BROKERS' FEES. No broker, finder, investment banker or
other Person is entitled to any brokerage fee, finders' fee or other commission
in connection with the transactions contemplated by this Agreement based
upon arrangements made by the Company or any of its Affiliates, except for
any arrangement with Morgan Stanley Dean Witter & Co. or Greenhill & Co.,
LLC, for which Chancellor LA shall be solely responsible.
Section 2.21. EVENTS SUBSEQUENT TO MARCH 31, 1999. Except as set forth on
SCHEDULE 2.21, from March 31, 1999 to the date hereof, there has not
occurred any material adverse change in the business, financial condition
or results of operations of the Company or its Subsidiaries, taken as a
whole.
Section 2.22. CHANCELLOR MEZZANINE SECURITIES ACT REPRESENTATIONS.
(a) Chancellor Mezzanine is acquiring the Lamar Mezzanine
Shares for investment for its own account, not as a nominee or agent, and
not with a view to the resale or distribution of any part thereof in
violation of the Securities Act. Chancellor Mezzanine does not have any
present intention of selling, granting any participation in, or otherwise
distributing the Lamar Mezzanine Shares otherwise than pursuant to an
effective registration statement under the Securities Act or in a
transaction exempt from the registration requirements under the securities
act and applicable state securities laws. Other than the possible
contribution of the Lamar Mezzanine Shares to a Subsidiary, Chancellor
Mezzanine does not have any contract, undertaking, agreement or arrangement
with any person to sell, transfer or grant participations to such person or
to any third person, with respect to any of the Lamar Mezzanine Shares.
(b) Chancellor Mezzanine acknowledges that the issuance of
the Lamar Mezzanine Shares will not be registered under the Securities Act
or any state securities laws on the basis of a claimed exemption by
Purchaser that the issuance of the Lamar Mezzanine Shares as provided for
herein is exempt from registration under the Securities Act and applicable
state securities laws. Chancellor Mezzanine acknowledges that the
availability of such exemptions is predicated in part on Chancellor
Mezzanine's representations set forth in this Section 2.22 and that
Purchaser is relying on such representations.
(c) Chancellor Mezzanine has received all the information it
considers necessary or appropriate for deciding whether to accept the Lamar
Mezzanine Shares. Chancellor Mezzanine has had an opportunity to ask
questions of and to receive answers from Purchaser regarding the terms and
conditions of the issuance of the Lamar Mezzanine Shares and the business,
properties, financial condition and prospects of Purchaser and to obtain
additional information (to the extent Purchaser possessed such information
or could acquire it without unreasonable effort or expense) necessary to
verify the accuracy of any information furnished to Chancellor Mezzanine or
to which Chancellor Mezzanine had access.
(d) Chancellor Mezzanine acknowledges that it is able to bear
the economic risk of the investment in the Lamar Mezzanine Shares, and has
such knowledge and experience in financial and business matters that it is
capable of evaluating the benefits and risks of the investment in the Lamar
Mezzanine Shares.
(e) Chancellor Mezzanine is an "accredited investor" as
Defined in Rule 501(a) of Regulation D promulgated under the Securities
Act.
(f) Chancellor Mezzanine acknowledges that the Lamar
Mezzanine Shares may not be sold, transferred or otherwise disposed of
without registration under the Securities Act or an applicable exemption
therefrom and that in the absence of any effective registration statement
covering the Lamar Mezzanine Shares or an available exemption from
registration under the Securities Act, the Lamar Mezzanine Shares must be
held indefinitely. Chancellor Mezzanine further acknowledges that the
Lamar Mezzanine Shares may not be sold pursuant to Rule 144 promulgated
under the Securities Act unless all of the conditions of that rule are met.
(g) Chancellor Mezzanine acknowledges that each certificate
representing any of the Lamar Mezzanine shares will be endorsed with a
legend substantially similar to the following:
The securities represented by this certificate have not been
Registered under the securities act of 1933, as amended, nor
Pursuant to the securities or "blue sky" laws of any state. Such
Securities may not be offered, sold, transferred, pledged,
Hypothecated or otherwise assigned, except pursuant to (i) a
Registration statement with respect to such securities which is
Effective under such act, (ii) rule 144 under such act, or
(iii) any other exemption from registration under such act.
Sectin 2.23. CHANCELLOR LA SECURITIES ACT REPRESENTATIONS.
(a) Chancellor LA is acquiring the Lamar LA Shares for
investment for its own account, not as a nominee or agent, and not with a
view to the resale or distribution of any part thereof in violation of the
Securities Act. Chancellor LA does not have any present intention of
selling, granting any participation in, or otherwise distributing the Lamar
LA Shares otherwise than pursuant to an effective registration statement
under the Securities Act or in a transaction exempt from the registration
requirements under the Securities Act and applicable state securities laws.
Chancellor LA does not have any contract, undertaking, agreement or
arrangement with any Person to sell, transfer or grant participations to
such Person or to any third Person, with respect to any of the Lamar LA
Shares.
(b) Chancellor LA acknowledges that the issuance of the Lamar
LA shares will not be registered under the Securities Act or any state
Securities laws on the basis of a claimed exemption by Purchaser that the
issuance of the Lamar LA Shares as provided for herein is exempt from
registration under the Securities Act and applicable state securities laws.
Chancellor LA acknowledges that the availability of such exemptions is
predicated in part on Chancellor LA's representations set forth in this
Section 2.23 and that Purchaser is relying on such representations.
(c) Chancellor LA has received all the information it
considers necessary or appropriate for deciding whether to accept the Lamar
LA Shares. Chancellor LA has had an opportunity to ask questions of and to
receive answers from Purchaser regarding the terms and conditions of the
issuance of the Lamar LA Shares and the business, properties, financial
condition and prospects of Purchaser and to obtain additional information
(to the extent Purchaser possessed such information or could acquire it
without unreasonable effort or expense) necessary to verify the accuracy of
any information furnished to Chancellor LA or to which Chancellor LA had
access.
(d) Chancellor LA acknowledges that it is able to bear the
economic risk of the investment in the Lamar LA Shares, and has such
knowledge and experience in financial and business matters that it is
capable of evaluating the benefits and risks of the investment in the Lamar
LA Shares.
(e) Chancellor LA is an "accredited investor" as defined in
Rule 501(a) of Regulation D promulgated under the Securities Act.
(f) Chancellor LA acknowledges that the Lamar LA shares may
not be sold, transferred or otherwise disposed of without registration
under the securities act or an applicable exemption therefrom and that in
the absence of any effective registration statement covering the Lamar LA
Shares or an available exemption from registration under the Securities
Act, the Lamar LA Shares must be held indefinitely. Chancellor LA further
acknowledges that the Lamar LA shares may not be sold pursuant to Rule 144
promulgated under the Securities Act unless all of the conditions of that
rule are met.
(g) Chancellor LA acknowledges that each certificate
representing any of the Lamar LA Shares will be endorsed with a legend
substantially similar to the following:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR
PURSUANT TO THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE. SUCH
SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED,
HYPOTHECATED OR OTHERWISE ASSIGNED, EXCEPT PURSUANT TO (i) A
REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS
EFFECTIVE UNDER SUCH ACT, (ii) RULE 144 UNDER SUCH ACT, OR
(iii) ANY OTHER EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
Section 2.24. DIVESTURE ASSETS. Chancellor LA has effected the sale or
other disposal of the outdoor advertising assets mandated by the United States
Department of Justice pursuant to the Final Judgments, as more particularly
described on ANNEX A hereto (the "DIVESTITURE ASSETS").
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to each Seller that, as
of the date of this Agreement:
Section 3.1. CORPORATE ORGANIZATION AND AUTHORITY OF PURCHASER.
Purchaser
has been duly incorporated and is validly existing as a corporation in good
standing under the laws of the State of Delaware and has the corporate
power and authority to enter into and perform its obligations under this
Agreement. The execution and delivery of this Agreement by Purchaser and
the consummation of the transactions contemplated hereby have been duly and
validly authorized and approved by the Board of Directors of Purchaser, and
except for the consent of the stockholders of Purchaser provided in Section
5.5 hereof, no other corporate proceeding on the part of Purchaser is
necessary to authorize this Agreement or the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by
Purchaser and, assuming this Agreement constitutes a valid and binding
agreement of each Seller, constitutes a legally valid and binding
obligation of Purchaser, enforceable against Purchaser in accordance with
its terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting
creditors' rights generally and subject, as to enforceability, to general
principles of equity.
Section 3.2. NO CONFLICT. The execution and delivery of this Agreement by
Purchaser and the consummation of the transactions contemplated hereby does
not and will not violate any provision of, or result in the breach of: (a)
any applicable law, rule or regulation of any Governmental Authority, or
any agreement, indenture or other instrument to which Purchaser is a party
or by which Purchaser may be bound, or of any order, judgment or decree
applicable to Purchaser, or terminate or result in the termination of any
such agreement, indenture or instrument, or result in the creation of any
Lien, charge or encumbrance upon any of the properties or assets of
Purchaser or constitute an event which, after notice or lapse of time or
both, would result in any such violation, breach, acceleration, termination
or creation of a Lien; or (b) the Certificate of Incorporation, Bylaws, or
other organizational documents of Purchaser.
Section 3.3. LITIGATION AND PROCEEDINGS. Except as disclosed in the
Purchaser SEC Documents, there are no lawsuits, actions, suits, claims or other
proceedings at law or in equity, or, to the knowledge of Purchaser,
investigations, before or by any court or Governmental Authority or before
any arbitrator pending or, to the knowledge of Purchaser, threatened,
against Purchaser or any of its Affiliates which, if determined adversely,
could reasonably be expected to have a material adverse effect on (a) the
ability of Purchaser to enter into and perform its obligations under this
Agreement, or (b) the business, financial condition or results of
operations of Purchaser. There is no unsatisfied judgment, order or decree
or any open injunction binding upon Purchaser or any of its Affiliates
which could reasonably be expected to have a material adverse effect on the
ability of Purchaser to enter into and perform its obligations under this
Agreement.
Section 3.4. GOVERNMENTAL AUTHORITIES; CONSENTS. Assuming the truth and
completeness of the representations and warranties of each Seller contained
in this Agreement, no consent, approval or authorization of, or
designation, declaration or filing with, any governmental authority or
other third party is required on the part of Purchaser with respect to
Purchaser's execution or delivery of this Agreement or the consummation of
the transactions contemplated hereby, except for (i) applicable
requirements of the HSR Act or (ii) the preparation and filing of a proxy
or information statement of Purchaser with the Securities and Exchange
Commission (the "SEC") pursuant to Section 5.5.
Section 3.5. BROKERS' FEES. No broker, finder, investment banker or other
Person is entitled to any brokerage fee, finders' fee or other commission
in connection with the transactions contemplated by this Agreement based
upon arrangements made by Purchaser or any of its Affiliates.
Section 3.6. CAPITAL STRUCTURE. The authorized capital stock of Purchaser
consists of (i) 125,000,000 shares of Purchaser Class A Common Stock,
(ii) 37,500,000 shares of Class B Common Stock, par value $0.001 per share
(the "PURCHASER CLASS B COMMON STOCK"), of Purchaser, (iii) 10,000 shares
of Class A Preferred Stock, $638.00 par value per share (the "PURCHASER
CLASS A PREFERRED STOCK"), of Purchaser, and (iv) 1,000,000 shares of
Preferred Stock, $0.001 par value per share (the "PURCHASER PREFERRED
STOCK"), of Purchaser. At the close of business on May 31, 1999
(a) 43,514,283 shares of Purchaser Class A Common Stock were issued and
outstanding, (b) no more than 1,000,000 shares of Purchaser Class A Common
Stock were reserved for issuance pursuant to outstanding options (the
"PURCHASER STOCK OPTIONS") to purchase shares of Purchaser Class A Common
Stock granted under Purchaser's 1996 Equity Incentive Plan, (c) 17,700,000
shares of Purchaser Class A Common Stock were reserved for issuance upon
conversion of outstanding shares of Purchaser Class B Common Stock,
(d) 17,699,997 shares of Purchaser Class B Common Stock were issued and
outstanding, (e) 5,719.49 shares of Purchaser Class A Preferred Stock were
issued and outstanding, and (f) no shares of Purchaser Class A Common
Stock, Purchaser Class B Common Stock, Purchaser Class A Preferred Stock or
Purchaser Preferred Stock were held as treasury shares by Purchaser or any
Subsidiary of Purchaser. Except as set forth above, at the close of
business on May 31, 1999, no shares of capital stock or other equity
securities of Purchaser were authorized, issued, reserved for issuance or
outstanding. All outstanding shares of capital stock of Purchaser are, and
all shares which may be issued (1) upon the exercise of outstanding
Purchaser Stock Options, or (2) to Chancellor Mezzanine pursuant to the
terms of this Agreement will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights.
No bonds, debentures, notes or other indebtedness of Purchaser or any
Subsidiary of Purchaser having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on
which the stockholders of Purchaser or any Subsidiary of Purchaser may vote
are issued or outstanding. All the outstanding shares of capital stock or
other equity interests of each Subsidiary of Purchaser have been validly
issued and are fully paid and nonassessable and are owned by Purchaser, by
one or more wholly-owned subsidiaries of Purchaser or by Purchaser and one
or more such wholly-owned subsidiaries, free and clear of all Liens.
Except as set forth above, or except as set forth in Purchaser SEC
Documents (as defined in Section 3.7), neither Purchaser nor any Subsidiary
of Purchaser has any outstanding option, warrant, agreement, arrangement or
other rights, relating to the capital stock of Purchaser or any Subsidiary
of Purchaser that either (x) obligates Purchaser or any Subsidiary of
Purchaser to issue, sell or transfer, repurchase, redeem, purchase,
register for sale or otherwise acquire or vote any shares of the capital
stock or other equity securities of Purchaser or any of its Subsidiaries or
(y) restricts the transfer of the Purchaser Class A Common Stock. From the
close of business on May 31, 1999, neither Purchaser nor any Subsidiary of
Purchaser has issued any capital stock or securities or other rights
convertible into or exercisable or exchangeable for shares of such capital
stock, other than any issuances of shares of Purchaser Class A Common Stock
pursuant to the exercise of Purchaser Stock Options outstanding on the date
hereof.
Section 3.7. SEC DOCUMENTS; FINANCIAL STATEMENTS. (i) Purchaser has
filed with the SEC all required reports, schedules, forms, statements and other
documents since its initial public offering (such reports, schedules,
forms, statements and any other documents filed with the SEC and publicly
available prior to the date of this Agreement are hereinafter referred to
as the "PURCHASER SEC DOCUMENTS"); (ii) as of their respective dates, the
Purchaser SEC Documents complied in all material respects with the
requirements of the Securities Act of 1933, as amended (the "SECURITIES
ACT"), or the Securities and Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), as the case may be, and the rules and regulations of the
SEC promulgated thereunder applicable to such Purchaser SEC Documents, and
none of the Purchaser SEC Documents as of such dates contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading;
and (iii) as of their respective dates, the consolidated financial
statements of Purchaser and its predecessors included in the Purchaser SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with GAAP applied on
a consistent basis during the periods involved (except as may be indicated
in the notes thereto or, in the case of unaudited statements, as permitted
by Rule 10-01 of Regulation S-X) and fairly present, in all material
respects, the consolidated financial position of Purchaser and its
consolidated Subsidiaries (or its predecessors and their respective
consolidated Subsidiaries) as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (on
the basis stated therein and subject, in the case of unaudited quarterly
statements, to normal year-end audit adjustments).
Section 3.8. LEGAL COMPLIANCE. Except with respect to matters disclosed
in the Purchaser SEC Documents, Purchaser and each of its Subsidiaries is in
compliance with all laws (including rules and regulations thereunder) of
federal, state, local and foreign governments (and all agencies thereof)
applicable thereto, except where such instances of noncompliance would not
have a material adverse effect on the business, operations or financial
condition of Purchaser and its Subsidiaries, taken as a whole.
Section 3.9. INTEREST IN COMPETITORS, SUPPLIERS AND CUSTOMERS. Except as
set forth on SCHEDULE 3.9, to the knowledge of Purchaser, no stockholder,
officer, or director of Purchaser or any Affiliate of any such stockholder,
officer or director has any ownership interest in any competitor, supplier,
or customer of Purchaser or any property used in the operation of the
business of Purchaser.
Section 3.10. STATE TAKEOVER STATUTES. The Board of Directors of
Purchaser has approved the terms of this Agreement and the consummation of the
transactions contemplated by this Agreement and such approval is sufficient
to render the provisions of Section 203 of the Delaware General Corporation
Law inapplicable to the acquisition of the Lamar Shares and the other
transactions contemplated by this Agreement. To Purchaser's knowledge, no
other state takeover statute or similar statute or regulation applies or
purports to apply to the acquisition of the Lamar Shares to be issued
pursuant to this Agreement or any of the transactions contemplated hereby.
Section 3.11. EVENTS SUBSEQUENT TO MARCH 31, 1999. From March 31, 1999
to the date hereof, there has not occurred any material adverse change in the
business, financial condition or results of operations of Purchaser.
Section 3.12. SECURITIES ACT REPRESENTATIONS.
(a) Purchaser is acquiring the Company Shares and the Whiteco
Shares for investment for its own account, not as a nominee or agent, and
not with a view to the resale or distribution of any part thereof in
violation of the Securities Act. Other than the possible contribution of
the company Shares or the Whiteco Shares to a Subsidiary, Purchaser does
not have any present intention of selling, granting any participation in,
or otherwise distributing any of the Company Shares or the Whiteco Shares
otherwise than pursuant to an effective registration statement under the
Securities Act or in a transaction exempt from the registration
requirements under the Securities Act and applicable state securities laws.
Purchaser does not have any contract, undertaking, agreement or arrangement
with any Person to sell, transfer or grant participations to such Person or
to any third Person, with respect to any of the Company Shares or the
Whiteco shares.
(b) Purchaser acknowledges neither the sale of the Company
Shares nor the Whiteco Shares will be registered under the Securities Act
or any state securities laws on the basis of a claimed exemption by either
Seller that the sale of the Company Shares and the Whiteco Shares as
provided for herein is exempt from registration under the Securities Act
and applicable state securities laws. Purchaser acknowledges that the
availability of such exemptions is predicated in part on Purchaser's
representations set forth in this Section 3.12 and that each Seller is
relying on such representations.
(c) Purchaser has received all the information it considers
necessary or appropriate for deciding whether to accept the Company Shares
and the whiteco shares. Purchaser has had an opportunity to ask questions
of and to receive answers from each Seller regarding the terms and
conditions of the sale of the Company Shares and the Whiteco Shares and the
business, properties, financial condition and prospects of each Seller and
to obtain additional information (to the extent either Seller possessed
such information or could acquire it without unreasonable effort or
expense) necessary to verify the accuracy of any information furnished to
Purchaser or to which Purchaser had access.
(d) Purchaser acknowledges that it is able to bear the
economic risk of the investment in the Company Shares and the Whiteco
Shares, and has such knowledge and experience in financial and business
matters that it is capable of evaluating the benefits and risks of the
investment in the Company Shares and the Whiteco Shares.
(e) Purchaser is an "accredited investor" as defined in Rule
501(a) of Regulation D promulgated under the Securities Act.
(f) Purchaser acknowledges that neither the Company Shares
nor the Whiteco Shares may be sold, transferred or otherwise disposed of
without registration under the Securities Act or an applicable exemption
therefrom and that in the absence of any effective registration statement
covering such Shares or an available exemption from registration under the
Securities Act, the Company Shares and the Whiteco Shares must be held
indefinitely. Purchaser further acknowledges that the neither the Company
Shares nor the Whiteco Shares may be sold pursuant to Rule 144 promulgated
under the Securities Act unless all of the conditions of that rule are met.
Section 3.13. COMMITMENT LETTERS. Purchaser has delivered to Chancellor
LA a letter of its lenders committing to fund no less than Seven Hundred
Million Dollars ($700,000,000) at Closing specifically for the transactions
contemplated by this Agreement (the "COMMITMENT LETTER"). Such Commitment
Letter contains no conditions to the funding of such amounts, other than
those which are customary for transactions of the type contemplated
hereunder. The Commitment Letter shall remain in full force and effect
until the date on which Definitive Documentation (as defined in Section
5.6(a)) has been executed, is binding and has been delivered to Chancellor
LA.
ARTICLE 4.
COVENANTS AND AGREEMENTS OF SELLERS
Section 4.1. PRELIMINARY TRANSACTIONS. Prior to or concurrent with the
Closing, Chancellor LA shall effect, or cause to be effected, the acquisition
of outdoor advertising assets pursuant to the Compromise Settlement Agreement
and Mutual Release between the Company, Chancellor Media Corporation, Randy
Burkett and Jeffrey Burkett, dated May 5, 1999, and the Asset Purchase
Agreement between Whiteco and Randy Burkett, dated May 5, 1999, all as more
particularly described on ANNEX B hereto (the "BURKETT ASSETS"). The
transactions contemplated by (i) the sale or other disposal of the
Divestiture Assets and (ii) the acquisition of the Burkett Assets shall be
referred to herein, collectively, as the "PRELIMINARY TRANSACTIONS."
Section 4.2. CONDUCT OF BUSINESS. From the date hereof through the
Closing, Chancellor LA shall use commercially reasonable efforts to cause the
Company and each of its Subsidiaries, except as may be necessary to effect
the Preliminary Transactions and except as otherwise contemplated by this
Agreement or as consented to by Purchaser in writing (which consent will
not be unreasonably withheld), to operate its business in the ordinary
course and substantially in accordance with past practice and use
commercially reasonable efforts not to take any action inconsistent with
this Agreement. Without limiting the generality of the foregoing, unless
consented to by Purchaser in writing (which consent shall not be
unreasonably withheld), Chancellor LA shall cause the Company and each of
its Subsidiaries not to, except as contemplated by this Agreement:
(a) change or amend its certificate of incorporation, bylaws
Or other organizational documents, except as otherwise required by law;
(b)(i) enter into, extend, materially modify, terminate or
renew any Contract of a type required to be listed on SCHEDULE 2.8, except
in the ordinary course of business, or (ii) settle or otherwise resolve any
financial issue, claim or adjustment under any such Contract;
(c) sell, assign, transfer, convey, lease or otherwise
Dispose of any material assets or properties, except in the ordinary course
Of business;
(d)except as otherwise required by law, take any action with
respect to the grant of any severance or termination pay (otherwise than
pursuant to policies or agreements of the Company or any of its
Subsidiaries in effect on the date hereof) which will become due and
payable from the Company or any of its Subsidiaries on or after the Closing
Date; make any change in the key management structure of the Company or any
of its Subsidiaries, including, without limitation, the hiring of
additional officers or the terminations of existing officers, other than in
the ordinary course of business;
(e) acquire by merger or consolidation with, or merge or
consolidate with, or purchase substantially all of the assets of, or
otherwise acquire any material assets or business of any corporation,
partnership, association or other business organization or division
thereof;
(f) make any material loans or advances to any partnership,
firm or corporation, or, except for expenses incurred in the ordinary
course of business, any individual;
(g) amend any employee plan or increase the salary of any
management Employee, except in the ordinary course of business;
(h) alter in any material respect the past practices of the
Company or its Subsidiaries with respect to the collection of receivables
or payment of payables; or
(i) enter into any agreement, or otherwise become obligated,
to do any action prohibited hereunder; provided, however, that none of the
foregoing shall restrict or prohibit the consummation of the dividend.
Section 4.3. INSPECTION. Subject to confidentiality obligations and
similar restrictions that may be applicable to information furnished to any
Seller, the Company or any Subsidiary of the Company by third parties that may
be in the possession of any Seller or the Company from time to time,
Chancellor LA shall afford to Purchaser and its accountants, counsel and
other representatives reasonable access, during normal business hours, to
the properties, books, contracts, commitments, tax returns, records and
appropriate officers and employees of the Company and its Subsidiaries, and
shall furnish such representatives with all financial and operating data
and other information concerning the affairs of the Company and its
Subsidiaries as they may reasonably request.
Section 4.4. HSR ACT.
(a) In connection with the transactions contemplated by this
Agreement, each Seller (and, to the extent required, its Affiliates) shall
comply promptly with the notification and reporting requirements of the HSR
Act and use reasonable best efforts to obtain early termination of the
waiting period under the HSR Act. Each Seller shall promptly comply with
any additional requests for information, including requests for production
of documents and production of witnesses for interviews or depositions, by
any Antitrust Authority.
(b) neither the Company nor any of its Subsidiaries shall
acquire any outdoor advertising assets in any county in which the
(i) Company or its Subsidiaries and (ii) Purchaser or its Affiliates, own a
material number of outdoor advertising assets. For purposes of this
Section 4.4(b), "a material number of outdoor advertising assets" shall
mean a significant number of outdoor advertising assets in a county, given
the total number of outdoor advertising assets in that county.
Section 4.5. NO SOLICITATIONS. From the date hereof through the Closing,
each Seller shall not, and shall not knowingly permit its Affiliates, officers,
directors, employees, representatives and agents to, directly or
indirectly, encourage, solicit, participate in, initiate or conduct
discussions or negotiations with, or provide any information to, any Person
or group of Persons (other than Purchaser or any of its Affiliates)
concerning any merger, sale of assets, sale of shares of capital stock or
similar transactions involving the Company or any Subsidiary or division of
the Company.
Section 4.6. NO SOLICITATION OR HIRING. For a period of five (5) years
following the Closing, each Seller shall not, directly or indirectly, hire
or offer employment to any employee of the Business whose employment is
continued by Purchaser after the Closing Date, unless (a) Purchaser first
terminates the employment of such employee or gives its prior written
consent to such employment or offer of employment, (b) such employee
contacts a Seller regarding employment opportunities, (c) such employee
responds to any general solicitation by any Seller for employment by such
Seller, or (d) the employment of such employee by Purchaser has been
terminated.
Section 4.7. REGISTRATION RIGHTS AGREEMENT AND STOCKHOLDERS
AGREEMENT.
Each of Chancellor Mezzanine and Chancellor LA shall, on the Closing Date,
execute and deliver to Purchaser each of the Registration Rights Agreement
and the Stockholders Agreement.
Section 4.8. REQUESTS FOR INFORMATION. Each Seller shall cooperate with
Purchaser in Purchaser's preparation and filing with the SEC of a
preliminary proxy or information statement, as applicable, as provided in
Section 5.5, including providing Purchaser with such information about such
Seller, the Company and its Subsidiaries, for use in connection with any
such preliminary proxy or information statement as Purchaser may reasonably
request. The information so provided by each Seller shall not contain any
untrue statement or alleged untrue statement of a material fact or any
omission of a material fact required to be stated therein or necessary to
make such statements not misleading, but only to the extent that such
untrue statement or omission is contained in any written information so
furnished by such Seller specifically for inclusion in such preliminary
proxy or information statement.
Section 4.9. NECESSARY LENDER APPROVALS.
(a) by August 14, 1999, Chancellor LA shall have delivered to
Purchaser a certificate signed by an officer of Chancellor LA certifying
that Chancellor LA has received all necessary approvals and consents from
its senior lenders to the consummation of the transactions contemplated
hereby, including, without limitation, the dividend and releases from any
and all applicable liens created by such lenders and releases from any and
all guarantees of each of the Company and its Subsidiaries (the "Approvals
Certificate").
(b) the approvals certificate shall contain no conditions to
the effectiveness of such consent other than the occurrence of the Closing
and other customary conditions and will contain a certification that
Chancellor LA has no reason to believe that it will be unable to meet the
conditions to the effectiveness of such consent.
(c) If Chancellor LA is unable to deliver the Approvals
Certificate by August 14, 1999, then Purchaser shall have the right, by
delivery of written notice to Chancellor LA within the five (5) calendar
days following such date, to elect to terminate this Agreement. In the
event of termination by Purchaser pursuant to this Section 4.9(c), this
Agreement shall forthwith become void and have no effect, without any
liability on the part of any party hereto or their respective Affiliates,
officers, directors or stockholders.
(d) Purchaser need not give any Seller prior notice nor any
opportunity to cure a breach of this Section 4.9 prior to the exercise by
Purchaser of the right to terminate this Agreement in the event of such
breach by Chancellor LA, in accordance with Section 8.1.
ARTICLE 5.
COVENANTS AND AGREEMENTS OF PURCHASER
Section 5.1. HSR ACT.
(a) in connection with the transactions contemplated by this
Agreement, Purchaser (and, to the extent required, its Affiliates) shall
comply promptly with the notification and reporting requirements of the HSR
Act and use reasonable best efforts to obtain early termination of the
waiting period under the HSR Act. Purchaser shall comply promptly with any
additional requests for information, including requests for production of
documents and production of witnesses for interviews or depositions, by any
Antitrust Authorities.
(b) In connection with the transactions contemplated hereby,
Purchaser shall take any and all steps needed to cause the transactions
contemplated by this Agreement and the Ancillary Agreements to be
consummated at the earliest practicable time, and no later than
November 30, 1999.
(c) Purchaser shall not, nor shall any of its Affiliates,
agents or representatives, take, or fail to take, any action which is
intended, or is reasonably likely, to impede, hinder or delay approval of
the transactions contemplated by this Agreement by the Antitrust
Authorities.
(d) No Seller need give Purchaser prior notice or any
opportunity to cure a breach of this Section 5.1 prior to the exercise by
any Seller of its right to terminate this Agreement in the event of such
breach by Purchaser, in accordance with Section 8.1.
Section 5.2. NO USE OF "CHANCELLOR" NAME. Promptly following the Closing,
Purchaser shall take all necessary action to cause the name of the Company
and its Subsidiaries to be changed to a name specified in a writing and
delivered to Sellers by Purchaser at least ten (10) Business Days prior to
the Closing. Following the Closing, Purchaser, the Company and its
Subsidiaries shall have no rights to the name "Chancellor" or any variant
thereof or any trademark, service mark, trade dress, logo or trade name
including the name "Chancellor" or any name similar to it. Following the
Closing, Purchaser shall cause the Company and each Affiliate of Purchaser
to refrain from making any use of the name "Chancellor" or any variant
thereof or any trademark, service mark, trade dress, logo or trade name
including the name "Chancellor" or any name similar to it within a
commercially reasonable period of time.
Section 5.3. INVESTIGATION; PURCHASER ACKNOWLEDGMENT.
(a) as of the date hereof, Purchaser acknowledges and agrees
that (i) it has made its own inquiry and investigation into, and, based
thereon, has formed an independent judgment concerning, the Company, its
Subsidiaries and the Business, (ii) in the course of such inquiry,
Purchaser has not become aware of any facts which would cause or constitute
a breach of any representation or warranty of either Seller set forth
herein, and (iii) it has been furnished with or given adequate access to
such information about the Company, its Subsidiaries and the Business as it
has requested.
(b) In connection with Purchaser's investigation of the
Company, its Subsidiaries and the Business, Purchaser has received from
Chancellor LA certain projections, forecasts, plans and budget information
concerning the Company, its Subsidiaries and the Business. Purchaser
acknowledges that there are uncertainties inherent in attempting to make
such projections, forecasts, plans and budgets; that Purchaser is familiar
with such uncertainties; Purchaser is taking full responsibility for making
its own evaluation of the adequacy and accuracy of all estimates,
projections, forecasts, plans and budgets so furnished to it; and that
Purchaser will not assert any claim against either Seller or any of either
Seller's directors, officers, employees, agents, stockholders, Affiliates,
consultants, counsel, accountants, or representatives, or hold such Seller
or any such persons liable, with respect thereto.
(c) Purchaser acknowledges that no Seller makes any
representations or warranties concerning the Company, its Subsidiaries,
their respective assets or the Business, other than as expressly set forth
in Article 2 hereof, and that each Seller expressly disclaims all other
representations and warranties, including, without limitation, any warranty
of merchantability or fitness for a particular purpose.
Section 5.4. NO SOLICITATIONS OR HIRING. Prior to Closing, without the
prior consent of Chancellor LA, Purchaser shall not, and shall not knowingly
permit its Affiliates, officers, directors, employees, representatives and
agents to, directly or indirectly, hire, offer, participate in, or initiate
negotiations concerning, employment to or with any employee of the Company.
Section 5.5. STOCKHOLDER CONSENT.
(a) As soon as practicable following the date of this
Agreement, Purchaser shall prepare and file with the SEC a preliminary
proxy or information statement, as applicable, with respect to its proposal
to issue the Lamar Shares and shall use its best efforts to cause the proxy
or information statement to be mailed to Purchaser's stockholders as
promptly as practicable after the review process at the SEC has been
completed.
(b) Purchaser agrees and represents and warrants that the
proxy or information statement will not, at the date it is first mailed to
Purchaser's stockholders or at the time of the Purchaser's stockholders
meeting, if any, contain any statement which, at the time and in light of
the circumstances under which it is made, is false or misleading with
respect to any material fact, or omits to state any material fact necessary
in order to make the statements therein not false or misleading or
necessary to correct any statement in any earlier communication with
respect to the solicitation of a proxy for the same meeting or subject
matter thereof which has become false or misleading except for information
provided to Purchaser by any Seller, for inclusion therein, as to which
Purchaser makes no such representation or warranty. Purchaser agrees that
the proxy or information statement will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and
regulations promulgated thereunder.
(c) Purchaser agrees that it will take all action necessary
in accordance with applicable law and its Certificate of Incorporation and
Bylaws to convene a meeting of its stockholders or obtain the written
consent of its stockholders for the approval of the issuance of the Lamar
Shares. Purchaser will use its best efforts to obtain the approval of its
stockholders as soon as practicable after the date hereof.
Section 5.6. DEFINITIVE DOCUMENTATION.
(a) Purchaser will deliver to Chancellor LA, on or prior to
August 14, 1999, definitive agreements (which have been executed and
delivered by the applicable parties and which are binding), reflecting the
commitment by equity and/or senior debt sources reasonably satisfactory to
Chancellor LA to provide funding to Purchaser at or prior to Closing in an
aggregate amount equal to at least $700,000,000 (the "DEFINITIVE
DOCUMENTATION"). The Definitive Documentation shall contain no conditions
to the funding of such amounts, other than those which are customary for
transactions of the type contemplated hereunder. The Definitive
Documentation must remain in full force and effect until the Closing.
(b) Concurrently with the delivery of the Definitive
Documentation, an executive officer of Purchaser will certify to Sellers,
in writing, that (i) Purchaser currently is meeting the covenants under its
existing lending facility and other existing instruments of indebtedness,
and (ii) Purchaser has no reason to believe that it will be unable to meet
the covenants set forth under the Definitive Documentation.
(c) If the Purchaser fails to deliver the Definitive
Documentation and the Certificate provided for in Section 5.6(b) by
August 14, 1999, then Sellers shall have the right, by delivery of written
notice to Purchaser within the five (5) calendar days following August 14,
1999, to elect to terminate this Agreement. In the event of termination by
Sellers pursuant to this Section 5.6(c), this Agreement shall forthwith
become void and have no effect, without any liability on the part of any
party hereto or their respective Affiliates, officers, directors or
stockholders.
Section 5.7. CONDUCT OF BUSINESS. From the date hereof through the
Closing, Purchaser shall use commercially reasonable efforts to operate its
business in the ordinary course and substantially in accordance with past
practice and use commercially reasonable efforts not to take any action
inconsistent with this Agreement. Without limiting the generality of the
foregoing, unless consented to by Sellers in writing, Purchaser shall not:
(a) change or amend its certificate of incorporation, bylaws
or other organizational documents, except as otherwise required by law; or
(b) take any action that would be prohibited by article iv
The stockholders agreement if such agreement were in effect.
Section 5.8. REGISTRATION RIGHTS AGREEMENT AND STOCKHOLDERS
AGREEMENT. Purchaser shall, on the Closing Date, execute and deliver to Sellers
the Registration Rights Agreement. Each of Purchaser and Reilly Family Limited
Partnership, a Louisiana limited partnership and a stockholder of Purchaser
("RFLP"), shall, on the Closing Date, execute and deliver to Sellers the
Stockholders Agreement.
Section 5.9. INSPECTION. Subject to confidentiality obligations and
similar restrictions that may be applicable to information furnished to
Purchaser by third parties that may be in the possession of Purchaser from
time to time, Purchaser shall afford to Sellers and their accountants, counsel
and other representatives reasonable access, during normal business hours, to
the properties, books, contracts, commitments, tax returns, records and
appropriate officers and employees of the Purchaser, and shall furnish such
representatives with all financial and operating data and other information
concerning the affairs of the Purchaser as they may reasonably request.
ARTICLES 6.
JOINT COVENANTS AND AGREEMENTS
Section 6.1. CONFIDENTIALITY.
(a) Except for any governmental filings required in order to
complete the transactions contemplated herein and as Sellers and Purchaser
may otherwise agree or consent in writing, all information received by
Purchaser and Sellers and their respective representatives in
contemplation, or pursuant to the terms, of this Agreement shall be kept in
confidence by the receiving party and its representatives; provided,
however, that any party hereto may disclose such information to (i) its
legal and financial advisors, lenders, financing sources and their
respective legal advisors and representatives, and (ii) such third parties
as are reasonably necessary to negotiate or consummate the sale or other
disposition by Purchaser of assets or lines of business of the Company or
any of its Subsidiaries pursuant to a request or governmental order by any
Antitrust Authority, so long as such Persons agree to maintain the
confidentiality of such information in accordance with this Section 6.1.
If the transactions contemplated hereby shall fail to be consummated, all
copies of documents or extracts thereof containing information and data as
to one of the other parties, including all information prepared by the
receiving party's representatives may be destroyed at the option of the
receiving party, with notice of such destruction (or return) to be
confirmed in writing to the disclosing party. Any information not so
destroyed (or returned) will remain subject to these confidentiality
provisions (notwithstanding any termination of this Agreement) until the
fifth (5th) anniversary of the Closing Date.
(b) The foregoing confidentiality provisions shall not apply
to such portions of the information received which (i) are or become
generally available to the public through no action by the receiving party
or by such party's representatives, (ii) are or become available to the
receiving party on a nonconfidential basis from a source, other than the
disclosing party or its representatives, which the receiving party
believes, after reasonable inquiry, is not prohibited from disclosing such
portions to it by a contractual legal or fiduciary obligation, or (iii) are
required by law to be disclosed, and shall not apply to any disclosure by
Purchaser after the Closing of any information disclosed by the Company.
Section 6.2. SUPPORT OF TRANSACTION. Purchaser and each Seller shall
each (i) use commercially reasonable efforts to assemble, prepare and file any
information (and, as needed, to supplement such information) as may be
reasonably necessary to obtain as promptly as practicable all governmental
and regulatory consents required to be obtained in connection with the
transactions contemplated hereby, (ii) use commercially reasonable efforts
to obtain all material consents and approvals of third parties that any of
Purchaser, either Seller, or their respective Affiliates are required to
obtain in order to consummate the transactions contemplated hereby, (iii)
take such other action as may reasonably be necessary or as another party
may reasonably request to satisfy the conditions of Article 7 or otherwise
to comply with this Agreement, and (iv) provide the other parties, and such
other parties employees, officers, accountants, lawyers, financial advisors
and other representatives with access to its personnel, properties,
business and records under all reasonable circumstances.
Section 6.3. [INTENTIONALLY LEFT BLANK].
Section 6.4. TAX MATTERS. The following provisions shall govern the
allocation of responsibility as between Purchaser and Sellers for certain Tax
matters following the Closing Date:
(a) Chancellor LA shall prepare and file (or cause to be
prepared and filed) in a timely manner all Tax Returns for the Company and
its Subsidiaries that relate to tax periods that end on or before the
Closing date. All such Tax Returns shall be prepared in a manner
consistent with past practices. Purchaser shall prepare and file (or cause
to be prepared and filed) in a timely manner all other Tax Returns for the
Company and any of its Subsidiaries. All Tax Returns prepared by the
Purchaser for any straddle period shall be prepared in a manner consistent
With past practices.
(b) In order to apportion any Taxes that relate to a Straddle
Period, the parties hereto will, to the extent permitted by applicable law,
elect with the relevant taxing authorities to treat for all purposes the
Closing Date as the last day of a taxable period of the Company and of its
Subsidiaries, and such period shall be treated as a "Short Period" and a
"Pre-Closing Period" for purposes of this Agreement. In any case where
applicable law does not permit the Closing Date to be treated as the last
day of a Short Period, then for purposes of this Agreement, the portion of
such Taxes that is attributable to the operation of the Company or any of
its Subsidiaries for the "Pre-Closing Partial Period" (as defined below)
shall be (i) in the case of Taxes that are not based on income gross
receipts, the total amount of such Taxes for the period in question
multiplied by a fraction, the numerator of which is the number of days in
the Pre-Closing Partial Period and the denominator of which is the number
of days in the entire period in question and (ii) in the case of any Taxes
that are based on income or gross receipts, the Taxes that would be due
with respect to the Straddle Period, if such Straddle Period were a Short
Period. "Pre-Closing Partial Period" means with respect to any Taxes
imposed on the Company or any of its Subsidiaries for which the Closing
Date is not the last day of the Short Period, the period of time beginning
on the first day of the actual taxable period that includes (but does not
end on) the Closing Date and ending on and including the Closing Date.
(c) Purchaser covenants that it will not, and it will not
cause or permit the Company, the Company's Subsidiaries or any Affiliate of
the Purchaser to, (i) take any action on the Closing Date other than in the
ordinary course of business, including, but not limited to, the
distribution of any dividend or the effectuation of any redemption that
could give rise to any Tax liability of any Seller or any of their
Affiliates, (ii) make any election or deemed election under Section 338 of
the Code (or any analogous or similar rules in any relevant tax
jurisdiction), or (iii) make or change any tax election, amend any Tax
Return, take any action, omit to take any action or enter into any
transaction, in each case, that results in any increased Tax liability,
reduction of any Tax Asset of any Seller, the Company or any Subsidiary of
the Company in respect of any period that ends on or before the Closing
Date or any Straddle Period without obtaining the Sellers' consent, which
consent shall not be unreasonably withheld.
(d) Each Seller or the parent of the consolidated group of
which each of them is a member may, at its or their option, elect to
reattribute certain Tax Assets of the Company or of any Subsidiary of the
Company pursuant to Treasury Regulations Section 1.1502-20(g).
(e) Sellers and Purchaser agree to give prompt notice to each
other of any proposed adjustment to Taxes for periods for which the other
may have liability under this Agreement. Sellers and Purchaser shall
cooperate with each other in the conduct of any audit or other proceedings
involving the Company or any of its Subsidiaries for such periods and each
may participate at its own expense. Purchaser shall cause powers of
attorney authorizing Sellers or its representative to represent the Company
and its Subsidiaries before the relevant taxing authority and such other
documents as are reasonably necessary for Sellers or their representative
to control the conduct of any such audit; provided, however, that Sellers
shall not compromise or settle any such audit without obtaining Purchaser's
consent, which consent shall not be unreasonably withheld, if such
compromise or settlement would result in an increased Tax liability or a
reduction in any Tax Assets or have the effect of increasing any Tax
liability of the Company, any of its Subsidiaries or the Purchaser, in each
case for any taxable period ending after the Closing Date.
(f) Purchaser shall make (or cause to be made), an election
under Section 172(b)(3) of the Code (or any analogous or similar rules in
any relevant tax jurisdiction, to the extent permitted by law) to
relinquish the entire carryback period with respect to any net operating
loss attributable by the Company or any of its Subsidiaries in any taxable
period beginning after the Closing Date that could be carried back to a
taxable year of the Company and its Subsidiaries ending on or before the
Closing Date. Except for any carrybacks of Tax credits, neither Seller nor
any Affiliate of either Seller shall be required to pay to Purchaser, the
Company or the Company's Subsidiaries any refund or credit of Taxes that
results from the carryback to any tax period ending on or before the
Closing Date of any net operating loss, capital credit or other Tax Asset
attributable to the Company or any of its Subsidiaries from any tax period
beginning after the Closing Date.
(g) Sellers and Purchaser agree to furnish or cause to be
furnished to each other, upon request, as promptly as practicable, such
information and assistance (including access to books and records) relating
to the Company or any of its Subsidiaries as is reasonably necessary for
the preparation of any Tax Return, claim for refund or audit, and the
prosecution or defense of any claim, suit or proceeding relating to any
proposed adjustment.
(h) After the Closing, Purchaser shall pay to Chancellor LA
any refunds of or credits for Taxes (net of any income Tax liability
incurred as a result of receiving such refund or credit) relating to the
Company or any of its Subsidiaries for periods ending on or before the
Closing Date and for Pre-Closing Partial Periods except to the extent any
such refund or credit is reflected as an asset on the Closing Balance
Sheet. Purchaser shall cause powers of attorneys authorizing Chancellor LA
or its representatives to represent the Company and its Subsidiaries before
the relevant taxing authority and such other documents as are reasonably
necessary for Chancellor LA or its representatives to receive any refunds
or credits that Chancellor LA is entitled to receive pursuant to the
preceding sentence; provided, however, that Chancellor LA shall not be
permitted to file for any refund or credit without obtaining the
Purchaser's consent, which consent shall not be unreasonably withheld, if
the receipt of such refund or credit would have the effect of increasing
any Tax liability or reducing any Tax Asset of the Company, any of its
Subsidiaries or the Purchaser (except for an increase of income Tax
liability incurred as a result of receiving such refund or credit) for any
taxable period ending after the Closing Date.
(i) Sellers and Purchaser agree that all transfer
documentary, sales, use, stamp, registration and other similar Taxes
("Conveyance Taxes") incurred solely as a result of a change of control of
the Company or its Subsidiaries occurring upon consummation of this
Agreement shall be borne 50% by Purchaser and 50% by Chancellor LA.
Chancellor LA's liability for its share of Conveyance Taxes shall be
discharged exclusively through an accrual on the Closing Balance Sheet of
its share of Conveyance Taxes.
(j) Chancellor LA shall be liable for and shall pay all Taxes
(i) of the Company or any of the Company's Subsidiaries in respect of any
taxable period ending on or before the Closing Date; (ii) of the Company or
any of the Company's Subsidiaries in respect of any Straddle Period to the
extent such Taxes are attributable to the Pre-Closing Partial Period as
determined in Section 6.4(b); (iii) that are imposed on the Company or any
of the Company's Subsidiaries under Treasury Regulation 1.1502-6 (or any
similar provision of state, local or foreign law) as a transferee or
successor with respect to any taxable period ending on or before the
Closing Date or with respect to any Pre-Closing Partial Period;
(iv) imposed on the Company or any of the Company's Subsidiaries pursuant
to any Tax sharing agreement existing as of the Closing Date; provided,
however, that in each case Chancellor LA shall not be liable for and shall
not be required to pay such Taxes to the extent such Taxes are accrued on
the Closing Balance Sheet; and (v) of the Company or any of the Company's
Subsidiaries resulting from the payment of the Dividend for any taxable
period, whether such period begins before or after the Closing.
Section 6.5. CERTAIN EMPLOYEE BENEFITS MATTERS.
(a) Purchaser shall or shall cause the Company and its
Subsidiaries to employ, effective as of the Closing Date, each of the
employees of the Company and its Subsidiaries who are, immediately prior to
the Closing, actively employed or on vacation, leave of absence, disability
or sick leave or lay-off (the "TRANSFERRED EMPLOYEES"). For purposes of
vacation entitlement only, Purchaser shall cause Purchaser's employee
benefit plans to recognize all service for the purpose of determining
vesting of benefits, participation eligibility and benefit accrual by
Transferred Employees with the Company, any of its Subsidiaries and
Chancellor LA, including service with predecessor employers to the extent
that such service was recognized by the analogous plans of the Company, any
of its Subsidiaries or either Seller such that no break or interruption of
employment or participation shall be deemed to have occurred with respect
to the Transferred Employees by reason of the transactions contemplated by
this Agreement.
(b) Purchaser agrees that any pre-existing condition
exclusions or waiting periods imposed under Purchaser's welfare benefit
plans will be no more restrictive than the analogous provisions under the
Applicable plans of chancellor LA or the Company (and shall be applied
Utilizing the service Crediting rules set forth in the last sentence of
Section 6.5(a)) with respect to any transferred employee and his or her
Covered dependents and Purchaser (or purchaser's employee benefit plans)
shall assume all liabilities relating to all claims by Transferred
Employees (and their dependents and beneficiaries) for benefits under all
medical, dental, employee assistance, life, accidental death and
dismemberment, dependent life, short- and long-term disability plans which
are submitted on and after the closing date (including claims related to
hospital stays commenced on or before the closing date). Purchaser shall
Provide that any expenses incurred under any welfare plan by a transferred
Employee or his or her covered dependents during the plan year that
includes the Closing Date shall be taken into account under any applicable
health plan maintained by Purchaser for such plan year for purposes of
satisfying applicable deductible, coinsurance and maximum out-of-pocket
Provisions.
(c) Purchaser shall provide continuation coverage to
Transferred Employees and former employees of the Company and its
Subsidiaries (and their covered dependents and qualified beneficiaries) who
are receiving continuation coverage required under Code Section 4980B(f)
("COBRA CONTINUATION COVERAGE") at the Closing, with respect to whom a
qualifying event occurred prior to the Closing and for which the applicable
election period for COBRA Continuation Coverage has not expired as of the
Closing Date, or with respect to whom a qualifying event occurs as a result
of the Closing of the transaction contemplated by this Agreement in
compliance with the provisions of Code Section 4980B and ERISA Section 601
et seq.
(d) SAVINGS PLANS.
(i) As soon as is practicable after the Closing Date,
but effective as of such date, Purchaser shall adopt or designate a
401(k) Savings Plan (the "PURCHASER SAVINGS PLAN") and shall establish
a trust pursuant thereto (the "PURCHASER SAVINGS TRUST"). As soon as
is practicable after the Closing Date, Purchaser shall furnish to
Sellers a determination letter finding the Purchaser Savings Plan and
the Purchaser Savings Trust to be qualified and tax-exempt under
Sections 401(a) and 501(a) of the Code.
(ii) As soon as practicable after Sellers' receipt of a
copy of such letter, Sellers shall cause the Chancellor Media
Corporation 401(k) Savings Plan (the "Seller Savings Plan") and the
trust pursuant thereto (the "SELLER SAVINGS TRUST") to transfer to the
Purchaser Savings Plan and Purchaser Savings Trust the accounts under
the Seller Savings Plan and the Seller Savings Trust (and the assets
and liabilities therein) attributable to any employee of the Company
as of immediately prior to the Closing Date or any employee of either
Seller or any of their Affiliates, in any case, who will continue
their employment with or shall become an employee, of the Company or
Purchaser or any of its Affiliates as of the Closing Date (the
"EMPLOYEES"). Sellers shall cause all of such accounts to be fully
vested upon such transfer. Such transfer shall be made in the form of
cash. Such transfer shall satisfy the requirements of Code Sections
401(a)(12) and 414(l) and the regulations pursuant thereto. Prior to
such transfer, Purchaser will provide Sellers with such documents and
other information as Sellers shall reasonably request to assure itself
that the Purchaser Savings Plan and the Purchaser Savings Trust
contain participant loan provisions and procedures necessary to effect
the orderly transfer of participant loan balances associated with the
transfer of assets. Prior to such transfer, Sellers will provide
Purchaser with such documents and other information as Purchaser shall
reasonably request to assure itself that the Seller Savings Plan and
Seller Savings Trust are qualified and tax-exempt under the provisions
of Code Sections 401(a) and 501(a) respectively as of the date of such
transfer. The Purchaser Savings Plan shall preserve for the Employees
all benefits, rights and features as required under Section 411(d)(6)
of the Code and Purchaser agrees not to eliminate the ability to make
participant loans without giving all participants in the Purchaser
Savings Plan at least three (3) months advance notice. Sellers shall
provide to Purchaser copies of such personnel and other records of
Sellers pertaining to the Employees and such records of any agent or
representative of either Seller, in each case pertaining to the Seller
Savings Plan and Seller Savings Trust and as Purchaser may reasonably
request in order to administer and manage the accounts and assets
transferred to the Purchaser Savings Plan and Purchaser Savings Trust.
Upon such transfer, the Purchaser Savings Plan shall assume all
liabilities and obligations whatsoever with respect to all amounts
transferred from the Seller Savings Plan and Seller Savings Trust to
the Purchaser Savings Plan and Purchaser Savings Trust in respect of
the Employees and each Seller and its Affiliates and the Seller
Savings Plan and Seller Savings Trust shall be relieved of all such
liabilities and obligations. Purchaser and Sellers shall cooperate in
the filing of documents required by the transfer of assets and
liabilities described herein.
(iii) The Purchaser Savings Plan shall preserve for the
Employees all of their benefits accrued under the Seller Savings Plan
as of the date of transfer. The Purchaser Savings Plan shall also
provide that an Employee's period of employment with either Seller,
the Company, any of their Subsidiaries or any predecessor thereof (as
applicable) for which credit was given under the Seller Savings Plan
shall be given equivalent credit under the Purchaser Savings Plan to
the effect that if any Employee becomes an employee of the Company or
Purchaser as of the Closing Date, or thereafter by reason of recall,
no interruption in participation, benefit accrual or vesting service
shall be deemed to have occurred for such Employee under the Purchaser
Savings Plan by reason of the change in employment contemplated by
this Agreement. The Purchaser Savings Plan shall further contain all
such provisions as are necessary for the transfer not to cause Seller
Savings Plan to fail to satisfy requirements of Code Sections 401(a)
or 401(k).
(iv) As soon as is practicable after the Closing Date
and prior to the transfer contemplated under this Section 6.5(d),
Sellers and Purchaser shall make such filings as are required under
Code Section 6058(b) with respect to such transfers including the
filing of Form 5310-A.
(e) Purchaser shall be liable for all obligations with
respect to claims of Transferred Employees for workers compensation for
incidents remaining unpaid on the Closing Date to the extent reflected as a
liability or reserved for on the Closing Balance Sheet.
(f) Nothing contained in this Agreement shall confer upon any
Transferred Employee any rights with respect to continuance of employment
by Purchaser, nor shall any provision of this Agreement create any third
party beneficiary rights in any Transferred Employee, any beneficiary or
dependents thereof, or any collective bargaining representative thereof.
ARTICLE 7.
CONDITIONS TO OBLIGATIONS
Section 7.1. CONDITIONS TO OBLIGATIONS OF PURCHASER AND SELLERS. The
obligations of Purchaser and Sellers to consummate, or cause to be
consummated, the transactions contemplated hereby are subject to the
satisfaction of the following conditions, any one or more of which may be
waived in writing by such parties:
(a) There shall not be in force any order or decree, statute,
rule or regulation nor shall there be on file any complaint by a
governmental agency seeking an order or decree, restraining, enjoining or
prohibiting the consummation of the transactions contemplated hereby, and
neither Purchaser nor either Seller shall have received notice from any
Governmental Authority that it has determined to institute any suit or
proceeding to restrain or enjoin the consummation of the transactions
contemplated hereby or to nullify or render ineffective this Agreement if
consummated, or to take any other action which would result in the
prohibition or a material change in the terms of the transactions
contemplated hereby.
(b) In connection with the consummation of the transactions
contemplated by this Agreement, Chancellor LA shall have obtained all
necessary approvals and consents to the consummation of the transactions
contemplated hereby from its senior lenders, including without limitation,
the dividend and releases from any and all applicable liens created by such
lenders and releases from any and all guarantees of each of the Company and
its Subsidiaries.
(c) The issuance of the Lamar Shares shall have been duly
approved by the stockholders of Purchaser.
Section 7.2. CONDITIONS TO OBLIGATIONS OF PURCHASER. The obligations of
Purchaser to consummate, or cause to be consummated, the transactions
contemplated by this Agreement are subject to the satisfaction of the
following additional conditions, any one or more of which may be waived in
writing by Purchaser:
(a) Each of the representations and warranties of each Seller
contained in this Agreement shall be true and correct both on the date
hereof and as of the Closing, as if made anew at and as of that time
(unless to the extent that any such representations and warranties
expressly relate to an earlier time, in which case they shall be true and
correct at such earlier time), and each of the covenants and agreements of
each Seller to be performed as of or prior to the Closing shall have been
duly performed, except in each case for changes after the date hereof which
are contemplated or expressly permitted by this Agreement, except where (i)
the failure of the representations and warranties to be true and correct,
or (ii) the failure of the covenants and agreements to be performed, as the
case may be, would not have a material adverse effect on the business,
operations or financial condition of the Company and its Subsidiaries,
taken as a whole.
(b) Chancellor LA shall have delivered to Purchaser a
certificate signed by an officer of chancellor la, dated the closing,
certifying that, to the best of the knowledge and belief of such officer,
the conditions specified in Section 7.1(b), as they relate to Chancellor
La, and section 7.2(a), to the extent they relate to Chancellor LA, have
been fulfilled.
(c) Chancellor Mezzanine shall have delivered to Purchaser a
certificate signed by an officer of Chancellor Mezzanine, dated the
Closing, certifying that, to the best of the knowledge and belief of such
officer, the conditions precedent specified in Section 7.2(a), to the
extent they relate to Chancellor Mezzanine, have been fulfilled.
(d) Any consent required for the consummation of the
transactions contemplated hereby under any Contract required to be listed
on schedule 2.8 hereto or for the continued enjoyment by the Company and
its Subsidiaries of the benefits of any such Contract after the Closing
shall have been obtained, except where the failure to obtain such consent
would not have a material adverse effect on the business, operations or
financial condition of the Company and its Subsidiaries, taken as a whole.
(e) Each Seller shall have duly executed and delivered the
Registration Rights Agreement.
(f) Each Seller shall have duly executed and delivered the
Stockholders Agreement.
(g) Each Seller shall have delivered, or caused to be
delivered, to Purchaser an executed affidavit, dated not more than 30 days
prior to the Closing Date, in accordance with Code Section 1445(b)(2) and
Treasury Regulation Section 1.1445-2(b), which statement certifies that
such Seller is not a foreign person and sets forth such Seller's name,
taxpayer identification number and address.
(h) As of the Closing, Sellers shall have caused to be
eliminated all intercompany receivables and payables between any Seller,
the Company and its Subsidiaries.
Section 7.3. CONDITIONS TO THE OBLIGATIONS OF SELLERS. The obligation of
each Seller to consummate the transactions contemplated by this Agreement is
subject to the satisfaction of the following additional conditions, any one
or more of which may be waived in writing by each Seller:
(a) All waiting periods under the HSR Act applicable to the
transactions contemplated hereby shall have expired or been terminated.
(b) Each of the representations and warranties of Purchaser
contained in this Agreement shall be true and correct in all material
respects both on the date hereof and as of the Closing, as if made anew at
and as of that time (unless to the extent that any such representations and
warranties expressly relate to an earlier time, in which case they shall be
true and correct at such earlier time), and each of the covenants and
agreements of Purchaser to be performed as of or prior to the Closing shall
have been duly performed in all material respects, except in each case for
changes after the date hereof which are contemplated or expressly permitted
by this Agreement.
(c) purchaser shall have delivered to such Seller a
certificate signed by an officer of Purchaser, dated the Closing,
certifying that, to the best of the knowledge and belief of such officer,
the conditions specified in Section 7.3(b) have been fulfilled.
(d) Purchaser shall have duly executed and delivered the
Registration Rights Agreement.
(e) Purchaser shall have duly executed and delivered the
Stockholders Agreement.
ARTICLE 8.
TERMINATION
Section 8.1. TERMINATION. This Agreement may be terminated and the
transactions contemplated hereby abandoned:
(a) By mutual written consent of the parties at any time
prior to the Closing.
(b) Prior to the Closing, by written notice to Sellers from
Purchaser, if (i) there is any material breach of any representation,
warranty, covenant or agreement on the part of either Seller set forth in
this Agreement, or if a representation or warranty of either Seller shall
be untrue in any material respect, in either case, such that the condition
specified in Section 7.2(a) hereof would not be satisfied at the Closing (a
"Terminating Seller Breach"), except that, if such Terminating Seller
Breach is curable by any Seller through the exercise of commercially
reasonable efforts, then, for a period of up to thirty (30) calendar days,
but only as long as any Seller continues to use commercially reasonable
efforts to cure such Terminating Seller Breach (the "SELLER CURE PERIOD"),
such termination shall not be effective, and such termination shall become
effective only if the Terminating Seller Breach is not cured within the
Seller Cure Period, (ii) the Closing has not occurred on or before
December 1, 1999, other than as a result of (A) a breach of a
representation, warranty, covenant or agreement of Purchaser, or (B) a
failure of all waiting periods under the HSR Act applicable to the
transactions contemplated hereby to have expired or been terminated, or
(iii) consummation of any of the transactions contemplated hereby is
enjoined, prohibited or otherwise restrained by the terms of a final, non-
appealable order or judgment of a court of competent jurisdiction.
(c) Prior to the Closing, by written notice to Purchaser from
either Seller, if (i) there is any material breach of any representation,
warranty, covenant or agreement on the part of Purchaser set forth in this
Agreement, or if a representation or warranty of Purchaser shall be untrue
in any material respect, in either case, such that the condition specified
in Section 7.3(a) hereof would not be satisfied at the Closing, except as
expressly provided in Sections 5.1 and 5.6 hereof (a "TERMINATING PURCHASER
BREACH"), except that, if such Terminating Purchaser Breach is curable by
Purchaser through the exercise of commercially reasonable efforts, then,
for a period of up to thirty (30) calendar days, but only as long as
Purchaser continues to exercise such commercially reasonable efforts to
cure such Terminating Purchaser Breach (the "PURCHASER CURE PERIOD"), such
termination shall not be effective, and such termination shall become
effective only if the Terminating Purchaser Breach is not cured within the
Purchaser Cure Period, (ii) the Closing has not occurred on or before
December 1, 1999, other than as a result of a breach of a representation,
warranty, covenant or agreement of either Seller, or (iii) consummation of
any of the transactions contemplated hereby is enjoined, prohibited or
otherwise restrained by the terms of a final, non-appealable order or
judgment of a court of competent jurisdiction.
Section 8.2. EFFECT OF TERMINATION. In the event of termination of this
Agreement pursuant to Section 8.1, this Agreement shall forthwith become
void and have no effect, without any liability on the part of any party
hereto or their respective Affiliates, officers, directors or stockholders,
other than liability of either Seller or of Purchaser as the case may be,
for such party's breaches of this Agreement occurring prior to such
termination. The provisions of Sections 6.1, 11.7, 11.11 and 11.12 hereof
shall survive any termination of this Agreement.
Sectin 8.2. OTHER TERMINATION. This Agreement may also be terminated
pursuant to Sections 5.6(d) or 4.9(b) hereof. The effect of a termination of
this Agreement pursuant to either Section 5.6(d) or 4.9(b) shall have the
effect set forth in Section 5.6(d) or 4.9(b), as the case may be.
ARTICLE 9.
INDEMNIFICATION
Section 9.1. SURVIVAL OF REPRESENTATIONS. The representations and
warranties of each Seller contained herein shall survive the Closing for a
period of twelve (12) months following the Closing Date; provided that, the
representations and warranties of Sellers set forth in Sections 2.4 and 2.6
shall survive without limitation; provided further that the representations
and warranties of Sellers set forth in Section 2.16 shall survive for a
period equal to the applicable statute of limitations for all Taxes imposed
as a result of any breach of Section 2.16. None of the representations and
warranties of Purchaser contained herein shall survive the Closing.
Sction 9.2. INDEMNIFICATION.
(a) Each Seller shall indemnify and hold Purchaser and its
officers, directors, employees and Affiliates harmless from any damage,
claim, liability or expense, including, without limitation, reasonable
attorneys' fees (collectively "DAMAGES"), arising out of or relating to the
breach of any warranty, representation, covenant or agreement of such
Seller contained in this Agreement.
(b) notwithstanding the foregoing, (i) Purchaser shall not be
entitled to indemnification for any damages unless and until the amount of
all damages for which purchaser is entitled to indemnification exceeds Two
Million Five Hundred Thousand Dollars ($2,500,000) (the "Threshold
Amount"), at which time Purchaser shall be entitled to indemnification only
for all such Damages sustained by Purchaser to the extent that the amount
of such Damages exceeds the Threshold Amount, (ii) in no event shall the
aggregate amount of Damages for which Purchaser shall be entitled to
indemnification exceed Twenty-Five Million Dollars ($25,000,000), and (iii)
the amount of Damages for which Purchaser is entitled to indemnification
shall be reduced by (A) any tax benefit or deduction allowable as a result
of the incurrence of such Damages or the facts or circumstances giving rise
thereto, and (B) any insurance recoveries or other indemnities,
contributions or similar payments recoverable from any third party as a
result of the incurrence of such Damages or the facts or circumstances
giving rise thereto.
(c) Purchaser hereto agrees to take, and to cause its
Affiliates to take, all reasonable steps to mitigate any Damages incurred
or to be incurred by Purchaser or its Affiliates upon and after becoming
aware of any event which could reasonably be expected to give rise to any
Damages.
Section 9.3. CONDUCT OF PROCEEDINGS. If any claim, action, suit or
proceeding covered by the foregoing agreements to indemnify and hold harmless
(a "PROCEEDING") shall arise, Purchaser shall give written notice thereof to
any Seller from whom indemnification is being sought promptly after
Purchaser learns of the existence of such Proceeding; provided, however,
that Purchaser's failure to give any such Seller prompt notice shall not
bar Purchaser's right to indemnification unless such failure has materially
prejudiced such Seller's ability to defend the Proceeding. Such Seller
shall have the right to employ counsel reasonably acceptable to Purchaser
to defend against any such Proceeding, or to compromise, settle or
otherwise dispose of the same, if such Seller deems it advisable to do so
(in its reasonable judgment), all at the expense of such Seller; provided
that, such Seller shall not settle, or consent to entry of any judgment in
any Proceeding, without obtaining a release of Purchaser from, or agreeing
to indemnify Purchaser for, all damages in respect of the claims underlying
such Proceeding. The parties will fully cooperate in any such action, and
shall make available to each other any books or records useful for the
defense of any such Proceeding. If any Seller against whom an
indemnification claim is made fails to acknowledge in writing its
obligation to defend against or settle such Proceeding within thirty (30)
days after receiving notice thereof from Purchaser (or such shorter time
specified in the notice as the circumstances of the matter may dictate),
Purchaser shall have the right to undertake the defense and settlement of
any such Proceeding, at such Seller's expense; provided that, if the
Purchaser assumes the defense of any such Proceeding, Purchaser shall not
settle such Proceeding prior to final judgment thereon or forego any appeal
with respect thereto without the prior written consent of such Seller
(which consent may not be unreasonably withheld).
Section 9.4. SOLE REMEDY; TIME LIMITATION. After the Closing has
occurred, the right to indemnification under this Article 9 shall be the
exclusive remedy of Purchaser hereto in connection with any breach by either
Seller of its representations, warranties, covenants or agreements contained
herein. Notwithstanding the foregoing provisions of this Article 9, neither
Seller shall have any responsibility or obligation with respect to any claim
for indemnification asserted pursuant to this Article 9 unless such claim is
asserted in writing by Purchaser to such Seller within the survival period
provided in Section 9.1.
ARTICLE 10.
CERTAIN DEFINITIONS
As used herein, the following terms shall have the
following meanings:
"ACTION" means any action, suit, arbitration or other
proceeding by or before any Governmental Authority.
"ADJUSTMENT AMOUNT" has the meaning specified in Section
1.5.
"ADVERTISING CONTRACTS" means Chancellor LA's and its
Subsidiaries' interest in Contracts for outdoor advertising displays by
customers and clients of Chancellor LA and its Subsidiaries.
"AFFILIATE" means, with respect to any specified Person,
any Person that, directly or indirectly, controls, is controlled by, or is
under common control with, such specified Person, through one or more
intermediaries or otherwise.
"AFFILIATED GROUP" means any affiliated group within the
meaning of Code Section 1504(a).
"AGREEMENT" has the meaning specified in the Preamble
hereto.
"ANCILLARY AGREEMENTS" shall mean the Registration Rights
Agreement, the Stockholders Agreement, and the Voting Agreement.
"ANTITRUST AUTHORITIES" means the Antitrust Division of
the United Stated Department of Justice, the United States Federal Trade
Commission or the antitrust or competition law authorities of any other
jurisdiction (whether United States, foreign or multinational).
"APPLICABLE RATE" has the meaning specified in
Section 1.5.
"APPROVALS CERTIFICATE" has the meaning specified in
Section 4.9(a).
"AUDITOR" has the meaning specified in Section 1.5.
"BURKETT ASSETS" has the meaning specified in Section
4.1.
"BUSINESS" means the outdoor advertising business
conducted by the Company and its Subsidiaries.
"BUSINESS DAY" means any day that is not a Saturday,
Sunday or other day on which banks are required or authorized by law to be
closed in New York, New York.
"CASH CONSIDERATION" has the meaning specified in Section
1.3.
"CHANCELLOR LA" has the meaning specified in the Preamble
hereto.
"CHANCELLOR MEZZANINE" has the meaning specified in the
Preamble hereto.
"CHANCELLOR SHARES" has the meaning specified in Section
1.1.
"CLOSING" has the meaning specified in Section 1.4.
"CLOSING BALANCE SHEET" has the meaning specified in
Section 1.5.
"CLOSING DATE" has the meaning specified in Section 1.4.
"CLOSING DATE NET WORKING CAPITAL" has the meaning
specified in Section 1.5.
"COBRA CONTINUATION COVERAGE" has the meaning specified
in Section 6.5.
"CODE" means the Internal Revenue Code of 1986, as
amended.
"COMMITMENT LETTER" has the meaning specified in Section
5.6.
"COMPANY" has the meaning specified in the Recitals
hereof.
"COMPANY SHARES" has the meaning specified in the
Recitals hereof.
"CONFIDENTIALITY AGREEMENT" has the meaning specified in
Section 11.8.
"CONTRACTS" means any contracts, agreements, subcontracts
or leases.
"CONVEYANCE TAXES" has the meaning specified in
Section 6.4.
"DAMAGES" has the meaning specified in Section 9.2.
"DEFINITIVE DOCUMENTATION" has the meaning specified in
Section 5.6.
"DETERMINATION DATE" has the meaning specified in
Section 1.5.
"DIVESTITURE ASSETS" has the meaning specified in Section
4.1.
"DIVIDEND" has the meaning specified in Section 1.1.
"EMPLOYEES" has the meaning specified in Section 6.5.
"EMPLOYEE PLANS" has the meaning specified in Section
2.12.
"ENVIRONMENTAL LAWS" means, collectively, all applicable
U.S. federal, state or local laws, statutes, ordinances, rules,
regulations, codes or common law relating to health, safety, pollution or
protection of the environment, as in effect as of the date hereof.
"ERISA" has the meaning specified in Section 2.12.
"EXCHANGE ACT" has the meaning specified in Section 3.7.
"FINAL JUDGMENTS" means (i) the Final Judgments of the
United States District Court for the District of Columbia in the case of
U.S. V. CHANCELLOR MEDIA AND CANS & COMPANY, filed November 12, 1998, and
(ii) the Final Judgment of the United States District Court for the
District of Columbia in the case of U.S. V. CHANCELLOR MEDIA AND WHITECO
INDUSTRIES, ET AL., filed November 25, 1998.
"GAAP" has the meaning specified in Section 1.5.
"GOVERNMENTAL AUTHORITY" means any Federal, state,
municipal or local government, governmental authority, regulatory or
administrative agency.
"HSR ACT" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder.
"INDEMNIFIED PARTY" has the meaning specified in Section
9.3.
"INTELLECTUAL PROPERTY" has the meaning specified in
Section 2.9.
"IRS" means the United States Internal Revenue Service.
"LAMAR LA SHARES" has the meaning specified in Section
1.3.
"LAMAR MEZZANINE SHARES" has the meaning specified in
Section 1.3.
"LAMAR SHARES" has the meaning specified in Section 1.3.
"LEASED REAL PROPERTY" means all real property leases to
which the Company or any of its Subsidiaries are a party.
"LIEN" means any mortgage, deed of trust, pledge,
hypothecation, encumbrance, security interest or other lien of any kind.
"MINIMUM NET WORKING CAPITAL" has the meaning specified
in Section 1.5.
"MULTIEMPLOYER PLAN" has the meaning specified in Section
2.12.
"NET WORKING CAPITAL" has the meaning specified in
Section 1.5.
"ORIGINAL AGREEMENT" has the meaning specified in the
Recitals hereof.
"OWNED REAL PROPERTY" means all real property owned by
the Company or any of its Subsidiaries.
"PBGC" has the meaning specified in Section 2.12.
"PENSION PLAN" has the meaning specified in Section 2.12.
"PERMITS" means all licenses, permits, approvals,
authorizations or consents of any Governmental Authority, whether federal,
foreign, state, municipal or local, pertaining to the Business.
"PERMITTED LIENS" means (i) mechanics, materialmen's and
similar Liens with respect to any amounts not yet due and payable or which
are being contested in good faith through appropriate proceedings, (ii)
Liens for Taxes not yet due and payable or which are being contested in
good faith through appropriate proceedings, (iii) Liens arising in
connection with the sale of foreign receivables, (iv) Liens on goods in
transit incurred pursuant to documentary letters of credit, (v) Liens
securing rental payments under capital lease agreements, (vi) Liens arising
in favor of the United States Government as a result of progress payment
clauses contained in any Contract, (vii) encumbrances and restrictions on
real property that do not materially interfere with the present uses of
such real property, and (viii) other Liens arising in the ordinary course
of business and not incurred in connection with the borrowing of money.
"PERSON" means any individual, firm, corporation,
partnership, limited liability company, incorporated or unincorporated
association, joint venture, joint stock company, governmental agency or
instrumentality or other entity of any kind.
"PRE-CLOSING PARTIAL PERIOD" has the meaning specified in
Section 6.4.
"PRELIMINARY TRANSACTIONS" has the meaning specified in
Section 4.1.
"PROCEEDING" has the meaning specified in Section 9.3.
"PRO FORMA BALANCE SHEET" has the meaning specified in
Section 2.7.
"PRO FORMA STATEMENT OF OPERATIONS" has the meaning
specified in Section 2.7.
"PURCHASER" has the meaning specified in the Preamble
hereto.
"PURCHASER CLASS A COMMON STOCK" has the meaning
specified in Section 1.3.
"PURCHASER CLASS A PREFERRED STOCK" has the meaning
specified in Section 3.6.
"PURCHASER CLASS B COMMON STOCK" has the meaning
specified in Section 3.6.
"PURCHASER CURE PERIOD" has the meaning specified in
Section 8.1.
"PURCHASER PREFERRED STOCK" has the meaning specified in
Section 3.6.
"PURCHASER SAVINGS PLAN" has the meaning specified in
Section 6.5.
"PURCHASER SAVINGS TRUST" has the meaning specified in
Section 6.5.
"PURCHASER SEC DOCUMENTS" has the meaning specified in
Section 3.7.
"PURCHASER STOCK OPTIONS" has the meaning specified in
Section 3.6.
"PWC" has the meaning specified in Section 1.5.
"REGISTRATION RIGHTS AGREEMENT" means the Registration
Rights Agreement among Purchaser and each Seller, dated the Closing Date,
in the form attached as ANNEX D.
"RFLP" has the meaning specified in Section 5.8.
"SEC" has the meaning specified in Section 3.4.
"SECURITIES ACT" has the meaning specified in Section
3.7.
"SELLERS" has the meaning specified in the Preamble
hereto.
"SELLER CURE PERIOD" has the meaning specified in Section
8.1.
"SELLER SAVINGS PLAN" has the meaning specified in
Section 6.5.
"SELLER SAVINGS TRUST" has the meaning specified in
Section 6.5.
"STOCKHOLDERS AGREEMENT" means that Stockholders
Agreement among Purchaser, each Seller and the other signatories listed
therein, dated as of the Closing Date, in the form attached as ANNEX E.
"STRADDLE PERIOD" means any taxable period which begins
before and ends after the Closing Date.
"SUBSIDIARY" means, with respect to any Person, a
corporation or other entity of which 50% of more of the voting power of the
equity securities or equity interests is owned, directly or indirectly, by
such Person. Except as otherwise expressly provided herein, references to
Subsidiaries of the Company shall be deemed to include Whiteco.
"TAX" or "TAXES" means all income, gross receipts, sales,
use, employment, franchise, profits, property or other fees, stamp duties,
assessments or similar charges (whether payable directly or by
withholding), together with any interest and any penalties or additions to
tax imposed by any tax authority with respect thereto.
"TAX ASSET" means any net operating loss, net capital
loss, investment tax credit, foreign tax credit, charitable deduction or
any other credit or tax attribute which could reduce Taxes (including,
without limitation, deductions and credits related to alternative minimum
taxes).
"TAX RETURNS" means all returns and reports (including
elections, declarations, disclosure schedules, estimates and information
returns, claims for refund, or statements of any kind or nature relating to
Taxes, in any schedule or amendment thereto and any amendment thereof)
required to be supplied to a Tax authority relating to Taxes.
"TERMINATING PURCHASER BREACH" has the meaning specified
in Section 8.1.
"TERMINATING SELLER BREACH" has the meaning specified in
Section 8.1.
"THRESHOLD AMOUNT" has the meaning specified in Section
9.2.
"TOTAL CONSIDERATION" has the meaning specified in
Section 1.3.
"TRANSFERRED EMPLOYEES" has the meaning specified in
Section 6.5.
"TREASURY REGULATIONS" means the regulations issued
pursuant to the Code.
"VOTING AGREEMENT" means the Amended and Restated Voting
Agreement among Purchaser, each Seller and RFLP, dated the date hereof, in
the form attached as ANNEX G.
"WELFARE PLAN" has the meaning specified in Section 2.12.
"WHITECO" has the meaning specified in the Recitals
hereof.
"WHITECO SHARES" has the meaning specified in the
Recitals hereof.
ARTICLE 11.
MISCELLANEOUS
Section 11.1. WAIVER. Any party to this Agreement may, at any time prior
to the Closing, waive any of the terms or conditions of this Agreement or
agree to an amendment or modification to this Agreement by an agreement in
writing executed in the same manner as this Agreement.
Section 11.2. NOTICES. All notices and other communications among the
parties shall be in writing and shall be deemed to have been duly given when
(i) delivered in person, or (ii) five (5) calendar days after posting in the
United States mail having been sent registered or certified mail return
receipt requested, or (iii) delivered by telecopy and promptly confirmed by
delivery in person or post as aforesaid in each case, with postage prepaid,
addressed as follows:
(a) If to Purchaser, to:
Lamar Advertising Company
5551 Corporate Boulevard
Baton Rouge, Louisiana 70808
Attention: Keith Istre
Telecopy No.: (225) 923-0658
with copies to:
Jones, Walker, Waechter, Poitevent,
Carre`re & Dene`gre, L.L.P.
5th Floor
Four United Plaza
8555 United Plaza Boulevard
Baton Rouge, Louisiana 70809
Attention: Brad J. Axelrod
Telecopy No.: (225) 231-3336
(b) IF TO CHANCELLOR LA, TO:
Chancellor Media Corporation of Los Angeles
1845 Woodall Rogers Freeway
Suite 1300
Dallas, Texas 75201
Attention: General Counsel
Telecopy No.: (512) 340-7890
with copies to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, D.C. 20004-2502
Attention: Eric L. Bernthal
Telecopy No.: (202) 637-2201
and
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201-6950
Attention: Michael A. Saslaw
Telecopy No.: (214) 746-7777
(c) IF TO CHANCELLOR MEZZANINE, TO:
Chancellor Mezzanine Holdings Corporation
1845 Woodall Rogers Freeway
Suite 1300
Dallas, Texas 75201
Attention: General Counsel
Telecopy No.: (512) 340-7890
with copies to:
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, D.C. 20004-2502
Attention: Eric L. Bernthal
Telecopy No.: (202) 637-2201
and
Weil, Gotshal & Manges LLP
100 Crescent Court, Suite 1300
Dallas, Texas 75201-6950
Attention: Michael A. Saslaw
Telecopy No.: (214) 746-7777
or to such other address or addresses as the parties may from time to time
designate in writing.
Section 11.3. TERMINATION OF SUBSCRIPTION AGREEMENT. Chancellor LA and
Purchaser hereby terminate that certain Subscription Agreement, dated as of
June 1, 1999, by and between Chancellor LA and Purchaser. Such Subscription
Agreement is hereby deemed to be void and of no further force and effect,
without any liability on the part of Chancellor LA or Purchaser or any of
their respective Affiliates.
Section 11.4. ASSIGNMENT. No party hereto shall assign this Agreement or
any part hereof without the prior written consent of the other parties.
Subject to the foregoing, this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective permitted successors
and assigns.
Section 11.5. RIGHTS OF THIRD PARTIES. Nothing expressed or implied in
this Agreement is intended or shall be construed to confer upon or give any
Person, other than the parties hereto, any right or remedies under or by
reason of this Agreement.
Section 11.6. EXPENSES. Each party hereto shall bear its own expenses
incurred in connection with this Agreement and the transactions herein
contemplated whether or not such transactions shall be consummated, including,
without limitation, all fees of its legal counsel, financial advisers and
accountants; provided, however, that (i) the fees and expenses of the
Auditors, if any, shall be paid one-half by Purchaser and one-half by
Chancellor LA, (ii) all Conveyance Taxes imposed as a result of the sale of
the Chancellor Shares and the Lamar Shares shall be paid by Sellers and
Purchaser as set forth in Section 6.4(i), and (iii) all fees paid to
Antitrust Authorities in connection with compliance with the notification
and reporting requirements of the HSR Act for the transactions contemplated
hereby, shall be paid by Purchaser.
Section 11.7. CONSTRUCTION. This Agreement shall be construed and
enforced in accordance with the internal laws, and not the law of conflicts,
of the State of Delaware. Unless otherwise stated, references to Sections,
Articles, Schedules or Annexes refer to the Sections, Articles, Schedules
and Annexes to this Agreement. As used herein, the phrase "to the
knowledge" of any Person shall mean the actual knowledge of such Person's
executive officers after due inquiry. The parties to this Agreement
participated jointly in the negotiation and drafting of this Agreement. If
any ambiguity or question of intent or interpretation shall arise with
respect to this Agreement, then this Agreement shall be construed as if
drafted jointly by the parties and no presumption or burden of proof will
arise favoring or disfavoring any party to this Agreement by virtue of the
authorship of any provision of this Agreement.
Section 11.8. CAPTIONS; COUNTERPARTS. The captions in this Agreement
are for convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Agreement. This
Agreement may be executed in two or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and
the same instrument.
Section 11.9. ENTIRE AGREEMENT. This Agreement (together with the
Ancillary Agreements, Schedules and Annexes to this Agreement, which, although
they may be bound separately, constitute part of this Agreement) and that
certain Confidentiality Agreement between Purchaser and Chancellor LA (the
"CONFIDENTIALITY AGREEMENT") constitute the entire agreement among the
parties and supersede any other agreements, whether written or oral, that
may have been made or entered into by or among any of the parties hereto or
any of their respective Subsidiaries relating to the transactions
contemplated hereby. No representations, warranties, covenants,
understandings, agreements, oral or otherwise, relating to the transactions
contemplated by this Agreement exist between the parties except as
expressly set forth in this Agreement and the Confidentiality Agreement.
This Agreement supersedes the Original Agreement in its entirety, and the
Original Agreement shall be of no further force and effect; PROVIDED,
HOWEVER, that the Schedules and Annexes delivered with the Original
Agreement shall be deemed to constitute a part of this Agreement. Except
as otherwise expressly provided herein, (i) references to "the date hereof"
or "the date of this Agreement" shall be deemed to refer to June 1, 1999
(the date of the Original Agreement) and (ii) all representations and
warranties set forth in this Agreement shall be deemed to be made as of
June 1, 1999 (the date of the Original Agreement), except that
representations and warranties that relate solely to Chancellor Mezzanine,
unless otherwise expressly provided herein, shall be deemed to be made as
of the date this Agreement was executed and delivered.
Section 11.10. AMENDMENTS. This Agreement may be amended or modified
in whole or in part, only by a duly authorized agreement in writing executed
in the same manner as this Agreement and which makes reference to this
Agreement.
Section 11.11. PUBLICITY. All press releases or other public
communications of any nature whatsoever relating to the transactions
contemplated by this Agreement, and the method of the release for publication
thereof, shall be subject to the prior mutual approval of Purchaser and
Sellers, which approval shall not be unreasonably withheld by any party;
provided, however, that, nothing herein shall prevent any party from publishing
such press releases or other public communications as such party may consider
necessary in order to satisfy such party's legal or contractual obligations
after such consultation with the other parties hereto as is reasonable
under the circumstances.
Section 11.12. DISPUTE RESOLUTION. Any and all disputes arising out of or
relating to this contract, or the breach, termination or validity thereof,
shall be resolved by final and binding, confidential arbitration in
accordance with the then current Center for Public Resources Institute for
Dispute Resolution Rules for Non-Administered Arbitration of Business
Disputes, by a sole arbitrator selected from among the Center for Public
Resources Panel of Distinguished Neutrals. The arbitration shall be
governed by the United States Arbitration Act, 9 U.S.C. 1-16, and judgment
upon the award rendered by the arbitrator may be entered by any court
having jurisdiction thereof. Neither party nor the arbitrator shall
disclose the existence, content or results of any arbitration hereunder
without the prior written consent of all parties. The place of arbitration
shall be Chicago, Illinois. The costs of the arbitrator and all expenses
relating to the arbitration (exclusive of legal fees) shall be borne
equally by the parties. The arbitrator may award reasonable attorneys'
fees to the prevailing party at the arbitrator's sole discretion.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF the parties have hereunto caused this Agreement to be
duly executed as of the date first above written.
LAMAR ADVERTISING COMPANY
By: /s/ Keith A. Istre
____________________________
Name: Keith A. Istre
Title: Chief Financial Officer
CHANCELLOR MEZZANINE HOLDINGS CORPORATION
By: /s/ William S. Banowsky, Jr.
----------------------------
Name: William S. Banowsky, Jr.
Title: Executive Vice President
CHANCELLOR MEDIA CORPORATION OF LOS ANGELES
By: /s/ William S. Banowsky, Jr.
----------------------------
Name: William S. Banowsky, Jr.
Title: Executive Vice President
<PAGE>
AMENDED AND RESTATED VOTING AGREEMENT
THIS AMENDED AND RESTATED VOTING AGREEMENT (this "Agreement"), dated
as of July 12, 1999, among LAMAR ADVERTISING COMPANY, a Delaware
corporation (the "Company"), CHANCELLOR MEDIA CORPORATION OF LOS ANGELES,
a Delaware corporation ("Chancellor LA"), CHANCELLOR MEZZANINE HOLDINGS
CORPORATION, a Delaware corporation ("Chancellor Mezzanine"), and REILLY
FAMILY LIMITED PARTNERSHIP, a Louisiana limited partnership (the
"Stockholder").
WHEREAS, the Company and Chancellor LA have entered into (i) that
certain Stock Purchase Agreement dated as of June 1, 1999 (the "Original
Purchase Agreement") and (ii) that certain Subscription Agreement, dated
as of June 1, 1999 (the "Subscription Agreement");
WHEREAS, the Company, Chancellor LA and Chancellor Mezzanine are
entering into that certain Amended and Restated Stock Purchase Agreement
of even date herewith (the "Purchase Agreement") in order to (i)
terminate the Subscription Agreement and (ii) amend and restate the
Original Purchase Agreement in its entirety;
WHEREAS, the Purchase Agreement contemplates the issuance and sale
of shares (collectively, the "Company Shares") of Class A Common Stock,
par value $0.001 per share, of the Company ("Class A Common Stock"), to
Chancellor LA and Chancellor Mezzanine upon the terms and subject to the
conditions set forth in the Purchase Agreement;
WHEREAS, all of the shares of Class A Common Stock and Class B
Common Stock, $0.001 par value per share, of the Company ("Class B Common
Stock"), that are held of record as of the date hereof by the Stockholder
or over which the Stockholder has the power to direct the vote, together
with any shares of capital stock of the Company acquired by the
Stockholder after the date hereof and during the term of this Agreement,
including upon exercise of any option or warrant, are collectively
referred to herein as the "Subject Shares;" and
WHEREAS, as a condition to its willingness to enter into the
Original Purchase Agreement, Chancellor LA requested that the Stockholder
enter into, and the Stockholder agreed to enter into, that certain Voting
Agreement dated as of June 1, 1999 (the "Original Voting Agreement"); and
WHEREAS, the parties are entering into this Agreement in order to
amend and restate the Original Voting Agreement to reflect changes that
are appropriate as a result of the parties' execution and delivery of the
Purchase Agreement;
NOW, THEREFORE, in consideration of Chancellor LA and Chancellor
Mezzanine entering into the Purchase Agreement, and in consideration of
the premises and the representations, warranties and agreements contained
herein, the parties agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS. The Stockholder
hereby represents and warrants to Chancellor LA and Chancellor Mezzanine as of
the date hereof as follows:
(a) AUTHORITY; NONCONTRAVENTION. The Stockholder has all
requisite power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by the Stockholder, and the consummation
of the transactions contemplated hereby, have been duly authorized
by all necessary partnership action on the part of the Stockholder.
This Agreement has been duly authorized, executed and delivered by
the Stockholder and constitutes a valid and binding obligation of
the Stockholder enforceable in accordance with its terms. The
execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby and compliance
with the terms hereof (including Section 3 of this Agreement) will
not, conflict with, or result in any violation of, or default (with
or without notice or lapse of time or both) under any provision of,
the certificate of limited partnership, the partnership agreement
or any other partnership organizational documents of the
Stockholder, or any trust agreement, loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment,
order, notice, decree, statute, law, ordinance, rule or regulation
applicable to the Stockholder or to the Stockholder's property or
assets.
(b) THE SUBJECT SHARES. The Stockholder is the record or
beneficial owner of, and has good and marketable title to, the
Subject Shares, free and clear of any claims, liens, encumbrances
and security interests whatsoever. The Stockholder has the sole
right to vote the Subject Shares. None of the Subject Shares is
subject to any voting trust or other agreement (other than the
Stockholders Agreement, among the parties hereto, of even date
herewith (the "Stockholders Agreement")), arrangement or
restriction with respect to the voting of the Subject Shares as
required by this Agreement.
2. REPRESENTATIONS AND WARRANTIES OF CHANCELLOR LA AND CHANCELLOR
MEZZANINE. Each of Chancellor LA and Chancellor Mezzanine hereby represents
and warrants to the Stockholder as of the date hereof that (i) such entity has
all requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby; (ii) the execution and
delivery of this Agreement by such entity, and the consummation of the
transactions contemplated hereby, have been duly authorized by all necessary
corporate action on the part of such entity; (iii) this Agreement has been duly
executed and delivered by such entity and constitutes a valid and binding
obligation of such entity enforceable in accordance with its terms; and (iv)
the execution and delivery of this Agreement do not, and the consummation of
the transactions contemplated hereby and compliance with the terms hereof will
not, conflict with, or result in any violation of, or default (with or without
notice or lapse of time or both) under any provision of, the certificate of
incorporation or bylaws of such entity, any trust agreement, loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order, notice,
decree, statute, law, ordinance, rule or regulation applicable to such entity
or to such entity's property or assets.
3. COVENANTS OF THE STOCKHOLDER. Until the termination of this
Agreement in accordance with Section 6, the Stockholder agrees as follows:
(a) At any meeting of stockholders of the Company called to
vote upon the approval and authorization of the issuance of the
Company Shares, as contemplated by the Purchase Agreement, or at
any adjournment thereof or in any other circumstances upon which a
vote, consent or other approval (including by written consent) with
respect to the approval and authorization of the issuance of the
Company Shares, is sought, the Stockholder shall vote (or cause to
be voted) the Subject Shares in favor of such proposals and any of
the other transactions contemplated by the Purchase Agreement. The
Stockholder further agrees (i) not to convert any Subject Shares
that are shares of Class B Common Stock into shares of Class A
Common Stock and (ii) not to waive or otherwise forfeit its right
to have each Subject Share that is a share of Class B Common Stock
be entitled to ten (10) votes per share.
(b) Except as provided in the immediately following sentence
of this Section 3(b), the Stockholder agrees not to (i) sell,
transfer, pledge, assign or otherwise dispose of (including by
gift) (collectively, the "Transfer"), or enter into any contract,
option or other arrangement (including any profit sharing
agreement) with respect to the Transfer of the Subject Shares to
any person, or (ii) enter into any voting arrangement, whether by
proxy, voting agreement or otherwise (other than the Amended and
Restated Stockholders Agreement to be entered into in connection
with the closing of the transactions contemplated by the Purchase
Agreement (the "Stockholders Agreement")), with respect to any
capital stock of the Company, and agrees not to commit or agree to
take any of the foregoing actions. Notwithstanding the foregoing,
the Stockholder shall have the right, for tax or estate planning
purposes, to Transfer the Subject Shares to a transferee provided
that, as a condition to any such Transfer, each such transferee
shall execute and deliver to Chancellor LA and Chancellor Mezzanine
a counterpart of this Agreement and expressly agree to be bound
hereby.
(c) Until after the earlier of (i) the consummation of the
transactions contemplated by the Purchase Agreement and (ii) the
termination of the Purchase Agreement, the Stockholder shall use
all reasonable efforts to take, or cause to be taken, all actions,
and to do, or cause to be done, and to assist and cooperate with
Chancellor LA and Chancellor Mezzanine in doing, all things
necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the transactions
contemplated by the Purchase Agreement.
(d) Immediately prior to the closing of the transactions
contemplated by the Purchase Agreement (the "Purchase
Closing"), the Stockholder shall execute and deliver to each
of the Company, Chancellor LA and Chancellor Mezzanine, the
Stockholders Agreement, dated as of the date of the Purchase
Closing, the form of which is attached to the Purchase
Agreement as Annex E, as required by Section 7.3(e) of the
Purchase Agreement.
4. FURTHER ASSURANCES. The Stockholder will, from time to time, execute
and deliver, or cause to be executed and delivered, such additional or further
consents, documents and other instruments as Chancellor LA and Chancellor
Mezzanine may reasonably request for the purpose of effectively carrying out
the transactions contemplated by this Agreement.
5. ASSIGNMENT. Neither party hereto shall assign this Agreement or any
part hereof without the prior written consent of the other party. Subject to
the foregoing, this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective permitted successors and assigns.
6. TERMINATION. This Agreement shall terminate upon the earlier of (a)
the termination of the Purchase Agreement in accordance with the terms thereof,
or (b) the closing of the transactions contemplated thereby.
7. GENERAL PROVISIONS.
(a) AMENDMENTS. This Agreement may not be amended except by
an instrument in writing signed by each of the parties hereto.
(b) NOTICE. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered
personally or sent by overnight courier (providing proof of
delivery) to the Company, Chancellor LA and Chancellor Mezzanine in
accordance with Section 11.2 of the Purchase Agreement and to the
Stockholder at its address set forth on the signature pages hereto
(or at such other address for a party as shall be specified by like
written notice).
(c) INTERPRETATION. When a reference is made in this
Agreement to Sections, such reference shall be to a Section to this
Agreement unless otherwise indicated. The headings contained in
this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
Wherever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words
"without limitation."
(d) COUNTERPARTS. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the
same agreement, and shall become effective when one or more of the
counterparts have been signed by each of the parties and delivered
to the other party, it being understood that each party need not
sign the same counterpart.
(e) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement (including the documents and instruments referred to
herein) (i) constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof and (ii) is
not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
(f) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE
REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW THEREOF.
8. ENFORCEMENT. The parties agree that irreparable damage would occur in
the event that any of the provisions of this A greement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any competent court of the United
States located in the State of Delaware or in a Delaware state court, this
being in addition to any other remedy to which they are entitled at law or in
equity. In addition, each of the parties hereto (i) consents to submit such
party to the personal jurisdiction of any Federal court in the event any
dispute arises out of this Agreement or any of the transactions contemplated
hereby, (ii) agrees that such party will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
(iii) agrees that such party will not bring any action relating to this
Agreement or the transactions contemplated hereby in any court other than a
Federal court sitting in the state of Delaware or a Delaware state court and
(iv) waives any right to trial by jury with respect to any claim or proceeding
related to or arising out of this Agreement or any of the transactions
contemplated hereby.
[The remainder of this page is intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be duly executed as of the date first
written above.
LAMAR ADVERTISING COMPANY
By: /s/ Keith A. Istre
-------------------------------------
Name: Keith A. Istre
Title: Cief Financial Officer
CHANCELLOR MEZZANINE HOLDINGS CORPORATION
By: /s/ William S. Banowsky, Jr.
-------------------------------------
Name: William S. Banowsky, Jr.
Title: Executive Vice President
CHANCELLOR MEDIA CORPORATION OF
LOS ANGELES
By: /s/ William S. Banowsky, Jr.
-------------------------------------
Name: William S. Banowsky, Jr.
Title: Executive Vice President
REILLY FAMILY LIMITED PARTNERSHIP
By: /s/ Kevin P. Reilly, Jr.
-------------------------------------
Name: Kevin P. Reilly, Jr.
Title: General Partner
<PAGE>
STOCKHOLDERS AGREEMENT
BY AND AMONG
LAMAR ADVERTISING COMPANY
AND
SIGNATORIES LISTED HEREIN
-------------------------------
Dated as of ____, 1999
--------------------------------
<PAGE>
TABLE OF CONTENTS
(continued)
Page
Article 1 DEFINITIONS..........................................1
Section 1.1 Definitions..........................................2
Section 1.2 Rules of Construction ...............................3
Article 2 MANAGEMENT OF THE COMPANY AND CERTAIN
ACTIVITIES...........................................4
Section 2.1 Board of Directors...................................4
2.1.1 Board of Representation..............................4
2.1.2 Vacancies............................................4
2.1.3 Committee Representation.............................4
2.1.4 Costs and Expenses...................................5
2.1.5 Other Activities of teh Holders; Fiduciary Duties....5
Article 3 CHANCELLOR LOCK-UP...................................5
Section 3.1 Lock-Up Agreement....................................5
Article 4 CERTAIN LIMITATIONS..................................6
Section 4.1 Transactions with Affiliates.........................6
Section 4.2 Other Significant Transactions.......................6
Article 5 LEGENDS..............................................7
Section 5.1 Restrictive Legends..................................7
5.1.1 Securities Act Legend................................7
5.1.2 Other Legends........................................7
Section 5.2 Termination of Certain Restrictions..................7
Article 6 TERMINATION..........................................8
Section 6.1 Termination..........................................8
Article 7 MISCELLANEOUS........................................8
Section 7.1 Financial Statements.................................8
Section 7.2 Notices..............................................8
Section 7.3 Voting of Holders....................................9
Section 7.4 Governing Law.......................................10
Section 7.5 Successors and Assigns..............................10
Section 7.6 Duplicate Originals.................................10
Section 7.7 Severability........................................10
Section 7.8 No Waivers; Amendments..............................10
Section 7.9 Entire Agreement....................................10
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "Stockholders Agreement") dated as
of ________, 1999, is entered into by and among Lamar Advertising
Company, a Delaware corporation (including its successors, the
"Company"), and the securityholders of the Company listed on the
signature pages hereof, or who may execute counterpart signature pages
hereto following the date hereof.
In consideration of the premises, mutual covenants and agreements
hereinafter contained and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1
DEFINITION
SECTION 1.1 DEFINITIONS.
"Affiliate" means, with respect to any Person, any Person
who, directly or indirectly, controls, is controlled by or is
under common control with that Person. For purposes of this
definition, "control" when used with respect to any Person
means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise.
"BENEFICIALLY OWN" OR "BENEFICIAL OWNERSHIP" means
beneficial ownership determined in accordance with Rule 13d-3
promulgated under the Exchange Act.
"CHANCELLOR LA" means Chancellor Media Corporation of Los
Angeles, a Delaware corporation.
"CHANCELLOR DESIGNEE" shall have the meaning provided in
SECTION 2.1.1(A) hereof.
"CHANCELLOR HOLDERS" means, collectively, Chancellor LA,
Chancellor Mezzanine and any Affiliates of Chancellor LA or
Chancellor Mezzanine who then are parties to this Stockholders
Agreement and who own any Common Stock or Common Stock
Equivalents or any interest therein.
"CHANCELLOR MEZZANINE" means Chancellor Mezzanine Holdings
Corporation, a Delaware corporation.
"CHANGE OF CONTROL" means the occurrence of one or more of
the following events: (i) a majority of the Board of Directors
of the Company shall consist of Persons who are not Continuing
Directors, or (ii) the failure by Reilly and the Chancellor
Holders collectively to Beneficially Own securities having more
than 50% of the ordinary voting power for the election of
directors of the Company.
"CLASS A COMMON STOCK" means shares of the Class A Common
Stock, par value $.001 per share, of the Company, and any
capital stock into which such Class A Common Stock hereafter
may be changed.
"CLASS B COMMON STOCK" means shares of the Class B Common
Stock, par value $.001 per share, of the Company, and any
capital stock, other than Class A Common Stock, into which such
Class B Common Stock hereafter may be changed.
"COMMON STOCK" means, collectively, the Class A Common
Stock and the Class B Common Stock.
"COMMON STOCK EQUIVALENTS" means, without duplication with
any other Common Stock or Common Stock Equivalents, any
security of the Company which is convertible into, exercisable
for or exchangeable for, directly or indirectly, Common Stock
of the Company, whether at the time of issuance or upon the
passage of time or the occurrence of some future event.
"COMPANY" shall have the meaning provided in the
introductory paragraph hereof.
"CONTINUING DIRECTOR " means, as of the date of
determination, any Person who (i) is a Chancellor Designee,
(ii) was a member of the Board of Directors of the Company as
of the date hereof, (iii) was nominated for election or elected
to the Board of Directors of the Company with the affirmative
vote of a majority of the Continuing Directors who were members
of the Board of Directors of the Company at the time of such
nomination or election or (iv) is a representative of Reilly or
an Affiliate of Reilly.
"EBITDA" shall have the meaning provided in SECTION 7.1
hereof.
"EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated by the
SEC thereunder.
"FULLY-DILUTED COMMON STOCK" means, at any time, the then
outstanding Common Stock of the Company plus (without
duplication) all shares of Common Stock issuable, whether at
such time or upon the passage of time or the occurrence of
future events, upon the conversion or exchange of all then
outstanding Common Stock Equivalents.
"GAAP" means generally accepted accounting principles.
"GROUP" means a group of related persons for purposes of
Section 13(d) of the Exchange Act.
"HOLDER" means (i) any Person (other than the Company)
listed on the signature pages hereof as of the date of this
Stockholders Agreement and (ii) any direct or indirect
transferee of any such Person who elects to become a party to
this Stockholders Agreement by executing and delivering a
counterpart signature page hereto.
"MAJORITY CHANCELLOR HOLDERS" means Chancellor Holders
owning Common Stock and/or Common Stock Equivalents
representing a majority of the Fully-Diluted Common Stock then
owned by all Chancellor Holders.
"PERSON" or "PERSON" means any individual, corporation,
partnership, limited liability company, joint venture,
association, joint-stock company, trust, unincorporated
organization or government or other agency or political
subdivision thereof.
"PURCHASE AGREEMENT" means the Amended and Restated Stock
Purchase Agreement, date as of July 12, 1999, by and among the
Company Chancellor Mezzanine and Chancellor LA.
"REILLY" means, collectively, the Reilly Family Limited
Partnership, a Louisiana limited partnership ("RFLP"), and any
Affiliates of RFLP (other than the Company and any of its
Subsidiaries) who then are parties to this Stockholders
Agreement and who own any Common Stock or Common Stock
Equivalents or any interest therein.
"SEC" means the U. S. Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated by the SEC
thereunder.
"STOCKHOLDERS AGREEMENT" means this Stockholders
Agreement, as such from time to time may be amended.
"SUBSIDIARY" of any Person means (i) a corporation a
majority of whose outstanding shares of capital stock or other
equity interests with voting power, under ordinary
circumstances, to elect directors, is at the time, directly or
indirectly, owned by such Person, by one or more subsidiaries
of such Person or by such Person and one or more subsidiaries
of such Person, and (ii) any other Person (other than a
corporation) in which such Person, a subsidiary of such Person
or such Person and one or more subsidiaries of such Person,
directly or indirectly, at the date of determination thereof,
has (x) at least a majority ownership interest or (y) the power
to elect or direct the election of the directors or other
governing body of such Person.
SECTION 1.2 RULES OF CONSTRUCTION. Unless the context otherwise
requires
(1) a term has the meaning assigned to it;
(2) "OR" IS NOT EXCLUSIVE;
(3) words in the singular include the plural, and words in
the plural include the singular;
(4) provisions apply to successive events and transactions; and
(5) "herein," "hereof" and other words of similar import
refer to this Stockholders Agreement as a whole and not to
any particular Article, Section or other subdivision.
Article 2
MANGEMENT OF THE COMPANY AND CERTAIN ACTIVITIES
Section 2.1 BOARD OF DIRECTORS
2.1.1 BOARD OF REPRESENTATIVES
(a) From and following the date hereof, the Board of Dirctions
of the Company shall consist of ten (10) individuals. The Majority
Chancellor Holders will be entitled to designate two (2) directors (each
a "Chancellor Designee"). The existence of the right, pursuant to this
SECTION 2.1.1(A), on the part of the Majority Chancellor Holders to
designate certain directors will in no way limit or impair the right of
the Majority Chancellor Holders to vote their shares of capital stock of
the Company as they see fit with respect to the election of persons to
fill seats on the Board of Directors other than the seats filled as a
result of the designation rights under this SECTION 2.1.1(A).
(b) The Company, from time to time at each appropriate time,
will cause each of the persons theretofore serving as Chancellor
Designees (or other persons designated by the Majority Chancellor Holders
as new Chancellor Designees in replacement of such persons) to be
nominated and recommended by the Board of Directors of the Company for
reelection to the Board of Directors of the Company by the stockholders
of the Company upon any expiration of their respective terms of office.
2.1.2 VACANCIES. If, prior to his election to the Board of
Directors of the Company pursuant to SECTION 2.1.1 hereof, any Chancellor
Designee shall be unable or unwilling to serve as a director of the
Company, then the Majority Chancellor Holders shall be entitled to
designate a replacement Chancellor Designee. If, following an election
to the Board of Directors of the Company pursuant to SECTION 2.1.1
hereof, any Chancellor Designee shall resign or be removed or be unable
to serve for any reason prior to the expiration of his term as a director
of the Company, then the Majority Chancellor Holders shall, within thirty
(30) days of such event, notify the Board of Directors of the Company in
writing of a replacement Chancellor Designee, and the Board of Directors
shall appoint such replacement Chancellor Designee to fill the unexpired
term of the director who such new Chancellor Designee is replacing. If
the Majority Chancellor Holders request that any Chancellor Designee be
removed as a director (with or without cause) by written notice thereof
to the Company, then each of the Holders shall vote all of its or his
capital stock in favor of such removal upon such request.
2.1.3 COMMITTEE REPRESENTATION. So long as the Chancellor
Holders are entitled to designate any director under SECTION 2.1.1, at
least one (1) of the Chancellor Designees shall be permitted to serve on
each committee of the Board of Directors of the Company (provided that,
if such committee has eligibility requirements that are imposed by a
Person other than the Company, such as independence requirements for the
independent committee of the Board of Directors of the Company, such
designee meets those requirements). Notwithstanding the foregoing, the
Executive Committee of the Board of Directors of the Company shall not be
required to have a Chancellor Designee serving on such committee so long
as (i) the actions of such committee are restricted to the day to day
management of the Company in the ordinary course of business and (ii)
each of such actions of such committee is not material to the Company and
its Subsidiaries, taken as a whole.
2.1.4 COSTS AND EXPENSES. The Company will pay all reasonable
out-of-pocket expenses incurred by the Chancellor Designees in connection
with the participation by directors in meetings of the Board of Directors
(and committees thereof) of the Company.
2.1.5 OTHER ACTIVITIES OF THE HOLDERS; FIDUCIARY DUTIES. It is
understood and accepted that the Holders and their Affiliates have
interests in other business ventures which may be in conflict with the
activities of the Company and its Subsidiaries and that, subject to
applicable law, nothing in this Stockholders Agreement shall limit the
current or future business activities of the Holders whether or not such
activities are competitive with those of the Company and its
Subsidiaries. Nothing in this Stockholders Agreement, express or
implied, shall relieve any officer or director of the Company or any of
its Subsidiaries, or any Holder, of any fiduciary or other duties or
obligations they may have to the Company's stockholders.
Article 3
CHANCELLOR LOCK-UP
SECTION 3.1 LOCK-UP AGREEMENT. Each of Chancellor LA and Chancellor
Mezzanine agrees that, until that date that is twelve (12) months
following the date hereof, such entity will not sell or otherwise
transfer any of the shares of Common Stock acquired pursuant to the
Purchase Agreement, or any interest therein; provided, however, that this
SECTION 3.1 shall not prohibit the transfer of any such shares (or any
interest therein) (i) to any Affiliate of Chancellor LA or Chancellor
Mezzanine in compliance with the other provisions of this Stockholders
Agreement, (ii) in a transaction approved by the Board of Directors of
the Company or (iii) pursuant to a bona fide pledge of such shares to a
lender or in connection with a foreclosure (or similar proceeding or
remedy) effected with respect to any such pledge.
ARTICLE 4
CERTAIN LIMITATIONS
SECTION 4.1 TRANSACTIONS WITH AFFILIATES. The Company will not, nor
will it permit any of its Subsidiaries to, directly or indirectly, enter
into or engage in any transaction with or for the benefit of any of its
Affiliates (other than transactions between the Company and a wholly
owned Subsidiary of the Company or among wholly owned Subsidiaries of the
Company), except for any such transaction which (i) has been approved in
advance in writing by the Majority Chancellor Holders or (ii) is on terms
no less favorable than those that might reasonably have been obtained in
a comparable transaction on an arm's-length basis from a person that is
not an Affiliate. With respect to the requirement set forth in clause
(ii) of the immediately preceding sentence, for a transaction or series
of related transactions involving a value of $1,000,000 or more, such
determination will be made in good faith by a majority of the members of
the Board of Directors of the Company and a majority of the disinterested
members of the Board of Directors of the Company, and for a transaction
or series of transactions involving a value of $5,000,000 or more, the
Board of Directors of the Company must receive an opinion from a
nationally recognized investment banking firm that such transaction is
(or that such series of transactions are) fair, from a financial point of
view, to the Company or such Subsidiary, as applicable. Notwithstanding
the foregoing, the restrictions set forth in this SECTION 4.1 shall not
apply to reasonable and customary directors' fees, reasonable and
customary directors' or officers' indemnification arrangements, or
reasonable and customary compensatory arrangements with officers of the
Company.
Section 4.2 OTHER SIGNIFICANT TRANSACTIONS. Subject to the
provisions set forth in this SECTION 4.2, without the prior written
approval of the Majority Chancellor Holders, neither the Company nor any
of the Holders will take any action which would result in (and the
Company will not permit any of its Subsidiaries to take any action which
would result in) (i) a Change of Control or (ii) the acquisition or
disposition by the Company and/or any of its Subsidiaries, in a single
transaction or a series of related transactions, of assets (which shall
include, without limitation, capital stock or other equity interests in
any Person) with an aggregate fair market value of $500,000,000 or more.
Notwithstanding the foregoing, the restrictions set forth in this SECTION
4.2 shall not apply to (a) any transaction pursuant to which all Persons
who owned Common Stock immediately prior to such transaction cease to own
any equity interest in the Company or, if applicable, in the entity that
is the successor to the Company as a result of such transaction, (b) any
merger in which all Persons who owned Common Stock immediately prior to
such merger are permitted to exercise statutory appraisal rights, or (c)
any sale of substantially all of the assets of the Company to a Person
that is not an Affiliate of the Company if the net proceeds of such sale
are promptly distributed to the holders of Common Stock.
Article 5
LEGENDS
SECTION 5.1 RESTRICTIVE LEGENDS.
5.1.1 SECURITIES ACT LEGEND. Except as otherwise provided in
SECTION 5.2 hereof, each certificate evidencing shares of Common
Stock issued on or after the date hereof to a Holder or to a
subsequent transferee of such Holder, shall be stamped or otherwise
imprinted with a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, NOR PURSUANT TO
THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE. SUCH SECURITIES MAY NOT
BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE
ASSIGNED, EXCEPT PURSUANT TO (i) A REGISTRATION STATEMENT WITH RESPECT TO
SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT, (ii) RULE 144 UNDER
SUCH ACT, OR (iii) ANY OTHER EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
5.12 OTHER LEGENDS. Each certificate evidencing shares of
Common Stock or Common Stock Equivalents, where applicable, issued
on or after the date hereof to a Holder or a subsequent transferee
of such Holder shall be stamped or otherwise imprinted with a legend
in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER, VOTING AND OTHER TERMS AND CONDITIONS SET FORTH
IN THE STOCKHOLDERS AGREEMENT DATED AS OF ______________, 1999, A COPY OF
WHICH MAY BE OBTAINED FROM THE COMPANY AT ITS PRINCIPAL EXECUTIVE
OFFICES.
SECTION 5.2 TERMINATION OF CERTAIN RESTRICTIONS. Notwithstanding
the foregoing provisions of this ARTICLE 5, the legend requirements of
SECTION 5.1.1 shall terminate as to any Common Stock (i) when and so long
as such Common Stock shall have been effectively registered under the
Securities Act and disposed of pursuant thereto or (ii) when the Company
shall have received an opinion of counsel reasonably satisfactory to it
that such Common Stock may be transferred without registration thereof
under the Securities Act and that such legend may be removed. Whenever
the restrictions imposed by SECTION 5.1.1 shall terminate as to any
Common Stock, the Holder thereof shall be entitled to receive from the
Company, at the Company's expense, a new certificate evidencing such
shares of Common Stock not bearing the restrictive legend set forth in
SECTION 5.1.1.
ARTICLE 6
TERMINATION
SECTION 6.1 TERMINATION. The provisions of this Stockholders
Agreement shall terminate on the earlier of (i) the date that is ten (10)
years following the date of this Stockholders Agreement and (ii) such
date that the Chancellor Holders collectively no longer Beneficially Own
at least ten percent (10%) of the Fully-Diluted Common Stock.
Notwithstanding the foregoing, SECTION 7.1 hereof shall remain in full
force and effect for so long as (and only for so long as) the information
to be provided to Chancellor LA or Chancellor Mezzanine under such
SECTION 7.1 is necessary for such entity in connection with the
preparation of its financial statements.
ARTICLE 7
MISCELLANEOUS
SECTION 7.1 FINANCIAL STATEMENTS. The Company shall deliver to
Chancellor LA and Chancellor Mezzanine the following, together with
management's discussion and analysis of financial condition and results
of operations for the relevant fiscal periods, in writing:
(a) as soon as available and in any event within 80 days after
the end of each fiscal year of the Company, (i) an audited consolidated
balance sheet or equivalent statement of financial position of the
Company and the related consolidated statements of income, cash flows,
and changes in stockholders' equity for such fiscal year, setting forth
in each case in comparative form the figures for the previous fiscal
year, and (ii) a statement of earnings before interest, taxes,
depreciation and amortization as per the consolidated financial
statements of the Company prepared in accordance with GAAP ("EBITDA") for
such fiscal year, all presented in accordance with GAAP and reported on
as to fairness of presentation, accounting principles and consistency,
and otherwise by independent public accountants; and
(b) as soon as available and in any event within 35 days after
the end of each calendar quarter of each fiscal year of the Company, (i)
an unaudited consolidated balance sheet or equivalent statement of
financial position of the Company as of the end of each such calendar
quarter, as applicable, and the related consolidated statements of income
and cash flows for the portion of the Company's fiscal year ended at the
end of each such calendar quarter setting forth in comparative form in
the case of such statements of income and cash flows the figures for the
corresponding calendar quarter of the previous fiscal year, and (ii) a
statement of EBITDA for such calendar quarter, all presented in
accordance with GAAP and certified as to fairness of presentation,
accounting principles and consistency by an officer of the Company.
SECTION 7.2 NOTICES. Any notices or other communications required
or permitted hereunder shall be in writing, and shall be sufficiently
given if made by hand delivery, by telex, by telecopier, by registered or
certified mail, postage prepaid, return receipt requested, or by
overnight courier, addressed as follows (or at such other address as may
be substituted by notice given as herein provided):
If to the Company:
Lamar Advertising Company
5551 Corporate Boulevard
Baton Rouge, Louisiana 70808
Attention: Keith Istre
Fax: (225) 923-0658
With copies to:
Jones, Walker, Waechter, Poitevent,
Carrere & Denegre, L.L.P.
5th Floor
Four United Plaza
8555 United Plaza Boulevard
Baton Rouge, Louisiana 70809
Attention: Brad J. Axelrod
Fax: (225) 231-3336
If to any Holder, at its address listed on the signature pages
hereof.
Any notice or communication hereunder shall be deemed to have been
given or made as of the date so delivered if personally delivered; when
answered back, if telexed; when receipt is acknowledged, if telecopied;
five (5) calendar days after mailing if sent by registered or certified
mail (except that a notice of change of address shall not be deemed to
have been given until actually received by the addressee); and one (1)
business day after delivery to a reputable overnight courier service
guaranteeing next business day delivery.
Failure to mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders. If
a notice or communication is mailed in the manner provided above, it is
duly given, whether or not the addressee receives it.
SECTION 7.3 VOTING OF HOLDERS. Each Holder shall vote his or its
shares of Voting Stock at any regular or special meeting of stockholders
of the Company or in any written consent executed in lieu of such a
meeting of stockholders and shall take all other lawful actions
(including using its, his or her commercially reasonable efforts to cause
the Board of Directors of the Company to take all such actions) necessary
to give effect to the agreements contained in this Stockholders Agreement
(including but not limited to the election of the Chancellor Designees)
and to ensure that the certificate of incorporation and bylaws of the
Company as in effect at any time hereafter do not conflict in any respect
with the provisions of this Stockholders Agreement. In order to
effectuate the provisions of this Stockholders Agreement, each Holder
hereby agrees that when any action or vote is required to be taken by
such Holder pursuant to this Stockholders Agreement, such Holder shall
use his commercially reasonable efforts to call, or cause the appropriate
officers and directors of the Company to call, a special or annual
meeting of stockholders of the Company, as the case may be, or execute or
cause to be executed a consent in writing in lieu of any such meetings
pursuant to the General Corporation Law of the State of Delaware, as
amended from time to time, or any successor statutes.
Section 7.4 GOVERNING LAW. THIS STOCKHOLDERS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
SECTION 7.5 SUCCESSORS AND ASSIGNS. This Stockholders Agreement
shall be binding upon the Company, each Holder, and their respective
successors and permitted assigns.
Section 7.6 DUPLICATE ORIGINALS. All parties may sign any number of
copies of this Stockholders Agreement. Each signed copy shall be an
original, but all of them together shall represent the same agreement.
SECTION 7.7 SEVERABILITY. In case any provision in this
Stockholders Agreement shall be held invalid, illegal or unenforceable in
any respect for any reason, the validity, legality and enforceability of
any such provision in every other respect and the remaining provisions
shall not in any way be affected or impaired thereby
Section 7.8 NO WAIVERS; AMENDMENTS.
7.8.1 NO FAILURE OR DELAY ON THE PART OF THE COMPANY OR ANY
HOLDER IN EXERCISING ANY RIGHT, POWER OR REMEDY HEREUNDER SHALL OPERATE
AS A WAIVER THEREOF, NOR SHALL ANY SINGLE OR PARTIAL EXERCISE OF ANY SUCH
RIGHT, POWER OR REMEDY PRECLUDE ANY OTHER OR FURTHER EXERCISE THEREOF OR
THE EXERCISE OF ANY OTHER RIGHT, POWER OR REMEDY. THE REMEDIES PROVIDED
FOR HEREIN ARE CUMULATIVE AND ARE NOT EXCLUSIVE OF ANY REMEDIES THAT MAY
BE AVAILABLE TO THE COMPANY OR ANY HOLDER AT LAW OR IN EQUITY OR
OTHERWISE.
7.8.2 Any provision of this Stockholders Agreement may be
amended or waived if, but only if, such amendment or waiver is in writing
and is signed by the Company, the Holders holding at least a majority of
the Fully-Diluted Common Stock held by all Holders and by the Majority
Chancellor Holders.
SECTION 7.9 ENTIRE AGREEMENT. This Stockholders Agreement contains
the entire agreement among the parties with respect to the subject matter
hereof and supersedes all prior agreements and understandings with
respect to such subject matter.
[SIGNATURE PAGES FOLLOW]
<PAGE>
LAMAR ADVERTISING COMPANY
By:___________________________
Name:_________________________
Title:________________________
<PAGE>
HOLDERS:
CHANCELLOR MEDIA CORPORATION
OF LOS ANGELES
By:______________________________
Name:____________________________
Title:___________________________
Address:
1845 Woodall Rogers Freeway
Suite 1300
Dallas, Texas 75201
Attention: General Counsel
Fax: (512) 340-7890
With copies to:
Weil, Gotshal & Manges LLP
100 Crescent Court
Suite 1300
Dallas, Texas 75201-6950
Attention: Michael A. Saslaw
Fax: (214) 746-7777
and
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, D.C. 20004-2502
Attention: Eric L. Bernthal
Fax: (202) 637-2201
<PAGE>
CHANCELLOR MEZZANINE HOLDINGS
CORPORATION
By:______________________________
Name:____________________________
Title:___________________________
Address:
1845 Woodall Rogers Freeway
Suite 1300
Dallas, Texas 75201
Attention: General Counsel
Fax: (512) 340-7890
With copies to:
Weil, Gotshal & Manges LLP
100 Crescent Court
Suite 1300
Dallas, Texas 75201-6950
Attention: Michael A. Saslaw
Fax: (214) 746-7777
and
Latham & Watkins
1001 Pennsylvania Avenue, N.W.
Suite 1300
Washington, D.C. 20004-2502
Attention: Eric L. Bernthal
Fax: (202) 637-2201
<PAGE>
REILLY FAMILY LIMITED PARTNERSHIP
By:______________________________
Name Kevin P. Reilly, Jr.
Title: General Partner
Address:
c/o Lamar Advertising Company
5551 Corporate Boulevard
Baton Rouge, Louisiana 70808
Attention: Kevin P. Reilly, Jr.
Fax: (225) 923-0658
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT dated as of _________, 1999 (this
"Agreement"), among Lamar Advertising Company, a Delaware corporation (the
"Issuer"), Chancellor Media Corporation of Los Angeles, a Delaware
Corporation ("Chancellor LA"), and Chancellor Mezzanine Holdings
Corporation, a Delaware corporation ("Chancellor Mezzanine").
WHEREAS, this Agreement is being entered into in connection with the
closing of the transactions contemplated by the Purchase Agreement referred
to below.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises, representations, warranties, covenants and agreements contained
herein, the parties hereto, intending to be legally bound hereby, agree as
follows:
ARTICLE 1
DEFINITIONS
Section 1.1 DEFINITIONS. The following terms, as used herein, shall
have the following respective meanings:
"Commission" means the Securities and Exchange Commission or any
successor governmental body or agency.
"Common Stock" means the Class A Common Stock, par value $0.001 per
share, of the Issuer and any capital stock into which such Common Stock
thereafter may be changed.
"Demand Registration" has the meaning ascribed thereto in Section
2.2(a).
"Demand Request" has the meaning ascribed thereto in Section 2.2(a).
"Disadvantageous Condition" has the meaning ascribed thereto in
Section 2.4.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Registration" means a registration under the Securities Act
of (i) securities pursuant to one or more Demand Registrations pursuant to
Section 2.2 hereof, (ii) securities registered on Form S-8 under the
Securities Act or any similar successor form and (iii) securities
registered to effect the acquisition of or combination with another
business entity.
"Holder" means (i) Chancellor LA, (ii) Chancellor Mezzanine and
(iii) any direct or indirect transferee of Chancellor LA or Chancellor
Mezzanine who shall agree to be bound by the terms of this Agreement.
"Person" or "person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint-stock company,
trust, unincorporated organization or government or other agency or
political subdivision thereof.
"Piggyback Registration" has the meaning ascribed thereto in
Section 2.3(a).
"Purchase Agreement" means the Amended and Restated Stock Purchase
Agreement dated as of July ___, 1999, among the Issuer, Chancellor LA and
Chancellor Mezzanine.
"Registrable Securities" means, at any time, any shares of Common
Stock owned by the Holders, whether owned on the date hereof or acquired
hereafter; PROVIDED, HOWEVER, that Registrable Securities shall not include
any shares of Common Stock (i) the sale of which has been registered
pursuant to the Securities Act and which shares have been sold pursuant to
such registration or (ii) which have been sold pursuant to Rule 144 of the
Commission under the Securities Act.
"Registration Expenses" means any and all expenses incident to
performance of or compliance with any registration of securities pursuant
to Article 2, including, without limitation, (i) all registration and
filing fees, (ii) all fees and expenses associated with filings required to
be made with the NASD (including, if applicable, the fees and expenses of
any "qualified independent underwriter" as such term is defined in
Rule 2720(b)(15) of the NASD Conduct Rules, and of its counsel), as may be
required by the rules and regulations of the NASD, (iii) fees and expenses
of compliance with securities or "blue sky" laws (including reasonable fees
and disbursements of counsel in connection with "blue sky" qualifications
of the Registrable Shares), (iv) rating agency fees, (v) printing expenses
(including expenses of printing certificates for the Registrable Shares in
a form eligible for deposit with The Depository Trust Company and of
printing prospectuses if the printing of prospectuses is requested by a
holder of Registrable Shares), (vi) messenger and delivery expenses,
(vii) the Issuer's internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), (viii) the fees and expenses incurred in connection
with any listing of the Registrable Shares, (ix) fees and expenses of
counsel for the Issuer and its independent certified public accountants
(including the expenses of any special audit or "cold comfort" letters
required by or incident to such performance), (x) Securities Act liability
insurance (if the Issuer elects to obtain such insurance), (xi) the fees
and expenses of any special experts retained by the Issuer in connection
with such registration, (xii) the fees and expenses of other persons
retained by the Issuer and (xiii) reasonable fees and expenses of one firm
of counsel for the Selling Holders (which shall be selected by the Holders
of a majority of the Registrable Securities being included in any
particular registration statement).
"Required Shelf Registration" has the meaning ascribed thereto in
Section 2.1.
"Rule 144" means Rule 144 (or any successor rule to similar effect)
promulgated under the Securities Act.
"Rule 145" means Rule 145 (or any successor rule to similar effect)
promulgated under the Securities Act.
"Rule 415 Offering" means an offering on a delayed or continuous
basis pursuant to Rule 415 (or any successor rule to similar effect)
promulgated under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller Affiliates" has the meaning ascribed thereto in Section 2.8.
"Selling Holder" means any Holder who sells Registrable Securities
pursuant to a public offering registered hereunder.
"Shelf Registration" means the registration under the Securities Act
of a Rule 415 Offering.
"Shelf Registration Statement" means a registration statement
intended to effect a Shelf Registration.
"Shelf Termination Date" has the meaning ascribed thereto in
Section 2.1(c).
Section 1.2 INTERNAL REFERENCES. Unless the context indicates otherwise,
references to Articles, Sections and paragraphs shall refer to the
corresponding articles, sections and paragraphs in this Agreement, and
references to the parties shall mean the parties to this Agreement.
ARTICLE 2
REGISTRATION RIGHTS
Section 2.1 SHELF REGISTRATION. At any time after the date that is ten
months from the date hereof, if requested by a Holder or Holders holding a
majority in interest of the Registrable Securities, as soon as practicable
(but in any event not more than 15 days) after such request, the Issuer
shall prepare and file with the Commission a Shelf Registration Statement
on an appropriate form that shall include all Registrable Securities, and
which shall not include any other securities (the "Required Shelf
Registration"). The Issuer shall use its reasonable best efforts to cause
such Shelf Registration Statement to be declared effective as soon as
practicable after such request; PROVIDED, HOWEVER, that the Issuer shall
have no obligation to cause such Shelf Registration Statement to be
declared effective on a date that is prior to the first anniversary of this
Agreement. Notwithstanding anything else contained in this Agreement, the
Issuer shall only be obligated to keep such Shelf Registration Statement
effective until the earliest of:
(a)(i) 12 months after the date such Shelf Registration
Statement has been declared effective, provided that such 12-month period
shall be extended by (1) the length of any period during which the Issuer
delays in maintaining the Shelf Registration Statement current pursuant to
Section 2.4, (2) the length of any period (in which such Shelf Registration
Statement is required to be effective hereunder) during which such Shelf
Registration Statement is not maintained effective, and (3) such number of
days that equals the number of days elapsing from (x) the date the written
notice contemplated by Section 2.6(e) below is given by the Issuer to
(y) the date on which the Issuer delivers to the Holders of Registrable
Securities the supplement or amendment contemplated by Section 2.6(e)
below;
(b)such time as all Registrable Securities have been sold or
disposed of thereunder or sold, transferred or otherwise disposed of to a
Person that is not a Holder; and
(c)such time as all securities owned by the Holders have
ceased to be Registrable Securities (the earliest of (a), (b) and (c) being
the "Shelf Termination Date").
The Required Shelf Registration shall not be counted as a Demand
Registration for purposes of Section 2.2 of this Agreement.
Section 2.2 DEMAND REGISTRATION.
(a) At any time after the date that is ten months from the date
hereof, upon written notice to the Issuer from a Holder or Holders holding
a majority in interest of the Registrable Securities (a "Demand Request")
requesting that the Issuer effect the registration under the Securities Act
of any or all of the Registrable Securities held by such requesting
Holders, which notice shall specify the intended method or methods of
disposition of such Registrable Securities, the Issuer shall prepare as
soon as practicable and, within 15 days after such request, file with the
Commission a registration statement with respect to such Registrable
Securities and thereafter use its reasonable best efforts to cause such
registration statement to be declared effective under the Securities Act
for purposes of dispositions in accordance with the intended method or
methods of disposition stated in such request within 30 days after the
filing of such registration statement; PROVIDED, HOWEVER, that the Issuer
shall have no obligation to (i) cause such registration statement filed
pursuant to this Section 2.2 to be declared effective on a date that is
prior to the first anniversary of this Agreement or (ii) cause such
registration statement filed pursuant to this Section 2.2 to be declared
effective during any period during which a Shelf Registration Statement
filed pursuant to Section 2.1 remains effective. Notwithstanding any other
provision of this Agreement to the contrary:
(i) the Holders may collectively exercise their Demand
Request rights for registration of their Registrable Securities under
this Section 2.2(a) on not more than three occasions (any such
registration being referred to herein as a "Demand Registration");
(ii) the method of disposition requested by Holders in
connection with any Demand Registration may not, without the Issuer's
written consent, be a Rule 415 Offering;
(iii) the Issuer shall not be required to effect a Demand
Registration hereunder if all securities owned by the Holders have
ceased to be Registrable Securities; and
(iv) the Issuer shall not be required to effect more than
one Demand Registration during any 12 month period.
(b) Notwithstanding any other provision of this Agreement to the
contrary, a Demand Registration requested by Holders pursuant to this
Section 2.2 shall not be deemed to have been effected, and, therefore, not
requested and the rights of each Holder shall be deemed not to have been
exercised for purposes of paragraph (a) above, (i) if such Demand
Registration has not become effective under the Securities Act or (ii) if
such Demand Registration, after it became effective under the Securities
Act, was not maintained effective under the Securities Act (including,
without limitation, if it was interfered with by any stop order,
injunctions or other order or requirement the Commission or other
governmental agency or court) for at least 30 days (or such shorter period
ending when all the Registrable Securities covered thereby have been
disposed of pursuant thereto) and, as a result thereof, the Registrable
Securities requested to be registered cannot be distributed in accordance
with the plan of distribution set forth in the related registration
statement. The Holders shall be deemed not to have exercised a Demand
Request under Section 2.2 if the Demand Registration related to such Demand
Request is delayed or not effected in the circumstances set forth in this
clause (b).
(c) The Issuer shall have the right to cause the registration of
additional shares of Common Stock for sale for the account of the Issuer,
but not for the account of any other Person, in the registration of
Registrable Securities requested by the Holders pursuant to Section 2.2(a)
above, PROVIDED, that if such Holders are advised by the lead or managing
underwriter referred to in Section 2.2(e) that, in such underwriter's good
faith view, all or a part of such Registrable Securities and additional
shares of Common Stock cannot be sold or the inclusion of such Registrable
Securities and additional shares of Common Stock in such registration would
be likely to have a material adverse effect on the price, timing or
distribution of the offering and sale of the Registrable Securities and
additional equity securities then contemplated, then the number of
securities that can, in the good faith view of such underwriter, be sold in
such offering without so materially adversely affecting such offering shall
be allocated first, pro rata among the requesting Holders on the basis of
the relative number requested to be included therein by each such Holder
and then second, to the Issuer. The Holders of the Registrable Securities
to be offered pursuant to paragraph (a) above may require that any such
additional equity securities be included by the Issuer in the offering
proposed by such Holders on the same conditions as the Registrable
Securities that are included therein. If, in the case of any registration
pursuant to a Demand Request, the Holders making such Demand Request are
advised by the lead or managing underwriter referred to in Section 2.2(e)
that, in such underwriter's good faith view, all or a part of such
Registrable Securities cannot be sold or the inclusion of such Registrable
Securities in such registration would be likely to have a material adverse
effect on the price, timing or distribution of the offering and sale of the
Registrable Securities then contemplated, then such Holders will have the
right, within 15 days following such advice from such underwriter, to elect
to terminate such Demand Request, in which case the Holders shall be deemed
not to have exercised a Demand Request pursuant to Section 2.2 hereof.
(d) Within 10 days after delivery of a Demand Request by a Holder,
the Issuer shall provide a written notice to each Holder, advising such
Holder of its right to include any or all of the Registrable Securities
held by such Holder for sale pursuant to the Demand Registration and
advising such Holder of procedures to enable such Holder to elect to so
include Registrable Securities for sale in the Demand Registration as each
such Holder may request. Any Holder may, within 20 days of delivery to
such Holder of a notice pursuant to this Section 2.2(d), elect to so
include such portion of its Registrable Securities in the Demand
Registration by written notice to such effect to the Issuer specifying the
number of Registrable Securities desired to be so included by such Holder.
(e) In the event that any public offering pursuant to either
Section 2.1 or 2.2 of this Agreement shall involve, in whole or in part, an
underwritten offering, the Holders of a majority of the Registrable
Securities being included in such underwritten offering shall have the
right to designate an underwriter or underwriters as the lead or managing
underwriters of such underwritten offering; PROVIDED, that such selection
shall be subject to the consent of the Issuer, which consent shall not be
unreasonably withheld or delayed.
Section 2.3 PIGGYBACK REGISTRATIONS.
(a) Each time the Issuer proposes to register any of its equity
securities (other than pursuant to an Excluded Registration) under the
Securities Act for sale to the public (whether for the account of the
Issuer or the account of any securityholder of the Issuer ) and the form of
registration statement to be used permits the registration of Registrable
Securities, the Issuer shall give prompt written notice to each Holder
(which notice shall be given not less than thirty (30) days prior to the
effective date of the Issuer's registration statement), which notice shall
offer each such Holder the opportunity to include any or all of its
Registrable Securities in such registration statement (a "Piggyback
Registration"), subject to the limitations contained in Section 2.3(b)
below. Each Holder who desires to have its Registrable Securities included
in such registration statement shall so advise the Issuer in writing
(stating the number of Registrable Securities desired to be registered)
within 20 days after the date of such notice from the Issuer. Any Holder
shall have the right to withdraw such Holder's request for inclusion of
such Holder's Registrable Securities in any registration statement pursuant
to this Section 2.3 by giving written notice to the Issuer of such
withdrawal. Subject to Section 2.3(b) below, the Issuer shall include in
such registration statement all such Registrable Securities so requested to
be included therein; PROVIDED, HOWEVER, that the Issuer may at any time
withdraw or cease proceeding with any such registration if it shall at the
same time withdraw or cease proceeding with the registration of all other
equity securities originally proposed to be registered.
(b) If the managing underwriter of an offering involving a request
for Piggyback Registration advises the Issuer in writing (with a copy to
the Holders requesting inclusion of their Registrable Securities) that, in
such underwriter's good faith view, the inclusion of any Registrable
Securities pursuant to Section 2.3(a) above would be likely to have a
material adverse effect on the price, timing or distribution of such
offering, then (i) the number of such Holder's or Holders' Registrable
Securities to be included in the registration statement for such offering
may, subject to the provisions of the immediately following sentence, be
reduced to an amount which, in the judgment of the managing underwriter,
would no longer be likely to have a material adverse effect on the price,
timing or distribution of such offering or (ii) if no such reduction would,
in the judgment of the managing underwriter, eliminate such likelihood of a
material adverse effect on the price, timing or distribution of such
offering, then the Issuer may, subject to the provisions of the immediately
following sentence, exclude all such Registrable Securities from such
registration statement. Any reduction in the number of Registrable
Securities to be included in the registration statement for such offering
pursuant to the immediately preceding sentence shall be effected by the
inclusion in such registration statement of (A) first, (p) if such
registration was initiated by the Issuer for the sale of securities for its
own account, any and all securities for sale by the Issuer or (q) if such
registration was initiated by any other Person pursuant to the exercise of
demand registration rights, any and all securities for sale by such Person
pursuant to such exercise of demand registration rights, (B) second, any
Registrable Shares requested to be included in such registration, pro rata
based on the ratio which such Holder's requested Registrable Securities
bears to the total number of Registrable Securities requested to be
included in such registration statement by all Holders who have requested
that their Registrable Securities be included in such registration
statement, and (C) third, pro rata among any other securities requested to
be included in such registration by other Persons pursuant to the exercise
of contractual registration rights granted by the Issuer. If as a result
of the provisions of this Section 2.3(b) any Holder shall not be entitled
to include all Registrable Securities in a registration that such Holder
has requested to be so included, such Holder may withdraw such Holder's
request to include any Registrable Securities in such registration
statement. No Holder may participate in any registration statement
hereunder unless such Holder (x) agrees to sell such Holder's Registrable
Securities on the basis provided in any underwriting arrangements approved
by the Issuer relating to such registration statement and (y) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements, and other documents reasonably required under the terms of such
underwriting arrangements; PROVIDED, HOWEVER, that no such Holder shall be
required to make any representations or warranties in connection with any
such registration other than representations and warranties as to (1) such
Holder's ownership of its Registrable Securities to be transferred free and
clear of all liens, claims, and encumbrances, (2) such Holder's power and
authority to effect such transfer, and (3) such matters pertaining to
compliance with securities laws as may be reasonably requested; PROVIDED
FURTHER, HOWEVER, that the obligation of such Holder to indemnify pursuant
to any such underwriting arrangements shall be several, not joint and
several, among such Holders selling Registrable Securities, and the
liability of each such Holder will be in proportion thereto, and PROVIDED
FURTHER that such liability will be limited to the net amount received by
such Holder from the sale of its Registrable Securities pursuant to such
registration statement.
Section 2.4 CERTAIN DELAY RIGHTS. Notwithstanding any other provision of
this Agreement to the contrary, if at any time while the Required Shelf
Registration is effective the Issuer provides written notice to each Holder
that in the good faith and reasonable judgment of the Board of Directors of
the Issuer it would be materially disadvantageous to the Issuer (because
the sale of Registrable Securities covered by such registration statement
or the disclosure of information therein or in any related prospectus or
prospectus supplement would materially interfere with any acquisition,
financing or other material event or transaction in connection with which a
registration of securities under the Securities Act for the account of the
Issuer is then intended or the public disclosure of which at the time would
be materially prejudicial to the Issuer (a "Disadvantageous Condition"))
for sales of Registrable Securities thereunder to then be permitted, and
setting forth the general reasons for such judgment, the Issuer may refrain
from maintaining current the prospectus contained in the Shelf Registration
Statement until such Disadvantageous Condition no longer exists (notice of
which the Issuer shall promptly deliver in writing to each Holder).
Furthermore, notwithstanding anything else contained in this Agreement,
with respect to any registration statement filed, or to be filed, pursuant
to Section 2.2 of this Agreement, if the Issuer provides written notice to
each Holder that in the good faith and reasonable judgment of the Board of
Directors of the Issuer it would be materially disadvantageous to the
Issuer (because of a Disadvantageous Condition) for such a registration
statement to be maintained effective, or to be filed and become effective,
and setting forth the general reasons for such judgment, the Issuer shall
be entitled to cause such registration statement to be withdrawn or the
effectiveness of such registration statement terminated, or, in the event
no registration statement has yet been filed, shall be entitled not to file
any such registration statement, until such Disadvantageous Condition no
longer exists (notice of which the Issuer shall promptly deliver in writing
to each Holder). With respect to each Holder, upon the receipt by such
Holder of any such notice of a Disadvantageous Condition (i) in connection
with the Required Shelf Registration, such Holder shall forthwith
discontinue use of the prospectus and any prospectus supplement under such
registration statement and shall suspend sales of Registrable Securities
until such Disadvantageous Condition no longer exists and (ii) in
connection with the Required Shelf Registration or the Demand Registration,
as applicable, if so directed by the Issuer by notice as aforesaid, such
Holder will deliver to the Issuer all copies, other than permanent filed
copies then in such Holder's possession, of the prospectus and prospectus
supplements then covering such Registrable Securities at the time of
receipt of such notice as aforesaid. Notwithstanding anything else
contained in this Agreement, (x) neither the filing nor the effectiveness
of any registration statement under Section 2.2 of this Agreement may be
delayed for more than a total of 60 days pursuant to this Section 2.4 and
(y) the maintaining current of a prospectus (and the suspension of sales of
Registrable Securities) in connection with the Required Shelf Registration
may not be delayed under this Section 2.4 for more than a total of 60 days
in any six-month period. If, in the case of any registration pursuant to a
Demand Request, the Issuer provides notice to the applicable Holders of a
Disadvantageous Condition, then such Holders will have the right, within 15
days following such notice from the Issuer, to elect to terminate such
Demand Request, in which case the Holders shall be deemed not to have
exercised a Demand Request pursuant to Section 2.2 hereof.
Section 2.5 EXPENSES. Except as provided herein, the Issuer shall pay all
Registration Expenses with respect to each registration hereunder, whether
or not any registration statement becomes effective. Notwithstanding the
foregoing, (i) each Holder and the Issuer shall be responsible for its own
internal administrative and similar costs, which shall not constitute
Registration Expenses, (ii) each Holder shall be responsible for the legal
fees and expenses of its own counsel (except as provided in the definition
of Registration Expenses) and (iii) each Holder shall be responsible for
all underwriting discounts and commissions, selling or placement agent or
broker fees and commissions, and transfer taxes, if any, in connection with
the sale of securities by such Holder.
Section 2.6 REGISTRATION AND QUALIFICATION. If and whenever the Issuer
is required to effect the registration of any Registrable Securities under the
Securities Act as provided in this Agreement, the Issuer shall as promptly
as practicable:
(a)prepare, file and cause to become effective a registration
statement under the Securities Act relating to the Registrable Securities
to be offered in accordance with the intended method of disposition
thereof;
(b)prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act
with respect to the disposition of all Registrable Securities (i) in the
case of the Required Shelf Registration, until the Shelf Termination Date,
(ii) in the case of a Demand Registration or Piggyback Registration, for a
period of not less than 180 days (or such shorter period as is necessary
for underwriters in an underwritten offering to sell unsold allotments),
provided, that such 180-day period shall be extended for such number of
days that equals the number of days elapsing from (x) the date the written
notice contemplated by paragraph (e) below is given by the Issuer to (y)
the date on which the Issuer delivers to the Holders of Registrable
Securities the supplement or amendment contemplated by paragraph (e) below;
(c)furnish to the Holders of Registrable Securities and to any
underwriter of such Registrable Securities (i) such number of conformed
copies of such registration statement and of each such amendment and
supplement thereto (in each case including all exhibits), (ii) such number
of copies of the prospectus included in such registration statement
(including each preliminary prospectus), in conformity with the
requirements of the Securities Act, and (iii) such documents incorporated
by reference in such registration statement or prospectus, as the Holders
of Registrable Securities or such underwriter may reasonably request in
order to facilitate the disposition of the Registrable Shares owned by such
Holder or the sale of such securities by such underwriter (it being
understood that, subject to Section 2.4 of this Agreement and the
requirements of the Securities Act and applicable state securities laws,
the Issuer consents to the use of the prospectus and any amendment or
supplement thereto by each Holder of Registrable Securities and any
underwriter of such Registrable Securities in connection with the offering
and sale of the Registrable Shares covered by the registration statement of
which such prospectus, amendment or supplement is a part);
(d)in the case of any underwritten offering, furnish to each
Selling Holder and any underwriter of Registrable Securities an opinion of
counsel for the Issuer and a "cold comfort" letter signed by the
independent public accountants who have audited the financial statements of
the Issuer included in the applicable registration statement, in each such
case covering substantially such matters with respect to such registration
statement (and the prospectus included therein) and the related offering as
are customarily covered in opinions of issuer's counsel with respect
thereto and in accountants' letters delivered to underwriters in
underwritten public offerings of securities and such other matters as any
such Selling Holder or underwriter may reasonably request;
(e)promptly notify each Selling Holder and each underwriter of
Registrable Securities in writing (i) at any time when a prospectus
relating to a registration pursuant to this Agreement is required to be
delivered under the Securities Act, of the happening of any event as a
result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, and (ii) of any request by the Commission or any
other regulatory body having jurisdiction for any additional information or
amendment or supplement to any registration statement or other document
relating to such offering, and in either such case, at the request of any
Selling Holder or underwriter, promptly prepare and furnish to each Selling
Holder and underwriter a reasonable number of copies of a supplement to or
an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they are
made, not misleading;
(f)cause all such Registrable Securities covered by such
registration to be listed on each securities exchange and included for
quotation on each automated interdealer quotation system on which the
Common Stock is then listed or included for quotation;
(g)provide a CUSIP number for the Registrable Shares included
in any registration statement not later than the effective date of such
registration statement;
(h)cooperate with each Selling Holder and each underwriter
participating in the disposition of Registrable Securities and their
respective counsel in connection with any filings required to be made with
the NASD;
(i)during the period when a prospectus is required to be
delivered under the Securities Act, promptly file all documents required to
be filed with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act;
(j)prepare and file with the Commission promptly any amendments
or supplements to such registration statement or prospectus which, in the
opinion of counsel for the Issuer or the managing underwriter, are required
in connection with the distribution of the Registrable Securities;
(k)advise each Selling Holder, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop order by
the Commission suspending the effectiveness of any registration statement
or the initiation or threatening of any proceeding for such purpose and
promptly use its commercially reasonable efforts to prevent the issuance of
any stop order or to obtain its withdrawal at the earliest possible moment
if such stop order should be issued;
(l)use reasonable efforts to assist the Holders in the
marketing of Common Stock in connection with underwritten offerings
hereunder (including using reasonable efforts to have officers of the
Issuer attend "road shows" and analyst or investor presentations scheduled
in connection with such registration); and
(m)furnish for delivery in connection with the closing of any
offering of Registrable Securities pursuant to a registration effected
pursuant to this Agreement unlegended certificates representing ownership
of the Registrable Securities being sold in such denominations as shall be
requested by the Selling Holders or the underwriters.
Section 2.7 Underwriting; Due Diligence
(a) If requested by the underwriters for any underwritten offering
of Registrable Securities pursuant to a registration requested under this
Article 2, the Issuer shall enter into an underwriting agreement with such
underwriters for such offering, which agreement will contain such
representations and warranties by the Issuer and such other terms and
provisions as are customarily contained in underwriting agreements with
respect to secondary distributions.
(b) In connection with the preparation and filing of each
registration statement registering Registrable Securities under the
Securities Act pursuant to this Article 2, the Issuer shall give the
Holders of such Registrable Securities and the underwriters, if any, and
their respective counsel and accountants, such reasonable and customary
access to its books, records and properties and such opportunities to
discuss the business and affairs of the Issuer with its officers and the
independent public accounts who have certified the financial statements of
the Issuer as shall be necessary, in the opinion of such Holders and such
underwriters or their respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act; PROVIDED that (i)
each Holder and the underwriters and their respective counsel and
accountants shall have entered into a confidentiality agreement reasonably
acceptable to the Issuer and (ii) the Holders of such Registrable
Securities and the underwriters and their respective counsel and
accountants shall use their reasonable best efforts to minimize the
disruption to the Issuer's business and coordinate any such investigation
of the books, records and properties of the Issuer and any such discussions
with the Issuer's officers and accountants so that all such investigations
occur at the same time and all such discussions occur at the same time.
Section 2.8 INDEMNIFICATION.
(a) The Issuer agrees to indemnify and reimburse, to the fullest
extent permitted by law, each Selling Holder, and each of its employees,
advisors, agents, representatives, partners, officers, and directors and
each Person who controls such seller of Registrable Securities (within the
meaning of the Securities Act or the Exchange Act) and any agent or
investment advisor thereof (collectively, the "Seller Affiliates") against
any and all losses, claims, damages, liabilities, and expenses, joint or
several (including, without limitation, reasonable attorneys' fees and
disbursements except as limited by Section 2.8(c) below) based upon,
arising out of, related to or resulting from any untrue or alleged untrue
statement of a material fact contained in any registration statement,
prospectus, or preliminary prospectus or any amendment thereof or
supplement thereto, or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same are made in reliance upon and in
strict conformity with information furnished in writing to the Issuer by
such Selling Holder or any Seller Affiliate for use therein or arise from
such Selling Holder's or any Seller Affiliate's failure to deliver a copy
of the registration statement or prospectus or any amendments or
supplements thereto after the Issuer has furnished such Selling Holder or
Seller Affiliate with a sufficient number of copies of the same. The
reimbursements required by this Section 2.8(a) will be made by periodic
payments during the course of the investigation or defense, as and when
bills are received or expenses incurred.
(b) In connection with any registration statement in which a
Selling Holder is participating, each such Selling Holder will furnish to
the Issuer in writing such information and affidavits as the Issuer
reasonably requests for use in connection with any such registration
statement or prospectus and, to the fullest extent permitted by law, each
such Selling Holder will indemnify the Issuer and its directors and
officers and each Person who controls the Issuer (within the meaning of the
Securities Act or the Exchange Act) against any and all losses, claims,
damages, liabilities, and expenses (including, without limitation,
reasonable attorneys' fees and disbursements except as limited by Section
2.8(c) below) resulting from: (i) any untrue statement or alleged untrue
statement of a material fact contained in the registration statement,
prospectus, or any preliminary prospectus or any amendment thereof or
supplement thereto, or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein
not misleading, but only to the extent that such untrue statement or
alleged untrue statement or omission or alleged omission is contained in
any information or affidavit so furnished in writing by such Selling Holder
or any of its Seller Affiliates specifically for inclusion in the
registration statement; or (ii) such Selling Holder's or any Seller
Affiliate's failure to deliver a copy of the registration statement or
prospectus or any amendments or supplements thereto after the Issuer has
furnished such Selling Holder or Seller Affiliate with a sufficient number
of copies of the same; PROVIDED, that the obligation to indemnify will be
several, not joint and several, among such Selling Holders, and the
liability of each such Selling Holder will be in proportion to, and
PROVIDED FURTHER that such liability will be limited to, the net amount
received by such Selling Holder from the sale of Registrable Securities
pursuant to such registration statement; PROVIDED, HOWEVER, that such
Selling Holder shall not be liable in any such case to the extent that,
prior to the filing of any such registration statement or prospectus or
amendment thereof or supplement thereto, such Selling Holder has furnished
in writing to the Issuer information expressly for use in such registration
statement or prospectus or any amendment thereof or supplement thereto
which corrected or made not misleading information previously furnished to
the Issuer.
(c) Any Person entitled to indemnification hereunder will give
prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification (provided that the failure to give such
notice shall not limit the rights of such Person except to the extent such
failure prejudiced the indemnifying party) and permit such indemnifying
party to assume the defense of such claim; PROVIDED, HOWEVER, that any
Person entitled to indemnification hereunder shall have the right to employ
separate counsel and to participate in the defense of such claim, but the
fees and expenses of such counsel shall be at the expense of such Person
unless (i) the indemnifying party has agreed to pay such fees or expenses,
(ii) the indemnifying party shall have failed to assume the defense of such
claim or (iii) in the reasonable opinion of counsel to such indemnified
party, a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim. If such defense is not
assumed by the indemnifying party as permitted hereunder, the indemnifying
party will not be subject to any liability for any settlement made by the
indemnified party without its consent (but such consent will not be
unreasonably withheld or delayed). If such defense is assumed by the
indemnifying party pursuant to the provisions hereof, such indemnifying
party shall not settle or otherwise compromise the applicable claim unless
(A) such settlement or compromise contains a full and unconditional release
of the indemnified party or (B) the indemnified party otherwise consents in
writing. An indemnifying party who is not entitled to, or elects not to,
assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party, a conflict of interest may exist between
such indemnified party and any other of such indemnified parties with
respect to such claim, in which event the indemnifying party shall be
obligated to pay the reasonable fees and disbursements of such additional
counsel or counsels.
(d) Each party hereto agrees that, if for any reason the
indemnification provisions contemplated by Section 2.8(a) or Section 2.8(b)
are unavailable to or insufficient to hold harmless an indemnified party in
respect of any losses, claims, damages, liabilities, or expenses (or
actions in respect thereof) referred to therein, then each indemnifying
party shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, liabilities, or expenses (or
actions in respect thereof) in such proportion as is appropriate to reflect
the relative fault of the indemnifying party and the indemnified party in
connection with the actions which resulted in the losses, claims, damages,
liabilities or expenses as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to
information supplied by such indemnifying party or indemnified party, and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The parties
hereto agree that it would not be just and equitable if contribution
pursuant to this Section 2.8(d) were determined by pro rata allocation
(even if the Holders or any underwriters or all of them were treated as one
entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to in this
Section 2.8(d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities, or expenses (or actions
in respect thereof) referred to above shall be deemed to include any legal
or other fees or expenses reasonably incurred by such indemnified party in
connection with investigating or, except as provided in Section 2.8(c)
above, defending any such action or claim. Notwithstanding the provisions
of this Section 2.8(d), no Holder shall be required to contribute an amount
greater than the dollar amount by which the net proceeds received by such
Holder with respect to the sale of any Registrable Securities exceeds the
amount of damages which such Holder has otherwise been required to pay by
reason of such statement or omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any Person who was not guilty
of such fraudulent misrepresentation. The Holders' obligations in this
Section 2.8(d) to contribute shall be several in proportion to the amount
of Registrable Securities registered by them and not joint.
If indemnification is available under this Section 2.8, the
indemnifying parties shall indemnify each indemnified party to the full
extent provided in Section 2.8(a) and Section 2.8(b) without regard to the
relative fault of said indemnifying party or indemnified party or any other
equitable consideration provided for in this Section 2.8(d) subject, in the
case of the Holders, to the limited dollar amounts set forth in
Section 2.8(b).
The indemnification and contribution provided for under this
Agreement shall be in addition to any liability which any party may
otherwise have to any other party and shall remain in full force and effect
regardless of any investigation made by or on behalf of the indemnified
party or any officer, director, or controlling Person of such indemnified
party and will survive the transfer of the Common Stock and the termination
of this Agreement.
Section 2.9 ISSUER'S EXISTING SHELF REGISTRATION. The Issuer shall use
its reasonable best efforts to cause the Issuer's Shelf Registration Statement
which was filed by the Issuer prior to the date hereof (the "Existing Shelf
Registration Statement") to be amended to contain a provision for the
inclusion in such Shelf Registration Statement of shares for sale for the
account of stockholders of the Issuer. In the event that the Issuer, after
the expiration of the twelve month period immediately following the date
hereof, proposes to effect any offering under the Existing Shelf
Registration Statement (other than to effect the acquisition of or
combination with another business entity), it shall permit each Holder to
include its Registrable Securities on substantially the same terms and
subject to substantially the same conditions and limitations (including,
but not limited to, indemnification provisions) as would be the case in
connection with a registration that is the subject of Section 2.3 hereof.
The Issuer will promptly file any prospectus supplements as are necessary
to reflect the inclusion in any such registration of any Registrable
Securities included in such registration by any Holder pursuant to this
Section 2.9.
ARTICLE 3
MISCELLANEOUS
Section 3.1 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof.
Section 3.2 SUCCESSORS AND ASSIGNS. Whether or not an express assignment
has been made pursuant to the provisions of this Agreement, provisions of this
Agreement that are for the Holders' benefit as the holders of any Common
Stock are, except as otherwise expressly provided herein, also for the
benefit of, and enforceable by, all subsequent holders of such Common
Stock, except as otherwise expressly provided herein. This Agreement shall
be binding upon the Issuer, each Holder, and, except as otherwise expressly
provided herein, their respective heirs, devisees, successors and assigns.
Section 3.3 DUPLICATE ORIGINALS. All parties may sign any number of
copies of this Agreement. Each signed copy shall be an original, but all of
them together shall represent the same agreement.
Section 3.4 AMENDMENTS, WAIVERS, ETC. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or terminated, except
upon the execution and delivery of a written agreement executed by the
Issuer and Holders representing a majority of the Registrable Securities
then held by all Holders.
Section 3.5 NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly received if given) by hand delivery or
telecopy, or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the address or telecopy number set forth on the
signature pages hereto (unless such contact information in the case of the
Holders is updated by written notice from the affected Holder to the
Issuer.
Section 3.6 SEVERABILITY. Whenever possible, each provision or portion
of any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any provision or portion
of any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not
affect any other provision or portion of any provision in such
jurisdiction, and this Agreement will be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision
or portion of any provision had never been contained herein.
Section 3.7 NO WAIVER. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any
other party hereto with its obligations hereunder, and any custom or
practice of the parties at variance with the terms hereof, shall not
constitute a waiver by such party of its right to exercise any such or
other right, power or remedy or to demand such compliance.
Section 3.8 NO THIRD PARTY BENEFICIARIES. Except as expressly provided
in Section 2.8; this Agreement is not intended to be for the benefit of, and
shall not be enforceable by, any Person who or which is not a party hereto;
provided, that, this Agreement is also intended to be for the benefit of
and is enforceable by each Holder.
Section 3.9 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD
TO PRINCIPLES OF CONFLICT OF LAWS.
Section 3.10 DESCRIPTIVE HEADINGS. The descriptive headings used herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
Section 3.11 COUNTERPARTS. This Agreement may be executed in counterpart,
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same Agreement.
<PAGE>
IN WITNESS WHEREOF, the Issuer and the Holders have caused this Agreement
to be duly executed as of the day and year first above written.
LAMAR ADVERTISING COMPANY
By:___________________________
Name:___________________________
Title:___________________________
Address:
Lamar Advertising Company
5551 Corporate Boulevard
Baton Rouge, Louisiana 70808
Attention: Keith Istre
Fax: (225) 923-0658
<PAGE>
HOLDERS:
CHANCELLOR MEDIA CORPORATION OF
LOS ANGELES
By:___________________________
Name:___________________________
Title:___________________________
Address:
1845 Woodall Rodgers Freeway
Suite 1300
Dallas, Texas 75201
Attention: General Counsel
Fax: (512) 340-7890
CHANCELLOR MEZZANINE HOLDINGS
CORPORATION
By:___________________________
Name:___________________________
Title:___________________________
Address:
1845 Woodall Rodgers Freeway
Suite 1300
Dallas, Texas 75201
Attention: General Counsel
Fax: (512) 340-7890
