<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 1, 1999.
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TRANSWESTERN PUBLISHING COMPANY LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 2741 33-0778740
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
TWP CAPITAL CORP. II
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 2741 33-0778739
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
TARGET DIRECTORIES OF MICHIGAN, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
MICHIGAN 2741 38-287704
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
8344 CLAIREMONT MESA BOULEVARD
SAN DIEGO, CALIFORNIA 92111
TELEPHONE: (619) 467-2800
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
<TABLE>
<S> <C>
JOAN FIORITO COPY TO:
8344 CLAIREMONT MESA BOULEVARD WILLIAM S. KIRSCH
SAN DIEGO, CALIFORNIA 92111 KIRKLAND & ELLIS
TELEPHONE: (619) 467-2800 200 EAST RANDOLPH DRIVE
(NAME, ADDRESS, INCLUDING ZIP CODE, AND CHICAGO, ILLINOIS 60601
TELEPHONE NUMBER, TELEPHONE: (312) 861-2000
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------------
Series D 9 5/8% Senior
Subordinated Notes due 2007..... $140,000,000 100% $140,000,000 $38,920
- ----------------------------------------------------------------------------------------------------------------------------
Guarantees of Series D 9 5/8%
Senior Subordinated Notes Due
2007(2)......................... -- -- -- (3)
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f).
(2) The subsidiary guarantor is a wholly-owned subsidiary of TransWestern
Publishing Company LLC and has guaranteed the Series D notes being
registered.
(3) Pursuant to Rule 457(n), no separate fee is payable with respect to the
guarantees of the Series D notes being registered.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
The information in this prospectus is not complete and may be changed. We may
not sell these notes until the registration statement filed with the Securities
and Exchange Commission is effective. This prospectus is not an offer to sell
these notes and it is not soliciting an offer to buy these notes in any state
where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED MARCH 1, 1999
PRELIMINARY PROSPECTUS
TRANSWESTERN PUBLISHING COMPANY LLC
TWP CAPITAL CORP. II
OFFER TO EXCHANGE SERIES D 9 5/8% SENIOR SUBORDINATED NOTES DUE 2007
FOR ALL OUTSTANDING SERIES B 9 5/8% SENIOR SUBORDINATED NOTES DUE 2007
AND SERIES C 9 5/8% SENIOR SUBORDINATED NOTES DUE 2007
-------------------------
TERMS OF THE EXCHANGE OFFER
- - THIS EXCHANGE OFFER EXPIRES AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1999, UNLESS EXTENDED.
- - All outstanding notes that are validly tendered and not validly withdrawn will
be exchanged.
- - Tenders of the outstanding notes may be withdrawn any time prior to the
expiration of the exchange offer.
- - This exchange offer is subject to certain customary conditions, which we may
waive.
- - We will not receive any proceeds from this exchange offer.
- - Our present subsidiary and our future material subsidiaries will guarantee the
notes we issue in this exchange offer. The guarantees will be unconditional
and will rank below such subsidiaries' senior debt, but will rank equal to
their other senior subordinated debt, in right of payment.
- - The terms of the notes we will issue in this exchange offer are substantially
identical to the outstanding notes, except for certain transfer restrictions
and registration rights that apply to the outstanding Series C notes.
- - Interest on the notes accrues at the rate of 9 5/8% per annum, payable
semi-annually on each May 15 and November 15.
- - There is no existing market for the Series D notes we are offering in this
exchange offer and we do not intend to apply for their listing on any
securities exchange.
-------------------------
BEFORE YOU TENDER YOUR NOTES, YOU SHOULD CONSIDER CAREFULLY THE "RISK
FACTORS" BEGINNING ON PAGE 13 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE NOTES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 3
FORWARD-LOOKING STATEMENTS
We make forward-looking statements throughout this prospectus. Whenever you
read a statement that is not simply a statement of historical fact, such as when
we describe what we believe, expect or anticipate will occur, and other similar
statements, you must remember that our expectations may not be correct, even
though we believe they are reasonable. You should read this prospectus
completely and with the understanding that actual future results may be
materially different from what we expect as a result of certain factors,
including the risks faced by us described in the "Risk Factors" section and
elsewhere in this prospectus. We will not update these forward-looking
statements, even though our situation will change in the future.
In this prospectus, unless the context requires otherwise, "TransWestern"
refers to TransWestern Publishing Company LLC and the "company," the "issuers,"
"we," "us" and "our" each refers to TransWestern Publishing Company LLC, its
wholly-owned subsidiary, Target Directories of Michigan, Inc., and TWP Capital
Corp. II collectively.
i
<PAGE> 4
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary may not contain all of the information you should consider before
tendering your notes for the notes offered hereby. We urge you to read this
entire prospectus carefully, including the "Risk Factors" described herein.
THE COMPANY
TransWestern is one of the largest independent yellow pages directory
publishers in the United States. We own 208 directories that serve communities
in 16 states, including:
- Alabama
- California
- Connecticut
- Georgia
- Indiana
- Kansas
- Kentucky
- Louisiana
- Massachusetts
- Michigan
- New York
- Ohio
- Oklahoma
- Pennsylvania
- Tennessee
- Texas
Our presence in our markets is well-established; more than 70% of our
directories having been in publication for more than 10 years. Our revenues are
derived from the sale of advertising to a diversified base of over 106,000
accounts, consisting primarily of small to medium-sized local businesses. For
this purpose we consider a single customer that advertises in more than one
directory as a separate account for each directory in which it advertises.
Yellow pages are an important advertising medium for local businesses due to
their low advertising cost, widespread distribution, lasting presence, and high
consumer usage.
INDUSTRY OVERVIEW
The United States yellow pages directory industry generated revenues of
approximately $11.4 billion in 1997. The independent publisher segment of the
yellow pages industry is highly fragmented and growing. More than 250
independent directory publishers circulated over 100 million directories and
generated an estimated $722 million in revenues during 1997.
Independent yellow pages publishers generally compete in suburban and rural
markets more than major urban markets, where the high distribution quantities
for each edition create a barrier to entry. In most markets, independent
directory publishers compete with the telephone utility and with one or more
independent yellow pages publishers.
Yellow pages directories accounted for approximately 6.1% of total
advertising spending in 1997. Yellow pages directories compete with other forms
of media advertising, including television, radio, newspapers and direct mail.
However, yellow pages advertising tends to be more stable than other forms of
media advertising and does not fluctuate widely with economic cycles.
1
<PAGE> 5
OPERATING STRENGTHS
Our operating strengths include:
- our high revenue renewal and account retention rates, which give us
stable profits and a strong customer base from which to grow;
- our geographic and account diversity, which reduces our risk to regional
economic conditions and enhance our cash flow stability;
- our favorable cash flow characteristics, which result from our stable
revenues, high level of advance payments, predictable cost structure, low
working capital investment and minimal capital expenditure needs; and
- our experienced senior management.
BUSINESS STRATEGY
Our strategy is to capitalize on our operating structure and, as a result,
grow as a leading independent yellow pages publisher. Our business strategy
focuses on:
- increasing revenues from both existing advertisers and new accounts;
- improving our production processes to increase our operating efficiency;
- increasing advance payments and shortening customer payment terms, which
in turn, reduces our investment in working capital and decreases
collection costs; and
- growing through new directory start-ups and selective acquisitions.
RECENT ACQUISITIONS
We have recently completed the following acquisitions:
Mast. On February 2, 1998, we acquired eight directories from Mast
Advertising and Publishing, Inc. for approximately $8.4 million. The acquired
directories serve Nashville, Tennessee and the surrounding area, Northern Ohio
and Southern Michigan. The 1997 editions of these directories generated
approximately $4.7 million in net revenue.
Target. On July 16, 1998, we acquired two directories through our
acquisition of all of the outstanding stock of Target Directories of Michigan,
Inc. for approximately $5.4 million. The acquired directories serve the Lenawee
County, Michigan, Hillsdale County, Michigan and Branch County, Michigan areas.
The 1997 editions of these directories generated approximately $2.2 million in
net revenue.
M&M. On November 23, 1998, we acquired three directories from M&M
Publishing, Inc. for approximately $1.2 million, subject to adjustment. The
acquired directories serve the Wayne County, Pennsylvania, Pike County,
Pennsylvania and Sullivan County, New York areas. The 1998 editions of these
directories generated approximately $0.6 million in net revenue.
Universal. On November 30, 1998, we acquired four directories from
Universal Phone Books, Inc. and Universal Phone Books of Jackson, Inc. for
approximately $15.3 million, subject to adjustment. The acquired directories
serve the cities of Ann Arbor and Jackson, Michigan and the following counties
of Michigan: Washtenaw, Jackson, Saginaw, Midland, Bay, Ingham,
2
<PAGE> 6
Eaton and Clinton. Approximately 43 persons previously employed by Universal
were retained. The 1998 editions of these directories generated approximately
$7.1 million in net revenue.
United. On January 5, 1999 we purchased 14 directories from United
Directory Services, Inc. for approximately $17.0 million, subject to adjustment.
The acquired directories serve the greater Ft. Worth, San Antonio and Austin,
Texas areas. The area sales managers and approximately 40 account executives
associated with the acquired directories were retained. The fourteen directories
generated approximately $7.7 million of net revenue in 1998.
Lambert. On January 8, 1999 we purchased eight directories from Lambert
Publishing for approximately $11.0 million, subject to adjustment. The acquired
directories serve the central Georgia area. Approximately 25 account executives
associated with the acquired directories were retained. The eight directories
generated approximately $4.0 million of net revenue in 1998.
Southern. On January 15, 1999 we purchased seven directories from Southern
Directories Publishing, Inc. for approximately $5.2 million in cash. The
acquired directories serve the central Georgia area. One area sales manager and
approximately five account executives associated with the acquired directories
were retained. The seven directories generated approximately $2.0 million of net
revenue in 1998.
Orange Line. On February 15, 1999 we purchased four directories from Call
It, Inc. for approximately $1.3 million in cash, subject to adjustment. The
acquired directories serve the northern Ohio area. Approximately seven account
executives associated with the acquired directories were retained. The four
directories generated approximately $1.1 million of net revenue in 1998.
For additional information regarding these directory acquisitions see the
"Business -- Recent Acquisitions" section of this prospectus.
3
<PAGE> 7
THE INITIAL OFFERING
On December 2, 1998, we privately placed $40.0 million of our Series C
9 5/8% Senior Subordinated Notes due 2007. We entered into a registration rights
agreement with the initial purchasers in this private offering in which we
agreed, among other things, to use our reasonable best efforts to file a
registration statement within 90 days after issuing the Series C notes, have the
registration statement declared effective within 180 days after issuing the
Series C notes and complete this exchange offer within 225 days after issuing
the Series C notes. We must pay liquidated damages to the holders of the Series
C notes if we do not meet these deadlines.
THE EXCHANGE OFFER
SECURITIES OFFERED............. $140,000,000 principal amount of Series D
9 5/8% Senior Subordinated Notes due 2007.
THE EXCHANGE OFFER............. We are offering to exchange $140,000,000
principal amount of our Series D notes which
have been registered under the Securities Act
of 1933 for:
- $100,000,000 of our outstanding Series B
9 5/8% Senior Subordinated Notes due 2007
which were issued in March 1998; and
- $40,000,000 of our outstanding Series C
9 5/8% Senior Subordinated Notes due 2007
which were issued in December 1998.
We will accept both the Series C notes and the
Series B notes in exchange for a single series
of Series D notes in order to increase the
liquidity of both series of our outstanding
notes. The Series D notes are substantially
identical to the Series B and C notes, except
that certain transfer restrictions and
registration rights relating to the Series C
notes do not apply to the Series B and D
notes. You may tender your Series B and C
notes by following the procedures described in
this prospectus under the heading "The
Exchange Offer."
EXPIRATION DATE................ The exchange offer will expire at 5:00 p.m.,
New York City time, on , 1999,
unless we extend it.
WITHDRAWAL RIGHTS.............. You may withdraw your tender of your notes at
any time prior to 5:00 p.m., New York City
time, on the expiration date of the exchange
offer.
CONDITIONS TO THE EXCHANGE
OFFER.......................... The exchange offer is subject to customary
conditions, which we may waive. Please read
the "The Exchange Offer -- Conditions" section
of this prospectus for more information
regarding conditions to the exchange offer.
4
<PAGE> 8
PROCEDURES FOR TENDERING SERIES
B AND C NOTES.................. If you are a holder of Series B or C notes who
wishes to accept the exchange offer, you must
either:
(a) complete, sign and date the accompanying
Letter of Transmittal, or a facsimile thereof,
and mail or otherwise deliver such
documentation, together with your Series B or
C notes, to the exchange agent at the address
set forth under "The Exchange Offer --
Exchange Agent;" or
(b) arrange for The Depository Trust Company
to transmit certain required information to
the exchange agent for this exchange offer in
connection with a book-entry transfer. By
tendering your notes in this manner, you will
be representing, among other things, that:
- the Series D notes you acquire pursuant to
the exchange offer are being acquired in the
ordinary course of your business;
- you are not participating, do not intend to
participate, and have no arrangement or
understanding with any person to participate
in the distribution of the Series D notes
issued to you in the exchange offer; and
- you are not an "affiliate" of our company.
CERTAIN UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES........ Your exchange of Series B or C notes for
Series D notes pursuant to the exchange offer
will not result in any gain or loss to you for
federal income tax purposes. See the "Certain
United States Federal Income Tax
Considerations" section of this prospectus.
CONSEQUENCES OF FAILURE TO
EXCHANGE....................... Series C notes that are not tendered or that
are tendered, but not accepted, will be
subject to the existing transfer restrictions
on such notes after the exchange offer. We
will have no further obligation to register
the Series C notes. If you do not participate
in the exchange offer, the liquidity of your
notes could be adversely affected.
PROCEDURES FOR BENEFICIAL
OWNERS......................... If you are the beneficial owner of Series B or
C notes registered in the name of a broker,
dealer or other nominee and you wish to tender
your notes, you should contact such person in
whose name your notes are registered and
promptly instruct such person to tender on
your behalf.
GUARANTY DELIVERY PROCEDURES... If you wish to tender your Series B or C notes
and time will not permit your required
documents to reach the
5
<PAGE> 9
Wilmington Trust Company by the expiration
date, or the procedure for book-entry transfer
cannot be completed on time, or the
certificate for your notes cannot be delivered
on time, you may tender your notes pursuant to
the guaranteed delivery procedures. See "The
Exchange Offer -- Guaranteed Delivery
Procedures."
ACCEPTANCE OF SERIES B AND C
NOTES; DELIVERY OF SERIES D
NOTES.......................... Subject to certain conditions, we will accept
Series B and C notes which are properly
tendered in the exchange offer and not
withdrawn, prior to 5:00 p.m., New York City
time, on the expiration date of the exchange
offer. The Series D notes will be delivered as
promptly as practicable following the
expiration date.
USE OF PROCEEDS................ We will receive no proceeds from the exchange
offer.
EXCHANGE AGENT................. Wilmington Trust Company is the exchange agent
for the exchange offer.
SUMMARY OF THE SERIES D NOTES
GENERAL........................ The terms of the Series B and C notes and the
Series D notes are identical in all material
respects, except that certain transfer
restrictions and registration rights relating
to the Series C notes do not apply to the
Series B notes or the Series D notes. In
addition, the interest rate on the Series C
notes will increase if we do not meet certain
deadlines in connection with the exchange
offer. See "The Exchange Offer -- Purpose and
Effect of the Exchange Offer" section of this
prospectus for a discussion of the payment of
increased interest.
MATURITY DATE.................. November 15, 2007.
INTEREST RATE.................. 9 5/8% per year, calculated using a 360-day
year of twelve 30-day months.
INTEREST PAYMENT DATES......... Interest will accrue on the Series D notes
from the date of issuance and will be payable
semiannually in arrears on May 15 and November
15, beginning on May 15, 1999.
RANKING........................ The Series D notes will not be secured by any
collateral. The Series D notes will rank below
all of our senior debt and will rank equal to
our other senior subordinated debt. Therefore,
if we default, your right to payment under the
Series D notes will be junior to the rights of
holders of our senior debt to collect money we
owe them at the time. The Series D notes will
6
<PAGE> 10
effectively rank below all liabilities,
including trade payables, of our subsidiaries
which are not guarantors.
The Series D notes will rank equal to our
other senior subordinated debt.
As of December 31, 1998, we had approximately
$67.9 million of senior debt and $140.0
million of senior subordinated debt, including
the Series B and C notes.
GUARANTEES BY SUBSIDIARIES..... Our present subsidiary and our future material
subsidiaries will guarantee the Series D notes
with unconditional guarantees of payment that
will rank below their senior debt, but will
rank equal to their other senior subordinated
debt, in right of payment.
OPTIONAL REDEMPTION AFTER
NOVEMBER 15, 2002.............. Except in the case of certain equity offerings
by us, we cannot choose to redeem the Series D
notes before November 15, 2002.
At any time after that date, which may be more
than once, we can choose to redeem some or all
of the Series D notes at certain specified
prices, plus accrued interest.
OPTIONAL REDEMPTION AFTER
EQUITY OFFERINGS............... At any time, which may be more than once,
before November 15, 2000, we can choose to buy
back up to 35% of the outstanding Series D
notes with money that we raise in one or more
public equity offerings, as long as:
- we pay 109.625% of the face amount of the
notes, plus interest;
- we buy the notes back within 90 days of
completing the equity offering; and
- at least 65% of all the notes issued under
the related indenture remain outstanding
afterwards.
CHANGE OF CONTROL OFFER........ If there is a change in control of our
company, we must give holders of the Series D
notes the opportunity to sell their Series D
notes to us at 101% of their face amount, plus
accrued interest.
We might not be able to pay you the required
price for Series D notes you present to us at
the time of a change of control, because:
- we might not have enough funds at that time;
or
- the terms of our senior debt may prevent us
from paying.
7
<PAGE> 11
ASSET SALE PROCEEDS............ We may have to use the cash proceeds from
selling assets to offer to buy back Series D
notes at their face amount, plus accrued
interest.
CERTAIN INDENTURE PROVISIONS... The indenture governing the Series D notes
limits what we, and most or all of our
subsidiaries, may do. The provisions of the
indenture limit our ability to:
- incur more debt;
- pay dividends and make distributions;
- issue stock of subsidiaries;
- make certain investments;
- repurchase stock;
- create liens;
- enter into transactions with affiliates;
- enter into sale lease-back transactions;
- merge or consolidate; and
- transfer or sell assets.
These covenants are subject to a number of
important exceptions.
For more information about the Series D notes, see the "Description of the
Notes" section of this prospectus.
RISK FACTORS
You should carefully consider the information set forth under "Risk
Factors" as well as the other information and data included in this prospectus
before tendering your Series B or C notes in exchange for Series D notes.
8
<PAGE> 12
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL AND OTHER DATA
(DOLLARS IN THOUSANDS)
The following table sets forth for the periods indicated selected
consolidated financial data for our company. The following summary consolidated
financial data are qualified by our more detailed consolidated financial
statements and the notes thereto included elsewhere in this prospectus and
should be read in conjunction with such consolidated financial statements and
notes and the discussion under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
prospectus.
On May 1, 1998, our fiscal year end was changed from April 30 to December
31. Starting with the quarter ending September 30, 1998, we began reporting on a
calendar year end basis.
The consolidated statement of operations data for the years ended April 30,
1996, 1997 and 1998 and the eight months ended December 31, 1998 and balance
sheet data as of April 30, 1997 and 1998 and as of December 31, 1998, have been
derived from our consolidated financial statements included elsewhere in this
prospectus.
The consolidated statement of operations data for the years ended April 30,
1994 and 1995 and balance sheet data as of April 30, 1994, 1995 and 1996, have
been derived from audited financial statements which do not appear in this
prospectus. The consolidated statement of operations data for the eight months
ended December 31, 1997 and balance sheet data as of December 31, 1997 have been
derived from unaudited consolidated financial statements which, in the opinion
of management, have been prepared on the same basis as the audited consolidated
financial statements and contain all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the results of
operations for the unaudited interim period.
9
<PAGE> 13
The following unaudited pro forma other data give effect to the issuance of
the Series C notes as if it had occurred at the beginning of each period
presented. The unaudited summary pro forma financial data do not purport to be
indicative of the actual financial position or results of operations of the
company that would have actually been attained had the issuance of the Series C
notes in fact occurred on the date specified, nor are they necessarily
indicative of the results of operations that we may achieve in the future.
<TABLE>
<CAPTION>
EIGHT MONTHS ENDED
YEARS ENDED APRIL 30, DECEMBER 31,
---------------------------------------------------- -----------------------
1994 1995 1996 1997 1998 1997 1998
------- -------- -------- -------- --------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues...................... $62,219 $ 69,845 $ 77,731 $ 91,414 $ 100,143 $ 52,326 $ 61,071
Gross profit...................... 43,431 52,889 59,529 71,914 79,910 40,328 48,377
Income from operations............ 4,093 11,414 14,538 18,453 17,489 1,358 8,755
Other income (expense), net....... 344 470 375 48 82 (23) 242
Interest expense.................. (2,951) (4,345) (6,630) (7,816) (13,387) (7,356) (11,754)
------- -------- -------- -------- --------- --------- ---------
Income (loss) before extraordinary
item............................ $ 1,486 $ 7,539 $ 8,283 $ 10,685 $ 4,184 $ (6,021) $ (2,757)
OTHER DATA:
Depreciation and amortization..... $ 4,063 $ 4,593 $ 4,691 $ 6,399 $ 7,086 $ 4,383 $ 4,526
Capital expenditures.............. 769 496 484 1,034 996 706 824
Cash flows provided by (used for):
Operating activities............ 9,853 14,608 13,091 15,302 15,681 9,084 4,474
Investing activities............ (3,121) (2,838) (5,713) (3,592) (9,200) (12,938) (22,156)
Financing activities............ (6,075) (11,550) (6,992) (11,776) (6,223) 9,412 30,237
EBITDA............................ 9,000 17,000 20,400 24,900 30,200 5,700 13,500
EBITDA margin..................... 14.5% 24.3% 26.2% 27.2% 30.2% 10.9% 22.1%
Gross profit margin............... 69.8% 75.7% 76.6% 78.7% 79.8% 77.1% 79.2%
Bookings.......................... $64,269 $ 70,013 $ 75,709 $ 86,859 $ 99,492 $ 65,848 $ 70,281
Advance payments as a % of
revenues........................ 31.8% 36.9% 41.0% 45.1% 46.0% 47.3% 47.4%
Number of accounts................ 71,832 77,371 84,117 93,157 97,479 52,071 61,997
Average net revenues per
account......................... $ 866 $ 903 $ 924 $ 981 $ 1,027 $ 1,005 $ 990
Number of directories............. 97 106 118 128 139 76 84
Ratio of earnings to fixed
charges......................... 1.44x 2.69x 2.28x 2.29x 1.70x 0.94x 0.77x
Pro forma interest expense........ -- -- -- -- $ 20,625 -- $ 13,401
BALANCE SHEET DATA:
Working capital................... $12,034 $ 3,496 $ 2,088 $ 24 $ 5,443 $ 3,886 $ 15,188
Total assets...................... 43,879 41,831 47,423 48,231 60,804 53,068 90,830
Total debt........................ 25,724 47,961 84,410 78,435 179,735 179,875 212,156
Member equity (deficit)........... 4,458 (22,721) (55,606) (50,722) (145,912) (156,117) (148,669)
</TABLE>
"EBITDA" is defined as income (loss) before extraordinary item plus
interest expense, discretionary contributions to our Equity Compensation Plan,
which represent special distributions to the Equity Compensation Plan in
connection with refinancing transactions, and depreciation and amortization and
is consistent with the definition of EBITDA in the indentures covering our notes
and in our senior credit facility. Contributions to the Equity Compensation Plan
were $525 in the year ended April 30, 1995, $796 in the year ended April 30,
1996, and $5,543 in the year ended April 30, 1998. EBITDA is not a measure of
performance under generally accepted accounting principles. EBITDA should not be
considered in isolation or as a substitute for net income, cash flows from
operating activities and other income or cash flow statement data prepared in
accordance with generally accepted accounting principles, or as a measure of
profitability or liquidity. However, management has included EBITDA because it
may be used by certain investors to analyze and compare companies on the basis
of operating performance, leverage and liquidity and to determine a company's
ability to service debt. Our definition of EBITDA may not be comparable to that
of other companies.
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<PAGE> 14
"EBITDA margin" is defined as EBITDA as a percentage of net revenues.
Management believes that EBITDA margin provides a valuable indication of the
company's ability to generate cash flow available for debt service.
"Bookings" is defined as the daily advertising orders received from
accounts during a given period and generally occur at a steady pace throughout
the year. In the year ended April 30, 1997, net revenues included $4,200 from
acquired directories, while bookings do not reflect this adjustment. See the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview" section of this prospectus.
"Advance payments as a percentage of net revenues" is defined as, for a
given period, all cash deposits received on advertising orders prior to revenue
recognition as a percentage of net revenues recognized upon directory
distribution.
"Number of accounts" is defined as the total number of advertising accounts
for all directories published during a given period. Customers are counted as
multiple accounts if advertising in more than one directory.
"Average net revenues per account" is defined as net revenues divided by
the number of accounts.
"Ratio of earnings to fixed charges" is calculated by dividing earnings by
fixed charges. Earnings consist of income (loss) before extraordinary item plus
contributions to the Equity Compensation Plan plus fixed charges. Fixed charges
consist of interest, whether expensed or capitalized, amortization of debt
issuance costs, whether expensed or capitalized, and an allocation of one-fourth
of the rental expense from operating leases which management considers to be a
reasonable approximation of the interest factor of rental expense. After giving
pro forma effect to the initial offering of the Series C notes, our ratio of
earnings to fixed charges would have been 1.69 to 1 for the year ended April 30,
1998 and 0.77 to 1 for the eight months ended December 31, 1998.
"Pro forma interest expense" represents estimated interest expense as if
the offering of the Series C notes had occurred at the beginning of each period
for which it is presented. However, for the year ended April 30, 1998, pro forma
interest expense includes interest expense on the loans under the senior credit
facility, the Series B notes and the Series C notes for the entire year even
though the debt incurred was only outstanding for portions thereof. This was
done because we believe that this more accurately represents the cost of the
company's debt structure. Pro forma interest expense is calculated as follows:
<TABLE>
<CAPTION>
EIGHT MONTHS
ENDED
YEAR ENDED DECEMBER 31,
APRIL 30, 1998 1998
-------------- -----------------
<S> <C> <C>
Interest expense:
Senior term loan ($68,438 at 8.87%)................. $ 6,070 $ 3,707
Senior revolving line of credit..................... -- --
Series B and Series C notes ($140 million at
9.625%)........................................... 13,475 8,983
------- -------
Pro forma cash interest expense..................... 19,545 12,690
Amortization of debt issuance costs, net............ 1,080 711
------- -------
Total pro forma interest expense.......... $20,625 $13,401
======= =======
</TABLE>
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<PAGE> 15
Member equity (deficit) represents the value of equity contributions to the
company by its member, TransWestern Holdings L.P., plus net income less member
distributions for income taxes and distributions related to recapitalization
transactions completed during the years ended April 30, 1996 and 1998. Member
distributions for income taxes during the years ended April 30, 1996, 1997 and
1998 totaled $3,400, $5,801 and $2,100, respectively. Member distributions
related to recapitalization transactions completed in the year ended April 30,
1996 and in the year ended April 30, 1998 totaled $36,400 and $174,381,
respectively. Also, in connection with the November 1995 refinancing of
TransWestern Holdings L.P., which was formerly TransWestern Publishing Company,
L.P., $36 million was distributed to the limited and general partners of the
partnership. Furthermore, in connection with the October 1997 refinancing of the
partnership, $174.4 million was distributed to the limited and general partners
of the partnership.
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<PAGE> 16
RISK FACTORS
You should carefully consider each of the following factors and all of the
other information set forth in this prospectus before tendering your Series B or
C notes for Series D notes. The risks and uncertainties described below are not
the only ones facing our company. Additional risks and uncertainties not
presently known to us or that we currently believe to be immaterial may also
adversely affect our business.
If any of the following risks and uncertainties develop into actual events,
our business, financial condition or results of operations could be materially
adversely affected. In such case, we may not be able to make principal and
interest payments on the notes, and you may lose all or part of your investment.
YOUR VOTING INTERESTS MAY BE DILUTED AS A RESULT OF THE EXCHANGE OFFER
It is likely that all of the Series C notes and all of the Series B notes
will be tendered for exchange in the exchange offer; however, we cannot assure
you that a significant amount of the Series B notes or the Series C notes will
be so tendered. If all of the Series B notes and Series C notes are exchanged
for Series D notes, $140,000,000 aggregate principal amount of Series D notes
will be outstanding following consummation of the exchange offer, and the Series
D notes will be deemed to be a single series of notes outstanding under the
indenture relating to the Series C notes. In such case, any actions requiring
the consent of each holder or the holders of a majority in outstanding principal
amount of notes under such indenture will therefore require the consent of each
holder of Series D notes or the holders of a majority in aggregate principal
amount of such outstanding Series D notes, as applicable, and the individual
voting interest of each holder will accordingly be diluted.
HOLDERS OF SERIES C NOTES THAT FAIL TO EXCHANGE THEIR NOTES MAY BE UNABLE TO
RESELL THEIR NOTES
We did not register the Series C notes under the federal or any state
securities laws, nor do we intend to following the exchange offer. As a result,
the Series C notes may only be transferred in limited circumstances under the
securities laws. If the holders of Series C notes do not exchange their notes in
the exchange offer, they lose their right to have the Series C notes registered
under the federal securities laws, subject to certain limitations. As a result,
a holder of Series C notes after the exchange offer may be unable to sell their
notes.
YOUR NOTES WILL NOT BE ACCEPTED FOR EXCHANGE IF YOU FAIL TO FOLLOW THE EXCHANGE
OFFER PROCEDURES
The Series D notes will be issued to you in exchange for your Series B or C
notes only after timely receipt by the exchange agent of:
- your Series B or C notes; and
- a properly completed and executed Letter of Transmittal and all other
required documentation; or
- a book-entry delivery by transmittal of an agent's message through the
Depository Trust Company.
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<PAGE> 17
If you want to tender your Series B or C notes in exchange for Series D notes,
you should allow sufficient time to ensure timely delivery.
Neither the exchange agent nor our company is under any duty to give you
notification of defects or irregularities with respect to tenders of Series B or
C notes for exchange. Series C notes that are not tendered or are tendered but
not accepted will, following the exchange offer, continue to be subject to the
existing transfer restrictions on such notes. In addition, if you tender your
Series B or C notes in the exchange offer to participate in a distribution of
the Series D notes, you will be required to comply with the registration and
prospectus delivery requirements of the federal securities laws in connection
with any resale transaction. For additional information, please refer to "The
Exchange Offer" and "Plan of Distribution" sections of this prospectus.
WE MAY BE UNABLE TO SERVICE OUR DEBT, INCLUDING THE NOTES, AS A RESULT OF OUR
HIGH LEVEL OF INDEBTEDNESS
We incurred significant debt in connection with the recapitalization of our
company that was completed in October 1997. As of December 31, 1998, we had
outstanding indebtedness of approximately $239 million and member deficit of
approximately $149 million. After giving pro forma effect to the offering of the
Series C notes, our ratio of earnings to fixed charges would have been 1.69 to 1
for the year ended April 30, 1998 and 0.77 to 1 for the eight-months ended
December 31, 1998. We also have additional borrowing capacity on our revolving
credit facility under our senior credit facility. The lenders under our senior
credit facility have an exclusive security interest in substantially all of the
assets of our company.
Our leveraged financial position poses substantial consequences to you as a
holder of our notes, including the risks that:
- a substantial portion of our cash flow from operations will be dedicated
to the payment of interest on the notes and the payment of principal and
interest under our senior credit facility and other outstanding
indebtedness;
- our leveraged position may impede our ability to obtain financing in the
future for working capital, capital expenditures, acquisitions and
general corporate purposes; and
- our highly leveraged financial position may make our company more
vulnerable to economic downturns and may limit our ability to withstand
competitive pressures.
In addition, as of December 31, 1998, we had outstanding indebtedness of
approximately $68 million under our senior credit facility and $40 million of
additional borrowing availability under our senior credit facility. Our senior
credit facility bears interest at floating rates. Accordingly, an increase in
prevailing interest rates which causes a corresponding increase in the interest
rates under the senior credit facility could adversely impact our business,
operating results or financial condition. See "Description of Certain
Indebtedness -- Senior Credit Facility."
We are currently required to make quarterly scheduled principal payments on
the term loans under our senior credit facility and to repay such term loans in
full in 2004. The senior credit facility also provides that the revolving credit
facility will be reduced each year commencing on January 1, 2000 and that all
borrowings under the revolving credit facility will become due in 2003. Our
ability to make the required scheduled
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<PAGE> 18
payments will depend on our financial and operating performance, which is
subject to prevailing economic and competitive conditions and to certain
financial, business and other factors beyond our control, including interest
rates, unscheduled shutdowns at our suppliers or printers, increased paper
prices and other developments.
If we are unable to generate sufficient cash flow from operations in the
future to service our indebtedness and to meet our other commitments, we will be
required to adopt one or more alternatives, such as refinancing or restructuring
our indebtedness, selling material assets or operations or seeking to raise
additional debt or equity capital. We cannot assure you that any of these
actions could be effected on a timely basis or on satisfactory terms or that
these actions would enable us to continue to satisfy our capital requirements.
In addition, the terms of existing or future debt agreements, including the
indenture relating to the Series D notes and our senior credit facility, may
prohibit us from adopting any of these alternatives, which could cause us to
default on a portion of, or all of, our indebtedness. See "Description of
Certain Indebtedness -- Senior Credit Facility" and "Description of the Notes."
For a discussion of our liquidity position, you should read the "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" section of this prospectus.
YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT BECAUSE THE NOTES ARE SUBORDINATED
TO OUR SENIOR DEBT
The Series D notes will be unsecured and subordinated to the prior right of
payment of all of our existing and future senior debt, including our obligations
under our senior credit facility. Our indebtedness under the senior credit
facility will also become due prior to the time the principal obligations under
the Series D notes become due. Subject to certain limitations, the indenture
relating to the Series D notes permits us to incur and secure additional senior
debt. As a result of the subordination provisions of the Series D notes, in the
event of a liquidation or insolvency, our assets will be available to pay
obligations on the Series D notes only after all of our senior debt has been
paid in full, and there may not be sufficient assets remaining to pay amounts
due on any or all of the Series D notes then outstanding. Claims in respect of
the Series D notes will be effectively subordinated to all liabilities,
including trade payables, of any of our subsidiaries that is not a guarantor of
the Series D notes. In addition, substantially all of the assets of our future
subsidiaries will be pledged to secure other indebtedness of our company. See
"Description of Certain Indebtedness -- Senior Credit Facility" and "Description
of the Notes."
THE TERMS OF OUR INDEBTEDNESS IMPOSE CERTAIN OPERATIONAL AND FINANCIAL
RESTRICTIONS ON OUR COMPANY
The agreements governing our outstanding indebtedness impose certain
operating and financial restrictions on our company. The senior credit facility
requires us to comply with financial covenants with respect to:
- a minimum interest coverage ratio;
- a minimum EBITDA, as this term is defined in our senior credit facility;
- a maximum leverage ratio; and
- a minimum fixed charge coverage ratio.
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<PAGE> 19
In addition, our senior credit facility restricts, among other things, our
ability to:
- declare dividends or redeem or repurchase capital stock;
- prepay, redeem or purchase debt;
- incur liens and engage in sale lease-back transactions;
- make loans and investments;
- incur additional indebtedness;
- amend or otherwise alter debt and other material agreements;
- make capital expenditures;
- engage in mergers, acquisitions and asset sales;
- transact with affiliates;
- alter the business we conduct;
- enter into guarantees of indebtedness; and
- make optional payments on or modify the terms of subordinated debt.
If we fail to comply with the restrictions in our senior credit facility,
we could be in default thereunder, which could result in an acceleration of such
indebtedness. Such an acceleration would be a default under the indenture
covering the Series D notes. See "Description of Certain Indebtedness -- Senior
Credit Facility."
Also, the indenture relating to the Series C and D notes and the indenture
relating to our Series B notes contain a number of covenants which restrict,
among other things, our ability to:
- incur additional debt;
- pay dividends and make distributions;
- issue stock of subsidiaries;
- make certain investments;
- repurchase stock;
- create liens;
- enter into transactions with affiliates;
- enter into sale lease-back transactions;
- merge or consolidate our company or any guarantors; and
- transfer or sell assets.
If we fail to comply with the restrictions in these indentures, we could be
in default under such indentures. See "Description of the Notes."
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<PAGE> 20
OUR BUSINESS COULD BE ADVERSELY AFFECTED BY TURNOVER AMONG OUR ACCOUNT
EXECUTIVES
Our ability to achieve our business plan depends to a significant extent on
our ability to identify, hire, train and retain qualified sales personnel in
each of the regions in which we operate. Historically, our revenue performance
has been closely related to our aggregate number of sales people. Our aggregate
number of salesperson days increased by approximately 85% from the year ended
April 30, 1994 to the year ended April 30, 1998 and our net revenues increased
by approximately 61% over the same period. In the years ended April 30, 1994,
1995, 1996, 1997 and 1998, we experienced a turnover of approximately 48%, 55%,
73%, 73% and 107.5%, respectively, in our sales force. Turnover is highest among
new hires, with approximately 73% of new hires over the past two years having
left within one year, and has increased as we have sought to increase our number
of account executives. As a result of these turnover rates, we have restructured
our sales management and instituted a training program for new hires.
Consequently, we expend a significant amount of resources and management time on
identifying and training our account executives. While we have been able to
achieve our objectives for increasing the number of sales days, our ability to
attract and retain qualified sales personnel depends on numerous factors,
including factors out of our control, such as conditions in the local employment
markets in which we operate. Our business plan calls for a continued increase in
the number of account executives, and we cannot assure you that we will be able
to hire or retain a sufficient number of account executives to achieve our
financial objectives. A decrease in the number of account executives could
adversely effect our ability to service our indebtedness, including principal
and interest payments on our notes, and could materially adversely affect our
business, operating results or financial condition.
WE MAY BE ADVERSELY AFFECTED BY VARIATION IN OUR QUARTERLY RESULTS
Our net revenues and operating results have exhibited some degree of
variability from quarter to quarter and between periods and some degree of
seasonality. Although we record bookings and receive advance payments at a
fairly constant rate, we do not recognize net revenues with respect to bookings
or cash receipts for any given directory or the costs directly related to sales,
production, printing and distribution of that directory until the month in which
it is distributed. The actual publication and distribution dates of individual
directories are subject to change and a significant number of individual
directories are not published during the same month each year, which results in
significant monthly fluctuation in our net revenues and EBITDA. Thus, EBITDA and
other financial indicators generally relied on by investors to evaluate a
company's ability to service its debt may not, in the case of our company,
reflect actual cash received during a given period. Also, changes in our sales
canvassing, production and distribution schedules could materially adversely
affect our ability to satisfy certain of the covenants in our senior credit
facility and the indentures relating to our notes. For a discussion of these
matters you should read the "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Overview" section of this prospectus.
OUR BUSINESS MAY BE ADVERSELY AFFECTED BY OUR RELIANCE ON, AND OUR
EXTENSION OF CREDIT TO, SMALL BUSINESSES
Approximately 94% of our net revenues come from selling advertising to
small businesses. In the ordinary course of our business, we extend credit to
our customers for advertising purchases. Full collection of delinquent accounts
can take up to 18 to
17
<PAGE> 21
24 months. Our net accounts receivable for a given month fluctuates based on the
number and size of directories published each month. Our net accounts receivable
was as low as $17.7 million in June 1996 and as high as $26.1 million in April
1998. As of December 31, 1998, we had approximately 25,500 credit customers,
with an average amount due per customer of approximately $1,190. Our average net
accounts receivable turnover, net of advance payments, was approximately 177
days in the year ended April 30, 1998 and approximately 159 (annualized) days in
the eight months ended December 31, 1998. We establish a reserve for bad debt
and errors when we recognize revenue for individual directories. We estimate bad
debt expense by taking into account actual collection history over a period of
15 to 21 months following publication of individual directories. Actual
write-offs are taken against the reserve when our management determines that an
account is uncollectible, which typically is determined after completion of the
next annual selling cycle. Therefore, actual account write-offs may not occur
for 18 to 24 months after directory publication. The estimated provision for bad
debt totaled $7.1 million, $8.9 million and $9.1 million in the years ended
April 30, 1996, 1997 and 1998, respectively, or 9.1%, 9.8% and 9.1%,
respectively, of net revenues. Actual account write-offs equaled $7.5 million,
or 9.7% of net revenues in the year ended April 30, 1996. As described above,
actual account write-offs for the years ended April 30, 1997 and 1998 have not
yet been determined. Based on current estimates, we believe that actual
write-offs for the year ended April 30, 1997 will total approximately $8.2
million or 9.0% of net revenues.
As a group, small businesses tend to have fewer financial resources and
higher financial failure rates than larger businesses. Consequently, although we
attempt to mitigate this exposure through the collection of advance payments, we
cannot assure you that we will not be adversely affected by our dependence on
and our extension of credit to small businesses.
WE DEPEND ON OUR KEY PERSONNEL AND WE COULD BE ADVERSELY AFFECTED IF WE LOSE OUR
KEY PERSONNEL
Our company is dependent on the continued services of our senior management
team, including our regional sales management personnel. In 1997, we entered
into employment contracts with our President and Chief Executive Officer and our
Chairman which provide for the continued employment of each of them for a five
year term. Although we believe we could replace our key employees in an orderly
fashion should the need arise, the loss of our key personnel could have a
material adverse effect on our business, operating results or financial
condition.
WE MAY BE UNABLE TO ACQUIRE DIRECTORIES AND START-UP NEW DIRECTORIES
A substantial portion of our growth, approximately 40% of our revenue
growth, since 1993 has resulted from the acquisition of directories from other
independent yellow pages publishers and start-ups of new directories. While one
of our strategies for achieving our financial objectives is increasing the
number of directories we publish and the local markets which we serve, we cannot
assure you that our historical success with acquisitions or start-ups will
continue. We intend to continue to seek opportunities for future expansion, but
we cannot assure you that we will be able to develop new directories or
identify, negotiate and consummate acquisitions on attractive terms, nor can we
assure you that new acquisitions or start-ups can be operated profitably or
integrated successfully into our operations.
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<PAGE> 22
Also, acquisitions and start-ups both require substantial attention from
and place substantial demands upon our senior management, which may divert
attention from and adversely impact their ability to manage our company's
existing business.
WE MAY BE UNABLE TO COMPETE SUCCESSFULLY IN OUR HIGHLY COMPETITIVE INDUSTRY
The yellow pages directory advertising business is highly competitive.
There are over 250 independent publishers operating in competition with the
regional Bell operating companies and other telephone utilities. In most
markets, we compete not only with the telephone utilities, but also with one or
more independent yellow pages publishers. Many of these telephone utility
competitors are larger and have greater financial resources than our company. We
cannot assure you that we will be able to compete effectively with these other
firms for advertising or acquisitions in the future. In addition, we compete
against other media, including newspapers, radio, television, the Internet,
billboards and direct mail, for business and professional advertising and cannot
assure you that we will be able to compete successfully against these and other
media for advertising.
WE MAY BE UNABLE TO RESPOND ADEQUATELY TO CHANGING TECHNOLOGY IN OUR INDUSTRY OR
TO DEVELOP NEW PRODUCTS
The yellow pages directory advertising business is subject to changes
arising from developments in technology, including information distribution
methods, and users' technological preferences. As a result of these factors, our
growth and future financial performance may depend upon our ability to develop
and market new products and services and create new distribution channels, while
enhancing existing products, services and distribution channels, in order to
accommodate the latest technological advances and user preferences, including
the use of the Internet. The increasing use of the Internet by consumers as a
means to transact commerce may result in new technologies being developed and
services provided that could compete with our products and services. We have
entered into a strategic agreement with InfoSpace, Inc. with respect to our
Internet service. However, we cannot assure you that we will be successful in
our attempt to provide our services over the Internet. If we fail to anticipate
or respond adequately to changes in technology and user preferences, or are
unable to finance the necessary capital expenditures, it could materially
adversely affect our business, operating results or financial condition.
FLUCTUATIONS IN THE PRICE AND AVAILABILITY OF RAW MATERIALS COULD ADVERSELY
AFFECT OUR BUSINESS
We are dependent upon outside suppliers for all of our raw material needs
and, therefore, we are subject to price increases and delays in receiving
supplies of such materials. Our principal raw material is paper, and we used
approximately 17.6 million and 18.2 million pounds of directory grade paper in
the years ended April 30, 1997 and 1998, respectively, resulting in a total cost
of paper during such periods of $5.8 million and $5.7 million, respectively.
Certain commodity grades of paper, including directory grade paper, have shown
considerable price volatility since 1989. Paper prices rose sharply in 1995 and
then fell throughout 1996. We do not purchase paper directly from paper mills;
instead, our printers purchase the paper on our behalf at prices we have
negotiated. Changes in the supply of, or demand for, paper could affect delivery
times and prices. We cannot assure you that we will continue to have available
necessary raw materials at reasonable prices or that any increases in paper
costs would not have a material adverse
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<PAGE> 23
effect on our business, financial condition or results of operations. For a
discussion of our raw material costs see "Management's Discussion and Analysis
of Financial Condition and Result of Operations -- Overview."
WE MAY BE ADVERSELY AFFECTED BY AN ECONOMIC RECESSION
We derive our net revenues from the sale of advertising in our directories.
Our advertising revenues, as well as those of yellow pages publishers in
general, generally do not fluctuate widely with economic cycles. However, a
prolonged national or regional economic recession could have a material adverse
effect on our business, operating results or financial condition.
THE CONTROLLING EQUITYHOLDER OF OUR COMPANY MAY HAVE INTERESTS IN CONFLICT WITH
THE INTERESTS OF OUR NOTEHOLDERS
Thomas H. Lee Equity Fund III and its affiliates own approximately 59% of
the common stock of TransWestern Communications Company, Inc. TransWestern
Communications Company, Inc. is the sole manager of our company and the general
partner of TransWestern Holdings L.P., which is the sole member of our company.
Under the terms of an investors agreement, all of the stockholders of
TransWestern Communications Company, Inc. have agreed to vote in favor of those
individuals designated by Thomas H. Lee and its affiliates to serve on the Board
of Directors of TransWestern Communications Company, Inc. and Thomas H. Lee and
its affiliates have the right to appoint a majority of the Directors until the
occurrence of certain events. As a result, Thomas H. Lee and its affiliates have
the ability to control the policies and operations of our company. Circumstances
may occur in which the interests of Thomas H. Lee and its affiliates, as the
principal equity holders of our company, could be in conflict with your
interests as a holder of our notes. In addition, our equity investors may have
an interest in pursuing acquisitions, divestitures and other transactions that,
in their judgment, could enhance their equity investment, even though such
transactions might involve risks to you as a holder of our notes.
WE MAY BE ADVERSELY AFFECTED IF OUR YEAR 2000 REMEDIATION EFFORTS ARE NOT
SUCCESSFUL
Currently, many computer systems and software products are coded to accept
only two digit entries in the date code field. These date code fields will need
to accept four digit entries to distinguish 21st century dates from 20th century
dates. As a result, many companies' software and computer systems may need to be
upgraded or replaced in order to comply with such "Year 2000" requirements. Our
company and third parties with which we do business rely on numerous computer
programs in day to day operations. We are in the process of evaluating and
remediating the Year 2000 issue as it relates to our internal computer systems
and we are also surveying our key suppliers for Year 2000 compliance. Because
our Year 2000 efforts are ongoing, we may not have yet identified all potential
Year 2000 complications. We cannot identify the potential impact of these
complications on our financial condition and results of operations at this time.
If our or our suppliers' computer systems, or the software applications we use
to produce our products, fail or experience significant difficulties related to
Year 2000 issues, it could have a material adverse impact on our business,
operating results or financial condition. For a further discussion of our Year
2000 readiness, you should read the "Management's Discussion and
20
<PAGE> 24
Analysis of Financial Conditions and Results of Operations -- Year 2000
Readiness Statement" section of this prospectus.
PROVISIONS IN THE INDENTURE COULD DELAY OR PREVENT A CHANGE OF CONTROL OF OUR
COMPANY; WE MAY BE UNABLE TO PURCHASE THE NOTES UPON A CHANGE OF CONTROL
In the event there is a change in control of our company, we will be
required to make an offer for cash to purchase the Series D notes at 101% of the
principal amount thereof, plus accrued and unpaid interest, if any, thereon to
the purchase date. Certain events involving a change in control of our company
may result in an event of default under our senior credit facility, our other
indebtedness or indebtedness we may incur in the future. Moreover, the exercise
by the holders of the Series D notes of their right to require us to purchase
the Series D notes may cause an event of default under the senior credit
facility or such other indebtedness, even if the change in control does not. Our
obligations under this provision of the indenture relating to the Series D notes
could delay, deter or prevent a sale of our company which might otherwise be
advantageous to you and other holders of our notes. Finally, we cannot assure
you that we will have the financial resources necessary to purchase the Series D
notes upon a change in control or our company. In this regard, you should read
the "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and the "Description of the
Notes -- Change of Control Offer" sections of this prospectus.
THE HOLDERS OF A MAJORITY OF THE NOTES MAY WAIVE DEFAULTS UNDER OR MODIFY THE
INDENTURE IN A MANNER ADVERSE TO NOTEHOLDERS WHO DO NOT APPROVE OF SUCH
ACTIONS
Subject to certain limitations specified in the indenture, the holders of a
majority in principal amount of the Series D notes then outstanding will have
the right to:
- waive certain existing defaults or events of default;
- waive compliance with certain provisions of the indenture or the Series D
notes;
- modify or supplement the indenture; and
- direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee under the indenture.
These provisions of the indenture could allow actions affecting the Series
D notes to be taken without the approval of all of the holders of the Series D
notes and thus may have an adverse effect on the holders of Series D notes who
do not approve of such actions. See "Description of the Notes -- Events of
Default" and "-- Modification of Indenture."
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<PAGE> 25
THE NOTES COULD BE VOIDED OR SUBORDINATED TO OUR OTHER DEBT IF THE ISSUANCE OF
THE NOTES CONSTITUTED FRAUDULENT CONVEYANCE
Under applicable provisions of the U.S. Bankruptcy Code or comparable
provisions of state fraudulent transfer or conveyance laws, if our company, at
the time we issued the Series C notes:
(1) incurred such indebtedness with intent to hinder, delay or defraud
creditors; or
(2) received less than reasonably equivalent value or fair consideration
for incurring such indebtedness; and
- was insolvent at the time of incurrence,
- was rendered insolvent by reason of such incurrence, and the
application of the proceeds thereof,
- was engaged or was about to engage in a business or transaction for
which the assets remaining with our company constituted unreasonably
small capital to carry on our businesses, or
- intended to incur, or believed it would incur, debts beyond our
ability to pay such debts as they mature,
then, in each case, a court of competent jurisdiction could void, in whole or in
part, the Series C notes or Series D notes if exchanged, or, in the alternative,
subordinate such notes to existing and future indebtedness of our company. The
measure of insolvency for purposes of the foregoing will vary depending upon the
law applied in such case. Generally, however, our company would be considered
insolvent if the sum of our debts, including contingent liabilities, was greater
than all of our assets at fair valuation or if the present fair saleable value
of our assets was less than the amount that would be required to pay the
probable liability on our existing debts, including contingent liabilities, as
they become absolute and matured.
We believe that, for purposes of the U.S. Bankruptcy Code and state
fraudulent transfer or conveyance laws, the Series C notes were issued and are
being exchanged without the intent to hinder, delay or defraud creditors and for
proper purposes and in good faith and that our company, after the issuance and
exchange of such notes and the application of the proceeds thereof, will be
solvent, will have sufficient capital for carrying on our business and will be
able to pay our debts as they mature. This belief is not based on an opinion of
counsel and we cannot assure you that a court passing on such questions would
agree with our view.
THERE IS CURRENTLY NO PUBLIC MARKET FOR THE SERIES D NOTES AND ONE MAY NOT
DEVELOP
While the Series C notes are presently eligible for trading in the Private
Offerings, Resales and Trading Through Automated Linkages market of the National
Association of Securities Dealers by qualified institutional buyers, there is no
existing market for the Series D notes. The initial purchasers of the Series C
notes have advised us that they currently intend to make a market in the Series
D notes following the exchange offer, but they are not obligated to do so, and
any market-making may be stopped at any time without notice. We do not intend to
apply for a listing of the Series D notes on any securities exchange. We do not
know if an active public market for the Series D notes will
22
<PAGE> 26
develop or, if developed, will continue. If an active public market does not
develop or is not maintained, the market price and liquidity of the Series D
notes may be adversely affected. We cannot assure you regarding the liquidity of
the market for the Series D notes, the ability of holders to sell their Series D
notes or the price at which holders may sell their Series D notes.
THE ISSUERS
TransWestern Publishing Company LLC. TransWestern Publishing Company, L.P.
(which we refer to as the "Partnership") was formed in 1993 to acquire the
TransWestern Publishing Division of US West Marketing Resources Group, Inc., a
subsidiary of US WEST INC. In October 1997, the Partnership completed a $312.7
million recapitalization (the "Recapitalization"). In November 1997, the
Partnership formed and contributed substantially all of its assets to our
company and our company assumed or guaranteed all of the liabilities of the
Partnership and the Partnership changed its name to TransWestern Holdings L.P.
(which we refer to as "Holdings"). As a result of this transaction, Holdings'
only assets are all of the membership interests of our company. All of the
operations that were previously conducted by the Partnership are now being
conducted by our company.
TWP Capital Corp. II. Capital II, a wholly-owned subsidiary of our company,
was incorporated in 1997 for the purpose of serving as a co-issuer of our Series
A notes, which were exchanged for our Series B notes. Capital II does not and
will not have substantial operations or assets of any kind and does not or will
not have any revenues. As a result, prospective purchasers of our notes should
not expect Capital II to participate in servicing the interest or principal
obligations of our notes. The indentures relating to our notes impose
substantial restrictions on the activities of Capital II.
Our principal executive offices are located 8344 Clairemont Mesa Boulevard,
San Diego, California 92111, and our telephone number is (619) 467-2800.
USE OF PROCEEDS
We will not receive cash proceeds from the issuance of the Series D notes.
We used the proceeds of approximately $40.7 million from the initial offering of
the Series C notes to:
- to repay approximately $10.5 million of our outstanding term loan under
our senior credit facility;
- to repay $22.7 million of our outstanding indebtedness under the
revolving credit facility of our senior credit facility, $13.4 million of
which was incurred to fund the purchase of certain directories from
Universal Phone Books, Inc. and Universal Phone Books of Jackson, Inc.;
and
- the balance of approximately $7.5 million is being used for general
corporate purposes, including working capital and acquisitions of
directories made in January 1999.
23
<PAGE> 27
CAPITALIZATION
The following table sets forth the capitalization of our company as of
December 31, 1998. The information in this table should be read in conjunction
with the "Management's Discussion and Analysis of Financial Condition and
Results of Operations" section of this prospectus as well as our financial
statements and the notes thereto which you can find elsewhere in this
prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Cash................................................ $ 14,067
Total debt:
Senior credit facility:
Revolving credit facility...................... --
Term loan...................................... 67,906
Other debt........................................ 2,466
Senior subordinated notes......................... 141,784
---------
Total debt..................................... 212,156
Total member deficit................................ (148,669)
---------
Total capitalization...................... $ 63,487
=========
</TABLE>
24
<PAGE> 28
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA
The following table sets forth for the periods indicated selected
historical consolidated financial data for the company. The following selected
historical consolidated financial data are qualified by the more detailed
consolidated financial statements of the company and the notes thereto included
elsewhere in this prospectus and should be read in conjunction with such
consolidated financial statements and notes and the discussion under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus.
On May 1, 1998, our fiscal year end was changed from April 30 to December
31. Starting with the quarter ending September 30, 1998, we began reporting on a
calendar year end basis.
The consolidated statement of operations data for the years ended April 30,
1996, 1997 and 1998 and the eight months ended December 31, 1998 and balance
sheet data as of April 30, 1997 and 1998 and as of December 31, 1998, have been
derived from our consolidated financial statements included elsewhere in this
prospectus.
The consolidated statement of operations data for the years ended April 30,
1994 and 1995 and balance sheet data as of April 30, 1994, 1995 and 1996, have
been derived from our audited financial statements which do not appear in this
prospectus. The consolidated statement of operations data for the eight months
ended December 31, 1997 and balance sheet data as of December 31, 1997 have been
derived from unaudited consolidated financial statements which, in the opinion
of management, have been prepared on the same basis as the audited consolidated
financial statements and contain all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the results of
operations for the unaudited interim period.
25
<PAGE> 29
<TABLE>
<CAPTION>
EIGHT MONTHS ENDED
YEARS ENDED APRIL 30, DECEMBER 31,
-------------------------------------------------------- ------------------------
1994 1995 1996 1997 1998 1997 1998
------- -------- -------- -------- --------- ----------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.................. $62,219 $ 69,845 $ 77,731 $ 91,414 $ 100,143 $ 52,326 $ 61,071
Cost of revenues.............. 18,788 16,956 18,202 19,500 20,233 11,998 12,694
Gross profit.................. 43,431 52,889 59,529 71,914 79,910 40,328 48,377
Operating expenses:
Sales and marketing......... 26,301 27,671 29,919 36,640 40,290 22,852 27,530
General and
administrative............ 13,037 13,279 14,276 16,821 16,588 10,575 12,092
Contribution to Equity
Compensation Plan......... -- 525 796 -- 5,543 5,543 --
------- -------- -------- -------- --------- --------- ---------
Total operating expenses...... 39,338 41,475 44,991 53,461 62,421 38,970 39,622
------- -------- -------- -------- --------- --------- ---------
Income from operations........ 4,093 11,414 14,538 18,453 17,489 1,358 8,755
Other income (expense), net... 344 470 375 48 82 (23) 242
Interest expense.............. (2,951) (4,345) (6,630) (7,816) (13,387) (7,356) (11,754)
------- -------- -------- -------- --------- --------- ---------
Income (loss) before
extraordinary item.......... 1,486 7,539 8,283 10,685 4,184 (6,021) (2,757)
Extraordinary item(a)......... -- (392) (1,368) -- (4,791) (4,791) --
------- -------- -------- -------- --------- --------- ---------
Net income (loss):............ $ 1,486 $ 7,147 $ 6,915 $ 10,685 $ (607) $ (10,812) $ (2,757)
======= ======== ======== ======== ========= ========= =========
OTHER DATA:
Depreciation and
amortization................ $ 4,603 $ 4,593 $ 4,691 $ 6,399 $ 7,086 $ 4,383 $ 4,526
Capital expenditures.......... 769 496 484 1,034 996 706 824
Cash flows provided by (used
for):
Operating activities........ 9,853 14,608 13,091 15,302 15,681 9,084 4,474
Investing activities........ (3,121) (2,838) (5,713) (3,592) (9,200) (12,938) (22,156)
Financing activities........ (6,075) (11,550) (6,992) (11,776) (6,223) 9,412 30,237
EBITDA(b)..................... 9,040 17,002 20,400 24,900 30,200 5,700 13,500
EBITDA margin(c).............. 14.5% 24.3% 26.2% 27.2% 30.2% 10.9% 22.1%
Gross profit margin........... 69.8% 75.7% 76.6% 78.7% 79.8% 77.1% 79.2%
Bookings(d)................... $64,269 $ 70,013 $ 75,709 $ 86,859 $ 99,492 $ 65,848 $ 70,281
Advance payments as a % of net
revenue(e).................. 31.8% 36.9% 41.0% 45.1% 46.0% 47.3% 47.4%
Number of accounts(f)......... 71,832 77,371 84,117 93,157 97,479 52,071 61,697
Average net revenues per
account(g).................. $ 866 $ 903 $ 924 $ 981 $ 1,027 $ 1,005 $ 990
Number of directories......... 97 106 118 128 139 76 84
Ratio of earnings to fixed
charges(h):................. 1.44x 2.69x 2.28x 2.29x 1.70x 0.94x 0.77x
BALANCE SHEET DATA
(AT END OF PERIOD):
Working capital............... $12,034 $ 3,496 $ 2,088 $ 24 $ 5,443 $ 3,886 $ 15,188
Total assets.................. 43,879 41,831 47,423 48,231 60,804 53,068 90,830
Total debt.................... 25,724 47,961 84,410 78,435 179,735 179,875 212,156
Member equity(deficit)(i)..... 4,458 (22,721) (55,606) (50,722) (145,912) (156,117) (148,669)
</TABLE>
See accompanying notes to Selected Historical Consolidated Financial and Other
Data.
26
<PAGE> 30
NOTES TO SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA
(DOLLARS IN THOUSANDS)
(a) "Extraordinary item" represents the write-off of unamortized debt issuance
costs related to the repayment of debt prior to maturity. See Note 4 of the
Notes to the Consolidated Financial Statements contained elsewhere in this
prospectus.
(b) "EBITDA" is defined as income (loss) before extraordinary item plus
interest expense, discretionary contributions to the company's Equity
Compensation Plan, which represent special distributions to the company's
Equity Compensation Plan in connection with refinancing transactions, and
depreciation and amortization and is consistent with the definition of
EBITDA in the indentures relating to the company's notes and in the
company's senior credit facility. Contributions to the Equity Compensation
Plan were $525 for the year ended April 30, 1995, $796 for the year ended
April 30, 1996 and $5,543 for the year ended April 30, 1998. EBITDA is not
a measure of performance under generally accepted accounting principles.
EBITDA should not be considered in isolation or as a substitute for net
income, cash flows from operating activities and other income or cash flow
statement data prepared in accordance with generally accepted accounting
principles, or as a measure of profitability or liquidity. However,
management has included EBITDA because it may be used by certain investors
to analyze and compare companies on the basis of operating performance,
leverage and liquidity and to determine a company's ability to service
debt. The company's definition of EBITDA may not be comparable to that of
other companies.
(c) "EBITDA margin" is defined as EBITDA as a percentage of net revenues.
Management believes that EBITDA margin provides a valuable indication of
the company's ability to generate cash flows available for debt service.
(d) "Bookings" is defined as the daily advertising orders received from
accounts during a given period and generally occur at a steady pace
throughout the year. In the year ended April 30, 1997, net revenues
included $4,200 from acquired directories, while bookings do not reflect
this adjustment. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Overview."
(e) "Advance payments as a percentage of net revenues" is defined as, for a
given period, all cash deposits received on advertising orders prior to
revenue recognition as a percentage of net revenues recognized upon
directory distribution.
(f) "Number of accounts" is defined as the total number of advertising accounts
for all directories published during a given period. Customers are counted
as multiple accounts if advertising in more than one directory.
(g) "Average net revenues per account" is defined as net revenues divided by
the number of accounts.
(h) "Ratio of earnings to fixed charges" is calculated by dividing earnings by
fixed charges. Earnings consist of income (loss) before extraordinary item
plus contributions to the Equity Compensation Plan plus fixed charges.
Fixed charges consist of interest, whether expensed or capitalized,
amortization of debt issuance costs, whether expensed or capitalized, and
an allocation of one-fourth of the rental expense from operating leases
which management considers to be a reasonable approximation of the interest
factor of rental expense.
27
<PAGE> 31
(i) Member equity (deficit) is the value of equity contributions to the company
by its member, TransWestern Holdings L.P., plus net income less member
distributions for income taxes and distributions related to
recapitalization transactions completed during the years ended April 30,
1996 and 1998. Member distributions for income taxes during the years ended
April 30, 1996, 1997 and 1998 totaled $3,400, $5,801 and $2,100,
respectively. Member distributions related to recapitalization transactions
completed in the years ended April 30, 1996 and 1998 totaled $36,400 and
$174,381, respectively. Also, in connection with the November 1995
refinancing of the Partnership, $36 million was distributed to the limited
and general partners of the Partnership. Furthermore, in connection with
the October 1997 refinancing of the Partnership, $174.4 million was
distributed to the limited and general partners of the Partnership.
28
<PAGE> 32
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
On May 1, 1998, the Board of Directors of TransWestern Communications
Company, Inc. ("TCC"), the general partner of Holdings, the sole member of our
company, authorized the change of our fiscal year from a fiscal year ending
April 30 to a fiscal year ending December 31. Starting with the quarter ending
September 30, 1998, we began reporting on a calendar year end basis.
OVERVIEW
Revenue Recognition. We recognize net revenues from the sale of advertising
placed in each directory when the completed directory is distributed. Costs
directly related to sales, production, printing and distribution of each
directory are capitalized as deferred directory costs and then matched against
related net revenues upon distribution. All other operating costs are recognized
during the period when incurred. As the number of directories increases, the
publication schedule is periodically adjusted to accommodate new books. In
addition, changes in distribution dates are affected by market and competitive
conditions and the staffing level required to achieve the individual directory
revenue goals. As a result, our directories may be published in a month earlier
or later than the previous year which may move recognition of related revenues
from one fiscal quarter or year to another. Year to year results depend on both
timing and performance factors.
Notwithstanding significant monthly fluctuation in net revenues recognized
based on actual distribution dates of individual directories, our bookings and
cash collection activities generally occur at a steady pace throughout the year.
The table below demonstrates that quarterly bookings, collection of advance
payments and total cash receipts, which includes both advance payments and
collections of accounts receivable, vary less than net revenues or EBITDA:
<TABLE>
<CAPTION>
TWELVE MONTHS ENDING APRIL 30,
---------------------------------------------------------------------------------------------
1996 1997 1998
----------------------------- ----------------------------- -----------------------------
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues............. $20.7 $14.7 $20.9 $21.4 $23.3 $14.7 $23.5 $29.9 $19.2 $19.1 $21.9 $39.9
EBITDA................... 5.5 2.4 7.0 5.5 5.8 2.6 6.9 9.6 4.0 3.3 6.2 16.7
Bookings................. 18.1 20.0 17.6 20.0 20.5 23.9 21.4 21.1 22.7 27.3 23.0 26.5
Advance payments......... 8.0 8.0 8.2 9.6 8.8 10.1 10.4 12.2 11.1 11.8 11.0 12.5
Total cash receipts...... 17.7 18.0 17.4 19.5 18.5 20.9 20.0 22.6 22.6 24.1 20.4 24.0
</TABLE>
For definitions of "EBITDA," "Bookings," and "advance payments" see the
notes to "Selected Historical Consolidated Financial and Other Data."
Revenue Growth. A key factor in our company's revenue growth has been the
increase in the number of directories published. Compared to 1996, the number of
directories owned has increased by 57, from 118 to 175 as of December 31, 1998,
and we increased our total number of accounts from nearly 84,000 to more than
106,000. The growth in directories was primarily due to acquiring 22 directories
that expanded our presence in northern California, upstate New York, western
Massachusetts, southern Indiana, eastern Ohio, southern Michigan, Pennsylvania,
Kentucky and Tennessee. Excluding acquired directories, our net revenues grew
7.2%, 6.7%, and 7.1% for the years ended April 30, 1996, 1997 and 1998 and 4.1%
for the eight months ended December 31, 1998. Our average revenue per account
increased from $959 in the year ended April 30, 1996 to $1,001 in the year ended
April 30, 1997 and to $1,027 for the year ended April 30,
29
<PAGE> 33
1998, and from $1,005 in the eight months ended December 31, 1997 to $1,016 in
the eight months ended December 31, 1998. Our overall revenue renewal and
account retention rates have averaged 88% and 76%, respectively, over the last
three years ended April 30, 1998.
Bookings. The length of the measurement periods for revenues and bookings
are the same; however, the measurement period for bookings for each month is the
thirty-day period ending on the twentieth of that month. Consequently, the
measurement period for bookings lags the measurement period for revenue and
other items by 10 days. Growth in bookings, which is closely correlated with the
number of account executives, was 14.5% for the year ended April 30, 1998 versus
the year ended April 30, 1997. To facilitate future growth, we increased the
size of our sales force by approximately 12.5% from an average 389 in the year
ended April 30, 1997, to an average of 438 during the year ended April 30, 1998.
We employed an average of 482 account executives over the eight month period
ended December 31, 1998.
Cost of Revenues. Our principal operating costs are production, paper and
printing. Total operating costs represented 20.2% of net revenues for the year
ended April 30, 1998 compared to 21.3% for the year ended April 30, 1997, and
20.8% for the eight months ended December 31, 1998 compared to 22.9% for the
same period in 1997. At the individual directory level, production, printing,
distribution and licensing costs are largely fixed for an established
circulation, resulting in high marginal profit contribution from incremental
advertising sales into an existing directory. Since 1995, our constant focus on
process improvement and increased productivity has enabled us to minimize
additional production and administrative costs while increasing the number of
directories.
Our principal raw material is paper. We used approximately 16.4 million,
17.6 million and 18.2 million pounds of directory grade paper for the years
ended April 30, 1996, 1997 and 1998, respectively, resulting in a total cost of
paper during such periods of approximately $6.0 million, $5.8 million and $5.7
million, respectively. We used 10.9 million pounds of paper during the eight
months ended December 31, 1998 for a total cost of approximately $4.3 million.
White pages listings are licensed from telephone utilities for a set fee
per name and the number of listings correspond directly to planned circulation
and does not fluctuate. Total licensing fees incurred by us were $1.1 million
for the year ended April 30, 1998 and $0.4 million for the eight months ended
December 31, 1998. Distribution is provided by two third-party vendors at a
fixed delivery cost per directory as established by individual market.
Selling and Marketing Expenses. Direct sales expense correlates closely
with the size of our sales force. As we continue to increase the number of
directories and to expand our total customer base, the number of account
executives required to complete the annual selling cycle grows accordingly. Our
ability to complete selling each directory within a prescribed time frame
depends on account executive staffing levels and productivity. Historically, we
have experienced a high turnover rate among our account executives, particularly
among new hires, and therefore continue to invest in recruiting and training
account executives to build the size of our sales force and to continue to grow
revenue. The number of account executives has grown from 345 as of April 30,
1996 to 532 as of December 31, 1998.
30
<PAGE> 34
Cash Flow Management. We have instituted several policies to accelerate
customer payments including:
- requiring customers to make minimum deposits on their annual purchase at
the time of contract signing;
- requiring customers with small advertising purchases to pay 100% at the
time of contract signing;
- offering a cash discount to customers who pay 100% at the time of
contract signing;
- providing commission incentives to account executives to collect higher
customer deposits earlier in the sales process;
- shortening customer payment terms from 12 months to eight months or less;
and
- requiring new customers to begin payments immediately after contract
signing rather than waiting for the directory to be distributed.
As a result of these initiatives which began in 1994, advance payments received
prior to directory publication as a percentage of net revenues has increased
from 41.0% for the year ended April 30, 1996 to 46.0% for the year ended April
30, 1998. Advance payments in the eight months ended December 31, 1998 were
47.4% of net revenues compared to 47.3% in the same period in 1997.
Although we collect an advance payment from most advertisers, credit is
extended based upon the size of the advertising program and customer collection
history. While our accounts receivable are not subject to any concentrated
credit risk, credit losses represent a cost of doing business due to the nature
of our customer base, largely local businesses, and the use of extended credit
terms. Generally, for larger and established accounts, credit may be extended
under eight to 12 month installment payment terms. In addition, customers are
given credits for the current year when errors occur in their advertisements. A
reserve for bad debt and errors is established when revenue is recognized for
individual directories. The estimated bad debt expense is determined on a market
by market basis taking into account prior years' collection history.
Actual write-offs are taken against the reserve when management determines
that an account is uncollectible, which typically will be determined after
completion of the next annual selling cycle. Therefore, actual account
write-offs may not occur until 18 to 24 months after a directory has been
published. The estimated provision for bad debt equaled 9.1%, 9.8% and 9.1% of
net revenues for the years ended April 30, 1996, 1997 and 1998, respectively.
Actual account write-offs equaled 9.8% in the year ended April 30, 1996. As
described above, actual account write-offs for the years ended April 30, 1997
and 1998 have not yet been determined. Based on current estimates, we believe
that actual write-offs for the year ended April 30, 1997 will total
approximately $8.2 million or 9.0% of net revenues. Management regularly reviews
actual write-offs of accounts receivable as compared to the reserve estimates
made at the time individual directories are published.
31
<PAGE> 35
RESULTS OF OPERATIONS
The following table summarizes the company's results of operations as a
percentage of revenue for the periods indicated:
<TABLE>
<CAPTION>
EIGHT MONTHS
TWELVE MONTHS ENDED
ENDED APRIL 30, DECEMBER 31,
----------------------- --------------
1996 1997 1998 1997 1998
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net revenues.......................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues...................... 23.4 21.3 20.2 22.9 20.8
----- ----- ----- ----- -----
Gross profit.......................... 76.6 78.7 79.8 77.1 79.2
Sales and marketing................... 38.5 40.1 40.2 43.7 45.1
General and administrative............ 19.4 18.4 22.1 30.8 19.8
----- ----- ----- ----- -----
Income from operations................ 18.7% 20.2% 17.5% 2.6% 14.3%
===== ===== ===== ===== =====
EBITDA................................ 26.2% 27.2% 30.2% 10.9% 22.1%
===== ===== ===== ===== =====
</TABLE>
For the definition of "EBITDA," see the notes to "Selected Historical
Consolidated Financial and Other Data."
Eight Months Ended December 31, 1998 Compared to Eight Months Ended
December 31, 1997
Net revenues increased $8.8 million, or 16.7%, from $52.3 million in the
eight months ended December 31, 1997 to $61.1 million in the same period in
1998. We published 84 directories in the eight months ended December 31, 1998
compared to 76 in the same period in 1997. The net revenue growth was due to
year to year growth in the same 68 directories published during both periods of
$3.3 million, $6.6 million from nine new directories and $3.9 million from seven
directories for which the publication date moved into the period; offset by $5.1
million of net revenues associated with eight directories published in the eight
months ended December 31, 1997 but not in the same period in 1998.
As a result of a combination of factors, including the addition of new
customers, price increases, increases in the amount of advertising by current
customers and new directory features such as colorization of ads, additional ad
sizes and additional headings, same book revenue growth for the 68 directories
published in both periods was 7.0%.
Cost of revenues increased $0.7 million, or 5.8%, from $12.0 million in the
eight months ended December 31, 1997 to $12.7 million in the same period in
1998. The increase was the result of $1.2 million of costs associated with nine
new directories published in the eight months ended December 31, 1998 and $0.7
million in costs associated with seven books published in the eight months ended
December 31, 1998, but not in the same period in 1997; offset by $1.2 million of
costs associated with eight directories published during the eight months ended
December 31, 1997, but not in the same period in 1998. A decrease in direct
costs of publishing the same 68 books in the eight months ended December 31,
1998 and 1997 of $0.3 million was substantially offset by increased indirect
production costs of $0.2 million.
As a result of the above factors, gross profit increased $8.0 million, or
20.0%, from $40.3 million in the eight months ended December 31, 1997 to $48.4
million in the same
32
<PAGE> 36
period in 1998. Gross margin increased from 77.1% in the eight months ended
December 31, 1997 to 79.2% in the same period in 1998 as a result of reduced
production costs and license fees and increased sales on a same directory basis.
Selling and marketing expenses increased $4.7 million, or 20.5%, from $22.9
million in the eight months ended December 31, 1997 to $27.6 million in the same
period in 1998. The increase was attributable to $1.2 million of costs
associated with nine new directories, $0.6 million of additional sales costs for
the same 68 directories published during both periods, $1.0 million of costs
associated with seven directories that published in the eight months ended
December 31, 1998 but not in the same period in 1997, $2.0 million of higher
sales management costs and a $1.0 million increase in the provision for bad debt
for write-offs due primarily to an increase in net revenue. These increases were
partially offset by $1.0 million of reduced selling and marketing expenses
associated with the eight directories published in the eight months ended
December 31, 1997 but not in the same period in 1998. Selling and marketing
expense as a percentage of net revenues increased from 43.7% in the eight months
ended December 31, 1997 to 45.1% in the same period in 1998 primarily as a
result of the reorganization of the company's sales management and the addition
of account executives.
General and administrative expense decreased $4.0 million, or 25%, from
$16.1 million for the eight months ended December 31, 1997 to $12.1 million for
the same period in 1998 primarily as a result of the contribution of $5.5
million to our Equity Contribution Plan that was made in connection with the
recapitalization of our company that was completed in October 1997. There were
no such contributions in the eight months ended December 31, 1998. Exclusive of
the contribution to our Equity Compensation Plan, general and administrative
expenses increased $1.5 million, or 14.3%, from $10.6 million in the eight
months ended December 31, 1997 to $12.1 million in the same period in 1998 due
primarily to additional professional fees incurred related to the
recapitalization of $0.3 million, increased recruiting and temporary employee
costs of $0.2 million, internet service related costs of $0.3 million, higher
amortization of acquisition related intangibles of $0.2 million, and higher
incentive based compensation of $0.2 million.
As a result of the above factors, income from operations increased $7.4
million, or 544.7%, from $1.4 million in the eight months ended December 31,
1997 to $8.8 million in the same period in 1998. Income from operations as a
percentage of net revenues increased from 2.6% in the eight months ended
December 31, 1997 to 14.3% in the same period in 1998.
Interest expense increased $4.4 million, or 59.8%, from $7.4 million in the
eight months ended December 31, 1997 to $11.8 million in the same period in
1998.
Loss before extraordinary item decreased $(3.2) million, or 54.2%, from a
loss of $(6.0) million in the eight months ended December 31, 1997 to a loss of
$(2.8) million in the same period in 1998.
Twelve Months Ended April 30, 1998 Compared to Twelve Months Ended April
30, 1997
Net revenues increased $8.7 million, or 9.5%, from $91.4 million in the
twelve months ended April 30, 1997 to $100.1 million in the same period in 1998.
We published 139 directories in the twelve months ended April 30, 1998 as
compared to 128 in the twelve months ended April 30, 1997. The net revenue
growth was due to growth in the
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same 123 directories of $6.0 million, $0.7 million of revenue from five new
directories and $5.7 million of revenue from 11 directories that moved into the
period; partially offset by $3.7 million of net revenues associated with five
directories that published in the twelve months ended April 30, 1997 but not in
the same period in 1998.
As a result of a combination of factors, including the addition of new
customers, price increases, increases in the amount of advertising by current
customers and new directory features such as colorization of ads, additional ad
sizes and additional headings, same book revenue growth for the 123 directories
published in both periods was 6.8%. In addition, the average revenue per account
was 6.4% higher in the same books in the twelve months ended April 30, 1998 than
in the same period in 1997.
Cost of revenues increased $0.7 million, or 3.8%, from $19.5 million in the
twelve months ended April 30, 1997 to $20.2 million in the same period in 1998.
The increase was the result of $0.3 million of costs associated with 5 new
directories published during the twelve months ended April 30, 1998, $1.5
million of costs associated with 11 books that published in the twelve months
ended April 30, 1998, but not in the same period in 1997 and $137,000 of
additional production and distribution overhead costs; offset by $0.5 million of
lower costs for the same 123 directories published in both periods and $0.7
million of costs associated with 5 directories published during the twelve
months ended April 30, 1997, but not in the same period in 1998. For the same
123 directories that were published in both periods, cost of revenues as a
percentage of net revenues decreased from 21.3% in 1997 to 19.7% in 1998,
primarily due to a decrease in printing and production costs and license fees.
As a result of the above factors, gross profit increased $8.0 million, or
11.1%, from $71.9 million in the twelve months ended April 30, 1997 to $79.9
million in the same period in 1998. Gross margin increased from 78.7% in the
twelve months ended April 30, 1997 to 79.8% in the twelve months ended April 30,
1998 as a result of reduced printing and production costs and license fees and
increased sales on a same directory basis.
Selling and marketing expense increased $3.7 million, or 10.0%, from $36.6
million in the twelve months ended April 30, 1997 to $40.3 million in the same
period in 1998. The increase was attributable to $0.3 million of costs
associated with 5 new directories, $1.9 million of additional sales costs on the
same 128 directories, $1.4 million of costs associated with 11 books that
published in the twelve months ended April 30, 1998 but not in the same period
in 1997, $468,000 of higher sales management costs, and a $368,000 increase in
the provision for bad debt for write-offs due to the change in the mix of
directories published in the twelve months ended April 30, 1998 as compared to
the same period in 1997.
These increases were partially offset by $0.7 million of reduced selling
and marketing expenses associated with the five directories that published in
the twelve months ended April 30, 1997 but not in the same period in 1998.
Selling and marketing expense as a percentage of net revenues increased slightly
from 40.1% in the twelve months ended April 30, 1997 to 40.2% in the same period
in 1998.
General and administrative expense increased $5.3 million, or 31.6%, from
$16.8 million in the twelve months ended April 30, 1997 to $22.1 million in the
same period in 1998 as a result of a contribution to our Equity Compensation
Plan of $5.5 million made on October 1, 1997 in connection with the
recapitalization of our company. There were no such contributions in the twelve
months ended April 30, 1997.
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Exclusive of the contribution to the Equity Compensation Plan, general and
administrative expenses decreased $233,000 as a result of general cost
containment measures by the company. General and administrative expense as a
percentage of net revenues increased from 18.4% in the twelve months ended April
30, 1997 to 22.1% in the same period in 1998.
As a result of the above factors, income from operations decreased $1.0
million, or 5.2%, from $18.5 million in the twelve months ended April 30, 1997
to $17.5 million in the same period in 1998. Income from operations as a
percentage of net revenues decreased from 20.2% in the twelve months ended April
30, 1997 to 17.5% in the same period in 1998.
Interest expense increased $5.6 million, or 71.3%, from $7.8 million in the
twelve months ended April 30, 1997 to $13.4 million in the same period in 1998.
Income before extraordinary item decreased $6.5 million, or 60.8%, from
$10.7 million in the twelve months ended April 30, 1997 to $4.2 million in the
same period in 1998.
Twelve Months Ended April 30, 1997 Compared to Twelve Months Ended April
30, 1996
Net revenues increased $13.7 million, or 17.6%, from $77.7 million in the
twelve months ended April 30, 1996 to $91.4 million in the same period in 1997.
We published 128 directories in the twelve months ended April 30, 1997 as
compared to 118 directories in the same period in 1996. The net revenue growth
was due to $9.5 million from 21 new directories published in the twelve months
ended April 30, 1997, an increase in net revenues of $5.6 million in the same
106 directories published in both periods, and $2.0 million from the second
publication of a directory during the twelve months ended April 30, 1997; offset
by $3.4 million of net revenues associated with 12 directories published in the
twelve months ended April 30, 1996 but not in the same period in 1997.
As a result of a combination of factors, including the addition of new
customers, price increases, increases in the amount of advertising by current
customers and new directory features such as colorization of ads, additional ad
sizes and additional headings, same book revenue growth for the 106 directories
published in both periods was 7.8%. In addition, the average revenue per account
was 4.8% higher in the twelve months ended April 30, 1997 than in the same
period in 1996.
Cost of revenues increased $1.3 million, or 7.1%, from $18.2 million in the
twelve months ended April 30, 1996 to $19.5 million in the same period in 1997.
The increase was the result of $2.7 million of costs associated with 21 new
directories published in the twelve months ended April 30, 1997 and $0.5 million
of additional production and distribution overhead costs; offset by $1.0 million
of lower costs for the same 106 directories published in both the twelve months
ended April 30, 1997 and 1996, and $0.9 million of costs associated with 12
directories published during the twelve months ended April 30, 1996, but not in
the same period in 1997. For the same 106 directories that were published in
both years, cost of revenues as a percentage of net revenues improved from 23.4%
in the twelve months ended April 30, 1996 to 21.3% in the same period in 1997,
primarily due to a decrease in printing and production costs and license fees.
As a result of the above factors, gross profit increased $12.4 million, or
20.8%, from $59.5 million in the twelve months ended April 30, 1996 to $71.9
million in the same
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period in 1997. Gross margin increased from 76.6% in the twelve months ended
April 30, 1996 to 78.7% in the same period in 1997 as a result of reduced
printing and production costs and license fees and increased sales on a same
directory basis.
Selling and marketing expense increased $6.7 million, or 22.5%, from $29.9
million in the twelve months ended April 30, 1996 to $36.6 million in the same
period in 1997. The majority of the increase was attributable to increased sales
staffing for new and acquired directories, the establishment of a permanent
sales office in the Nashville, Tennessee market and an increase in the provision
for bad debt for write-offs on directories expected to be published in the
twelve months ended April 30, 1995. Selling and marketing expense as a
percentage of net revenues increased from 38.5% in the twelve months ended April
30, 1996 to 40.1% in the same period in 1997.
General and administrative expense increased $1.7 million, or 11.6%, from
$15.1 million in the twelve months ended April 30, 1996 to $16.8 million in the
same period in 1997, primarily as a result of increased depreciation and
amortization. General and administrative expense as a percentage of net revenues
decreased from 19.4% in the twelve months ended April 30, 1996 to 18.4% in the
same period in 1997.
As a result of the above factors, income from operations increased $3.9
million, or 26.9%, from $14.5 million in the twelve months ended April 30, 1996
to $18.5 million in the same period in 1997. Income from operations as a
percentage of net revenues increased from 18.7% in the twelve months ended April
30, 1996 to 20.2% in the same period in 1997.
Interest expense increased $1.2 million, or 17.9%, from $6.6 million in the
twelve months ended April 30, 1996 to $7.8 million in the same period in 1997.
Income before extraordinary item increased $2.4 million, or 29.0%, from
$8.3 million in the twelve months ended April 30, 1996 to $10.7 million in the
same period in 1997.
LIQUIDITY AND CAPITAL RESOURCES
Capital expenditures were $0.5 million, $1.0 million and $1.0 million for
the twelve months ended April 30, 1996, 1997 and 1998, respectively and $0.7
million and $0.8 million in the eight months ended December 31, 1997 and 1998
respectively. Capital spending is used largely for computer hardware and
software upgrades for the maintenance of production and operating systems. As of
December 31, 1998, we did not have any material commitments for capital
expenditures.
Through our focus on increasing customer advance payments and the
acceleration of cash receipts, we have been able to reduce working capital
requirements despite strong revenue growth. Net accounts receivable, which
represents the largest component of working capital, increased to $26.1 million
as of April 30, 1998 compared to $23.3 million as of April 30, 1997 and $21.4
million as of April 30, 1996. Net accounts receivable was $20.9 million as of
December 31, 1998. Advance payments as a percentage of net revenues increased
from 41.0% for the twelve months ended April 30, 1996 to 45.1% for the same
period in 1997 and 45.9% in the same period in 1998. Advance payments in the
eight months ended December 31, 1998 were 47.4% of net revenues compared to
47.3% in the same period in 1997. Working capital increased $5.4 million as of
April 30, 1998 compared to April 30, 1997 primarily due to the reduction in the
current maturity of debt due to the recapitalization of our company completed in
October 1997. Working capital increased $11.3 million as of December 31, 1998 as
compared to December 31, 1997 due to drawing
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on our revolving credit facility in anticipation of payment for directories
acquired in early 1999. Working capital decreased $2.0 million for the twelve
months ended April 30, 1997 due to increased current debt related to the
refinancing completed in the twelve months ended April 30, 1996.
Net cash provided by operating activities was approximately $13.1 million,
$15.3 million and $15.7 million in the twelve months ended April 30, 1996, 1997
and 1998, respectively. The increase from 1996 to 1997 was primarily related to
the $3.8 million increase in net income and increased non-cash charges for
depreciation, amortization and provision for bad debt along with an approximate
$1.0 million reduction in write-offs of doubtful accounts to an amount which is
in line with normal levels associated with the growth in revenue. Also, the use
of cash in the twelve months ended April 30, 1997 from increased trade
receivables associated with higher revenues was partially offset by the timing
impact of accrued interest and accounts payable balances totaling $1.9 million.
The $0.4 million increase in operating cash flows from 1997 to 1998 resulted
from a combination of large offsetting cash flows. Net cash provided by
operating activities was $9.1 million and $4.5 million in the eight months ended
December 31, 1997 and 1998, respectively, the decrease resulting primarily from
higher payments for interest and other current liabilities in 1998 compared to
1997.
Net cash used for investing activities was approximately $(5.7) million,
$(3.6) million and $(9.2) million in the twelve months ended April 30, 1996,
1997 and 1998, respectively. The decrease from 1996 to 1997 was caused by
reduced directory asset purchases compared to the twelve months ended April 30,
1996 and refinancing costs in 1996 which did not recur in 1997. The increase in
the twelve months ended April 30, 1998 was primarily a result of increased
directory acquisition related payments relative to 1997. Net cash used by
investing activities was $12.9 million and $22.1 million in the eight months
ended December 31, 1997 and 1998, respectively, with the increase resulting
primarily from increased directory acquisition related payments in comparison to
1997.
Net cash provided (used) for financing activities was approximately $(7.0)
million, $(11.8) million and $(6.2) million in the twelve months ended April 30,
1996, 1997 and 1998, respectively. The increased use from 1996 to 1997 was
caused by a decrease in the net proceeds of long term debt as the twelve months
ended April 30, 1997 did not include any refinancing activity. The decrease in
funds in the twelve months ended April 30, 1998 relates directly to the
recapitalization of our company in October 1997. Net cash provided by financing
activities was $9.4 million and $30.2 million in the eight months ended December
31, 1997 and 1998, respectively, the increase resulting from the issuance of the
Series B 9 5/8% Senior Subordinated Notes due 2007 in 1998.
In connection with the recapitalization of our company in October 1997, we
incurred significant debt. As of December 31, 1998 we had total outstanding long
term indebtedness of $210 million, including $140 million of Series B and C
9 5/8% Senior Subordinated Notes due 2007, and $68 million of outstanding
borrowings under the senior credit facility, which ranks senior to the Series B
and C notes. We had $40.0 million of additional borrowing availability under the
Senior Credit Facility, none of which was outstanding at December 31, 1998.
Our principal sources of funds are cash flows from operating activities and
$40.0 million of available funds under our revolving credit facility. Based upon
the successful implementation of management's business and operating strategy,
we believe that these funds will provide us with sufficient liquidity and
capital resources to meet our
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current and future financial obligations, including the payment of principal and
interest on our notes, as well as to provide funds for our working capital,
capital expenditures and other needs. Our future operating performance will be
subject to future economic conditions and to financial, business and other
factors, many of which are beyond our control. There can be no assurance that
such sources of funds will be adequate and that we will not require additional
capital from borrowings or securities offerings to satisfy such requirements. In
addition, we may require additional capital to fund future acquisitions and
there can be no assurance that such capital will be available.
In connection with our strategy of growing revenues from existing
directories, we have increased our sales force from 223 employees at April 30,
1993 to 532 at December 31, 1998. We seek to continue to increase the absolute
size of our sales force, however, exclusive of the effect of the increase in the
sales force due to acquisitions, we currently do not believe that our sales
force will increase at a rate equal to the percentage increase from 1993 to
1998. The Company does not believe that increases in the number of its sales
personnel will materially impact its liquidity.
YEAR 2000 READINESS STATEMENT
We have a Year 2000 ("Y2K") project team focusing on four key readiness
areas:
- business computer systems -- addressing hardware and software used in our
core operations;
- computing infrastructure -- addressing network servers, operating
software, voice networks, and phones;
- end user computing -- addressing hardware and software used in our
ancillary operations; and
- vendors/ suppliers -- addressing the preparedness of our key suppliers.
For each readiness area, we are performing risk assessment, conducting
testing, and remediation, either retirement, replacement or conversion,
developing contingency plans to mitigate known risk, and communicating with
employees, suppliers, and other third parties to raise awareness of the Y2K
problem.
Business Computer Systems, Computing Infrastructure, and End User Computing
Readiness Programs. We, with the assistance of third parties, are conducting an
assessment of internal applications and computer hardware. Some software
applications already are or have been made year 2000 compliant and resources
have been assigned to address other applications based on their importance and
the time required to make them Y2K compliant. All software remediation, Y2K
compliance evaluation of hardware, including routers, telecommunication
equipment, workstations and other items is expected to be completed by August
1999.
In addition to applications and information technology hardware, we are
developing remediation/contingency plans for embedded systems, facilities and
other operations, such as financial and banking systems.
Vendors/Suppliers Readiness Program. This program focuses on minimizing the
risks associated with key suppliers. We have identified key suppliers and are in
the process of contacting them to solicit information on their Y2K readiness. To
date, we have received some responses, most of which indicate that the suppliers
are in the process of developing
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remediation plans. We are also developing supplier action lists and contingency
plans for key suppliers.
We estimate that total Y2K costs will be approximately $0.7 million. Y2K
costs to be incurred by the end of the first quarter of 1999 will be
approximately $0.5 million. Management intends to periodically refine these
estimates over time as it continues to assess and develop alternatives. There
can be no assurance, however, that there will not be a delay in or increased
costs associated with, the programs described in this section.
Since the programs described in this section are ongoing, management has
not yet identified all potential Y2K complications. Therefore, the potential
impact of these complications on our financial condition and results of
operations cannot be determined at this time. If computer systems used by us or
our suppliers, the performance of products provided to us by our suppliers, or
the software applications we use to produce our products fail or experience
significant difficulties related to Y2K, our results of operations and financial
condition could be materially adversely affected. See "Risk Factors -- We May Be
Adversely Affected if Our Year 2000 Remediation Efforts Are Not Successful."
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BUSINESS
We are one of the largest independent yellow pages directory publishers in
the United States. We own 208 directories which serve communities in the 16
states of Alabama, California, Connecticut, Georgia, Indiana, Kansas, Kentucky,
Louisiana, Massachusetts, Michigan, New York, Ohio, Oklahoma, Pennsylvania,
Tennessee and Texas. Our revenues are derived from the sale of advertising to a
diversified base of over 106,000 accounts, consisting primarily of small to
medium-sized local businesses. In counting our number of accounts, we count a
single customer that advertises in more than one directory as a separate account
for each directory in which it advertises. Yellow pages are an important
advertising medium for local businesses due to their low advertising cost,
widespread distribution, lasting presence, and high consumer usage.
Since 1993, our management team has successfully executed its strategy of
growing revenues from existing directories, improving operating efficiency,
accelerating cash flows and starting and acquiring new directories. Over this
period, we increased average revenue per account from $789 for year ended April
30, 1993 to $1,106 for the eight months ended December 31, 1998 and increased
our number of directories from 90 as of April 30, 1993 to 175 as of December 31,
1998, driving our net revenues from $54.9 million for the year ended April 30,
1993 to $100.1 million for the year ended April 30, 1998 and $61.1 million for
the eight months ended December 31, 1998, and our EBITDA from $3.2 million for
the year ended April 30, 1993 to $30.2 million for the year ended April 30, 1998
and $13.6 million for the eight months ended December 31, 1998.
RECENT ACQUISITIONS
Since the recapitalization of our company, completed in October 1997, we
have acquired 50 directories in Alabama, Georgia, Michigan, Ohio, New York,
Pennsylvania, Texas, and Tennessee:
Mast. On February 2, 1998, we acquired eight directories from Mast
Advertising and Publishing, Inc. for an aggregate consideration of approximately
$8.4 million. Six of the acquired directories are located in northern Ohio and
southern Michigan and serve the Toledo and Columbus areas, and two of the
acquired directories are contiguous with the Nashville, Tennessee market. The
eight directories generated approximately $4.7 million of net revenue in 1997.
We recently completed publishing all of these directories for the first time
since the acquisition in 1998 and recorded revenues of $5.0 million, or an
increase of 6.4%.
Target. On July 16, 1998, we acquired two directories through our
acquisition of all of the outstanding capital stock of Target Directories of
Michigan, Inc. for approximately $5.4 million in cash, $0.8 million of which was
delivered into an escrow account to be used to satisfy indemnification
obligations, if any, of the sellers. The acquired directories serve the Lenawee
County, Michigan, Hillsdale County, Michigan and Branch County, Michigan areas.
The 1997 editions of these directories generated approximately $2.2 million in
net revenue.
M&M. On November 23, 1998, we acquired three directories from M&M
Publishing, Inc. for approximately $1.2 million, subject to adjustment. The
three directories generated approximately $0.6 million of net revenue in 1998.
The acquired directories serve the Wayne County, Pennsylvania, Pike County,
Pennsylvania and Sullivan County, New York areas.
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Universal. On November 30, 1998, we acquired four directories from
Universal Phone Books, Inc. and Universal Phone books of Jackson, Inc. for
approximately $15.3 million. The purchase price consisted of approximately $13.3
million of cash and a $2.0 million promissory note, subject to adjustment based
on the actual collections of accounts receivable during the 18 month period
following the consummation of the acquisition.
The acquired directories serve the cities of Ann Arbor and Jackson,
Michigan and the following counties of Michigan: Washtenaw, Jackson, Saginaw,
Midland, Bay, Ingham, Eaton and Clinton. Three area sales managers and 37
account executives associated with the acquired directories were retained. The
four directories generated approximately $7.1 million of net revenue in 1998.
United. On January 5, 1999, we purchased 14 directories from United
Directory Services, Inc. for approximately $17.0 million. The purchase price
consisted of $12.3 million in cash, a promissory note for $2.0 million, due in
eighteen months, subject to adjustment based upon the actual collections of
accounts receivable outstanding as of the closing during such period, and
contingent payments paid over a period of three years not to exceed an
additional $2.7 million based upon the contribution margin of a prototype
directory acquired in Austin, Texas. The acquired directories serve the greater
Ft. Worth, San Antonio and Austin, Texas areas. The area sales managers and
approximately 40 account executives associated with the acquired directories
were retained. The fourteen directories generated approximately $7.7 million of
net revenue in 1998.
Lambert. On January 8, 1999, we purchased eight directories from Lambert
Publishing for approximately $11.0 million. The purchase price consisted of $9.5
million in cash, a promissory note of $1.0 million due in eighteen months,
subject to adjustment based upon the actual collections of accounts receivable
outstanding as of the consummation of the acquisition, and a $0.5 million
contingent payment based upon the performance of the subsequent years
directories exceeding a specific revenue forecast. The acquired directories
serve the central Georgia area and Alabama. Approximately 25 account executives
associated with the acquired directories were retained. The eight directories
generated approximately $4.0 million of net revenue in 1998.
Southern. On January 15, 1999, we purchased seven directories from Southern
Directories Publishing, Inc. for approximately $5.2 million in cash. The
acquired directories serve the central Georgia area. One area sales manager and
approximately five account executives associated with the acquired directories
were retained. The seven directories generated approximately $2.0 million of net
revenue in 1998.
Orange Line. On February 15, 1999, we purchased four directories from Call
It, Inc. for approximately $1.1 million in cash and $0.2 million in cash held in
escrow for six months to be released upon the expiration of the representation
and warranty period of the purchase agreement. The acquired directories serve
the northern Ohio area. Approximately seven account executives associated with
the acquired directories were retained. The four directories generated
approximately $1.1 million of net revenue in 1998.
INDUSTRY OVERVIEW
The United States yellow pages directory industry generated revenues of
approximately $11.4 billion in 1997, with circulation of approximately 350
million directories. Yellow pages directories are published by both telephone
utilities and, in many markets,
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independent directory publishers, such as us, which are not affiliated with the
telephone service provider. More than 250 independent directory publishers
circulated over 100 million directories and generated an estimated $722 million
in revenues during 1997. Between 1992 and 1997, while industry-wide yellow pages
advertising revenues grew at a compound annual rate of 4.2%, advertising
revenues of independent directories grew at a compound annual rate of
approximately 6.4%. Concurrent with the overall expansion of the yellow pages
advertising market, independent directory publishers have steadily increased
their market share from 5.7% in 1992 to 6.4% in 1997. This has occurred because
the diverse needs of both consumers and advertisers are often not satisfied by a
single utility directory.
Yellow pages directories accounted for approximately 6.1% of total
advertising spending in 1997 and compete with all other forms of media
advertising, including television, radio, newspapers and direct mail. In
general, media advertising may be divided into three categories:
- market development or image advertising such as television, radio and
newspaper advertisements;
- direct response sales promotion such as direct mail; and
- point of purchase or directional advertising such as classified
directories.
Yellow pages directories are primarily directional advertising because they are
used either at home or in the workplace when consumers are contemplating a
purchase or in need of a service.
Yellow pages advertising expenditures tend to be more stable than other
forms of media advertising and do not fluctuate widely with economic cycles.
Yellow pages directory advertising is considered a "must buy" by many small and
medium-sized businesses since it is often their principal means of soliciting
customers. The strength of the yellow pages as compared to other forms of
advertising lies in its consumer reach, lasting presence and cost-effectiveness.
Yellow pages are present in nearly every household and business in the United
States. Once an advertisement is placed in a directory, it remains within reach
of its target audience until the directory is replaced with the next annual
edition or discarded.
The independent publisher segment of the yellow pages industry is highly
fragmented and growing. There are approximately 250 independent yellow pages
publishers in the United States and the five largest independent publishers
accounted for 67% of 1997 revenues in the independent publisher segment.
Successful independent publishers effectively compete with telephone utilities
by differentiating their product based on geographical market segmentation,
pricing strategy and enhanced product features. To maximize both advertiser
value and consumer usage, independent directory publishers target their
directory coverage areas based on consumer shopping patterns. In contrast, most
directories published by telephone utilities coincide with their telephone
service territories, which may incorporate multiple local markets or only
portions of a single market. Also, independent publishers generally offer yellow
pages advertisements at a significant discount to the price that competing
telephone utilities usually charge. As a result, independent yellow pages
directories allow local advertisers to better target their desired market and
are often more useful for consumers.
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Independent yellow pages publishers generally compete in suburban and rural
markets more than major urban markets, where the high distribution quantities
for each edition create a barrier to entry. In most markets, independent
directory publishers compete with the telephone utility and with one or more
independent yellow pages publishers. In markets where two or more directory
publishers compete, advertisers frequently purchase advertisements in multiple
directories.
In some markets, independent directory publishers compete by "overscoping"
multiple telephone utilities. Overscoping refers to publishing a directory which
encompasses the service territories of two or more telephone utilities. For
example, an independent publisher may publish a single overscoped directory
which provides coverage of an entire county that also contains three smaller
utility books corresponding to different telephone service territories. The
overscoped directory provides advertisers with a lower cost, more efficient
means to reach the entire area, and provides consumers with the most complete
yellow pages resource for the area.
In other markets, independent directory publishers compete by
"underscoping" a utility company's directory. For example, an independent
publisher may publish multiple smaller community directories which provide
targeted local coverage in an area in which a utility publishes a single
directory to cover an entire county consisting of many discrete communities.
Underscoping provides more efficient advertising for certain types of local
businesses for whom advertising outside the immediate community is unproductive,
and for consumers interested in local services, the community directory
frequently represents a more convenient and relevant source of information than
the county-wide directory.
Independent directory publishers also distinguish their directories from
the telephone utility directories on the basis of advertisement pricing. The
independents typically price advertising at a significantly lower rate than the
utility directories in the same market areas. Advertising rates are specifically
tailored to reflect the different size, market position, stage of development
and penetration rate of each directory. As a result, businesses generally are
able to place either multiple advertisements or a larger advertisement in an
independent directory for the same price as a single advertisement in the
telephone utility's directory.
OPERATING STRENGTHS
We believe that we benefit from the following operating strengths:
High Revenue Stability and Account Renewal Rates. Our high revenue renewal
and account retention rates, which averaged 86% and 76%, respectively, during
the last five years ended April 30, 1998 and 86% and 74%, respectively, for the
eight months ended December 31, 1998, have provided considerable revenue and
profit stability and form a strong base of business from which to grow. For many
local businesses, yellow pages directory advertising is their principal form of
advertising and provides an effective means of reaching their potential
customers. Also, advertisement placement within a directory is based on size and
seniority, and therefore advertisers have a strong incentive to increase the
size of their advertisements and to renew their advertising program. In
addition, advertisers are reluctant to cancel their advertising programs when
their local competition is well-represented in that directory.
Geographic, Directory, Industry and Account Diversity. Our 208 directories
serve communities in 16 states across the country. No single directory accounted
for more than
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5% of net revenues for the year ended April 30, 1998 or 7.4% for the eight
months ended December 31, 1998. Our over 106,000 accounts represent a wide
variety of service, retailing and other businesses and our top 1,000 accounts
represented less than 17% of our net revenues for the year ended April 30, 1998.
This high level of diversification reduces our exposure to adverse regional
economic conditions and enhances revenue and cash flow stability.
Favorable Cash Flow Characteristics. Our favorable cash flow
characteristics result from our stable revenues, high level of advance payments,
predictable cost structure, low working capital investment and minimal capital
expenditure needs. During the year ended April 30, 1998 and the eight months
ended December 31, 1998, we collected approximately 46% and 56%, respectively,
of our net revenues prior to publication of our directories, up from
approximately 26% in the year ended April 30, 1993. In addition to collecting
higher levels of advance payments, we shortened customer payment terms and
reduced credit exposure to our smallest customers. Further, our capital
expenditures have averaged approximately $750,000 per year over the last five
years ended April 30, 1998 and were $824,000 for the eight months ended December
31, 1998.
Proven, Experienced Management. We have a proven senior management team
with extensive experience in the yellow pages business. Since 1993, management
has demonstrated the ability to grow our company profitably while we have had
significant financial leverage. Collectively, management owns approximately 9%
of Holdings and also participates in a substantial equity-based incentive
program tied to our successful long-term performance.
BUSINESS STRATEGY
Our strategy is to capitalize on our operating structure, consisting of a
decentralized sales force and centralized production and administrative
operations, in order to grow our position as a leading independent yellow pages
publisher. This strategy recognizes the inherent operating leverage of
established directories where production and administrative costs are largely
fixed, resulting in high marginal profit from incremental sales. At the same
time, our focus on continuous process improvements has significantly expanded
capacity without increasing production costs, establishing a platform to start
and acquire directories in a highly profitable manner. Specific elements of our
business strategy are as follows:
Grow Revenues from Existing Directories. We believe there are opportunities
to increase revenues from both existing advertisers and new accounts. Specific
initiatives include:
- cross-selling advertisers into multiple directories;
- encouraging customers to purchase larger advertisements or advertisements
under multiple headings within the same directory;
- introducing new premium advertising features, including color, at premium
prices; and
- offering Internet directory listings.
We also utilize our proprietary database to increase our customer
penetration by systematically targeting potential customers and converting them
into new advertisers. To
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<PAGE> 48
support this strategy, we have expanded our sales force from 223 employees at
April 30, 1993 to 532 at December 31, 1998, representing an increase of
approximately 238%. We believe that new account growth drives long term
profitability and improves the quality of our directories. In connection with
this strategy, we seek to continue to increase the absolute size of our sales
force. Exclusive of the effect of the increase in the sales force due to
acquisitions, we currently do not believe that our sales force will increase at
a rate equal to the percentage increase from 1993 to 1998.
Improve Operating Efficiency. We work to continuously improve our
production processes and systems in order to increase our operating efficiency.
We have created a team-oriented environment focused on managing costs,
streamlining processes and cross-training personnel to adjust to fluctuations in
production levels. These efforts have resulted in increased capacity and lower
production costs.
Accelerate Cash Flows. We continue to focus on increasing the amount of
cash we collect from advertisers prior to the publication of each directory.
Increasing advance payments and shortening customer payment terms:
- reduces our investment in working capital;
- decreases collection and bad debt costs; and
- permits us to finance the introduction of new directories from internally
generated funds.
For the year ended April 30, 1998 and the eight months ended December 31, 1998,
we collected approximately 46% and 56%, respectively, of our net revenues prior
to publication of our directories, up from approximately 26% for the year ended
April 30, 1993. For the year ended April 30, 1998 and the eight months ended
December 31, 1998, our average net accounts receivable turnover, net of advance
payments, was approximately 177 and 159 (annualized) days, respectively.
Accounts receivable as a percentage of our revenue decreases as we increase the
percentage of our net revenues that we collect prior to directory publication.
New Directory Growth. Our strategy includes growth through new directory
start-ups and selective acquisitions. We minimize start-up risks by launching
new directories in areas contiguous to our existing markets where we have
existing sales infrastructure and local recognition and where existing customers
can provide an initial revenue base. Since 1993, we have introduced 30 new
"fill-in" directory start-ups and since the recapitalization of our company in
October 1997 we have acquired 50 directories.
MARKETS SERVED
We publish 208 yellow pages directories serving distinct communities in 16
states, including Alabama, California, Connecticut, Georgia, Indiana, Kansas,
Kentucky, Louisiana, Massachusetts, Michigan, New York, Ohio, Oklahoma,
Pennsylvania, Tennessee and Texas. Our directories are generally
well-established in our local communities and are clustered in contiguous
geographic areas to create a strong local market presence and to achieve selling
efficiencies.
Our net revenues are not materially concentrated in any single directory,
industry, geographic region or customer. For the year ended April 30, 1998, we
served approximately 97,000 active accounts with our top 1,000 accounts
representing less than
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<PAGE> 49
17% of net revenues and no single directory accounting for more than 5% of net
revenues. Approximately 94% of our net revenues are derived from local accounts
with the remainder coming from national companies advertising locally. Our high
level of diversification reduces exposure to adverse regional economic
conditions and provides additional stability in operating results.
During the year ended April 30, 1998, we published 139 directories. Our
geographic diversity is evidenced in the following table:
<TABLE>
<CAPTION>
NUMBER OF DIRECTORIES PUBLISHED NET REVENUES
-------------------------------- --------------------------------------
94 95 96 97 98 94 95 96 97 98
---- ---- ---- ---- ---- ----- ----- ----- ----- ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REGION
Northeast................ 37 39 42 45 46 $26.2 $29.2 $33.1 $38.0 $ 39.1
Central.................. 26 28 35 42 50 11.2 12.5 14.8 19.7 23.5
Southwest................ 19 22 23 23 24 16.0 18.2 19.7 22.0 24.8
West..................... 15 17 18 18 19 8.8 9.9 10.1 11.7 12.7
--- --- --- --- --- ----- ----- ----- ----- ------
Total........... 97 106 118 128 139 $62.2 $69.8 $77.7 $91.4 $100.1
=== === === === === ===== ===== ===== ===== ======
</TABLE>
PRODUCTS
Our yellow pages directories are designed to meet the informational needs
of consumers and the advertising needs of local businesses. Each directory
consists of:
- a yellow pages section containing display advertisements and a listing of
businesses by various headings;
- a white pages section listing the names, addresses, and phone numbers of
residences and businesses in the area served;
- a community information section providing reference information about
general community services such as listings for government offices,
schools and hospitals; and
- a map of the geographic area covered by the directory.
Advertising space is sold throughout the directory, including in-column and
display advertising space in the yellow pages, bold listings and business card
listings in the white pages, banner advertising in the community pages, and
image advertisements on the front, back, inside, and outside covers. We also
have the production capacity to include options such as full color
advertisements which generate significantly higher advertising rates. This
diversity of product offerings enables us to create customized advertising
programs that are responsive to specific customer needs and financial resources.
Our directories are an efficient source of information for consumers. With
over 2,000 headings in our directories and an expansive list of businesses by
heading in each local market, our directories are both comprehensive and
conveniently organized. We believe that the completeness and accuracy of the
data in a directory is essential to consumer acceptance.
Although we remain primarily focused on our printed directories, we have
recently initiated an Internet directory service. We entered into a strategic
alliance with InfoSpace, Inc. to offer electronic directory services in each of
our local markets. Under this strategic alliance, InfoSpace, Inc. is responsible
for the technical aspects of the alliance. We are responsible for selling
advertisement space in the electronic directory. This arrangement enables us to
avoid technical risks which we are not presently staffed to manage and
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<PAGE> 50
permits us to participate in any opportunities that develop through the
Internet. We believe that our experience, reputation and account relationships
within our local markets will help us successfully market this service. We began
to test market our Internet product in March of 1998 in Houston, TX and
Nashville, TN and since then have test marketed our Internet product in
additional markets. Although the growing use of the Internet has not had an
appreciable impact on us to date, we have not yet determined how, if at all, the
Internet will impact our performance, prospects or operations. We cross promote
our Internet service and our printed directories. Our website is at
http://www.transwesternpub.com. Our website and the information contained
therein or connected thereto shall not be deemed to be incorporated into this
prospectus or the registration statement of which it forms a part.
SALES AND MARKETING
Yellow pages marketing is a direct sales business which requires both
servicing existing accounts and developing new customers. Repeat customers
comprise our core account base and a number of these customers have advertised
in our directories for many years. For the years ended April 30, 1997 and 1998,
accounts representing 85.3% and 87.2%, respectively, of the prior year's net
revenues have renewed their advertising program in the current edition of each
directory. Management believes that this high revenue renewal rate reflects the
importance of our directories to our local accounts for whom yellow pages
directory advertising is a principal form of advertising. In addition, yellow
pages advertising often comprises an integral part of the local advertising
strategy for larger national companies operating at the local level. Advertisers
have a strong incentive to increase the size of their advertisement and to renew
their advertising programs because advertisements are placed within each heading
of a directory based first on size then on seniority. Generally, larger
advertisements are more effective than smaller advertisements and advertisements
placed near the beginning of a heading generate more responses than similarly
sized advertisements placed further back in the heading.
We also build on our account base by generating new business leads from
multiple sources including a comprehensive compilation of data about individual
company advertising expenditures in competitive yellow page directories. We have
developed a proprietary database of high potential customers based on each
individual customer's yellow page advertising expenditures and focus our sales
resources on those potential customers. In support of this strategy, we have
expanded our sales force from 223 employees at April 30, 1993 to 532 at December
31, 1998, representing an increase of approximately 139%. Management has
observed a direct correlation between adding new sales force employees and
revenue growth.
We employ four executive vice presidents and 64 regional, district and area
sales managers who, together, are responsible for supervising the activities of
the account executives. Our 532 account executives generate virtually all of our
revenues and are responsible for servicing existing advertising accounts and
developing new accounts within their assigned service areas.
We have well-established practices and procedures to manage the
productivity and effectiveness of our sales force. All new account executives
complete a formal two-week training program and receive continuous on-the-job
training through the regional sales management structure. Each account executive
has a specified account assignment consisting of both new business leads and
renewal accounts and is accountable for daily,
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<PAGE> 51
weekly and monthly sales and advance payment goals. Account executives are
compensated in the form of base salary, commissions and car allowance.
Approximately 50% of total account executive compensation is in the form of
commissions, such that sales force compensation is largely tied to sales
performance and account collection. As of December 31, 1998, we employed
approximately 819 people, 642 of whom were engaged in sales and sales support
functions.
The sales cycle of a directory varies based on the size of the revenue base
and can extend from a few weeks to as long as nine months. Once the canvass of
customers for a directory is completed, the directory is "closed" and the
advertisements are assembled into directories in the production cycle.
PRODUCTION AND DISTRIBUTION
We develop a production planning guide for each directory, which is a
comprehensive planning tool setting forth production specifications and the cost
structure for that directory. Each production planning guide is incorporated
into our annual production schedule and serves as the foundation for our annual
budgeting process. Although we view our directories as annual publications, the
actual interval between publications may vary from 11 to 13 months. New
directory starts can be incorporated into the production schedule without
significant disruption because directory production is staggered throughout the
year. As of December 31, 1998, we had a production staff of approximately 111
full-time employees.
Prior to 1995, we purchased specialized yellow pages data processing
services from a third-party provider to supplement our own internal information
processing and management functions. In 1995, we began eliminating a substantial
portion of third-party information processing services by internally generating
leads and processing white pages and yellow pages with our own management
information systems.
Major production initiatives since 1994 which have resulted in significant
savings, include:
- the conversion of yellow pages processing from a third-party vendor to an
internal process;
- the internal production of all in-column and display advertising graphics
and elimination of all third-party vendor graphic costs;
- internal processing of sales leads and elimination of third-party lead
processing costs;
- the re-negotiation and reduction of third-party charges for keying data;
- the internal typesetting of pages;
- the internal production of community pages; and
- direct production cost reductions for white pages processing and cover
graphics.
Our current production process includes post-sales, national sales order
processing, advertisement design and manufacturing, white pages licensing and
production, yellow pages production, community pages production and pagination.
Production operations are primarily managed in-house to minimize costs and to
assure a high level of accuracy.
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After the in-house production process is complete, the directories are then
sent to outside vendors to be printed. We do not print any of our directories
but instead contract with a limited number of printers to print and bind our
directories. We contract with two outside vendors to distribute our directories
to each business and residence in our markets.
RAW MATERIALS
Our principal raw material is paper. We used approximately 16.4, 17.6,
18.2, 10.9 million pounds of directory grade paper for the years ended April 30,
1996, 1997, 1998 and the eight months ended December 31, 1998, respectively,
resulting in a total cost of paper during such periods of approximately of $6.0
million, $5.8 million, $5.7 million and $4.3 million, respectively. We do not
purchase paper directly from the paper mills; instead, our printers purchase the
paper on our behalf at prices negotiated by us.
COMPETITION
The yellow pages directory advertising business is highly competitive.
There are over 250 independent publishers operating in competition with the
regional Bell operating companies and other telephone utilities. In most
markets, we compete not only with the local utilities, but also with one or more
independent yellow pages publishers. Other media in competition with yellow
pages for local business and professional advertising include newspapers, radio,
television, billboards and direct mail.
INTELLECTUAL PROPERTY
We have registered one trademark and one service mark used in our business.
In addition, each of our publications is protected under Federal copyright laws.
Telephone utilities are required to license directory listings of names and
telephone numbers that we then license for a set fee per name for use in our
white pages listings. Total licensing fees paid by us were $1.1 million and $0.4
million in the year ended April 30, 1998 and eight months ended December 31,
1998, respectively. In addition, we believe that the phrase "yellow pages" and
the walking fingers logo are in the public domain in the United States.
Otherwise, we believe that we own or license the intellectual property rights
necessary to conduct our business.
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<PAGE> 53
PROPERTIES
We house our corporate, administrative and production staff at our
headquarters located at 8344 Clairemont Mesa Boulevard, San Diego, California.
Information as of December 31, 1998 relating to our corporate headquarters and
other regional sales offices is set forth in the following table:
<TABLE>
<CAPTION>
SQUARE TERM DESCRIPTION OF
LOCATION ADDRESS FOOTAGE EXPIRATION USE
-------- ----------------------- ------- ---------- -----------------
<S> <C> <C> <C> <C>
San Diego, CA.................. 8344 Clairemont Mesa 35,824 10/31/03 Corporate/Office/
Boulevard Sales/Production
Jackson, MI.................... 2 Universal Way 10,500 11/30/99 Sales Office
Houston, TX.................... 11243 Fuqua 9,600 3/31/01 Sales Office
Elmsford, NY................... 150 Clearbrook Road 8,775 12/31/00 Sales Office
Albany, NY..................... 501 New Karner Road, 7,565 3/31/99 Sales Office
Suite 1
Poughkeepsie, NY............... 4 Jefferson Street, 6,210 12/31/03 Sales Office
#500
Bedford, TX.................... 4001 Airport Fwy., 5,697 7/31/00 Sales Office
Suite 230
Louisville, KY................. 2300 Envoy Circle, 6,514 3/31/02 Sales Office
#2301
Stamford, CT................... 333 Ludlow Street 4,895 8/31/02 Sales Office
Indianapolis, IN............... 2601 Fortune Circle, E 3,943 11/30/02 Sales Office
#100
Nashville, TN.................. 2525 Perimeter Drive, 3,637 5/31/01 Sales Office
Suite 105
Manitou Beach, MI.............. 6155 U.S. 223 3,500 12/31/99 Sales Office
Kettering, OH.................. 3085 Woodman Drive, 3,312 12/31/00 Sales Office
Suite 120
Oklahoma, OK................... 4901 W. Reno, Suite 800 2,931 6/30/02 Sales Office
ElDorado Hills, CA............. 5160 Robert J. Matthews 2,800 7/31/99 Sales Office
Boulevard, #4
</TABLE>
We lease 30 other sales offices for more remote sales areas and
periodically lease facilities for storage of directories.
EMPLOYEES
As of December 31, 1998, we employed approximately 819 full-time employees,
none of whom are members of a union. We believe that we have good relations with
our employees.
LEGAL PROCEEDINGS
We are a party to various litigation matters incidental to the conduct of
our business. Management does not believe that the outcome of any of the matters
in which we are currently involved will have a material adverse effect on our
financial condition or the results of our operations.
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<PAGE> 54
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES OF THE COMPANY
The following table sets forth certain information with respect to the
persons who are members of the Board of Directors (the "Board") of TCC, the
manager of our company, or executive officers of our company. TCC controls the
policies and operations of our company. The ages listed below are as of January
31, 1999.
<TABLE>
<CAPTION>
NAME AGE POSITION AND OFFICES
---- --- --------------------
<S> <C> <C>
Laurence H. Bloch.......... 45 Chairman of the Board, Secretary and Director
Ricardo Puente............. 45 President, Chief Executive Officer and Director
Joan M. Fiorito............ 44 Vice President, Chief Financial Officer and Assistant
Secretary
Marybeth Brennan........... 42 Vice President -- Operations
Cynthia M. Hardesty........ 43 Vice President -- Human Resources
Joseph L. Wazny............ 53 Vice President -- Information Services
Richard E. Beck............ 53 Executive Vice President -- Sales
Michael Bynum.............. 43 Executive Vice President -- Sales
Richard Mellert............ 54 Executive Vice President -- Sales
Ita Shea-Oglesby........... 41 Executive Vice President -- Sales
C. Hunter Boll............. 43 Director
Terrence M. Mullen......... 32 Director
Christopher J. Perry....... 43 Director
Scott A. Schoen............ 40 Director
Marcus D. Wedner........... 36 Director
</TABLE>
Laurence H. Bloch is Chairman and Secretary of TransWestern and Holdings
and has been a Director of TCC since 1993. Prior to October 1997, Mr. Bloch
served as Vice Chairman and Chief Financial Officer of the company. Before
joining the company, Mr. Bloch was Senior Vice President and Chief Financial
Officer of Lanxide Corporation, a materials technology company. Mr. Bloch was a
Vice President, then Managing Director of Smith Barney from 1985 to 1990, prior
to which he was Vice President, Corporate Finance with Thomson McKinnon
Securities, Inc. Mr. Bloch received a BA from the University of Rochester and an
MBA from Wharton Business School.
Ricardo Puente has been President of TransWestern and Holdings and a
Director of TCC since 1993 and became Chief Executive Officer in October 1997.
Previously, he held the positions of Vice President of Sales and Controller of
TransWestern's predecessor which he joined in 1988. Before joining
TransWestern's predecessor, Mr. Puente held various financial positions with the
Pillsbury Company for nine years. After receiving his MS in Accounting from the
University of Miami, Mr. Puente was a senior auditor with Touche Ross & Co. Mr.
Puente earned a BS in Accounting from Florida State University.
Joan M. Fiorito is the Vice President, Chief Financial Officer and
Assistant Secretary of TransWestern and Holdings and prior to October 1997 was
Vice President and Controller. Ms. Fiorito joined TransWestern's predecessor in
1989 as Manager, Financial Planning & Analysis and subsequently was promoted to
Controller. Prior to joining TransWestern's predecessor, Ms. Fiorito was
Controller of Coastal Office Products. Ms. Fiorito received a BS in Management
from Dominican College and an MBA in Finance from Fordham University.
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<PAGE> 55
Marybeth Brennan has been TransWestern's Vice President of Operations since
its formation in 1993. Ms. Brennan joined TransWestern's predecessor in 1987 as
Production Manager, prior to which Ms. Brennan was Director of Publications for
Maynard-Thomas Publishing. Ms. Brennan received a BA in English from Stonehill
College.
Cynthia M. Hardesty was promoted to Vice President, Human Resources of
TransWestern effective January 1, 1999. Ms. Hardesty is responsible for all
human resource activities within TransWestern. Ms. Hardesty had served as
Director, Human Resources for the prior five years. She joined TransWestern's
predecessor in March, 1991 as a Senior Human Resources Associate. Prior to
joining TransWestern's predecessor, she was Manager of Employment and Training
with Emerald Systems. Ms. Hardesty has a BS in Business Administration from
National University.
Joseph L. Wazny has been the Vice President, Management Information Systems
of TransWestern since its formation in 1993. Before joining the company, Mr.
Wazny was Director of Systems Development and Director, Information Systems with
R.H. Donnelley Corp. Mr. Wazny graduated with a degree in Business
Administration and Computer Sciences from Roosevelt University.
Richard E. Beck was promoted to Executive Vice President of TransWestern
effective November 1, 1998. Mr. Beck is responsible for negotiating with
companies regarding potential mergers and acquisitions as well as integrating
completed acquisitions into TransWestern. Mr. Beck has served as a District
Sales Manager for both Louisville and Houston. Most recently, Mr. Beck has been
serving as the Regional Vice President for the Kentucky/Ohio/Indianapolis
district. Mr. Beck joined TransWestern's predecessor as District Sales Manager
when it acquired Metro Publishing in 1986.
Michael Bynum was promoted to Executive Vice President of TransWestern
effective May 1, 1998. His responsibilities include the management of the
Oklahoma/Kansas Region, North Texas Region, Tennessee Region, and
Ohio/Kentucky/Indiana/Michigan Region. Since 1993, Mr. Bynum was Regional Vice
President overseeing the Oklahoma/ Kansas/Tennessee Region. Mr. Bynum joined
TransWestern's predecessor in 1985 as a sales associate and holds a BA in
Management from Cameron University.
Richard Mellert was promoted to Executive Vice President of TransWestern
effective May 1, 1998. His responsibilities include the management of the
Upstate New York Region, Midstate New York Region, and Downstate New York
Region. Since 1993, Mr. Mellert was Regional Vice President overseeing the
Upstate New York Region. Mr. Mellert joined TransWestern's predecessor in 1980.
Mr. Mellert was promoted to District Sales Manager in 1991. Mr. Mellert holds an
AA degree from Dutchess Community College.
Ita Shea-Oglesby was promoted to Executive Vice President of TransWestern
effective May 1, 1998. Her responsibilities include the management of the South
Texas, Louisiana Region and the Northern and Southern California Regions. Since
1993, Ms. Shea-Oglesby was Regional Vice President overseeing the South Texas,
Louisiana Region and the Northern California Region. Ms. Shea-Oglesby joined
TransWestern's predecessor in 1983 and previously held the positions of Area
Sales Manager, Sales Trainer and District Sales Manager. Ms. Shea-Oglesby earned
a BA from Louisiana State University.
C. Hunter Boll became a Director of TCC upon the consummation of the
recapitalization completed in October 1997. Mr. Boll is a Managing Director of
Thomas H. Lee Company where he has been employed since 1986. Mr. Boll is also a
Trustee of
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<PAGE> 56
THL Equity Trust III, the General Partner of THL Equity Advisors Limited
Partnership III, which is the General Partner of Thomas H. Lee Equity Fund III,
L.P. Mr. Boll also serves as a Director of Big V Supermarkets, Inc., New York
Restaurant Group, Inc., Cott Corporation, Freedom Securities Corporation and
United Industries Corporation. Mr. Boll holds an MBA from Stanford University
and a BA from Middlebury College.
Terrence M. Mullen became a Director of TCC upon consummation of the
recapitalization completed in October 1997. Mr. Mullen is currently an Associate
of the Thomas H. Lee Company. Mr. Mullen worked at the Thomas H. Lee Company
from 1992 to 1994 and rejoined in 1996. From 1990 to 1992, Mr. Mullen worked in
the Corporate Finance Department of Morgan Stanley & Co., Incorporated. Mr.
Mullen received a BBA in Finance and Economics from the University of Notre Dame
and an MBA from the Harvard Graduate School of Business Administration.
Christopher J. Perry has been a Director of TCC since 1994. Mr. Perry is
currently Managing Director and President of Continental Illinois Venture
Corporation, a position he has held since 1994, and is also a Managing Partner
of CIVC Partners III. Mr. Perry has been at Bank of America or, prior to its
merger with Bank of America, Continental Bank, since 1985. Prior positions with
Bank of America or Continental Bank include Managing Director and head of the
Mezzanine Investments Group and Managing Director and head of the Chicago
Structured Finance Group. Prior to joining Continental Bank, Mr. Perry was in
the Corporate Finance Department of Northern Trust. In addition to being a
Director of TCC, Mr. Perry is a Director of General Roofing Services, The
Brickman Group, Ltd and RAM Reinsurance Company, Ltd. Mr. Perry received a BS
from the University of Illinois and an MBA from Pepperdine University and is a
certified public accountant.
Scott A. Schoen became a Director of TCC upon consummation of the
recapitalization completed in October 1997. Mr. Schoen is a Managing Director of
the Thomas H. Lee company where he has been employed since 1986. Mr. Schoen is
also a Trustee of THL Equity Trust III, the General Partner of THL Equity
Advisors Limited Partnership III, which is the General Partner of Thomas H. Lee
Equity Fund III L.P. Mr. Schoen also serves as Vice President of Thomas H. Lee
Advisors I and Thomas H. Lee Advisors II. Mr. Schoen is a Director of Affordable
Residential Communities LLC, Rayovac Corporation, Syratech Corporation and
United Industries Corporation. Mr. Schoen received a BA in History from Yale
University, a JD from Harvard Law School and an MBA from the Harvard Graduate
School of Business Administration. Mr. Schoen is a member of the New York Bar.
Marcus D. Wedner has been a Director of TCC since its formation in 1993.
Mr. Wedner is currently Managing Director of Continental Illinois Venture
Corporation, a position he has held since 1992, and is also a Managing Partner
of CIVC Partners III. Mr. Wedner joined Continental Illinois Venture Corporation
in 1988. Previously, Mr. Wedner held marketing and sales management positions at
Pacific Telesis Group and as an associate with Goldman, Sachs & Co. In addition
to being a Director of TCC, Mr. Wedner is a Director of Teletouch
Communications, Advanced Quick Circuits, L.P., Grapevine Communications, Inc.,
General Roofing Services and Precision Tube Technology, Inc. Mr. Wedner holds a
BA from the University of California at Los Angeles and received an MBA from the
Harvard Graduate School of Business Administration.
At present, all Directors are elected and serve until a successor is duly
elected and qualified or until his or her earlier death, resignation or removal.
All members of the Board
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<PAGE> 57
of Directors set forth herein were elected pursuant to an investors agreement
that was entered into in connection with the Recapitalization. See "Certain
Relationships and Related Transactions -- Investors Agreement." There are no
family relationships between any of the Directors of TCC or executive officers
of the company. Executive officers of the company are elected by and serve at
the discretion of the Board of Directors of TCC.
COMPENSATION OF DIRECTORS
The company is a limited liability company and Holdings is a limited
partnership, both of which are controlled by TCC. The Directors of TCC are not
be paid for their services, although Directors are reimbursed for out-of-pocket
expenses incurred in connection with attending Board meetings.
EXECUTIVE COMPENSATION
The compensation of executive officers of TransWestern is determined by the
Board of TCC. The following Summary Compensation Table includes individual
compensation information for the Chairman, the President and Chief Executive
Officer and each of the three other most highly compensated executive officers
of the company (collectively, the "Named Executive Officers") for services
rendered in all capacities to the company during the fiscal periods ended April
30, 1997, 1998 and December 31, 1998. There were no stock options exercised
during our last fiscal year nor were there any options outstanding at the end of
our last fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------------------------------------------------
OTHER ANNUAL LTIP ALL OTHER
PERIOD(A) SALARY BONUS COMPENSATION(B) PAYMENTS(C) COMPENSATION(D)
--------- ------- ------- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Laurence H. Bloch................. 1 235,976 67,040 -- -- 10,529
Chairman of the Board 2 222,167 56,497 -- -- 48,946
and Secretary 3 222,167 222,167 -- -- 4,798
Ricardo Puente.................... 1 231,757 -- -- -- 21,618
President, Chief Executive 2 199,519 191,369 -- -- 134,734
Officer 3 199,519 171,822 -- -- 11,380
Marybeth Brennan.................. 1 140,945 40,043 -- 60,382 12,892
Vice President -- Operations.... 2 132,698 130,460 -- 50,700 28,922
3 132,698 120,030 -- 9,322 13,805
Joan M. Fiorito................... 1 134,574 39,700 -- 60,382 12,854
Vice President, Chief 2 119,461 118,394 -- 50,700 29,686
Financial Officer and 3 119,460 105,649 -- 9,322 14,449
Assistant Secretary
Richard Mellert................... 1 125,045 36,444 -- 60,382 12,804
Executive Vice
President -- Sales 2 111,236 162,254 -- 50,700 11,023
3 111,851 119,907 -- 9,322 9,400
</TABLE>
- -------------------------
(a) 1 -- refers to the twelve month period ended December 31, 1998
2 -- refers to the year ended April 30, 1998
3 -- refers to the year ended April 30, 1997
(b) None of the prerequisites and other benefits paid to each named executive
officer exceeded the lesser of $50,000 or 10% of the annual salary and bonus
received by each Named Executive Officer.
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<PAGE> 58
(c) Represents distributions made pursuant to the company's Equity Compensation
Plan. See "Equity Compensation Arrangements."
(d) All Other Compensation for twelve month period ended December 31, 1998
includes: (1) payments for long-term disability insurance premiums: Bloch
($1,112), Puente ($1,111), Brennan ($752), Fiorito ($714) and Mellert
($664); (2) payments of $1,725 for tax preparation for each of the Named
Executive Officers; (3) contributions to the 401(k) Profit Sharing Plan:
Puente ($7,244), Brennan ($8,300), Fiorito ($8,300) and Mellert ($8,300);
and (5) management fees paid in connection with the Recapitalization: Bloch
($7,692), Puente ($11,538), Brennan ($2,115), Fiorito ($2,115), and Mellert
($2,115).
EQUITY COMPENSATION ARRANGEMENTS
Holdings' Class B Units are designed to encourage performance by providing
the members of management the opportunity to participate in the equity growth of
TransWestern. There are 10,000 Class B Units authorized, 8,500 of which have
been issued to the company's senior managers and 1,500 of which have been issued
to the Equity Compensation Plan as discussed below. See "Certain Relationships
and Related Transactions."
In fiscal 1994, the company established the TransWestern Publishing
Company, L.P. Equity Compensation Plan (the "Equity Compensation Plan") to
provide approximately 60 of the company's managers, other than certain senior
executives, including Messrs. Bloch and Puente, the opportunity to participate
in the equity growth of the company without having direct ownership of the
company's securities. In connection with the Recapitalization, the company
reserved $5.5 million for distributions to participants in the Equity
Compensation Plan, one half of which was distributed in October 1997 and one
half of which was distributed in October 1998. Special distributions made
pursuant to the Equity Compensation Plan were recorded as an expense in the
company's financial statements when declared by the Board of Directors.
Employees participating in the Equity Compensation Plan were eligible to receive
a ratable per unit share of cash distributions made pursuant to the Equity
Compensation Plan, if and when, declared. In the year ended April 30, 1998,
distributions totaling $2.6 million were paid, in the eight months ended
December 31, 1998 distributions totaling $2.9 million were paid, and at December
31, 1998, there were no undistributed proceeds under the Equity Compensation
Plan.
As a result of the Recapitalization, the existing Equity Compensation Plan
was terminated. However, the company adopted a new Equity Compensation Plan
which functions similarly to the old plan. As of December 31, 1998, no assets
had been contributed to the new plan.
EMPLOYMENT AGREEMENTS
Messrs. Bloch and Puente have each entered into an Employment Agreement
(each, an "Employment Agreement") with the company. The Employment Agreements
provide for the employment of Mr. Bloch as the Chairman of the Board of
Directors of TCC and Chairman of the Partnership and Mr. Puente as the President
and Chief Executive Officer of the Partnership and TCC until October 1, 2002
unless terminated earlier as provided in the respective Employment Agreement.
The Employment Agreements of Messrs. Bloch and Puente provide for an annual base
salary of $222,167 and $235,500, respectively,
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<PAGE> 59
subject to annual increases based on the consumer price index, and annual
bonuses based on the achievement of certain EBITDA targets of up to 100% of
their base salary.
Each executive's employment may be terminated by the company at any time
with cause or without cause. If such executive is terminated by the company with
cause or resigns other than for good reason, the executive will be entitled to
his base salary and fringe benefits until the date of termination, but will not
be entitled to any unpaid bonus. Messrs. Bloch and Puente will be entitled to
their base salary and fringe benefits and any accrued bonus for a period of 12
months following their termination in the event such executive is terminated
without cause or resigns with good reason. The Employment Agreements also
provide each executive with customary fringe benefits and vacation periods.
"Cause" is defined in the Employment Agreements to mean:
- the commission of a felony or a crime involving moral turpitude or the
commission of any other act or omission involving dishonesty, disloyalty
or fraud;
- conduct tending to bring the company or any of its subsidiaries into
substantial public disgrace or disrepute;
- the substantial and repeated failure to perform duties as reasonably
directed by TCC or the company;
- gross negligence or willful misconduct with respect to the company or any
subsidiary; or
- any other material breach of the Employment Agreement or company policy
established by the Board, which breach, if curable, is not cured within
15 days after written notice thereof to the executive.
"Good Reason" is defined to mean the occurrence, without such executive's
consent, of:
- a reduction by the company of the executive's annual base salary by more
than 20%;
- any reduction in the executive's annual base salary, in effect
immediately prior to such reduction, if in the fiscal year prior to such
reduction the EBITDA for such prior fiscal year was equal to or greater
than 80% of the target EBITDA for such prior year;
- any willful action by the company that is intentionally inconsistent with
the terms of the Employment Agreement or the executive's Executive
Agreement (as defined herein); or
- any material reduction in the powers, duties or responsibilities which
the executive was entitled to exercise as of the date of the Employment
Agreement.
Messrs. Bloch and Puente have also entered into Executive Agreements with
the company pursuant to which they purchased Class B Units of the Partnership.
See "Certain Relationships and Related Transactions -- Executive Agreements."
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<PAGE> 60
401(K) AND PROFIT SHARING PLAN
The company has a 401(k) and profit-sharing retirement plan for the benefit
of substantially all of its employees, which was qualified for tax exempt status
by the Internal Revenue Service.
Employees can make contributions to the plan up to the maximum amount
allowed by federal tax code regulations. The company may match the employee
contributions, up to 83% of the first 6% of annual earnings per participant. The
company may also make annual discretionary profit sharing contributions. The
company's contributions to the 401(k) and profit-sharing plan for the years
ended April 30, 1996, 1997, and 1998 were approximately $0.8 million, $0.8
million, and $1.1 million, respectively. On May 12, 1998, the company elected to
change its fiscal year from April 30 to December 31 as reported on Form 8-K. The
company amended the plan year of the TransWestern Publishing 401(k) and Profit
Sharing Plan from April 30 to December 31 on December 31, 1997.
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<PAGE> 61
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All of the membership interests in our company are owned by Holdings. The
following table sets forth certain information regarding the beneficial
ownership of the equity securities of Holdings by:
- each of the directors of TCC and the executive officers of the company;
- all directors of TCC and executive officers of the company as a group;
and
- each owner of more than 5% of any class of equity securities of Holdings.
Unless otherwise noted, the address for each executive officer of the
company and the directors of TCC is c/o TransWestern, 8344 Clairemont Mesa
Boulevard, San Diego, California 92111.
<TABLE>
<CAPTION>
CLASS A
COMMON PERCENT OF PREFERRED PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER UNITS(A) CLASS UNITS CLASS
------------------------------------ --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS:
Laurence H. Bloch(b).................... 19,209 1.51% 9,974 1.51%
Ricardo Puente(c)....................... 28,813 2.27 14,961 2.27
Joan M. Fiorito(d)...................... 5,282 * 2,743 *
C. Hunter Boll(e)....................... 715,193 56.29 371,351 56.29
Terrence M. Mullen(e)................... 712,231 56.06 369,813 56.06
Christopher J. Perry(f)................. 288,134 22.68 149,608 22.68
Scott A. Schoen(e)...................... 715,193 56.29 371,351 56.29
Marcus D. Wedner(f)..................... 288,134 22.68 149,608 22.68
All Directors and executive officers as
a group (8 persons)................... 1,059,987 84.43 550,376 84.43
5% OWNERS:
Thomas H. Lee Equity Fund III,
L.P.(g)............................... 712,034 56.05 369,710 56.05
Thomas H. Lee Foreign Fund III,
L.P.(h)............................... 712,034 56.05 369,710 56.05
THL-CCI Limited Partnership(i).......... 712,034 56.05 369,710 56.05
Continental Illinois Venture
Corporation(j)........................ 288,134 22.68 149,608 22.68
CIVC Partners III (k)................... 288,134 22.68 149,608 22.68
</TABLE>
- -------------------------
* Represents less than one percent.
(a) Holders of Class A Units are entitled to share in any distribution on a pro
rata basis, but only if the holders of the Preferred Units have received a
certain preference amount set forth in Holdings Third Amended and Restated
Agreement of Limited Partnership, as amended. Holdings has also issued
Class B Units to the members of the company's senior management. The Class
B Units will be entitled to share in any such distributions only if the
holders of the Preferred Units and Class A Units have achieved an internal
rate of return on their total investment of 12%. The percentage of such
distributions that the Class B Units will be entitled to receive will range
from 10% to 20%, based on the internal rate of return achieved by the
holders of the Preferred and Class A Units. All Common Units listed in the
table represent Class A Units unless otherwise noted.
(b) Does not include 800 Class B Units which are subject to vesting in equal
installments over a five year period.
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<PAGE> 62
(c) Does not include 2,500 Class B Units which are subject to vesting in equal
installments over a five year period.
(d) Does not include 352 Class B Units which are subject to vesting in equal
installments over a five year period.
(e) Includes 712,034 Class A Units and 369,710 Preferred Units beneficially
owned by Thomas H. Lee Equity Fund III, L.P. Such persons disclaim
beneficial ownership of all such interests. Such person's address is c/o
Thomas H. Lee Company, 75 State Street, Suite 2600, Boston, Massachusetts
02109.
(f) Includes 244,914 Class A Units and 127,167 Preferred Units owned by
Continental Illinois Venture Corporation 43,220 Class A Units and 22,441
Preferred Units owned by CIVC Partners III. Such persons disclaim
beneficial ownership of all such interests. Such person's address is c/o
Continental Illinois Venture Corporation, 231 South LaSalle Street,
Chicago, Illinois 60697.
(g) Includes 39,259 Class A Units and 20,385 Preferred Units owned by Thomas H.
Lee Foreign Fund III, L.P. and 38,305 Class A Units and 19,889 Preferred
Units owned by THL-CCI Limited Partnership. Such person disclaims
beneficial ownership of all such interests. Such person's address is c/o
Thomas H. Lee Company, 75 State Street, Suite 2600, Boston, Massachusetts
02109.
(h) Includes 634,470 Class A Units and 329,437 Preferred Units owned by Thomas
H. Lee Equity Fund III, L.P. and 38,305 Class A Units and 19,889 Preferred
Units owned by THL-CCI Limited Partnership. Such person disclaims
beneficial ownership of all such interests. Such person's address is c/o
Thomas H. Lee Company, 75 State Street, Suite 2600, Boston, Massachusetts
02109.
(i) Includes 634,470 Class A Units and 329,437 Preferred Units owned by Thomas
H. Lee Equity Fund III, L.P. and 39,259 Class A Units and 20,385 Preferred
Units owned by Thomas H. Lee Foreign Fund III, L.P. Such person disclaims
beneficial ownership of all such interests. Such person's address is c/o
Thomas H. Lee Company, 75 State Street, Suite 2600, Boston, Massachusetts
02109.
(j) Includes 43,220 Class A Units and 22,441 Preferred Units owned by CIVC
Partners III. Such person disclaims beneficial ownership of such interests.
Such person's address is c/o Continental Illinois Venture Corporation, 231
South LaSalle Street, Chicago, Illinois 60697.
(k) Includes 244,914 Class A Units and 127,167 Preferred Units owned by
Continental Illinois Venture Corporation. Such person disclaims beneficial
ownership of all such interests. Such person's address is c/o Continental
Illinois Venture Corporation, 231 South LaSalle Street, Chicago, IL 60697.
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<PAGE> 63
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RECAPITALIZATION
The Partnership completed a $312 million Recapitalization in October 1997
(the "Recapitalization"). In the Recapitalization, new investors led by Thomas
H. Lee Equity Fund III, L.P. ("THL") and its affiliates (together, the "THL
Parties"), along with other investors, the Partnership's existing limited
partners (the "Existing Limited Partners"), and the company's 25 most senior
managers (the "Management Investors"), invested new and continuing capital of
$130.0 million in the Partnership and TCC (the "Equity Investment"). The
proceeds from the Equity Investment, together with borrowings of approximately
$107.7 million under the senior credit facility and $75.0 million under a senior
subordinated financing facility were used:
- for $224.5 million of Recapitalization consideration, including the
redemption of a portion of the limited partnership interests from the
Existing Limited Partners;
- to repay $75.6 million under the Partnership's then existing credit
facilities;
- to pay $10.6 million of fees and expenses; and
- for $2.0 million for general corporate purposes, including working
capital.
The senior subordinated financing facility was subsequently repaid with a
portion of the net proceeds from the company's issuance of its 9 5/8% Series A
Senior Subordinated Notes due 2007.
The Recapitalization Agreement contained customary provisions for such
agreements, including representations and warranties with respect to the
condition and operations of the business, covenants with respect to the conduct
of the business prior to the Recapitalization closing date and various closing
conditions, including the continued accuracy of representations and warranties.
Pursuant to the Recapitalization Agreement, each Existing Limited Partner
that reinvested in Holdings has agreed that for a period ending on the later of
the second anniversary of the Recapitalization closing date and the one year
anniversary of the termination of such reinvesting Manager's employment with us
not to own, control, participate or engage in any yellow pages directory
publishing directory business or any business competing for the same customers
as our businesses as such businesses exist or are in process during such period
in any markets, or markets contiguous thereto, in which we engage or plan to
engage during such period.
James D. Dunning, Jr., the Partnership's and TCC's former Chairman and
Chief Executive Officer, has agreed that for the three-year period commencing on
the Recapitalization closing date not to participate, directly or indirectly, in
any yellow pages directory publishing business in the United States or any
business competing for the same customers as us in the geographic areas in which
we engaged in the local or national yellow pages directory publishing business
as of August 27, 1997; provided that Mr. Dunning may participate in any industry
specific yellow pages business or any trade or industry publications.
In addition, each Existing Limited Partner that reinvested in Holdings has
agreed that for the two-year period commencing on the Recapitalization closing
date not to solicit the employment of or hire any employee of the company, other
than Laurence Bloch, and
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<PAGE> 64
further, under the Recapitalization Agreement, during such two-year period, each
Existing Limited Partner that reinvested in Holdings is subject to a
confidentiality agreement with respect to all information concerning our
business and TCC of which such person has knowledge and which is not in the
public domain.
MANAGEMENT AGREEMENT
Effective upon the Recapitalization, we entered into a Management Agreement
with Thomas H. Lee Company ("THL Co.") pursuant to which THL Co. agreed to
provide:
- general executive and management services;
- identification, negotiation and analysis of financial and strategic
alternatives; and
- other services agreed upon by us and THL Co.
On the Recapitalization closing date, THL Co. and the other equity investors in
the company each received their pro rata portion of a $5.0 million transaction
fee. In addition, THL and all other equity investors receive a pro rata portion
of the $500,000 annual management fee (the "Management Fee"), plus THL will be
reimbursed for all reasonable out-of-pocket expenses, payable monthly in
arrears. The Management Agreement had an initial term of one year, subject to
automatic one-year extensions, unless we or THL Co. provide written notice of
termination no later than 30 days prior to the end of the initial or any
successive period.
INVESTORS AGREEMENT
Pursuant to the Recapitalization, Holdings, TCC, the THL Parties, CIBC
Argosy Merchant Fund 2, L.L.C. ("CIBC Merchant Fund"), CIVC Partners III ("CIVC
III" and, together with the THL Parties and CIBC Merchant Fund, the "New
Investors") and the reinvesting Existing Limited Partners (together with the New
Investors, the "New Partners") entered into an Investors Agreement (the
"Investors Agreement"). The Investors Agreement requires that each of the
parties thereto vote all of his or its voting securities and take all other
necessary or desirable actions to cause the size of the Board of Directors of
TCC to be established at nine members and to cause the election to the Board of
five representatives designated by THL (the "THL Designees"), each of the then
current chairman and president of the Partnership (the "Executive Directors")
and two representatives designated by Continental Illinois Venture Corporation
("CIVC" and, together with CIVC III, the "CIVC Parties"), and CIVC III (the
"CIVC Designees"), of which one CIVC Designee will at all times serve on the
Board's compensation committee, audit committee and executive committee.
Currently, however, only three of the THL Designees have been appointed to TCC's
Board of Directors. The respective rights of THL and the CIVC Parties to
designate representatives to the Board terminates at such time when such party
owns less than 30% of the Common Units held by such party as of the
Recapitalization closing date. If at any time THL and its permitted transferees
own less partnership interests in Holdings or less equity securities in TCC than
the amount of such partnership interests or such equity securities, as the case
may be, owned by the CIVC Parties and the Management Investors, taken as a
group, then the number of THL Designees will be reduced automatically from five
to three and the number of CIVC Designees will be increased automatically from
two to three. The Investors Agreement provides that certain significant actions
may not be taken without the express approval of the at least one of the CIVC
Designees and at least one of the Executive Directors.
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<PAGE> 65
In addition to the foregoing, the Investors Agreement:
- requires the holders of interests in Holdings and common stock of TCC,
other than THL and CIVC, to obtain the prior written consent of THL prior
to transferring any interests in Holdings or TCC stock, other than
interests or securities held by the Management Investors pursuant to
Executive Agreements;
- grants in connection with the sale of interests in Holdings or TCC stock
by the Management Investors certain preemptive rights with respect to
such sale first to Holdings, then to the limited partners;
- grants the New Partners certain participation rights in connection with
certain transfers made by THL;
- grants the New Partners certain preemptive rights in connection with
certain issuances, sales or other transfers for consideration of any
securities by Holdings or TCC;
- requires the holders of shares of TCC's common stock to consent to a sale
of TCC to an independent third party if such sale is approved by the
Board and the holders of a majority of the shares of TCC's common stock;
and
- requires the holders of interests in Holdings to consent to the sale of
Holdings in the event TCC and the holders of a majority of Class A Units
approve a sale of Holdings.
The foregoing agreements terminate on the earlier of October 1, 2001 and the
date on which the Partnership consummates a public offering of $40 million or
more of its equity securities (a "Qualified Public Offering"). The agreements
with respect to the participation rights and preemptive rights described above
continue with respect to each security until the earlier of:
- October 1, 2007;
- a Qualified Public Offering;
- the transfer in a public sale of such security;
- with respect to equity securities of Holdings, upon the sale of the
Holdings; and
- with respect to equity securities of TCC, upon the sale of TCC.
REGISTRATION AGREEMENT
Pursuant to the Recapitalization, Holdings, TCC, and the New Partners
entered into a registration agreement (the "Registration Agreement"). Under the
Registration Agreement, the holders of a majority of registrable securities
owned by the THL Parties and the CIVC Parties have the right at any time,
subject to certain conditions, to require Holdings to register any or all of
their interests in Holdings' under the Securities Act of 1933, as amended (the
"Securities Act") on Form S-1 (a "Long-Form Registration") on three occasions at
Holdings' expense and on Form S-2 or Form S-3 (a "Short-Form Registration") on
three occasions at Holdings' expense. Holdings is not required, however, to
effect any such Long-Form Registration or Short-Form Registration within six
months after the effective date of a prior demand registration. In addition, all
holders of registrable securities are entitled to request the inclusion of such
securities in any registration
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<PAGE> 66
statement at Holdings' expense whenever Holdings proposes to register any of its
securities under the Securities Act, other than pursuant to a demand
registration. In connection with such registrations, Holdings has agreed to
indemnify all holders of registrable securities against certain liabilities
including liabilities under the Securities Act. In addition, Holdings has the
one-time right to preempt a demand registration with a piggyback registration.
EXECUTIVE AGREEMENTS
Each Management Investor has entered into an Executive Agreement with
Holdings and TCC (each, an "Executive Agreement"), pursuant to which such
Management Investor purchased Class B Units which are subject to a five-year
vesting period, which vesting schedule accelerates upon a sale of Holdings. The
Class B Units were issued in connection with the Recapitalization to members of
management as incentive units at fair market value. Under each Management
Investor's Executive Agreement, in the event that such Management Investor's
employment with the Company is terminated for any reason, Holdings has the
option to repurchase all of such Management Investor's vested Class B Units in
accordance with the provisions outlined in the Partnership Agreement and all
other of such Management Investor's interests in Holdings and TCC at a price per
unit derived as specified in the Partnership Agreement. In addition, in the
event of a termination of the Management Investor's employment by Holdings
without "cause" or by such Management Investor for "good reason" or such
Management Investor's death or disability, such Management Investor may require
Holdings or TCC to repurchase his or her vested Class B Units in accordance with
the provisions outlined in the Partnership Agreement and all other interests of
such Management Investor in Holdings and TCC at a price per unit derived as
specified in the Partnership Agreement.
BENEFITS OF THE RECAPITALIZATION TO CERTAIN EXISTING SECURITY OWNERS AND
MANAGEMENT INVESTORS
Pursuant to the Recapitalization, Holdings redeemed a portion of the
limited partnership interests held by Existing Limited Partners and the New
Investors purchased a portion of TCC's common stock from the Existing Limited
Partners. In the Recapitalization, the company's Named Executive Officers,
including the company's former Chairman and Chief Executive Officer, received
approximately $50 million and exchanged their remaining limited partnership
interests, valued at approximately $7 million in the Recapitalization, for newly
issued Preferred and Class A Units. All Management Investors as a group received
an aggregate of approximately $38 million in the Recapitalization and exchanged
their remaining limited partnership interests, valued at approximately $1.1
million in the Recapitalization, for newly issued Preferred and Class A Units.
CIVC and its affiliates, including Christopher J. Perry and Marcus D. Wedner,
received an aggregate of approximately $70 million in the Recapitalization and
exchanged their remaining limited partnership interests, valued at approximately
$25 million in the Recapitalization, for newly issued Preferred and Class A
Units. In addition, CIVC III, an affiliate of CIVC, contributed $4.4 million at
the closing of the Recapitalization in exchange for newly issued Preferred and
Class A Units and paid approximately $78,000 to certain of the Existing Limited
Partners to purchase TCC common stock.
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PAYMENTS ON TCC NOTE
Since the acquisition of the company's predecessor in 1993, TCC loaned to
us all amounts distributed to TCC in connection with the periodic and special
distributions made by us to our partners. As of September 1, 1997, the aggregate
amount of principal and interest due under these loans was $833,419. Shortly
before the consummation of the Recapitalization in October 1997, we repaid to
TCC in full the outstanding balance of all of these loans.
TCC used the proceeds received from the loans to:
- pay $500,000 to First Union Capital Markets Corp. for certain advisory
services rendered in advance of the Recapitalization;
- pay $100,000 to Kirkland & Ellis, counsel to the Company, for certain
services rendered in advance of the Recapitalization;
- pay $143,419 for miscellaneous expenses; and
- pay a dividend immediately prior to the Recapitalization to TCC's
stockholders of $90,000 in the aggregate.
REDEMPTION OF PREFERRED UNITS
Holdings used $31.3 million of the proceeds from its sale of $57.4 million
aggregate principal amount at maturity of 11 7/8% Senior Discount Notes due 2008
in November 1997 to redeem a portion of the Equity Investment. Holdings' limited
partners received the following amounts as a result of the redemption of
approximately one half of the Preferred Units: THL Parties $18.6 million; Named
Executive Officers, including the company's former Chairman and Chief Executive
Officer, $1.4 million; Management Investors $1.7 million; CIVC $6.1 million;
CIVC III $1.1 million; First Union Capital Partners Inc. $1.2 million; CIBC
Merchant Fund $1.2 million.
LIMITED LIABILITY COMPANY AGREEMENT
Our company is a limited liability company formed under the Delaware
Limited Liability Company Act (as amended from time to time, the "Limited
Liability Act") and we are governed by the Limited Liability Company Agreement
of TransWestern Publishing Company LLC (the "LLC Agreement") executed by our
manager, TCC.
The membership interests of our members consist of a single class of common
units (the "Member Units"). Holdings is the sole initial member of our company
and currently holds 100% of the Member Units. Distributions to our company's
members are in the sole discretion of the manager. However, the senior credit
facility and the indentures relating to our notes generally limit our ability to
pay cash distributions to our members other than distributions in amounts equal
to the tax liability of the partners of Holdings resulting from the taxable
income of our company. Such tax distributions will be based on the approximate
highest combined tax rate that applies to any one of Holdings' limited partners.
TCC has the sole right to make decisions regarding the management and
affairs of our company and has all the powers and rights necessary or
appropriate to effectuate and
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carry out the purposes and business of our company, including the authority to
act for and bind our company.
The LLC Agreement provides that our company's existence shall continue
until such time as the manager determines it is appropriate to dissolve, windup
and terminate our company or, if earlier, upon the occurrence of the entry of
judicial dissolution in accordance with the Limited Liability Act or the
expulsion, bankruptcy, dissolution or withdrawal of Holdings. In the event of a
termination of our company, after satisfaction of all of our company's debts and
liabilities, all of the assets of our company would be distributed to Holdings
or if our company then has more than one member, pro rata based on the relative
percentage interests in our company of our members.
LIMITED PARTNERSHIP AGREEMENT
Holdings is a limited partnership formed under the Delaware Revised Uniform
Limited Partnership Act (as amended from time to time, the "Delaware Limited
Partnership Act"). Holdings is governed by its Third Amended and Restated
Agreement of Limited Partnership, as amended (the "Partnership Agreement"). TCC
a corporation organized under the Delaware General Corporation Law, is the
general partner of the Partnership. The Partnership Agreement governs the
relative rights and duties of its limited partners and its general partner with
respect to Holdings.
TCC controls, directs and exercises full control over all of Holdings'
activities and the Partnership Agreement vests all management powers over the
business and affairs of Holdings exclusively in TCC. Holdings' limited partners
have no right of control or management power over the business and affairs of
Holdings except in their various capacities as an officer or director of
Holdings or TCC, as the case may be. Any change affecting the rights and
liabilities of any of Holdings' limited partners requires the consent of such
limited partner.
TCC may not withdraw as Holdings' general partner without the consent of
the holders of a majority of Holdings' Class A Units, except that TCC shall be
deemed to have withdrawn as Holdings' general partner upon the effective date of
the transfer of all of its interests in Holdings.
The ownership interests in Holdings consist of Preferred Units and Common
Units. The Preferred Units are entitled to a preferred yield of 12.0% per annum,
compounded quarterly, and an amount equal to their original investment in such
Preferred Units, net of any prior repayments of Preferred Units, plus any
accrued and unpaid preferred yield (collectively, the "Preference Amount") on
any liquidation or other distribution by Holdings. The Common Units represent
the common equity of Holdings and consist of Class A Units and Class B Units.
After payment of the Preference Amount, partners holding Class A Units are
entitled to share in any remaining proceeds of any liquidation or other
distribution by Holdings pro rata according to the number of Class A Units held
by such partners. Holders of Class B Units will also be entitled to share in any
such distributions, but only if the holders of the Preferred Units and the Class
A Units have achieved an internal rate of return on their total investment of
12.0% (the "Target 1 IRR"). After the achievement of the Target 1 IRR, the
holders of Class B Units will be entitled to share in 10.0% of any distributions
made after payment of the Preference Amount. The holders of Class B Units will
be entitled to share in 15.0% of any distributions, pro rata, according to the
number of Class B Units held by such partners if the holders of the Preferred
Units and the Class A Units achieve the second target internal
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rate of return and 20.0% of any distributions if such holders achieve the third
target internal rate of return during the periods set forth below:
<TABLE>
<CAPTION>
SECOND THIRD
TIME PERIOD TARGET TARGET
----------- ------ ------
<S> <C> <C>
10/1/97 through 9/30/98.............................. 32.500% 45.000%
10/1/98 through 9/30/99.............................. 29.375 40.000
10/1/99 through 9/30/00.............................. 26.250 35.000
10/1/00 through 9/30/01.............................. 23.125 30.000
after 9/30/01........................................ 20.000 25.000
</TABLE>
Both the senior credit facility and the indentures relating to our notes
generally limit Holdings' ability to pay cash distributions to its partners
other than distributions in amounts approximately equal to the income tax
liability of the partners of Holdings resulting from the taxable income of
Holdings. Such tax distributions will be based on the approximate highest
combined tax rate that applies to any one of Holdings' partners.
The Partnership Agreement, and thus Holdings' existence, will continue in
effect until the earlier to occur of:
- December 31, 2043;
- the withdrawal of TCC if Holdings' limited partners to do not elect a
successor general partner; and
- the occurrence of an act that results in TCC ceasing to be general
partner under the Delaware Limited Partnership Act.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
SENIOR CREDIT FACILITY
In connection with the Recapitalization, we entered into the senior credit
facility, among Canadian Imperial Bank of Commerce ("CIBC"), First Union
National Bank ("First Union" and, together with CIBC and the several banks and
other financial institutions from time to time parties thereto, the "Lenders")
and us, pursuant to which the Lenders agreed to lend to us up to $125.0 million
consisting of a revolving credit facility of up to $40.0 million and term loans
in aggregate principal amount of $85.0 million.
Repayment. Commitments under the revolving credit facility will be reduced
on a quarterly basis commencing on January 1, 2000 and the Term Loans are being
amortized on a quarterly basis as of January 1, 1998 each in accordance with the
following schedule:
<TABLE>
<CAPTION>
REVOLVING
TERM LOANS CREDIT FACILITY
---------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
DATE
1998......................................... $ 2,125 $ 0
1999......................................... 2,125 0
2000......................................... 2,125 6,000
2001......................................... 2,125 6,000
2002......................................... 2,125 6,000
2003......................................... 27,625 22,000
2004......................................... 46,750 0
------- -------
Total.............................. $85,000 $40,000
======= =======
</TABLE>
Security; Guaranty. The revolving credit facility and the term loans are
secured by a first priority lien on substantially all of the properties and
assets of the company and its future subsidiaries, including a pledge of all of
the shares of the company's future subsidiaries. Future subsidiaries of the
company will be required to guarantee the revolving credit facility and the term
loans.
Interest. At the company's option, the interest rates per annum applicable
to the revolving credit facility and the term loans will be a fluctuating rate
of interest measured by reference to:
- LIBOR plus the applicable borrowing margin; or
- a rate per annum equal to the higher of the published prime rate of the
Agent Bank or the Federal Funds Rate (as such terms are defined in the
senior credit facility) as quoted by the Agent Bank plus 1/2 of 1% (the
"ABR") plus the applicable borrowing margin.
The applicable borrowing margin for the revolving credit facility will range
from 1.375% to 2.500% for LIBOR based borrowings and 0.375% to 1.500% for ABR
based borrowings. The applicable borrowing margin for the term loans will range
from 1.875% to 2.750% for LIBOR based borrowings and 0.875% to 1.750% for ABR
based borrowings.
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Fees. We have agreed to pay customary fees with respect to the senior
credit facility including up-front facility fees, agent and arrangement fees and
commitment fees on the unused portion of the revolving credit facility.
Use of Proceeds. As of December 31, 1998, approximately $68 million of the
term loans were outstanding and no amounts were outstanding under the revolving
credit facility. The revolving credit facility is available to finance certain
permitted acquisitions, working capital requirements and general corporate
purposes of the company.
Prepayments; Reductions of Commitments. The term loans are required to be
prepaid and commitments under the revolving credit facility are required to be
permanently reduced with:
(i) 100% of the net cash proceeds of asset sales or other
dispositions of property if such proceeds are not used to purchase or
acquire other assets within 180 days of the original asset sale, subject to
limited exceptions;
(ii) 50% of excess cash flow for a fiscal year if the company's total
leverage ratio determined as of the last day of such fiscal year equals or
exceeds 5.0 to 1;
(iii) 100% of excess insurance proceeds; and
(iv) 100% of the net proceeds of issuances of equity securities or
debt obligations of the company, subject to limited exceptions, and subject
to reduction to 50% of such proceeds if the company's total leverage ratio
is less than 5.0 to 1.
Such mandatory prepayments and reductions will first be applied to the permanent
reduction of the term loans and second to the permanent reduction of the
revolving credit facility. Within the term loans, prepayments with proceeds
described in clause (i) or (iii) above will be applied pro rata to the remaining
installments of the term loans and prepayments with proceeds described in clause
(ii) or (iv) above will be applied to each remaining installment of the term
loans in inverse order of maturity. The company may make voluntary prepayments
in minimum principal amounts of $50,000 or a whole multiple thereof.
Covenants. The senior credit facility contains covenants restricting the
ability of the company and its subsidiaries to, among others:
- declare dividends or redeem or repurchase capital stock;
- prepay, redeem or repurchase debt;
- incur liens and engage in sale lease-back transactions;
- make loans and investments;
- incur additional indebtedness;
- amend or otherwise alter debt and other material agreements;
- make capital expenditures;
- engage in mergers, acquisitions and asset sales;
- transact with affiliates;
- alter its line of business;
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- enter into guarantees of indebtedness; and
- make optional payments on or modify the terms of subordinated debt.
The company must also make certain customary indemnifications of the
Lenders and their agents and will also be required to comply with financial
covenants with respect to:
- a minimum interest coverage ratio;
- a minimum EBITDA, as this term is defined in the senior credit facility;
- a maximum leverage ratio; and
- a minimum fixed charge coverage ratio.
The senior credit facility also contains certain customary affirmative
covenants.
Events of Default. Events of default under the senior credit facility
include:
- the company's failure to pay principal or interest when due;
- the company's material breach of any covenant, representation or warranty
contained in the loan documents;
- customary cross-default provisions;
- events of bankruptcy, insolvency or dissolution of the company;
- the levy of certain judgements against the company;
- certain adverse events under ERISA plans of the company;
- the actual or asserted invalidity of security documents or guarantees of
the company or its subsidiaries; and
- a change of control of the company.
SERIES B 9 5/8% SENIOR SUBORDINATED NOTES
In November 1997, we issued $100,000,000 of 9 5/8% Senior Subordinated
Notes due 2007. In April 1998, we consummated an exchange offer in which we
exchanged all of such 9 5/8% Senior Subordinated Notes due 2007 for our Series B
9 5/8% Senior Subordinated Notes due 2007, which had been registered pursuant to
the Securities Act.
The principal terms of the Series B notes are the same as those of the
Series C and Series D notes, including the interest rate, the interest payment
dates and the maturity date. The indenture relating to the Series B notes
contains covenants which are substantially the same as those contained in the
indenture relating to the Series C and Series D notes other than certain
transfer restrictions applicable to the Series C notes. In connection with the
exchange offer for the Series D notes we are conducting for the Series C notes,
we are also offering to exchange all of the Series B notes in return for Series
D notes. It is likely that all of the Series C notes and all of our currently
outstanding Series B notes will be tendered for exchange in the exchange offer;
however, we cannot assure you that a significant amount of the Series B notes or
the Series C notes will be so tendered. If all of the Series B notes and Series
C notes are exchanged for Series D notes, $140,000,000 aggregate principal
amount of the Series D notes will be outstanding following consummation of the
exchange offer, and the Series D notes will be
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deemed to be a single series of notes outstanding under the indenture relating
to the Series C notes. This would dilute your voting interest.
We are offering to accept both our Series C notes and our Series B notes in
exchange for the Series D notes offered hereby in order to increase the
liquidity of both series. However, we cannot assure you that all the Series B or
Series C noteholders will participate in the exchange, in which case the Series
B notes not exchanged for the Series D notes will continue as a separate series
of notes under a separate indenture.
DISCOUNT NOTES
Also in November 1997, Holdings and TWP Capital Corp., a wholly owned
subsidiary of Holdings, issued $32.5 million initial aggregate principal amount,
$57.9 million principal amount at maturity, of their 11 7/8% Senior Discount
Notes due 2008 (the "Discount Notes").
Interest on the Discount Notes will not accrue or be payable prior to
November 15, 2002. Thereafter, interest on the Discount Notes will accrue on the
principal amount at maturity at a rate of 11 7/8% per annum, and will be payable
semiannually on each May 15 and November 15, commencing May 15, 2003. Interest
will be payable at the option of Holdings at a rate of 13 3/8% per annum by the
issuance of additional Discount Notes, valued at 100% of the face amount
thereof, in lieu of cash interest.
The Discount Note indenture contains covenants for the benefit of the
holders of the Discount Notes that, among other things, restrict the ability of
Holdings and Capital and any of their restricted subsidiaries, including the
company, to:
- incur additional indebtedness;
- pay dividends and make distributions;
- issue stock of subsidiaries;
- make certain investments;
- repurchase stock;
- enter into transactions with affiliates;
- enter into sale lease-back transactions; and
- merge or consolidate the company.
Holdings and Capital are also limited in their ability to create liens and
transfer or sell assets. These covenants are subject to a number of important
exceptions, including the allowance of permitted tax distributions as a result
of Holdings' status as a limited partnership.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
We originally sold our Series C notes on December 2, 1998 to First Union
Capital Markets, CIBC Oppenheimer Corp. and BancBoston Robertson Stephens Inc.
(the "Initial Purchasers") pursuant to a Securities Purchase Agreement dated
December 2, 1998. The Initial Purchasers subsequently resold the notes to
qualified institutional buyers in reliance on Rule 144A under the Securities
Act. As a condition of the purchase agreement, we entered into an Exchange Offer
Registration Rights Agreement (the "Exchange Offer Registration Rights
Agreement") with the Initial Purchasers pursuant to which we agreed, for the
benefit of the holders of the Series C notes, at our cost, to:
- use our reasonable best efforts to file an exchange offer registration
statement (the "Exchange Offer Registration Statement") within 90 days
after the date of the original issuance of the Series C notes with the
SEC with respect to the exchange offer for the Series D notes; and
- use our reasonable best efforts to cause the Exchange Offer Registration
Statement to be declared effective under the Securities Act within 180
days after the date of the original issuance of the Series C notes.
Upon the Exchange Offer Registration Statement being declared effective, we
will offer the Series D notes in exchange for surrender of the Series B and C
notes. We will keep the exchange offer open for not less than 30 days, or longer
if required by applicable law, after the date on which notice of the exchange
offer is mailed to the holders of the Series B and C notes. For each Series B
and C note surrendered to us pursuant to the exchange offer, the holder of such
Series B or C note will receive a Series D note having a principal amount equal
to that of the surrendered Series B or C note.
We issued our Series B notes in March 1998 in exchange for our Series A
notes which we had privately placed in November 1997. The Series B notes are
identical in all material respects to the Series D notes. We are including the
Series B notes in the exchange offer in order to increase the liquidity of both
series of our outstanding notes.
Under existing interpretations of the staff of the SEC contained in several
no-action letters to third parties, we believe that the Series D notes will in
general be freely tradeable after the exchange offer without further
registration under the Securities Act. However, any purchaser of Series B or C
notes who is an "affiliate" of our company or who intends to participate in the
exchange offer for the purpose of distributing the Series D notes:
- will not be able to rely on the interpretation of the staff of the SEC;
- will not be able to tender its Series B or C notes in the exchange offer;
and
- must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any sale or transfer of the Series
B or C notes, unless such sale or transfer is made pursuant to an
exemption from such requirements.
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As contemplated by these no-action letters and the Exchange Offer
Registration Rights Agreement, each holder accepting the exchange offer is
required to represent to us in the Letter of Transmittal that:
- the Series D notes are to be acquired by the holder or the person
receiving such Series D notes, whether or not such person is the holder,
in the ordinary course of business;
- the holder or any such other person, other than a broker-dealer referred
to in the next sentence, is not engaging and does not intend to engage,
in distribution of the Series D notes;
- the holder or any such other person has no arrangement or understanding
with any person to participate in the distribution of the Series D notes;
- neither the holder nor any such other person is an "affiliate" of our
company within the meaning of Rule 405 under the Securities Act; and
- the holder or any such other person acknowledges that if such holder or
any other person participates in the exchange offer for the purpose of
distributing the Series D notes it must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with
any resale of the Series D notes and cannot rely on those no-action
letters.
As indicated above, each broker-dealer (a "Participating Broker-Dealer") that
receives Series D notes for its own account in exchange for Series B or C notes
must acknowledge that it:
- acquired the Series D notes for its own account as a result of
market-making activities or other trading activities;
- has not entered into any arrangement or understanding with us or any
"affiliate" of our company (within the meaning of Rule 405 under the
Securities Act) to distribute the Series D notes to be received in the
exchange offer; and
- will deliver a prospectus meeting the requirements of the Securities Act
in connection with any resale of such Series D notes.
For a description of the procedures for resales by Participating Broker-Dealers,
see "Plan of Distribution."
In the event that changes in the law or the applicable interpretations of
the staff of the SEC do not permit us to effect such an exchange offer, or if
for any other reason the exchange offer is not consummated within 180 days of
the date of the original issuance of the Series C notes, we will:
- file a shelf registration statement (the "Shelf Registration Statement")
covering the resale of the Series C notes;
- use our reasonable best efforts to cause the Shelf Registration Statement
to be declared effective under the Securities Act; and
- use our reasonable best efforts to keep effective the Shelf Registration
Statement for two years after its effective date.
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We will, in the event of the filing of the Shelf Registration Statement, provide
to each applicable holder of the Series C notes copies of the prospectus, which
is a part of the Shelf Registration Statement, notify each such holder when the
Shelf Registration Statement has become effective, and take certain other
actions as are required to permit unrestricted resale of the Series C notes. A
holder of the Series C notes that sells such Series C notes pursuant to the
Shelf Registration Statement generally will be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales, and will be bound by the
provisions of the Exchange Offer Registration Rights Agreement which are
applicable to such a holder, including certain indemnification obligations. In
addition, each holder of the Series C notes will be required to deliver
information to be used in connection with the Shelf Registration Statement and
to provide comments on the Shelf Registration Statement within the time periods
set forth in the Exchange Offer Registration Rights Agreement in order to have
their Series C notes included in the Shelf Registration Statement and to benefit
from the provisions set forth in the following paragraph.
The Exchange Offer Registration Rights Agreement provides that:
- we will use our reasonable best efforts to file an Exchange Offer
Registration Statement with the SEC on or prior to 90 days after the date
of the original issue of the Series C notes;
- we will use our reasonable best efforts to have the Exchange Offer
Registration Statement declared effective by the SEC on or prior to 180
days after the date of the original issue of the Series C notes;
- unless the exchange offer would not be permitted by applicable law or SEC
policy, we will commence the exchange offer and use our reasonable best
efforts to issue on or prior to 45 days after the exchange offer
effectiveness date, Series D notes in exchange for all Series C notes
tendered prior thereto in the exchange offer; and
- if obligated to file the Shelf Registration Statement, we will use our
reasonable best efforts to file the Shelf Registration Statement with the
SEC in a timely fashion.
If:
(a) we fail to file any of the registration statements required by the
Exchange Offer Registration Rights Agreement on or before the date
specified for such filing;
(b) any of such registration statements is not declared effective by the
SEC on or prior to the date specified for such effectiveness;
(c) we fail to consummate the exchange offer within 180 days of the date of
the original issuance of the Series C notes; or
(d) the Shelf Registration Statement or the Exchange Offer Registration
Statement is declared effective but thereafter ceases to be effective
or usable in connection with resales of Transfer Restricted Securities
(as such term is defined in the Exchange Offer Registration Rights
Agreement) during the period specified in the Exchange Offer
Registration Rights Agreement (each such event referred to in clauses
(a) through (d) above a "registration default"),
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the sole remedy available to holders of the Series C notes will be the immediate
assessment of additional interest as follows: the per annum interest rate on the
Series C notes will increase by .50% for the first 90-day period following a
registration default and the per annum interest rate will increase by an
additional .25% for each subsequent 90-day period during which the registration
default remains uncured, up to a maximum additional interest rate of 2% per
annum in excess of 9 5/8% per annum.
All additional interest will be payable to holders of the Series C notes in
cash on each May 15 and November 15, commencing with the first such date
occurring after any such additional interest commences to accrue, until such
registration default is cured. After the date on which such registration default
is cured, the interest rate on the Series C notes will revert to 9 5/8% per
annum. Holders of Series B notes have no right to receive such additional
interest, if any.
Holders of Series B and C notes will be required to make certain
representations to us in order to participate in the exchange offer and holders
of Series C notes will be required to deliver information to be used in
connection with the Shelf Registration Statement and to provide comments on the
Shelf Registration Statement within the time periods set forth in the Exchange
Offer Registration Rights Agreement in order to have their Series C notes
included in the Shelf Registration Statement and benefit from the provisions
regarding additional interest set forth above. Such required representations and
information is described in the Exchange Offer Registration Rights Agreement.
The summary herein of certain provisions of the Exchange Offer Registration
Rights Agreement is subject to, and is qualified in its entirety by, all the
provisions of the Exchange Offer Registration Rights Agreement, a copy of which
is filed as an exhibit to the Exchange Offer Registration Statement of which
this prospectus is a part.
Following the consummation of the exchange offer, holders of the Series C
notes who were eligible to participate in the exchange offer but who did not
tender their Series C notes will not have any further registration rights and
such Series C notes will continue to be subject to certain restrictions on
transfer. Accordingly, the liquidity of the market for such Series C notes could
be adversely affected.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this prospectus
and in the Letter of Transmittal, we will accept any and all Series B and C
notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time,
on , 1999. We will issue $1,000 principal amount of Series
D notes in exchange for each $1,000 principal amount of outstanding Series B and
C notes accepted in the exchange offer. Holders may tender some or all of their
Series B and C notes pursuant to the exchange offer. However, Series B and C
notes may be tendered only in integral multiples of $1,000.
The form and terms of the Series D notes are substantially the same as the
form and terms of the Series B and C notes except that:
- the Series D notes bear a Series D designation and a different CUSIP
number from the Series B and C notes;
- the Series D notes have been registered under the federal securities laws
and hence will not bear legends restricting the transfer thereof as the
Series C notes do; and
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- the holders of the Series D notes will generally not be entitled to
certain rights under the Exchange Offer Registration Rights Agreement,
which rights generally will be satisfied when the exchange offer is
consummated. The Series D notes will evidence the same debt as the
tendered Series B and C notes and will be entitled to the benefits of the
indenture under which the Series C notes were issued. As of the date of
this prospectus, $140,000,000 aggregate principal amount of Series B and
C notes were outstanding.
Holders of Series B and C notes do not have any appraisal or dissenters'
rights under the General Corporation Law of Delaware, the Delaware Limited
Liability Company Act or the indentures relating to such notes in connection
with the exchange offer. We intend to conduct the exchange offer in accordance
with the applicable requirements of the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder.
We shall be deemed to have accepted validly tendered Series B and C notes
when, as and if we have given oral or written notice thereof, such notice if
given orally, to be confirmed in writing, to the exchange agent. The exchange
agent will act as agent for the tendering holders for the purpose of receiving
the Series D notes from our company.
If any tendered Series B or C notes are not accepted for exchange because
of an invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted Series B or C notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the expiration date.
Holders who tender Series B and C notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of Series
B or C notes pursuant to the exchange offer. We will pay all charges and
expenses, other than transfer taxes in certain circumstances, in connection with
the exchange offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The expiration date is 5:00 p.m., New York City time, on
, 1999, unless we extend the exchange offer, in which case
the expiration date will be the latest date and time to which the exchange offer
is extended.
In order to extend the exchange offer, we will notify the exchange agent of
any extension by oral or written notice, such notice if given orally, to be
confirmed in writing, and will issue a press release or other public
announcement thereof, each prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled expiration date.
We reserve the right:
- to delay accepting any Series B and C notes, to extend the exchange offer
or to terminate the exchange offer if any of the conditions set forth
below under "-- Conditions" shall not have been satisfied, by giving oral
or written notice, such notice if given orally, to be confirmed in
writing, of such delay, extension or termination to the exchange agent,
or
- to amend the terms of the exchange offer in any manner.
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Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof to the
registered holders.
INTEREST ON THE SERIES D NOTES
The Series D notes will bear interest from their date of issuance. Holders
of Series B and C notes that are accepted for exchange will receive, in cash,
accrued interest thereon to, but not including, the date of issuance of the
Series D notes. Such interest will be paid with the first interest payment on
the Series D notes on May 15, 1999 to persons who are registered holders of the
Series D notes on May 1, 1999. Interest on the Series B and C notes accepted for
exchange will cease to accrue upon issuance of the Series D notes.
Interest on the Series D notes is payable semi-annually on each May 15 and
November 15, commencing on May 15, 1999.
PROCEDURES FOR TENDERING
Only a registered holder of Series B or C notes may tender such notes in
the exchange offer. To tender in the exchange offer, a holder must complete,
sign and date the Letter of Transmittal, or a facsimile thereof, have the
signatures thereon guaranteed if required by the Letter of Transmittal and mail
or otherwise deliver such Letter of Transmittal or such facsimile, together with
the Series B or C notes and any other required documents, or cause The
Depository Trust Company to transmit an agent's message in connection with a
book-entry transfer, to the exchange agent prior to 5:00 p.m., New York City
time, on the expiration date. To be tendered effectively, the Series B or C
notes, the Letter of Transmittal or agent's message and other required documents
must be completed and received by the exchange agent at the address set forth
below under "-- Exchange Agent" prior to 5:00 p.m., New York City time, on the
expiration date. Delivery of the Series B or C notes may be made by book entry
transfer in accordance with the procedures described below. Confirmation of such
book-entry transfer must be received by the exchange agent prior to the
expiration date.
The term "agent's message" means a message, transmitted by a book-entry
transfer facility to, and received by, the exchange agent forming a part of a
confirmation of a book-entry, which states that such book-entry transfer
facility has received an express acknowledgment from the participant in such
book-entry transfer facility tendering the Series B or C notes that such
participant has received and agrees:
- to participate in the Automated Tender Option Program ("ATOP");
- to be bound by the terms of the Letter of Transmittal; and
- that we may enforce such agreement against such participant.
By executing the Letter of Transmittal or agent's message, each holder will
make to us the representations set forth above in the fourth paragraph under the
heading "-- Purpose and Effect of the Exchange Offer."
The tender by a holder and the acceptance thereof by us will constitute
agreement between such holder and the company in accordance with the terms and
subject to the conditions set forth herein and in the Letter of Transmittal or
agent's message.
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THE METHOD OF DELIVERY OF SERIES B AND C NOTES AND THE LETTER OF
TRANSMITTAL OR AGENT'S MESSAGE AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE
AGENT IS AT THE ELECTION AND SOLE RISK OF THE HOLDER. AS AN ALTERNATIVE TO
DELIVERY BY MAIL, HOLDERS MAY WISH TO CONSIDER OVERNIGHT OR HAND DELIVERY
SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO
THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR
SERIES B OR C NOTES SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR
RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO
EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner whose Series B or C notes are registered in the name
of a broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See "Instructions
to Registered Holder and/or Book-Entry Transfer Facility Participant from
Beneficial Owner" included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an eligible institution (as defined below)
unless the notes tendered pursuant thereto are tendered by a registered holder
who has not completed the box entitled "Special Registration Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal, or for the account
of an eligible institution. In the event that signatures on a Letter of
Transmittal or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantee must be by a member firm of the Medallion System (an
"eligible institution").
If the Letter of Transmittal is signed by a person other than the
registered holder of any Series B or C notes listed therein, such notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such notes with
the signature thereon guaranteed by an eligible institution.
If the Letter of Transmittal or any Series B or C notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and evidence to our
satisfaction of their authority to so act must be submitted with the Letter of
Transmittal.
We understand that the exchange agent will make a request promptly after
the date of this prospectus to establish accounts with respect to the Series B
and C notes at the book-entry transfer facility, The Depository Trust Company
(the "book-entry transfer facility"), for the purpose of facilitating the
exchange offer, and subject to the establishment thereof, any financial
institution that is a participant in the book-entry transfer facility's system
may make book-entry delivery of Series B or C notes by causing such book-entry
transfer facility to transfer such Series B or C notes into the exchange agent's
account with respect to the Series B and C notes in accordance with the
book-entry transfer facility's procedures for such transfer. Although delivery
of the Series B and C notes may be effected through book-entry transfer into the
exchange agent's account at the book-entry transfer facility, unless an agent's
message is transmitted to and received by the exchange agent in compliance with
ATOP on or prior to the expiration date, or, if the guaranteed delivery
procedures described below are complied with, within the time period provided
under such procedures, the tender of such notes will not be valid. Delivery of
documents to the book-entry transfer facility does not constitute delivery to
the exchange agent.
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All questions as to the validity, form, eligibility, including time of
receipt, acceptance of tendered Series B and C notes and withdrawal of tendered
Series B and C notes will be determined by us, in our sole discretion, which
determination will be final and binding. We reserve the absolute right to reject
any and all Series B and C notes not properly tendered or any Series B or C
notes our acceptance of which would, in the opinion of our counsel, be unlawful.
We also reserve the right to waive any defects, irregularities or conditions of
tender as to particular Series B or C notes. We may not waive any condition to
the exchange offer unless such condition is legally waiveable. In the event such
a waiver by us gives rise to the legal requirement to do so, we will hold the
exchange offer open for at least five business days thereafter. Our
interpretation of the terms and conditions of the exchange offer, including the
instructions in the Letter of Transmittal, will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Series B and C notes must be cured within such time as we shall determine.
Although we intend to notify holders of defects or irregularities with respect
to tenders of Series B and C notes, neither our company, the exchange agent nor
any other person shall incur any liability for failure to give such
notification. Tender of Series B and C notes will not be deemed to have been
made until such defects or irregularities have been cured or waived. Any Series
B or C notes received by the exchange agent that are not properly tendered and
as to which the defects or irregularities have not been cured or waived will be
returned by the exchange agent to the tendering holders, unless otherwise
provided in the Letter of Transmittal, as soon as practicable following the
expiration date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Series B or C notes and whose Series B or
C notes are not immediately available, who cannot deliver their Series B or C
notes, the Letter of Transmittal or any other required documents to the exchange
agent, or who cannot complete the procedures for book-entry transfer, prior to
the expiration date, may effect a tender if:
(a) the tender is made through an eligible institution;
(b) prior to the expiration date, the exchange agent receives by facsimile
transmission, mail or hand delivery from such eligible institution a
properly completed and duly executed Notice of Guaranteed Delivery,
setting forth the name and address of the holder, the certificate
number(s) of such Series B or C notes and the principal amount of
Series B or C notes tendered, stating that the tender is being made
thereby and guaranteeing that, within three New York Stock Exchange
trading days after the expiration date, the Letter of Transmittal, or
facsimile thereof, or, in the case of a book-entry transfer, an agent's
message, together with the certificate(s) representing the Series B or
C notes, or a confirmation of book-entry transfer of such notes into
the exchange agent's account at the Book-Entry Transfer Facility, and
any other documents required by the Letter of Transmittal will be
deposited by the eligible institution with the exchange agent; and
(c) the certificate(s) representing all tendered Series B or C notes in
proper form for transfer, or a confirmation of a book-entry transfer of
such Series B or C notes into the exchange agent's account at the book
entry transfer facility, together with a Letter of Transmittal, or
facsimile thereof, properly completed and duly executed, with any
required signature guarantees, or, in the case of a book-entry
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transfer, an agent's message, are received by the exchange agent within
three New York Stock Exchange trading days after the expiration date of
the exchange offer.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Series B and C notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the expiration
date of the exchange offer.
To withdraw a tender of Series B or C notes in the exchange offer, a
telegram, telex, letter or facsimile transmission notice of withdrawal must be
received by the exchange agent at its address set forth herein prior to 5:00
p.m., New York City time, on the expiration date of the exchange offer. Any such
notice of withdrawal must:
- specify the name of the person having deposited notes to be withdrawn
(the "Depositor");
- identify the notes to be withdrawn, including the certificate number(s)
and principal amount of such notes, or, in the case of Series B or C
notes transferred by book-entry transfer, the name and number of the
account at the book entry transfer facility to be credited;
- be signed by the holder in the same manner as the original signature on
the Letter of Transmittal by which such notes were tendered, including
any required signature guarantees, or be accompanied by documents of
transfer sufficient to have the trustee with respect to the Series B and
C notes register the transfer of such notes into the name of the person
withdrawing the tender; and
- specify the name in which any such Series B or C notes are to be
registered, if different from that of the Depositor.
All questions as to the validity, form and eligibility, including time of
receipt, of such notices will be determined by us and shall be final and binding
on all parties. Any Series B and C notes so withdrawn will be deemed not to have
been validly tendered for purposes of the exchange offer and no Series D notes
will be issued with respect thereto unless the Series B and C notes so withdrawn
are validly retendered. Any Series B and C notes which have been tendered but
which are not accepted for exchange will be returned to the holder thereof
without cost to such holder as soon as practicable after withdrawal, rejection
of tender or termination of the exchange offer. Properly withdrawn Series B and
C notes may be retendered by following one of the procedures described above
under "-- Procedures for Tendering" at any time prior to the expiration date.
CONDITIONS
Notwithstanding any other term of the exchange offer, we shall not be
required to accept for exchange, or exchange notes for, any Series B or C notes,
and may terminate or amend the exchange offer as provided herein before the
acceptance of such Series B or C notes, if:
- any action or proceeding is instituted or threatened in any court or by
or before any governmental agency with respect to the exchange offer
which, in our sole judgment, might materially impair our ability to
proceed with the exchange offer, or
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any material adverse development has occurred in any existing action or
proceeding with respect to the company or any of its subsidiaries; or
- any law, statute, rule, regulation or interpretation by the staff of the
SEC is proposed, adopted or enacted, which, in our sole judgment, might
materially impair our ability to proceed with the exchange offer or
materially impair the contemplated benefits of the exchange offer; or
- any governmental approval has not been obtained, which approval we shall,
in our sole discretion, deem necessary for the consummation of the
exchange offer as contemplated hereby.
If we determine, in our sole discretion, that any of the conditions are not
satisfied, we may:
- refuse to accept any Series B and C notes and return all tendered Series
B and C notes to the tendering holders;
- extend the exchange offer and retain all Series B and C notes tendered
prior to the expiration of the exchange offer, subject, however, to the
rights of holders to withdraw such Series B and C notes as described in
"-- Withdrawal of Tenders" above;
- waive such unsatisfied conditions with respect to the exchange offer and
accept all properly tendered Series B and C notes which have not been
withdrawn.
EXCHANGE AGENT
Wilmington Trust Company has been appointed as exchange agent for the
exchange offer. Questions and requests for assistance, requests for additional
copies of this prospectus or of the Letter of Transmittal and requests for
Notice of Guaranteed Delivery should be directed to the exchange agent addressed
as follows:
<TABLE>
<S> <C>
By Registered or Certified Mail By Hand:
or Overnight Courier: Wilmington Trust Company
Wilmington Trust Company c/o Harris Trust Co. of New York, as Agent
Rodney Square North 88 Pine Street, 19th Floor
1100 North Market Street Wall Street Plaza
Wilmington, Delaware 19890 New York, New York 10005
Attention: Corporate Trust Operations Attention: Corporate Trust Operations
</TABLE>
By Facsimile.
(For Eligible Institutions Only)
(302) 651-1079
Confirm by Telephone:
(302) 651-8869
Kristin Long
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
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FEES AND EXPENSES
The expenses of soliciting tenders will be borne by us. The principal
solicitation is being made by mail however, additional solicitation may be made
by telegraph, telecopy, telephone or in person by officers and regular employees
of the company and its affiliates.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to brokers, dealers, or others soliciting
acceptances of the exchange offer. We, however, will pay the exchange agent
reasonable and customary fees for its services and will reimburse it for its
reasonable out-of-pocket expenses in connection therewith.
We will pay the cash expenses to be incurred in connection with the
exchange offer. Such expenses include fees and expenses of the exchange agent
and trustee, accounting and legal fees and printing costs, among others.
ACCOUNTING TREATMENT
The Series D notes will be recorded at the same carrying value as the
Series B and C notes, which is face value, as reflected in the company's
accounting records on the date of exchange. Accordingly, we will recognize no
gain or loss for accounting purposes. The expenses of the exchange offer will be
expensed over the term of the Series D notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Series C notes that are not exchanged for Series D notes pursuant to
the exchange offer will remain restricted securities. Accordingly, such Series C
notes may be resold only:
- to the company, upon redemption thereof or otherwise;
- so long as the Series C notes are eligible for resale pursuant to Rule
144A under the Securities Act, to a person inside the United States whom
the seller reasonably believes is a qualified institutional buyer within
the meaning of Rule 144A in a transaction meeting the requirements of
Rule 144A, in accordance with Rule 144 under the Securities Act, or
pursuant to another exemption from the registration requirements of the
Securities Act, and based upon an opinion of counsel reasonably
acceptable to the company;
- outside the United States to a foreign person in a transaction meeting
the requirements of Rule 904 under the Securities Act; or
- pursuant to an effective registration statement under the Securities Act,
in each case in accordance with any applicable securities laws of any
state of the United States.
RESALE OF THE SERIES D NOTES
With respect to resales of Series D notes, based on interpretations by the
staff of the SEC set forth in no-action letters issued to third parties, we
believe that a holder or other person who receives Series D notes, whether or
not such person is the holder, other than a person that is an "affiliate" of the
company within the meaning of Rule 405 under the Securities Act, in exchange for
Series B or C notes in the ordinary course of business and
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who is not participating, does not intend to participate, and has no arrangement
or understanding with any person to participate, in the distribution of the
Series D notes, will be allowed to resell the Series D notes to the public
without further registration under the Securities Act and without delivering to
the purchasers of the Series D notes a prospectus that satisfies the
requirements of Section 10 of the Securities Act. However, if any holder
acquires Series D notes in the exchange offer for the purpose of distributing or
participating in a distribution of the Series D notes, such holder cannot rely
on the position of the staff of the SEC enunciated in such no-action letters or
any similar interpretive letters, and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction, unless an exemption from registration is otherwise
available. Further, each Participating Broker-Dealer that receives Series D
notes for its own account in exchange for Series B or C notes, where such Series
B or C notes were acquired by such Participating Broker-Dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such Series D notes.
As contemplated by these no-action letters and the Exchange Offer
Registration Rights Agreement, each holder accepting the exchange offer is
required to represent to the company in the Letter of Transmittal that:
- the Series D notes are to be acquired by the holder or the person
receiving such Series D notes, whether or not such person is the holder,
in the ordinary course of business;
- the holder or any such other person, other than a broker-dealer referred
to in the next sentence, is not engaging and does not intend to engage,
in the distribution of the Series D notes;
- the holder or any such other person has no arrangement or understanding
with any person to participate in the distribution of the Series D notes;
- neither the holder nor any such other person is an "affiliate" of the
company within the meaning of Rule 405 under the Securities Act; and
- the holder or any such other person acknowledges that if such holder or
other person participates in the exchange offer for the purpose of
distributing the Series D notes it must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with
any resale of the Series D notes and cannot rely on those no-action
letters.
As indicated above, each Participating Broker-Dealer that receives Series D
notes for its own account in exchange for Series B or C notes must acknowledge
that it will deliver a prospectus in connection with any resale of such Series D
notes. For a description of the procedures for such resales by Participating
Broker-Dealers, see "Plan of Distribution."
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DESCRIPTION OF THE NOTES
We issued the Series C notes and will issue the Series D notes under an
Indenture, dated as of December 2, 1998 (the "Indenture"), among our company and
TWP Capital Corp. II (the "Issuers") and Target Directories of Michigan, Inc.,
as Guarantor, and Wilmington Trust Company, as trustee (the "Trustee"). The
Series B notes were issued under an indenture, dated as of November 12, 1997,
among our company, TWP Capital Corp II and the Trustee. The form and terms of
the Series D notes are the same as the form and terms of the Series B and C
notes, which they replace, except that:
- the Series B and D notes have been registered under the Securities Act
and, therefore, will not bear legends restricting the transfer thereof as
the Series C notes do; and
- the holders of Series B and D notes will not be entitled to certain
rights under the Exchange Offer Registration Rights Agreement, including
the provisions providing for an increase in the interest rate on the
Series C notes in certain circumstances relating to the timing of the
exchange offer, which rights will terminate when the exchange offer is
consummated.
You can find definitions of certain capitalized terms used in the following
summary under "-- Certain Definitions" and throughout this description.
Capitalized terms that are used but not otherwise defined herein have the
meanings assigned to them in the Indenture and such definitions are incorporated
herein by reference. For purposes of this "Description of the Notes," the term
"Company" means TransWestern Publishing Company LLC and the term "Notes" means
the Series C and D notes collectively.
The following is a summary of the material terms and provisions of the
Notes. It does not include all of the provisions of the Indenture. We urge you
to read the Indenture because it defines your rights. The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"), as in effect on the date of the Indenture. A copy of the Indenture may be
obtained from us by any holder or prospective investor upon request.
GENERAL
The Notes will be our general unsecured obligations, ranking subordinate in
right of payment to all our Senior Indebtedness. The Notes will be our joint and
several obligations.
The Notes will be unconditionally guaranteed, on a senior subordinated
basis, as to payment of principal, premium, if any, and interest, jointly and
severally, by each Restricted Subsidiary which guarantees payment of the Notes
pursuant to the covenant described under "Limitation on Creation of
Subsidiaries" (the "Guarantors").
MATURITY, INTEREST AND PRINCIPAL
The Notes will be limited in aggregate principal amount to $140.0 million,
provided that $100.0 million of Notes reserved for issuance under the Indenture
will be available only in connection with the exchange of Series B Notes for
Series D notes pursuant to the exchange offer. The Notes will mature on November
15, 2007. The Notes will bear interest at a rate of 9 5/8% per annum, which will
be payable semiannually in arrears on
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each May 15 and November 15, commencing May 15, 1999. We will make interest
payments to the persons who are holders of record of the Notes at the close of
business on the immediately preceding May 1 and November 1, respectively.
Interest on the Notes will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from November 15, 1998. The
interest rate on the Notes is subject to increase, and such Additional Interest
will be payable on the payment dates set forth above, in certain circumstances,
if the Notes, or other securities substantially similar to the Notes, are not
registered with the SEC within the time periods set forth in the Exchange Offer
Registration Rights Agreement.
REDEMPTION
Optional Redemption. Except as described below, the Notes are not
redeemable before November 15, 2002. On one or more occasions thereafter, the
Issuers may redeem the Notes, in whole or in part, at the following redemption
prices, which are expressed as a percentage of principal amount, if redeemed
during the twelve-month period beginning on November 15 of each year listed
below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002........................................................ 104.813%
2003........................................................ 103.208%
2004........................................................ 101.604%
2005 and thereafter......................................... 100.000%
</TABLE>
In addition, the Issuers must pay all accrued and unpaid interest on the
Notes redeemed.
Optional Redemption upon Equity Offerings. On one or more occasions prior
to November 15, 2000, the Issuers may use the Net Proceeds of one or more Public
Equity Offerings to redeem up to 35% of the original principal amount of the
Notes at a redemption price of 109.625% of the principal amount thereof plus
accrued and unpaid interest thereon; provided that:
(a) at least 65% of the original principal amount of the Notes remains
outstanding immediately after the occurrence of any such redemption;
and
(b) the Issuers make such redemption not more than 90 days following the
closing of any such Public Equity Offering.
SELECTION AND NOTICE OF REDEMPTION
In the event that the Issuers choose to redeem less than all of the Notes,
selection of the Notes for redemption will be made by the Trustee either:
(a) in compliance with the requirements of the principal national
securities exchange, if any, on which such Notes are listed; or
(b) on a pro rata basis or by lot or by such method as the Trustee shall
deem fair and appropriate.
If a partial redemption is made with the proceeds of a Public Equity
Offering, the Trustee will select the Notes or portion thereof only on a pro
rata basis or on as nearly a pro rata basis as practicable, unless such method
is prohibited. Notice of redemption will
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be mailed by first-class mail at least 30 but not more than 60 days before the
redemption date to each holder at its registered address. On and after any
redemption date, interest will cease to accrue on the Notes or portions thereof
called for redemption unless the Issuers fail to redeem any such Note.
SUBORDINATION
The indebtedness represented by the Notes will be subordinate in right of
payment to the prior payment in full in cash of all existing and future Senior
Indebtedness. As of December 31, 1998, the principal amount of outstanding
Senior Indebtedness, on a consolidated basis, would have been $67.9 million. In
addition, the Issuers would have had $40 million of undrawn commitments
available under the Senior Credit Facility.
The holders of Senior Indebtedness of the Issuers will be entitled to
receive payment in full in cash of all amounts due on or in respect of all
Senior Indebtedness of the Issuers before the holders of the Notes will be
entitled to receive any payment with respect to the Notes in the event of any
distribution to creditors of the Issuers:
(a) in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to the Issuers or to their creditors, as such, or
to their assets;
(b) in a liquidation or dissolution or other winding-up of the Issuers;
(c) in an assignment for the benefit of creditors; or
(d) in any marshaling of assets or liabilities of the Issuers (all of the
foregoing referred to herein individually as a "Bankruptcy Proceeding"
and collectively as "Bankruptcy Proceedings").
As a result of such subordination, in the event of any Bankruptcy
Proceeding, holders of the Notes may recover less ratably than creditors of the
Issuers who are holders of Senior Indebtedness.
No payment may be made on the Notes following delivery by the
representative of the holders of Designated Senior Indebtedness under the Senior
Credit Facility, if it exists, or if it does not, the holders of other
Designated Senior Indebtedness (in either such case, the "Representative") to
the Trustee of written notice of:
(i) a Payment Default on Designated Senior Indebtedness; or
(ii) a Non-Payment Event of Default on Designated Senior Indebtedness
and the acceleration of the maturity of Designated Senior
Indebtedness.
Any such prohibition shall continue until the Payment Default is cured, waived
in writing or ceases to exist or such acceleration has been rescinded or
otherwise cured.
Upon a Non-Payment Event of Default on Designated Senior Indebtedness, no
payment may be made on the Notes for a period (a "Payment Blockage Period")
beginning on the date the Trustee receives written notice from the
Representative of the
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Non-Payment Event of Default until (subject to any blockage under the preceding
paragraph) the earliest of:
(x) more than 179 days have elapsed since the Trustee received the notice;
(y) the Non-Payment Event of Default has been cured or waived in writing or
ceased to exist or such Designated Senior Indebtedness has been paid in
full; or
(z) the Payment Blockage Period has been terminated by written notice to
the Issuers or the Trustee from the Representative.
No Payment Blockage Period can extend beyond 179 days from the date the Trustee
receives the notice (the "Initial Blockage Period"). Any number of additional
Payment Blockage Periods may be commenced during the Initial Blockage Period;
provided, that no additional Payment Blockage Period can extend beyond the
Initial Blockage Period. After the Initial Blockage Period, no Payment Blockage
Period may be commenced until at least 180 days after the Initial Blockage
Period. No event of default with respect to Designated Senior Indebtedness,
other than a Payment Default, which existed or was continuing on the first day
of any Payment Blockage Period can serve as the basis for a second Payment
Blockage Period, unless such event of default has been cured or waived for at
least 90 days.
Each Guarantee will, to the extent set forth in the Indenture, be
subordinate in right of payment to the prior indefeasible payment and
satisfaction in full in cash of all Senior Indebtedness of the respective
Guarantor, including obligations of such Guarantor with respect to the Senior
Credit Facility, including any guarantee thereof, and will be subject to the
rights of holders of Designated Senior Indebtedness of such Guarantor to
initiate blockage periods, upon terms substantially comparable to the
subordination of the Notes to all Senior Indebtedness of the Issuers.
If the Issuers or any Guarantor fails to make any payment on the Notes or
any Guarantee when due or within any applicable grace period, whether or not on
account of payment blockage provisions, such failure would constitute an Event
of Default under the Indenture. See "Events of Default."
By accepting these Notes, each holder agrees to be bound by such provisions
and authorizes and expressly directs the Trustee, on his behalf, to take such
action as may be necessary or appropriate to effectuate the subordination
provided for in the Indenture and appoints the Trustee his attorney-in-fact for
such purpose.
CERTAIN COVENANTS
The Indenture will contain, among others, the following covenants. Except
as otherwise specified, all of the covenants described below will appear in the
Indenture.
Limitation on Additional Indebtedness
The Issuers will not, and will not permit any Restricted Subsidiary of the
Issuers to, directly or indirectly, incur (as defined) any Indebtedness,
including Acquired Indebtedness, other than Permitted Indebtedness.
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Notwithstanding the foregoing, the Issuers and their Restricted
Subsidiaries may incur Indebtedness, including Acquired Indebtedness, if:
(a) after giving effect to the incurrence of such Indebtedness and the
receipt and application of the proceeds thereof, the ratio of the total
Indebtedness of the Issuers and their Restricted Subsidiaries,
excluding any Indebtedness owed to a Restricted Subsidiary by any other
Restricted Subsidiary or the Issuers and any Indebtedness owed to the
Issuers by any Restricted Subsidiary, to the Issuers' EBITDA,
determined on a pro forma basis for the last four fiscal quarters of
the Issuers and their consolidated Restricted Subsidiaries for which
financial statements are available at the date of determination, is
less than (i) 6.25 to 1 if the Indebtedness is incurred prior to
November 15, 2000 and (ii) 6.0 to 1 if the Indebtedness is incurred on
or after November 15, 2000; provided, however, that if the Indebtedness
which is the subject of a determination under this provision is
Acquired Indebtedness, or Indebtedness incurred in connection with the
simultaneous acquisition of any Person, business, property or assets,
then such ratio shall be determined by giving effect to, on a pro forma
basis, as if the transaction had occurred at the beginning of the
four-quarter period, both the incurrence or assumption of such Acquired
Indebtedness or such other Indebtedness by the Issuers or any
Restricted Subsidiary, together with any other Acquired Indebtedness or
other Indebtedness incurred or assumed by the Issuers and Restricted
Subsidiaries in connection with acquisitions consummated by the Issuers
during such four-quarter period, and the inclusion in the Issuers'
EBITDA of the EBITDA of the acquired Person, business, property or
assets and any pro forma expense and cost reductions calculated on a
basis consistent with Regulation S-X under the Securities Act as in
effect and as applied as of the Series A/B Issue Date, together with
the EBITDA of, and pro forma expense and cost reductions relating to,
any other Person, business, property or assets acquired by the Issuers
or any Restricted Subsidiary during such four-quarter period; and
(b) no Default or Event of Default shall have occurred and be continuing at
the time or as a consequence of the incurrence of such Indebtedness.
Limitation on Restricted Payments
The Issuers will not make, and will not permit any of their Restricted
Subsidiaries to, directly or indirectly, make, any Restricted Payment, unless:
(a) no Default or Event of Default shall have occurred and be continuing at
the time of or immediately after giving effect to such Restricted
Payment;
(b) immediately after giving pro forma effect to such Restricted Payment,
the Issuers could incur $1.00 of additional Indebtedness, other than
Permitted Indebtedness, under the covenant set forth under "Limitation
on Additional Indebtedness"; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments declared or made after the Series
A/B Issue Date does not exceed the sum of
(i) 50% of the cumulative Consolidated Net Income of the Company
subsequent to the Series A/B Issue Date, or minus 100% of any
cumulative deficit in Consolidated Net Income during such period,
plus
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(ii) 100% of the aggregate Net Proceeds and the fair market value of
securities or other property received by the company from the
issue or sale, after the Series A/B Issue Date, of Capital
Stock, other than Disqualified Capital Stock or Capital Stock of
the Company issued to any Subsidiary of the Company, of the
Company or any Indebtedness or other securities of the Company
convertible into or exercisable or exchangeable for Capital
Stock, other than Disqualified Capital Stock, of the Company
which have been so converted or exercised or exchanged, as the
case may be, plus
(iii) without duplication of any amounts included in clauses (i) and
(ii) above, 100% of the aggregate net proceeds of any equity
contribution received by the Company from a holder of Capital
Stock plus
(iv) $5,000,000.
For purposes of determining under this clause (c) the amount expended for
Restricted Payments, cash distributed shall be valued at the face amount thereof
and property other than cash shall be valued at its fair market value
determined, in good faith, by the Board of Directors of the Company.
The provisions of this covenant shall not prohibit:
(a) the payment of any distribution within 60 days after the date of
declaration thereof, if at such date of declaration such payment would
comply with the provisions of the Indenture,
(b) the retirement of any shares of Capital Stock of the Company or
subordinated Indebtedness by conversion into, or by or in exchange for,
shares of Capital Stock, other than Disqualified Capital Stock, or out
of, the Net Proceeds of the substantially concurrent sale, other than
to a Subsidiary of the Company, of other shares of Capital Stock of the
Company, other than Disqualified Capital Stock,
(c) the redemption or retirement of Indebtedness of the Issuers
subordinated to the Notes in exchange for, by conversion into, or out
of the Net Proceeds of a substantially concurrent sale or incurrence of
Indebtedness, other than any Indebtedness owed to a Subsidiary, of the
Issuers that is contractually subordinate in right of payment to the
Notes to at least the same extent as the subordinated Indebtedness
being redeemed or retired,
(d) the retirement of any shares of Disqualified Capital Stock by
conversion into, or by exchange for, shares of Disqualified Capital
Stock, or out of the Net Proceeds of the substantially concurrent sale,
other than to a Subsidiary of the Company, of other shares of
Disqualified Capital Stock,
(e) so long as no Default or Event of Default shall have occurred and be
continuing, at the time of or immediately after giving effect to such
payment, the purchase, redemption or other acquisition for value of
shares of Capital Stock, other than Disqualified Capital Stock, or
options on such shares held by the Issuers' or their Subsidiaries'
officers or employees or former officers or employees, or their estates
or beneficiaries under their estates, upon the death, disability,
retirement or termination of employment of such current or former
officers or employees pursuant to the terms of an employee benefit plan
or any other agreement pursuant to which such shares of Capital Stock
or options were issued or pursuant to a severance, buy-sale or right of
first refusal agreement with such
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current or former officer or employee and payments of principal and
interest on the Management Subordinated Notes in accordance with the
terms thereof; provided that the aggregate cash consideration paid, or
distributions or payments made, in compliance with this clause (e)
shall not exceed $2,000,000 in any fiscal year or $10,000,000 in the
aggregate from and after the Series A/B Issue Date,
(f) the payment of management fees under the management agreement with THL
and its Affiliates and successors and assigns that do not exceed
$500,000 per year and the reimbursement of expenses pursuant thereto,
and
(g) distributions to Holdings solely for the purpose of enabling Holdings
to pay its, Capital's or TCC's reasonable operating and administrative
expenses, including professional fees and expenses, the amount of which
in any fiscal year will not exceed 0.2% at the Company's consolidated
net revenues for such fiscal year.
Notwithstanding the foregoing, the amount of any payments made in reliance
on clause (e) above shall reduce the amount otherwise available for Restricted
Payments pursuant to subparagraph (c) above.
Not later than the date of making any Restricted Payment, the Issuers shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by this covenant "Limitation on Restricted Payments" were computed,
which calculations may be based upon the Issuers' latest available financial
statements, and, to the extent that the absence of a Default or an Event of
Default is condition to the making of such Restricted Payment, that no Default
or Event of Default exists and is continuing and no Default or Event of Default
will occur immediately after giving effect to any Restricted Payments.
Limitation on Other Senior Subordinated Debt
The Issuers will not, and will not permit any of their Restricted
Subsidiaries to, directly or indirectly, incur, contingently or otherwise, any
Indebtedness, other than the Notes and the Guarantees, as the case may be, that
is both:
(a) subordinate in right of payment to any Senior Indebtedness of the
Issuers or their Restricted Subsidiaries, as the case may be, and
(b) senior in right of payment to the Notes and the Guarantees, as the case
may be. For purposes of this covenant, Indebtedness is deemed to be
senior in right of payment to the Notes and the Guarantees, as the case
may be, if it is not explicitly subordinate in right of payment to
Senior Indebtedness at least to the same extent as the Notes and the
Guarantees, as the case may be, are subordinate to Senior Indebtedness.
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Limitations on Investments
The Issuers will not, and will not permit any of their Restricted
Subsidiaries to, make any Investment other than:
(a) a Permitted Investment; or
(b) an Investment that is made as a Restricted Payment in compliance with
the "Limitation on Restricted Payments" covenant, after the Issue Date.
Limitations on Liens
The Issuers will not, and will not permit any of their Restricted
Subsidiaries to, create, incur or otherwise cause or suffer to exist or become
effective any Liens of any kind, other than Permitted Liens, upon any property
or asset of the Issuers or any Restricted Subsidiary or any shares of stock,
other than under the Senior Credit Facility, or debt of any Restricted
Subsidiary which owns property or assets, now owned or hereafter acquired,
unless:
(a) if such Lien secures Indebtedness which is pari passu with the Notes,
then the Notes are secured on an equal and ratable basis with the
obligations so secured until such time as such obligation is no longer
secured by a Lien; or
(b) if such Lien secures Indebtedness which is subordinated to the Notes,
any such Lien shall be subordinated to the Lien granted to the Holders
of the Notes to the same extent as such subordinated Indebtedness is
subordinated to the Notes.
Limitation on Transactions with Affiliates
The Issuers will not, and will not permit any of their Restricted
Subsidiaries to, directly or indirectly, enter into or suffer to exist any
transaction or series of related transactions, including, without limitation,
the sale, purchase, exchange or lease of assets, property or services, with any
Affiliate, including entities in which the Issuers or any of their Restricted
Subsidiaries owns a minority interest, (an "Affiliate Transaction") or extend,
renew, waive or otherwise modify the terms of any Affiliate Transaction entered
into prior to the Issue Date if such extension, renewal, waiver or other
modification is more disadvantageous to the Holders in any material respect than
the original agreement as in effect on the Issue Date unless:
(a) such Affiliate Transaction is between or among the Issuers and/or their
Wholly-Owned Subsidiaries and/or Holdings and so long as Holdings owns
at least 99% of the voting and economic power of the Common Stock of
the Company; or
(b) the terms of such Affiliate Transaction are fair and reasonable to the
Issuers or such Restricted Subsidiary, as the case may be, and the
terms of such Affiliate Transaction are at least as favorable as the
terms which could be obtained by the Issuers or such Restricted
Subsidiary, as the case may be, in a comparable transaction made on an
arm's-length basis between unaffiliated parties.
In any Affiliate Transaction involving an amount or having a value in
excess of $1.0 million which is not permitted under clause (a) above, the
Issuers must obtain a resolution of the Board of Directors of the Company
certifying that such Affiliate
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Transaction complies with clause (b) above. In any Affiliate Transaction with a
value in excess of $5.0 million which is not permitted under clause (a) above,
other than any sale by the Company of its Capital Stock that is not Disqualified
Capital Stock, the Issuers must obtain a written opinion as to the fairness of
such a transaction from an independent investment banking firm.
The foregoing provisions will not apply to:
(a) any Restricted Payment that is not prohibited by the provisions
described under "Limitation on Restricted Payments" contained herein;
(b) any transaction pursuant to an agreement, arrangement or understanding
existing on the Series A/B Issue Date and described in the Offering
Memorandum dated November 6, 1997 relating to the Issuers' Series B
Notes;
(c) any transaction, approved by the Board of Directors of the Company or
Capital II, with an officer or director of the Issuers or of any
Subsidiary in his or her capacity as officer or director entered into
in the ordinary course of business; or
(d) transactions permitted by the Indenture under the provision "Merger,
Consolidation or Sale of Assets."
Limitation on Creation of Subsidiaries
The Issuers will not create or acquire, nor permit any of their Restricted
Subsidiaries to create or acquire, any Subsidiary other than:
(a) a Restricted Subsidiary that is acquired or created in connection with
the acquisition by the Company of a business primarily engaged in, or
an asset primarily utilized in, providing directory services and/or
classified advertising; or
(b) an Unrestricted Subsidiary;
provided, however, that each Restricted Subsidiary acquired or created pursuant
to clause (a) shall at the time it has either assets or stockholder's equity in
excess of $100,000 execute a guarantee in the form attached to the Indenture and
reasonably satisfactory in form and substance to the Trustee, and with such
documentation relating thereto as the Trustee shall require, including, without
limitation, a supplement or amendment to the Indenture and opinions of counsel
as to the enforceability of such guarantee, pursuant to which such Restricted
Subsidiary shall become a Guarantor.
As of the Issue Date, the Company's only Subsidiaries will be Capital II
and Target, the latter of which will be a Guarantor of the Notes.
Limitation on Certain Asset Sales
The Issuers will not, and will not permit any of their Restricted
Subsidiaries to, consummate an Asset Sale unless:
(a) such Issuer or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such sale or other disposition at least
equal to the fair market value thereof, as determined in good faith by
the Company's Board of Directors, and evidenced by a board resolution;
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(b) not less than 75% of the consideration received by the Issuers or their
Subsidiaries, as the case may be, is in the form of cash or Temporary
Cash Investments other than in the case where the Company is
undertaking a Permitted Asset Swap; and
(c) the Asset Sale Proceeds received by such Issuer or such Restricted
Subsidiary are applied:
(i) first, to the extent the Company elects, or is required, to
prepay, repay or purchase debt or to reduce an unused commitment
to lend under any then existing Senior Indebtedness of the Company
or any Restricted Subsidiary within 180 days following the receipt
of the Asset Sale Proceeds from any Asset Sale, but only to the
extent that any such repayment shall result in a permanent
reduction of the commitments thereunder in an amount equal to the
principal amount so repaid;
(ii) second, to the extent of the balance of Asset Sale Proceeds after
application as described above, to the extent the Company or a
Restricted Subsidiary elects, to an investment in assets,
including Capital Stock or other securities purchased in
connection with the acquisition of Capital Stock or property of
another person, used or useful in businesses similar or ancillary
to the business of the Company or such Restricted Subsidiary as
conducted at the time of such Asset Sale, provided that such
investment occurs or the Issuers or a Restricted Subsidiary
enters into contractual commitments to make such investment,
subject only to customary conditions, other than the obtaining of
financing, on or prior to the 181st day following receipt of such
Asset Sale Proceeds (the "Reinvestment Date") and Asset Sale
Proceeds contractually committed are so applied within 270 days
following the receipt of such Asset Sale Proceeds; and
(iii) third, if on the Reinvestment Date with respect to any Asset
Sale, the Available Asset Sale Proceeds exceed $10.0 million,
the Issuers shall apply an amount equal to such Available Asset
Sale Proceeds, first, to an offer to repurchase the Series B
Notes, if any are outstanding, in accordance with the terms of
the Series A/B Indenture, as in effect on the Issue Date (the
"Series B Asset Sale Offer") and, second, in the event that any
Available Asset Sale Proceeds are not applied to a Series B
Asset Sale Offer, to an offer to repurchase the Notes, at a
purchase price in cash equal to 100% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of
repurchase (an "Excess Proceeds Offer").
If an Excess Proceeds Offer is not fully subscribed, the Company may retain
the portion of the Available Asset Sale Proceeds not required to repurchase
Notes and use such portion for general corporate purposes, and such retained
portion will not be considered in the calculation of Available Asset Sale
Proceeds with respect to any subsequent offer to purchase Notes.
If the Issuers are required to make an Excess Proceeds Offer, the Issuers
shall mail, within 30 days following the Reinvestment Date, a notice to the
Holders stating, among other things:
(a) that such Holders have the right to require the Issuers to apply the
Available Asset Sale Proceeds to repurchase such Notes at a purchase
price in cash equal
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to 100% of the aggregate principal amount thereof together with accrued
and unpaid interest, if any, thereon to the date of purchase;
(b) the purchase date, which shall be no earlier than 30 days and not later
than 60 days from the date such notice is mailed;
(c) the instructions, determined by the Issuers, that each Holder must
follow in order to have such Notes repurchased; and
(d) the calculations used in determining the amount of Available Asset Sale
Proceeds to be applied to the repurchase of such Notes.
Limitation on Preferred Stock of Restricted Subsidiaries
The Issuers will not permit any Restricted Subsidiary to issue any
Preferred Stock, except Preferred Stock issued to the Company or a Restricted
Subsidiary, or permit any Person, other than the Company or a Subsidiary, to
hold any such Preferred Stock unless the Company or such Restricted Subsidiary
would be entitled to incur or assume Indebtedness under the first paragraph of
the covenant described under "Limitation on Additional Indebtedness" in an
aggregate principal amount equal to the aggregate liquidation value of the
Preferred Stock to be issued.
Limitation on Capital Stock of Subsidiaries
The Issuers will not:
(a) sell, pledge, hypothecate or otherwise convey or dispose of any Capital
Stock of a Subsidiary, other than under the Senior Credit Facility or
under the terms of any Designated Senior Indebtedness; or
(b) permit any of their Subsidiaries to issue any Capital Stock, other than
to the Issuers or a Wholly-Owned Subsidiary of the Company.
The foregoing restrictions shall not apply to an Asset Sale made in
compliance with "Limitation on Certain Asset Sales" or the issuance of Preferred
Stock in compliance with the covenant described under "Limitation on Preferred
Stock of Subsidiaries." In no event will the Company sell, pledge, hypothecate
or otherwise convey or dispose of any Capital Stock of Capital II or will
Capital II issue any Capital Stock.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries
The Issuers will not, and will not permit any of their Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary of the Issuers to:
(a) (i) pay dividends or make any other distributions to the Issuers or any
Restricted Subsidiary of the Issuers
(A) on its Capital Stock, or
(B) with respect to any other interest or participation in, or
measured by, its profits, or
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(ii) repay any Indebtedness or any other obligation owed to the Issuers
or any Restricted Subsidiary of the Issuers;
(b) make loans or advances or capital contributions to the Issuers or any
of their Restricted Subsidiaries; or
(c) transfer any of its properties or assets to the Issuers or any of their
Restricted Subsidiaries,
except for such encumbrances or restrictions existing under or by reason of:
(i) encumbrances or restrictions existing on the Series A/B Issue Date
to the extent and in the manner such encumbrances and restrictions
were in effect on the Series A/B Issue Date, including without
limitation pursuant to the Senior Credit Facility or under the
Series B Notes or the Discount Notes,
(ii) the Indenture, the Notes and the Guarantees,
(iii) applicable law,
(iv) any instrument governing Acquired Indebtedness, which encumbrance or
restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or
assets of the Person, including any Subsidiary of the Person, so
acquired,
(v) customary non-assignment provisions in leases or other agreements
entered in the ordinary course of business and consistent with past
practices,
(vi) Refinancing Indebtedness; provided that such restrictions are no
more restrictive than those contained in the agreements governing
the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded,
(vii) customary restrictions in security agreements or mortgages securing
Indebtedness of the Issuers or a Restricted Subsidiary to the extent
such restrictions restrict the transfer of the property subject to
such security agreements and mortgages, or
(viii) customary restrictions with respect to a Restricted Subsidiary of
the Issuers pursuant to an agreement that has been entered into for
the sale or disposition of all or substantially all of the Capital
Stock or assets of such Restricted Subsidiary.
Limitation on Sale and Lease-Back Transactions
The Issuers will not, and will not permit any Restricted Subsidiary to,
enter into any Sale and Lease-Back Transaction unless:
(a) the consideration received in such Sale and Lease-Back Transaction is
at least equal to the fair market value of the property sold, as
determined, in good faith, by the Board of Directors of the Company,
and
(b) the Issuers could incur the Attributable Indebtedness in respect of
such Sale and Lease-Back Transaction in compliance with the covenant
described under "Limitation on Additional Indebtedness."
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Payments for Consent
Neither the Issuers nor any of their Subsidiaries will, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of the
Indenture or the Notes unless such consideration is offered to be paid or agreed
to be paid to all holders of the Notes which so consent, waive or agree to amend
in the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
Limitation on Conduct of Business of Capital II
Except to the extent permitted under "Merger, Consolidation or Sale of
Assets," Capital II will not hold any operating assets or other properties or
conduct any business other than to serve as an Issuer and co-obligor with
respect to the Notes and will not own any Capital Stock of any other Person.
CHANGE OF CONTROL OFFER
Within 20 days of the occurrence of a Change of Control, the Company shall
notify the Trustee in writing of such occurrence and shall make an offer to
purchase (the "Change of Control Offer") the outstanding Notes at a purchase
price equal to 101% of the principal amount thereof together with any accrued
and unpaid interest thereon to the Change of Control Payment Date (as
hereinafter defined) (such applicable purchase price being hereinafter referred
to as the "Change of Control Purchase Price") in accordance with the procedures
set forth in this covenant.
Within 20 days of the occurrence of a Change of Control, the Company also
shall:
(a) cause a notice of the Change of Control Offer to be sent at least once
to the Dow Jones News Service or similar business news service in the
United States; and
(b) send by first-class mail, postage prepaid, to the Trustee and to each
holder of the Notes, at the address appearing in the register
maintained by the registrar of the Notes, a notice stating:
(i) that the Change of Control Offer is being made pursuant to this
covenant and that all Notes tendered will be accepted for
payment, and otherwise subject to the terms and conditions set
forth herein;
(ii) the Change of Control Purchase Price and the purchase date,
which shall be a Business Day no earlier than 20 business days
from the date such notice is mailed (the "Change of Control
Payment Date");
(iii) that any Note not tendered will remain outstanding and continue
to accrue interest;
(iv) that, unless the Issuers default in the payment of the Change of
Control Purchase Price, any Notes accepted for payment pursuant
to the Change of Control Offer shall cease to accrue interest
after the Change of Control Payment Date;
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(v) that holders accepting the offer to have their Notes purchased
pursuant to a Change of Control Offer will be required to
surrender the Notes, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Note completed, to the
Paying Agent at the address specified in the notice prior to the
close of business on the Business Day preceding the Change of
Control Payment Date;
(vi) that holders will be entitled to withdraw their acceptance if
the Paying Agent receives, not later than the close of business
on the third Business Day preceding the Change of Control
Payment Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the holder, the principal
amount of the Notes delivered for purchase, and a statement that
such holder is withdrawing his election to have such Notes
purchased;
(vii) that holders whose Notes are being purchased only in part will
be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered, provided that
each Note purchased and each such new Note issued shall be in
an original principal amount in denominations of $1,000 and
integral multiples thereof;
(viii) any other procedures that a holder must follow to accept a
Change of Control Offer or effect withdrawal of such
acceptance; and
(ix) the name and address of the Paying Agent.
On the Change of Control Payment Date, the Issuers shall, to the extent
lawful:
(a) accept for payment Notes or portions thereof tendered pursuant to the
Change of Control Offer;
(b) deposit with the Paying Agent money sufficient to pay the purchase
price of all Notes or portions thereof so tendered; and
(c) deliver or cause to be delivered to the Trustee Notes so accepted
together with an Officers' Certificate stating the Notes or portions
thereof tendered to the Issuers.
The Paying Agent shall promptly mail to each holder of Notes so accepted
payment in an amount equal to the purchase price for such Notes, and the Issuers
shall execute and issue, the Guarantors shall endorse the Guarantee and the
Trustee shall promptly authenticate and mail to such holder, a new Note equal in
principal amount to any unpurchased portion of the Notes surrendered; provided
that each such new Note shall be issued in an original principal amount in
denominations of $1,000 and integral multiples thereof.
The Indenture will require that if the Senior Credit Facility is in effect,
or any amounts are owing thereunder or in respect thereof, at the time of the
occurrence of a Change of Control, prior to the mailing of the notice to holders
described in the preceding paragraph, but in any event within 20 days following
any Change of Control, the Issuers on a joint and several basis covenant to:
(i) repay in full all obligations under or in respect of the Senior Credit
Facility or offer to repay in full all obligations under or in respect
of the Senior Credit
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Facility and repay the obligations under or in respect of the Senior
Credit Facility of each lender who has accepted such offer; or
(ii) obtain the requisite consent under the Senior Credit Facility to
permit the repurchase of the Notes as described above.
The Issuers must first comply with the covenant described in the preceding
sentence before they shall be required to purchase Notes in the event of a
Change of Control; provided that the Issuers' failure to comply with the
covenant described in the preceding sentence constitutes an Event of Default
described in clause (c) under "Events of Default" below if not cured within 60
days after the notice required by such clause. As a result of the foregoing, a
holder of the Notes may not be able to compel the Issuers to purchase the Notes
unless the Issuers are able at the time to refinance all of the obligations
under or in respect of the Senior Credit Facility or obtain requisite consents
under the Senior Credit Facility. Failure by the Issuers to make a Change of
Control Offer when required by the Indenture constitutes a default under the
Indenture and, if not cured within 60 days after notice, constitutes an Event of
Default.
The Indenture will require that:
(A) if either Issuer or any Subsidiary thereof has issued any outstanding
(i) Indebtedness that is subordinate in right of payment to the Notes;
or (ii) Preferred Stock, and such Issuer or Subsidiary is required to
make a change of control offer or to make a distribution with respect
to such subordinated Indebtedness or Preferred Stock in the event of a
change of control, the Issuers shall not consummate any such offer or
distribution with respect to such subordinated Indebtedness or
Preferred Stock until such time as the Issuers shall have paid the
Change of Control Purchase Price in full to the holders of Notes that
have accepted the Issuers' Change of Control Offer and shall otherwise
have consummated the Change of Control Offer made to holders of the
Notes; and
(B) the Issuers will not issue Indebtedness that is subordinate in right of
payment to the Notes or Preferred Stock with change of control
provisions requiring the payment of such Indebtedness or Preferred
Stock prior to the payment of the Notes in the event of a Change in
Control under the Indenture.
In the event that a Change of Control occurs and the holders of Notes
exercise their right to require the Issuers to purchase Notes, if such purchase
constitutes a "tender offer" for purposes of Rule l4e-1 under the Exchange Act
at that time, the Issuers will comply with the requirements of Rule 14e-1 as
then in effect with respect to such repurchase.
MERGER, CONSOLIDATION OR SALE OF ASSETS
Neither of the Issuers will, nor will they permit any Guarantor to,
consolidate with, merge with or into, or transfer all or substantially all of
its assets, as an entirety or substantially as an entirety in one transaction or
a series of related transactions, to, any Person unless, in the case of the
Company or any Guarantor:
(a) the Company or such Guarantor, as the case may be, shall be the
continuing Person, or the Person, if other than the Company or such
Guarantor, formed by such consolidation or into which the Company or
such Guarantor, as the case may be, is merged or to which the
properties and assets of the Company or such Guarantor, as the case may
be, are transferred shall be a corporation, or, in the
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case of the Company, a corporation or a limited partnership, organized
and existing under the laws of the United States or any State thereof
or the District of Columbia and shall expressly assume, by a
supplemental indenture, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all of the obligations of the Company or
such Guarantor, as the case may be, under the Notes and the Indenture,
and the obligations under the Indenture shall remain in full force and
effect; provided, that at any time the Company or its successor is a
limited partnership, there shall be a co-issuer of the Notes that is a
corporation;
(b) immediately before and immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing;
(c) immediately after giving effect to such transaction or series of
transactions on a pro forma basis the Consolidated Net Worth of the
Company or the surviving entity as the case may be is at least equal to
the Consolidated Net Worth of the Company immediately before such
transaction or series of transactions; and
(d) immediately after giving effect to such transaction on a pro forma
basis the Company or such Person could incur at least $1.00 of
additional Indebtedness, other than Permitted Indebtedness, under the
covenant set forth under "Limitation on Additional Indebtedness."
Notwithstanding anything in this "Merger, Consolidation or Sale of Assets"
provision herein to the contrary, but subject to the "Change of Control Offer"
provisions above, any of the Company, Capital II and TCC may merge with or into,
or consolidate with, another of them and subject only to compliance with clause
(a) of the immediately preceding sentence and the Company may merge into,
consolidate with or transfer all or substantially all of its assets to another
entity, which entity shall have no significant assets, other than an ownership
interest in the Company, and no liabilities immediately prior to such
transaction, without regard to the requirements of clause (d) of the immediately
preceding sentence.
In connection with any consolidation, merger or transfer of assets
contemplated by this provision, the Issuers shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate and an opinion of counsel, each stating that
such consolidation, merger or transfer and the supplemental indenture in respect
thereto comply with this provision and that all conditions precedent herein
provided for relating to such transaction or transactions have been complied
with.
GUARANTEES
The Notes will be unconditionally guaranteed on an unsecured senior
subordinated basis by the Guarantors. All payments pursuant to the Guarantees by
the Guarantors will be unconditionally subordinate in right of payment to the
prior indefeasible payment and satisfaction in full in cash of all Senior
Indebtedness of the Guarantor, to the same extent and in the same manner that
all payments pursuant to the Notes are subordinate in right of payment to the
prior payment in full of all Senior Indebtedness of the Issuers.
The obligations of each Guarantor are limited to the maximum amount as
will, after giving effect to all other contingent and fixed liabilities of such
Guarantor, including, without limitation, any Guarantees of Senior Indebtedness,
and after giving effect to any collections from or payments made by or on behalf
of any other Guarantor in respect of the obligations of such other Guarantor
under its Guarantee or pursuant to its contribution
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obligations under the Indenture, result in the obligations of such Guarantor
under the Guarantee not constituting a fraudulent conveyance or fraudulent
transfer under federal or state law. Each Guarantor that makes a payment or
distribution under a Guarantee shall be entitled to a contribution from each
other Guarantor in a pro rata amount based on the Adjusted Net Assets of each
Guarantor.
A Guarantor shall be released from all of its obligations under its
Guarantee if all or substantially all of its assets are sold or all of its
Capital Stock is sold, in each case in a transaction in compliance with the
covenant described under "Limitation on Certain Asset Sales," or the Guarantor
merges with or into or consolidates with, or transfers all or substantially all
of its assets to, the Company or another Guarantor in a transaction in
compliance with "Merger, Consolidation or Sale of Assets," and such Guarantor
has delivered to the Trustee an Officers' Certificate and an opinion of counsel,
each stating that all conditions precedent herein provided for relating to such
transaction have been complied with.
EVENTS OF DEFAULT
The following events will be defined in the Indenture as "Events of
Default":
(a) default in payment of any principal of, or premium, if any, on the
Notes whether at maturity, upon acceleration or redemption or
otherwise, whether or not such payment shall be prohibited by the
subordination provisions of the Indenture;
(b) default for 30 days, whether or not such payment is prohibited by the
subordination provisions of the Indenture, in payment of any interest
on the Notes;
(c) default by either of the Issuers or any Guarantor in the observance or
performance of any other covenant in the Notes or the Indenture for 60
days after written notice from the Trustee or the holders of not less
than 25% in aggregate principal amount of the Notes then outstanding;
(d) default in the payment at final maturity of principal in an aggregate
amount of $5.0 million or more with respect to any Indebtedness of
either Issuer or any Restricted Subsidiary thereof, or the acceleration
of any such Indebtedness aggregating $5.0 million or more which default
shall not be cured, waived or postponed pursuant to an agreement with
the holders of such Indebtedness within 60 days after written notice as
provided in the Indenture, or such acceleration shall not be rescinded
or annulled within 20 days after written notice as provided in the
Indenture;
(e) any final judgment or judgments which can no longer be appealed for the
payment of money in excess of $5.0 million shall be rendered against
either of the Issuers or any Restricted Subsidiary thereof, and shall
not be discharged for any period of 60 consecutive days during which a
stay of enforcement shall not be in effect;
(f) certain events involving bankruptcy, insolvency or reorganization of
either of the Issuers or any Restricted Subsidiary thereof; and
(g) any of the Guarantees ceases to be in full force and effect or any of
the Guarantees is declared to be null and void and unenforceable or any
of the
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Guarantees is found to be invalid or any of the Guarantors denies in
writing its liability under its Guarantee, other than by reason of
release of a Guarantor in accordance with the terms of the Indenture.
The Indenture will provide that the Trustee may withhold notice to the
holders of the Notes of any default, except in payment of principal or premium,
if any, or interest on the Notes, if the Trustee considers it to be in the best
interest of the holders of the Notes to do so.
The Indenture will provide that if an Event of Default, other than an Event
of Default resulting from certain events of bankruptcy, insolvency or
reorganization, shall have occurred and be continuing, then the Trustee by
notice to the Issuers or the holders of not less than 25% in aggregate principal
amount of the Notes then outstanding by written notice to the Issuers and the
Trustee may declare to be immediately due and payable the entire principal
amount of all the Notes then outstanding plus accrued but unpaid interest to the
date of acceleration and
(a) such amounts shall become immediately due and payable; or
(b) if there are any amounts outstanding under or in respect of the Senior
Credit Facility, such amounts shall become due and payable upon the
first to occur of an acceleration of amounts outstanding under or in
respect of the Senior Credit Facility or five business days after
receipt by the Company and the representative of the holders of Senior
Indebtedness under or in respect of the Senior Credit Facility, of
notice of the acceleration of the Notes;
provided, however, that after such acceleration but before a judgment or decree
based on such acceleration is obtained by the Trustee, the holders of a majority
in aggregate principal amount of outstanding Notes may, under certain
circumstances, rescind and annul such acceleration if all existing Events of
Default, other than nonpayment of accelerated principal, premium, if any, or
interest that has become due solely because of the acceleration, have been cured
or waived as provided in the Indenture. In case an Event of Default resulting
from certain events of bankruptcy, insolvency or reorganization shall occur, the
principal, premium, if any, and interest amount with respect to all of the Notes
shall be due and payable immediately without any declaration or other act on the
part of the Trustee or the holders of the Notes.
The holders of a majority in principal amount of the Notes then outstanding
shall have the right to waive any existing default or compliance with any
provision of the Indenture or the Notes and to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee, subject to
certain limitations specified in the Indenture.
No holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such holder shall
have previously given to the Trustee written notice of a continuing Event of
Default and unless also the holders of at least 25% in aggregate principal
amount of the outstanding Notes shall have made written request and offered
indemnity satisfactory to the Trustee to institute such proceeding as a trustee,
and unless the Trustee shall not have received from the holders of a majority in
aggregate principal amount of the outstanding Notes a direction inconsistent
with such request and shall have failed to institute such proceeding within 60
days. However, such limitations do not apply to a suit instituted on such Note
on or after the respective due dates expressed in such Note.
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DEFEASANCE AND COVENANT DEFEASANCE
The Indenture will provide that the Issuers may elect either:
(a) to defease and be discharged from any and all obligations with respect
to the Notes, except for the obligations to register the transfer or
exchange of such Notes, to replace temporary or mutilated, destroyed,
lost or stolen Notes, to maintain an office or agency in respect of the
Notes and to hold monies for payment in trust ("defeasance"); or
(b) to be released from their obligations with respect to the Notes under
certain covenants contained in the Indenture and described above under
"Certain Covenants" ("covenant defeasance")
upon the deposit with the Trustee, or other qualifying trustee, in trust for
such purpose of money and/or U.S. Government Obligations (as defined in the
Indenture) which through the payment of principal and interest in accordance
with their terms will provide money, in an amount sufficient to pay the
principal of, premium, if any, and interest on the Notes, on the scheduled due
dates therefor or on a selected date of redemption in accordance with the terms
of the Indenture. Such a trust may only be established if, among other things,
the Issuers have delivered to the Trustee an Opinion of Counsel (as specified in
the Indenture):
(a) to the effect that neither the trust nor the Trustee will be required
to register as an investment company under the Investment Company Act
of 1940, as amended, and
(b) describing either a private ruling concerning the Notes or a published
ruling of the Internal Revenue Service, to the effect that holders of
the Notes or persons in their positions will not recognize income, gain
or loss for federal income tax purposes as a result of such deposit,
defeasance and discharge and will be subject to federal income tax on
the same amount and in the same manner and at the same times, as would
have been the case if such deposit, defeasance and discharge had not
occurred.
MODIFICATION OF INDENTURE
From time to time, the Issuers, the Guarantors and the Trustee may, without
the consent of holders of the Notes, amend the Indenture or the Notes or
supplement the Indenture for certain specified purposes, including providing for
uncertificated Notes in addition to certificated Notes, and curing any
ambiguity, defect or inconsistency, or making any other change that does not
adversely affect the rights of any holder. The Indenture contains provisions
permitting the Issuers, the Guarantors and the Trustee, with the consent of
holders of at least a majority in principal amount of the outstanding Notes, to
modify or supplement the Indenture or the Notes, except that no such
modification shall, without the consent of each holder affected thereby:
(a) reduce the amount of Notes whose holders must consent to an amendment,
supplement, or waiver to the Indenture or the Notes;
(b) reduce the rate of or change the time for payment of interest on any
Note;
(c) reduce the principal of or premium on or change the stated maturity of
any Note;
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(d) make any Note payable in money other than that stated in the Note or
change the place of payment from New York, New York;
(e) change the amount or time of any payment required by the Notes or
reduce the premium payable upon any redemption of Notes, or change the
time before which no such redemption may be made;
(f) waive a default in the payment of the principal of, interest on, or
redemption payment with respect to any Note;
(g) take any other action otherwise prohibited by the Indenture to be taken
without the consent of each holder affected thereby; or
(h) affect the ranking of the Notes or the Guarantees in a manner adverse
to the holders.
REPORTS TO HOLDERS
So long as the Issuers are subject to the periodic reporting requirements
of the Exchange Act, they will continue to furnish the information required
thereby to the Securities and Exchange Commission and to the holders of the
Notes. The Indenture will provide that even if the Company is entitled under the
Exchange Act not to furnish such information to the Securities and Exchange
Commission or to the holders of the Notes, it will nonetheless continue to
furnish such information to the Securities and Exchange Commission and holders
of the Notes.
COMPLIANCE CERTIFICATE
The Issuers will deliver to the Trustee on or before 120 days after the end
of the Issuers' fiscal year and on or before 50 days after the end of each of
the first, second and third fiscal quarters in each year an Officers'
Certificate stating whether or not the signers know of any Default or Event of
Default that has occurred. If they do, the certificate will describe the Default
or Event of Default and its status.
THE TRUSTEE
The Trustee under the Indenture will be the Registrar and Paying Agent with
regard to the Notes. The Indenture will provide that, except during the
continuance of an Event of Default, the Trustee will perform only such duties as
are specifically set forth in the Indenture. During the existence of an Event of
Default, the Trustee will exercise such rights and powers vested in it under the
Indenture and use the same degree of care and skill in its exercise as a prudent
person would exercise under the circumstances in the conduct of such person's
own affairs. The Trustee is also acting as trustee under the indenture relating
to the Discount Notes.
TRANSFER AND EXCHANGE
Holders of the Notes may transfer or exchange the Notes in accordance with
the Indenture. The Registrar under the Indenture may require a holder, among
other things, to furnish appropriate endorsements and transfer documents, and to
pay any taxes and fees required by law or permitted by the Indenture. The
Registrar is not required to transfer or exchange any Note selected for
redemption. Also, the Registrar is not required to transfer
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or exchange any Note for a period of 15 days before selection of the Notes to be
redeemed.
The registered holder of a Note may be treated as the owner of it for all
purposes.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants contained in the Indenture. We refer you to the Indenture for the full
definition of all such terms as well as any other capitalized terms used herein
for which no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person, including an
Unrestricted Subsidiary, existing at the time such Person becomes a Restricted
Subsidiary or assumed in connection with the acquisition of assets from such
Person.
"Adjusted Net Assets" of a Guarantor at any date shall mean the lesser of
the amount by which:
(a) the fair value of the property of such Guarantor exceeds the total
amount of liabilities, including, without limitation, contingent
liabilities, after giving effect to all other fixed and contingent
liabilities, but excluding liabilities under the Guarantee, of such
Guarantor at such date; and
(b) the present fair salable value of the assets of such Guarantor at such
date exceeds the amount that will be required to pay the probable
liability of such Guarantor on its debts, after giving effect to all
other fixed and contingent liabilities and after giving effect to any
collection from any Subsidiary of such Guarantor in respect of the
obligations of such Subsidiary under the Guarantee, excluding
Indebtedness in respect of the Guarantee, as they become absolute and
matured.
"Affiliate" of any specified Person means any other Person which directly
or indirectly through one or more intermediaries controls, or is controlled by,
or is under common control with, such specified Person. For the purposes of this
definition, "control," including, with correlative meanings, the terms
"controlling," "controlled by," and "under common control with," as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement or
otherwise.
"Asset Sale" means the sale, transfer or other disposition, other than to
the Company or any of its Restricted Subsidiaries, in any single transaction or
series of related transactions having a fair market value in excess of
$1,000,000 of:
(a) any Capital Stock of or other equity interest in any Restricted
Subsidiary of the Issuers;
(b) all or substantially all of the assets of the Issuers or of any
Restricted Subsidiary thereof;
(c) real property; or
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(d) all or substantially all of the assets of a division, line of business
or comparable business segment of the Issuers or any Restricted
Subsidiary thereof;
provided that Asset Sales shall not include:
(a) sales, leases, conveyances, transfers or other dispositions to the
Company or to a Restricted Subsidiary or to any other Person if after
giving effect to such sale, lease, conveyance, transfer or other
disposition such other Person becomes a Restricted Subsidiary; or
(b) the contribution of any assets to a joint venture, partnership or other
Person, which may be a Subsidiary, to the extent such contribution
constitutes a Permitted Investment, other than by operation of clause
(d) of the definition thereof,
"Asset Sale Proceeds" means, with respect to any Asset Sale:
(a) cash received by the Issuers or any Restricted Subsidiary from such
Asset Sale, including cash received as consideration for the
assumption of liabilities incurred in connection with or in
anticipation of such Asset Sale, after
(i) provision for all income or other taxes, including taxes required
to be distributed under the partnership agreement of the Company,
measured by or resulting from such Asset Sale,
(ii) payment of all brokerage commissions, underwriting and other fees
and expenses related to such Asset Sale,
(iii) provision for minority interest holders in any Restricted
Subsidiary as a result of such Asset Sale, and
(iv) deduction of appropriate amounts to be provided by the Issuers or
a Restricted Subsidiary as a reserve, in accordance with GAAP,
against any liabilities associated with the assets sold or
disposed of in such Asset Sale and retained by the Issuers or a
Restricted Subsidiary after such Asset Sale, including, without
limitation, severance, healthcare, pension and other post-
employment benefit liabilities and liabilities related to
environmental matters or against any indemnification obligations
associated with the assets sold or disposed of in such Asset
Sale; and
(b) promissory notes and other non-cash consideration received by the
Issuers or any Restricted Subsidiary from such Asset Sale or other
disposition upon the liquidation or conversion of such notes or
non-cash consideration into cash.
"Attributable Indebtedness" in respect of a Sale and Lease-Back Transaction
means, as at the time of determination, the greater of:
(a) the fair value of the property subject to such arrangement, as
determined by the Board of Directors of the Company; and
(b) the present value of the total obligations, discounted at a rate of
10%, compounded annually, of the lessee for rental payments during the
remaining term of the lease included in such Sale and Lease-Back
Transaction, including any period for which such lease has been
extended.
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"Available Asset Sale Proceeds" means, with respect to any Asset Sale, the
aggregate Asset Sale Proceeds from such Asset Sale that have not been applied in
accordance with clauses (c)(i) or (c)(ii), and that have not been the basis for
a Series B Asset Sale Offer or an Excess Proceeds Offer in accordance with
clause (c)(iii), of the first paragraph of "Certain Covenants -- Limitation on
Certain Asset Sales."
"Board of Directors" means:
(a) in the case of a Person that is a limited partnership, the board of
directors of its corporate general partner or any committee authorized
to act therefor or, if the general partner is itself a limited
partnership, the board of directors of such general partner's
corporate general partner or any committee authorized to act therefor;
(b) in the case of a Person that is a corporation, the board of directors
of such Person or any committee authorized to act therefor, and
(c) in the case of any other Person, the board of directors, management
committee or similar governing body or any authorized committee
thereof responsible for the management of the business and affairs of
such Person.
"Capital Stock" means, with respect to any Person, any and all shares or
other equivalents, however designated, of capital stock, partnership interests
or any other participation, right or other interest in the nature of an equity
interest in such Person or any option, warrant or other security convertible
into or exercisable for any of the foregoing.
"Capitalized Lease Obligations" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
A "Change of Control" means the occurrence of one or more of the following
events:
(a) any Person, including a Person's Affiliates and associates, other than
a Permitted Holder, becomes the beneficial owner, directly or
indirectly (as defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act), of 50% or more of the
total voting or economic power of the Common Stock of the Company,
(b) any Person, including a Person's Affiliates and associates, other than
a Permitted Holder, becomes the beneficial owner, directly or
indirectly, of more than 33'% of the total voting power of the Common
Stock of the Company, and the Permitted Holders beneficially own,
directly or indirectly, in the aggregate, a lesser percentage of the
total voting power of the Common Stock of the Company, as the case may
be, than such other Person and do not have the right or ability by
voting power, contract or otherwise to elect or designate for election
a majority of the Board of Directors of the Company,
(c) the admission of any Person as a general partner of Holdings after
which TCC, together with one or more Permitted Holders, do not have
the sole power, directly or indirectly, to take all of the actions
they are entitled or required, to take under the partnership agreement
of Holdings as in effect on the Series A/B Issue Date,
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(d) there shall be consummated any consolidation or merger of either
Issuer in which such Issuer is not the continuing or surviving
corporation or pursuant to which the Common Stock of such Issuer would
be converted into cash, securities or other property, other than a
merger or consolidation of such Issuer in which the beneficial owners
of the Common Stock of such Issuer outstanding immediately prior to
the consolidation or merger hold, directly or indirectly, at least a
majority of the Common Stock of the surviving corporation immediately
after such consolidation or merger, or
(e) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of TCC,
together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of TCC
has been approved by a majority of the directors then still in office
who either were directors at the beginning of such period or whose
election or recommendation for election was previously so approved,
cease to constitute a majority of the Board of Directors of TCC.
"CIBC Merchant Fund" means the CIBC WG Argosy Merchant Fund 2, L.L.C.
"CIVC" means Continental Illinois Venture Corporation.
"Commodity Hedge Agreement" shall mean any option, hedge or other similar
agreement or arrangement designed to protect against fluctuations in commodity
or materials prices.
"Common Stock" of any Person means all Capital Stock of such Person that is
generally entitled to:
(a) vote in the election of directors of such Person; or
(b) if such Person is not a corporation, vote or otherwise participate in
the selection of the governing body, partners, managers or others that
will control the management and policies of such Person.
"Consolidated Interest Expense" means, with respect to any Person, for any
period:
(a) the aggregate amount of interest which, in conformity with GAAP, would
be set forth opposite the caption "interest expense" or any like
caption on an income statement for such Person and its Subsidiaries on
a consolidated basis, including, but not limited to:
(i) Redeemable Dividends, whether paid or accrued, on Preferred
Stock of Subsidiaries,
(ii) imputed interest included in Capitalized Lease Obligations,
(iii) all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing,
(iv) the net costs associated with hedging obligations,
(v) amortization of other financing fees and expenses,
(vi) the interest portion of any deferred payment obligation,
(vii) amortization of discount or premium, if any; and
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(viii) all other non-cash interest expense, other than interest
amortized to cost of sales,
plus, without duplication;
(b) all net capitalized interest for such period and all interest incurred
or paid under any guarantee of Indebtedness, including a guarantee of
principal, interest or any combination thereof, of any Person, plus
the amount of all dividends or distributions paid on Disqualified
Stock, other than dividends paid or payable in shares of Capital Stock
of the Company, less the amortization of deferred financing costs.
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate of:
(a) the Net Income of such Person and its Subsidiaries for such period, on
a consolidated basis, determined in accordance with GAAP, plus
(b) in the case of the Company, payments by the Company to the Equity
Compensation Trust for the benefit of the beneficiaries thereof, minus
(c) Permitted Tax Distributions, to the extent such Permitted Tax
Distributions are made;
provided, however, that:
(a) the Net Income of any Person (the "other Person") in which the Person
in question or any of its Subsidiaries has less than a 100% interest,
which interest does not cause the net income of such other Person to
be consolidated into the net income of the Person in question in
accordance with GAAP, shall be included only to the extent of the
amount of dividends or distributions paid to the Person in question or
the Subsidiary;
(b) the Net Income of any Subsidiary of the Person in question that is
subject to any restriction or limitation on the payment of dividends
or the making of other distributions, other than pursuant to the Notes
or the Indenture, shall be excluded to the extent of such restriction
or limitation;
(c) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall
be excluded;
(d) any net gain, but not loss, resulting from an Asset Sale by the Person
in question or any of its Subsidiaries other than in the ordinary
course of business shall be excluded; and
(e) extraordinary, unusual and nonrecurring gains and losses, including
any related tax effects on the Issuers, shall be excluded.
"Consolidated Net Worth" means, with respect to any Person at any date, the
consolidated stockholder's equity of such Person less the amount of such
stockholder's equity attributable to Disqualified Capital Stock of such Person
and its Subsidiaries, as determined in accordance with GAAP.
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"Default" means any condition or event that is, or with the passing of time
or giving of any notice expressly required under the Indenture, or both, would
be, an Event of Default.
"Designated Senior Indebtedness" as to the Company or any Guarantor, as the
case may be, means any Senior Indebtedness:
(a) under the Senior Credit Facility; or
(b) (i) which at the time of determination exceeds $25.0 million in
aggregate principal amount, or accreted value in the case of
Indebtedness issued at a discount, outstanding or available under
a committed facility;
(ii) which is specifically designated in the instrument evidencing
such Senior Indebtedness as "Designated Senior Indebtedness" by
such Person; and
(iii) as to which the Trustee has been given written notice of such
designation.
"Disqualified Capital Stock" means any Capital Stock of the Company or a
Restricted Subsidiary thereof which, by its terms, or by the terms of any
security into which it is convertible or for which it is exchangeable at the
option of the holder, or upon the happening of any event:
(a) matures on or prior to the maturity date of the Notes, for cash or
securities constituting Indebtedness; or
(b) is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, on or prior to the maturity date of the Notes, for cash or
securities constituting Indebtedness; or
(c) is redeemable at the option of the holder thereof, in whole or in part,
on or prior to the maturity date of the Notes, for cash or securities
constituting Indebtedness;
provided that Capital Stock of the Company that is held by a current or former
employee of the Company subject to a put option and/or a call option with the
Company triggered by the termination of such employee's employment with the
Company and/or the Company's performance shall not be deemed to be Disqualified
Capital Stock solely by virtue of such call option and/or put option.
Without limitation of the foregoing, Disqualified Capital Stock shall be
deemed to include:
(i) any Preferred Stock of a Restricted Subsidiary of the Company; and
(ii) any Preferred Stock of the Company, with respect to either of which,
under the terms of such Preferred Stock, by agreement or otherwise,
such Restricted Subsidiary or the Company is obligated to pay current
dividends or distributions in cash, other than Permitted Tax
Distributions, during the period prior to the maturity date of the
Notes;
provided, however, that Preferred Stock of the Company or any Restricted
Subsidiary thereof that is issued with the benefit of provisions requiring a
change of control offer to be made for such Preferred Stock in the event of a
change of control of the Company or such Restricted Subsidiary, which provisions
have substantially the same effect as the provisions
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of the Indenture described under "Change of Control," shall not be deemed to be
Disqualified Capital Stock solely by virtue of such provisions.
"EBITDA" means, for any Person, for any period, an amount equal to
(a) the sum of
(i) Consolidated Net Income for such period, plus
(ii) the provision for taxes for such period based on income or
profits to the extent such income or profits were included in
computing Consolidated Net Income and any provision for taxes
utilized in computing net loss under clause (i) hereof, plus
(iii) Consolidated Interest Expense for such period, but only
including Redeemable Dividends in the calculation of such
Consolidated Interest Expense to the extent that such Redeemable
Dividends have not been excluded in the calculation of
Consolidated Net Income, plus
(iv) depreciation for such period on a consolidated basis, plus
(v) amortization of intangibles for such period on a consolidated
basis, plus
(vi) any other non-cash items reducing Consolidated Net Income for
such period, plus
(vii) without duplication, Permitted Tax Distributions, plus
(viii) cash payments of expenses arising in connection with the
Recapitalization, minus
(b) all non-cash items increasing Consolidated Net Income for such period,
all for such Person and its Subsidiaries determined in accordance with
GAAP;
except that with respect to the Issuers, each of the foregoing items shall be
determined on a consolidated basis with respect to the Issuers and their
Restricted Subsidiaries only; provided, however, that, for purposes of
calculating EBITDA during any fiscal quarter, cash income from a particular
Investment, other than in a Subsidiary which under GAAP is consolidated, of such
Person shall be included only:
(i) if cash income has been received by such Person with respect to such
Investment; or
(ii) if the cash income derived from such Investment is attributable to
Temporary Cash Investments.
"Equity Compensation Trust" means the Company's Equity Compensation Trust
for the benefit of certain of its employees, established pursuant to the Equity
Compensation Trust Agreement, dated as of November 4, 1993, as amended by an
agreement dated as of October 1, 1997 between the Company and the trustees
thereof, and any successor trust with terms substantially similar thereto, with
an additional requirement of continued employment status.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
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"GAAP" means generally accepted accounting principles consistently applied
as in effect in the United States from time to time.
"Guarantee" means, as the context may require, individually, a guarantee,
or collectively, any and all guarantees, of the Obligations of the Company with
respect to the Notes by each Guarantor, if any, pursuant to the terms of the
Indenture.
"Guarantor" means Target and each Restricted Subsidiary of the Issuers that
hereafter becomes a Guarantor pursuant to the Indenture, and "Guarantors" mean
such entities, collectively.
"Guarantor Senior Indebtedness" means the principal of and premium, if any,
and interest, including, without limitation, interest accruing or that would
have accrued but for the filing of a bankruptcy, reorganization or other
insolvency proceeding whether or not such interest constitutes an allowable
claim in such proceeding, on, and any and all other fees, expense reimbursement
obligations, indemnities and other amounts due pursuant to the terms of all
agreements, documents and instruments providing for, creating, securing or
evidencing or otherwise entered into in connection with:
(a) any Guarantor's direct incurrence of any Indebtedness or its guarantee
of all Indebtedness of the Company or any Restricted Subsidiaries, in
each case owed to lenders under the Senior Credit Facility,
(b) all obligations of such Guarantor with respect to any Interest Rate
Agreement,
(c) all obligations of such Guarantor to reimburse any bank or other person
in respect of amounts paid under letters of credit, acceptances or
other similar instruments,
(d) all other Indebtedness of such Guarantor which does not provide that it
is to rank pari passu with or subordinate to the Guarantees, and
(e) all deferrals, renewals, extensions and refundings of, and amendments,
modifications and supplements to, any of the Guarantor Senior
Indebtedness described above.
Notwithstanding anything to the contrary in the foregoing, Guarantor Senior
Indebtedness will not include:
(a) Indebtedness of such Guarantor to any of its Subsidiaries;
(b) Indebtedness represented by the Guarantees;
(c) any Indebtedness which by the express terms of the agreement or
instrument creating, evidencing or governing the same is junior or
subordinate in right of payment to any item of Guarantor Senior
Indebtedness;
(d) any trade payable arising from the purchase of goods or materials or
for services obtained in the ordinary course of business; or
(e) Indebtedness incurred in violation of the Indenture.
"incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become liable in respect of such Indebtedness or other
obligation or the recording, as required pursuant to GAAP or otherwise, of any
such Indebtedness or other obligation on
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the balance sheet of such Person (and "incurrence," "incurred," "incurrable" and
"incurring" shall have meanings correlative to the foregoing); provided that a
change in GAAP that results in an obligation of such Person that exists at such
time becoming Indebtedness shall not be deemed an incurrence of such
Indebtedness.
"Indebtedness" means, without duplication, with respect to any Person, any
indebtedness at any time outstanding, secured or unsecured, contingent or
otherwise, which is for borrowed money, whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof, or evidenced by bonds, notes, debentures or similar instruments or
representing the balance deferred and unpaid of the purchase price of any
property, excluding, without limitation, any balances that constitute accounts
payable or trade payables or liabilities arising from advance payments or
customer deposits for goods and services sold by the Company in the ordinary
course of business, and other accrued liabilities arising in the ordinary course
of business, if and to the extent any of the foregoing indebtedness would appear
as a liability upon a balance sheet of such Person prepared in accordance with
GAAP, and shall also include, to the extent not otherwise included:
(a) any Capitalized Lease Obligations,
(b) obligations secured by a Lien to which the property or assets owned or
held by such Person is subject, whether or not the obligation or
obligations secured thereby shall have been assumed, provided, however,
that if such obligation or obligations shall not have been assumed, the
amount of such indebtedness shall be deemed to be the lesser of the
principal amount of the obligation or the fair market value of the
pledged property or assets,
(c) guarantees of items of other Persons which would be included within
this definition for such other Persons, whether or not such items would
appear upon the balance sheet of the guarantor,
(d) all obligations for the reimbursement of any obligor on any letter of
credit, banker's acceptance or similar credit transaction, provided
that in the case of any such letters of credit, the items for which
such letters of credit provide credit support are those of other
Persons which would be included within this definition for such other
Persons,
(e) in the case of the Issuers, Disqualified Capital Stock of the Issuers
or any Restricted Subsidiary thereof, and
(f) obligations of any such Person under any Interest Rate Agreement
applicable to any of the foregoing, if and to the extent such Interest
Rate Agreement obligations would appear as a liability upon a balance
sheet of such Person prepared in accordance with GAAP.
The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and, with respect to contingent obligations, the maximum liability upon
the occurrence of the contingency giving rise to the obligation, provided:
(a) that the amount outstanding at any time of any Indebtedness issued with
original issue discount is the principal amount of such Indebtedness
less the remaining unamortized portion of the original issue discount
of such Indebtedness at such time as determined in conformity with
GAAP; and
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(b) that Indebtedness shall not include any liability for federal, state,
local or other taxes.
Notwithstanding any other provision of the foregoing definition, any trade
payable arising from the purchase of goods or materials or for services obtained
in the ordinary course of business shall not be deemed to be "Indebtedness" of
the Company or any Restricted Subsidiary for purposes of this definition.
Furthermore, guarantees of, or obligations with respect to letters of credit
supporting, Indebtedness otherwise included in the determination of such amount
shall not also be included.
"Individual Investors" means the Management Investors and the former
Chairman of Holdings.
"Interest Rate Agreement" shall mean any interest or foreign currency rate
swap, cap, collar, option, hedge, forward rate or other similar agreement or
arrangement designed to protect against fluctuations in interest rates or
currency exchange rates.
"Investments" means, directly, or indirectly, any advance, account
receivable, other than an account receivable arising in the ordinary course of
business or acquired as part of the assets acquired by the Issuers in connection
with an acquisition of assets which is otherwise permitted by the terms of the
Indenture, loan or capital contribution to (by means of transfers of property to
others, payments for property or services for the account or use of others or
otherwise), the purchase of any stock, bonds, notes, debentures, partnership or
joint venture interests or other securities of, the acquisition, by purchase or
otherwise, of all or substantially all of the business or assets or stock or
other evidence of beneficial ownership of, any Person or the making of any
investment in any Person. Investments shall exclude extensions of trade credit
on commercially reasonable terms in accordance with normal trade practices.
"Issue Date" means the date the Notes are first issued by the Issuers and
authenticated by the Trustee under the Indenture.
"Lien" means, with respect to any property or assets of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, other than advance payments or customer deposits for goods and
services sold by the Company in the ordinary course of business, security
interest, lien, charge, easement, encumbrance, preference, priority, or other
security agreement or preferential arrangement of any kind or nature whatsoever
on or with respect to such property or assets, including without limitation, any
Capitalized Lease Obligation, conditional sales, or other title retention
agreement having substantially the same economic effect as any of the foregoing.
"Management Subordinated Notes" means notes issued to current or former
employees of the Company in accordance with the terms of the Executive
Agreements between the Company and such current or former employees in existence
on the Series A/ B Issue Date or pursuant to agreements between Holdings, TCC or
the Company and then current or former employees with substantially similar
terms regarding such issuance entered into after the Series A/B Issue Date,
which notes are expressly subordinated as to payment of principal, premium, if
any, and interest to the Notes.
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person determined in accordance with GAAP.
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"Net Proceeds" means:
(a) in the case of any sale of Capital Stock by an Issuer, the aggregate
net proceeds received by such Issuer, after payment of expenses,
commissions and the like incurred in connection therewith, whether such
proceeds are in cash or in property, valued at the fair market value
thereof, as determined in good faith by the Board of Directors of such
Issuer, at the time of receipt, and
(b) in the case of any exchange, exercise, conversion or surrender of
outstanding securities of any kind for or into shares of Capital Stock
of the Company which is not Disqualified Capital Stock, the net book
value of such outstanding securities on the date of such exchange,
exercise, conversion or surrender, plus any additional amount required
to be paid by the holder to the Company upon such exchange, exercise,
conversion or surrender, less any and all payments made to the holders,
e.g., on account of fractional shares and less all expenses incurred by
the Company in connection therewith.
"Non-Payment Event of Default" means any event, other than a Payment
Default, the occurrence of which entitles one or more Persons to accelerate the
maturity of any Designated Senior Indebtedness.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by the Chief Executive Officer, the President or any Vice President and
the Chief Financial Officer or any Treasurer of such Person that shall comply
with applicable provisions of the Indenture and delivered to the Trustee.
"Payment Default" means any default, whether or not any requirement for the
giving of notice, the lapse of time or both, or any other condition to such
default becoming an event of default has occurred, in the payment of principal
of, or premium, if any, or interest on or any other amount payable in connection
with Designated Senior Indebtedness.
"Permitted Asset Swap" means any transfer of properties or assets by the
Company or any of its Subsidiaries in which 90% of the consideration received by
the transferor consists of properties or assets, other than cash, that will be
used in the business of the transferor; provided that
(a) the aggregate fair market value, as determined in good faith by the
Board of Directors of the Company, of the property or assets being
transferred by the Company or such Subsidiary is not greater than the
aggregate fair market value, as determined in good faith by the Board
of Directors, of the property or assets received by the Company or such
Subsidiary in such exchange; and
(b) the aggregate fair market value, as determined in good faith by the
Board of Directors, of all property or assets transferred by the
Company and any of its Subsidiaries
(i) in connection with any single transfer or series of related
transfers shall not exceed $2.0 million and
(ii) in connection with all such transfers following the Series A/B
Issue Date shall not exceed $5.0 million in the aggregate.
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"Permitted Holders" means, collectively,
(a) Holdings and TCC,
(b) THL, CIVC, CIBC Merchant Fund, First Union and any Affiliate of,
including any equity fund advised by, any of the foregoing, other than
any portfolio company with operating assets, and
(c) the Individual Investors, each of the spouses, children, adoptive or
biological, or other lineal descendants of the Individual Investors,
the probate estate of any such individual and any trust, so long as one
or more of the foregoing individuals retains substantially all of the
controlling or beneficial interest thereunder.
"Permitted Indebtedness" means:
(a) Indebtedness of the Company or any Restricted Subsidiary
(i) arising under or in connection with the Senior Credit Facility in
an amount not to exceed $125.0 million, which amount shall be
reduced by any mandatory prepayments actually made thereunder
required as a result of any Asset Sale or similar sale of assets,
to the extent, in the case of payments of revolving credit
indebtedness, that the corresponding commitments have been
permanently reduced, and any scheduled payments actually made
thereunder; or
(ii) that constitutes Acquisition Debt (as defined in the Senior
Credit Facility) under the Senior Credit Facility to the extent
such Indebtedness permanently reduces the aggregate commitments
available under the Senior Credit Facility;
(b) Indebtedness under the Series B Notes and related guarantees, the Notes
and the Guarantees;
(c) Indebtedness not covered by any other clause of this definition which
was outstanding on the Series A/B Issue Date or is outstanding on the
Issue Date and was incurred subsequent to the Series A/B Issue Date in
compliance with the Series A/B Indenture;
(d) Indebtedness of the Company to any Restricted Subsidiary and
Indebtedness of any Restricted Subsidiary to the Company or another
Restricted Subsidiary;
(e) Interest Rate Agreements;
(f) Refinancing Indebtedness;
(g) Indebtedness under Commodity Hedge Agreements entered into in the
ordinary course of business consistent with reasonable business
requirements and not for speculation;
(h) Indebtedness consisting of guarantees made in the ordinary course of
business by the Company or its Subsidiaries of obligations of the
Issuers or any of their Subsidiaries, which obligations are otherwise
permitted under the Indenture;
(i) contingent obligations of the Company or its Subsidiaries in respect of
customary indemnification and purchase price adjustment obligations
incurred in connection with an Asset Sale; provided that the maximum
assumable liability in respect of
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all such obligations shall at no time exceed the gross proceeds
actually received by the Company and its Subsidiaries in connection
with such Asset Sale;
(j) Purchase Money Indebtedness and Capitalized Lease Obligations of the
Company and its Subsidiaries incurred to acquire property in the
ordinary course of business and any refinancings, renewals or
replacements of any such Purchase Money Indebtedness or Capitalized
Lease Obligation, subject to the limitations on the principal amount
thereof set forth in this clause (j), the principal amount of which
Purchase Money Indebtedness and Capitalized Lease Obligations shall not
in the aggregate at any one time outstanding exceed 5% of the Company's
consolidated total assets stated in accordance with GAAP as of the end
of the last preceding fiscal quarter for which financial statements are
available;
(k) the Management Subordinated Notes; and
(l) additional Indebtedness of the Company or any of its Subsidiaries,
other than Indebtedness specified in clauses (a) through (k) above, not
to exceed $5.0 million in the aggregate at any one time outstanding.
"Permitted Investments" means, for any Person, Investments made on or after
the date of the Indenture consisting of:
(a) Investments by the Company, or by a Restricted Subsidiary thereof, in
the Company or a Restricted Subsidiary;
(b) Temporary Cash Investments;
(c) Investments by the Company, or by a Restricted Subsidiary thereof, in a
Person, if as a result of such Investment
(i) such Person becomes a Restricted Subsidiary of the Company,
(ii) such Person is merged, consolidated or amalgamated with or into,
or transfers or conveys substantially all of its assets to, or
is liquidated into, the Company or a Restricted Subsidiary
thereof, or
(iii) such business or assets are owned by the Company or a Restricted
Subsidiary;
(d) an Investment that is made by the Company or a Restricted Subsidiary
thereof in the form of any stock, bonds, notes, debentures, partnership
or joint venture interests or other securities that are issued by a
third party to either or both of the Issuers or a Restricted Subsidiary
solely as partial consideration for the consummation of an Asset Sale
that is otherwise permitted under the covenant described under
"Limitation on Sale of Assets";
(e) Investments consisting of
(i) purchases and acquisitions of inventory, supplies, materials and
equipment, or
(ii) licenses or leases of intellectual property and other assets, in
each case in the ordinary course of business;
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(f) Investments consisting of
(i) loans and advances to employees for reasonable travel, relocation
and business expenses in the ordinary course of business not to
exceed $1.0 million in the aggregate at any one time outstanding,
(ii) loans to employees of the Company for the sole purpose of
purchasing equity of the Company,
(iii) extensions of trade credit in the ordinary course of business,
and
(iv) prepaid expenses incurred in the ordinary course of business;
(g) without duplication, Investments consisting of Indebtedness permitted
pursuant to clause (d) under the definition of Permitted Indebtedness;
(h) Investments existing on the Series A/B Issue Date or existing on the
Issue Date that were made subsequent to the Series A/B Issue Date in
compliance with the Series A/B Indenture;
(i) Investments of the Company under Interest Rate Agreements;
(j) Investments under Commodity Hedge Agreements entered into in the
ordinary course of business consistent with reasonable business
requirements and not for speculation;
(k) Investments consisting of endorsements for collection or deposit in the
ordinary course of business; and
(l) Investments, other than Investments specified in clauses (a) through
(k) above, in an aggregate amount, as valued at the time each such
Investment is made, not exceeding $5.0 million for all such Investments
from and after the Series A/B Issue Date; provided that the amount
available for Investments to be made pursuant to this clause (l) shall
be increased from time to time to the extent any return on capital is
received by the Company or a Restricted Subsidiary on an Investment
previously made in reliance on this clause (l).
"Permitted Liens" means
(a) Liens on property or assets of, or any shares of stock of or secured
debt of, any corporation existing at the time such corporation becomes
a Restricted Subsidiary of the Company or at the time such corporation
is merged into the Company or any of its Restricted Subsidiaries;
provided that such Liens are not incurred in connection with, or in
contemplation of, such corporation becoming a Restricted Subsidiary of
the Company or merging into the Company or any of its Restricted
Subsidiaries;
(b) Liens securing Refinancing Indebtedness; provided that any such Lien
does not extend to or cover any Property, shares or debt other than the
Property, shares or debt securing the Indebtedness so refunded,
refinanced or extended;
(c) Liens in favor of the Issuers or any of their Restricted Subsidiaries;
(d) Liens securing industrial revenue bonds;
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(e) Liens to secure Purchase Money Indebtedness and Capitalized Lease
Obligations that are permitted under clause (j) of the definition of
"Permitted Indebtedness"; provided that,
(i) with respect to any Purchase Money Indebtedness, any such Lien is
created solely for the purpose of securing Indebtedness
representing, or incurred to finance, refinance or refund, the
cost, including sales and excise taxes, installation and delivery
charges and other direct costs of, and other direct expenses paid
or charged in connection with, such purchase or construction, of
such Property,
(ii) with respect to any Purchase Money Indebtedness, the principal
amount of the Indebtedness secured by such Lien does not exceed
100% of such costs, and
(iii) such Lien does not extend to or cover any Property other than
the item of Property that is the subject of such Purchase Money
Indebtedness or Capitalized Lease Obligation, as the case may
be, and any improvements on such item,
(f) statutory liens or landlords', carriers', warehouseman's, mechanics',
suppliers', materialmen's, repairmen's or other like Liens arising in
the ordinary course of business which do not secure any Indebtedness
and with respect to amounts not yet delinquent or being contested in
good faith by appropriate proceedings, if a reserve or other
appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made therefor;
(g) Liens for taxes, assessments or governmental charges that are being
contested in good faith by appropriate proceedings;
(h) Liens securing Senior Indebtedness or Guarantor Senior Indebtedness;
(i) Liens existing on the Series A/B Issue Date or existing on the Issue
Date that arose subsequent to the A/B Issue Date in compliance with
the Series A/B Indenture;
(j) any extensions, substitutions, replacements or renewals of the
foregoing,
(k) Liens incurred in the ordinary course of business in connection with
worker's compensation, unemployment insurance or other forms of
government insurance or benefits, or to secure the performance of
letters of credit, bids, tenders, statutory obligations, surety and
appeal bonds, leases, government contracts and other similar
obligations, other than obligations for borrowed money, entered into
in the ordinary course of business;
(l) any attachment or judgment Lien not constituting an Event of Default
under the Indenture that is being contested in good faith by
appropriate proceedings and for which adequate reserves have been
established in accordance with GAAP, if so required;
(m) Liens arising from the filing, for notice purposes only, of financing
statements in respect of operating leases;
(n) Liens arising by operation of law in favor of depositary banks and
collecting banks, incurred in the ordinary course of business;
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(o) Liens consisting of restrictions on the transfer of securities,
pursuant to applicable federal and state securities laws;
(p) interests of lessors and licensors under leases and licenses to which
the Issuers or any of their Restricted Subsidiaries is a party; and
(q) with respect to any real property occupied by the Company or any of its
Restricted Subsidiaries, all easements, rights of way, licenses and
similar encumbrances on or defects of title that do not materially
impair the use of such property for its intended purposes.
"Permitted Tax Distributions" means distributions by Holdings or the
Company to their respective partners or members from time to time in an amount
approximately equal to the income tax liability of such partners or members of
Holdings or the Company, as the case may be, resulting from the taxable income
of Holdings or Company, as the case may be, (after taking into account, to the
extent they may reduce such tax liability, all of the prior tax losses of
Holdings or the Company, as the case may be, to the extent such losses have not
previously been deemed to reduce the taxable income of Holdings or the Company,
as the case may be, and thereby reduce distributions for taxes in accordance
herewith); such distribution for taxes shall be based on the approximate highest
combined tax rate that applies to any one of the partners or members of Holdings
or the Company, as the case may be.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization or government, including any agency or political subdivision
thereof.
"Preferred Stock" means any Capital Stock of a Person, however designated,
which entitles the holder thereof to a preference with respect to dividends,
distributions or liquidation proceeds of such Person over the holders of other
Capital Stock issued by such Person.
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person and its Subsidiaries under
GAAP.
"Public Equity Offering" means a public offering by the Company or TCC of
shares of its Common Stock, however designated and whether voting or non-voting,
and any and all rights, warrants or options to acquire such Common Stock;
provided, however, that in connection with any such Public Equity Offering the
net proceeds of such Public Equity Offering are contributed to the Company as
common equity.
"Purchase Money Indebtedness" means any Indebtedness incurred by a Person
to finance, within 90 days from incurrence, the cost, including the cost of
construction, of an item of Property acquired in the ordinary course of
business, the principal amount of which Indebtedness does not exceed the sum of
(a) 100% of such cost; and
(b) reasonable fees and expenses of such Person incurred in connection
therewith.
"Recapitalization" means the transactions described in the Recapitalization
Agreement.
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"Recapitalization Agreement" means the Securities Purchase and Redemption
Agreement dated August 27, 1997 by and among Holdings, TCC, TWP Recapitalization
Corp., THL and certain limited partners of Holdings and TCC, as amended as of
September 30, 1997.
"Redeemable Dividend" means, for any dividend or distribution, other than
Permitted Tax Distributions, with regard to Disqualified Capital Stock, the
quotient of the dividend or distribution divided by the difference between one
and the maximum statutory federal income tax rate, expressed as a decimal number
between 1 and 0, then applicable to the issuer of such Disqualified Capital
Stock.
"Refinancing Indebtedness" means Indebtedness that refunds, refinances or
extends any Indebtedness of the Company outstanding on the Issue Date or other
Indebtedness permitted to be incurred by the Company or its Restricted
Subsidiaries pursuant to the terms of the Indenture, but only to the extent
that:
(a) the Refinancing Indebtedness is subordinated to the Notes to at least
the same extent as the Indebtedness being refunded, refinanced or
extended, if at all;
(b) the Refinancing Indebtedness is scheduled to mature either
(i) no earlier than the Indebtedness being refunded, refinanced or
extended, or
(ii) after the maturity date of the Notes;
(c) the portion, if any, of the Refinancing Indebtedness that is scheduled
to mature on or prior to the maturity date of the Notes has a weighted
average life to maturity at the time such Refinancing Indebtedness is
incurred that is equal to or greater than the weighted average life to
maturity of the portion of the Indebtedness being refunded, refinanced
or extended that is scheduled to mature on or prior to the maturity
date of the Notes;
(d) such Refinancing Indebtedness is in an aggregate principal amount that
is equal to or less than the sum of
(i) the aggregate principal amount then outstanding under the
Indebtedness being refunded, refinanced or extended;
(ii) the amount of accrued and unpaid interest, if any, and premiums
owed, if any, not in excess of preexisting prepayment provisions
on such Indebtedness being refunded, refinanced or extended; and
(iii) the amount of customary fees, expenses and costs related to the
incurrence of such Refinancing Indebtedness, and
(e) such Refinancing Indebtedness is incurred by the same Person that
initially incurred the Indebtedness being refunded, refinanced or
extended, except that the Company may incur Refinancing Indebtedness to
refund, refinance or extend Indebtedness of any Wholly-Owned Subsidiary
of the Company.
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"Restricted Payment" means any of the following:
(a) the declaration or payment of any dividend or any other distribution
or payment on Capital Stock of the Issuers or any Restricted
Subsidiary of the Issuers or any payment made to the direct or
indirect holders, in their capacities as such, of Capital Stock of the
Issuers or any Restricted Subsidiary of the Issuers other than:
(i) dividends or distributions payable solely in Capital Stock,
other than Disqualified Capital Stock, or in options, warrants
or other rights to purchase Capital Stock, other than
Disqualified Capital Stock,
(ii) Permitted Tax Distributions, and
(iii) in the case of Restricted Subsidiaries of the Company,
dividends or distributions payable to the Company or to a
Wholly-Owned Subsidiary of the Company;
(b) the purchase, redemption or other acquisition or retirement for value
of any Capital Stock of the Company or any of its Restricted
Subsidiaries, other than Capital Stock owned by the Company or a
Wholly-Owned Subsidiary of the Company, excluding Disqualified Stock;
(c) the making of any principal payment on, or the purchase, defeasance,
repurchase, redemption or other acquisition or retirement for value,
prior to any scheduled maturity, scheduled repayment or scheduled
sinking fund payment, of any Indebtedness which is subordinate in
right of payment to the Notes other than subordinated Indebtedness
acquired in anticipation of satisfying a scheduled sinking fund
obligation, principal installment or final maturity, in each case due
within one year of the date of acquisition;
(d) without limiting the generality of the foregoing clause (c), the
making of any principal or interest payment on the Management
Subordinated Notes;
(e) the making of any payments to the Equity Compensation Trust;
(f) the making of any Investment or guarantee of any Investment in any
Person other than a Permitted Investment;
(g) any designation of a Restricted Subsidiary as an Unrestricted
Subsidiary on the basis of the Investment by the Issuers therein; and
(h) forgiveness of any Indebtedness of an Affiliate of the Issuers, other
than a Restricted Subsidiary, to the Issuers or a Restricted
Subsidiary.
For purposes of determining the amount expended for Restricted Payments, cash
distributed or invested shall be valued at the face amount thereof and property
other than cash shall be valued at its fair market value determined by the
Company's Board of Directors.
"Restricted Subsidiary" means a Subsidiary of the Company other than an
Unrestricted Subsidiary. The Board of Directors of the Company may designate any
Unrestricted Subsidiary or any Person that is to become a Subsidiary as a
Restricted Subsidiary if immediately after giving effect to such action, and
treating any Acquired Indebtedness as having been incurred at the time of such
action, the Issuers could have
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incurred at least $1.00 of additional Indebtedness, other than Permitted
Indebtedness, pursuant to the "Limitation on Additional Indebtedness" covenant.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Sale and Lease-Back Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Restricted Subsidiary of the
Company of any real or tangible personal Property, which Property has been or is
to be sold or transferred by the Company or such Restricted Subsidiary to such
Person in contemplation of such leasing.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Credit Facility" means the Credit Agreement, dated as of October 1,
1997, among the Issuers, the lenders listed therein and Canadian Imperial Bank
of Commerce, as administrative agent, and First Union National Bank, as
documentation agent, as amended and restated as of November 6, 1997, together
with the documents related thereto, including, without limitation, any guarantee
agreements and security documents, in each case as such agreements may be
amended, including any amendment and restatement thereof, supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring, including adding
Subsidiaries of the Issuers as additional borrowers or guarantors thereunder,
all or any portion of the Indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agent, lender or
group of lenders.
"Senior Indebtedness" means the principal of and premium, if any, and
interest, including, without limitation, interest accruing or that would have
accrued but for the filing of a bankruptcy, reorganization or other insolvency
proceeding whether or not such interest constitutes an allowable claim in such
proceeding, on, and any and all other fees, expense reimbursement obligations,
indemnities and other amounts due pursuant to the terms of all agreements,
documents and instruments providing for, creating, securing or evidencing or
otherwise entered into in connection with
(a) all Indebtedness of the Issuers owed to lenders under the Senior Credit
Facility;
(b) all obligations of the Company with respect to any Interest Rate
Agreement;
(c) all obligations of the Company to reimburse any bank or other Person in
respect of amounts paid under letters of credit, acceptances or other
similar instruments;
(d) all other Indebtedness of the Company which does not provide that it is
to rank pari passu with or subordinate to the Notes; and
(e) all deferrals, renewals, extensions and refundings of, and amendments,
modifications and supplements to, any of the Senior Indebtedness
described above.
Notwithstanding anything to the contrary in the foregoing, Senior
Indebtedness will not include:
(a) Indebtedness of the Company to any of its Subsidiaries;
(b) Indebtedness represented by the Notes or the Series B Notes;
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(c) any Indebtedness which by the express terms of the agreement or
instrument creating, evidencing or governing the same is junior or
subordinate in right of payment to any item of Senior Indebtedness;
(d) any trade payable arising from the purchase of goods or materials or
for services obtained in the ordinary course of business; and
(e) Indebtedness incurred in violation of the Indenture.
"Series A/B Indenture" means the Indenture, dated as of November 12, 1997,
among the Issuers and the Trustee relating to the 9 5/8% Senior Subordinated
Notes due 2007 of the Issuers.
"Series A/B Issue Date" means November 12, 1997.
"Series B Notes" means the $100.0 million aggregate principal amount of
Series B 9 5/8% Senior Subordinated Notes due 2007 issued under the Series A/B
Indenture in exchange for the 9 5/8% Senior Subordinated Notes due 2007
originally issued thereunder on the Series A/B Issue Date.
"Subsidiary" of any specified Person means any corporation, partnership,
limited liability company, joint venture, association or other business entity,
whether now existing or hereafter organized or acquired,
(a) in the case of a corporation, of which more than 50% of the total
voting power of the Capital Stock entitled, without regard to the
occurrence of any contingency, to vote in the election of directors,
officers or trustees thereof is held by such first-named Person or any
of its Subsidiaries; or
(b) in the case of a partnership, limited liability company, joint venture,
association or other business entity, with respect to which such
first-named Person or any of its Subsidiaries has the power to direct
or cause the direction of the management and policies of such entity by
contract or otherwise or if in accordance with GAAP such entity is
consolidated with the first-named Person for financial statement
purposes.
"Target" means Target Directories of Michigan, Inc., a Michigan corporation
and a Wholly-Owned Subsidiary of the Company.
"TCC" means TransWestern Communications Company, Inc., a Delaware
corporation and the general partner of the Company.
"Temporary Cash Investments" means
(a) Investments in marketable, direct obligations issued or guaranteed by
the United States of America, or of any governmental agency or
political subdivision thereof, maturing within 365 days of the date of
purchase;
(b) Investments in certificates of deposit issued by a bank organized under
the laws of the United States of America or any state thereof or the
District of Columbia, in each case having capital, surplus and
undivided profits totaling more than $500.0 million and rated at least
A by Standard & Poor's Corporation and A-2 by Moody's Investors
Service, Inc., maturing within 365 days of purchase; or
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(c) Investments not exceeding 365 days in duration in money market funds
that invest substantially all of such funds' assets in the Investments
described in the preceding clauses (a) and (b).
"THL" means Thomas H. Lee Equity Fund III, L.P.
"Unrestricted Subsidiary" means
(a) any Subsidiary of an Unrestricted Subsidiary; and
(b) any Subsidiary of the Company which is classified after the Issue Date
as an Unrestricted Subsidiary by a resolution adopted by the Board of
Directors of the Company; provided that a Subsidiary organized or
acquired after the Issue Date may be so classified as an Unrestricted
Subsidiary only if such classification is in compliance with the
covenant set forth under "Limitation on Restricted Payments."
The Trustee shall be given prompt notice by the Company of each resolution
adopted by the Board of Directors of the Company under this provision, together
with a copy of each such resolution adopted.
"Wholly-Owned Subsidiary" of a specified Person means any Subsidiary, or,
if such specified Person is the Company, a Restricted Subsidiary, all of the
outstanding voting securities, other than directors' qualifying shares, of which
are owned, directly or indirectly, by such Person.
BOOK-ENTRY; DELIVERY AND FORM
The Series D notes initially will be represented by one or more notes in
registered, global form without interest coupons (collectively, the "Global
Note"). The Global Note will be deposited upon issuance with the Trustee, as
custodian for The Depository Trust Company ("DTC"), in New York, New York, and
registered in the name of DTC or its nominee, in each case for credit to an
account of a direct or indirect participant as described below.
Except as set forth below, the Global Note may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Note may not be exchanged for Series
D notes in certificated form except in the limited circumstances described
below.
The Series D notes may be presented for registration of transfer and
exchange at the offices of the Registrar.
DTC has advised us that DTC is a limited-purpose trust company created to
hold securities for its participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in those securities between the Participants through electronic book-entry
changes in accounts of the Participants. The Participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. Access to DTC's system is also available to other entities
such as banks, brokers, dealers and trust companies that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly (collectively, the "Indirect Participants"). Persons who are not
Participants may beneficially own securities held by or on behalf of DTC only
through the Participants or the Indirect Participants. The ownership interest
and transfer of ownership interest of each
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actual purchaser of each security held by or on behalf of DTC are recorded on
the records of the Participants and the Indirect Participants.
DTC has also advised us that pursuant to procedures established by it:
- upon deposit of the Global Note, DTC will credit the accounts of
Participants designated by the exchanging holders with portions of the
principal amount of the Global Note; and
- ownership of such interests in the Global Note will be shown on, and the
transfer of ownership thereof will be effected only through, records
maintained by DTC, with respect to the Participants, or by the
Participants and the Indirect Participants, with respect to other owners
of beneficial interests in the Global Note.
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in the Global Note to such persons may be limited
to that extent. Because DTC can act only on behalf of the Participants, which in
turn act on behalf of the Indirect Participants and certain banks, the ability
of a person having beneficial interests in the Global Note to pledge such
interests to persons or entities that do not participate in the DTC system, or
otherwise take actions in respect of such interests, may be affected by the lack
of a physical certificate evidencing such interests.
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTE WILL NOT
HAVE SERIES D NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL
DELIVERY OF SERIES D NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE
REGISTERED OWNERS OR HOLDERS THEREOF UNDER THE INDENTURE RELATED THERETO FOR ANY
PURPOSE.
Payments in respect of the principal of, and premium, if any, and interest
on the Global Note registered in the name of DTC or its nominee will be payable
to DTC or its nominee in its capacity as the registered holder under the
indenture relating to the Series D notes. Under the terms of such indenture, the
persons in whose names the notes, including the Global Note, are registered will
be treated as the owners thereof for the purpose of receiving such payments and
for any and all other purposes whatsoever. Consequently, none of our company or
the Trustee nor any agent of our company or the Trustee has or will have any
responsibility or liability for:
- any aspect or accuracy of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of
beneficial ownership interests in the Global Note, or for maintaining,
supervising or reviewing any of DTC's records or any Participant's or
Indirect Participant's records relating to the beneficial ownership
interests in the Global Note; or
- any other matter relating to the actions and practices of DTC or any of
the Participants or the Indirect Participants.
DTC has advised us that its current practice, upon receipt of any payment
in respect of securities such as the Series D notes, including principal and
interest, is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the relevant security as
shown on the records of DTC. Payments by the Participants and the Indirect
Participants to the beneficial owners of Series D notes will be governed by
standing instructions and customary practices and will not be the responsibility
of DTC, the Trustee or the company. Neither our company nor the Trustee will be
liable for any
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delay by DTC or any of the Participants in identifying the beneficial owners of
the Series D notes, and we and the Trustee may conclusively rely on and will be
protected in relying on instructions from DTC or its nominee as the registered
owner of the Global Note for all purposes.
Interests in the Global Note will trade in DTC's Same-Day Funds Settlement
System and secondary market trading activity in such interests will therefore
settle in immediately available funds, subject in all cases to the rules and
procedures of DTC and the Participants. Transfers between Participants in DTC
will be effected in accordance with DTC's procedures and will be settled in
same-day funds.
DTC has advised us that it will take any action permitted to be taken by a
holder of Series D notes only at the direction of one or more Participants to
whose account with DTC interests in the Global Note are credited and only in
respect of such portion of the aggregate principal amount of the Notes as to
which such Participant or Participants has or have given such direction.
However, if any of the events described under "-- Exchange of Book Entry Notes
for Certificated Notes" occurs, DTC reserves the right to exchange the Global
Note for Series D notes in certificated form and to distribute such notes to its
Participants.
The information in this section concerning DTC and its book-entry system
has been obtained from sources that we believe to be reliable, but we take no
responsibility for the accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Note among accountholders in DTC, it is under no
obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. None of our company or the Trustee
nor any agent of our company or the Trustee will have any responsibility for the
performance by DTC or its respective participants, indirect participants or
accountholders of their respective obligations under the rules and procedures
governing their operations.
Exchange of Book-Entry Notes for Certificated Notes
The Global Note is exchangeable for definitive Series D notes in registered
certificated form if:
- DTC notifies us that it is unwilling or unable to continue as depository
for the Global Note and we thereupon fail to appoint a successor
depository or DTC has ceased to be a clearing agency registered under the
Exchange Act;
- we, at our option, notify the Trustee in writing that we elect to cause
the issuance of the Series D notes in certificated form; or
- there shall have occurred and be continuing a default or an event of
default with respect to the Series D notes.
In all cases, certificated notes delivered in exchange for the Global Note or
beneficial interests therein will be registered in the names, and issued in any
approved denominations, requested by or on behalf of DTC, in accordance with its
customary procedures.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes the material U.S. federal income tax
aspects of the exchange of Series B and C notes for Series D notes pursuant to
the exchange offer and the ownership and disposition of the Series D notes. This
discussion is a summary and does not consider all aspects of U.S. federal income
taxation that may be relevant to the purchase, ownership and disposition of the
notes by a prospective investor in light of such investor's personal
circumstances. This discussion also does not address the U.S. federal income tax
consequences of ownership of notes not held as capital assets within the meaning
of Section 1221 of the U.S. Internal Revenue Code of 1986, as amended (the
"Code"), or the U.S. federal income tax consequences to investors subject to
special treatment under the U.S. federal income tax laws, such as dealers in
securities or foreign currency, tax-exempt entities, financial institutions,
insurance companies, persons that hold the notes as part of a "straddle," a
"hedge" or a "conversion transaction," persons that have a "functional currency"
other than the U.S. dollar, and investors in pass-through entities. In addition,
this discussion does not describe any tax consequences arising under U.S.
federal gift and estate taxes or out of the tax laws of any state, local or
foreign jurisdiction.
This discussion is based upon the Code, existing Treasury regulations
thereunder, and current administrative rulings and court decisions. All of the
foregoing is subject to change, possibly on a retroactive basis, and any such
change could affect the continuing validity of this discussion.
PERSONS CONSIDERING INVESTING IN THE NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE APPLICATION OF FEDERAL INCOME TAX LAWS, AS WELL AS THE
LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION, TO THEIR PARTICULAR
SITUATIONS.
The exchange of Series B and C notes for Series D notes pursuant to the
exchange offer will not be treated as an "exchange" for federal income tax
purposes because the Series D notes will not be considered to differ materially
in kind or extent from the Series B and C notes. Rather, the Series D notes
received by a holder will be treated as a continuation of the Series B and C
notes in the hands of such holder. As a result, there will be no federal income
tax consequences to holders exchanging Series B and C notes for Series D notes
pursuant to the exchange offer.
U.S. HOLDERS
The following discussion is limited to the U.S. federal income tax
consequences relevant to a holder of a Series D note that is:
- a citizen or resident (as defined in Section 7701(b)(1) of the Code) of
the United States;
- a corporation organized under the laws of the United States or any
political subdivision thereof or therein;
- an estate, the income of which is subject to U.S. federal income tax
regardless of the source; or
- a trust with respect to which a court within the United States is able to
exercise primary supervision over its administration and one or more
United States persons have the authority to control all of its
substantial decisions (a "U.S. Holder").
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Certain U.S. federal income tax consequences relevant to a holder other than a
U.S. Holder are discussed separately below.
Stated Interest
Stated interest on a Series D note should be taxable to a U.S. Holder as
ordinary interest income at the time it accrues or is received in accordance
with such Holder's method of accounting for U.S. federal income tax purposes.
Market Discount
If a Series D note is acquired at a "market discount," some or all of any
gain realized upon a sale or other disposition or payment at maturity or some or
all of a partial principal payment of such Series D note may be treated as
ordinary income, as described below. For this purpose, "market discount" is the
excess, if any, of the stated redemption price at maturity of a Series D note
over its purchase price, subject to a statutory de minimis exception. Unless a
U.S. Holder has elected to include market discount in income as it accrues, any
gain realized on a subsequent disposition of a Series D note, other than in
connection with certain nonrecognition transactions, or payment at maturity, or
some or all of any partial principal payment with respect to the Series D note,
will be treated as ordinary income to the extent of the market discount that is
treated as having accrued during the period such U.S. Holder held the Series D
note.
The amount of market discount treated as having accrued will be determined
either:
- on a straight-line basis by multiplying the market discount times a
fraction, the numerator of which is the number of days the Series D note
was held by the U.S. Holder and the denominator of which is the total
number of days after the date such U.S. Holder acquired the Series D note
up to and including the date of its maturity; or
- if the U.S. Holder so elects, on a constant interest rate method.
A U.S. Holder may make that election with respect to any Series D note but, once
made, such election is irrevocable.
In lieu of recharacterizing gain upon disposition as ordinary income to the
extent of accrued market discount at the time of disposition, a U.S. Holder of a
Series D note acquired at a market discount may elect to include market discount
in income currently, through the use of either the straight-line inclusion
method or the elective constant interest method. Once made, the election to
include market discount in income currently applies to all Series D notes and
other obligations held by the U.S. Holder that are purchased at a market
discount during the taxable year for which the election is made, and all
subsequent taxable years of the U.S. Holder, unless the Internal Revenue Service
(the "IRS") consents to a revocation of the election. If an election is made to
include market discount in income currently, the basis of the Series D note in
the hands of the U.S. Holder will be increased by the market discount thereon as
it is included in income.
Unless a U.S. Holder who acquires a Series D note at a market discount
elects to include market discount in income currently, such U.S. Holder may be
required to defer deductions for any interest paid on indebtedness allocable to
such Series D notes in an amount not exceeding the deferred income until such
income is realized.
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Bond Premium
If a U.S. Holder purchases a note and immediately after the purchase the
adjusted basis of the note exceeds the sum of all amounts payable on the
instrument after the purchase date, other than qualified stated interest, the
note has "bond premium." The Series C notes were issued for an amount in excess
of their principal amount, and thus have "bond premium." A U.S. Holder may elect
to amortize such bond premium over the remaining term of such note or if it
results in a smaller amount of amortizable bond premium, until an earlier call
date.
If bond premium is amortized, the amount of interest that must be included
in the U.S. Holder's income for each period ending on an interest payment date
or at the stated maturity, as the case may be, will be reduced by the portion of
premium allocable to such period based on the note's yield to maturity. If such
an election to amortize bond premium is not made, a U.S. Holder must include the
full amount of each interest payment in income in accordance with its regular
method of accounting and will receive a tax benefit from the premium only in
computing such U.S. Holder's gain or loss upon the sale or other disposition or
payment of the principal amount of the Series D note.
An election to amortize premium will apply to amortizable bond premium on
all notes and other bonds, the interest on which is includible in the U.S.
Holder's gross income, held at the beginning of the U.S. Holder's first taxable
year to which the election applies or that are thereafter acquired and may be
revoked only with the consent of the IRS.
Exchange Notes
Neither an exchange of Series B or C notes for Series D notes with terms
identical to those of the Series B and C notes nor the filing of a registration
statement with respect to the resale of the Series C notes should be a taxable
event to holders of Series B or C notes, and holders should not recognize any
taxable gain or loss or any interest income as a result of such an exchange or
such a filing. The issuers are obligated to pay additional interest to the
holders of the Series C notes under certain circumstances described under "The
Exchange Offer -- Purpose and Effect of the Exchange Offer" above. Any such
payments should be treated for tax purposes as interest, taxable to holders as
such payments become fixed and payable.
Sale, Exchange or Redemption of the Series D Notes
Upon the disposition of a Series D note by sale, exchange or redemption, a
U.S. Holder will generally recognize gain or loss equal to the difference
between the amount realized on the disposition, other than amounts attributable
to accrued interest not yet taken into income which will be taxed as ordinary
income, and the U.S. Holder's tax basis in the Series D note. A U.S. Holder's
tax basis in a Series D note generally will equal the cost of the Series D note
to the U.S. Holder increased by amounts includible in income as market discount,
if the U.S. Holder elects to include market discount on a current basis, and
reduced by any bond premium amortized by any U.S. Holder.
Assuming the Series D note is held as a capital asset, such gain or loss,
except to the extent that the market discount rules otherwise provide, will
generally constitute capital gain or loss and will be long-term capital gain,
which is taxed, in the case of non-corporate taxpayers, at a maximum rate of
20%, or loss if the U.S. Holder has held such Series D note for longer than 12
months.
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Backup Withholding and Information Reporting
Under the Code, a U.S. Holder of a Series D note may be subject, under
certain circumstances, to information reporting and/or backup withholding at a
31% rate with respect to cash payments in respect of interest on, or the gross
proceeds from disposition of, a Series D note. This withholding applies only if
a U.S. Holder:
- fails to furnish its social security or other taxpayer identification
number ("TIN") within a reasonable time after a request therefor;
- furnishes an incorrect TIN;
- fails to report interest or dividends properly; or
- fails, under certain circumstances, to provide a certified statement,
signed under penalty of perjury, that the TIN provided is its correct
number and that it is not subject to backup withholding.
Any amount withheld from a payment to a U.S. Holder under the backup withholding
rules is allowable as a credit, and may entitle such holder to a refund, against
such Holder's U.S. federal income tax liability, provided that the required
information is furnished to the IRS. Certain persons are exempt from backup
withholding, including corporations and financial institutions. Holders of
Series D notes should consult their tax advisors as to their qualification for
exemption from withholding and the procedure for obtaining such exemption.
NON-U.S. HOLDERS
The following discussion is limited to the U.S. federal income tax
consequences relevant to a holder of a Series D note that is not a U.S. Holder
(a "Non-U.S. Holder").
This discussion does not address all aspects of U.S. federal income
taxation that may be relevant to the purchase, ownership or disposition of the
Series D notes by any particular Non-U.S. Holder in light of such Holder's
personal circumstances, including holding the Series D notes through a
partnership. For example, persons who are partners in foreign partnerships or
beneficiaries of foreign trusts or estates and who are subject to U.S. federal
income tax because of their own status, such as U.S. residence or foreign
persons engaged in a trade or business in the United States, may be subject to
U.S. federal income tax even though the entity is not subject to income tax on
disposition of its Series D note.
For purposes of the following discussion, interest and gain on the sale,
exchange or other disposition of the Series D note will be considered "U.S.
trade or business income" if such income or gain is effectively connected with
the conduct of a U.S. trade or business, or in the case of an applicable income
tax treaty between the United States and the country of which the Holder is a
qualified resident, attributable to a U.S. permanent establishment (or to a
fixed base) in the United States.
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Stated Interest
Generally, any interest paid to a Non-U.S. Holder of a Series D note that
is not U.S. trade or business income will not be subject to U.S. federal income
tax if the interest qualifies as "portfolio interest." Interest on the Series D
notes will qualify as portfolio interest if:
- the Non-U.S. Holder does not actually or constructively own 10% or more
capital or profits interest in TransWestern Publishing Company LLC, or
10% or more of the voting power of TWP Capital Corp. II, and is not a
"controlled foreign corporation" with respect to which either of the
issuers is a "related person" within the meaning of Section 881(c)(3)(C)
of the Code; and
- the beneficial owner, under penalties of perjury, certifies that the
beneficial owner is not a U.S. person and such certificate provides the
beneficial owner's name and address.
The gross amount of payments to a Non-U.S. Holder of interest that do not
qualify for the portfolio interest exception and that are not U.S. trade or
business income will be subject to U.S. withholding tax at the rate of 30%,
unless a U.S. income tax treaty applies to reduce or eliminate withholding. U.S.
trade or business income will be taxed at regular U.S. federal income tax rates
rather than the 30% gross rate. To claim the benefit of a tax treaty or to claim
exemption from withholding because the income is U.S. trade or business income,
the Non-U.S. Holder must provide a properly executed Form 1001 or 4224, or such
successor forms as the IRS designates, as applicable, prior to payment of
interest. These forms must be periodically updated. Under regulations effective
beginning after December 31, 1999, the Forms 1001 and 4224 will be replaced by
Form W-8, and a Non-U.S. Holder who is claiming the benefits of a tax treaty may
be required to obtain a U.S. TIN and to provide certain documentary evidence
issued by foreign governmental authorities to prove residence in the foreign
country.
Sale, Exchange or Redemption of Notes
Subject to the discussion concerning backup withholding, any gain realized
by a Non-U.S. Holder on the sale, exchange or redemption of a Series D note
generally will not be subject to U.S. federal income tax unless such gain is
U.S. trade or business income, or, subject to certain exceptions, the Non-U.S.
Holder is an individual who holds the Series D note as a capital asset and is
present in the United States for 183 days or more in the taxable year of the
disposition.
Information Reporting and Backup Withholding
The issuers must report annually to the IRS and to each Non-U.S. Holder any
interest that is subject to U.S. withholding tax or that is exempt from
withholding pursuant to a tax treaty or the portfolio interest exception. Copies
of these information returns may also be made available under the provisions of
a specific treaty or agreement to the tax authorities of the country in which
the Non-U.S. Holder resides.
Backup withholding and information reporting will not apply to payments of
principal on the Series D notes by the issuers to a Non-U.S. Holder, if the
Holder certifies as to its non-U.S. status under penalties of perjury or
otherwise establishes an exemption, provided
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that neither the issuers nor their paying agent has actual knowledge that the
Holder is a U.S. Holder or that the conditions of any other exemption are not,
in fact, satisfied.
The payment of the proceeds from the disposition of notes to or through the
U.S. office of any broker, U.S. or foreign, will be subject to information
reporting and possible backup withholding unless the owner certifies as to its
non-U.S. status under penalties of perjury or otherwise establishes an
exemption, provided that the broker does not have actual knowledge that the
holder is a U.S. Holder or that the conditions of any other exemption are not,
in fact, satisfied. The payment of the proceeds from the disposition of a Series
D note to or through a non-U.S. office of a U.S. broker that is not a "U.S.
related person" will not be subject to information reporting or backup
withholding. For this purpose, a "U.S. related person" is a "controlled foreign
corporation" for U.S. federal income tax purposes or a foreign person 50% or
more of whose gross income from all sources for the three-year period ending
with the close of its taxable year preceding the payment, or for such part of
the period that the broker has been in existence, is derived from activities
that are effectively connected with the conduct of a U.S. trade or business.
In the case of the payment of proceeds from the disposition of Series D
notes to or through a non-U.S. office of a broker that is either a U.S. person
or a U.S. related person, the regulations require information reporting on the
payment unless the broker has documentary evidence in its files that the owner
is a Non-U.S. Holder and the broker has no knowledge to the contrary. Backup
withholding will not apply to payments made through foreign offices of a broker
that is a U.S. person or a U.S. related person, absent actual knowledge that the
payee is a U.S. Holder.
Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a refund or a credit against such Non-U.S.
Holder's U.S. federal income tax liability, provided that the requisite
procedures are followed.
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Series D notes for its own
account pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Series D notes. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a Participating Broker-Dealer in connection with the resale of Series D notes
received in exchange for Series B or C notes where such Series B or C notes were
acquired as a result of market-making activities or other trading activities. We
have agreed that for a period of 180 days after the expiration date of the
exchange offer, we will make this prospectus, as amended or supplemented,
available to any Participating Broker-Dealer for use in connection with any such
resale.
We will not receive any proceeds from any sales of the Series D notes by
Participating Broker Dealers. Series D notes received by Participating
Broker-Dealers for their own account pursuant to the exchange offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Series D notes or
a combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such Participating Broker-Dealer and/or the purchasers of
any such Series D notes. Any Participating Broker-Dealer that resells the Series
D notes that were
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received by it for its own account pursuant to the exchange offer and any broker
or dealer that participates in a distribution of such Series D notes may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any such resale of Series D notes and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The Letter of Transmittal states that by acknowledging that
it will deliver and by delivering a prospectus, a Participating Broker-Dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
For a period of 180 days after the expiration date, we will promptly send
additional copies of this prospectus and any amendment or supplement to this
prospectus to any Participating Broker-Dealer that requests such documents in
the Letter of Transmittal.
LEGAL MATTERS
Certain legal matters relating to the issuance of the Series D notes will
be passed upon by Kirkland & Ellis, Chicago, Illinois, a partnership which
includes professional corporations.
EXPERTS
The financial statements of TransWestern Publishing Company LLC as of
December 31, 1998 and April 30, 1998 and 1997 and for the eight months ended
December 31, 1998 and each of the three years in the period ended April 30, 1998
included in this prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report appearing
elsewhere herein and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
AVAILABLE INFORMATION
TransWestern is subject to the periodic reporting and other informational
requirements of the Securities Exchange Act of 1934, as amended, and in
accordance therewith files reports and other information with the SEC. Any
reports and other information filed under the Securities Exchange Act of 1934
may be inspected at the public reference facilities maintained by the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of the
SEC located at 7 World Trade Center, Suite 1300, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such materials may be obtained from the Public Reference
Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The SEC maintains a web site at http://www.sec.gov that contains reports
and other information regarding registrants, like TransWestern, that file
electronically with the SEC.
TransWestern has agreed that, whether or not it is required to do so by the
rules and regulations of the SEC, for so long as any of the notes remain
outstanding, it will furnish to the holders of the notes and file with the SEC,
unless the SEC will not accept such a filing:
- all quarterly and annual financial information that would be required to
be contained in a filing with the SEC on Forms 10-Q and 10-K if it was
required to
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file such forms, including a "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and, with respect to the
annual information only, a report thereon by TransWestern's certified
independent accountants, and
- all reports that would be required to be filed with the SEC on Form 8-K
if TransWestern was required to file such reports.
In addition, for so long as any of the notes remain outstanding, the issuers
have agreed to make available to any prospective purchaser of the notes or
beneficial owner of the notes in connection with any sale thereof the
information required by Rule 144A(d)(4) under the Securities Act.
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TRANSWESTERN PUBLISHING COMPANY LLC
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........... F-2
Consolidated Balance Sheets as of April 30, 1997 and 1998
and December 31, 1998..................................... F-3
Consolidated Statements of Operations for each of the three
years ended April 30, 1998 and for the transition periods
for the eight months ended December 31, 1997 (Unaudited)
and 1998.................................................. F-4
Consolidated Statements of Changes in Member Deficit for
each of the three years ended April 30, 1998, and the
transition period for the eight months ended December 31,
1998...................................................... F-5
Consolidated Statements of Cash Flows for each of the three
years ended April 30, 1998 and the transition periods for
the eight months ended December 31, 1997 (Unaudited) and
1998...................................................... F-6
Notes to Consolidated Financial Statements.................. F-7
UNITED DIRECTORY SERVICES, INC.
INDEX TO FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Auditors........... F-22
Balance Sheet as of December 31, 1998....................... F-23
Statement of Operations for the Year Ended December 31,
1998...................................................... F-24
Statement of Shareholders' Equity for the Year Ended
December 31, 1998......................................... F-25
Statement of Cash Flows for the Year Ended December 31,
1998...................................................... F-26
Notes to Financial Statements............................... F-27
UNIVERSAL PHONE BOOKS, INC.
INDEX TO FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Auditors........... F-30
Balance Sheet as of September 30, 1998...................... F-31
Statement of Operations for the Year Ended September 30,
1998...................................................... F-32
Statement of Shareholders' Deficit for the Year Ended
September 30, 1998........................................ F-33
Statement of Cash Flows for the Year Ended September 30,
1998...................................................... F-34
Notes to Financial Statements............................... F-35
TRANSWESTERN PUBLISHING COMPANY LLC
PRO FORMA COMBINED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)
Pro Forma Combined Condensed Balance Sheet (Unaudited)...... F-39
Pro Forma Combined Condensed Statement of Operations
(Unaudited)............................................... F-40
Notes to Pro Forma Combined Condensed Financial Statements
(Unaudited)............................................... F-41
</TABLE>
F-1
<PAGE> 138
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Member
TransWestern Publishing Company LLC
We have audited the accompanying consolidated balance sheets of
TransWestern Publishing Company LLC at April 30, 1997 and 1998 and December 31,
1998 and the related statements of operations, changes in member deficit and
cash flows for each of the three years in the period ended April 30, 1998 and
for the eight months ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of TransWestern Publishing
Company LLC at April 30, 1997 and 1998 and December 31, 1998 and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended April 30, 1998 and for the eight months ended December
31, 1998, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
San Diego, California
February 15, 1999
F-2
<PAGE> 139
TRANSWESTERN PUBLISHING COMPANY LLC
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
APRIL 30,
-------------------- DECEMBER 31,
1997 1998 1998
-------- --------- ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash........................................ $ 1,254 $ 1,512 $ 14,067
Trade receivable, (less allowance for
doubtful accounts of $7,626 at April 30,
1997, $9,532 at April 30, 1998 and $9,608
at December 31, 1998).................... 23,279 26,127 20,931
Deferred directory costs................. 6,412 6,226 8,935
Other current assets..................... 518 950 805
-------- --------- ---------
Total current assets................ 31,463 34,815 44,738
Property, equipment and leasehold
improvements, net........................... 2,840 2,694 2,977
Acquired intangibles, net..................... 12,241 14,860 34,486
Other assets, primarily debt issuance costs,
net......................................... 1,687 8,435 8,629
-------- --------- ---------
Total assets........................ $ 48,231 $ 60,804 $ 90,830
======== ========= =========
LIABILITIES AND MEMBER DEFICIT
Current liabilities:
Accounts payable............................ $ 3,901 $ 4,373 $ 4,241
Salaries and benefits payable............... 4,112 3,075 3,980
Accrued acquisition costs................... 986 504 450
Accrued Equity Compensation Plan
contribution............................. -- 2,900 --
Accrued interest............................ 69 4,841 1,470
Other accrued liabilities................... 448 1,124 1,063
Amount due general partner.................. 805 -- --
Customer deposits........................... 10,197 10,164 16,139
Current portion, long-term debt............. 10,921 2,391 2,207
-------- --------- ---------
Total current liabilities........... 31,439 29,372 29,550
Long-term debt:
Senior Credit Facility...................... 67,514 77,344 66,165
Series B and C 9 5/8% Senior Subordinated
Notes.................................... -- 100,000 141,784
Other notes payable......................... -- -- 2,000
-------- --------- ---------
Total non-current liabilities....... 67,514 177,344 209,949
Member deficit................................ (50,722) (145,912) (148,669)
-------- --------- ---------
Total liabilities and member
deficit.......................... $ 48,231 $ 60,804 $ 90,830
======== ========= =========
</TABLE>
See accompanying notes.
F-3
<PAGE> 140
TRANSWESTERN PUBLISHING COMPANY LLC
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
EIGHT MONTHS ENDED
YEARS ENDED APRIL 30, DECEMBER 31,
---------------------------- ----------------------
1996 1997 1998 1997 1998
------- ------- -------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues................. $77,731 $91,414 $100,143 $ 52,326 $ 61,071
Cost of revenues............. 18,202 19,500 20,233 11,998 12,694
------- ------- -------- -------- --------
Gross profit................. 59,529 71,914 79,910 40,328 48,377
Operating expenses:
Sales and marketing........ 29,919 36,640 40,290 22,852 27,530
General and
administrative.......... 14,276 16,821 16,588 10,575 12,092
Contribution to Equity
Compensation Plan....... 796 -- 5,543 5,543 --
------- ------- -------- -------- --------
Total operating
expenses........ 44,991 53,461 62,421 38,970 39,622
------- ------- -------- -------- --------
Income from operations....... 14,538 18,453 17,489 1,358 8,755
Other income, net............ 375 48 82 (23) 242
Interest expense............. (6,630) (7,816) (13,387) (7,356) (11,754)
------- ------- -------- -------- --------
(6,255) (7,768) (13,305) (7,379) (11,512)
------- ------- -------- -------- --------
Income (loss) before
extraordinary item......... 8,283 10,685 4,184 (6,021) (2,757)
Extraordinary loss........... (1,368) -- (4,791) (4,791) --
------- ------- -------- -------- --------
Net income (loss)............ $ 6,915 $10,685 $ (607) $(10,812) $ (2,757)
------- ------- -------- -------- --------
Net income (loss) per Member
unit....................... $ 6,915 $10,685 $ (607) $(10,812) $ (2,757)
======= ======= ======== ======== ========
</TABLE>
See accompanying notes.
F-4
<PAGE> 141
TRANSWESTERN PUBLISHING COMPANY LLC
STATEMENTS OF CHANGES IN MEMBER DEFICIT
YEARS ENDED APRIL 30, 1998, 1997, AND 1996, AND
EIGHT MONTHS ENDED DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<S> <C>
Balance at April 30, 1995................................... $ (22,721)
Net income................................................ 6,915
Distributions to member................................... (39,800)
---------
Balance at April 30, 1996................................... (55,606)
Net income................................................ 10,685
Distributions to member................................... (5,801)
---------
Balance at April 30, 1997................................... (50,722)
Net (loss)................................................ (607)
Contributions from member................................. 85,756
Equity transaction costs.................................. (3,858)
Distributions to member................................... (176,481)
---------
Balance at April 30, 1998................................... (145,912)
Net (loss)................................................ (2,757)
---------
Balance at December 31, 1998................................ $(148,669)
=========
</TABLE>
See accompanying notes.
F-5
<PAGE> 142
TRANSWESTERN PUBLISHING COMPANY LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
EIGHT MONTHS ENDED
YEARS ENDED APRIL 30, DECEMBER 31,
------------------------------ ----------------------
1996 1997 1998 1997 1998
-------- ------- --------- ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)................................... $ 6,915 $10,685 $ (607) $ (10,812) $ (2,757)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Extraordinary item-non cash....................... 1,368 -- 4,791 4,791 --
Depreciation and amortization..................... 4,691 6,399 7,086 4,383 4,526
Amortization of deferred debt issuance costs...... 804 703 943 559 869
Provision for doubtful accounts................... 7,069 8,920 9,094 4,847 5,895
Changes in operating assets & liabilities, net of
effects of purchased directories:
Trade receivables............................... (684) (4,142) (4,754) 5,917 5,249
Write-off of doubtful accounts.................. (8,231) (7,287) (7,672) (4,842) (6,276)
Recoveries of doubtful accounts................. 660 679 485 355 432
Deferred directory costs........................ 97 (302) 186 (2,413) (1,546)
Other current assets............................ (158) 247 (433) (37) 145
Accounts payable................................ (96) 710 472 (620) (419)
Accrued liabilities............................. 1,038 (1,136) 1,352 (129) (2,676)
Accrued interest................................ (1,054) 69 4,772 2,188 (3,370)
Customer deposits............................... 672 (243) (34) 4,897 4,402
-------- ------- --------- --------- --------
Net cash provided by operating activities........... 13,091 15,302 15,681 9,084 4,474
INVESTING ACTIVITIES
Purchase of property, equipment and leasehold
improvements...................................... (484) (1,034) (996) (706) (824)
Payment for purchase of directories................. (5,229) (2,558) (8,204) (12,232) (21,332)
-------- ------- --------- --------- --------
Net cash used for investing activities.............. (5,713) (3,592) (9,200) (12,938) (22,156)
FINANCING ACTIVITIES
Borrowings under long-term debt agreements:
Senior Term Loan.................................. 80,000 -- 85,000 85,000 --
Revolving Credit Facility......................... 23,846 24,000 37,039 28,573 40,300
Increase in other assets, primarily debt issuance
costs, net...................................... (2,631) -- (12,940) -- --
9 5/8% Senior Subordinated Notes.................. -- -- 100,000 100,000 41,800
Senior Subordinated Facility...................... -- -- 75,000 75,000 --
Repayments of long-term debt:
Revolving Credit Facility......................... (16,546) (21,975) (47,108) (37,973) (40,300)
Senior Subordinated Facility...................... (4,461) -- (75,000) (75,000) --
External Debt..................................... -- -- -- (505) --
Senior Term Loan.................................. (47,400) (8,000) (73,631) (71,100) (11,563)
Equity transaction costs............................ -- -- (3,858) (3,858) --
Contributions from member........................... -- -- 85,756 85,756 --
Distributions to member............................. (39,800) (5,801) (176,481) (176,481) --
-------- ------- --------- --------- --------
Net cash (used for) provided by financing
activities........................................ (6,992) (11,776) (6,223) 9,412 30,237
-------- ------- --------- --------- --------
Net increase (decrease) in cash..................... 386 (66) 258 5,558 12,555
Cash at beginning of period......................... 934 1,320 1,254 1,254 1,512
-------- ------- --------- --------- --------
Cash at end of period............................... $ 1,320 $ 1,254 $ 1,512 $ 6,812 $ 14,067
======== ======= ========= ========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest............................ $ 7,223 $ 7,131 $ 7,724 $ 4,665 $ 14,271
======== ======= ========= ========= ========
</TABLE>
See accompanying notes.
F-6
<PAGE> 143
TRANSWESTERN PUBLISHING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(ALL DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization, Business Activities and Basis of Presentation
TransWestern Publishing Company, L.P. (the "Partnership") was formed in
1993 to acquire the business of TransWestern Publishing from US West Marketing
Resources Group, Inc. TransWestern Publishing was a division of US West prior to
May 1993.
In October 1997, the Partnership completed certain recapitalization
transactions involving $312,709 (the "Recapitalization"). In the
Recapitalization, New Investors (as defined) including Thomas H. Lee Equity Fund
III, L.P. and its affiliates along with other investors, existing limited
partners of the Partnership and the Partnership's senior managers invested new
and continuing capital of $130,009 in the Partnership and TransWestern
Communications Company, Inc. (the general partner of the Partnership). The
proceeds of the equity investment together with approximately $182,700 of senior
and senior subordinated debt financing were used (i) for $224,500 of
consideration paid to redeem a portion of the limited partnership interests from
existing limited partners, (ii) to repay $75,600 outstanding under credit
facilities in existence since 1995, (iii) to pay $10,600 of costs and fees and
expenses associated with the Recapitalization and (iv) for $2,000 for general
corporate purposes, including working capital.
The Recapitalization was financed with (i) the $130,009 equity investment,
(ii) borrowings of $107,700 under a $125,000 (maximum) variable interest rate
Senior Credit Facility and (iii) borrowings of $75,000 under a Senior
Subordinated Facility. The assets and liabilities of the Company are stated at
historical cost and were not revalued to fair market value at the date of the
Recapitalization. As a result of the Recapitalization, Thomas H. Lee Equity Fund
III, L.P. and its affiliates collectively own approximately 59% of the equity of
the Partnership.
In November 1997, TransWestern Publishing Company, L.P. changed its name to
TransWestern Holdings L.P. ("Holdings") and formed and contributed substantially
all of its assets to TransWestern Publishing Company LLC ("TransWestern" or the
"Company"). TransWestern assumed or guaranteed all of the liabilities of the
Partnership. As a result, Holdings' only assets consist of TransWestern's Member
Units (as defined) and all of Capital's (as defined) capital stock. All of the
operations that were previously conducted by the Partnership are now being
conducted by TransWestern. Holdings has formed TWP Capital Corp. ("Capital") as
a wholly-owned subsidiary and the Company has formed TWP Capital Corp. II
("Capital II") as a wholly-owned subsidiary. Neither Capital nor Capital II has
any significant assets or operations.
The membership interests of TransWestern consists of a single class of
authorized common units ("the Member Units"). Holdings is the sole initial
member of TransWestern and accordingly, holds all 1,000 of the issued and
outstanding Member Units.
F-7
<PAGE> 144
TRANSWESTERN PUBLISHING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(ALL DOLLARS IN THOUSANDS)
TCC, the general partner of Holdings, held approximately 1.0% of Holdings
outstanding partnership units in the period from formation (1993) through
September 1997. Upon the closing of the Recapitalization, TCC held approximately
1.7% of Holdings outstanding partnership units.
TransWestern publishes and distributes local yellow page directories in
fourteen states.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary, Target Directories of Michigan, Inc. All
significant intercompany transactions have been eliminated.
Cash and cash equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less at the date of acquisition to be cash
equivalents. The Company evaluates the financial strength of the institutions at
which significant investments are made and believes the related credit risk is
limited to an acceptable level.
Revenue Recognition, Deferred Directory Costs and Customer Deposits
Revenues from the sale of advertising placed in each directory are
recognized upon the distribution of directories in their individual market
areas. Advance payments received for directory advertising are shown as customer
deposits in the accompanying balance sheets. Expenditures directly related to
sales, production, printing and distribution of directories are capitalized as
deferred directory costs and matched against related revenues upon directory
distribution. The Company published and recognized revenue for 118, 128, and 139
directories during the years ended April 30, 1996, 1997, and 1998, respectively,
and 84 during the eight months ended December 31, 1998.
Fiscal Year End
Effective May 1, 1998 as reported on Form 8-K dated May 12, 1998, the
Company elected to change its fiscal year from April 30 to December 31.
Concentration of Credit Risk
Management believes it is not subject to a concentration of credit risk as
revenues are not significantly concentrated in any single directory, industry,
geographic region, or customer. However credit losses have represented a cost of
doing business due to the nature of the customer base (predominantly small
businesses) and the use of extended credit terms.
A provision for doubtful accounts based on historical experience is
recorded at the time revenue is recognized for individual directories. The
estimated provision for doubtful
F-8
<PAGE> 145
TRANSWESTERN PUBLISHING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(ALL DOLLARS IN THOUSANDS)
accounts as a percentage of net revenues equaled 9.2%, 9.1%, and 9.1% in the
years ended April 30, 1996, 1997 and 1998, respectively, and 9.7% for the eight
month period ended December 31, 1998. Actual write-offs are taken against the
allowance when management determines that an account is uncollectible. In
general, management makes this determination when an account has declared
bankruptcy, has gone out of business or fails to renew for the following year's
directory.
Fair Value of Financial Instruments
In accordance with requirements of Statement of Financial Accounting
Standards No. 107, Disclosures about Fair Value of Financial Instruments, the
following methods and assumptions were used by the Company in estimating the
fair value disclosures:
Cash and Short-Term Receivables
The carrying amounts approximate fair values because of short maturities of
these instruments and the reserves for doubtful accounts which in the opinion of
management is adequate to state short-term receivables at their fair value.
Long-Term Debt
Based on the borrowing rates currently available to the Company for loans
with similar terms and average maturities, management of the Company believes
the fair value of long-term debt approximates its carrying value at December 31,
1998.
Long-Lived Assets
Property, equipment and leasehold improvements are carried at cost, less
depreciation and amortization. Depreciation is computed using the straight-line
method over the assets' estimated useful lives which range from three to seven
years. Leasehold improvements are amortized over the shorter of their estimated
useful lives or the lease period.
Acquired intangibles are carried at cost which represents the excess of the
purchase price over the fair value of net tangible assets acquired in connection
with acquisitions of regional providers of yellow page directories. Acquired
intangibles consist primarily of consumer lists with initial carrying values,
which, in the opinion of management, are equal to fair market value on the date
of acquisition. Acquired intangibles are being amortized over five years.
In accordance with Statement of Financial Accounting Standard No. 121, the
Company reviews the carrying value of property, equipment and leasehold
improvements for evidence of impairment through comparison of the undiscounted
cash flows generated from those assets to the related carrying amounts of the
assets. The carrying value of acquired intangibles is evaluated for impairment
through comparison of the undiscounted
F-9
<PAGE> 146
TRANSWESTERN PUBLISHING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(ALL DOLLARS IN THOUSANDS)
cash flows derived from publication of acquired directories to the carrying
value of the related intangibles.
Debt Issuance Costs
Debt issuance costs are being amortized over the term of the related debt
using the weighted-average declining balance method (which approximates the
interest method) or the straight line method based on the repayment terms of the
related debt. Amortization of debt issuance costs is included in interest
expense in the accompanying statements of operations.
Income Taxes
No provision has been made in the accompanying statements of income for
federal and state income taxes, except for the California minimum franchise tax,
as any taxable income or loss of the Partnership is included in the income tax
returns of the Partnership's partners.
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 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.
New Accounting Standards
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, Reporting Comprehensive Income (SFAS 130). This statement requires the
Company to report in the financial statements, in addition to net income,
comprehensive income and its components including foreign currency items and
unrealized gains and losses on certain investments in debt and equity
securities. SFAS 130 is effective for fiscal years beginning after December 15,
1997. There was no difference between the Company's net income (loss) for the
years ended April 30, 1996, 1997, and 1998 and for the eight months ended
December 31, 1998.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, Disclosures about Segments of an Enterprise and Related Information
(SFAS 131). This statement establishes standards for reporting information about
operating segments in annual financial statements and requires selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. Under SFAS 131,
operating segments are to be determined consistent with the way that
F-10
<PAGE> 147
TRANSWESTERN PUBLISHING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(ALL DOLLARS IN THOUSANDS)
management organizes and evaluates financial information internally for making
operating decisions and assessing performance. The Company operates in one
reportable segment.
2. DIRECTORY ACQUISITIONS
For the year ended April 30, 1998 and the eight months ended December 31,
1998, the Company acquired the following, which were accounted for by the
purchase method of accounting:
On February 2, 1998, the Company purchased certain tangible and
intangible assets totaling $8,433 of Mast Advertising and Publishing, Inc.
("Mast") for cash of $7,734 and other liabilities totaling $699. The
obligations represent a Seller Note Payable and potential adjustment of
such note based on actual cash collection performance of certain
directories acquired and certain acquisition related expenses.
On July 16, 1998, the Company purchased all of the outstanding common
stock of Target Directories of Michigan, Inc. ("Target") for cash of
approximately $5,400. In connection with the acquisition, the Company also
assumed certain liabilities of Target totaling approximately $1,600.
On November 23, 1998, the Company purchased certain tangible and
intangible assets of M&M Publishing, Inc. ("M&M") for cash of $1,200,
subject to potential adjustment.
On November 23, 1998, the Company purchased certain tangible and
intangible assets of Universal Phone Books, Inc. ("Universal") for cash of
$13,939, a seller promissory note of $2,000 and other liabilities totaling
$434. The seller note is subject to adjustment based on collection
performance of certain acquired directories.
Assuming that the acquisitions of Mast, Target, M&M and Universal had occurred
on May 1, 1997 and 1998, pro forma results of operations would have been as
follows:
<TABLE>
<CAPTION>
YEAR ENDED EIGHT MONTHS ENDED
APRIL 30, 1998 DECEMBER 31, 1998
-------------- ------------------
<S> <C> <C>
Revenues................................ $113,332 $64,300
Loss Before Extraordinary Item.......... (2,747) (6,082)
Net Loss................................ (7,538) (6,082)
</TABLE>
These results give effect to pro forma adjustment for the amortization of
acquired intangibles and for the additional interest expense on the debt
incurred to fund the acquisitions.
F-11
<PAGE> 148
TRANSWESTERN PUBLISHING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(ALL DOLLARS IN THOUSANDS)
3. FINANCIAL STATEMENT DETAILS
Property, Equipment and Leasehold Improvements
<TABLE>
<CAPTION>
APRIL 30,
----------------- DECEMBER 31,
1997 1998 1998
------- ------- ------------
<S> <C> <C> <C>
Computer and office equipment.................... $ 4,335 $ 5,148 $ 6,122
Furniture and fixtures........................... 1,370 1,508 1,636
Leasehold improvements........................... 233 278 310
------- ------- -------
5,938 6,934 8,068
Less accumulated depreciation and amortization... (3,098) (4,240) (5,091)
------- ------- -------
$ 2,840 $ 2,694 $ 2,977
======= ======= =======
</TABLE>
ACQUIRED INTANGIBLES
<TABLE>
<CAPTION>
APRIL 30,
------------------- DECEMBER 31,
1997 1998 1998
-------- -------- ------------
<S> <C> <C> <C>
Customer Base.................................. $ 27,957 $ 36,520 $ 60,031
Less accumulated amortization.................. (15,716) (21,660) (25,545)
-------- -------- --------
$ 12,241 $ 14,860 $ 34,486
======== ======== ========
</TABLE>
OTHER ASSETS
<TABLE>
<CAPTION>
APRIL 30,
---------------- DECEMBER 31,
1997 1998 1998
------- ------ ------------
<S> <C> <C> <C>
Debt issuance costs............................... $ 2,827 $9,054 $10,117
Less accumulated amortization..................... (1,140) (619) (1,488)
------- ------ -------
$ 1,687 $8,435 $ 8,629
======= ====== =======
</TABLE>
F-12
<PAGE> 149
TRANSWESTERN PUBLISHING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(ALL DOLLARS IN THOUSANDS)
4. FINANCING ARRANGEMENTS
Principal balances under the Company's long-term financing arrangements
consist of the following:
<TABLE>
<CAPTION>
APRIL 30,
------------------ DECEMBER 31,
1997 1998 1998
------- -------- ------------
<S> <C> <C> <C>
Series B and C 9 5/8% Senior Subordinated Notes,
including $1,784 of unamortized premium at
December 31, 1998............................. $ -- $100,000 $141,784
Senior Credit Facility:
Senior term loan.............................. 68,100 79,469 67,906
Revolving loan................................ 9,400 -- --
Other notes payable............................. 935 266 2,466
------- -------- --------
78,435 179,735 212,156
Current portion of long-term debt............... 10,921 2,391 2,207
------- -------- --------
Long-term debt net of current portion........... $67,514 $177,344 $209,949
======= ======== ========
</TABLE>
Fees. In connection with the Recapitalization, the Company incurred loan
fees of $10.6 million; $3.3 million for the Senior Credit Facility, $3.4 million
for the Senior Subordinated Facility, and $3.9 million for transaction costs. Of
the $10.6 million, $6.7 million was capitalized as debt issuance costs related
to the equity raised in the Recapitalization. Debt issuance costs are being
amortized over the term of the related debt using the interest method. The $3.4
million of capitalized loan fees related to the Senior Subordinated Facility,
were subsequently written-off as an extraordinary item (see discussion below).
SERIES B AND C 9 5/8% SENIOR SUBORDINATED NOTES DUE 2007
Maturity, Interest and Principal. The $140 million outstanding aggregate
amount of Senior Subordinated Notes (the "Notes") consists of $100 million of
Series B 9 5/8% Senior Subordinated Notes issued on April 3, 1998 and $41.8
million of Series C 9 5/8% Senior Subordinated Notes issued on December 2, 1998
which includes $1.8 million of unamortized premium. Both series will mature on
November 15, 2007 and bear interest at a rate of 9 5/8% per annum from the date
of original issuance until maturity. Interest is payable semiannually in arrears
on each May 15 and November 15, commencing May 15, 1998, to holders of record of
the Notes at the close of business on the immediately preceding May 1 and
November 1, respectively. The Company will pay interest on any overdue principal
(including post-petition interest in a proceeding under any Bankruptcy Law), and
interest, to the extent lawful, at the rate specified in the Senior Subordinated
Notes. The Notes are general unsecured obligations of the Company, subordinated
in right of payment to all existing and future senior indebtedness of the
Company, pari passu in right of payment to all senior subordinated indebtedness
of the Company and senior in right of payment to all subordinated indebtedness.
F-13
<PAGE> 150
TRANSWESTERN PUBLISHING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(ALL DOLLARS IN THOUSANDS)
Optional Redemption. The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after November 15, 2002 at the
following redemption prices (expressed as a percentage of principal amount),
together, in each case, with accrued interest to the redemption date, if
redeemed during the twelve-month period beginning on November 15 of each year
listed below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002................................................ 104.813%
2003................................................ 103.208
2004................................................ 101.604
2005 and thereafter................................. 100.000
</TABLE>
Notwithstanding the foregoing, the Company, at its option, may redeem in
the aggregate up to 35% of the original principal amount of the Notes at any
time and from time to time prior to November 15, 2000 at a redemption price
equal to 109.625% of the aggregate principal amount so redeemed, together with
accrued interest thereon to the redemption date, out of the net proceeds of one
or more Public Equity Offerings (as defined), provided, however, that at least
$65.0 million of the principal amount of the Notes remains outstanding
immediately after the occurrence of any such redemption and that any such
redemption occurs within 90 days following the closing of any such Public Equity
Offering (as defined).
In the event of redemption of fewer than all of the Notes, Wilmington Trust
Company, (the "Trustee"), shall select, if the Notes are listed on a national
securities exchange, in accordance with the rules of such exchange or, if the
Notes are not so listed, either on a pro rata basis or by lot or in such other
manner as it shall deem fair and equitable the Notes to be redeemed; provided,
that if a partial redemption is made with the proceeds of a Public Equity
Offering, selection of the Notes or portion thereof for redemption will be made
by the Trustee on a pro rata basis, unless such method is prohibited. The Notes
will be redeemable in whole or in part upon not less than 30 nor more than 60
days' prior written notice, mailed by first class mail to a holder's last
address as it shall appear on the register maintained by the Registrar of the
Notes. On and after any redemption date, interest will cease to accrue on the
Notes or portions thereof called for redemption unless the Company shall fail to
redeem any such Senior Subordinated Note.
Covenants. The Senior Subordinated Indenture contains covenants restricting
the ability of the Company and its subsidiaries to, among other things, (i)
incur additional indebtedness; (ii) prepay, redeem or repurchase debt; (iii)
make loans and investments; (iv) incur liens and engage in sale lease-back
transactions; (v) transact with affiliates; (vi) engage in mergers, acquisitions
and asset sales; (vii) make optional payments on or modify the terms of
subordinated debt; (viii) restrict preferred and capital stock of subsidiaries
and (ix) declare dividends or redeem or repurchase capital stock. As of December
31, 1998, the Company was in compliance with covenants specified in the Senior
Subordinated Indenture.
F-14
<PAGE> 151
TRANSWESTERN PUBLISHING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(ALL DOLLARS IN THOUSANDS)
The Exchange Offer. On April 3, 1998, the Company consummated its exchange
offer to exchange $100 million of the aggregate principal amount outstanding of
its 9 5/8% Senior Subordinated Notes due 2007 (the "Old Notes") for $100 million
of aggregate principal of Series B 9 5/8% Senior Subordinated Notes due 2007
(the "Exchange Notes"). The form and terms of the Exchange Notes are the same as
the form and term of the Old Notes except that (i) the Exchange Notes bear a
Series B designation and (ii) the Exchange Notes have been registered under the
Securities Act of 1933, as amended, and therefore, do not bear legends
restricting the transfer thereof. The Exchange Notes evidence the same debt as
the Old Notes (which they replace).
As of December 31, 1998, the $40 million aggregate principal of newly
issued Series C 9 5/8% Senior Subordinated Notes due 2007 (the "The New Notes")
had not been exchanged and remained unregistered under the Securities Act of
1933, as amended, and therefore bear legends restricting the transfer thereof.
Guarantee. Target Directories of Michigan, Inc. ("Target"), which is
wholly-owned by the Company, fully and unconditionally guaranteed the Notes on
an unsecured senior subordinated basis. Target is the Company's only
consolidated operating subsidiary and it has no debt senior to the Notes.
Separate full financial statements and other disclosures concerning Target have
not been presented because, in the opinion of management, such information is
not deemed material or meaningful. At December 31, 1998, and for the eight
months then ended, Target had total assets of $6,800, net assets of $5,500, net
revenues of $1,600 and net income of $60. The indenture governing the Notes
provides certain restrictions on the ability of Target to make distributions to
the Company.
SENIOR SUBORDINATED FACILITY
In connection with the Recapitalization, the Company also entered into the
Senior Subordinated Facility with Canadian Imperial Bank of Commerce ("CIBC")
and First Union National Bank ("First Union"). The Company initially borrowed
$75.0 million under this agreement in October 1997 and capitalized associated
loan fees of $3.4 million. Upon the issuance of the $100 million of Series B
9 5/8% Notes in November 1997, the Company exercised its permitted redemption
rights under this agreement and prepaid the $75.0 million principal balance
outstanding under the agreement and the agreement was terminated. In connection
with the redemption, the capitalized loan fees of $3.4 million were written off
as an extraordinary expense in the statement of operations for the year ended
April 30, 1998.
SENIOR CREDIT FACILITY
In connection with the Recapitalization, the Company entered into the
Senior Credit Facility with CIBC and First Union and other lenders, pursuant to
which the Company may borrow up to $125.0 million consisting of a revolving
credit facility of up to $40.0 million (the "Revolving Credit Facility") and a
Senior Term Loan in an aggregate
F-15
<PAGE> 152
TRANSWESTERN PUBLISHING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(ALL DOLLARS IN THOUSANDS)
principal amount of $85.0 million (the "Senior Term Loan"). Principal payments
on the Senior Term Loan are due quarterly through maturity, October 1, 2004. The
revolving credit agreement expires on October 1, 2003. Borrowings under this
agreement rank senior to all other indebtedness of the Company and are secured
by all the assets of the Company.
Repayment. Principal outstanding under the Senior Credit Facility is
required to be paid on a quarterly basis. Annual minimum principal payments at
December 31, 1998 are:
<TABLE>
<S> <C>
1999.......................................... $ 1,741
2000.......................................... 1,741
2001.......................................... 1,741
2002.......................................... 1,741
2003.......................................... 22,635
Thereafter.................................... 38,307
-------
$67,906
=======
</TABLE>
Revolving Credit Facility. Commitments under the Revolving Credit Facility
will be reduced on a quarterly basis commencing on January 1, 2000. The
commitment on the Revolving Credit Facility is reduced by $6.0 million in each
of the fiscal years 2000, 2001, 2002 and expires in fiscal year 2003. As of
December 31, 1998, no borrowings were outstanding under the Revolving Credit
Facility.
Security; Guaranty. The Revolving Credit Facility and the Senior Term Loan
are secured by a first priority lien on substantially all of the properties and
assets of the Company and its future subsidiaries, including a pledge of all of
the shares of the Company's future subsidiaries, if any. Future subsidiaries of
the Company (if any) will be required to guarantee the Revolving Credit Facility
and the Senior Term Loan.
Interest. At the Company's option, the interest rates per annum applicable
to the Revolving Credit Facility and the Term Loans will be a fluctuating rate
of interest measured by reference to (i) LIBOR plus the applicable borrowing
margin, or (ii) a rate per annum equal to the higher of the published prime rate
of the Agent Bank or the Federal Funds Rate (as defined in the Senior Credit
Facility) as quoted by the Agent Bank plus 1/2 of 1% (the "ABR") plus the
applicable borrowing margin. The applicable borrowing margin for the Revolving
Credit Facility ranges from 1.375% to 2.500% for LIBOR based borrowings and
0.375% to 1.500% for ABR based borrowings. The applicable borrowing margin for
the Term Loan ranges from 1.875% to 2.750% for LIBOR based borrowings and 0.875%
to 1.750% for ABR based borrowings. At April 30, 1998 the Company had $79.5
million outstanding on the Senior Term Loan under a one month LIBOR at 8.40625%
and at December 31, 1998 the Company had $67.9 million outstanding on the Senior
Term Loan under a one month LIBOR at 7.93563%.
Prepayments; Reductions of Commitments. The Senior Term Loan is required to
be prepaid and commitments under the Revolving Credit Facility are required to
be permanently reduced with: (i) 100% of the net cash proceeds of asset sales or
other
F-16
<PAGE> 153
TRANSWESTERN PUBLISHING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(ALL DOLLARS IN THOUSANDS)
dispositions of property if such proceeds are not used to purchase or acquire
other assets within 180 days of the original asset sale, subject to limited
exceptions, (ii) 50% of excess cash flow (as defined) for the eight month period
ended December 31, 1998 and all fiscal years ended December 31, thereafter, if
the Company's total leverage ratio (as defined) determined as of the last day of
the eight month period ended December 31, 1998 and all fiscal years ended
December 31, thereafter, equals or exceeds 5.0 to 1, (iii) 100% of excess
insurance proceeds (as defined) and (iv) 100% of the net proceeds (as defined)
of issuances of equity securities or debt obligations of the Company, subject to
limited exceptions, and subject to reduction to 50% of such proceeds if the
Company's total leverage ratio (as defined) is less than 5.0 to 1. Such
mandatory prepayments and reductions will first be applied to the permanent
reduction of the Senior Term Loan and second to the permanent reduction of the
Revolving Credit Facility. Within the Senior Term Loan, prepayments with
proceeds described in clause (i) or (iii) above will be applied pro rata to the
remaining installments of the Senior Term Loan and prepayments with proceeds
described in clause (ii) or (iv) above will be applied to each remaining
installment of the Senior Term Loan in inverse order of maturity. The Company
may make voluntary prepayments in minimum principal amounts of $50,000 or a
whole multiple thereof.
Covenants. The Senior Credit Facility contains covenants restricting the
ability of the Company and its subsidiaries to, among other things, (i) declare
dividends or redeem or repurchase capital stock, (ii) prepay, redeem or
repurchase debt, (iii) incur liens and engage in sale lease-back transactions,
(iv) make loans and investments, (v) incur additional indebtedness, (vi) amend
or otherwise alter debt and other material agreements, (vii) make capital
expenditures, (viii) engage in mergers, acquisitions and asset sales, (ix)
transact with affiliates, (x) alter its line of business, (xi) enter into
guarantees of indebtedness, and (xii) make optional payments on or modify the
terms of subordinated debt. The Company must also make certain customary
indemnifications of the Lenders and their agents is required to comply with
financial covenants with respect to: (a) a minimum interest coverage ratio, (b)
a minimum EBITDA, (c) a maximum leverage ratio, and (d) a minimum fixed charge
coverage ratio (all defined in the Senior Credit Facility Agreement). The Senior
Credit Facility also contains certain customary affirmative covenants. As of
December 31, 1998, the Company was in compliance with all covenants specified in
the Senior Credit Facility.
Events of Default. Events of default under the Senior Credit Facility
include (i) the Company's failure to pay principal or interest when due, (ii)
the Company's material breach of any covenant, representation or warranty
contained in the loan documents, (iii) customary cross-default provisions, (iv)
events of bankruptcy, insolvency or dissolution of the Company, (v) the levy of
certain judgments against the Company, (vi) certain adverse events under ERISA
plans of the Company, (vii) the actual or asserted invalidity of security
documents or guarantees of the Company or its subsidiaries, and (viii) a change
of control of the Company.
F-17
<PAGE> 154
TRANSWESTERN PUBLISHING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(ALL DOLLARS IN THOUSANDS)
DISCOUNT NOTES
On November 12, 1997 Holdings, the Company's parent, issued $32.5 million
of initial aggregate principal ($57.9 million principal at maturity) of Series B
11 7/8% Senior Discount Notes due 2008 (the "Discount Notes"). The Discount
Notes are joint and several obligations of Holdings and Capital and are
guaranteed by the Company.
5. MEMBER DEFICIT
TransWestern is a limited liability company formed under the Delaware
Limited Liability Company Act (as amended from time to time, the "Limited
Liability Act") and is governed by the Limited Liability Company Agreement of
TransWestern Publishing Company LLC (the "LLC Agreement") executed by its
manager, TCC.
The Company's equity interest consists of a single class of authorized
common units (the "Member Units"). Holdings is the sole member of TransWestern
and accordingly holds all of the issued and outstanding Member Units.
Distributions to TransWestern's member are at the sole discretion of the
manager. Terms of the Senior Credit Facility and the Senior Subordinated Note
Indenture generally limit TransWestern's ability to pay cash distributions to
its member other than distributions in amounts equal to the tax liability of the
partners of Holdings resulting from the taxable income of TransWestern (the "Tax
Distributions"). The Tax Distributions will be based on the approximate highest
combined tax rate that applies to any one of Holdings' limited partners.
TCC has the sole right to make decisions regarding the management and
affairs of TransWestern and has all the powers and rights necessary or
appropriate to effectuate and carry out the purposes and business of
TransWestern, including the authority to act for and bind TransWestern.
The LLC Agreement provides that TransWestern's existence shall continue
until such time as the manager determines it is appropriate to dissolve, windup
and terminate TransWestern or, if earlier, upon the occurrence of (i) the entry
of judicial dissolution in accordance with the Limited Liability Act or (ii) the
expulsion, bankruptcy, dissolution or withdrawal of Holdings. In the event of a
termination of TransWestern, after satisfaction of all of TransWestern's debts
and liabilities, all of the assets of TransWestern would be distributed to
Holdings or if TransWestern then has more than one member, pro rata based on the
relative percentage interests in TransWestern of its members.
Prior to the formation of TransWestern, the accumulated deficit of the
Partnership arose from distributions to partners in accordance with the terms of
the Partnership Agreement.
As of April 30, 1997, the Partnership's general partner equity consisted of
9,800 authorized, issued and outstanding units with such units representing a
1.0% interest in the limited partnership. Also as of April 30, 1997, limited
partner equity of the Partnership consisted of 3,968,236 authorized, issued and
outstanding Class A Common units and 314,290 authorized Class E Incentive units,
of which 299,698 were issued and outstanding.
F-18
<PAGE> 155
TRANSWESTERN PUBLISHING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(ALL DOLLARS IN THOUSANDS)
During the years ended April 30, 1996, 1997 and 1998, the Partnership made
tax distributions to unit holders totaling $3,400 and $5,801, $2,100
respectively. Also, in connection with the November 1995 refinancing of the
Partnership, approximately $36 million was distributed to the limited and
general partners of the Partnership. Furthermore, in connection with the October
1997 refinancing of the Partnership, approximately $174.4 million was
distributed to the limited and general partners of the Partnership.
6. BENEFIT PLANS
401(k) and Profit Sharing Plan
Substantially all of the Partnership's employees are covered by a 401(k)
and profit sharing retirement plan. Employees can make contributions to the plan
up to the maximum amount allowed by federal tax code regulations. The
Partnership may match the employee contributions, up to a limitation of 83% of
the first 6% of annual earnings per participant. The Partnership may also make
annual discretionary profit sharing contributions. Contributions to the plan for
the years ended April 30, 1996, 1997 and 1998 were approximately, $761, $761,
and $1.1 million, respectively and $639 for the eight months ended December 31,
1998.
As mentioned in Note 1, the Company elected to change its fiscal year from
April 30 to December 31. As a result, the Company also amended the plan year of
the TransWestern Publishing 401(k) and Profit Sharing Plan from April 30 to
December 31.
Equity Compensation Plan
Prior to formation of TransWestern, the Partnership established the
TransWestern Publishing Company, L.P. Equity Compensation Plan (the "Plan"). The
Plan provides select key full-time employees with deferred compensation benefits
for income tax purposes. Special distributions to the Plan are recorded as
expense in the accompanying statements of income when declared by the Board of
Directors, generally following a significant refinancing transaction.
Distributions to the Plan related to refinancing transactions completed in
the twelve month periods ending April 30, 1996 and fiscal 1998 totaled $796 and
$5,543, respectively. Employees receiving units in the Plan are eligible to
receive a ratable per unit share of cash distributions from the Plan, if and
when declared by the Plan Administrators.
Generally, the Plan Administrators intend to distribute to employee unit
holders all assets contributed to the Plan within three years of the date of
contribution. In the twelve month periods ending April 30, 1997 and 1998, the
Plan Administrators paid distributions totaling $411 and $2.6 million. In the
eight months ended December 31, 1998 the plan administrators paid $2.9 million
and as of December 31, 1998, the plan had no undistributed equity.
F-19
<PAGE> 156
TRANSWESTERN PUBLISHING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(ALL DOLLARS IN THOUSANDS)
As a result of the Recapitalization, the existing Equity Compensation Plan
was terminated. The Company adopted a new Equity Compensation Plan which will
function similar to the old plan.
7. LEASE COMMITMENTS
The Company leases office facilities in several cities throughout the
United States under operating leases with remaining terms ranging from one to
six years. Total rent expense for the years ended April 30, 1996, 1997, and
1998, was $1,750, $1,866 and $1,745 respectively and $1,208 for the eight months
ended December 31, 1998. Annual minimum lease payments due as of December 31,
1998 under these leases are:
<TABLE>
<S> <C>
1999................................................... $1,753
2000................................................... 1,464
2001................................................... 1,052
2002................................................... 863
2003................................................... 534
------
$5,666
======
</TABLE>
8. RELATED PARTY TRANSACTIONS
In connection with the Recapitalization, the Company entered into a
Management Agreement with Thomas H. Lee, Co. ("THL Co.") pursuant to which THL
Co. agreed to provide (i) general executive and management services, (ii)
identification, negotiation and analysis of financial and strategic
alternatives, and (iii) other services agreed upon by the Company and THL Co. On
the Recapitalization closing date, THL Co. and the other equity investors in the
Company each received their pro rata portion of a $5.0 million transaction fee.
In addition, THL and all other equity investors will receive a pro rata portion
of the $500,000 annual management fee (the "Management Fee"), plus THL will be
reimbursed for all reasonable out-of-pocket expenses (payable monthly in
arrears). The Management Agreement has an initial term of one year, subject to
automatic one-year extensions, unless the Company or THL Co. provides written
notice of termination no later than 30 days prior to the end of the initial or
any successive period.
9. SUBSEQUENT EVENTS
On January 5, 1999, the Company completed the purchase of certain tangible
and intangible assets of United Directory Services, Inc. ("United") for a price
of $17.0 million, including earn-out payments on a certain directory. United
published 14 directories in Texas in 1998. On January 8, 1999 the Company
purchased certain tangible and intangible assets of Lambert Publishing
("Lambert") for approximately $11.0 million. Lambert published eight directories
in Georgia and Alabama in 1998. On January 15, 1999 the Company purchased
certain tangible and intangible assets of Southern Directory Publishing
("Southern") for approximately $5.2 million. Southern published seven
directories in Georgia in 1998. On
F-20
<PAGE> 157
TRANSWESTERN PUBLISHING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
(ALL DOLLARS IN THOUSANDS)
February 15, 1999, the Company purchased certain tangible and intangible assets
of Call It, Inc. ("Orange Line") for approximately $1.3 million. Orange Line
published four directories in Ohio in 1998.
F-21
<PAGE> 158
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Shareholders
United Directory Services, Inc.
We have audited the accompanying balance sheet of United Directory
Services, Inc., (the "Company") as of December 31, 1998, and the related
statements of operations, shareholders' equity and cash flows for the year then
ended. 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 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 the Company at December 31,
1998, and the results of its operations and its cash flows for the year then
ended, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
San Diego, California
January 29, 1999
F-22
<PAGE> 159
UNITED DIRECTORY SERVICES, INC.
BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 627,054
Accounts receivable, less allowance for doubtful accounts
of $1,137,631.......................................... 1,054,298
Deferred directory costs.................................. 1,678,183
Other current assets...................................... 1,522
----------
Total current assets.............................. 3,361,057
Property and equipment, net................................. 54,456
Other assets................................................ 1,835
----------
Total assets...................................... $3,417,348
==========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable.......................................... $ 4,865
Salaries, commissions, and benefits payable............... 29,548
Customer deposits......................................... 1,671,845
Other accrued liabilities................................. 7,429
----------
Total current liabilities......................... 1,713,687
Shareholders' equity:
Common stock, $1 par value, 100,000 shares authorized,
1,000 shares issued and outstanding at December 31,
1998................................................... 11,000
Retained earnings......................................... 1,692,661
----------
Total shareholders' equity........................ 1,703,661
----------
Total liabilities and shareholders' equity........ $3,417,348
==========
</TABLE>
See accompanying notes.
F-23
<PAGE> 160
UNITED DIRECTORY SERVICES, INC.
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
Net revenues................................................ $5,755,778
Cost of revenues............................................ 2,271,503
----------
Gross profit................................................ 3,484,275
----------
Operating expenses:
Sales and marketing....................................... 2,636,257
General and administrative................................ 646,794
----------
Total operating expenses.......................... 3,283,051
----------
Income from operations...................................... 201,224
Other expense............................................... 43,562
----------
Net income.................................................. $ 157,662
==========
</TABLE>
See accompanying notes.
F-24
<PAGE> 161
UNITED DIRECTORY SERVICES, INC.
STATEMENT OF SHAREHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
---------------- RETAINED SHAREHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
------ ------- ---------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1997........... $1,000 $11,000 $1,534,999 $1,545,999
Net income............................. -- -- 157,662 157,662
------ ------- ---------- ----------
Balance at December 31, 1998........... $1,000 $11,000 $1,692,661 $1,703,661
====== ======= ========== ==========
</TABLE>
See accompanying notes.
F-25
<PAGE> 162
UNITED DIRECTORY SERVICES, INC.
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net income.................................................. $157,662
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation.............................................. 16,795
Changes in operating assets and liabilities:
Accounts receivable.................................... (23,938)
Deferred expenses...................................... (500,730)
Accounts payable....................................... 2,565
Deferred revenue....................................... 647,969
Accrued salaries, commissions, and benefits............ 14,961
Other accrued liabilities.............................. 7,429
--------
Net cash provided by operating activities................... 322,713
INVESTING ACTIVITIES
Purchase of property and equipment.......................... (14,881)
--------
Net cash used by investing activities....................... (14,881)
--------
Net increase in cash and cash equivalents................... 307,832
Cash and cash equivalents at the beginning of the year...... 319,222
--------
Cash and cash equivalents at the end of year................ $627,054
========
</TABLE>
See accompanying notes.
F-26
<PAGE> 163
UNITED DIRECTORY SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION, BUSINESS ACTIVITIES AND BASIS OF PRESENTATION
United Directory Services, Inc. (the "Company") was incorporated in 1989,
and publishes and distributes fourteen local yellow page directories throughout
Texas.
REVENUE RECOGNITION, DEFERRED DIRECTORY COST AND CUSTOMER DEPOSITS
Revenues from the sales of advertising placed in each directory are
recognized upon the distribution of directories in their individual market
areas. Advance payments received for directory advertising are shown as customer
deposits in the accompanying balance sheet. Expenditures directly related to
sales, production, printing and distribution of directories are capitalized as
deferred directory costs and matched against related revenues upon distribution
of the related directories.
CONCENTRATION OF CREDIT RISK
The Company is subject to a concentration of credit risk as revenues are
within fourteen major market areas in Texas. In addition, credit losses have
represented a cost of doing business due to the nature of the customer base
(predominately small businesses) and the use of extended credit terms.
The Company establishes a bad debt reserve based on the historical
experience in each market area. Actual write-offs are recorded against the
allowance when management determines that an account is uncollectible. In
general, management determines an account to be uncollectible if a company has
entered bankruptcy, discontinued its operations, or fails to renew an
advertisement in the following year's directory.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on hand and short-term investments
with a maturity of three months or less on the date of acquisition.
PROPERTY AND EQUIPMENT
Property and equipment is carried at cost, less depreciation, which is
provided based on the straight-line method over the estimated useful lives of
the assets (generally five years).
F-27
<PAGE> 164
UNITED DIRECTORY SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RELATED PARTY TRANSACTIONS
The Company leases its corporate office from a partnership in which the
sole shareholder and certain employees of the Company are partners. The lease is
cancelable upon thirty days written notice by either party. Rent expense related
to the lease amounted to $84,000 for the year ended December 31, 1998.
INCOME TAXES
The Company has elected S-Corporation status for federal and state income
tax purposes. Accordingly, the income for the Company is included in the tax
returns of the shareholder and no provision for federal and state income taxes
was made in the accompanying statement of operations other than the state
franchise tax imposed on S-Corporations by Texas.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company believes that the carrying amounts of its financial instruments
approximate their fair market values due to their short-term nature.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions about the future that affect the amounts reported in the financial
statements and disclosures made in the accompanying notes to the financial
statements. Actual results could differ from those estimates.
2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31, 1998:
<TABLE>
<S> <C>
Computer equipment................................... $ 63,879
Office equipment..................................... 77,198
--------
141,077
Less accumulated depreciation........................ (86,621)
--------
$ 54,456
========
</TABLE>
3. LEASE COMMITMENTS
The Company leases office facilities in Texas under operating leases with
remaining terms ranging from three to six months. Total rent expense for the
year ended September 30, 1998 was $119,208.
F-28
<PAGE> 165
UNITED DIRECTORY SERVICES, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. YEAR 2000 (UNAUDITED)
Many currently installed computer systems and software products are coded
to accept only two-digit entries in the date code field. Beginning in the year
2000, these date code fields will need to accept four-digit entries to
distinguish 21st century dates from 20th century dates. As a result, in
approximately one year, computer systems and/or software used by many companies
may need to be upgraded to comply with such "Year 2000" requirements.
The Company recognizes the need to ensure that its operations will not be
adversely impacted by the Year 2000 issue on a going concern basis. However, as
the Company sold substantially all of its net assets and operations subsequent
to year end (see Note 5), implementation of Year 2000 modifications will be
accomplished by TransWestern Publishing Company LLC.
5. SUBSEQUENT EVENT
On January 5, 1999, substantially all the assets of the Company were
purchased by TransWestern Publishing Company LLC for cash of approximately $12.3
million, a $2.0 million promissory note due in 18 months from the purchase date,
subject to adjustment based on the collection of accounts receivable and an
additional $2.75 million earn-out over three years, subject to the performance
of a certain directory.
F-29
<PAGE> 166
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Partners
Universal Phone Books, Inc.
We have audited the accompanying combined balance sheet of Universal Phone
Books, Inc., and Universal Phone Books of Jackson, Inc. (the "Company") as of
September 30, 1998, and the related combined statements of operations,
shareholders' equity and cash flows for the year then ended. 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 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 combined financial position of the Company at
September 30, 1998, and the combined results of their operations and their cash
flows for the year then ended, in conformity with generally accepted accounting
principles.
San Diego, California
December 12, 1998
F-30
<PAGE> 167
UNIVERSAL PHONE BOOKS, INC.
COMBINED BALANCE SHEET
SEPTEMBER 30, 1998
<TABLE>
<S> <C>
ASSETS
Current assets:
Trade receivables, less allowance for doubtful accounts of
$746,665............................................... $4,701,617
Note receivable from related party........................ 500,000
Deferred directory costs.................................. 2,757,507
Other current assets...................................... 118,814
----------
Total current assets.............................. 8,077,938
Property and equipment, net................................. 67,543
----------
$8,145,481
==========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Bank overdraft............................................ $ 5,498
Notes payable to bank..................................... 363,600
Notes payable to shareholders............................. 2,309,857
Accounts payable.......................................... 428,564
Salaries and benefits payable............................. 406,281
Customer deposits......................................... 4,601,698
Other accrued liabilities................................. 64,454
----------
Total current liabilities......................... 8,179,952
Shareholders' deficit
Universal Phone Books, Inc.
Common stock, $1 par value, 300,000 shares authorized,
154,523 shares issued and outstanding at September 30,
1998................................................... 154,523
Accumulated deficit....................................... (1,337,558)
Universal Phone Books of Jackson, Inc.
Common stock, no par value, 60,000 shares authorized,
12,265 shares issued and outstanding at September 30,
1998................................................... 12,265
Retained earnings......................................... 1,136,299
----------
Total shareholders' deficit....................... (34,471)
----------
Total liabilities and shareholders' deficit....... $8,145,481
==========
</TABLE>
See accompanying notes.
F-31
<PAGE> 168
UNIVERSAL PHONE BOOKS, INC.
COMBINED STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1998
<TABLE>
<S> <C>
Net revenues................................................ $7,143,230
Cost of revenues............................................ 2,133,747
----------
Gross profit................................................ 5,009,483
----------
Operating expenses:
Sales and marketing....................................... 1,434,193
General and administrative................................ 1,975,716
Profit sharing expenses................................... 198,622
----------
Total operating expenses.......................... 3,608,531
----------
Income from operations...................................... 1,400,952
Other income, net........................................... 70,350
Interest expense............................................ (310,255)
----------
Income before state income taxes............................ 1,161,047
Provision for income taxes.................................. 63,700
----------
Net income.................................................. $1,097,347
==========
</TABLE>
See accompanying notes.
F-32
<PAGE> 169
UNIVERSAL PHONE BOOKS, INC.
COMBINED STATEMENT OF SHAREHOLDERS' DEFICIT
YEAR ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
UNIVERSAL PHONE BOOKS, INC.
----------------------------------
COMMON STOCK
------------------- ACCUMULATED
SHARES AMOUNT DEFICIT
------- -------- -----------
<S> <C> <C> <C>
Balance at September 30, 1997............... 154,523 $154,523 $(2,060,719)
Net income.................................. -- -- 723,161
------- -------- -----------
Balance at September 30, 1998............... 154,523 $154,523 $(1,337,558)
======= ======== ===========
</TABLE>
<TABLE>
<CAPTION>
UNIVERSAL PHONE BOOKS OF JACKSON, INC.
----------------------------------------
COMMON STOCK
----------------------- RETAINED
SHARES AMOUNT EARNINGS
--------- ---------- -------------
<S> <C> <C> <C>
Balance at September 30, 1997............... 12,265 $ 12,265 $ 1,130,063
Dividends................................... -- -- (367,950)
------- -------- -----------
Net income.................................. -- -- 374,186
------- -------- -----------
Balance at September 30, 1998............... 12,265 $ 12,265 $ 1,136,299
======= ======== ===========
</TABLE>
See accompanying notes.
F-33
<PAGE> 170
UNIVERSAL PHONE BOOKS, INC.
COMBINED STATEMENT OF CASH FLOWS
YEAR ENDED SEPTEMBER 30, 1998
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 1,097,347
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation.............................................. 39,645
Loss on sales of assets................................... 11,915
Changes in operating assets and liabilities:
Accounts receivable....................................... (90,916)
Deferred expenses......................................... (755,379)
Accounts payable.......................................... 338,600
Deferred revenue.......................................... 80,194
Accrued salaries and benefits............................. 345,954
Accrued commissions....................................... 19,837
Other assets and liabilities.............................. (38,836)
-----------
Net cash provided by operating activities................... 1,048,361
INVESTING ACTIVITIES
Purchase of property and equipment.......................... (3,999)
-----------
Net cash used by investing activities....................... (3,999)
FINANCING ACTIVITIES
Repayment of shareholders notes............................. (421,682)
Dividends paid.............................................. (367,950)
Repayments on bank debt..................................... (237,400)
-----------
Net cash used in financing activities....................... (1,027,032)
-----------
Net decrease in cash and cash equivalents................... 17,330
Net overdraft at the beginning of year...................... (22,828)
-----------
Net overdraft at the end of year............................ $ (5,498)
===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid............................................... $ 110,501
===========
</TABLE>
See accompanying notes.
F-34
<PAGE> 171
UNIVERSAL PHONE BOOKS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION, BUSINESS ACTIVITIES AND BASIS OF PRESENTATION
Universal Phone Books, Inc. (the "Company") was incorporated in 1989, and
publishes and distributes local yellow page directories in Lansing, Ann Arbor
and Saginaw, Michigan. Included in the Company's financial statements are
financial statements of Universal Phone Books of Jackson, Inc. ("Jackson, Inc.")
which was incorporated in 1991. Jackson Inc. distributes a local yellow page
directory in Jackson, Michigan. The Company and Jackson, Inc. are managed and
owned by three shareholders whose interests are substantially the same in each
company.
PRINCIPLES OF COMBINATION
These combined financial statements include the accounts of the Company and
Jackson Inc. All intercompany accounts and transactions have been eliminated in
combination.
REVENUE RECOGNITION, DEFERRED DIRECTORY COST AND CUSTOMER DEPOSITS
Revenues from the sales of advertising placed in each directory are
recognized upon the distribution of directories in their individual market
areas. Advance payments received for directory advertising are shown as customer
deposits in the accompanying balance sheet. Expenditures directly related to
sales, production, printing and distribution of directories are capitalized as
deferred directory costs and matched against related revenues upon distribution
of the related directories.
CONCENTRATION OF CREDIT RISK
The Company is subject to a concentration of credit risk as revenues are
within four major market areas in South Central Michigan. In addition, credit
losses have represented a cost of doing business due to the nature of the
customer base (predominately small businesses) and the use of extended credit
terms.
The Company establishes a bad debt reserve based on the historical
experience in each market area. Actual write-offs are recorded against the
allowance when management determines that an account is uncollectible. In
general, management declares an account uncollectible if a company has entered
bankruptcy, discontinued its operations, or fails to renew an advertisement in
the following year's directory.
PROPERTY AND EQUIPMENT
Property and equipment is carried at cost, less depreciation and is
depreciated using the straight-line method over the estimated useful lives of
the assets (five to seven years).
INCOME TAXES
The Company has elected S-Corporation status for federal and state income
tax purposes. Accordingly, the income for the Company is included in the tax
returns of the
F-35
<PAGE> 172
UNIVERSAL PHONE BOOKS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
shareholders and no provision for federal and state income taxes was made in the
accompanying statement of operations other than the single business tax imposed
on S-Corporations by Michigan.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The Company believes that the carrying amounts of its financial instruments
approximate their fair market values due to their short-term nature.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions about the future that affect the amounts reported in the financial
statements and disclosures made in the accompanying notes to the financial
statements. Actual results could differ from those estimates.
2. NOTE RECEIVABLE FROM RELATED PARTY
The Company has a note receivable amounting to $500,000 from a commercial
finance entity in which a shareholder of the Company is a shareholder of the
debtor. The principal amount is due December 31, 1998, with annual interest of
12%, payable quarterly. Accrued interest of $15,000 is included in the
accompanying balance sheet.
3. FINANCIAL STATEMENT DETAILS
Property and equipment consist of the following at September 30, 1998:
<TABLE>
<S> <C>
Computer equipment.......................................... $ 233,827
Office equipment............................................ 34,981
---------
268,808
Less accumulated depreciation............................... (201,265)
---------
$ 67,543
=========
</TABLE>
Other assets consist of the following at September 30, 1998:
<TABLE>
<S> <C>
Tax deposits................................................ $ 103,461
Interest receivable......................................... 15,000
Other....................................................... 353
---------
$ 118,814
=========
</TABLE>
4. NOTES PAYABLE TO BANKS
The Company has a note payable to two banks with aggregate principal
balances of $363,600. The notes have interest rates of 6.25% and 8.00% per annum
and are
F-36
<PAGE> 173
UNIVERSAL PHONE BOOKS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
collateralized by the accounts receivable of the Company. The entire principal
balances are due within one year.
5. NOTES PAYABLE TO SHAREHOLDERS
The Company has various notes payable to two shareholders with aggregate
principal balances of $2,309,857 which are due on demand. The notes bear
interest at rates ranging from 8.25% to 9.00% per annum.
6. LEASE COMMITMENTS
The Company leases office facilities throughout Michigan under operating
leases with remaining terms ranging from three to four years. Total rent expense
for the year ended September 30,1998 was $25,550. Annual minimum lease payments
due under these leases at September 30, 1998 are:
<TABLE>
<S> <C>
1999........................................................ $ 38,652
2000........................................................ 40,224
2001........................................................ 41,796
2002........................................................ 21,600
--------
$142,272
========
</TABLE>
7. PROFIT SHARING PLAN
The Company has established a Profit Sharing Plan and Trust whereby
employees may contribute up to 25% of their salary on an annual basis. The
Company matches up to 25% of the employees' contribution and the Company's
portion for the year ended September 30, 1998 totaled $207,743.
8. YEAR 2000 (UNAUDITED)
Many currently installed computer systems and software products are coded
to accept only two-digit entries in the date code field. Beginning in the year
2000, these date code fields will need to accept four-digit entries to
distinguish 21st century dates from 20th century dates. As a result, in
approximately one year, computer systems and/or software used by many companies
may need to be upgraded to comply with such "Year 2000" requirements.
The Company recognizes the need to ensure that its operations will not be
adversely impacted by the Year 2000 issue on a going concern basis. However, as
the Company sold substantially all of its net assets and operations subsequent
to year end (see Note 9), implementation of Year 2000 modifications will be
accomplished by TransWestern Publishing Company LLC.
F-37
<PAGE> 174
UNIVERSAL PHONE BOOKS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
9. SUBSEQUENT EVENTS
On November 30, 1998, substantially all the assets of the Company were
purchased by TransWestern Publishing Company LLC for cash of approximately $13.9
million and a $2.0 million promissory note subject to adjustment based on
operating results of certain directories over an 18 month period.
F-38
<PAGE> 175
TRANSWESTERN PUBLISHING COMPANY LLC
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEETS
DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
TRANSWESTERN UNITED PRO FORMA
PUBLISHING DIRECTORY ADJUSTMENTS COMBINED PRO
COMPANY LLC SERVICES, INC. (NOTE 5) FORMA
------------ -------------- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash......................... $ 14,067 $ 627 $ (627)(a) $ 14,067
Trade receivables, net....... 20,931 1,054 (1,054)(a) 20,931
Deferred directory costs..... 8,935 1,678 (991)(a) 9,622
Other current assets......... 805 2 (2)(a) 805
--------- ------ ------- --------
Total current
assets............ 44,738 3,361 (2,674) 45,425
Property, equipment and
leasehold improvements,
net.......................... 2,977 54 (54)(a) 2,977
Acquired intangibles, net...... 34,486 -- 17,770(b) 52,256
Other assets, primarily debt
issuance costs, net.......... 8,629 2 (2)(a) 8,629
--------- ------ ------- --------
Total assets......... $ 90,830 $3,417 $15,040 $109,287
========= ====== ======= ========
LIABILITIES AND MEMBERS' OR SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............. $ 4,241 $ 5 $ (5)(a) $ 4,241
Salaries and benefits
payable................... 3,980 29 (29)(a) 3,980
Accrued acquisition costs.... 450 -- 720(d) 1,170
Accrued interest............. 1,470 -- -- 1,470
Other accrued liabilities.... 1,063 7 (7)(a) 1,063
Customer deposits............ 16,139 1,672 (956)(a) 16,855
Current portion, long-term
debt...................... 2,207 -- -- 2,207
--------- ------ ------- --------
Total current
liabilities....... 29,550 1,713 (277) 30,986
Long term debt:
Promissory note.............. 2,000 -- 4,750(c) 6,750
Revolving loan............... -- -- 12,271(c) 12,271
Senior credit facility....... 66,165 -- -- 66,165
Series B and Series C 9 5/8%
senior subordinated
notes..................... 141,784 -- -- 141,784
Shareholders' equity........... 1,704 (1,704)(e) --
Member's deficit............... (148,669) -- -- (148,669)
--------- ------ ------- --------
Total liabilities and
members' or
shareholders
equity............ $ 90,830 $3,417 $15,040 $109,287
========= ====== ======= ========
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
statements.
F-39
<PAGE> 176
TRANSWESTERN PUBLISHING COMPANY LLC
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
TRANSWESTERN
PUBLISHING UNITED UNIVERSAL
COMPANY DIRECTORY PHONE BOOKS, PRO FORMA COMBINED
LLC SERVICES, INC. INC. ADJUSTMENTS PRO FORMA
------------ -------------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C>
Net revenues................ $108,889 $5,756 $7,143 $ -- $121,788
Cost of revenues............ 20,930 2,272 2,134 -- 25,336
-------- ------ ------ ------- --------
Gross profit................ 87,959 3,484 5,009 -- 96,452
Operating expenses:
Sales and marketing....... 44,968 2,636 1,434 -- 49,038
General and
administrative......... 18,106 647 2,174 6,714(a) 27,641
-------- ------ ------ ------- --------
Total operating expenses.... 63,074 3,283 3,608 6,714 76,679
-------- ------ ------ ------- --------
Income (loss) from
operations................ 24,885 201 1,401 (6,714) 19,773
Other income (expense),
net....................... 347 (44) 70 -- 373
Interest expense............ (17,785) -- (310) (2,631)(b) (20,726)
======== ====== ====== ======= ========
Income (loss) from
continuing operations per
member unit (Note 6)...... $ 7,447 $ 157 $1,161 $(9,345) $ (580)
======== ====== ====== ======= ========
</TABLE>
- -------------------------
(a) Adjustment to reflect the twelve month amortization of acquired intangibles
based on the allocation of the assumed purchase price in the December 31,
1998 pro forma balance sheet of TransWestern Publishing Company LLC.
(b) Adjustment to reflect the incremental interest expense TransWestern
Publishing Company LLC would have incurred on the additional debt resulting
from the acquisition of United Directory Services, Inc. and Universal Phone
Books, Inc., calculated using the applicable borrowing rates during the
period outstanding.
See accompanying notes to unaudited pro forma combined condensed financial
statements.
F-40
<PAGE> 177
TRANSWESTERN PUBLISHING COMPANY LLC
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS
(IN THOUSANDS)
NOTE 1.
Effective May 1, 1998 as reported on Form 8-K dated May 12, 1998,
TransWestern Publishing Company LLC ("TWP") elected to change its fiscal year
from April 30 to December 31. Accordingly, TWP began reporting interim results
on a calendar year basis. The unaudited pro forma combined condensed statement
of income for the twelve months ended December 31, 1998 includes the unaudited
four month period ended April 1998.
NOTE 2.
The unaudited pro forma combined condensed financial statements reflect the
following acquisitions:
On January 5, 1999, TWP purchased certain tangible and intangible
assets totaling $18,457 of United Directory Services, Inc. ("United"). The
purchase price, which includes estimated transaction costs of $720 was
allocated as follows:
<TABLE>
<S> <C>
Acquired customer lists..................................... $17,770
Deferral directory costs.................................... 687
Customer deposits and other liabilities..................... (716)
-------
$17,741
=======
</TABLE>
On November 30, 1998, TWP purchased certain tangible and intangible
assets totaling $16,900 of Universal Phone Books, Inc. ("Universal"). The
purchase price, which includes estimated transaction costs of $501 was
allocated as follows:
<TABLE>
<S> <C>
Acquired customer lists..................................... $15,801
Property and equipment...................................... 68
Deferral directory costs.................................... 653
Customer deposits and other liabilities..................... (434)
-------
$16,088
=======
</TABLE>
NOTE 3.
The unaudited pro forma condensed financial statements have been prepared
by TWP based upon the historical financial statements of United, Universal and
TWP and may not be indicative of the results that may have actually occurred if
the combinations had been in effect on the date indicated or for the periods
presented or which may be obtained in the future. The unaudited pro forma
condensed statement of operations include the statement of operations of TWP and
United for the twelve months ended December 31, 1998 and the statement of
operations of Universal for the twelve months ended September 30, 1998. The pro
forma condensed financial statements should be read in conjunction with the
audited financial statements and notes of United and Universal included
elsewhere in the Prospectus
F-41
<PAGE> 178
TRANSWESTERN PUBLISHING COMPANY LLC
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4.
The unaudited pro forma combined condensed statements of operations of TWP,
United and Universal for the year ended December 31, 1998 assumes the purchase
of United and Universal had been consummated on January 1, 1998. The pro forma
information is based on this historical financial statements of TWP, United and
Universal giving effect to the transaction under the purchase method of
accounting and the assumptions and adjustments in the accompanying footnotes to
the pro forma financial statements.
NOTE 5.
The unaudited pro forma condensed balance sheet assumes the purchase of
United had been consummated on December 31, 1998. The pro forma information is
based on the historical financial statements of TWP and United giving effect to
the transaction under the purchase method of accounting and the assumptions and
adjustments as summarized below:
(a) Represents the elimination of assets and liabilities not included
in the Asset Purchase Agreement.
(b) Represents the purchase price assigned to the fair value of the
intangibles acquired (customer list)
(c) Represents the additional borrowings under the revolving loan and
seller promissory notes to fund the acquisition of United.
(d) Represents the accrual of estimated acquisition costs to be
incurred by TWP.
(e) Represents the elimination of shareholders' equity of United at
the date of acquisition.
NOTE 6.
TWP's equity interest consists of a single class of authorized common units
(the "Member Units"). TransWestern Publishing Company, L.P. is the sole member
of TWP and accordingly holds all of the issued and outstanding Member Units.
\
F-42
<PAGE> 179
- ------------------------------------------------------
- ------------------------------------------------------
WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE ANY
INFORMATION OR REPRESENT ANYTHING TO YOU OTHER THAN THE INFORMATION CONTAINED IN
THIS PROSPECTUS. YOU MUST NOT RELY ON UNAUTHORIZED INFORMATION OR
REPRESENTATIONS.
THIS PROSPECTUS DOES NOT OFFER TO SELL OR ASK FOR OFFERS TO BUY ANY OF THE
SECURITIES IN ANY JURISDICTION WHERE IT IS UNLAWFUL, WHERE THE PERSON MAKING THE
OFFER IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON WHO CAN NOT LEGALLY BE OFFERED
THE SECURITIES. THE INFORMATION IN THIS PROSPECTUS IS CURRENT ONLY AS OF THE
DATE ON ITS COVER, AND MAY CHANGE AFTER THAT DATE. FOR ANY TIME AFTER THE COVER
DATE OF THIS PROSPECTUS, WE DO NOT REPRESENT THAT OUR AFFAIRS ARE THE SAME AS
DESCRIBED OR THAT THE INFORMATION IN THIS PROSPECTUS IS CORRECT -- NOR DO WE
IMPLY THOSE THINGS BY DELIVERING THIS PROSPECTUS OR SELLING SECURITIES TO YOU.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................... 1
Risk Factors............................. 13
The Issuers.............................. 23
Use of Proceeds.......................... 23
Capitalization........................... 24
Selected Historical Consolidated
Financial and Other Data............... 25
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................. 29
Business................................. 40
Management............................... 51
Security Ownership of Certain Beneficial
Owners and Management.................. 58
Certain Relationships and Related
Transactions........................... 60
Limited Liability Company Agreement...... 64
Limited Partnership Agreement............ 65
Description of Certain Indebtedness...... 67
The Exchange Offer....................... 71
Description of the Notes................. 83
Certain United States Federal Income Tax
Considerations......................... 126
Plan of Distribution..................... 131
Legal Matters............................ 132
Experts.................................. 132
Available Information.................... 132
Index to Financial Statements............ F-1
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
$140,000,000
TRANSWESTERN PUBLISHING
COMPANY LLC
TWP CAPITAL CORP. II
OFFER TO EXCHANGE THEIR
9 5/8% SENIOR SUBORDINATED NOTES
DUE 2007 FOR ANY AND ALL OF THEIR
OUTSTANDING SERIES B 9 5/8% SENIOR
SUBORDINATED NOTES DUE 2007
AND SERIES C 9 5/8% SENIOR
SUBORDINATED NOTES DUE 2007
-------------------------
PROSPECTUS
-------------------------
, 1999
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 180
PART II: INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
TransWestern. TransWestern is a limited liability company organized under
the laws of the State of Delaware. Section 18-108 of the Delaware Limited
Liability Company Act (the "Act") provides that, subject to such standards and
restrictions, if any, as are set forth in its limited liability company
agreement, a limited liability company may, and shall have the power to,
indemnify and hold harmless any member or manager or other person from and
against any and all claims and demands whatsoever.
Section 4.2 of TransWestern's Limited Liability Company Agreement ("Section
4.2") provides, among other things, that each person and entity shall be
entitled to be indemnified and held harmless on an incurred basis by
TransWestern (but only after first making a claim for indemnification available
from any other source and only to the extent indemnification is not provided by
that source) to the fullest extent permitted under the Act (including
indemnification for gross negligence and breach of fiduciary duty to the extent
so authorized) as amended from time to time (but, in the case of any such
amendment, only to the extent that such amendment permits TransWestern to
provide broader indemnification rights than such law permitted TransWestern to
provide prior to such amendment) against all losses, liabilities and expenses,
including attorneys' fees and expenses, arising from claims, actions and
proceedings in which, such person or entity may be involved, as a party or
otherwise, by reason of his, her or it being or having been the Manager, a
Member or an officer of TransWestern, or by reason of his, her or it serving at
the request of TransWestern as a director, officer, manager, member, partner,
employee or agent of another limited liability company or of a corporation,
partnership, joint venture, trust or other enterprise, including service with
respect to an employee benefit plan whether or not such person or entity
continues to be such or serve in such capacity at the time any such loss,
liability or expense is paid or incurred.
Section 4.2 also provides that, the rights of indemnification will be in
addition to any rights to which such person or entity may otherwise be entitled
by contract or as a matter of law and shall extend to his, her or its successors
and assigns. In particular, and without limitation of the foregoing, such person
or entity shall be entitled to indemnification by TransWestern against expenses,
as incurred, including attorneys' fees and expenses, incurred by such person or
entity upon the delivery by such person or entity to TransWestern of a written
undertaking, reasonably acceptable to the Manager, to repay all amounts so
advanced if it shall ultimately be determined that such person or entity is not
entitled to be indemnified under Section 4.2. TransWestern may, to the extent
authorized from time to time by the Manager, grant rights to indemnification and
to advancement of expenses to any employee or agent of TransWestern to the
fullest extent of the provisions of Section 4.2 with respect to the
indemnification and advancement of expenses of the Manager, Members and officers
of TransWestern.
TransWestern intends to obtain insurance policies covering all of its
directors and officers against certain liabilities for actions taken in such
capacities, including liabilities under the Securities Act of 1933.
Capital II. Capital II is incorporated under the laws of the State of
Delaware. Section 145 of the General Corporation Law of the State of Delaware,
inter alia ("Section 145") provides that a Delaware corporation may indemnify
any persons who were, are or are threatened to be made, parties to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other
II-1
<PAGE> 181
than an action by or in the right of such corporation), by reason of the fact
that such person is or was an officer, director, employee or agent of such
corporation, or is or was serving at the request of such corporation as a
director, officer, employee or agent of another corporation or enterprise. The
indemnity may include expenses, such as attorneys' fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided such person acted in
good faith and in a manner he or she reasonably believed to be or not opposed to
the corporation's best interests and, with respect to any criminal action or
proceeding, had no reasonable cause to believe that his or her conduct was
illegal. A Delaware corporation may indemnify any persons who are, were or are
threatened to be made, party to any threatened, pending or completed action or
suit by or in the right of the corporation by reasons of the fact that such
person was a director, officer, employee or agent of such corporation, or is or
was serving at the request of such corporation as a director, officer, employee
or agent of another corporation or enterprise. The indemnity may include
expenses, including attorneys' fees, actually and reasonably incurred by such
person in connection with the defense or settlement of such action or suit,
provided such person acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the corporation's best interests, provided
that no indemnification is permitted without judicial approval if the officer,
director, employee or agent is adjudged to be liable to the corporation. Where
an officer, director, employee or agent is successful on the merits or otherwise
in the defense of any action referred to above, the corporation must indemnify
him or her against the expenses which such officer or director has actually and
reasonably incurred.
Capital II's Certificate of Incorporation provides that to the fullest
extent permitted by the General Corporation Law of the State of Delaware as the
same exists or may hereafter be amended, a director of Capital II shall not be
liable to Capital II or its stockholders for monetary damages for a breach of
fiduciary duty as a director.
Article V of the By-laws of Capital II ("Article V") provides, among other
things, that each person who was or is made a party or is threatened to be made
a party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or she,
or a person of whom he or she is the legal representative, is or was a director
or officer, of the corporation or is or was serving at the request of Capital II
as a director, officer, employee, fiduciary, or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, shall be indemnified
and held harmless by Capital II to the fullest extent which it is empowered to
do so by the General Corporation Law of the State of Delaware, as the same
exists or may hereafter be amended but, in the case of any such amendment, only
to the extent that such amendment permits Capital II to provide broader
indemnification rights than said law permitted the corporation to provide prior
to such amendment, against all expense, liability and loss, including attorneys'
fees actually and reasonably incurred by such person in connection with such
proceeding, and such indemnification shall inure to the benefit of his or her
heirs, executors and administrators; provided, however, that, Capital II shall
indemnify any such person seeking indemnification in connection with a
proceeding initiated by such person only if such proceeding was authorized by
the board of directors of Capital II.
Article V also provides that persons who are not covered by the foregoing
provisions of Article V and who are or were employees or agents of Capital II,
or who are or were serving at the request of Capital II as employees or agents
of another corporation,
II-2
<PAGE> 182
partnership, joint venture, trust or other enterprise, may be indemnified to the
extent authorized at any time or from time to time by the board of directors.
Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation or enterprise,
against any liability asserted against him and incurred by him or her in any
such capacity, arising out of his or her status as such, whether or not the
corporation would otherwise have the power to indemnify him or her under Section
145.
Article V further provides that Capital II may purchase and maintain
insurance on its behalf and on behalf of any person who is or was a director,
officer, employee, fiduciary or agent of Capital II or was serving at the
request of Capital II as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him or her and incurred by him or her in any such
capacity, whether or not Capital II would have the power to indemnify such
person against such liability under Article V.
All of Capital II's directors and officers will be covered by insurance
policies intended to be obtained by Capital II against certain liabilities for
actions taken in such capacities, including liabilities under the Securities Act
of 1933.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<S> <C>
2.1 Contribution and Assumption Agreement, dated November 6,
1997, by and among Holdings and TransWestern.(1)
2.2 Assignment and Assumption Agreement, dated November 6, 1997,
by and among Holdings and TransWestern.(1)
2.3 Bill of Sale, dated November 6, 1997 by and among Holdings
and TransWestern.(1)
2.4 Asset Purchase Agreement with Universal Phone Books, Inc.,
incorporated by reference to Exhibit 2.1 to the Company's
Current Report on Form 8-K, dated November 30, 1998.
2.5 Asset Purchase Agreement with United Directory Services,
Inc., incorporated by reference to Exhibit 2.1 to the
Company's Current Report on Form 8-K, dated January 5, 1999.
3.1 Certificate of Formation of TransWestern.(1)
3.2 Certificate of Incorporation of Capital II.(1)
3.3 By-Laws of Capital II.(1)
3.4 Limited Liability Company Agreement of TransWestern
Publishing Company LLC.(1)
3.5 Certificate of Incorporation of TCC.(1)
3.6 By-Laws of TCC.(1)
3.7 Certificate of Incorporation of Target Directories of
Michigan, Inc.
3.8 By-Laws of Target Directories of Michigan, Inc.
4.1 Indenture, dated as of November 12, 1997 by and between the
Company and Wilmington Trust Company, as Trustee for the
Series B notes.(1)
</TABLE>
II-3
<PAGE> 183
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<S> <C>
4.2 Form of Series B 9 5/8% Senior Subordinated Notes due
2007.(1)
4.3 Securities Purchase Agreement, dated as of November 6, 1997,
by and among the Company, Holdings, TCC and the Initial
Purchasers of the Series A/B notes.(1)
4.4 Registration Rights Agreement, dated as of November 12,
1997, by and among the Company and the Initial Purchasers of
the Series A/B notes.(1)
4.5 Form of Series D 9 5/8% Senior Subordinated Notes due 2007
and the related Guarantees.
4.6 Indenture, dated as of December 2, 1998, by and among the
Company, Target Directories of Michigan, Inc. and Wilmington
Trust Company, as Trustee, for the Series C notes (including
the form of the Series C notes and the related Guarantees).
4.7 Securities Purchase Agreement, dated as of December 2, 1998,
by and among the Company, Target Directories of Michigan,
Inc., Holdings, TCC and the Initial Purchasers of the Series
C notes.
4.8 Registration Rights Agreement, dated as of December 2, 1998,
by and among the Company, Target Directories of Michigan,
Inc. and the Initial Purchasers of the Series C notes.
5.1 Opinion of Kirkland & Ellis.*
10.1 Employment Agreement, dated as of October 1, 1997, by and
between Laurence H. Bloch and TransWestern.(1)
10.2 Employment Agreement, dated as of October 1, 1997, by and
between Ricardo Puente and TransWestern.(1)
10.3 Assumption Agreement and Amended and Restated Credit
Agreement, dated as of November 6, 1997, among the Company,
the lenders listed therein and Canadian Imperial bank of
Commerce, as administrative agent, and First Union National
Bank, as documentation agent.(1)
10.4 Form of Equity Compensation Plan.(1)
10.5 Form of Executive Agreement between Holdings, TCC and each
Management Investor.(1)
10.6 Securities Purchase Agreement, dated as of November 6, 1997,
by and among Holdings, TWP Capital Corp., TransWestern, TCC
and the Initial Purchasers of the Discount Notes.(1)
10.7 Indenture relating to the Discount Notes, dated as of
November 12, 1997, by and among Holdings, TWP Capital Corp.
and Wilmington Trust Company, as Trustee.(1)
10.8 Registration Rights Agreement, dated as of November 12,
1997, by and among Holdings, TWP Capital Corp. and the
Initial Purchasers of the Discount Notes.(1)
10.9 Management Agreement, dated as of October 1, 1997, by and
among Holdings and Thomas H. Lee Company.(1)
10.10 Investors Agreement, dated as of October 1, 1997, by and
among Holdings, TCC and the limited partners of Holdings.(1)
12.1 Statement regarding computation of ratio of earnings to
fixed charges.*
21.1 Subsidiaries of TransWestern, incorporated by reference to
Exhibit 21.1 to the Company's Annual Report on Form 10-K for
the fiscal year ended April 30, 1998.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
</TABLE>
II-4
<PAGE> 184
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ------- -------
<S> <C>
23.2 Consent of Kirkland & Ellis (included in Exhibit 5.1
above).*
24.1 Power of Attorney (included in Part II of the Registration
Statement).
25.1 Statement of Eligibility of Trustee on Form T-1 with respect
to the Series D notes.*
25.2 Statement of Eligibility of Trustee on Form T-1 with respect
to the guarantees of the Series D notes.*
27.1 Financial Data Schedule.*
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of Tender Instructions.*
</TABLE>
- -------------------------
* To be filed by Amendment.
(1) Incorporated herein by reference to the same numbered exhibit to the
Company's Registration Statement on Form S-4 (Registration No. 333-42085),
originally filed with the SEC on December 12, 1997.
(b) FINANCIAL STATEMENT SCHEDULES.
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions, are inapplicable or not material, or the information
called for thereby is otherwise included in the financial statements and
therefore has been omitted.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-5
<PAGE> 185
(4) The undersigned registrants hereby undertake as follows: that
prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this registration statement,
by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the issuers undertake that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form.
(5) The registrants undertake that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to
meet the requirements of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the registration statement and will not
be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to
directors, officers and controlling persons of the registrants pursuant to
the provisions described under Item 20 or otherwise, the registrants have
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrants of expenses incurred or paid by a director, officer or
controlling person of the registrants in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrants will, unless in the opinion of their counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by them is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(6) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrants pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(7) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(8) The undersigned registrants hereby undertake to respond to
requests for information that is incorporated by reference into the
prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within one
business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means.
II-6
<PAGE> 186
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(9) The undersigned registrants hereby undertake to supply by means of
a post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of
and included in the registration statement when it became effective.
II-7
<PAGE> 187
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
TransWestern Publishing Company LLC has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
City of San Diego, State of California, on the 26th day of February, 1999.
TRANSWESTERN PUBLISHING COMPANY LLC
By: /s/ LAURENCE H. BLOCH
------------------------------------
Name: Laurence H. Bloch
Title: President and Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Laurence H. Bloch and Joan M. Fiorito and each of
them, his or her true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any or all amendments (including
post-effective amendments) to this registration statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their, his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
* * *
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 26th day of February, 1999.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<C> <S>
/s/ RICARDO PUENTE President, Chief Executive Officer and Director
- -------------------------------------------------------- of TCC (Principal Executive Officer)
Ricardo Puente
/s/ LAURENCE H. BLOCH Chairman, Secretary and Director of TCC
- --------------------------------------------------------
Laurence H. Bloch
/s/ JOAN M. FIORITO Vice President, Chief Financial Officer and
- -------------------------------------------------------- Assistant Secretary (Principal Financial and
Joan M. Fiorito Accounting Officer)
/s/ C. HUNTER BOLL Director of TCC
- --------------------------------------------------------
C. Hunter Boll
/s/ TERRENCE M. MULLEN Director of TCC
- --------------------------------------------------------
Terrence M. Mullen
/s/ CHRISTOPHER J. PERRY Director of TCC
- --------------------------------------------------------
Christopher J. Perry
/s/ SCOTT A. SCHOEN Director of TCC
- --------------------------------------------------------
Scott A. Schoen
/s/ MARCUS D. WEDNER Director of TCC
- --------------------------------------------------------
Marcus D. Wedner
</TABLE>
- -------------------------
** TCC is the Manager of TransWestern Publishing Company LLC.
II-8
<PAGE> 188
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, TWP
Capital Corp. II has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in City of San Diego,
State of California, on the 26th day of February, 1999.
TWP CAPITAL CORP. II
By: /s/ LAURENCE H. BLOCH
------------------------------------
Name: Laurence H. Bloch
Title: President and Secretary
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 26th day of February, 1999.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<C> <S>
/s/ LAURENCE H. BLOCH President, Secretary and Director
- -------------------------------------------------- (Principal Executive Officer)
Laurence H. Bloch
/s/ JOAN M. FIORITO Vice President and Assistant Secretary
- -------------------------------------------------- (Principal Financial and Accounting Officer)
Joan M. Fiorito
</TABLE>
II-9
<PAGE> 189
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Target Directories of Michigan, Inc. has duly caused this Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in
City of San Diego, State of California, on the 26th day of February, 1999.
TARGET DIRECTORIES OF MICHIGAN, INC.
By: /s/ RICARDO PUENTE
------------------------------------
Name: Ricardo Puente
Title: President and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Laurence H. Bloch and Joan M. Fiorito and each of
them, his or her true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him or her and in his or her name, place
and stead, in any and all capacities, to sign any or all amendments (including
post-effective amendments) to this registration statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their, his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
* * *
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities indicated on the 26th day of February, 1999.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
--------- --------
<C> <S>
/s/ RICARDO PUENTE President, Chief Executive Officer and Director
- -------------------------------------------------------- (Principal Executive Officer)
Ricardo Puente
/s/ LAURENCE H. BLOCH Treasurer and Director
- --------------------------------------------------------
Laurence H. Bloch
/s/ JOAN M. FIORITO Vice President, Chief Financial Officer and
- -------------------------------------------------------- Secretary (Principal Financial and Accounting
Joan M. Fiorito Officer)
/s/ C. HUNTER BOLL Director
- --------------------------------------------------------
C. Hunter Boll
/s/ TERRENCE M. MULLEN Director
- --------------------------------------------------------
Terrence M. Mullen
/s/ SCOTT A. SCHOEN Director
- --------------------------------------------------------
Scott A. Schoen
/s/ CHRISTOPHER J. PERRY Director
- --------------------------------------------------------
Christopher J. Perry
/s/ MARCUS D. WEDNER Director
- --------------------------------------------------------
Marcus D. Wedner
</TABLE>
II-10
<PAGE> 1
EXHIBIT 3.7
[THE STATE OF MICHIGAN SEAL]
This is to Certify that the Annexed copy has been compared by me with the
record on file in this Department and that the same is a true copy thereof.
In testimony whereof, I have hereunto
set my hand and affixed the Seal of the
Department, in the City of Lansing, this
23rd day of November, 1998.
/s/ JULIE CROLL, Director
----------------------------------
Corporation, Securities and Land Development Bureau
<PAGE> 2
- --------------------------------------------------------------------------------
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
- --------------------------------------------------------------------------------
(FOR BUREAU USE ONLY) Date Received
JANUARY 23, 1989
FILED
JANUARY 23, 1989
Administration
MICHIGAN DEPT. OF CONSUMER
Corporation & Securities Bureau
EFFECTIVE DATE:
- --------------------------------------------------------------------------------
CORPORATION IDENTIFICATION NUMBER 446-111
- --------------------------------------------------------------------------------
ARTICLES OF INCORPORATION
FOR USE BY DOMESTIC PROFIT CORPORATIONS
(Please read Instructions and Paperwork Reduction Act notice on last page)
Pursuant to the provisions of Act 284, Public Acts of 1972, as amended,
the undersigned corporation executes the following Articles:
ARTICLE I
- --------------------------------------------------------------------------------
The name of the corporation is:
TARGET DIRECTORIES OF MICHIGAN, INC.
ARTICLE II
- --------------------------------------------------------------------------------
The purpose or purposes for which the corporation is organized is to engage in
any activity within the purposes for which corporations may be organized under
the Business Corporation Act of Michigan.
The compiling and printing of advertising and telephone directories and the
sale of advertisement in said directories.
ARTICLE III
- --------------------------------------------------------------------------------
The total authorized capital stock is:
1. Common Shares 50,000 Par Value Per Share $1.00
Preferred Shares ________ Par Value Per Share $____
and/or shares without par value as follows:
2. Common Shares ___________ Stated Par Value Per Share $____
Preferred Shares ________ Stated Par Value Per Share $____
3. A statement of all or any of the relative rights, preferences and
limitations of the shares of each class is as follows:
<PAGE> 3
ARTICLE IV
- --------------------------------------------------------------------------------
1. The address of the registered office is:
6155 US-223 Manitou Beach Michigan 49253
-----------------------------------------------------------------------------
(Street Address) (City) (Zip Code)
2. The mailing address of the registered office if different than above:
Michigan
-----------------------------------------------------------------------------
(P.O. Box) (City) (Zip Code)
3. The name of the resident agent at the registered office is: Dale Ray
Engberson
- --------------------------------------------------------------------------------
ARTICLE V
- --------------------------------------------------------------------------------
The name(s) and address(es) of the incorporator(s) is (are) as follows:
Name Residence or Business Address
Dale Ray Engberson 6155 US-223, Manitou Beach, MI 49253
-----------------------------------------------------------------------------
Rhonda Lynn Engberson 6155 US-223, Manitou Beach, MI 49253
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
________________________________________________________________________________
ARTICLE VI (OPTIONAL. DELETE IF NOT APPLICABLE)
________________________________________________________________________________
When a compromise or arrangement or a plan of reorganization of this
corporation is proposed between this corporation and its creditors or any
class of them or between this corporation and its shareholders or any class
of them, a court of equity jurisdiction within the state, on application of
this corporation or of a creditor or shareholder thereof, or an application
of a receiver appointed for the corporation, may order a meeting of the
creditors or class of creditors or of the shareholders or class of
shareholders to be affected by the proposed compromise or arrangement or
reorganization, to be summoned in such manner as the court directs. If a
majority in number representing 3/4 in value of the creditors or class of
creditors, or of the shareholders or class of shareholders to be affected by
the proposed compromise or arrangement or a reorganization, agree to a
compromise or arrangement or a reorganization of this corporation as a
consequence of the compromise or arrangement, the compromise or arrangement
and the reorganization, if sanctioned by the court to which the application
has been made, shall be binding on all the creditors or class of creditors,
or on all the shareholders or class of shareholders and also on this
corporation.
________________________________________________________________________________
ARTICLE VII (OPTIONAL DELETE IF NOT APPLICABLE)
________________________________________________________________________________
Any action required or permitted by the Act to be taken at an annual or
special meeting of shareholders may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action
so taken, is signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take the
action at a meeting at which all shares entitled to vote thereon were present
and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to shareholders who have not
consented in writing.
________________________________________________________________________________
<PAGE> 4
Use space below for additional Articles or for continuation of previous
Articles. Please identify any Article being continued or added. Attach
additional pages if needed.
I (We), the incorporator(s) sign my (our) name(s) this 20th day of January 1989.
/s/ DALE RAY ENGBERSON /s/ RHONDA LYNN ENGBERSON
- -------------------------- --------------------------
Dale Ray Engberson Rhonda Lynn Engberson
- -------------------------- --------------------------
- -------------------------- --------------------------
- -------------------------- --------------------------
- -------------------------- --------------------------
<PAGE> 5
DOCUMENT WILL BE RETURNED TO NAME AND MAILING ADDRESS
INDICATED IN THE BOX BELOW. Include name, street and number
(or P.O. box), city, state and ZIP code.
- -----------------------------------------------------------
James D. Hayne
Attorney at Law
47 E. Bacon Street
Hillsdale, Michigan 49242
- -----------------------------------------------------------
Name of person or organization
remitting fees:
Dale Ray Engberson
- -----------------------------------------------------------
- -----------------------------------------------------------
Preparers name and business
telephone number:
James D. Hayne, Esq.
- -----------------------------------------------------------
(517) 437-4418
- -----------------------------------------------------------
- --------------------------------------------------------------------------------
INFORMATION AND INSTRUCTIONS
1. This form is issued under the authority of Act 284, P.A. of 1972, as
amended. The articles of incorporation cannot be filed until this form, or a
comparable document, is submitted.
2. Submit one original copy of this document. Upon filing, a microfilm
copy will be prepared for the records of the Corporation and Securities Bureau.
The original copy will be returned to the address appearing in the box above as
evidence of filing.
Since this document must be microfilmed, it is important that the
filing be legible. Documents with poor black and white contrast, or otherwise
illegible, will be rejected.
3. This document is to be used pursuant to the provisions of Act 284.
P.A. of 1972, by one or more persons for the purpose of forming a domestic
profit corporation.
4. Article I -- The corporate name of a domestic profit corporation is
required to contain one of the following words or abbreviations: "Corporation,"
"Company," "Incorporated," "Limited," "Corp.," "Co.," "Inc.," or "Ltd."
5. Article II -- State, in general terms, the character of the particular
business to be carried on. Under section 202(b) of the Act, it is sufficient to
state substantially, alone or without specifically enumerated purposes, that
the corporation may engage in any activity within the purposes for which
corporations may be organized under the Act. The Act requires, however, that
educational corporations state their specific purposes.
6. Article III (2) -- The Act requires the incorporators of a domestic
corporation having shares without par value to submit in writing the amount of
consideration proposed to be received for each share which shall be allocated to
stated capital. Such stated value may be indicated either in item 2 of article
III or in a written statement accompanying the articles of incorporation.
7. Article IV -- A post office box may not be designated as the address
of the registered office.
8. Article V -- The Act requires one or more Incorporators. The
address(es) should include a street number and name (or other designation),
city and state.
9. The duration of the corporation should be stated in the articles only
if the duration is not perpetual.
10. This document is effective on the date approved and filed by the
Bureau. A later effective date, no more than 90 days after the date of
delivery, may be stated as an additional article.
11. The articles must be signed in ink by each incorporator. The names of
the incorporators as set out in article V should correspond with the signatures.
12. FEES:
<TABLE>
<S> <C>
Filing fee .......................................................... $10.00
Franchise Fee -- 1/2 mill (.0005) on each dollar of authorized
capital stock with a minimum franchise fee of ....................... $25.00
Total minimum fees (Make remittance payable to State of Michigan) ... $25.00
</TABLE>
13. Mail form and fee to:
Michigan Department of Commerce, Corporation and Securities Bureau,
Corporation Division, P.O. Box 30054,
Lansing, MI 48908, Telephone: (517) 334-6302
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 3.8
BY-LAWS
TARGET DIRECTORIES OF MICHIGAN, INC.
ARTICLE I
MEETING OF STOCKHOLDERS
1. The name of this company is Target Directories of Michigan, Inc.
2. The annual meeting of the stockholders of the company shall be held at
its principal office at 6155 US-223, Manitou Beach, Michigan, or at such other
principal office which may later be established, at 10:00 a.m. on January 30th
of each and every year, at which time there shall be elected by the stockholders
of the company, by ballot, a board of two directors for the ensuing year and the
stockholders shall transact such other business as shall properly come before
them.
3. A notice setting out the time and place of such annual meeting shall be
mailed, postage prepaid, to each stockholder of record at his address as the
same appears on the stock book of the company, or if no such address appears, at
his last known place of business at least ten days prior to the annual meeting.
4. If a quorum be not present at the annual meeting, the stockholders
present in person or by proxy may adjourn to such future time as shall be agreed
upon by them and notice of such adjournment shall be mailed, postage prepaid, to
each stockholder at least ten days before such adjourned meeting; but if a
quorum be present, they may adjourn from day to day as they see fit and no
notice of such adjournment need be given.
5. Special meeting of stockholders shall be held at the same place as the
annual meeting as hereinbefore provided. Such meetings may be called at any time
by the President, any Director or the holders of 50% of the shares of the
capital stock of the company. The Secretary-Treasurer shall mail a notice of
such meeting called to each stockholder of the company at least ten days before
the meeting and such notice shall state the time and place of such meeting and
the object thereof. No business shall be transacted at a special meeting except
as stated in the notice sent to the stockholders unless by the unanimous consent
of all stockholders either in person or by proxy, all such stock being
represented at the meeting.
6. A majority of the stock issued and outstanding either in person or by
proxy shall constitute a quorum for the transaction of business at any meeting
of the stockholders.
<PAGE> 2
7. Each stockholder shall be entitled to one vote for each share of stock
standing in his own name on the books of the company whether represented in
person or by proxy.
8. All proxies shall be in writing and properly signed.
9. The following order of business shall be observed at all annual and
special meetings of the stockholders so far as practicable:
1. Calling the roll:
2. Reading, correction and approval of minutes of previous meeting;
3. Reports of Officers;
4. Reports of Committees;
5. Election of Directors;
6. Unfinished Business;
7. New Business;
ARTICLE II
STOCK
1. Certificates of stock shall be in a form adopted by the Board of
Directors and shall be signed by the President and Secretary-Treasurer and be
attested by the corporate seal.
2. All certificates shall be consecutively numbered. The name of the
person owning the shares represented thereby, with the name of such shares and
the date of issue, shall be entered on the company's books.
ARTICLE III
DIRECTORS
1. A board of two directors shall be chosen annually by the stockholders
at their annual meeting to manage the affairs of the company. Their term of
office shall be one year.
2. Vacancies in the board of directors by reason of death, resignation
or other causes shall be filled by the remaining director.
3. Regular meetings of the board of directors shall be held on the same
date as the annual stockholders meeting at the office of the corporation or at
such other time or place as the Board of Directors shall by resolution appoint.
Special meetings may be called by the President or any one director by giving
three day's
<PAGE> 3
notice to each director. A majority of the directors shall constitute a quorum.
4. The directors shall have the general management and control of the
business and affairs of the corporation and shall exercise all the powers that
may be exercised or performed by the corporation under the statutes, the
certificate of incorporation and by-laws.
ARTICLE IV
OFFICERS
1. The Officers of this company shall consist of a President and
Secretary-Treasurer and such other officers as shall from time to time be
chosen and appointed.
2. The President shall preside at all meetings of the directors and
stockholders and shall have general charge of and control over the affairs of
the corporation subject to the board of directors.
3. The Secretary-Treasurer shall keep a record of the minutes of the
proceedings of meetings of stockholders and directors and shall give notice as
required in these by-laws of all such meetings. He shall also countersign all
certificates of stock of the company. He shall have custody of all books,
records and papers of the company except such as shall be in the charge of some
other person authorized to have custody and possession of same by a resolution
of the board of directors. He shall also keep accounts of all moneys of the
company received or disbursed, and shall deposit all moneys and valuables of
the company in the name of and to the credit of the company in such banks and
depositories as the board of directors shall designate.
4. The salaries of the officers shall be fixed by the board of directors
and may be changed from time to time by a majority vote of the board.
5. Each of such officers shall serve for the term of one year or until
the next annual meeting.
6. The Treasurer shall submit the books and records of the company for an
audit by an independent auditor upon request of the board of directors.
ARTICLE V
SEAL
1. The corporate seal of this company shall be that prescribed by the
board of directors.
<PAGE> 4
ARTICLE VI
FISCAL YEAR
1. The fiscal year of the corporation shall be set by the board of
directors.
ARTICLE VII
ISSUANCE OF ADDITIONAL STOCK
1. In the event that additional authorized stock is issued by the
corporation, said additional stock shall first be offered to the stockholders of
record at the time of issuance in proportion to the holdings of each respective
stockholder. Under these circumstances, each stockholder shall be given thirty
days notice in which to make an election as to whether or not he wishes to
subscribe to the additional shares. After the thirty day period, any stock not
subscribed to may be sold to person other than the stockholders.
2. Any stockholder may sell, give and assign his stock to immediate
members of his family. In the event, however, that any stockholder wishes to
sell his stock to persons not an immediate member of his family, he must first
offer said stock to the corporation for sale at book value and said corporation
shall have ninety days in which to decide whether or not to purchase such
offered stock. In the event that the corporation fails to elect to purchase
said stock, sale may be made to other parties.
ARTICLE VIII
AMENDMENTS
1. Any of these by-laws may be amended by majority vote of the
outstanding issued stock at any annual meeting or at any special meeting,
provided notice of any proposed changes have been given each stockholder.
2. The board of directors may adopt additional by-laws in harmony
therewith, but shall not alter or repeal any by-laws adopted by the
stockholders of the company.
<PAGE> 5
ADOPTION OF BY-LAWS BY THE DIRECTORS
THE UNDERSIGNED, HAVING EXAMINED THE BY-LAWS OF THE CORPORATION, HEREBY
ADOPT SAID BY-LAWS.
IN WITNESS WHEREOF, WE BEING ALL OF THE DIRECTORS OF TARGET DIRECTORIES OF
MICHIGAN INC., HAVE HEREUNTO SET HANDS THIS DAY OF JULY 26, 1989.
DALE RAY ENGBERSON
/s/ DALE RAY ENGBERSON
----------------------
RHONDA LYNN ENGBERSON
/s/ RHONDA LYNN ENGBERSON
-------------------------
<PAGE> 1
EXHIBIT 4.5
[FORM OF FACE OF NOTE]
Number CUSIP
TRANSWESTERN PUBLISHING COMPANY LLC
TWP CAPITAL CORP. II
9 5/8% SENIOR SUBORDINATED NOTE DUE 2007 SERIES D
TransWestern Publishing Company LLC, a Delaware limited
partnership (the "Company", which term includes any successor corporation), and
TWP Capital Corp. II, a Delaware corporation (jointly and severally, together
with the Company, the "Issuers"), for value received promise to pay to or
registered assigns the principal sum of ($ ), on November 15, 2007.
Interest Payment Dates: May 15 and November 15, commencing May
15, 1998
Record Dates: May 1 and November 1
This Note shall not be valid or obligatory for any purpose until
the certificate of authentication shall have been executed by the Trustee by its
manual signature.
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
1
<PAGE> 2
IN WITNESS WHEREOF, the Issuers have caused this Note to be
signed manually or by facsimile by their duly authorized Officers.
TRANSWESTERN PUBLISHING COMPANY LLC
By:
----------------------------------------
Name:
Title:
By:
----------------------------------------
Name:
Title:
TWP CAPITAL CORP. II
By:
----------------------------------------
Name:
Title:
By:
----------------------------------------
Name:
Title:
Certificate of Authentication:
This is one of the 9 5/8% Senior
Subordinated Notes due 2007 Series C
referred to in the within-mentioned
Indenture
Dated:
WILMINGTON TRUST COMPANY, as Trustee
By:
------------------------------------
Authorized Signatory
2
<PAGE> 3
(REVERSE SIDE)
TRANSWESTERN PUBLISHING COMPANY LLC
TWP CAPITAL CORP. II
9 5/8% SENIOR SUBORDINATED NOTE DUE 2007 SERIES D
1. INTEREST.
TRANSWESTERN PUBLISHING COMPANY LLC, a Delaware limited
partnership (the "Company"), and TWP Capital Corp. II, a Delaware corporation
(together with the Company, the "Issuers"), jointly and severally promise to pay
interest on the principal amount of this Note semiannually on May 15 and
November 15 of each year (each an "Interest Payment Date"), commencing on May
15, 1999, at the rate of 9 5/8% per annum. Interest will be computed on the
basis of a 360-day year of twelve 30-day months. Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from November 15, 1998.
The Issuers shall pay interest on overdue principal, and on
overdue premium, if any, and overdue interest, to the extent lawful, at the rate
equal to 2% per annum in excess of the rate borne by the Notes.
2. METHOD OF PAYMENT.
The Issuers will pay interest on this Note provided for in
Paragraph 1 above (except defaulted interest) to the person who is the
registered Holder of this Note at the close of business on the May 1 or November
1 preceding the Interest Payment Date (whether or not such day is a Business
Day). The Holder must surrender this Note to a Paying Agent to collect principal
payments. The Issuers will pay principal, premium, if any, and interest in money
of the United States that at the time of payment is legal tender for payment of
public and private debts; provided, however, that the Issuers may pay principal,
premium, if any, and interest by check payable in such money. They may mail an
interest check to the Holder's registered address.
3
<PAGE> 4
3. PAYING AGENT AND REGISTRAR.
Initially, Wilmington Trust Company (the "Trustee") will act as
Paying Agent and Registrar. The Issuers may change any Paying Agent or Registrar
without notice to the Holders of the Notes. Neither the Issuers nor any of their
Subsidiaries or Affiliates may act as Paying Agent but may act as Registrar.
4. INDENTURE; RESTRICTIVE COVENANTS.
The Issuers issued this Note under an Indenture dated as of
December 2, 1998 (the "Indenture") among the Issuers, the Guarantors and the
Trustee. The terms of this Note include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939 (15
U.S. Code Sections 77aaa-77bbbb) as in effect on the date of the
Indenture. This Note is subject to all such terms, and the Holder of this Note
is referred to the Indenture and said Trust Indenture Act for a statement of
them. All capitalized terms in this Note, unless otherwise defined, have the
meanings assigned to them by the Indenture.
The Notes are general unsecured obligations of the Issuers
limited to $140,000,000 aggregate principal amount; provided that $100,000,000
of Notes reserved for issuance under the Indenture will be available only in
connection with the exchange of Series B Notes for Exchange Notes (as defined in
the Registration Rights Agreement (as defined herein)). The Indenture imposes
certain restrictions on, among other things, the incurrence of indebtedness, the
incurrence of liens and the issuance of capital stock by Subsidiaries of the
Issuers, mergers and sale of assets, the payments of dividends on, or the
repurchase of, capital stock of the Issuers and their Restricted Subsidiaries,
certain other restricted payments by the Issuers and their Restricted
Subsidiaries, certain transactions with, and investments in, their affiliates,
certain sale and lease-back transactions and a provision regarding
change-of-control transactions.
5. SUBORDINATION.
The Indebtedness evidenced by the Notes is, to the extent and in
the manner provided in the Indenture, subordinated and subject in right of
payment to the prior payment in full of all Senior Indebtedness as defined in
the Indenture, and this Note is issued subject to such provisions. Each Holder
of this Note, by accepting the same, (a) agrees to and
4
<PAGE> 5
shall be bound by such provisions, (b) authorizes and directs the Trustee, on
behalf of such Holder, to take such action as may be necessary or appropriate to
effectuate the subordination as provided in the Indenture and (c) appoints the
Trustee attorney-in-fact of such Holder for such purpose; provided, however,
that the Indebtedness evidenced by this Note shall cease to be so subordinate
and subject in right of payment upon any defeasance of this Note referred to in
Paragraph 18 below.
6. OPTIONAL REDEMPTION.
The Issuers, at their option, may redeem the Notes, in whole or
in part, at any time on or after November 15, 2002 upon not less than 30 nor
more than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount), set forth below, together, in each case, with accrued and
unpaid interest to the Redemption Date, if redeemed during the twelve month
period beginning on November 15 of each year listed below:
<TABLE>
Year Redemption Price
---- ----------------
<S> <C>
2002............................................. 104.813%
2003............................................. 103.208%
2004............................................. 101.604%
2005 and thereafter.............................. 100.000%
</TABLE>
Notwithstanding the foregoing, the Issuers may redeem in the
aggregate up to 35% of the original principal amount of Notes at any time and
from time to time prior to November 15, 2000 at a redemption price equal to
109.625% of the aggregate principal amount so redeemed, plus accrued interest to
the Redemption Date out of the Net Proceeds of one or more Public Equity
Offerings; provided that at least 65% of the original principal amount of Notes
(including any Exchange Notes) remain outstanding immediately after the
occurrence of any such redemption and that any such redemption occurs within 90
days following the closing of any such Public Equity Offering.
7. NOTICE OF REDEMPTION.
Notice of redemption will be mailed via first class mail at least
30 days but not more than 60 days prior to the redemption date to each Holder of
Notes to be redeemed at its registered address as it shall appear on the
register of the Notes maintained by the Registrar. On and after any Redemption
Date, interest will cease to accrue on the Notes or portions
5
<PAGE> 6
thereof called for redemption unless the Issuers shall fail to redeem any such
Note.
8. OFFERS TO PURCHASE.
The Indenture requires that certain proceeds from Asset Sales be
used, subject to further limitations contained therein, to make an offer to
purchase certain amounts of Notes in accordance with the procedures set forth in
the Indenture. The Issuers are also required to make an offer to purchase Notes
upon the occurrence of a Change of Control in accordance with procedures set
forth in the Indenture.
9. DENOMINATIONS, TRANSFER, EXCHANGE.
The Notes are in registered form without coupons in denominations
of $1,000 and integral multiples thereof. A Holder may register the transfer or
exchange of Notes in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not register the transfer of or exchange any Note
selected for redemption or register the transfer of or exchange any Note for a
period of 15 days before the mailing of notice of redemption of Notes to be
redeemed or any Note after it is called for redemption in whole or in part,
except the unredeemed portion of any Note being redeemed in part.
6
<PAGE> 7
10. PERSONS DEEMED OWNERS.
The registered Holder of this Note may be treated as the owner of
it for all purposes.
11. UNCLAIMED MONEY.
If money for the payment of principal, premium or interest on any
Note remains unclaimed for two years, the Trustee or Paying Agent will pay the
money back to the Issuers at their written request. After that, Holders entitled
to money must look to the Issuers for payment as general creditors unless an
"abandoned property" law designates another person.
12. AMENDMENT, SUPPLEMENT AND WAIVER.
Subject to certain exceptions, the Indenture or the Notes may be
modified, amended or supplemented by the Issuers, the Guarantors and the Trustee
with the consent of the Holders of at least a majority in principal amount of
the Notes then outstanding and any existing default or compliance with any
provision may be waived in a particular instance with the consent of the Holders
of a majority in principal amount of the Notes then outstanding. Without the
consent of Holders, the Issuers, the Guarantors and the Trustee may amend the
Indenture or the Notes or supplement the Indenture for certain specified
purposes including providing for uncertificated Notes in addition to
certificated Notes, and curing any ambiguity, defect or inconsistency, or making
any other change that does not materially and adversely affect the rights of any
Holder.
13. SUCCESSOR ENTITY.
When a successor corporation assumes all the obligations of its
predecessor under the Notes and the Indenture and immediately before and
thereafter no Default exists and certain other conditions are satisfied, the
predecessor corporation will be released from those obligations.
14. DEFAULTS AND REMEDIES.
Events of Default are set forth in the Indenture. If an Event of
Default (other than an Event of Default pursuant to Section 6.01(6) or (7) of
the Indenture with respect to either of the Issuers) occurs and is continuing,
the Trustee by notice to the Issuers, or the Holders of not less than 25% in
aggregate principal amount of the Notes then outstanding, may de-
7
<PAGE> 8
clare to be immediately due and payable the entire principal amount of all the
Notes then outstanding plus accrued but unpaid interest to the date of
acceleration and (i) such amounts shall become immediately due and payable or
(ii) if there are any amounts outstanding under or in respect of the Senior
Credit Facility, such amounts shall become due and payable upon the first to
occur of an acceleration of amounts outstanding under or in respect of the
Senior Credit Facility or five Business Days after receipt by the Company and
the Representative of notice of the acceleration of the Notes; provided,
however, that after such acceleration but before judgment or decree based on
such acceleration is obtained by the Trustee, the Holders of a majority in
aggregate principal amount of the outstanding Notes may, under certain
circumstances, rescind and annul such acceleration and its consequences if all
existing Events of Default, other than the nonpayment of principal, premium or
interest that has become due solely because of the acceleration, have been cured
or waived and if the rescission would not conflict with any judgment or decree.
No such rescission shall affect any subsequent Default or impair any right
consequent thereto. In case an Event of Default specified in Section 6.01(6) or
(7) of the Indenture with respect to either of the Issuers occurs, such
principal amount, together with premium, if any, and interest with respect to
all of the Notes, shall be due and payable immediately without any declaration
or other act on the part of the Trustee or the Holders of the Notes.
15. TRUSTEE DEALINGS WITH THE ISSUERS
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for the
Issuers, any Guarantor or their Affiliates, and may otherwise deal with the
Issuers any Guarantor or their Affiliates, as if it were not Trustee.
16. NO RECOURSE AGAINST OTHERS.
As more fully described in the Indenture, a director, officer,
employee or stockholder, as such, of the Issuers or any Guarantor shall not have
any liability for any obligations of the Issuers or any Guarantor under the
Notes or the Indenture or for any claim based on, in respect or by reason of,
such obligations or their creation. The Holder of this Note by accepting this
Note waives and releases all such liability. The waiver and release are part of
the consideration for the issuance of this Note.
8
<PAGE> 9
17. DEFEASANCE AND COVENANT DEFEASANCE.
The Indenture contains provisions for defeasance of the entire
indebtedness on this Note and for defeasance of certain covenants in the
Indenture upon compliance by the Issuers with certain conditions set forth in
the Indenture.
18. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Holder of a
Note or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants
by the entireties), JT TEN (joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (Uniform Gifts to Minors
Act).
19. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on
Uniform Note Identification Procedures, the Issuers have caused CUSIP Numbers to
be printed on the Notes and have directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Holders of the Notes. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification numbers placed thereon.
20. GOVERNING LAW.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED
WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF
THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS NOTE.
THE ISSUERS WILL FURNISH TO ANY HOLDER OF A NOTE UPON WRITTEN
REQUEST AND WITHOUT CHARGE A COPY OF THE INDENTURE. REQUESTS MAY BE MADE TO:
TRANSWESTERN PUBLISHING COMPANY LLC, 8344 Clairemont Mesa Boulevard, San Diego,
California 92111, Attention: Executive Vice President - Chief Financial Officer.
9
<PAGE> 10
21. GUARANTEES BY SUBSIDIARIES.
The Notes will be entitled to the benefits of certain Guarantees
by subsidiaries made for the benefit of the Holders. Reference is hereby made to
the Indenture for a statement of the respective rights, limitations of rights,
duties and obligations thereunder of the Guarantors, the Trustee and the
Holders.
10
<PAGE> 11
ASSIGNMENT
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Agent to transfer this Note on the books of the Company. The Agent may
substitute another to act for him.
Date: Your Signature:
-------------- -------------------------------------
(Sign exactly as your name appears
on the other side of this Note)
Signature Guarantee:
-------------------------------
<PAGE> 12
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Note
purchased by the Company pursuant to Section 4.10 or Section 4.19 of the
Indenture, check the appropriate box:
[ ] Section 4.10 [ ] Section 4.19
If you want to have only part of the Note purchased by the
pursuant to Section 4.10 or Section 4.19 of the Indenture, state the amount you
elect to have purchased:
$
------------------------
Date: Your Signature:
-------------- -------------------------------------
(Sign exactly as your name appears
on the other side of this Note)
- -------------------------------
Signature Guaranteed
<PAGE> 13
[FORM OF GUARANTEE]
The undersigned (the "Guarantor") hereby unconditionally
guarantees, on a senior subordinated basis, jointly and severally with all other
guarantors under the Indenture dated as of December 2, 1998 by and among
TransWestern Publishing Company LLC, a Delaware limited partnership (the
"Company"), TWP Capital Corp. II, a Delaware corporation ("Capital" and,
together with the Company, the "Issuers"), the Guarantors named therein and
Wilmington Trust Company, as trustee (as amended, restated or supplemented from
time to time, the "Indenture"), to the extent set forth in the Indenture and
subject to the provisions of the Indenture, (a) the due and punctual payment of
the principal of and premium, if any, and interest on the Notes, whether at
maturity, by acceleration or otherwise, the due and punctual payment of interest
on overdue principal of, and premium, if any, and interest on the Notes, to the
extent lawful, and the due and punctual performance of all other obligations of
the Issuers to the Noteholders or the Trustee, all in accordance with the terms
set forth in Article 10 of the Indenture, and (b) in case of any extension of
time of payment or renewal of any Notes or any of such other obligations, that
the same will be promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise.
The obligations of the Guarantor to the Noteholders and to the
Trustee pursuant to this Guarantee and the Indenture are expressly set forth in
Article 10 of the Indenture and reference is hereby made to the Indenture for
the precise terms and limitations of this Guarantee.
Guarantor
By:
-------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 4.6
================================================================================
TRANSWESTERN PUBLISHING COMPANY LLC
and TWP CAPITAL CORP. II,
as Issuers,
the Guarantors
named herein
and
WILMINGTON TRUST COMPANY,
as Trustee
-------------------------
INDENTURE
Dated as of December 2, 1998
-------------------------
$40,000,000
Series C 9 5/8% Senior Subordinated Notes due 2007
$140,000,000
Series D 9 5/8% Senior Subordinated Notes due 2007
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ----------- ---------
<S> <C>
310(a)(1) ...................................................... 7.10
(a)(2) ...................................................... 7.10
(a)(3) ...................................................... N.A.
(a)(4) ...................................................... N.A.
(b) ......................................................... 7.08; 7.10;
12.02
(b)(1) ...................................................... 7.10
(b)(9) ...................................................... 7.10
(c) ......................................................... N.A.
311(a) ......................................................... 7.11
(b) ......................................................... 7.11
(c) ......................................................... N.A.
312(a) ......................................................... 2.05
(b) ......................................................... 12.03
(c) ......................................................... 12.03
313(a) ......................................................... 7.06
(b)(1) ...................................................... 7.06
(b)(2) ...................................................... 7.06
(c) ......................................................... 12.02
(d) ......................................................... 7.06
314(a) ......................................................... 4.02; 4.04;
12.02
(b) ......................................................... N.A.
(c)(1) ...................................................... 12.04; 12.05
(c)(2) ...................................................... 12.04; 12.05
(c)(3) ...................................................... N.A.
(d) ......................................................... N.A.
(e) ......................................................... 12.05
(f) ......................................................... N.A.
315(a) ......................................................... 7.01; 7.02
(b) ......................................................... 7.05; 12.02
(c) ......................................................... 7.01
(d) ......................................................... 6.05; 7.01;
7.02
(e) ......................................................... 6.11
316(a) (last sentence) ......................................... 2.10
(a)(1)(A) ................................................... 6.05
(a)(1)(B) ................................................... 6.04
(a)(2) ...................................................... 8.02
(b) ......................................................... 6.07
(c) ......................................................... 8.04
317(a)(1) ...................................................... 6.08
(a)(2) ...................................................... 6.09
(b) ......................................................... 7.12
318(a) ......................................................... 12.01
</TABLE>
- ----------
N.A. means Not Applicable.
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
<S> <C> <C>
Section 1.01. Definitions...................................................1
Section 1.02. Other Definitions............................................29
Section 1.03. Incorporation by Reference of Trust Indenture Act............30
Section 1.04. Rules of Construction........................................30
ARTICLE 2
THE NOTES
Section 2.01. Amount of Notes..............................................31
Section 2.02. Form and Dating..............................................31
Section 2.03. Execution and Authentication.................................32
Section 2.04. Registrar and Paying Agent...................................33
Section 2.05. Paying Agent to Hold Money in Trust..........................34
Section 2.06. Noteholder Lists.............................................34
Section 2.07. Transfer and Exchange........................................34
Section 2.08. Replacement Notes............................................35
Section 2.09. Outstanding Notes............................................36
Section 2.10. Treasury Notes...............................................36
Section 2.11. Temporary Notes..............................................37
Section 2.12. Cancellation.................................................37
Section 2.13. Defaulted Interest...........................................37
Section 2.14. CUSIP Number.................................................38
Section 2.15. Deposit of Moneys............................................38
Section 2.16. Book-Entry Provisions for Global Notes.......................38
Section 2.17. Special Transfer Provisions..................................41
Section 2.18. Computation of Interest......................................44
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee...........................................44
Section 3.02. Selection by Trustee of Notes to Be Redeemed.................44
Section 3.03. Notice of Redemption.........................................45
Section 3.04. Effect of Notice of Redemption...............................46
Section 3.05. Deposit of Redemption Price..................................46
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Section 3.06. Notes Redeemed in Part.......................................47
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.............................................47
Section 4.02. SEC Reports..................................................47
Section 4.03. Waiver of Stay, Extension or Usury Laws......................48
Section 4.04. Compliance Certificate.......................................49
Section 4.05. Taxes........................................................50
Section 4.06. Limitation on Additional Indebtedness........................50
Section 4.07. Limitation on Preferred Stock of Restricted Subsidiaries.....51
Section 4.08. Limitation on Capital Stock of Subsidiaries..................51
Section 4.09. Limitation on Restricted Payments............................51
Section 4.10. Limitation on Certain Asset Sales............................54
Section 4.11. Limitation on Transactions with Affiliates...................57
Section 4.12. Limitations on Liens.........................................58
Section 4.13. Limitations on Investments...................................58
Section 4.14. Limitation on Creation of Subsidiaries.......................58
Section 4.15. Limitation on Other Senior Subordinated Debt.................59
Section 4.16. Limitation on Sale and Lease-Back Transactions...............59
Section 4.17. Payments for Consent.........................................59
Section 4.18. Legal Existence..............................................60
Section 4.19. Change of Control............................................60
Section 4.20. Maintenance of Office or Agency..............................63
Section 4.21. Maintenance of Properties; Insurance; Books and Records;
Compliance with Law.......................................63
Section 4.22. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries.........................64
Section 4.23. Further Assurance to the Trustee.............................65
Section 4.24. Limitation on Conduct of Business of Capital.................65
Section 4.25. Certain Consents and Filings.................................___
ARTICLE 5
SUCCESSOR CORPORATION
Section 5.01. Limitation on Consolidation, Merger and Sale of Assets.......66
</TABLE>
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Section 5.02. Successor Person Substituted.................................67
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default............................................67
Section 6.02. Acceleration.................................................70
Section 6.03. Other Remedies...............................................70
Section 6.04. Waiver of Past Defaults and Events of Default...............71
Section 6.05. Control by Majority..........................................71
Section 6.06. Limitation on Suits..........................................71
Section 6.07. Rights of Holders to Receive Payment.........................72
Section 6.08. Collection Suit by Trustee...................................72
Section 6.09. Trustee May File Proofs of Claim.............................73
Section 6.10. Priorities...................................................73
Section 6.11. Undertaking for Costs........................................74
Section 6.12. Restoration of Rights and Remedies...........................74
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee............................................74
Section 7.02. Rights of Trustee............................................76
Section 7.03. Individual Rights of Trustee.................................77
Section 7.04. Trustee's Disclaimer.........................................77
Section 7.05. Notice of Defaults...........................................77
Section 7.06. Reports by Trustee to Holders................................77
Section 7.07. Compensation and Indemnity...................................78
Section 7.08. Replacement of Trustee.......................................79
Section 7.09. Successor Trustee by Consolidation, Merger, Etc..............80
Section 7.10. Eligibility; Disqualification................................81
Section 7.11. Preferential Collection of Claims Against Company............81
Section 7.12. Paying Agents................................................81
ARTICLE 8
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.01. Without Consent of Holders...................................82
Section 8.02. With Consent of Holders......................................82
Section 8.03. Compliance with Trust Indenture Act..........................84
Section 8.04. Revocation and Effect of Consents............................84
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Section 8.05. Notation on or Exchange of Notes.............................85
Section 8.06. Trustee to Sign Amendments, etc..............................85
ARTICLE 9
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Discharge of Indenture.......................................86
Section 9.02. Legal Defeasance.............................................86
Section 9.03. Covenant Defeasance..........................................87
Section 9.04. Conditions to Defeasance or Covenant Defeasance..............87
Section 9.05. Deposited Money and U.S. Government Obligations to Be Held
in Trust; Other Miscellaneous Provisions..................90
Section 9.06. Reinstatement................................................90
Section 9.07. Moneys Held by Paying Agent..................................91
Section 9.08. Moneys Held by Trustee.......................................91
ARTICLE 10
GUARANTEE OF NOTES
Section 10.01. Guarantee....................................................92
Section 10.02. Execution and Delivery of Guarantees.........................93
Section 10.03. Limitation of Guarantee......................................93
Section 10.04. Release of Guarantor.........................................94
Section 10.05. Guarantee Obligations Subordinated to Guarantor
Senior Indebtedness.......................................94
Section 10.06. Payment Over of Proceeds upon Dissolution, etc.,
of a Guarantor............................................95
Section 10.07. Suspension of Guarantee Obligations When
Guarantor Senior Indebtedness in Default.....................96
Section 10.08. Subrogation to Rights of Holders of Guarantor
Senior Indebtedness.......................................99
Section 10.09. Guarantee Subordination Provisions Solely To Define
Relative Rights..........................................100
Section 10.10. Application of Certain Article 11 Provisions................100
ARTICLE 11
SUBORDINATION OF NOTES
Section 11.01. Notes Subordinate to Senior Indebtedness....................101
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Section 11.02. Payment Over of Proceeds upon Dissolution, etc..............101
Section 11.03. Suspension of Payment When Senior Indebtedness in Default...103
Section 11.04. Trustee's Relation to Senior Indebtedness...................105
Section 11.05. Subrogation to Rights of Holders of Senior Indebtedness.....105
Section 11.06. Provisions Solely To Define Relative Rights.................106
Section 11.07. Trustee To Effectuate Subordination.........................107
Section 11.08. No Waiver of Subordination Provisions.......................107
Section 11.09. Notice to Trustee...........................................108
Section 11.10. Reliance on Judicial Order or Certificate of
Liquidating Agent........................................109
Section 11.11. Rights of Trustee as a Holder of Senior Indebtedness;
Preservation of Trustee's Rights.........................109
Section 11.12. Article Applicable to Paying Agents.........................109
Section 11.13. No Suspension of Remedies...................................109
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls................................110
Section 12.02. Notices.....................................................110
Section 12.03. Communications by Holders with Other Holders................111
Section 12.04. Certificate and Opinion as to Conditions Precedent..........112
Section 12.05. Statements Required in Certificate and Opinion..............112
Section 12.06. Rules by Trustee and Agents.................................113
Section 12.07. Business Days; Legal Holidays...............................113
Section 12.08. Governing Law...............................................113
Section 12.09. No Adverse Interpretation of Other Agreements...............113
Section 12.10. No Recourse Against Others..................................113
Section 12.11. Successors..................................................114
Section 12.12. Multiple Counterparts.......................................114
Section 12.13. Table of Contents, Headings, etc............................114
Section 12.14. Separability................................................115
EXHIBITS
Exhibit A Form of Initial Note ........................................A-1
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Exhibit B Form of Legend and Assignment for 144A Note .................B-1
Exhibit C Form of Legend and Assignment for Regulation S Note .........C-1
Exhibit D Form of Legend for Global Note ..............................D-1
Exhibit E Form of Certificate to Be Delivered in Connection with
Transfers to Non-QIB Accredited Investors ................E-1
Exhibit F Form of Certificate to Be Delivered in Connection with
Transfers Pursuant to Regulation S .......................F-1
Exhibit G Form of Guarantee ...........................................G-1
</TABLE>
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<PAGE> 9
INDENTURE, dated as of December 2, 1998, among TRANSWESTERN
PUBLISHING COMPANY LLC, a Delaware limited liability company (the "Company"),
TWP CAPITAL CORP. II, a Delaware corporation ("Capital" and, together with the
Company, the "Issuers"), the Guarantors (as hereinafter defined) and WILMINGTON
TRUST COMPANY, a Delaware banking corporation, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other parties
and for the equal and ratable benefit of the Holders of the Issuers' 9 5/8%
Senior Subordinated Notes due 2007 Series C (the "Initial Notes") and the
Issuers' 9 5/8% Senior Subordinated Notes due 2007 Series D (the "Exchange
Notes") to be issued in exchange for the Initial Notes and Series A/B Notes
pursuant to the Registration Rights Agreement (as defined herein):
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.
"Acquired Indebtedness" means Indebtedness of a Person (including
an Unrestricted Subsidiary) existing at the time such Person becomes a
Restricted Subsidiary or assumed in connection with the acquisition of assets
from such Person.
"Additional Interest" means additional interest on the Notes
which the Issuers and the Guarantors, jointly and severally, agree to pay to the
Holders pursuant to Section 4 of the Registration Rights Agreement.
"Additional Series D Notes" means any Exchange Notes issued in
exchange for Series A/B Notes pursuant to the Registration Rights Agreement.
"Adjusted Net Assets" of a Guarantor at any date shall mean the
lesser of the amount by which (x) the fair value of the property of such
Guarantor exceeds the total amount of liabilities, including, without
limitation, contingent liabilities (after giving effect to all other fixed and
contingent liabilities), but excluding liabilities under the Guarantee, of such
Guarantor at such date and (y) the present fair salable value of the assets of
such Guarantor at such date exceeds the amount that will be required to pay the
probable liability of
<PAGE> 10
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such Guarantor on its debts (after giving effect to all other fixed and
contingent liabilities and after giving effect to any collection from any
Subsidiary of such Guarantor in respect of the obligations of such Subsidiary
under the Guarantee), excluding Indebtedness in respect of the Guarantee, as
they become absolute and matured.
"Affiliate" of any specified Person means any other Person which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. For the
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlling," "controlled by," and "under common control with"), as
used with respect to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by agreement or
otherwise.
"Agent" means the Registrar, any Paying Agent, or agent for
service of notices and demands.
"Asset Sale" means the sale, transfer or other disposition (other
than to the Company or any of its Restricted Subsidiaries) in any single
transaction or series of related transactions having a fair market value in
excess of $1,000,000 of (a) any Capital Stock of or other equity interest in any
Restricted Subsidiary of the Issuers, (b) all or substantially all of the assets
of the Issuers or of any Restricted Subsidiary thereof, (c) real property or (d)
all or substantially all of the assets of a division, line of business or
comparable business segment of the Issuers or any Restricted Subsidiary thereof;
provided that Asset Sales shall not include (i) sales, leases, conveyances,
transfers or other dispositions to the Company or to a Restricted Subsidiary or
to any other Person if after giving effect to such sale, lease, conveyance,
transfer or other disposition such other Person becomes a Restricted Subsidiary;
or (ii) the contribution of any assets to a joint venture, partnership or other
Person (which may be a Subsidiary) to the extent such contribution constitutes a
Permitted Investment (other than by operation of clause (iv) of the definition
thereof).
"Asset Sale Proceeds" means, with respect to any Asset Sale, (i)
cash received by the Issuers or any Restricted Subsidiary from such Asset Sale
(including cash received as consideration for the assumption of liabilities
incurred in connection with or in anticipation of such Asset Sale), after
<PAGE> 11
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(a) provision for all income or other taxes (including taxes required to be
distributed under the partnership agreement of the Company) measured by or
resulting from such Asset Sale, (b) payment of all brokerage commissions,
underwriting and other fees and expenses related to such Asset Sale, (c)
provision for minority interest holders in any Restricted Subsidiary as a result
of such Asset Sale and (d) deduction of appropriate amounts to be provided by
the Issuers or a Restricted Subsidiary as a reserve, in accordance with GAAP,
against any liabilities associated with the assets sold or disposed of in such
Asset Sale and retained by the Issuers or a Restricted Subsidiary after such
Asset Sale, including, without limitation, severance, healthcare, pension and
other post-employment benefit liabilities and liabilities related to
environmental matters or against any indemnification obligations associated with
the assets sold or disposed of in such Asset Sale, and (ii) promissory notes and
other non-cash consideration received by the Issuers or any Restricted
Subsidiary from such Asset Sale or other disposition upon the liquidation or
conversion of such notes or non-cash consideration into cash.
"Attributable Indebtedness" in respect of a Sale and Lease-Back
Transaction means, as at the time of determination, the greater of (i) the fair
value of the property subject to such arrangement (as determined by the Board of
Directors of the Company) and (ii) the present value of the total obligations
(discounted at a rate of 10%, compounded annually) of the lessee for rental
payments during the remaining term of the lease included in such Sale and
Lease-Back Transaction (including any period for which such lease has been
extended).
"Available Asset Sale Proceeds" means, with respect to any Asset
Sale, the aggregate Asset Sale Proceeds from such Asset Sale that have not been
applied in accordance with clause (iii)(a) or (iii)(b) of Section 4.10(a) and
that have not been the basis for a Series A/B Asset Sale Offer or an Excess
Proceeds Offer in accordance with clause (iii)(c) of Section 4.10(a).
"Board of Directors" means (i) in the case of a Person that is a
limited partnership, the board of directors of its corporate general partner or
any committee authorized to act therefor (or, if the general partner is itself a
limited partnership, the board of directors of such general partner's corporate
general partner or any committee authorized to act therefor), (ii) in the case
of a Person that is a corporation, the board of directors of such Person or any
committee authorized to act therefore and (iii) in the case of any other Per-
<PAGE> 12
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son, the board of directors, management committee or similar governing body or
any authorized committee thereof responsible for the management of the business
and affairs of such Person.
"Board Resolution" means a copy of a resolution certified
pursuant to an Officers' Certificate to have been duly adopted by the Board of
Directors of an Issuer or a Guarantor, as appropriate, and to be in full force
and effect, and delivered to the Trustee.
"Capital" means the party named as such in the first paragraph of
this Indenture until a successor replaces such party pursuant to Article 5 of
this Indenture and thereafter means the successor.
"Capital Stock" means, with respect to any Person, any and all
shares or other equivalents (however designated) of capital stock, partnership
interests or any other participation, right or other interest in the nature of
an equity interest in such Person or any option, warrant or other security
convertible into or exercisable for any of the foregoing.
"Capitalized Lease Obligations" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
"Cash Equivalents" means (i) direct obligations of the United
States of America or any agency thereof, or obligations guaranteed or insured by
the United States of America; provided that in each case such obligations mature
within one year from the date of acquisition thereof, (ii) certificates of
deposit maturing within one year from the date of creation thereof issued by any
U.S. national or state banking institution having capital, surplus and undivided
profits aggregating at least $250,000,000 and at the time of investment rated at
least A-1 by S&P and P-1 by Moody's, (iii) commercial paper with a maturity of
180 days or less issued by a corporation (except an Affiliate of the Company)
organized under the laws of any state of the United States or the District of
Columbia and at the time of investment rated at least A-1 by S&P or at least P-1
by Moody's, (iv) repurchase agreements and reverse repurchase agreements
relating to marketable direct obligations issued or unconditionally guaranteed
by the United States of America or issued by an agency thereof and backed by the
full faith and credit of the United States of America, in each case
<PAGE> 13
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maturing within one year from the date of acquisition; provided that the terms
of such agreements comply with the guidelines set forth in the Federal Financial
Agreements of Depository Institutions with Securities Dealers and Others, as
adopted by the Comptroller of the Currency, and (v) tax-exempt auction rate
securities and municipal preferred stock, in each case, subject to reset no more
than 35 days after the date of acquisition and having a rating of at least AA by
S&P or Aa by Moody's at the time of investment.
"Change of Control" means the occurrence of one or more of the
following events: (i) any Person (including a Person's Affiliates and
associates), other than a Permitted Holder, becomes the beneficial owner
(directly or indirectly) (as defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of 50% or more of the total
voting or economic power of the Common Stock of the Company, (ii) any Person
(including a Person's Affiliates and associates), other than a Permitted Holder,
becomes the beneficial owner (directly or indirectly) of more than 33 1/3% of
the total voting power of the Common Stock of the Company, and the Permitted
Holders beneficially own (directly or indirectly), in the aggregate, a lesser
percentage of the total voting power of the Common Stock of the Company than
such other Person and do not have the right or ability by voting power, contract
or otherwise to elect or designate for election a majority of the Board of
Directors of the Company, (iii) the admission of any Person as a general partner
of Holdings after which Communications, together with one or more Permitted
Holders, do not have the sole power, directly or indirectly, to take all of the
actions they are entitled or required to take under the partnership agreement of
Holdings as in effect on the Series A/B Issue Date, (iv) there shall be
consummated any consolidation or merger of either Issuer in which such Issuer is
not the continuing or surviving corporation or pursuant to which the Common
Stock of such Issuer would be converted into cash, securities or other property,
other than a merger or consolidation of such Issuer in which the beneficial
owners of the Common Stock of such Issuer outstanding immediately prior to the
consolidation or merger hold, directly or indirectly, at least a majority of the
Common Stock of the surviving corporation immediately after such consolidation
or merger, or (v) during any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors of
Communications (together with any new directors whose election by such Board of
Directors or whose nomination for election by the shareholders of Communications
has been approved by a majority of the directors then still in office who either
were directors
<PAGE> 14
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at the beginning of such period or whose election or recommendation for election
was previously so approved) cease to constitute a majority of the Board of
Directors of Communications.
"CIBC Merchant Fund" means the CIBC WG Argosy Merchant Fund 2,
L.L.C.
"CIVC" means Continental Illinois Venture Corporation.
"Commodity Hedge Agreement" shall mean any option, hedge or other
similar agreement or arrangement designed to protect against fluctuations in
commodity or materials prices.
"Common Stock" of any Person means all Capital Stock of such
Person that is generally entitled to (i) vote in the election of directors of
such Person or (ii) if such Person is not a corporation, vote or otherwise
participate in the selection of the governing body, partners, managers or others
that will control the management and policies of such Person.
"Communications" means TransWestern Communications Company, Inc.,
a Delaware corporation and the general partner of Holdings.
"Company" means the party named as such in the first paragraph of
this Indenture until a successor replaces such party pursuant to Article 5 of
this Indenture and thereafter means the successor.
"Consolidated Interest Expense" means, with respect to any
Person, for any period, the aggregate amount of interest which, in conformity
with GAAP, would be set forth opposite the caption "interest expense" or any
like caption on an income statement for such Person and its Subsidiaries on a
consolidated basis (including, but not limited to, Redeemable Dividends, whether
paid or accrued, on Preferred Stock of Subsidiaries, imputed interest included
in Capitalized Lease Obligations, all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing, the net costs associated with hedging obligations, amortization of
other financing fees and expenses, the interest portion of any deferred payment
obligation, amortization of discount or premium, if any, and all other non-cash
interest expense (other than interest amortized to cost of sales)) plus, without
duplication, all net capitalized interest for such period and all interest
incurred or paid under any guarantee of Indebtedness (including a guarantee of
principal, interest or
<PAGE> 15
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any combination thereof) of any Person, plus the amount of all dividends or
distributions paid on Disqualified Capital Stock (other than dividends paid or
payable in shares of Capital Stock of the Company), less the amortization of
deferred financing costs.
"Consolidated Net Income" means, with respect to any Person, for
any period, the aggregate of the Net Income of such Person and its Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP,
plus, in the case of the Company, payments by the Company to the Equity
Compensation Trust for the benefit of the beneficiaries thereof, minus Permitted
Tax Distributions (to the extent such Permitted Tax Distributions are made);
provided, however, that (a) the Net Income of any Person (the "other Person") in
which the Person in question or any of its Subsidiaries has less than a 100%
interest (which interest does not cause the net income of such other Person to
be consolidated into the net income of the Person in question in accordance with
GAAP) shall be included only to the extent of the amount of dividends or
distributions paid to the Person in question or the Subsidiary, (b) the Net
Income of any Subsidiary of the Person in question that is subject to any
restriction or limitation on the payment of dividends or the making of other
distributions (other than pursuant to the Notes or as permitted under Section
4.22) shall be excluded to the extent of such restriction or limitation, (c) (i)
the Net Income of any Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition and (ii) any net gain (but not
loss) resulting from an Asset Sale by the Person in question or any of its
Subsidiaries other than in the ordinary course of business shall be excluded and
(d) extraordinary, unusual and non-recurring gains and losses (including any
related tax effects on the Issuers) shall be excluded.
"Consolidated Net Worth" means, with respect to any Person at any
date, the consolidated stockholder's equity of such Person less the amount of
such stockholder's equity attributable to Disqualified Capital Stock of such
Person and its Subsidiaries, as determined in accordance with GAAP.
"Corporate Trust Office" means the office of the Trustee at which
at any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture is located
at Rodney Square North, 1100 North Market Street, Wilmington, Delaware 10890.
<PAGE> 16
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"Default" means any condition or event that is, or with the
passing of time or giving of any notice expressly required under Section 6.01
(or both) would be, an Event of Default.
"Depository" means, with respect to the Notes issued in the form
of one or more Global Notes, The Depository Trust Company or another Person
designated as Depository by the Issuers, which Person must be a clearing agency
registered under the Exchange Act.
"Designated Senior Indebtedness," as to the Company or any
Guarantor, as the case may be, means any Senior Indebtedness (a) under the
Senior Credit Facility, or (b)(i) which at the time of determination exceeds
$25,000,000 in aggregate principal amount (or accreted value in the case of
Indebtedness issued at a discount) outstanding or available under a committed
facility, (ii) which is specifically designated in the instrument evidencing
such Senior Indebtedness as "Designated Senior Indebtedness" by such Person and
(iii) as to which the Trustee has been given written notice of such designation.
"Discount Notes" means the 11 7/8% Senior Discount Notes due 2008
of Holdings and TWP Capital Corp.
"Disqualified Capital Stock" means any Capital Stock of the
Company or a Restricted Subsidiary thereof which, by its terms (or by the terms
of any security into which it is convertible or for which it is exchangeable at
the option of the holder), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the maturity date of the Notes, for cash or securities constituting
Indebtedness; provided that Capital Stock of the Company that is held by a
current or former employee of the Company subject to a put option and/or a call
option with the Company triggered by the termination of such employee's
employment with the Company and/or the Company's performance shall not be deemed
to be Disqualified Capital Stock solely by virtue of such call option and/or put
option. Without limitation of the foregoing, Disqualified Capital Stock shall be
deemed to include (i) any Preferred Stock of a Restricted Subsidiary of the
Company and (ii) any Preferred Stock of the Company, with respect to either of
which, under the terms of such Preferred Stock, by agreement or otherwise, such
Restricted Subsidiary or the Company is obligated to pay current dividends or
distributions in cash (other than Permitted Tax Distributions) during the period
<PAGE> 17
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prior to the maturity date of the Notes; provided, however, that Preferred Stock
of the Company or any Restricted Subsidiary thereof that is issued with the
benefit of provisions requiring a change of control offer to be made for such
Preferred Stock in the event of a change of control of the Company or such
Restricted Subsidiary, which provisions have substantially the same effect as
the provisions described in Section 4.19, shall not be deemed to be Disqualified
Capital Stock solely by virtue of such provisions.
"EBITDA" means, for any Person, for any period, an amount equal
to (a) the sum of (i) Consolidated Net Income for such period, plus (ii) the
provision for taxes for such period based on income or profits to the extent
such income or profits were included in computing Consolidated Net Income and
any provision for taxes utilized in computing net loss under clause (i) hereof,
plus (iii) Consolidated Interest Expense for such period (but only including
Redeemable Dividends in the calculation of such Consolidated Interest Expense to
the extent that such Redeemable Dividends have not been excluded in the
calculation of Consolidated Net Income), plus (iv) depreciation for such period
on a consolidated basis, plus (v) amortization of intangibles for such period on
a consolidated basis, plus (vi) any other non-cash items reducing Consolidated
Net Income for such period, plus (vii) without duplication, Permitted Tax
Distributions, plus (viii) cash payments of expenses arising in connection with
the Recapitalization, minus (b) all non-cash items increasing Consolidated Net
Income for such period, all for such Person and its Subsidiaries determined in
accordance with GAAP, except that with respect to the Issuers each of the
foregoing items shall be determined on a consolidated basis with respect to the
Issuers and their Restricted Subsidiaries only; provided, however, that, for
purposes of calculating EBITDA during any fiscal quarter, cash income from a
particular Investment (other than in a Subsidiary which under GAAP is
consolidated) of such Person shall be included only (x) if cash income has been
received by such Person with respect to such Investment or (y) if the cash
income derived from such Investment is attributable to Temporary Cash
Investments.
"Equity Compensation Trust" means the Company's Equity
Compensation Trust for the benefit of certain of its employees, established
pursuant to the Equity Compensation Trust Agreement, dated as of November 4,
1993, as amended by an agreement dated as of October 1, 1997 between the Company
and the trustees thereof, and any successor trust with terms substantially
similar thereto (with an additional requirement of continued employment status).
<PAGE> 18
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"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Notes" means the Issuers' 9 5/8% Senior Subordinated
Notes due 2007 Series D issued in exchange for the Initial Notes pursuant to the
Registration Rights Agreement and shall also include any Additional Series D
Notes.
"First Union" means First Union Capital Markets, a division of
Wheat First Securities, Inc.
"GAAP" means generally accepted accounting principles
consistently applied as in effect in the United States from time to time.
"Guarantee" means, as the context may require, individually, a
guarantee, or collectively, any and all guarantees, of the Obligations of the
Company with respect to the Notes by each Guarantor, if any, pursuant to the
terms of Article 10 hereof, substantially in the form set forth in Exhibit G.
"Guarantor" means Target and each Restricted Subsidiary of the
Issuers that hereafter becomes a Guarantor pursuant to Section 4.14, and
"Guarantors" means such entities, collectively.
"Guarantor Senior Indebtedness" means the principal of and
premium, if any, and interest (including, without limitation, interest accruing
or that would have accrued but for the filing of a bankruptcy, reorganization or
other insolvency proceeding whether or not such interest constitutes an
allowable claim in such proceeding) on, and any and all other fees, expense
reimbursement obligations, indemnities and other amounts due pursuant to the
terms of all agreements, documents and instruments providing for, creating,
securing or evidencing or otherwise entered into in connection with, (a) any
Guarantor's direct incurrence of any Indebtedness or its guarantee of all
Indebtedness of the Company or any Restricted Subsidiaries, in each case owed to
lenders under the Senior Credit Facility, (b) all obligations of such Guarantor
with respect to any Interest Rate Agreement, (c) all obligations of such
Guarantor to reimburse any bank or other person in respect of amounts paid under
letters of credit, acceptances or other similar instruments, (d) all other
Indebtedness of such Guarantor which does not provide that it is to rank pari
passu with or subordinate to the Guarantees and (e) all deferrals, renewals,
extensions and refundings of, and amendments, modifications and supplements to,
any of the Guarantor Senior Indebtedness described
<PAGE> 19
-11-
above. Notwithstanding anything to the contrary in the foregoing, Guarantor
Senior Indebtedness will not include (i) Indebtedness of such Guarantor to any
of its Subsidiaries, (ii) Indebtedness represented by the Guarantees, (iii) any
Indebtedness which by the express terms of the agreement or instrument creating,
evidencing or governing the same is junior or subordinate in right of payment to
any item of Guarantor Senior Indebtedness, (iv) any trade payable arising from
the purchase of goods or materials or for services obtained in the ordinary
course of business or (v) Indebtedness incurred in violation of this Indenture.
"Holdings" means TransWestern Holdings L.P., a Delaware limited
partnership, and owner of all of the membership units of the Company.
"incur" means, with respect to any Indebtedness or other
obligation of any Person, to create, issue, incur (by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "incurrence," "incurred," "incurable" and "incurring" shall
have meanings correlative to the foregoing); provided that a change in GAAP that
results in an obligation of such Person that exists at such time becoming
Indebtedness shall not be deemed an incurrence of such Indebtedness.
"Indebtedness" means (without duplication), with respect to any
Person, any indebtedness at any time outstanding, secured or unsecured,
contingent or otherwise, which is for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to a
portion thereof), or evidenced by bonds, notes, debentures or similar
instruments or representing the balance deferred and unpaid of the purchase
price of any property (excluding, without limitation, any balances that
constitute accounts payable or trade payables or liabilities arising from
advance payments or customer deposits for goods and services sold by the Company
in the ordinary course of business, and other accrued liabilities arising in the
ordinary course of business) if and to the extent any of the foregoing
indebtedness would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, and shall also include, to the extent not
otherwise included (i) any Capitalized Lease Obligations, (ii) obligations
secured by a Lien to which the property or assets owned or held by such Person
is subject, whether or not
<PAGE> 20
-12-
the obligation or obligations secured thereby shall have been assumed (provided,
however, that if such obligation or obligations shall not have been assumed, the
amount of such Indebtedness shall be deemed to be the lesser of the principal
amount of the obligation or the fair market value of the pledged property or
assets), (iii) guarantees of items of other Persons which would be included
within this definition for such other Persons (whether or not such items would
appear upon the balance sheet of the guarantor), (iv) all obligations for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction (provided that in the case of any such letters of
credit, the items for which such letters of credit provide credit support are
those of other Persons which would be included within this definition for such
other Persons), (v) in the case of the Issuers, Disqualified Capital Stock of
the Issuers or any Restricted Subsidiary thereof, and (vi) obligations of any
such Person under any Interest Rate Agreement applicable to any of the foregoing
(if and to the extent such Interest Rate Agreement obligations would appear as a
liability upon a balance sheet of such Person prepared in accordance with GAAP).
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and,
with respect to contingent obligations, the maximum liability upon the
occurrence of the contingency giving rise to the obligation, provided (i) that
the amount outstanding at any time of any Indebtedness issued with original
issue discount is the principal amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at such
time as determined in conformity with GAAP and (ii) that Indebtedness shall not
include any liability for federal, state, local or other taxes. Notwithstanding
any other provision of the foregoing definition, any trade payable arising from
the purchase of goods or materials or for services obtained in the ordinary
course of business shall not be deemed to be "Indebtedness" of the Company or
any Restricted Subsidiary for purposes of this definition. Furthermore,
guarantees of (or obligations with respect to letters of credit supporting)
Indebtedness otherwise included in the determination of such amount shall not
also be included.
"Indenture" means this Indenture as amended, restated or
supplemented from time to time.
"Individual Investors" means the individuals listed on Schedule
1.01 hereto.
<PAGE> 21
-13-
"Initial Notes" means the Company's 9 5/8% Senior Subordinated
Notes due 2007 Series C issued pursuant to this Indenture.
"Institutional Accredited Investor" means an institution that is
an "accredited investor" as that term is defined in Rule 501 (a)(1), (2), (3) or
(7) promulgated under the Securities Act.
"Interest Payment Date" means the stated maturity of an
installment of interest on the Notes.
"Interest Rate Agreement" shall mean any interest or foreign
currency rate swap, cap, collar, option, hedge, forward rate or other similar
agreement or arrangement designed to protect against fluctuations in interest
rates or currency exchange rates.
"Investments" means, directly or indirectly, any advance, account
receivable (other than an account receivable arising in the ordinary course of
business or acquired as part of the assets acquired by the Issuers in connection
with an acquisition of assets which is otherwise permitted by the terms of this
Indenture), loan or capital contribution to (by means of transfers of property
to others, payments for property or services for the account or use of others or
otherwise), the purchase of any stock, bonds, notes, debentures, partnership or
joint venture interests or other securities of, the acquisition, by purchase or
otherwise, of all or substantially all of the business or assets or stock or
other evidence of beneficial ownership of, any Person or the making of any
investment in any Person. Investments shall exclude extensions of trade credit
on commercially reasonable terms in accordance with normal trade practices.
"Issue Date" means the date the Initial Notes are first issued by
the Issuers and authenticated by the Trustee under this Indenture.
"Issuer Request" means any written request signed in the names of
each of the Issuers by the Chief Executive Officer, the President, any Vice
President, the Chief Financial Officer or the Treasurer of each of the Issuers
and attested to by the Secretary or any Assistant Secretary of each of the
Issuers.
"Issuers" means the parties named as such in the first paragraph
of this Indenture until a successor replaces
<PAGE> 22
-14-
such parties pursuant to Article 5 of this Indenture and thereafter means the
successor and any other obligor on the Notes.
"Lien" means, with respect to any property or assets of any
Person, any mortgage or deed of trust, pledge, hypothecation, assignment,
deposit arrangement (other than advance payments or customer deposits for goods
and services sold by the Company in the ordinary course of business), security
interest, lien, charge, easement, encumbrance, preference, priority, or other
security agreement or preferential arrangement of any kind or nature whatsoever
on or with respect to such property or assets (including, without limitation,
any Capitalized Lease Obligation, conditional sales, or other title retention
agreement having substantially the same economic effect as any of the
foregoing).
"Management Subordinated Notes" means notes issued to current or
former employees of the Company in accordance with the terms of the Executive
Agreements between the Company and such current or former employees in existence
on the Series A/B Issue Date or pursuant to agreements between Holdings, TCC or
the Company and then current or former employees with substantially similar
terms regarding such issuance entered into after the Series A/B Issue Date,
which notes are expressly subordinated as to payment of principal, premium, if
any, and interest to the Notes.
"Maturity Date" means November 15, 2007.
"Moody's" means Moody's Investors Service, Inc. and its
successors.
"Net Income" means, with respect to any Person for any period,
the net income (loss) of such Person determined in accordance with GAAP.
"Net Proceeds" means (a) in the case of any sale of Capital Stock
by an Issuer, the aggregate net proceeds received by such Issuer, after payment
of expenses, commissions and the like incurred in connection therewith, whether
such proceeds are in cash or in property (valued at the fair market value
thereof, as determined in good faith by the Board of Directors of such Issuer,
at the time of receipt) and (b) in the case of any exchange, exercise,
conversion or surrender of outstanding securities of any kind for or into shares
of Capital Stock of the Company which is not Disqualified Capital Stock, the net
book value of such outstanding securities on the date of such exchange,
exercise, conversion or surrender (plus any addi-
<PAGE> 23
-15-
tional amount required to be paid by the holder to the Company upon such
exchange, exercise, conversion or surrender, less any and all payments made to
the holders, e.g., on account of fractional shares and less all expenses
incurred by the Company in connection therewith).
"Non-Payment Event of Default" means any event (other than a
Payment Default) the occurrence of which entitles one or more Persons to
accelerate the maturity of any Designated Senior Indebtedness.
"Non-U.S. Person" means a person who is not a U.S. person, as
defined in Regulation S.
"Notes" means the Initial Notes and the Exchange Notes (including
any Additional Series D Notes) treated as a single class of securities, as
amended or supplemented from time to time in accordance with the terms hereof,
that are issued pursuant to this Indenture.
"Obligations" means, with respect to any Indebtedness, any
principal, premium, interest, penalties, fees, indemnifications, reimbursements,
damages and other expenses payable under the documentation governing such
Indebtedness.
"Offering" means the offering of the Notes as described in the
Offering Memorandum.
"Offering Memorandum" means the Offering Memorandum dated
November 6, 1997 pursuant to which the Notes were offered.
"Officer," with respect to any Person (other than the Trustee),
means the Chief Executive Officer, the President, any Vice President and the
Chief Financial Officer, the Treasurer or the Secretary of such Person, or any
other officer designated by the Board of Directors of such Person, as the case
may be.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chief Executive Officer, the President or any Vice
President and the Chief Financial Officer or any Treasurer of such Person that
shall comply with applicable provisions of this Indenture and delivered to the
Trustee.
"100% Affiliate" of any specified Person means any Affiliate of
such Person that is a Wholly-Owned Subsidiary of
<PAGE> 24
-16-
such Person, of which such Person is a Wholly-Owned Subsidiary or that is a
Wholly-Owned Subsidiary of a third Person of which the specified Person is also
a Wholly-Owned Subsidiary.
"Opinion of Counsel" means a written opinion reasonably
satisfactory in form and substance to the Trustee from legal counsel which
counsel is reasonably acceptable to the Trustee stating the matters required by
Section 12.05 and delivered to the Trustee.
"Payment Default" means any default, whether or not any
requirement for the giving of notice, the lapse of time or both, or any other
condition to such default becoming an event of default has occurred, in the
payment of principal of (or premium, if any) or interest on or any other amount
payable in connection with Designated Senior Indebtedness.
"Permitted Asset Swap" means any transfer of properties or assets
by the Company or any of its Subsidiaries in which 90% of the consideration
received by the transferor consists of properties or assets (other than cash)
that will be used in the business of the transferor; provided that (i) the
aggregate fair market value (as determined in good faith by the Board of
Directors of the Company) of the property or assets being transferred by the
Company or such Subsidiary is not greater than the aggregate fair market value
(as determined in good faith by the Board of Directors) of the property or
assets received by the Company or such Subsidiary in such exchange and (ii) the
aggregate fair market value (as determined in good faith by the Board of
Directors) of all property or assets transferred by the Company and any of its
Subsidiaries (A) in connection with any single transfer or series of related
transfers shall not exceed $2,000,000 and (B) in connection with all such
transfers following the Series A/B Issue Date shall not exceed $5,000,000 in the
aggregate.
"Permitted Holders" means, collectively, (i) Holdings and
Communications, (ii) THL, CIVC, CIBC Merchant Fund, First Union and any
Affiliate of (including any equity fund advised by) any of the foregoing (other
than any portfolio company with operating assets) and (iii) the Individual
Investors, each of the spouses, children (adoptive or biological) or other
lineal descendants of the Individual Investors, the probate estate of any such
individual and any trust, so long as one or more of the foregoing individuals
retains substantially all of the controlling or beneficial interest thereunder.
"Permitted Indebtedness" means:
<PAGE> 25
-17-
(i) Indebtedness of the Company or any Restricted Subsidiary (A)
arising under or in connection with the Senior Credit Facility in an
amount not to exceed $125,000,000, which amount shall be reduced by any
mandatory prepayments actually made thereunder required as a result of
any Asset Sale or similar sale of assets (to the extent, in the case of
payments of revolving credit indebtedness, that the corresponding
commitments have been permanently reduced) and any scheduled payments
actually made thereunder or (B) that constitutes Acquisition Debt (as
defined in the Senior Credit Facility) under the Senior Credit Facility
to the extent such Indebtedness permanently reduces the aggregate
commitments available under the Senior Credit Facility;
(ii) Indebtedness under the Series A/B Notes and the related
guarantees, the Notes and the Guarantees;
(iii) Indebtedness not covered by any other clause of this
definition which was outstanding on the Series A/B Issue Date or is
outstanding on the Issue Date and was incurred subsequent to the Series
A/B Indenture.
(iv) Indebtedness of the Company to any Restricted Subsidiary
and Indebtedness of any Restricted Subsidiary to the Company or another
Restricted Subsidiary;
(v) Interest Rate Agreements;
(vi) Refinancing Indebtedness;
(vii) Indebtedness under Commodity Hedge Agreements entered into
in the ordinary course of business consistent with reasonable business
requirements and not for speculation;
(viii) Indebtedness consisting of guarantees made in the
ordinary course of business by the Company or its Subsidiaries of
obligations of the Issuers or any of their Subsidiaries, which
obligations are otherwise permitted under this Indenture;
(ix) contingent obligations of the Company or its Subsidiaries
in respect of customary indemnification and purchase price adjustment
obligations incurred in connection with an Asset Sale; provided that the
maximum assumable liability in respect of all such obligations shall at
no time exceed the gross proceeds actually received by the
<PAGE> 26
-18-
Company and its Subsidiaries in connection with such Asset Sale;
(x) Purchase Money Indebtedness and Capitalized Lease
Obligations of the Company and its Subsidiaries incurred to acquire
property in the ordinary course of business and any refinancings,
renewals or replacements of any such Purchase Money Indebtedness or
Capitalized Lease Obligation (subject to the limitations on the
principal amount thereof set forth in this clause (x)), the principal
amount of which Purchase Money Indebtedness and Capitalized Lease
Obligations shall not in the aggregate at any one time outstanding
exceed 5% of the Company's consolidated total assets stated in
accordance with GAAP as of the end of the last preceding fiscal quarter
for which financial statements are available;
(xi) the Management Subordinated Notes; and
(xii) additional Indebtedness of the Company or any of its
Subsidiaries (other than Indebtedness specified in clauses (i) through
(xi) above) not to exceed $5,000,000 in the aggregate at any one time
outstanding.
"Permitted Investments" means, for any Person, Investments made
on or after the date of this Indenture consisting of:
(i) Investments by the Company, or by a Restricted Subsidiary
thereof, in the Company or a Restricted Subsidiary;
(ii) Temporary Cash Investments;
(iii) Investments by the Company, or by a Restricted Subsidiary
thereof, in a Person, if as a result of such Investment (a) such Person
becomes a Restricted Subsidiary of the Company, (b) such Person is
merged, consolidated or amalgamated with or into, or transfers or
conveys substantially all of its assets to, or is liquidated into, the
Company or a Restricted Subsidiary thereof or (c) such business or
assets are owned by the Company or a Restricted Subsidiary;
(iv) an Investment that is made by the Company or a Restricted
Subsidiary thereof in the form of any stock, bonds, notes, debentures,
partnership or joint venture interests or other securities that are
issued by a third
<PAGE> 27
-19-
party to either or both of the Issuers or a Restricted Subsidiary solely
as partial consideration for the consummation of an Asset Sale that is
otherwise permitted by Section 4.10;
(v) Investments consisting of (a) purchases and acquisitions of
inventory, supplies, materials and equipment, or (b) licenses or leases
of intellectual property and other assets, in each case in the ordinary
course of business;
(vi) Investments consisting of (a) loans and advances to
employees for reasonable travel, relocation and business expenses in the
ordinary course of business not to exceed $1,000,000 in the aggregate at
any one time outstanding, (b) loans to employees of the Company for the
sole purpose of purchasing equity of the Company, (c) extensions of
trade credit in the ordinary course of business, and (d) prepaid
expenses incurred in the ordinary course of business;
(vii) without duplication, Investments consisting of
Indebtedness permitted pursuant to clause (iv) under the definition of
Permitted Indebtedness;
(viii) Investments existing on the Series A/B Issue Date or
existing on the Issue Date that were made subsequent to the Series A/B
Issue Date in compliance with the Series A/B Indenture;
(ix) Investments of the Company under Interest Rate Agreements;
(x) Investments under Commodity Hedge Agreements entered into in
the ordinary course of business consistent with reasonable business
requirements and not for speculation;
(xi) Investments consisting of endorsements for collection or
deposit in the ordinary course of business; and
(xii) Investments (other than Investments specified in clauses
(i) through (xi) above) in an aggregate amount, as valued at the time
each such Investment is made, not exceeding $5,000,000 for all such
Investments from and after the Series A/B Issue Date; provided that the
amount available for Investments to be made pursuant to this clause
(xii) shall be increased from time to time to the extent
<PAGE> 28
-20-
any return on capital is received by the Company or a Restricted
Subsidiary on an Investment previously made in reliance on this clause
(xii).
"Permitted Liens" means (i) Liens on property or assets of, or
any shares of stock of or secured debt of, any corporation or other entity
existing at the time such corporation or other entity becomes a Restricted
Subsidiary of the Company or at the time such corporation or other entity is
merged into the Company or any of its Restricted Subsidiaries; provided that
such Liens are not incurred in connection with, or in contemplation of, such
corporation becoming a Restricted Subsidiary of the Company or merging into the
Company or any of its Restricted Subsidiaries, (ii) Liens securing Refinancing
Indebtedness; provided that any such Lien does not extend to or cover any
Property, shares or debt other than the Property, shares or debt securing the
Indebtedness so refunded, refinanced or extended, (iii) Liens in favor of the
Issuers or any of their Restricted Subsidiaries, (iv) Liens securing industrial
revenue bonds, (v) Liens to secure Purchase Money Indebtedness and Capitalized
Lease Obligations that are permitted under clause (x) of the definition of
"Permitted Indebtedness"; provided that (a) with respect to any Purchase Money
Indebtedness, any such Lien is created solely for the purpose of securing
Indebtedness representing, or incurred to finance, refinance or refund, the cost
(including sales and excise taxes, installation and delivery charges and other
direct costs of, and other direct expenses paid or charged in connection with,
such purchase or construction) of such Property, (b) with respect to any
Purchase Money Indebtedness, the principal amount of the Indebtedness secured by
such Lien does not exceed 100% of such costs, and (c) such Lien does not extend
to or cover any Property other than the item of Property that is the subject of
such Purchase Money Indebtedness or Capitalized Lease Obligation, as the case
may be, and any improvements on such item, (vi) statutory liens or landlords',
carriers', warehousemen's, mechanics', suppliers', materialman's, repairmen's or
other like Liens arising in the ordinary course of business which do not secure
any Indebtedness and with respect to amounts not yet delinquent or being
contested in good faith by appropriate proceedings, if a reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP
shall have been made therefor, (vii) Liens for taxes, assessments or
governmental charges that are being contested in good faith by appropriate
proceedings, (viii) Liens securing Senior Indebtedness or Guarantor Senior
Indebtedness, (ix) Liens existing on the A/B Issue Date or existing on the Issue
Date that arose subsequent to the A/B Issue Date in compliance with the
<PAGE> 29
-21-
Series A/B Indenture, (x) any extensions, substitutions, replacements or
renewals of the foregoing, (xi) Liens incurred in the ordinary course of
business in connection with worker's compensation, unemployment insurance or
other forms of government insurance or benefits, or to secure the performance of
letters of credit, bids, tenders, statutory obligations, surety and appeal
bonds, leases, government contracts and other similar obligations (other than
obligations for borrowed money) entered into in the ordinary course of business,
(xii) any attachment or judgment Lien not constituting an Event of Default under
this Indenture that is being contested in good faith by appropriate proceedings
and for which adequate reserves have been established in accordance with GAAP
(if so required), (xiii) Liens arising from the filing, for notice purposes
only, of financing statements in respect of operating leases, (xiv) Liens
arising by operation of law in favor of depositary banks and collecting banks,
incurred in the ordinary course of business, (xv) Liens consisting of
restrictions on the transfer of securities pursuant to applicable federal and
state securities laws, (xvi) interests of lessors and licensors under leases and
licenses to which the Issuers or any of their Restricted Subsidiaries is a party
and (xvii) with respect to any real property occupied by the Company or any of
its Restricted Subsidiaries, all easements, rights of way, licenses and similar
encumbrances on or defects of title that do not materially impair the use of
such property for its intended purposes.
"Permitted Tax Distributions" means distributions by Holdings or
the Company to their respective partners or members from time to time in an
amount approximately equal to the income tax liability of such partners or
members of Holdings or the Company, as the case may be, resulting from the
taxable income of Holdings or the Company, as the case may be, (after taking
into account, to the extent they may reduce such tax liability, all of the prior
tax losses of Holdings or the Company, as the case may be, to the extent such
losses have not previously been deemed to reduce the taxable income of Holdings
or the Company, as the case may be, and thereby reduce distributions for taxes
in accordance herewith); such distribution for taxes shall be based on the
approximate highest combined tax rate that applies to any one of the partners or
members of Holdings or the Company, as the case may be.
"Person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government (including any agency or political
subdivision thereof).
<PAGE> 30
-22-
"Physical Notes" means certificated Notes in registered form in
substantially the form set forth in Exhibit A.
"Preferred Stock" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such Person over the holders
of other Capital Stock issued by such Person.
"Preferred Units" means the Preferred Units provided for in the
Third Amended and Restated Agreement of Limited Partnership of Holdings.
"Private Exchange Notes" shall have the meaning assigned thereto
in the Registration Rights Agreement.
"Private Placement Legend" means the legend initially set forth
on the Rule 144A Notes and on any Physical Notes (other than Regulation S Notes)
delivered prior to the issuance of the Exchange Notes in the form set forth in
Exhibit B.
"Property" of any Person means all types of real, personal,
tangible, intangible or mixed property owned by such Person whether or not
included in the most recent consolidated balance sheet of such Person and its
Subsidiaries under GAAP.
"Public Equity Offering" means a public offering by the Company,
Holdings, Capital, TWP Capital Corp. or Communications of shares of its Common
Stock (however designated and whether voting or non-voting) and any and all
rights, warrants or options to acquire such Common Stock; provided, however,
that in connection with any such Public Equity Offering by Communications, the
net proceeds of such Public Equity Offering are contributed to the Company as
common equity.
"Purchase Money Indebtedness" means any Indebtedness incurred by
a Person to finance (within 90 days from incurrence) the cost (including the
cost of construction) of an item of Property acquired in the ordinary course of
business, the principal amount of which Indebtedness does not exceed the sum of
(i) 100% of such cost and (ii) reasonable fees and expenses of such Person
incurred in connection therewith.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A promulgated under the Securities Act.
<PAGE> 31
-23-
"Recapitalization" means the transactions described in the
Recapitalization Agreement.
"Recapitalization Agreement" means the Securities Purchase and
Redemption Agreement dated August 27, 1997 by and among Holdings,
Communications, TWP Recapitalization Corp., THL and certain limited partners of
Holdings and Communications, as amended as of September 30, 1997.
"Redeemable Dividend" means, for any dividend or distribution
(other than Permitted Tax Distributions) with regard to Disqualified Capital
Stock, the quotient of the dividend or distribution divided by the difference
between one and the maximum statutory federal income tax rate (expressed as a
decimal number between 1 and 0) then applicable to the issuer of such
Disqualified Capital Stock.
"Redemption Date" when used with respect to any Note to be
redeemed means the date fixed for such redemption pursuant to the terms of the
Notes.
"Refinancing Indebtedness" means Indebtedness that refunds,
refinances or extends any Indebtedness of the Company outstanding on the Issue
Date or other Indebtedness permitted to be incurred by the Company or its
Restricted Subsidiaries pursuant to the terms of this Indenture, but only to the
extent that (i) the Refinancing Indebtedness is subordinated to the Notes to at
least the same extent as the Indebtedness being refunded, refinanced or
extended, if at all, (ii) the Refinancing Indebtedness is scheduled to mature
either (a) no earlier than the Indebtedness being refunded, refinanced or
extended, or (b) after the maturity date of the Notes, (iii) the portion, if
any, of the Refinancing Indebtedness that is scheduled to mature on or prior to
the maturity date of the Notes has a weighted average life to maturity at the
time such Refinancing Indebtedness is incurred that is equal to or greater than
the weighted average life to maturity of the portion of the Indebtedness being
refunded, refinanced or extended that is scheduled to mature on or prior to the
maturity date of the Notes, (iv) such Refinancing Indebtedness is in an
aggregate principal amount that is equal to or less than the sum of (a) the
aggregate principal amount then outstanding under the Indebtedness being
refunded, refinanced or extended, (b) the amount of accrued and unpaid interest,
if any, and premiums owed, if any, not in excess of preexisting prepayment
provisions on such Indebtedness being refunded, refinanced or extended and (c)
the amount of customary fees, expenses and costs related to the incurrence of
such Refinancing Indebtedness, and (v) such Refi-
<PAGE> 32
-24-
nancing Indebtedness is incurred by the same Person that initially incurred the
Indebtedness being refunded, refinanced or extended, except that the Company may
incur Refinancing Indebtedness to refund, refinance or extend Indebtedness of
any Wholly-Owned Subsidiary of the Company.
"Registration Rights Agreement" means the Registration Rights
Agreement dated as of December 2, 1998 among the Issuers and CIBC Oppenheimer
Corp. and First Union Capital Markets Corp., as Initial Purchasers.
"Regulation S" means Regulation S promulgated under the
Securities Act.
"Responsible Officer," when used with respect to the Trustee,
means an officer or assistant officer assigned to the corporate trust department
of the Trustee (or any successor group of the Trustee) including any vice
president, assistant vice president, assistant secretary, treasurer or assistant
treasurer or any other officer of the Trustee customarily performing functions
similar to those performed by any of the above designated officers and also
means, with respect to a particular corporate trust matter, any other officer to
whom such matter is referred because of his knowledge of and familiarity with
the particular subject.
"Restricted Payment" means any of the following: (i) the
declaration or payment of any dividend or any other distribution or payment on
Capital Stock of the Issuers or any Restricted Subsidiary of the Issuers or any
payment made to the direct or indirect holders (in their capacities as such) of
Capital Stock of the Issuers or any Restricted Subsidiary of the Issuers (other
than (x) dividends or distributions payable solely in Capital Stock (other than
Disqualified Capital Stock) or in options, warrants or other rights to purchase
Capital Stock (other than Disqualified Capital Stock), (y) Permitted Tax
Distributions and (z) in the case of Restricted Subsidiaries of the Company,
dividends or distributions payable to the Company or to a Wholly-Owned
Subsidiary of the Company), (ii) the purchase, redemption or other acquisition
or retirement for value of any Capital Stock of the Company or any of its
Restricted Subsidiaries (other than Capital Stock owned by the Company or a
Wholly-Owned Subsidiary of the Company, excluding Disqualified Capital Stock),
(iii) the making of any principal payment on, or the purchase, defeasance,
repurchase, redemption or other acquisition or retirement for value, prior to
any scheduled maturity, scheduled repayment or scheduled sinking fund payment,
of any Indebtedness which is subordinate
<PAGE> 33
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in right of payment to the Notes other than subordinated Indebtedness acquired
in anticipation of satisfying a scheduled sinking fund obligation, principal
installment or final maturity (in each case due within one year of the date of
acquisition), (iv) without limiting the generality of the foregoing clause
(iii), the making of any principal or interest payment on the Management
Subordinated Notes, (v) the making of any payments to the Equity Compensation
Trust, (vi) the making of any Investment or guarantee of any Investment in any
Person other than a Permitted Investment, (vii) any designation of a Restricted
Subsidiary as an Unrestricted Subsidiary on the basis of the Investment by the
Issuers therein and (viii) forgiveness of any Indebtedness of an Affiliate of
the Issuers (other than a Restricted Subsidiary) to the Issuers or a Restricted
Subsidiary. For purposes of determining the amount expended for Restricted
Payments, cash distributed or invested shall be valued at the face amount
thereof and property other than cash shall be valued at its fair market value
determined by the Company's Board of Directors.
"Restricted Subsidiary" means a Subsidiary of the Company other
than an Unrestricted Subsidiary. The Board of Directors of the Company may
designate any Unrestricted Subsidiary or any Person that is to become a
Subsidiary as a Restricted Subsidiary if immediately after giving effect to such
action (and treating any Acquired Indebtedness as having been incurred at the
time of such action), the Issuers could have incurred at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to Section
4.06.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Sale and Lease-Back Transaction" means any arrangement with any
Person providing for the leasing by the Company or any Restricted Subsidiary of
the Company of any real or tangible personal Property, which Property has been
or is to be sold or transferred by the Company or such Restricted Subsidiary to
such Person in contemplation of such leasing.
"S&P" means Standard & Poor's Corporation and its successors.
"SEC" means the United States Securities and Exchange Commission
as constituted from time to time or any successor performing substantially the
same functions.
<PAGE> 34
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"Securities Act" means the Securities Act of 1933, as amended.
"Senior Credit Facility" means the Credit Agreement, dated as of
October 1, 1997, among the Issuers, the lenders listed therein and Canadian
Imperial Bank of Commerce, as administrative agent, and First Union National
Bank, as documentation agent, as amended and restated as of November 6, 1997,
together with the documents related thereto (including, without limitation, any
guarantee agreements and security documents), in each case as such agreements
may be amended (including any amendment and restatement thereof), supplemented
or otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including adding
Subsidiaries of the Issuers as additional borrowers or guarantors thereunder)
all or any portion of the Indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agent, lender or
group of lenders.
"Senior Indebtedness" means the principal of and premium, if any,
and interest (including, without limitation, interest accruing or that would
have accrued but for the filing of a bankruptcy, reorganization or other
insolvency proceeding whether or not such interest constitutes an allowable
claim in such proceeding) on, and any and all other fees, expense reimbursement
obligations, indemnities and other amounts due pursuant to the terms of all
agreements, documents and instruments providing for, creating, securing or
evidencing or otherwise entered into in connection with (a) all Indebtedness of
the Issuers owed to lenders under the Senior Credit Facility, (b) all
obligations of the Company with respect to any Interest Rate Agreement, (c) all
obligations of the Company to reimburse any bank or other Person in respect of
amounts paid under letters of credit, acceptances or other similar instruments,
(d) all other Indebtedness of the Company which does not provide that it is to
rank pari passu with or subordinate to the Notes and (e) all deferrals,
renewals, extensions and refundings of, and amendments, modifications and
supplements to, any of the Senior Indebtedness described above. Notwithstanding
anything to the contrary in the foregoing, Senior Indebtedness will not include
(i) Indebtedness of the Company to any of its Subsidiaries, (ii) Indebtedness
represented by the Notes or the Series A/B Notes, (iii) any Indebtedness which
by the express terms of the agreement or instrument creating, evidencing or
governing the same is junior or subordinate in right of payment to any item of
Senior Indebtedness, (iv) any trade payable arising from the purchase of goods
or materials or for services obtained in the
<PAGE> 35
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ordinary course of business or (v) Indebtedness incurred in violation of this
Indenture.
"Series A/B Indenture" means the Indenture, dated as of November
12, 1997, among the Issuers and the Trustee relating to the 9 5/8% Senior
Subordinated Notes due 2007 of the Issuers.
"Series A/B Issue Date" means November 12, 1997.
"Series A/B Notes" means the $100.0 million aggregate principal
amount of 9 5/8% Senior Subordinated Notes due 2007 and the Series B 9 5/8%
Senior Subordinated Notes due 2007, issued under the Series A/B Indenture .
"Subsidiary" of any specified Person means any corporation,
partnership, limited liability company, joint venture, association or other
business entity, whether now existing or hereafter organized or acquired, (i) in
the case of a corporation, of which more than 50% of the total voting power of
the Capital Stock entitled (without regard to the occurrence of any contingency)
to vote in the election of directors, officers or trustees thereof is held by
such first-named Person or any of its Subsidiaries; or (ii) in the case of a
partnership, limited liability company, joint venture, association or other
business entity, with respect to which such first-named Person or any of its
Subsidiaries has the power to direct or cause the direction of the management
and policies of such entity by contract or otherwise or if in accordance with
GAAP such entity is consolidated with the first-named Person for financial
statement purposes.
"Target" means Target Directories of Michigan, Inc., a Michigan
corporation and a Wholly-Owned Subsidiary of the Company.
"Temporary Cash Investments" means (i) Investments in marketable
direct obligations issued or guaranteed by the United States of America, or of
any governmental agency or political subdivision thereof, maturing within 365
days of the date of purchase; (ii) Investments in certificates of deposit issued
by a bank organized under the laws of the United States of America or any state
thereof or the District of Columbia, in each case having capital, surplus and
undivided profits totaling more than $500,000,000 and rated at least A by S&P
and A-2 by Moody's maturing within 365 days of purchase; or (iii) Investments
not exceeding 365 days in duration in money market funds that invest
substantially all of such funds' as-
<PAGE> 36
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sets in the Investments described in the preceding clauses (i) and (ii).
"THL" means Thomas H. Lee Equity Fund III, L.P.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code
Sections 77aaa-77bbbb) as in effect on the date of this Indenture (except as
provided in Section 8.03 hereof).
"Trustee" means the party named as such in this Indenture until a
successor replaces it pursuant to this Indenture and thereafter means the
successor.
"Unrestricted Subsidiary" means (a) any Subsidiary of an
Unrestricted Subsidiary and (b) any Subsidiary of the Company which is
classified after the Issue Date as an Unrestricted Subsidiary by a resolution
adopted by the Board of Directors of the Company; provided that a Subsidiary
organized or acquired after the Issue Date may be so classified as an
Unrestricted Subsidiary only if such classification is in compliance with the
covenant set forth in Section 4.09 hereof. The Trustee shall be given prompt
notice by the Company of each resolution adopted by the Board of Directors of
the Company under this provision, together with a copy of each such resolution
adopted.
"U.S. Government Obligations" means (a) securities that are
direct obligations of the United States of America for the payment of which its
full faith and credit are pledged or (b) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act) as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such U.S.
Government Obligation held by such custodian for the account of the holder of
such depository receipt; provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or a specific payment of principal or
interest on any such U.S. Government Obligation held by such custodian for the
account of the holder of such depository receipt.
<PAGE> 37
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"Wholly-Owned Subsidiary" of a specified Person means any
Subsidiary (or, if such specified Person is the Company, a Restricted
Subsidiary), all of the outstanding voting securities (other than directors'
qualifying shares) of which are owned, directly or indirectly, by such Person.
Section 1.02. Other Definitions.
The definitions of the following terms may be found in the
sections indicated as follows:
<TABLE>
<CAPTION>
Term Defined in Section
- ---- ------------------
<S> <C>
"Affiliate Transaction".......................................... 4.11(a)
"Agent Members".................................................. 2.16(a)
"Bankruptcy Law"................................................. 6.01
"Business Day"................................................... 12.07
"CEDEL".......................................................... 2.16(a)
"Change of Control Offer"........................................ 4.19(a)
"Change of Control Payment Date"................................. 4.19(b)
"Change of Control Purchase Price"............................... 4.19(a)
"Covenant Defeasance"............................................ 9.03
"Custodian"...................................................... 6.01
"Euroclear"...................................................... 2.16(a)
"Event of Default"............................................... 6.01
"Excess Proceeds Offer".......................................... 4.10(a)
"Global Notes"................................................... 2.16(a)
"Guarantee Payment Blockage Period".............................. 10.07(b)
"Guarantor Representative........................................ 10.07(a)
"Initial Blockage Period"........................................ 11.03(b)
"Initial Guarantee Blockage Period".............................. 10.07(b)
"Legal Defeasance"............................................... 9.02
"Legal Holiday".................................................. 12.07
"Offer Period"................................................... 4.10(b)
"Other Notes".................................................... 2.02
"Paying Agent"................................................... 2.03
"Payment Blockage Period"........................................ 11.03(b)
"Purchase Date".................................................. 4.10(b)
"Registrar"...................................................... 2.03
"Regulation S Global Notes"...................................... 2.16(a)
"Regulation S Notes"............................................. 2.02
"Reinvestment Date".............................................. 4.10(a)
"Representative"................................................. 11.03(a)
"Restricted Global Note"......................................... 2.16(a)
"Restricted Period".............................................. 2.16(f)
"Rule 144A Notes"................................................ 2.02
"Series A/B Asset Sale Offer".................................... 4.10(a)
</TABLE>
<PAGE> 38
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Section 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
portion of such provision required to be incorporated herein in order for this
Indenture to be qualified under the TIA is incorporated by reference in and made
a part of this Indenture. The following TIA terms used in this Indenture have
the following meanings:
"Commission" means the SEC.
"indenture securities" means the Notes.
"indenture securityholder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor on the indenture securities" means the Issuers, the
Guarantors or any other obligor on the Notes.
All other terms used in this Indenture that are defined by the
TIA, defined in the TIA by reference to another statute or defined by SEC rule
have the meanings therein assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein, whether
defined expressly or by reference;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) words used herein implying any gender shall apply to every
gender; and
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(6) whenever in this Indenture there is mentioned, in any
context, principal, interest or any other amount payable under or with
respect to any Note, such mention shall be deemed to include mention of
the payment of Additional Interest to the extent that, in such context,
Additional Interest is, was or would be payable in respect thereof.
ARTICLE 2
THE NOTES
Section 2.01. Amount of Notes.
The Trustee shall authenticate Initial Notes for original issue
on the Issue Date in the aggregate principal amount of $40,000,000, upon a
written order of the Company in the form of an Officers' Certificate of the
Company. Such written order shall specify the amount of Notes to be
authenticated and the date on which the Notes are to be authenticated.
Upon receipt of an Issuer Request and an Officers' Certificate
certifying that a registration statement relating to an exchange offer specified
in the Registration Rights Agreement is effective and that the conditions
precedent to a private exchange thereunder have been met, the Trustee shall
authenticate an additional series of Notes in an aggregate principal amount not
to exceed $140,000,000 provided that $100,000,000 shall be reserved for issuance
and shall be available for issuance only in connection with the exchange of the
Series A/B Notes for Exchange Notes.
Section 2.02. Form and Dating.
The Initial Notes and the Trustee's certificate of authentication
with respect thereto shall be substantially in the form set forth in Exhibit A,
which is incorporated in and forms a part of this Indenture. The Notes may have
notations, legends or endorsements required by law, rule or usage to which the
Issuers are subject. Any such notations, legends or endorsements shall be
furnished to the Trustee in writing. Without limiting the generality of the
foregoing, Notes offered and sold to Qualified Institutional Buyers in reliance
on Rule 144A ("Rule 144A Notes") shall bear the legend and include the form of
assignment set forth in Exhibit B, Notes offered and sold in offshore
transactions in reliance on Regulation S ("Regulation
<PAGE> 40
-32-
S Notes") shall bear the legend and include the form of assignment set forth in
Exhibit C, and Notes offered and sold to Institutional Accredited Investors in
transactions exempt from registration under the Securities Act not made in
reliance on Rule 144A or Regulation S ("Other Notes") shall be represented by
Physical Notes bearing the Private Placement Legend. Each Note shall be dated
the date of its authentication.
The terms and provisions contained in the Notes shall constitute,
and are expressly made, a part of this Indenture and, to the extent applicable,
the Issuers and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and agree to be bound thereby.
The Notes may be presented for registration of transfer and
exchange at the offices of the Registrar in the Borough of Manhattan.
Section 2.03. Execution and Authentication.
Two Officers shall sign, or one Officer shall sign and one
Officer (each of whom shall, in each case, have been duly authorized by all
requisite corporate actions) shall attest to, the Notes for each of the Issuers
by manual or facsimile signature.
If an Officer whose signature is on a Note was an Officer at the
time of such execution but no longer holds that office at the time the Trustee
authenticates the Note, the Note shall be valid nevertheless.
No Note shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any Note
shall be conclusive evidence, and the only evidence, that such Note has been
duly authenticated and delivered hereunder. Notwithstanding the foregoing, if
any Note shall have been authenticated and delivered hereunder but never issued
and sold by the Issuers, and the Issuers shall deliver such Note to the Trustee
for cancellation as provided in Section 2.12, for all purposes of this Indenture
such Note shall be deemed never to have been authenticated and delivered
hereunder and shall never be entitled to the benefits of this Indenture.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Issuers to authenticate the Notes.
<PAGE> 41
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Unless otherwise provided in the appointment, an authenticating agent may
authenticate the Notes whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
agent. An authenticating agent has the same rights as an Agent to deal with the
Issuers and Affiliates of the Issuers. Each Paying Agent is designated as an
authenticating agent for purposes of this Indenture.
The Notes shall be issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof.
Section 2.04. Registrar and Paying Agent.
The Issuers shall maintain an office or agency (which shall be
located in the Borough of Manhattan in The City of New York, State of New York)
where Notes may be presented for registration of transfer or for exchange (the
"Registrar"), and an office or agency where Notes may be presented for payment
(the "Paying Agent") and an office or agency where notices and demands to or
upon the Issuers, if any, in respect of the Notes and this Indenture may be
served. The Issuers hereby initially designate the office of Wilmington Trust
Company, c/o Harris Trust Company of New York, 88 Pine Street, 19th Floor, Wall
Street Plaza, New York, New York 10005, as their office or agency in the Borough
of Manhattan, The City of New York. The Registrar shall keep a register of the
Notes and of their transfer and exchange. The Issuers may have one or more
additional Paying Agents. The term "Paying Agent" includes any additional Paying
Agent. Neither the Issuers nor any Affiliate thereof may act as Paying Agent.
The Issuers may change any Paying Agent or Registrar without notice to any
Noteholder.
The Issuers shall enter into an appropriate agency agreement with
any Agent not a party to this Indenture, which shall incorporate the provisions
of the TIA. The agreement shall implement the provisions of this Indenture that
relate to such Agent. The Issuers shall notify the Trustee of the name and
address of any such Agent. If the Issuers fail to maintain a Registrar or Paying
Agent, or fail to give the foregoing notice, the Trustee shall act as such and
shall be entitled to compensation in accordance with Section 7.07.
The Issuers initially designate the Corporate Trust Office of the
Trustee as Registrar, Paying Agent and agent for service of notices and demands
in connection with the Notes and this Indenture.
<PAGE> 42
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Section 2.05. Paying Agent to Hold Money in Trust.
Each Paying Agent shall hold in trust for the benefit of the
Noteholders or the Trustee all money held by the Paying Agent for the payment of
principal of or premium or interest on the Notes (whether such money has been
paid to it by the Issuers or any other obligor on the Notes), and the Issuers
and the Paying Agent shall notify the Trustee of any default by the Issuers (or
any other obligor on the Notes) in making any such payment. Money held in trust
by the Paying Agent need not be segregated except as required by law and in no
event shall the Paying Agent be liable for any interest on any money received by
it hereunder. The Issuers at any time may require the Paying Agent to pay all
money held by it to the Trustee and account for any funds disbursed and the
Trustee may at any time during the continuance of any Event of Default specified
in Section 6.01(1) or (2), upon written request to the Paying Agent, require
such Paying Agent to pay forthwith all money so held by it to the Trustee and to
account for any funds disbursed. Upon making such payment, the Paying Agent
shall have no further liability for the money delivered to the Trustee.
Section 2.06. Noteholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Noteholders. If the Trustee is not the Registrar, the Issuers shall furnish
to the Trustee at least five Business Days before each Interest Payment Date,
and at such other times as the Trustee may request in writing, a list in such
form and as of such date as the Trustee may reasonably require of the names and
addresses of the Noteholders.
Section 2.07. Transfer and Exchange.
Subject to Sections 2.16 and 2.17, when Notes are presented to
the Registrar with a request from the Holder of such Notes to register a
transfer or to exchange them for an equal principal amount of Notes of other
authorized denominations, the Registrar shall register the transfer as
requested. Every Note presented or surrendered for registration of transfer or
exchange shall be duly endorsed or be accompanied by a written instrument of
transfer in form satisfactory to the Issuers and the Registrar, duly executed by
the Holder thereof or his attorneys duly authorized in writing. To permit
registrations of transfers and exchanges, the Issuers shall issue and execute
and the Trustee shall authenticate new Notes evidencing such transfer or
exchange at the Registrar's request. No serv-
<PAGE> 43
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ice charge shall be made to the Noteholder for any registration of transfer or
exchange. The Issuers may require from the Noteholder payment of a sum
sufficient to cover any transfer taxes or other governmental charge that may be
imposed in relation to a transfer or exchange, but this provision shall not
apply to any exchange pursuant to Section 2.11, 3.06, 4.10, 4.19 or 8.05 (in
which events the Issuers shall be responsible for the payment of such taxes).
The Trustee shall not be required to exchange or register a transfer of any Note
for a period of 15 days immediately preceding the selection of Notes to be
redeemed or any Note selected for redemption.
Any Holder of the Global Note shall, by acceptance of such Global
Note, agree that transfers of the beneficial interests in such Global Note may
be effected only through a book entry system maintained by the Holder of such
Global Note (or its agent), and that ownership of a beneficial interest in the
Global Note shall be required to be reflected in a book entry.
Each Holder of a Note agrees to indemnify the Issuers and the
Trustee against any liability that may result from the transfer, exchange or
assignment of such Holder's Note in violation of any provision of this Indenture
and/or applicable U.S. Federal or state securities law.
Except as expressly provided herein, neither the Trustee nor the
Registrar shall have any duty to monitor the Issuers' compliance with or have
any responsibility with respect to the Issuers' compliance with any Federal or
state securities laws.
Section 2.08. Replacement Notes.
If a mutilated Note is surrendered to the Registrar or the
Trustee, or if the Holder of a Note claims that the Note has been lost,
destroyed or wrongfully taken, the Issuers shall issue and the Trustee shall
authenticate a replacement Note if the Holder of such Note furnishes to the
Issuers and the Trustee evidence reasonably acceptable to them of the ownership
and the destruction, loss or theft of such Note and if the requirements of
Section 8-405 of the New York Uniform Commercial Code as in effect on the date
of this Indenture are met. If required by the Trustee or the Issuers, an
indemnity bond shall be posted, sufficient in the judgment of both to protect
the Issuers, the Trustee or any Paying Agent from any loss that any of them may
suffer if such Note is replaced. The Issuers may charge such Holder for the
Issuers' reasonable out-of-pocket expenses in replacing such Note and the
Trustee may charge the
<PAGE> 44
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Issuers for the Trustee's expenses (including, without limitation, attorneys'
fees and disbursements) in replacing such Note. Every replacement Note shall
constitute an additional contractual obligation of the Issuers.
Section 2.09. Outstanding Notes.
The Notes outstanding at any time are all Notes that have been
authenticated by the Trustee except for (a) those canceled by it, (b) those
delivered to it for cancellation, (c) to the extent set forth in Sections 9.01
and 9.02, on or after the date on which the conditions set forth in Section 9.01
or 9.02 have been satisfied, those Notes theretofore authenticated and delivered
by the Trustee hereunder and (d) those described in this Section 2.09 as not
outstanding. Subject to Section 2.10, a Note does not cease to be outstanding
because an Issuer or one of its Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.08, it ceases to be
outstanding unless the Trustee receives written notice that the replaced Note is
held by a bona fide purchaser in whose hands such Note is a legal, valid and
binding obligation of the Issuers.
If the Paying Agent holds, in its capacity as such, on any
Maturity Date or on any optional redemption date, money sufficient to pay all
accrued interest and principal with respect to the Notes payable on that date
and is not prohibited from paying such money to the Holders thereof pursuant to
the terms of this Indenture, then on and after that date such Notes cease to be
outstanding and interest on them ceases to accrue.
Section 2.10. Treasury Notes.
In determining whether the Holders of the required principal
amount of Notes have concurred in any declaration of acceleration or notice of
default or direction, waiver or consent or any amendment, modification or other
change to this Indenture, Notes owned by an Issuer or any Affiliate of an Issuer
shall be disregarded as though they were not outstanding, except that for the
purposes of determining whether the Trustee shall be protected in relying on any
such declaration, notice, direction, waiver or consent or any amendment,
modification or other change to this Indenture, only Notes as to which a
Responsible Officer of the Trustee has received an Officers' Certificate stating
that such Notes are so owned shall be so disregarded. Notes so owned which have
been pledged in good faith shall not be disregarded if the pledgee establishes
the
<PAGE> 45
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pledgee's right so to act with respect to the Notes and that the pledgee is not
either of the Issuers, any other obligor or guarantor on the Notes or any of
their respective Affiliates.
Section 2.11. Temporary Notes.
Until definitive Notes are prepared and ready for delivery, the
Issuers may prepare and the Trustee shall authenticate temporary Notes.
Temporary Notes shall be substantially in the form of definitive Notes but may
have variations that the Issuers consider appropriate for temporary Notes.
Without unreasonable delay, the Issuers shall prepare and the Trustee shall
authenticate definitive Notes in exchange for temporary Notes. Until such
exchange, temporary Notes shall be entitled to the same rights, benefits and
privileges as definitive Notes.
Section 2.12. Cancellation.
The Issuers at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee shall cancel all Notes surrendered for registration of transfer,
exchange, payment, replacement or cancellation and shall (subject to the
record-retention requirements of the Exchange Act) destroy canceled Notes and
deliver a certificate of destruction thereof to the Issuers. The Issuers may not
reissue or resell, or issue new Notes to replace, Notes that the Issuers have
redeemed or paid, or that have been delivered to the Trustee for cancellation.
Section 2.13. Defaulted Interest.
If the Issuers default on a payment of interest on the Notes,
they shall pay the defaulted interest, plus (to the extent permitted by law) any
interest payable on the defaulted interest, pursuant to Section 4.01 hereof, to
the Persons who are Noteholders on a subsequent special record date, which date
shall be at least five Business Days prior to the payment date. The Issuers
shall fix such special record date and payment date and provide the Trustee at
least 20 days notice of the proposed amount of defaulted interest to be paid and
the special payment date and at the same time the Issuers shall deposit with the
Trustee the aggregate amount proposed to be paid in respect of such defaulted
interest. At least 15 days before such special record date, the Issuers shall
mail to each Noteholder a notice that states the special record date, the
payment date and the
<PAGE> 46
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amount of defaulted interest, and interest payable on defaulted interest, if
any, to be paid. The Issuers may make payment of any defaulted interest in any
other lawful manner not inconsistent with the requirements (if applicable) of
any securities exchange on which the Notes may be listed and, upon such notice
as may be required by such exchange, if, after written notice given by the
Issuers to the Trustee of the proposed payment pursuant to this sentence, such
manner of payment shall be deemed practicable by the Trustee.
Section 2.14. CUSIP Number.
The Issuers in issuing the Notes may use a "CUSIP" number, and if
so, such CUSIP number shall be included in notices of redemption or exchange as
a convenience to Holders; provided that any such notice may state that no
representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Notes, and that reliance may be placed only on
the other identification numbers printed on the Notes. The Issuers shall
promptly notify the Trustee of any such CUSIP number used by the Issuers in
connection with the issuance of the Notes and of any change in the CUSIP number.
Section 2.15. Deposit of Moneys.
Prior to 10:00 a.m., New York City time, on each Interest Payment
Date and Maturity Date, the Issuers shall have deposited with the Paying Agent
in immediately available funds money sufficient to make cash payments, if any,
due on such Interest Payment Date or Maturity Date, as the case may be, in a
timely manner which permits the Trustee to remit payment to the Holders on such
Interest Payment Date or Maturity Date, as the case may be. The principal and
interest on Global Notes shall be payable to the Depository or its nominee, as
the case may be, as the sole registered owner and the sole holder of the Global
Notes represented thereby. The principal and interest on Physical Notes shall be
payable at the office of the Paying Agent. The Issuers shall deliver an
Officers' Certificate to the Trustee, at least 5 business days before any
applicable payment date, setting forth the amount of Additional Interest due per
$1,000 aggregate principal amount of Notes.
Section 2.16. Book-Entry Provisions for Global Notes.
(a) Rule 144A Notes initially shall be represented by one or more
notes in registered, global form without interest coupons (collectively, the
"Restricted Global Note"). Regulation S Notes initially shall be represented by
one or
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more notes in registered, global form without interest coupons (collectively,
the "Regulation S Global Note," and, together with the Restricted Global Note
and any other global notes representing Notes, the "Global Notes"). The Global
Notes shall bear legends as set forth in Exhibit D. The Global Notes initially
shall (i) be registered in the name of the Depository or the nominee of such
Depository, in each case for credit to an account of an Agent Member (or, in the
case of the Regulation S Global Notes, Agent Members of the Depository holding
for Euroclear System ("Euroclear") and Cedel Bank, S.A. ("CEDEL")), (ii) be
delivered to the Trustee as custodian for such Depository and (iii) bear legends
as set forth in Exhibit B with respect to Restricted Global Notes and Exhibit C
with respect to Regulation S Global Notes.
Members of, or direct or indirect participants in, the Depository
("Agent Members") shall have no rights under this Indenture with respect to any
Global Note held on their behalf by the Depository, or the Trustee as its
custodian, or under the Global Notes, and the Depository may be treated by the
Issuers, the Trustee and any agent of the Issuers or the Trustee as the absolute
owner of the Global Note for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Trustee or any agent of the Issuers
or the Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Note.
(b) Transfers of Global Notes shall be limited to transfer in
whole, but not in part, to the Depository, its successors or their respective
nominees. Interests of beneficial owners in the Global Notes may be transferred
or exchanged for Physical Notes in accordance with the rules and procedures of
the Depository and the provisions of Section 2.17. In addition, a Global Note
shall be exchangeable for Physical Notes if (i) the Depository (x) notifies the
Issuers that it is unwilling or unable to continue as depository for such Global
Note and the Issuers thereupon fail to appoint a successor depository or (y) has
ceased to be a clearing agency registered under the Exchange Act, (ii) the
Issuers, at their option, notify the Trustee in writing that they elect to cause
the issuance of such Physical Notes or (iii) there shall have occurred and be
continuing a Default or an Event of Default with respect to the Notes. In all
cases, Physical Notes delivered in exchange for any Global Note or beneficial
interests therein shall be registered in the names, and issued in any approved
denominations,
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requested by or on behalf of the Depository (in accordance with its customary
procedures).
(c) In connection with any transfer or exchange of a portion of
the beneficial interest in any Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Note in an amount equal to the principal amount
of the beneficial interest in the Global Note to be transferred, and the Issuers
shall execute, and the Trustee shall upon receipt of a written order from the
Issuers authenticate and make available for delivery, one or more Physical Notes
of like tenor and amount.
(d) In connection with the transfer of Global Notes as an
entirety to beneficial owners pursuant to paragraph (b), the Global Notes shall
be deemed to be surrendered to the Trustee for cancellation, and the Issuers
shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by the Depository in writing in exchange for its
beneficial interest in the Global Notes, an equal aggregate principal amount of
Physical Notes of authorized denominations.
(e) Any Physical Note constituting a Restricted Note delivered in
exchange for an interest in a Global Note pursuant to paragraph (b), (c) or (d)
shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of Section
2.17, bear the Private Placement Legend or, in the case of the Regulation S
Global Note, the legend set forth in Exhibit C, in each case, unless the Issuers
determine otherwise in compliance with applicable law.
(f) On or prior to the 40th day after the later of the
commencement of the offering of the Notes represented by a Regulation S Global
Note and the original issue date of such Notes (such period through and
including such 40th day, the "Restricted Period"), a beneficial interest in the
Regulation S Global Note may be held only through Euroclear or CEDEL, as
indirect participants in DTC, unless transferred to a Person who takes delivery
in the form of an interest in the corresponding Restricted Global Note, only
upon receipt by the Trustee of a written certification from the transferor to
the effect that such transfer is being made (i)(a) to a Person who the
transferor reasonably believes is a Qualified Institutional Buyer in a
transaction meeting the requirements of Rule 144A or (b) pursuant to another
exemption from the registration requirements under the Securities Act which is
accompanied by an opinion of
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counsel regarding the availability of such exemption and (ii) in accordance with
all applicable securities laws of any state of the United States or any other
jurisdiction.
(g) Beneficial interests in the Restricted Global Note may be
transferred to a Person who takes delivery in the form of an interest in the
Regulation S Global Note, whether before or after the expiration of the
Restricted Period, only if the transferor first delivers to the Trustee a
written certificate to the effect that such transfer is being made in accordance
with Rule 903 or 904 of Regulation S or Rule 144 (if available) and that, if
such transfer occurs prior to the expiration of the Restricted Period, the
interest transferred will be held immediately thereafter through Euroclear or
CEDEL.
(h) Any beneficial interest in one of the Global Notes that is
transferred to a Person who takes delivery in the form of an interest in another
Global Note shall, upon transfer, cease to be an interest in such Global Note
and become an interest in such other Global Note and, accordingly, shall
thereafter be subject to all transfer restrictions and other procedures
applicable to beneficial interests in such other Global Note for as long as it
remains such an interest.
(i) The Holder of any Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture or the Notes.
Section 2.17. Special Transfer Provisions.
(a) Transfers to Non-QIB Institutional Accredited Investors and
Non-U.S. Persons. The following provisions shall apply with respect to the
registration of any proposed transfer of a Note constituting a Restricted Note
to any Institutional Accredited Investor which is not a QIB or to any Non-U.S.
Person:
(i) the Registrar shall register the transfer of any Note
constituting a Restricted Note, whether or not such Note bears the
Private Placement Legend, if (x) the requested transfer is after
November 12, 1999 or such other date as such Note shall be freely
transferable under Rule 144 as certified in an Officers' Certificate or
(y) (1) in the case of a transfer to an Institutional Accredited
Investor which is not a QIB (excluding Non-U.S. Persons), the proposed
transferee has delivered to the Registrar a
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certificate substantially in the form of Exhibit E hereto or (2) in the
case of a transfer to a Non-U.S. Person (including a QIB), the proposed
transferor has delivered to the Registrar a certificate substantially in
the form of Exhibit F hereto; provided that in the case of a transfer of
a Note bearing the Private Placement Legend for a Note not bearing the
Private Placement Legend, the Registrar has received an Officers'
Certificate authorizing such transfer; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in a Global Note, upon receipt by the Registrar of
(x) the certificate, if any, required by paragraph (i) above and (y)
instructions given in accordance with the Depository's and the
Registrar's procedures,
whereupon (a) the Registrar shall reflect on its books and records the date and
(if the transfer does not involve a transfer of outstanding Physical Notes) a
decrease in the principal amount of a Global Note in an amount equal to the
principal amount of the beneficial interest in a Global Note to be transferred,
and (b) the Registrar shall reflect on its books and records the date and an
increase in the principal amount of a Global Note in an amount equal to the
principal amount of the beneficial interest in the Global Note transferred or
the Issuers shall execute and the Trustee shall authenticate and make available
for delivery one or more Physical Notes of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed registration of transfer of a Note
constituting a Restricted Note to a QIB (excluding transfers to Non-U.S.
Persons):
(i) the Registrar shall register the transfer if such transfer
is being made by a proposed transferor who has checked the box provided
for on such Holder's Note stating, or has otherwise advised the Issuers
and the Registrar in writing, that the sale has been made in compliance
with the provisions of Rule 144A to a transferee who has signed the
certification provided for on such Holder's Note stating, or has
otherwise advised the Issuers and the Registrar in writing, that it is
purchasing the Note for its own account or an account with respect to
which it exercises sole investment discretion and that it and any such
account is a QIB within the meaning of Rule 144A, and is aware that the
sale to it is being made in reliance on
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Rule 144A and acknowledges that it has received such information
regarding the Issuers as it has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon its foregoing representations in order to
claim the exemption from registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the
Notes to be transferred consist of Physical Notes which after transfer
are to be evidenced by an interest in the Restricted Global Note, upon
receipt by the Registrar of instructions given in accordance with the
Depository's and the Registrar's procedures, the Registrar shall reflect
on its books and records the date and an increase in the principal
amount of the Restricted Global Note in an amount equal to the principal
amount of the Physical Notes to be transferred, and the Trustee shall
cancel the Physical Notes so transferred.
(c) Private Placement Legend. Upon the registration of transfer,
exchange or replacement of Notes not bearing the Private Placement Legend, the
Registrar shall deliver Notes that do not bear the Private Placement Legend.
Upon the registration of transfer, exchange or replacement of Notes bearing the
Private Placement Legend, the Registrar shall deliver only Notes that bear the
Private Placement Legend unless (i) it has received the Officers' Certificate
required by paragraph (a)(i)(x) of this Section 2.17, (ii) there is delivered to
the Registrar an Opinion of Counsel reasonably satisfactory to the Issuers to
the effect that neither such legend nor the related restrictions on transfer are
required in order to maintain compliance with the provisions of the Securities
Act or (iii) such Note has been sold pursuant to an effective registration
statement under the Securities Act and the Registrar has received an Officers'
Certificate from the Issuers to such effect.
(d) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain for a period of two years copies of
all letters, notices and other written communications received pursuant to
Section 2.16 or this Section 2.17. The Issuers shall have the right to inspect
and make copies of all such letters, notices or other written communications at
any
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reasonable time upon the giving of reasonable notice to the Registrar.
Section 2.18. Computation of Interest.
Interest on the Notes shall be computed on the basis of a 360-day
year of twelve 30-day months.
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee.
If the Issuers elect to redeem Notes pursuant to paragraph 6 of
the Notes, at least 45 days prior to the Redemption Date or during such other
period as the Trustee may agree to (which agreement shall not unreasonably be
withheld) the Issuers shall notify the Trustee in writing of the Redemption
Date, the principal amount of Notes to be redeemed and the redemption price, and
deliver to the Trustee an Officers' Certificate stating that such redemption
will comply with the conditions contained in paragraph 6 of the Notes, as
appropriate.
Section 3.02. Selection by Trustee of Notes to Be Redeemed.
In the event that fewer than all of the Notes are to be redeemed,
the Trustee shall select the Notes to be redeemed, if the Notes are listed on a
national securities exchange, in accordance with the rules of such exchange or,
if the Notes are not so listed, either on a pro rata basis or by lot, or such
other method as it shall deem fair and equitable; provided, however, that the
Issuers shall have previously notified the Trustee in writing of any such
exchange on which the Notes are listed; and provided, further, that if a partial
redemption is made with the proceeds of a Public Equity Offering, selection of
the Notes or portion thereof for redemption shall be made by the Trustee on a
pro rata basis, unless such a method is prohibited. The Trustee shall promptly
notify the Issuers of the Notes selected for redemption and, in the case of any
Notes selected for partial redemption, the principal amount thereof to be
redeemed. The Trustee may select for redemption portions of the principal of the
Notes that have denominations larger than $1,000. Notes and portions thereof the
Trustee selects shall be redeemed in amounts of $1,000 or whole multiples of
$1,000.
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For all purposes of this Indenture unless the context otherwise requires,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
Section 3.03. Notice of Redemption.
At least 30 days, and no more than 60 days, before a Redemption
Date, the Issuers shall mail, or cause to be mailed, a notice of redemption by
first-class mail to each Holder of Notes to be redeemed at his or her last
address as the same appears on the registry books maintained by the Registrar
pursuant to Section 2.03 hereof.
The notice shall identify the Notes to be redeemed (including the
CUSIP numbers thereof) and shall state:
(1) the Redemption Date and the amount of premium and accrued
interest to be paid;
(2) the redemption price and the amount of premium and accrued
interest to be paid;
(3) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the
Redemption Date and upon surrender of such Note, a new Note or Notes in
principal amount equal to the unredeemed portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(6) that unless the Issuers default in making the redemption
payment, interest on Notes called for redemption ceases to accrue on and
after the Redemption Date;
(7) the provision of paragraph 6 of the Notes pursuant to which
the Notes called for redemption are being redeemed; and
(8) the aggregate principal amount of Notes that are being
redeemed.
At the Issuers' written request made at least five Business Days
prior to the date on which notice is to be given,
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the Trustee shall give the notice of redemption in the Issuers' name and at the
Issuers' sole expense.
Section 3.04. Effect of Notice of Redemption.
Once the notice of redemption described in Section 3.03 is
mailed, Notes called for redemption become due and payable on the Redemption
Date and at the redemption price, including any premium, plus interest accrued
to the Redemption Date. Upon surrender to the Paying Agent, such Notes shall be
paid at the redemption price, including any premium, plus interest accrued to
the Redemption Date; provided that if the Redemption Date is after a regular
record date and on or prior to the Interest Payment Date, the accrued interest
shall be payable to the Holder of the redeemed Notes registered on the relevant
record date; and provided, further, that if a Redemption Date is a Legal
Holiday, payment shall be made on the next succeeding Business Day and no
interest shall accrue for the period from such Redemption Date to such
succeeding Business Day.
Section 3.05. Deposit of Redemption Price.
On or prior to 10:00 A.M., New York City time, on each Redemption
Date, the Issuers shall deposit with the Paying Agent in immediately available
funds money sufficient to pay the redemption price of and accrued interest on
all Notes to be redeemed on that date other than Notes or portions thereof
called for redemption on that date which have been delivered by the Issuers to
the Trustee for cancellation.
On and after any Redemption Date, if money sufficient to pay the
redemption price of and accrued interest on Notes called for redemption shall
have been made available in accordance with the preceding paragraph, the Notes
called for redemption will cease to accrue interest and the only right of the
Holders of such Notes will be to receive payment of the redemption price of and,
subject to the first proviso in Section 3.04, accrued and unpaid interest on
such Notes to the Redemption Date. If any Note surrendered for redemption shall
not be so paid, interest will be paid, from the Redemption Date until such
redemption payment is made, on the unpaid principal of the Note and any interest
not paid on such unpaid principal, in each case, at the rate and in the manner
provided in the Notes.
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Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Trustee
shall authenticate for a Holder a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
The Issuers shall pay the principal of and interest (including
all Additional Interest as provided in the Registration Rights Agreement) on the
Notes on the dates and in the manner provided in the Notes and this Indenture.
An installment of principal or interest shall be considered paid on the date it
is due if the Trustee or Paying Agent holds on that date money designated for
and sufficient to pay such installment.
The Issuers shall pay interest on overdue principal (including
post-petition interest in a proceeding under any Bankruptcy Law), and overdue
interest, to the extent lawful, at the rate specified in the Notes.
Section 4.02. SEC Reports.
(a) The Issuers will file with the SEC all information, documents
and reports to be filed with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act, in the case of the Company, whether or not the Company is required
to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act, and in
the case of Capital, only to the extent subject to such filing requirements. The
Issuers (at their own expense) will file with the Trustee within 15 days after
they file them with the SEC, copies of the annual reports and of the
information, documents and other reports (or copies of such portions of any of
the foregoing as the SEC may by rules and regulations prescribe) which the
Issuers file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act.
Upon qualification of this Indenture under the TIA, the Issuers shall also
comply with the provisions of TIA Section 314(a). Delivery of such reports,
information and documents to the Trustee is for informational purposes only and
the Trustee's receipt of such shall not constitute
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constructive notice of any information contained therein or determinable from
information contained therein, including the Issuers' compliance with any of
their covenants hereunder (as to which the Trustee is entitled to rely
exclusively on Officers' Certificates).
(b) At the Issuers' expense, regardless of whether the Issuers
are required to furnish such reports and other information referred to in
paragraph (a) above to their equityholders pursuant to the Exchange Act, the
Company shall cause such reports and other information to be mailed to the
Holders at their addresses appearing in the register of Notes maintained by the
Registrar within 15 days after they file them with the SEC.
(c) The Issuers shall, upon request, provide to any Holder of
Notes or any prospective transferee of any such Holder any information
concerning the Issuers (including financial statements) necessary in order to
permit such Holder to sell or transfer Notes in compliance with Rule 144A under
the Securities Act; provided, however, that the Issuers shall not be required to
furnish such information in connection with any request made on or after the
date which is two years from the later of (i) the date such Note (or any
predecessor Note) was acquired from the Issuers or (ii) the date such Note (or
any predecessor Note) was last acquired from an "affiliate" of the Issuers
within the meaning of Rule 144 under the Securities Act.
Section 4.03. Waiver of Stay, Extension or Usury Laws.
The Issuers covenant (to the extent that they may lawfully do so)
that they shall not at any time insist upon, or plead (as a defense or
otherwise) or in any manner whatsoever claim or take the benefit or advantage
of, any stay or extension law or any usury law or other law which would prohibit
or forgive the Issuers from paying all or any portion of the principal of,
premium, if any, and/or interest on the Notes as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture; and (to the extent that they may
lawfully do so) the Issuers hereby expressly waive all benefit or advantage of
any such law, and covenant that they will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
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Section 4.04. Compliance Certificate.
(a) The Issuers shall deliver to the Trustee, within 120 days
after the end of each fiscal year and on or before 50 days after the end of the
first, second and third quarters of each fiscal year, an Officers' Certificate
(one of the signers on behalf of each of the Issuers of which shall be the
principal executive officer, principal financial officer or principal accounting
officer of such Issuer) stating that a review of the activities of the Issuers
and their Subsidiaries during such fiscal year or fiscal quarter, as the case
may be, has been made under the supervision of the signing Officers with a view
to determining whether the Issuers have kept, observed, performed and fulfilled
their obligations under this Indenture, and further stating, as to each such
Officer signing such certificate, that to the best of his or her knowledge the
Issuers have kept, observed, performed and fulfilled each and every covenant
contained in this Indenture and are not in default in the performance or
observance of any of the terms, provisions and conditions hereof (or, if a
Default or Event of Default shall have occurred, describing all such Defaults or
Events of Default of which he or she may have knowledge and what action they are
taking or propose to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action the Issuers are taking or propose to take with respect thereto.
(b) So long as not contrary to the then current recommendations
of the American Institute of Certified Public Accountants, the year-end
financial statements delivered pursuant to Section 4.02 above shall be
accompanied by a written statement of the Issuers' independent public
accountants (who shall be a firm of established national reputation) that in
making the examination necessary for certification of such financial statements
nothing has come to their attention which would lead them to believe that the
Issuers have violated any provisions of this Article 4 or Article 5 of this
Indenture or, if any such violation has occurred, specifying the nature and
period of existence thereof, it being understood that such accountants shall not
be liable directly or indirectly for any failure to obtain knowledge of any such
violation.
(c) The Issuers will, so long as any of the Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Of-
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ficers' Certificate specifying such Default or Event of Default and what action
the Issuers are taking or propose to take with respect thereto.
(d) Both the Company's and Capital's fiscal year currently ends
on December 31. The Company will provide notice to the Trustee of any change in
fiscal year.
Section 4.05. Taxes.
The Issuers shall, and shall cause each of their Subsidiaries to,
pay prior to delinquency all material taxes, assessments, and governmental
levies except as contested in good faith and by appropriate proceedings.
Section 4.06. Limitation on Additional Indebtedness.
The Issuers shall not, and shall not permit any Restricted
Subsidiary of the Issuers to, directly or indirectly, incur any Indebtedness
(including Acquired Indebtedness) other than Permitted Indebtedness.
Notwithstanding the foregoing, the Issuers and their Restricted
Subsidiaries may incur Indebtedness (including Acquired Indebtedness) if: (a)
after giving effect to the incurrence of such Indebtedness and the receipt and
application of the proceeds thereof, the ratio of the total Indebtedness of the
Issuers and their Restricted Subsidiaries (excluding any Indebtedness owed to a
Restricted Subsidiary by any other Restricted Subsidiary or the Issuers and any
Indebtedness owed to the Issuers by any Restricted Subsidiary) to the Issuers'
EBITDA (determined on a pro forma basis for the last four fiscal quarters of the
Issuers and their consolidated Restricted Subsidiaries for which financial
statements are available at the date of determination) is less than (i) 6.25 to
1 if the Indebtedness is incurred prior to November 15, 2000 and (ii) 6.0 to 1
if the Indebtedness is incurred on or after November 15, 2000; provided,
however, that if the Indebtedness which is the subject of a determination under
this provision is Acquired Indebtedness, or Indebtedness incurred in connection
with the simultaneous acquisition of any Person, business, property or assets,
then such ratio shall be determined by giving effect to (on a pro forma basis,
as if the transaction had occurred at the beginning of the four-quarter period)
both the incurrence or assumption of such Acquired Indebtedness or such other
Indebtedness by the Issuers or any Restricted Subsidiary (together with any
other Acquired Indebtedness or other Indebtedness incurred or assumed by the
Issuers and Restricted Sub-
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sidiaries in connection with acquisitions consummated by the Issuers during such
four-quarter period) and the inclusion in the Issuers' EBITDA of the EBITDA of
the acquired Person, business, property or assets and any pro forma expense and
cost reductions calculated on a basis consistent with Regulation S-X under the
Securities Act as in effect and as applied as of the Series A/B Issue Date
(together with the EBITDA of, and pro forma expense and cost reductions relating
to, any other Person, business, property or assets acquired by the Issuers or
any Restricted Subsidiary during such four-quarter period), and (b) no Default
or Event of Default shall have occurred and be continuing at the time or as a
consequence of the incurrence of such Indebtedness.
Section 4.07. Limitation on Preferred Stock of Restricted Subsidiaries.
The Issuers shall not permit any Restricted Subsidiary to issue
any Preferred Stock (except Preferred Stock to the Company or a Restricted
Subsidiary) or permit any Person (other than the Company or a Subsidiary) to
hold any such Preferred Stock unless the Company or such Restricted Subsidiary
would be entitled to incur or assume Indebtedness under the first paragraph of
Section 4.06 hereof in an aggregate principal amount equal to the aggregate
liquidation value of the Preferred Stock to be issued.
Section 4.08. Limitation on Capital Stock of Subsidiaries.
The Issuers shall not (i) sell, pledge, hypothecate or otherwise
convey or dispose of any Capital Stock of a Subsidiary (other than under the
Senior Credit Facility or under the terms of any Designated Senior Indebtedness)
or (ii) permit any of their Subsidiaries to issue any Capital Stock, other than
to the Issuers or a Wholly-Owned Subsidiary of the Company. The foregoing
restrictions shall not apply to an Asset Sale made in compliance with Section
4.10 hereof or the issuance of Preferred Stock in compliance with Section 4.07
hereof. In no event will the Company sell, pledge, hypothecate or otherwise
convey or dispose of any Capital Stock of Capital or will Capital issue any
Capital Stock.
Section 4.09. Limitation on Restricted Payments.
The Issuers will not make, and will not permit any of their
Restricted Subsidiaries to, directly or indirectly, make, any Restricted
Payment, unless:
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(a) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such Restricted
Payment;
(b) immediately after giving pro forma effect to such Restricted
Payment, the Issuers could incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under Section 4.06 hereof; and
(c) immediately after giving effect to such Restricted Payment,
the aggregate of all Restricted Payments declared or made after the Series A/B
Issue Date does not exceed the sum of (1) 50% of the cumulative Consolidated Net
Income of the Company subsequent to the Series A/B Issue Date (or minus 100% of
any cumulative deficit in Consolidated Net Income during such period) plus (2)
100% of the aggregate Net Proceeds and the fair market value of securities or
other property received by the Company from the issue or sale, after the Series
A/B Issue Date, of Capital Stock (other than Disqualified Capital Stock or
Capital Stock of the Company issued to any Subsidiary of the Company) of the
Company or any Indebtedness or other securities of the Company convertible into
or exercisable or exchangeable for Capital Stock (other than Disqualified
Capital Stock) of the Company which has been so converted or exercised or
exchanged, as the case may be, plus (3) without duplication of any amounts
included in clauses (1) and (2) above, 100% of the aggregate net proceeds of any
equity contribution received by the Company from a holder of the Company's
Capital Stock plus (4) $5,000,000. For purposes of determining under this clause
(c) the amount expended for Restricted Payments, cash distributed shall be
valued at the face amount thereof and property other than cash shall be valued
at its fair market value determined, in good faith, by the Board of Directors of
the Company.
The provisions of this Section 4.09 shall not prohibit: (i) the
payment of any distribution within 60 days after the date of declaration
thereof, if at such date of declaration such payment would comply with the
provisions of this Indenture; (ii) the retirement of any shares of Capital Stock
of the Company or subordinated Indebtedness by conversion into, or by or in
exchange for, shares of Capital Stock (other than Disqualified Capital Stock),
or out of, the Net Proceeds of the substantially concurrent sale (other than to
a Subsidiary of the Company) of other shares of Capital Stock of the Company
(other than Disqualified Capital Stock); (iii) the redemption or retirement of
Indebtedness of the Issuers subordinated to the Notes in exchange for, by
conversion into, or out of the
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Net Proceeds of, a substantially concurrent sale or incurrence of Indebtedness
(other than any Indebtedness owed to a Subsidiary) of the Issuers that is
contractually subordinate in right of payment to the Notes to at least the same
extent as the subordinated Indebtedness being redeemed or retired; (iv) the
retirement of any shares of Disqualified Capital Stock by conversion into, or by
exchange for, shares of Disqualified Capital Stock, or out of the Net Proceeds
of the substantially concurrent sale (other than to a Subsidiary of the Company)
of other shares of Disqualified Capital Stock; (v) so long as no Default or
Event of Default shall have occurred and be continuing at the time of or
immediately after giving effect to such payment, the purchase, redemption or
other acquisition for value of shares of Capital Stock (other than Disqualified
Capital Stock) or options on such shares held by the Issuers' or their
Subsidiaries' officers or employees or former officers or employees (or their
estates or beneficiaries under their estates) upon the death, disability,
retirement or termination of employment of such current or former officers or
employees pursuant to the terms of an employee benefit plan or any other
agreement pursuant to which such shares of Capital Stock or options were issued
or pursuant to a severance, buy-sale or right of first refusal agreement with
such current or former officer or employee and payments of principal and
interest on the Management Subordinated Notes in accordance with the terms
thereof; provided that the aggregate cash consideration paid, or distributions
or payments made, in compliance with this clause (v) shall not exceed $2,000,000
in any fiscal year or $10,000,000 in the aggregate from and after the Series A/B
Issue Date; (vi) the payment of management fees under the management agreement
with THL and its Affiliates, successors and assigns that do not exceed $500,000
per year and the reimbursement of expenses pursuant thereto; and (vii)
distributions to Holdings solely for the purpose of enabling Holdings to pay
its, Capital's or TCC's reasonable operating and administrative expenses
(including professional fees and expenses), the amount of which in any fiscal
year will not exceed 0.2% of the Company's consolidated net revenues for such
fiscal year. Notwithstanding the foregoing, the amount of any payments made in
reliance on clause (v) above shall reduce the amount otherwise available for
Restricted Payments pursuant to subparagraph (c) above.
Not later than the date of making any Restricted Payment, the
Issuers shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 4.09 were computed, which calculations
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may be based upon the Issuers' latest available financial statements, and, to
the extent that the absence of a Default or an Event of Default is a condition
to the making of such Restricted Payment, that no Default or Event of Default
exists and is continuing and no Default or Event of Default will occur
immediately after giving effect to any Restricted Payments.
Section 4.10. Limitation on Certain Asset Sales.
(a) The Issuers shall not, and shall not permit any of their
Restricted Subsidiaries to, consummate an Asset Sale unless (i) such Issuer or
such Restricted Subsidiary, as the case may be, receives consideration at the
time of such sale or other disposition at least equal to the fair market value
thereof (as determined in good faith by the Board of Directors of the Company,
and evidenced by a Board Resolution); (ii) not less than 75% of the
consideration received by the Issuers or their Subsidiaries, as the case may be,
is in the form of cash or Temporary Cash Investments other than in the case
where the Company is undertaking a Permitted Asset Swap; and (iii) the Asset
Sale Proceeds received by such Issuer or such Restricted Subsidiary are applied
(a) first, to the extent the Company elects, or is required, to prepay, repay or
purchase debt or to reduce an unused commitment to lend under any then existing
Senior Indebtedness of the Company or any Restricted Subsidiary within 180 days
following the receipt of the Asset Sale Proceeds from any Asset Sale, but only
to the extent that any such repayment shall result in a permanent reduction of
the commitments thereunder in an amount equal to the principal amount so repaid;
(b) second, to the extent of the balance of Asset Sale Proceeds after
application as described above, to the extent the Company or a Restricted
Subsidiary elects, to an investment in assets (including Capital Stock or other
securities purchased in connection with the acquisition of Capital Stock or
property of another Person) used or useful in businesses similar or ancillary to
the business of the Company or such Restricted Subsidiary as conducted at the
time of such Asset Sale, provided that such investment occurs or the Issuers or
a Restricted Subsidiary enter into contractual commitments to make such
investment, subject only to customary conditions (other than the obtaining of
financing), on or prior to the 181st day following receipt of such Asset Sale
Proceeds (the "Reinvestment Date") and Asset Sale Proceeds contractually
committed are so applied within 270 days following the receipt of such Asset
Sale Proceeds; and (c) third, if, on the Reinvestment Date with respect to any
Asset Sale, the Available Asset Sale Proceeds exceed $10,000,000, the Issuers
shall apply an amount equal to such Available Asset Sale Proceeds, first, to
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an offer to repurchase the Series A/B Notes, if any are outstanding, in
accordance with the terms of the Series A/B Indenture (as in effect on the Issue
Date) (the "Series A/B Asset Sale Offer") and second, in event that any
Available Asset Sale Proceeds are not applied to a Series A/B Asset Sale Offer,
to an offer to repurchase the Notes, at a purchase price in cash equal to 100%
of the principal amount thereof plus accrued and unpaid interest, if any, to the
date of repurchase (an "Excess Proceeds Offer").
(b) If the Issuers are required to make an Excess Proceeds Offer,
the Issuers shall mail, within 30 days following the Reinvestment Date, a notice
to the Holders stating, among other things: (1) that such Holders have the right
to require the Issuers to apply the Available Asset Sale Proceeds to repurchase
such Notes at a purchase price in cash equal to 100% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase; (2)
the purchase date (the "Purchase Date"), which shall be no earlier than 30 days
and not later than 60 days from the date such notice is mailed; (3) the
instructions, determined by the Issuers, that each Holder must follow in order
to have such Notes repurchased; and (4) the calculations used in determining the
amount of Available Asset Sale Proceeds to be applied to the repurchase of such
Notes. The Excess Proceeds Offer shall remain open for a period of 20 Business
Days following its commencement (the "Offer Period"). The notice, which shall
govern the terms of the Excess Proceeds Offer, shall state:
(1) that the Excess Proceeds Offer is being made pursuant to
this Section 4.10 and the length of time the Excess Proceeds Offer will
remain open;
(2) the purchase price and the Purchase Date;
(3) that any Note not tendered or accepted for payment will
continue to accrue interest;
(4) that any Note accepted for payment pursuant to the Excess
Proceeds Offer shall cease to accrue interest on and after the Purchase
Date and the deposit of the purchase price with the Trustee;
(5) that Holders electing to have a Note purchased pursuant to
any Excess Proceeds Offer will be required to surrender the Note, with
the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Note completed, to the Issuers, a depositary, if appointed by the
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Issuers, or a Paying Agent at the address specified in the notice prior
to the close of business on the Business Day preceding the Purchase
Date;
(6) that Holders will be entitled to withdraw their election if
the Issuers, depositary or Paying Agent, as the case may be, receives,
not later than the expiration of the Offer Period, a facsimile
transmission or letter setting forth the name of the Holder, the
principal amount of the Note the Holder delivered for purchase and a
statement that such Holder is withdrawing its election to have the Note
purchased;
(7) that, if the aggregate principal amount of Notes surrendered
by Holders exceeds the Available Asset Sale Proceeds, the Issuers shall
select the Notes to be purchased on a pro rata basis (with such
adjustments as may be deemed appropriate by the Issuers so that only
Notes in denominations of $1,000, or integral multiples thereof, shall
be purchased); and
(8) that Holders whose Notes were purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered.
On or before the Purchase Date, the Issuers shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, Notes
or portions thereof tendered pursuant to the Excess Proceeds Offer, deposit with
the Paying Agent U.S. legal tender sufficient to pay the purchase price plus
accrued interest, if any, on the Notes to be purchased and deliver to the
Trustee an Officers' Certificate stating that such Notes or portions thereof
were accepted for payment by the Issuers in accordance with the terms of this
Section 4.10. The Paying Agent shall promptly (but in any case not later than 5
days after the Purchase Date) mail or deliver to each tendering Holder an amount
equal to the purchase price of the Note tendered by such Holder and accepted by
the Issuers for purchase, and the Issuers shall promptly issue a new Note, the
Guarantors shall endorse the guarantee thereon and the Trustee shall
authenticate and mail or make available for delivery such new Note to such
Holder equal in principal amount to any unpurchased portion of the Note
surrendered. Any Note not so accepted shall be promptly mailed or delivered by
the Issuers to the Holder thereof. The Issuers will publicly announce the
results of the Excess Proceeds Offer on the Purchase Date by sending a press
release to the Dow Jones News Service or similar business news service in the
United States. If an Excess
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Proceeds Offer is not fully subscribed, the Issuers may retain that portion of
the Available Asset Sale Proceeds not required to repurchase Notes and use such
portion for general corporate purposes, and such retained portion shall not be
considered in the calculation of "Available Asset Sale Proceeds" with respect to
any subsequent offer to purchase Notes.
Section 4.11. Limitation on Transactions with Affiliates.
(a) The Issuers shall not, and shall not permit any of their
Restricted Subsidiaries to, directly or indirectly, enter into or suffer to
exist any transaction or series of related transactions (including, without
limitation, the sale, purchase, exchange or lease of assets, property or
services) with any Affiliate (including entities in which the Issuers or any of
its Restricted Subsidiaries own a minority interest)(an "Affiliate Transaction")
or extend, renew, waive or otherwise modify the terms of any Affiliate
Transaction entered into prior to the Issue Date if such extension, renewal,
waiver or other modification is more disadvantageous to the Holders in any
material respect than the original agreement as in effect on the Issue Date
unless (i) such Affiliate Transaction is between or among the Issuers and/or
their Wholly-Owned Subsidiaries and/or Holdings (so long as Holdings owns at
least 99% of the voting and economic power of the Common Stock of the Company);
or (ii) the terms of such Affiliate Transaction are fair and reasonable to the
Issuers or such Restricted Subsidiary, as the case may be, and the terms of such
Affiliate Transaction are at least as favorable as the terms which could be
obtained by the Issuers or such Restricted Subsidiary, as the case may be, in a
comparable transaction made on an arm's-length basis between unaffiliated
parties. In any Affiliate Transaction involving an amount or having a value in
excess of $1,000,000 which is not permitted under clause (i) above, the Issuers
must obtain a resolution of the Board of Directors of the Company certifying
that such Affiliate Transaction complies with clause (ii) above. In any
Affiliate Transaction with a value in excess of $5,000,000 which is not
permitted under clause (i) above (other than any sale by the Company of its
Capital Stock that is not Disqualified Capital Stock), the Issuers must obtain a
written opinion as to the fairness of such a transaction from an independent
investment banking firm.
(b) The limitations set forth in Section 4.11(a) shall not apply
to (i) any Restricted Payment that is not prohibited by Section 4.09 hereof,
(ii) any transaction pursuant to an agreement, arrangement or understanding
existing on the Series A/B Issue Date and described in Schedule 4.11 hereto,
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(iii) any transaction, approved by the Board of Directors of the Company or
Capital, with an officer or director of the Issuers or of any Subsidiary in his
or her capacity as officer or director entered into in the ordinary course of
business or (iv) transactions permitted by Section 5.01 hereof.
Section 4.12. Limitations on Liens.
The Issuers shall not, and shall not permit any of their
Restricted Subsidiaries to, create, incur or otherwise cause or suffer to exist
or become effective any Liens of any kind (other than Permitted Liens) upon any
property or asset of the Issuers or any Restricted Subsidiary or any shares of
stock (other than under the Senior Credit Facility) or debt of any Restricted
Subsidiary which owns property or assets, now owned or hereafter acquired,
unless (i) if such Lien secures Indebtedness which is pari passu with the Notes,
then the Notes are secured on an equal and ratable basis with the obligations so
secured until such time as such obligation is no longer secured by a Lien or
(ii) if such Lien secures Indebtedness which is subordinated to the Notes, any
such Lien shall be subordinated to the Lien granted to the Holders of the Notes
to the same extent as such subordinated Indebtedness is subordinated to the
Notes.
Section 4.13. Limitations on Investments.
The Issuers shall not, and shall not permit any of their
Restricted Subsidiaries to, make any Investment other than (i) a Permitted
Investment or (ii) an Investment that is made as a Restricted Payment in
compliance with Section 4.09 hereof, after the Issue Date.
Section 4.14. Limitation on Creation of Subsidiaries.
The Issuers shall not create or acquire, nor permit any of their
Restricted Subsidiaries to create or acquire, any Subsidiary other than (i) a
Restricted Subsidiary that is acquired or created in connection with the
acquisition by the Company of a business primarily engaged in, or an asset
primarily utilized in, providing directory services and/or classified
advertising, or (ii) an Unrestricted Subsidiary; provided, however, that each
Restricted Subsidiary acquired or created pursuant to clause (i) shall at the
time it has either assets or stockholder's equity in excess of $100,000 execute
a guarantee in the form attached as Exhibit G to this Indenture and reasonably
satisfactory in form and substance to the Trustee (and with such documentation
relating thereto as the Trustee shall
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require, including, without limitation, a supplement or amendment to this
Indenture and Opinions of Counsel as to the enforceability of such guarantee),
pursuant to which such Restricted Subsidiary shall become a Guarantor.
Section 4.15. Limitation on Other Senior Subordinated Debt.
The Issuers shall not, and shall not permit any of their
Restricted Subsidiaries to, directly or indirectly, incur, contingently or
otherwise, any Indebtedness (other than the Notes and the Guarantees, as the
case may be) that is both (i) subordinate in right of payment to any Senior
Indebtedness of the Issuers or their Restricted Subsidiaries, as the case may
be, and (ii) senior in right of payment to the Notes and the Guarantees, as the
case may be. For purposes of this Section 4.15, Indebtedness is deemed to be
senior in right of payment to the Notes and the Guarantees, as the case may be,
if it is not explicitly subordinate in right of payment to Senior Indebtedness
at least to the same extent as the Notes and the Guarantees, as the case may be,
are subordinate to Senior Indebtedness.
Section 4.16. Limitation on Sale and Lease-Back Transactions.
The Issuers shall not, and shall not permit any Restricted
Subsidiary to, enter into any Sale and Lease-Back Transaction unless (i) the
consideration received in such Sale and Lease-Back Transaction is at least equal
to the fair market value of the property sold, as determined, in good faith, by
the Board of Directors of the Company and (ii) the Issuers could incur the
Attributable Indebtedness in respect of such Sale and Lease-Back Transaction in
compliance with Section 4.06.
Section 4.17. Payments for Consent.
Neither the Issuers nor any of their Subsidiaries shall, directly
or indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of this
Indenture or the Notes unless such consideration is offered to be paid or agreed
to be paid to all Holders of the Notes which so consent, waive or agree to amend
in the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
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Section 4.18. Legal Existence.
Subject to Article 5 hereof, the Issuers shall do or cause to be
done all things necessary to preserve and keep in full force and effect (i)
their legal existence, and the corporate, partnership or other existence of each
Restricted Subsidiary, in accordance with the respective organizational
documents (as the same may be amended from time to time) of each Restricted
Subsidiary and the rights (charter and statutory), licenses and franchises of
the Issuers and their Restricted Subsidiaries; provided, however, that the
Issuers shall not be required to preserve any such right, license or franchise,
or the corporate, partnership or other existence of any of their Restricted
Subsidiaries if the Board of Directors of the Company shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Issuers and their Restricted Subsidiaries, taken as a whole, and that the
loss thereof is not adverse in any material respect to the Holders.
Section 4.19. Change of Control.
(a) Within 20 days of the occurrence of a Change of Control, the
Company shall notify the Trustee in writing of such occurrence and shall make an
offer to purchase (the "Change of Control Offer") the outstanding Notes at a
purchase price equal to 101% of the principal amount thereof plus any accrued
and unpaid interest thereon to the Change of Control Payment Date (such purchase
price being hereinafter referred to as the "Change of Control Purchase Price")
in accordance with the procedures set forth in this Section 4.19.
If the Senior Credit Facility is in effect, or any amounts are
owing thereunder or in respect thereof, at the time of the occurrence of a
Change of Control, prior to the mailing of the notice to Holders described in
paragraph (b) below, but in any event within 20 days following any Change of
Control, the Issuers on a joint and several basis covenant to (i) repay in full
all obligations under or in respect of the Senior Credit Facility or offer to
repay in full all obligations under or in respect of the Senior Credit Facility
and repay the obligations under or in respect of the Senior Credit Facility of
each lender who has accepted such offer or (ii) obtain the requisite consent
under the Senior Credit Facility to permit the repurchase of the Notes pursuant
to this Section 4.19. The Issuers must first comply with the covenant described
in the preceding sentence before they shall be required to purchase Notes in the
event of a Change of Control; provided that the Issuers'
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failure to comply with the covenant described in the preceding sentence
constitutes an Event of Default described in clause (3) under Section 6.01
hereof if not cured within 60 days after the notice required by such clause.
(b) Within 20 days of the occurrence of a Change of Control, the
Company also shall (i) cause a notice of the Change of Control Offer to be sent
at least once to the Dow Jones News Service or similar business news service in
the United States and (ii) send by first-class mail, postage prepaid, to the
Trustee and to each Holder of the Notes, at the address appearing in the
register maintained by the Registrar of the Notes, a notice stating:
(i) that the Change of Control Offer is being made pursuant to
this Section 4.19 and that all Notes tendered will be accepted for
payment, and otherwise subject to the terms and conditions set forth
herein;
(ii) the Change of Control Purchase Price and the purchase date
(which shall be a Business Day no earlier than 20 Business Days from the
date such notice is mailed (the "Change of Control Payment Date"));
(iii) that any Note not tendered will remain outstanding and
continue to accrue interest;
(iv) that, unless the Issuers default in the payment of the
Change of Control Purchase Price, any Notes accepted for payment
pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Payment Date;
(v) that Holders accepting the offer to have their Notes
purchased pursuant to a Change of Control Offer will be required to
surrender the Notes, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Note completed, to the Paying Agent at
the address specified in the notice prior to the close of business on
the Business Day preceding the Change of Control Payment Date;
(vi) that Holders will be entitled to withdraw their acceptance
if the Paying Agent receives, not later than the close of business on
the third Business Day preceding the Change of Control Payment Date, a
telegram, telex, facsimile transmission or letter setting forth the name
of the Holder, the principal amount of the Notes delivered
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for purchase, and a statement that such Holder is withdrawing his
election to have such Notes purchased;
(vii) that Holders whose Notes are being purchased only in part
will be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered, provided that each Note purchased and
each such new Note issued shall be in an original principal amount in
denominations of $1,000 and integral multiples thereof;
(viii) any other procedures that a Holder must follow to accept
a Change of Control Offer or effect withdrawal of such acceptance; and
(ix) the name and address of the Paying Agent.
On the Change of Control Payment Date, the Issuers shall, to the
extent lawful, (i) accept for payment Notes or portions thereof tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent
money sufficient to pay the purchase price of all Notes or portions thereof so
tendered and (iii) deliver or cause to be delivered to the Trustee Notes so
accepted together with an Officers' Certificate stating the Notes or portions
thereof tendered to the Issuers. The Paying Agent shall promptly mail to each
Holder of Notes so accepted payment in an amount equal to the purchase price for
such Notes, and the Issuers shall execute and issue, the Guarantors shall
endorse the Guarantee and the Trustee shall promptly authenticate and mail to
such Holder, a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered; provided that each such new Note shall be issued in an
original principal amount in denominations of $1,000 and integral multiples
thereof.
(c) (i) If either Issuer or any Subsidiary thereof has issued any
outstanding (A) Indebtedness that is subordinated in right of payment to the
Notes or (B) Preferred Stock, and such Issuer or Subsidiary is required to make
a change of control offer or to make a distribution with respect to such
subordinated Indebtedness or Preferred Stock in the event of a change of
control, the Issuers shall not consummate any such offer or distribution with
respect to such subordinated Indebtedness or Preferred Stock until such time as
the Issuers shall have paid the Change of Control Purchase Price in full to the
Holders of Notes that have accepted the Issuers' Change of Control Offer and
shall otherwise have consummated the Change of Control Offer made to Holders of
the Notes and (ii) the Issuers will not issue Indebtedness that is subordinated
in right of
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payment to the Notes or Preferred Stock with change of control provisions
requiring the payment of such Indebtedness or Preferred Stock prior to the
payment of the Notes in the event of a Change in Control under this Indenture.
In the event that a Change of Control occurs and the Holders of
Notes exercise their right to require the Issuers to purchase Notes, if such
purchase constitutes a "tender offer" for purposes of Rule 14e-1 under the
Exchange Act at that time, the Issuers will comply with the requirements of Rule
14e-1 as then in effect with respect to such repurchase.
Section 4.20. Maintenance of Office or Agency.
The Issuers shall maintain an office or agency where Notes may be
surrendered for registration of transfer or exchange or for presentation for
payment and where notices and demands to or upon the Issuers in respect of the
Notes and this Indenture may be served. The Issuers shall give prompt written
notice to the Trustee of the location, and any change in the location, of such
office or agency. If at any time the Issuers shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office of the Trustee as set forth in Section
12.02.
The Issuers may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations.
The Issuers shall give prompt written notice to the Trustee of such designation
or rescission and of any change in the location of any such other office or
agency.
The Issuers hereby initially designate the Corporate Trust Office
of the Trustee as such office of the Issuers.
Section 4.21. Maintenance of Properties; Insurance; Books and Records;
Compliance with Law.
(a) The Issuers shall, and shall cause each of their Restricted
Subsidiaries to, at all times cause all properties used or useful in the conduct
of their business to be maintained and kept in good condition, repair and
working order (reasonable wear and tear excepted) and supplied with all
necessary equipment, and shall cause to be made all necessary re-
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pairs, renewals, replacements, betterments and improvements thereto.
(b) The Issuers shall, and shall cause each of their Restricted
Subsidiaries to, maintain insurance (which may include self-insurance) in such
amounts and covering such risks as are usually and customarily carried with
respect to similar facilities according to their respective locations.
(c) The Issuers shall, and shall cause each of their Subsidiaries
to, keep proper books of record and account, in which full and correct entries
shall be made of all financial transactions and the assets and business of the
Issuers and each Subsidiary of the Issuers, in accordance with GAAP consistently
applied to the Issuers and their Subsidiaries taken as a whole.
(d) The Issuers shall and shall cause each of their Subsidiaries
to comply with all statutes, laws, ordinances or government rules and
regulations to which they are subject, non-compliance with which would
materially adversely affect the business, earnings, assets or financial
condition of the Issuers and their Subsidiaries taken as a whole.
Section 4.22. Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries.
The Issuers shall not, and shall not permit any of their
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Issuers to (a)(i) pay dividends or
make any other distributions to the Issuers or any Restricted Subsidiary of the
Issuers (A) on its Capital Stock or (B) with respect to any other interest or
participation in, or measured by, its profits or (ii) repay any Indebtedness or
any other obligation owed to the Issuers or any Restricted Subsidiary of the
Issuers, (b) make loans or advances or capital contributions to the Issuers or
any of their Restricted Subsidiaries or (c) transfer any of its properties or
assets to the Issuers or any of their Restricted Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (i) encumbrances or
restrictions existing on the Series A/B Issue Date to the extent and in the
manner such encumbrances and restrictions were in effect on the Series A/B Issue
Date (including without limitation pursuant to the Senior Credit Facility or
under the Series A/B Notes or the Discount Notes), (ii) the Indenture, the
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Notes and the Guarantees, (iii) applicable law, (iv) any instrument governing
Acquired Indebtedness, which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person, or the
property or assets of the Person (including any Subsidiary of the Person), so
acquired, (v) customary non-assignment provisions in leases or other agreements
entered in the ordinary course of business and consistent with past practices,
(vi) Refinancing Indebtedness; provided that such payment restrictions are no
more restrictive than those contained in the agreements governing the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded, (vii) customary restrictions in security agreements or mortgages
securing Indebtedness of the Issuers or a Restricted Subsidiary to the extent
such restrictions restrict the transfer of the property subject to such security
agreements and mortgages or (viii) customary restrictions with respect to a
Restricted Subsidiary of the Issuers pursuant to an agreement that has been
entered into for the sale or disposition of all or substantially all of the
Capital Stock or assets of such Restricted Subsidiary.
Section 4.23. Further Assurance to the Trustee.
The Issuers shall, upon the reasonable request of the Trustee,
execute and deliver such further instruments and do such further acts as may be
reasonably necessary or proper to carry out more effectively the provisions of
this Indenture.
Section 4.24. Limitation on Conduct of Business of Capital.
Except to the extent permitted under Article 5, Capital shall not
hold any operating assets or other properties or conduct any business other than
to serve as an Issuer and co-obligor with respect to the Notes and shall not own
any Capital Stock of any other Person.
ARTICLE 5
SUCCESSOR CORPORATION
Section 5.01. Limitation on Consolidation, Merger and Sale of Assets.
(a) Neither of the Issuers will, nor will they permit any
Guarantor to, consolidate with, merge with or into, or
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transfer all or substantially all of its assets (as an entirety or substantially
as an entirety in one transaction or a series of related transactions) to, any
Person unless (in the case of the Company or any Guarantor): (i) the Company or
such Guarantor, as the case may be, shall be the continuing Person, or the
Person (if other than the Company or such Guarantor) formed by such
consolidation or into which the Company or such Guarantor, as the case may be,
is merged or to which the properties and assets of the Company or such
Guarantor, as the case may be, are transferred shall be a corporation (or in the
case of the Company, a corporation or a limited partnership) organized and
existing under the laws of the United States or any State thereof or the
District of Columbia and shall expressly assume, in writing by a supplemental
indenture, executed and delivered to the Trustee, in form and substance
satisfactory to the Trustee, all of the obligations of the Company or such
Guarantor, as the case may be, under the Notes and this Indenture, and the
obligations under this Indenture shall remain in full force and effect; provided
that at any time the Company or its successor is a limited partnership there
shall be a co-issuer of the Notes that is a corporation; (ii) immediately before
and immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing; (iii) immediately after giving
effect to such transaction or series of transactions on a pro forma basis the
Consolidated Net Worth of the Company or the surviving entity as the case may be
is at least equal to the Consolidated Net Worth of the Company immediately
before such transaction or series of transactions; and (iv) immediately after
giving effect to such transaction on a pro forma basis the Company or such
Person could incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) pursuant to Section 4.06 hereof. Notwithstanding
anything in this Article 5 to the contrary, but subject to Section 4.19, (a) any
of the Company, Capital and Communications may merge with or into, or
consolidate with, another of them and subject only to compliance with clause (i)
of the immediately preceding sentence and (b) the Company may merge into,
consolidate with or transfer all or substantially all of its assets to another
entity, which entity shall have no significant assets (other than an ownership
interest in the Company) and no liabilities immediately prior to such
transaction, without regard to the requirements of clause (iv) of the
immediately preceding sentence.
(b) In connection with any consolidation, merger or transfer of
assets contemplated by this Section 5.01, the Issuers shall deliver, or cause to
be delivered, to the Trustee, in form and substance reasonably satisfactory to
the Trustee, an
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Officers' Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and the supplemental indenture in respect
thereto comply with this Section 5.01 and that all conditions precedent herein
provided for relating to such transaction or transactions have been complied
with.
Section 5.02. Successor Person Substituted.
Upon any consolidation or merger, or any transfer of all or
substantially all of the assets of the Company or any Guarantor in accordance
with Section 5.01 above, the successor corporation formed by such consolidation
or into which the Company is merged or to which such transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company or such Guarantor under this Indenture with the same effect as if
such successor corporation had been named as the Company or such Guarantor
herein, and thereafter the predecessor corporation shall be relieved of all
obligations and covenants under this Indenture and the Notes.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An "Event of Default" occurs if
(1) there is a default in the payment of any principal of, or
premium, if any, on the Notes when the same becomes due and payable
whether at maturity, upon acceleration, redemption or otherwise, whether
or not such payment is prohibited by the provisions of Article 11
hereof;
(2) there is a default in the payment of any interest on any
Note when the same becomes due and payable and the Default continues for
a period of 30 days, whether or not such payment is prohibited by the
provisions of Article 11 hereof;
(3) either of the Issuers or any Guarantor defaults in the
observance or performance of any other covenant in the Notes or this
Indenture for 60 days after written notice from the Trustee or the
Holders of not less than 25% in the aggregate principal amount of the
Notes then outstanding;
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(4) there is a default in the payment at final maturity of
principal in an aggregate amount of $5,000,000 or more with respect to
any Indebtedness of either Issuer or any Restricted Subsidiary thereof,
or there is an acceleration of any such Indebtedness aggregating
$5,000,000 or more which default shall not be cured, waived or postponed
pursuant to an agreement with the holders of such Indebtedness within 60
days after written notice by the Trustee or any Holder, or which
acceleration shall not be rescinded or annulled within 20 days after
written notice to the Issuers of such Default by the Trustee or any
Holder;
(5) the entry of a final judgment or judgments which can no
longer be appealed for the payment of money in excess of $5,000,000
against either of the Issuers or any Restricted Subsidiary thereof and
such judgment remains undischarged, for a period of 60 consecutive days
during which a stay of enforcement of such judgment shall not be in
effect;
(6) either of the Issuers or any Restricted Subsidiary pursuant
to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against
it in an involuntary case,
(C) consents to the appointment of a Custodian of it or
for all or substantially all of its property,
(D) makes a general assignment for the benefit of its
creditors, or
(E) generally is not paying its debts as they become
due;
(7) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against either of the Issuers or any
Restricted Subsidiary in an involuntary case,
(B) appoints a Custodian of either of the Issuers or any
Restricted Subsidiary or for all or sub-
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stantially all of the property of either of the Issuers or any
Restricted Subsidiary, or
(C) orders the liquidation of either of the Issuers or
any Restricted Subsidiary,
and the order or decree remains unstayed and in effect for
60 days; or
(8) any of the Guarantees ceases to be in full force and effect
or any of the Guarantees is declared to be null and void and
unenforceable or any of the Guarantees is found to be invalid or any of
the Guarantors denies in writing its liability under its Guarantee
(other than by reason of release of a Guarantor in accordance with the
terms of this Indenture).
The term "Bankruptcy Law" means Title 11, U.S. Code or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.
The Trustee may withhold notice to the Holders of the Notes of
any Default (except in payment of principal or premium, if any, or interest on
the Notes) if the Trustee considers it to be in the best interest of the Holders
of the Notes to do so. The Trustee shall not be charged with knowledge of any
Default, Event of Default, Change of Control or Asset Sale in payment of
Additional Interest unless written notice thereof shall have been given to a
Responsible Officer at the corporate trust office of the Trustee by the Issuers
or any other Person.
Section 6.02. Acceleration.
If an Event of Default (other than an Event of Default arising
under Section 6.01(6) or (7) with respect to either of the Issuers) occurs and
is continuing, the Trustee by notice to the Issuers, or the Holders of not less
than 25% in aggregate principal amount of the Notes then outstanding may by
written notice to the Issuers and the Trustee declare to be immediately due and
payable the entire principal amount of all the Notes then outstanding plus
accrued but unpaid interest to the date of acceleration and (i) such amounts
shall become immediately due and payable or (ii) if there are any amounts
outstanding under or in respect of the Senior Credit Facility, such amounts
shall become due and payable upon the first to occur of an acceleration of
amounts outstanding under or in respect of the Senior Credit Facility or five
Business Days after
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receipt by the Company and the Representative of notice of the acceleration of
the Notes; provided, however, that after such acceleration but before a judgment
or decree based on such acceleration is obtained by the Trustee, the Holders of
a majority in aggregate principal amount of the outstanding Notes may rescind
and annul such acceleration and its consequences if all existing Events of
Default, other than the nonpayment of accelerated principal, premium, if any, or
interest that has become due solely because of the acceleration, have been cured
or waived and if the rescission would not conflict with any judgment or decree.
No such rescission shall affect any subsequent Default or impair any right
consequent thereto. In case an Event of Default specified in Section 6.01(6) or
(7) with respect to either of the Issuers occurs, such principal, premium, if
any, and interest amount with respect to all of the Notes shall be due and
payable immediately without any declaration or other act on the part of the
Trustee or the Holders of the Notes.
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of, or premium, if any, and interest on the Notes or to
enforce the performance of any provision of the Notes or this Indenture and may
take any necessary action requested of it as Trustee to settle, compromise,
adjust or otherwise conclude any proceedings to which it is a party.
The Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Noteholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
Section 6.04. Waiver of Past Defaults and Events of Default.
Subject to Sections 6.02, 6.07 and 8.02 hereof, the Holders of a
majority in principal amount of the Notes then outstanding have the right to
waive any existing Default or Event of Default or compliance with any provision
of this Indenture or the Notes. Upon any such waiver, such Default shall cease
to exist, and any Event of Default arising therefrom
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shall be deemed to have been cured for every purpose of this Indenture; but no
such waiver shall extend to any subsequent or other Default or Event of Default
or impair any right consequent thereto.
Section 6.05. Control by Majority.
The Holders of a majority in principal amount of the Notes then
outstanding may direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on the Trustee by this Indenture. The Trustee, however, may refuse to
follow any direction that conflicts with law or this Indenture or that the
Trustee determines may be unduly prejudicial to the rights of another Noteholder
not taking part in such direction, and the Trustee shall have the right to
decline to follow any such direction if the Trustee, being advised by counsel,
determines that the action so directed may not lawfully be taken or if the
Trustee in good faith shall, by a Responsible Officer, determine that the
proceedings so directed may involve it in personal liability; provided that the
Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction.
Section 6.06. Limitation on Suits.
Subject to Section 6.07 below, a Noteholder may not institute any
proceeding or pursue any remedy with respect to this Indenture or the Notes
unless:
(1) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(2) the Holders of at least 25% in aggregate principal amount of
the Notes then outstanding make a written request to the Trustee to
pursue the remedy;
(3) such Holder or Holders offer and if requested provide to the
Trustee indemnity satisfactory to the Trustee against any loss,
liability or expense;
(4) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer, and, if requested provision,
of indemnity; and
(5) no direction inconsistent with such written request has been
given to the Trustee during such 60 day pe-
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riod by the Holders of a majority in aggregate principal amount of the
Notes then outstanding.
A Noteholder may not use this Indenture to prejudice the rights
of another Noteholder or to obtain a preference or priority over another
Noteholder.
Section 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right
of any Holder of a Note to receive payment of principal of, or premium, if any,
and interest of the Note (including Additional Interest) on or after the
respective due dates expressed in the Note, or to bring suit for the enforcement
of any such payment on or after such respective dates, is absolute and
unconditional and shall not be impaired or affected without the consent of the
Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default in payment of principal, premium or
interest specified in Section 6.01(1) or (2) hereof occurs and is continuing,
the Trustee may recover judgment in its own name and as trustee of an express
trust against the Issuers or the Guarantors (or any other obligor on the Notes)
for the whole amount of unpaid principal and accrued interest remaining unpaid,
together with interest on overdue principal and, to the extent that payment of
such interest is lawful, interest on overdue installments of interest, in each
case at the rate set forth in the Notes, and such further amounts as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Noteholders allowed in any judicial proceedings relative to the Issuers or the
Guarantors (or any other obligor upon the Notes), its creditors or its property
and shall be entitled and empowered to collect and receive any monies or other
property payable or deliverable on any such claims and to distribute the same
after deduction of its charges and expenses to the extent that any such charges
and expenses are not paid out of the estate in any
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such proceedings and any custodian in any such judicial proceeding is hereby
authorized by each Noteholder to make such payments to the Trustee, and in the
event that the Trustee shall consent to the making of such payments directly to
the Noteholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof.
Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Noteholder any
plan or reorganization, arrangement, adjustment or composition affecting the
Notes or the rights of any Holder thereof, or to authorize the Trustee to vote
in respect of the claim of any Noteholder in any such proceedings.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article 6, it
shall pay out the money in the following order:
FIRST: to the Trustee for amounts due under Section 7.07 hereof;
SECOND: to Noteholders for amounts due and unpaid on the Notes
for principal, premium, if any, and interest (including Additional
Interest, if any) as to each, ratably, without preference or priority of
any kind, according to the amounts due and payable on the Notes; and
THIRD: to the Issuers or, to the extent the Trustee collects any
amount from any Guarantor, to such Guarantor.
The Trustee may fix a record date and payment date for any
payment to Noteholders pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section
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6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to
Section 6.07 hereof or a suit by Holders of more than 10% in principal amount of
the Notes then outstanding.
Section 6.12. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every case, subject to any
determination in such proceeding, the Issuers, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default actually known to a Responsible
Officer of the Trustee has occurred and is continuing, the Trustee shall
exercise such of the rights and powers vested in it by this Indenture and use
the same degree of care and skill in their exercise as a prudent man would
exercise or use under the same circumstances in the conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties that are
specifically set forth in this Indenture and no others and no implied
covenants or obligations shall be read into this Indenture against the
Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this
Indenture but, in the case of any such certificates or opinions
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which by any provision hereof are specifically required to be furnished
to the Trustee, the Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this
Indenture (but need not confirm or investigate the accuracy of
mathematical calculations or other facts stated therein).
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.01.
(2) The Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Sections 6.02, 6.05 or 6.06 hereof.
(4) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its rights, powers or duties or to take or
omit to take any action under this Indenture or take any action at the
request or direction of Holders if it shall have reasonable grounds for
believing that repayment of such funds is not assured to it or it does
not receive an indemnity satisfactory to it in its sole discretion
against such risk, liability, loss, fee or expense which may be incurred
by it in connection with such performance.
(d) Whether or not therein expressly so provided, paragraphs (a),
(b), (c) and (e) of this Section 7.01 shall govern every provision of this
Indenture that in any way relates to the Trustee.
(e) The Trustee may refuse to perform any duty or exercise any
right or power unless it receives indemnity satisfactory to it in its sole
discretion against any loss, liability, expense or fee.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in
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writing with the Issuers or any Guarantor. Money held in trust by the Trustee
need not be segregated from other funds except to the extent required by the
law.
Section 7.02. Rights of Trustee.
Subject to Section 7.01 hereof:
(1) The Trustee may rely on any document reasonably believed by
it to be genuine and to have been signed or presented by the proper
person. The Trustee need not investigate any fact or matter stated in
the document.
(2) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel, or both,
which shall conform to the provisions of Section 12.05 hereof. The
Trustee shall be protected and shall not be liable for any action it
takes or omits to take in good faith in reliance on such certificate or
opinion.
(3) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent
appointed by it with due care.
(4) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it reasonably believes to be
authorized or within its rights or powers.
(5) The Trustee may consult with counsel of its selection, and
the advice or opinion of such counsel as to matters of law shall be full
and complete authorization and protection from liability in respect of
any action taken, omitted or suffered by it hereunder in good faith and
in accordance with the advice or opinion of such counsel.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may make loans to, accept deposits from,
perform services for or otherwise deal with either of the Issuers or any
Guarantor, or any Affiliates thereof, with the same rights it would have if it
were not Trustee. Any Agent may do the same with like rights. The Trustee,
however, shall be subject to Sections 7.10 and 7.11 hereof.
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Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the Notes or
any Guarantee, it shall not be accountable for the Issuers' or any Guarantor's
use of the proceeds from the sale of Notes or any money paid to the Issuers or
any Guarantor pursuant to the terms of this Indenture and it shall not be
responsible for any statement in the Notes, Guarantee or this Indenture other
than its certificate of authentication.
Section 7.05. Notice of Defaults.
If a Default occurs and is continuing and if it is known to the
Trustee, the Trustee shall mail to each Noteholder notice of the Default within
90 days after it occurs. Except in the case of a Default in payment of the
principal of, or premium, if any, or interest on any Note the Trustee may
withhold the notice if and so long as a committee of its Responsible Officers in
good faith determine(s) that withholding the notice is in the interests of the
Noteholders.
Section 7.06. Reports by Trustee to Holders.
If required by TIA Section 313(a), within 60 days after November
15 of any year, commencing November 15, 1998, the Trustee shall mail to each
Noteholder a brief report dated as of such November 15 that complies with TIA
Section 313(a). The Trustee also shall comply with TIA Section 313(b)(2). The
Trustee shall also transmit by mail all reports as required by TIA Section
313(c) and TIA Section 313(d).
Reports pursuant to this Section 7.06 shall be transmitted by
mail:
(1) to all registered Holders of Notes, as the names and
addresses of such Holders appear on the Registrar's books; and
(2) to such Holder of Notes as have, within the two years
preceding such transmission, filed their names and addresses with the
Trustee for that purpose.
A copy of each report at the time of its mailing to Noteholders
shall be filed with the SEC and each stock exchange on which the Notes are
listed. The Issuers shall promptly notify the Trustee when the Notes are listed
on any stock exchange.
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Section 7.07. Compensation and Indemnity.
The Issuers and the Guarantors shall pay to the Trustee and
Agents from time to time such compensation as shall be agreed in writing between
the Company and the Trustee for its services hereunder (which compensation shall
not be limited by any provision of law in regard to the compensation of a
trustee of an express trust). The Issuers and the Guarantors shall reimburse the
Trustee and Agents upon request for all reasonable disbursements, expenses and
advances incurred or made by it in connection with its duties under this
Indenture, including the reasonable compensation, disbursements and expenses of
the Trustee's agents and counsel.
The Issuers and the Guarantors shall indemnify each of the
Trustee and any predecessor Trustee for, and hold each of them harmless against,
any and all loss, damage, claim, liability or expense, including without
limitation taxes (other than taxes based on the income of the Trustee or such
Agent) and reasonable attorneys' fees and expenses incurred by each of them in
connection with the acceptance or performance of its duties under this Indenture
including the reasonable costs and expenses of defending itself against any
claim or liability in connection with the exercise or performance of any of its
powers or duties hereunder (including, without limitation, settlement costs).
The Trustee or Agent shall notify the Issuers and the Guarantors in writing
promptly of any claim asserted against the Trustee or Agent for which it may
seek indemnity. However, the failure by the Trustee or Agent to so notify the
Issuers and the Guarantors shall not relieve the Issuers and Guarantors of their
obligations hereunder except to the extent the Issuers and the Guarantors are
prejudiced thereby.
Notwithstanding the foregoing, the Issuers and the Guarantors
need not reimburse the Trustee for any expense or indemnify it against any loss
or liability incurred by the Trustee through its negligence or bad faith. To
secure the payment obligations of the Issuers and the Guarantors in this Section
7.07, the Trustee shall have a lien prior to the Notes on all money or property
held or collected by the Trustee except such money or property held in trust to
pay principal of and interest on particular Notes. The obligations of the
Issuers and the Guarantors under this Section 7.07 to compensate, reimburse and
indemnify the Trustee, Agents and each predecessor Trustee and to pay or
reimburse the Trustee, Agents and each predecessor Trustee for expenses,
disbursements and advances shall be joint and several liabilities of the Issuers
and each of the Guarantors and shall survive the satisfaction,
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discharge and termination of this Indenture, including any termination or
rejection hereof under any bankruptcy law or the resignation or removal of the
Trustee.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(6) or (7) hereof occurs, the expenses
and the compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
For purposes of this Section 7.07, the term "Trustee" shall
include any trustee appointed pursuant to Article 9.
Section 7.08. Replacement of Trustee.
The Trustee may resign by so notifying the Issuers and the
Guarantors in writing. The Holders of a majority in principal amount of the
outstanding Notes may remove the Trustee by notifying the removed Trustee in
writing and may appoint a successor Trustee with the Issuers' written consent
which consent shall not be unreasonably withheld. The Issuers may remove the
Trustee at their election if:
(1) the Trustee fails to comply with Section 7.10 hereof;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property;
(4) the Trustee otherwise becomes incapable of acting; or
(5) a successor corporation becomes successor Trustee pursuant
to Section 7.09 below.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Issuers shall notify the holders of
such event and promptly appoint a successor Trustee. Within one year after the
successor Trustee takes office, the Holders of a majority in principal amount of
the Notes may appoint a successor Trustee to replace the successor Trustee
appointed by the Issuers.
If a successor Trustee does not take office within 60 days after
the retiring Trustee resigns or is removed, the re-
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tiring Trustee, the Issuers or the Holders of a majority in principal amount of
the outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10 hereof, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuers. Immediately following
such delivery, the retiring Trustee shall, subject to its rights under Section
7.07 hereof, transfer all property held by it as Trustee to the successor
Trustee, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture. A successor Trustee shall mail
notice of its succession to each Noteholder. Notwithstanding replacement of the
Trustee pursuant to this Section 7.08, the Issuers obligations under Section
7.07 hereof shall continue for the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Consolidation, Merger, Etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust assets to, another
corporation, subject to Section 7.10 hereof, the successor corporation without
any further act shall be the successor Trustee.
Section 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1) and (2) in every respect. The Trustee
shall have a combined capital and surplus of at least $100,000,000 as set forth
in its most recent published annual report of condition. The Trustee shall
comply with TIA Section 310(b), including the provision in Section 310(b)(1).
Section 7.11. Preferential Collection of Claims Against Company.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311 (b). A Trustee
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who has resigned or been removed shall be subject to TIA Section 311(a) to the
extent indicated therein.
Section 7.12. Paying Agents.
The Issuers shall cause each Paying Agent other than the Trustee
to execute and deliver to it and the Trustee an instrument in which such agent
shall agree with the Trustee, subject to the provisions of this Section 7.12:
(A) that it will hold all sums held by it as agent for the
payment of principal of, or premium, if any, or interest on, the Notes
(whether such sums have been paid to it by the Issuers or by any obligor
on the Notes) in trust for the benefit of Holders of the Notes or the
Trustee;
(B) that it will at any time during the continuance of any Event
of Default, upon written request from the Trustee, deliver to the
Trustee all sums so held in trust by it together with a full accounting
thereof; and
(C) that it will give the Trustee written notice within three (3)
Business Days of any failure of the Issuers (or by any obligor on the
Notes) in the payment of any installment of the principal of, premium,
if any, or interest on, the Notes when the same shall be due and
payable.
ARTICLE 8
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.01. Without Consent of Holders.
The Issuers and the Guarantors, when authorized by a Board
Resolution of each of them, and the Trustee may amend, waive or supplement this
Indenture or the Notes without notice to or consent of any Noteholder:
(1) to comply with Section 5.01 hereof;
(2) to provide for uncertificated Notes in addition to or in
place of certificated Notes;
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(3) to comply with any requirements of the SEC under the TIA;
(4) to cure any ambiguity, defect or inconsistency, or to make
any other change that does not adversely affect the rights of any
Noteholder;
(5) to make any other change that does not adversely affect the
rights of any Noteholders hereunder; or
(6) to add a Guarantor.
The Trustee is hereby authorized to join with the Issuers and the
Guarantors in the execution of any supplemental indenture authorized or
permitted by the terms of this Indenture and to make any further appropriate
agreements and stipulations which may be therein contained, but the Trustee
shall not be obligated to enter into any such supplemental indenture which
adversely affects its own rights, duties or immunities under this Indenture.
Section 8.02. With Consent of Holders.
The Issuers (each when authorized by a Board Resolution), the
Guarantors (each when authorized by a Board Resolution) and the Trustee may
modify or supplement this Indenture or the Notes with the written consent of the
Holders of not less than a majority in aggregate principal amount of the
outstanding Notes. The Holders of not less than a majority in aggregate
principal amount of the outstanding Notes may waive compliance in a particular
instance by the Issuers or Guarantors with any provision of this Indenture or
the Notes. Subject to Section 8.04, without the consent of each Noteholder
affected, however, an amendment, supplement or waiver, including a waiver
pursuant to Section 6.04, may not:
(1) reduce the amount of Notes whose Holders must consent to an
amendment, supplement or waiver to this Indenture or the Notes;
(2) reduce the rate of or change the time for payment of
interest on any Note;
(3) reduce the principal of or premium on or change the stated
maturity of any Note;
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(4) make any Note payable in money other than that stated in the
Note or change the place of payment from New York, New York;
(5) change the amount or time of any payment required by the
Notes or reduce the premium payable upon any redemption of the Notes in
accordance with Section 3.07 hereof, or change the time before which no
such redemption may be made;
(6) waive a default in the payment of the principal of, or
interest on, or redemption payment with respect to, any Note (including
any obligation to make a Change of Control Offer or, after the Issuers'
obligation to purchase Notes arises thereunder, an Excess Proceeds Offer
or modify any of the provisions or definitions with respect to such
offers);
(7) make any changes in Sections 6.04 or 6.07 hereof or this
sentence of Section 8.02; or
(8) affect the ranking of the Notes or the Guarantee in a manner
adverse to the Holders.
After an amendment, supplement or waiver under this Section 8.02
or Section 8.01 becomes effective, the Issuers shall mail to the Holders a
notice briefly describing the amendment, supplement or waiver.
Upon the written request of the Issuers, accompanied by a Board
Resolution authorizing the execution of any such supplemental indenture, and
upon the receipt by the Trustee of evidence reasonably satisfactory to the
Trustee of the consent of the Noteholders as aforesaid and upon receipt by the
Trustee of the documents described in Section 8.06 hereof, the Trustee shall
join with the Issuers and the Guarantors in the execution of such supplemental
indenture unless such supplemental indenture affects the Trustee's own rights,
duties or immunities under this Indenture, in which case the Trustee may, but
shall not be obligated to, enter into such supplemental indenture.
It shall not be necessary for the consent of the Holders under
this Section to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
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Section 8.03. Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the Notes
shall comply with the TIA as then in effect.
Section 8.04. Revocation and Effect of Consents.
Until an amendment, supplement, waiver or other action becomes
effective, a consent to it by a Holder of a Note is a continuing consent
conclusive and binding upon such Holder and every subsequent Holder of the same
Note or portion thereof, and of any Note issued upon the transfer thereof or in
exchange therefor or in place thereof, even if notation of the consent is not
made on any such Note. Any such Holder or subsequent Holder, however, may revoke
the consent as to his Note or portion of a Note, if the Trustee receives the
written notice of revocation before the date the amendment, supplement, waiver
or other action becomes effective.
The Issuers may, but shall not be obligated to, fix a record date
for the purpose of determining the Holders entitled to consent to any amendment,
supplement, or waiver. If a record date is fixed, then, notwithstanding the
preceding paragraph, those Persons who were Holders at such record date (or
their duly designated proxies), and only such Persons, shall be entitled to
consent to such amendment, supplement, or waiver or to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
record date. No such consent shall be valid or effective for more than 90 days
after such record date unless the consent of the requisite number of Holders has
been obtained.
After an amendment, supplement, waiver or other action becomes
effective, it shall bind every Noteholder, unless it makes a change described in
any of clauses (1) through (8) of Section 8.02 hereof. In that case the
amendment, supplement, waiver or other action shall bind each Holder of a Note
who has consented to it and every subsequent Holder of a Note or portion of a
Note that evidences the same debt as the consenting Holder's Note.
Section 8.05. Notation on or Exchange of Notes.
If an amendment, supplement, or waiver changes the terms of a
Note, the Trustee (in accordance with the specific written direction of the
Issuers) shall request the Holder of the Note (in accordance with the specific
written direction of the Issuers) to deliver it to the Trustee. In such case,
the
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Trustee shall place an appropriate notation on the Note about the changed terms
and return it to the Holder. Alternatively, if the Issuers or the Trustee so
determines, the Issuers in exchange for the Note shall issue, the Guarantors
shall endorse, and the Trustee shall authenticate a new Note that reflects the
changed terms. Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment supplement or waiver.
Section 8.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amendment, supplement or waiver
authorized pursuant to this Article 8 if the amendment, supplement or waiver
does not adversely affect the rights, duties, liabilities or immunities of the
Trustee. If it does, the Trustee may, but need not, sign it. In signing or
refusing to sign such amendment, supplement or waiver the Trustee shall be
entitled to receive and, subject to Section 7.01 hereof, shall be fully
protected in relying upon an Officers' Certificate and an Opinion of Counsel
stating that such amendment, supplement or waiver is authorized or permitted by
this Indenture and is a legal, valid and binding obligation of the Issuers and
the Guarantors, enforceable against the Issuers and the Guarantors in accordance
with its terms (subject to customary exceptions).
ARTICLE 9
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Discharge of Indenture.
The Issuers and the Guarantors may terminate their obligations
under the Notes, the Guarantees and this Indenture, except the obligations
referred to in the last paragraph of this Section 9.01, if there shall have been
canceled by the Trustee or delivered to the Trustee for cancellation all Notes
theretofore authenticated and delivered (other than any Notes that are asserted
to have been destroyed, lost or stolen and that shall have been replaced as
provided in Section 2.07 hereof) and the Issuers have paid all sums payable by
them hereunder or deposited all required sums with the Trustee.
After such delivery the Trustee upon Issuer request shall
acknowledge in writing the discharge of the Issuers' and the Guarantors'
obligations under the Notes, the Guarantees and
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this Indenture except for those surviving obligations specified below.
Notwithstanding the satisfaction and discharge of this Indenture,
the obligations of the Issuers in Sections 7.07, 9.05 and 9.06 hereof shall
survive.
Section 9.02. Legal Defeasance.
The Issuers may at their option, by Board Resolution of the Board
of Directors of each of the Issuers, be discharged from their obligations with
respect to the Notes and the Guarantors discharged from their obligations under
the Guarantees on the date the conditions set forth in Section 9.04 below are
satisfied (hereinafter, "Legal Defeasance"). For this purpose, such Legal
Defeasance means that the Issuers shall be deemed to have paid and discharged
the entire indebtedness represented by the Notes and to have satisfied all its
other obligations under such Notes and this Indenture insofar as such Notes are
concerned (and the Trustee, at the expense of the Issuers, shall, subject to
Section 9.06 hereof, execute instruments in form and substance reasonably
satisfactory to the Trustee and Issuers acknowledging the same), except for the
following which shall survive until otherwise terminated or discharged
hereunder: (A) the rights of Holders of outstanding Notes to receive solely from
the trust funds described in Section 9.04 hereof and as more fully set forth in
such Section, payments in respect of the principal of, premium, if any, and
interest on such Notes when such payments are due, (B) the Issuers' obligations
with respect to such Notes under Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08,
2.09 and 4.20 hereof, (C) the rights, powers, trusts, duties, and immunities of
the Trustee hereunder (including claims of, or payments to, the Trustee under or
pursuant to Section 7.07 hereof) and (D) this Article 9. Subject to compliance
with this Article 9, the Issuers may exercise their option under this Section
9.02 with respect to the Notes notwithstanding the prior exercise of its option
under Section 9.03 below with respect to the Notes.
Section 9.03. Covenant Defeasance.
At the option of the Issuers, pursuant to a Board Resolution of
the Board of Directors of each of the Issuers, the Issuers and the Guarantors
shall be released from their respective obligations under Sections 4.02 through
4.19, Sections 4.21 through 4.22 and Sections 4.24 through 4.25 hereof,
inclusive, and clauses (a)(ii), (iii) and (iv) of Section 5.01 hereof with
respect to the outstanding Notes on and after the
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date the conditions set forth in Section 9.04 hereof are satisfied (hereinafter,
"Covenant Defeasance"). For this purpose, such Covenant Defeasance means that
the Issuers and the Guarantors may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
specified Section or portion thereof, whether directly or indirectly by reason
of any reference elsewhere herein to any such specified Section or portion
thereof or by reason of any reference in any such specified Section or portion
thereof to any other provision herein or in any other document, but the
remainder of this Indenture and the Notes shall be unaffected thereby.
Section 9.04. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of Section
9.02 or Section 9.03 hereof to the outstanding Notes:
(1) the Issuers shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the
requirements of Section 7.10 hereof who shall agree to comply with the
provisions of this Article 9 applicable to it) as funds in trust for the
purpose of making the following payments, specifically pledged as
security for, and dedicated solely to, the benefit of the Holders of the
Notes, (A) money in an amount, or (B) U.S. Government Obligations which
through the scheduled payment of principal and interest in respect
thereof in accordance with their terms will provide, not later than the
due date of any payment, money in an amount, or (C) a combination
thereof, sufficient, in the opinion of a nationally-recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, and which shall
be applied by the Trustee (or other qualifying trustee) to pay and
discharge, the principal of, premium, if any, and accrued interest on
the outstanding Notes at the maturity date of such principal, premium,
if any, or interest, or on dates for payment and redemption of such
principal, premium, if any, and interest selected in accordance with the
terms of this Indenture and of the Notes;
(2) no Event of Default or Default with respect to the Notes
shall have occurred and be continuing on the date of such deposit, or
shall have occurred and be continuing at any time during the period
ending on the 91st
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day after the date of such deposit or, if longer, ending on the day
following the expiration of the longest preference period under any
Bankruptcy Law applicable to the Issuers in respect of such deposit (it
being understood that this condition shall not be deemed satisfied until
the expiration of such period);
(3) such Legal Defeasance or Covenant Defeasance shall not cause
the Trustee to have a conflicting interest for purposes of the TIA with
respect to any securities of the Company;
(4) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute default under any
other agreement or instrument to which the Issuers are a party or by
which they are bound;
(5) the Issuers shall have delivered to the Trustee an Opinion
of Counsel stating that, as a result of such Legal Defeasance or
Covenant Defeasance, neither the trust nor the Trustee will be required
to register as an investment company under the Investment Company Act of
1940, as amended;
(6) in the case of an election under Section 9.02 above, the
Issuers shall have delivered to the Trustee an Opinion of Counsel
stating that (i) the Issuers have received from, or there has been
published by, the Internal Revenue Service a ruling to the effect that
or (ii) there has been a change in any applicable Federal income tax law
with the effect that, and such opinion shall confirm that, the Holders
of the outstanding Notes or persons in their positions will not
recognize income, gain or loss for Federal income tax purposes solely as
a result of such Legal Defeasance and will be subject to Federal income
tax on the same amounts, in the same manner, including as a result of
prepayment, and at the same times as would have been the case if such
Legal Defeasance had not occurred;
(7) in the case of an election under Section 9.03 hereof, the
Issuers shall have delivered to the Trustee an Opinion of Counsel to the
effect that the Holders of the outstanding Notes will not recognize
income, gain or loss for Federal income tax purposes as a result of such
Covenant Defeasance and will be subject to Federal income tax on the
same amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;
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(8) the Issuers shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the Legal Defeasance under
Section 9.02 above or the Covenant Defeasance under Section 9.03 hereof
(as the case may be) have been complied with;
(9) the Issuers shall have delivered to the Trustee an Officers'
Certificate stating that the deposit under clause (1) was not made by
the Issuers with the intent of defeating, hindering, delaying or
defrauding any creditors of the Company or others;
(10) the Issuers shall have paid or duly provided for payment
under terms mutually satisfactory to the Issuers and the Trustee all
amounts then due to the Trustee pursuant to Section 7.07 hereof; and
(11) the Issuers shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel (to the extent matters of law are
involved), each stating that (x) all conditions precedent herein
provided for relating to either the legal defeasance under paragraph
9.02 above or the covenant defeasance under paragraph 9.03 above, as the
case may be, have been complied with and (y) if any other Indebtedness
of the Issuers shall then be outstanding or committed, such legal
defeasance or covenant defeasance will not violate the provisions of the
agreements or instruments evidencing such Indebtedness.
Section 9.05. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Other Miscellaneous Provisions.
All money and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee pursuant to Section 9.04 hereof in respect
of the outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the payment,
either directly or through any Paying Agent, to the Holders of such Notes, of
all sums due and to become due thereon in respect of principal, premium, if any,
and accrued interest, but such money need not be segregated from other funds
except to the extent required by law.
The Issuers and the Guarantors shall (on a joint and several
basis) pay and indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against the U.S.
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Government Obligations deposited pursuant to Section 9.04 hereof or the
principal, premium, if any, and interest received in respect thereof other than
any such tax, fee or other charge which by law is for the account of the Holders
of the outstanding Notes.
Anything in this Article 9 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Issuers from time to time upon an Issuer
Request any money or U.S. Government Obligations held by it as provided in
Section 9.04 hereof which, in the opinion of a nationally-recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
Section 9.06. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or
U.S. Government Obligations in accordance with Section 9.01, 9.02 or 9.03 hereof
by reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Issuers' and each Guarantor's obligations under this
Indenture, the Notes and the Guarantees shall be revived and reinstated as
though no deposit had occurred pursuant to this Article 9 until such time as the
Trustee or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with Section 9.01 hereof; provided, however, that if
the Issuers or the Guarantors have made any payment of principal of, premium, if
any, or accrued interest on any Notes because of the reinstatement of their
obligations, the Issuers or the Guarantors, as the case may be, shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the money or U.S. Government Obligations held by the Trustee or Paying
Agent.
Section 9.07. Moneys Held by Paying Agent.
In connection with the satisfaction and discharge of this
Indenture, all moneys then held by any Paying Agent under the provisions of this
Indenture shall, upon written demand of the Issuers, be paid to the Trustee, or
if sufficient moneys have been deposited pursuant to Section 9.01 hereof, to the
Issuers upon an Issuer Request (or, if such moneys had been deposited by the
Guarantors, to such Guarantors), and thereupon such Paying Agent shall be
released from all further liability with respect to such moneys.
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Section 9.08. Moneys Held by Trustee.
Any moneys deposited with the Trustee or any Paying Agent or then
held by the Issuers or the Guarantors in trust for the payment of the principal
of, or premium, if any, or interest on any Note that are not applied but remain
unclaimed by the Holder of such Note for two years after the date upon which the
principal of, or premium, if any, or interest on such Note shall have
respectively become due and payable shall be repaid to the Issuers (or, if
appropriate, the Guarantors) upon an Issuer Request, or if such moneys are then
held by the Issuers or the Guarantors in trust, such moneys shall be released
from such trust; and the Holder of such Note entitled to receive such payment
shall thereafter, as an unsecured general creditor, look only to the Issuers and
the Guarantors for the payment thereof, and all liability of the Trustee or such
Paying Agent with respect to such trust money shall thereupon cease; provided,
however, that the Trustee or any such Paying Agent, before being required to
make any such repayment, may, at the expense of the Issuers and the Guarantors,
either mail to each Noteholder affected, at the address shown in the register of
the Notes maintained by the Registrar pursuant to Section 2.04 hereof, or cause
to be published once a week for two successive weeks, in a newspaper published
in the English language, customarily published each Business Day and of general
circulation in the City of New York, New York, a notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less than
30 days from the date of such mailing or publication, any unclaimed balance of
such moneys then remaining will be repaid to the Issuers. After payment to the
Issuers or the Guarantors or the release of any money held in trust by the
Issuers or any Guarantors, as the case may be, Noteholders entitled to the money
must look only to the Issuers and the Guarantors for payment as general
creditors unless applicable abandoned property law designates another person.
ARTICLE 10
GUARANTEE OF NOTES
Section 10.01. Guarantee.
Subject to the provisions of this Article 10, each Guarantor, by
execution of the Guarantee, will jointly and severally unconditionally guarantee
to each Holder and to the Trustee, (i) the due and punctual payment of the
principal of,
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and premium, if any, and interest on each Note, when and as the same shall
become due and payable, whether at maturity, by acceleration or otherwise, the
due and punctual payment of interest on the overdue principal of, and premium,
if any, and interest on the Notes, to the extent lawful, and the due and
punctual performance of all other Obligations of the Issuers to the Holders or
the Trustee (including without limitation amounts due the Trustee under Section
7.07) all in accordance with the terms of such Note and this Indenture, and (ii)
in the case of any extension of time of payment or renewal of any Notes or any
of such other Obligations, that the same will be promptly paid in full when due
or performed in accordance with the terms of the extension or renewal, at stated
maturity, by acceleration or otherwise. Each Guarantor, by execution of the
Guarantee, will agree that its obligations thereunder and hereunder shall be
absolute and unconditional, irrespective of, and shall be unaffected by, any
invalidity, irregularity or unenforceability of any such Note or this Indenture,
any failure to enforce the provisions of any such Note or this Indenture, any
waiver, modification or indulgence granted to the Issuers with respect thereto
by the Holder of such Note or the Trustee, or any other circumstances which may
otherwise constitute a legal or equitable discharge of a surety or such
Guarantor.
Each Guarantor, by execution of the Guarantee, will waive
diligence, presentment, demand for payment, filing of claims with a court in the
event of merger or bankruptcy of the Issuers, any right to require a proceeding
first against the Issuers, protest or notice with respect to any such Note or
the Indebtedness evidenced thereby and all demands whatsoever, and will covenant
that this Guarantee will not be discharged as to any such Note except by payment
in full of the principal thereof, premium if any, and interest thereon and as
provided in Section 9.01 hereof. Each Guarantor, by execution of the Guarantee,
will further agree that, as between such Guarantor, on the one hand, and the
Holders and the Trustee, on the other hand, (i) the maturity of the Obligations
guaranteed hereby may be accelerated as provided in Article 6 hereof for the
purposes of this Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the Obligations
guaranteed hereby, and (ii) in the event of any declaration of acceleration of
such Obligations as provided in Article 6 hereof, such Obligations (whether or
not due and payable) shall forthwith become due and payable by each Guarantor
for the purpose of this Guarantee. In addition, without limiting the foregoing
provisions, upon the effectiveness of an acceleration under Article 6 hereof,
the Trustee shall promptly
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make a demand for payment on the Notes under the Guarantee provided for in this
Article 10 and not discharged.
A Guarantee shall not be valid or become obligatory for any
purpose with respect to a Note until the certificate of authentication on such
Note shall have been signed by or on behalf of the Trustee.
Section 10.02. Execution and Delivery of Guarantees.
A Guarantee shall be executed on behalf of a Guarantor by the
manual or facsimile signature of an Officer of such Guarantor.
If an Officer of a Guarantor whose signature is on the Guarantee
no longer holds that office, such Guarantee shall be valid nevertheless.
Section 10.03. Limitation of Guarantee.
The obligations of each Guarantor are limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities of such Guarantor (including, without limitation, any guarantees of
Senior Indebtedness) and after giving effect to any collections from or payments
made by or on behalf of any other Guarantor in respect of the obligations of
such other Guarantor under its Guarantee or pursuant to its contribution
obligations under this Indenture, result in the obligations of such Guarantor
under the Guarantee not constituting a fraudulent conveyance or fraudulent
transfer under federal or state law. Each Guarantor that makes a payment or
distribution under a Guarantee shall be entitled to a contribution from each
other Guarantor in a pro rata amount based on the Adjusted Net Assets of each
Guarantor.
Section 10.04. Release of Guarantor.
A Guarantor shall be released from all of its obligations under
its Guarantee if:
(i) the Guarantor has sold all or substantially all of its
assets or the Company and its Restricted Subsidiaries have sold all of
the Capital Stock of the Guarantor owned by them, in each case in a
transaction in compliance with Sections 4.10 and 5.01 hereof; or
(ii) the Guarantor merges with or into or consolidates with, or
transfers all or substantially all of its
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assets to, the Company or another Guarantor in a transaction in
compliance with Section 5.01 hereof;
and in each such case, such Guarantor has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to such transactions have been complied
with.
Section 10.05. Guarantee Obligations Subordinated to Guarantor Senior
Indebtedness.
Each Guarantor, by execution of the Guarantee, will covenant and
agree, and each Holder of Notes, by its acceptance thereof, likewise covenants
and agrees, that to the extent and in the manner hereinafter set forth in this
Article 10, the Indebtedness represented by the Guarantee and the payment of the
principal of, premium, if any, and interest on the Notes pursuant to the
Guarantee by such Guarantor are hereby expressly made subordinate and subject in
right of payment as provided in this Article 10 to the prior indefeasible
payment and satisfaction in full in cash of all Guarantor Senior Indebtedness of
such Guarantor.
This Section 10.05 and the following Sections 10.06 through 10.10
shall constitute a continuing offer to all Persons who, in reliance upon such
provisions, become holders of or continue to hold Guarantor Senior Indebtedness
of any Guarantor; and such provisions are made for the benefit of the holders of
Guarantor Senior Indebtedness of each Guarantor; and such holders are made
obligees hereunder and they or each of them may enforce such provisions.
Section 10.06. Payment Over of Proceeds upon Dissolution, etc., of a Guarantor.
In the event of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, arrangement, reorganization or
other similar case or proceeding in connection therewith, relative to any
Guarantor or to its creditors, as such, or to its assets, whether voluntary or
involuntary, or (b) any liquidation, dissolution or other winding-up of any
Guarantor, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy or (c) any general assignment for the benefit of
creditors or any other marshaling of assets or liabilities of any Guarantor,
then and in any such event:
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(1) the holders of all Guarantor Senior Indebtedness of such
Guarantor shall be entitled to receive payment in full in cash of all
amounts due on or in respect of all such Guarantor Senior Indebtedness,
before the Holders of the Notes are entitled to receive or retain,
pursuant to the Guarantee of such Guarantor, any payment or distribution
of any kind or character by such Guarantor on account of any of its
Obligations on its Guarantee; and
(2) any payment or distribution of assets of such Guarantor of
any kind or character, whether in cash, property or securities, by
set-off or otherwise, to which the Holders or the Trustee would be
entitled but for the subordination provisions of this Article 10 shall
be paid by the liquidating trustee or agent or other Person making such
payment or distribution, whether a trustee in bankruptcy, a receiver or
liquidating trustee or otherwise, directly to the holders of Guarantor
Senior Indebtedness of such Guarantor or their representative or
representatives or to the trustee or trustees under any indenture under
which any instruments evidencing any of such Guarantor Senior
Indebtedness may have been issued, ratably according to the aggregate
amounts remaining unpaid on account of such Guarantor Senior
Indebtedness held or represented by each, to the extent necessary to
make payment in full in cash of all such Guarantor Senior Indebtedness
remaining unpaid, after giving effect to any concurrent payment or
distribution to the holders of such Guarantor Senior Indebtedness; and
(3) in the event that, notwithstanding the foregoing provisions
of this Section 10.06, the Trustee or the Holder of any Note shall have
received any payment or distribution of assets of such Guarantor of any
kind or character, whether in cash, property or securities, including,
without limitation, by way of set-off or otherwise, in respect of any of
its Obligations on its Guarantee before all Guarantor Senior
Indebtedness of such Guarantor is paid in full in cash, then and in such
event such payment or distribution shall be paid over or delivered
forthwith to the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee, agent or other Person making payment or
distribution of assets of such Guarantor for application to the payment
of all such Guarantor Senior Indebtedness remaining unpaid, to the
extent necessary to pay all of such Guarantor Senior Indebtedness in
full in cash, after giving effect to any concurrent payment or
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distribution to or for the holders of such Guarantor Senior
Indebtedness.
The consolidation of a Guarantor with, or the merger of a
Guarantor with or into, another Person or the liquidation or dissolution of a
Guarantor following the conveyance, transfer or lease of its properties and
assets substantially as an entirety to another Person upon the terms and
conditions set forth in Article 5 hereof shall not be deemed a dissolution,
winding-up, liquidation, reorganization, assignment for the benefit of creditors
or marshaling of assets and liabilities of such Guarantor for the purposes of
this Article 10 if the Person formed by such consolidation or the surviving
entity of such merger or the Person which acquires by conveyance, transfer or
lease such properties and assets substantially as an entirety, as the case may
be, shall, as a part of such consolidation, merger, conveyance, transfer or
lease, comply with the conditions set forth in such Article 5 hereof.
Section 10.07. Suspension of Guarantee Obligations When Guarantor Senior
Indebtedness in Default.
(a) Unless Section 10.06 hereof shall be applicable, after the
occurrence of a Payment Default with respect to any Designated Senior
Indebtedness which constitutes Guarantor Senior Indebtedness, no payment or
distribution of any assets or securities of a Guarantor (or any Restricted
Subsidiary or Subsidiary of such Guarantor) of any kind or character (including,
without limitation, cash, property and any payment or distribution which may be
payable or deliverable by reason of the payment of any other Indebtedness of
such Guarantor being subordinated to its Obligations on its Guarantee) may be
made by or on behalf of such Guarantor (or any Restricted Subsidiary or
Subsidiary of such Guarantor), including, without limitation, by way of set-off
or otherwise, for or on account of its Obligations on its Guarantee, and neither
the Trustee nor any holder or owner of any Notes shall take or receive from any
Guarantor (or any Restricted Subsidiary or Subsidiary of such Guarantor),
directly or indirectly in any manner, payment in respect of all or any portion
of its Obligations on its Guarantee following the delivery by the representative
of the holders of, for so long as there shall exist any Designated Senior
Indebtedness under or in respect of the Senior Credit Facility, the holders of
Designated Senior Indebtedness under or in respect of the Senior Credit Facility
or, thereafter, the holders of Designated Senior Indebtedness which constitutes
Guarantor Senior Indebtedness (in either such case, the "Guarantor
Representative") to the Trustee of written notice of (i) the occurrence
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of a Payment Default on Designated Senior Indebtedness or (ii) the occurrence of
a Non-Payment Event of Default on such Designated Senior Indebtedness and the
acceleration of the maturity of Designated Senior Indebtedness in accordance
with its terms, and in any such event, such prohibition shall continue until
such Payment Default is cured, waived in writing or ceases to exist or such
acceleration has been rescinded or otherwise cured. At such time as the
prohibition set forth in the preceding sentence shall no longer be in effect,
subject to the provisions of the following paragraph (b), such Guarantor shall
resume making any and all required payments in respect of its Obligations under
its Guarantee.
(b) Unless Section 10.06 hereof shall be applicable, upon the
occurrence of a Non-Payment Event of Default on Designated Senior Indebtedness
guaranteed by a Guarantor (which guarantee constitutes Guarantor Senior
Indebtedness of such Guarantor), no payment or distribution of any assets of
such Guarantor of any kind or character (including, without limitation, cash,
property and any payment or distribution which may be payable or deliverable by
reason of the payment of any other Indebtedness of such Guarantor being
subordinated to its Obligations on its Guarantee) shall be made by such
Guarantor, including, without limitation, by way of set-off or otherwise, for or
on account of any of its Obligations on its Guarantee, and neither the Trustee
nor any holder or owner of any Notes shall take or receive from any Guarantor
(or any Restricted Subsidiary or Subsidiary of such Guarantor), directly or
indirectly in any manner, payment in respect of all or any portion of its
Obligations on its Guarantee for a period (a "Guarantee Payment Blockage
Period") commencing on the date of receipt by the Trustee of written notice from
the Guarantor Representative of such Non-Payment Event of Default, unless and
until (subject to any blockage of payments that may then be in effect under the
preceding paragraph (a)) the earliest to occur of the following events: (x) more
than 179 days shall have elapsed since the date of receipt of such written
notice by the Trustee, (y) such Non-Payment Event of Default shall have been
cured or waived in writing or shall have ceased to exist or such Designated
Senior Indebtedness shall have been discharged or paid in full or (z) such
Guarantee Payment Blockage Period shall have been terminated by written notice
to such Guarantor or the Trustee from the Guarantor Representative, after which,
in the case of clause (x), (y) or (z), such Guarantor shall resume making any
and all required payments in respect of its Obligations on its Guarantee.
Notwithstanding any other provisions of this Indenture, no Non-Payment Event of
Default with respect to Designated Senior Indebtedness which existed or was
continu-
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ing on the date of the commencement of any Guarantee Payment Blockage Period
initiated by the Guarantor Representative shall be, or be made, the basis for
the commencement of a second Guarantee Payment Blockage Period initiated by the
Guarantor Representative, whether or not initiated within the Initial Guarantee
Blockage Period, unless such event of default shall have been cured or waived
for a period of not less than 90 consecutive days. In no event shall a Guarantee
Payment Blockage Period extend beyond 179 days from the date of the receipt by
the Trustee of the notice referred to in this Section 10.07(b) or, in the event
of a Non-Payment Event of Default which formed the basis for a Payment Blockage
Period under Section 11.03(b) hereof, 179 days from the date of the receipt by
the Trustee of the notice referred to in Section 11.03(b) (the "Initial
Guarantee Blockage Period"). Any number of additional Guarantee Payment Blockage
Periods may be commenced during the Initial Guarantee Blockage Period; provided,
however, that no such additional Guarantee Payment Blockage Period shall extend
beyond the Initial Guarantee Blockage Period. After the expiration of the
Initial Guarantee Blockage Period, no Guarantee Payment Blockage Period may be
commenced under this Section 10.07(b) and no Payment Blockage Period may be
commenced under Section 11.03(b) hereof until at least 180 consecutive days have
elapsed from the last day of the Initial Guarantee Blockage Period.
(c) In the event that, notwithstanding the foregoing, the Trustee
or the Holder of any Note shall have received any payment from a Guarantor
prohibited by the foregoing provisions of this Section 10.07, then and in such
event such payment shall be paid over and delivered forthwith to the Guarantor
Representative initiating the Guarantee Payment Blockage Period, in trust for
distribution to the holders of Guarantor Senior Indebtedness or, if no amounts
are then due in respect of Guarantor Senior Indebtedness, promptly returned to
the Guarantor, or as a court of competent jurisdiction shall direct.
Section 10.08. Subrogation to Rights of Holders of Guarantor Senior
Indebtedness.
Upon the payment in full of all amounts payable under or in
respect of all Guarantor Senior Indebtedness of a Guarantor, the Holders shall
be subrogated to the rights of the holders of such Guarantor Senior Indebtedness
to receive payments and distributions of cash, property and securities of such
Guarantor made on such Guarantor Senior Indebtedness until all amounts due to be
paid under the Guarantee shall be paid in
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full. For the purposes of such subrogation, no payments or distributions to
holders of Guarantor Senior Indebtedness of any cash, property or securities to
which Holders of the Notes or the Trustee would be entitled except for the
provisions of this Article 10, and no payments over pursuant to the provisions
of this Article 10 to holders of Guarantor Senior Indebtedness by Holders of the
Notes or the Trustee, shall, as among each Guarantor, its creditors other than
holders of Guarantor Senior Indebtedness and the Holders of the Notes, be deemed
to be a payment or distribution by such Guarantor to or on account of such
Guarantor Senior Indebtedness.
If any payment or distribution to which the Holders would
otherwise have been entitled but for the provisions of this Article 10 shall
have been applied, pursuant to the provisions of this Article 10, to the payment
of all amounts payable under Guarantor Senior Indebtedness, then and in such
case, the Holders shall be entitled to receive from the holders of such
Guarantor Senior Indebtedness at the time outstanding any payments or
distributions received by such holders of Guarantor Senior Indebtedness in
excess of the amount sufficient to pay all amounts payable under or in respect
of such Guarantor Senior Indebtedness in full in cash.
Section 10.09. Guarantee Subordination Provisions Solely To Define Relative
Rights.
The subordination provisions of this Article 10 are and are
intended solely for the purpose of defining the relative rights of the Holders
of the Notes on the one hand and the holders of Guarantor Senior Indebtedness on
the other hand. Nothing contained in this Article 10 or elsewhere in this
Indenture or in the Notes is intended to or shall (a) impair, as among each
Guarantor, its creditors other than holders of its Guarantor Senior Indebtedness
and the Holders of the Notes, the obligation of such Guarantor, which is
absolute and unconditional, to make payments to the Holders in respect of its
Obligations on its Guarantee in accordance with its terms; or (b) affect the
relative rights against such Guarantor of the Holders of the Notes and creditors
of such Guarantor other than the holders of the Guarantor Senior Indebtedness;
or (c) prevent the Trustee or the Holder of any Note from exercising all
remedies otherwise permitted by applicable law upon a Default or an Event of
Default under this Indenture, subject to the rights, if any, under this Article
10 of the holders of Guarantor Senior Indebtedness (1) in any case, proceeding,
dissolution, liquidation or other winding-up, assignment for the benefit of
creditors or other marshaling of assets and liabilities of the
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Company referred to in Section 10.06 hereof, to receive, pursuant to and in
accordance with such Section, cash, property and securities otherwise payable or
deliverable to the Trustee or such Holder, or (2) under the conditions specified
in Section 10.07 hereof, to prevent any payment prohibited by such Section or
enforce their rights pursuant to Section 10.07(c) hereof.
The failure by any Guarantor to make a payment in respect of its
obligations on its Guarantee by reason of any provision of this Article 10 shall
not be construed as preventing the occurrence of a Default or an Event of
Default hereunder.
Section 10.10. Application of Certain Article 11 Provisions.
The provisions of Sections 11.04, 11.07, 11.08, 11.09, 11.10,
11.12 and 11.13 hereof shall apply, mutatis mutandis, to each Guarantor and
their respective holders of Guarantor Senior Indebtedness and the rights, duties
and obligations set forth therein shall govern the rights, duties and
obligations of each Guarantor, the holders of Guarantor Senior Indebtedness, the
Holders and the Trustee with respect to the Guarantee and all references therein
to Article 11 hereof shall mean this Article 10.
ARTICLE 11
SUBORDINATION OF NOTES
Section 11.01. Notes Subordinate to Senior Indebtedness.
The Issuers covenant and agree, and each Holder of Notes, by its
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article 11, the Indebtedness
represented by the Notes and the payment of the principal of, premium, if any,
and interest on the Notes are hereby expressly made subordinate and subject in
right of payment as provided in this Article 11 to the prior indefeasible
payment and satisfaction in full in cash of all Senior Indebtedness.
This Article 11 shall constitute a continuing offer to all
Persons who, in reliance upon such provisions, become holders of or continue to
hold Senior Indebtedness; and such provisions are made for the benefit of the
holders of Senior
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Indebtedness; and such holders are made obligees hereunder and they or each of
them may enforce such provisions.
Section 11.02. Payment Over of Proceeds upon Dissolution, etc.
In the event of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, arrangement, reorganization or
other similar case or proceeding in connection therewith, relative to the
Issuers or to their creditors, as such, or to their assets, whether voluntary or
involuntary or (b) any liquidation, dissolution or other winding-up of the
Issuers, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any general assignment for the benefit of
creditors or any other marshaling of assets or liabilities of the Issuers, then
and in any such event:
(1) the holders of Senior Indebtedness shall be entitled to
receive payment and satisfaction in full in cash of all amounts due on
or in respect of all Senior Indebtedness, before the Holders of the
Notes are entitled to receive or retain any payment or distribution of
any kind or character on account of principal of, premium, if any, or
interest on the Notes; and
(2) any payment or distribution of assets of the Issuers of any
kind or character, whether in cash, property or securities, by set-off
or otherwise, to which the Holders or the Trustee would be entitled but
for the provisions of this Article 11 shall be paid by the liquidating
trustee or agent or other Person making such payment or distribution,
whether a trustee in bankruptcy, a receiver or liquidating trustee or
otherwise, directly to the holders of Senior Indebtedness or their
representative or representatives or to the trustee or trustees under
any indenture under which any instruments evidencing any of such Senior
Indebtedness may have been issued, ratably according to the aggregate
amounts remaining unpaid on account of the Senior Indebtedness held or
represented by each, to the extent necessary to make payment in full in
cash of all Senior Indebtedness remaining unpaid, after giving effect to
any concurrent payment or distribution, or provision therefor, to the
holders of such Senior Indebtedness; and
(3) in the event that, notwithstanding the foregoing provisions
of this Section 11.02, the Trustee or the
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Holder of any Note shall have received any payment or distribution of
assets of the Issuers of any kind or character, whether in cash,
property or securities, including, without limitation, by way of set-off
or otherwise, in respect of principal of, premium, if any, and interest
on the Notes before all Senior Indebtedness is paid in full in cash,
then and in such event such payment or distribution shall be paid over
or delivered forthwith to the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee, agent or other Person making
payment or distribution of assets of the Issuers for application to the
payment of all Senior Indebtedness remaining unpaid, to the extent
necessary to pay all Senior Indebtedness in full in cash, after giving
effect to any concurrent payment or distribution, or provision therefor,
to or for the holders of Senior Indebtedness.
The consolidation of either Issuer with, or the merger of either
Issuer with or into, another Person or the liquidation or dissolution of either
Issuer following the conveyance, transfer or lease of its properties and assets
substantially as an entirety to another Person upon the terms and conditions set
forth in Article 5 hereof shall not be deemed a dissolution, winding-up,
liquidation, reorganization, assignment for the benefit of creditors or
marshaling of assets and liabilities of such Issuer for the purposes of this
Article 11 if the Person formed by such consolidation or the surviving entity of
such merger or the Person which acquires by conveyance, transfer or lease such
properties and assets substantially as an entirety, as the case may be, shall,
as a part of such consolidation, merger, conveyance, transfer or lease, comply
with the conditions set forth in such Article 5 hereof.
Section 11.03. Suspension of Payment When Senior Indebtedness in Default.
(a) Unless Section 11.02 hereof shall be applicable, after the
occurrence of a Payment Default no payment or distribution of any assets or
securities of the Issuers or any Restricted Subsidiary of any kind or character
(including, without limitation, cash, property and any payment or distribution
which may be payable or deliverable by reason of the payment of any other
Indebtedness of the Issuers being subordinated to the payment of the Notes by
the Issuers) may be made by or on behalf of the Issuers or any Restricted
Subsidiary, including, without limitation, by way of set-off or otherwise, for
or on account of the Notes, or for or on account of the purchase, redemption or
other acquisition of the Notes, and neither the
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Trustee nor any holder or owner of any Notes shall take or receive from the
Issuers or any Restricted Subsidiary, directly or indirectly in any manner,
payment in respect of all or any portion of Notes following the delivery by the
representative of the holders of Designated Senior Indebtedness under or in
respect of the Senior Credit Facility, for so long as there shall exist any
Designated Senior Indebtedness under or in respect of the Senior Credit
Facility, and, thereafter, the holders of Designated Senior Indebtedness (in
either such case, the "Representative") to the Trustee of written notice of (i)
the occurrence of a Payment Default on Designated Senior Indebtedness or (ii)
the occurrence of a Non-Payment Event of Default on Designated Senior
Indebtedness and the acceleration of the maturity of Designated Senior
Indebtedness in accordance with its terms, and in any such event, such
prohibition shall continue until such Payment Default is cured, waived in
writing or ceases to exist or such acceleration has been rescinded or otherwise
cured. At such time as the prohibition set forth in the preceding sentence shall
no longer be in effect, subject to the provisions of the following paragraph
(b), the Issuers shall resume making any and all required payments in respect of
the Notes, including any missed payments.
(b) Unless Section 11.02 hereof shall be applicable, upon the
occurrence of a Non-Payment Event of Default on Designated Senior Indebtedness,
no payment or distribution of any assets or securities of the Issuers of any
kind or character (including, without limitation, cash, property and any payment
or distribution which may be payable or deliverable by reason of the payment of
any other Indebtedness of the Issuers being subordinated to the payment of the
Notes by the Issuers) may be made by or on behalf of the Issuers, including,
without limitation, by way of set-off or otherwise, for or on account of the
Notes, or for or on account of the purchase, redemption, defeasance or other
acquisition of Notes, and neither the Trustee nor any holder or owner of Notes
shall take or receive from the Issuers or any Restricted Subsidiary, directly or
indirectly in any manner, payment in respect of all or any portion of the Notes
for a period (a "Payment Blockage Period") commencing on the date of receipt by
the Trustee of written notice from the Representative of such Non-Payment Event
of Default unless and until (subject to any blockage of payments that may then
be in effect under the preceding paragraph (a)) the earliest to occur of the
following events: (x) more than 179 days shall have elapsed since the date of
receipt of such written notice by the Trustee, (y) such Non-Payment Event of
Default shall have been cured or waived in writing or shall have ceased to exist
or such Designated Senior Indebtedness shall have been paid in
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full or (z) such Payment Blockage Period shall have been terminated by written
notice to the Issuers or the Trustee from the Representative, after which, in
the case of clause (x), (y) or (z), the Issuers shall resume making any and all
required payments in respect of the Notes, including any missed payments.
Notwithstanding any other provisions of this Indenture, no event of default with
respect to Designated Senior Indebtedness (other than a Payment Default) which
existed or was continuing on the date of the commencement of any Payment
Blockage Period initiated by the Representative shall be, or be made, the basis
for the commencement of a second Payment Blockage Period initiated by the
Representative, whether or not within the Initial Blockage Period, unless such
event of default shall have been cured or waived for a period of not less than
90 consecutive days. Notwithstanding any other provisions of this Indenture, in
no event shall a Payment Blockage Period commenced in accordance with the
provisions of this Indenture described in this paragraph extend beyond 179 days
from the date of the receipt by the Trustee of the notice referred to in this
Section 11.03(b) (the "Initial Blockage Period"). Any number of additional
Payment Blockage Periods may be commenced during the Initial Blockage Period;
provided, however, that no such additional Payment Blockage Period shall extend
beyond the Initial Blockage Period. After the expiration of the Initial Blockage
Period, no Payment Blockage Period may be commenced until at least 180
consecutive days have elapsed from the last day of the Initial Blockage Period.
(c) In the event that, notwithstanding the foregoing, the Trustee
or the Holder of any Note shall have received any payment prohibited by the
foregoing provisions of this Section 11.03, then and in such event such payment
shall be paid over and delivered forthwith to the Representative initiating the
Payment Blockage Period, in trust for distribution to the holders of Senior
Indebtedness or, if no amounts are then due in respect of Senior Indebtedness,
promptly returned to the Issuers, or otherwise as a court of competent
jurisdiction shall direct.
Section 11.04. Trustee's Relation to Senior Indebtedness.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article 11, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior
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Indebtedness and the Trustee shall not be liable to any holder of Senior
Indebtedness if it shall mistakenly pay over or deliver to Holders, the Issuers
or any other Person moneys or assets to which any holder of Senior Indebtedness
shall be entitled by virtue of this Article 11 or otherwise.
Section 11.05. Subrogation to Rights of Holders of Senior Indebtedness.
Upon the payment in full of all Senior Indebtedness, the Holders
of the Notes shall be subrogated to the rights of the holders of such Senior
Indebtedness to receive payments and distributions of cash, property and
securities applicable to the Senior Indebtedness until the principal of,
premium, if any and interest on the Notes shall be paid in full. For purposes of
such subrogation, no payments or distributions to the holders of Senior
Indebtedness of any cash, property or securities to which the Holders of the
Notes or the Trustee would be entitled except for the provisions of this Article
11, and no payments over pursuant to the provisions of this Article 11 to the
holders of Senior Indebtedness by Holders of the Notes or the Trustee, shall, as
among the Issuers, their creditors other than holders of Senior Indebtedness and
the Holders of the Notes, be deemed to be a payment or distribution by the
Issuers to or on account of the Senior Indebtedness.
If any payment or distribution to which the Holders would
otherwise have been entitled but for the provisions of this Article 11 shall
have been applied, pursuant to the provisions of this Article 11, to the payment
of all amounts payable under the Senior Indebtedness of the Issuers, then and in
such case the Holders shall be entitled to receive from the holders of such
Senior Indebtedness at the time outstanding any payments or distributions
received by such holders of such Senior Indebtedness in excess of the amount
sufficient to pay all amounts payable under or in respect of such Senior
Indebtedness in full in cash.
Section 11.06. Provisions Solely To Define Relative Rights.
The provisions of this Article 11 are and are intended solely for
the purpose of defining the relative rights of the Holders of the Notes on the
one hand and the holders of Senior Indebtedness on the other hand. Nothing
contained in this Article or elsewhere in this Indenture or in the Notes is
intended to or shall (a) impair, as among the Issuers, their creditors other
than holders of Senior Indebtedness and the
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Holders of the Notes, the obligation of the Issuers, which is absolute and
unconditional, to pay to the Holders of the Notes the principal of, premium, if
any, and interest on the Notes as and when the same shall become due and payable
in accordance with their terms; or (b) affect the relative rights against the
Issuers of the Holders of the Notes and creditors of the Issuers other than the
holders of Senior Indebtedness; or (c) prevent the Trustee or the Holder of any
Note from exercising all remedies otherwise permitted by applicable law upon a
Default or an Event of Default under this Indenture, subject to the rights, if
any, under this Article 11 of the holders of Senior Indebtedness (1) in any
case, proceeding, dissolution, liquidation or other winding-up, assignment for
the benefit of creditors or other marshaling of assets and liabilities of the
Issuers referred to in Section 11.02 hereof, to receive, pursuant to and in
accordance with such Section, cash, property and securities otherwise payable or
deliverable to the Trustee or such Holder, or (2) under the conditions specified
in Section 11.03, to prevent any payment prohibited by such Section or enforce
their rights pursuant to Section 11.03(c) hereof.
The failure to make a payment on account of principal of,
premium, if any, or interest on the Notes by reason of any provision of this
Article 11 shall not be construed as preventing the occurrence of a Default or
an Event of Default hereunder.
Section 11.07. Trustee To Effectuate Subordination.
Each Holder of a Note by his acceptance thereof authorizes and
directs the Trustee on his behalf to take, in the Trustee's sole discretion,
such action as may be necessary or appropriate to effectuate the subordination
provided in this Article and appoints the Trustee his attorney-in-fact for any
and all such purposes, including, in the event of any dissolution, winding-up,
liquidation or reorganization of the Issuers whether in bankruptcy, insolvency,
receivership proceedings, or otherwise, the timely filing of a claim for the
unpaid balance of the indebtedness of the Issuers owing to such Holder in the
form required in such proceedings and the causing of such claim to be approved.
If the Trustee does not file such a claim prior to 30 days before the expiration
of the time to file such a claim, the holders of Senior Indebtedness, or any
Representative, may file such a claim on behalf of Holders of the Notes.
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Section 11.08. No Waiver of Subordination Provisions.
(a) No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Issuers or by any act or failure to act, in good faith, by any such holder,
or by any non-compliance by the Issuers with the terms, provisions and covenants
of this Indenture, regardless of any knowledge thereof any such holder may have
or be otherwise charged with.
(b) Without limiting the generality of subsection (a) of this
Section 11.08, the holders of Senior Indebtedness may, at any time and from time
to time, without the consent of or notice to the Trustee or the Holders of the
Notes, without incurring responsibility to the Holders of the Notes and without
impairing or releasing the subordination provided in this Article 11 or the
obligations hereunder of the Holders of the Notes to the holders of Senior
Indebtedness, do any one or more of the following: (1) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, Senior
Indebtedness or any instrument evidencing the same or any agreement under which
Senior Indebtedness is outstanding; (2) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (3) release any Person liable in any manner for the collection or
payment of Senior Indebtedness; and (4) exercise or refrain from exercising any
rights against the Company and any other Person; provided, however, that in no
event shall any such actions limit the right of the Trustee or the Holders of
the Notes to take any action to accelerate the maturity of the Notes pursuant to
Article 6 hereof or to pursue any rights or remedies hereunder or under
applicable laws if the taking of such action does not otherwise violate the
terms of this Indenture.
Section 11.09. Notice to Trustee.
(a) The Issuers shall give prompt written notice to the Trustee
of any fact known to the Issuers which would prohibit the making of any payment
to or by the Trustee at its Corporate Trust Office in respect of the Notes.
Notwithstanding the provisions of this Article 11 or any other provision of this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any facts which would prohibit the making of any payment to or by the Trustee in
respect of the Notes, unless and until the Trustee shall have received written
notice at least two Business Days prior to the date of any payment to
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the Holders thereof from the Issuers or a holder of Senior Indebtedness or from
any trustee, fiduciary or agent therefor; and, prior to the timely receipt of
any such written notice, the Trustee, subject to the provisions of this Section
11.09, shall be entitled in all respects to assume that no such facts exist.
(b) Subject to the provisions of Section 7.01 hereof, the Trustee
shall be entitled to rely on the delivery to it of a written notice to the
Trustee and the Issuers by a Person representing itself to be a holder of Senior
Indebtedness (or a trustee, fiduciary or agent therefor) to establish that such
notice has been given by a holder of Senior Indebtedness (or a trustee,
fiduciary or agent therefor); provided, however, that failure to give such
notice to the Issuers shall not affect in any way the right of the Trustee to
rely on such notice. In the event that the Trustee determines in good faith that
further evidence is required with respect to the right of any Person as a holder
of Senior Indebtedness to participate in any payment or distribution pursuant to
this Article 11, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article 11, and if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
Section 11.10. Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets of the Issuers
referred to in this Article 11, the Trustee, subject to the provisions of
Section 7.01 hereof, and the Holders shall be entitled to rely upon any order or
decree entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding-up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Holders, for the purpose of ascertaining the
Persons entitled to participate in such payment or distribution, the holders of
Senior Indebtedness and other Indebtedness of the Issuers, the amount thereof or
payable thereon, the
<PAGE> 117
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amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article 11.
Section 11.11. Rights of Trustee as a Holder of Senior Indebtedness;
Preservation of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all
the rights set forth in this Article 11 with respect to any Senior Indebtedness
which may at any time be held by it, to the same extent as any other holder of
Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of
any of its rights as such holder. Nothing in this Article 11 shall apply to
claims of, or payments to, the Trustee under or pursuant to Section 7.07 hereof.
Section 11.12. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall
have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article 11 shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if such Paying Agent
were named in this Article 11 in addition to or in place of the Trustee.
Section 11.13. No Suspension of Remedies.
Nothing contained in this Article 11 shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the maturity of
the Notes pursuant to Article 6 or to pursue any rights or remedies hereunder or
under applicable law, subject to the rights, if any, under this Article 11 of
the holders, from time to time, of Senior Indebtedness.
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts
with another provision which is required to be included in this Indenture by the
TIA, the required provision shall control.
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Section 12.02. Notices.
Except for notice or communications to Holders any notice or
communication shall be given in writing and delivered in person, sent by
facsimile, delivered by commercial courier service or mailed by first-class
mail, postage prepaid, addressed as follows:
If to the Issuers or any Guarantor:
TransWestern Publishing Company LLC
8344 Clairemont Mesa Boulevard
San Diego, California 92111
Attention: Chief Financial Officer
Fax Number: (619) 292-4125
Copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: William S. Kirsch, P.C.
If to the Trustee:
Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, Delaware 10890
Attention: Corporate Trust Administration
Fax Number: (302) 651-8882
Copy to:
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
Attention: Michele D. Ross, Esq.
Fax Number: (212) 715-8000
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Such notices or communications shall be effective when received
and shall be sufficiently given if so given within the time prescribed in this
Indenture.
The Issuers, the Guarantors or the Trustee by written notice to
the others may designate additional or different addresses for subsequent
notices or communications.
Any notice or communication mailed to a Noteholder shall be
mailed to him by first-class mail, postage prepaid, at his address shown on the
register kept by the Registrar.
Failure to mail a notice or communication to a Noteholder or any
defect in it shall not affect its sufficiency with respect to other Noteholders.
If a notice or communication to a Noteholder is mailed in the manner provided
above, it shall be deemed duly given, whether or not the addressee receives it.
In case by reason of the suspension of regular mail service, or
by reason of any other cause, it shall be impossible to mail any notice as
required by this Indenture, then such method of notification as shall be made
with the approval of the Trustee shall constitute a sufficient mailing of such
notice.
Section 12.03. Communications by Holders with Other Holders.
Noteholders may communicate pursuant to TIA Section 312(b) with
other Noteholders with respect to their rights under this Indenture or the
Notes. The Issuers, the Guarantors, the Trustee, the Registrar and anyone else
shall have the protection of TIA Section 312(c).
Section 12.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Issuers or any Guarantor
to the Trustee to take any action under this Indenture, the Issuers or such
Guarantor shall furnish to the Trustee:
(1) an Officers' Certificate (which shall include the statements
set forth in Section 12.05 below) stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
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(2) an Opinion of Counsel (which shall include the statements
set forth in Section 12.05 below) stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
Section 12.05. Statements Required in Certificate and Opinion.
Each certificate and opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, it or he
has made such examination or investigation as is necessary to enable it
or him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
Person, such covenant or condition has been complied with.
Section 12.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by
or meetings of Noteholders. The Registrar and Paying Agent may
make reasonable rules for their functions.
Section 12.07. Business Days; Legal Holidays.
A "Business Day" is a day that is not a Legal Holiday. A "Legal
Holiday" is a Saturday, a Sunday, a federally-recognized holiday or a day on
which banking institutions are not required to be open in the State of New York
or the State of Delaware. If a payment date is a Legal Holiday at a place of
payment, payment may be made at that place on the next succeeding day that is
not a Legal Holiday, and no interest shall accrue for the intervening period.
<PAGE> 121
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Section 12.08. Governing Law.
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE NOTES.
Section 12.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture,
loan, security or debt agreement of the Issuers or any Subsidiary thereof. No
such indenture, loan, security or debt agreement may be used to interpret this
Indenture.
Section 12.10. No Recourse Against Others.
No recourse for the payment of the principal of or premium, if
any, or interest on any of the Notes, or for any claim based thereon or
otherwise in respect thereof, and no recourse under or upon any obligation,
covenant or agreement of the Issuers or any Guarantor in this Indenture or in
any supplemental indenture, or in any of the Notes, or because of the creation
of any Indebtedness represented thereby, shall be had against any stockholder,
officer, director or employee, as such, past, present or future, of the Issuers
or of any successor corporation or against the property or assets of any such
stockholder, officer, employee or director, either directly or through the
Issuers or any Guarantor, or any successor corporation thereof, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly understood that this
Indenture and the Notes are solely obligations of the Issuers and the
Guarantors, and that no such personal liability whatever shall attach to, or is
or shall be incurred by, any stockholder, officer, employee or director of the
Issuers or any Guarantor, or any successor corporation thereof, because of the
creation of the indebtedness hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in this Indenture or the Notes or
implied therefrom, and that any and all such personal liability of, and any and
all claims against every stockholder, officer, employee and director, are hereby
expressly waived and released as a condition of, and as a consideration for, the
execution of this Indenture and the issu-
<PAGE> 122
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ance of the Notes. It is understood that this limitation on recourse is made
expressly for the benefit of any such shareholder, employee, officer or director
and may be enforced by any of them.
Section 12.11. Successors.
All agreements of the Issuers and the Guarantors in this
Indenture and the Notes shall bind their respective successors. All agreements
of the Trustee, any additional trustee and any Paying Agents in this Indenture
shall bind its successor.
Section 12.12. Multiple Counterparts.
The parties may sign multiple counterparts of this Indenture.
Each signed counterpart shall be deemed an original, but all of them together
represent one and the same agreement.
Section 12.13. Table of Contents, Headings, etc.
The table of contents, cross-reference sheet and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
Section 12.14. Separability.
Each provision of this Indenture shall be considered separable
and if for any reason any provision which is not essential to the effectuation
of the basic purpose of this Indenture or the Notes shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
<PAGE> 123
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IN WITNESS WHEREOF, the parties have caused this Indenture to be
duly executed all as of the date and year first written above.
ISSUERS:
TRANSWESTERN PUBLISHING COMPANY LLC
By: /s/ Joan M. Fiorito
----------------------------------------
Name: Joan M. Fiorito
Title: Vice President, Chief
Financial Officer
TWP CAPITAL CORP. II
By: /s/ Joan M. Fiorito
----------------------------------------
Name: Joan M. Fiorito
Title: Vice President, Chief
Financial Officer
GUARANTOR:
TARGET DIRECTORIES OF MICHIGAN, INC.
By: /s/ Joan M. Fiorito
----------------------------------------
Name: Joan M. Fiorito
Title: Vice President, Chief
Financial Officer
WILMINGTON TRUST COMPANY, as Trustee
By: /s/ James D. Nesci
----------------------------------------
Name: James D. Nesci
Title:
<PAGE> 124
EXHIBIT A
[FORM OF FACE OF NOTE]
Number CUSIP
TRANSWESTERN PUBLISHING COMPANY LLC
TWP CAPITAL CORP. II
9 5/8% SENIOR SUBORDINATED NOTE DUE 2007 SERIES C
TransWestern Publishing Company LLC, a Delaware limited
partnership (the "Company", which term includes any successor corporation), and
TWP Capital Corp. II, a Delaware corporation (jointly and severally, together
with the Company, the "Issuers"), for value received promise to pay to or
registered assigns the principal sum of ($ ), on November 15, 2007.
Interest Payment Dates: May 15 and November 15, commencing May
15, 1998
Record Dates: May 1 and November 1
This Note shall not be valid or obligatory for any purpose until
the certificate of authentication shall have been executed by the Trustee by its
manual signature.
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
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<PAGE> 125
IN WITNESS WHEREOF, the Issuers have caused this Note to be
signed manually or by facsimile by their duly authorized Officers.
TRANSWESTERN PUBLISHING COMPANY LLC
By:
----------------------------------------
Name:
Title:
By:
----------------------------------------
Name:
Title:
TWP CAPITAL CORP. II
By:
----------------------------------------
Name:
Title:
By:
----------------------------------------
Name:
Title:
Certificate of Authentication:
This is one of the 9 5/8% Senior
Subordinated Notes due 2007 Series C
referred to in the within-mentioned
Indenture
Dated:
WILMINGTON TRUST COMPANY, as Trustee
By:
------------------------------------
Authorized Signatory
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<PAGE> 126
(REVERSE SIDE)
TRANSWESTERN PUBLISHING COMPANY LLC
TWP CAPITAL CORP. II
9 5/8% SENIOR SUBORDINATED NOTE DUE 2007 SERIES C
1. INTEREST.
TRANSWESTERN PUBLISHING COMPANY LLC, a Delaware limited
partnership (the "Company"), and TWP Capital Corp. II, a Delaware corporation
(together with the Company, the "Issuers"), jointly and severally promise to pay
interest on the principal amount of this Note semiannually on May 15 and
November 15 of each year (each an "Interest Payment Date"), commencing on May
15, 1999, at the rate of 9 5/8% per annum. Interest will be computed on the
basis of a 360-day year of twelve 30-day months. Interest on the Notes will
accrue from the most recent date to which interest has been paid or, if no
interest has been paid, from November 15, 1998.
The Issuers shall pay interest on overdue principal, and on
overdue premium, if any, and overdue interest, to the extent lawful, at the rate
equal to 2% per annum in excess of the rate borne by the Notes.
2. METHOD OF PAYMENT.
The Issuers will pay interest on this Note provided for in
Paragraph 1 above (except defaulted interest) to the person who is the
registered Holder of this Note at the close of business on the May 1 or November
1 preceding the Interest Payment Date (whether or not such day is a Business
Day). The Holder must surrender this Note to a Paying Agent to collect principal
payments. The Issuers will pay principal, premium, if any, and interest in money
of the United States that at the time of payment is legal tender for payment of
public and private debts; provided, however, that the Issuers may pay principal,
premium, if any, and interest by check payable in such money. They may mail an
interest check to the Holder's registered address.
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3. PAYING AGENT AND REGISTRAR.
Initially, Wilmington Trust Company (the "Trustee") will act as
Paying Agent and Registrar. The Issuers may change any Paying Agent or Registrar
without notice to the Holders of the Notes. Neither the Issuers nor any of their
Subsidiaries or Affiliates may act as Paying Agent but may act as Registrar.
4. INDENTURE; RESTRICTIVE COVENANTS.
The Issuers issued this Note under an Indenture dated as of
December 2, 1998 (the "Indenture") among the Issuers, the Guarantors and the
Trustee. The terms of this Note include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939 (15
U.S. Code Sections 77aaa-77bbbb) as in effect on the date of the
Indenture. This Note is subject to all such terms, and the Holder of this Note
is referred to the Indenture and said Trust Indenture Act for a statement of
them. All capitalized terms in this Note, unless otherwise defined, have the
meanings assigned to them by the Indenture.
The Notes are general unsecured obligations of the Issuers
limited to $140,000,000 aggregate principal amount; provided that $100,000,000
of Notes reserved for issuance under the Indenture will be available only in
connection with the exchange of Series B Notes for Exchange Notes (as defined in
the Registration Rights Agreement (as defined herein)). The Indenture imposes
certain restrictions on, among other things, the incurrence of indebtedness, the
incurrence of liens and the issuance of capital stock by Subsidiaries of the
Issuers, mergers and sale of assets, the payments of dividends on, or the
repurchase of, capital stock of the Issuers and their Restricted Subsidiaries,
certain other restricted payments by the Issuers and their Restricted
Subsidiaries, certain transactions with, and investments in, their affiliates,
certain sale and lease-back transactions and a provision regarding
change-of-control transactions.
5. SUBORDINATION.
The Indebtedness evidenced by the Notes is, to the extent and in
the manner provided in the Indenture, subordinated and subject in right of
payment to the prior payment in full of all Senior Indebtedness as defined in
the Indenture, and this Note is issued subject to such provisions. Each Holder
of this Note, by accepting the same, (a) agrees to and
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shall be bound by such provisions, (b) authorizes and directs the Trustee, on
behalf of such Holder, to take such action as may be necessary or appropriate to
effectuate the subordination as provided in the Indenture and (c) appoints the
Trustee attorney-in-fact of such Holder for such purpose; provided, however,
that the Indebtedness evidenced by this Note shall cease to be so subordinate
and subject in right of payment upon any defeasance of this Note referred to in
Paragraph 18 below.
6. OPTIONAL REDEMPTION.
The Issuers, at their option, may redeem the Notes, in whole or
in part, at any time on or after November 15, 2002 upon not less than 30 nor
more than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount), set forth below, together, in each case, with accrued and
unpaid interest to the Redemption Date, if redeemed during the twelve month
period beginning on November 15 of each year listed below:
<TABLE>
Year Redemption Price
---- ----------------
<S> <C>
2002............................................. 104.813%
2003............................................. 103.208%
2004............................................. 101.604%
2005 and thereafter.............................. 100.000%
</TABLE>
Notwithstanding the foregoing, the Issuers may redeem in the
aggregate up to 35% of the original principal amount of Notes at any time and
from time to time prior to November 15, 2000 at a redemption price equal to
109.625% of the aggregate principal amount so redeemed, plus accrued interest to
the Redemption Date out of the Net Proceeds of one or more Public Equity
Offerings; provided that at least 65% of the original principal amount of Notes
(including any Exchange Notes) remain outstanding immediately after the
occurrence of any such redemption and that any such redemption occurs within 90
days following the closing of any such Public Equity Offering.
7. NOTICE OF REDEMPTION.
Notice of redemption will be mailed via first class mail at least
30 days but not more than 60 days prior to the redemption date to each Holder of
Notes to be redeemed at its registered address as it shall appear on the
register of the Notes maintained by the Registrar. On and after any Redemption
Date, interest will cease to accrue on the Notes or portions
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thereof called for redemption unless the Issuers shall fail to redeem any such
Note.
8. OFFERS TO PURCHASE.
The Indenture requires that certain proceeds from Asset Sales be
used, subject to further limitations contained therein, to make an offer to
purchase certain amounts of Notes in accordance with the procedures set forth in
the Indenture. The Issuers are also required to make an offer to purchase Notes
upon the occurrence of a Change of Control in accordance with procedures set
forth in the Indenture.
9. REGISTRATION RIGHTS.
Pursuant to the Registration Rights Agreement among the Issuers,
First Union Capital Markets, CIBC Oppenheimer Corp. and BancBoston Robertson
Stephens Inc., as initial purchasers of the Notes, the Issuers will be obligated
to consummate an exchange offer pursuant to which the Holder of this Note shall
have the right to exchange this Note for Notes of a separate series issued under
the Indenture (or a trust indenture substantially identical to the Indenture in
accordance with the terms of the Registration Rights Agreement) which have been
registered under the Securities Act, in like principal amount and having
substantially identical terms as the Notes. The Holders shall be entitled to
receive certain additional interest payments in the event such exchange offer is
not consummated and upon certain other conditions, all pursuant to and in
accordance with the terms of the Registration Rights Agreement.
10. DENOMINATIONS, TRANSFER, EXCHANGE.
The Notes are in registered form without coupons in denominations
of $1,000 and integral multiples thereof. A Holder may register the transfer or
exchange of Notes in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not register the transfer of or exchange any Note
selected for redemption or register the transfer of or exchange any Note for a
period of 15 days before the mailing of notice of redemption of Notes to be
redeemed or any Note after it is called for redemption in whole or in part,
except the unredeemed portion of any Note being redeemed in part.
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11. PERSONS DEEMED OWNERS.
The registered Holder of this Note may be treated as the owner of
it for all purposes.
12. UNCLAIMED MONEY.
If money for the payment of principal, premium or interest on any
Note remains unclaimed for two years, the Trustee or Paying Agent will pay the
money back to the Issuers at their written request. After that, Holders entitled
to money must look to the Issuers for payment as general creditors unless an
"abandoned property" law designates another person.
13. AMENDMENT, SUPPLEMENT AND WAIVER.
Subject to certain exceptions, the Indenture or the Notes may be
modified, amended or supplemented by the Issuers, the Guarantors and the Trustee
with the consent of the Holders of at least a majority in principal amount of
the Notes then outstanding and any existing default or compliance with any
provision may be waived in a particular instance with the consent of the Holders
of a majority in principal amount of the Notes then outstanding. Without the
consent of Holders, the Issuers, the Guarantors and the Trustee may amend the
Indenture or the Notes or supplement the Indenture for certain specified
purposes including providing for uncertificated Notes in addition to
certificated Notes, and curing any ambiguity, defect or inconsistency, or making
any other change that does not materially and adversely affect the rights of any
Holder.
14. SUCCESSOR ENTITY.
When a successor corporation assumes all the obligations of its
predecessor under the Notes and the Indenture and immediately before and
thereafter no Default exists and certain other conditions are satisfied, the
predecessor corporation will be released from those obligations.
15. DEFAULTS AND REMEDIES.
Events of Default are set forth in the Indenture. If an Event of
Default (other than an Event of Default pursuant to Section 6.01(6) or (7) of
the Indenture with respect to either of the Issuers) occurs and is continuing,
the Trustee by notice to the Issuers, or the Holders of not less than 25% in
aggregate principal amount of the Notes then outstanding, may de-
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clare to be immediately due and payable the entire principal amount of all the
Notes then outstanding plus accrued but unpaid interest to the date of
acceleration and (i) such amounts shall become immediately due and payable or
(ii) if there are any amounts outstanding under or in respect of the Senior
Credit Facility, such amounts shall become due and payable upon the first to
occur of an acceleration of amounts outstanding under or in respect of the
Senior Credit Facility or five Business Days after receipt by the Company and
the Representative of notice of the acceleration of the Notes; provided,
however, that after such acceleration but before judgment or decree based on
such acceleration is obtained by the Trustee, the Holders of a majority in
aggregate principal amount of the outstanding Notes may, under certain
circumstances, rescind and annul such acceleration and its consequences if all
existing Events of Default, other than the nonpayment of principal, premium or
interest that has become due solely because of the acceleration, have been cured
or waived and if the rescission would not conflict with any judgment or decree.
No such rescission shall affect any subsequent Default or impair any right
consequent thereto. In case an Event of Default specified in Section 6.01(6) or
(7) of the Indenture with respect to either of the Issuers occurs, such
principal amount, together with premium, if any, and interest with respect to
all of the Notes, shall be due and payable immediately without any declaration
or other act on the part of the Trustee or the Holders of the Notes.
16. TRUSTEE DEALINGS WITH THE ISSUERS
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for the
Issuers, any Guarantor or their Affiliates, and may otherwise deal with the
Issuers any Guarantor or their Affiliates, as if it were not Trustee.
17. NO RECOURSE AGAINST OTHERS.
As more fully described in the Indenture, a director, officer,
employee or stockholder, as such, of the Issuers or any Guarantor shall not have
any liability for any obligations of the Issuers or any Guarantor under the
Notes or the Indenture or for any claim based on, in respect or by reason of,
such obligations or their creation. The Holder of this Note by accepting this
Note waives and releases all such liability. The waiver and release are part of
the consideration for the issuance of this Note.
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18. DEFEASANCE AND COVENANT DEFEASANCE.
The Indenture contains provisions for defeasance of the entire
indebtedness on this Note and for defeasance of certain covenants in the
Indenture upon compliance by the Issuers with certain conditions set forth in
the Indenture.
19. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Holder of a
Note or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants
by the entireties), JT TEN (joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (Uniform Gifts to Minors
Act).
20. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on
Uniform Note Identification Procedures, the Issuers have caused CUSIP Numbers to
be printed on the Notes and have directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Holders of the Notes. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification numbers placed thereon.
21. GOVERNING LAW.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED
WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF
THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS NOTE.
THE ISSUERS WILL FURNISH TO ANY HOLDER OF A NOTE UPON WRITTEN
REQUEST AND WITHOUT CHARGE A COPY OF THE INDENTURE. REQUESTS MAY BE MADE TO:
TRANSWESTERN PUBLISHING COMPANY LLC, 8344 Clairemont Mesa Boulevard, San Diego,
California 92111, Attention: Executive Vice President - Chief Financial Officer.
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22. GUARANTEES BY SUBSIDIARIES.
The Notes will be entitled to the benefits of certain Guarantees
by subsidiaries made for the benefit of the Holders. Reference is hereby made to
the Indenture for a statement of the respective rights, limitations of rights,
duties and obligations thereunder of the Guarantors, the Trustee and the
Holders.
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ASSIGNMENT
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Agent to transfer this Note on the books of the Company. The Agent may
substitute another to act for him.
Date: Your Signature:
-------------- -------------------------------------
(Sign exactly as your name appears
on the other side of this Note)
Signature Guarantee:
-------------------------------
<PAGE> 135
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Note
purchased by the Company pursuant to Section 4.10 or Section 4.19 of the
Indenture, check the appropriate box:
[ ] Section 4.10 [ ] Section 4.19
If you want to have only part of the Note purchased by the
pursuant to Section 4.10 or Section 4.19 of the Indenture, state the amount you
elect to have purchased:
$
------------------------
Date: Your Signature:
-------------- -------------------------------------
(Sign exactly as your name appears
on the other side of this Note)
- -------------------------------
Signature Guaranteed
<PAGE> 136
EXHIBIT B
[FORM OF LEGEND FOR 144A NOTE]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS
SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER AGREES THAT IT WILL NOT
PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") THAT IS TWO YEARS
AFTER THE LATER OF THE ORIGINAL ISSUE DATE OF THIS NOTE AND THE LAST DATE ON
WHICH THE ISSUERS OR ANY AFFILIATE OF THE ISSUERS, WAS THE OWNER OF THIS NOTE
(OR ANY PREDECESSOR OF SUCH NOTE), RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT
(A) TO AN ISSUER OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT, (C) INSIDE THE UNITED STATES TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE ACT, (D)
INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE
COMPANY AND THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF
WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (E) OUTSIDE THE UNITED STATES IN
AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE ACT OR (F)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE ACT
(IF AVAILABLE) AND (2) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS NOTE
IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THIS NOTE PRIOR TO THE RESALE RESTRICTION
TERMINATION DATE, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE
HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS
OF THE ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES"
AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE ACT.
B-1
<PAGE> 137
[FORM OF ASSIGNMENT FOR 144A NOTE]
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Agent to transfer this Note on the books of the Issuers. The Agent may
substitute another to act for him.
[Check One]
[ ] (a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act provided by
Rule 144A thereunder.
or
[ ] (b) this Note is being transferred other than in accordance
with (a) above and documents are being furnished which comply
with the conditions of transfer set forth in this Note and the
Indenture.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the Holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Sections 2.16 and 2.17 of the Indenture shall have been
satisfied.
Date: Your Signature:
-------------- -------------------------------------
(Sign exactly as your name appears
on the other side of this Note)
Signature Guarantee:
-------------------------------
B-2
<PAGE> 138
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Issuers as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated:
-------------------- ------------------------------------------
NOTICE: To be executed by an
executive officer
B-3
<PAGE> 139
EXHIBIT C
[FORM OF LEGEND FOR REGULATION S NOTE]
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, UNLESS SO
REGISTERED, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR
THE ACCOUNT OR BENEFIT OF, U.S. PERSONS UNLESS REGISTERED UNDER THE SECURITIES
ACT OR EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
C-1
<PAGE> 140
[FORM OF ASSIGNMENT FOR REGULATION S NOTE]
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Agent to transfer this Note on the books of the Issuers. The Agent may
substitute another to act for him.
[Check One]
[ ] (a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act provided by
Rule 144A thereunder.
or
[ ] (b) this Note is being transferred other than in accordance
with (a) above and documents are being furnished which comply
with the conditions of transfer set forth in this Note and the
Indenture.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the Holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Sections 2.16 and 2.17 of the Indenture shall have been
satisfied.
Date: Your Signature:
-------------- -------------------------------------
(Sign exactly as your name appears
on the other side of this Note)
Signature Guarantee:
-------------------------------
C-2
<PAGE> 141
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing
this Note for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Issuers as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated:
-------------------- ------------------------------------------
NOTICE: To be executed by an
executive officer
C-3
<PAGE> 142
EXHIBIT D
[FORM OF LEGEND FOR GLOBAL NOTE]
Any Global Note authenticated and delivered hereunder shall bear
a legend (which would be in addition to any other legends required in the case
of a Restricted Note or Regulation S Note) in substantially the following form:
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES REGISTERED IN
THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS NOTE
(OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF
THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (A NEW YORK CORPORATION) ("DTC")
TO THE ISSUERS OR THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
IN SUCH OTHER NAME AS IT REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
D-1
<PAGE> 143
EXHIBIT E
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
_________, _____
Attention:
Re: TRANSWESTERN PUBLISHING COMPANY LLC (the "Company") and TWP
CAPITAL CORP. II (together with the Company, the "Issuers") 9
5/8% Senior Subordinated Notes due 2007 Series C (the "Notes")
Dear Sirs:
In connection with our proposed purchase of Notes, we confirm
that:
1. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the
Indenture dated as of November 12, 1997 relating to the Notes and we
agree to be bound by, and not to resell, pledge or otherwise transfer
the Notes except in compliance with, such restrictions and conditions
and the Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the Notes have not been registered under
the Securities Act, and that the Notes may not be offered, sold, pledged
or otherwise transferred except as permitted in the following sentence.
We agree, on our own behalf and on behalf of any accounts for which we
are acting as hereinafter stated, that if we should sell any Notes, we
will do so only (i) to an Issuer or any subsidiary thereof, (ii)
pursuant to an effective registration statement under the Securities
Act, (iii) in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined in Rule 144A), (iv) to an
institutional "accredited investor" (as defined below) that, prior to
such transfer, furnishes (or has
E-1
<PAGE> 144
furnished on its behalf by a U.S. broker-dealer) to you a signed letter
containing certain representations and agreements relating to the
restrictions on transfer of the Notes, (v) outside the United States to
persons other than U.S. persons in offshore transactions meeting the
requirements of Rule 904 of Regulation S under the Securities Act, or
(vi) pursuant to any other exemption from registration under the
Securities Act (if available), and we further agree to provide to any
person purchasing any of the Notes from us a notice advising such
purchaser that resales of the Notes are restricted as stated herein.
3. We understand that, on any proposed resale of any Notes, we
will be required to furnish to you and the Issuers such certifications,
legal opinions and other information as you and the Issuers may
reasonably require to confirm that the proposed sale complies with the
foregoing restrictions. We further understand that the Notes purchased
by us will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act) and have such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of our
investment in the Notes, and we and any accounts for which we are acting
each are able to bear the economic risk of our or their investment, as
the case may be.
5. We are acquiring the Notes purchased by us for our account or
for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
You and the Issuers are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:
-------------------------------------
Authorized Signature
E-2
<PAGE> 145
EXHIBIT F
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
_________, _____
Attention:
Re: TRANSWESTERN PUBLISHING COMPANY LLC (the "Company") and TWP
CAPITAL CORP. II (together with the Company, the "Issuers") 9
5/8% Senior Subordinated Notes due 2007 Series C (the "Notes")
Dear Sirs:
In connection with our proposed sale of $__________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a U.S. person or to a
person in the United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the
United States, or (b) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
prearranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United
States in contravention of the requirements of Rule 903(b) or Rule
904(b) of Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
F-1
<PAGE> 146
(5) we have advised the transferee of the transfer restrictions
applicable to the Notes.
You and the Issuers are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferee]
By:
-------------------------------------
Authorized Signature
F-2
<PAGE> 147
EXHIBIT G
[FORM OF GUARANTEE]
The undersigned (the "Guarantor") hereby unconditionally
guarantees, on a senior subordinated basis, jointly and severally with all other
guarantors under the Indenture dated as of December 2, 1998 by and among
TransWestern Publishing Company LLC, a Delaware limited partnership (the
"Company"), TWP Capital Corp. II, a Delaware corporation ("Capital" and,
together with the Company, the "Issuers"), the Guarantors named therein and
Wilmington Trust Company, as trustee (as amended, restated or supplemented from
time to time, the "Indenture"), to the extent set forth in the Indenture and
subject to the provisions of the Indenture, (a) the due and punctual payment of
the principal of and premium, if any, and interest on the Notes, whether at
maturity, by acceleration or otherwise, the due and punctual payment of interest
on overdue principal of, and premium, if any, and interest on the Notes, to the
extent lawful, and the due and punctual performance of all other obligations of
the Issuers to the Noteholders or the Trustee, all in accordance with the terms
set forth in Article 10 of the Indenture, and (b) in case of any extension of
time of payment or renewal of any Notes or any of such other obligations, that
the same will be promptly paid in full when due or performed in accordance with
the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise.
The obligations of the Guarantor to the Noteholders and to the
Trustee pursuant to this Guarantee and the Indenture are expressly set forth in
Article 10 of the Indenture and reference is hereby made to the Indenture for
the precise terms and limitations of this Guarantee.
Guarantor
By:
-------------------------------------
Name:
Title:
G-1
<PAGE> 1
EXHIBIT 4.7
================================================================================
SECURITIES PURCHASE AGREEMENT
by and among
TRANSWESTERN PUBLISHING COMPANY LLC,
TWP CAPITAL CORP. II,
TRANSWESTERN HOLDINGS L.P.,
TRANSWESTERN COMMUNICATIONS COMPANY, INC.,
TARGET DIRECTORIES OF MICHIGAN, INC.
and
THE INITIAL PURCHASERS NAMED HEREIN
FIRST UNION CAPITAL MARKETS,
CIBC OPPENHEIMER CORP.,
BANCBOSTON ROBERTSON STEPHENS INC.
Dated as of November 24, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions......................................................................1
SECTION 1.2. Accounting Terms; Financial Statements...........................................5
ARTICLE II
ISSUE OF NOTES; PURCHASE AND SALE
OF NOTES; RIGHTS OF HOLDERS OF NOTES;
OFFERING BY INITIAL PURCHASERS
SECTION 2.1. Issue of Notes...................................................................5
SECTION 2.2. Purchase, Sale and Delivery of Notes.............................................6
SECTION 2.3. Registration Rights of Holders of Notes..........................................7
SECTION 2.4. Offering by the Initial Purchasers...............................................7
ARTICLE III
REPRESENTATIONS AND WARRANTIES; RESALE OF NOTES
SECTION 3.1 Representations and Warranties of the Issuers....................................7
SECTION 3.2. Resale of Notes.................................................................22
ARTICLE IV
CONDITIONS PRECEDENT TO CLOSING
SECTION 4.1. Conditions Precedent to Obligations of the Initial Purchasers...................22
SECTION 4.2. Conditions Precedent to Obligations of the Issuers..............................24
ARTICLE V
COVENANTS
SECTION 5.1. Covenants of the Issuers........................................................25
ARTICLE VI
FEES
SECTION 6.1. Costs, Expenses and Taxes.......................................................27
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VII
INDEMNITY
SECTION 7.1. Indemnity.......................................................................28
SECTION 7.2 Contribution....................................................................31
SECTION 7.3. Registration Rights Agreement...................................................33
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Survival of Provisions..........................................................33
SECTION 8.2. Termination.....................................................................33
SECTION 8.3. No Waiver; Modifications in Writing.............................................34
SECTION 8.4. Information Supplied by the Initial Purchasers..................................35
SECTION 8.5. Communications..................................................................35
SECTION 8.6. Execution in Counterparts.......................................................36
SECTION 8.7. Successors......................................................................36
SECTION 8.8. Governing Law...................................................................36
SECTION 8.9. Severability of Provisions......................................................36
SECTION 8.10. Headings........................................................................37
</TABLE>
-ii-
<PAGE> 4
SECURITIES PURCHASE AGREEMENT, dated as of November 24, 1998
(the "Agreement"), among TRANSWESTERN PUBLISHING COMPANY LLC, a Delaware limited
liability company (the "Company"), TWP CAPITAL CORP. II, a Delaware corporation
("Capital" and together with the Company, the "Issuers"), TRANSWESTERN HOLDINGS
L.P., a Delaware limited partnership ("Holdings"), TRANSWESTERN COMMUNICATIONS
COMPANY, INC., a Delaware corporation and the manager of the Company and the
general partner of Holdings ("Communications"), TARGET DIRECTORIES OF MICHIGAN,
INC., a Michigan corporation and a wholly-owned subsidiary of the Company (the
"Guarantor")and FIRST UNION CAPITAL MARKETS ("First Union"), CIBC OPPENHEIMER
CORP. ("CIBC") and BancBoston Robertson Stephens Inc. ("BancBoston") (the
"Initial Purchasers").
In consideration of the mutual covenants and agreements set
forth herein and for good and valuable consideration, the receipt of which is
hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. As used in this Agreement, and
unless the context requires a different meaning the following terms have the
meanings indicated:
"Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder.
"Affiliate" of any specified Person means any other Person
which directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control such specified Person. For purposes of
this definition, "control" (including with correlative meanings, the terms
"controlling", "controlled by" and "under common control with"), as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by agreement or
otherwise.
"Agreement" means this Agreement, as the same may be amended,
supplemented or modified in accordance with the terms hereof and in effect.
<PAGE> 5
-2-
"Basic Documents" means, collectively, the Indenture, the
Notes, the Guarantee, the Registration Rights Agreement and this Agreement.
"Capital Stock" means, with respect to any Person, any and all
shares or other equivalents (however designated) of capital stock, partnership
interests or any other participation, right or other interest in the nature of
an equity interest in such Person or any option, warrant or other security
convertible into or exercisable for any of the foregoing.
"Closing" has the meaning provided therefor in Section 2.2 of
this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission or
any similar agency then having jurisdiction to en force the Act.
"Commonly Controlled Entity" has the meaning provided therefor
in Section 3.1(z) of this Agreement.
"Default" means any event, act or condition which, with notice
or lapse of time or both, would constitute an Event of Default.
"Employee Benefit Plan" has the meaning provided therefor in
Section 3.1(z) of this Agreement.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, together with all rules and regulations
promulgated pursuant thereto, as amended from time to time.
"Event of Default" means any event defined as an Event of
Default in the Indenture.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.
"Exchange Act Reports" has the meaning provided therefor in
Section 2.1 of this Agreement.
"Exchange Notes" shall have the meaning provided therefor in
the Registration Rights Agreement.
<PAGE> 6
-3-
"Facilities" means any and all real property (including
without limitation, all buildings, fixtures or other improvements located
thereon) now, hereafter or heretofore owned, leased, operated or used by the
Issuers, Holdings and Communications or any of their respective predecessors in
interest.
"Guarantee" has the meaning provided therefor in Section 2.1
of this Agreement.
"Guarantor" has the meaning set forth in the introductory
paragraph to this Agreement.
"Indemnified Party" has the meaning provided therefor in
Section 7.1(c) of this Agreement.
"Indemnifying Party" has the meaning provided therefor in
Section 7.1(c) of this Agreement.
"Indenture" means the indenture dated as of December 2, 1998
among the Issuers, the Guarantor and Wilmington Trust Company, as Trustee, under
which the Notes will be issued.
"Initial Purchasers" has the meaning set forth in the
introductory paragraph to this Agreement.
"Intellectual Property Rights" has the meaning provided
therefor in Section 3.1(r) of this Agreement.
"Lien" means, with respect to any property or assets of any
Person, any mortgage or deed of trust, pledge, hypothecation, assignment,
deposit arrangement (other than advance payments or customer deposits for goods
and services sold by Holdings or the Company in the ordinary course of
business), security interest, lien, charge, easement, encumbrance, preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including
without limitation, any Capitalized Lease Obligations (as defined in the
Indenture)), conditional sales, or other title retention agreement having
substantially the same economic effect as any of the foregoing.
"Material Adverse Effect" means (i) a material adverse effect
on the business, assets, condition (financial or otherwise), results of
operations or properties of the Issuers and Communications, taken as a whole, or
(ii) a material ad-
<PAGE> 7
-4-
verse effect on the legality, validity, binding effect or enforceability of this
Agreement or the Basic Documents.
"Memorandum" has the meaning provided therefor in Section 2.1
of this Agreement.
"Notes" means the 9 5/8% Senior Subordinated Notes due 2007,
Series C of the Issuers.
"Offering" means the offering of the Notes pursuant to the
Memorandum.
"Offering Materials" has the meaning provided therefor in
Section 7.1 of this Agreement.
"Offering Memorandum" has the meaning provided therefor in
Section 2.1 of this Agreement.
"Partnership Interest" means any general or limited
partnership interest and any interest as a member of a limited liability company
or a limited liability partnership.
"Person" means any individual, corporation, partnership,
limited liability company, joint venture, joint-stock company, trust,
unincorporated organization or association or government (including any agency
or political subdivision thereof).
"PORTAL" means the Private Offering Resales, and Trading
through Automated Linkages Market.
"Private Exchange Notes" has the meaning provided therefor in
the Registration Rights Agreement.
"Proceeding" has the meaning provided therefor in Section
7.1(c) of this Agreement.
"QIB" has the meaning provided therefor in Section 3.2 of this
Agreement.
"Registration Rights Agreement" means the registration rights
agreement among the Issuers, the Guarantor and the Initial Purchasers relating
to the Notes.
"Regulation S" means Regulation S under the Act.
<PAGE> 8
-5-
"State" means each of the states of the United States, the
District of Columbia and the Commonwealth of Puerto Rico.
"State Commission" means any agency of any State having
jurisdiction to enforce such States securities laws.
"tax" has the meaning provided therefor in Section 3.1(x) of
this Agreement.
"Taxpayers" has the meaning provided therefor in Section
3.1(x) of this Agreement.
"Third Amended Partnership Agreement" has the meaning provided
therefor in Section 3.1(c) of this Agreement.
"Time of Purchase" has the meaning provided therefor in
Section 2.2 of this Agreement.
"TransWestern Delivered Documents" has the meaning provided
therefor in Section 3.1(e) of this Agreement.
"Trust Indenture Act" means the Trust indenture Act of 1939,
as amended, and the rules and regulations of the Commission thereunder.
SECTION 1.2. Accounting Terms; Financial Statements. All
accounting terms used herein not expressly defined in this Agreement shall have
the respective meanings given to them in accordance with sound accounting
practice. The term "sound accounting practice" shall mean such accounting
practice as, in the opinion of the independent accountants regularly retained by
the Company, conforms at the time to generally accepted accounting principles in
the United States applied on a consistent basis except for changes with which
such accountants concur. All determinations to which accounting principles apply
shall be made in accordance with sound accounting practice.
ARTICLE II
ISSUE OF NOTES; PURCHASE AND SALE
OF NOTES; RIGHTS OF HOLDERS OF NOTES;
OFFERING BY INITIAL PURCHASERS
SECTION 2.1. Issue of Notes. The Company and Capital have
authorized the issuance of $40,000,000 aggregate prin-
<PAGE> 9
-6-
cipal amount of the Notes which are to be issued pursuant to the Indenture. Each
Note will be substantially in the form of the Note set forth as Exhibit A to the
Indenture.
The obligations of the Company under the Indenture and the
Notes will be unconditionally guaranteed (the "Guarantee"), on a senior
subordinated basis, by the Guarantor. The Guarantee will be substantially in the
form of the Guarantee as set forth in the Indenture.
The Notes will be offered and sold to the Initial Purchasers
without being registered under the Act, in reliance on exemptions therefrom.
In connection with the sale of the Notes, the Issuers have
prepared an offering memorandum dated November 24, 1998 (the "Offering
Memorandum"), which includes as exhibits thereto the Company's Annual Report on
Form 10-K for the fiscal year ended April 30, 1998, Quarterly Report on Form
10-Q filed on November 16, 1998 for the fiscal period ended September 30, 1998,
Current Report on Form 8-K dated May 1, 1998 and Current Report on Form 8-K
dated November 24, 1998 (collectively, the "Exchange Act Reports," and together
with the Offering Memorandum, the "Memorandum"), setting forth or including a
description of the terms of the Notes, the terms of the Offering a description
of the Issuers and any material developments relating to the Issuers occurring
after the date of the most recent financial statements included therein.
SECTION 2.2. Purchase, Sale and Delivery of Notes. On the
basis of the representations, warranties, agreements and covenants herein
contained and subject to the terms and conditions herein set forth, the Issuers
agree that they will sell to each Initial Purchaser, and each Initial Purchaser
agrees, acting severally and not jointly, that it will purchase from the Issuers
at the Time of Purchase, the principal amount of the Notes set forth opposite
the name of such Initial Purchaser on Schedule I hereto at a price equal to
102.5% of the principal amount thereof.
The purchase, sale and delivery of the Notes will take place
at a closing (the "Closing") at the offices of Cahill Gordon & Reindel, 80 Pine
Street, New York, New York 10005, at 9:00 A.M., New York time, on December 2,
1998, or such later date and time, if any, as the Initial Purchasers and the
Company shall agree. The time at which such Closing is concluded is herein
called the "Time of Purchase."
<PAGE> 10
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One or more certificates in definitive form for the Notes that
the Initial Purchasers have agreed to purchase hereunder, and in such
denomination or denominations and registered in such name or names as the
Initial Purchasers request upon notice to the Company at least 24 hours prior to
the Closing shall be delivered by or on behalf of the Issuers to the Initial
Purchasers, against payment by or on behalf of the Initial Purchasers of the
purchase price therefor by wire transfer of immediately available funds wired in
accordance with the written instructions of the Company. The Issuers will make
such certificate or certificates for the Notes available for checking and
packaging by the Initial Purchasers at the offices of CIBC or First Union, or
such other place as CIBC and First Union may designate, at least 24 hours prior
to the Closing.
SECTION 2.3. Registration Rights of Holders of Notes. The
Initial Purchasers and their direct and indirect transferees of the Notes will
have such rights with respect to the registration thereof under the Act and
qualification of the Indenture under the Trust Indenture Act as are set forth in
the Registration Rights Agreement.
SECTION 2.4 Offering by the Initial Purchasers. The Initial
Purchasers propose to make an offering of the Notes at the price and upon the
terms set forth in the Memorandum, as soon as practicable after this Agreement
is entered into and as in the judgment of the Initial Purchasers is advisable.
ARTICLE III
REPRESENTATIONS AND WARRANTIES; RESALE OF NOTES
SECTION 3.1 Representations and Warranties of the Issuers. The
Company, Capital, Communications and the Guarantor jointly and severally
represent and warrant to and agree with each of the Initial Purchasers as
follows:
(a) Memorandum. The Memorandum, as of its date does not, and
at the Time of Purchase will not, contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading except that the representations and
warranties set forth in this Section 3.1(a) do not apply to statements
or omissions made in reliance upon and in conformity with information
relating to the Initial Purchasers fur-
<PAGE> 11
-8-
nished to the Company in writing by the Initial Purchasers expressly
for use in the Memorandum or any amendment or supplement thereto as set
forth in Section 8.4 hereof. The statistical and market-related data
included in the Memorandum are based on or derived from sources which
the Issuers and Holdings believe to be reliable and accurate or
represents the Issuers' and Holdings good faith estimates that are made
on the basis of data derived from such sources. The Notes, the
Indenture and the Registration Rights Agreement conform in all material
respects to the description thereof in the Memorandum.
(b) Financial Statements. The audited financial statements of
the Company set forth in the Memorandum are in accordance with the
books and records of the Company, fairly present in all material
respects the financial position, results of operations, member deficit
and cash flows of the Company at the dates and for the periods to which
they relate and have been prepared in accordance with generally
accepted accounting principles consistently applied (except as
otherwise stated therein); the unaudited financial statements of the
Company set forth in the Memorandum were prepared in a manner
consistent with the Company's historical practices and in the
reasonable judgment of management fairly present in all material
respects the financial position and results of operations of the
Company at the date and for the period to which they relate, subject
only to year end adjustments, the absence of footnote disclosures and
adjustment required by generally accepted accounting principles; the
summary financial data in the Memorandum present fairly the financial
information shown therein and have been prepared and compiled on a
basis consistent with audited and unaudited financial statements
included therein, except as otherwise stated therein; and the adjusted
and pro forma financial information included in the Memorandum have
been prepared using reasonable assumptions and have been prepared in
accordance with the applicable requirements of the Act, and the
adjustments used therein are appropriate to give effect to the
transactions or circumstances referred to therein. Ernst & Young LLP,
which has reported upon the audited financial statements included in
the Memorandum, is an independent public accounting firm as required by
the Act and the rules and regulations thereunder.
(c) Organization. The Company is a limited liability company
duly organized, validly existing and in good standing under the laws of
the State of Delaware and has
<PAGE> 12
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the power and authority to carry on its business as now being conducted
and to own and operate the properties and assets now owned and being
operated by it. The Company has delivered to the Initial Purchasers
complete and correct copies of its Certificate of Formation and Limited
Liability Company Agreement (the "LLC Agreement") as in effect on the
date hereof.
Holdings is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of Delaware
and has the power and authority to carry on its business as now being
conducted and to own and operate the properties and assets now owned
and being operated by it. Holdings has delivered to the Initial
Purchasers complete and correct copies of its Certificate of Limited
Partnership and the Third Amended and Restated Agreement of Limited
Partnership, as amended as of November 4, 1997 (the "Third Amended
Partnership Agreement") as in effect on the date hereof. Holdings is
duly qualified or licensed to do business and is in good standing in
each jurisdiction in which such qualification is necessary under the
applicable law as a result of the conduct of its business or the
ownership of its properties except where the failure to be so
qualified, licensed or in good standing does not have a Material
Adverse Effect.
The Guarantor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Michigan
and has the corporate power and authority to carry on its business as
now being conducted and to own and operate the properties and assets
now owned and being operated by it. The Guarantor has delivered to the
Initial Purchasers complete and correct copies of its Certificate of
Incorporation and By-Laws as in effect on the date hereof. The
Guarantor is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which such qualification is necessary
under the applicable law except where the failure to be so qualified,
licensed or in good standing does not have a Material Adverse Effect.
(d) Capitalization; Equity Ownership. As of the Time of
Purchase (after giving effect to the Offering), the Company will have
the capitalization as set forth in the Memorandum, except as otherwise
noted therein, the authorized capital stock of Capital will consist of
1,000 shares of its common stock (all of which will be issued and
outstanding and owned and held by the Company), Hold-
<PAGE> 13
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ings will have the capitalization as set forth in the Memorandum and
the authorized capital stock of Communications will consist of 30,000
shares of its common stock (9,800.05 of which will be issued and
outstanding); except as described in the Memorandum, all of the issued
and outstanding securities of the Company, Holdings and Communications
have been duly authorized and validly issued and are fully paid and
non-assessable and none of them have been issued in violation of any
preemptive or other right; all of the outstanding shares of the
Guarantor are owned by the Company; and, except as contemplated in this
Agreement or the other agreements, instruments or documents delivered
in connection with the transactions contemplated hereby, neither the
Company, Holdings, Capital, Communications nor the Guarantor is a party
to or bound by any contract, agreement or arrangement to issue, sell or
otherwise dispose of or redeem, purchase or otherwise acquire any
Capital Stock, Partnership Interest or any other security of the
Company, Holdings, Capital, Communications or the Guarantor or any
other security exercisable or exchangeable for or convertible into any
Capital Stock, Partnership Interest or any other security of the
Company, Holdings, Capital, Communications or the Guarantor.
(e) Authority. The Company, Holdings, Capital, Communications
and the Guarantor have the power to enter into the Basic Documents (to
the extent a party thereto) and all other agreements, instruments and
documents executed and delivered by the Company, Holdings, Capital,
Communications or the Guarantor pursuant thereto (collectively, the
"TransWestern Delivered Documents") and to carry out their respective
obligations thereunder, including without limitation issuing the Notes
in the manner and for the purpose contemplated by this Agreement. The
execution, delivery and performance of the TransWestern Delivered
Documents and the consummation of the transactions contemplated thereby
have been duly authorized by the Company, Holdings, Capital,
Communications and the Guarantor (to the extent a party thereto), and
no other proceeding or approval on the part of the Company, Holdings,
Capital, Communications and the Guarantor is necessary to authorize the
execution and delivery of the TransWestern Delivered Documents or the
performance of any of the transactions contemplated thereby.
(f) Purchase Agreement. This Agreement has been duly
authorized, executed and delivered by the Issuers, Holdings,
Communications and the Guarantor and (assuming
<PAGE> 14
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the due authorization, execution and delivery thereof by the Initial
Purchasers), is a valid and legally binding agreement of the Issuers,
Holdings, Communications and the Guarantor, enforceable against each of
them in accordance with its terms except (i) that the enforcement
hereof may be subject to bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws now or
hereafter in effect relating to creditors, rights generally, and to
general principles of equity and the discretion of the court before
which any proceeding therefor may be brought and (ii) as any rights to
indemnity or contribution hereunder may be limited by federal and state
securities laws and public policy considerations.
(g) Indenture. The Indenture has been duly authorized by the
Issuers and the Guarantor and, when executed and delivered by the
Issuers and the Guarantor (assuming the due authorization, execution
and delivery thereof by the Trustee), will constitute a valid and
legally binding agreement of the Issuers and the Guarantor, enforceable
against each of them in accordance with its terms except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights generally and
(ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought.
(h) Registration Rights Agreement. The Registration Rights
Agreement has been duly authorized by the Issuers and the Guarantor
and, when executed and delivered by the Issuers and the Guarantor
(assuming the due authorization, execution and delivery thereof by the
Initial Purchasers), will constitute a valid and legally binding
agreement of the Issuers and the Guarantor, enforceable against each of
them in accordance with its terms except (i) that the enforcement
thereof may be subject to bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally, and to
general principles of equity and the discretion of the court before
which any proceeding therefor may be brought and (ii) as any rights to
indemnity or contribution thereunder may be limited by federal and
state securities laws and public policy considerations.
(i) Notes. The Notes, the Exchange Notes and the Private
Exchange Notes have each been duly authorized by
<PAGE> 15
-12-
the Issuers and, when executed by the Issuers and authenticated by the
Trustee in accordance with the provisions of the Indenture and, in the
case of the Notes, delivered to and paid for by the Initial Purchasers
in accordance with the terms of this Agreement, will be entitled to the
benefits of the Indenture and will constitute valid and legally binding
obligations of the Issuers enforceable in accordance with their terms,
except that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally, and (ii) general principles of equity and the discretion of
the court before which any proceeding therefor may be brought.
(j) Guarantee. The Guarantee has been duly authorized by the
Guarantor and, when executed by the Guarantor in accordance with the
provisions of the Indenture and, when the Notes are executed by the
Company and authenticated by the Trustee in accordance with the
provisions of the Indenture and delivered to and paid for by the
Initial Purchaser in accordance with the terms of this Agreement, will
constitute a valid and legally binding obligations of the Guarantor
enforceable against the Guarantor in accordance with its terms except
that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of
the court before which any proceeding therefor may be brought.
(k) Other Documents. Each other TransWestern Delivered
Document executed and delivered by the Issuers, Holdings,
Communications or the Guarantor (to the extent a party thereto) has
been duly and validly authorized, executed and delivered by the
Issuers, Holdings, Communications and the Guarantor (to the extent
party thereto) and constitutes or will constitute a valid and legally
binding obligation of the Issuers, Holdings, Communications and the
Guarantor (to the extent a party thereto), enforceable against them in
accordance with its terms, except (i) that the enforcement thereof may
be subject to bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, and to general principles of
equity and the discretion of the court before which any proceeding
therefor may be brought and (ii)
<PAGE> 16
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as any rights to indemnity and contribution hereunder and thereunder
may be limited by applicable law.
(l) Solvency. Immediately after the consummation of the
transactions contemplated by this Agreement (including the use of
proceeds from the sale of Notes at the Time of Purchase), the fair
value and present fair saleable value of the assets of each of the
Company and Holdings (on a consolidated basis) will exceed the sum of
its stated liabilities and identified contingent liabilities; each of
the Company and Holdings (on a consolidated basis) will not be, after
giving effect to the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby
(including the use of proceeds from the sale of Notes at the Time of
Purchase), (i) left with unreasonably small capital with which to carry
on its business as it is proposed to be conducted, (ii) unable to pay
its debts (contingent or otherwise) as they mature or (iii) otherwise
insolvent.
(m) Absence of Certain Changes. Subsequent to the date as of
which information is given in the Memorandum, except as described in
the Memorandum, there has not been (i) any event or condition that has
a Material Adverse Effect, (ii) any transaction entered into by the
Issuers, other than in the ordinary course of business, that has a
Material Adverse Effect, or (iii) any dividend or distribution of any
kind declared, paid or made by the Company on its Membership Interests
other than Permitted Tax Distributions and other distributions
permitted under the Indenture.
(n) No Violation. Neither the execution, delivery or
performance of any of the TransWestern Delivered Documents nor the
consummation of any of the transactions contemplated thereby (i) will
violate or conflict with the Certificate of Formation or LLC Agreement
of the Company or the Certificate of Limited Partnership or the Third
Amended Partnership Agreement of Holdings, (ii) will violate or
conflict with Capital's, Communications' or the Guarantor's Certificate
of Incorporation or By-Laws, (iii) will, as of the Time of Purchase,
result in any breach of or default under any provision of any material
contract or agreement to which the Company, Holdings, Capital,
Communications or the Guarantor is a party or by which the Company,
Holdings, Capital, Communications or the Guarantor is bound or to which
any property or assets of the Company, Holdings, Capital,
Communications or the
<PAGE> 17
-14-
Guarantor is subject, (iv) violates, is prohibited by or requires the
Company, Holdings, Capital, Communications or the Guarantor to obtain
or make any consent, authorization, approval, registration or filing
under any statute, law, ordinance, regulation (including without
limitation Regulation T, U or X of the Board of Governors of the
Federal Reserve System), rule, judgment, decree or order of any court
or governmental agency, board, bureau, body, department or authority,
or of any other person, presently in effect or in effect at the Time of
Purchase, (v) will cause any acceleration of maturity of any note,
instrument or other indebtedness to which the Company, Holdings,
Capital, Communications or the Guarantor is a party or by which the
Company, Holdings, Capital, Communications or the Guarantor is bound or
with respect to which the Company, Holdings, Capital, Communications or
the Guarantor is an obligor or guarantor, or (vi) except as
contemplated by this Agreement and the other Basic Documents, will
result in the creation or imposition of any Lien upon or give to any
other person any interest or right (including any right of termination
or cancellation) in or with respect to the equity or any of the
properties, assets, business agreements or contracts of the Company,
Holdings, Capital, Communications or the Guarantor, other than any
violation, conflict, breach, default, acceleration or Lien which
individually or in the aggregate does not have a Material Adverse
Effect.
(o) Title and Condition of Properties and Assets. As of the
date hereof, the Company, Holdings, Communications and the Guarantor
have good and valid title to all of their respective owned assets and
properties which are material to their business, taken as a whole, and
Capital has no operating assets. As of the Time of Purchase, the
Company, Holdings, Communications and the Guarantor will have good and
valid title to all of their respective assets and properties which are
material to their business, taken as a whole, (except as sold or
otherwise disposed of in the ordinary course of business), subject to
no Liens other than Permitted Liens (as defined in the Indenture).
(p) Leased Property. Each lease of real property or personal
property that is material to the business of the Company, Holdings,
Communications and the Guarantor, taken as a whole, is in full force
and effect and is valid and enforceable in accordance with its terms.
There is not under any such lease any default by the Company, Holdings,
Communications or the Guarantor, or any event that with
<PAGE> 18
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notice or lapse of time or both would constitute such a default by the
Company, Holdings, Communications or the Guarantor and with respect to
which the Company, Holdings, Communications or the Guarantor has not
taken adequate steps to prevent such default from occurring except for
any such default as has not had a Material Adverse Effect; all of such
events, if any, and the aforesaid steps taken by the Company, Holdings,
Communications or the Guarantor are set forth in the Memorandum. There
is not under any such lease any default by any other party thereto or
any event that with notice or lapse of time or both would constitute
such a default thereunder by such party, which default has a Material
Adverse Effect. Neither the Company, Holdings, Communications nor the
Guarantor owns any real property.
(q) Litigation. Except as set forth in the Memorandum, there
are no actions, suits, proceedings or investigations, either at law or
in equity, or before any commission or other administrative authority
in any United States jurisdiction, of any kind now pending or, to the
best of the Company's, Holdings', Capital's, Communications' or the
Guarantor's knowledge, threatened involving the Company, Holdings,
Capital, Communications or the Guarantor that (i) seeks to restrain,
enjoin, prevent the consummation of or otherwise challenge the issuance
and sale of the Notes by the Issuers or the issuance of the Guarantee
by the Guarantor or any of the other material transactions contemplated
hereby, (ii) questions the legality or validity of any such
transactions or seeks to recover damages or obtain other relief in
connection with any such transactions or (iii) which has individually
or in the aggregate, a Material Adverse Effect.
(r) Patents, Copyrights and Trademarks. There are no material
copyrights, patents, trade names, trademarks and service marks,
identifying whether registered or at common law, and all applications
therefor that are pending or in the process of preparation
(collectively, the "Intellectual Property Rights"), that are directly
or indirectly owned, licensed, used, required for use or controlled in
whole or in part by the Company, Holdings, Communications or the
Guarantor and no licenses and other agreements allowing the Company,
Holdings, Communications and the Guarantor to use Intellectual Property
Rights of third parties in the United States that are not accurately
described in the Memorandum. Except as otherwise described in the
Memorandum, the Company, Holdings and the
<PAGE> 19
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Guarantor are the sole and exclusive owners of the Intellectual
Property Rights described therein, free and clear of any Lien (other
than Permitted Liens) and such Intellectual Property Rights have not
been and are not being challenged in any way or involved in any pending
or threatened unfair competition proceeding. Except as set forth in the
Memorandum, there has been and is no claim challenging the scope,
validity or enforceability of any of the Intellectual Property Rights.
Neither the Company, Holdings, Communications nor the Guarantor has
infringed, or is infringing or is subject to any unfair competition
claim with respect to any service mark or trade name registration or
application therefor, trademark, trademark registration or application
therefor, copyright, copyright registration or application therefor,
patent, patent registration or application therefor, or any other
proprietary or intellectual property right of any person or entity and
neither the Company, Holdings, Communications nor the Guarantor has
received or has any knowledge, after due inquiry, of any such claim or
other notice of any such violation or infringement.
(s) Compliance with Laws, Etc. The Company, Holdings, Capital,
Communications and the Guarantor are in compliance with, and the
execution and delivery of this Agreement and the other TransWestern
Delivered Documents and the consummation by the Company, Holdings,
Capital, Communications and the Guarantor of the transactions
contemplated hereby and thereby (including without limitation, the
issuance of the Notes in the manner and for the purpose contemplated by
this Agreement) will comply with, all federal, state and local
statutes, laws, ordinances, regulations, rules, permits, judgments,
orders or decrees applicable to the Company, Holdings, Capital,
Communications or the Guarantor and there does not exist any basis for
any claim of default under or violation of any such statute, law,
ordinance, regulation, rule, judgment, order or decree except such
noncompliance, defaults or violations, if any, that in the aggregate do
not have a Material Adverse Effect. Except as set forth in the
Memorandum, the Company, Holdings, Capital, Communications and the
Guarantor are in compliance with (i) all applicable requirements of all
United States, state and local governmental authorities with respect to
environmental protection, including without limitation, regulations
establishing quality criteria and standards for air, water, land and
hazardous materials, (ii) all applicable requirements of the
Occupational Safety and Health Act of 1970 within
<PAGE> 20
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the United States and rules, regulations and orders thereunder and
(iii) all applicable laws and related rules and regulations of all
United States jurisdictions affecting labor union activities, civil
rights or employment, including without limitation, in the United
States, the Civil Rights Act of 1964, the Age Discrimination in
Employment Act of 1967, the Equal Employment Opportunity Act of 1972,
the Employee Retirement Income Security Act of 1974, the Equal Pay Act
and the National Labor Relations Act, in each case, other than any such
noncompliance which in the aggregate has a Material Adverse Effect.
Neither of the Issuers, Holdings, Communications nor the Guarantor is
currently or, after giving effect to the consummation of the
transactions contemplated by this Agreement and the Basic Documents,
will be (i) in violation of its respective organizational documents, or
(ii) in default (nor will an event occur which with notice or passage
of time or both would constitute such a default) under or in violation
of any indenture or loan or credit agreement or any other material
agreement or instrument to which it is a party or by which it or any of
its properties or assets may be bound or affected (except as set forth
in the Memorandum), which default or violation (individually or in the
aggregate) (x) materially and adversely affects the legality, validity
or enforceability of this Agreement or any of the Basic Documents or
(y) has a Material Adverse Effect. As of the Closing neither the
Company, Holdings, Capital, Communications nor the Guarantor is engaged
in any printing or manufacturing activities.
(t) Governmental Authorizations and Regulations. There are no
material licenses, franchises, permits and other governmental
authorizations held by the Company, Holdings, Capital, Communications
or the Guarantor with respect to the conduct of their respective
businesses that are not accurately described in the Memorandum. Except
as set forth in the Memorandum, no authorization, consent, approval,
license, qualification or formal exemption from, nor any filing
declaration or registration with, any court, governmental agency,
securities exchange or any regulatory authority is required in
connection with the execution, delivery or performance by the Issuers,
Holdings, Communications and the Guarantor of this Agreement or any of
the other Basic Documents or any of the transactions contemplated
thereby, except (i) as may be required under state securities or "blue
sky" laws or the laws of any foreign jurisdiction in connection with
the offer and sale of the Notes, or (ii) as does not (individually or
in
<PAGE> 21
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the aggregate) have a Material Adverse Effect. All such authorizations,
consents, approvals, licenses, qualifications, exemptions, filings,
declarations and registrations set forth in the Memorandum (other than
as disclosed therein) which are required to have been obtained by the
date hereof have been obtained or made, as the case may be, and are in
full force and effect and not the subject of any pending or, to the
knowledge of the Company, threatened attack by appeal or direct
proceeding or otherwise.
(u) Labor Matters. No employees of the Company, Holdings,
Capital, Communications or the Guarantor are currently represented by a
labor union or labor organization, no labor union or labor organization
has been certified or recognized as a representative of any such
employees, and neither the Company, Holdings, Capital, Communications
nor the Guarantor has any obligation under any collective bargaining
agreement or other agreement with any labor union or labor organization
that, in any way, affects the Company, Holdings, Capital,
Communications or the Guarantor.
(v) Employees. Except as set forth in the Memorandum, there
has been no resignation or termination of employment of any officer or
key employee of the Company, Holdings, Capital, Communications or the
Guarantor and neither the Company, Holdings, Capital, Communications
nor the Guarantor has any knowledge of any impending or threatened
resignation or termination of employment in any case that would have a
Material Adverse Effect. Except as set forth it the Memorandum, neither
the Company, Holdings, Capital, Communications nor the Guarantor has
entered into any severance or similar arrangement in respect of any
present or former employees required to be disclosed therein.
(w) Brokers. Except as described in the Memorandum, there are
no claims for brokerage commissions, finders' fees or similar
compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement binding upon the
Company, Holdings, Capital, Communications or the Guarantor.
(x) Tax Matters. Holdings and Communications (hereinafter
referred to collectively as the "Taxpayers") have duly filed all tax
reports and returns required to be filed by them, including all
federal, state, local and
<PAGE> 22
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foreign tax returns and reports, and the Taxpayers have paid in full
all taxes required to be paid by such Taxpayers before such payment
became delinquent other than taxes being contested in good faith and
for which adequate reserves have been established in accordance with
GAAP, except where the failure to file such return or pay such tax
does not have a Material Adverse Effect.
(y) Investment Company. Neither of the Issuers, Holdings,
Communications nor the Guarantor is and immediately after the Time of
Purchase none of them will be, "investment companies" or, to the
Company's knowledge, companies "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
(z) ERISA. The execution and delivery of this Agreement and
the other Basic Documents and the sale of the Notes to the Initial
Purchasers will not involve any non-exempt prohibited transaction
within the meaning of Section 406 of ERISA or Section 4975 of the Code
on the part of the Issuers or the Guarantor. The preceding
representation is made in reliance on and subject to the accuracy of
the Initial Purchasers' representations and warranties in Section 3.2
hereof. No Reportable Event (as defined in Section 4043 of ERISA) has
occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Employee
Benefit Plan, and the Issuers, the Guarantor and Commonly Controlled
Entities have complied in all material respects with the applicable
provisions of ERISA and the Code in connection with the Employee
Benefit Plans. The present value of all accrued benefits under each
Employee Benefit Plan subject to Title IV of ERISA (based on the
current liability, interest rate and other assumptions used in
preparation of the plan's Form 5500 Annual Report) did not, as of the
last annual valuation date prior to the date on which this
representation is made or deemed made, exceed the value of the assets
of such plan allocable to such accrued benefits. Neither of the
Issuers, the Guarantor, nor any Commonly Controlled Entity (as defined
below) has had a complete or partial withdrawal from any Multiemployer
Plan (as defined in Section 4001(a)(3) of ERISA), and neither the
Issuers, the Guarantor, nor any Commonly Controlled Entity would become
subject to any liability under ERISA if the Issuers, the Guarantor or
any such Commonly Controlled Entity were to withdraw completely from
all Multiemployer Plans as of the valuation
<PAGE> 23
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date most closely preceding the date on which such representation is
made or deemed made. No such Multiemployer Plan is in reorganization or
insolvent. There are no material liabilities of the Issuers the
Guarantor or any Commonly Controlled Entity for post-retirement
benefits to be provided to their current and former employees under
Plans which are welfare benefit plans (as described in Section 3(l) of
ERISA). With respect to each Employee Benefit Plan, no event has
occurred and there exists no conditions or set of circumstances in
connection with which the Company or any off its subsidiaries may,
directly or indirectly (through a Commonly Controlled Entity or
otherwise) be subject to material liability under the Code, ERISA or
any other applicable law, except for liability for benefit claims and
funding obligations payable in the ordinary course. "Commonly
Controlled Entity" means any person or entity that, together with any
Issuer or the Guarantor, is treated as a single employer under Section
414(b), (c), (m) or (o) of the Code. "Employee Benefit Plan" means an
employee benefit plan, as defined in Section 3(3) of ERISA, which is
maintained or contributed to by an Issuer, or any Commonly Controlled
Entity or to which an Issuer, or any Commonly Controlled Entity may
have liability.
(aa) The Offering. No form of general solicitation or general
advertising (as those terms are used in Regulation D under the Act) was
used by the Issuers, the Guarantor or their representatives in
connection with the offer and sale of the Notes. Neither of the
Issuers, the Guarantor nor any Person authorized to act for any of them
has, either directly or indirectly, sold or offered for sale any of the
Notes or any other similar security of the Issuers or the Guarantor to,
or solicited any offers to buy any thereof from, or has otherwise
approached or negotiated in respect thereof with, any Person or Persons
other than with or through the Initial Purchasers; and the Issuers and
the Guarantor agree that neither they nor any Person acting on their
behalf will sell or offer for sale any Notes and the Guarantee to, or
solicit any offers to buy any Notes or Guarantee from, or otherwise
approach or negotiate in respect thereof with, any Person or Persons so
as thereby to bring the issuance or sale of any of the Notes or
Guarantee within the provisions of Section 5 of the Act. Assuming the
accuracy of the Initial Purchasers' representations and warranties set
forth in Section 3.2 hereof, and the due performance by the Initial
Purchasers of the covenants and agreements set forth in Section 3.2
<PAGE> 24
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hereof, the offer and sale of the Notes and the Guarantee to the
Initial Purchasers in the manner contemplated by this Agreement and the
Memorandum does not require registration under the Act and the
Indenture does not require qualification under the Trust Indenture Act.
No securities of the Issuers or the Guarantor are of the same class
(within the meaning of Rule 144A under the Act) as the Notes or the
Guarantee and listed on a national securities exchange registered under
Section 6 of the Exchange Act, or quoted in a U.S. automated
interdealer quotation system. Neither of the Issuers nor the Guarantor
has taken, nor will either of them take, directly or indirectly, any
action designed to, or that might be reasonably expected to, cause or
result in stabilization or manipulation of the price of the Notes.
Neither of the Issuers, the Guarantor nor any of their respective
Affiliates or any person acting on its or their behalf (other than the
Initial Purchasers) has engaged in any directed selling efforts (as
that term is defined in Regulation S) with respect to the Notes or the
Guarantee and the Issuers, the Guarantor Company and their respective
Affiliates and any person acting on its or their behalf (other than the
Initial Purchasers) have acted in accordance with the offering
restrictions requirements of Regulation S.
(bb) Insurance. Holdings, the Company and/or the Guarantor
carry insurance (including self insurance) in such amounts and covering
such risks as in their reasonable determination is adequate for the
conduct of their business and the value of their properties.
(cc) Exchange Act Reports. The Exchange Act Reports, when
filed by the Company with the Commission pursuant to the Exchange Act,
did not include any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading. Such documents, when so filed with the Commission, complied
as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations of the Commission
thereunder.
(dd) Accounting Controls. Each of the Company and the
Guarantor maintains a system of internal accounting controls sufficient
to provide reasonable assurances that (i) transactions are executed in
accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit preparation of
<PAGE> 25
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financial statements in conformity with generally accepted accounting
principles and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets
is compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
SECTION 3.2. Resale of Notes. Each of the Initial Purchasers
represents and warrants (as to itself only) that it is a "qualified
institutional buyer" as defined in Rule 144A of the Act ("QIB"). Each of the
Initial Purchasers agrees with the Issuers and the Guarantor (as to itself only)
that (a) it has not and will not solicit offers for, or offer or sell, the Notes
or the Guarantee by any form of general solicitation or general advertising (as
those terms are used in Regulation D under the Act) or in any manner involving a
public offering within the meaning of Section 4(2) of the Act; and (b) it has
and will solicit offers for the Notes and the Guarantee only from, and will
offer the Notes only to (A) in the case of offers inside the United States,
Persons whom the Initial Purchasers reasonably believe to be QIBs or, if any
such Person is buying for one or more institutional accounts for which such
Person is acting as fiduciary or agent, only when such Person has represented to
the Initial Purchasers that each such account is a QIB, to whom notice has been
given that such sale or delivery is being made in reliance on Rule 144A, and, in
each case, in transactions under Rule 144A and (B) in the case of offers outside
the United States, to Persons other than U.S. Persons ("foreign purchasers,"
which term shall include dealers or other professional fiduciaries in the United
States acting on a discretionary basis for foreign beneficial owners (other than
an estate or trust)); provided, however, that, in the case of this clause (B),
in purchasing such Notes such Persons are deemed to have represented and agreed
as provided under the caption "Notice to Investors" contained in the Memorandum.
ARTICLE IV
CONDITIONS PRECEDENT TO CLOSING
SECTION 4.1. Conditions Precedent to Obligations of the
Initial Purchasers. The obligation of each Initial Purchaser to purchase the
Notes to be purchased at the Closing is subject, at the Time of Purchase, to the
satisfaction of the following conditions:
<PAGE> 26
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(a) At the Time of Purchase, the Initial Purchasers shall have
received the opinions, dated as of the Time of Purchase and addressed
to the Initial Purchasers, of Kirkland & Ellis, counsel for the
Issuers, in form and sub stance reasonably satisfactory to counsel for
the Initial Purchasers, to the effect as set forth on Exhibit A hereto.
(b) The Initial Purchasers shall have received an opinion,
addressed to the Initial Purchasers in form and substance satisfactory
to the Initial Purchasers and dated the Time of Purchase, of Cahill
Gordon & Reindel, counsel to the Initial Purchasers.
(c) The Initial Purchasers shall have received from Ernst &
Young LLP a comfort letter or letters dated the Closing in form and
substance reasonably satisfactory to counsel to the Initial Purchasers.
(d) The representations and warranties made by the Issuers,
Holdings and Communications herein shall be true and correct in all
material respects (except for changes expressly provided for in this
Agreement) on and as of the Time of Purchase with the same effect as
though such representations and warranties had been made on and as of
the Time of Purchase, the Issuers shall have complied in all material
respects with all agreements as set forth in or contemplated hereunder
and in the Basic Documents required to be performed by it at or prior
to the Time of Purchase and the Company shall have furnished to each
Initial Purchaser a certificate, dated the Time of Purchase, to such
effect.
(e) Subsequent to the date of the Memorandum, (i) there shall
not have been any change which has a Material Adverse Effect and (ii)
the Issuers and Holdings shall not have taken any voluntary,
affirmative action to conduct their respective businesses other than in
the ordinary course.
(f) At the Time of Purchase and after giving effect to the
consummation of the transactions contemplated by this Agreement and the
Basic Documents, there shall exist no Default or Event of Default.
(g) The purchase of and payment for the Notes by the Initial
Purchasers hereunder shall not be prohibited or enjoined (temporarily
or permanently) by any applicable
<PAGE> 27
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law or governmental regulation (including, without limitation,
Regulation T, U or X of the Board of Governors of the Federal Reserve
System).
(h) At the Time of Purchase, the Initial Purchasers shall have
received a certificate, dated the Time of Purchase, from the Company,
Holdings, Capital and Communications stating that the conditions
specified in Sections 4.1(d), (e), (f) and (g) have been satisfied or
duly waived at the Time of Purchase.
(i) Each of the Basic Documents shall have been executed and
delivered by all the respective parties thereto be in full force and
effect.
(j) All proceedings required in order to issue the Notes and
the Guarantee and consummate the transactions contemplated by this
Agreement and all documents and papers relating thereto shall be
reasonably satisfactory to the Initial Purchasers and counsel to the
Initial Purchasers. The Initial Purchasers and counsel to the Initial
Purchasers shall have received copies of such papers and documents of
the Issuers and the Guarantor as they may reasonably request in
connection therewith, all in form and substance reasonably satisfactory
to them.
(k) The sale of the Notes hereunder shall not have been
enjoined (temporarily or permanently) at the Time of Purchase.
On or before the Closing, the Initial Purchasers and counsel
to the Initial Purchasers shall have received such further documents, opinions,
certificates and schedules or other instruments relating to the business,
corporate, legal and financial affairs of the Issuers as they may reasonably
request.
SECTION 4.2. Conditions Precedent to Obligations of the
Issuers. The obligations of the Issuers to deliver the Notes shall be subject to
the accuracy as of the date hereof and at the Time of Purchase (as if made on
and as of the time of Purchase) of the representations and warranties of the
Initial Purchasers herein (delivery of the purchase price by the Initial
Purchasers for the Notes being an affirmation by the Initial Purchasers of the
accuracy of their representations and warranties).
<PAGE> 28
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ARTICLE V
COVENANTS
SECTION 5.1. Covenants of the Issuers. The Issuers and the
Guarantor covenant and agree with each of the Initial Purchasers that:
(a) The Issuers will not amend or supplement the Memorandum or
any amendment or supplement thereto of which the Initial Purchasers
shall not previously have been advised and furnished a copy for a
reasonable period of time prior to the proposed amendment or supplement
and as to which the Initial Purchasers shall not have given their
consent, which consent shall not be unreasonably withheld. The Issuers
will promptly, upon the reasonable request of the Initial Purchasers or
counsel to the Initial Purchasers, make any amendments or supplements
to the Memorandum that may be necessary or advisable in connection with
the resale of the Notes by the Initial Purchasers.
(b) The Issuers and the Guarantor will cooperate with the Initial
Purchasers in arranging for the qualification of the Notes for offering
and sale under the securities or "blue sky" laws of such jurisdictions
as the Initial Purchasers may designate and will continue such
qualifications in effect for as long as may be reasonably necessary to
complete the resale of the Notes; provided, however, that in connection
therewith, neither the Issuers nor the Guarantor shall be required to
qualify as a foreign corporation, to take any acts which would require
it to qualify to do business or to execute a general consent to service
of process in any jurisdiction or subject itself to taxation in excess
of a nominal dollar amount in any such jurisdiction where it is not
then so subject.
(c) If, at any time prior to the completion of the distribution by
the Initial Purchasers of the Notes, the Exchange Notes or the Private
Exchange Notes, any event occurs or information becomes known as a
result of which the Memorandum as then amended or supplemented would
include any untrue statement of a material fact, or omit to state a
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading or it for
any other reason it is necessary at any time to amend or supplement the
Memorandum to comply with applicable law, the Issuers will
<PAGE> 29
-26-
promptly notify the Initial Purchasers thereof (who thereafter will not
use such Memorandum until appropriately amended or supplemented) and
will prepare, at the expense of the Issuers, an amendment or supplement
to the Memorandum that corrects such statement or omission or effects
such compliance.
(d) The Issuers will, without charge, provide to the Initial
Purchasers and to counsel to the Initial Purchasers as many copies of
the Memorandum or any amendment or supplement thereto as the Initial
Purchasers may reasonably request.
(e) The Issuers will apply the net proceeds from the sale of the
Notes as set forth under "Use of Proceeds" in the Memorandum.
(f) For and during the period ending on the date no Notes are
outstanding, the Issuers will furnish to the Initial Purchasers copies
of all reports and other communications (financial or otherwise)
furnished by the Issuers to the Trustee or the holders of the Notes and
promptly after available copies of any reports or financial statements
furnished to or filed by the Issuers with the Commission or any
national securities exchange on which any class of securities of the
Company may be listed.
(g) Prior to the Time of Purchase, the Company will furnish to the
Initial Purchasers, as soon as they have been prepared in final form, a
copy of any unaudited interim financial statements of the Company for
any period subsequent to the period covered by the most recent
financial statements appearing in the Memorandum.
(h) None of the Issuers nor any of their Affiliates will sell,
offer for sale or solicit offers to buy or otherwise negotiate in
respect of any "security" (as defined in the Act) which could be
integrated with the sale of the Notes in a manner which would require
the registration under the Act of the Notes.
(i) The Issuers will not solicit any offer to buy or offer to sell
the Notes by means of any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Act) or
in any manner involving a public offering within the meaning of Section
4(2) of the Act.
<PAGE> 30
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(j) For so long as any of the Notes remain outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Act and not saleable in full under Rule 144 under the Act (or any
successor provision), the Issuers will make available, upon request, to
any seller of such Notes the information specified in Rule 144A(d)(4)
under the Act, unless the Issuers are then subject to Section 13 or
15(d) of the Exchange Act.
(k) The Issuers will use their best efforts to (i) permit the
Notes to be included for quotation on PORTAL and (ii) permit the Notes
to be eligible for clearance and settlement through The Depository
Trust Company.
(l) The Issuers, Holdings, Communications and the Guarantor (to
the extent a party thereto) will do and perform all things required to
be done and performed by them under this Agreement and the other Basic
Documents prior to or after the Closing, subject to the qualifications
and limitations in the writing that expresses such obligations, and to
satisfy all conditions precedent on their part to the obligations of
the Initial Purchasers under this Agreement to purchase and accept
delivery of the Notes.
(m) In connection with Notes offered and sold in an offshore
transaction (as defined in Regulation S), the Issuers will not register
any transfer of such Notes not made in accordance with the provisions
of Regulation S and will not, except in accordance with the provisions
of Regulation S, if applicable, issue any such Notes in the form of
definitive securities.
ARTICLE VI
FEES
SECTION 6.1. Costs, Expenses and Taxes. The Issuers, jointly
and severally, agree to pay all costs and expenses incident to the performance
of their obligations under this Agreement, whether or not the transactions
contemplated herein are consummated or this Agreement is terminated pursuant to
Section 8.2 hereof, including, but not limited to, all costs and expenses
incident to (i) the Company's cost of preparation, printing, reproduction,
execution and delivery of this Agreement, each of the other Basic Documents, any
amendment or sup-
<PAGE> 31
-28-
plement to or modification of any of the foregoing and any and all other
documents furnished pursuant hereto or thereto or in connection herewith or
therewith, (ii) any costs of printing the Memorandum and any amendment or
supplement thereto, any other marketing related materials, (iii) all
arrangements relating to the delivery to the Initial Purchasers of copies of the
foregoing documents, (iv) the fees and disbursements of the counsel, the
accountants and any other experts or advisors retained by the Issuers, (v)
preparation (including printing), issuance and delivery to the Initial
Purchasers of the Notes, (vi) fees and expenses of the Trustee, including fees
and expenses of counsel to the Trustee, (vii) all expenses and listing fees
incurred in connection with the application for quotation of the Notes on
PORTAL, (viii) any fees charged by investment rating agencies for the rating of
the Notes, and (ix) except as limited by Article VII, all costs and expenses
(including, without limitation, reasonable attorneys' fees and expenses), if
any, of the successful enforcement of this Agreement, the Notes or any other
agreement furnished pursuant hereto or thereto or in connection herewith or
therewith. In addition, the Issuers shall pay any and all stamp, transfer and
other similar taxes payable or determined to be payable in connection with the
execution and delivery of this Agreement, any other Basic Document or the
issuance of the Notes, and shall save and hold each Initial Purchaser harmless
from and against any and all liabilities with respect to or resulting from any
delay in paying, or omission to pay, such taxes. Notwithstanding anything
herein, it is understood that the Issuers shall have no obligation to pay any
fees, expenses or disbursements of Cahill Gordon & Reindel, counsel for the
Initial Purchasers.
ARTICLE VII
INDEMNITY
SECTION 7.1. Indemnity.
(a) Indemnification by the Issuers. The Issuers and
Holdings, jointly and severally, agree and covenant to hold harmless
and indemnify each of the Initial Purchasers and any Affiliates thereof
(including any director, officer, employee, agent or controlling Person
of any of the foregoing) from and against any losses, claims, damages,
liabilities and expenses (including expenses of investigation) to which
such Initial Purchaser and its Affiliates may become subject arising
out of or based upon any untrue
<PAGE> 32
-29-
statement or alleged untrue statement of any material fact contained in
the Memorandum and any amendments, or supplements thereto, the Basic
Documents or any application or other documents filed with the
Commission or any State Commission (collectively, the "Offering
Materials") or arising out of or based upon the omission or alleged
omission to state in any of the Offering Materials a material fact
required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that the Issuers and
Holdings shall not be liable under this paragraph (a) to the extent
that such losses, claims, damages or liabilities arose out of or are
based upon an untrue statement or omission made in any of the documents
referred to in this paragraph (a) in reliance upon and in conformity
with the information relating to the Initial Purchasers furnished in
writing by such Initial Purchasers for inclusion therein; provided,
further, that the Issuers and Holdings shall not be liable under this
paragraph (a) to the extent that such losses, claims, damages or
liabilities arose out of or are based upon an untrue statement or
omission made in any Memorandum that is corrected in any amendment or
supplement thereto if the person asserting such loss, claim, damage or
liability purchased Notes from an Initial Purchaser in reliance on such
Memorandum but was not given the Memorandum (or any amendment or
supplement thereto) on or prior to the confirmation of the sale of such
Notes. The Issuers and Holdings, on a joint and several basis, further
agree to reimburse each Initial Purchaser for any reasonable legal and
other expenses as they are incurred by it in connection with
investigating, preparing to defend or defending any lawsuits, claims or
other proceedings or investigations arising in any manner out of or in
connection with such Person being an Initial Purchaser; provided that
if the Issuers or Holdings reimburse an Initial Purchaser hereunder for
any expenses incurred in connection with a lawsuit, claim or other
proceeding for which indemnification is sought, such Initial Purchaser
hereby agrees to refund such reimbursement of expenses to the extent
that the losses, claims, damages or liabilities are not entitled to
indemnification hereunder. The Issuers and Holdings further agree that
the indemnification, contribution and reimbursement commitments set
forth in this Article VII shall apply whether or not an Initial
Purchaser is a formal party to any such lawsuits, claims or other
proceedings. The indemnity, contribution and expense reimbursement
obligations of the Issuers and Holdings under this Article
<PAGE> 33
-30-
VII shall be in addition to any liability the Issuers or Holdings may
otherwise have.
(b) Indemnification by the Initial Purchasers. Each of the
Initial Purchasers agrees and covenants, severally and not jointly, to
hold harmless and indemnify the Issuers and Holdings and any Affiliates
thereof (including any director, officer, employee, agent or
controlling Person of any of the foregoing) from and against any
losses, claims, damages, liabilities and expenses insofar as such
losses, claims, damages, liabilities or expenses arise out of or are
based upon any untrue statement of any material fact contained in the
Offering Materials, or upon the omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or omission was made in reliance
upon and in conformity with the information relating to such Initial
Purchaser furnished in writing by such Initial Purchaser for inclusion
therein. The indemnity, contribution and expense reimbursement
obligations of the Initial Purchasers under this Article VII shall be
in addition to any liability the Initial Purchasers may otherwise have.
(c) Procedure. If any Person shall be entitled to indemnity
hereunder (each an "Indemnified Party"), such Indemnified Party shall
give prompt written notice to the party or parties from which such
indemnity is sought (each an "Indemnifying Party") of the commencement
of any action, suit, investigation or proceeding, governmental or
otherwise (a "Proceeding"), with respect to which such Indemnified
Party seeks indemnification or contribution pursuant hereto; provided,
however, that the failure so to notify the Indemnifying Parties shall
not relieve the indemnifying Parties from any obligation or liability
except to the extent that the indemnifying Parties have been prejudiced
materially by such failure. The Indemnifying Parties shall have the
right, exercisable by giving written notice to an Indemnified Party
promptly after the t, of written notice from such Indemnified Party of
such Proceeding, to assume, at the Indemnifying Parties' expense, the
defense of any such Proceeding, with counsel reasonably satisfactory to
such Indemnified Party; provided, however, that an Indemnified Party or
parties (if more than one such Indemnified Party is named in any
Proceeding) shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof,
<PAGE> 34
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but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party or parties unless: (1) the Indemnifying Parties
agree to pay such fees and expenses; or (2) the Indemnifying Parties
fail promptly to assume the defense of such Proceeding or fail to
employ counsel reasonably satisfactory to such Indemnified Party or
parties; or (3) the named parties to any such Proceeding (including any
impleaded parties) include both such Indemnified Party or parties and
the Indemnifying Party or an Affiliate of the Indemnifying Party and
such Indemnified Parties, and the Indemnified Parties shall have been
advised in writing by counsel that there may be one or more legal
defenses available to such Indemnified Party or parties that are
different from or additional to those available to the Indemnifying
Parties, in which case, IF such Indemnified Party or parties notifies
the Indemnifying Parties in writing that it elects to employ separate
counsel at the expense of the Indemnifying Parties, the Indemnifying
Parties shall not have the right to assume the defense thereof and such
counsel shall be at the expense of the Indemnifying Parties, it being
understood, however, that, unless there exists a conflict among
Indemnified Parties, the Indemnifying Parties shall not, in connection
with any one such Proceeding or separate but substantially similar or
related Proceedings in the same jurisdiction, arising out of the same
general allegations or circumstances, be liable for the reasonable fees
and expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for such Indemnified Party or
Parties, or for fees and expenses that are not reasonable. No
Indemnified Party or Parties will settle any Proceeding without the
consent of the Indemnifying Party or Parties (but such consent shall
not be unreasonably withheld). No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect any settlement
of any pending or threatened Proceeding in respect of which any
Indemnified Party is or could have been a party and indemnity could
have been sought hereunder by such Indemnified Party, unless such
settlement includes an unconditional release of such Indemnified Party
from all liability or claims that are the subject of such Proceeding.
SECTION 7.2. Contribution. If for any reason the
indemnification provided for in Section 7.1 of this Agreement is unavailable to
an Indemnified Party, or insufficient to hold it harmless, in respect of any
losses, claims, damages, liabilities or expenses referred to therein, then each
applicable
<PAGE> 35
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Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages or liabilities in such proportion as is
appropriate to reflect not only the relative benefits received by the
Indemnifying Party on the one hand and the Indemnified Party on the other, but
also the relative fault of the Indemnifying and Indemnified Parties in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Indemnifying and
Indemnified Parties shall be deemed to be in the same proportion as the total
proceeds from the offering of the Notes (net of the Initial Purchasers'
discounts and commissions but before deducting expenses) received by the Issuers
bear to the total discounts and commissions received by each Initial Purchaser.
The relative fault of the Indemnifying and Indemnified Parties shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Indemnifying or
Indemnified Parties and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims, damages
and liabilities referred to above shall be deemed to include any legal or other
fees or expenses incurred by such party in connection with investigating or
defending any such claim.
The Issuers, Holdings and each of the Initial Purchasers agree
that it would not be just and equitable if contribution pursuant to the
immediately preceding paragraph were determined pro rata or per capita or by any
other method of allocation which does not take into account the equitable
considerations referred to in such paragraph. Notwithstanding any other
provision of this Section 7.2, no Initial Purchaser shall be obligated to make
contributions hereunder that in the aggregate exceed the total discounts,
commissions and other compensation received by such Initial Purchaser under this
Agreement, less the aggregate amount of any damages that such Initial Purchaser
has otherwise been required to pay by reason of the untrue or alleged untrue
statements or the omissions or alleged omissions to state a material fact. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
<PAGE> 36
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SECTION 7.3. Registration Rights Agreement. Notwithstanding
anything to the contrary in this Article 7, the indemnification and contribution
provisions of the Registration Rights Agreement shall govern any claim with
respect thereto,
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Survival of Provisions. The representations,
warranties and covenants of the Issuers, Holdings, Communications, the Guarantor
and the Initial Purchasers made herein, the indemnity and contribution
agreements contained herein and each of the provisions of Articles VI, VII and
VIII shall remain operative and in full force and effect regardless of (a) any
investigation made by or on behalf of the Issuers, any Initial Purchaser or any
Indemnified Party, (b) acceptance of any of the Notes and payment therefor, (c)
any termination of this Agreement other than pursuant to Section 8.2, or (d)
disposition of the Notes by the Initial Purchasers whether by redemption,
exchange, sale or otherwise. With respect to any termination of this Agreement
pursuant to Section 8.2, this Agreement and the obligations contemplated hereby
shall terminate without liability to any party, and no party shall have any
continuing obligation hereunder or liability to any other party hereto, except
that each of the provisions of Articles VI, VII, and VIII shall remain operative
and in full force and effect regardless of any termination pursuant thereto.
SECTION 8.2. Termination. (a) This Agreement may be terminated
in the sole discretion of the Initial Purchasers by notice to the Company given
prior to the Time of Purchase in the event that the Issuers or the Guarantor
shall have failed, refused or been unable to perform all obligations and satisfy
all conditions on their part to he performed or satisfied hereunder at or prior
thereto or, if at or prior to the Closing:
(i) the Issuers, Holdings or the Guarantor shall have
sustained any loss or interference with respect to
their businesses or properties from
fire, flood, hurricane, accident or other calamity,
whether or not covered by insurance, or from any
strike, labor dispute, slow down or work stoppage or
any legal or governmental proceeding, which loss or
interference, in the sole judgment of the Initial
Purchasers, has a Mate-
<PAGE> 37
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rial Adverse Effect, or there shall have been, in the
sole judgment of the Initial Purchasers, any event or
development that, individually or in the aggregate,
has a Material Adverse Effect (including without
limitation a Change of Control (as defined in the
Indenture)), except in each case as described in the
Memorandum (exclusive of any amendment or supplement
thereto);
(ii) trading in securities of the Company or in securities
generally and the New York Stock Exchange, American
Stock Exchange or the Nasdaq National Market shall
have been suspended or minimum or maximum prices
shall have been established on any such exchange or
market;
(iii) a banking moratorium shall have been declared by New
York or United States authorities;
(iv) there shall have been (A) an outbreak or escalation
of hostilities between the United States and any
foreign power, or (B) an outbreak or escalation of
any other insurrection or armed conflict involving
the United States or any other national or
international calamity or emergency, or (C) any
material change in the financial markets of the
United States which, in the case of (A), (B) or (C)
above and in the sole judgment of the Initial
Purchasers, makes it impracticable or inadvisable to
proceed with the offering or the delivery of the
Notes as contemplated by the Memorandum; or
(v) any securities of the Company or Holdings shall have
been downgraded or placed on any "watch list" for
possible downgrading by any nationally recognized
statistical rating organization.
(b) Termination of this Agreement pursuant to this Section 8.2
shall be without liability of any party to any other party except as provided in
Section 8.1 hereof.
SECTION 8.3. No Waiver; Modifications in Writing. No failure
or delay on the part of any of the parties hereto 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
fur-
<PAGE> 38
-35-
ther 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 parties at law or in equity or otherwise.
No waiver of or consent to any departure by the Issuers from any provision of
this Agreement shall be effective unless signed in writing by the party hereto
entitled to the benefit thereof, provided that notice of any such waiver shall
be given to each party hereto as set forth below. Except as otherwise provided
herein, no amendment, modification or termination of any provision of this
Agreement shall be effective unless signed in writing by or an behalf of each of
the Issuers and each Initial Purchaser. Any amendment, supplement or
modification of or to any provision of this Agreement, any waiver of any
provision of this Agreement, and any consent to any departure by any party from
the terms of any provision of this Agreement, shall be effective only in the
specific instance and for the specific purpose for which made or given. Except
where notice is specifically required by this Agreement, no notice to or demand
on the Issuers or the Guarantor in any case shall entitle the Issuers or the
Guarantor to any other or further notice or demand in similar or other
circumstances.
SECTION 8.4. Information Supplied by the Initial Purchasers.
The statements set forth in the fourth paragraph on page (i) and in the third
and fourth sentences of the fifth paragraph and the eighth paragraph under the
heading "Plan of Distribution" in the Memorandum (to the extent such statements
relate to the Initial Purchasers) constitute the only information furnished by
the Initial Purchasers to the Company for the purposes of Sections 3.1(a) and
7.1(a) and (b) hereof.
SECTION 8.5. Communications. All notices, demands and other
communications provided for hereunder shall be in writing and, (a) if to the
Initial Purchasers, shall be given by registered or certified mail, return
receipt requested, telex, telegram, telecopy, courier service or personal
delivery, addressed to First Union Capital Markets, 301 South College
Street,TW-10, Charlotte, North Carolina 28288-0604, CIBC Oppenheimer Corp., 425
Lexington Avenue, 3rd floor, New York, New York 10017, and BancBoston Robertson
Stephens Inc., 100 Federal Street, 01-12-07, Boston, Massachusetts 02110, and
with a copy to Cahill Gordon & Reindel, 80 Pine Street, New York, New York,
10005, Attention: Geoffrey E. Liebmann, Esq. and (b) if to the Issuers,
Holdings, Communications or the Guarantor, shall be given by similar means to
TransWestern Publishing Company LLC, 8344 Clairemont Mesa Boulevard, San Diego,
CA 92111, Attn: Chief Financial Officer, with copies to Kirkland
<PAGE> 39
-36-
& Ellis, 200 East Randolph Drive, Chicago, IL 60601, Attn: William S. Kirsch,
P.C. In each case notices, demands and other communications shall be deemed
given when received.
SECTION 8.6. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto on
separate counterparts, each of which counterparts, when so executed and
delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Agreement.
SECTION 8.7. Successors. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and legal representatives, and nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any other Person any legal
or equitable right, remedy or claim under or in respect of this Agreement, or
any provisions herein contained; this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of such Persons and for the benefit of no other Person except that (i)
the indemnities of the Issuers contained in Section 7.1(a) of this Agreement
shall also be for the benefit of the directors, officers, employees and agents
of the Initial Purchasers and any Person or Persons who control the Initial
Purchasers within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act and (ii) the indemnities of the Initial Purchasers contained in
Section 7.1(b) of this Agreement shall also be for the benefit of the directors
of the Issuers, their directors, officers, employees and agents and any Person
or Persons who control the Issuers within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act. No purchaser of Notes from the Initial
Purchasers will be deemed a successor because of such purchase.
SECTION 8.8. Governing Law. THIS AGREEMENT SHALL BE DEEMED TO
BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK, AND FOR ALL PURPOSES
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF SAID STATE, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
SECTION 8.9. Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
<PAGE> 40
SECTION 8.10. Headings. The Article and Section headings and
Table of Contents used or contained in this Agreement are for convenience of
reference only and shall not affect the construction of this Agreement.
<PAGE> 41
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first written above.
TRANSWESTERN PUBLISHING COMPANY LLC
By: /s/ Joan M. Fiorito
------------------------------------------
Name: Joan M. Fiorito
Title: Vice President, Chief Financial Officer
TWP CAPITAL CORP. II
By: /s/ Joan M. Fiorito
------------------------------------------
Name: Joan M. Fiorito
Title: Vice President, Chief Financial Officer
TRANSWESTERN HOLDINGS L.P.
By: TRANSWESTERN COMMUNICATIONS
COMPANY, INC., its general partner
By: /s/ Joan M. Fiorito
------------------------------------------
Name: Joan M. Fiorito
Title: Vice President, Chief Financial Officer
TRANSWESTERN COMMUNICATIONS COMPANY, INC.
By: /s/ Joan M. Fiorito
------------------------------------------
Name: Joan M. Fiorito
Title: Vice President, Chief Financial Officer
TARGET DIRECTORIES OF MICHIGAN, INC.
By: /s/ Joan M. Fiorito
------------------------------------------
Name: Joan M. Fiorito
Title: Vice President, Chief Financial Officer
<PAGE> 42
FIRST UNION CAPITAL MARKETS
By: /s/ Scott E. Chappell
------------------------------------------
Name: Scott E. Chappell
Title: Vice President
CIBC OPPENHEIMER CORP.
By: /s/ Brian S. Gerson
------------------------------------------
Name: Brian S. Gerson
Title: Managing Director
BANCBOSTON ROBERTSON STEPHENS INC.
By: /s/ Scott M. D'Orsi
------------------------------------------
Name: Scott M. D'Orsi
Title: Vice President
<PAGE> 43
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount
Initial Purchaser of Notes
- ----------------- ----------------
<S> <C>
First Union Capital Markets $20,000,000
CIBC Oppenheimer Corp. 15,000,000
BancBoston Robertson Stephens Inc. 5,000,000
-----------
Total $40,000,000
</TABLE>
<PAGE> 1
EXHIBIT 4.8
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of December 2, 1998
by and among
TRANSWESTERN PUBLISHING COMPANY, LLC,
TWP CAPITAL CORP. II
and
TARGET DIRECTORIES OF MICHIGAN, INC.
and
THE INITIAL PURCHASERS
named herein
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Definitions..........................................................................................1
2. Exchange Offer.......................................................................................5
3. Shelf Registration...................................................................................9
4. Additional Interest.................................................................................10
5. Registration Procedures.............................................................................12
6. Registration Expenses...............................................................................23
7. Indemnification.....................................................................................25
8. Rules 144 and 144A..................................................................................28
9. Underwritten Registrations..........................................................................29
10. Miscellaneous.......................................................................................29
(a) Remedies ..................................................................................29
(b) Enforcement ...............................................................................29
(c) No Inconsistent Agreements ................................................................29
(d) Adjustments Affecting Registrable Notes ...................................................30
(e) Amendments and Waivers ....................................................................30
(f) Notices ...................................................................................30
(g) Successors and Assigns ....................................................................31
(h) Counterparts ..............................................................................31
(i) Headings ..................................................................................31
(j) Governing Law .............................................................................31
(k) Severability ..............................................................................32
(l) Entire Agreement ..........................................................................32
(m) Joint and Several Obligations .............................................................32
(n) Notes Held by the Issuers or Their Affiliates .............................................32
</TABLE>
-i-
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as of
December 2, 1998, by and among TRANSWESTERN PUBLISHING COMPANY, LLC, a Delaware
limited liability company (the "Company"), TWP CAPITAL CORP. II, a Delaware
corporation ("Capital II" and together with the Company (the "Issuers")), and
TARGET DIRECTORIES OF MICHIGAN, INC., a Michigan corporation and a wholly owned
subsidiary of the Company (the "Guarantor"), and FIRST UNION CAPITAL MARKETS,
CIBC OPPENHEIMER CORP. and BANCBOSTON ROBERTSON STEPHENS INC. as initial
purchasers (the "Initial Purchasers").
This Agreement is entered into in connection with the
Securities Purchase Agreement, dated as of November 24, 1998 among the Issuers,
TransWestern Publishing Company, LLC, TWP Capital Corp. II, TransWestern
Holdings, L.P., TransWestern Communications Company, Inc., and Target
Directories of Michigan, Inc. as Guarantor and the Initial Purchasers (the
"Purchase Agreement") relating to the sale by the Company to the Initial
Purchasers of $40,000,000 aggregate principal amount of the Issuers' Series C 9
5/8% Senior Subordinated Notes due 2007 (the "Notes"). In order to induce the
Initial Purchasers to enter into the Purchase Agreement, the Issuers have agreed
to provide the registration rights set forth in this Agreement to the Initial
Purchasers and their direct and indirect transferees and assigns. The execution
and delivery of this Agreement is a condition to the Initial Purchasers'
obligation to purchase the Notes under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4(a).
Advice: See Section 5.
Applicable Period: See Section 2(b).
Capital II: See the introductory paragraph to this Agreement.
Closing: See the Purchase Agreement.
Company: See the introductory paragraph to this Agreement.
<PAGE> 4
Consummation Date: The 225th day after the Issue Date.
Effectiveness Date: The 180th day after the Issue Date.
Effectiveness Period: See Section 3(a).
Event Date: See Section 4(b).
Exchange Act: The Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2(a).
Exchange Offer: See Section 2(a).
Exchange Registration Statement: See Section 2(a).
Filing Date: The 90th day after the Issue Date.
Guarantor: See the introductory paragraph hereto.
Holder: Any holder of a Registrable Note or Registrable Notes
or any holder of a Series A/B Note or Series A/B Notes.
Indemnified Person: See Section 7(c).
Indemnifying Person: See Section 7(c).
Indenture: The Indenture, dated as of December 2, 1998, among
the Issuers, the Guarantors listed thereto and Wilmington Trust, as trustee,
pursuant to which the Notes are being issued, as amended or supplemented from
time to time in accordance with the terms thereof.
Initial Purchasers: See the introductory paragraph to this
Agreement.
Initial Shelf Registration: See Section 3(a).
Inspectors: See Section 5(o).
Issue Date: The date on which the original Notes are sold to
the Initial Purchasers pursuant to the Purchase Agreement.
<PAGE> 5
Issuers: See the introductory paragraph to this Agreement.
NASD: See Section 5(t).
Notes: See the introductory paragraph to this Agreement.
Participant: See Section 7(a).
Participating Broker-Dealer: See Section 2(b).
Person: An individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government (including any agency or political
subdivision thereof).
Private Exchange: See Section 2(b).
Private Exchange Notes: See Section 2(b).
Prospectus: The prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to completion
and a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
Purchase Agreement: See the introductory paragraphs to this
Agreement.
Records: See Section 5(o).
Registrable Notes: The Notes upon original issuance of the
Notes and at all times subsequent thereto and, if issued, the Private Exchange
Notes, until in the case of any such Notes or any such Private Exchange Notes,
as the case may be, (i) a Registration Statement covering such Notes or such
Private Exchange Notes has been declared effective by the SEC and such Notes or
such Private Exchange Notes, as the case may be, have been exchanged and/or
disposed of in accordance with such effective Registration Statement, (ii) such
Notes or such Private Exchange Notes, as the case may be, are sold in compliance
with Rule 144, (iii) in the case of any Note, such Note has
<PAGE> 6
been exchanged for an Exchange Note or Exchange Notes pursuant to an Exchange
Offer or (iv) such Notes or such Private Exchange Notes, as the case may be,
cease to be outstanding.
Registration Default: See Section 4(a).
Registration Statement: Any registration statement of the
Company or Capital II, including, but not limited to, the Exchange Registration
Statement, which covers any of the Registrable Notes pursuant to the provisions
of this Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
Rule 415: Rule 415 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Series A/B Notes: The Issuer's 9 5/8% Senior Subordinated
Notes due 2007 in the aggregate principal amount of $100,000,000 issued pursuant
to the Indenture dated as of November 12, 1997 among the Issuers and the
Trustee.
<PAGE> 7
Shelf Notice: See Section 2(c).
Shelf Registration: See Section 3(b).
Subsequent Shelf Registration: See Section 3(b).
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture and, if existent, the
trustee under any indenture governing the Exchange Notes and Private Exchange
Notes (if any).
Underwritten registration or underwritten offering: A
registration under the Securities Act in which securities of the Company are
sold to an underwriter(s) for reoffering to the public.
2. Exchange Offer
(a) Each of the Issuers jointly and severally agrees to use
its reasonable best efforts to file with the SEC as soon as practicable after
the Closing, but in no event later than the Filing Date, documents pertaining to
an offer to exchange (the "Exchange Offer") any and all of the Registrable Notes
and the Series A/B Notes for a like aggregate principal amount of debt
securities of the Issuers which are identical in all material respects to the
Notes (the "Exchange Notes") (and which are entitled to the benefits of the
Indenture or a trust indenture which is substantially identical to the Indenture
(other than such changes to the Indenture or any such identical trust indenture
as are necessary to comply with any requirements of the SEC to effect or
maintain the qualification thereof under the TIA) and which, in either case, has
been qualified under the TIA), except that the Exchange Notes shall have been
registered pursuant to an effective registration statement under the Securities
Act and will not contain terms with respect to transfer restrictions. The
Exchange Offer will be registered under the Securities Act on the appropriate
form (the "Exchange Registration Statement"), and the Exchange Offer will comply
with all applicable tender offer rules and regulations under the Exchange Act.
Each of the Issuers jointly and severally agrees to use its reasonable best
efforts to (x) cause the Exchange Registration Statement to become effective
under the Securities Act on or before the Effectiveness Date; (y) keep the
Exchange Offer open for at least 30 days (or longer if required by applicable
law) after the date that notice of the Exchange Offer is mailed to Holders; and
(z) consummate the Exchange Offer with respect to all Notes validly tendered on
or prior to
<PAGE> 8
the 60th day following the date the Exchange Registration Statement is declared
effective (in any event on or prior to the Consummation Date) (or, in the event
of any extension of the Exchange Offer required by applicable law, the earliest
day following any such extension). Each Holder who participates in the Exchange
Offer will be required to represent that any Exchange Notes received by it will
be acquired in the ordinary course of its business, that at the time of the
consummation of the Exchange Offer such Holder will have no arrangement or
understanding with any Person to participate in the distribution of the Exchange
Notes in violation of the provisions of the Securities Act, that such Holder is
not an affiliate of either of the Issuers within the meaning of Rule 405
promulgated under the Securities Act or if it is such an affiliate, that it will
comply with the registration and prospectus delivery requirements of the
Securities Act, to the extent applicable, and that is not acting on behalf of
any Person who could not truthfully make the foregoing representations. Upon
consummation of the Exchange Offer in accordance with this Section 2, the
provisions of this Agreement shall continue to apply, mutatis mutandis, solely
with respect to Registrable Notes that are Private Exchange Notes and Exchange
Notes held by Participating Broker-Dealers, and the Issuers shall have no
further obligation to register Registrable Notes (other than Private Exchange
Notes and Exchange Notes held by Participating Broker-Dealers) pursuant to
Section 3 of this Agreement.
(b) The Issuers shall include within the Prospectus contained
in the Exchange Registration Statement a section entitled "Plan of
Distribution," reasonably acceptable to the Initial Purchasers, which shall
contain a summary statement of the positions taken or policies made by the staff
of the SEC with respect to the potential "underwriter" status of any
broker-dealer that is the beneficial owner (as defined in Rule 13d-3 promulgated
under the Exchange Act) of Exchange Notes received by such broker-dealer in the
Exchange Offer (a "Participating Broker-Dealer"), whether such positions or
policies have been publicly disseminated by the staff of the SEC or such
positions or policies, in the reasonable judgment of the Initial Purchasers,
represent the prevailing views of the staff of the SEC. Such "Plan of
Distribution" section shall also allow the use of the Prospectus by all Persons
subject to the prospectus delivery requirements of the Securities Act, including
all Participating Broker-Dealers, and include a statement describing the means
by which Participating Broker-Dealers may resell the Exchange Notes.
<PAGE> 9
Each of the Issuers shall use its reasonable best efforts to
keep the Exchange Registration Statement effective and to amend and supplement
the Prospectus contained therein in order to permit such Prospectus to be
lawfully delivered by all Persons subject to the prospectus delivery
requirements of the Securities Act for such period of time as such Persons must
comply with such requirements in order to resell the Exchange Notes, provided
that such period shall not exceed 180 days (or such longer period if extended
pursuant to the last paragraph of Section 5) (the "Applicable Period").
If, prior to consummation of the Exchange Offer, the Initial
Purchasers hold any Notes acquired by them and having, or which are reasonably
likely to be determined to have, the status as an unsold allotment in the
initial distribution, the Issuers upon the request of such Initial Purchasers
shall, simultaneously with the delivery of the Exchange Notes in the Exchange
Offer, issue and deliver to such Initial Purchasers, in exchange (the "Private
Exchange") for the Notes held by such Initial Purchasers, a like principal
amount of debt securities of the Issuers that are identical in all material
respects to the Exchange Notes (the "Private Exchange Notes") (and which are
issued pursuant to the same indenture as the Exchange Notes) except for the
placement of a restrictive legend on the Private Exchange Notes. If possible,
the Private Exchange Notes shall bear the same CUSIP number as the Exchange
Notes. Interest on the Exchange Notes and Private Exchange Notes will accrue
from the last interest payment date on which interest was paid on the Notes
surrendered in exchange therefor or, if no interest has been paid on the Notes,
from the Issue Date.
In connection with the Exchange Offer, the Issuers shall:
(i) mail to each Holder a copy of the Prospectus forming part
of the Exchange Registration Statement, together with an appropriate
letter of transmittal and related documents;
(ii) utilize the services of a depositary for the Ex change
Offer with an address in the Borough of Manhattan, The City of New
York; and
(iii) permit Holders to withdraw tendered Notes at any time
prior to the close of business, New York City time, on the last
business day on which the Exchange Offer shall remain open.
<PAGE> 10
As soon as practicable after the close of the Exchange Offer
or the Private Exchange, as the case may be, the Issuers shall:
(i) accept for exchange all Notes and all Series A/B Notes
tendered and not validly withdrawn pursuant to the Exchange Offer or
the Private Exchange;
(ii) deliver to the Trustee for cancellation all Notes and
Series A/B Notes so accepted for exchange; and
(iii) cause the Trustee to authenticate and deliver promptly
to each Holder of Notes, Exchange Notes or Private Exchange Notes, as
the case may be, equal in principal amount to the Notes of such Holder
so accepted for exchange.
The Exchange Notes and the Private Exchange Notes may be
issued under (i) the Indenture or (ii) an indenture substantially identical to
the Indenture, which in either event will provide that (1) the Exchange Notes
will not be subject to the transfer restrictions set forth in the Indenture and
(2) the Private Exchange Notes will be subject to the transfer restrictions set
forth in the Indenture. The Indenture or such indenture shall provide that the
Exchange Notes, the Private Ex change Notes and the Notes will have the right to
vote and give consents together on all matters presented to such holders for
votes or consents as one class and that neither the Exchange Notes, the Private
Exchange Notes nor the Notes will have the right to vote or consent as a
separate class on any matter.
(c) If (1) prior to the consummation of the Exchange Offer,
the Issuers or Holders of at least a majority in aggregate principal amount of
the Registrable Notes reasonably determine in good faith that (i) the Exchange
Notes would not, upon receipt, be freely transferable by such Holders which are
not affiliates (within the meaning of the Securities Act) of the Issuers without
restriction under the Securities Act and without restrictions under applicable
state securities laws, (ii) the interests of the Holders under this Agreement
would be adversely affected by the consummation of the Exchange Offer or (iii)
after conferring with counsel, the SEC is unlikely to permit the commencement of
the Exchange Offer prior to the Effectiveness Date, (2) subsequent to the
consummation of the Private Exchange, any holder of the Private Exchange Notes
so requests or (3) the Exchange Offer is commenced and not consummated prior to
the Consummation Date, then the Issuers shall promptly deliver to the Holders
and the Trustee written notice
<PAGE> 11
thereof (the "Shelf Notice") and shall file an Initial Shelf Registration
pursuant to Section 3. The parties hereto agree that following the delivery of a
Shelf Notice to the Holders of Registrable Notes (in the circumstances
contemplated by clauses (1) and (3) of the preceding sentence), the Issuers
shall not have any further obligation to conduct the Exchange Offer or the
Private Exchange under this Section 2.
3. Shelf Registration
If a Shelf Notice is required to be delivered as contemplated
by Section 2(c), then:
(a) Initial Shelf Registration. The Issuers shall prepare and
file with the SEC a Registration Statement for an offering to be made on a
continuous basis pursuant to Rule 415 covering all of the then existing
Registrable Notes (the "Initial Shelf Registration"). If the Issuers shall have
not yet filed an Exchange Registration Statement, each of the Issuers shall use
its reasonable best efforts to file with the SEC the Initial Shelf Registration
on or prior to the Filing Date. In any other instance, each of the Issuers shall
use its reasonable best efforts to file with the SEC the Initial Shelf
Registration as promptly as practicable but, in any event, within 45 days
following delivery of the Shelf Notice. The Initial Shelf Registration shall be
on Form S-1 or another appropriate form permitting registration of such
Registrable Notes for resale by such Holders in the manner or manners designated
by them (including, without limitation, one or more underwritten offerings). The
Issuers shall not permit any securities other than the Registrable Notes to be
included in the Initial Shelf Registration or any Subsequent Shelf Registration.
Each of the Issuers shall use its reasonable best efforts to cause the Initial
Shelf Registration to be declared effective under the Securities Act, if an
Exchange Registration Statement has not yet been declared effective, on or prior
to the Effectiveness Date, or, in any other instance, as soon as practicable
after the filing thereof and in no event later than 60 days after filing of the
Initial Shelf Registration, and to keep the Initial Shelf Registration
continuously effective under the Securities Act until the date which is 24
months from the date on which such Initial Shelf Registration is declared
effective (subject to extension pursuant to the last paragraph of Section 5
hereof), or such shorter period ending when (i) all Registrable Notes covered by
the Initial Shelf Registration have been sold in the manner set forth and as
contemplated in the Initial Shelf Registration or (ii) a Subsequent Shelf
Registration covering all of the Registrable Notes has
<PAGE> 12
been declared effective under the Securities Act (the "Effectiveness Period").
(b) Subsequent Shelf Registrations. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be effective for any
reason at any time prior to the termination of the Effectiveness Period, each of
the Issuers shall use its reasonable best efforts to promptly restore the
effectiveness thereof, and in any event shall, within 45 days of such cessation
of effectiveness, amend the Shelf Registration in a manner reasonably expected
to restore the effectiveness thereof, or file an additional "shelf" Registration
Statement pursuant to Rule 415 covering all of the then existing Registrable
Notes (a "Subsequent Shelf Registration"). If a Subsequent Shelf Registration is
filed, each of the Issuers shall use its reasonable best efforts to cause the
Subsequent Shelf Registration to be declared effective as soon as practicable
after such filing and to keep such Registration Statement continuously effective
for a period equal to the number of days in the Effectiveness Period less the
aggregate number of days during which the Initial Shelf Registration or any
Subsequent Shelf Registration was previously continuously effective. As used
herein the term "Shelf Registration" means the Initial Shelf Registration and
any Subsequent Shelf Registration.
(c) Supplements and Amendments. The Issuers shall promptly
supplement and amend the Shelf Registration if required by the rules,
regulations or instructions applicable to the registration form used for such
Shelf Registration or if required by the Securities Act. The Issuers shall
promptly supplement and amend the Shelf Registration if any such supplement or
amendment is requested by the Holders of a majority in aggregate principal
amount of the Registrable Notes covered by such Registration Statement or by any
underwriter(s) of such Registrable Notes.
4. Additional Interest
(a) The Issuers and the Initial Purchasers agree that the
Holders of Registrable Notes will suffer damages if the Company and Capital II
fail to fulfill their obligations under Section 2 or Section 3 hereof and that
it would not be feasible to ascertain the extent of such damages with precision.
Accordingly, the Company and Capital II agree to pay additional interest on the
Notes ("Additional Interest") under the circumstances and to the extent set
forth below:
<PAGE> 13
(i) if neither the Exchange Registration Statement nor the
Initial Shelf Registration has been filed on or prior to the Filing
Date;
(ii) if neither the Exchange Registration Statement nor the
Initial Shelf Registration has been declared effective on or prior to
the Effectiveness Date;
(iii) if an Initial Shelf Registration required by Section
2(c)(2) has not been filed on or prior to the date 45 days after
delivery of the Shelf Notice;
(iv) if an Initial Shelf Registration required by Section
2(c)(2) has not been declared effective on or prior to the date 105
days after the delivery of the Shelf Notice; and/or
(v) if (A) the Company and Capital II have not exchanged the
Exchange Notes for all Notes and Series A/B Notes validly tendered in
accordance with the terms of the Exchange Offer on or prior to the
Consummation Date or (B) the Exchange Registration Statement ceases to
be effective at any time prior to the time that the Exchange Offer is
consummated as to all Notes and Series A/B Notes validly tendered or
(C) if applicable, the Shelf Registration has been declared effective
and such Shelf Registration ceases to be effective at any time prior to
the termination of the Effectiveness Period.
(each such event referred to in clauses (i) through (v) above is a "Registration
Default"). The sole remedy available to Holders of the Notes for a Registration
Default will be the accrual of Additional Interest as follows: the per annum
inter est rate on the Notes will increase by .50% during the first 90-day period
following the occurrence of a Registration Default and until it is waived or
cured; and the per annum interest rate will increase by an additional .25% for
each subsequent 90-day period during which the Registration Default remains
uncured, up to a maximum additional interest rate of 2.0% per annum, provided,
however, that only Holders of Private Exchange Notes shall be entitled to
receive Additional Interest as a result of a Registration Default pursuant to
clause (iii) or (iv), provided, further, that (1) upon the filing of the
Exchange Registration Statement or the Initial Shelf Registration (in the case
of (i) above), (2) upon the effectiveness of the Exchange Registration Statement
or a Shelf Registration (in the case of (ii) above), (3) upon the filing of the
Shelf Registration (in the case of (iii) above), (4) upon the effectiveness
<PAGE> 14
of the Shelf Registration (in the case of (iv) above), or (5) upon the exchange
of Exchange Notes for all Notes tendered or the effectiveness of a Shelf
Registration (in the case of (v)(A) above), or upon the subsequent effectiveness
of the Exchange Registration Statement which had ceased to remain effective or
the effectiveness of a Shelf Registration (in the case of (v)(B) above), or upon
the subsequent effectiveness of the Shelf Registration which had ceased to
remain effective (in the case of (v)(C) above), Additional Interest on the Notes
as a result of such clause (i), (ii), (iii), (iv) or (v) (or the relevant
subclause thereof), as the case may be, shall cease to accrue and the interest
rate on the Notes will revert to the interest rate originally borne by the
Notes.
(b) The Issuers shall notify the Trustee within one business
day after each and every date on which an event occurs in respect of which
Additional Interest is required to be paid (an "Event Date"). Any amounts of
Additional Interest due pursuant to (a)(i), (a)(ii), (a)(iii), (a)(iv) or (a)(v)
of this Section 4 will be payable in cash semi-annually on each May 15 and
November 15 (to the Holders of record on the May 1 and November 1 immediately
preceding such dates), commencing with the first such date occurring after any
such Additional Interest commences to accrue and until such Registration Default
is cured, by depositing with the Trustee, in trust for the benefit of such
Holders, immediately available funds in sums sufficient to pay such Additional
Interest. The amount of Additional Interest will be determined by multiplying
the applicable Additional Interest rate by the principal amount of the
Registrable Notes, multiplied by a fraction, the numerator of which is the
number of days such Additional Interest rate was applicable during such period
(determined on the basis of a 360-day year comprised of twelve 30-day months
and, in the case of a partial month, the actual number of days elapsed), and the
denominator of which is 360.
5. Registration Procedures
In connection with the filing of any Registration Statement
pursuant to Section 2 or 3 hereof, the Issuers shall effect such registrations
to permit the sale of the securities covered thereby in accordance with the
intended method or methods of disposition thereof, and pursuant thereto the
Issuers shall:
(a) Prepare and file with the SEC, as provided herein, a
Registration Statement or Registration Statements as prescribed by
Section 2 or 3, and use their re-
<PAGE> 15
spective reasonable best efforts to cause each such Registration
Statement to become effective and remain effective as provided herein,
provided that, if (1) such filing is pursuant to Section 3, or (2) a
Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities
Act by any Participating Broker-Dealer who seeks to sell Exchange Notes
during the Applicable Period, before filing any Registration Statement
or Prospectus or any amendments or supplements thereto, the Issuers
shall, upon written request, furnish to and afford the Holders of the
Registrable Notes covered by such Registration Statement and each such
Participating Broker-Dealer, as the case may be, their counsel and the
managing underwriter(s), if any, a reasonable opportunity to review
copies of all such documents (including copies of any documents to be
incorporated by reference therein and all exhibits thereto) proposed to
be filed (to the extent practicable, at least 5 business days prior to
such filing). The Issuers shall not file any Registration Statement or
Prospectus or any amendments or supplements thereto in respect of which
the Holders must be afforded an opportunity to review prior to the
filing of such document, if the Holders of a majority in aggregate
principal amount of the Registrable Notes covered by such Registration
Statement, or such Participating Broker-Dealer, as the case may be,
their counsel, or the managing underwriter(s), if any, shall reasonably
object.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Shelf Registration or Exchange
Registration Statement, as the case may be, as may be necessary to keep
such Registration Statement continuously effective for the
Effectiveness Period or the Applicable Period, as the case may be;
cause the related Prospectus to be supplemented by any prospectus
supplement required by applicable law, and as so supplemented to be
filed pursuant to Rule 424 (or any similar provisions then in force)
under the Securities Act; and comply with the provisions of the
Securities Act and the Exchange Act applicable to them with respect to
the disposition of all securities covered by such Registration
Statement as so amended or in such Prospectus as so supplemented and
with respect to the subsequent resale of any securities being sold by a
Participating Broker-Dealer covered by any such Prospectus; the Issuers
shall be deemed not to have used their reasonable best efforts to keep
a Registration Statement effective during the Applicable Period if
either
<PAGE> 16
of them voluntarily takes any action that would result in selling
Holders of the Registrable Notes covered thereby or Participating
Broker-Dealers seeking to sell Exchange Notes not being able to sell
such Registrable Notes or such Exchange Notes during that period unless
such action is required by applicable law or unless the Issuers comply
with this Agreement, including without limitation, the provisions of
clauses 5(c)(v) and (vi) below.
(c) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, notify the selling Holders
of Registrable Notes, or each such Participating Broker-Dealer, as the
case may be, their counsel and the managing underwriter(s), if any,
promptly (but in any event within two business days), and confirm such
notice in writing, (i) when a Prospectus or any prospectus supplement
or post-effective amendment thereto has been filed, and, with respect
to a Registration Statement or any post-effective amendment thereto,
when the same has become effective under the Securities Act (including
in such notice a written statement that any Holder may, upon request,
obtain, without charge, one conformed copy of such Registration
Statement or post-effective amendment thereto including financial
statements and schedules, documents incorporated or deemed to be
incorporated by reference and exhibits), (ii) of the issuance by the
SEC of any stop order suspending the effectiveness of a Registration
Statement or of any order preventing or suspending the use of any
preliminary Prospectus or the initiation of any proceedings for that
purpose, (iii) if at any time when a Prospectus is required by the
Securities Act to be delivered in connection with sales of the
Registrable Notes or resales of Exchange Notes by Participating
Broker-Dealers the representations and warranties of the Issuers
contained in any agreement (including any underwriting agreement)
contemplated by Section 5(n) below cease to be true and correct, (iv)
of the receipt by either of the Issuers of any notification with
respect to the suspension of the qualification or exemption from
qualification of a Registration Statement or any of the Registrable
Notes or the Exchange Notes to be sold by any Participating
Broker-Dealer for offer or sale in any jurisdiction, or the initiation
or threatening of any proceeding for such purpose, (v) of the happening
of any event or any information be-
<PAGE> 17
coming known that makes any statement made in such Registration
Statement or related Prospectus or any document incorporated or deemed
to be incorporated therein by reference untrue in any material respect
or that requires the making of any changes in, or amendments or
supplements to, such Registration Statement, Prospectus or documents so
that, in the case of the Registration Statement, it will not contain
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the Prospectus, it will
not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which
they were made, not misleading, and (vi) of either Issuer's reasonable
determination that a post-effective amendment to a Registration
Statement would be necessary or appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, use their reasonable best
efforts to prevent the issuance of any order suspending the
effectiveness of a Registration Statement or of any order preventing or
suspending the use of a Prospectus or suspending the qualification (or
exemption from qualification) of any of the Registrable Notes or the
Exchange Notes to be sold by any Participating Broker-Dealer, for sale
in any jurisdiction, and, if any such order is issued, to use their
reasonable best efforts to obtain the withdrawal of any such order as
promptly as practicable.
(e) If a Shelf Registration is filed pursuant to Section 3 and
if requested by the managing underwriter(s), if any, or the Holders of
a majority in aggregate principal amount of the Registrable Notes being
sold in connection with an underwritten offering, (i) promptly
incorporate in a Prospectus supplement or post-effective amendment such
information as the managing underwriter(s), if any, or such Holders
reasonably request to be included therein and (ii) make all required
filings of such Prospectus supplement or such post-effective amendment
as soon as practicable after the Company has received notification of
the matters to be incorporated in such Prospectus supplement or
post-effective amendment.
<PAGE> 18
(f) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, furnish to each selling
Holder of Registrable Notes who so requests and to each such
Participating Broker-Dealer who so requests and to counsel and the
managing underwriter(s), if any, without charge, one conformed copy of
the Registration Statement or Registration Statements and each
post-effective amendment thereto, including financial statements and
schedules, and, if requested, all documents incorporated or deemed to
be incorporated therein by reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, deliver to each selling
Holder of Registrable Notes, or each such Participating Broker-Dealer,
as the case may be, their counsel, and the managing underwriter or
underwriters, if any, without charge, as many copies of the Prospectus
or Prospectuses (including each form of preliminary Prospectus) and
each amendment or supplement thereto and any documents incorporated by
reference therein as such Persons may reasonably request; and, subject
to the last paragraph of this Section 5, each of the Issuers hereby
consents to the use of such Prospectus and each amendment or supplement
thereto by each of the selling Holders of Registrable Notes or each
such Participating Broker-Dealer, as the case may be, and the managing
underwriter or underwriters or agents, if any, and dealers (if any), in
connection with the offering and sale of the Registrable Notes covered
by, or the sale by Participating Broker-Dealers of the Exchange Notes
pursuant to, such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or any
delivery of a Prospectus contained in the Exchange Registration
Statement by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, to use their reasonable best
efforts to register or qualify, and to cooperate with the selling
Holders of Registrable Notes or each such Participating Bro-
<PAGE> 19
ker-Dealer, as the case may be, the managing underwriter or
underwriters, if any, and their respective counsel in connection with
the registration or qualification of (or exemption from such
registration or qualification), such Registrable Notes for offer and
sale under the securities or Blue Sky laws of such jurisdictions within
the United States as any selling Holder, Participating Broker-Dealer,
or the managing underwriter or underwriters, if any, reasonably request
in writing, provided that where Exchange Notes held by Participating
Broker-Dealers or Registrable Notes are offered other than through an
underwritten offering, the Issuers agree to cause their counsel to
perform Blue Sky investigations and file registrations and
qualifications required to be filed pursuant to this Section 5(h); keep
each such registration or qualification (or exemption therefrom)
effective during the period such Registration Statement is required to
be kept effective and do any and all other acts or things reasonably
necessary or advisable to enable the disposition in such jurisdictions
of the Exchange Notes held by Participating Broker-Dealers or the
Registrable Notes covered by the applicable Registration Statement;
provided that neither of the Issuers shall be required to (A) qualify
generally to do business in any jurisdiction where it is not then so
qualified, (B) take any action that would subject it to general service
of process in any such jurisdiction where it is not then so subject or
(C) subject itself to taxation in any such jurisdiction where it is not
otherwise so subject.
(i) If a Shelf Registration is filed pursuant to Section 3,
cooperate with the selling Holders of Registrable Notes and the
managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable Notes
to be sold, which certificates shall not bear any restrictive legends
and shall be in a form eligible for deposit with The Depository Trust
Company; and enable such Registrable Notes to be in such denominations
and registered in such names as the managing underwriter or
underwriters, if any, or Holders may reasonably request.
(j) Use their reasonable best efforts to cause the Registrable
Notes covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof or the managing
underwriter or underwriters, if any, to consummate the disposition of
<PAGE> 20
such Registrable Notes, except as may be required solely as a
consequence of the nature of such selling Holder's business, in which
case each of the Issuers will cooperate in all reasonable respects with
the filing of such Registration Statement and the granting of such
approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, upon the occurrence of any
event contemplated by paragraph 5(c)(v) or 5(c)(vi), as promptly as
reasonably practicable prepare and (subject to Section 5(a)) file with
the SEC, at the joint and several expense of each of the Issuers, a
supplement or post-effective amendment to the Registration Statement or
a supplement to the related Prospectus or any document incorporated or
deemed to be incorporated therein by reference, or file any other
required document so that, as thereafter delivered to the purchasers of
the Registrable Notes being sold thereunder or to the purchasers of the
Exchange Notes to whom such Prospectus will be delivered by a
Participating Broker-Dealer, any such Prospectus will not contain 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 the light of the circumstances under which they were made,
not misleading.
(l) Use their reasonable best efforts to cause the Registrable
Notes covered by a Registration Statement or the Exchange Notes, as the
case may be, to be rated with the appropriate rating agencies, if so
requested by the Holders of a majority in aggregate principal amount of
Registrable Notes covered by such Registration Statement or the
Exchange Notes, as the case may be, or the managing underwriter or
underwriters, if any.
(m) Prior to the effective date of the first Registration
Statement relating to the Registrable Notes, (i) provide the Trustee
with certificates for the Registrable Notes or Exchange Notes, as the
case may be, in a form eligible for deposit with The Depository Trust
Company and (ii) provide a CUSIP number for the Registrable Notes or
Exchange Notes, as the case may be.
<PAGE> 21
(n) In connection with an underwritten offering of Registrable
Notes pursuant to a Shelf Registration, enter into an underwriting
agreement upon such reasonable terms and conditions as are customary in
underwritten offerings of debt securities similar to the Notes and take
all such other actions as are reasonably requested by the managing
underwriter(s), if any, in order to expedite or facilitate the
registration or the disposition of such Registrable Notes, and in such
connection, (i) make such reasonable representations and warranties to
the managing underwriter or underwriters on behalf of any underwriters,
with respect to the business of the Company and the Registration
Statement, Prospectus and documents, if any, incorporated or deemed to
be incorporated by reference therein, in each case, as are customarily
made by issuers to underwriters in underwritten offerings of debt
securities similar to the Notes, and confirm the same if and when
requested; (ii) obtain opinions of counsel to the Issuers and updates
thereof in form and substance reasonably satisfactory to the managing
underwriter or underwriters, addressed to the managing underwriter or
underwriters covering the matters customarily covered in opinions
received in underwritten offerings of debt securities similar to the
Notes and such other customary matters as may be reasonably requested
by the managing underwriter(s); (iii) obtain "cold comfort" letters and
updates thereof in form and substance reasonably satisfactory to the
managing underwriter or underwriters from the independent certified
public accountants of the Issuers (and, if necessary, any other
independent certified public accountants of any business acquired by
the Company for which financial statements and financial data are, or
are required to be, included in the Registration Statement), addressed
to the managing underwriter or underwriters on behalf of any
underwriters, such letters to be in customary form and covering matters
of the type customarily covered in "cold comfort" letters in connection
with underwritten offerings of debt securities similar to the Notes and
such other matters as may be reasonably requested by the managing
underwriter or underwriters; and (iv) if an underwriting agreement is
entered into, the same shall contain indemnification provisions and
procedures no less favorable than those set forth in Section 7 hereof
(or such other provisions and procedures acceptable to Holders of a
majority in aggregate principal amount of Registrable Notes covered by
such Registration Statement and the managing underwriter or
underwriters or agents) with respect to all parties to be indemnified
pursuant to said Section. The above shall be done at each closing un-
<PAGE> 22
der such underwriting agreement, or as and to the extent required
thereunder.
(o) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, make available for in-
spection by any selling Holder of such Registrable Notes being sold, or
each such Participating Broker-Dealer, as the case may be, the managing
underwriter or underwriters participating in any such disposition of
Registrable Notes, if any, and any attorney, accountant or other agent
retained by any such selling Holder or each such Participating
Broker-Dealer, as the case may be (collectively, the "Inspectors"), at
the offices where normally kept, during reasonable business hours, all
financial and other records, pertinent corporate documents and
properties of the Company (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise any applicable due
diligence responsibilities, and cause the officers, directors and
employees of the Company to supply all information in each case
reasonably requested by any such Inspector in connection with such
Registration Statement. Records which the Company determines, in good
faith, to be confidential and any Records which they notify the Inspec-
tors are confidential shall not be disclosed by the Inspectors unless
(i) the disclosure of such Records is necessary to avoid or correct a
material misstatement or material omission in such Registration
Statement, (ii) the release of such Records is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction or (iii)
the information in such Records has been made generally available to
the public. Each selling Holder of such Registrable Notes and each such
Participating Broker-Dealer or underwriter will be required to agree
that information obtained by it as a result of such inspections shall
be deemed confidential and shall not be used by it as the basis for any
market transactions in the securities of the Issuers or for any purpose
other than in connection with such Registration Statement unless and
until such is made generally available to the public. Each selling
Holder of such Registrable Notes and each such Participating
Broker-Dealer will be required to further agree that it will, upon
learning that disclosure of such Records is sought in a court of
competent jurisdiction, give prompt notice to the Company and allow the
Company to undertake
<PAGE> 23
appropriate action to prevent disclosure of the Records deemed
confidential at their expense.
(p) Provide an indenture trustee for the Registrable Notes or
the Exchange Notes, as the case may be, and cause the Indenture or the
trust indenture provided for in Section 2(a), as the case may be, to be
qualified under the TIA not later than the effective date of the
Exchange Registration Statement or the first Registration Statement
relating to the Registrable Notes; and in connection therewith,
cooperate with the trustee under any such indenture and the Holders, to
effect such changes to such indenture as may be required for such
indenture to be so qualified in accordance with the terms of the TIA;
and execute, and use their respective reasonable best efforts to cause
such trustee to execute, all documents as may be required to effect
such changes, and all other forms and documents required to be filed
with the SEC to enable such indenture to be so qualified in a timely
manner.
(q) Comply in all material respects with all applicable rules
and regulations of the SEC and make generally available to its
securityholders earnings statements satisfying the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder (or any
similar rule promulgated under the Securities Act) no later than 90
days after the end of any 12-month period (i) commencing at the end of
any fiscal quarter in which Registrable Notes are sold to underwriters
in a firm commitment or best efforts underwritten offering and (ii) if
not sold to underwriters in such an offering, commencing on the first
day of the first fiscal quarter of the Company after the effective date
of a Registration Statement, which statements shall cover said 12-month
periods.
(r) Upon consummation of an Exchange Offer or a Private
Exchange, obtain an opinion of counsel to the Issuers, in a form
reasonable and customary for underwritten offerings of debt securities
similar to the Notes, addressed to the Trustee for the benefit of all
Holders of Registrable Notes participating in the Exchange Offer or the
Private Exchange, as the case may be, and which includes an opinion
that (i) each of the Issuers has duly authorized, executed and
delivered the Exchange Notes and Private Exchange Notes and the related
indenture and (ii) each of the Exchange Notes or the Private Exchange
Notes, as the case may be, and related indenture constitute a legal,
valid and binding obligation of each of the
<PAGE> 24
Issuers, enforceable against each of the Issuers in accordance with its
respective terms (with reasonable and customary exceptions and
qualifications).
(s) If an Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Notes or the Series A/B
Notes by Holders to the Issuers (or to such other Person as directed by
the Issuers) in exchange for the Exchange Notes or the Private Exchange
Notes, as the case may be, the Issuers shall mark, or cause to be
marked, on such Registrable Notes or the Series A/B Notes that such
Registrable Notes or the Series A/B Notes are being canceled in
exchange for the Exchange Notes or the Private Exchange Notes, as the
case may be; and, in no event shall such Registrable Notes or the
Series A/B Notes be marked as paid or otherwise satisfied.
(t) Cooperate with each seller of Registrable Notes covered by
any Registration Statement and the managing underwriter(s), if any,
participating in the disposition of such Registrable Notes and their
respective counsel in connection with any filings required to be made
with the National Association of Securities Dealers, Inc. (the "NASD").
(u) Use their respective reasonable best efforts to take all
other reasonable steps necessary to effect the registration of the
Registrable Notes covered by a Registration Statement contemplated
hereby.
The Issuers may require each seller of Registrable Notes or
Participating Broker-Dealer as to which any registration is being effected to
furnish to the Issuers such information regarding such seller or Participating
Broker-Dealer and the distribution of such Registrable Notes or Exchange Notes
to be sold by such Participating Broker-Dealer, as the case may be, as the
Issuers may, from time to time, reasonably request. The Issuers may exclude from
such registration the Registrable Notes of any seller or Participating
Broker-Dealer who fails to furnish such information within a reasonable time
after receiving such request. Each seller as to which any Shelf Registration is
being effected agrees to furnish promptly to the Issuers all information
required to be disclosed in order to make the information previously furnished
to the Issuers by such seller not materially misleading.
Each Holder of Registrable Notes and each Participating
Broker-Dealer agrees by acquisition of such Registrable
<PAGE> 25
Notes or Exchange Notes to be sold by such Participating Broker-Dealer, as the
case may be, that, upon receipt of any notice from the Company of the happening
of any event of the kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v) or
5(c)(vi) hereof, such Holder will forthwith discontinue disposition of such
Registrable Notes covered by such Registration Statement or Prospectus or
Exchange Notes to be sold by such Holder or Participating Broker-Dealer, as the
case may be, until such Holder's or Participating Broker-Dealer's receipt of the
copies of the supplemented or amended Prospectus contemplated by Section 5(k),
or until it is advised in writing (the "Advice") by the Company that the use of
the applicable Prospectus may be resumed, and has received copies of any
amendments or supplements thereto. In the event the Company shall give any such
notice, each of the Effectiveness Period and the Applicable Period shall be
extended by the number of days during such periods from and including the date
of the giving of such notice to and including the date when each seller of
Registrable Notes covered by such Registration Statement or Exchange Notes to be
sold by such Holder or Participating Broker-Dealer, as the case may be, shall
have received (x) the copies of the supplemented or amended Prospectus
contemplated by Section 5(k) or (y) the Advice.
6. Registration Expenses
(a) All reasonable fees and expenses incident to the
performance of or compliance with this Agreement by the Issuers shall be borne
by the Issuers, jointly and severally, whether or not the Exchange Offer or a
Shelf Registration is filed or becomes effective, including, without limitation,
(i) all registration and filing fees (including, without limitation, (A) fees
with respect to filings required to be made with the NASD in connection with an
underwritten offering and (B) fees and expenses of compliance with state
securities or Blue Sky laws (including, without limitation, reasonable fees and
disbursements of counsel in connection with Blue Sky qualifications of the
Registrable Notes or Exchange Notes and determination of the eligibility of the
Registrable Notes or Exchange Notes for investment under the laws of such
jurisdictions in the United States (x) where the Holders are located, in the
case of the Exchange Notes, or (y) as provided in Section 5(h), in the case of
Registrable Notes or Exchange Notes to be sold by a Participating Broker-Dealer
during the Applicable Period)), (ii) printing expenses (including, without
limitation, expenses of printing certificates for Registrable Notes or Exchange
Notes in a form eligible for deposit with The Depository Trust Company and of
printing Prospectuses if the printing of
<PAGE> 26
Prospectuses is reasonably requested by the managing underwriter or
underwriters, if any, or, in respect of Registrable Notes or Exchange Notes to
be sold by any Participating Broker-Dealer during the Applicable Period, if
reasonably requested by the Holders of a majority in aggregate principal amount
of the Registrable Notes included in any Registration Statement or of such
Exchange Notes, as the case may be), (iii) messenger, telephone and delivery
expenses, (iv) reasonable fees and disbursements of counsel for the Issuers and
reasonable fees and disbursements of special counsel for the sellers of
Registrable Notes (subject to the provisions of Section 6(b)), (v) fees and
disbursements of all independent certified public accountants referred to in
Section 5(n)(iii) (including, without limitation, the expenses of any special
audit and "cold comfort" letters required by or incident to such performance),
(vi) rating agency fees, (vii) Securities Act liability insurance, if the
Issuers desire such insurance, (viii) fees and expenses of the Trustee, (ix)
fees and expenses of all other Persons retained by the Issuers, (x) internal
expenses of the Issuers (including, without limitation, all salaries and
expenses of officers and employees of the Issuers performing legal or accounting
duties), (xi) the expense of any annual audit, (xii) the fees and expenses
incurred in connection with any listing of the securities to be registered on
any securities exchange and (xiii) the expenses relating to printing, word
processing and distributing all Registration Statements, underwriting
agreements, securities sales agreements, indentures and any other documents
necessary in order to comply with this Agreement. In the event of an
underwritten offering of Registrable Notes the Company shall not be responsible
for any "roadshow" expenses in connection therewith.
(b) In connection with any Shelf Registration hereunder, the
Issuers, jointly and severally, shall reimburse the Holders of the Registrable
Notes being registered in such registration for the reasonable fees and
disbursements of not more than one counsel (in addition to appropriate local
counsel) chosen by the Holders of a majority in aggregate principal amount of
the Registrable Notes to be included in such Registration Statement and other
reasonable out-of-pocket expenses of the Holders of Registrable Notes incurred
in connection with the registration of the Registrable Notes.
(c) Notwithstanding any of the foregoing, the Issuers shall
not have any obligation to pay any underwriting fees, discounts or commissions
attributable to the sale of Registrable Notes.
<PAGE> 27
7. Indemnification
(a) Each of the Issuers, jointly and severally, agrees to
indemnify and hold harmless each Holder and each Participating Broker-Dealer
selling Exchange Notes during the Applicable Period, the officers and directors
of each such Person, and each Person, if any, who controls any such Person
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act (each, a "Participant"), from and against any and all losses,
claims, damages and liabilities (including, without limitation, the reasonable
legal fees and other expenses actually incurred in connection with any suit,
action or proceeding or any claim asserted) caused by, arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement or Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) or any preliminary Prospectus, or caused by, arising out of or based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, except insofar
as such losses, claims, damages or liabilities are caused by any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with information relating to any Participant furnished to
the Company in writing by such Participant expressly for use therein; provided
that the foregoing indemnity with respect to any preliminary Prospectus shall
not inure to the benefit of any Participant (or to the benefit of an officer or
director of such Participant or any Person controlling such Participant) from
whom the Person asserting any such losses, claims, damages or liabilities
purchased Registrable Notes or Exchange Notes if such untrue statement or
omission or alleged untrue statement or omission made in such preliminary
Prospectus is eliminated or remedied in the related Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) and a copy of the related Prospectus (as so amended or supplemented)
shall have been furnished to such Participant at or prior to the sale of such
Registrable Notes or Exchange Notes, as the case may be, to such Person.
(b) Each Participant will be required to agree, severally and
not jointly, to indemnify and hold harmless the Issuers, their respective
directors and officers and each Person who controls either of the Issuers within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act to the same extent as the foregoing indemnity from the Issuers
<PAGE> 28
to each Participant, but only with reference to information relating to such
Participant furnished to the Issuers in writing by such Participant expressly
for use in any Registration Statement or Prospectus, any amendment or supplement
thereto, or any preliminary Prospectus. The liability of any Participant under
this paragraph (b) shall in no event exceed the proceeds received by such
Participant from sales of Registrable Notes or Exchange Notes giving rise to
such obligations.
(c) If any suit, action, proceeding (including any
governmental or regulatory investigation), claim or demand shall be brought or
asserted against any Person in respect of which indemnity may be sought pursuant
to either paragraph (a) or (b) of this Section 7, such Person (the "Indemnified
Person") shall promptly notify the Person against whom such indemnity may be
sought (the "Indemnifying Person") in writing, and the Indemnifying Person, upon
request of the Indemnified Person, shall retain one counsel reasonably
satisfactory to the Indemnified Person to represent the Indemnified Person and
any others the Indemnifying Person may reasonably designate in such proceeding
and shall pay the reasonable fees and expenses incurred by such counsel related
to such proceeding. In any such proceeding, any Indemnified Person shall have
the right to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Person unless (i) the Indemnifying
Person and the Indemnified Person shall have mutually agreed in writing to the
contrary, (ii) the Indemnifying Person has failed to retain counsel reasonably
satisfactory to the Indemnified Person or (iii) the named parties in any such
proceeding (including any impleaded parties) include both the Indemnifying
Person and the Indemnified Person and such Indemnified Person shall have been
advised by counsel that there may be one or more legal defenses available to it
which are different from or additional to those available to any such
Indemnifying Person. It is understood that the Indemnifying Person shall not, in
connection with any proceeding or related proceeding in the same jurisdiction,
be liable for the reasonable fees and expenses of more than one separate law
firm (in addition to any local counsel) for all Indemnified Persons, and that
all such reasonable fees and expenses shall be reimbursed as they are incurred.
Any such separate firm for the Participants and such control Persons of
Participants shall be designated in writing by Participants who sold a majority
in interest of Registrable Notes and Exchange Notes sold by all such
Participants and any such separate firm for the Issuers, their directors, their
officers and such control Persons of the Issuers shall be designated in writing
by the Issuers. The Indemnifying Person shall not be liable for any settlement
of any
<PAGE> 29
proceeding effected without its prior written consent, but if settled with such
consent or if there is a final judgment for the plaintiff for which the
Indemnified Person is entitled to indemnification pursuant to this Agreement,
the Indemnifying Person agrees to indemnify any Indemnified Person from and
against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an Indemnified Person
shall have requested an Indemnifying Person to reimburse the Indemnified Person
for reasonable fees and expenses incurred by counsel as contemplated by the
third sentence of this paragraph, the Indemnifying Person agrees that it shall
be liable for any settlement of any proceeding effected without its written
consent if (i) such settlement is entered into more than 60 days after receipt
by such Indemnifying Person of the aforesaid request and (ii) such Indemnifying
Person shall not have reimbursed the Indemnified Person in accordance with such
request prior to the date of such settlement; provided, however, that the
Indemnifying Person shall not be liable for any settlement effected without its
consent pursuant to this sentence if the Indemnifying Party is contesting, in
good faith, the request for reimbursement. No Indemnifying Person shall, without
the prior written consent of the Indemnified Person, effect any settlement of
any pending or threatened proceeding in respect of which any Indemnified Person
is a party and indemnity has been sought hereunder by such Indemnified Person,
unless such settlement includes an unconditional release (or any other release
reasonably acceptable to the Indemnified Person) of such Indemnified Person from
all liability on claims that are the subject matter of such proceeding.
(d) If the indemnification provided for in paragraphs (a) and
(b) of this Section 7 is unavailable to an Indemnified Person in respect of any
losses, claims, damages or liabilities referred to therein (other than as a
result of the proviso set forth in Section 7(a)), then each Indemnifying Person
under such paragraphs, in lieu of indemnifying such Indemnified Person
thereunder, shall contribute to the amount paid or payable by such Indemnified
Person as a result of such losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative fault of the Issuers on the
one hand and the Participants on the other in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative fault of the
Issuers on the one hand and the Participants on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to infor-
<PAGE> 30
mation supplied by the Issuers or by the Participants and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
(e) The parties agree that it would not be just and equitable
if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Participants were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any reasonable legal or other expenses actually incurred by such
Indemnified Person in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes exceeds the amount of any damages that such Participant has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged 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.
(f) The indemnity and contribution agreements contained in
this Section 7 will be in addition to any liability which the Indemnifying
Persons may otherwise have to the Indemnified Persons referred to above.
8. Rules 144 and 144A
Each of the Issuers covenants that it will file the reports
required to be filed by it under the Securities Act and the Exchange Act and the
rules and regulations adopted by the SEC thereunder in a timely manner and, if
at any time the Company is not required to file such reports, it will, upon the
request of any Holder of Registrable Notes, make publicly available other
information of a like nature so long as necessary to permit sales pursuant to
Rule 144 or Rule 144A. Each of the Issuers further covenants that so long as any
Registrable Notes remain outstanding to make available to any Holder of
Registrable Notes in connection with any sale thereof, the information required
by Rule 144A(d)(4) under the Securities Act in order to permit resales of such
Registrable Notes pursuant
<PAGE> 31
to (a) such Rule 144A, or (b) any similar rule or regulation hereafter adopted
by the SEC.
9. Underwritten Registrations
If any of the Registrable Notes covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banking
firm or firms that will underwrite the offering and the manager or managers that
will manage the offering will be selected by the Holders of a majority in
aggregate principal amount of such Registrable Notes included in such offering
and shall be reasonably acceptable to the Issuers.
No Holder of Registrable Notes may participate in any
underwritten offering hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Notes on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
10. Miscellaneous
(a) Remedies. In the event of a breach by either Issuer of any
of its obligations under this Agreement, other than the occurrence of an event
which requires payment of Additional Interest, each Holder of Registrable Notes,
in addition to being entitled to exercise all rights provided herein, in the
Indenture or, in the case of the Initial Purchasers, in the Purchase Agreement
or granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. Each of the Issuers, jointly and
severally, agree that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees, jointly and severally, that, in the event
of any action for specific performance in respect of such breach, it shall waive
the defense that a remedy at law would be adequate.
(b) Enforcement. The Trustee shall be authorized to enforce
the provisions of this Agreement for the ratable benefit of the Holders.
(c) No Inconsistent Agreements. Neither of the Issuers has
entered, as of the date hereof, and the Issuers shall not enter, after the date
of this Agreement, into any agreement with respect to any of their securities
that is inconsistent
<PAGE> 32
with the rights granted to the Holders of Registrable Notes in this Agreement or
otherwise conflicts with the provisions hereof. Neither of the Issuers has
entered or will enter into any agreement with respect to any of its securities
which will grant to any Person piggy-back rights with respect to a Registration
Statement required to be filed under this Agreement.
(d) Adjustments Affecting Registrable Notes. Neither of the
Issuers shall, directly or indirectly, take any action with respect to the
Registrable Notes or the Series A/B Notes as a class that would adversely affect
the ability of the Holders to include such Registrable Notes or the Series A/B
Notes in a registration undertaken pursuant to this Agreement.
(e) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Issuers have obtained the written consent of
Holders of at least a majority of the then outstanding aggregate principal
amount of Registrable Notes. Notwithstanding the foregoing, a waiver or consent
to depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders of Registrable Notes whose securities are
being sold pursuant to a Registration Statement and that does not directly or
indirectly affect, impair, limit or compromise the rights of other Holders of
Registrable Notes may be given by Holders of at least a majority in aggregate
principal amount of the Registrable Notes being sold by such Holders pursuant
to such Registration Statement, provided that the provisions of this sentence
may not be amended, modified or supplemented except in accordance with the
provisions of the immediately preceding sentence.
(f) Notices. All notices and other communications (including
without limitation any notices or other communications to the Trustee) provided
for or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day courier or telecopier:
(i) if to a Holder or any Participating Broker-Dealer, at the
most current address given by the Trustee to the Issuers; and
(ii) if to the Issuers, to TransWestern Publishing Company,
LLC and TWP Capital Corp. II, 8344 Clairemont Mesa Boulevard, San
Diego, CA 92111, Attention: Chief Financial Officer and with a copy to
Kirkland & Ellis, 200
<PAGE> 33
East Randolph Drive, Chicago, IL 60601, Attention: William Kirsch, Esq.
All such notices and communications shall be deemed to have
been duly given: (i) when delivered by hand, if personally delivered; (ii) five
business days after being deposited in the mail, postage prepaid, if mailed;
(iii) one business day after being timely delivered to a next-day courier; and
(iv) when receipt is acknowledged by the addressee, if telecopied.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee
under the Indenture at the address specified in such Indenture.
(g) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders; provided that, with respect to the indemnity and
contribution agreements in Section 7, each Holder of Registrable Notes
subsequent to the Initial Purchasers shall be bound by the terms thereof if such
Holder elects to include Registrable Notes in a Shelf Registration; provided,
however, that this Agreement shall not inure to the benefit of or be binding
upon a successor or assign of a Holder unless and except to the extent such
successor or assign holds Registrable Notes.
(h) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(i) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(J) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO
CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
<PAGE> 34
(k) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their reasonable best efforts to find and employ an alternative
means to achieve the same or substantially the same result as that contemplated
by such term, provision, covenant or restriction.
(l) Entire Agreement. This Agreement, together with the
Purchase Agreement and the Indenture, is intended by the parties as a final
expression of their agreement, and is intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect
of the subject matter contained herein and therein.
(m) Joint and Several Obligations. Unless otherwise stated
herein, each of the obligations of the Issuers under this Agreement shall be
joint and several obligations of each of them.
(n) Notes Held by the Issuers or Their Affiliates. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Notes is required hereunder, Registrable Notes held by the Issuers or their
affiliates (as such term is defined in Rule 405 under the Securities Act) shall
not be counted in determining whether such consent or approval was given by the
Holders of such required percentage.
<PAGE> 35
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
TRANSWESTERN PUBLISHING COMPANY LLC
By: /s/ Joan M. Fiorito
-------------------------------------------
Name: Joan M. Fiorito
Title: Vice President, Chief Financial Officer
TWP CAPITAL CORP. II
By: /s/ Joan M. Fiorito
-------------------------------------------
Name: Joan M. Fiorito
Title: Vice President, Chief Financial Officer
TARGET DIRECTORIES OF MICHIGAN, INC.
By: /s/ Joan M. Fiorito
-------------------------------------------
Name: Joan M. Fiorito
Title: Vice President, Chief Financial Officer
<PAGE> 36
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
FIRST UNION CAPITAL MARKETS
By: /s/ Scott E. Chappell
-------------------------------------------
Name: Scott E. Chappell
Title: Vice President
CIBC OPPENHEIMER CORP.
By: /s/ Brian S. Gerson
-------------------------------------------
Name: Brian S. Gerson
Title: Managing Director
BANCBOSTON ROBERTSON STEPHENS INC.
By: /s/ Scott M. D'Orsi
-------------------------------------------
Name: Scott M. D'Orsi
Title: Vice President
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 15, 1999, with respect to the consolidated
financial statements of TransWestern Publishing Company LLC, our report dated
December 12, 1998, with respect to the Financial Statements of Universal Phone
Books, Inc. and our report dated January 29, 1999, with respect to the financial
statements of United Directory Services, Inc., included in the Registration
Statement (Form S-4) of TransWestern Publishing Company LLC for the offer to
exchange Series D 9 5/8% Senior Subordinated Notes due 2007 for any and all
outstanding 9 5/8% Senior Subordinated Notes Due 2007 of TransWestern Publishing
Company LLC.
ERNST & YOUNG LLP
San Diego, California
February 26, 1999
