<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 12, 1997.
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TRANSWESTERN HOLDINGS L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 2741 33-0560667
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
TWP CAPITAL CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 2741 33-0779058
(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 M. FIORITO COPY TO:
8344 CLAIREMONT MESA BOULEVARD WILLIAM S. KIRSCH, P.C.
SAN DIEGO, CALIFORNIA 92111 KIRKLAND & ELLIS
TELEPHONE: (619) 467-2800 200 EAST RANDOLPH DRIVE
(NAME, ADDRESS, INCLUDING ZIP CODE, AND
TELEPHONE NUMBER, CHICAGO, ILLINOIS 60601
INCLUDING AREA CODE, OF AGENT FOR SERVICE) TELEPHONE: (312) 861-2000
</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>
<CAPTION>
==================================================================================================================
PROPOSED MAXIMUM PROPOSED
TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE MAXIMUM AGGREGATE AMOUNT OF
REGISTERED REGISTERED(2) PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
11 7/8% Senior Discount Notes due 2008,
Series B................................. $126,000,000 100% $126,000,000 $37,170
==================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f).
(2) Includes up to $68,084,000 in aggregate principal amount of Discount Notes
which may, at the Registrants' option, be issued in lieu of cash interest on
outstanding Discount Notes after November 15, 2002 through the maturity of
the Discount Notes.
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
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED DECEMBER 12, 1997
PRELIMINARY PROSPECTUS
JANUARY , 1998
TRANSWESTERN HOLDINGS L.P.
TWP CAPITAL CORP.
OFFER TO EXCHANGE THEIR SERIES B 11 7/8% SENIOR DISCOUNT NOTES DUE 2008
FOR ANY AND ALL OF THEIR OUTSTANDING
11 7/8% SENIOR DISCOUNT NOTES DUE 2008
THE DISCOUNT NOTE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME
ON , 1998, UNLESS EXTENDED.
TransWestern Holdings L.P., a Delaware limited partnership ("Holdings") and
TWP Capital Corp., a Delaware corporation ("Capital" and, together with
Holdings, the "Discount Note Issuers") hereby offer (the "Discount Note Exchange
Offer"), upon the terms and conditions set forth in this Prospectus (the
"Prospectus") and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), to exchange $1,000 principal amount at maturity of their Series B
11 7/8% Senior Discount Notes due 2008 (the "Exchange Discount Notes"),
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a registration statement of which this Prospectus is a part, for
each $1,000 principal amount at maturity of their outstanding 11 7/8% Senior
Discount Notes due 2008 (the "Old Discount Notes"), of which $57,916,000
aggregate principal amount at maturity is outstanding as of the date hereof. The
form and terms of the Exchange Discount Notes are the same as the form and terms
of the Old Discount Notes except that (i) the Exchange Discount Notes will bear
a Series B designation, (ii) the Exchange Discount Notes will have been
registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof and (iii) holders of the Exchange Discount
Notes will not be entitled to certain rights of holders of Old Discount Notes
under the Registration Rights Agreement (as defined herein). The Exchange
Discount Notes will evidence the same debt as the Old Discount Notes (which they
replace) and will be issued under and be entitled to the benefits of the
Indenture dated as November 12, 1997 (the "Discount Note Indenture") by and
among the Discount Note Issuers and Wilmington Trust Company, as trustee. The
Old Discount Notes and the Exchange Discount Notes are sometimes referred to
herein collectively as the "Discount Notes." See "The Discount Note Exchange
Offer" and "Description of the Discount Notes."
The Old Discount Notes were issued at a substantial discount to their
principal amount at maturity. The offering price of the Old Discount Notes was
$32,500,000 and their principal amount at maturity is $57,916,000. 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 the rate of 11 7/8% per annum and will be payable semi-annually
on each May 15 and November 15, commencing May 15, 2003. Interest will be
payable at the option of the Discount Note Issuers 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 Notes will be redeemable at the option of the Discount Note
Issuers, in whole or in part, at any time on or after November 15, 2002, at the
redemption prices set forth herein, together with accrued and unpaid interest
thereon, if any, to the redemption date. In addition, the Discount Note Issuers,
at their option, may redeem all, but not less than all, of the aggregate
principal amount of the Discount Notes outstanding at any time prior to November
15, 2002 at a redemption price equal to 111.875% of the Accreted Value (as
defined herein) thereof, out of the Net Proceeds (as defined herein) of one or
more Public Equity Offerings (as defined herein), provided, however, that any
such redemption occurs within 90 days following the closing of any such Public
Equity Offering. See "Description of the Discount Notes -- Optional Redemption."
Upon the occurrence of a Change of Control (as defined herein), each holder of
the Discount Notes will be entitled to require the Discount Note Issuers to
purchase such holder's Discount Notes at a purchase price equal to (i) 101% of
the Accreted Value thereof, if the repurchase date is on or prior to November
15, 2002, or (ii) 101% of the principal amount at maturity thereof, together
with accrued and unpaid interest thereon, if any, to the repurchase date, if
such date is after November 15, 2002. See "Description of the Discount
Notes -- Change of Control Offer."
The Discount Notes will be general senior unsecured obligations of the
Discount Note Issuers and will rank senior in right of payment to any
subordinated indebtedness of the Discount Note Issuers. The Discount Notes will
be effectively subordinated in right of payment to all existing and future
obligations of the Company's (as defined herein) subsidiaries, including
TransWestern (as defined herein). As of October 31, 1997, after giving effect to
the consummation of the Initial Offerings (as defined herein) and the Asset
Drop-Down (as defined herein), such subsidiaries would have had approximately
$185.0 million aggregate principal amount of Indebtedness outstanding. In
addition, such
(Cover continued on following page)
------------------------
SEE "RISK FACTORS" ON PAGE 13 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD DISCOUNT NOTES IN THE
DISCOUNT NOTE EXCHANGE OFFER.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 3
(Cover page continued)
subsidiaries would have had $40.0 million of additional borrowing availability
under the Senior Credit Facility (as defined herein). Holdings' pro forma
earnings were insufficient to cover fixed charges by approximately $4.5 million
for the fiscal year ended April 30, 1997 and $10.0 million for the six-month
period ended October 31, 1997. See "Capitalization" and "Description of the
Discount Notes."
The Discount Note Issuers will accept for exchange any and all Old Discount
Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time
on , 1998, unless extended by the Discount Note Issuers in their
sole discretion (the "Expiration Date"). Tenders of Old Discount Notes may be
withdrawn at any time prior to 5:00 p.m. on the Expiration Date. The Discount
Note Exchange Offer is subject to certain customary conditions. The Old Discount
Notes were sold by the Discount Note Issuers on November 12, 1997 to CIBC
Oppenheimer and First Union Capital Markets Corp. (the "Initial Purchasers") in
a transaction not registered under the Securities Act in reliance upon an
exemption under the Securities Act (the "Initial Discount Note Offering"). The
Initial Purchasers subsequently placed the Old Discount Notes with qualified
institutional buyers in reliance upon Rule 144A under the Securities Act and
qualified buyers outside the United States in reliance upon Regulation S under
the Securities Act. Accordingly, the Old Discount Notes may not be reoffered,
resold or otherwise transferred in the United States unless registered under the
Securities Act or unless an applicable exemption from the registration
requirements of the Securities Act is available. The Exchange Discount Notes are
being offered hereunder in order to satisfy the obligations of the Discount Note
Issuers under the Registration Rights Agreement entered into by the Discount
Note Issuers and the Initial Purchasers in connection with the Initial Discount
Note Offering. See "The Discount Note Exchange Offer."
Based upon an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in certain no-action letters issued to
third parties, the Discount Note Issuers believe that the Exchange Discount
Notes issued pursuant to the Discount Note Exchange Offer may be offered for
resale, resold and otherwise transferred by any holder thereof (other than any
such holder that is an "affiliate" of the Discount Note Issuers within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery requirements of the Securities Act,
provided that such Exchange Discount Notes are acquired in the ordinary course
of such holder's business and such holder has no arrangement or understanding
with any person to participate in the distribution of such Exchange Discount
Notes. See "The Discount Note Exchange Offer -- Resale of the Exchange Discount
Notes." Holders of Old Discount Notes wishing to accept the Discount Note
Exchange Offer must represent to the Discount Note Issuers, as required by the
Registration Rights Agreement, that such conditions have been met. Each
broker-dealer (a "Participating Broker-Dealer") that receives Exchange Discount
Notes for its own account pursuant to the Discount Note Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Discount Notes. The Letter of Transmittal states that by so
acknowledging 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. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a Participating Broker-Dealer in connection with resales
of Exchange Discount Notes received in exchange for Old Discount Notes where
such Old Discount Notes were acquired by such Participating Broker-Dealer as a
result of market-making activities or other trading activities. The Discount
Note Issuers have agreed that, for a period of 180 days after the Expiration
Date, they will make this Prospectus available to any Participating
Broker-Dealer for use in connection with any such resale. See "Plan of
Distribution."
Holders of Old Discount Notes not tendered and accepted in the Discount
Note Exchange Offer will continue to hold such Old Discount Notes and will be
entitled to all the rights and benefits and will be subject to the limitations
applicable thereto under the Discount Note Indenture and with respect to
transfer under the Securities Act.
The Discount Note Issuers will not receive any proceeds from the Discount
Note Exchange Offer. The Discount Note Issuers have agreed to bear the expenses
of the Discount Note Exchange Offer. No underwriter is being used in connection
with the Discount Note Exchange Offer.
<PAGE> 4
(Cover page continued)
There has not previously been any public market for the Old Discount Notes
or the Exchange Discount Notes. The Discount Note Issuers do not intend to list
the Exchange Discount Notes on any securities exchange or to seek approval for
quotation through any automated quotation system. There can be no assurance that
an active market for the Exchange Discount Notes will develop. See "Risk
Factors -- Absence of a Public Market Could Adversely Affect the Value of
Exchange Discount Notes." Moreover, to the extent that Old Discount Notes are
tendered and accepted in the Discount Note Exchange Offer, the trading market
for untendered and tendered but unaccepted Old Discount Notes could be adversely
affected.
Concurrent with the Initial Discount Note Offering, TransWestern Publishing
Company LLC ("TransWestern"), a subsidiary of Holdings, and TWP Capital Corp. II
("Capital II," and together with TransWestern, the "Company" or the "Issuers"),
sold (the "Initial Offering," and together with the Initial Discount Note
Offering, the "Initial Offerings") $100 million in initial aggregate principal
amount of their 9 5/8% Senior Subordinated Notes due 2007 (the "Old Notes").
Concurrent with this Discount Note Exchange Offer, the Issuers are offering
to exchange (the "Exchange Offer," and together with this Discount Note Exchange
Offer, the "Exchange Offers") $1,000 principal amount at maturity of their
Series B 9 5/8% Senior Subordinated Notes due 2007 (the "Exchange Notes")
registered under the Securities Act pursuant to a registration statement, for
each $1,000 principal amount at maturity of their outstanding Old Notes, of
which $100 million in initial aggregate principal amount is outstanding. The Old
Notes and the Exchange Notes are sometimes referred to herein collectively as
the "Notes." See "The Transactions" and "Description of the Notes."
THE DISCOUNT NOTE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE
DISCOUNT NOTE ISSUERS ACCEPT SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD
DISCOUNT NOTES IN ANY JURISDICTION IN WHICH THE DISCOUNT NOTE EXCHANGE OFFER OR
THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE SECURITIES OR BLUE
SKY LAWS OF SUCH JURISDICTION.
NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING HEREBY TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
DISCOUNT NOTE ISSUERS. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE
ACCOMPANYING LETTER OF TRANSMITTAL, NOR ANY EXCHANGE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1998 (90 DAYS AFTER COMMENCEMENT OF THE DISCOUNT
NOTE EXCHANGE OFFER), ALL DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE
DISCOUNT NOTES, WHETHER OR NOT PARTICIPATING IN THE DISCOUNT NOTE EXCHANGE
OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
The Exchange Discount Notes will be available initially only in book-entry
form and the Discount Note Issuers expect that the Exchange Discount Notes
issued pursuant to the Discount Note Exchange Offer will be issued in the form
of a Global Note (as defined herein), which will be deposited with, or on behalf
of, The Depository Trust Company ("DTC") and registered in its name or in the
name of Cede & Co., its nominee. Beneficial interests in the Global Note
representing the Exchange Discount Notes will be shown on, and transfers thereof
will be effected through, records maintained by DTC and its participants. After
the initial issuance of the Global Note, Exchange Discount Notes in certificated
form will be issued in exchange for the Global Note only under limited
circumstances as set forth in the Discount Note Indenture. See "Description of
the Discount Notes -- Book Entry; Delivery and Form."
<PAGE> 5
AVAILABLE INFORMATION
The Discount Note Issuers have filed with the Commission a registration
statement on Form S-4 (the "Discount Note Exchange Offer Registration
Statement," which term shall encompass all amendments, exhibits, annexes and
schedules thereto) pursuant to the Securities Act, and the rules and regulations
promulgated thereunder, covering the Discount Note Exchange Offer contemplated
hereby. This Prospectus does not contain all the information set forth in the
Discount Note Exchange Offer Registration Statement. For further information
with respect to the Discount Note Issuers and the Discount Note Exchange Offer,
reference is made to the Discount Note Exchange Offer Registration Statement.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document referred to are not necessarily complete. With respect to each
such contract, agreement or other document filed as an exhibit to the Discount
Note Exchange Offer Registration Statement, reference is made to the exhibit for
a more complete description of the document or matter involved, and each such
statement shall be deemed qualified in its entirety by such reference. The
Discount Note Exchange Offer Registration Statement, including the exhibits
thereto, can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and inspected at the Commission's regional offices at 7 World Trade
Center, Suite 1300, New York, New York 10048 and Citicorp Center, Suite 1400,
500 West Madison Street, Chicago, Illinois 60661. Copies of such materials can
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The address of such site is http://www.sec.gov.
As a result of the filing of the Discount Note Exchange Offer Registration
Statement with the Commission, the Discount Note Issuers will become subject to
the informational requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and in accordance therewith will be required to
file periodic reports and other information with the Commission. The obligation
of the Discount Note Issuers to file periodic reports and other information with
the Commission will be suspended if the Discount Notes are held of record by
fewer than 300 holders as of the beginning of any fiscal year of the Discount
Note Issuers other than the fiscal year in which the Discount Note Exchange
Offer Registration Statement is declared effective. Holdings has agreed that,
whether or not it is required to do so by the rules and regulations of the
Commission, for so long as any of the Discount Notes remain outstanding, it will
furnish to the holders of the Discount Notes and file with the Commission
(unless the Commission will not accept such a filing) (i) all quarterly and
annual financial information that would be required to be contained in a filing
with the Commission on Forms 10-Q and 10-K if Holdings was required to 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 Holdings' certified independent accountants and (ii) all
current reports that would be required to be filed with the Commission on Form
8-K if Holdings was required to file such reports. Capital will furnish to the
holders of the Discount Notes and file such reports with the Commission only if
it is required to file such reports with the Commission by the rules and
regulations of the Commission. In addition, for so long as any of the Discount
Notes remain outstanding, the Discount Note Issuers have agreed to furnish to
the holders of the Discount Notes or any prospective transferee of any such
holder, upon their request the information required to be delivered by Rule
144A(d)(4) under the Securities Act.
i
<PAGE> 6
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Unless otherwise specified herein, all market and
industry data relating to independent yellow pages directory publishers are
based on information provided by Cowles/Simba Information, an independent market
research firm, as adjusted to reflect actual performance and events known to the
Company, and all other market and industry data have been obtained from the
Yellow Pages Publishers Association, an independent trade association. Unless
the context otherwise requires (i) the term "TransWestern business" refers to
the historical operations of the Company and the TransWestern business acquired
in 1993 (the "1993 Acquisition") from US West Marketing Resources Group, Inc., a
subsidiary of US WEST INC. ("US West"), (ii) the term "Holdings" refers to
TransWestern Holdings L.P. (f/k/a TransWestern Publishing Company, L.P.), (iii)
the term "TCC" refers to TransWestern Communications Company, Inc., which is the
general partner of Holdings and the manager of TransWestern Publishing Company
LLC, (iv) the term "Capital" refers to TWP Capital Corp., a wholly-owned
subsidiary of Holdings, (v) the term "Discount Note Issuers" collectively refers
to Holdings and Capital, (vi) the term "TransWestern" refers to TransWestern
Publishing Company LLC, a wholly-owned subsidiary of Holdings, (vii) the term
"Capital II" refers to TWP Capital Corp. II, a wholly-owned subsidiary of
TransWestern, (viii) the term "Company" refers to TransWestern and, where the
context requires, to the historical operations of TransWestern Publishing
Company, L.P. prior to the Asset Drop-Down, (ix) the term "Partnership" refers
to TransWestern Publishing Company, L.P. prior to the Asset Drop-Down, and (x) a
single customer that advertises in more than one directory is counted as a
separate "account" for each directory in which it advertises. All references to
fiscal years in this Prospectus refer to years ended April 30.
THE COMPANY
The Company is one of the largest independent yellow pages directory
publishers in the United States. The Company's 142 directories serve communities
in the 12 states of California, Connecticut, Indiana, Kansas, Kentucky,
Louisiana, Massachusetts, New York, Ohio, Oklahoma, Tennessee and Texas. The
Company's presence in its markets is well-established; more than 70% of its
directories have been in publication for more than 10 years. The Company's
revenues are derived from the sale of advertising to a diversified base of over
93,000 accounts consisting primarily of small to medium-sized local businesses.
Yellow pages are an important advertising medium for local businesses due to
their low advertising cost, widespread distribution, lasting presence, and high
consumer usage. The strength of the Company's directories is evidenced by high
revenue renewal and account retention rates, which have averaged 86% and 76%,
respectively, during the last five years.
Since the 1993 Acquisition, the Company's 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, the Company increased average revenue per account
from $789 to $981 and increased its number of directories from 90 to 142,
driving the Company's net revenues from $54.9 million to $91.4 million. The
Company achieved this growth without significantly increasing working capital or
capital expenditures, while leveraging its existing cost structure and creating
a platform for future growth. As a result, the Company's EBITDA (as defined
herein) increased from $3.2 million to $25.2 million and its EBITDA margin
increased from 5.9% to 27.6%.
INDUSTRY OVERVIEW
The United States yellow pages directory industry generated revenues of
approximately $10.8 billion in 1996, with circulation of approximately 316
million directories. Yellow pages directories are published by both telephone
utilities and, in many markets, independent directory publishers, such as the
Company, which are not affiliated with the telephone service provider. More than
250 independent directory publishers circulated over 77 million directories and
generated an estimated $677 million in revenues during 1996. Between 1991 and
1996, while industry-wide yellow pages advertising revenues grew at a compound
annual rate of 3.5%, advertising revenues of independent directories grew at a
compound annual rate of approximately 6.9%. Concurrent with the overall
expansion of the yellow pages advertising market, independent directory
1
<PAGE> 7
publishers have steadily increased their market share from 5.5% in 1991 to 6.5%
in 1996. This has occurred because the diverse needs of both consumers and
advertisers are often not satisfied by a single utility directory.
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 target cost-effectively their desired
market and are often more useful for consumers.
OPERATING STRENGTHS
The Company believes that it benefits from the following operating
strengths:
High Revenue Stability and Account Renewal Rates. The Company's high
revenue renewal and account retention rates (averaging 86% and 76%,
respectively, during the last five fiscal years) 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. The Company's 142
directories serve communities in 12 states across the country. No single
directory accounted for more than 5% of net revenues, and the top five
directories accounted for less than 19% of net revenues in fiscal 1997. The
Company's 93,000 accounts represent a wide variety of service, retailing and
other businesses and its top 1,000 accounts represented less than 12% of the
Company's fiscal 1997 net revenues. This high level of diversification reduces
the Company's exposure to adverse regional economic conditions and enhances
revenue and cash flow stability.
Favorable Cash Flow Characteristics. The Company's favorable cash flow
characteristics result from its stable revenues, high level of advance payments,
predictable cost structure, low working capital investment and minimal capital
expenditure needs. During fiscal 1997, the Company collected approximately 45%
of its net revenues prior to publication of its directories, up from
approximately 26% in fiscal 1993. In addition to collecting higher levels of
advance payments, the Company shortened customer payment terms and reduced
credit exposure to its smallest customers. Further, the Company's capital
expenditures have averaged less than $750,000 per year over the last five fiscal
years.
Proven, Experienced Management. The Company has a proven senior management
team with extensive experience in the yellow pages business. Since the 1993
Acquisition, management has demonstrated the ability to grow the Company
profitably while the Company has had significant financial leverage.
Collectively, management owns approximately 9% of Holdings and also participates
in a substantial equity-based incentive program tied to the successful long-term
performance of the Company.
BUSINESS STRATEGY
The Company's strategy is to capitalize on its operating structure,
consisting of a decentralized sales force and centralized production and
administrative operations, in order to grow its 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, the Company's focus on continuous process
improvements has significantly expanded
2
<PAGE> 8
capacity without increasing production costs, establishing a platform to start
and acquire directories in a highly profitable manner. Specific elements of the
Company's business strategy are as follows:
Grow Revenues from Existing Directories. Management believes there are
opportunities to increase revenues from both existing advertisers and new
accounts. Specific initiatives include (i) cross-selling advertisers into
multiple directories, (ii) encouraging customers to purchase larger
advertisements or advertisements under multiple headings within the same
directory, (iii) introducing new premium advertising features, including color,
at premium prices, and (iv) offering Internet directory listings.
The Company also utilizes its proprietary database to increase its customer
penetration by systematically targeting potential customers and converting them
into new advertisers. To support this strategy, the Company has expanded its
sales force from 223 employees at the end of fiscal 1993 to 448 as of November
30, 1997, representing an increase of approximately 101%. Management believes
that new account growth drives long term profitability and improves the quality
of its directories.
Improve Operating Efficiency. The Company works to continuously improve
its production processes and systems in order to increase its operating
efficiency. Management has 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. The Company continues to focus on increasing the
amount of cash it collects from advertisers prior to the publication of each
directory. Increasing advance payments and shortening customer payment terms (i)
reduces the Company's investment in working capital, (ii) decreases collection
and bad debt costs and (iii) permits the Company to finance the introduction of
new directories from internally generated funds.
New Directory Growth. The Company's strategy includes growth through new
directory start-ups and selective acquisitions. The Company minimizes start-up
risks by launching new directories in areas contiguous to the Company's existing
markets where it has established sales infrastructure and local recognition and
where existing customers can provide an initial revenue base. Since the 1993
Acquisition, the Company has introduced 26 new "fill-in" directory start-ups in
California, Connecticut, Indiana, Louisiana, New York, Oklahoma and Texas.
In addition, the Company has acquired 24 directories in California,
Indiana, Kentucky, Massachusetts, New York and Tennessee since the 1993
Acquisition. Although the Company has no current acquisition commitments,
management continuously reviews acquisition opportunities and believes it can
successfully acquire and integrate additional directories into its existing
production and administrative infrastructure.
THE TRANSACTIONS
The Initial Discount Note Offering was made in conjunction with the
Partnership's $312.7 million Recapitalization which was consummated in October
1997.
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 Existing Limited Partners (as defined herein), 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 of the Equity Investment, together with approximately
$182.7 million of aggregate proceeds from the debt financings described below,
were used (i) for $224.5 million of Recapitalization consideration, including
the redemption of a portion of the limited partnership interests from the
Existing Limited Partners, (ii) to repay $75.6 million under the Partnership's
existing credit facilities (the "Old Credit Facility"), (iii) to pay $10.6
million of fees and expenses and (iv) for $2.0 million for general corporate
purposes, including working capital.
The Recapitalization was financed with (i) the Equity Investment of $130.0
million, (ii) borrowings of approximately $107.7 million under a $125.0 million
senior credit facility (the "Senior Credit Facility") and (iii) borrowings of
$75.0 million under a senior subordinated financing facility (the "Senior
Subordinated
3
<PAGE> 9
Facility"). The above-described purchase and redemption of partnership units and
the borrowings under the Senior Credit Facility and the Senior Subordinated
Facility and the use of proceeds therefrom are collectively referred to herein
as the "Recapitalization."
Holdings applied the net proceeds of the Initial Discount Note Offering to
redeem approximately $31.3 million of the Equity Investment. Concurrent with the
Initial Discount Note Offering, TransWestern and Capital II offered $100 million
of their 9 5/8% Old Senior Subordinated Notes due 2007. TransWestern applied the
net proceeds of the Initial Offering to repay the Senior Subordinated Facility
and to reduce its outstanding indebtedness under the Revolving Credit Facility
(as defined herein) established by the Senior Credit Facility. See "The
Transactions."
In November 1997, the Partnership formed and contributed substantially all
of its assets to TransWestern, TransWestern assumed or guaranteed all of the
liabilities of the Partnership, and the Partnership changed its name to
TransWestern Holdings L.P. (the "Asset Drop-Down"). As a result of the Asset
Drop-Down, Holdings' only assets are all of the TransWestern membership
interests and all of Capital's capital stock. All of the operations that were
previously conducted by the Partnership are now being conducted by TransWestern.
The Recapitalization, together with the Asset Drop-Down and the Initial
Offerings and the use of proceeds therefrom, are collectively referred to herein
as the "Transactions."
After giving effect to the Transactions, the THL Parties collectively own
approximately 59% of the equity of Holdings and the CIVC Parties (as defined
herein) and the Management Investors own approximately 23% and 9% of the equity
of Holdings, respectively. The remainder of the equity of Holdings is held by
other investors. TCC is owned approximately pro rata by all the equity investors
in Holdings. See "The Transactions."
THE PRINCIPAL INVESTORS
The Company's principal equity investor, THL, is party to a management
agreement with Thomas H. Lee Company ("THL Co."), one of the oldest and most
successful private equity investment firms in the United States. Founded in
1974, THL Co. focuses on identifying and acquiring substantial ownership stakes
in middle market growth companies. THL Co. currently manages over $3 billion of
capital and has participated in more than 100 acquisitions and investments.
Continental Illinois Venture Corporation ("CIVC") was the principal
investor in the 1993 Acquisition and continues to be a principal investor in the
Partnership. CIVC is an indirect subsidiary of BankAmerica Corporation, an
international financial services organization.
The Management Investors have all been members of the Company's senior
management since at least 1993 and have extensive experience in the yellow pages
publishing business. See "Management" and "Security Ownership of Certain
Beneficial Owners and Management."
The Company's principal executive offices are located at 8344 Clairemont
Mesa Boulevard, San Diego, California 92111, and its telephone number is (619)
467-2800.
4
<PAGE> 10
THE INITIAL DISCOUNT NOTE OFFERING
Old Discount Notes............ The Old Discount Notes were sold by the
Discount Note Issuers on November 12, 1997 to
the Initial Purchasers pursuant to a Securities
Purchase Agreement dated November 6, 1997 (the
"Purchase Agreement"). The Initial Purchasers
subsequently resold the Old Discount Notes to
qualified institutional buyers pursuant to Rule
144A under the Securities Act and qualified
buyers outside the United States in reliance
upon Regulation S under the Securities Act.
Registration Rights
Agreement..................... Pursuant to the Purchase Agreement, the
Discount Note Issuers and the Initial
Purchasers entered into a Registration Rights
Agreement dated as of November 12, 1997 (the
"Registration Rights Agreement"), which grants
the holders of the Old Discount Notes certain
exchange and registration rights. The Discount
Note Exchange Offer is intended to satisfy such
exchange rights which terminate upon the
consummation of the Discount Note Exchange
Offer.
THE DISCOUNT NOTE EXCHANGE OFFER
Securities Offered............ $57,916,000 aggregate principal amount at
maturity of Series B 11 7/8% Senior Discount
Notes due 2008 of the Discount Note Issuers.
The Discount Note Exchange
Offer......................... $1,000 principal amount at maturity of Exchange
Discount Notes in exchange for each $1,000
principal amount at maturity of Old Discount
Notes. As of the date hereof, $57,916,000
aggregate principal amount at maturity of Old
Discount Notes are outstanding. The Discount
Note Issuers will issue the Exchange Discount
Notes to holders on or promptly after the
Expiration Date.
Based on an interpretation by the staff of the
Commission set forth in no-action letters
issued to third parties, the Discount Note
Issuers believe that Exchange Discount Notes
issued pursuant to the Discount Note Exchange
Offer in exchange for Old Discount Notes may be
offered for resale, resold and otherwise
transferred by any holder thereof (other than
any such holder which is an "affiliate" of the
Discount Note Issuers within the meaning of
Rule 405 under the Securities Act) without
compliance with the registration and prospectus
delivery provisions of the Securities Act,
provided that such Exchange Discount Notes are
acquired in the ordinary course of such
holder's business and that such holder does not
intend to participate and has no arrangement or
understanding with any person to participate in
the distribution of such Exchange Discount
Notes. Each holder accepting the Discount Note
Exchange Offer is required to represent to the
Discount Note Issuers in the Letter of
Transmittal that, among other things the
Exchange Discount Notes will be acquired by the
holder in the ordinary course of business and
the holder does not intend to participate and
has no arrangement or understanding with any
person to participate in the distribution of
such Exchange Discount Notes.
5
<PAGE> 11
Any Participating Broker-Dealer that acquired
Old Discount Notes for its own account as a
result of market-making activities or other
trading activities may be a statutory
underwriter. Each Participating Broker-Dealer
that receives Exchange Discount Notes for its
own account pursuant to the Discount Note
Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any
resale of such Exchange Discount Notes. The
Letter of Transmittal states that by so
acknowledging 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. This Prospectus,
as it may be amended or supplemented from time
to time, may be used by a Participating
Broker-Dealer in connection with resales of
Exchange Discount Notes received in exchange
for Old Discount Notes where such Old Discount
Notes were acquired by such Participating
Broker-Dealer as a result of market-making
activities or other trading activities. The
Discount Note Issuers have agreed that, for a
period of 180 days after the Expiration Date,
they will make this Prospectus available to any
Participating Broker-Dealer for use in
connection with any such resale. See "Plan of
Distribution."
Any holder who tenders in the Discount Note
Exchange Offer with the intention to
participate, or for the purpose of
participating, in a distribution of the
Exchange Discount Notes cannot rely on the
position of the staff of the Commission
enunciated in no-action letters and, in the
absence of an exemption therefrom, must comply
with the registration and prospectus delivery
requirements of the Securities Act in
connection with any resale transaction. Failure
to comply with such requirements in such
instance may result in such holder incurring
liability under the Securities Act for which
the holder is not indemnified by the Discount
Note Issuers.
Expiration Date............... 5:00 p.m., New York City time, on ,
1998 unless the Discount Note Exchange Offer is
extended, in which case the term "Expiration
Date" means the latest date and time to which
the Discount Note Exchange Offer is extended.
Accreted Value and Accrued
Interest on the Exchange
Discount Notes and the Old
Discount Notes.............. No cash interest will accrue or be payable in
respect of the Exchange Discount Notes prior to
November 15, 2002. Thereafter, interest on the
Exchange Discount Notes will accrue on the
principal amount at maturity at the rate of
11 7/8% per annum and will be payable
semi-annually on each May 15 and November 15,
commencing May 15, 2003. Interest will be
payable at the option of the Discount Note
Issuers 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 Old Discount Notes will
continue to accrete at the rate of 11 7/8% per
annum to, but excluding, the date of issuance
of the Exchange Discount Notes and will cease
to accrete upon cancellation of the Old
Discount Notes and issuance of the Exchange
Discount Notes. Any Old Discount Notes not
tendered or accepted for exchange will continue
to accrete at the rate of 11 7/8% per annum in
accordance with
6
<PAGE> 12
their terms. The Accreted Value of Exchange
Discount Notes upon issuance will equal the
Accreted Value of the Old Discount Notes
accepted for exchange immediately prior to
issuance of the Exchange Discount Notes.
Conditions to the Discount
Note Exchange Offer........... The Discount Note Exchange Offer is subject to
certain customary conditions, which may be
waived by the Discount Note Issuers. See "The
Discount Note Exchange Offer -- Conditions."
Procedures for Tendering Old
Discount Notes................ Each holder of Old Discount Notes wishing to
accept the Discount Note Exchange Offer must
complete, sign and date the accompanying Letter
of Transmittal, or a facsimile thereof or
transmit an Agent's Message (as defined herein)
in connection with a book-entry transfer, in
accordance with the instructions contained
herein and therein, and mail or otherwise
deliver such Letter of Transmittal, such
facsimile or such Agent's Message, together
with the Old Discount Notes and any other
required documentation to the Exchange Agent
(as defined herein) at the address set forth
herein. By executing the Letter of Transmittal
or Agent's Message, each holder will represent
to the Discount Note Issuers that, among other
things, the Exchange Discount Notes acquired
pursuant to the Discount Note Exchange Offer
are being obtained in the ordinary course of
business of the person receiving such Exchange
Discount Notes, whether or not such person is
the holder, that neither the holder nor any
such other person (i) has any arrangement or
understanding with any person to participate in
the distribution of such Exchange Discount
Notes, (ii) is engaging in or intends to engage
in the distribution of such Exchange Notes, or
(iii) is an "affiliate," as defined under Rule
405 of the Securities Act, of the Discount Note
Issuers. See "The Discount Note Exchange
Offer -- Purpose and Effect of the Discount
Note Exchange Offer" and "-- Procedures for
Tendering."
Untendered Old Discount
Notes......................... Following the consummation of the Discount Note
Exchange Offer, holders of Old Discount Notes
eligible to participate but who do not tender
their Old Discount Notes will not have any
further exchange rights and such Old Discount
Notes will continue to be subject to certain
restrictions on transfer. Accordingly, the
liquidity of the market for such Old Discount
Notes could be adversely affected.
Consequences of Failure to
Exchange...................... The Old Discount Notes that are not exchanged
pursuant to the Discount Note Exchange Offer
will remain restricted securities. Accordingly,
such Old Discount Notes may be resold only (i)
to the Discount Note Issuers, (ii) pursuant to
Rule 144A or Rule 144 under the Securities Act
or pursuant to some other exemption under the
Securities Act, (iii) outside the United States
to a foreign person pursuant to the
requirements of Rule 904 under the Securities
Act, or (iv) pursuant to an effective
registration statement under the Securities
Act. See "The Discount Note Exchange
Offer -- Consequences of Failure to Exchange."
7
<PAGE> 13
Shelf Registration
Statement..................... If any holder of the Old Discount Notes (other
than any such holder which is an "affiliate" of
the Discount Note Issuers within the meaning of
Rule 405 under the Securities Act) is not
eligible under applicable securities laws to
participate in the Discount Note Exchange
Offer, and such holder has satisfied certain
conditions relating to the provision of
information to the Discount Note Issuers for
use therein, the Discount Note Issuers have
agreed to register the Old Discount Notes on a
shelf registration statement (the "Shelf
Registration Statement") and use their
reasonable best efforts to cause it to be
declared effective by the Commission as
promptly as practical on or after the
consummation of the Discount Note Exchange
Offer. The Discount Note Issuers have agreed to
maintain the effectiveness of the Shelf
Registration Statement for, under certain
circumstances, a maximum of two years, to cover
resales of the Old Discount Notes held by any
such holders.
Special Procedures for
Beneficial Owners............. Any beneficial owner whose Old Discount Notes
are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender should contact such
registered holder promptly and instruct such
registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes
to tender on such owner's own behalf, such
owner must, prior to completing and executing
the Letter of Transmittal and delivering its
Old Discount Notes, either make appropriate
arrangements to register ownership of the Old
Discount Notes in such owner's name or obtain a
properly completed bond power from the
registered holder. The transfer of registered
ownership may take considerable time. The
Discount Note Issuers will keep the Discount
Note Exchange Offer open for not less than
thirty days in order to provide for the
transfer of registered ownership.
Guaranteed Delivery
Procedures.................... Holders of Old Discount Notes who wish to
tender their Old Discount Notes and whose Old
Discount Notes are not immediately available or
who cannot deliver their Old Discount Notes,
the Letter of Transmittal or any other
documents required by the Letter of Transmittal
to the Exchange Agent (or comply with the
procedures for book-entry transfer) prior to
the Expiration Date must tender their Old
Discount Notes according to the guaranteed
delivery procedures set forth in "The Discount
Note Exchange Offer -- Guaranteed Delivery
Procedures."
Withdrawal Rights............. Tenders may be withdrawn at any time prior to
5:00 p.m., New York City time, on the
Expiration Date.
Acceptance of Old Discount
Notes and Delivery of Exchange
Discount Notes.............. The Discount Note Issuers will accept for
exchange any and all Old Discount Notes which
are properly tendered in the Discount Note
Exchange Offer prior to 5:00 p.m., New York
City time, on the Expiration Date. The Exchange
Discount Notes issued pursuant to the Discount
Note Exchange Offer will be delivered promptly
following the Expiration Date. See "The
Discount Note Exchange Offer -- Terms of the
Discount Note Exchange Offer."
Use of Proceeds............... There will be no cash proceeds to the Discount
Note Issuers from the exchange pursuant to the
Discount Note Exchange Offer.
8
<PAGE> 14
Exchange Agent................ Wilmington Trust Company.
THE EXCHANGE DISCOUNT NOTES
General....................... The form and terms of the Exchange Discount
Notes are the same as the form and terms of the
Old Discount Notes (which they replace) except
that (i) the Exchange Discount Notes bear a
Series B designation, (ii) the Exchange
Discount Notes have been registered under the
Securities Act and, therefore, will not bear
legends restricting the transfer thereof, and
(iii) the holders of Exchange Discount Notes
will not be entitled to certain rights under
the Registration Rights Agreement, including
the provisions providing for an increase in the
interest rate on the Old Discount Notes in
certain circumstances relating to the timing of
the Discount Note Exchange Offer, which rights
will terminate when the Discount Note Exchange
Offer is consummated. See "The Discount Note
Exchange Offer -- Purpose and Effect of the
Discount Note Exchange Offer." The Exchange
Discount Notes will evidence the same debt as
the Old Discount Notes and will be entitled to
the benefits of the Discount Note Indenture.
See "Description of the Discount Notes." The
Old Discount Notes and the Exchange Discount
Notes are referred to herein collectively as
the "Discount Notes."
Maturity Date................. November 15, 2008.
Original Issue Discount....... The Discount Notes were issued at a substantial
discount to their principal amount at maturity.
A holder of Discount Notes will be required to
include the accretion of the original issue
discount as gross income for U.S. federal
income tax purposes prior to the receipt of the
cash payments to which such income is
attributable. See "Certain U.S. Federal Income
Tax Considerations -- U.S. Holders -- Original
Issue Discount on the Discount Notes."
Interest...................... 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 the Company 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.
Ranking....................... The Discount Notes will be senior unsecured
obligations of the Discount Note Issuers and
will rank senior in right of payment to any
subordinated indebtedness of the Discount Note
Issuers. The Discount Notes will be effectively
subordinated in right of payment to all
existing and future indebtedness and other
liabilities, including trade payables, of
subsidiaries of the Discount Note Issuers. As
of October 31, 1997, after giving effect to the
consummation of the Initial Offerings and the
Asset Drop-Down, such subsidiaries would have
had approximately $185.0 million aggregate
principal amount of Indebtedness outstanding.
In addition, such subsidiaries would have had
$40.0 million of additional borrowing
availability under the Senior Credit Facility.
9
<PAGE> 15
Optional Redemption........... The Discount Notes will be redeemable at the
option of the Discount Note Issuers, in whole
or in part, at any time on or after November
15, 2002, at the redemption prices set forth
herein, together with accrued and unpaid
interest thereon, if any, to the redemption
date. In addition, the Discount Note Issuers,
at their option, may redeem all, but not less
than all, of the principal amount of the
Discount Notes outstanding at any time prior to
November 15, 2002 at a redemption price equal
to 111.875% of the Accreted Value thereof, out
of the Net Proceeds of one or more Public
Equity Offerings, provided, however, that any
such redemption occurs within 90 days following
the closing of any such Public Equity Offering.
See "Description of the Discount
Notes -- Optional Redemption."
Change of Control............. Upon the occurrence of a Change of Control,
each holder of the Discount Notes will be
entitled to require the Discount Note Issuers
to purchase such holder's Discount Notes at a
purchase price equal to (i) 101% of the
Accreted Value thereof, if the repurchase date
is on or prior to November 15, 2002 or (ii)
101% of the principal amount at maturity
thereof, together with accrued and unpaid
interest thereon, if any, to the repurchase
date, if such date is after November 15, 2002.
See "Description of the Discount
Notes -- Change of Control Offer."
Asset Sale Proceeds........... The Discount Note Issuers will be obligated in
certain instances to make an offer to
repurchase the Discount Notes at a purchase
price equal to (i) 100% of the Accreted Value
thereof, if the repurchase date is on or prior
to November 15, 2002, or (ii) 100% of the
principal amount at maturity thereof, together
with accrued and unpaid interest thereon to the
purchase date, with the net cash proceeds of
certain asset sales. See "Description of the
Discount Notes -- Certain
Covenants -- Limitation on Certain Asset
Sales."
Certain Covenants............. The Discount Notes Indenture pursuant to which
the Discount Notes were issued contains
covenants for the benefit of the holders of the
Discount Notes that, among other things,
restrict the ability of (a) the Discount Note
Issuers and any of their Restricted
Subsidiaries to (i) incur additional
Indebtedness (as defined herein), (ii) pay
dividends and make distributions, (iii) make
certain investments, (iv) repurchase stock, (v)
enter into transactions with affiliates, (vi)
enter into sale lease-back transactions and
(vii) merge or consolidate the Company; (b) the
Discount Note Issuers 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 defined herein) as a result
of Holdings' status as a limited partnership.
See "Description of the Discount
Notes -- Certain Covenants."
RISK FACTORS
Prospective investors should carefully consider the specific matters set
forth under "Risk Factors" as well as the other information and data set forth
in this Prospectus before tendering the Old Discount Notes in exchange for
Exchange Discount Notes.
10
<PAGE> 16
SUMMARY HISTORICAL AND UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL AND OTHER DATA
(DOLLARS IN THOUSANDS)
The following table presents summary historical consolidated financial data
for the five fiscal years ended April 30, 1997. The statement of operations data
for each of the three years in the period ended April 30, 1997 have been derived
from the audited consolidated financial statements of Holdings and the
TransWestern business and the notes thereto appearing elsewhere in this
Prospectus. The statement of operations data for the years ended April 30, 1993
and 1994 are derived from the audited consolidated financial statements of
Holdings and the TransWestern business not appearing in this Prospectus. The
summary historical consolidated financial data for the six months ended October
31, 1996 and October 31, 1997 have been derived from unaudited consolidated
financial statements of Holdings, which in the opinion of management, include
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the results for the unaudited interim periods. Results
for the six months ended October 31, 1997 are not necessarily indicative of
results that may be expected for the entire year.
The following summary unaudited pro forma consolidated statement of
operations data give effect to, among other things, the Transactions, as if they
had occurred at the beginning of each period presented. The following summary
unaudited pro forma consolidated balance sheet data give effect to, among other
things, the Initial Offerings and the Asset Drop-Down, as if they had occurred
October 31, 1997. Certain management assumptions and adjustments relating to the
Initial Offerings and the Asset Drop-Down are described in the Notes to
Unaudited Pro Forma Consolidated Financial Data and should be read in
conjunction therewith. The summary unaudited pro forma consolidated financial
data do not purport to be indicative of the actual financial position or results
of operations of Holdings that would have actually been attained had the
Transactions in fact occurred on the date specified, nor are they necessarily
indicative of the results of operations that may be achieved in the future. See
"Unaudited Pro Forma Consolidated Financial Data," "Selected Historical
Consolidated Financial and Other Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements of
Holdings and notes thereto appearing elsewhere herein.
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30, SIX MONTHS ENDED OCTOBER 31,
------------------------------------------------------------------ --------------------------------
PREDECESSOR PRO FORMA PRO FORMA
1993(A) 1994 1995 1996 1997 1997 1996 1997 1997
----------- ------- ------- ------- ------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.......... $54,949 $62,219 $69,845 $77,731 $91,414 $91,414 $38,050 $38,254(b) $38,254 (b)
Gross profit.......... 37,110 43,431 52,889 59,529 71,914 71,914 29,054 29,082 29,082
Income (loss) from
operations.......... 1,844 4,093 11,414 14,538 18,453 13,010 5,296 (1,468) (1,418)
Other income
(expense), net...... 243 344 470 375 48 48 18 (107) (107)
Interest expense...... (342) (2,951) (4,345) (6,630) (7,816) (23,057)(c) (4,029) (4,333) (13,977) (c)
Income (loss) before
extraordinary
item................ $ 1,745 $ 1,486 $ 7,539 $ 8,283 $10,685 $(9,999) $ 1,285 $(5,908) $(15,502)
OTHER DATA:
Depreciation and
amortization........ $ 1,129 $ 4,603 $ 4,593 $ 4,691 $ 6,399 $ 3,699 $ 3,122 $ 3,274 $ 3,274
Capital
expenditures........ 743 769 496 484 1,034 1,034 259 580 580
EBITDA(d)............. 3,216 9,040 17,002 20,400 25,200 25,300 8,586 7,568(b) 7,618 (b)
EBITDA margin......... 5.9% 14.5% 24.3% 26.2% 27.6% 27.7% 22.6% 19.8% 19.9 %
Gross margin.......... 67.5% 69.8% 75.7% 76.6% 78.7% 78.7% 76.4% 76.0% 76.0 %
Bookings(e)........... $54,188 $64,269 $70,013 $75,709 $86,859 $86,859 $44,485 $49,926 $49,926
Advance payments as a
% of net
revenues(f)......... 26.2% 31.8% 36.9% 41.0% 45.1% 45.1% 43.6% 46.6% 46.6 %
Number of
accounts(g)......... 69,632 71,832 77,371 84,117 93,157 93,157 37,904 38,025 38,025
Average net revenues
per account(h)...... $ 789 $ 866 $ 903 $ 924 $ 981 $ 981 $ 1,004 $ 1,006 $1,006
Number of
directories......... 90 97 106 118 128 128 49 57 57
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital....... $ 4,377
Total assets.......... 55,603
Total debt............ 217,930
Partnership deficit... (187,255)
</TABLE>
(See footnotes on following page)
11
<PAGE> 17
NOTES TO SUMMARY HISTORICAL CONSOLIDATED AND UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL AND OTHER DATA
(DOLLARS IN THOUSANDS)
(a) Effective May 1, 1993, an investor group and CIVC formed the Partnership to
acquire the TransWestern business from US West. The results of operations of
the predecessor are not directly comparable to the results of operations of
the Company due to (i) the incurrence of interest expense from borrowings to
finance the acquisition and subsequent distributions, and (ii) the effect of
increased depreciation and amortization expense associated with the
acquisition.
(b) For the six months ended October 31, 1997 consolidated net revenues
increased $204,000 and EBITDA decreased $1.0 million as compared to the six
months ended October 31, 1996 primarily due to changes in the publication
schedule which caused a different mix of directories to be published in the
respective six month periods. Consolidated EBITDA for the latest twelve
months ended October 31, 1997 and November 30, 1997 was $24,182 and $25,240,
respectively. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(c) Non-cash interest expense relating to amortization of debt issuance costs
for pro forma fiscal 1997 and the pro forma six months ended October 31,
1997 was $1,136 and $568, respectively.
(d) "EBITDA" is defined as consolidated income (loss) before extraordinary item
plus consolidated interest expense, non-recurring other expense,
discretionary contributions to the Equity Compensation Plan (as defined
herein) and depreciation and amortization. Non-recurring other expense was
$300 in fiscal 1997 and $326 in fiscal 1998. Contributions to the Equity
Compensation Plan were $525 in fiscal 1995, $796 in fiscal 1996 and $5,543
in pro forma fiscal 1997 and for the six months ended October 31, 1997.
EBITDA is not a measure of performance under generally accepted accounting
principles ("GAAP"). While EBITDA should not be considered in isolation or
as a substitute for net income, cash flows from operating activities and
other income or cash flow statement data prepared in accordance with GAAP,
management understands that EBITDA is widely used by certain investors as
one measure to evaluate the financial performance of companies in the yellow
pages directory industry. The Company's definition of EBITDA may not be
comparable to that of other companies.
(e) "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 fiscal 1997, net revenues included $4,200 from acquired
directories, while bookings does not reflect this adjustment. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview."
(f) "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.
(g) "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.
(h) "Average net revenues per account" is defined as net revenues divided by the
number of accounts.
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<PAGE> 18
RISK FACTORS
This Prospectus, including the documents incorporated by reference herein,
contains forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Such forward-looking statements are based on the
beliefs of the Company's management as well as on assumptions made by and
information currently available to the Company at the time such statements were
made. When used in this Prospectus, the words "anticipate," "believe,"
"estimate," "expect," "intend" and similar expressions, as they relate to the
Company, are intended to identify forward-looking statements. Prospective
investors should be aware that actual results could differ materially from those
projected by such forward-looking statements as a result of the risk factors set
forth below or other factors. Prospective investors should consider carefully
the following factors as well as the other information and data included in this
Prospectus before tendering Old Discount Notes in exchange for Exchange Discount
Notes. The Discount Note Issuers caution the reader, however, that this list of
factors may not be exhaustive and that these or other factors could have an
adverse effect on the Company's ability to service its indebtedness, including
principal and interest payments on the Discount Notes.
SUBSTANTIAL LEVERAGE
Holdings incurred significant debt in connection with the Recapitalization.
As of October 31, 1997, after giving pro forma effect to the Initial Offerings
and the Asset Drop-Down, Holdings would have had outstanding indebtedness of
approximately $217.9 million and partnership deficit of approximately $187.3
million. After giving pro forma effect to the Initial Offerings and the Asset
Drop-Down, Holdings' earnings would have been insufficient to cover fixed
charges by $4.5 million for the fiscal year ended April 30, 1997 and $10.0
million for the six-month period ended October 31, 1997. Holdings' subsidiaries
also have additional borrowing capacity on their Revolving Credit Facility under
the Senior Credit Facility. The lenders under the Senior Credit Facility have an
exclusive security interest in substantially all of the assets of and membership
interests in the Company and in any assets of Holdings not timely transferred to
the Company in the Asset Drop-Down.
Holdings' leveraged financial position poses substantial consequences to
holders of the Discount Notes, including the risks that (i) a substantial
portion of the Company's cash flow from operations will be dedicated to the
payment of interest on the Notes and the payment of principal and interest under
the Senior Credit Facility and other indebtedness, (ii) the Company's leveraged
position may impede its ability to obtain financing in the future for working
capital, capital expenditures, acquisitions and general corporate purposes, and
(iii) the Company's highly leveraged financial position may make it more
vulnerable to economic downturns and may limit its ability to withstand
competitive pressures. Based upon the successful implementation of management's
business and operating strategy, the Company believes it will have sufficient
capital to carry on its business and will be able to meet its scheduled debt
service requirements. However, there can be no assurance that the future cash
flow of the Company will be sufficient to meet the Company's obligations and
commitments. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources."
The Company will be required to make quarterly scheduled principal payments
on the Term Loans (as defined herein) under the Senior Credit Facility
commencing on January 1, 1998 and to repay the 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. The Company's ability to
make the required scheduled payments will depend on its financial and operating
performance, which is subject to prevailing economic and competitive conditions
and to certain financial, business and other factors beyond its control,
including interest rates, unscheduled shutdowns at the Company's suppliers or
printers, paper prices and other developments. If the Company is unable to
generate sufficient cash flow from operations in the future to service its
indebtedness and to meet its other commitments, the Company will be required to
adopt one or more alternatives, such as refinancing or restructuring its
indebtedness, selling material assets or operations or seeking to raise
additional debt or equity capital. There can be no assurance that any of these
actions could be effected on a timely basis or on satisfactory terms or that
these actions would enable the Company to continue to satisfy its capital
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<PAGE> 19
requirements. In addition, the terms of existing or future debt agreements,
including the Indenture and the Senior Credit Facility, may prohibit the Company
from adopting any of these alternatives. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources," "Description of Senior Credit Facility" and "Description of
the Notes."
LIMITATIONS ON ACCESS TO CASH FLOW OF SUBSIDIARIES; HOLDING COMPANY STRUCTURE
Holdings is a holding company which has no significant assets other than
its investments in its direct and indirect subsidiaries, and therefore, its
ability to make payments with respect to the Discount Notes is dependent upon
the receipt of dividends or debt service in respect of intercompany indebtedness
from its direct and indirect subsidiaries.
The Senior Credit Facility and the indenture governing the Notes
significantly restrict the distribution of funds by TransWestern and the other
subsidiaries of Holdings. See "Description of Senior Credit Facility" and
"Description of the Notes." There can be no assurance that the agreements
governing indebtedness of Holdings' subsidiaries will permit such subsidiaries
to distribute funds to Holdings in amounts sufficient to pay the Accreted Value
or principal or interest on the Discount Notes when the same becomes due
(whether at maturity, upon acceleration or redemption or otherwise). The
Discount Notes will be effectively subordinated in right of payment to all
existing and future claims of creditors of subsidiaries of Holdings, including
the lenders under the Senior Credit Facility, the holders of the Notes and trade
creditors. After giving pro forma effect to the Initial Offerings and the Asset
Drop-Down as of October 31, 1997, the subsidiaries of Holdings would have had
approximately $185.0 million aggregate principal amount of indebtedness
outstanding. In addition, such subsidiaries would have had $40.0 million of
additional borrowing availability under the Senior Credit Facility.
RESTRICTIONS IMPOSED BY CERTAIN COVENANTS
The agreements governing the outstanding indebtedness of the Company impose
certain operating and financial restrictions on the Company. The Senior Credit
Facility requires the Company to comply with financial covenants with respect to
(i) a minimum interest coverage ratio, (ii) a minimum EBITDA (as defined in the
Senior Credit Facility), (iii) a maximum leverage ratio, and (iv) a minimum
fixed charge coverage ratio. In addition, the Senior Credit Facility restricts,
among other things, the Company's ability to (i) declare dividends or redeem or
repurchase capital stock, (ii) prepay, redeem or purchase 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 the business it conducts, (xi) enter into guarantees of indebtedness,
and (xii) make optional payments on or modify the terms of subordinated debt. A
failure to comply with the restrictions contained in the Senior Credit Facility
could lead to an event of default thereunder which could result in an
acceleration of such indebtedness. Such an acceleration would constitute an
event of default under the Discount Note Indenture. See "Description of Senior
Credit Facility."
The indenture relating to the Notes contains a number of covenants which
restrict, among other things, the Company's ability to (i) incur additional
Indebtedness, (ii) pay dividends and make distributions, (iii) issue stock of
subsidiaries, (iv) make certain investments, (v) repurchase stock, (vi) create
liens, (vii) enter into transactions with affiliates, (viii) enter into sale
lease-back transactions, (ix) merge or consolidate the Company or any
Guarantors, and (x) transfer or sell assets. A failure to comply with the
restrictions in this indenture could lead to an event of default thereunder
which could result in an acceleration of such indebtedness. Such an acceleration
would result in an event of default under the Discount Note Indenture. See
"Description of the Notes."
The Discount Note Indenture contains a number of covenants which restrict,
among other things, the ability of Holdings and its subsidiaries, including
TransWestern, to (i) incur additional indebtedness, (ii) pay dividends and make
distributions, (iii) issue stock of subsidiaries, (iv) make certain investments,
(v) repurchase stock, (vi) enter into transactions with affiliates, (vii) enter
into sale lease-back transactions,
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<PAGE> 20
and (viii) merge or consolidate Holdings. A failure to comply with the
restrictions in the Discount Note Indenture could result in an event of default
thereunder. See "Description of the Discount Notes."
VARIATION IN QUARTERLY RESULTS
The Company's net revenues and operating results have exhibited some degree
of variability from quarter to quarter and between periods and some degree of
seasonality. Although the Company records bookings and receives advance payments
at a fairly constant rate, the Company does 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 the
Company's 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 the Company, reflect actual cash received during a
given period. Also, changes to the Company's sales canvassing, production and
distribution schedules could have a material adverse effect on the Company's
ability to satisfy certain of the covenants in the Senior Credit Facility and
the indenture relating to the Notes and therefore on Holdings' ability to
satisfy certain of the covenants in the Discount Note Indenture. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview."
IMPORTANCE OF ACCOUNT EXECUTIVES
The Company's ability to achieve its business plan depends to a significant
extent on its ability to identify, hire, train and retain qualified sales
personnel in each of the regions in which the Company operates. Historically,
the Company's revenue performance has been closely related to the aggregate
number of the Company's sales people. The Company's aggregate number of
salesperson days increased by approximately 59% from fiscal 1993 to fiscal 1997
and the Company's net revenues increased by approximately 66% over the same
period. However, in each of those five fiscal years, the Company experienced a
turnover of approximately 34% to 73% in its sales force, particularly among new
hires. As a result of these turnover rates, the Company expends a significant
amount of resources and management time on identifying and training its account
executives. While the Company has been able to achieve its objectives for
increasing the number of sales days, the Company's ability to attract and retain
qualified sales personnel depends on numerous factors, including factors out of
the Company's control, such as conditions in the local employment markets in
which the Company operates. The Company's business plan calls for a continued
increase in the number of account executives, and there can be no assurance that
the Company will be able to hire or retain a sufficient number of account
executives to achieve its financial objectives. A decrease in the number of
account executives could have an adverse effect on the Company's ability to
service its indebtedness and could have a material adverse effect on the
Company's business, operating results or financial condition.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on the continued services of its senior management
team, including its regional sales management personnel. In connection with the
Recapitalization, the Company's previous Chairman of the Board and Chief
Executive Officer resigned and was replaced, in his Chief Executive Officer
capacity, by Ricardo Puente, the Company's existing President and, in his
capacity as Chairman of the Board, by Laurence H. Bloch, the Company's previous
Vice Chairman and Chief Financial Officer. Otherwise, the Company has retained
the services of its existing senior management team, all of whom have
significant experience in the yellow pages publishing industry. Messrs. Puente
and Bloch have each entered into an employment contract with the Company which
provides for their continued employment for a five year term. See
"Management -- Employment Agreements." Although the Company believes it could
replace such key employees in an orderly fashion should the need arise, the loss
of such key personnel could have a material adverse effect on the Company's
business, operating results or financial condition. See "Management -- Directors
and Executive Officers."
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<PAGE> 21
ACQUISITION AND DEVELOPMENT RISKS
A portion of the Company's growth since the 1993 Acquisition has resulted
from the acquisition of directories from other independent yellow pages
publishers and start-ups of new directories. While one of the Company's
strategies for achieving its financial objectives is increasing the number of
directories it publishes and the local markets which it serves, there can be no
assurance that the Company's historical success with acquisitions or start-ups
will continue. The Company intends to continue to seek out opportunities for
future expansion, but there can be no assurance that the Company will be able to
develop new directories or identify, negotiate and consummate acquisitions on
attractive terms, nor can there be any assurance that new acquisitions or
start-ups can be operated profitably or integrated successfully into the
Company's operations. Furthermore, start-ups and acquisitions both require
substantial attention from and place substantial demands upon the senior
management of the Company, which may divert attention from and adversely impact
their ability to manage the Company's existing businesses. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Overview."
RISK ASSOCIATED WITH CREDITWORTHINESS OF SMALL BUSINESSES
Approximately 95% of the Company's net revenues come from selling
advertising to local businesses. In the ordinary course of its business, the
Company extends credit to its customers for advertising purchases. Full
collection of delinquent accounts can take up to 18 to 24 months. As a group,
local businesses tend to have fewer financial resources and higher financial
failure rates than larger businesses. Consequently, although the Company
attempts to mitigate this exposure through the size, geographic and industry
diversification of its customer base as well as through collection of advance
payments, there can be no assurance that it will not be adversely affected by
its dependence on local businesses.
SUBSTANTIAL 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, the Company competes 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 the
Company. Other media in competition with yellow pages for local business and
professional advertising include newspapers, radio, television, billboards and
direct mail. There can be no assurance that the Company will be able to compete
effectively with these other firms for advertising or acquisitions in the
future.
RISK OF CHANGING TECHNOLOGY; NEW PRODUCT DEVELOPMENT
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, the
Company's growth and future financial performance may depend upon its 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 the Company's products
and services. The Company has entered into a strategic agreement with InfoSpace,
Inc. ("InfoSpace") with respect to its Internet service. However, there can be
no assurance that the Company will be successful in its attempt to provide its
services over the Internet. A failure by the Company to anticipate or respond
adequately to changes in technology and user preferences, or an inability to
finance the necessary capital expenditures, could have a material adverse effect
on the Company's business, operating results or financial condition.
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<PAGE> 22
SENSITIVITY OF REVENUE TO ECONOMIC CONDITIONS
The Company derives its net revenues from the sale of advertising in its
directories. Advertising revenues of the Company, 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 the Company's business, operating results or
financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Overview" and "Business -- Industry
Overview."
CONTROLLING EQUITYHOLDER
The THL Parties own approximately 59% of TCC's Common Stock. Under the
terms of the Investors Agreement (as defined herein), all of the stockholders of
TCC have agreed to vote in favor of those individuals designated by THL to serve
on the Board of Directors of TCC, and THL has the right to appoint a majority of
the Directors until the occurrence of certain events. As a result, THL has the
ability to control the policies and operations of Holdings. Circumstances may
occur in which the interests of THL, as the principal equity holder of Holdings
could be in conflict with the interests of the holders of the Discount Notes. In
addition, the equity investors may have an interest in pursuing acquisitions,
divestitures or other transactions that, in their judgment, could enhance their
equity investment, even though such transactions might involve risks to the
holders of the Notes. See "Security Ownership of Certain Beneficial Owners and
Management."
LIMITATIONS ON CHANGE OF CONTROL
In the event of a Change of Control, the Discount Note Issuers will be
required to make an offer for cash to purchase the Discount Notes at a purchase
price equal to (i) 101% of the Accreted Value thereof, if the repurchase date is
on or prior to November 15, 2002 or (ii) 101% of the principal amount at
maturity thereof, together with accrued and unpaid interest thereon, if any, to
the repurchase date, if such date is after November 15, 2002. Certain events
involving a Change of Control may result in an event of default under the Senior
Credit Facility, the Notes or other indebtedness of the Discount Note Issuers
that may be incurred in the future. Moreover, the exercise by the holders of the
Discount Notes of their right to require the Discount Note Issuers to purchase
the Discount Notes may cause an event of default under the Senior Credit
Facility, the Notes or such other indebtedness, even if the Change of Control
does not. The Discount Note Issuers' obligations under this provision of the
Discount Note Indenture could delay, deter or prevent a sale of Holdings which
might otherwise be advantageous to holders of the Discount Notes. Finally, there
can be no assurance that the Discount Note Issuers will have the financial
resources necessary to purchase the Discount Notes upon a Change of Control. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Description of the Discount
Notes -- Change of Control Offer."
RISK ASSOCIATED WITH FLUCTUATIONS IN PAPER COSTS
The Company is dependent upon outside suppliers for all of its raw material
needs and, therefore, is subject to price increases and delays in receiving
supplies of such materials. The Company's principal raw material is paper, and
it used approximately 16.4 million and 17.6 million pounds of directory grade
paper in its fiscal years ended April 30, 1996 and 1997, respectively, resulting
in a total cost of paper during such periods of $6.0 million and $5.8 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. The Company does not purchase
paper directly from paper mills; instead, the Company's printers purchase the
paper on behalf of the Company at prices negotiated by the Company. However, the
Company recently entered into a pricing agreement through January 1, 1998, with
the paper mill that supplies the Company's primary printer, which has the effect
of delaying an announced price increase. Changes in the supply of, or demand
for, paper could affect delivery times and prices. No assurances can be given
that the Company will continue to have available necessary raw materials at
reasonable prices or that any increases in paper costs would not have a material
adverse effect on the Company's business, financial condition or results
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<PAGE> 23
of operations. See "Management's Discussion and Analysis of Financial Condition
and Result of Operations -- Overview" and "Business -- Raw Materials."
RISK OF FRAUDULENT TRANSFER
Under applicable provisions of the U.S. Bankruptcy Code or comparable
provisions of state fraudulent transfer or conveyance laws, if the Company, at
the time it borrowed under the Senior Credit Facility and the Senior
Subordinated Facility or issued the Notes or if Holdings, at the time it issued
the Discount Notes and redeemed the Preferred Units, (i) incurred such
indebtedness with intent to hinder, delay or defraud creditors or (ii)(a)
received less than reasonably equivalent value or fair consideration for
incurring such indebtedness and (b)(1) was insolvent at the time of incurrence,
(2) was rendered insolvent by reason of such incurrence (and the application of
the proceeds thereof), (3) was engaged or was about to engage in a business or
transaction for which the assets remaining with the Company or Holdings (as the
case may be) constituted unreasonably small capital to carry on its businesses
or (4) intended to incur, or believed that it would incur, debts beyond its
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 Notes or the
Discount Notes or, in the alternative, subordinate the Notes and the Discount
Notes to existing and future indebtedness of the Company and Holdings,
respectively. The measure of insolvency for purposes of the foregoing will vary
depending upon the law applied in such case. Generally, however, Holdings would
be considered insolvent if the sum of its debts, including contingent
liabilities, was greater than all of its assets at fair valuation or if the
present fair saleable value of its assets was less than the amount that would be
required to pay the probable liability on its existing debts, including
contingent liabilities, as they become absolute and matured.
Management believes that, for purposes of the U.S. Bankruptcy Code and
state fraudulent transfer or conveyance laws, the Discount 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 Holdings, after the issuance and
exchange of the Discount Notes and the application of the proceeds therefrom,
will be solvent, will have sufficient capital for carrying on its business and
will be able to pay its debts as they mature. There can be no assurance,
however, that a court passing on such questions would agree with management's
view.
ORIGINAL ISSUE DISCOUNT
The Discount Notes will be considered to be issued with original issue
discount. Holders of the Discount Notes will be required to include the
accretion of the original issue discount in gross income for U.S. federal income
tax purposes in advance of receipt of the cash payments to which such income is
attributable. See "Certain U.S. Federal Income Tax Considerations -- Original
Issue Discount on the Discount Notes" for a more detailed discussion of the U.S.
federal income tax consequences to holders of the Discount Notes of the
purchase, ownership and disposition of the Discount Notes. If a bankruptcy case
is commenced by or against Holdings or the Company under the United States
Bankruptcy Code after the issuance of the Discount Notes, the claim of a holder
of Discount Notes with respect to the principal amount thereof may be limited to
an amount equal to the sum of (i) the purchase price, and (ii) that portion of
the original issue discount which has been amortized as of any such bankruptcy
filing.
ABSENCE OF A PUBLIC MARKET COULD ADVERSELY AFFECT THE VALUE OF EXCHANGE DISCOUNT
NOTES
The Old Discount Notes were issued to, and the Discount Note Issuers
believe are currently owned by, a relatively small number of beneficial owners.
Prior to the Discount Note Exchange Offer, there has not been any public market
for the Old Discount Notes. The Old Discount Notes have not been registered
under the Securities Act and will be subject to restrictions on transferability
to the extent that they are not exchanged for Exchange Discount Notes by holders
who are entitled to participate in this Discount Note Exchange Offer. The
holders of Old Discount Notes (other than any such holder that is an "affiliate"
of the Discount Note Issuers within the meaning of Rule 405 under the Securities
Act) who are not eligible to participate in the Discount Note Exchange Offer are
entitled to certain registration rights, and the Discount Note Issuers are
required to file a Shelf Registration Statement with respect to such Old
Discount Notes. The Exchange Discount Notes will constitute a new issue of
securities with no established trading market. The Discount
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<PAGE> 24
Note Issuers do not intend to list the Exchange Discount Notes on any national
securities exchange or seek the admission thereof to trading in the National
Association of Securities Dealers Automated Quotation System. The Initial
Purchasers have advised the Discount Note Issuers that they currently intend to
make a market in the Exchange Discount Notes, but they are not obligated to do
so and may discontinue such market making at any time. In addition, such market
making activity will be subject to the limits imposed by the Securities Act and
the Exchange Act and may be limited during the Discount Note Exchange Offer and
the pendency of the Shelf Registration Statement. Accordingly, no assurance can
be given that an active public or other market will develop for the Exchange
Discount Notes or as to the liquidity of the trading market for the Exchange
Discount Notes. If a trading market does not develop or is not maintained,
holders of the Exchange Discount Notes may experience difficulty in reselling
the Exchange Discount Notes or may be unable to sell them at all. If a market
for the Exchange Discount Notes develops, any such market may be discontinued at
any time.
If a public trading market develops for the Exchange Discount Notes, future
trading prices of such securities will depend on many factors including, among
other things, prevailing interest rates, the Discount Note Issuers' results of
operations and the market for similar securities. Depending on prevailing
interest rates, the market for similar securities and other factors, including
the financial condition of the Discount Note Issuers, the Exchange Discount
Notes may trade at a discount from their principal amount.
FAILURE TO FOLLOW DISCOUNT NOTE EXCHANGE OFFER PROCEDURES COULD ADVERSELY AFFECT
HOLDERS
Issuance of the Exchange Discount Notes in exchange for the Old Discount
Notes pursuant to the Discount Note Exchange Offer will be made only after a
timely receipt by the Discount Note Issuers of such Old Discount Notes, a
properly completed and duly executed Letter of Transmittal and all other
required documents. Therefore, holders of the Old Discount Notes desiring to
tender such Old Discount Notes in exchange for Exchange Discount Notes should
allow sufficient time to ensure timely delivery. The Discount Note Issuers are
under no duty to give notification of defects or irregularities with respect to
the tender of Old Discount Notes for exchange. Old Discount Notes that are not
tendered or are tendered but not accepted will, following the consummation of
the Discount Note Exchange Offer, continue to be subject to the existing
restrictions upon transfer thereof, and, upon consummation of the Discount Note
Exchange Offer certain registration rights under the Registration Rights
Agreement will terminate. In addition, any holder of Old Discount Notes who
tenders in the Discount Note Exchange Offer for the purpose of participating in
a distribution of the Exchange Discount Notes may be deemed to have received
restricted securities, and if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives
Exchange Discount Notes for its own account in exchange for Old Discount Notes,
where such Old Discount Notes were acquired by such 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 Exchange
Discount Notes. See "Plan of Distribution." To the extent that Old Discount
Notes are tendered and accepted in the Discount Note Exchange Offer, the trading
market for untendered and tendered but unaccepted Old Discount Notes could be
adversely affected. See "The Discount Note Exchange Offer."
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<PAGE> 25
THE DISCOUNT NOTE ISSUERS
TransWestern Holdings L.P. The Partnership was formed by CIVC, the
Management Investors and certain other investors in May 1993 to acquire the
TransWestern business from US West. US West assembled the assets and management
team that comprised the TransWestern business through the acquisition of 15
independent companies between 1985 and 1989. In November 1997, the Partnership
formed and contributed substantially all its assets to TransWestern,
TransWestern assumed or guaranteed all of the liabilities of the Partnership,
and the Partnership changed its name to TransWestern Holdings L.P.
TWP Capital Corp. Capital, a wholly-owned subsidiary of Holdings, was
incorporated in 1997 for the purpose of serving as a co-issuer of the Discount
Notes. Capital will not have substantial operations or assets of any kind and
will not have any revenues. As a result, prospective purchasers of the Discount
Notes should not expect Capital to participate in servicing the interest or
principal obligations of the Discount Notes. The Discount Note Indenture will
impose substantial restrictions on the activities of Capital.
The Company's principal executive offices are located at 8344 Clairemont
Mesa Boulevard, San Diego, California 92111, and its telephone number is (619)
467-2800.
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THE TRANSACTIONS
The Initial Discount Note Offering was consummated in conjunction with the
Partnership's $312.7 million Recapitalization plan set forth in the Securities
Purchase and Redemption Agreement, dated as of August 27, 1997, as amended,
among the THL Parties, CIBC WG Argosy Merchant Fund 2, L.L.C. ("CIBC Merchant
Fund"), an affiliate of CIBC Oppenheimer, which was one of the Initial
Purchasers, the Partnership and each of the Partnership's existing limited
partners (the "Existing Limited Partners").
In the Recapitalization, the THL Parties, CIBC Merchant Fund and CIVC
Partners III ("CIVC III" and together with the THL Parties and CIBC Merchant
Fund, the "New Investors"), the Management Investors and certain of the other
Existing Limited Partners made the Equity Investment in the Partnership and TCC.
The proceeds of the Equity Investment, together with approximately $182.7
million of aggregate proceeds from the debt financings described below, were
used (i) for $224.5 million of Recapitalization consideration, (ii) to repay
$75.6 million under the Old Credit Facility, (iii) to pay $10.6 million of fees
and expenses and (iv) for $2.0 million for general corporate purposes, including
working capital. The Recapitalization consideration consisted of (a) $174.4
million for redemption of outstanding partnership units, (b) $42.7 million of
capital which was reinvested by the Management Investors and certain other
Existing Limited Partners, (c) $5.5 million reserved for payments pursuant to
the Equity Compensation Plan, (d) $1.4 million for the purchase of TCC common
stock and (e) $0.5 million representing debt assumed.
The Recapitalization was financed with (i) the Equity Investment of $130.0
million, (ii) borrowings of approximately $107.7 million under the Senior Credit
Facility and (iii) borrowings of $75.0 million under the Senior Subordinated
Facility.
The Senior Credit Facility was provided by Canadian Imperial Bank of
Commerce, New York Agency, as lender and administrative agent ("CIBC"), and
First Union National Bank, as lender and documentation agent ("First Union"),
both of which are affiliates of the Initial Purchasers. The Senior Subordinated
Facility was provided by CIBC Oppenheimer and First Union Corporation, an
affiliate of First Union Capital Markets Corp., which is one of the Initial
Purchasers. TCC is owned approximately pro rata by all the equity investors in
the Partnership.
One half of the $5.5 million reserved for payments pursuant to the Equity
Compensation Plan was paid in the Recapitalization and one half remains an
obligation of the Company and was not borrowed concurrently with the other steps
of the Recapitalization. However, the entire $5.5 million for payments pursuant
to the Equity Compensation Plan is included in the sources and uses of funds
outlined below. See "Management -- Equity Compensation Arrangements."
The following table sets forth the sources and uses of funds in the
Recapitalization (dollars in millions):
<TABLE>
<S> <C>
SOURCES:
Senior Credit Facility(a)(b)...................................... $107.7
Senior Subordinated Facility(b)................................... 75.0
Equity Investment(c).............................................. 130.0
------
Total sources............................................. $312.7
======
USES:
Recapitalization consideration(d)................................. $224.5
Repayment of Old Credit Facility(e)............................... 75.6
Fees and expenses................................................. 10.6
Working Capital................................................... 2.0
------
Total uses................................................ $312.7
======
</TABLE>
- ---------------
(a) Includes borrowings of $85.0 million in Term Loans and $22.7 million under
the Revolving Credit Facility. Although the Company had actually drawn $17.2
million under the Revolving Credit Facility as of October 1, 1997, this
table reflects an amount, $22.7 million, that would have been borrowed under
the
21
<PAGE> 27
Revolving Credit Facility if all estimated fees and expenses, other debt
assumed and the total amount to be paid under the Equity Compensation Plan
had been paid on that date.
(b) The net proceeds of the Initial Offering were applied to (i) repay the
Senior Subordinated Facility, (ii) reduce the outstanding balance under the
Revolving Credit Facility, (iii) pay fees and expenses related to the
Initial Offering and (iv) for general corporate purposes, including working
capital.
(c) Includes $87.3 million from the New Investors, comprised of (i) $77.0
million invested by the THL Parties, (ii) $5.0 million invested by the CIBC
Merchant Fund, (iii) $4.5 million invested by CIVC III and (iv) $0.8 million
from new management investors. Also includes $42.7 million from continuing
investors, comprised of (i) $25.5 million from CIVC, (ii) $11.2 million from
the Management Investors, (iii) $5.0 million from First Union Capital
Partners Inc. ("FUCP") and (iv) $1.0 million from the Partnership's former
Chairman.
(d) Includes $174.4 million for redemption of outstanding partnership units,
$1.4 million for the purchase of TCC common stock, $5.5 million reserved for
payments pursuant to the Equity Compensation Plan, $0.5 million representing
debt assumed and $42.7 million of capital which was reinvested by the
Management Investors and certain other Existing Limited Partners.
(e) The Old Credit Facility was provided by First Union, as lender and
administrative agent, and CIBC Inc., an affiliate of CIBC Oppenheimer, as
lender and documentation agent.
In November 1997, the Partnership formed and contributed substantially all
of its assets to TransWestern, TransWestern assumed or guaranteed all of the
liabilities of the Partnership, and the Partnership changed its name to
TransWestern Holdings L.P. As a result of the Asset Drop-Down, Holdings' only
assets are all of the TransWestern membership interests and all of Capital's
capital stock. All of the operations that were previously conducted by the
Partnership are now being conducted by TransWestern.
Holdings applied the net proceeds of the Initial Discount Note Offering to
redeem approximately $31.3 million of the Equity Investment. However, this
redemption by Holdings did not reduce the equity capitalization of TransWestern.
Concurrent with the Initial Discount Note Offering, TransWestern and Capital II
offered $100 million of their 9 5/8% Senior Subordinated Notes due 2007.
TransWestern applied the net proceeds of the Initial Offering to repay the
Senior Subordinated Facility and to reduce its outstanding indebtedness under
the Revolving Credit Facility established by the Senior Credit Facility.
After giving effect to the Initial Offerings and Asset Drop-Down, the THL
Parties collectively own approximately 59% of the equity of Holdings and the
CIVC Parties and the Management Investors own approximately 23% and 9% of the
equity of Holdings, respectively. The remainder of the equity of Holdings is
held by other investors.
22
<PAGE> 28
THE PRINCIPAL INVESTORS
After giving effect to the Initial Offerings and the Asset Drop-Down, the
THL Parties are collectively the principal investors in the Company, owning
approximately 59% of the Preferred Units, the Class A Units and the stock of
TCC. THL, which is the principal THL Party, is managed by THL Co., one of the
oldest and most successful private equity investment firms in the United States.
Founded in 1974, THL Co. focuses on identifying and acquiring ownership stakes
in middle market growth companies. THL Co. currently manages more than $3
billion of capital and has participated in more than 100 acquisitions and
investments.
CIVC and CIVC III (the "CIVC Parties") together own approximately 23% of
the Preferred Units, the Class A Units and the stock of TCC. CIVC is a private
equity firm and a licensed small business investment company. Since 1990, CIVC
has invested approximately $300 million in small and middle market businesses
and was the principal investor in the 1993 Acquisition. CIVC is an indirect
subsidiary of BankAmerica Corporation, an international financial services
organization.
All of the Management Investors, who own in the aggregate approximately 9%
of the Preferred Units, the Class A Units and the stock of TCC, have been
officers and/or senior operational managers of the Company since the 1993
Acquisition. The Management Investors have extensive experience in the yellow
pages publishing business. See "Management."
23
<PAGE> 29
USE OF PROCEEDS
Holdings used the net proceeds of the Initial Discount Note Offering,
estimated to be approximately $31.3 million (after deduction of estimated
discounts to the Initial Purchasers and other Discount Note Offering expenses),
to redeem approximately $31.3 million of the Equity Investment. However, this
redemption by Holdings did not reduce the equity capitalization of TransWestern.
Affiliates of the Initial Purchasers own Preferred Units and therefore
participated in such redemption.
The Discount Note Exchange Offer is intended to satisfy certain of the
Discount Note Issuers' obligations under the Registration Rights Agreement. The
Discount Note Issuers will not receive any cash proceeds from the issuance of
the Exchange Discount Notes offered hereby. In consideration for issuing the
Exchange Discount Notes contemplated in this Prospectus, the Discount Note
Issuers will receive Old Discount Notes in like principal amount, the form and
terms of which are the same as the form and terms of the Exchange Discount Notes
(which replace the Old Discount Notes), except as otherwise described herein.
24
<PAGE> 30
CAPITALIZATION
The following table sets forth the capitalization of Holdings as of October
31, 1997, after giving effect to the Initial Offerings and the Asset Drop-Down.
The Old Discount Notes surrendered in exchange for Exchange Discount Notes will
be retired and canceled and cannot be reissued. Accordingly, issuance of the
Exchange Discount Notes will not result in any increase or decrease in the
indebtedness of the Discount Note Issuers. As such, no effect has been given to
the Discount Note Exchange Offer in the following capitalization table. The
information in this table should be read in conjunction with "The Transactions,"
"Unaudited Pro Forma Consolidated Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements and accompanying notes thereto appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
OCTOBER 31, 1997
-----------------------------
PRO FORMA
FOR THE INITIAL
OFFERINGS AND
THE
ACTUAL ASSET DROP-DOWN
--------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Total debt:
Senior Credit Facility(a):
Revolving Credit Facility(a)................ $ 16,000 $ --
Term Loans(a)............................... 85,000 85,000
Senior Subordinated Facility................... 75,000 --
Notes(b)....................................... -- 100,000
Discount Notes................................. -- 32,500
Other debt..................................... 430 430
--------- ---------
Total debt.................................. 176,430 217,930
Total Partnership deficit(c)(d).................. (152,605) (187,255)
--------- ---------
Total capitalization........................ $ 23,825 $ 30,675
========= =========
</TABLE>
- ---------------
(a) The Senior Credit Facility consists of a $40 million Revolving Credit
Facility and $85 million in Term Loans. See "Description of Senior Credit
Facility." Although the Company had actually drawn $17.2 million under the
Revolving Credit Facility as of October 1, 1997, this table reflects an
amount, $22.7 million, that would have been borrowed under the Revolving
Credit Facility if all estimated fees and expenses, other assumed debt and
the total amount to be paid under the Equity Compensation Plan had been paid
on that date. On a pro forma basis, the Company would have had approximately
$40 million of additional borrowing availability under the Revolving Credit
Facility after applying a portion of the proceeds from the issuance of the
Old Notes to reducing the outstanding balance under the Revolving Credit
Facility.
(b) These obligations are direct obligations of TransWestern and Capital II, to
which the Discount Notes are effectively subordinated.
(c) As of October 31, 1997, there were 1,270,456 Preferred units, 1,270,456
Class A units and 10,000 Class B units issued and outstanding.
(d) As of the date hereof, there were 659,660 Preferred Units, 1,270,456 Class A
Units and 10,000 Class B Units issued and outstanding.
25
<PAGE> 31
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated financial data are derived
from Holdings' consolidated financial statements appearing elsewhere in this
Prospectus, as adjusted to give effect to the Transactions. The unaudited pro
forma consolidated statements of operations data for the fiscal year ended April
30, 1997 and the six-month period ended October 31, 1997 give effect to the
Transactions as if they had occurred at the beginning of such periods, and the
unaudited pro forma consolidated balance sheet data give effect to the Initial
Offerings and the Asset Drop-Down as if they had occurred on October 31, 1997.
The pro forma adjustments are based upon available data and certain assumptions
that Holdings believes are reasonable. The unaudited pro forma consolidated
financial data do not purport to represent what Holdings' results of
consolidated operations or consolidated financial position would actually have
been had the Transactions in fact occurred at such prior times or to project the
Company's consolidated results of operations or financial position for or at any
future period or date. The unaudited pro forma consolidated financial data
should be read in conjunction with the consolidated financial statements of
Holdings' and the information contained in "The Transactions," "Use of
Proceeds," and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere herein.
26
<PAGE> 32
TRANSWESTERN HOLDINGS L.P.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED APRIL 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
TRANSACTIONS
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ------------ ---------
<S> <C> <C> <C>
Net revenues............................................ $ 91,414 $ 91,414
Cost of revenues........................................ 19,500 19,500
------- --------
Gross profit.......................................... 71,914 71,914
Operating expenses:
Sales and marketing................................... 36,640 36,640
General and administrative............................ 16,821 $ (100)(a) 16,721
Contribution to Equity Compensation Plan.............. -- 5,543(b) 5,543
------- -------- --------
Total operating expenses................................ 53,461 5,443 58,904
------- -------- --------
Income from operations.................................. 18,453 (5,443) 13,010
Other income (expense), net............................. 48 48
Interest expense........................................ (7,816) (15,241)(c) (23,057)
------- -------- --------
Income (loss) before extraordinary item................. $ 10,685 $(20,684) $ (9,999)
======= ======== ========
EBITDA data:
Income (loss) before extraordinary item............... $ 10,685 $ (9,999)
Interest expense...................................... 7,816 23,057
Non-recurring other expense........................... 300 300
Contribution to Equity Compensation Plan.............. -- 5,543
Depreciation and amortization......................... 6,399 6,399
------- --------
EBITDA................................................ $ 25,200 $ 25,300
======= ========
Ratio of earnings to fixed charges(d)................... 2.29x --
======= ========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Statements of
Operations.
27
<PAGE> 33
TRANSWESTERN HOLDINGS L.P.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED OCTOBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
TRANSACTIONS
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ------------- ---------
<S> <C> <C> <C>
Net revenues.............................................. $ 38,254 $ 38,254
Cost of revenues.......................................... 9,172 9,172
------- -------
Gross profit............................................ 29,082 29,082
Operating expenses:
Sales and marketing..................................... 17,114 17,114
General and administrative.............................. 7,893 $ (50)(a) 7,843
Contribution to Equity Compensation Plan................ 5,543 -- 5,543
------- ------- -------
Total operating expenses.................................. 30,550 (50) 30,500
------- ------- -------
Income (loss) from operations............................. (1,468) 50 (1,418)
Other income (expense), net............................... (107) (107)
Interest expense.......................................... (4,333) (9,644)(c) (13,977)
------- ------- -------
Income (loss) before extraordinary item................... $ (5,908) $(9,594) $ (15,502)
======= ======= =======
EBITDA data:
Income (loss) before extraordinary item................. $ (5,908) $ (15,502)
Interest expense........................................ 4,333 13,977
Non-recurring other expense............................. 326 326
Contribution to Equity Compensation Plan................ 5,543 5,543
Depreciation and amortization........................... 3,274 3,274
------- -------
EBITDA.................................................... $ 7,568 $ 7,618
======= =======
Ratio of earnings to fixed charges(d)..................... -- --
======= =======
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Statements of
Operations.
28
<PAGE> 34
TRANSWESTERN HOLDINGS L.P.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
APRIL 30, ENDED OCTOBER 31,
1997 1997
---------- -----------------
<S> <C> <C> <C>
(a) Entry records elimination of expenses of former Chairman
net of expenses associated with the Management Fee (as
defined herein)........................................... $ (100) $ (50)
(b) Entry records accrued contribution to Equity Compensation
Plan (see "Management -- Equity Compensation
Arrangements")............................................ 5,543 --
(c) Pro forma adjustments to interest expense as a result of
the Transactions are as follows:
Interest expense:
Term Loans ($85,000 @ 8.50%).............................. 7,191 3,613
Notes ($100,000 @ 9.625%)................................. 9,625 4,813
Unused Revolving Credit Facility fee...................... 200 100
Discount Notes............................................ 4,905 2,348
------- --------
Pro forma cash interest expense........................... 21,921 10,874
Amortization of debt issuance costs (i)................... 1,136 568
------- --------
Total pro forma interest expense.......................... 23,057 11,442
------- --------
Less historical interest expense.......................... (7,816) (1,798)
------- --------
$ 15,241 $ 9,644
======= ========
</TABLE>
(i) It is anticipated that the total amount of the Senior Subordinated
Facility debt issuance costs of $3,400 will be written off upon
consummation of the Offerings.
(d) Earnings consist of income (loss) before extraordinary item plus
contributions to the Equity Compensation Plan plus fixed charges. Fixed
charges consist of (i) interest, whether expensed or capitalized, (ii)
amortization of debt issuance costs, whether expensed or capitalized, and
(iii) an allocation of one-fourth of the rental expense from operating
leases which management considers is a reasonable approximation of the
interest factor of rental expense. Pro forma earnings were insufficient to
cover fixed charges by $4,456 for the year ended April 30, 1997 and $9,959
for the six-month period ended October 31, 1997.
29
<PAGE> 35
TRANSWESTERN HOLDINGS L.P.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
OCTOBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
INITIAL
OFFERINGS
AND THE
ASSET
DROP-DOWN
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash................................................ $ 2,223 $ 3,515(a) $ 5,738
Trade receivables................................... 17,230 17,230
Deferred directory costs............................ 8,417 8,417
Other current assets................................ 475 475
-------- ---------
Total current assets.................................. 28,345 31,860
Property, equipment and leasehold improvements, net... 2,881 2,881
Acquired intangibles, net............................. 9,281 9,281
Other assets, primarily debt
issuance costs,net.................................. 8,246 6,735(a) 11,581
(3,400)(b)
-------- -------- ---------
$ 48,753 $ 6,850 $ 55,603
======== ======== =========
LIABILITIES AND PARTNERSHIP DEFICIT
Current liabilities:
Accounts payable.................................... $ 2,925 $ 2,925
Salaries and benefits payable....................... 2,498 2,498
Other accrued liabilities........................... 4,753 4,753
Amount due Holdings' general partner................ -- --
Customer deposits................................... 14,752 14,752
Current portion, long-term debt..................... 2,555 2,555
-------- ---------
Total current liabilities............................. 27,483 27,483
Long-term debt:
Senior Credit Facility.............................. 98,875 $ (16,000)(a) 82,875
Senior Subordinated Facility........................ 75,000 (75,000)(a) --
Notes............................................... -- 100,000(a) 100,000
Discount Notes...................................... -- 32,500(a) 32,500
Partnership deficit................................... (152,605) (3,400)(b) (187,255)
(31,250)(a)
-------- -------- ---------
$ 48,753 $ 6,850 $ 55,603
======== ======== =========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Balance Sheet.
30
<PAGE> 36
TRANSWESTERN HOLDINGS L.P.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
(a) Reflects the actual sources and uses of funds for the Recapitalization
through October 31, 1997 and the estimated pro forma sources and uses of
funds for the Initial Offerings as if they had occurred as of October 31,
1997:
<TABLE>
<CAPTION>
INITIAL
RECAPITALIZATION OFFERINGS
---------------------- --------
<S> <C> <C> <C>
SOURCES OF FUNDS:
New Investors(i):
THL Parties..................................................... $75,674
CIVC III........................................................ 4,422
CIBC Merchant Fund ............................................. 4,914
Management Investors............................................ 738 $ 85,748
-------
Continuing investors(i)(ii):
CIVC ........................................................... 25,061
Management Investors and the former Chairman.................... 12,048
FUCP............................................................ 4,914 42,023
-------
New financing:
Senior Credit Facility(iii):
Revolving Credit Facility..................................... 22,716
Term Loans.................................................... 85,000
Senior Subordinated Facility.................................... 75,000 182,716
-------
Notes........................................................... $100,000
Discount Notes.................................................. 32,500
-------- --------
$310,487(v) $132,500
======== ========
USES OF FUNDS:
Repay Old Credit Facility ........................................ $ 75,600
Repay amount due General Partner.................................. 833
Redemption of partnership units................................... 174,381
Continuing investors(ii).......................................... 42,023
Repay Revolving Credit Facility................................... $ 16,000
Repay Senior Subordinated Facility................................ 75,000
Contribution to Equity Compensation Plan.......................... 5,543
Redemption of Preferred Units(i).................................. 31,250
Transaction costs and fees(iv):
Senior Credit Facility.......................................... $ 3,319
Senior Subordinated Facility.................................... 3,428
Transaction costs............................................... 3,858 10,605
-------
Prepaid Offering Costs.......................................... 1000
Notes........................................................... 5,485
Discount Notes.................................................. 1,250
Funds available for Working Capital............................... 502 3,515
-------- --------
$310,487(v) $132,500
======== ========
</TABLE>
(i) The table below sets forth the Equity Investment from New Investors and
continuing investors and TCC's partnership interests as of the
Recapitalization and as adjusted to reflect the Initial Discount Note
Offering and the redemption of the Preferred Units.
<TABLE>
<CAPTION>
PREFERRED AS ADJUSTED
AS OF THE UNIT FOR THE
RECAPITALIZATION REDEMPTIONS INITIAL OFFERINGS
---------------- ----------- -----------------
<S> <C> <C> <C>
New Investors:
THL Parties......................................... $ 75,674 $ (18,191) $57,483
CIVC III............................................ 4,422 (1,063) 3,359
CIBC Merchant Fund.................................. 4,914 (1,182) 3,732
Management Investors................................ 738 (177) 561
Continuing investors:
CIVC................................................ 25,061 (6,024) 19,037
Management Investors................................ 12,048 (2,894) 9,154
FUCP................................................ 4,914 (1,181) 3,733
TCC................................................... 2,238 (538) 1,700
-------- -------- -------
$130,009 $ (31,250) $98,759
======== ======== =======
</TABLE>
31
<PAGE> 37
TRANSWESTERN PUBLISHING COMPANY LLC
NOTES TO UNAUDITED PRO FORMA BALANCE SHEET -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(ii) Based on the purchase price per unit for the New Investors, multiplied
by the number of units retained by the continuing investors in the
Recapitalization. See "The Transactions." This implied value does not
represent (a) a purchase, sale or other change in such equity
investment for accounting or tax purposes or (b) any funds or proceeds
paid to or used by the Company in the Recapitalization.
(iii) The Senior Credit Facility makes available up to $40,000 under the
terms of the Revolving Credit Facility. The terms of the Term Loans
require annual principal payments of $2,125 (in years one through
five), $27,625 in year six and $46,750 in year seven.
(iv) The Transaction costs and fees and the allocation to the various
components of the Recapitalization and the Initial Offerings have been
estimated by management and may be subject to change.
(v) Does not include approximately $2.2 million expended by the New
Investors to purchase common stock of TCC directly from the holders
thereof in connection with the Recapitalization.
(b) Entry records write-off of debt issuance costs:
<TABLE>
<CAPTION>
OFFERING
----------------
<S> <C>
Senior Subordinated Facility.............................. $ 3,400
</TABLE>
32
<PAGE> 38
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA
(DOLLARS IN THOUSANDS)
The following tables present selected historical consolidated financial
data and, insofar as they relate to each of the five fiscal years in the period
ended April 30, 1997, have been derived from the audited consolidated financial
statements of Holdings and the TransWestern business. The audited consolidated
statements of operations of Holdings for each of the three years in the period
ended April 30, 1997 and the audited consolidated balance sheet of Holdings as
of April 30, 1996 and 1997 and the notes thereto appear elsewhere in this
Prospectus. The consolidated balance sheet data at April 30, 1993, 1994 and 1995
and the consolidated statement of operations data for each of the years ended
April 30, 1993 and 1994 have been derived from the audited consolidated
financial statements of Holdings and the TransWestern business which do not
appear in this Prospectus. The selected historical consolidated statement of
operations and balance sheet data of Holdings as of and for the six months ended
October 31, 1996 and 1997 have been derived from unaudited consolidated
financial statements of Holdings included elsewhere in this Prospectus, which,
in the opinion of management, include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of such information.
Results for the six months ended October 31, 1997 are not necessarily indicative
of results that may be expected for the entire year. See "Unaudited Pro Forma
Consolidated Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and the financial statements of Holdings
and notes thereto appearing elsewhere herein.
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30, SIX MONTHS ENDED
------------------------------------------------------------------ OCTOBER 31,
PREDECESSOR ----------------------
1993(a) 1994 1995 1996 1997 1996 1997
----------- ------- -------- -------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenues............... $54,949 $62,219 $ 69,845 $ 77,731 $ 91,414 $38,050 $38,254(b)
Cost of revenues........... 17,839 18,788 16,956 18,202 19,500 8,996 9,172
------- ------- ------- ------- ------- ------- --------
Gross profit............. 37,110 43,431 52,889 59,529 71,914 29,054 29,082
Operating expenses:
Selling and marketing.... 26,473 26,301 27,671 29,919 36,640 15,888 17,114
General and
administrative......... 8,793 13,037 13,804 15,072 16,821 7,870 13,436
------- ------- ------- ------- ------- ------- --------
Total operating expenses... 35,266 39,338 41,475 44,991 53,461 23,758 30,550
------- ------- ------- ------- ------- ------- --------
Income from operations..... 1,844 4,093 11,414 14,538 18,453 5,296 (1,468)
Other income(expense),
net...................... 243 344 470 375 48 18 (107)
Interest expense........... (342) (2,951) (4,345) (6,630) (7,816) (4,029) (4,333)
------- ------- ------- ------- ------- ------- --------
Income before extraordinary
item..................... 1,745 1,486 7,539 8,283 10,685 1,285 (5,908)
Extraordinary item(c)...... 296 -- 392 1,368 -- -- 1,391
------- ------- ------- ------- ------- ------- --------
Net income................. $ 1,449 $ 1,486 $ 7,147 $ 6,915 $ 10,685 $ 1,285 $(7,299)
======= ======= ======= ======= ======= ======= ========
OTHER DATA:
Depreciation and
amortization............. $ 1,129 $ 4,603 $ 4,593 $ 4,691 $ 6,399 $ 3,122 $3,274
Capital expenditures....... 743 769 496 484 1,034 259 580
EBITDA(d).................. 3,216 9,040 17,002 20,400 25,200 8,586 7,568(b)
EBITDA margin.............. 5.9% 14.5% 24.3% 26.2% 27.6% 22.6% 19.8%
Gross margin............... 67.5% 69.8% 75.7% 76.6% 78.7% 76.4% 76.0%
Bookings(e)................ $54,188 $64,269 $ 70,013 $ 75,709 $ 86,859 $44,485 $49,926
Advance payments as a % of
net revenues(f).......... 26.2% 31.8% 36.9% 41.0% 45.1% 43.6% 46.6%
Number of accounts(g)...... 69,632 71,832 77,371 84,117 93,157 37,904 38,025
Average net revenues per
account(h)............... $ 789 $ 866 $ 903 $ 924 $ 981 $ 1,004 $1,006
Number of directories...... 90 97 106 118 128 49 57
Ratio of earnings to fixed
charges(i)............... 3.55x 1.44x 2.69x 2.28x 2.29x 1.17x --
BALANCE SHEET DATA (AT END
OF PERIOD):
Working capital............ $10,436 $12,034 $ 3,496 $ 2,088 $ 24 $(1,522) $862
Total assets............... 46,594 43,879 41,831 47,423 48,231 47,975 48,753
Total debt................. 28,921 25,724 47,961 84,410 78,435 84,335 176,430
Partnership equity
(deficit)................ 5,850 4,458 (22,721) (55,606) (50,722) (57,675) (152,605)
</TABLE>
See accompanying Notes to Selected Historical Consolidated Financial and Other
Data.
33
<PAGE> 39
NOTES TO SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER DATA
(DOLLARS IN THOUSANDS)
(a) Effective May 1, 1993, an investor group and CIVC formed the Partnership to
acquire the Transwestern business from US West. The results of operations
of the predecessor are not directly comparable to the results of operations
of the Company due to (i) the incurrence of interest expense from
borrowings to finance the acquisition and subsequent distributions, and
(ii) the effect of increased depreciation and amortization expense
associated with the acquisition.
(b) For the six months ended October 31, 1997 consolidated net revenues
increased $204,000 and EBITDA decreased $1.0 million as compared to the six
months ended October 31, 1996 primarily due to changes in the publication
schedule which caused a different mix of directories to be published in the
respective six month periods. EBITDA for the latest twelve months ended
October 31, 1997 and November 30, 1997 was $24,182 and $25,240
respectively. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(c) "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 Financial Statements.
(d) "EBITDA" is defined as consolidated income (loss) before extraordinary item
plus consolidated interest expense, non-recurring other expense,
discretionary contributions to the Equity Compensation Plan and
depreciation and amortization. Non-recurring other expense was $300 in
fiscal 1997 and $326 for fiscal 1996. Contributions to the Equity
Compensation Plan were $525 in fiscal 1995 and $796 in fiscal 1996 and
$5,543 for the six months ended October 31, 1997. EBITDA is not a measure
of performance under GAAP. While EBITDA should not be considered in
isolation or as a substitute for net income, cash flows from operating
activities and other income or cash flow statement data prepared in
accordance with GAAP, management understands that EBITDA is widely used by
certain investors as one measure to evaluate the financial performance of
companies in the yellow pages directory industry. The Company's definition
of EBITDA may not be comparable to that of other companies.
(e) "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 fiscal 1997, net revenues included $4,200 from
acquired directories, while bookings does not reflect this adjustment. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview."
(f) "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.
(g) "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.
(h) "Average net revenues per account" is defined as net revenues divided by
the number of accounts.
(i) Earnings consist of income (loss) before extraordinary item plus
contributions to the Equity Compensation Plan plus fixed charges. Fixed
charges consist of (i) interest, whether expensed or capitalized, (ii)
amortization of debt issuance costs, whether expensed or capitalized, and
(iii) an allocation of one-fourth of the rental expense from operating
leases which management considers is a reasonable approximation of the
interest factor of rental expense.
34
<PAGE> 40
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The Partnership was formed in May 1993 to acquire the TransWestern business
from US West. In November 1997, the Partnership formed and contributed
substantially all of its assets to TransWestern, TransWestern assumed or
guaranteed all of the liabilities of the Partnership, and the Partnership
changed its name to TransWestern Holdings L.P.
Revenue Recognition. The Company recognizes net revenues from the sale of
advertisements placed in each directory when the completed directory is
distributed. Costs directly related to sales, production, printing and
distribution of each directory are capitalized initially 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 grows, 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, the Company's directories
may be published in a month earlier or later than the previous year and may move
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, the Company's
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 vary less than net
revenues or EBITDA:
<TABLE>
<CAPTION>
FISCAL 1996 FISCAL 1997 FISCAL 1998
----------------------------- ----------------------------- -------------
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues(a).... $20.7 $14.7 $20.9 $21.4 $23.3 $14.7 $23.5 $29.9 $19.2 19.1
EBITDA............. 5.5 2.4 7.0 5.5 5.9 2.7 7.0 9.6 4.0 3.6
Bookings(b)........ 18.1 20.0 17.6 20.0 20.5 23.9 21.4 21.1 22.7 27.2
Advance payments... 8.0 8.0 8.2 9.6 8.8 10.1 10.4 12.2 11.1 11.8
Total cash
receipts(c)...... 17.7 18.0 17.4 19.5 18.5 20.9 20.0 22.6 22.6 24.1
</TABLE>
- ---------------
(a) Fiscal 1997 includes $4.2 million of net revenues from contracts acquired
by the Company in connection with directory acquisitions.
(b) Excludes $4.2 million from contracts booked before the related directories
were acquired by the Company.
(c) Includes both advance payments and collection of accounts receivable.
Revenue Growth. Since the 1993 Acquisition, the Company's total number of
directories increased by 52, from 90 to 142, and the Company increased its total
number of accounts from nearly 70,000 to more than 93,000. Four acquisitions
completed since May 1995 expanded the Company's presence in northern California,
upstate New York, western Massachusetts, southern Indiana, Kentucky and
Tennessee and accounted for the addition of 24 directories and approximately
$9.2 million of net revenues in fiscal 1997. In addition, the Company started 26
new directories since fiscal 1993 which accounted for $5.2 million of net
revenues in fiscal 1997. Excluding these new and acquired directories, the
Company's net revenues grew 9.0% in fiscal 1995, 7.2% in fiscal 1996 and 6.7% in
fiscal 1997 with average revenue per account increasing from $919 in fiscal 1995
to $959 in fiscal 1996 and $1,017 in fiscal 1997. The Company's overall revenue
renewal and account retention rates have averaged 86% and 76%, respectively,
over the last five years.
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
35
<PAGE> 41
executives, has been 9.7% through the seven months ended November 30, 1997
versus the same period in 1996. Through November 30, 1997, the Company has
recognized net revenues of $42.8 million and has account bookings of $39.9
million for directories scheduled but not yet published in fiscal 1998, compared
to $42.0 million of net revenues and $37.4 million of bookings recognized
through November 30, 1996. To facilitate future growth, the Company increased
the size of its sales force by approximately 12.0%, increasing the number of
account executives from 400 as of November 30, 1996 to 448 as of November 30,
1997. Average bookings per week has grown from approximately $1.6 million for
the 12-month period ended November 30, 1996 to $1.8 million for the 12-month
period ended November 30, 1997, an increase of approximately 12.5%.
Cost of Revenues. The Company's principal operating costs are production,
paper and printing. Total operating costs represented 21.3% of net revenues in
fiscal 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 fiscal 1995, the Company's
constant focus on process improvement and increased productivity has enabled it
to minimize additional production and administrative costs while increasing the
number of its directories. Despite the addition of 52 directories and an
approximately 34% increase in the total number of accounts since fiscal 1993,
improved production and administrative processing has enabled the Company to
reduce total non-sales staffing from 214 in fiscal 1993 to 148 in fiscal 1997
and to improve the proportion of account executives to total employees from
43.1% in fiscal 1993 to 64.3% in fiscal 1997.
The Company's principal raw material is paper. The Company used
approximately 16.4 million and 17.6 million pounds of directory grade paper in
fiscal 1996 and 1997, respectively, resulting in a total cost of paper during
such periods of approximately $6.0 million and $5.8 million, respectively. 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 the Company in fiscal 1997 were $1.1
million. 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 the Company's sales force. As the Company continues to increase
the number of directories and to expand its total customer base, the number of
account executives required to complete the annual selling cycle grows
accordingly. The Company's ability to complete selling each directory within a
prescribed time frame depends on account executive staffing levels and
productivity. Historically, the Company has experienced a high turnover rate
among its account executives, particularly among new hires, and therefore
continues to invest in recruiting and training account executives to build the
size of its sales force and to continue to grow revenue. The number of account
executives has grown from 296 at the end of fiscal 1995 to 433 at the end of
fiscal 1997 and 448 as of November 30, 1997. However, as a result of a
significantly increased percentage of revenue attributable to new accounts,
revenue per account executive has decreased from $236,000 in fiscal 1995 to
$211,000 in fiscal 1997. Revenue per account executive has decreased because the
selling time required to develop a new account typically exceeds the time
required to service a renewal account and new accounts typically commit to
smaller advertising programs than do established renewal accounts. Although the
account renewal rate is typically lower for newer accounts than for established
accounts, as new accounts renew and mature, the net revenues from such accounts
generally increase, while the cost of revenues for such accounts decreases.
Direct sales expense accounted for approximately 19% of net revenues in fiscal
1997, 18% of net revenues in fiscal 1996 and 17% of net revenues in fiscal 1995.
Cash Flow Management. The Company has instituted several policies to
accelerate customer payments including (i) requiring customers to make minimum
deposits on their annual purchase at the time of contract signing, (ii)
requiring customers with small advertising purchases to pay 100% at the time of
contract signing, (iii) offering a cash discount to customers who pay 100% at
the time of contract signing, (iv) providing commission incentives to account
executives to collect higher customer deposits earlier in the sales process, (v)
shortening customer payment terms from 12 months to eight months or less, and
(vi) requiring new customers to begin payments immediately after contract
signing rather than waiting for the directory to be
36
<PAGE> 42
distributed. As a result of these initiatives, advance payments received prior
to directory publication as a percentage of net revenues has increased from
26.2% in fiscal 1993 to 45.1% in fiscal 1997.
Although the Company generally collects an advance payment from all
advertisers, credit is extended based upon the size of the advertising program
and customer collection history. While the Company's accounts receivable are not
subject to any concentrated credit risk, credit losses represent a cost of doing
business due to the nature of the Company's 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 9.2%, 9.1% and
9.8% of net revenues for fiscal years 1995, 1996 and 1997, respectively.
Management regularly reviews actual write-offs of accounts receivable as
compared to the reserve estimates made at the time individual directories are
published. During fiscal 1997, the Company's provision for bad debt included
approximately $600,000 more than management expects to write-off with respect to
fiscal 1997 directories. This addition was made to offset lower realized
collections with respect to the fiscal 1995 directories.
Recapitalization Accounting and Tax Effects. The Company believes the
Recapitalization qualifies for recapitalization accounting treatment, pursuant
to which the Company has incurred substantial negative net worth. For tax
purposes the Company's basis in its assets is increased to approximately $225
million. This step-up in the basis of its assets will increase the Company's
amortization expense for tax purposes by approximately $15 million per year over
the next 15 years. Under current federal tax laws, Holdings' partners, not
Holdings, pay federal income taxes with respect to Holdings' net income.
RESULTS OF OPERATIONS
The following table summarizes the Company's historical results of
operations as a percentage of net revenues for the fiscal years ended April 30,
1995, 1996 and 1997 and for the six month periods ended October 31, 1996 and
1997:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED APRIL 30, ENDED OCTOBER 31,
------------------------- ------------------
1995 1996 1997 1996 1997
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net revenues............................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues........................... 24.3 23.4 21.3 23.6 24.0
----- ----- ----- ----- -----
Gross profit............................... 75.7 76.6 78.7 76.4 76.0
Selling and marketing...................... 39.6 38.5 40.1 41.8 44.7
General and administrative................. 19.8 19.4 18.4 20.7 35.1
----- ----- ----- ----- -----
Income (loss) from operations.............. 16.3% 18.7% 20.2% 13.9% (3.8)%
===== ===== ===== ===== =====
EBITDA..................................... 24.3% 26.2% 27.6% 22.6% 19.8%
</TABLE>
SIX MONTHS ENDED OCTOBER 31, 1997 COMPARED TO SIX MONTHS ENDED OCTOBER 31, 1996
The Company's financial results were affected by changes in the publishing
schedule during the first six months of fiscal 1998 compared to the same period
in fiscal 1997, resulting in differences in the number and mix of directories
published. As a result, interim results are not indicative of results that may
be expected for the entire year, as the impact of changes in the Company's
publishing schedule is diminished over longer reporting periods.
On October 1, 1997 the Company consummated the Recapitalization, the
effects of which are included in the financial results of the six month period
ending October 31, 1997.
37
<PAGE> 43
Net revenues increased $204,000, from $38.1 million for the first six
months of fiscal 1997 to $38.3 million during the first six months of fiscal
1998. The Company published 57 directories during the first six months of fiscal
1998 and 49 directories during the first six months of fiscal 1997. The increase
in net revenue consisted of $2.0 million from year to year growth of the same 43
directories published during both periods, $0.6 million from four new
directories and $3.6 million from directories for which the publication date
moved into the period offset by $6.0 million from directories for which the
publication date moved out of the period.
Same book revenue growth for the 43 directories published in both periods
was 6.1% and the average revenue per account was 6.4% higher in the first six
months of fiscal 1998 than in the first six months of fiscal 1997.
Cost of revenues for the first six months of fiscal 1998 increased $176,000
from $9.0 million to $9.2 million for the same period in fiscal 1997, primarily
due to changes in the mix of publications. Cost of revenues for the same 43
directories published in both periods decreased by $426,000, from 20.3% of
revenue to 17.9% and was attributable to a reduction in printing and
distribution expenses.
Gross profit for the six months ended October 31, 1997 remained flat at
$29.1 million compared to the same period in fiscal 1997. Timing changes led to
the publication during the first six months of fiscal 1998 of more directories
with lower profit contributions than those published during the same period in
fiscal 1997, the effect of which was partially offset by an increase in gross
profit of $2.2 million, or 9.2%, for the same 43 directories published in both
periods and $266,000 of gross profit associated with four new directories. Gross
margin decreased slightly from 76.4% during the first six months of fiscal 1997
to 76.0% during the same period in fiscal 1998.
Selling and marketing expense increased $1.2 million from $15.9 million for
the first six months of fiscal 1997 to $17.1 million for the same period in
fiscal 1998. This increase in selling and marketing costs was attributable to
increased selling costs of $0.7 million for the same 43 directories published in
both periods, $0.4 million for the four new directories and $0.1 million from an
increase in sales management costs. The provision for bad debt as a percentage
of net revenues increased from 8.7% to 9.1% due to the change in the mix of
directories published. Selling and marketing expense as a percentage of net
revenues increased from 41.8% during the first six months of fiscal 1997 to
44.7% during the same period in fiscal 1998 due to an increase in the number of
sales representatives selling advertising for the same 43 books and higher
start-up selling costs for the four new directories.
General and administrative expense increased $5.5 million from $7.9 million
in the first six months of fiscal 1997 to $13.4 million in the same period of
fiscal 1998 as a result of a contribution to the Equity Compensation Plan of
$5.5 million made on October 1, 1997 in connection with the Recapitalization.
There were no such contributions made in the first six months of fiscal 1997.
General and administrative expenses as a percentage of net revenues increased
from 20.7% for the first six months of fiscal 1997 to 35.1% during the same
period in fiscal 1998.
As a result of the above factors, income (loss) from operations decreased
$6.8 million, from $5.3 million for the first six months of fiscal 1997 to
($1.5) million for the same period in fiscal 1998. Income (loss) from operations
as a percentage of net revenues decreased from 13.9% during the first six months
of fiscal 1997 to (3.8%) during the same period of fiscal 1998.
The foregoing factors, exclusive of the contributions to the Equity
Compensation Plan, caused a decrease in EBITDA of $1.0 million from $8.6 million
for the first six months of fiscal 1997 to $7.6 million for the same period in
fiscal 1998. EBITDA margin decreased from 22.6% during the first six months of
fiscal 1997 to 19.8% during the same period in fiscal 1998.
Depreciation and amortization increased $152,000 from $3.1 million for the
first six months of fiscal 1997 to $3.3 million in fiscal 1998.
Interest expense increased $304,000 from $4.0 million for the first six
months of fiscal 1997 to $4.3 million in fiscal 1998.
38
<PAGE> 44
Income (loss) before extraordinary item decreased $7.2 million from $1.3
million in the first six months of fiscal 1997 to ($5.9) million in fiscal 1998.
Extraordinary item charges of $1.4 million in the six month period ended
October 31, 1997 were in connection with the Recapitalization and consisted of
write-off of unamortized debt issuance costs related to the repayment of debt
prior to maturity.
YEAR ENDED APRIL 30, 1997 COMPARED TO YEAR ENDED APRIL 30, 1996
Net revenues increased $13.7 million, or 17.6%, from $77.7 million in
fiscal 1996 to $91.4 million in fiscal 1997. The Company published 128
directories in fiscal 1997 as compared to 118 directories in fiscal 1996. The
net revenue growth was due to (i) $9.5 million from 21 new directories published
in fiscal 1997, (ii) an increase in net revenues of $5.6 million in the same 106
directories published in both periods, and (iii) $2.0 million from the second
publication of the Tyler, Texas directory during fiscal 1997, offset by $3.4
million of net revenues associated with 12 directories published in fiscal 1996
but not in fiscal 1997.
Same book revenue growth for the 106 directories published in both periods
was 7.8%, and was the result of 74.2% of accounts representing 85.3% of the
fiscal 1996 net revenues renewing their advertising program in fiscal 1997, with
new accounts contributing to the balance of the growth. In addition, the average
revenue per account was 4.8% higher in fiscal 1997 than in fiscal 1996.
Cost of revenues increased $1.3 million, or 7.1%, from $18.2 million in
fiscal 1996 to $19.5 million in fiscal 1997. The increase was the result of (i)
$2.7 million of costs associated with 21 new directories published in fiscal
1997 and (ii) $0.5 million of additional production and distribution overhead
costs, offset by (a) $1.0 million of lower costs for the same 106 directories
published in both fiscal years and (b) $0.9 million of costs associated with 12
directories published during fiscal 1996, but not in fiscal 1997. For the same
106 directories that were published in both fiscal years, cost of revenues as a
percentage of net revenues improved from 23.4% in fiscal 1996 to 21.3% in fiscal
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 fiscal 1996 to $71.9 million in fiscal 1997. Gross
margin increased from 76.6% in fiscal 1996 to 78.7% in fiscal 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 fiscal 1996 to $36.6 million in fiscal 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
expected on fiscal 1995 directories. Selling and marketing expense as a
percentage of net revenues increased from 38.5% in fiscal 1996 to 40.1% in
fiscal 1997.
General and administrative expense increased $1.7 million, or 11.6%, from
$15.1 million in fiscal 1996 to $16.8 million in fiscal 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 fiscal 1996 to
18.4% in fiscal 1997.
As a result of the above factors, income from operations increased $3.9
million, or 26.9%, from $14.5 million in fiscal 1996 to $18.5 million in fiscal
1997. Income from operations as a percentage of net revenues increased from
18.7% in fiscal 1996 to 20.2% in fiscal 1997.
The foregoing factors caused an increase in EBITDA of $4.8 million, or
23.5%, from $20.4 million in fiscal 1996 to $25.2 million in fiscal 1997. EBITDA
margin increased from 26.2% in fiscal 1996 to 27.6% in fiscal 1997.
Depreciation and amortization expense increased $1.7 million, or 37.2%,
from $4.7 million in fiscal 1996 to $6.4 million in fiscal 1997.
Interest expense increased $1.2 million, or 17.9%, from $6.6 million in
fiscal 1996 to $7.8 million in fiscal 1997.
39
<PAGE> 45
Income before extraordinary item increased $2.4 million, or 29.0%, from
$8.3 million in fiscal 1996 to $10.7 million in fiscal 1997.
YEAR ENDED APRIL 30, 1996 COMPARED TO YEAR ENDED APRIL 30, 1995
Net revenues increased $7.9 million, or 11.3%, from $69.8 million in fiscal
1995 to $77.7 million in fiscal 1996. The Company published 118 directories in
fiscal 1996 as compared to 106 directories in fiscal 1995. The growth in net
revenues was the result of (i) $2.7 million from the addition of 15 new
directories, (ii) $5.4 million of increased net revenues from the same 103
directories published in both periods, partially offset by $209,000 from the
discontinuation of three Oklahoma directories.
Same book revenue growth for the 103 directories published in both periods
was 7.8%, and was the result of 76.3% of accounts accounting for 87.5% of the
fiscal 1995 net revenues renewing their advertising program in fiscal 1996, with
new accounts contributing to the balance of the growth. In addition, the average
revenue per account was 4.0% higher in fiscal 1996 than in fiscal 1995.
Cost of revenues increased $1.2 million, or 7.3%, from $17.0 million in
fiscal 1995 to $18.2 million in fiscal 1996. The increase was the result of $1.2
million for new directories, $0.5 million from an increase in paper prices and
distribution costs for the same 103 directories published in both fiscal 1996
and 1995, offset by $323,000 associated with the discontinuation of three
Oklahoma directories and $200,000 of production cost savings. For the same 103
directories that were published in both fiscal years, cost of revenues as a
percentage of net revenues improved from 19.4% in fiscal 1995 to 18.6% to fiscal
1996, primarily due to a decrease in printing and production costs and license
fees.
As a result of the above factors, gross profit increased $6.6 million, or
12.6%, from $52.9 million in fiscal 1995 to $59.5 million in fiscal 1996. Gross
profit margin grew from 75.7% in fiscal 1995 to 76.6% in fiscal 1996, primarily
due to improved margins on the same 103 directories published during both fiscal
1995 and 1996, new directories and from improvements in production processing.
Selling and marketing expense increased $2.2 million, or 8.1%, from $27.7
million in fiscal 1995 to $29.9 million in fiscal 1996. The bulk of this
increase was due to increased sales staffing for the 15 new directories
introduced in 1996 as well as the same 103 directories published during both
fiscal years. Selling and marketing expense as a percentage of net revenues
decreased from 39.6% in fiscal 1995 to 38.5% in fiscal 1996.
General and administrative expense increased $1.3 million, or 9.2%, from
$13.8 million in fiscal 1995 to $15.1 million in fiscal 1996. This increase was
due to higher salaries and benefits, additional costs associated with travel and
recruiting and an increase in incentives paid for the collection of advance
payments. General and administrative expense as a percentage of net revenues
decreased from 19.8% in fiscal 1995 to 19.4% in fiscal 1996.
As a result of the above factors, income from operations increased $3.1
million, or 27.4%, from $11.4 million in fiscal 1995 to $14.5 million in fiscal
1996. Income from operations as a percentage of net revenues increased from
16.3% in fiscal 1995 to 18.7% in fiscal 1996.
The foregoing factors caused an increase in EBITDA of $3.4 million, or
20.0%, from $17.0 million in fiscal 1995 to $20.4 million in fiscal 1996. EBITDA
margin increased from 24.3% in fiscal 1995 to 26.2% in fiscal 1996.
Depreciation and amortization expense increased $98,000, or 2.1%, from $4.6
million in fiscal 1995 to $4.7 million in fiscal 1996.
Interest expense increased $2.3 million, or 52.6%, from $4.3 million in
fiscal 1995 to $6.6 million in fiscal 1996. This increase in interest expense
was due to a refinancing of the Partnership that was consummated in November
1995.
Income before extraordinary item increased $0.7 million, or 9.9%, from $7.5
million in fiscal 1995 to $8.3 million in fiscal 1996 due to Equity Compensation
Plan expenses.
40
<PAGE> 46
LIQUIDITY AND CAPITAL RESOURCES
Capital Expenditures. The Company's operations are not capital intensive.
Capital expenditures were $496,000, $484,000 and $1.0 million in fiscal 1995,
1996 and 1997, respectively. Capital spending is largely for computer hardware
and software upgrades for the maintenance of its production and operating
systems. The increase of $0.5 million in fiscal 1997 was related to the purchase
of graphics workstations that will allow the Company to produce color
advertisements in-house and avoid the high cost for color processing charged by
third-party vendors. As of the end of fiscal 1997 and October 31, 1997, the
Company did not have any material commitments for capital expenditures.
Working Capital. Through its focus on increasing customer advance payments
and the acceleration of cash receipts, the Company has been able to reduce
working capital requirements despite strong revenue growth. Several factors have
contributed to this reduction, including (i) programs designed to accelerate
advance payments, (ii) shortening billing options for credit payments, (iii)
improved production and administrative processing to reduce non-sales staffing
and the elimination of costly third party vended services, and (iv) consistent
earnings growth. Net accounts receivable, which represents the largest component
of working capital, increased to $23.3 million in fiscal 1997 compared to $17.5
million in fiscal 1993. This increase of $5.7 million, or 32.8%, compares
favorably to the net revenue growth of $36.5 million, or 66.4%, over the same
period. In addition, advance payments as a percentage of net revenues increased
from 26.2% in fiscal 1993 to 45.1% in fiscal 1997.
Liquidity. Holdings is a holding company which has no significant assets
other than its investments in its direct and indirect subsidiaries, and
therefore, its ability to make payments with respect to the Discount Notes is
dependent upon the receipt of dividends or debt service in respect of
intercompany indebtedness from its direct and indirect subsidiaries. The
Company's principal sources of funds following the Initial Offerings and Asset
Drop-Down are anticipated to be cash flows from operating activities and
borrowings under the Revolving Credit Facility. See "Description of Senior
Credit Facility." Based upon the successful implementation of management's
business and operating strategy, the Company believes that these funds will
provide it with sufficient liquidity and capital resources to meet current and
future financial obligations, including the payment of principal and interest on
the Notes, as well as to provide funds for the Company's working capital,
capital expenditures and other needs. The Company's future operating performance
and ability to service or refinance the Notes and to repay, extend or refinance
the Senior Credit Facility will be subject to future economic conditions and to
financial, businesses and other factors, many of which are beyond the Company's
control. There can be no assurance that such sources of funds will be adequate
and that the Company will not require additional capital from borrowings or
securities offerings to satisfy such requirements. In addition, the Company may
require additional capital to fund future acquisitions and there can be no
assurance that such capital will be available. See "Risk Factors."
The Revolving Credit Facility and the indenture governing the Notes
significantly restrict the distribution of funds by TransWestern and the other
subsidiaries of Holdings. See "Description of Certain Indebtedness" and
"Description of the Notes." There can be no assurance that the agreements
governing indebtedness of Holdings' subsidiaries will permit such subsidiaries
to distribute funds to Holdings in amounts sufficient to pay the Accreted Value
or principal or interest on the Discount Notes when the same becomes due
(whether at maturity, upon acceleration or redemption or otherwise). The
Discount Notes will be effectively subordinated in right of payment to all
existing and future claims of creditors of subsidiaries of Holdings, including
the lenders under the Senior Credit Facility, the holders of the Notes and trade
creditors. After giving pro forma effect to the Initial Offerings and the Asset
Drop-Down as of October 31, 1997, the subsidiaries of Holdings would have had
approximately $185.0 million aggregate principal amount of indebtedness
outstanding. In addition, such subsidiaries would have had $40.0 million of
additional borrowing availability under the Senior Credit Facility.
Upon the occurrence of a Change of Control, Holdings will be required to
make an offer for cash to purchase the Discount Notes at a purchase price equal
to (i) 101% of the Accreted Value thereof, if the repurchase date is on or prior
to November 15, 2002 or (ii) 101% of the principal amount at maturity thereof,
together with accrued and unpaid interest thereon, if any, to the repurchase
date, if such date is after
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<PAGE> 47
November 15, 2002. Certain events involving a Change of Control may result in an
event of default under the Senior Credit Facility, the Notes or other
indebtedness of Holdings that may be incurred in the future. Moreover, the
exercise by the holders of the Discount Notes of their right to require Holdings
to purchase the Discount Notes may cause an event of default under the Senior
Credit Facility, the Notes or such other indebtedness, even if the Change of
Control does not. Finally, there can be no assurance that Holdings will have the
financial resources necessary to purchase the Discount Notes upon a Change of
Control. See "Risk Factors -- Limitations on Change of Control" and "Description
of the Discount Notes -- Change of Control Offer."
FINANCING ACTIVITIES RELATING TO THE TRANSACTIONS
Holdings applied the net proceeds of the Initial Discount Note Offering to
redeem approximately $31.3 million of the Equity Investment. However, this
redemption by Holdings did not reduce the equity capitalization of TransWestern.
See "The Transactions" and "Use of Proceeds."
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<PAGE> 48
BUSINESS
The Company is one of the largest independent yellow pages directory
publishers in the United States. The Company's 142 directories serve communities
in the 12 states of California, Connecticut, Indiana, Kansas, Kentucky,
Louisiana, Massachusetts, New York, Ohio, Oklahoma, Tennessee and Texas. The
Company's presence in its markets is well-established; more than 70% of its
directories have been in publication for more than 10 years. The Company's
revenues are derived from the sale of advertising to a diversified base of over
93,000 accounts consisting primarily of small to medium-sized local businesses.
Yellow pages are an important advertising medium for local businesses due to
their low advertising cost, widespread distribution, lasting presence, and high
consumer usage. The strength of the Company's directories is evidenced by high
revenue renewal and account retention rates, which have averaged 86% and 76%,
respectively, during the last five years.
Since the 1993 Acquisition, the Company's 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, the Company increased average revenue per account
from $789 to $981 and increased its number of directories from 90 to 142,
driving the Company's net revenues from $54.9 million to $91.4 million. The
Company achieved this growth without significantly increasing working capital or
capital expenditures, while leveraging its existing cost structure and creating
a platform for future growth. As a result, the Company's EBITDA increased from
$3.2 million to $25.2 million and its EBITDA margin increased from 5.9% to
27.6%.
INDUSTRY OVERVIEW
The United States yellow pages directory industry generated revenues of
approximately $10.8 billion in 1996, with circulation of approximately 316
million directories. Yellow pages directories are published by both telephone
utilities and, in many markets, independent directory publishers, such as the
Company, which are not affiliated with the telephone service provider. More than
250 independent directory publishers circulated over 77 million directories and
generated an estimated $677 million in revenues during 1996. Between 1991 and
1996, while industry-wide yellow pages advertising revenues grew at a compound
annual rate of 3.5%, advertising revenues of independent directories grew at a
compound annual rate of approximately 6.9%. Concurrent with the overall
expansion of the yellow pages advertising market, independent directory
publishers have steadily increased their market share from 5.5% in 1991 to 6.5%
in 1996. 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 6.0% of total
advertising spending in 1996 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: (i) market
development or image advertising (e.g., television, radio and newspapers), (ii)
direct response sales promotion (e.g., direct mail), and (iii) point of purchase
or directional advertising (e.g., 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 63% of 1996 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
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<PAGE> 49
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.
Independent yellow pages publishers generally compete in rural and suburban
markets and not 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 with the
telephone utility's directory.
OPERATING STRENGTHS
The Company believes that it benefits from the following operating
strengths:
High Revenue Stability and Account Renewal Rates. The Company's high
revenue renewal and account retention rates (averaging 86% and 76%,
respectively, during the last five fiscal years) 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. The Company's 142
directories serve communities in 12 states across the country. No single
directory accounted for more than 5% of net revenues, and the top five
directories accounted for less than 19% of net revenues in fiscal 1997. The
Company's 93,000 accounts represent a wide variety of service, retailing and
other businesses and its top 1,000 accounts represented less than 12% of the
Company's fiscal 1997 net revenues. This high level of diversification reduces
the Company's exposure to adverse regional economic conditions and enhances
revenue and cash flow stability.
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<PAGE> 50
Favorable Cash Flow Characteristics. The Company's favorable cash flow
characteristics result from its stable revenues, high level of advance payments,
predictable cost structure, low working capital investment and minimal capital
expenditure needs. During fiscal 1997, the Company collected approximately 45%
of its net revenues prior to publication of its directories, up from
approximately 26% in fiscal 1993. In addition to collecting higher levels of
advance payments, the Company shortened customer payment terms and reduced
credit exposure to its smallest customers. Further, the Company's capital
expenditures have averaged less than $750,000 per year over the last five fiscal
years.
Proven, Experienced Management. The Company has a proven senior management
team with extensive experience in the yellow pages business. Since the 1993
Acquisition, management has demonstrated the ability to grow the Company
profitably while the Company has had significant financial leverage.
Collectively, management owns approximately 9% of Holdings and also participates
in a substantial equity-based incentive program tied to the successful long-term
performance of the Company.
BUSINESS STRATEGY
The Company's strategy is to capitalize on its operating structure,
consisting of a decentralized sales force and centralized production and
administrative operations, in order to grow its 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, the Company's 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 the Company's business strategy are as
follows:
Grow Revenues from Existing Directories. Management believes there are
opportunities to increase revenues from both existing advertisers and new
accounts. Specific initiatives include (i) cross-selling advertisers into
multiple directories, (ii) encouraging customers to purchase larger
advertisements or advertisements under multiple headings within the same
directory, (iii) introducing new premium advertising features, including color,
at premium prices, and (iv) offering Internet directory listings.
The Company also utilizes its proprietary database to increase its customer
penetration by systematically targeting potential customers and converting them
into new advertisers. To support this strategy, the Company has expanded its
sales force from 223 employees at the end of fiscal 1993 to 448 as of November
30, 1997, representing an increase of approximately 101%. Management believes
that new account growth drives long term profitability and improves the quality
of its directories.
Improve Operating Efficiency. The Company works to continuously improve
its production processes and systems in order to increase its operating
efficiency. Management has 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. The Company continues to focus on increasing the
amount of cash it collects from advertisers prior to the publication of each
directory. Increasing advance payments and shortening customer payment terms (i)
reduces the Company's investment in working capital, (ii) decreases collection
and bad debt costs and (iii) permits the Company to finance the introduction of
new directories from internally generated funds.
New Directory Growth. The Company's strategy includes growth through new
directory start-ups and selective acquisitions. The Company minimizes start-up
risks by launching new directories in areas contiguous to the Company's existing
markets where the Company has existing sales infrastructure and local
recognition and where existing customers can provide an initial revenue base.
Since the 1993 Acquisition, the Company has introduced 26 new "fill-in"
directory start-ups in California, Connecticut, Indiana, Louisiana, New York,
Oklahoma and Texas.
In addition, the Company has acquired 24 directories in California,
Indiana, Kentucky, Massachusetts, New York and Tennessee since the 1993
Acquisition. Although the Company has no current acquisition
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<PAGE> 51
commitments, management continuously reviews acquisition opportunities and
believes it can successfully acquire and integrate additional directories into
its existing production and administrative infrastructure.
MARKETS SERVED
The Company publishes 142 yellow pages directories serving distinct
communities in 12 states, including California, Connecticut, Indiana, Kansas,
Kentucky, Louisiana, Massachusetts, New York, Ohio, Oklahoma, Tennessee and
Texas. The Company's directories are generally well-established in their local
communities and are clustered in contiguous geographic areas to create a strong
local market presence and to achieve selling efficiencies.
The Company's net revenues are not materially concentrated in any single
directory, industry, geographic region or customer. In fiscal 1997, the Company
served approximately 93,000 active accounts with its top 1,000 accounts
representing less than 12% of net revenues and no single directory accounting
for more than 5% of net revenues. Approximately 95% of the Company's net
revenues are derived from local accounts with the remaining 5% coming from
national companies advertising locally. The Company's high level of
diversification reduces exposure to adverse regional economic conditions and
provides additional stability in operating results. During fiscal 1997, the
Company published 128 directories with a total circulation of approximately 7.0
million copies. The Company's geographic diversity is evidenced in the table
below:
<TABLE>
<CAPTION>
NUMBER OF DIRECTORIES NET REVENUES
--------------------------------------------- ---------------------------------------------
REGION F'93 F'94 F'95 F'96 F'97 F'93 F'94 F'95 F'96 F'97
- ------- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Northeast.. 34 37 39 42 45 $23.9 $26.2 $29.2 $33.1 $38.0
Central... 25 26 28 35 42 9.9 11.2 12.5 14.8 19.7
Southwest.. 16 19 22 23 23 13.1 16.0 18.2 19.7 22.0
West.... 15 15 17 18 18 8.0 8.8 9.9 10.1 11.7
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total.. 90 97 106 118 128 $54.9 $62.2 $69.8 $77.7 $91.4
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
PRODUCTS
The Company's yellow pages directories are designed to meet the
informational needs of consumers and the advertising needs of local businesses.
Each directory consists of (i) a yellow pages section containing display
advertisements and a listing of businesses by various headings, (ii) a white
pages section listing the names, addresses, and phone numbers of residences and
businesses in the area served, (iii) a community information section providing
reference information about general community services such as listings for
government offices, schools and hospitals, and (iv) 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. The Company
is also currently in the process of upgrading its production capacity to include
options such as full color advertisements which generate significantly higher
advertising rates. This diversity of product offerings enables the Company to
create customized advertising programs that are responsive to specific customer
needs and financial resources.
The Company's directories are an efficient source of information for
consumers. With over 2,000 headings in its directories and an expansive list of
businesses by heading in each local market, the Company's directories are both
comprehensive and conveniently organized. The Company's management believes that
the completeness and accuracy of the data in a directory is essential to
consumer acceptance.
Although the Company remains primarily focused on its printed directories,
it has recently initiated an Internet directory service. The Company has entered
into a strategic alliance with InfoSpace to offer electronic directory services
in each of its local markets. Under this strategic alliance, InfoSpace is
responsible for the technical aspects of the alliance and the Company is
providing local content and selling advertisement
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<PAGE> 52
space in this electronic directory. This arrangement enables the Company to
avoid technical risks which it is not presently staffed to manage and permits
the Company to participate in any opportunities that develop through the
Internet. Management believes that the Company's experience, reputation and
account relationships within its local markets will help it successfully market
this service. Although the growing use of the Internet has not had any
appreciable impact on the Company to date, management has not yet determined
how, if at all, the Internet will impact its performance, prospects or
operations. The Company cross promotes its Internet service and its printed
directories. The Company's web site is at http://www.transwesternpub.com.
SALES AND MARKETING
Yellow pages marketing is a direct sales business which requires both
servicing existing accounts and developing new customers. Repeat customers
comprise the Company's core account base and a number of these customers have
advertised in the Company's directories for many years. On average, since fiscal
1993, accounts representing 86% of the prior year's net revenues for each
directory have renewed their advertising program in the current edition of each
directory. Management believes that this high revenue renewal rate reflects the
importance of the Company's directories to its 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.
The Company also builds on its 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. The Company has developed a proprietary database of high potential
customers based on each individual customer's yellow page advertising
expenditures and focuses its sales resources on those potential customers. In
support of this strategy, the Company has expanded its sales force from 223
employees at the end of fiscal 1993 to 448 employees as of November 30, 1997,
representing an increase of approximately 101%. Management has observed a direct
correlation between adding new sales force employees and revenue growth.
The Company employs seven regional vice presidents and 49 area and district
sales managers who, together, are responsible for supervising the activities of
the account executives. The Company's 448 account executives generate virtually
all of the Company's revenues and are responsible for servicing existing
advertising accounts and developing new accounts within their assigned service
areas.
The Company has well-established practices and procedures to manage the
productivity and effectiveness of its 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, 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
November 30, 1997, the Company employed approximately 690 people, 536 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 six 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
The Company develops 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
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<PAGE> 53
planning guide is incorporated into the Company's annual production schedule and
serves as the foundation for the Company's annual budgeting process. Although
the Company views its 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 November 30, 1997,
the Company had a production staff of approximately 90 full-time employees.
The 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.
Prior to fiscal 1995, the Company purchased specialized yellow pages data
processing services from a third-party provider to supplement its own internal
information processing and management functions. In fiscal 1995, the Company
began eliminating a substantial portion of third-party information processing
services by internally generating leads and processing white pages and yellow
pages with its own management information systems.
Major production initiatives since fiscal 1994 which have resulted in
significant savings, include (i) the conversion of yellow pages processing from
a third-party vendor to an internal process, (ii) the internal production of all
in-column and display advertising graphics and elimination of all third-party
vendor graphic costs, (iii) internal processing of sales leads and elimination
of third-party lead processing costs, (iv) the re-negotiation and reduction of
third-party charges for keying data, (v) the internal typesetting of pages, (vi)
the internal production of community pages, and (vii) direct production cost
reductions for white pages processing and cover graphics.
After the in-house production process is complete, the directories are then
sent to outside vendors to be printed. The Company does not print any of its
directories but instead contracts with a limited number of printers to print and
bind its directories. The Company contracts with two outside vendors to
distribute its directories to each business and residence in its markets.
RAW MATERIALS
The Company's principal raw material is paper. The Company used
approximately 17.6 and 16.4 million pounds of directory grade paper in its
fiscal years ended April 30, 1997 and 1996, respectively, resulting in a total
cost of paper during such periods of approximately $5.8 million and $6.0
million, respectively. The Company does not purchase paper directly from the
paper mills; instead, the Company's printers purchase the paper on behalf of the
Company at prices negotiated by the Company. The Company recently entered into a
pricing agreement with the mill that supplies the Company's primary printer
pursuant to which the mill agreed to a set price through the end of December
1997.
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, the Company competes 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
The Company has registered one trademark and one service mark used in its
business. In addition, each one of the Company's publications is protected under
Federal copyright laws. Telephone utilities are required to license directory
listings of names and telephone numbers that the Company then licenses for a set
fee per name for use in its white pages listings. Total licensing fees paid by
the Company were $1.1 million in fiscal 1997. In addition, the Company believes
that the phrase "yellow pages" and the walking fingers logo are in the
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<PAGE> 54
public domain in the United States. Otherwise, the Company believes that it owns
or licenses the intellectual property rights necessary to conduct its business.
PROPERTIES
The Company houses its corporate, administrative and production staff at
its headquarters located at 8344 Clairemont Mesa Boulevard, San Diego,
California. Information relating to the Company's corporate headquarters and
other regional sales offices is set forth in the following table:
<TABLE>
<CAPTION>
SQUARE TERM
LOCATION ADDRESS FOOTAGE EXPIRATION DESCRIPTION OF USE
- -------------------------- -------------------------------- ------- ---------- ------------------
<S> <C> <C> <C> <C>
San Diego, CA............. 8344 Clairemont Mesa Boulevard 35,824 10/31/03 Corporate Office/
Sales/Production
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, Suite 1 7,565 3/31/99 Sales Office
Bedford, TX............... 4001 Airport Fwy., Suite 230 5,697 7/31/00 Sales Office
Louisville, KY............ 2300 Envoy Circle, #2301 5,600 3/31/02 Sales Office
Highland, NY.............. 7-9 Cummings Lane 5,000 4/30/99 Sales Office
Stamford, CT.............. 333 Ludlow Street 4,895 8/31/02 Sales Office
Nashville, TN............. 2525 Perimeter Drive, Suite 105 3,637 5/31/01 Sales Office
Oklahoma City, OK......... 4901 W. Reno, Suite 800 2,931 6/30/02 Sales Office
</TABLE>
The Company leases 24 other sales offices for more remote sales areas and
periodically leases small facilities for temporary storage of directories.
EMPLOYEES
As of November 30, 1997, the Company employed approximately 690 full-time
employees, none of whom are members of a union. The Company believes that it has
good relations with its employees.
LEGAL PROCEEDINGS
The Company is a party to various litigation matters incidental to the
conduct of its business. Management does not believe that the outcome of any of
the matters in which it is currently involved will have a material adverse
effect on the financial condition or results of operations of the Company.
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<PAGE> 55
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information (ages as of November 30,
1997) with respect to the persons who are members of the Board of Directors (the
"Board") of TCC or executive officers of Holdings or TransWestern. TCC controls
the policies and operations of Holdings and TransWestern. See "Limited
Partnership Agreement." THL has the ability to appoint a majority of the members
of the Board of TCC pursuant to the Investors Agreement. See "Certain
Transactions -- Investors Agreement."
<TABLE>
<CAPTION>
NAME AGE POSITION AND OFFICES
- ---------------------------------- --- -------------------------------------------------
<S> <C> <C>
Laurence H. Bloch................. 44 Chairman of the Board, Secretary and Director
Ricardo Puente.................... 44 President, Chief Executive Officer and Director
Joan M. Fiorito................... 43 Vice President, Chief Financial Officer and
Assistant Secretary
Marybeth Brennan.................. 41 Vice President - Operations
Joseph L. Wazny................... 52 Vice President - Information Services
Robert Bambace.................... 56 Regional Vice President - Sales
Richard Beck...................... 52 Regional Vice President - Sales
Michael Bynum..................... 42 Regional Vice President - Sales
Steve Cartlidge................... 47 Regional Vice President - Sales
Kim Kaznowski..................... 42 Regional Vice President - Sales
Richard Mellert................... 53 Regional Vice President - Sales
Ita Shea-Oglesby.................. 40 Regional Vice President - Sales
C. Hunter Boll.................... 42 Director
Terrence M. Mullen................ 30 Director
Christopher J. Perry.............. 42 Director
Scott A. Schoen................... 40 Director
Marcus D. Wedner.................. 34 Director
</TABLE>
Laurence H. Bloch is Chairman and Secretary of TransWestern and Holdings
and has been a Director of TCC since 1993. Prior to the Recapitalization, 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. Mr. Bloch also serves as a Director of The
Petersen Companies, Inc.
Ricardo Puente has been President of TransWestern and Holdings and a
Director of TCC since 1993 and became Chief Executive Officer as of the
Recapitalization. Previously, he held the positions of Vice President of Sales
and Controller of the TransWestern business which he joined in 1988. Before
joining US West, 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 the
Recapitalization was Vice President and Controller. Ms. Fiorito joined the
TransWestern business in 1989 as Manager, Financial Planning & Analysis and
subsequently was promoted to Controller. Prior to joining the TransWestern
business, 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> 56
Marybeth Brennan has been the Company's Vice President of Operations since
its formation in 1993. Ms. Brennan joined the TransWestern business 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.
Joseph L. Wazny has been the Vice President, Management Information Systems
of the Company 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.
Robert Bambace has been a Regional Vice President of the Company since
1993. Mr. Bambace oversees the Downstate New York Region. Mr. Bambace joined the
TransWestern business as a District Sales Manager in 1983, and was promoted to
his current position in 1993. Mr. Bambace holds a BA in Business Administration
from the State University of New York.
Richard Beck has been a Regional Vice President of the Company since 1993.
Mr. Beck oversees the Kentucky/Ohio/Indiana Region. Mr. Beck joined the
TransWestern business in 1980 in a sales position. He holds an AA in Business
Administration from the University of Kentucky.
Michael Bynum has been a Regional Vice President of the Company since 1993.
Mr. Bynum oversees the Oklahoma/Kansas/Tennessee Region. Mr. Bynum joined the
TransWestern business in 1985 as a sales associate and holds a BA in Management
from Cameron University.
Steve Cartlidge has been a Regional Vice President of the Company since
1993. Mr. Cartlidge oversees the North Texas Region. Mr. Cartlidge joined the
TransWestern business from Donnelley Publishing in 1989 as an Area Sales Manager
and shortly thereafter was promoted to District Sales Manager. Mr. Cartlidge
earned a BA from Howard Payne University.
Kim Kaznowski has been a Regional Vice President of the Company since 1993.
Ms. Kaznowski oversees the Midstate New York Region. Ms. Kaznowski joined the
TransWestern business as a Sales Associate in 1980 and became a District Sales
Manager in 1991. Ms. Kaznowski earned a BS from the University of Rhode Island.
Richard Mellert has been a Regional Vice President of the Company since
1993. Mr. Mellert oversees the Upstate New York Region. Mr. Mellert joined the
TransWestern business 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 has been a Regional Vice President of the Company since
1993. Ms. Shea-Oglesby oversees the South Texas, Louisiana Region and the
Northern California Region. Ms. Shea-Oglesby joined the TransWestern business 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. 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 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 Stanley Furniture Company, Inc., New York Restaurant
Group, Inc., Freedom Securities Corporation and Select Beverages, Inc. 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. 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 also serves as a
Director of Anchor Advanced Products, Inc. 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
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<PAGE> 57
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 Teletouch Communications. 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. 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 Anchor Advanced Products, Inc.,
First Alert, Inc., Signature Brands USA, Inc., Rayovac Corporation and Syratech
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 a 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 the TCC, Mr. Wedner is a Director of Teletouch
Communications. Mr. Wedner holds a BA from the University of California at Los
Angeles and received an MBA from Harvard Graduate School of Business
Administration.
COMPENSATION OF DIRECTORS
TransWestern is a limited liability company and Holdings is a limited
partnership, both of which are controlled by TCC. See "Limited Partnership
Agreement." The Directors of TCC will not be paid for their services, although
Directors are reimbursed for out-of-pocket expenses incurred in connection with
attending Board meetings.
COMPENSATION OF EXECUTIVE OFFICERS
The compensation of executive officers of TransWestern will be determined
by the Board of TCC. The following Summary Compensation Table includes
individual compensation information for the former Chairman and Chief Executive
Officer, the current President and Chief Executive Officer and each of the three
other most highly compensated executive officers of the Company in fiscal 1997
(collectively, the "Named Executive Officers") for services rendered in all
capacities to the Company during fiscal 1997. There were no stock options
exercised during the Company's last fiscal year nor were there any options
outstanding at the end of the Company's last fiscal year.
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<PAGE> 58
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------- ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION(a)
- ------------------------------------------------------- -------- -------- ---------------
<S> <C> <C> <C>
James D. Dunning, Jr.(b)............................... $277,709 $277,709 $20,510
Former Chairman and Chief Executive Officer
Laurence H. Bloch(c)................................... 222,167 222,167 11,998
Chairman of the Board and Secretary
Ricardo Puente......................................... 199,519 171,822 21,360
President, Chief Executive Officer(d)
Marybeth Brennan....................................... 132,698 120,030 20,405
Vice President -- Operations
Joan M. Fiorito(e)..................................... 119,460 105,649 21,049
Vice President, Chief Financial Officer and Assistant
Secretary
</TABLE>
- ---------------
(a) Includes auto allowance, long-term disability insurance, personal life
insurance, profit sharing, tax preparation and bonuses paid pursuant to the
Equity Compensation Plan.
(b) Mr. Dunning resigned as Chairman of the Board and Chief Executive Officer
upon consummation of the Recapitalization.
(c) Mr. Bloch served as Vice Chairman until consummation of the
Recapitalization, at which time he became Chairman.
(d) Mr. Puente served as President until consummation of the Recapitalization,
at which time he became President and Chief Executive Officer.
(e) Ms. Fiorito served as Vice President-Controller until consummation of the
Recapitalization, at which time she became Vice President, Chief Financial
Officer and Assistant Secretary.
EQUITY COMPENSATION ARRANGEMENTS
Holding's 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 were
issued to the Management Investors and 1,500 of which were issued to the Equity
Compensation Plan discussed below. See "Limited Partnership Agreement" and
"Certain Transactions -- Executive Agreements."
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 Messrs. Dunning,
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 will be distributed in
October 1998 to participants employed by the Company at the time the
distribution is made. The Equity Compensation Plan was terminated upon the
consummation of the Recapitalization; however, a new plan has been established
on terms substantially the same as those of the Equity Compensation Plan which
also requires that participants must be employees of the Company on the date of
any distribution. 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 fiscal 1997, distributions totaling $411,000 were paid and at April
30, 1997, there were no undistributed proceeds under the Equity Compensation
Plan.
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<PAGE> 59
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 (i) an annual
base salary of $222,167 and $199,519 ($235,500 effective May 1, 1998),
respectively (subject to annual increases based on the consumer price index) and
(ii) annual bonuses based on the achievement of certain EBITDA (as defined in
each Employment Agreement) 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 (i) 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, (ii) conduct tending to bring the
Company or any of its subsidiaries into substantial public disgrace or
disrepute, (iii) the substantial and repeated failure to perform duties as
reasonably directed by TCC or the Company, (iv) gross negligence or willful
misconduct with respect to the Company or any subsidiary, or (v) 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 (i) a reduction by the Company
of the executive's annual base salary by more than 20%, (ii) 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, (iii) 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 (iv) 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
Transactions -- Executive Agreements."
401(k) AND PROFIT SHARING PLAN
The Company has a 401(k) and profit-sharing retirement plan (the "Profit
Sharing 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 Profit Sharing Plan for the years ended April 30, 1995, 1996 and 1997
were approximately $0.6 million, $0.8 million and $0.8 million, respectively.
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<PAGE> 60
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All of TransWestern's membership interests are owned by Holdings. The
following table sets forth certain information regarding the beneficial
ownership of the equity securities of Holdings by: (i) each of the Directors of
TCC and the executive officers of TransWestern; (ii) all Directors of TCC and
executive officers of TransWestern as a group; (iii) all Management Investors as
a group and (iv) each owner of more than 5% of any class of equity securities of
the Partnership ("5% Owners"). Unless otherwise noted, the address for each
executive officer of TransWestern and the Directors of TCC is c/o TransWestern,
8344 Clairemont Mesa Boulevard, San Diego, California 92111. All of Capital's
issued and outstanding capital stock is owned by Holdings. All of Capital II's
issued and outstanding capital stock is owned by TransWestern.
<TABLE>
<CAPTION>
CLASS A
COMMON PERCENT PREFERRED PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER UNITS(A) OF CLASS UNITS OF 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 *
Marybeth Brennan(d)............................... 5,282 * 2,743 *
Joseph L. Wazny(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
(10 persons).................................... 1,070,551 84.27 555,862 84.27
All Management Investors as a group............... 115,250 9.07 59,841 9.07
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
the Preference Amount (as defined herein). The Partnership also issued
Class B Units to the Management Investors. 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. See "Limited Partnership Agreement."
(b) Does not include 800 Class B Units which are subject to vesting in equal
installments over a five year period.
(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.
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<PAGE> 61
(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 CIVC
and 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 CIVC.
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.
56
<PAGE> 62
CERTAIN TRANSACTIONS
MANAGEMENT AGREEMENT
Effective upon the Recapitalization, the Company entered into a Management
Agreement with 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.
INVESTORS AGREEMENT
Pursuant to the Recapitalization, Holdings, TCC, 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
the CIVC Parties (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.
In addition to the foregoing, the Investors Agreement (i) 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), (ii) 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, (iii) grants the New Partners certain
participation rights in connection with certain transfers made by THL, (iv)
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, (v) 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 (vi) 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, 2007 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 (i)
October 1, 2007, (ii) a Qualified Public Offering, (iii) the transfer in a
public sale of such security, (iv) with respect to equity securities of
Holdings, upon the sale of the Holdings, and (v) with respect to equity
securities of TCC, upon the sale of TCC.
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<PAGE> 63
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 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 the 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
statement at Holding's 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.
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 and all other of such Management Investor's interests in Holdings
and TCC. 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 and all other interests of such Management Investor in Holdings and TCC.
RECAPITALIZATION AGREEMENT
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.
The representations and warranties made by Holdings and the Existing Limited
Partners do not survive the Recapitalization closing date; except that no party
is prevented from bringing a claim or action against any other person for any
fraud or intentional tort committed directly by such person.
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 the
Company not to own, control, participate or engage in any yellow pages directory
publishing directory business or any business competing for the same customers
as the businesses of the Company as such businesses exist or are in process
during such period in any markets (or markets contiguous thereto) in which the
Company engages or plans to engage during such period.
James D. Dunning, Jr., the Company'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 the Company in the geographic areas in which
the Company is 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.
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<PAGE> 64
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 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 the business of the Company and TCC of which such person has
knowledge and which is not in the public domain.
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
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. As a group, the
Named Executive Officers continuing with the Company received an aggregate of
approximately $24 million in the Recapitalization and exchanged their remaining
limited partnership interests, valued at approximately $6 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 $11 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.
Affiliates of the Initial Purchasers also participated in the equity
component of the Recapitalization. FUCP received an aggregate of approximately
$178,000 in the Recapitalization and exchanged its remaining limited partnership
interests, valued at approximately $5 million in the Recapitalization, for newly
issued Preferred and Class A Units of Holdings. CIBC Merchant Fund contributed
approximately $5 million at the closing of the Recapitalization in exchange for
newly issued Preferred and Class A Units are paid approximately $87,000 to
certain of the Existing Limited Partners to purchase TCC common stock.
PAYMENTS ON TCC NOTE
Since the 1993 Acquisition, TCC loaned to the Company all amounts
distributed to TCC in connection with the periodic and special distributions
made by the Company to its partners (the "TCC Loans"). As of September 1, 1997,
the aggregate amount of principal and interest due under the TCC Loans was
$833,419. Shortly before the consummation of the Recapitalization, the Company
repaid in full the outstanding balance of all TCC Loans.
TCC used the proceeds received from the TCC Loans to (i) pay $500,000 to
First Union Capital Markets Corp. for certain advisory services rendered in
advance of the Recapitalization, (ii) pay $100,000 to Kirkland & Ellis, counsel
to the Company, for certain services rendered in advance of the
Recapitalization, (iii) pay $143,419 for miscellaneous expenses and (iv) 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 of the Initial Discount Note
Offering 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 $1.7 million; Named Executive Officers continuing with the
Company $1.5 million; Management Investors $2.9 million; CIVC $6.1 million; CIVC
III $1.1 million; FUCP $1.2 million; and CIBC Merchant Fund $1.2 million.
59
<PAGE> 65
CERTAIN OTHER FEES IN CONNECTION WITH THE TRANSACTIONS
Upon issuing the notes under the Senior Subordinated Facility, the Company
paid CIBC Oppenheimer and First Union Corporation customary commitment and
funding fees for committing to provide, and providing, the Senior Subordinated
Facility. In addition, upon consummation of the Recapitalization, the Company
paid CIBC Oppenheimer a financial advisory fee of $2 million for advisory
services rendered in connection with the Recapitalization. In addition, upon
issuance of the Old Notes, the Company paid CIBC Oppenheimer and First Union
Capital Markets Corp. customary underwriting fees.
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<PAGE> 66
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"),
between Holdings and each of the New Investors. Interests in Holdings are owned
98.3% by the New Investors and 1.7% by TCC. TCC is a corporation organized under
the Delaware General Corporation Law. 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 the 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. See "Certain
Transactions -- Investors Agreement."
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 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>
TIME PERIOD SECOND TARGET THIRD TARGET
- ------------------------- ------------- ------------
<S> <C> <C>
10/1/97 through 9/30/98 32.500% 45%
10/1/98 through 9/30/99 29.375 40
10/1/99 through 9/30/00 26.250 35
10/1/00 through 9/30/01 23.125 30
after 9/30/01 20.000 25
</TABLE>
Both the Senior Credit Facility and the Discount Note Indenture 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 (the "Tax
Distributions"). Tax Distributions will be based on the approximate highest
combined tax rate that applies to any one of Holdings' partners.
The Partnership Agreement, and therefore Holdings' existence, will continue
in effect until the earlier to occur of (i) December 31, 2043, (ii) the
withdrawal of TCC if Holdings' limited partners to do not elect a successor
general partner, and (iii) the occurrence of an act that results in TCC ceasing
to be general partner under the Delaware Limited Partnership Act.
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<PAGE> 67
LIMITED LIABILITY COMPANY AGREEMENT
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 membership interests of TransWestern's members consists of a single
class of common units (the "Member Units"). Holdings is the sole initial member
of TransWestern and currently holds 100% of the Member Units. Distributions to
TransWestern's members are in the sole discretion of the manager. However, the
Senior Credit Facility and the Indenture generally limit TransWestern's ability
to pay cash distributions to its members 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 Distribution
will be based on the approximate highest combined tax rate that applies to any
one of the 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 the TransWestern of its members.
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<PAGE> 68
DESCRIPTION OF SENIOR CREDIT FACILITY
In connection with the Recapitalization, the Issuers entered into the
Senior Credit Facility, among CIBC, First Union (together with CIBC and the
several banks and other financial institutions from time to time parties
thereto, the "Lenders") and the Issuers, pursuant to which the Lenders will lend
to the Company up to $125.0 million consisting of a revolving credit facility of
up to $40.0 million (the "Revolving Credit Facility") and term loans in
aggregate principal amount of $85.0 million (the "Term Loans").
Repayment. Commitments under the Revolving Credit Facility will be reduced
on a quarterly basis commencing on January 1, 2000 and the Term Loans will be
amortized on a quarterly basis commencing January 1, 1998 each in accordance
with the following schedule:
<TABLE>
<CAPTION>
REVOLVING
DATE TERM LOANS CREDIT FACILITY
----- ---------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
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 will
be 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 (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 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.
Fees. The Company has agreed to pay customary fees with respect to the
Senior Credit Facility including upfront facility fees, agent and arrangement
fees and commitment fees on the unused portion of the Revolving Credit Facility.
Use of Proceeds. The entire amount of the Term Loans and $22.7 million of
the Revolving Credit Facility were made available to the Company at the time of
the Recapitalization and the remainder of the Revolving Credit Facility will be
made 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
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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 (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 and will also be required to
comply with financial covenants with respect to: (a) a minimum interest coverage
ratio, (b) a minimum EBITDA (as defined in the Senior Credit Facility), (c) a
maximum leverage ratio, and (d) 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 (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 judgements 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.
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<PAGE> 70
DESCRIPTION OF THE NOTES
The Exchange Notes will be issued under an Indenture, dated as of November
12, 1997 among the Issuers and Wilmington Trust Company, as trustee (the
"Trustee"). The terms of the Exchange 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. The Exchange Notes are subject to all such terms, and
holders of the Exchange Notes are referred to the Indenture and the Trust
Indenture Act for a statement of them. The following is a summary of the
material terms and provisions of the Exchange Notes. This summary does not
purport to be a complete description of the Exchange Notes and is subject to the
detailed provisions of, and qualified in its entirety by reference to, the
Exchange Notes and the Indenture (including the definitions contained therein).
The form and terms of the Exchange Notes are the same as the form and terms of
the Old Notes (which they replace) except that (i) the Exchange Notes bear a
Series B designation, (ii) the Exchange Notes have been registered under the
Securities Act and, therefore, will not bear legends restricting the transfer
thereof, and (iii) the holders of Exchange Notes will not be entitled to certain
rights under the registration rights agreement relating to the Old Notes,
including the provisions providing for an increase in the interest rate on the
Old Notes in certain circumstances relating to the timing of the Exchange Offer,
which rights will terminate when the Exchange Offer is consummated. A copy of
the form of Indenture may be obtained from the Issuers by any holder or
prospective investor upon request. Definitions relating to certain capitalized
terms are set forth 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.
GENERAL
The Notes will be limited in aggregate principal amount to $100.0 million.
The Notes will be general unsecured obligations of the Issuers, subordinated in
right of payment to all existing and future Senior Indebtedness of the Issuers,
pari passu in right of payment to all senior subordinated indebtedness of the
Issuers and senior in right of payment to all subordinated indebtedness of the
Issuers. The Notes will be joint and several obligations of the Issuers.
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 mature on November 15, 2007. The Notes will 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
interest rate on the Old Notes is subject to increase, and such Additional
Interest will be payable on the payment dates set forth above, in certain
circumstances, if the Exchange Notes (or other securities substantially similar
to the Notes) are not registered with the Commission within the prescribed time
periods.
OPTIONAL REDEMPTION
The Notes will be redeemable at the option of the Issuers, 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),
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<PAGE> 71
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 Issuers, at their 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; 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.
In the event of redemption of fewer than all of the Notes, 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 Issuers shall fail to redeem any such Note.
SUBORDINATION
The indebtedness represented by the Notes is, to the extent and in the
manner provided in the Indenture, subordinated in right of payment to the prior
indefeasible payment and satisfaction in full in cash of all existing and future
Senior Indebtedness of the Issuers. As of October 31, 1997, after giving pro
forma effect to the Initial Offerings and the Asset Drop-Down, the principal
amount of outstanding Senior Indebtedness of the Issuers, on a consolidated
basis, would have been $85.0 million. In addition, the Issuers would have had
$40.0 million of undrawn commitments available under the Senior Credit Facility.
In the event of 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 any
liquidation, dissolution or other winding-up of the Issuers, whether voluntary
or involuntary and whether or not involving insolvency or bankruptcy, or any
general assignment for the benefit of creditors or other marshalling of assets
or liabilities of the Issuers (except in connection with the merger or
consolidation of the Issuers or their liquidation or dissolution following the
transfer of substantially all of their assets, upon the terms and conditions
permitted under the circumstances described under "-- Merger, Consolidation or
Sale of Assets") (all of the foregoing referred to herein individually as a
"Bankruptcy Proceeding" and collectively as "Bankruptcy Proceedings"), the
holders of Senior Indebtedness of the Issuers will be entitled to receive
payment and satisfaction 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 are
entitled to receive or retain any payment or distribution of any kind on account
of the Notes. In the event that, notwithstanding the foregoing, the Trustee or
any holder of Notes receives any payment or distribution of assets of the
Issuers of any kind, whether in cash, property or securities, including, without
limitation, by way of set-off or otherwise, in respect of the Notes before all
Senior Indebtedness of the Issuers is paid and satisfied in full in cash, then
such payment or distribution will be held by the recipient in trust for the
benefit of holders of Senior Indebtedness and will be immediately paid over or
delivered to the holders of Senior Indebtedness or their representative or
representatives to the extent necessary to make payment in full
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<PAGE> 72
in cash of all Senior Indebtedness remaining unpaid, after giving effect to any
concurrent payment or distribution, or provision therefor, to or for the holders
of Senior Indebtedness. By reason of such subordination, in the event of
liquidation or insolvency, creditors of the Issuers who are holders of Senior
Indebtedness may recover more, ratably, than other creditors of the Issuers, and
creditors of the Issuers who are not holders of Senior Indebtedness or of the
Notes may recover more, ratably, than the holders of the Notes.
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 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,
the Issuers shall resume making any and all required payments in respect of the
Notes, including any missed payments.
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 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) the earliest of (x) more than 179
days shall have elapsed since 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 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 provision of the Indenture, in no event
shall a Payment Blockage Period commenced in accordance with the provisions of
the Indenture described in this paragraph extend beyond 179 days from the date
of the receipt by the Trustee of the notice referred to above (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. Notwithstanding any other provision
of the 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,
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<PAGE> 73
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.
Each Guarantee will, to the extent set forth in the Indenture, be
subordinated 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, as the case may be 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 and would enable the
holders of the Notes to accelerate the maturity thereof. See "Events of
Default."
A holder of Notes by his acceptance of Notes 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) unless (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 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.
Notwithstanding the foregoing, the Issuers and their Restricted
Subsidiaries may incur Permitted Indebtedness.
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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 Issue Date
does not exceed the sum of (1) 50% of the cumulative Consolidated Net
Income of the Company subsequent to the 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
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 (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 covenant 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 the
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 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 subordinated 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, pursuant to this clause (v) shall not exceed $2,000,000 in any
fiscal year or $10,000,000 in the aggregate from and after the Issue Date, (vi)
payments by the Company to the Equity Compensation Trust, in an aggregate amount
not to exceed $3,100,000, to be paid up to 12 months after the Issue Date in
connection with the Recapitalization, (vii) the payment of management fees under
the management agreement with THL and its Affiliates and successors and assigns
that do not exceed $500,000
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per year and the reimbursement of expenses pursuant thereto, (viii)
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, (ix) distributions not to exceed $100,000 in the aggregate to
Holdings to make payments as liquidated damages to the holders of the Discount
Notes under the registration rights agreement relating to the Discount Notes,
(x) the distribution of the proceeds of the Offering to Holdings on the Issue
Date to the extent necessary to repay outstanding Indebtedness under the Senior
Subordinated Facility and (xi) the redemption on the Issue Date of approximately
one-half of the outstanding Preferred Units with the proceeds from the sale of
the Discount Notes. 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 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 given 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 (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 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.
Limitations on Investments
The Issuers will not, and will 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 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 (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.
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
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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 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 $1.0 million
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 $5.0 million 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.
The foregoing provisions will not apply to (i) any Restricted Payment that
is not prohibited by the provisions described under "Limitation on Restricted
Payments" contained herein, (ii) any transaction pursuant to an agreement,
arrangement or understanding existing on the Issue Date and described elsewhere
in this Prospectus, (iii) 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 (iv) 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 (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 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 will have no Subsidiaries other than Capital.
Limitation on Certain Asset Sales
The Issuers will not, and will 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 Company's Board of Directors, 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,
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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 (c) 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 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: (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 aggregate principal
amount thereof together with accrued and unpaid interest, if any, thereon to the
date of purchase; (2) 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.
Limitation on Preferred Stock of Restricted Subsidiaries
The Issuers will 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
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 (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 "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 or will Capital 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 (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 Issue Date to the extent and in the manner such encumbrances and
restrictions are in effect on the Issue Date (including without limitation
pursuant to the Senior Credit Facility or under the Discount Notes), (ii) the
Indenture, the Notes and the Guarantees,
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(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 (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 the covenant described under "Limitation on Additional Indebtedness."
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.
Certain Consents and Filings
On or before December 31, 1997, the Issuers will have made, or caused to
have been made, all filings, and will have received all required consents of
third parties, relating to the Asset Drop-Down, other than filings and consents
the absence of which, individually or in the aggregate, will not have a material
adverse effect on the business, assets, condition (financial or otherwise) or
results of operations of the Company and its Subsidiaries, taken as a whole, or
on the legality, validity, binding effect or enforceability of the Notes or the
Indenture. The Issuers will deliver to the Trustee, within 10 days after such
date, an Officer's Certificate stating that such filings have been made and such
consents received, subject only to the qualification in the immediately
preceding sentence.
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.
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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
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;
(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, (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.
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 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
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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 (iii) 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 subordinated 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 subordinated 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 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.
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): (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, 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; (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) 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, (a) 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 (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
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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 preceeding 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, if any. All payments pursuant to the
Guarantees by the Guarantors will be unconditionally subordinated 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 subordinated 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 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":
(i) 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);
(ii) 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;
(iii) 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;
(iv) 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;
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(v) 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;
(vi) certain events involving bankruptcy, insolvency or reorganization
of either of the Issuers or any Restricted Subsidiary thereof; and
(vii) 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 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 such amounts shall become immediately due and payable
or 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.
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
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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) (i) 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
(ii) 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, (i)
reduce the amount of Notes whose holders must consent to an amendment,
supplement, or waiver to the Indenture or the Notes, (ii) reduce the rate of or
change the time for payment of interest on any Note, (iii) reduce the principal
of or premium on or change the stated maturity of any Note, (iv) make any Note
payable in money other than that stated in the Note or change the place of
payment from New York, New York, (v) 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, (vi)
waive a default in the payment of the principal of, interest on, or redemption
payment with respect to any Note, (vii) take any other action otherwise
prohibited by the Indenture to be taken without the consent of each holder
affected thereby or (viii) 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 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 Commission or to the holders of the Notes, it
will nonetheless continue to furnish such information to the 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
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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 such 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 Indentures. The
Registrar is not required to transfer or exchange any Note selected for
redemption. Also, the Registrar is not required to transfer or exchange any Note
for a period of 15 days before selection of the Notes to be redeemed.
The Notes will be issued in a transaction exempt from registration under
the Securities Act and will be subject to the restrictions on transfer described
in "Notice to Investors."
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. Reference is made 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 (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
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 (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
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liabilities incurred in connection with or in anticipation of such Asset Sale),
after (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 noncash 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 clauses (iii)(a) or (iii)(b), and that have not been the basis
for an Excess Proceeds Offer in accordance with clause (iii)(c), of the first
paragraph of "Certain Covenants -- Limitation on Certain Asset Sales."
"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 therefor and (iii) 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: (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, 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, (iii) 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 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
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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 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 (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.
"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 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 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 the Indenture) 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.
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"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.
"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, 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
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 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 (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
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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.
"First Union" means First Union Corporation.
"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 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 (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.
"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," "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 (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 the
obligation or obligations secured thereby shall have been assumed (provided,
however, that if such obligation or obligations shall not have been
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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.
"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 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 Issue Date, which notes are expressly
subordinated as to payment of principal, premium, if any, and interest to the
Notes.
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"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 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 (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 $2.0
million and (B) in connection with all such transfers following the Issue Date
shall not exceed $5.0 million in the aggregate.
"Permitted Holders" means, collectively, (i) Holdings and TCC, (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:
(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 $125.0 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 (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 Notes and the Guarantees;
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(iii) Indebtedness not covered by any other clause of this definition
which is outstanding on the date of the 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 the 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 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 $5.0 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:
(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 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";
(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;
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(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 $1.0 million 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 date of the 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 $5.0 million for all such Investments
from and after the 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 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 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, (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', 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, (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 Issue Date; (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 the Indenture that is being contested
in good faith by appropriate proceedings and for
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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 members or 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, Holdings,
Capital II, Capital, 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
(i) 100% of such cost and (ii) reasonable fees and expenses of such Person
incurred in connection therewith.
"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, TCC, TWP Recapitalization
Corp., THL and certain limited partners of the 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
(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
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(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 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.
"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 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 subordinated 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 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.
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"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,
(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 ordinary
course of business and (v) Indebtedness incurred in violation of the 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.
"TCC" means TransWestern Communications Company, Inc., a Delaware
corporation and the general partner 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 $500.0 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 (iii) 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 (i) and
(ii).
"THL" means Thomas H. Lee Equity Fund III, L.P.
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"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.
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THE DISCOUNT NOTE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE DISCOUNT NOTE EXCHANGE OFFER
The Old Discount Notes were originally sold by the Discount Note Issuers on
November 12, 1997 to the Initial Purchasers pursuant to the Purchase Agreement.
The Initial Purchasers subsequently resold the Old Discount Notes to qualified
institutional buyers in reliance on Rule 144A under the Securities Act and
qualified buyers outside the United States in reliance upon Regulation S under
the Securities Act. As a condition of the Purchase Agreement, the Discount Note
Issuers have entered into the Registration Rights Agreement with the Initial
Purchasers pursuant to which the Discount Note Issuers have agreed, for the
benefit of the holders of the Old Discount Notes, at the Discount Note Issuers'
cost, (i) to use their reasonable best efforts to file the Discount Note
Exchange Offer Registration Statement within 45 days after the date of the
original issue of the Old Discount Notes with the Commission with respect to the
Discount Note Exchange Offer for the Exchange Discount Notes; (ii) use their
reasonable best efforts to cause the Discount Note Exchange Offer Registration
Statement to be declared effective under the Securities Act within 135 days
after the date of the original issuance of the Old Discount Notes and (iii)
unless the Discount Note Exchange Offer would not be permitted by applicable law
or Commission policy, commence the Discount Note Exchange Offer and use their
reasonable best efforts to issue the Exchange Discount Notes on or prior to 60
days after the date on which the Discount Note Exchange Offer Registration
Statement was declared effective by the Commission. Upon the Discount Note
Exchange Offer Registration Statement being declared effective, the Discount
Note Issuers will offer the Exchange Discount Notes in exchange for surrender of
the Old Discount Notes. The Discount Note Issuers will keep the Discount Note
Exchange Offer open for not less than 30 days (or longer if required by
applicable law) after the date on which notice of the Discount Note Exchange
Offer is mailed to the holders of the Old Discount Notes. For each Old Discount
Note surrendered to the Discount Note Issuers pursuant to the Discount Note
Exchange Offer, the holder of such Old Discount Note will receive an Exchange
Discount Note having a principal amount equal to that of the surrendered Old
Discount Note.
Under existing interpretations of the staff of the Commission contained in
several no-action letters to third parties, the Discount Note Issuers believe
that the Exchange Discount Notes will in general be freely tradeable after the
Discount Note Exchange Offer without further registration under the Securities
Act. However, any purchaser of Old Discount Notes who is an "affiliate" of the
Discount Note Issuers or who intends to participate in the Discount Note
Exchange Offer for the purpose of distributing the Exchange Discount Notes (i)
will not be able to rely on the interpretation of the staff of the Commission,
(ii) will not be able to tender its Old Discount Notes in the Discount Note
Exchange Offer and (iii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any sale or
transfer of the Old Discount Notes, unless such sale or transfer is made
pursuant to an exemption from such requirements.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Discount Note Exchange Offer is required to
represent to the Discount Note Issuers in the Letter of Transmittal that (i) the
Exchange Discount Notes are to be acquired by the holder or the person receiving
such Exchange Discount Notes, whether or not such person is the holder, in the
ordinary course of business, (ii) 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 Exchange Discount Notes, (iii) the
holder or any such other person has no arrangement or understanding with any
person to participate in the distribution of the Exchange Discount Notes, (iv)
neither the holder nor any such other person is an "affiliate" of the Discount
Note Issuers within the meaning of Rule 405 under the Securities Act, and (v)
the holder or any such other person acknowledges that if such holder or any
other person participates in the Discount Note Exchange Offer for the purpose of
distributing the Exchange Discount Notes it must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with
any resale of the Exchange Discount Notes and cannot rely on those no-action
letters. As indicated above, each Participating Broker-Dealer that receives an
Exchange Discount Note for its own account in exchange for Old Discount Notes
must acknowledge that it (i) acquired the Old Discount Notes for its own account
as a result of market-making activities or other trading activities, (ii) has
not entered into any arrangement or
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understanding with the Discount Note Issuers or any "affiliate" of the Discount
Note Issuers (within the meaning of Rule 405 under the Securities Act) to
distribute the Exchange Discount Notes to be received in the Discount Note
Exchange Offer and (iii) will deliver a prospectus meeting the requirements of
the Securities Act in connection with any resale of such Exchange Discount
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 Commission do not permit the Discount Note Issuers to effect
such a Discount Note Exchange Offer, or if for any other reason the Discount
Note Exchange Offer is not consummated within 180 days of the date of the
original issuance of the Old Discount Notes, the Discount Note Issuers will (i)
file the Shelf Registration Statement covering the resale of the Old Discount
Notes, (ii) use their reasonable best efforts to cause the Shelf Registration
Statement to be declared effective under the Securities Act and (iii) use their
reasonable best efforts to keep effective the Shelf Registration Statement for
two years after its effective date. The Discount Note Issuers will, in the event
of the filing of the Shelf Registration Statement, provide to each applicable
holder of the Old Discount 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 Old Discount Notes. A holder
of the Old Discount Notes that sells such Old Discount 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 Registration Rights Agreement which are applicable to such a
holder (including certain indemnification obligations). In addition, each holder
of the Old Discount 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
Registration Rights Agreement in order to have their Old Discount Notes included
in the Shelf Registration Statement and to benefit from the provisions set forth
in the following paragraph.
The Registration Rights Agreement provides that (i) the Discount Note
Issuers will use their reasonable best efforts to file the Discount Note
Exchange Offer Registration Statement with the Commission on or prior to 45 days
after the date of the original issue of the Old Discount Notes with the
Commission, (ii) the Discount Note Issuers will use their reasonable best
efforts to have the Discount Note Exchange Offer Registration Statement declared
effective by the Commission on or prior to 135 days after the date of the
original issue of the Old Discount Notes, (iii) unless the Discount Note
Exchange Offer would not be permitted by applicable law or Commission policy,
the Discount Note Issuers will commence the Discount Note Exchange Offer and use
their reasonable best efforts to issue on or prior to 60 days after the Discount
Note Exchange Offer Effectiveness Date, Exchange Discount Notes in exchange for
all Old Discount Notes tendered prior thereto in the Discount Note Exchange
Offer and (iv) if obligated to file the Shelf Registration Statement, the
Discount Note Issuers will use their reasonable best efforts to file the Shelf
Registration Statement with the Commission in a timely fashion. If (a) the
Discount Note Issuers fail to file any of the Registration Statements required
by the Registration Rights Agreement on or before the date specified for such
filing, (b) any of such Registration Statements is not declared effective by the
Commission on or prior to the date specified for such effectiveness, (c) the
Discount Note Issuers fail to consummate the Discount Note Exchange Offer within
180 days of the date of the original issuance of the Old Discount Notes, or (d)
the Shelf Registration Statement or the Discount Note Exchange Offer
Registration Statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer Restricted Securities
during the period specified in the Registration Rights Agreement (each such
event referred to in clauses (a) through (d) above a "Registration Default"),
the Discount Note Issuers shall pay as liquidated damages to each holder of the
Old Discount Notes an amount (the "Damage Amount") equal to 0.50% per annum of
the average Accreted Value of the Old Discount Notes for the first 90 days
during which any such default exists, and the Damage Amount will be increased by
an additional 0.25% per annum of the average Accreted Value of the Old Discount
Notes for each subsequent 90-day period that any such Damage Amount continues to
accrue; provided that in no event shall the rate at which the Damage Amount
accrues be more than 2.0%. After the date on which such Registration Default is
cured, the Damage Amount will cease to accrue.
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Holders of Old Discount Notes will be required to make certain
representations to the Discount Note Issuers (as described in the Registration
Rights Agreement) in order to participate in the Discount Note Exchange Offer
and 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 Registration Rights Agreement
in order to have their Old Discount Notes included in the Shelf Registration
Statement and benefit from the provisions regarding the Damage Amount set forth
above.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by, all the provisions of the Registration Rights Agreement, a copy
of which is filed as an exhibit to the Discount Note Exchange Offer Registration
Statement of which this Prospectus is a part.
Following the consummation of the Discount Note Exchange Offer, holders of
the Old Discount Notes who were eligible to participate in the Discount Note
Exchange Offer but who did not tender their Old Discount Notes will not have any
further registration rights and such Old Discount Notes will continue to be
subject to certain restrictions on transfer. Accordingly, the liquidity of the
market for such Old Discount Notes could be adversely affected.
TERMS OF THE DISCOUNT NOTE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Discount Note Issuers will accept any and
all Old Discount Notes validly tendered and not withdrawn prior to 5:00 p.m.,
New York City time, on the Expiration Date. The Discount Note Issuers will issue
$1,000 principal amount at maturity of Exchange Discount Notes in exchange for
each $1,000 principal amount at maturity of outstanding Old Discount Notes
accepted in the Discount Note Exchange Offer. Holders may tender some or all of
their Old Discount Notes pursuant to the Discount Note Exchange Offer. However,
Old Discount Notes may be tendered only in integral multiples of $1,000.
The form and terms of the Exchange Discount Notes are the same as the form
and terms of the Old Discount Notes except that (i) the Exchange Discount Notes
bear a Series B designation and a different CUSIP Number from the Old Discount
Notes, (ii) the Exchange Discount Notes have been registered under the
Securities Act and hence will not bear legends restricting the transfer thereof
and (iii) the holders of the Exchange Discount Notes will not be entitled to
certain rights under the Registration Rights Agreement, including the provisions
providing for an increase in the interest rate on the Old Discount Notes in
certain circumstances relating to the timing of the Discount Note Exchange
Offer, all of which rights will terminate when the Discount Note Exchange Offer
is terminated. The Exchange Discount Notes will evidence the same debt as the
Old Discount Notes and will be entitled to the benefits of the Discount Note
Indenture.
As of the date hereof, $57,916,000 aggregate principal amount at maturity
of Old Discount Notes are outstanding. The Discount Note Issuers have fixed the
close of business on , 1998 as the record date for the Discount Note
Exchange Offer for purposes of determining the persons to whom this Prospectus
and the Letter of Transmittal will be mailed initially.
Holders of Old Discount Notes do not have any appraisal or dissenters'
rights under the General Corporation Law of Delaware, the Delaware Limited
Partnership Act or the Discount Note Indenture in connection with the Discount
Note Exchange Offer. The Discount Note Issuers intend to conduct the Discount
Note Exchange Offer in accordance with the applicable requirements of the
Exchange Act and the rules and regulations of the Commission thereunder.
The Discount Note Issuers shall be deemed to have accepted validly tendered
Old Discount Notes when, as and if the Discount Note Issuers have given oral or
written notice thereof to the Exchange Agent. The Exchange Agent will act as
agent for the tendering holders for the purpose of receiving the Exchange
Discount Notes from the Discount Note Issuers.
If any tendered Old Discount 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 Old
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Discount Notes will be returned, without expense, to the tendering holder
thereof as promptly as practicable after the Expiration Date.
Holders who tender Old Discount Notes in the Discount Note 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 Old Discount Notes pursuant to the Discount Note Exchange Offer. The
Discount Note Issuers will pay all charges and expenses, other than transfer
taxes in certain circumstances, in connection with the Discount Note Exchange
Offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1998, unless the Discount Note Issuers, in their sole discretion,
extend the Discount Note Exchange Offer, in which case the term "Expiration
Date" shall mean the latest date and time to which the Discount Note Exchange
Offer is extended.
In order to extend the Discount Note Exchange Offer, the Discount Note
Issuers will notify the Exchange Agent of any extension by oral or written
notice and will mail to the registered holders an announcement thereof, each
prior to 9:00 a.m., New York City time, on the next business day after the
previously scheduled expiration date.
The Discount Note Issuers reserve the right, in their sole discretion, (i)
to delay accepting any Old Discount Notes, to extend the Discount Note Exchange
Offer or to terminate the Discount Note Exchange Offer if any of the conditions
set forth below under "-- Conditions" shall not have been satisfied, by giving
oral or written notice of such delay, extension or termination to the Exchange
Agent or (ii) to amend the terms of the Discount Note Exchange Offer in any
manner. 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.
ACCRETION OF THE DISCOUNT NOTES; INTEREST
The Old Discount Notes will continue to accrete at the rate of 11 7/8% per
annum to, but excluding the date of issuance of the Exchange Discount Notes. Any
Old Discount Notes not tendered or accepted for exchange will continue to
accrete at the rate of 11 7/8% per annum in accordance with their terms and will
cease to accrete upon cancellation of the Old Discount Notes and issuance of the
Exchange Discount Notes. From and after the date of issuance of the Exchange
Discount Notes, the Exchange Discount Notes shall accrete at the rate of 11 7/8%
per annum, but no cash interest will accrue or be payable in respect of the
Exchange Discount Notes prior to November 15, 2002. Thereafter, interest on the
Exchange Discount Notes will accrue on the principal amount at maturity at the
rate of 11 7/8% per annum and will be payable semi-annually on each May 15 and
November 15, commencing May 15, 2003. Interest will be payable at the option of
the Discount Note Issuers 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.
PROCEDURES FOR TENDERING
Only a holder of Old Discount Notes may tender such Old Discount Notes in
the Discount Note Exchange Offer. To tender in the Discount Note 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 or transmit an Agent's Message in connection with a book-entry
transfer, and mail or otherwise deliver such Letter of Transmittal or such
facsimile or Agent's Message, together with the Old Discount Notes and any other
required documents, to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date. To be tendered effectively, the Old Discount
Notes, 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 Old Discount Notes may be made by book-entry
transfer in accordance with the
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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 Old Discount Notes that such
participant has received and agrees: (i) to participate in the Automated Tender
Option Program ("ATOP"); (ii) to be bound by the terms of the Letter of
Transmittal; and (iii) that the Discount Note Issuers may enforce such agreement
against such participant.
By executing the Letter of Transmittal or Agent's Message, each holder will
make to the Discount Note Issuers the representations set forth above in the
third paragraph under the heading "-- Purpose and Effect of the Discount Note
Exchange Offer."
The tender by a holder and the acceptance thereof by the Discount Note
Issuers will constitute agreement between such holder and the Discount Note
Issuers in accordance with the terms and subject to the conditions set forth
herein and in the Letter of Transmittal or Agent's Message.
THE METHOD OF DELIVERY OF OLD DISCOUNT NOTES AND THE LETTER OF TRANSMITTAL
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 OLD DISCOUNT NOTES SHOULD BE SENT TO THE
DISCOUNT NOTE ISSUERS. 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 Old Discount 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 Old Discount Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Registration
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) 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 Old Discount Notes listed therein, such Old Discount
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 Old
Discount Notes with the signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Old Discount 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
satisfactory to the Discount Note Issuers of their authority to so act must be
submitted with the Letter of Transmittal.
The Discount Note Issuers understand that the Exchange Agent will make a
request promptly after the date of this Prospectus to establish accounts with
respect to the Old Discount Notes at the book-entry transfer facility, The
Depository Trust Company (the "Book-Entry Transfer Facility"), for the purpose
of facilitating the Discount Note 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 Old
Discount Notes
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by causing such Book-Entry Transfer Facility to transfer such Old Discount Notes
into the Exchange Agent's account with respect to the Old Discount Notes in
accordance with the Book-Entry Transfer Facility's procedures for such transfer.
Although delivery of the Old Discount 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 received by the Exchange Agent in compliance with
ATOP, an appropriate Letter of Transmittal properly completed and duly executed
with any required signature guarantee and all other required documents must in
each case be transmitted to and received or confirmed by the Exchange Agent at
its address set forth below 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. Delivery of documents to the
Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance of tendered Old Discount Notes and withdrawal of tendered
Old Discount Notes will be determined by the Discount Note Issuers in their sole
discretion, which determination will be final and binding. The Discount Note
Issuers reserve the absolute right to reject any and all Old Discount Notes not
properly tendered or any Old Discount Notes the Discount Note Issuers'
acceptance of which would, in the opinion of counsel for the Discount Note
Issuers, be unlawful. The Discount Note Issuers also reserve the right in their
sole discretion to waive any defects, irregularities or conditions of tender as
to particular Old Discount Notes. The Discount Note Issuers' interpretation of
the terms and conditions of the Discount Note 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 Old Discount Notes must be cured within such time as the Discount Note
Issuers shall determine. Although the Discount Note Issuers intend to notify
holders of defects or irregularities with respect to tenders of Old Discount
Notes, neither the Discount Note Issuers, the Exchange Agent nor any other
person shall incur any liability for failure to give such notification. Tenders
of Old Discount Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Discount 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 Old Discount Notes and (i) whose Old
Discount Notes are not immediately available, (ii) who cannot deliver their Old
Discount Notes, the Letter of Transmittal or any other required documents to the
Exchange Agent or (iii) 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 from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number(s)
of such Old Discount Notes and the principal amount of Old Discount Notes
tendered, stating that the tender is being made thereby and guaranteeing
that, within five 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 Old Discount Notes (or a confirmation of book-entry
transfer of such Discount 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 Old Discount Notes in
proper form for transfer or a confirmation of a book-entry transfer of such
Old Discount 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), and all other documents required by the
Letter of Transmittal are received by the Exchange Agent within five New
York Stock Exchange trading days after the Expiration Date.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Discount Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date.
To withdraw a tender of Old Discount Notes in the Discount Note 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. Any such notice of
withdrawal must (i) specify the name of the person having deposited the Old
Discount Notes to be withdrawn (the "Depositor"), (ii) identify the Old Discount
Notes to be withdrawn (including the certificate number(s) and principal amount
of such Old Discount Notes, or, in the case of Old Discount Notes transferred by
book-entry transfer, the name and number of the account at the Book-Entry
Transfer Facility to be credited), (iii) be signed by the holder in the same
manner as the original signature on the Letter of Transmittal by which such Old
Discount Notes were tendered (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have the Trustee with respect
to the Old Discount Notes register the transfer of such Old Discount Notes into
the name of the person withdrawing the tender and (iv) specify the name in which
any such Old Discount 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 the Discount Note
Issuers, whose determination shall be final and binding on all parties. Any Old
Discount Notes so withdrawn will be deemed not to have been validly tendered for
purposes of the Discount Note Exchange Offer and no Exchange Discount Notes will
be issued with respect thereto unless the Old Discount Notes so withdrawn are
validly retendered. Any Old Discount 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 Discount Note Exchange Offer. Properly withdrawn Old
Discount 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 Discount Note Exchange Offer, the
Discount Note Issuers shall not be required to accept for exchange, or exchange
Discount Notes for, any Old Discount Notes, and may terminate or amend the
Discount Note Exchange Offer as provided herein before the acceptance of such
Old Discount Notes, if:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Discount Note
Exchange Offer which, in the sole judgment of the Discount Note Issuers,
might materially impair the ability of the Discount Note Issuers to proceed
with the Discount Note Exchange Offer, or any material adverse development
has occurred in any existing action or proceeding with respect to the
Discount Note Issuers or any of its subsidiaries; or
(b) any law, statute, rule, regulation or interpretation by the staff
of the Commission is proposed, adopted or enacted, which, in the sole
judgment of the Discount Note Issuers, might materially impair the ability
of the Discount Note Issuers to proceed with the Discount Note Exchange
Offer or materially impair the contemplated benefits of the Discount Note
Exchange Offer to the Discount Note Issuers; or
(c) any governmental approval has not been obtained, which approval
the Discount Note Issuers shall, in their sole discretion, deem necessary
for the consummation of the Discount Note Exchange Offer as contemplated
hereby.
If the Discount Note Issuers determine in their sole discretion that any of
the conditions are not satisfied, the Discount Note Issuers may (i) refuse to
accept any Old Discount Notes and return all tendered Old Discount Notes to the
tendering holders, (ii) extend the Discount Note Exchange Offer and retain all
Old Discount Notes tendered prior to the expiration of the Discount Note
Exchange Offer, subject, however, to
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the rights of holders to withdraw such Old Discount Notes (see "-- Withdrawal of
Tenders") or (iii) waive such unsatisfied conditions with respect to the
Discount Note Exchange Offer and accept all properly tendered Old Discount Notes
which have not been withdrawn.
EXCHANGE AGENT
Wilmington Trust Company has been appointed as Exchange Agent for the
Discount Note 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 Mail: Overnight Courier:
Wilmington Trust Company Wilmington Trust Company
Rodney Square North Rodney Square North
1100 North Market Street 1100 North Market Street
Wilmington, Delaware 10890 Wilmington, Delaware 10890
Attention: Corporate Trust Operations Attention: Corporate Trust Operations
By Hand: Facsimile Transmission:
Wilmington Trust Company (302) 651-1576
Rodney Square North
1100 North Market Street
Wilmington, Delaware 10890
Attention: Corporate Trust Operations
Confirm by Telephone:
(302) 651-8869
</TABLE>
DELIVERY TO AN ADDRESS OTHER THAN SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Discount Note
Issuers. 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 Discount Note Issuers and their
affiliates.
The Discount Note Issuers have not retained any dealer-manager in
connection with the Discount Note Exchange Offer and will not make any payments
to brokers, dealers, or others soliciting acceptances of the Discount Note
Exchange Offer. The Discount Note Issuers, 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.
The cash expenses to be incurred in connection with the Discount Note
Exchange Offer will be paid by the Discount Note Issuers. Such expenses include
fees and expenses of the Exchange Agent and Trustee, accounting and legal fees
and printing costs, among others.
ACCOUNTING TREATMENT
The Exchange Discount Notes will be recorded at the same carrying value as
the Old Discount Notes, which is face value less accrued original discount, as
reflected in the Discount Note Issuers' accounting records on the date of
exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Discount Note Issuers. The expenses of the Discount Note
Exchange Offer will be amortized over the term of the Exchange Discount Notes.
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CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Discount Notes that are not exchanged for Exchange Discount Notes
pursuant to the Discount Note Exchange Offer will remain restricted securities.
Accordingly, such Old Discount Notes may be resold only (i) to the Discount Note
Issuers (upon redemption thereof or otherwise), (ii) so long as the Old Discount
Notes are eligible for resale pursuant to Rule 144A, to a person inside the
United States whom the seller reasonably believes is a qualified institutional
buyer within the meaning of Rule 144A under the Securities Act 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 Discount Note Issuers), (iii) outside the United
States to a foreign person in a transaction meeting the requirements of Rule 904
under the Securities Act, or (iv) 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 EXCHANGE DISCOUNT NOTES
With respect to resales of Exchange Discount Notes, based on
interpretations by the staff of the Commission set forth in no-action letters
issued to third parties, the Discount Note Issuers believe that a holder or
other person who receives Exchange Discount Notes, whether or not such person is
the holder (other than a person that is an "affiliate" of the Discount Note
Issuers within the meaning of Rule 405 under the Securities Act), in exchange
for Old Discount Notes in the ordinary course of business and 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
Exchange Discount Notes, will be allowed to resell the Exchange Discount Notes
to the public without further registration under the Securities Act and without
delivering to the purchasers of the Exchange Discount Notes a prospectus that
satisfies the requirements of Section 10 of the Securities Act. However, if any
holder acquires Exchange Discount Notes in the Discount Note Exchange Offer for
the purpose of distributing or participating in a distribution of the Exchange
Discount Notes, such holder cannot rely on the position of the staff of the
Commission 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 Exchange Discount Notes for its own
account in exchange for Old Discount Notes, where such Old Discount 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 Exchange Discount Notes.
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Discount Note Exchange Offer is required to
represent to the Discount Note Issuers in the Letter of Transmittal that (i) the
Exchange Discount Notes are to be acquired by the holder or the person receiving
such Exchange Discount Notes, whether or not such person is the holder, in the
ordinary course of business, (ii) 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 Exchange Discount Notes, (iii)
the holder or any such other person has no arrangement or understanding with any
person to participate in the distribution of the Exchange Discount Notes, (iv)
neither the holder nor any such other person is an "affiliate" of the Discount
Note Issuers within the meaning of Rule 405 under the Securities Act and (v) the
holder or any such other person acknowledges that if such holder or other person
participates in the Discount Note Exchange Offer for the purpose of distributing
the Exchange Discount Notes it must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale of the
Exchange Discount Notes and cannot rely on those no-action letters. As indicated
above, each Participating Broker-Dealer that receives Exchange Discount Notes
for its own account in exchange for Old Discount Notes must acknowledge that it
will deliver a prospectus in connection with any resale of such Exchange
Discount 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 DISCOUNT NOTES
The Exchange Discount Notes will be issued under an Indenture, dated as of
November 12, 1997 (for purposes of this "Description of the Discount Notes," the
"Indenture") among the Discount Note Issuers and Wilmington Trust Company, as
trustee (for purposes of this "Description of the Discount Notes," the
"Trustee"). The terms of the Exchange Discount 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. The Exchange Discount Notes are subject to all such
terms, and holders of the Exchange Discount Notes are referred to the Indenture
and the Trust Indenture Act for a statement of them. The form and terms of the
Exchange Discount Notes are the same as the form and terms of the Old Discount
Notes (which they replace) except that (i) the Exchange Discount Notes bear a
Series B designation, (ii) the Exchange Discount Notes have been registered
under the Securities Act and, therefore, will not bear legends restricting the
transfer thereof, and (iii) the holders of Exchange Discount Notes will not be
entitled to certain rights under the Registration Rights Agreement, including
the provisions providing for the payment of liquidated damages on the Old
Discount Notes in certain circumstances relating to the timing of the Discount
Note Exchange Offer, which rights will terminate when the Discount Note Exchange
Offer is consummated. The following is a summary of the material terms and
provisions of the Exchange Discount Notes. This summary does not purport to be a
complete description of the Exchange Discount Notes and is subject to the
detailed provisions of, and qualified in its entirety by reference to, the
Exchange Discount Notes and the Indenture (including the definitions contained
therein). A copy of the form of Indenture may be obtained from the Discount Note
Issuers by any holder or prospective investor upon request. Definitions relating
to certain capitalized terms are set forth 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 Discount Notes," the term "Company" means TransWestern
Holdings L.P. (formerly Transwestern Publishing Company, L.P.), the term "TWP"
means TransWestern Publishing Company LLC and the term "Indenture" means the
Discount Note Indenture.
GENERAL
The Discount Notes will be limited to $57,916,000 million aggregate
principal amount at maturity (other than Discount Notes issued in lieu of cash
interest on the Discount Notes in accordance with the Indenture). The Discount
Notes will be general senior unsecured obligations of the Discount Note Issuers,
ranking senior in right of payment to any subordinated indebtedness of the
Discount Note Issuers. The Discount Notes will be effectively subordinated in
right of payment to all existing and future obligations of the Company's
subsidiaries, including TWP. The Discount Notes are being issued at a
substantial discount to their aggregate principal amount at maturity such that
the gross proceeds from the issuance of the Discount Notes will be approximately
$32.5 million. Based on the issue price thereof, the yield to maturity of the
Discount Notes is 11 7/8% per annum (computed on a semi-annual bond equivalent
basis and assuming no Discount Notes are issued in lieu of cash interest
thereon).
MATURITY, INTEREST AND PRINCIPAL
The Discount Notes will mature on November 15, 2008. Interest will not
accrue or be payable on the Discount Notes prior to November 15, 2002.
Thereafter, interest on the Discount Notes will accrue at the rate of 11 7/8%
per annum and will be payable semi-annually on each May 15 and November 15,
commencing May 15, 2003, to the holders of record of Discount Notes at the close
of business on the May 1 and November 1 immediately preceding such interest
payment date. Interest on the Discount Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from
November 15, 2002. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. Commencing November 15, 2002, interest is
payable at the option of the Company, in whole but not in part, at the 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; provided, however, that in
connection with any redemption or repurchase of the Discount Notes as permitted
or required by the Indenture and upon the acceleration of the
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<PAGE> 107
Discount Notes, all accrued interest shall be payable solely in cash. As used
herein, the term "Discount Notes" shall include Discount Notes issued in lieu of
cash interest on the Discount Notes in accordance with the Indenture, unless the
context indicates otherwise.
Pursuant to the Registration Rights Agreement, the Damage Amount is payable
with respect to the Old Discount Notes, in certain circumstances, if the Old
Discount Notes (or securities substantially similar to the Discount Notes) are
not registered within the prescribed time periods set forth in the Registration
Rights Agreement.
OPTIONAL REDEMPTION
The Discount Notes will be redeemable at the option of the Discount Note
Issuers, 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 at
maturity), together, in each case, with accrued interest, if any, 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.............................................................. 105.938%
2003.............................................................. 103.958%
2004.............................................................. 101.979%
2005 and thereafter............................................... 100.000%
</TABLE>
Notwithstanding the foregoing, the Discount Note Issuers, at their option,
may redeem all, but not less than all, of the aggregate principal amount of the
Discount Notes outstanding at any time prior to November 15, 2002 at a
redemption price equal to 111.875% of the Accreted Value thereof, out of the Net
Proceeds of one or more Public Equity Offerings; provided, however, that any
such redemption occurs within 90 days following the closing of any such Public
Equity Offering.
In the event of redemption of fewer than all of the Discount Notes, the
Trustee shall select, if the Discount Notes are listed on a national securities
exchange, in accordance with the rules of such exchange or, if the Discount
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 Discount Notes to be redeemed;
provided, that if a partial redemption is made with the proceeds of a Public
Equity Offering, selection of the Discount Notes or portion thereof for
redemption will be made by the Trustee on a pro rata basis, unless such method
is prohibited. The Discount 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 Discount Notes. On and after any redemption
date, Accreted Value will cease to accrete or interest will cease to accrue, as
the case may be, on the Discount Notes or portions thereof called for redemption
unless the Discount Note Issuers shall fail to redeem any such Note.
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 Discount Note Issuers will not, and will not permit any Restricted
Subsidiary of the Discount Note Issuers to, directly or indirectly, incur (as
defined) any Indebtedness (including Acquired Indebtedness) unless (a)(1) in the
case of Indebtedness of TWP or any of its Restricted Subsidiaries, 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 TWP and its
Restricted Subsidiaries (excluding any Indebtedness owed to a Restricted
Subsidiary of TWP by any other Restricted Subsidiary of TWP or TWP and any
Indebtedness owed to TWP by any Restricted Subsidiaries of TWP) to TWP's EBITDA
(determined on a pro forma basis for the last four fiscal quarters of TWP and
its 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
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November 15, 2000 and (ii) 6.0 to 1 if the Indebtedness is incurred on or after
November 15, 2000; and (2) in the case of Indebtedness of the Company or any of
its Restricted Subsidiaries other than TWP or its Restricted Subsidiaries, 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
Discount Note Issuers and their Restricted Subsidiaries (excluding any
Indebtedness owed to a Restricted Subsidiary by any other Restricted Subsidiary
or the Discount Note Issuers and any Indebtedness owed to the Discount Note
Issuers by any Restricted Subsidiary) to the Discount Note Issuers' EBITDA
(determined on a pro forma basis for the last four fiscal quarters of the
Discount Note Issuers and their consolidated Restricted Subsidiaries for which
financial statements are available at the date of determination) is less than
(i) 7.25 to 1 if the Indebtedness is incurred prior to November 15, 2000 and
(ii) 7.0 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 Discount Note Issuers,
TWP or any other Restricted Subsidiary (together with any other Acquired
Indebtedness or other Indebtedness incurred or assumed by the Discount Note
Issuers, TWP and other Restricted Subsidiaries in connection with acquisitions
consummated by the Discount Note Issuers during such four-quarter period) and
the inclusion in the Discount Note 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 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 Discount Note Issuers, TWP
or any other 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. The accretion of
original issue discount (and any accruals of interest or payment of interest in
additional Discount Notes) on the Discount Notes shall not be deemed an
incurrence of Indebtedness for purposes of this covenant.
Notwithstanding the foregoing, (a) the Discount Note Issuers and their
Restricted Subsidiaries may incur Permitted Indebtedness and (b) the Discount
Note Issuers will not incur any Indebtedness (other than Permitted Indebtedness
described in clause (i)(B) of the definition thereof) that is either senior or
pari passu in right of payment to the Discount Notes.
Limitation on Restricted Payments
The Discount Note 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 Discount Note 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 Issue Date
does not exceed the sum of (1) 50% of the cumulative Consolidated Net
Income of the Company subsequent to the 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
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 (3) without
duplication of any amounts included in clauses (1) and (2) above,
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<PAGE> 109
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 covenant 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 the
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 Discount Note Issuers subordinated to the Discount 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 Discount Note Issuers that is contractually subordinated in
right of payment to the Discount 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 of the Discount Note Issuers or
their Subsidiaries (other than Disqualified Capital Stock) or options on such
shares held by the Discount Note 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, pursuant to this clause
(v) shall not exceed $2,000,000 in any fiscal year or $10,000,000 in the
aggregate from and after the Issue Date, (vi) payments to the Equity
Compensation Trust, in an aggregate amount not to exceed $3,100,000, to be paid
up to 12 months after the Issue Date in connection with the Recapitalization,
(vii) 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, (viii) the reimbursement of
the reasonable expenses of the Company, Capital, Capital II or TCC (ix) the
redemption on the Issue Date of approximately one-half of the outstanding
Preferred Units with the proceeds from the sale of the Discount Notes and (x)
the distribution of the proceeds of the Offering to the Company on the Issue
Date to the extent necessary to repay outstanding Indebtedness under the Senior
Subordinated Facility. 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 Discount Note
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 Discount Note 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 given effect to any Restricted
Payments.
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Limitations on Investments
The Discount Note Issuers will not, and will 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 the "Limitation on Restricted Payments" covenant, after the
Issue Date.
Limitations on Liens
The Discount Note Issuers will not 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 Discount Note Issuers 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
Discount Notes, then the Discount 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 Discount Notes, any such Lien shall be subordinated to the
Lien granted to the Holders of the Discount Notes to the same extent as such
subordinated Indebtedness is subordinated to the Discount Notes.
Limitation on Transactions with Affiliates
The Discount Note 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 Discount Note
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 (i) such Affiliate Transaction is between or among the
Discount Note Issuers and/or their Wholly-Owned Subsidiaries and/or TCC; or (ii)
the terms of such Affiliate Transaction are fair and reasonable to the Discount
Note 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 Discount Note 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 (i) above,
the Discount Note 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 $5.0 million 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 Discount Note
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 (i) any Restricted Payment that
is not prohibited by the provisions described under "Limitation on Restricted
Payments" contained herein, (ii) any transaction pursuant to an agreement,
arrangement or understanding existing on the Issue Date and described elsewhere
in this Prospectus, (iii) any transaction, approved by the Board of Directors of
the Company, TCC, TWP, Capital or Capital II, with an officer or director of the
Discount Note 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 the Indenture under the provision "Merger, Consolidation or Sale of
Assets."
Limitation on Creation of Subsidiaries
The Discount Note Issuers will 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. As of the Issue Date, the
Company will have no Subsidiaries other than TWP, Capital and Capital II.
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Limitation on Certain Asset Sales
The Discount Note Issuers will not consummate an Asset Sale unless (i) such
Discount Note Issuer 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); (ii) not less than 75% of the consideration received by the
Discount Note Issuers 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 Discount Note Issuer are applied
(a) first, to the extent the Company or any Restricted Subsidiary, as the case
may be, elects, or is required, to prepay, repay or purchase debt or to reduce
an unused commitment to lend under the Senior Credit Facility, the Senior
Subordinated Notes and/or any other Indebtedness of a Restricted Subsidiary
incurred in compliance with the Indenture 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 Discount Note 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 (C) third, if on the Reinvestment Date with respect to any
Asset Sale, the Available Asset Sale Proceeds exceed $10.0 million, the Discount
Note Issuers shall apply an amount equal to such Available Asset Sale Proceeds
to an offer to repurchase the Discount Notes, at a purchase price in cash equal
to (x) 100% of the Accreted Value thereof, if the applicable repurchase date is
on or prior to November 15, 2002, or (y) 100% of the principal amount at
maturity thereof plus accrued and unpaid interest, if any, to the date of
repurchase, if the repurchase date is after November 15, 2002 (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 Discount 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
Discount Notes.
If the Discount Note Issuers are required to make an Excess Proceeds Offer,
the Discount Note 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 Discount Note Issuers to apply the Available Asset
Sale Proceeds to repurchase such Discount Notes at a purchase price in cash
equal to (x) 100% of the Accreted Value thereof, if the applicable purchase date
is on or prior to November 15, 2002, or (y) 100% of the principal amount at
maturity thereof together with accrued and unpaid interest, if any, thereon to
the date of purchase, if the purchase date is after November 15, 2002; (2) 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
Discount Note Issuers, that each Holder must follow in order to have such
Discount Notes repurchased; and (4) the calculations used in determining the
amount of Available Asset Sale Proceeds to be applied to the repurchase of such
Discount Notes.
Limitation on Preferred Stock of Restricted Subsidiaries
The Discount Note Issuers will 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
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.
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Limitation on Capital Stock of Subsidiaries
The Discount Note Issuers will 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 (ii) permit any of their Subsidiaries to
issue any Capital Stock, other than to the Discount Note 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 or will Capital issue any Capital Stock.
Limitation on Sale and Lease-Back Transactions
The Discount Note Issuers will not, and will 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 Discount Note 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."
Payments for Consent
Neither the Discount Note 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 Discount Notes for or as
an inducement to any consent, waiver or amendment of any of the terms or
provisions of the Indenture or the Discount Notes unless such consideration is
offered to be paid or agreed to be paid to all holders of the Discount 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
Except to the extent permitted under "Merger, Consolidation or Sale of
Assets," Capital will not hold any operating assets or other properties or
conduct any business other than to serve as a Discount Note Issuer and
co-obligor with respect to the Discount Notes and will not own any Capital Stock
of any other Person other than up to 1% of the Capital Stock of TWP.
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 Discount Notes at a
purchase price equal to (x) 101% of the Accreted Value thereof, if the Change of
Control Payment Date (as hereinafter defined) is on or prior to November 15,
2002, or (y) 101% of the principal amount at maturity thereof together with any
accrued and unpaid interest, if any, thereon to the Change of Control Payment
Date, if the Change of Control Payment Date is after November 15, 2002 (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 (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 Discount Notes, at the address appearing in the register
maintained by the registrar of the Discount Notes, a notice stating:
(i) that the Change of Control Offer is being made pursuant to this
covenant and that all Discount Notes tendered will be accepted for payment,
and otherwise subject to the terms and conditions set forth herein;
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(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 Discount Note not tendered will remain outstanding and
continue to accrue interest;
(iv) that, unless the Discount Note Issuers default in the payment of
the Change of Control Purchase Price, any Discount Notes accepted for
payment pursuant to the Change of Control Offer shall cease to accrete in
value or accrue interest after the Change of Control Payment Date;
(v) that holders accepting the offer to have their Discount Notes
purchased pursuant to a Change of Control Offer will be required to
surrender the Discount Notes, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Discount 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 Discount Notes delivered for purchase,
and a statement that such holder is withdrawing his election to have such
Discount Notes purchased;
(vii) that holders whose Discount Notes are being purchased only in
part will be issued new Discount Notes equal in principal amount to the
unpurchased portion of the Discount Notes surrendered, provided that each
Note purchased and each such new Discount 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 Discount Note Issuers shall, to
the extent lawful, (i) accept for payment Discount 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 Discount Notes or
portions thereof so tendered and (iii) deliver or cause to be delivered to the
Trustee Discount Notes so accepted together with an Officers' Certificate
stating the Discount Notes or portions thereof tendered to the Discount Note
Issuers. The Paying Agent shall promptly mail to each holder of Discount Notes
so accepted payment in an amount equal to the purchase price for such Discount
Notes, and the Discount Note Issuers shall execute and issue and the Trustee
shall promptly authenticate and mail to such holder, a new Discount Note equal
in principal amount to any unpurchased portion of the Discount Notes
surrendered; provided that each such new Discount 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 the Senior Subordinated Notes are outstanding, 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 Discount Note Issuers on a joint and several basis covenant to (i)
cause the borrowers thereunder to 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 and cause the issuers thereof to repay in full all
obligations in respect of the Senior Subordinated Notes or offer to repay in
full all obligations in respect of the Senior Subordinated Notes and repay the
obligations in respect of the Senior Subordinated Notes of each holder who has
accepted such offer or (ii) cause such borrowers and issuers to obtain the
requisite consent under the Senior Credit Facility and from the holders of the
Senior Subordinated Notes, respectively, to permit the repurchase of the
Discount Notes as described above. The Discount Note Issuers must first comply
with the covenant described in the preceding
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sentence before they shall be required to purchase Discount Notes in the event
of a Change of Control; provided that the Discount Note Issuers' failure to
comply with the covenant described in the preceding sentence constitutes an
Event of Default described in clause (iii) 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 Discount Notes may not be able to compel the
Discount Note Issuers to purchase the Discount Notes unless the Discount Note
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 and refinance all of the obligations in respect of the
Senior Subordinated Notes or obtain requisite consents from the holders of the
Senior Subordinated Notes. Failure by the Discount Note 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 Discount Note Issuer or any
Subsidiary thereof has issued any outstanding (i) Indebtedness that is
subordinated in right of payment to the Discount Notes or (ii) Preferred Stock,
and such Discount Note 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
Discount Note Issuers shall not consummate any such offer or distribution with
respect to such subordinated Indebtedness or Preferred Stock until such time as
the Discount Note Issuers shall have paid the Change of Control Purchase Price
in full to the holders of Discount Notes that have accepted the Discount Note
Issuers' Change of Control Offer and shall otherwise have consummated the Change
of Control Offer made to holders of the Discount Notes and (B) the Discount Note
Issuers will not issue Indebtedness that is subordinated in fight of payment to
the Discount Notes or Preferred Stock with change of control provisions
requiring the payment of such Indebtedness or Preferred Stock prior to the
payment of the Discount 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 Discount
Notes exercise their right to require the Discount Note Issuers to purchase
Discount Notes, if such purchase constitutes a "tender offer" for purposes of
Rule 14e-1 under the Exchange Act at that time, the Discount Note Issuers will
comply with the requirements of Rule 14e-I as then in effect with respect to
such repurchase.
MERGER, CONSOLIDATION OR SALE OF ASSETS
Neither of the Discount Note Issuers will 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): (i) the Company
shall be the continuing Person, or the Person (if other than the Company) formed
by such consolidation or into which the Company is merged or to which the
properties and assets of the Company are transferred shall be a corporation (or
a limited partnership or a limited liability company) 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, as the case may be, under the Discount 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 or a limited liability company, there shall be a co-issuer of the
Discount 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)
under the covenant set forth under "Limitation on Additional Indebtedness."
Notwithstanding anything in this "Merger, Consolidation or Sale of Assets"
provision to the contrary but subject to the "Change of Control Offer"
provisions above, (a) either of the Company or Capital may merge with or into,
or consolidate with, the other, and any Subsidiary of THL that is a holding
company (with no assets other than partnership interests in the Company and no
liabilities) may
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merge with and into the Company, in either case subject only to 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 and no liabilities
immediately prior to such transaction, without regard to the requirements of
clause (iv) of the immediately preceding sentence so long as the surviving or
consolidated entity or transferee, as the case may be, shall, immediately after
giving effect to such transaction, directly own at least 99% of the voting and
economic power of the Common Stock of TWP. Nothing in this "Merger,
Consolidation and Sale of Assets" provision shall limit any merger or
consolidation involving TWP or Capital II so long as such merger or
consolidation is not with or into the Company or Capital.
In connection with any consolidation, merger or transfer of assets
contemplated by this provision, the Discount Note 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.
EVENTS OF DEFAULT
The following events will be defined in the Indenture as "Events of
Default":
(i) default in payment of any Accreted Value, principal of, or
premium, if any, on the Discount Notes whether at maturity, upon
acceleration or redemption or otherwise when due;
(ii) default for 30 days in payment of any interest on the Discount
Notes;
(iii) default by either of the Discount Note Issuers or any Restricted
Subsidiary in the observance or performance of any other covenant in the
Discount 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 Discount Notes then outstanding;
(iv) 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 Discount Note 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;
(v) 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 Discount Note 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; and
(vi) certain events involving bankruptcy, insolvency or reorganization
of either of the Discount Note Issuers or any Restricted Subsidiary
thereof.
The Indenture will provide that the Trustee may withhold notice to the
holders of the Discount Notes of any default (except in payment of principal or
premium, if any, or interest on the Discount Notes) if the Trustee considers it
to be in the best interest of the holders of the Discount 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 Discount Note Issuers or the holders of not less than 25% in
aggregate principal amount at maturity of the Discount Notes then outstanding by
written notice to the Discount Note Issuers and the Trustee may declare the
Discount Notes to be immediately due and payable in an amount equal to (x) the
Accreted Value of the Discount Notes outstanding on the date of acceleration, if
such declaration is made on or prior to November 15, 2002, or (y) the entire
principal amount at maturity of the Discount Notes outstanding on the date of
acceleration plus accrued but unpaid interest, if any, to the date of
acceleration, if
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such declaration is made after November 15, 2002, and such amounts shall become
immediately due and payable or if there are any amounts outstanding under the
Senior Credit Facility or the Senior Subordinated Notes, such amounts shall
become due and payable upon the first to occur of an acceleration of amounts
outstanding under the Senior Credit Facility or the Senior Subordinated Notes or
five business days after receipt by the Company, the representative of the
lenders under the Senior Credit Facility and the trustee under the indenture
relating to the Senior Subordinated Notes of notice of acceleration of the
Discount 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 at maturity of outstanding
Discount Notes may, under certain circumstances, rescind and annul such
acceleration if all existing Events of Default, other than nonpayment of
accelerated Accreted Value, 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 Accreted
Value or principal and all premium, if any, and interest amount with respect to
all of the Discount Notes shall be due and payable immediately without any
declaration or other act on the part of the Trustee or the holders of the
Discount Notes.
The holders of a majority in principal amount at maturity of the Discount
Notes then outstanding shall have the right to waive any existing default or
compliance with any provision of the Indenture or the Discount 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 Discount 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 at maturity of the outstanding Discount 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 Discount 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 Discount Note on or after
the respective due dates expressed in such Discount Note.
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture will provide that the Discount Note Issuers may elect either
(a) to defease and be discharged from any and all obligations with respect to
the Discount Notes (except for the obligations to register the transfer or
exchange of such Discount Notes, to replace temporary or mutilated, destroyed,
lost or stolen Discount Notes, to maintain an office or agency in respect of the
Discount Notes and to hold monies for payment in trust) ("defeasance") or (b) to
be released from their obligations with respect to the Discount 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
at maturity and interest in accordance with their terms will provide money, in
an amount sufficient to pay the principal at maturity of, premium, if any, and
interest on the Discount 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 Discount Note
Issuers have delivered to the Trustee an Opinion of Counsel (as specified in the
Indenture) (i) 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 (ii) describing either a private ruling concerning the
Discount Notes or a published ruling of the Internal Revenue Service, to the
effect that holders of the Discount 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.
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MODIFICATION OF INDENTURE
From time to time, the Discount Note Issuers and the Trustee may, without
the consent of holders of the Discount Notes, amend the Indenture or the
Discount Notes or supplement the Indenture for certain specified purposes,
including providing for uncertificated Discount Notes in addition to
certificated Discount 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 Discount Note Issuers
and the Trustee, with the consent of holders of at least a majority in principal
amount at maturity of the outstanding Discount Notes, to modify or supplement
the Indenture or the Discount Notes, except that no such modification shall,
without the consent of each holder affected thereby, (i) reduce the amount of
Discount Notes whose holders must consent to an amendment, supplement, or waiver
to the Indenture or the Discount Notes, (ii) reduce the rate of or change the
time for payment of interest on any Note, (iii) reduce the Accreted Value or
principal at maturity of or premium on or change the stated maturity of any
Note, (iv) make any Discount Note payable in money other than that stated in the
Discount Note or change the place of payment from New York, New York, (v) change
the amount or time of any payment required by the Discount Notes or reduce the
premium payable upon any redemption of Discount Notes, or change the time before
which no such redemption may be made, (vi) waive a default in the payment of the
principal of, interest on, or redemption payment with respect to any Note, (vii)
take any other action otherwise prohibited by the Indenture to be taken without
the consent of each holder affected thereby or (viii) affect the ranking of the
Discount Notes in a manner adverse to the Holders.
REPORTS TO HOLDERS
So long as the Discount Note Issuers are subject to the periodic reporting
requirements of the Exchange Act, they will continue to furnish the information
required thereby to the Commission and to the holders of the Discount Notes. The
Indenture will provide that even if the Company is entitled under the Exchange
Act not to furnish such information to the Commission or to the holders of the
Discount Notes, it will nonetheless continue to furnish such information to the
Commission and holders of the Discount Notes.
COMPLIANCE CERTIFICATE
The Discount Note Issuers will deliver to the Trustee on or before 120 days
after the end of the Discount Note 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 Discount 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 Senior Subordinated Notes.
TRANSFER AND EXCHANGE
Holders of the Discount Notes may transfer or exchange the Discount Notes
in accordance with the Indenture. The Registrar under such 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
Indentures. The Registrar is not required to transfer or exchange any Discount
Note selected for redemption. Also, the Registrar is not required to transfer or
exchange any Discount Note for a period of 15 days before selection of the
Discount Notes to be redeemed.
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The Discount Notes will be issued in a transaction exempt from registration
under the Securities Act and will be subject to the restrictions on transfer
described in "Notice to Investors."
The registered holder of a Discount 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. Reference is made 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.
"Accreted Value" means, as of any date prior to November 15, 2002, an
amount per $1,000 principal amount at maturity of Discount Notes that is equal
to the sum of (a) $561.16 and (b) the portion of the excess of the principal
amount at maturity of each Discount Note over $561.16 which shall have been
amortized on a daily basis and compounded semi-annually on each May 15 and
November 15 at the rate of 11 7/8% per annum from the Issue Date through the
date of determination computed on the basis of a 360-day year of twelve 30-day
months; and, as of any date on or after November 15, 2002, the Accreted Value of
each Discount Note shall mean the aggregate principal amount at maturity of such
Note.
"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.
"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 in any single
transaction or series of related transactions having a fair market value in
excess of $2,000,000 of (a) any Capital Stock of or other equity interest in any
Restricted Subsidiary of the Discount Note Issuers, (b) all or substantially all
of the assets of the Discount Note Issuers, (c) real property or (d) all or
substantially all of the assets of a division, line of business or comparable
business segment of the Discount Note Issuers, provided that Asset Sales shall
not include (i) 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 Discount Note Issuers 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 (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 Discount Note Issuers 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 Discount Note Issuers after
such Asset Sale, including, without limitation, severance, healthcare, pension
and other postemployment 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 Discount Note Issuers from such
Asset Sale or other disposition upon the liquidation or conversion of such notes
or noncash 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
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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 clauses (iii) (a) or (iii) (b), and that have not been the basis
for an Excess Proceeds Offer in accordance with clause (iii) (c), of the first
paragraph of "Certain Covenants -- Limitation on Certain Asset Sales."
"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 therefor and (iii) 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" means TWP Capital Corp., a Delaware corporation and one of the
Discount Note Issuers.
"Capital II" means TWP Capital Corp. II, a Delaware corporation and a
Wholly-Owned Subsidiary of TWP.
"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: (i) any Person (including a Person's Affiliates and associates), other
than a Permitted Holder, becomes the beneficial owner (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 or TCC, (ii) any Person (including a Person's Affiliates and
associates), other than a Permitted Holder, becomes the beneficial owner of more
than 33 1/3% of the total voting power of the Common Stock of the Company or
TCC, and the Permitted Holders beneficially own, in the aggregate, a lesser
percentage of the total voting power of the Common Stock of the Company or TCC,
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, (iii) the Company ceases to
directly own 99% of the total voting and economic power of the Common Stock of
TWP, (iv) the admission of any Person as a general partner of the Company 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 the Company as in effect on
the Issue Date, (v) there shall be consummated any consolidation or merger of
either Discount Note Issuer in which such Discount Note Issuer is not the
continuing or surviving corporation or pursuant to which the Common Stock of
such Discount Note Issuer would be converted into cash, securities or other
property, other than a merger or consolidation of such Discount Note Issuer in
which the beneficial owners of the Common Stock of such Discount Note 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 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.
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"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.
"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 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 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 (other than TWP, if the
Person in question is the Company) that is subject to any restriction or
limitation on the payment of dividends or the making of other distributions
(other than pursuant to the Discount Notes or the Indenture) 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
Discount Note 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.
"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.
"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 Discount 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
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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 Discount 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 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 Discount Note Issuers each
of the foregoing items shall be determined on a consolidated basis with respect
to the Discount Note 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 TWP or in any 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).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"First Union" means First Union Corporation.
"GAAP" means generally accepted accounting principles consistently applied
as in effect in the United States from time to time.
"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," "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
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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 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 Discount Note
Issuers, Disqualified Capital Stock of the Discount Note 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.
"Individual Investors" means the Management Investors and the former
Chairman of the Company.
"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 Discount Note 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 Discount Notes are first issued by the
Discount Note 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,
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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, TWP or TCC and such current or former employees
in existence on the Issue Date or pursuant to agreements between the Company and
then current or former employees with substantially similar terms regarding such
issuance entered into after the Issue Date.
"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 a
Discount Note Issuer, the aggregate net proceeds received by such Discount Note
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 Discount Note 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).
"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.
"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 $2.0
million and (B) in connection with all such transfers following the Issue Date
shall not exceed $5.0 million in the aggregate.
"Permitted Holders" means, collectively, (i) the Company and TCC, (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:
(i) Indebtedness (A) of any Restricted Subsidiary (1) arising under or
in connection with the Senior Credit Facility in an amount, when taken
together with the amount of any outstanding Indebtedness described in
clause (B) below, 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 (2) 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
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commitments available under the Senior Credit Facility and (B) of the
Company or Capital (as co-borrowers with TWP) that has been reinstated
under the Senior Credit Facility as a result of the failure of any assets
to be transferred to TransWestern in the Asset Drop-Down, but only to the
extent of the value of the assets not so transferred and only for so long
as the representations in the Senior Credit Facility relating thereto
remain untrue;
(ii) Indebtedness under the Discount Notes;
(iii) Indebtedness under the Senior Subordinated Notes and the
guarantees thereof;
(iv) Indebtedness not covered by any other clause of this definition
which is outstanding on the date of the Indenture;
(v) Indebtedness of the Company to any Restricted Subsidiary and
Indebtedness of any Restricted Subsidiary to the Company or another
Restricted Subsidiary;
(vi) Interest Rate Agreements;
(vii) Refinancing Indebtedness;
(viii) Indebtedness under Commodity Hedge Agreements entered into in
the ordinary course of business consistent with reasonable business
requirements and not for speculation;
(ix) Indebtedness consisting of guarantees made in the ordinary course
of business by the Company or its Subsidiaries of obligations of the
Discount Note Issuers or any of their Subsidiaries, which obligations are
otherwise permitted under the Indenture;
(x) 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 Company and its
Subsidiaries in connection with such Asset Sale;
(xi) 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;
(xii) the Management Subordinated Notes; and
(xiii) additional Indebtedness of the Company or any of its
Subsidiaries (other than Indebtedness specified in clauses (i) through (xi)
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:
(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;
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(iv) an Investment that is made by the Company 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
Discount Note Issuers 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";
(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 $1.0 million 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 (v) under the definition of Permitted
Indebtedness;
(viii) Investments existing on the date of the 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 $5.0 million for all such Investments
from and after the 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 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 any shares of stock of any corporation
existing at the time such corporation becomes a Restricted Subsidiary of the
Company; provided that such Liens are not incurred in connection with, or in
contemplation of, such corporation becoming a Restricted Subsidiary of the
Company, (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 Discount Note 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 (xi) 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',
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, (vii) Liens for taxes, assessments or governmental charges that
are being contested in good faith by appropriate proceedings, (viii) Liens
existing on the Issue Date; (ix) any extensions, substitutions, replacements or
renewals of the foregoing, (x) Liens
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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, (xi) 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), (xii) Liens arising
from the filing, for notice purposes only of financing statements in respect of
operating leases, (xiii) Liens arising by operation of law in favor of
depositary banks and collecting banks, incurred in the ordinary course of
business, (xiv) Liens consisting of restrictions on the transfer of securities
pursuant to applicable federal and state securities laws, (xv) interests of
lessors and licensors under leases and licenses to which the Discount Note
Issuers is a party, (xvi) with respect to any real property occupied by the
Company, 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 and (xvii) Liens on assets of the Company or Capital not
transferred to TransWestern in the Asset Drop-Down that have been reinstated
under the Senior Credit Facility, but only to the extent of the value of the
assets not so transferred and only for so long as the representations in the
Senior Credit Facility relating thereto shall remain untrue.
"Permitted Tax Distributions" means distributions by the Company or TWP 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
the Company or TWP, as the case may be, resulting from the taxable income of the
Company or TWP, 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 the Company
or TWP, as the case may be, to the extent such losses have not previously been
deemed to reduce the taxable income of the Company or TWP, 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 the Company or TWP,
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, Capital,
TWP, Capital II 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
(i) 100% of such cost and (ii) reasonable fees and expenses of such Person
incurred in connection therewith.
"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 the Company, TCC, TWP
Recapitalization Corp., THL and certain limited partners of the Company and TCC,
as amended as of September 30, 1997.
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"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
(i) the Refinancing Indebtedness is subordinated to the Discount 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 Discount Notes, (iii) the
portion, if any, of the Refinancing Indebtedness that is scheduled to mature on
or prior to the maturity date of the Discount 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 Discount 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
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.
"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 Discount Note Issuers or any Restricted Subsidiary of the Discount Note
Issuers or any payment made to the direct or indirect holders (in their
capacities as such) of Capital Stock of the Discount Note Issuers or any
Restricted Subsidiary of the Discount Note 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 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 subordinated in
right of payment to the Discount 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
Discount Note Issuers therein and (viii) forgiveness of any Indebtedness of an
Affiliate of the Discount Note Issuers (other than a Restricted Subsidiary) to
the Discount Note 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. In no event shall the term "Restricted Payment" include any payment
from TWP to the Company (in its capacity as a member of TWP).
"Restricted Subsidiary" means TWP and any other Subsidiary of the Company
other than an Unrestricted Subsidiary. The Board of Directors of the Company may
designate any Unrestricted Subsidiary
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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 Discount
Note Issuers could have 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 TWP, Capital II, 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 TWP 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 Subordinated Notes" means the 9 5/8% Senior Subordinated Notes due
2007 of TWP and Capital II.
"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.
"TCC" means TransWestern Communications Company, Inc., a Delaware
corporation, which is the general partner of the Company and the managing member
of TWP.
"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 $500.0 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 (iii) 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 (i) and
(ii).
"THL" means Thomas H. Lee Equity Fund III, L.P.
"TWP" means TransWestern Publishing Company LLC, a Delaware limited
liability company.
"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
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compliance with the covenant set forth under "Limitation on Restricted Payments"
and with the indenture relating to the Senior Subordinated Notes. 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. Notwithstanding the
foregoing, TWP will be deemed a Wholly-Owned Subsidiary of the Company so long
as the Company owns at least 99% of the total voting and economic power of the
Common Stock of TWP.
BOOK-ENTRY; DELIVERY AND FORM
Exchange Discount Notes initially will be represented by one or more notes
in registered, global form without interest coupons (collectively, the "Global
Discount Note"). The Global Discount 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.
Discount Notes sold to Institutional Accredited Investors may be represented by
the Global Discount Note or, if such an investor may not hold an interest in the
Global Discount Note, a certificated Discount Note.
Except as set forth below, the Global Discount 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 Discount Note may not be
exchanged for Discount Notes in certificated form except in the limited
circumstances described below.
The Discount Notes may be presented for registration of transfer and
exchange at the offices of the Registrar.
DTC has advised the Discount Note Issuers 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 (including the Initial Purchasers),
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 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 the Discount Note Issuers that pursuant to procedures
established by it, (i) upon deposit of the Global Discount Note, DTC will credit
the accounts of Participants designated by the Initial Purchasers with portions
of the principal amount of the Global Discount Note and (ii) ownership of such
interests in the Global Discount 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
Discount 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 Discount 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 Discount 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.
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Except as described below, owners of interests in the Global Discount Note
will not have Discount Notes registered in their names, will not receive
physical delivery of Discount Notes in certificated form and will not be
considered the registered owners or holders thereof under the Indenture for any
purpose.
Payments in respect of the Accreted Value or principal of (and premium, if
any) and interest on the Global Discount 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. Under the terms of the Discount Note
Indenture, the Discount Note Issuers and the Trustee will treat the persons in
whose names the Discount Notes, including the Global Discount Note, are
registered as the owners thereof for the purpose of receiving such payments and
for any and all other purposes whatsoever. Consequently, none of the Discount
Note Issuers or the Trustee nor any agent of the Discount Note Issuers or the
Trustee has or will have any responsibility or liability for (i) 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 Discount 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 Discount Note, or (ii) any other
matter relating to the actions and practices of DTC or any of the Participants
or the Indirect Participants.
DTC has advised the Discount Note Issuers that its current practice, upon
receipt of any payment in respect of securities such as the Discount Notes
(including Accreted Value or 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
Discount Notes will be governed by standing instructions and customary practices
and will not be the responsibility of DTC, the Trustee or the Discount Note
Issuers. Neither the Discount Note Issuers nor the Trustee will be liable for
any delay by DTC or any of the Participants in identifying the beneficial owners
of the Discount Notes, and the Discount Note Issuers 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 Discount Note for all
purposes.
Interests in the Global Discount 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 the Discount Note Issuers that it will take any action
permitted to be taken by a holder of Discount Notes only at the direction of one
or more Participants to whose account with DTC interests in the Global Discount
Note are credited and only in respect of such portion of the aggregate principal
amount of the Discount 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 Discount Notes for Certificated Discount Notes"
occurs, DTC reserves the right to exchange the Global Discount Note for Discount
Notes in certificated form and to distribute such Discount Notes to its
Participants.
The information in this section concerning DTC and its book-entry system
has been obtained from sources that the Company believes to be reliable, but the
Company takes no responsibility for the accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Discount 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 the Discount Note Issuers or
the Trustee nor any agent of the Discount Note Issuers 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.
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Exchange of Book-Entry Discount Notes for Certificated Discount Notes
The Global Discount Note is exchangeable for definitive Discount Notes in
registered certificated form if (i) DTC (x) notifies the Discount Note Issuers
that it is unwilling or unable to continue as depository for the Global Discount
Note and the Discount Note Issuers thereupon fail to appoint a successor
depository or (y) has ceased to be a clearing agency registered under the
Exchange Act, (ii) the Discount Note Issuers, at their option, notify the
Trustee in writing that they elect to cause the issuance of the Discount Notes
in certificated form or (iii) there shall have occurred and be continuing a
Default or an Event of Default with respect to the Discount Notes. In all cases,
certificated Discount Notes delivered in exchange for the Global Discount 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).
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of certain material U.S. federal income tax
consequences of the acquisition, ownership and disposition of the Discount
Notes. This discussion is for general information purposes only and does not
consider all aspects of U.S. federal income taxation that may be relevant to the
purchase, ownership and disposition of the Discount Notes by a prospective
investor in light of such investor's personal circumstances. In particular, this
discussion does not address the U.S. federal income tax consequences of the
acquisition, ownership and disposition of Discount 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 Discount
Notes as part of a "straddle," "hedge," "conversion transaction" or other
integrated investment, 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 U.S. federal alternative minimum tax
consequences, and does not describe any tax consequences arising under U.S.
federal gift and estate or other U.S. federal tax laws (except to the limited
extent set forth below under "Non-U.S. Holders") or under the tax laws of any
state, local or foreign jurisdiction.
This discussion is based upon the Code, existing regulations thereunder,
and current administrative rulings and court decisions. All of the foregoing are
subject to change, possibly on a retroactive basis, and any such change could
affect the continuing validity of this discussion.
EXCHANGE OF DISCOUNT NOTES
The Discount Note Issuers believe that the exchange of Old Discount Notes
for Exchange Discount Notes pursuant to the Discount Note Exchange Offer will
not be treated as an "exchange" for federal income tax purposes because the
Exchange Discount Notes will not be considered to differ materially in kind or
extent from the Old Discount Notes. Rather, the Exchange Discount Notes received
by a holder will be treated as a continuation of the Old Discount Notes in the
hands of such holder. As a result, there will be no federal income tax
consequences to holders exchanging Old Discount Notes for Exchange Discount
Notes pursuant to the Discount Note Exchange Offer.
Persons considering the exchange of Old Discount Notes should consult their
own tax advisors concerning the application of U.S. federal income, estate and
other tax laws, as well as the laws of any state, local or foreign taxing
jurisdiction, to their particular situations.
U.S. HOLDERS
The following discussion is limited to the U.S. federal income tax
consequences relevant to a holder of a Discount Note that is (i) a citizen or
resident (as defined in Section 7701(b)(1) of the Code) of the United States,
(ii) a corporation or partnership organized in or under the laws of the United
States or any political subdivision thereof or therein, (iii) an estate the
income of which is subject to U.S. federal income tax regardless of its source,
or (iv) a trust if a court within the United States is able to exercise primary
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supervision over the trust's administration and one or more United States
persons have the authority to control all its substantial decisions (a "U.S.
Holder"). Certain U.S. federal income tax consequences relevant to a holder
other than a U.S. Holder are discussed separately below.
ORIGINAL ISSUE DISCOUNT ON THE DISCOUNT NOTES
The Discount Notes were issued with original issue discount ("OID"), and
U.S. Holders of the Discount Notes (including cash basis holders) will be
required to include such OID in income as interest income on a constant yield
basis, generally in advance of the receipt of the cash payments to which such
income is attributable and generally in increasing amounts until November 15,
2002.
The total amount of OID with respect to a Discount Note will be equal to
the excess of the "stated redemption price at maturity" of such Discount Note
over its "issue price". The "stated redemption price at maturity" of a Discount
Note will be the sum of all payments (other than payments of Penalty Interest,
as defined below), whether denominated as interest or principal, required to be
made on such Discount Note other than payments of "qualified stated interest".
Qualified stated interest is stated interest that is unconditionally payable at
least annually at a single fixed rate that appropriately takes into account the
length of the interval between payments. Because interest is not payable on the
Discount Notes until November 15, 2002, none of the interest payments on a
Discount Note will constitute qualified stated interest and all such payments
will be included in the Discount Note's stated redemption price at maturity. The
"issue price" of a Discount Note will be the first price to the public (not
including bond houses, brokers, or similar persons or organizations acting in
the capacity of underwriters or wholesalers) at which a substantial portion of
the Discount Notes are initially sold.
The amount of OID required to be included in a U.S. Holder's income with
respect to a Discount Note for any taxable year (regardless of whether such
holder uses the cash or accrual method of accounting) is the sum of the daily
portions of OID with respect to the Discount Note for each day during the
taxable year or portion thereof in which such holder holds such Discount Note. A
daily portion is determined by allocating to each day in any "accrual period" a
pro rata portion of the OID allocable to that accrual period. Accrual periods
with respect to a Discount Note may be of any length selected by the holder and
may vary in length over the term of the Discount Note as long as (i) no accrual
period is longer than one year and (ii) each scheduled payment of interest or
principal on the Discount Note occurs on either the first or final day of an
accrual period. The amount of OID allocable to each accrual period will be the
product of the adjusted issue price of the Discount Note at the beginning of
that accrual period and the yield to maturity of such Discount Note (determined
on the basis of a compounding assumption that reflects the length of the accrual
period). The adjusted issue price of a Discount Note at the beginning of an
accrual period will be its original issue price, increased by all previously
accrued OID (disregarding any reduction on account of acquisition premium,
described below) and reduced by the amount of all previous cash payments (other
than payments of Penalty Interest, described below) on the Discount Note. The
yield to maturity is the interest rate, expressed as a constant annual interest
rate, that when used in computing the present value of all payments of principal
and interest (other than payments of Penalty Interest, described below) to be
paid in connection with a Discount Note produces an amount equal to the issue
price of the Discount Note.
Treatment of Additional Discount Notes. The issuance of additional notes
("Additional Discount Notes") in lieu of cash interest is not treated as a
payment of interest. Instead, the underlying Discount Note and any Additional
Discount Notes that may be issued thereon are treated as a single debt
instrument under the OID rules. Moreover, because the terms of an Additional
Discount Note and the underlying Discount Note are identical so that the two are
fungible in all respects, the issuance of an Additional Discount Note should be
treated simply as a division of the underlying Discount Note, so that a U.S.
Holder's tax basis and adjusted issue price in the underlying Discount Note
should be allocated between the underlying Discount Note and any Additional
Discount Notes in proportion to their relative principal amounts. That is, upon
the issuance of an Additional Discount Note with respect to a Discount Note, the
underlying Discount Note and the Additional Discount Note derived therefrom are
treated as initially having the same adjusted issue price and inherent amount of
OID per dollar of principal amount. The underlying Discount Note and the
Additional Discount Note derived therefrom also would be treated as having the
same yield to maturity. Similar
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<PAGE> 133
treatment would be applied when new Additional Discount Notes were issued with
respect to outstanding Additional Discount Notes.
The Discount Note Issuers will provide certain information to the IRS, and
will furnish annually to record holders of the Discount Notes information with
respect to OID accruing during the calendar year. Because this information will
be based upon the adjusted issue price of the Discount Note as if the holder
were the original holder of the instrument who purchased it at the original
price, holders who purchase the Discount Notes for an amount other than the
original issue price will be required to determine for themselves the amount of
OID with respect to the Discount Notes they hold.
ACQUISITION OR BOND PREMIUM AND MARKET DISCOUNT
Acquisition Premium. A U.S. Holder who purchases a Discount Note for an
amount that is greater than its adjusted issue price as of the purchase date
will be considered to have purchased such Discount Note at an "acquisition
premium". The amount of OID that such holder must include in its gross income
with respect to such Discount Note for any taxable year is generally reduced by
the portion of such acquisition premium properly allocable to such year.
Bond Premium. If a U.S. Holder purchases a Discount Note and immediately
after the purchase the adjusted basis of the Discount Note exceeds the sum of
all amounts payable on the instrument after the purchase date (other than
qualified stated interest), the Discount Note has "bond premium". A U.S. Holder
may elect to amortize such bond premium over the remaining term of such Discount
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 Discount 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 Discount Note.
An election to amortize premium will apply to amortizable bond premium on
all Discount Notes and other bonds, the interest on which is includable 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.
Market Discount. If a U.S. Holder purchases a Discount Note for an amount
that is less than its "revised issue price" as of the purchase date, the amount
of the difference generally will be treated as "market discount," unless such
difference is less than a specified de minimis amount. The Code provides that
the revised issue price of a Discount Note equals its issue price plus the
amount of OID includable in the income of all holders for periods prior to the
purchase date (disregarding any deduction for acquisition premium) reduced by
the amount of all prior cash payments (other than payments of Penalty Interest,
described below) on the Discount Notes. Subject to a de minimis exception, a
U.S. Holder will be required to treat any gain recognized on the sale, exchange,
redemption, retirement or other disposition of the Discount Notes as ordinary
income to the extent of the accrued market discount that has not previously been
included in income. In addition, a U.S. Holder may be required to defer, until
the maturity date of the Discount Note or its earlier disposition in a taxable
transaction, the deduction of a portion of the interest expense on any
indebtedness incurred or continued to purchase or carry such Discount Note.
Any market discount will be considered to accrue on a straight line basis
during the period from the date of acquisition to the maturity date of the
Discount Note, unless the holder elects to accrue market discount on a constant
interest method. A U.S. Holder of a Discount Note may elect to include market
discount in income currently as it accrues (under either the straight line or
constant interest method). This election to include market discount currently,
once made, applies to all market discount obligations acquired in or after the
first taxable year to which the election applies and may not be revoked without
the consent of the IRS. If a U.S.
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<PAGE> 134
Holder of Discount Notes makes such an election, the foregoing rules with
respect to the recognition of ordinary income on sales and other dispositions of
such instruments and with respect to the deferral of interest deductions on debt
incurred or maintained to purchase or carry such debt instruments would not
apply.
ELECTION TO TREAT ALL INTEREST AS OID
A U.S. Holder of a Discount Note may elect, subject to certain limitations,
to include all interest that accrues on the Discount Note in gross income on a
constant yield basis. For purposes of this election, interest includes stated
interest, OID, market discount, de minimis market discount and unstated
interest, as adjusted by any amortizable bond premium or acquisition premium.
In applying the constant yield method to a Discount Note with respect to
which this election has been made, the issue price of the Discount Note will
equal the holder's basis in the Discount Note immediately after its acquisition,
the issue date of the Discount Note will be the date of its acquisition by the
holder, and no payments on the Discount Note will be treated as payments of
qualified stated interest. The election generally will apply only to the
Discount Note with respect to which it is made and may not be revoked without
the consent of the IRS.
If the election to apply the constant yield method to all interest on a
Discount Note is made with respect to a Discount Note on which there is market
discount, the electing holder will be treated as having made the election
described above under "Acquisition or Bond Premium and Market Discount -- Market
Discount" to include market discount in income currently over the life of all
debt instruments held or thereafter acquired by such holder.
EXCHANGE DISCOUNT NOTES
Neither an exchange of Discount Notes for Exchange Discount Notes of the
Discount Note Issuers with terms identical to those of the Discount Notes nor
the filing of a registration statement with respect to the resale of the
Discount Notes should be a taxable event to holders of Discount 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 ("Penalty Interest") to the holder under certain
circumstances described under "The Discount Note Exchange Offer -- Purpose and
Effect of the Discount Note 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 AND RETIREMENT OF DISCOUNT NOTES
A holder's adjusted tax basis in a Discount Note will, in general, equal
the holder's cost for the Discount Note, increased by any amounts included in
income as OID, market discount or de minimis market discount which the holder
has previously elected to accrue in gross income on an annual basis and reduced
by any amortized premium which the holder has previously elected to offset
against interest on the Discount Note and any cash payments (other than payments
of Penalty Interest) in respect of the Discount Note. Upon the sale, exchange,
redemption, retirement or other disposition of a Discount Note, a holder
generally will recognize gain or loss equal to the difference between the amount
realized on such sale, exchange, redemption or retirement and the holder's tax
basis in the Discount Note. Except as described above regarding market discount,
gain or loss recognized by a holder on the sale, exchange, redemption or
retirement of a Discount Note will be capital gain or loss and will, in the case
of individuals, be long-term capital gain or loss subject to a maximum rate of
20% if the Discount Note has been held for more than eighteen months at the time
of such disposition. An individual will be taxed on his or her net capital gain
at a rate of 28% for property held for 18 months or less but more than one year.
Special rules (and generally lower maximum rates) apply for individuals in lower
tax brackets.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Under the Code, a U.S. Holder of a Discount 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 Discount Note thereof. This withholding applies
only if
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<PAGE> 135
a U.S. Holder (i) fails to furnish its social security or other taxpayer
identification number ("TIN") within a reasonable time after a request therefor,
(ii) furnishes an incorrect TIN, (iii) fails to report interest or dividends
properly, or (iv) 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 Discount 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 certain U.S. federal income and
estate tax consequences relevant to a holder of a Discount Note that is not a
U.S. Holder (a "Non-U.S. Holder").
This discussion does not deal with all aspects of U.S. federal income and
estate taxation that may be relevant to the purchase, ownership or disposition
of the Discount Notes by any particular Non-U.S. Holder in light of such
holder's personal circumstances, including holding the Discount 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 United States 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 Discount Note.
For purposes of the following discussion, interest and gain on the sale,
exchange or other disposition of a Discount Note will be considered "U.S. trade
or business income" if such income or gain is (i) effectively connected with the
conduct of a U.S. trade or business and (ii) in the case of a qualified resident
of a country having an applicable income tax treaty with the United States
containing a permanent establishment provision, attributable to a U.S. permanent
establishment (or to a fixed base) in the United States.
STATED INTEREST AND OID
Generally, any interest and OID, if any, actually paid to a Non-U.S. Holder
of a Discount Note that is not U.S. trade or business income will not be subject
to U.S. federal income tax (or withholding of tax) if such amounts qualify as
"portfolio interest". Interest and OID on the Discount Notes will qualify as
portfolio interest if (i) the Non-U.S. Holder does not actually or
constructively own 10% or more of the total capital or profits interests in the
Company and is not a "controlled foreign corporation" with respect to which
either of the Discount Note Issuers is a "related person" within the meaning of
Section 881(c)(3)(C) of the Code or (ii) either (a) 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 or (b) a
securities clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business (a
"financial institution") certifies, under penalties of perjury, that such
statement has been received from the beneficial owner by it or by another
financial institution and furnishes the Discount Note Issuers or their agent
with a copy thereof.
The gross amount of payments to a Non-U.S. Holder of interest and OID, if
any, 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 withholding tax rate and, if the
Non-U.S. Holder is a foreign corporation, may be subject to a branch profits tax
equal to 30% of its "effectively connected earnings and profits," as adjusted
for certain items, unless it qualifies for a lower rate under an applicable
treaty. 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 as of January 1,
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<PAGE> 136
1999, the Forms 1001 and 4224 may be replaced by Form W-8. Also under
regulations effective as of January 1, 1999, a Non-U.S. Holder who is claiming
the benefits of a tax treaty may be required to obtain a U.S. taxpayer
identification number and to provide certain documentary evidence issued by
foreign governmental authorities to prove residence in the foreign country.
Certain special procedures are provided in the regulations for payments through
qualified intermediaries.
SALE, EXCHANGE OR REDEMPTION OF DISCOUNT NOTES
Except as described below and subject to the discussion concerning backup
withholding, gain realized by a Non-U.S. Holder on the sale, exchange or
redemption of a Discount Note generally will not be subject to U.S. federal
income tax, unless (i) such gain is U.S. trade or business income, (ii) subject
to certain exceptions, the Non-U.S. Holder is an individual who holds the
Discount Note as a capital asset and is present in the United States for 183
days or more in the taxable year of the disposition or (iii) the Non-U.S. Holder
is subject to certain provisions applicable to certain U.S. expatriated persons.
FEDERAL ESTATE TAX
Discount Notes held (or treated as held) by an individual who is a Non-U.S.
Holder at the time of his or her death will not be subject to U.S. federal
estate tax, provided that any interest on the Discount Notes would have
qualified as portfolio interest if received by such individual at the time of
his or her death.
INFORMATION REPORTING AND BACKUP WITHHOLDING
The Discount Note Issuers must report annually to the IRS and to each
Non-U.S. Holder any interest and OID, if any, 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 also may
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.
The regulations provide that backup withholding and information reporting
will not apply to payments of principal on the Discount Notes by the Company to
a Non-U.S. Holder if such holder certifies as to its non-U.S. status under
penalties of perjury or otherwise establishes an exemption (provided that
neither the Discount Note 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 Discount Notes to or
through the United States 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 Discount Note to or through a non-U.S. office of a non-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
(i) a "controlled foreign corporation" for U.S. federal income tax purposes or
(ii) 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 Discount
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).
Regulations effective as of January 1, 1999 provide similar rules but, in
the case of payment of proceeds inside the United States, may require an
additional certification that the beneficial owner has not and does not
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<PAGE> 137
expect to be present in the United States for a period of 183 days or more
during the year. Each Non-U.S. Holder should consult such Holder's own tax
advisor to determine the applicability of these regulations to its particular
situation.
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 Exchange Discount Notes for
its own account pursuant to the Discount Note Exchange Offer must acknowledge
that it will deliver a prospectus in connection with any resale of such Exchange
Discount 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 Exchange Discount Notes received in exchange for Old Discount Notes
where such Old Discount Notes were acquired as a result of market-making
activities or other trading activities. The Discount Note Issuers have agreed
that for a period of 180 days after the Expiration Date, they will make this
Prospectus, as amended or supplemented, available to any Participating
Broker-Dealer for use in connection with any such resale. In addition, until
, 1998 (90 days after the commencement of the Discount Note
Exchange Offer), all dealers effecting transactions in the Exchange Discount
Notes may be required to deliver a prospectus.
The Discount Note Issuers will not receive any proceeds from any sales of
the Exchange Discount Notes by Participating Broker Dealers. Exchange Discount
Notes received by Participating Broker-Dealers for their own account pursuant to
the Discount Note 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 Exchange Discount 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 Exchange Discount
Notes. Any Participating Broker-Dealer that resells the Exchange Discount Notes
that were received by it for its own account pursuant to the Discount Note
Exchange Offer and any broker or dealer that participates in a distribution of
such Exchange Discount Notes may be deemed to be an "underwriter" within the
meaning of the Securities Act and any profit on any such resale of Exchange
Discount 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 the Discount Note
Issuers 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 Exchange Discount
Notes will be passed upon for the Issuers by Kirkland & Ellis, Chicago, Illinois
(a partnership which includes professional corporations). Certain partners of
Kirkland & Ellis are also partners of KLANS Associates, a partnership that
invested in the Partnership and TCC in connection with the 1993 Acquisition. In
the Recapitalization, KLANS Associates received $2.1 million for the redemption
of all of its holdings of Partnership interests and for the sale of all of its
holdings of TCC common stock.
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EXPERTS
The consolidated financial statements of TransWestern Holdings L.P. at
April 30, 1996 and 1997 and for each of the three years in the period ended
April 30, 1997 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.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
TRANSWESTERN HOLDINGS L.P.
Report of Ernst & Young LLP, Independent Auditors..................................... F-2
Consolidated Balance Sheets as of April 30, 1996 and 1997 and October 31, 1997
(unaudited)......................................................................... F-3
Consolidated Statements of Operations for each of the three years in the period ended
April 30, 1997 and the six months ended October 31, 1996 and 1997 (unaudited)....... F-4
Consolidated Statements of Changes in Partnership Deficit for each of three years in
the period ended April 30, 1997 and for the six months ended October 31, 1997
(unaudited)......................................................................... F-5
Consolidated Statements of Cash Flows for each of the three years in the period ended
April 30, 1997 and the six months ended October 31, 1996 and 1997 (unaudited)....... F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE> 140
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Partners
TransWestern Holdings L.P.
We have audited the accompanying consolidated balance sheets of
TransWestern Holdings L.P. as of April 30, 1996 and 1997 and the related
consolidated statements of operations, changes in partnership deficit and cash
flows for each of the three years in the period ended April 30, 1997. These
consolidated financial statements are the responsibility of Holdings'
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial position of TransWestern
Holdings L.P. at April 30, 1996 and 1997 and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
April 30, 1997, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
San Diego, California
June 6, 1997, except for "Organization, Business
Activity and Basis of Presentation" under Note 1,
as to which the date is November 6, 1997
F-2
<PAGE> 141
TRANSWESTERN HOLDINGS L.P.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
APRIL 30,
--------------------- OCTOBER 31,
1996 1997 1997
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash.................................................... $ 1,320 $ 1,254 $ 2,223
Trade receivables (less allowance for doubtful accounts
of $5,314 in 1996 and $7,626 in 1997 ($7,771 at
October 31, 1997 (unaudited))........................ 21,449 23,279 17,230
Deferred directory costs................................ 5,667 6,412 8,417
Other current assets.................................... 765 518 475
-------- -------- --------
Total current assets...................................... 29,201 31,463 28,345
Property, equipment and leasehold improvements, net....... 2,759 2,840 2,881
Acquired intangibles, net................................. 12,867 12,093 9,281
Other assets, primarily debt issuance costs, net.......... 2,596 1,835 8,246
-------- -------- --------
$ 47,423 $ 48,231 $ 48,753
======== ======== ========
LIABILITIES AND PARTNERSHIP DEFICIT
Current liabilities:
Accounts payable........................................ $ 3,191 $ 3,901 $ 2,925
Salaries and benefits payable........................... 3,757 4,112 2,498
Other accrued liabilities............................... 1,636 1,503 4,753
Amount due general partner.............................. 754 805 --
Customer deposits....................................... 9,281 10,197 14,752
Current portion, long-term debt......................... 8,494 10,921 2,555
-------- -------- --------
Total current liabilities................................. 27,113 31,439 27,483
Long-term debt............................................ 75,916 67,514 173,875
Partnership deficit....................................... (55,606) (50,722) (152,605)
-------- -------- --------
$ 47,423 $ 48,231 $ 48,753
======== ======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 142
TRANSWESTERN HOLDINGS L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED APRIL 30, OCTOBER 31,
--------------------------- -----------------
1995 1996 1997 1996 1997
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues..................................... $69,845 $77,731 $91,414 $38,050 $38,254
Cost of sales.................................... 16,956 18,202 19,500 8,996 9,172
------- ------- ------- ------- -------
Gross profit................................... 52,889 59,529 71,914 29,054 29,082
Operating expenses:
Sales and marketing............................ 27,671 29,919 36,640 15,888 17,114
General and administrative..................... 13,279 14,276 16,821 7,870 7,893
Contributions to equity compensation plan...... 525 796 -- -- 5,543
------- ------- ------- ------- -------
Total operating expenses......................... 41,475 44,991 53,461 23,758 30,550
------- ------- ------- ------- -------
Income (loss) from operations.................... 11,414 14,538 18,453 5,296 (1,468)
Other income (expense), net...................... 470 375 48 18 (107)
Interest expense................................. (4,345) (6,630) (7,816) (4,029) (4,333)
------- ------- ------- ------- -------
(3,875) (6,255) (7,768) (4,011) (4,440)
------- ------- ------- ------- -------
Income (loss) before extraordinary item.......... 7,539 8,283 10,685 1,285 (5,908)
Extraordinary item............................... 392 1,368 -- -- 1,391
------- ------- ------- ------- -------
Net income (loss)................................ $ 7,147 $ 6,915 $10,685 $ 1,285 $(7,299)
======= ======= ======= ======= =======
</TABLE>
See accompanying notes.
F-4
<PAGE> 143
TRANSWESTERN HOLDINGS L.P.
STATEMENTS OF CHANGES IN CONSOLIDATED PARTNERSHIP DEFICIT
(IN THOUSANDS)
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
------- -------- ---------
<S> <C> <C> <C>
Balance at April 30, 1994................................... $ 45 $ 4,413 $ 4,458
Net income................................................ 71 7,076 7,147
Distributions to partners................................. (343) (33,983) (34,326)
------ -------- ---------
Balance at April 30, 1995................................... (227) (22,494) (22,721)
Net income................................................ 69 6,846 6,915
Distributions to partners................................. (406) (39,394) (39,800)
------ -------- ---------
Balance at April 30, 1996................................... (564) (55,042) (55,606)
Net income................................................ 106 10,579 10,685
Distributions to partners................................. (59) (5,742) (5,801)
------ -------- ---------
Balance at April 30, 1997................................... (517) (50,205) (50,722)
Net (loss) (unaudited).................................... 124 7,175 (7,299)
Contributions from partners (unaudited)................... 1,458 84,298 85,756
Equity transaction costs (unaudited)...................... 66 3,793 (3,859)
Distributions to partners (unaudited)..................... 2,985 173,496 (176,481)
------ -------- ---------
Balance at October 31, 1997 (unaudited)..................... $ (504) $(51,974) $(152,605)
====== ======== =========
</TABLE>
See accompanying notes.
F-5
<PAGE> 144
TRANSWESTERN HOLDINGS, L.P.
STATEMENTS OF CONSOLIDATED CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED APRIL 30, OCTOBER 31,
------------------------------ -------------------
1995 1996 1997 1996 1997
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................... $ 7,147 $ 6,915 $ 10,685 $ 1,285 $ (7,299)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Extraordinary item........................ 353 1,368 -- -- 1,391
Depreciation and amortization............. 4,593 4,691 6,399 3,122 3,274
Amortization of deferred debt issuance
costs.................................. 488 804 703 371 358
Provision for bad debts................... 6,429 7,069 8,920 3,653 3,747
Changes in operating assets and
liabilities net of effects from
purchase of directories:
Trade receivables...................... (2,810) (684) (4,142) 1,796 5,903
Write-off of doubtful accounts......... (5,718) (7,571) (6,608) (2,970) (3,601)
Deferred directory costs............... 600 97 (302) (1,316) (2,005)
Other current assets................... 269 (158) 247 174 42
Accounts payable....................... 967 (96) 710 (734) (976)
Accrued liabilities.................... 1,667 1,038 (1,136) (1,838) (660)
Accrued interest, non current.......... -- (1,054) 69 (17) 1,516
Customer deposits...................... 623 672 (243) 2,146 4,555
-------- -------- -------- -------- --------
Net cash provided by operating activities... 14,608 13,091 15,302 5,672 6,245
INVESTING ACTIVITIES
Purchase of property, equipment and
leasehold improvements.................... (496) (484) (1,034) (259) (580)
Increase in other assets.................... (2,342) (2,631) -- -- (8,182)
Payment for purchase of directories......... -- (5,229) (2,558) (2,558) --
-------- -------- -------- -------- --------
Net cash used for investing activities...... (2,838) (8,344) (3,592) (2,817) (8,762)
FINANCING ACTIVITIES
Proceeds from long-term debt................ 50,000 87,300 24,000 14,000 187,373
Repayments of long-term debt................ (27,224) (51,861) (29,975) (14,075) (89,303)
Equity transaction costs.................... -- -- -- -- (3,859)
Contributions from partner.................. -- -- -- -- 85,756
Partnership distributions................... (34,326) (39,800) (5,801) (2,800) (176,481)
-------- -------- -------- -------- --------
Net cash provided by (used for) financing
activities................................ (11,550) (4,361) (11,776) (2,875) 3,486
-------- -------- -------- -------- --------
Net increase (decrease) in cash............. 220 386 (66) (20) 969
Cash at beginning of period................. 714 934 1,320 1,320 1,254
-------- -------- -------- -------- --------
Cash at end of period....................... $ 934 $ 1,320 $ 1,254 $ 1,300 $ 2,223
======== ======== ======== ======== ========
Supplemental disclosure of cash flow
information:
Cash paid for interest...................... $ 3,066 $ 7,223 $ 7,131 $ 3,674 $ 2,459
======== ======== ======== ======== ========
</TABLE>
See accompanying notes.
F-6
<PAGE> 145
TRANSWESTERN HOLDINGS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS ARE IN THOUSANDS, INFORMATION SUBSEQUENT TO APRIL 30, 1997
AND
FOR THE SIX MONTH PERIODS ENDED OCTOBER 31, 1996 AND 1997 ARE UNAUDITED)
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 November 1997, the Partnership 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"). The
Partnership contributed substantially all of its assets to TransWestern and
TransWestern assumed or guaranteed all of the liabilities of the Partnership. As
a result, Holdings' only assets are all of the TransWestern membership interests
and all of Capital's 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 have any significant assets or
operations.
The general partner of Holdings is TransWestern Communications Company,
Inc. (TCC) which holds approximately 2.0% of Holdings outstanding partnership
units. TCC has no significant assets other than its investment in Holdings and
has no operations.
The accompanying financial statements give retroactive effect to the
formation of the Company and the contribution of assets and liabilities by
Holdings as if these events had occurred on the date of the Partnership's
formation. The accompanying consolidated financial statements present the
historical consolidated financial position and results of operations of
Holdings, Capital, TransWestern and Capital II.
TransWestern publishes and distributes local yellow page directories in
twelve states.
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 consolidated 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. Holdings published and recognized revenue for 106,
118 and 128 directories in fiscal 1995, 1996 and 1997, respectively.
Concentration of Credit Risk
Credit is extended based upon customer collection history and generally a
deposit is required. Holdings is not subject to a concentration of credit risk
due to the geographic and economic diversity of its customer base, 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 accounts as a percentage of net revenues
equaled 9.2%, 9.1% and 9.8% of net revenues in fiscal 1995, 1996 and 1997,
respectively. 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.
F-7
<PAGE> 146
TRANSWESTERN HOLDINGS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
Long-Term Debt
Management believes that the carrying value of Holdings' long-term debt
materially approximates its fair value as all debt outstanding at April 30, 1997
and October 31, 1997 is variable rate debt which is tied to standard indices
which adjust over relatively short periods (one to six months). These rates are
similar to current rates offered to Holdings for debt of similar maturity.
Property, Equipment and Leasehold Improvements
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
Acquired intangibles are being amortized over their estimated economic
lives of five years for the customer base and three years for the covenants not
to compete.
In March 1995, the Financial Accounting Standards Board issued Statement
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of, regarding the impairment of long-lived assets,
identifiable intangibles and goodwill related to those assets. Holdings adopted
Statement No. 121 on May 1, 1996 and such adoption did not have a material
effect on Holdings' financial position or results of operations.
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). Amortization is included in interest expense in the
accompanying statements of income.
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 prior to the formation of
TransWestern was 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.
F-8
<PAGE> 147
TRANSWESTERN HOLDINGS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Interim Financial Information
The accompanying consolidated financial statements and related notes for
the six month periods ended October 31, 1996 and 1997 are unaudited but include
all adjustments (consisting of normal recurring adjustments) which are, in the
opinion of management, necessary for a fair statement of consolidated financial
position, results of operations and cash flows for these interim periods. The
consolidated results of operations for the six months ended October 31, 1997 are
not necessarily indicative of operating results to be expected for the full
fiscal year.
2. DIRECTORY ACQUISITIONS
During fiscal 1996 and 1997, Holdings completed acquisitions of certain
tangible and intangible assets from companies which publish yellow page
directories in California, Massachusetts, New York, Indiana, Kentucky and
Tennessee. These transactions were accounted for as purchases and accordingly
the purchase price was allocated to the tangible and intangible assets acquired
based on their respective fair values at the date of acquisition as follows:
<TABLE>
<CAPTION>
APRIL 30,
-----------------
1996 1997
------ ------
<S> <C> <C>
Deferred directory costs................................... $ 671 $ 443
Customer base.............................................. 6,615 4,620
Other...................................................... 421 56
------ ------
Total assets acquired...................................... $7,707 $5,119
====== ======
</TABLE>
In fiscal 1997, Holdings purchased certain tangible and intangible assets
totaling $5,119 (including related liabilities totaling $535) of Alliance Media,
Inc. for cash of $2,558 and recorded other obligations totaling $2,026. The
obligations represent the realized contribution margin contingent upon the
operating results (as defined in the purchase agreement) of certain directories
acquired and certain acquisition related expenses. Management believes the
contingent payments due under the 1997 acquisition agreement are reasonably
assured.
Assuming that the acquisition of Alliance Media, Inc. had occurred on the
first day of Holdings' fiscal years ended April 30, 1996 and 1997, pro forma
consolidated condensed results of operations would be as follows:
<TABLE>
<CAPTION>
YEARS ENDED APRIL
30,
-------------------
1996 1997
------- -------
(UNAUDITED)
<S> <C> <C>
Revenues................................................. $82,180 $91,414
Net income............................................... 7,110 9,651
</TABLE>
These results give effect to a pro forma consolidated adjustment for the
amortization of acquired intangibles.
In fiscal 1996, Holdings purchased certain tangible and intangible assets,
totaling $7,707 (including related liabilities totaling $611) of J&J Marketing
Services, Inc. and Golden State Directory Corporation for cash of $5,229, notes
payable totaling $1,010 (Note 4) and other amounts due totaling $857.
F-9
<PAGE> 148
TRANSWESTERN HOLDINGS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Assuming that the acquisitions of J&J Marketing Services, Inc. and Golden
State Directory Corporation had occurred on the first day of Holdings' fiscal
year ended April 30, 1996 pro forma consolidated condensed results of operations
would be as follows:
<TABLE>
<CAPTION>
YEAR ENDED
APRIL 30,
1996
-----------
(UNAUDITED)
<S> <C>
Revenues......................................................... $81,595
Net income....................................................... 7,008
</TABLE>
These results give effect to pro forma consolidated adjustments for the
amortization of acquired intangibles and additional interest expense on related
debt.
3. CONSOLIDATED FINANCIAL STATEMENT DETAILS
Property, Equipment and Leasehold Improvements
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
------------------- -----------
1996 1997 1997
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Computer and office equipment....................... $ 3,337 $ 4,335 $ 4,794
Furniture and fixtures.............................. 1,340 1,370 1,471
Leasehold improvements.............................. 227 233 254
------- ------- -------
4,904 5,938 6,519
Less accumulated depreciation and amortization...... (2,145) (3,098) (3,638)
------- ------- -------
$ 2,759 $ 2,840 $ 2,881
======= ======= =======
</TABLE>
Acquired Intangibles
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
--------------------- -----------
1996 1997 1997
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Customer base..................................... $ 23,073 $ 27,693 $ 27,587
Covenant not to compete........................... 1,200 -- --
------- ------- -------
24,273 27,693 27,587
Less accumulated amortization..................... (11,406) (15,600) (18,306)
------- ------- -------
$ 12,867 $ 12,093 $ 9,281
======= ======= =======
</TABLE>
Other Assets
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
------------------- -----------
1996 1997 1997
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Debt issuance costs................................. $ 2,883 $ 2,827 $ 8,434
Other............................................... 214 264 271
------- ------- -------
3,097 3,091 8,705
Less accumulated amortization....................... (501) (1,256) (459)
------- ------- -------
$ 2,596 $ 1,835 $ 8,246
======= ======= =======
</TABLE>
F-10
<PAGE> 149
TRANSWESTERN HOLDINGS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. FINANCING ARRANGEMENTS
Long-term financing arrangements consist of the following:
<TABLE>
<CAPTION>
APRIL 30,
-------------------
1996 1997
------- -------
<S> <C> <C>
Senior term loan................................................. $76,100 $68,100
Revolving loan................................................... 7,300 9,400
Other notes payable.............................................. 1,010 935
------- -------
84,410 78,435
Less current portion............................................. 8,494 10,921
------- -------
$75,916 $67,514
======= =======
</TABLE>
In November 1995, Holdings entered into a $95.0 million credit agreement
with a group of banks in which First Union National Bank of North Carolina is
the administrative agent. Under the terms of this agreement, Holdings borrowed
$80.0 million under a senior term note and initially borrowed $5.0 million under
a $15.0 million (maximum) revolving credit facility. Proceeds from the term note
and the revolving credit facility were used to repay principal and interest
outstanding under the then existing term note and revolving credit facilities of
$40.5 million, repay principal and accrued interest of $5.8 million on the
Junior Subordinated Note (as defined below), make a distribution to the general
and limited partners totaling $36.4 million and $2.3 million for working capital
purposes. In connection with the repayment of the previous term notes and
revolving credit facilities, unamortized debt issue costs of $392 and $1,368
were written off and recorded in the accompanying consolidated 1995 and 1996
income statements as extraordinary items.
Principal payments on the senior term note are due quarterly through
maturity, April 30, 2002. The revolving credit agreement also expires on April
30, 2002. Borrowings under this agreement rank senior to all other indebtedness
of the Partnership and are secured by all of Holdings' assets.
Annual maturities under the long-term financing arrangements as of April
30, 1997 are as follows:
<TABLE>
<CAPTION>
REVOLVING
SENIOR LOAN AND
TERM LOAN OTHER TOTAL
--------- ---------- -------
<S> <C> <C> <C>
1998................................................. $ 9,986 $ 935 $10,921
1999................................................. 11,984 -- 11,984
2000................................................. 15,480 -- 15,480
2001................................................. 17,977 -- 17,977
2002................................................. 12,673 9,400 22,073
------- ------- -------
$68,100 $ 10,335 $78,435
======= ======= =======
</TABLE>
Holdings may prepay any or all of the outstanding borrowings under the term
or revolving credit notes, in minimum increments of $50, without penalty. The
agreement requires that excess cash flows (as defined) and net cash proceeds
from the sale of assets, issuance of debt or partnership equity (in excess of
prescribed amounts) shall be used to repay term or revolving credit borrowings.
Such mandatory prepayments shall first be applied to the outstanding term note
balance with any excess being applied to the revolving credit note balance.
Under the terms of the agreement, Holdings can elect to have the interest
rate on borrowings tied to either of two indices: the administrative agent's
prime rate based on the Alternative Base Rate (ABR) (as defined) plus a margin
of 1.75 percentage points, or the administrative agent's LIBOR base rate (as
defined) plus a margin of 2.75 percentage points. The margin applicable for ABR
and LIBOR loans is subject to
F-11
<PAGE> 150
TRANSWESTERN HOLDINGS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
adjustment based on the ratio of Holdings' total indebtedness to EBITDA. The ABR
margin ranges from 1.25% to 1.75% and the LIBOR margin ranges from 2.25% to
2.75%.
Interest tied to LIBOR may be based on one, three or six month interest
rate periods. At April 30, 1997, all outstanding term loan borrowings of $68.1
million were tied to a one month LIBOR period and the total interest rate in
effect was 8.4375%. Borrowings under the revolving credit facility at April 30,
1997 consisted of $7.0 million under a one month LIBOR period (total interest
rate of 8.4375%) and $2.4 million under an ABR rate (interest rate of 10.25%).
Interest on loans tied to the ABR is payable quarterly, interest on debt tied to
one month and three month LIBOR periods is payable at the end of the respective
period and interest on six month LIBOR periods is payable at three month
intervals. Holdings is also required to pay a quarterly fee of 0.5% of the
average daily available balance outstanding under the revolving credit facility.
Additionally, Holdings is also required to pay a annual fee of $75 to the
administrative agent which Holdings accrues for ratably over the twelve month
period.
Under the terms of the term loan agreement, Holdings is required to have
interest rate protection for at least 50% of the initial balance of the term
loan. In December 1996, Holdings entered into interest rate swap agreements with
two banks which are effective through October 30, 1998. Interest rate coverage
under these agreements is tied to the one month LIBOR rate relative to a fixed
"Swap Reset Rate" (equal to 5.375%). Under these agreements, if the one month
LIBOR rate is greater than the "Swap Reset Rate," Holdings will receive an
amount equal to the interest rate differential multiplied by the "Notional
Amount" (the "Notional Amount" at April 30, 1997 equaled $61.0 million). The
"Notional Amount" decreases by approximately $3.0 million per quarter through
March 1998.
If the LIBOR rate is less than the "Swap Reset Rate," Holdings would owe
the banks an amount calculated in a similar manner. As of April 30, 1997,
amounts paid or received by Holdings under the interest rate swap agreements
were not significant.
In addition to the interest rate swap agreements, at April 30, 1997,
Holdings has nine months remaining under an interest rate cap contract entered
into in 1996 and to date amounts paid or received by Holdings under the interest
rate cap agreement were not significant.
Terms of the credit agreements include certain financial covenants,
including minimum annual EBITDA (earnings before interest, taxes, depreciation
and amortization, as defined), a leverage ratio, an interest coverage ratio, and
a fixed charge coverage ratio. These covenants also limit capital expenditures
and indebtedness of Holdings as well as restricting distributions to the
partners. As of April 30, 1997 and October 31, 1997 Holdings was in compliance
with these covenants.
In conjunction with the November 1996 refinancing, Holdings retired all
indebtedness associated with a $4.5 million 12% Junior Subordinated Note.
In connection with the acquisition of certain assets from other directory
companies in fiscal 1996 (Note 2) Holdings issued two 7% notes payable totaling
$1,010, of which $935 remains outstanding at April 30, 1997. The outstanding
balance is due in fiscal 1998.
5. PARTNERSHIP DEFICIT
As of April 30, 1997, 3,968,236 Common units were outstanding. In May 1995,
314,290 Class E Incentive units were authorized as performance-based equity
units and issued principally to senior management. The value of these units on
the date of issuance were determined not to be material. These units vest at a
rate of 20% per year for five years. As of April 30, 1997, 20% of the Class E
units had vested. Upon achievement of certain financial milestones (as defined
in the Partnership Agreement dated May 13, 1993, as amended), these units will
become Common units and share in partnership distributions.
F-12
<PAGE> 151
TRANSWESTERN HOLDINGS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Distributions by Holdings are made on an equal basis per Common unit.
During fiscal 1996 and 1997, Holdings made tax distributions to Common unit
holders totaling $3,400 and $5,801, respectively. Also, in connection with the
November 1995 refinancing of Holdings, $36 million was distributed to the
limited and general partners of Holdings. Other than for tax distributions,
Holdings is currently restricted under the terms of its senior term loan
agreement from making additional partnership distributions.
6. BENEFIT PLANS
401(k) and Profit Sharing Plan
Substantially all of Holdings' 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. Holdings may match the
employee contributions, up to a limitation of 83% of the first 6% of annual
earnings per participant. Holdings may also make annual discretionary profit
sharing contributions. Contributions to the plan for the years ended April 30,
1995, 1996 and 1997 were approximately $608, $761 and $761, respectively.
Equity Compensation Plan
During fiscal 1994, Holdings 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 Trust are recorded as expense in the
accompanying statements of income when declared by the Board of Directors.
Employees receiving units in the Trust are eligible to receive a ratable per
unit share of cash distributions from the Trust, if and when declared by the
Plan Administrators.
Generally, the Plan Administrators intend to distribute to employee unit
holders all assets contributed to the Trust within three years of the date of
contribution. In fiscal 1997, the Plan Administrators paid distributions
totaling $411 and at April 30, 1997 there was no undistributed equity trust
proceeds.
7. LEASE COMMITMENTS
Holdings 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, 1995, 1996 and 1997, was
$1,711, $1,750 and $1,866, respectively. Future minimum lease payments, under
these leases are as follows for fiscal years ending April 30:
<TABLE>
<S> <C>
1998................................................ $1,428
1999................................................ 1,301
2000................................................ 1,002
2001................................................ 827
2002................................................ 558
Thereafter.......................................... 627
------
$5,743
======
</TABLE>
8. RELATED PARTY TRANSACTION
The General Partner advanced $694 and $4 in fiscal 1996 and 1997,
respectively, to Holdings for working capital purposes. Holdings accrues
interest on these advances at the established senior term loan rate (see Note
4). As of April 30, 1997, $805, including accrued interest of $124, was due the
General Partner. The amount due to the General Partner is payable upon demand by
the General Partner.
F-13
<PAGE> 152
TRANSWESTERN HOLDINGS L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. SUBSEQUENT EVENTS (UNAUDITED)
In October 1997, the Partnership completed a $312,700 recapitalization (the
"Recapitalization"). In the Recapitalization, new investors 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 $130,000 in the Partnership and
TransWestern Communications Company, Inc. (which is 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 fees
and expenses associated with the Recapitalization and (iv) for $2.0 million 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. As a result of the Recapitalization, Thomas H. Lee Equity
Fund III, L.P. and its affiliates will collectively own approximately 59% of the
equity of the Partnership. In November 1997, the Partnership changed its name to
TransWestern Holdings L.P. and formed and contributed substantially all of its
assets to TransWestern. TransWestern assumed or guaranteed all of the
liabilities of the Partnership. As a result, Holdings only assets are all of the
TransWestern membership interests and all of Capital's capital stock. All of the
operations that were previously conducted by the Partnership are now being
conducted by TransWestern. Holdings formed Capital as a wholly-owned subsidiary.
Neither Capital nor Capital II has any significant assets or operations.
The Partnership intends to utilize the proceeds of an offering by
TransWestern of $100,000 of unsecured notes to repay the $75,000 Senior
Subordinated Facility and to pay down the balance outstanding under the
revolving Senior Credit Facility. Subsequent to the Recapitalization, Holdings
commenced an offering of $32,500 initial aggregate principal amount of unsecured
senior discount notes, the net proceeds of which will be used to redeem
approximately $31,300 of preferred units of Holdings. However, the redemption
will not reduce the equity capitalization of TransWestern.
F-14
<PAGE> 153
============================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFERS
CONTAINED HEREIN OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE DISCOUNT NOTE ISSUERS OR THE INITIAL PURCHASERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER
TO BUY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE DISCOUNT NOTE ISSUERS SINCE THE DATE HEREOF
OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................... i
Summary.................................... 1
Risk Factors............................... 13
The Discount Note Issuers.................. 20
The Transactions........................... 21
The Principal Investors.................... 23
Use of Proceeds............................ 24
Capitalization............................. 25
Unaudited Pro Forma Consolidated Financial
Data..................................... 26
Selected Historical Consolidated Financial
and Other Data........................... 33
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 35
Business................................... 43
Management................................. 50
Security Ownership of Certain Beneficial
Owners and Management.................... 55
Certain Transactions....................... 57
Limited Partnership Agreement.............. 61
Limited Liability Company Agreement........ 62
Description of Senior Credit Facility...... 63
Description of the Notes................... 65
The Discount Note Exchange Offer........... 92
Description of the Discount Notes.......... 101
Certain U.S. Federal Income Tax
Considerations........................... 126
Plan of Distribution....................... 132
Legal Matters.............................. 132
Experts.................................... 133
Index to Consolidated Financial
Statements............................... F-1
</TABLE>
============================================================
============================================================
$57,916,000
TRANSWESTERN HOLDINGS L.P.
TWP CAPITAL CORP.
OFFER TO EXCHANGE THEIR 11 7/8 SERIES B SENIOR DISCOUNT NOTES DUE 2008 FOR ANY
AND ALL OF THEIR OUTSTANDING 11 7/8% SENIOR DISCOUNT
NOTES DUE 2008
-----------------
PROSPECTUS
-----------------
JANUARY , 1998
============================================================
<PAGE> 154
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Holdings. Holdings is a limited partnership organized under the laws of
the State of Delaware. Section 17-108 of the Delaware Revised Uniform Limited
Partnership Act (the "Act") provides that, subject to such standards and
restrictions, if any, as are set forth in its limited partnership agreement, a
limited partnership may, and shall have the power to, indemnify and hold
harmless any member or general partner or other person from and against any and
all claims and demands whatsoever.
Section 5.10 of Holdings' Third Amended and Restated Agreement of Limited
Partnership provides, among other things, that Holdings shall indemnify and hold
harmless TCC and each affiliate, officer, director, controlling person, partner,
employee or shareholder of TCC ("Indemnified Person") from and against any and
all losses, claims, damages, liabilities, expenses (including reasonable legal
fees and expenses), judgments, fines, settlements and other amounts relating to
any and all claims, demands, actions, suits or proceedings, whether civil,
criminal, administrative or investigative, which relate to TCC's status or
activities as the general partner or to Holdings' property, business or affairs
("Claims"). An Indemnified Person's expenses paid or incurred in defending
itself against any Claim shall be reimbursed as paid or incurred.
Holdings may maintain insurance, at its expense, to protect any person
against any expense, liability or loss, to the extent that Holdings would have
the power to indemnify such person against such expense, liability or loss under
the Act.
Holdings 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. Capital 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 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 (including 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'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 shall not be liable to
Capital or its stockholders for monetary damages for a breach of fiduciary duty
as a director.
II-1
<PAGE> 155
Article V of the By-laws of Capital ("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 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 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 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 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.
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, or
who are or were serving at the request of Capital as employees or agents of
another corporation, 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 or her 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 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 or was serving at the request of
Capital 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 would have the power to indemnify such person against
such liability under Article V.
All of Capital's directors and officers will be covered by insurance
policies intended to be obtained by Capital 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.
See Index to Exhibits.
(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.
II-2
<PAGE> 156
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.
(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.
II-3
<PAGE> 157
(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. 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-4
<PAGE> 158
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, TransWestern
Holdings L.P. 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 11th day of December, 1997.
TRANSWESTERN HOLDINGS L.P.
By: TransWestern Communications
Company, Inc.
--------------------------------------
(General Partner)
By: /s/ LAURENCE H. BLOCH
------------------------------------
Name: Laurence H. Bloch
Title: Vice President, 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 11th day of December, 1997.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
- --------------------------------------------- ----------------------------------------------
<C> <S>
/s/ RICARDO PUENTE President and Chief Executive Officer and
- --------------------------------------------- Director of TCC (Principal Executive
Ricardo Puente Officer)
/s/ LAURENCE H. BLOCH Chairman and 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)
</TABLE>
II-5
<PAGE> 159
<TABLE>
<CAPTION>
SIGNATURE CAPACITY
- --------------------------------------------- ----------------------------------------------
<C> <S>
/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>
II-6
<PAGE> 160
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, TWP Capital
Corp. 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 11th day of December, 1997.
TWP CAPITAL CORP.
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 11th day of December, 1997.
<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-7
<PAGE> 161
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------ ----------------------------------------------------------------------------------
<C> <S>
2.1 Securities Purchase and Redemption Agreement, dated August 27, 1997, as amended,
by and among Holdings, TCC, TWP Recapitalization Corp., THL and certain limited
partners of Holdings.+
2.2 Contribution and Assumption Agreement, dated November 6, 1997, by and among
Holdings and TransWestern.(1)
2.3 Assignment and Assumption Agreement, dated November 6, 1997, by and among Holdings
and TransWestern.(1)
2.4 Bill of Sale, dated November 6, 1997, by and among Holdings and TransWestern.(1)
3.1 Certificate of Limited Partnership of Holdings.
3.2 Certificate of Incorporation of Capital.
3.3 By-Laws of Capital.
3.4 Third Amended and Restated Agreement of Limited Partnership, as amended, of
Holdings.
3.5 Certificate of Incorporation of TCC.
3.6 By-Laws of TCC.
4.1 Indenture, dated as of November 12, 1997, by and between the Discount Note Issuers
and Wilmington Trust Company, as Trustee.(1)
4.2 Form of 11 7/8% Senior Discount Notes due 2008.
4.3 Securities Purchase Agreement, dated as of November 6, 1997, by and among the
Discount Note Issuers, TransWestern, TCC, and the Initial Purchasers.(1)
4.4 Registration Rights Agreement, dated as of November 12, 1997, by and among the
Discount Note Issuers and the Initial Purchasers.(1)
5.1 Opinion of Kirkland & Ellis.*
10.1 Management Agreement, dated as of October 1, 1997, by and between Holdings
(formerly known as TransWestern Publishing Company, L.P.) and Thomas H. Lee
Company.
10.2 Investors Agreement, dated as of October 1, 1997, by and between Holdings
(formerly known as TransWestern Publishing Company, L.P.), TCC and the limited
partners of Holdings.+
10.3 Registration Agreement, dated as of October 1, 1997, by and between Holdings
(formerly known as TransWestern Publishing Company, L.P.), TCC and the limited
partners of Holdings.
10.4 Form of Executive Agreement between Holdings (formerly known as TransWestern
Publishing Company, L.P.), TCC and each Management Investor.(1)
10.5 Employment Agreement, dated as of October 1, 1997, by and between Laurence H.
Bloch and TransWestern.(1)
10.6 Employment Agreement, dated as of October 1, 1997, by and between Ricardo Puente
and TransWestern.(1)
10.7 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)
10.8 Securities Purchase Agreement, dated as of November 6, 1997, by and among the
Company, Holdings, TCC and the Initial Purchasers.(1)
10.9 Indenture, dated as of November 12, 1997, by and between the Company and
Wilmington Trust Company, as Trustee.(1)
10.10 Registration Rights Agreement, dated as of November 12, 1997, by and among the
Company and the Initial Purchasers.(1)
</TABLE>
<PAGE> 162
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
------ ----------------------------------------------------------------------------------
<C> <S>
10.11 Equity Compensation Plan.*
12.1 Statement regarding computation of ratios of earnings to fixed charges.
21.1 Subsidiaries of Holdings and TransWestern.
23.1 Consent of Ernst & Young LLP Independent Auditors.
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.*
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.
+ Holdings agrees to furnish supplementally to the Commission a copy of any
omitted schedule or exhibit to such agreement upon request by the
Commission.
(1) Filed as an Exhibit to the Registration Statement on Form S-4 (Registration
No. 333-42085) filed by TransWestern Publishing Company LLC and TWP Capital
Corp. II with the Securities and Exchange Commission on December 12, 1997.
<PAGE> 1
EXHIBIT 2.1
SECURITIES PURCHASE AND REDEMPTION AGREEMENT
DATED AUGUST 27, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. TWP Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Repayment of Existing Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 New Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. Purchase/Redemption of Partnership Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Purchase/Redemption of Partnership Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 TWP Purchase of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.3 Exchange of Partnership Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4. [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
5. Delivery and Surrender of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5.1 Delivery of Purchased Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5.2 Delivery of Purchased Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5.3 Surrender of Redemption Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
6. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
6.1 Documents to be Delivered by the Company and/or the Partnership . . . . . . . . . . . . . . . . . . . . . . . . 4
6.2 Documents to be Delivered by the Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.3 Documents to be Delivered by the Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6.4 Documents to be Delivered by TWP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7. Representations and Warranties by the Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
7.2 Capitalization, Equity Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7.3 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7.4 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7.6 No Undisclosed Liabilities, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.7 Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7.8 Title to and Condition of Properties and Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.9 Leased Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.10 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.11 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.12 Patents, Copyrights and Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
7.13 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.14 Governmental Authorizations and Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.15 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.16 Relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.17 Publications in Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.18 List of Publications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.19 Replacement of Computer Tapes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.20 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.21 Compliance With Legislation Regulating Environmental Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.22 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.23 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.24 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.25 No Untrue Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8. Representations and Warranties by TWP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.1 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.3 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.4 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.6 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.7 No Untrue Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.8 Acquisition for Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9. Representations and Warranties of the Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9.1 Organization and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9.2 Ownership of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9.3 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9.4 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.5 Absence of Conflicts, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.6 Knowledge; Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.7 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
10. Representations and Warranties of the Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
10.1 Organization and Good Standing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
10.2 Ownership of Partnership Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10.3 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10.4 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10.5 Absence of Conflicts, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10.6 Knowledge; Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
10.7 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
11. Covenants of the Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
11.1 Access, Information and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
11.2 Conduct of Business Pending Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
11.3 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
11.4 No Solicitation of Offers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
11.5 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.6 No Transfers by Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.7 No Transfers by Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.8 Updating of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.9 Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11.10 No Unreasonable Interference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.11 Non-Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.12 Dunning Non-Competition Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
12. Conditions to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
12.1 Conditions to Obligations of the Company and the Partnership. . . . . . . . . . . . . . . . . . . . . 27
12.3 Commercially Reasonable Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
13. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
13.1 TWP's Right to Terminate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
13.2 The Stockholders and the Limited Partners' Right to Terminate . . . . . . . . . . . . . . . . . . . . 32
13.3 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
14. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
14.1 Non-Survival of Representations and Warranties; Release Upon Closing. . . . . . . . . . . . . . . . . 33
14.2 Limited Partner and Stockholder Representative. . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
14.3 Selling Securityholder's Post-Closing Access. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
14.4 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
14.5 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
14.6 Choice of Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
14.7 No Third Party Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
14.8 Entire Agreement; Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
14.9 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
14.10 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
14.11 Invalidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
14.12 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
14.13 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
14.14 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
14.15 Time of the Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
14.16 Fund Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
14.17 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
</TABLE>
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<PAGE> 5
INDEX TO SCHEDULES AND EXHIBITS
Schedule 1 - Calculation Methodology of Unit Value
Schedule 3 - Redemption of Partnership Units/Redemption of Shares
Schedule 7.1 - Jurisdictions
Schedule 7.2 - Partnership Capitalization
Schedule 7.3 - Authority
Schedule 7.4 - No Violations
Schedule 7.6 - Undisclosed Liabilities
Schedule 7.7 - Absence of Certain Changes
Schedule 7.8 - Title to and Condition of Properties and Assets
Schedule 7.9 - Leased Property
Schedule 7.10 - Materials Contracts and Commitments
Schedule 7.11 - Litigation
Schedule 7.12 - Patents, Copyrights and Trademarks
Schedule 7.13 - Compliance with Laws
Schedule 7.14 - Governmental Authorizations and Regulations
Schedule 7.18 - List of Publications
Schedule 7.19 - Replacement of Computer Tapes
Schedule 7.20 - Employees
Schedule 7.21 - Compliance With Legislation Regulating Environmental Quality
Schedule 9.4 - Consents re: Stockholders
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<PAGE> 6
Schedule 10.4 - Consents re: Limited Partners
Schedule 11.2.7 - Conduct of Business re: Compensation
Schedule 12.2.7 - Consents and Authorizations
Exhibit A - Legal Opinion from Latham & Watkins
Exhibit B - TWP Certificate
Exhibit C - Legal Opinion from Kirkland & Ellis
Exhibit D - Company Certificate
Exhibit E - Certificate of Secretary of the Company
Exhibit F - Partnership Certificate
Exhibit G - Certificate of the General Partner of the Partnership
Exhibit H - Third Amended and Restated Partnership Agreement and Summary of
Terms
Exhibit I - Investors Agreement
Exhibit J1-J2 - Employment Agreements
Exhibit K - Executive Agreement
Exhibit L - Management Agreement
Exhibit M - Registration Agreement
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<PAGE> 7
SECURITIES PURCHASE AND REDEMPTION AGREEMENT
This Securities Purchase and Redemption Agreement (the "Agreement") is
entered into as of August 27, 1997 by and among TransWestern Publishing Company,
L.P., a Delaware limited partnership (the "Partnership"), TransWestern
Communications Company, Inc., a Delaware corporation (the "Company"), TWP
Recapitalization Corp., a Delaware corporation ("TWP"), Thomas H. Lee Equity
Fund III, L.P., a Delaware limited partnership (the "Fund"), the limited
partners of the Partnership executing this Agreement (each such limited partner,
together with any additional limited partners becoming a party hereto by
execution and delivery of a counterpart signature page in accordance with the
terms hereof, a "Limited Partner" and collectively the "Limited Partners") and
the stockholders of the Company executing this Agreement (each such stockholder,
together with any additional stockholders becoming a party hereto by execution
and delivery of a counterpart signature page in accordance with the terms
hereof, a "Stockholder" and collectively the "Stockholders").
WHEREAS, the Partnership, the Company, the Stockholders and TWP desire to
effect a recapitalization of the Partnership pursuant to which TWP will purchase
units in the Partnership and the Partnership and the Limited Partners desire to
effect a redemption of all or part of the units held by the Limited Partners;
WHEREAS, TWP desires to purchase and the Stockholders desire to sell all or
part of the stock of the Company held by the Stockholders, all in accordance
with the terms and conditions of this Agreement;
WHEREAS, TWP was organized solely for the purpose of purchasing units in
the Partnership and acquiring such stock of the Company held by the
Stockholders, and, except for certain commitments made to TWP by the Fund, TWP
has no assets; and
WHEREAS, the Fund desires to induce each of the other parties hereto to
enter into this Agreement with TWP and to consummate the transactions
contemplated hereby.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and for other good and valuable consideration, the mutual
receipt and sufficiency of which are hereby acknowledged, the parties do hereby
covenant and agree as follows:
1. TWP Investment. Upon the terms and conditions of this Agreement, the
Fund shall cause TWP to, and TWP shall, pay to the Partnership the sum of (a)
One Hundred Thirty Million Dollars ($130,000,000), minus (b) the aggregate
amount of cash invested by the CIVC Parties, the Reinvesting Managers and the
Other Investors at the Closing as contemplated by Section 12.1.6 or Section
12.1.7, minus (c) the aggregate value of the Class A Units and Company common
stock exchanged, retained or purchased by the CIVC Parties, the Reinvesting
Managers and the Other
<PAGE> 8
Investors at the Closing as contemplated by Section 12.1.6 or Section 12.1.7,
minus (d) the aggregate purchase price (the "Share Purchase Price") to be paid
by TWP to certain Stockholders pursuant to Section 4 to acquire shares of
Company common stock, by wire transfer in immediately available funds as
payment in full for the Purchased Units (as defined below). In consideration
for the foregoing investment, the Partnership will issue to TWP Preferred Units
and Class A Units (collectively, the "Purchased Units"). The value of each
Purchased Unit and the number of Purchased Units shall be determined using the
methodology set forth in Schedule 1 attached hereto; it being understood that
the numbers set forth therein are assumptions made for example purposes only.
2. Indebtedness. Upon the terms and conditions of this Agreement, on the
Closing Date, the Partnership shall, upon receipt of such executed agreements
and other documents described in Section 2.1 and the proceeds of the equity
investment by TWP described in Section 1, sequentially effectuate the following
transactions described in Sections 2.1 and 2.2 relating to indebtedness.
2.1 Repayment of Existing Indebtedness. The Partnership shall use
part of the proceeds of the equity investment by TWP described in Section 1
to concurrently (i) repay all funded indebtedness of the Partnership
(except for the Promissory Note dated April 29, 1996 in favor of J&J
Marketing, Inc.), including without limitation indebtedness under the
existing credit facility with First Union National Bank of North Carolina
and CIBC, Inc., any LIBOR contract breakage costs and any costs associated
with the termination of all interest rate swap agreements.
2.2 New Financing. The Fund shall arrange the financing (the
"Financing") on behalf of the Partnership described in the following
commitment letters delivered by TWP to the Partnership and shall deliver to
the Partnership at the Closing all agreements and other documents necessary
for the Partnership to consummate such financing, each executed by Canadian
Imperial Bank of Commerce ("CIBC") or CIBC Wood Gundy Securities Corp.
("CIBC Wood Gundy"), as applicable, and the other lenders participating
therein, if any: (i) a commitment letter dated August 26, 1997 from CIBC
pursuant to which CIBC has committed pursuant to the terms thereof to
provide senior secured credit facilities to the Partnership in connection
with the transactions contemplated hereby; and (ii) a commitment letter
dated August 26, 1997 from CIBC Wood Gundy pursuant to which CIBC Wood
Gundy has committed pursuant to the terms thereof to provide senior
subordinated financing to the Partnership in connection with the
transactions contemplated hereby (collectively, the "Debt Commitment
Letters"). The Partnership shall cooperate with the Fund in obtaining such
financing. The Partnership shall use a portion of the combined proceeds of
the Financing and the equity investment by TWP to pay a portion of the
expenses set forth in Section 14.13 and to make the Class E Catch-Up
Distribution (as defined in the Partnership Agreement).
-2-
<PAGE> 9
3. Purchase/Redemption and Exchange of Partnership Units; Purchase and
Sale of Shares.
3.1 Purchase/Redemption of Partnership Units. From the proceeds of
the Financing and, to the extent necessary, part of the proceeds of the
equity investment by TWP described in Section 1, the Partnership shall
redeem and purchase from each of the Limited Partners on the Closing Date
the number of Class A Units listed opposite such Limited Partner's name on
Schedule 3 attached hereto, other than such Class A Units which such
Limited Partner elects to retain or exchange as contemplated by Section
12.1.6 or Section 12.1.7 (such Class A Units to be redeemed being sometimes
hereinafter referred to as the "Redemption Units"). Upon the terms and
conditions of this Agreement, each Limited Partner hereby agrees to sell
and deliver to the Partnership on the Closing Date such Limited Partner's
respective Redemption Units. As payment in full for the Redemption Units,
the Partnership shall pay to each Limited Partner the amount set forth on
Schedule 3 opposite the name of such Limited Partner in cash at the Closing
(reduced, in the case of each Limited Partner electing to retain or
exchange Class A Units pursuant to Section 12.1.6 or Section 12.1.7, in
direct proportion to the proportion of such Limited Partner's aggregate
amount of Class A Units which are retained or exchanged).
3.2 Exchange of Partnership Units. Each Limited Partner that elects
to retain Class A Units pursuant to Section 12.1.6 or 12.1.7, as
applicable, shall deliver to the Partnership one-half of the Class A Units
so retained by such Limited Partner and the Partnership shall issue to such
Limited Partner a Preferred Unit in exchange for each Class A Unit
delivered to the Partnership.
3.3 TWP Purchase of Shares. Upon the terms and conditions of this
Agreement, the Fund shall cause TWP to, and TWP shall, pay to each
Stockholder on the Closing Date by wire transfer of immediately available
funds as payment in full for such Stockholder's Purchased Shares (as
defined below), the amount set forth on Schedule 3 opposite the name of
such Stockholder in cash at the Closing (reduced, in the case of each
Stockholder electing to retain shares of the Company's common stock
pursuant to Section 12.1.6 or Section 12.1.7, in direct proportion to the
proportion of such Stockholder's aggregate amount of such shares which are
retained). The value of the Purchased Shares and the number of Purchased
Units and Purchased Shares shall be determined using the methodology set
forth in Schedule 1 attached hereto; it being understood that the numbers
set forth therein are assumptions made for example purposes only. The sum
total of the number of shares of Company common stock listed opposite each
Stockholder's name, other than such shares which such Stockholder elects to
retain as contemplated by Section 12.1.6 or 12.1.7, in direct proportion to
the amount of Class A Units which are being retained by such person, are
referred to as the "Purchased Shares."
4. [Intentionally Omitted]
-3-
<PAGE> 10
5. Delivery and Surrender of Certificates.
5.1 Delivery of Purchased Shares. At the Closing, each Stockholder
shall deliver to TWP the stock certificate(s) representing such
Stockholder's Purchased Shares, duly endorsed in blank for transfer or
accompanied by stock powers duly executed in blank. The Stockholders shall
cease to have any rights as stockholders relating to their respective
Purchased Shares except for such rights as they have pursuant to this
Agreement.
5.2 Delivery of Purchased Units. At the Closing, the Partnership
shall make appropriate notations in its books and records to reflect the
issuance and transfer of newly issued Purchased Units to TWP hereunder.
5.3 Surrender of Redemption Units. At the Closing, each Limited
Partner shall cease to have any rights as a limited partner relating to its
own Redemption Units (if any) except for such rights as it has pursuant to
this Agreement.
6. Closing. The closing of the transactions contemplated herein (the
"Closing") shall take place on October 1, 1997 at 10:00 am local time at the
offices of Latham & Watkins, 701 B Street, San Diego, California 92101, or on
such earlier date that all of the conditions precedent to closing set forth in
Section 12 shall have been satisfied or waived in writing. The date that the
Closing actually occurs is referred to as the "Closing Date".
6.1 Documents to be Delivered by the Company and/or the Partnership.
On or before the Closing Date, the Company and/or the Partnership, as
applicable, shall deliver the following:
6.1.1 The Partnership shall deliver the instruments and
documents described in Section 5.2 and all documents and instruments
required to be delivered by the Partnership pursuant to Section 12.2.
6.1.2 The Company shall deliver all documents and instruments
required to be delivered by the Company pursuant to Section 12.2.
6.1.3 The Partnership shall deliver the consideration described
in Section 3.
6.1.4 All instruments and documents executed and delivered to
TWP pursuant hereto shall be in form and substance, and shall be
executed in a manner, reasonably satisfactory to TWP. All instruments
and documents executed and delivered to the Company pursuant hereto
shall be in form and substance, and shall be executed in a manner,
reasonably satisfactory to the Company. All instruments and documents
executed and delivered to the Partnership pursuant hereto shall be in
-4-
<PAGE> 11
form and substance, and shall be executed in a manner, reasonably
satisfactory to the Partnership.
6.2 Documents to be Delivered by the Stockholders On or before the
Closing Date, the Stockholders shall deliver the following:
6.2.1 All instruments and documents described in Section 5.1.
6.2.2 All instruments and documents executed and delivered to
TWP pursuant hereto shall be in form and substance, and shall be
executed in a manner, reasonably satisfactory to TWP.
6.3 Documents to be Delivered by the Limited Partners. On or before
the Closing Date, the Limited Partners shall deliver the following:
6.3.1 All instruments and documents described in Section 5.3.
6.3.2 All instruments and documents executed and delivered to
TWP pursuant hereto shall be in form and substance, and shall be
executed in a manner, reasonably satisfactory to TWP. All instruments
and documents executed and delivered to the Partnership pursuant
hereto shall be in form and substance, and shall be executed in a
manner, reasonably satisfactory to the Partnership.
6.4 Documents to be Delivered by TWP. On or before the Closing Date,
the Fund shall cause TWP to, and TWP shall, deliver the following:
6.4.1 Immediately available funds as described in Sections 1 and
all documents required to be delivered by TWP pursuant to Section
12.1.
6.4.2 All instruments and documents executed and delivered to
the Company pursuant hereto shall be in form and substance, and shall
be executed in a manner, reasonably satisfactory to the Company. All
instruments and documents executed and delivered to the Partnership
pursuant hereto shall be in form and substance, and shall be executed
in a manner, reasonably satisfactory to the Partnership.
7. Representations and Warranties by the Partnership. The Company and
the Partnership jointly and severally represent and warrant to TWP as follows:
7.1 Organization. The Partnership 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
-5-
<PAGE> 12
properties and assets now owned and being operated by it. The Partnership has
delivered to TWP complete and correct copies of its Certificate of Limited
Partnership and the Second Amended and Restated Agreement of Limited Partnership
(the "Second Amended Partnership Agreement") as in effect on the date hereof.
The Partnership 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. Each jurisdiction in which the Partnership is qualified to do
business is listed on Schedule 7.1 attached hereto.
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware 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 Company has
delivered to TWP complete and correct copies of its Certificate of Incorporation
and By-Laws as in effect on the date hereof. The Company 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.
7.2 Capitalization, Equity Ownership. Immediately prior to the consummation
of the transactions contemplated hereby, the authorized capital stock of the
Company consists of 30,000 shares of the Company's common stock (9,800.05 of
which will be issued and outstanding) and the capitalization of the Partnership
consists of 3,968,236.02 issued and outstanding Class A Units and 299,698.43
issued and outstanding Class E Units, as set forth in more detail on Schedule
7.2 attached hereto; all of the foregoing securities of the Company and the
Partnership will have been duly authorized and will be validly issued and fully
paid and non-assessable and none of them will be issued in violation of any
preemptive or other right; 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 nor the Partnership will
be 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 or the
Partnership or any other security exercisable or exchangeable for or convertible
into any capital stock, partnership interest or any other security of the
Company or the Partnership, and there will not be any outstanding option,
warrant or other right to subscribe for or purchase, or contract, agreement or
arrangement with respect to, any capital stock, partnership interest or any
other security of the Company or the Partnership or any other security
exercisable or convertible into any capital stock, partnership interest or any
other security of the Company or the Partnership.
7.3 Authority. The Company and the Partnership have the power to enter
into this Agreement and all other agreements, instruments and documents executed
and delivered by the Company or the Partnership pursuant to this Agreement
(collectively, the "TransWestern Delivered Documents") and to carry out their
respective obligations
-6-
<PAGE> 13
thereunder. Except as set forth on Schedule 7.3 attached hereto, 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 and the Partnership, and no other proceeding or approval on the
part of the Company or the Partnership is necessary to authorize the execution
and delivery of the TransWestern Delivered Documents or the performance of any
of the transactions contemplated thereby. Assuming due authorization, execution
and delivery of the TransWestern Delivered Documents by the other parties
thereto, the TransWestern Delivered Documents will be legal, valid and binding
obligations of the Company or the Partnership as applicable, enforceable against
the Company or the Partnership in accordance with their respective terms.
7.4 No Violation. Except as set forth in Schedule 7.4 attached hereto,
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 Limited Partnership
of the Partnership or the Second Amended Partnership Agreement, (ii) will
violate or conflict with the Company's Certificate of Incorporation or By-Laws,
(iii) will result in any breach of or default under any provision of any
material contract or agreement to which the Company or the Partnership is a
party or by which the Company or the Partnership is bound or to which any
property or assets of the Company or the Partnership is subject, (iv) is
prohibited by or requires the Company or the Partnership to obtain or make any
consent, authorization, approval, registration or filing under any statute, law,
ordinance, regulation, rule, judgment, decree or order of any court or
governmental agency, board, bureau, body, department or authority, or of any
other person, (v) will cause any acceleration of maturity of any note,
instrument or other obligation to which the Company or the Partnership is a
party or by which the Company or the Partnership is bound or with respect to
which the Company or the Partnership is an obligor or guarantor, or (vi) will
result in the creation or imposition of any and all liens, claims, charges,
restrictions, equities, taxes and encumbrances of every kind or description
(collectively "Encumbrances" and individually an "Encumbrance") 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 or the Partnership, except as
may be required in connection with obtaining any of the Financing.
7.5 Financial Statements. The Partnership has heretofore furnished TWP
with copies of the audited balance sheets, statements of income, statements of
changes in partnership deficit and statements of cash flows for the fiscal years
ended April 30, 1994, 1995, 1996 and 1997 (collectively, the "Year End
Financials") and the unaudited balance sheet and income statement of the
Partnership for the three months ended July 31, 1997 and the monthly financial
review dated July 1997 (collectively, the "Unaudited Statements"). Except as
otherwise set forth therein, the Unaudited Statements were prepared in a manner
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<PAGE> 14
consistent with the Partnership's historical practices and in the reasonable
judgment of management fairly present the results of operations in all material
respects for the periods covered thereby, subject to year end adjustments, the
absence of footnote disclosures and adjustments required by generally accepted
accounting principles. Except as otherwise set forth therein, the Year End
Financials are in accordance with the books and records of the Partnership and
contain and reflect all necessary adjustments for a fair representation in all
material respects of the financial statements as of the date and for the period
covered thereby and reflect the assets, liabilities, financial condition and
results of operations indicated thereby in accordance with generally accepted
accounting principles consistently applied.
7.6 No Undisclosed Liabilities, Etc. Since April 30, 1997 (except (i) for
the transactions contemplated by this Agreement and (ii) as set forth in
Schedule 7.6 attached hereto):
7.6.1 Neither the Company nor the Partnership has incurred any
liability or obligation (absolute, accrued, contingent or otherwise) of any
nature affecting the Company or the Partnership or any of their properties
or assets, other than liabilities and obligations incurred in the ordinary
course of business, that would properly be reflected or reserved against in
a balance sheet prepared in conformity with the Financial Statements; and
7.6.2 The Partnership's backlog (i.e., all sales of advertising to be
included in directories to be published) has been produced in the ordinary
course of the business of the Partnership in quantities that are not
materially greater or less than those required for the current operation of
the business of the Partnership.
7.7 Absence of Certain Changes. Since April 30, 1997 (except (i) for the
negotiation, execution and delivery of this Agreement, (ii) as contemplated by
this Agreement and (iii) as set forth in Schedule 7.7 attached hereto):
7.7.1 Neither the Company nor the Partnership has had any change in
their condition, operations, business, properties, assets or liabilities,
except where such changes would not have a materially adverse effect on the
business, assets, condition (financial or otherwise) or operating results
of the Company and the Partnership, taken as a whole (a "Materially Adverse
Effect");
7.7.2 Except for the transactions contemplated in this Agreement,
neither the Company nor the Partnership has issued, sold or otherwise
disposed of, or agreed to issue, sell or otherwise dispose of, any equity
interests or any other security of the Company or the Partnership and has
not granted or agreed to grant any option, warrant or other right to
subscribe for or to purchase any equity interests or any other security of
the Company or the Partnership;
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<PAGE> 15
7.7.3 (i) Except for normal periodic increases in the ordinary course
of business consistent with past practice, since July 1, 1997 there has not
been any increase in the compensation payable or to become payable by the
Company or the Partnership to any of their respective directors, officers,
employees or agents (collectively, "Personnel"), (ii) other than in the
ordinary course of business, since July 1, 1997 there has not been any
bonus, incentive compensation, service award or other like benefit granted,
made or accrued, contingently or otherwise, for or to the credit of any of
the Personnel, (iii) since July 1, 1997 there has not been any employee
welfare, pension, retirement, profit-sharing or similar payment or
arrangement made or agreed to by the Company or the Partnership for any
Personnel except pursuant to existing plans and arrangements described in
Schedule 7.7 (collectively, the "Plans"), or (iv) since July 1, 1997 there
has not been any new employment or consulting agreement to which the
Company or the Partnership is a party;
7.7.4 No property or asset of a material nature to the Company or the
Partnership has been sold, transferred or otherwise disposed of, and
neither the Company nor the Partnership has agreed to sell, transfer or
otherwise dispose of, any of their respective material properties or
assets, except in the ordinary course of business;
7.7.5 No property or asset of a material nature to the Company or the
Partnership has been subjected to any Encumbrance and neither the Company
nor the Partnership has agreed to subject any of their respective material
properties or assets to any Encumbrance, except for (a) tax liens with
respect to taxes not yet due and payable or which are being contested in
good faith by appropriate proceedings and for which appropriate reserves
have been established in accordance with generally accepted accounting
principles, consistently applied; (b) deposits or pledges made in
connection with, or to secure payment of, utilities or similar services,
workers' compensation, unemployment insurance, old age pensions or other
social security obligations; (c) purchase money security interests in any
property acquired by the Company or the Partnership; (d) interests or title
of a lessor under any lease under which the Company or the Partnership is
the lessee; (e) mechanics', materialmen's or contractors' liens or
encumbrances or any similar lien or restriction; (f) easements,
rights-of-way, restrictions and other similar charges and encumbrances not
interfering with the ordinary conduct of the business of the Company or
detracting from the value of the assets of the Company; (g) liens
outstanding on the date hereof pursuant to agreements which will be
satisfied as of the Closing; and (h) liens securing the Financing
(collectively, "Permitted Encumbrances"); or
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<PAGE> 16
7.7.6 There has not been any amendment or termination of any
contract, agreement or license materially adversely affecting the Company
or the Partnership taken as a whole.
7.8 Title to and Condition of Properties and Assets. As of the date
hereof, (i) the Company and the Partnership have good and marketable title to
all of their respective assets and properties and (ii) as of the Closing Date,
the Company and the Partnership will have good and marketable title to all of
their respective assets and properties (except as sold or otherwise disposed of
in the ordinary course of business), subject to no Encumbrance (other than
Permitted Encumbrances), except as set forth on Schedule 7.8 attached hereto.
The Company's and the Partnership's material facilities, machinery, furniture,
office and other equipment are in good operating condition and repair, subject
only to ordinary wear and tear, and neither the Company nor the Partnership nor
any of their respective assets or properties is in material violation of any
applicable ordinance, regulation or building, zoning, environmental or other law
in respect thereof.
7.9 Leased Property. Attached as Schedule 7.9 is a true and complete list
of all property leased by the Company or the Partnership. Each lease set forth
in Schedule 7.9 pursuant to which the Company or the Partnership leases any real
property or personal property 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 or the Partnership, or any event that with notice or
lapse of time or both would constitute such a default by the Company or the
Partnership and with respect to which the Company or the Partnership has not
taken adequate steps to prevent such default from occurring, except for any such
default as had not had and would not reasonably be expected to have a Materially
Adverse Effect; all of such events, if any, and the aforesaid steps taken by the
Company or the Partnership are set forth in Schedule 7.9. 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 had or would reasonably be expected to have a
Materially Adverse Effect. Neither the Company nor the Partnership owns any
real property.
7.10 Material Contracts. All Material Contracts to which the Company or
the Partnership is a party or by which the Company or the Partnership are bound
are listed on Schedule 7.10. Except as disclosed on Schedule 7.10, each
Material Contract is valid and subsisting and the Company or the Partnership, as
applicable, has duly performed in all material respects all its obligations
under each such Material Contract to which it is party to the extent that such
obligations to perform have accrued and no breach or default, or, to the
knowledge of the Company or the Partnership, any other party or obligor
thereunder, has occurred or, assuming that the approvals and consents set forth
on Schedule 12.2.7 are sought and obtained, as a result of the execution,
delivery and performance of this Agreement. For purposes hereof, a "Material
Contract" of the Partnership or the Company
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<PAGE> 17
means any agreement, arrangement, bond, commitment, indemnity, lease or license
to which such person is a party that (a) by its terms obligates such Person to
pay an amount in excess of $50,000 per year and which cannot be terminated or
canceled by such Person without liability or penalty upon 60 days' or less prior
notice (but not including any advertising sale contract between the Partnership
and any of its customers), (b) limits or restricts the ability of such Person to
compete or to conduct its business in any manner or place, (c) is a credit
agreement, note, bond, mortgage, deed of trust or indenture evidencing any
indebtedness of such Person for borrowed money, is a guaranty or obligation,
other than pursuant to the Plans, of any Affiliate, officer or director, of such
Person, from or to such Person (but not including any advertising sale contract
between the Partnership and any of its customers), or (d) the termination of
which would have a Materially Adverse Effect (but not including any advertising
sale contract between the Partnership and any of its customers); provided,
however, that "Material Contracts" shall not mean or include any of the Plans.
7.11 Litigation. Except as set forth in Schedule 7.11, 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 or the
Partnership's knowledge, threatened and involving in excess of $150,000,
involving the Company or the Partnership or which questions the validity of any
TransWestern Delivered Document or which seeks to delay, prohibit or restrict in
any manner any action taken or contemplated to be taken by the Company or the
Partnership under any TransWestern Delivered Document.
7.12 Patents, Copyrights and Trademarks. Schedule 7.12 sets forth a
complete list of all 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 or the Partnership and all licenses and other agreements
allowing the Company or the Partnership to use Intellectual Property Rights of
third parties in the United States. Except as otherwise set forth in Schedule
7.12, the Partnership is the sole and exclusive owner of the Intellectual
Property Rights listed therein, free and clear of any Encumbrance (other than
Permitted Encumbrances) 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 on Schedule 7.12, there has
been and is no claim challenging the scope, validity or enforceability of any of
the Intellectual Property Rights. Neither the Company, nor the Partnership 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 nor the Partnership has received or has any
knowledge, after due
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<PAGE> 18
inquiry, of any such claim or other notice of any such violation or
infringement. Except for the licenses listed in Schedule 7.12, neither the
Company nor the Partnership requires any license or other proprietary right to
conduct its business as it is now being conducted.
7.13 Compliance with Laws. The Company and the Partnership are in
compliance with, and the execution and delivery of this Agreement and the other
TransWestern Delivery Documents and the consummation by the Company and the
Partnership of the transactions contemplated hereby and thereby (including,
without limitation, the issuance to TWP of the Purchased Units) will comply
with, all federal, state and local statutes, laws, ordinances, regulations,
rules, permits, judgments, orders or decrees applicable to the Company or the
Partnership 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 defaults or violations, if any, that in the aggregate do
not and will not materially and adversely affect the Company and the
Partnership, taken as a whole. Except as set forth on Schedule 7.13, the
Company and the Partnership 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 the United States and all 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 non-compliance which in the aggregate would not
reasonably be expected to have a Materially Adverse Effect.
7.14 Governmental Authorizations and Regulations. Schedule 7.14 lists all
material licenses, franchises, permits and other governmental authorizations
held by the Company or the Partnership with respect to the conduct of their
respective businesses. Such licenses, franchises, permits and other
governmental authorizations are valid and neither the Company nor the
Partnership has not received any notice that any governmental authority intends
to cancel, terminate or not renew any such license, franchise, permit or other
governmental authorization. After the Closing the Company and the Partnership
will continue to hold all licenses, franchises, permits and other governmental
authorizations necessary to the conduct of their respective businesses as
currently conducted.
7.15 Labor Matters. No employees of the Company or the Partnership 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 nor the Partnership have any obligation
under any collective bargaining
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<PAGE> 19
agreement or other agreement with any labor union or labor organization that, in
any way, affects the Company or the Partnership. Neither the Company nor the
Partnership have any obligation to recognize or deal with any labor union or
labor organization concerning the Partnership, and there are no union agreements
pertaining to or which determine the terms or conditions of employment of any
employee of the Company or the Partnership. There are no pending or, to the
Company's or the Partnership's knowledge, threatened representation campaigns,
elections or proceedings or investigations concerning union representation
involving any employees of the Company or the Partnership. Neither the Company
nor the Partnership have any knowledge of any activities or efforts of any labor
union or labor organization (or representative thereof) to organize any
employees of the Company or the Partnership nor of any demands for recognition
or collective bargaining, nor of any strikes, slowdowns, work stoppages or
lock-outs of any kind, or threats thereof, by or with respect to any employees
of the Company or the Partnership or any actual or claimed representative
thereof, and no such activities, efforts, demands, strikes, slowdowns, work
stoppages or lock-outs occurred during the three year period preceding the date
hereof. Neither the Company nor the Partnership is involved in any industrial
or trade dispute or any dispute or negotiation regarding a claim of material
importance with any labor union or labor organization concerning any employee of
the Company or the Partnership, and there are no controversies, claims, demands
or grievances of material importance pending or, so far as the Company or the
Partnership is aware, threatened, between the Company or the Partnership and any
of their respective employees or any actual or claimed representative thereof.
7.16 Relationships. To the best of their knowledge, the relationships of
the Company and the Partnership taken as a whole with material suppliers,
distributors, dealers, sales representatives, customers and others having
business relationships with them are generally satisfactory, and there is no
indication of any intention by any party thereto to terminate or modify the
terms of any of such relationships, except for any termination or modification
which would not reasonably be expected to have a Materially Adverse Effect.
7.17 Publications in Process. The publications in process and the
directories in process of distribution, including, but not limited to, artwork,
production material, production information in the hands of subcontractors,
work-in-progress and parts and supplies relating to such publications and
directories, are suitable and usable in all material respects in the ordinary
course of business for the purposes for which intended, and suitable and usable
in all material respects for the due publication of the Partnership's
neighborhood telephone directories and the satisfactory discharge of customer
contracts for the insertion of advertising that the Partnership has entered
into. Without limiting the generality of the foregoing, those items do not
include any material amount of obsolete or defective materials or any excess
stock items.
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<PAGE> 20
7.18 List of Publications. Schedule 7.18 attached hereto contains a true
and complete list of (a) each telephone directory published by the Partnership,
(b) the two most recent dates on which each of such directories were published
by the Partnership and (c) the approximate number of copies of each directory
published on the most recent date listed. Each publication listed in Schedule
7.18 is substantially free of errors, substantially without offset charges and
without material claims for short distribution. To the knowledge of the
Partnership and the Company, each directory listed in Schedule 7.18 contains
substantially all of the addresses and phone numbers for the area of its
publication (except for telephone numbers that are "unlisted" by agreement with
the applicable local telephone exchange company) and was distributed to
substantially all of the residences and business firms in its area.
7.19 Replacement of Computer Tapes. Except as set for on Schedule 7.19
attached hereto, the Partnership does not have any knowledge that the
arrangements under which information is being supplied to the Partnership by the
local telephone exchange company for listed telephone numbers and addresses of
households in the geographical areas in which the Partnership publishes
telephone directories will be canceled, terminated or revoked.
7.20 Employees. Except as set forth on Schedule 7.20 attached hereto,
there has been no resignation or termination of employment of any officer or key
employee of the Company or the Partnership and neither the Company nor the
Partnership has any knowledge of any impending or threatened resignation or
termination of employment that would have a material adverse effect on the
operations or business of the Company or the Partnership. Except as set forth
on Schedule 7.20, there has been no labor trouble, strike or work stoppage with
respect to the Company or the Partnership and neither the Company nor the
Partnership has any knowledge of any impending or threatened labor trouble,
strike or work stoppage with respect to the Company or the Partnership. Except
as set forth on Schedule 7.20 attached hereto, neither the Company not the
Partnership has entered into any severance or similar arrangement in respect of
any present or former employees that will result in any obligation (absolute or
contingent) of the Company or the Partnership to make any payment to any present
or former employees following termination of employment.
7.21 Compliance With Legislation Regulating Environmental Quality. Except
as set forth on Schedule 7.21 attached hereto, to the knowledge of the Company
and the Partnership, there are no toxic wastes or other toxic or hazardous
substances or materials being stored or otherwise held on, under or about any of
the real properties owned, leased or used by the Company or the Partnership (the
"Facilities"). The Partnership has maintained the Facilities in compliance in
all material respects with all federal, state and local environmental
protection, occupational, health and safety or similar laws, ordinances,
restrictions, licenses and local environmental protection, occupational, health
and safety or similar laws, ordinances, restrictions, licenses and regulations,
including but not limited to the Federal Water Pollution Control Act (33 U.S.C.
Section 1251 et seq.), Resource Conservation
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<PAGE> 21
& Recovery Act (42 U. S. C. Section 6901 et seq.), Safe Drinking Water Act (21
U. S. C. Section 349, 42 U. S. C. Section Section 2019 300f), Toxic Substances
Control Act (15 U.S.C. Section 2601 et seq.), Clean Air Act (42 U.S.C. Section
7401 et seq.), Comprehensive Environmental Response, Compensation and Liability
Act (42 U.S.C. Section 9601 et seq.), California Health & Safety Code (Section
25100 et seq., Section 39000 et seq.), and California Water Code (Section
13000 et seq.). Neither the Company nor the Partnership is engaged in any
printing or manufacturing activities.
7.22 Brokers. 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 or the
Partnership.
7.23 Payments. Neither the Company nor the Partnership has, directly or
indirectly, paid or delivered any fee, commission or other sum of money or item
or property, however characterized, to any finder, agent, government official or
other party, in the United States or any other country, which is in any manner
related to the business or operations of the Company or the Partnership, which
either the Company or Partnership knows or has reason to believe to have been
illegal under any federal, state or local laws of the United States or any other
country having jurisdiction; and neither the Company nor the Partnership has
participated directly in any boycotts or other similar practices affecting any
of their actual or potential customers and have at all times done business in an
open and ethical manner.
7.24 Tax Matters. The Partnership and the Company (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 foreign
tax returns and reports. The Taxpayers have paid in full all taxes required to
be paid by such Taxpayers before such payment became delinquent. The Taxpayers
have made adequate provision, in conformity with generally accepted accounting
principles consistently applied, for the payment of all taxes which may
subsequently become due. All taxes which any Taxpayer has been required to
collect or withhold have been duly collected or withheld and, to the extent
required when due, have been or will be duly paid to the proper taxing
authority. There are no audits known by the Taxpayers to be pending of the any
of the Taxpayers tax returns, and there are no claims which have been asserted
relating to any of the Taxpayers' tax returns filed for any year which if
determined adversely would result in the assertion by any governmental agency of
any deficiency. There have been no waivers of statutes of limitations by any of
the Taxpayers. None of the Taxpayers has filed a statement under Section 341(f)
of the Internal Revenue Code of 1986, as may be amended from time to time (the
"Code") (or any comparable state income tax provision) consenting to have the
provisions of Section 341(f)(2) (collapsible corporations provisions) of the
Code (or any comparable state income tax provision) apply to any disposition of
any of the Taxpayers' assets or property, no property of the Taxpayers is
property which TWP, the Partnership or the Company is or will be required to
treat as owned by another person pursuant to the provisions of Section 168(f)
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<PAGE> 22
(safe harbor leasing provisions) of the Code. Neither of the Taxpayers are
a party to any tax-sharing agreement or similar arrangement with any other
party. For the purpose of this Agreement, any federal, state, local or
foreign income, sales, use, transfer, payroll, personal property, occupancy
or other tax, levy, impost, fee, imposition, assessment or similar charge,
together with any related addition to tax, interest or penalty thereon, is
referred to as a "tax."
7.25 No Untrue Statements. No statement by the Company or the
Partnership contained in this Agreement (including all Exhibits, Schedules
and certificates delivered pursuant hereto) and, to the knowledge of
Laurence H. Bloch, Ricardo Puente or Joan Fiorito, no written statement
(other than budgets or projections) furnished to TWP or the Fund or their
respective representatives by the Company or the Partnership or at the
direction of any officer thereof contains any untrue statement of a
material fact, or omits or will omit to state a material fact necessary in
order to make the statements therein contained not misleading.
8. Representations and Warranties by TWP. TWP represents and warrants to
the Company and the Partnership as follows:
8.1 Organization. TWP is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and
has the corporate power and authority to carry on its business as now being
conducted.
8.2 Authority. TWP has the power to enter into this Agreement and all
other agreements, instruments and documents executed and delivered by TWP
pursuant to this Agreement (collectively, the "TWP Delivered Documents")
and to carry out its obligations hereunder and thereunder. The execution,
delivery and performance of each of TWP Delivered Documents and the
consummation of the transactions contemplated hereby and thereby have been
duly authorized by TWP, and no other proceeding on the part of TWP is
necessary to authorize the execution and delivery of any of TWP Delivered
Documents or the performance of any of the transactions contemplated hereby
or thereby. Assuming due authorization, execution and delivery of TWP
Delivered Documents by the other parties thereto, TWP Delivered Documents
will be legal, valid and binding obligations of TWP enforceable against TWP
in accordance with their respective terms.
8.3 No Violation. Neither the execution, delivery or performance of
any of TWP Delivered Documents nor consummation of any of the transactions
contemplated thereby (i) will violate or conflict with the Certificate of
Incorporation or By-laws of TWP, (ii) will result in any breach of or
default under any provision of any contract or agreement to which TWP is a
party or by which TWP is bound or to which any property or assets of TWP is
subject, (iii) is prohibited by or requires TWP to obtain or make any
consent, authorization, approval, registration or filing under any statute,
law, ordinance, regulation, rule, judgment, decree or order of any court or
governmental agency, board, bureau, body, department or
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<PAGE> 23
authority, or of any other person, (iv) will cause any acceleration of maturity
of any note, instrument or other obligation to which TWP is a party or by which
TWP is bound or with respect to which TWP is an obligor or guarantor or (v) will
result in the creation or imposition of any Encumbrance upon or give to any
other person any interest or right (including any right of termination or
cancellation) in or with respect to any of the properties, assets, business,
agreements or contracts of TWP, except as may be required in connection with
obtaining any of the Financing.
8.4 Financing. TWP has provided to the Partnership true and correct copies
of the Equity Commitment Letter and the Debt Commitment Letters.
8.5 Litigation. 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 or foreign jurisdiction, of any
kind now pending or threatened or proposed in any manner, or any circumstances
which should or could reasonably form the basis of any such action, suit,
proceeding or investigation, involving TWP or any of its properties or assets
that (i) questions the validity of this Agreement or (ii) seeks to delay,
prohibit or restrict in any manner any action taken or contemplated to be taken
by TWP under this Agreement.
8.6 Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by TWP directly with the
Company, the Partnership, the Limited Partners or the Stockholders and without
the intervention of any other person and in such manner as not to give rise to
any valid claim against any of the parties for a finder's fee, brokerage
commission or like payment, except for fees due CIBC, which fees shall be paid
by the Partnership.
8.7 No Untrue Statements. No statement by TWP contained in this Agreement
and no written statement contained in any certificate or other document required
to be furnished by any officer, employee, counsel or other agent of TWP pursuant
to this Agreement contains or will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary in order. to make
the statements therein contained not misleading.
8.8 Acquisition for Investment. TWP is acquiring the Purchased Shares and
the Purchased Units for investment for its own account, and not with a view to,
or for offer or sale in connection with, any distribution thereof in violation
of applicable securities laws. TWP understands that the Purchased Shares and
the Purchased Units cannot be sold, transferred or otherwise disposed of without
registration under the 1933 Act or an exemption therefrom, and that in the
absence of an effective registration statement covering such Purchased Shares
and Purchased Units or an available exemption from registration from the 1933
Act, such Purchased Shares and Purchased Units must be held indefinitely. In
particular, TWP is aware that the Purchased Shares and the Purchased Units may
not be sold
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<PAGE> 24
pursuant to Rule 144 promulgated under the 1933 Act unless all of the
conditions of that Rule are met. TWP acknowledges that all certificates
evidencing the Purchased Shares and the Purchased Units to be owned by TWP
following the Closing shall bear appropriate legends evidencing the
foregoing. TWP represents that it has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits
and risks of its execution and delivery of this Agreement and the other TWP
Delivered Agreements and the consummation of the transactions contemplated
hereby and thereby. TWP is "accredited," as such term is defined in the
regulations promulgated under the 1933 Act, and is an "institutional buyer"
as such term is defined in the regulations promulgated under Chapter 110A
of the Massachusetts General Laws.
9. Representations and Warranties of the Stockholders. Each Stockholder
hereby severally represents and warrants as follows:
9.1 Organization and Good Standing. Such Stockholder has the
requisite power, authority and legal capacity to execute and deliver this
Agreement and any other agreements, instruments and documents executed and
delivered by such Stockholder pursuant to this Agreement (this Agreement
and such other agreements, instruments and documents being referred to
collectively as the "Stockholder Delivered Agreements") and to consummate
the transactions contemplated hereby and thereby. Such Stockholder
purporting to be a corporation or partnership is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization. Such Stockholder has all requisite power
and authority to own or operate its properties and assets, and to carry on
its business as it is now being conducted. Upon their delivery, the
Stockholder Delivered Agreements will have been duly executed and delivered
by such Stockholder. Assuming the due authorization, execution and delivery
of the Stockholder Delivered Agreements to which they are a party by the
other parties thereto, the Stockholder Delivered Agreements will constitute
valid and binding obligations of such Stockholder enforceable in accordance
with their respective terms.
9.2 Ownership of Common Stock. Such Stockholder owns the Common Stock
of the Company listed as being owned by it in Schedule 7.2 free and clear
of any and all Encumbrances, except for pledges of such Common Stock
pursuant to agreements or arrangements which will be satisfied at the
Closing.
9.3 Litigation. No claim, litigation, action, investigation or
proceeding is pending or, to the best knowledge of such Stockholder,
threatened, and no administrative, governmental or judicial order, decree,
judgement or decision is outstanding against such Stockholder or any of its
assets which would prevent such Stockholder from consummating the
transactions contemplated herein.
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9.4 Consents. Except as otherwise set forth on Schedule 9.4 attached
hereto, no authorization, approval, consent or order of, or registration,
declaration or filing with, any administrative, governmental or judicial
agency or tribunal or any other public or private body, entity or person is
required in connection with the execution, delivery or performance of the
Stockholder Delivered Agreements by such Stockholder.
9.5 Absence of Conflicts, Etc. Neither the execution, delivery nor
performance of the Stockholder Delivered Agreements:
9.5.1 violates or conflicts with, constitutes or results in a
default or breach of, or gives rise to a right of consent,
acceleration or termination, under such Stockholder's governing
instruments, if any, or any material commitment, contract, loan, note,
agreement, instrument, lease, license or permit to which such
Stockholder is a party or by which it is bound;
9.5.2 results in the imposition of any lien or Encumbrance
against such Stockholder or any of its assets; or
9.5.3 with respect to the execution, delivery and performance by
such Stockholder, violates any applicable statues, laws or
governmental regulations.
9.6 Knowledge; Access. Such Stockholder represents that it has such
knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of its execution and delivery of this
Agreement and the other Stockholder Delivered Agreements and the
consummation of the transactions contemplated hereby and thereby. Such
Stockholder further represents that it has had access to, prior to its
execution of this Agreement, the opportunity to ask questions of, and
receive answers from, the Company and the Partnership and their respective
officers concerning the terms and conditions of the transactions
contemplated hereby and to obtain additional information (to the extent the
either the Company or the Partnership possessed such information (or could
acquire it without unreasonable effort or expense) necessary to verify the
accuracy of any information furnished to it or to which it had access.
9.7 Brokers. 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 such Stockholder.
10. Representations and Warranties of the Limited Partners. Each Limited
Partner hereby represents and warrants as follows:
10.1 Organization and Good Standing. Such Limited Partner has the
requisite power, authority and legal capacity to execute and deliver this
Agreement and any other
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agreements, instruments and documents executed and delivered by such Limited
Partner pursuant to this Agreement (this Agreement and such other agreements,
instruments and documents being referred to collectively as the "Limited
Partner Delivered Agreements") and to consummate the transactions contemplated
hereby and thereby. Such Limited Partner purporting to be a corporation or
partnership is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization. Such Limited
Partner has all requisite power and authority to own or operate its properties
and assets, and to carry on its business as it is now being conducted. Upon
their delivery, the Limited Partner Delivered Agreements will have been duly
executed and delivered by such Limited Partner. Assuming the due
authorization, execution and delivery of the Limited Partner Delivered
Agreements to which they are a party by the other parties thereto, the Limited
Partner Delivered Agreements will constitute valid and binding obligations of
such Limited Partner enforceable in accordance with their respective terms.
10.2 Ownership of Partnership Units. Such Limited Partner owns the
equity units of the Partnership listed as being owned by it in Schedule 3 free
and clear of any and all Encumbrances, except for the pledges of such
Partnership units pursuant to agreements or arrangements which will be
satisfied at the Closing.
10.3 Litigation. No claim, litigation, action, investigation or
proceeding is pending or, to the best knowledge of such Limited Partner,
threatened, and no administrative, governmental or judicial order, decree,
judgement or decision is outstanding against such Limited Partner or any of its
assets which would prevent such Limited Partner from consummating the
transactions contemplated herein.
10.4 Consents. Except as otherwise set forth on Schedule 10.4 attached
hereto, no authorization, approval, consent or order of, or registration,
declaration or filing with, any administrative, governmental or judicial agency
or tribunal or any other public or private body, entity or person is required
in connection with the execution, delivery or performance of the Limited
Partner Delivered Agreements by such Limited Partner.
10.5 Absence of Conflicts, Etc. Neither the execution, delivery nor
performance of the Limited Partner Delivered Agreements:
10.5.1 violates or conflicts with, constitutes or results in
a default or breach of, or gives rise to a right of consent,
acceleration or termination, under such Limited Partner's governing
instruments, if any, or any material commitment, contract, loan, note,
agreement, instrument, lease, license or permit to which such Limited
Partner is a party or by which it is bound;
10.5.2 results in the imposition of any lien or Encumbrance
against such Limited Partner or any of its assets; or
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10.5.3 with respect to the execution, delivery and performance by
such Limited Partner, violates any applicable statues, laws or
governmental regulations.
10.6 Knowledge; Access. Such Limited Partner represents that it has such
knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of its execution and delivery of this
Agreement and the other Limited Partner Delivered Agreements and the
consummation of the transactions contemplated hereby and thereby. Such
Limited Partner further represents that it has had access, prior to its
execution of this Agreement, the opportunity to ask questions of, and receive
answers from, the Company and the Partnership and their respective officers
concerning the terms and conditions of the transactions contemplated hereby
and to obtain additional information (to the extent the either the Company or
the Partnership' possessed such information (or could acquire it without
unreasonable effort or expense) necessary to verify the accuracy of any
information furnished to it or to which it had access.
10.7 Brokers. 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 such Limited Partner.
11. Covenants of the Parties. Each of the Fund, TWP, the Company and
the Partnership, as applicable, covenant and agree as follows:
11.1 Access, Information and Documents. Pending the Closing, the
Partnership will give to TWP and its agents and representatives
(including, but not limited to, accountants, lawyers and appraisers), at
TWP's own expense, reasonable access during normal business hours to any and
all of the properties, assets, books, records and other documents relating to
the Partnership, and the Partnership and the Company will furnish to TWP such
information and copies of such documents and records as TWP shall reasonably
request. As part of such examination TWP may make such inquiries of such
persons having business relationships with the Partnership (including, but
not limited to, suppliers, licensees, distributors, account executives and
customers) as TWP shall determine, subject to the prior written approval of
the Company (which approval shall not be withheld unreasonably). In
addition, the Partnership and the Company and their respective officers will
cooperate with CIBC or other lender or underwriter and its or their advisors
in the preparation of an offering memorandum and other information, filing or
marketing material, and to the extent reasonably requested (and at TWP's sole
expense), participate in and cooperate with any roadshow relating to any
marketing or sale activities in connection with the Financing.
11.2 Conduct of Business Pending Closing. From the date hereof until the
Closing, except as consented to by TWP in writing:
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11.2.1 the Partnership will maintain itself at all times as a
partnership duly organized, validly existing and in good standing under
the laws of the State of Delaware;
11.2.2 the Company will maintain itself at all times as a corporation
duly organized, validly existing and in good standing under the laws of
the State of Delaware;
11.2.3 neither the Company nor the Partnership will amend or restate
its respective incorporation, charter, by-laws, partnership or other
organizational documents;
11.2.4 the Partnership will carry on its business and operations in a
good and diligent manner on an arm's length basis and substantially in
the manner carried on as of the date hereof and the Partnership will not
engage in any activity or transaction or make any commitment to purchase or
spend other than in the ordinary course of its business as heretofore
conducted;
11.2.5 the Partnership will not authorize or pay any distribution to
its partners (except for compensation payable in the ordinary course of
business to partners who are also employees and except in connection with
the termination of James D. Dunning, Jr.'s existing employment agreement
with the Partnership) and will not redeem, purchase or otherwise acquire, or
agree to redeem, purchase or otherwise acquire, any equity units except
described in this Agreement;
11.2.6 the Company will not authorize or pay any dividend or
distribution to its stockholders and will not redeem, purchase or
otherwise acquire, or agree to redeem, purchase or otherwise acquire, any of
the Company's stock except as described in this Agreement;
11.2.7 except as set forth on Schedule 11.2.7, other than in
connection with the termination of James D. Dunning, Jr.'s existing
employment arrangements with the Partnership, the Partnership will not pay
or obligate itself to pay any compensation, commission or bonus to any
officer or employee of the Partnership except for the regular compensation
and commissions payable to such, officer or employee at the rate in effect
on the date of this Agreement;
11.2.8 the Partnership will continue to carry all of its existing
insurance with respect to its assets and properties;
11.2.9 the Partnership will not, or obligate itself to, sell or
otherwise dispose of or pledge or otherwise encumber any of its assets
or properties except in the
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ordinary course of business and the Partnership will maintain its
Facilities and other assets in good operating condition and repair,
subject only to ordinary wear and tear;
11.2.10 the Partnership will at all times maintain a cash
balance in the ordinary course of its business in a manner consistent
with its prior cash management practices;
11.2.11 the Partnership will not engage in any activity or
transaction other than in the ordinary course of the business of the
Partnership as heretofore conducted; and
11.2.12 without limiting the foregoing, the Company and the
Partnership will consult with TWP regarding all significant
developments, transactions and proposals relating to the business of
the Partnership.
Notwithstanding the foregoing, nothing in this Section 11.2 shall
prohibit the Company or the Partnership from taking any other action or omitting
to take any other action as required or contemplated by this Agreement,
including without limitation incurring and paying expenses and redeeming
securities held by the Stockholders and the Limited Partners in connection
herewith; provided, however, that subject to the prior written approval of TWP
the Partnership may make acquisitions of existing yellow pages assets or
businesses ("Permitted Acquisitions") and incur earn-out or other liabilities
("Permitted Indebtedness") and/or make cash payments in connection therewith
(such cash payments and Permitted Indebtedness collectively referred to as
"Permitted Expenditures").
11.3 Consents and Approvals. The Fund shall cause TWP to, and TWP
shall, and the Partnership shall also, use its reasonable best efforts to
obtain prior to the Closing all consents, authorizations and approvals under
all statutes, laws, ordinances, regulations, rules, judgments, decrees and
orders of any court or governmental agency, board, bureau, body, department
or authority or of any other person required to be obtained by it in
connection with the execution, delivery and performance of this Agreement and
all other agreements, certificates and instruments contemplated herein and
the consummation of the transactions contemplated hereby and thereby.
11.4 No Solicitation of Offers. The Company and the Partnership shall
not, directly or indirectly, through any officer, director, employee, agent
or otherwise, (i) solicit, initiate or encourage the submission of any
proposal or offer from any person relating to any acquisition or purchase of
all or a material amount of the assets of, or any equity interest in, or any
merger, consolidation or business combination with, the Partnership or the
Company (an "Acquisition Proposal") or (ii) participate in any discussion or
negotiation regarding, or furnish to any other person any information with
respect to, or otherwise cooperate in any way with or assist, facilitate or
encourage, any Acquisition Proposal by any other person.
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11.5 Public Announcements. Prior to the Closing, neither the Fund nor
TWP, on the one hand, nor the Partnership nor the Company, on the other
hand, shall make any public announcement of the execution of this Agreement
or any of the transactions contemplated hereby, except as necessary to
obtain regulatory approval or as otherwise required by law, without the
prior written approval of the Company (in the case of the Fund or TWP) or
TWP (in the case of the Partnership or the Company), which approval shall
not be unreasonably withheld.
11.6 No Transfers by Stockholders. From the date hereof until the
Closing or earlier termination of this Agreement, no Stockholder shall sell,
transfer, pledge, assign or dispose of any Purchased Shares or issue or sell
any options or warrants to purchase any Purchased Shares, or agree to do any
of the foregoing, other than to a transferee that executes a counterpart
hereto or otherwise agrees in writing to be bound as a Stockholder by all of
the terms hereof prior to acquiring any Purchased Shares.
11.7 No Transfers by Limited Partners. From the date hereof until the
Closing or earlier termination of this Agreement, no Limited Partner
shall sell, transfer, pledge, assign or dispose of any Purchased Units or
issue or sell any options or warrants to purchase any Purchased Units, or
agree to do any of the foregoing, other than to a transferee that executes a
counterpart hereto or otherwise agrees in writing to be bound as a Limited
Partner by all of the terms hereof prior to acquiring any Purchased Units.
11.8 Updating of Information. The Company and the Partnership shall
promptly deliver to TWP any information concerning material events
subsequent to the date of this Agreement which is necessary to supplement
the information contained in or made a part of the representations and
warranties contained herein, including without limitation all Schedules
referred to herein, and the Financial Statements (including without
limitation monthly financial reviews), pursuant to any of the covenants or
agreements contained herein, in order that the information contained herein
or so delivered be complete and accurate in all material respects at all
times prior to and including the Closing, provided, however, that the
delivery of such information shall not in any manner constitute a waiver by
TWP of any of the covenants of the Partnership, the Company, the
Stockholders or the Limited Partners or of any of the conditions precedent
to the Closing hereunder and shall not be taken into account in determining
whether such covenants and conditions have been satisfied.
11.9 Confidential Information. The Fund shall, and shall cause TWP to,
preserve and maintain all proprietary information and trade secrets of
the Partnership and the Company received or confirmed in documentary form by
the Fund or TWP from the Partnership or the Company (or any of their
respective agents or representatives) and shall not disclose to any third
person or use any such proprietary information or trade secret for personal
advantage, except that TWP shall be free to disclose all or any of such
proprietary information and trade secrets which (a) are a matter of public
knowledge (other than on
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<PAGE> 31
account of any disclosure by or through the Fund or TWP; (b) have been
or are hereafter published other than through the Fund or TWP; (c) are
lawfully obtained by TWP from a third person not subject to any obligation
of confidentiality; or (d) required by law to be disclosed, so long as the
disclosing party gives sufficient prior notice of such anticipated
disclosure to the Company so that the Company may take steps to protect such
information, including by opposing such disclosure. In the event the
Closing does not occur, TWP will return all written documentation provided
to it by the Partnership or the Company and shall return to the Company or
destroy all written embodiments of any such proprietary information or
trade secrets. The covenants of TWP contained in this Section 11.9 shall
terminate at the Closing.
11.10 No Unreasonable Interference. Pending the Closing, neither the
Fund nor TWP will take any action which would interfere unreasonably with
the business or operations of the Partnership.
11.11 Non-Solicitation. Each Limited Partner, on behalf of itself and
its Affiliates (other than Affiliates of Chase Equity Associates, L.P.),
agrees that for a period of two (2) years after the Closing Date (the
"Non-Solicitation Period"), such Limited Partner shall not, directly or
indirectly, solicit the employment (in any capacity) of or hire any employee
(other than Laurence H. Bloch) of the Partnership or the Company. Each
Limited Partner agrees that, during the Non-Solicitation Period, it will not
directly or indirectly divulge or appropriate for his, her or its own use,
or for the use of any third party, any secret or confidential information or
knowledge obtained by such Limited Partner concerning the business of the
Company and the Partnership. This obligation of secrecy shall not apply to
information which (i) is or becomes part of the public domain other than
through breach of this Agreement or directly or indirectly through the fault
of such Limited Partner from an unaffiliated source, which source has no
obligation of secrecy to any party hereunder or (ii) is required to be
disclosed by law or government order (but only to the extent so required).
Each Limited Partner recognizes and affirms that in the event of breach of
any of the provisions of this Section 11.11, money damages would be
inadequate and the Company and the Partnership would have no adequate remedy
at law. Accordingly, such Limited Partner agrees that the Company and the
Partnership shall have the right, in addition to any other rights and
remedies existing in their favor, to enforce their rights and such Limited
Partner's obligations under this Section 11.11 not only by an action or
actions for damages, but also by an action or actions for specific
performance, injunctive and/or other equitable relief in order to enforce or
prevent any violations (whether anticipatory, continuing or future) of this
Section 11.11. The obligations of each Limited Partner pursuant to this
Section 11.11 are several and applicable only to such Limited Partner.
11.12 Dunning Non-Competition Agreement. For a period of three (3)
years after the Closing Date (the "Non-Competition Period"), James D.
Dunning, Jr. shall not,
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<PAGE> 32
directly or indirectly, either for himself or for any other person,
"participate" in any yellow page directory publishing business in the United
States or any business competing for the same customers as the businesses of
the Partnership and its subsidiaries in the geographic markets in which the
Partnership and its subsidiaries are engaged in the local or national yellow
page directory publishing business on the date hereof (the "Business");
provided that nothing contained herein shall prohibit Mr. Dunning from
participating in any industry specific yellow page business or any trade or
industry publications. For purposes of this Agreement, the term
"participate" includes any direct or indirect interest in any enterprise,
whether as an officer, director, employee, partner, sole proprietor, agent,
representative, independent contractor, consultant, franchisor, franchisee,
creditor, owner or otherwise; provided, that the term "participate" shall
not include ownership of less than 2% of the stock of a publicly-held
corporation whose stock is traded on a national securities exchange, on the
NASDAQ stock market or in the over-the-counter market. If, at the time of
enforcement of this Section 11.12, a court holds that the duration, scope,
geographic area or other restrictions stated herein are unreasonable under
circumstances then existing, the parties hereto agree that the maximum
duration, scope, geographic area or other restrictions deemed reasonable
under such circumstances by such court shall be substituted for the stated
duration, scope, geographic area or other restrictions. Mr. Dunning, on
behalf of himself and his Affiliates, recognizes and affirms that in the
event of breach of any of the provisions of this Section 11.12, money
damages would be inadequate and the Company and the Partnership and their
successors would have no adequate remedy at law. Accordingly, Mr. Dunning,
on behalf of himself and his Affiliates, agrees that the Company and the
Partnership shall have the right, in addition to any other rights and
remedies existing in their favor, to enforce their rights and Mr. Dunning's
obligations under this Section 11.12 not only by an action or actions for
damages, but also by an action or actions for specific performance,
injunctive and/or other equitable relief in order to enforce or prevent any
violations (whether anticipatory, continuing or future) of the provisions of
Section 11.12 .
11.13 Reinvesting Manager's Non-Competition Agreement. Each Reinvesting
Manager acknowledges that in the course of his or her employment with
the Partnership he or she has become familiar with the Partnership's trade
secrets and with other confidential information concerning the Partnership
and its predecessors and that his or her services have been and will be of
special, unique and extraordinary value to the Partnership. Therefore, such
Reinvesting Manager agrees that, for the period commencing on the Closing
Date and ending on the later of the second anniversary of the Closing Date
and the first anniversary of the date of termination of such Reinvesting
Manager's employment (the "Noncompete Period"), he or she shall not directly
or indirectly own, manage, control, participate in, consult with, render
services for, or in any manner engage in any yellow page directory
publishing business or any business competing for the same customers as the
businesses of the Partnership or its Subsidiaries as such businesses exist
or are in process during the Noncompete Period within any markets (or
markets contiguous thereto) in which the
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Partnership or its Subsidiaries engage or plan to engage in such businesses
during the Noncompete Period. Nothing herein shall prohibit such Reinvesting
Manager from (i) being a passive owner of not more than 5% of the outstanding
stock of any class of any corporation, so long as such Reinvesting Manager has
no active participation in the business of such corporation or (ii) becoming
employed by a competitor; provided that such Reinvesting Manager is not directly
or indirectly responsible for, or does not have control over, the business of
such competitor which directly competes with any of the businesses of the
Partnership.
12. Conditions to Closing.
12.1 Conditions to Obligations of the Company and the Partnership. The
obligations of the Partnership to issue the Purchased Units to TWP and to redeem
the Redemption Units is subject to the fulfillment prior to or at the Closing of
the following conditions:
12.1.1 The representations and warranties by TWP contained in this
Agreement or in any written statement delivered by TWP to the Company or
the Partnership pursuant to this Agreement shall be true in all material
respects at and as of the Closing as though such representations and
warranties were made at and as of said time (except (i) as contemplated by
this Agreement and (ii) to the extent, if any, the Company shall waive the
same in writing); and TWP shall have performed and complied in all material
respects with all the terms, provisions and covenants of this Agreement to
be performed and complied with by TWP at or before the Closing.
12.1.2 The Partnership shall have received an opinion, dated the
Closing Date, of Latham & Watkins, counsel for TWP, in form and substance
reasonably satisfactory to Kirkland & Ellis, counsel for the Partnership,
with respect to the matters set forth on Exhibit A attached hereto.
12.1.3 The Partnership shall have received a certificate from TWP in
the form of Exhibit B attached hereto certifying as to the accuracy of
TWP's representations and warranties at and as of the Closing and that TWP
has performed and complied with all of the terms, provisions and conditions
to be performed and complied with by TWP at or before the Closing.
12.1.4 TWP shall have executed and delivered the Third Amended and
Restated Agreement of Limited Partnership in the form attached hereto as
Exhibit H and the Investors Agreement in the form attached hereto as
Exhibit I.
12.1.5 The Partnership, the Company and TWP shall have obtained all
material consents, authorizations and approvals under all statutes, laws,
ordinances,
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regulations, rules, judgments, decrees and orders of any court or
governmental agency, board, bureau, body, department or authority or of any
other person required to be obtained by the Partnership, the Company or TWP,
as the case may be, in connection with the execution, delivery and
performance of this Agreement and all other agreements, certificates and
instruments contemplated herein and the consummation of the transactions
contemplated hereby and thereby.
12.1.6 Continental Illinois Venture Corporation ("CIVC") and one or more
of its employees and affiliates designated by CIVC, including CIVC
Partners III (CIVC collectively with such other participating Persons, the
"CIVC Parties"), shall have been offered the opportunity to invest up to an
aggregate of $30 million in cash in Purchased Units and Purchased Shares or,
at CIVC's election, to exchange or retain Class A Units and retain shares of
the common stock of the Company with value aggregating up to $30 million (it
being understood that for such purposes the value of any such securities
shall be deemed to equal the amount otherwise payable as redemption or the
purchase price under this Agreement if such interests were redeemed or
purchased in accordance herewith), or to invest cash and exchange or retain
equity interests, in such proportions as CIVC elects, in an amount
aggregating up to $30 million, pursuant to and substantially in accordance
with the terms contained in the Third Amended and Restated Agreement of
Limited Partnership and in accordance with the summary of terms attached as
Exhibit H hereto or on such other terms and conditions and pursuant to such
other documentation as is satisfactory to CIVC, provided that after
consummating any such investment and/or exchange, and taking into account
any securities so retained, the CIVC Parties and TWP will own Purchased
Units and Purchased Shares of the same classes, and in the same proportions
(relative to TWP (together with its Affiliates), the Reinvesting Managers
and the Other Investors) as set forth in the summary of terms included in
Exhibit H.
12.1.7 Each of Laurence H. Bloch, Ricardo Puente, Joan Fiorito, Marybeth
Brennan, Joseph Wazny, Robert Bambace, Richard Beck, Michael Bynum,
Steve Cartlidge, Kim Kaznowski, Richard Mellert, Ita Shea-Oglesby, Lois
Elizabeth Speights, Victoria Welch (each, a "Reinvesting Manager") and
James Dunning, Jr. and First Union Investors, Inc. (together, the "Other
Investors") shall have been offered the opportunity to invest up to an
aggregate of $19 million in cash in Purchased Units or, at the election of
each such Person, to exchange or retain Class A Units and retain shares of
the common stock of the Company with value aggregating up to $19 million (it
being understood that for such purposes the value of any such securities
shall be deemed to equal the amount otherwise payable as Redemption Price
under this Agreement if such interests were redeemed in accordance
herewith), or to invest cash and exchange or retain Class A Units and retain
Company common stock in such proportions as the Key Executives and the'
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Other Investors elect, in an amount aggregating up to $19 million,
pursuant to and substantially in accordance with the terms contained in the
form of the Third Amended and Restated Agreement of Limited Partnership and
in accordance with the summary of terms attached as Exhibit H hereto or upon
such other terms and conditions and pursuant to such other documentation as
is satisfactory to CIVC, provided that after consummating any such
investment and/or exchange, and taking into account any securities so
retained (but excluding any securities issued pursuant to incentive
arrangements), the Reinvesting Managers, the Other Investors, the CIVC
Parties and TWP will own securities of the Company and the Partnership in
the same classes, and in the same proportions (relative to one another) as
set forth in the summary of terms included in Exhibit H.
12.1.8 The Partnership shall have executed and delivered employment
agreements in the form of Exhibits J-1 through J-2 hereto with Laurence
H. Bloch and Ricardo Puente.
12.1.9 The Company and the Partnership shall have executed and delivered
to each Reinvesting Manager an Executive Agreement in the form attached
hereto as Exhibit K.
12.2 Conditions to Obligations of TWP. The obligations of TWP to purchase
the Purchased Units and purchase the Purchased Shares is subject to the
fulfillment prior to or at the Closing of the following conditions:
12.2.1 The representations and warranties by the Company, the Partnership,
the Stockholders or the Limited Partners contained in this Agreement or
in any written statement delivered to TWP by the Company or the Partnership
or the Stockholders or the Limited Partners pursuant to this Agreement shall
be true in all material respects at and as of the Closing as though such
representations and warranties were made at and as of said time (except (i)
as contemplated by this Agreement and (ii) to the extent, if any, TWP shall
waive the same in writing); and the Company the Partnership, the
Stockholders and the Limited Partners shall have performed and complied in
all material respects with all the terms, provisions and covenants of this
Agreement to be performed and complied with by said entities or individuals
at or before the Closing; provided, however, that if (x) one or more of such
representations or warranties or statements is untrue or partially untrue at
the Closing but (y) such fact does not have or can not reasonably be
expected to have, materially adverse monetary consequences to the Company
and the Partnership, taken as a whole, such fact shall not relieve TWP of
any of its obligations under this Agreement.
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12.2.2 TWP shall have received an opinion, dated the Closing
Date, of Kirkland & Ellis, counsel for the Company and the
Partnership, in form and substance reasonably satisfactory to Latham &
Watkins, counsel for TWP, with respect to the matters set forth on
Exhibit C attached hereto.
12.2.3 TWP shall have received a certificate from the Company in
the form of Exhibit D attached hereto certifying as to the accuracy in
all material respects of the Company's representations and warranties
at and as of the Closing and that the Company has performed and
complied in all material respects with all of the terms, provisions
and conditions to be performed and complied with by the Company at or
before the Closing.
12.2.4 TWP shall have received a certificate from the Company in
the form of Exhibit E attached hereto certifying as to certain
corporate matters with respect to the Company, together with all of
the attachments referred to therein.
12.2.5 TWP shall have received a certificate from the
Partnership in the form of Exhibit F attached hereto certifying as to
the accuracy in all material respects of the Partnership's
representations and warranties at and as of the Closing and that the
Partnership has performed and complied in all material respects with
all of the terms, provisions and conditions to be performed and
complied with by the Partnership at or before the Closing.
12.2.6 TWP shall have received a certificate from the
Partnership in the form of Exhibit G attached hereto certifying as to
certain partnership matters with respect to the Partnership, together
with all of the attachments referred to therein.
12.2.7 The Partnership, the Company and TWP shall have obtained
all of the consents, authorizations and approvals listed on Schedule
12.2.7 hereto under (i) all statutes, laws, ordinances, regulations,
rules, judgments, decrees and orders of any court or governmental
agency, board, bureau, body, department or authority or of any other
person required to be obtained by the Partnership, the Company or TWP,
as the case may be, in connection with the execution, delivery and
performance of this Agreement, and (ii) all other agreements,
certificates and instruments contemplated herein and the consummation
of the transactions contemplated hereby and thereby.
12.2.8 The Interest Rate Swap agreement between the Partnership
and First Union National Bank of North Carolina dated December 7,
1995, including the "Master Agreement" referred to therein and the
Interest Rate Swap agreement between the Partnership and the Canadian
Imperial Bank of Commerce dated December 7, 1995, including the
"Master Agreement" referred to therein shall have
-30-
<PAGE> 37
been terminated to the reasonable satisfaction of TWP without further
liability to the Partnership or the Company.
12.2.9 The Employment Agreement dated May 13, 1993 between the
Partnership and James D. Dunning, Jr. shall have been terminated in
accordance with its terms.
12.2.10 The respective Employment Agreements dated May 13, 1993
between the Partnership and Laurence H. Bloch and Ricardo Puente shall
have been terminated to the reasonable satisfaction of TWP without
further liability to the Partnership or the Company and new Employment
Agreements, in the forms of Exhibit J-1 and J-2 hereto, shall have
been entered into with Laurence H. Bloch and Ricardo Puente.
12.2.11 The respective Executive Agreements dated May 13, 1993
between the Partnership and James D. Dunning, Jr, Laurence H. Bloch
and Ricardo Puente shall have been terminated to the reasonable
satisfaction of TWP without further liability to the Partnership or
the Company.
12.2.12 The Partnership's Equity Compensation Plan and the
Equity Compensation Trust shall have been terminated or continued to
the reasonable satisfaction of TWP without further liability to the
Partnership or the Company.
12.2.13 The Registration Agreement dated May 13, 1993 between
the Partnership and the persons named therein and the persons who
later became a party to said agreement shall have been terminated to
the reasonable satisfaction of TWP without further liability to the
Partnership or the Company.
12.2.14 The Investors Agreement dated May 13, 1993 between the
Company, the Partnership and the persons named therein and the persons
who later became a party to said agreement shall have been terminated
to the reasonable satisfaction of TWP without further liability to the
Partnership or the Company.
12.2.15 The Company, the Partnership and all partners of the
Partnership shall have executed and delivered the Third Amended and
Restated Agreement of Limited Partnership in the form attached hereto
as Exhibit H.
12.2.16 The Company, the Partnership and all persons who will
continue to hold an equity interest of any type or description in the
Company or the Partnership shall have executed and delivered the
Investors Agreement in the form attached hereto as Exhibit I.
-31-
<PAGE> 38
12.2.17 The Partnership shall have executed and delivered to
Thomas H. Lee Company the Management Agreement between the Partnership
and Thomas H. Lee Company in substantially the form attached hereto as
Exhibit L.
12.2.18 Reinvesting Managers shall have invested cash or
exchanged or retained Class A Units, Class E Units or Company common
stock, as contemplated by Section 12.1.7, in an aggregate amount
(including the sum of the amount of such cash invested plus the value
of the Class A Units, Class E Units and Company common stock retained
or exchanged) equal to or exceeding $10 million (it being understood
that for such purposes the value of any such securities retained or
exchanged shall be deemed to equal the amount otherwise payable as
Redemption Price under this Agreement if such interests were redeemed
in accordance herewith).
12.2.19 All Stockholders shall have tendered their stock
certificates representing the Purchased Shares pursuant to the terms
hereof.
12.2.20 The Company, the Partnership and all persons who will
continue to hold an equity interest of any type or description in the
Partnership shall have executed and delivered the Registration
Agreement in the form attached hereto as Exhibit M.
12.3 Commercially Reasonable Efforts. Upon the terms and subject to
the terms and conditions set forth in this Agreement, each of the parties agrees
to use its commercially reasonable efforts to take, or cause to be taken, and
the Fund shall cause TWP to take, all actions, and to do, or cause to be done,
and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement,
including the satisfaction of the respective conditions set forth in Section 13.
13. Termination. This Agreement may be terminated as follows:
13.1 TWP's Right to Terminate. By TWP by written notice to the Company
and the Partnership (a) if the transactions contemplated hereby have not been
consummated by October 1, 1997, or (b) if any event occurs or condition exists
which would render impossible the satisfaction of one or more conditions to the
obligations of TWP to consummate the transactions contemplated by this Agreement
as set forth in Section 12.2 and such condition has not been satisfied within
five (5) days after such notice; provided that TWP will not be entitled to
terminate this Agreement pursuant to this paragraph if the occurrence of the
events, circumstances or condition described in (a) or (b) foregoing is the
direct or indirect result of (i) any breach by TWP of any of its obligations
hereunder or (ii) TWP having failed to satisfy any condition set forth herein
that TWP was required to satisfy.
-32-
<PAGE> 39
13.2 The Stockholders and the Limited Partners' Right to Terminate. By the
Company's board of directors, by written notice to TWP (a) if the transactions
contemplated hereby have not been consummated by October 1, 1997, or (b) if any
event occurs or condition exists which would render impossible the satisfaction
of one or more conditions to the obligations of the Stockholders or the Limited
Partners, respectively, to consummate the transactions contemplated by this
Agreement as set forth in Section 12.1 and such condition has not been satisfied
within five (5) days after such notice; provided that neither the Stockholders
nor the Limited Partners will be entitled to terminate this Agreement pursuant
to this paragraph if the occurrence of the events, circumstances or condition
described in (a) or (b) foregoing is the direct or indirect result of (i) any
breach by the Stockholders, the Limited Partners, the Company or the Partnership
of any of their respective obligations hereunder or (ii) any of the
Stockholders, the Limited Partners, the Company or the Partnership having
failed to satisfy any condition set forth herein that such party was required to
satisfy.
13.3 Effect of Termination. In the event that this Agreement shall be
terminated pursuant to Section 13.1 or 13.2, all further obligations of the
parties under this Agreement shall terminate; provided that, the obligations of
the parties contained in (i) Section 11, and (ii) the Confidentiality Agreement
dated July 18, 1997, executed by each of the Partnership and Thomas H. Lee
Company, shall survive any such termination, and that a termination under
Section 13.1 or 13.2 shall not relieve either party of any liability for a
breach of, or for any misrepresentation under this Agreement, or be deemed to
constitute a waiver of any available remedy (including specific performance if
available) for any such breach or misrepresentation.
14. Miscellaneous.
14.1 Non-Survival of Representations and Warranties; Release Upon Closing.
None of the representations and warranties in this Agreement shall survive the
Closing. Upon consummation of the Closing, notwithstanding any breach of
representations or warranties by another party, any failure to be satisfied of
any other condition to the obligations of a Party hereto or any breach of any
covenant by another party hereto, each such breach of representations and
warranties, condition that is unsatisfied and covenant which is breached prior
to the Closing Date shall be deemed to be waived by such party, and such party
shall be deemed to fully release and forever discharge the other party on
account of any and all claims, demands or charges, known or unknown with respect
to the same, except that nothing in this Section 14.1 shall be construed so as
to limit the ability of any party to bring a claim or action against any other
person for fraud or intentional tort committed directly by such person.
Further, notwithstanding the provisions of Section 13 above, each of the Parties
shall be deemed to have waived its respective right to terminate this Agreement
upon consummation of the Closing. The foregoing provision shall not limit
-33-
<PAGE> 40
any covenant or agreement of any of the parties which by its terms
contemplates performance after the Closing.
14.2 Limited Partner and Stockholder Representative.
14.2.1 By execution of this Agreement, each of the Limited
Partners and the Stockholders who is selling Redemption Units and Purchased
Shares hereby designates the Selling Securityholder Representative to serve as
its representative with respect to the matters contemplated in Section 14.2.2
below.
14.2.2 Each of the Limited Partners and the Stockholders who is
selling Redemption Units and Purchased Shares (a "Selling Securityholder"), by
his, her or its execution of this Agreement, hereby irrevocably appoints the
Selling Securityholder Representative as the agent, proxy and attorney-in-fact
for such Selling Securityholder for all purposes of this agreement, including
without limitation, full power and authority on such Person's behalf: (a) to
consummate the transactions contemplated herein (other than acceptance of any
amounts owed to such Selling Securityholder pursuant to this Agreement); (b) to
pay such Selling Securityholder's expenses (whether incurred on or after the
date hereof) incurred in connection with the negotiation and performance of this
Agreement, it being understood that such expense shall be allocated among the
Selling Securityholders pro rata based on the aggregate proceeds payable to such
Selling Securityholders at the Closing in respect of Redemption Units and
Purchase Shares; (c) to execute and deliver any certificates required hereunder,
including delivery of any stock certificates representing the Redemption Units
and Purchased Shares; (d) to execute and deliver on behalf of such Selling
Securityholder any amendment hereto; provided that such amendment does not
change the definition or manner of calculating the price payable in respect of
Redemption Units or Purchased Shares or the form of payment to such Selling
Securityholder, does not increase such Selling Securityholder's liabilities in
any material respect and does not treat any Selling Securityholder adversely in
a manner which is disproportionate to the manner in which the other Selling
Securityholders are treated (taking into account the Selling Securityholders'
respective ownership of Purchased Shares and Partnership Units); (e) to take all
other actions to be taken by or on behalf of such Selling Securityholder in
connection herewith; and (f) to do each and every act and exercise any and all
rights which such Selling Securityholder or the Selling Securityholders
(collectively) are permitted or required to do or exercise under this Agreement;
it being understood that none of the foregoing (a) through (e) constitutes
authority for the Selling Securityholder Representative to receive payments
hereunder on behalf of such Selling Securityholder or obligates the Selling
Securityholder Representative to take any action or omit to take any action.
Each of the Selling Securityholders agrees that such agency and proxy are
coupled with an interest and are therefore irrevocable without the consent of
the Selling Securityholder Representative.
14.2.3 Neither the Selling Securityholder Representative nor any
agent employed by him shall incur any liability to any Selling Securityholder,
TWP or the Fund (a) by virtue of the failure or refusal of the Selling
Securityholder Representative for any reason to consummate the
-34-
<PAGE> 41
transactions contemplated hereby, or (b) relating to the performance of his
other duties hereunder, except for fraud or bad faith.
14.3 Selling Securityholder's Post-Closing Access. TWP, the
Company and the Partnership shall fully cooperate with the Selling
Securityholders, to make available to the Selling Securityholders such
assistance and financial, Tax and other information (including the
books and records of the Company and the Partnership) reasonably
requested by any of the Selling Securityholders in connection with (a)
any audit or other investigation by any taxing authority or any
required reports or submissions to governmental entities relating to
any period (or portion thereof) ending on or before the Closing Date,
and (b) matters relating to insurance coverage of the Company and
Partnership, third-party litigation, claims, proceedings and
investigations involving the Company and the Partnership, if any.
TWP, the Company and the Partnership shall preserve such information
and such books and records for at least four years after the Closing
Date, and thereafter to dispose thereof only after it shall have given
the Selling Securityholder Representative at least 90 days' prior
written notice of such impending disposition and the opportunity (at
the Selling Securityholders' expense) to remove and retain such
information and such books and records.
14.4 Assignment. This Agreement, the rights and obligations
hereunder, and any and all other agreements, instruments or
certificates referenced herein are fully assignable and transferrable
at any time prior to or at the Closing by TWP to the Fund and/or its
affiliates without the consent or approval of any other party hereto,
provided that TWP and the Fund shall remain jointly and severally
liable for all obligations of each such assignee hereof. Subject to
the foregoing, neither this Agreement nor any of the rights or
obligations hereunder may be assigned by any party hereto without the
prior written consent of TWP, the Company and the Partnership.
Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors and assigns, and no other person shall have any right,
benefit or obligation hereunder.
14.5 Notices. Unless otherwise provided herein, any notice,
request, instruction or other document to be given hereunder by any
party to the others shall be in writing and delivered in person or by
courier, by facsimile transmission or mailed by certified or
registered mail, postage prepaid, return receipt requested and shall
be deemed to have been given when delivered personally to the
recipient, one business day after being sent to the recipient by
reputable overnight courier service (charges prepaid for overnight
delivery) or five business days after being mailed to the recipient by
certified or registered mail, return receipt requested and postage
prepaid, as follows:
-35-
<PAGE> 42
If to the Partnership TransWestern Publishing Company, L.P.
or the Company: 8344 Clairemont Mesa Boulevard
San Diego, California 92111
Attn: Ricardo Puente
Laurence H. Bloch
With a copy to: The Selling Securityholder Representative
and
Continental Illinois Venture Corporation
231 South LaSalle Street
Chicago, Illinois 60697
Attn: Marcus D. Wedner
With a copy to: Kirkland & Ellis
200 East Randolph Drive, 57th Floor
Chicago, Illinois 60601
Attn: William S. Kirsch, P.C.
If to the Selling Avy H. Stein
Securityholder c/o Willis, Stein & Partners
Representative: 225 West Monroe Street
Chicago, Illinois 60606
With a copy to: Kirkland & Ellis
200 East Randolph Drive, 57th Floor
Chicago, IL 60601
Attn: William S. Kirsch, P.C.
If to TWP: TWP Recapitalization Corp.
c/o Thomas H. Lee Company
75 State Street
Boston, Massachusetts 02109
Attn: Scott A. Schoen
Attn: C. Hunter Boll
With a copy to: Latham & Watkins
701 B Street, Suite 2100
San Diego, California 92101
Attn: Scott N. Wolfe, Esq.
-36-
<PAGE> 43
If to the Fund: Thomas H. Lee Equity Fund III, L.P.
c/o Thomas H. Lee Company
75 State Street
Boston, Massachusetts 02109
Attn: Scott A. Schoen
Attn: C. Hunter Boll
With a copy to: Latham & Watkins
701 B Street, Suite 2100
San Diego, California 92101
Attn: Scott N. Wolfe, Esq.
or to such other place and with such other copies as either party may
designate as to itself by written notice to the others.
14.6 Choice of Law. This Agreement shall be construed, interpreted and
the rights of the parties determined in accordance with the laws of the
State of California except with respect to matters of law concerning the
internal corporate affairs of any corporate entity which is a party to or
the subject of this Agreement, and as to those matters the law of the
jurisdiction under which the respective entity derives its powers shall
govern.
14.7 No Third Party Rights. Except as otherwise specifically provided
herein, nothing in this Agreement shall be construed to give any person
or entity other than TWP, the Partnership, the Company, the Stockholders and
the Limited Partners any legal or equitable right, remedy or claim under
this Agreement. This Agreement shall be for the sole and exclusive benefit
of the foregoing parties and their respective permitted successors, assigns,
heirs and personal representatives.
14.8 Entire Agreement; Amendments and Waivers. This Agreement, together
with all exhibits and schedules hereto, constitutes the entire
agreement among the parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties. No supplement,
modification or waiver of this Agreement shall be binding unless executed in
writing by the party to be bound thereby. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
14.9 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
-37-
<PAGE> 44
14.10 Attorneys' Fees. If any party to this Agreement brings an
action to enforce its rights under this Agreement, the prevailing
party shall be entitled to recover its costs and expenses, including
without limitation reasonable attorneys' fees, incurred in connection
with such action, including any appeal of such action.
14.11 Invalidity. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument
referred to herein, shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provision of this
Agreement or of any other such instrument.
14.12 Headings. The headings of the Paragraphs and Sections
herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of
this Agreement.
14.13 Expenses. Each party will each be liable for its own
costs and expenses incurred in connection with the negotiation,
preparation, execution or performance of this Agreement; provided,
however, that in the event the Closing successfully occurs as
described herein, the Partnership shall (i) pay the Company's, the
Partnership's, TWP's and Thomas H. Lee Company's reasonable and
necessary expenses incurred in connection with the negotiation and
documentation of the transactions described herein, (ii) pay a
transaction fee equal to Five Million Dollars ($5,000,000) pro-rata to
Thomas H. Lee Company and other stockholders of the Company and other
partners of the Partnership in proportion to their respective (or that
of their Affiliates) post-Closing equity in the Company and the
Partnership, (iii) pay ongoing management fees equal to Five Hundred
Thousand Dollars ($500,000) per year pro-rata to Thomas H. Lee Company
and other stockholders of the Company and other partners of the
Partnership in proportion to their respective (or that of their
Affiliates) post-Closing equity in the Company and the Partnership,
pursuant to the Management Agreement described in Section 13.2.17,
(iv) pay all TransWestern Transactional Expenses and (v) pay the fees
and expenses of the lenders as set forth in the Debt Commitment
Letters. As used herein, the term "TransWestern Transactional
Expenses" is defined as any and all legal or other expenses or fees of
any legal counsel or other advisor to the Partnership, the Company,
the Stockholders or the Limited Partners relating to the transactions
described or contemplated herein up to $250,000 in the aggregate, but
not including any such expenses or fees incurred directly in
connection with the negotiation of a recapitalization of the
Partnership and the Company as proposed by Continental Illinois
Venture Corporation.
14.14 Remedies. All rights, remedies, undertakings,
obligations, options, covenants, conditions and agreements contained
in this Agreement or provided by law shall be cumulative and no one of
them shall be exclusive of any other.
-38-
<PAGE> 45
14.15 Time of the Essence. Time is of the essence under this
Agreement and any amendment, modification or revision of it.
14.16 Fund Obligations. One or more affiliates of the Fund own
all of the outstanding capital stock of TWP. The Fund enters into
this Agreement to induce each of the other parties hereto to enter
into this Agreement and the other agreements and documents
contemplated hereby and to consummate the transactions contemplated
hereby and thereby. The Fund hereby undertakes and agrees that, until
consummation of the transactions contemplated to occur at the Closing,
each and every obligation of TWP pursuant to this Agreement, and each
and every obligation of TWP pursuant to any of the other agreements
and documents contemplated hereby, is and shall be the joint and
several obligation of the Fund. In particular, and without limiting
the foregoing, the Fund shall be jointly and severally liable to
arrange the Financing (as described in Section 2) and to pay the
purchase price described in Section 1. The Fund acknowledges that each
of the Company, the Partnership, the Limited Partners and the
Stockholders have entered into this Agreement and the other agreements
and documents contemplated hereby to which each such Person is a party
in reliance on the agreements of the Fund set forth herein
14.17 Further Assurances. The parties agree to cooperate and
take such further action and execute such documents and instruments as
may reasonably be required in order to more effectively carry out the
terms of this Agreement and the intentions of the parties.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
-39-
<PAGE> 46
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, or
have caused this Agreement to be duly executed on their respective behalf by
their respective officers thereunto duly authorized, as of the day and year
first above written.
TRANSWESTERN PUBLISHING COMPANY, L.P.
By: TRANSWESTERN COMMUNICATIONS COMPANY, INC.
Its General Partner
By: /s/ Laurence H. Bloch
-------------------------------------
Title: Executive Vice President
TRANSWESTERN COMMUNICATIONS COMPANY, INC.
By: /s/ Laurence H. Bloch
-------------------------------------
Title: Executive Vice President
TWP RECAPITALIZATION CORP.
By: /s/ C. Hunter Boll
------------------------------
Title: Chief Financial Officer
------------------------------
THOMAS H. LEE EQUITY FUND III, L.P.
By: THL Equity Advisors Limited Partnership III
Its: General Partner
By: THL Equity Trust III
Its: General Partner
By: /s/ C. Hunter Boll
-----------------------------
Title: Trustee
(SIGNATURE PAGE TO SECURITIES PURCHASE AND REDEMPTION AGREEEMENT)
<PAGE> 47
CIVC PARTNERS III
By: /s/ Marcus Wedner
----------------------------------------------
Title: Managing Director
/s/ Avy H. Stein
- -----------------------------------------------------
Avy H. Stein, individually and in his capacity as the
Selling Securityholder Representative
LIMITED PARTNERS:
FIRST UNION INVESTORS, INC.
By: /s/ Watts Hamrick
----------------------------------------------
Title: Senior Vice President
----------------------------------------------
CONTINENTAL ILLINOIS VENTURE CORPORATION
By: /s/ Marcus Wedner
----------------------------------------------
Title: Managing Director
----------------------------------------------
CIVC PARTNERS I
By: /s/ Marcus Wedner
----------------------------------------------
Title: Managing Director
/s/ John R. Willis
----------------------------------------------
JOHN R. WILLIS
(SIGNATURE PAGE TO SECURITIES PURCHASE AND REDEMPTION AGREEMENT)
<PAGE> 48
SPERSIBS LP
By: /s/ Philip Spertus
----------------------------------------------
Title: President of SCMI, its General Partner
----------------------------------------------
KLANS ASSOCIATES
By: /s/ Jack S. Levin
----------------------------------------------
Its:
----------------------------------------------
/s/ Irwin Bard
- -----------------------------------------------------
IRWIN BARD
JOHN S. BAKALAR TESTAMENTARY TRUST
By: /s/ John S. Bakalar
----------------------------------------------
John S. Bakalar, Trustee
/s/ Stuart Karu
- -----------------------------------------------------
STUART KARU
/s/ Candace Karu
- -----------------------------------------------------
CANDACE KARU
/s/ Daniel G. Helle
- -----------------------------------------------------
DANIEL G. HELLE
/s/ Marcus D. Wedner
- -----------------------------------------------------
MARCUS D. WEDNER
(SIGNATURE PAGE TO SECURITIES PURCHASE AND REDEMPTION AGREEMENT)
<PAGE> 49
BERNARD SHAVITZ IRA ROLLOVER,
By: /s/ Bernard Shavitz
----------------------------------------------
BERNARD SHAVITZ
/s/ Gregg I. Shavitz
- -----------------------------------------------------
GREGG I. SHAVITZ
/s/ Jeff Shavitz
- -----------------------------------------------------
JEFF SHAVITZ
/s/ Camillo Santomero
- -----------------------------------------------------
CAMILLO SANTOMERO
/s/ James D. Dunning, Jr.
- -----------------------------------------------------
JAMES D. DUNNING, JR.
DAVID F. DUNNING TRUST
By: /s/ James D. Dunning, Jr.
----------------------------------------------
James D. Dunning, Jr., Trustee
JAMES D. DUNNING III TRUST
By: /s/ James D. Dunning, Jr.
----------------------------------------------
James D. Dunning, Jr., Trustee
/s/ Laurence H. Bloch
- -----------------------------------------------------
LAURENCE H. BLOCH
RICARDO PUENTE LIVING TRUST
By: /s/ Ricardo Puente
----------------------------------------------
Ricardo Puente, Trustee
/s/ Joan Fiorito
- -----------------------------------------------------
JOAN FIORITO
(SIGNATURE PAGE TO SECURITIES PURCHASE AND REDEMPTION AGREEMENT)
<PAGE> 50
MARYBETH BRENNAN TRUST
By: /s/ Marybeth Brennan
----------------------------------------------
Marybeth Brennan, Trustee
/s/ Ita Shea-Oglesby
- -----------------------------------------------------
ITA SHEA-OGLESBY
/s/ Kim Kaznowski
- -----------------------------------------------------
KIM KAZNOWSKI
/s/ Michael Bynum
- -----------------------------------------------------
MICHAEL BYNUM
/s/ Richard Beck
- -----------------------------------------------------
RICHARD BECK
/s/ Richard Mellert
- -----------------------------------------------------
RICHARD MELLERT
/s/ Robert Bambace
- -----------------------------------------------------
ROBERT BAMBACE
/s/ Steve Cartlidge
- -----------------------------------------------------
STEVE CARTLIDGE
/s/ Victoria Welch
- -----------------------------------------------------
VICTORIA WELCH
THE WAZNY FAMILY TRUST
By: /s/ Joseph L. Wazny
----------------------------------------------
Joseph L. Wazny, as Trustee
/s/ Beth Speights
- -----------------------------------------------------
BETH SPEIGHTS
(SIGNATURE PAGE TO SECURITIES PURCHASE AND REDEMPTION AGREEMENT)
<PAGE> 51
CHASE EQUITY ASSOCIATES, L.P.
By: Chase Capital Partners
Its: General Partner
By: /s/ Brian J. Richmond
----------------------------------------------
Its: General Partner
----------------------------------------------
FIRST UNION CORPORATION
By:
----------------------------------------------
Title:
----------------------------------------------
(SIGNATURE PAGE TO SECURITIES PURCHASE AND REDEMPTION AGREEMENT)
<PAGE> 1
Exhibit 3.1
CERTIFICATE OF LIMITED PARTNERSHIP
OF
TRANSWESTERN PUBLISHING COMPANY, L.P.
This Certificate of Limited Partnership of TransWestern Publishing
Company, L.P. is being executed by the undersigned for the purpose of forming a
limited partnership under Chapter 17, Title 6 of the Code of the State of
Delaware.
1. Name of Partnership.
The name of the Partnership is TransWestern Publishing Company, L.P.
2. Registered Office and Registered Agent.
The address of the registered office of the Partnership in Delaware is
c/o the Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle
County, Delaware 19801. The name and address of the registered agent of the
Partnership is The Corporation Trust Company, 1209 Orange Street, Wilmington,
New Castle County, Delaware 19801.
3. Name and Address of General Partner.
The General Partner of the Partnership is TransWestern Communications
Company, Inc., having a principal place of business at c/o Morgan, Lewis &
Bockius, 101 Park Avenue, New York, NY 10178.
IN WITNESS WHEREOF, the undersigned have executed this instrument this
29th day of April, 1993.
GENERAL PARTNER:
TRANSWESTERN COMMUNICATIONS
COMPANY, INC.
By: /s/ Laurence H. Bloch
----------------------------
Name: Laurence H. Bloch
Title: President
<PAGE> 2
CERTIFICATE OF MERGER
OF TRANSWESTERN PUBLISHING COMPANY
INTO TRANSWESTERN PUBLISHING COMPANY, L.P.
The undersigned limited partnership organized and existing under and by
virtue of the Revised Uniform Limited Partnership Act of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the name and state of formation of each of the constituent
business entities of the merger (the "Merger") is as follows:
<TABLE>
<CAPTION>
NAME STATE OF FORMATION
---- ------------------
<S> <C>
TransWestern Publishing Company Delaware
TransWestern Publishing Company, L.P. Delaware
</TABLE>
SECOND: That an Agreement of Merger between the parties to the Merger
has been approved, and adopted in the manner prescribed by law by the board of
directors of each of TransWestern Publishing Company and TransWestern
Communications Company, Inc., acting as sole general partner of TransWestern
Publishing Company, L.P., and has been certified, acknowledged and executed by
each of the constituent business entities in accordance with the requirements
of Section 17-211 of the Revised Uniform Limited Partnership Act of Delaware
and Section 263 of the General Corporation Law of the State of Delaware, and a
copy of said Agreement of Merger is attached hereto as Exhibit A.
<PAGE> 3
THIRD: That the name of the surviving limited partnership of the Merger
is TransWestern Publishing Company, L.P.
FOURTH: That the executed Agreement of Merger is on file at the
principal place of business of the surviving limited partnership, the address
of which is c/o Continental Illinois Venture Corporation, 231 S. LaSalle
Street, Chicago, Illinois 60697.
FIFTH: That a copy of the Agreement of Merger will be furnished by the
surviving limited partnership, on request and without cost, to any partner or
stockholder of any constituent business entity.
Dated: May 13, 1993
TRANSWESTERN PUBLISHING
COMPANY, L.P.
By TRANSWESTERN COMMUNICATIONS
COMPANY, INC.
its General Partner
By: /s/ Laurence H. Bloch
----------------------------------
Name: Laurence H. Bloch
Title: Executive Vice President
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<PAGE> 4
AGREEMENT OF MERGER
AGREEMENT OF MERGER, dated this 13th day of May, 1993, pursuant to Section
17-211 of the Revised Uniform Limited Partnership Act of Delaware, between
TransWestern Publishing Company, a Delaware corporation, and TransWestern
Publishing Company, L.P., a Delaware limited partnership.
WITNESSETH that:
WHEREAS, TransWestern Publishing Company is a wholly-owned subsidiary of
TransWestern Publishing Company, L.P.;
WHEREAS, both of the constituent business entities desire to merge into a
single limited partnership, as hereinafter specified;
NOW, THEREFORE, the parties to this Agreement, in consideration of the
mutual covenants, agreements and provisions hereinafter contained, do hereby
prescribe the terms and conditions of such merger and mode of carrying the same
into effect as follows:
FIRST: TransWestern Publishing Company, L.P., hereby merges TransWestern
Publishing Company into itself and TransWestern Publishing Company shall be and
hereby is merged into TransWestern Publishing Company, L.P., which shall be the
surviving limited partnership (the "Merger").
SECOND: Each share of Common Stock of the merged corporation outstanding
at the time the Merger becomes effective
<PAGE> 5
shall, by virtue of the Merger and without any action on the part of the
surviving limited partnership, as the holder of all such outstanding Common
Stock, be cancelled and retired and all certificates representing such shares
shall be cancelled, and no cash or securities or other property shall be issued
in respect thereof.
THIRD: The terms and conditions of the Merger are as follows:
(a) The Agreement of Limited Partnership of the surviving limited
partnership as it shall exist on the effective date of the Merger shall be and
remain the Agreement of Limited Partnership of the surviving limited
partnership until the same shall be altered, amended or repealed as therein
provided.
(b) The officers of the surviving limited partnership shall continue in
office until their successors shall have been elected and qualified.
(c) The Merger shall become effective upon filing with the Secretary of
State of Delaware.
(d) Upon the Merger becoming effective, all the property, rights,
privileges, franchises, patents, trademarks, licenses, registrations and other
assets of every kind and description of the merged corporation shall be
transferred to, vested in and devolve upon the surviving limited partnership
without further act or deed and all property, rights and every other interest
of the surviving limited partnership and the merged corporation shall be as
effectively the property of the surviving limited partnership as they were of
the surviving limited partnership and the merged corporation, respectively. The
merged corporation hereby agrees from time to time as and when requested by the
surviving limited partnership or by its successors or assigns, to execute and
deliver or cause to be executed and delivered all such deeds and instruments
and to take or cause to be taken such further or other action as the surviving
limited partnership may deem necessary or desirable in order to vest in and
confirm to the surviving limited partnership title to and possession of any
property of the merged corporation acquired or to be acquired by reason of or as
a result of the Merger herein provided for and otherwise to carry out the
intent and purposes hereof and the proper officers and directors of the merged
corporation and the proper officers and directors of the general partner,
acting as general partner, of the surviving
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<PAGE> 6
limited partnership are fully authorized in the name of the merged corporation
or otherwise to take any and all such action.
IN WITNESS WHEREOF, the parties to this Agreement, pursuant to the approval
and authority duly given by resolutions adopted by the Board of Directors of
the merged corporation and by the Board of Directors of the general partner,
acting as general partner, of the surviving limited partnership, have caused
these presents to be executed by the Chief Executive Officer or the President,
respectively, and attested by the Secretary of each party hereto as the
respective act, deed and agreement of each of such business entity, on this
13th day of May, 1993.
TRANSWESTERN PUBLISHING COMPANY
By /s/ LAURENCE H. BLOCH
----------------------------
Name: Laurence H. Bloch
Title: President
ATTEST:
By: /s/ DAVID W. POLLAK
--------------------
David W. Pollak
Secretary
TRANSWESTERN PUBLISHING COMPANY, L.P.
By TRANSWESTERN COMMUNICATIONS
COMPANY, INC., its General Partner
By /s/ JAMES D. DUNNING, JR.
----------------------------
Name: James D. Dunning, Jr.
Title: Chief Executive Officer
- 3 -
<PAGE> 7
ATTEST:
By: /s/ LAURENCE H. BLOCH
----------------------
Laurence H. Bloch
Secretary
- 4 -
<PAGE> 8
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF LIMITED PARTNERSHIP
OF
TRANSWESTERN PUBLISHING COMPANY, L.P.
* * * *
Adopted in accordance with the provisions of Section17-202 of the
Delaware Revised Uniform Limited Partnership Act
* * * *
FIRST
The name of the limited partnership is TransWestern Publishing Company,
L.P. (the "Partnership").
SECOND
The Certificate of Limited Partnership of the Partnership is amended by
deleting article First of the Certificate of Limited Partnership and substitute
therefor as follows:
"FIRST
The name of the limited partnership is TransWestern Holdings, L.P. (the
"Partnership")."
IN WITNESS WHEREOF, the undersigned being the general partner
hereinbefore named, declaring and certifying that the facts herein stated are
true for the purpose of amending the Certificate of Limited Partnership pursuant
to the Delaware Revised Uniform Limited Partnership Act, hereby make this
Certificate of Amendment to Certificate of Limited Partnership as of the 4th day
of November, 1997.
TransWestern Communications Company, Inc.,
a Delaware corporation
By: /s/ JOAN FIORITO
--------------------------
Joan Fiorito
Chief Financial Officer
<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF INCORPORATION
OF
TWP CAPITAL CORP
ARTICLE ONE
The name of the corporation is TWP Capital Corp.
ARTICLE TWO
The address of the corporation's registered office in the State
of Delaware is 1013 Centre Road, in the City of Wilmington, County of New
Castle, 19805. The name of its registered agent at such address is Corporation
Service Company.
ARTICLE THREE
The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of the State of Delaware.
ARTICLE FOUR
The total number of shares of stock which the corporation has
authority to issue is one thousand (1,000) shares of Common Stock, par value one
cent ($0.01) per share.
ARTICLE FIVE
The name and mailing address of the sole incorporator are as
follows:
NAME MAILING ADDRESS
---- ---------------
Thaddine G. Gomez 200 East Randolph Drive
Suite 5700
Chicago, Illinois 60601
<PAGE> 2
ARTICLE SIX
The corporation is to have perpetual existence.
ARTICLE SEVEN
In furtherance and not in limitation of the powers conferred by
statute, the board of directors of the corporation is expressly authorized to
make, alter or repeal the by-laws of the corporation.
ARTICLE EIGHT
Meetings of stockholders may be held within or without the State
of Delaware, as the by-laws of the corporation may provide. The books of the
corporation may be kept outside the State of Delaware at such place or places as
may be designated from time to time by the board of directors or in the by-laws
of the corporation. Election of directors need not be by written ballot unless
the by-laws of the corporation so provide.
ARTICLE NINE
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 this corporation shall not be liable to the corporation or its stockholders
for monetary damages for a breach of fiduciary duty as a director. Any repeal or
modification of this ARTICLE NINE shall not adversely affect any right or
protection of a director of the corporation existing at the time of such repeal
or modification.
ARTICLE TEN
The corporation expressly elects not to be governed by Section203
of the General Corporation Law of the State of Delaware.
ARTICLE ELEVEN
The corporation reserves the right to amend, alter, change or
repeal any provision contained in this certificate of incorporation in the
manner now or hereafter prescribed herein and by the laws of the State of
Delaware, and all rights conferred upon stockholders herein are granted subject
to this reservation.
- 2 -
<PAGE> 3
I, THE UNDERSIGNED, being the sole incorporator hereinbefore
named, for the purpose of forming a corporation pursuant to the General
Corporation Law of the State of Delaware, do make this certificate, hereby
declaring and certifying that this is my act and deed and the facts stated
herein are true, and accordingly have hereunto set my hand on the 24th day of
September, 1997.
/s/ Thaddine G. Gomez
---------------------
Thaddine G. Gomez
Sole Incorporator
- 3 -
<PAGE> 1
EXHIBIT 3.3
BY-LAWS
OF
TWP CAPITAL CORP.
A Delaware corporation
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the
corporation in the State of Delaware shall be located at 1013 Centre Road,
Wilmington, Delaware, County of New Castle 19805. The name of the
corporation's registered agent at such address shall be Corporation Service
Company. The registered office and/or registered agent of the corporation may
be changed from time to time by action of the board of directors.
Section 2. Other Offices. The corporation may also have offices
at such other places, both within and without the State of Delaware, as the
board of directors may from time to time determine or the business of the
corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place and Time of Meetings. An annual meeting of
the stockholders shall be held each year within one hundred twenty (120) days
after the close of the immediately preceding fiscal year of the corporation for
the purpose of electing directors and conducting such other proper business as
may come before the meeting. The date, time and place of the annual meeting
shall be determined by the president of the corporation; provided, that if the
president does not act, the board of directors shall determine the date, time
and place of such meeting.
Section 2. Special Meetings. Special meetings of stockholders
may be called for any purpose and may be held at such time and place, within or
without the State of Delaware, as shall be stated in a notice of meeting or in
a duly executed waiver of notice thereof. Such meetings may be called at any
time by the board of directors or the president and shall be called by the
president upon the written request of holders of shares entitled to cast not
less than a majority of the votes at the meeting, such written request shall
state the purpose or purposes of the meeting and shall be delivered to the
president.
<PAGE> 2
Section 3. Place of Meetings. The board of directors may
designate any place, either within or without the State of Delaware, as the
place of meeting for any annual meeting or for any special meeting called by
the board of directors. If no designation is made, or if a special meeting be
otherwise called, the place of meeting shall be the principal executive office
of the corporation.
Section 4. Notice. Whenever stockholders are required or
permitted to take action at a meeting, written or printed notice stating the
place, date, time, and, in the case of special meetings, the purpose or
purposes, of such meeting, shall be given to each stockholder entitled to vote
at such meeting not less than ten (10) nor more than sixty (60) days before the
date of the meeting. All such notices shall be delivered, either personally or
by mail, by or at the direction of the board of directors, the president or the
secretary, and if mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, postage prepaid, addressed to the
stockholder at his, her or its address as the same appears on the records of
the corporation. Attendance of a person at a meeting shall constitute a waiver
of notice of such meeting, except when the person attends for the express
purpose of objecting at the beginning of the meeting to the transaction of any
business because the meeting is not lawfully called or convened.
Section 5. Stockholders List. The officer having charge of the
stock ledger of the corporation shall make, at least ten (10) days before every
meeting of the stockholders, a complete list of the stockholders entitled to
vote at such meeting arranged in alphabetical order, showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, either at a place within
the city where the meeting is to be held, which place shall be specified in the
notice of the meeting or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
Section 6. Quorum. The holders of a majority of the outstanding
shares of capital stock, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders, except as otherwise
provided by statute or by the certificate of incorporation. If a quorum is not
present, the holders of a majority of the shares present in person or
represented by proxy at the meeting, and entitled to vote at the meeting, may
adjourn the meeting to another time and/or place.
Section 7. Adjourned Meetings. When a meeting is adjourned to
another time and place, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting the corporation may transact
any business which might have been transacted at the original meeting. If the
adjournment is for more than thirty (30) days, or if after the adjournment a
new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
-2-
<PAGE> 3
Section 8. Vote Required. When a quorum is present, the
affirmative vote of the majority of shares present in person or represented by
proxy at the meeting and entitled to vote on the subject matter shall be the
act of the stockholders, unless the question is one upon which by express
provisions of an applicable law or of the certificate of incorporation a
different vote is required, in which case such express provision shall govern
and control the decision of such question.
Section 9. Voting Rights. Except as otherwise provided by the
General Corporation Law of the State of Delaware or by the certificate of
incorporation of the corporation or any amendments thereto and subject to
Section 3 of Article VI hereof, every stockholder shall at every meeting of the
stockholders be entitled to one (1) vote in person or by proxy for each share
of common stock held by such stockholder.
Section 10. Proxies. Each stockholder entitled to vote at a
meeting of stockholders or to express consent or dissent to corporate action in
writing without a meeting may authorize another person or persons to act for
him or her by proxy, but no such proxy shall be voted or acted upon after three
(3) years from its date, unless the proxy provides for a longer period. A duly
executed proxy shall be irrevocable if it states that it is irrevocable and if,
and only as long as, it is coupled with an interest sufficient in law to
support an irrevocable power. A proxy may be made irrevocable regardless of
whether the interest with which it is coupled is an interest in the stock
itself or an interest in the corporation generally. Any proxy is suspended
when the person executing the proxy is present at a meeting of stockholders and
elects to vote, except that when such proxy is coupled with an interest and the
fact of the interest appears on the face of the proxy, the agent named in the
proxy shall have all voting and other rights referred to in the proxy,
notwithstanding the presence of the person executing the proxy. At each
meeting of the stockholders, and before any voting commences, all proxies filed
at or before the meeting shall be submitted to and examined by the secretary or
a person designated by the secretary, and no shares may be represented or voted
under a proxy that has been found to be invalid or irregular.
Section 11. Action by Written Consent. Unless otherwise
provided in the certificate of incorporation, any action required to be taken
at any annual or special meeting of stockholders of the corporation, or any
action which may be taken at any annual or special meeting of such
stockholders, may be taken without a meeting, without prior notice and without
a vote, if a consent or consents in writing, setting forth the action so taken
and bearing the dates of signature of the stockholders who signed the consent
or consents, shall be signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted and shall be delivered to the corporation by delivery to its
registered office in the state of Delaware, or the corporation's principal
place of business, or an officer or agent of the corporation having custody of
the book or books in which proceedings of meetings of the stockholders are
recorded. Delivery made to the corporation's registered office shall be by
hand or by certified or registered mail, return receipt requested provided,
however, that no consent or consents delivered by certified or registered mail
shall be deemed delivered until such consent or consents are actually received
at the registered office. All consents properly delivered in
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<PAGE> 4
accordance with this section shall be deemed to be recorded when so delivered.
No written consent shall be effective to take the corporate action referred to
therein unless, within sixty (60) days of the earliest dated consent delivered
to the corporation as required by this section, written consents signed by the
holders of a sufficient number of shares to take such corporate action are so
recorded. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. Any action taken pursuant to
such written consent or consents of the stockholders shall have the same force
and effect as if taken by the stockholders at a meeting thereof.
ARTICLE III
DIRECTORS
Section 1. General Powers. The business and affairs of the
corporation shall be managed by or under the direction of the board of
directors.
Section 2. Number, Election and Term of Office. The number of
directors which shall constitute the first board shall be one (1). Thereafter,
the number of directors shall be established from time to time by resolution of
the board. The directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote in the election of directors. The directors shall be elected in this
manner at the annual meeting of the stockholders, except as provided in Section
4 of this Article III. Each director elected shall hold office until a
successor is duly elected and qualified or until his or her earlier death,
resignation or removal as hereinafter provided.
Section 3. Removal and Resignation. Any director or the entire
board of directors may be removed at any time, with or without cause, by the
holders of a majority of the shares then entitled to vote at an election of
directors. Whenever the holders of any class or series are entitled to elect
one or more directors by the provisions of the corporation's certificate of
incorporation, the provisions of this section shall apply, in respect to the
removal without cause of a director or directors so elected, to the vote of the
holders of the outstanding shares of that class or series and not to the vote
of the outstanding shares as a whole. Any director may resign at any time upon
written notice to the corporation.
Section 4. Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director. Each director so chosen shall hold office until a
successor is duly elected and qualified or until his or her earlier death,
resignation or removal as herein provided.
Section 5. Annual Meetings. The annual meeting of each newly
elected board of directors shall be held without other notice than this by-law
immediately after, and at the same place as, the annual meeting of
stockholders.
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<PAGE> 5
Section 6. Other Meetings and Notice. Regular meetings, other
than the annual meeting, of the board of directors may be held without notice
at such time and at such place as shall from time to time be determined by
resolution of the board. Special meetings of the board of directors may be
called by or at the request of the president on at least twenty-four (24) hours
notice to each director, either personally, by telephone, by mail, or by
telegraph.
Section 7. Quorum, Required Vote and Adjournment. A majority of
the total number of directors shall constitute a quorum for the transaction of
business. The vote of a majority of directors present at a meeting at which a
quorum is present shall be the act of the board of directors. If a quorum
shall not be present at any meeting of the board of directors, the directors
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present.
Section 8. Committees. The board of directors may, by
resolution passed by a majority of the whole board, designate one or more
committees, each committee to consist of one or more of the directors of the
corporation, which to the extent provided in such resolution or these by-laws
shall have and may exercise the powers of the board of directors in the
management and affairs of the corporation except as otherwise limited by law.
The board of directors may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. Such committee or committees shall have such name or
names as may be determined from time to time by resolution adopted by the board
of directors. Each committee shall keep regular minutes of its meetings and
report the same to the board of directors when required.
Section 9. Committee Rules. Each committee of the board of
directors may fix its own rules of procedure and shall hold its meetings as
provided by such rules, except as may otherwise be provided by a resolution of
the board of directors designating such committee. Unless otherwise provided
in such a resolution, the presence of at least a majority of the members of the
committee shall be necessary to constitute a quorum. In the event that a
member and that member's alternate, if alternates are designated by the board
of directors as provided in Section 8 of this Article III, of such committee is
or are absent or disqualified, the member or members thereof present at any
meeting and not disqualified from voting, whether or not such member or members
constitute a quorum, may unanimously appoint another member of the board of
directors to act at the meeting in place of any such absent or disqualified
member.
Section 10. Communications Equipment. Members of the board of
directors or any committee thereof may participate in and act at any meeting of
such board or committee through the use of a conference telephone or other
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in the meeting pursuant to this
section shall constitute presence in person at the meeting.
Section 11. Waiver of Notice and Presumption of Assent. Any
member of the board of directors or any committee thereof who is present at a
meeting shall be conclusively
-5-
<PAGE> 6
presumed to have waived notice of such meeting except when such member attends
for the express purpose of objecting at the beginning of the meeting to the
transaction of any business because the meeting is not lawfully called or
convened. Such member shall be conclusively presumed to have assented to any
action taken unless his or her dissent shall be entered in the minutes of the
meeting or unless his or her written dissent to such action shall be filed with
the person acting as the secretary of the meeting before the adjournment
thereof or shall be forwarded by registered mail to the secretary of the
corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to any member who voted in favor of such action.
Section 12. Action by Written Consent. Unless otherwise
restricted by the certificate of incorporation, any action required or
permitted to be taken at any meeting of the board of directors, or of any
committee thereof, may be taken without a meeting if all members of the board
or committee, as the case may be, consent thereto in writing, and the writing
or writings are filed with the minutes of proceedings of the board or
committee.
ARTICLE IV
OFFICERS
Section 1. Number. The officers of the corporation shall be
elected by the board of directors and shall consist of a president, one or more
vice-presidents, secretary, a treasurer, and such other officers and assistant
officers as may be deemed necessary or desirable by the board of directors.
Any number of offices may be held by the same person. In its discretion, the
board of directors may choose not to fill any office for any period as it may
deem advisable, except that the offices of president and secretary shall be
filled as expeditiously as possible.
Section 2. Election and Term of Office. The officers of the
corporation shall be elected annually by the board of directors at its first
meeting held after each annual meeting of stockholders or as soon thereafter as
conveniently may be. The president shall be elected annually by the board of
directors at the first meeting of the board of directors held after each annual
meeting of stockholders or as soon thereafter as conveniently may be. The
president shall appoint other officers to serve for such terms as he or she
deems desirable. Vacancies may be filled or new offices created and filled at
any meeting of the board of directors. Each officer shall hold office until a
successor is duly elected and qualified or until his or her earlier death,
resignation or removal as hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board
of directors may be removed by the board of directors whenever in its judgment
the best interests of the corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
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<PAGE> 7
Section 4. Vacancies. Any vacancy occurring in any office
because of death, resignation, removal, disqualification or otherwise, may be
filled by the board of directors for the unexpired portion of the term by the
board of directors then in office.
Section 5. Compensation. Compensation of all officers shall be
fixed by the board of directors, and no officer shall be prevented from
receiving such compensation by virtue of his or her also being a director of
the corporation.
Section 6. The President. The president shall be the chief
executive officer of the corporation; shall preside at all meetings of the
stockholders and board of directors at which he is present; subject to the
powers of the board of directors, shall have general charge of the business,
affairs and property of the corporation, and control over its officers, agents
and employees; and shall see that all orders and resolutions of the board of
directors are carried into effect. The president shall execute bonds,
mortgages and other contracts requiring a seal, under the seal of the
corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the board of directors to some other officer or agent of
the corporation. The president shall have such other powers and perform such
other duties as may be prescribed by the board of directors or as may be
provided in these by-laws.
Section 7. Vice-presidents. The vice-president, or if there
shall be more than one, the vice-presidents in the order determined by the
board of directors or by the president, shall, in the absence or disability of
the president, act with all of the powers and be subject to all the
restrictions of the president. The vice-presidents shall also perform such
other duties and have such other powers as the board of directors, the
president or these by-laws may, from time to time, prescribe.
Section 8. The Secretary and Assistant Secretaries. The
secretary shall attend all meetings of the board of directors, all meetings of
the committees thereof and all meetings of the stockholders and record all the
proceedings of the meetings in a book or books to be kept for that purpose.
Under the president's supervision, the secretary shall give, or cause to be
given, all notices required to be given by these by-laws or by law; shall have
such powers and perform such duties as the board of directors, the president or
these by-laws may, from time to time, prescribe; and shall have custody of the
corporate seal of the corporation. The secretary, or an assistant secretary,
shall have authority to affix the corporate seal to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such assistant secretary. The board of directors may give general authority to
any other officer to affix the seal of the corporation and to attest the
affixing by his signature. The assistant secretary, or if there be more than
one, the assistant secretaries in the order determined by the board of
directors, shall, in the absence or disability of the secretary, perform the
duties and exercise the powers of the secretary and shall perform such other
duties and have such other powers as the board of directors, the president, or
secretary may, from time to time, prescribe.
-7-
<PAGE> 8
Section 9. The Treasurer and Assistant Treasurer. The treasurer
shall have the custody of the corporate funds and securities; shall keep full
and accurate accounts of receipts and disbursements in books belonging to the
corporation; shall deposit all monies and other valuable effects in the name
and to the credit of the corporation as may be ordered by the board of
directors; shall cause the funds of the corporation to be disbursed when such
disbursements have been duly authorized, taking proper vouchers for such
disbursements; and shall render to the president and the board of directors, at
its regular meeting or when the board of directors so requires, an account of
the corporation; shall have such powers and perform such duties as the board of
directors, the president or these by-laws may, from time to time, prescribe.
If required by the board of directors, the treasurer shall give the corporation
a bond (which shall be rendered every six (6) years) in such sums and with such
surety or sureties as shall be satisfactory to the board of directors for the
faithful performance of the duties of the office of treasurer and for the
restoration to the corporation, in case of death, resignation, retirement, or
removal from office, of all books, papers, vouchers, money, and other property
of whatever kind in the possession or under the control of the treasurer
belonging to the corporation. The assistant treasurer, or if there shall be
more than one, the assistant treasurers in the order determined by the board of
directors, shall in the absence or disability of the treasurer, perform the
duties and exercise the powers of the treasurer. The assistant treasurers
shall perform such other duties and have such other powers as the board of
directors, the president or treasurer may, from time to time, prescribe.
Section 10. Other Officers, Assistant Officers and Agents.
Officers, assistant officers and agents, if any, other than those whose duties
are provided for in these by-laws, shall have such authority and perform such
duties as may from time to time be prescribed by resolution of the board of
directors.
Section 11. Absence or Disability of Officers. In the case of
the absence or disability of any officer of the corporation and of any person
hereby authorized to act in such officer's place during such officer's absence
or disability, the board of directors may by resolution delegate the powers and
duties of such officer to any other officer or to any director, or to any other
person whom it may select.
ARTICLE V
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
Section 1. Nature of Indemnity. 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
(hereinafter a "proceeding"), by reason of the fact that he, or a person of
whom he is the legal representative, is or was a director or officer, of the
corporation or is or was serving at the request of the corporation 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 the corporation to the fullest extent which it is empowered to
do so unless prohibited from doing so by the
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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 the corporation 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 heirs, executors and administrators; provided, however, that, except as
provided in Section 2 hereof, the corporation 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 the
corporation. The right to indemnification conferred in this Article V shall be
a contract right and, subject to Sections 2 and 5 hereof, shall include the
right to be paid by the corporation the expenses incurred in defending any such
proceeding in advance of its final disposition. The corporation may, by action
of its board of directors, provide indemnification to employees and agents of
the corporation with the same scope and effect as the foregoing indemnification
of directors and officers.
Section 2. Procedure for Indemnification of Directors and
Officers. Any indemnification of a director or officer of the corporation
under Section 1 of this Article V or advance of expenses under Section 5 of
this Article V shall be made promptly, and in any event within thirty (30)
days, upon the written request of the director or officer. If a determination
by the corporation that the director or officer is entitled to indemnification
pursuant to this Article V is required, and the corporation fails to respond
within sixty (60) days to a written request for indemnity, the corporation
shall be deemed to have approved the request. If the corporation denies a
written request for indemnification or advancing of expenses, in whole or in
part, or if payment in full pursuant to such request is not made within thirty
(30) days, the right to indemnification or advances as granted by this Article
V shall be enforceable by the director or officer in any court of competent
jurisdiction. Such person's costs and expenses incurred in connection with
successfully establishing his right to indemnification, in whole or in part, in
any such action shall also be indemnified by the corporation. It shall be a
defense to any such action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any, has been tendered to the
corporation) that the claimant has not met the standards of conduct which make
it permissible under the General Corporation Law of the State of Delaware for
the corporation to indemnify the claimant for the amount claimed, but the
burden of such defense shall be on the corporation. Neither the failure of the
corporation (including its board of directors, independent legal counsel, or
its stockholders) to have made a determination prior to the commencement of
such action that indemnification of the claimant is proper in the circumstances
because he has met the applicable standard of conduct set forth in the General
Corporation Law of the State of Delaware, nor an actual determination by the
corporation (including its board of directors, independent legal counsel, or
its stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
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Section 3. Article Not Exclusive. The rights to indemnification
and the payment of expenses incurred in defending a proceeding in advance of
its final disposition conferred in this Article V shall not be exclusive of any
other right which any person may have or hereafter acquire under any statute,
provision of the certificate of incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 4. Insurance. The corporation may purchase and maintain
insurance on its own behalf and on behalf of any person who is or was a
director, officer, employee, fiduciary, or agent of the corporation or was
serving at the request of the corporation 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 the corporation would have the
power to indemnify such person against such liability under this Article V.
Section 5. Expenses. Expenses incurred by any person described
in Section 1 of this Article V in defending a proceeding shall be paid by the
corporation in advance of such proceeding's final disposition unless otherwise
determined by the board of directors in the specific case upon receipt of an
undertaking by or on behalf of the director or officer to repay such amount if
it shall ultimately be determined that he or she is not entitled to be
indemnified by the corporation. Such expenses incurred by other employees and
agents may be so paid upon such terms and conditions, if any, as the board of
directors deems appropriate.
Section 6. Employees and Agents. Persons who are not covered by
the foregoing provisions of this Article V and who are or were employees or
agents of the corporation, or who are or were serving at the request of the
corporation as employees or agents of another corporation, 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 7. Contract Rights. The provisions of this Article V
shall be deemed to be a contract right between the corporation and each
director or officer who serves in any such capacity at any time while this
Article V and the relevant provisions of the General Corporation Law of the
State of Delaware or other applicable law are in effect, and any repeal or
modification of this Article V or any such law shall not affect any rights or
obligations then existing with respect to any state of facts or proceeding then
existing.
Section 8. Merger or Consolidation. For purposes of this
Article V, references to "the corporation" shall include, in addition to the
res ulting corporation, any constituent corporation (including any constituent
of a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was
a director, officer, employee or agent of such constituent corporation, or is
or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under this Article
V with respect to the resulting or surviving
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corporation as he or she would have with respect to such constituent
corporation if its separate existence had continued.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Form. Every holder of stock in the corporation shall
be entitled to have a certificate, signed by, or in the name of the corporation
by the president or a vice-president and the secretary or an assistant
secretary of the corporation, certifying the number of shares of a specific
class or series owned by such holder in the corporation. If such a certificate
is countersigned (1) by a transfer agent or an assistant transfer agent other
than the corporation or its employee or (2) by a registrar, other than the
corporation or its employee, the signature of any such president,
vice-president, secretary, or assistant secretary may be facsimiles. In case
any officer or officers who have signed, or whose facsimile signature or
signatures have been used on, any such certificate or certificates shall cease
to be such officer or officers of the corporation whether because of death,
resignation or otherwise before such certificate or certificates have been
delivered by the corporation, such certificate or certificates may nevertheless
be issued and delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signature or signatures have
been used thereon had not ceased to be such officer or officers of the
corporation. All certificates for shares shall be consecutively numbered or
otherwise identified. The name of the person to whom the shares represented
thereby are issued, with the number of shares and date of issue, shall be
entered on the books of the corporation. Shares of stock of the corporation
shall only be transferred on the books of the corporation by the holder of
record thereof or by such holder's attorney duly authorized in writing, upon
surrender to the corporation of the certificate or certificates for such shares
endorsed by the appropriate person or persons, with such evidence of the
authenticity of such endorsement, transfer, authorization, and other matters as
the corporation may reasonably require, and accompanied by all necessary stock
transfer stamps. In that event, it shall be the duty of the corporation to
issue a new certificate to the person entitled thereto, cancel the old
certificate or certificates, and record the transaction on its books. The
board of directors may appoint a bank or trust company organized under the laws
of the United States or any state thereof to act as its transfer agent or
registrar, or both in connection with the transfer of any class or series of
securities of the corporation.
Section 2. Lost Certificates. The board of directors may direct
a new certificate or certificates to be issued in place of any certificate or
certificates previously issued by the corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the
person claiming the certificate of stock to be lost, stolen, or destroyed.
When authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his or her legal representative, to give the corporation a
bond sufficient to indemnify the corporation against any claim that
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may be made against the corporation on account of the loss, theft or
destruction of any such certificate or the issuance of such new certificate.
Section 3. Fixing a Record Date for Stockholder Meetings. In
order that the corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, the board
of directors may fix a record date, which record date shall not precede the
date upon which the resolution fixing the record date is adopted by the board
of directors, and which record date shall not be more than sixty (60) nor less
than ten (10) days before the date of such meeting. If no record date is fixed
by the board of directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be the
close of business on the next day preceding the day on which notice is given,
or if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to
any adjournment of the meeting; provided, however, that the board of directors
may fix a new record date for the adjourned meeting.
Section 4. Fixing a Record Date for Action by Written Consent.
In order that the corporation may determine the stockholders entitled to
consent to corporate action in writing without a meeting, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the board of
directors, and which date shall not be more than ten (10) days after the date
upon which the resolution fixing the record date is adopted by the board of
directors. If no record date has been fixed by the board of directors, the
record date for determining stockholders entitled to consent to corporate
action in writing without a meeting, when no prior action by the board of
directors is required by statute, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the corporation by delivery to its registered office in the State
of Delaware, its principal place of business, or an officer or agent of the
corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the corporation's registered
office shall be by hand or by certified or registered mail, return receipt
requested. If no record date has been fixed by the board of directors and
prior action by the board of directors is required by statute, the record date
for determining stockholders entitled to consent to corporate action in writing
without a meeting shall be at the close of business on the day on which the
board of directors adopts the resolution taking such prior action.
Section 5. Fixing a Record Date for Other Purposes. In order
that the corporation may determine the stockholders entitled to receive payment
of any dividend or other distribution or allotment or any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purposes of any other lawful
action, the board of directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty (60) days prior to
such action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the
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close of business on the day on which the board of directors adopts the
resolution relating thereto.
Section 6. Registered Stockholders. Prior to the surrender to
the corporation of the certificate or certificates for a share or shares of
stock with a request to record the transfer of such share or shares, the
corporation may treat the registered owner as the person entitled to receive
dividends, to vote, to receive notifications, and otherwise to exercise all the
rights and powers of an owner. The corporation shall not be bound to recognize
any equitable or other claim to or interest in such share or shares on the part
of any other person, whether or not it shall have express or other notice
thereof.
Section 7. Subscriptions for Stock. Unless otherwise provided
for in the subscription agreement, subscriptions for shares shall be paid in
full at such time, or in such installments and at such times, as shall be
determined by the board of directors. Any call made by the board of directors
for payment on subscriptions shall be uniform as to all shares of the same
class or as to all shares of the same series. In case of default in the
payment of any installment or call when such payment is due, the corporation
may proceed to collect the amount due in the same manner as any debt due the
corporation.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the certificate of
incorporation. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or any other purpose
and the directors may modify or abolish any such reserve in the manner in which
it was created.
Section 2. Checks, Drafts or Orders. All checks, drafts, or
other orders for the payment of money by or to the corporation and all notes
and other evidences of indebtedness issued in the name of the corporation shall
be signed by such officer or officers, agent or agents of the corporation, and
in such manner, as shall be determined by resolution of the board of directors
or a duly authorized committee thereof.
Section 3. Contracts. The board of directors may authorize any
officer or officers, or any agent or agents, of the corporation to enter into
any contract or to execute and deliver any instrument in the name of and on
behalf of the corporation, and such authority may be general or confined to
specific instances.
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Section 4. Loans. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiary, including any officer or employee who
is a director of the corporation or its subsidiary, whenever, in the judgment
of the directors, such loan, guaranty or assistance may reasonably be expected
to benefit the corporation. The loan, guaranty or other assistance may be with
or without interest, and may be unsecured, or secured in such manner as the
board of directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in this section contained shall be
deemed to deny, limit or restrict the powers of guaranty or warranty of the
corporation at common law or under any statute.
Section 5. Fiscal Year. The fiscal year of the corporation
shall be fixed by resolution of the board of directors.
Section 6. Corporate Seal. The board of directors shall provide
a corporate seal which shall be in the form of a circle and shall have
inscribed thereon the name of the corporation and the words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
Section 7. Voting Securities Owned By Corporation. Voting
securities in any other corporation held by the corporation shall be voted by
the president, unless the board of directors specifically confers authority to
vote with respect thereto, which authority may be general or confined to
specific instances, upon some other person or officer. Any person authorized
to vote securities shall have the power to appoint proxies, with general power
of substitution.
Section 8. Inspection of Books and Records. Any stockholder of
record, in person or by attorney or other agent, shall, upon written demand
under oath stating the purpose thereof, have the right during the usual hours
for business to inspect for any proper purpose the corporation's stock ledger,
a list of its stockholders, and its other books and records, and to make copies
or extracts therefrom. A proper purpose shall mean any purpose reasonably
related to such person's interest as a stockholder. In every instance where an
attorney or other agent shall be the person who seeks the right to inspection,
the demand under oath shall be accompanied by a power of attorney or such other
writing which authorizes the attorney or other agent to so act on behalf of the
stockholder. The demand under oath shall be directed to the corporation at its
registered office in the State of Delaware or at its principal place of
business.
Section 9. Section Headings. Section headings in
these by-laws are for convenience of reference only and shall not be given any
substantive effect in limiting or otherwise construing any provision herein.
Section 10. Inconsistent Provisions. In the event that any
provision of these by-laws is or becomes inconsistent with any provision of the
certificate of incorporation, the General Corporation Law of the State of
Delaware or any other applicable law, the provision of
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these by-laws shall not be given any effect to the extent of such
inconsistency but shall otherwise be given full force and effect.
ARTICLE VIII
AMENDMENTS
These by-laws may be amended, altered, or repealed and new by-laws
adopted at any meeting of the board of directors by a majority vote. The fact
that the power to adopt, amend, alter, or repeal the by-laws has been conferred
upon the board of directors shall not divest the stockholders of the same
powers.
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EXHIBIT 3.4
________________________________________________________________________________
________________________________________________________________________________
TRANSWESTERN PUBLISHING COMPANY, L.P.
_______________________________________
THIRD AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
Dated as of October 1, 1997
THE PARTNERSHIP INTERESTS REPRESENTED BY THIS AGREEMENT OF LIMITED PARTNERSHIP
HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 OR
UNDER ANY OTHER APPLICABLE SECURITIES LAWS. SUCH INTERESTS MAY NOT BE SOLD,
ASSIGNED, PLEDGED OR OTHERWISE DISPOSED OF AT ANY TIME WITHOUT EFFECTIVE
REGISTRATION UNDER SUCH ACT AND LAWS OR EXEMPTION THEREFROM, AND COMPLIANCE
WITH THE OTHER SUBSTANTIAL RESTRICTIONS ON TRANSFERABILITY SET FORTH HEREIN.
________________________________________________________________________________
________________________________________________________________________________
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
ORGANIZATIONAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.1 Organization of Partnership . . . . . . . . . . . . . . . . . . . . . 8
2.2 Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.3 Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.4 Principal Office; Registered Office . . . . . . . . . . . . . . . . . 8
2.5 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III
CAPITAL CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.1 General Partner . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Limited Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 Capital Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.4 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.5 No Withdrawal . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 Loans From Partners . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 Issuances of Units . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE IV
DISTRIBUTIONS AND ALLOCATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.1 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.2 Allocations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.3 Special Allocations . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.4 Tax Allocations . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.5 Curative Allocations . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.6 Indemnification and Reimbursement for Payments on Behalf of a Partner . 15
ARTICLE V
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.1 Authority of General Partner . . . . . . . . . . . . . . . . . . . . . 15
5.2 Actions Requiring Approval of Limited Partners . . . . . . . . . . . . 17
5.3 Partnership Qualifications and Filings . . . . . . . . . . . . . . . . 17
5.4 Reliance by Third Parties . . . . . . . . . . . . . . . . . . . . . . 18
5.5 Compensation and Reimbursement of General Partner . . . . . . . . . . 18
5.6 Outside Activities . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.7 Dealings With the General Partner . . . . . . . . . . . . . . . . . . 19
5.8 Resolution of Conflicts of Interest . . . . . . . . . . . . . . . . . 19
5.9 Purchase of Units . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.10 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
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<TABLE>
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5.11 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VI
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS . . . . . . . . . . . . . . . . . . . . 21
6.1 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . 21
6.2 Management of Business . . . . . . . . . . . . . . . . . . . . . . . . 21
6.3 No Right of Partition . . . . . . . . . . . . . . . . . . . . . . . . 21
6.4 Outside Activities . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.5 Representations and Warranties of Partners . . . . . . . . . . . . . . 21
ARTICLE VII
BOOKS, RECORDS, ACCOUNTING AND REPORTS . . . . . . . . . . . . . . . . . . . . . . 22
7.1 Records and Accounting . . . . . . . . . . . . . . . . . . . . . . . . 22
7.2 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.3 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.4 Transmission of Communications . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VIII
TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.1 Preparation of Tax Returns . . . . . . . . . . . . . . . . . . . . . . 23
8.2 Tax Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.3 Tax Controversies . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE IX
VOTING; AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.1 Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
9.2 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE X
TRANSFER OF PARTNERSHIP INTERESTS . . . . . . . . . . . . . . . . . . . . . . . . 25
10.1 TRANSFER IN GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE XI
ADMISSION OF PARTNERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11.1 Substituted Limited Partners . . . . . . . . . . . . . . . . . . . . . 25
11.2 Additional Limited Partners . . . . . . . . . . . . . . . . . . . . . 25
11.3 Admission of a Successor General Partner . . . . . . . . . . . . . . . 25
11.4 Representations of New Partners . . . . . . . . . . . . . . . . . . . 26
ARTICLE XII
WITHDRAWAL OR REMOVAL OF PARTNERS . . . . . . . . . . . . . . . . . . . . . . . . 26
12.1 Withdrawal of General Partner . . . . . . . . . . . . . . . . . . . . 26
12.2 Election of Successor General Partner . . . . . . . . . . . . . . . . 26
12.3 Purchase of General Partnership Interest . . . . . . . . . . . . . . . 27
12.4 Former General Partner's Liabilities . . . . . . . . . . . . . . . . . 27
12.5 Withdrawal of Limited Partners . . . . . . . . . . . . . . . . . . . . 27
</TABLE>
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<TABLE>
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ARTICLE XIII
DISSOLUTION AND LIQUIDATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
13.1 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
13.2 Continuation After Dissolution . . . . . . . . . . . . . . . . . . . . 28
13.3 Liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
13.4 Distribution in Kind . . . . . . . . . . . . . . . . . . . . . . . . . 29
13.5 Cancellation of Certificate of Limited Partnership . . . . . . . . . . 30
13.6 Reasonable Time for Winding Up . . . . . . . . . . . . . . . . . . . . 30
13.7 Return of Capital . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE XIV
VALUATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
14.1 Valuation in General . . . . . . . . . . . . . . . . . . . . . . . . . 30
14.2 Appraisals for Purchase of
General Partner's General Partnership Interest . . . . . . . . . . . . 30
ARTICLE XV
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
15.1 Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . 31
15.2 Title to Partnership Assets . . . . . . . . . . . . . . . . . . . . . 32
15.3 Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
15.4 Conversion to Corporate Form . . . . . . . . . . . . . . . . . . . . . 32
15.5 Addresses and Notices . . . . . . . . . . . . . . . . . . . . . . . . 33
15.6 Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
15.7 Creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
15.8 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
15.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
15.10 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
15.11 Invalidity of Provisions . . . . . . . . . . . . . . . . . . . . . . . 34
15.12 Number and Gender . . . . . . . . . . . . . . . . . . . . . . . . . . 34
15.13 Further Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
15.14 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
15.15 Including . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
15.16 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
</TABLE>
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<PAGE> 5
TRANSWESTERN PUBLISHING COMPANY, L.P.
THIRD AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
This THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP, dated as of October 1, 1997 is entered into by and between
TransWestern Communications Company, Inc., as General Partner, the Limited
Partners listed on Schedule I hereto and any and all Persons who hereafter
become Limited Partners.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
The following definitions shall be applied to the terms used
in this Agreement for all purposes, unless otherwise clearly indicated to the
contrary.
"ADDITIONAL LIMITED PARTNER" means a Person admitted to the
Partnership as a Limited Partner pursuant to Section 11.2.
"ADJUSTED CAPITAL ACCOUNT DEFICIT" means with respect to any
Capital Account as of the end of any Taxable Year, the amount by which the
balance in such Capital Account is less than zero. For this purpose, such
Person's Capital Account balance shall be
(i) reduced for any items described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(4), (5), and (6), and
(ii) increased for any amount such Person is treated as being
obligated to contribute to the Partnership pursuant to
Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (relating to
partner liabilities to a partnership) or 1.704-2(g)(1) and
1.704-2(i) (relating to minimum gain).
"AFFILIATE" means any Person that directly or indirectly
controls, is controlled by, or is under common control with the Person in
question. "CONTROL" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through ownership of voting securities, by contract or otherwise. The
Partnership shall not be deemed an Affiliate of the General Partner for any
purpose hereunder.
"AGREEMENT" means this Third Amended and Restated Agreement of
Limited Partnership, as it may be further amended, supplemented or restated
from time to time.
<PAGE> 6
"BOOK VALUE" means, with respect to any Partnership property,
the Partnership's adjusted basis for federal income tax purposes, adjusted from
time to time to reflect the adjustments required or permitted by Treasury
Regulation Section 1.704-1(b)(2)(iv)(d)-(g).
"CAPITAL ACCOUNT" means the capital account maintained for a
Partner pursuant to Section 3.3.
"CAPITAL CONTRIBUTION" means any cash, cash equivalents or
Fair Market Value of other property which a Partner contributes or is deemed to
have contributed to the Partnership pursuant to Section 3.1 or 3.2.
"CATCH-UP CLASS E DISTRIBUTION" means $273,586.48 to be
distributed on the date of the closing of the transactions contemplated in the
Purchase Agreement to the holders of Class E Units as of such date (according
to their respective Class E Percentage Interests).
"CERTIFICATE OF LIMITED PARTNERSHIP" means the Partnership's
Certificate of Limited Partnership as filed with the Secretary of State of
Delaware, as it may be amended, supplemented or restated from time to time.
"CLASS A COMMON UNIT" means a Common Unit representing a
fractional part of the Partnership Interests of certain Partners and having the
rights and obligations specified with respect to Class A Common Units in this
Agreement.
"CLASS B COMMON UNIT" means a Common Unit representing a
fractional part of the Partnership Interests of certain Partners and having the
rights and obligations specified with respect to Class B Common Units in this
Agreement. To the extent the Partnership's Equity Compensation Trust (or any
successor trust or similar employee compensation plan) is deemed to own Units
for purposes of receiving Distributions hereunder ("EQUITY TRUST UNITS"), such
Equity Trust Units shall be treated in all respects as Class B Common Units and
any reference hereunder to Class B Common Units shall be deemed to include such
Equity Trust Units.
"CLASS E COMMON UNIT" means a Common Unit representing a
fractional part of the Partnership Interests of certain Partners and having the
rights and obligations specified with respect to Class E Common Units in the
Agreement; provided that immediately after the Catch-Up Class E Distribution is
made to the holders of Class E Common Units, each Class E Common Unit shall
convert automatically into a Class A Common Unit and thereafter shall have all
of the rights and obligations specified with respect to Class A Common Units in
this Agreement.
"CLASS A PERCENTAGE INTEREST" means, with respect to any
Partner holding Class A Common Units, a percentage equal to a fraction, the
numerator of which is the number of Class A Common Units owned by such Partner
and the denominator of which is the aggregate number of Class A Common Units
owned by all Partners.
"CLASS B PERCENTAGE INTEREST" means, with respect to any
Partner holding Class B Common Units, a percentage equal to a fraction, the
numerator of which is the number of Class B
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<PAGE> 7
Common Units owned by such Partner and the denominator of which is the
aggregate number of Class B Common Units owned by all Partners.
"CLASS E PERCENTAGE INTEREST" means, with respect to any
Partner holding Class E Common Units, a percentage equal to a fraction, the
numerator of which is the number of Class E Units owned by such partner and the
denominator of which is the aggregate number of Class E Common Units owned by
all Partners.
"CODE" means the United States Internal Revenue Code of 1986, as amended.
"COMMON PERCENTAGE INTEREST" means the Class A Percentage
Interest, the Class B Percentage Interest or the Class E Percentage Interest,
as the context may require.
"COMMON UNIT" means a Unit representing a fractional part of
the Partnership Interests of the Partners and having the applicable rights and
obligations specified with respect to Class A Common Units, Class B Common
Units and Class E Common Units in this Agreement.
"DELAWARE ACT" means the Delaware Revised Uniform Limited
Partnership Act, 6 Del. Code Ann. tit. 6, Section Section 17-101, et seq., as
it may be amended from time to time, and any successor to the Delaware Act.
"DISTRIBUTION" means each distribution made by the Partnership
to a Unitholder, whether in cash, property or securities of the Partnership and
whether by liquidating distribution, redemption, repurchase or otherwise;
provided that none of the following shall be a Distribution: (a) any redemption
or repurchase by the Partnership of any securities held by an employee of the
Partnership or General Partner pursuant to an Executive Agreement or pursuant
to the Investors Agreement, (b) any recapitalization or exchange of securities
of the Partnership, and (c) any subdivision (by Unit split or otherwise) or any
combination (by reverse Unit split or otherwise) of any outstanding Units.
"EXECUTIVE AGREEMENTS" has the meaning given to such term in
the Investors Agreement.
"EVENT OF WITHDRAWAL" means, with respect to any Person, the
occurrence of any event described in subsections (4) through (10) of Section
17-402 of the Delaware Act.
"FAIR MARKET VALUE" means, with respect to any asset, its fair
market value determined according to Article XIV.
"FISCAL PERIOD" means any interim accounting period within a
Taxable Year established by the General Partner and which is permitted or
required by Code Section 706.
"FISCAL YEAR" means the Partnership's annual accounting period
established pursuant to Section 7.2.
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<PAGE> 8
"GENERAL PARTNER" means TransWestern Communications Company,
Inc. or any Successor General Partner, in its capacity as general partner of
the Partnership.
"GENERAL PARTNERSHIP INTEREST" means, with respect to a
General Partner, the Units set forth on Schedule I with respect to such General
Partner.
"IRR" means the annual interest rate (compounded annually)
which, when used to calculate the net present value as of October 1, 1997 of
all Cash Inflows and all Cash Outflows (each as defined below), causes such net
amount to equal zero. The IRR shall be determined by the General Partner
unless any member of the General Partner's board of directors objects to such
determination being made by the General Partner, in which case the IRR shall be
determined by an independent accounting firm of national reputation, which
accounting firm shall be selected by the General Partner in good faith. Except
as provided below, "CASH INFLOWS" as used herein shall include all cash
payments received by THL with respect to or in exchange for Preferred and/or
Common Units of the Partnership and shares of capital stock of the General
Partner purchased by THL (whether such payments are received from the
Partnership, the General Partner or any third party); provided that in
calculating Cash Inflows fees paid under the Management Agreement (as in effect
as of the date hereof) shall not be taken into account. In calculating Cash
Inflows (i) for purposes of determining whether the Target One IRR has been
satisfied, tax Distributions made to holders on account of Profits allocable to
such holders' Units shall not be taken into account until such time as a
Distribution other than a tax Distribution (a "Non-Tax Distribution") has been
made with respect to the Units which, together with any prior tax
Distributions, results in the Target One IRR being paid; (ii) after the Target
One IRR has been paid, for purposes of determining whether the Target Two IRR
has been satisfied, tax Distributions made after payment of the Target One IRR
to holders on account of Profits allocable to such holders' Units ("Target Two
Tax Distributions") shall not be taken into account until such time as a
Non-Tax Distribution has been made with respect to the Units which, together
with any prior Target Two Tax Distribution, results in the Target Two IRR being
paid and (iii) after the Target Two IRR has been paid, for purposes of
determining whether the Target Three IRR has been satisfied, tax Distributions
made after payment of the Target Two IRR to holders on account of Profits
allocable to such holders' Units ("Target Three Tax Distributions") shall not
be taken into account until such time as a Non-Tax Distribution has been made
with respect to the Units which, together with any prior Target Three Tax
Distributions, results in the Target Three IRR being paid; it being understood
that all tax Distributions made prior to or simultaneous with the payment of
the Target One IRR shall be deemed to have been made and taken into account on
the date the Target One IRR is paid; all Target Two Tax Distributions shall be
deemed to have been made and taken into account on the date the Target Two IRR
is paid, and all Target Three Tax Distributions shall be deemed to have been
made and taken into account on the date the Target Three IRR is paid. "CASH
OUTFLOWS" as used herein shall include the sum of all cash payments and
investments made by THL to and in the Partnership and the General Partner to
acquire Preferred and/or Common Units of the Partnership and shares of capital
stock of the General Partner. For purposes of the net present value
calculation, each Cash Inflow and each Cash Outflow specified above will be
deemed to have been received or made on the first day of the month nearest to
the actual date of such payment.
- 4 -
<PAGE> 9
For example, assume that a Cash Outflow of $1,000 occurs on
May 3, 1998 and a Cash Inflow of $2,441.41 occurs on April 16,
2001. In such event, at a 25% annual interest rate
(compounded annually), the net present value on May 1, 1998 of
the Cash Outflow (deemed to be made on May 1, 1998) is $1,000
and the net present value on May 1, 1998 of the Cash Inflow
(deemed to be received on May 1, 2001) is $1,000, and the IRR
is 25%.
"INVESTORS AGREEMENT" means that certain Investors Agreement,
dated as of the date hereof by and among the Partnership, the General Partner
and each of the investors listed on Schedule I attached thereto.
"INDEMNIFIED PERSON" shall have the meaning set forth in
Section 5.11(a).
"LIMITED PARTNER" means each of the limited partners named on
Schedule I attached hereto and any Person admitted to the Partnership as a
Substituted Limited Partner or Additional Limited Partner; but only so long as
such Person is shown on the Partnership's books and records as the owner of one
or more Units.
"LIQUIDATOR" has the meaning specified in Section 13.3.
"LOSSES" means items of Partnership loss and deduction
determined according to Section 3.3.
"MANAGEMENT AGREEMENT" means the management agreement dated as
of October 1, 1997 between the Thomas H. Lee Company and the Company.
"MAJORITY INTEREST" means more than 50% of the Common Units
which are owned by Partners on the day for any determination requiring approval
of a Majority Interest.
"MINIMUM GAIN" means the partnership minimum gain determined
pursuant to Treasury Regulation Section 1.704-2(d).
"PARTNER" means a General Partner or a Limited Partner.
"PARTNERSHIP" means the limited partnership organized pursuant
to the Certificate of Limited Partnership.
"PARTNERSHIP INTEREST" means the interest of a Partner in
Profits, Losses and Distributions.
"PERSON" means an individual or a corporation, partnership,
trust, unincorporated organization, association or other entity.
- 5 -
<PAGE> 10
"PREFERRED UNIT" means a Unit representing a fractional part
of the Partnership Interests of all Partners and having the preference rights
and other rights and obligations specified with respect to Preferred Units in
this Agreement.
"PROFITS" means items of Partnership income and gain
determined according to Section 3.3.
"PURCHASE AGREEMENT" means the Securities Purchase and
Redemption Agreement dated as of August 27, 1997 among the Partnership, the
General Partner and each of the selling securityholders identified on the
signature pages thereto.
"QUALIFIED PUBLIC OFFERING" has the meaning given to such term
in the Investors Agreement.
"SALE OF THE PARTNERSHIP" has the meaning given to such term
in the Investors Agreement.
"SECURITIES ACT" means the United States Securities Act of
1933 and applicable rules and regulations thereunder, and any successor to such
statute, rules or regulations. Any reference herein to a specific section,
rule or regulation of the Securities Act shall be deemed to include any
corresponding provisions of future law.
"SUBSTITUTED LIMITED PARTNER" means a Person that is admitted
as a limited partner to the Partnership pursuant to Section 11.1.
"SUCCESSOR GENERAL PARTNER" means any Person admitted as a
general partner of the Partnership pursuant to Section 11.3.
"TARGET ONE IRR" means an IRR greater than or equal to 12%.
"TARGET TWO IRR" means, with respect to any date covered by
any "IRR PERIOD" described below, an IRR which is greater than or equal to the
IRR set forth below opposite such IRR Period:
IRR Period IRR
10/1/97 through 9/30/98 32.500%
10/1/98 through 9/30/99 29.375%
10/1/99 through 9/30/2000 26.250%
10/1/2000 through 9/30/2001 23.125%
periods after 9/30/2001 20.000%
"TARGET THREE IRR" means, with respect to any date covered by
any IRR Period described below, an IRR which is greater than or equal to the
IRR set forth below opposite such IRR Period:
- 6 -
<PAGE> 11
IRR Period IRR
10/1/97 through 9/30/98 45%
10/1/98 through 9/30/99 40%
10/1/99 through 9/30/2000 35%
10/1/2000 through 9/30/2001 30%
periods after 9/30/2001 25%
"TAXABLE YEAR" means the Partnership's accounting period for
federal income tax purposes determined pursuant to Section 8.2.
"THL" means the Thomas H. Lee Equity Fund III, a Delaware
limited partnership, and its Affiliates.
"TREASURY REGULATIONS" means the income tax regulations
promulgated under the Code and effective as of the date hereof. Such term
shall be deemed to include any future amendments to such regulations and any
corresponding provisions of succeeding regulations to the extent the General
Partner determines that any such amendments and succeeding regulations do not
adversely affect the economic interests of the Partners hereunder.
"UNIT" means a Partnership Interest of a Partner in the
Partnership representing a fractional part of the Partnership Interests of all
Partners and shall include Common Units and Preferred Units; provided that
(a) each Common Unit of a class at any time outstanding
shall represent the same fractional part of the
Partnership Interests of all Partners which own
Common Units of such class as each other Common Unit
of such class, and
(b) each Preferred Unit at any time outstanding shall
represent the same fractional part of the Partnership
Interests of all Partners owning Units as each other
Preferred Unit;
and provided further that any class of Units issued shall have designations,
preferences or special rights set forth in this Agreement and the Partnership
Interest represented by such class of Units shall be determined in accordance
with such designations, preferences or special rights.
"UNIT PURCHASE AGREEMENTS" means the Purchase Agreement, each
of the Executive Agreements and any other agreement pursuant to which the
Partnership issues Units, in each case as such agreement may be further
amended, supplemented or restated from time to time.
"UNITHOLDER" means any Partner in its capacity as owner of one
or more Units as reflected on the Partnership's books and records.
"UNPAID YIELD" of any Preferred Unit means, as of any date, an
amount equal to the excess, if any, of (a) the aggregate Yield accrued on such
Preferred Unit for all periods prior to such
- 7 -
<PAGE> 12
date, over (b) the aggregate amount of prior Distributions made by the
Partnership that constitute payment of Yield on such Preferred Unit.
"UNRETURNED CAPITAL" means, with respect to a Preferred Unit,
the Capital Contribution made in exchange for such Preferred Unit reduced by
all Distributions made by the Partnership that constitute a return of the
Capital Contribution therefor.
"YIELD" means, with respect to each Preferred Unit, the amount
accruing on such Preferred Unit on a daily basis, at the rate of 12% per annum
on (a) the Unreturned Capital plus (b) Unpaid Yield thereon for all prior
quarterly periods. In calculating the amount of any Distribution to be made
during a period, the portion of a Preferred Unit's Yield for such portion of
such period elapsing before such Distribution is made shall be taken into
account.
ARTICLE II
ORGANIZATIONAL MATTERS
2.1 ORGANIZATION OF PARTNERSHIP. The Partners hereby
agree to continue the Partnership as a limited partnership pursuant to the
provisions of the Delaware Act. Except as expressly provided herein to the
contrary, the rights and obligations of the Partners and the administration and
termination of the Partnership shall be governed by the Delaware Act.
2.2 NAME. The name of the Partnership shall be
TransWestern Publishing Company, L.P. The General Partner in its sole
discretion may change the name of the Partnership at any time and from time to
time. Notification of any such change shall be given to all Unitholders. The
Partnership's business may be conducted under its name and/or any other name or
names deemed advisable by the General Partner.
2.3 PURPOSE. The purpose and business of the Partnership
shall be any business which may lawfully be conducted by a limited partnership
organized pursuant to the Delaware Act, including: the operation of companies
that publish yellow page directories and related properties; the carrying on of
any business relating thereto or arising therefrom in the United States; the
entering into of any partnership, joint venture or other similar arrangement to
engage in any of the foregoing or the ownership of any interest in any entity
engaged in any of the foregoing; and exercising such powers as are necessary in
connection with the foregoing or are incidental or ancillary thereto.
2.4 PRINCIPAL OFFICE; REGISTERED OFFICE. The principal
office of the Partnership shall be at 8344 Clairemont Mesa Boulevard in San
Diego, California or such other place as the General Partner may from time to
time designate. The Partnership may maintain offices at such other place or
places as the General Partner deems advisable. Notification of any such change
shall be given to all Unitholders. The address of the registered office of the
Partnership in the State of Delaware shall be c/o CT Corporation System, 1209
Orange Street, Wilmington, Delaware 19801,
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<PAGE> 13
and the registered agent for service of process on the Partnership in the State
of Delaware at such registered office shall be CT Corporation System.
2.5 TERM. The term of the Partnership shall commence
upon the filing of the Certificate of Limited Partnership in accordance with
the Delaware Act and shall continue in existence until 11:59 p.m. Delaware
time, on December 31, 2043 or until the earlier termination of the Partnership
in accordance with the provisions of Article XIII.
ARTICLE III
CAPITAL CONTRIBUTIONS
3.1 GENERAL PARTNER. Pursuant to the second sentence of
Section 3.3(a), the Capital Account of the General Partner shall be restated to
equal the amount set forth on Schedule I with respect to the General Partner.
The General Partner shall hereafter be required to make additional Capital
Contributions to the Partnership (i) as may be necessary to pay liabilities of
the Partnership for which provision cannot otherwise be made and (ii) as
otherwise required in order that the Capital Account of the General Partner
shall at all times be not less than 1% of the total Capital Account of all
Partners.
3.2 LIMITED PARTNERS.
(a) Initial Contributions. Each Limited Partner named on
Schedule I attached hereto who is purchasing Units as of the date hereof agrees
to make the Capital Contributions to the Partnership as set forth on Schedule I
in exchange for the Units specified thereon pursuant to the Unit Purchase
Agreements. Pursuant to the second sentence of Section 3.3(a), the Capital
Account of each Limited Partner who owned Units immediately before the date
hereof and who continues to hold Units as of the date hereof shall be restated
to equal the amount set forth on Schedule I with respect to such Limited
Partner.
(b) Future Contributions. Each Limited Partner who is
issued Units by the Partnership pursuant to Section 3.7 shall make the Capital
Contributions to the Partnership determined under Section 3.7 in exchange for
such Units.
3.3 CAPITAL ACCOUNTS.
(a) The Partnership shall maintain a separate Capital
Account for each Partner according to the rules of Treasury Regulation Section
1.704-1(b)(2)(iv). For this purpose, the Partnership may, upon the occurrence
of the events specified in Treasury Regulation Section 1.704-1(b)(2)(iv)(f),
increase or decrease the Capital Accounts in accordance with the rules of such
regulation and Treasury Regulation Section 1.704-1(b)(2)(iv)(g) to reflect a
revaluation of Partnership property.
- 9 -
<PAGE> 14
(b) For purposes of computing the amount of any item of
Partnership income, gain, loss or deduction to be allocated pursuant to Article
IV and to be reflected in the Capital Accounts, the determination, recognition
and classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes (including any
method of depreciation, cost recovery or amortization used for this purpose),
provided that:
(i) The computation of all items of income, gain, loss
and deduction shall include those items described in
Code Section 705(a)(2)(B) or Treasury Regulation
Section 1.704-1(b)(2)(iv)(i), without regard to the
fact that such items are not includable in gross
income or are not deductible for federal income tax
purposes.
(ii) If the Book Value of any Partnership property is
adjusted pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(e) or (f), the amount of such
adjustment shall be taken into account as gain or
loss from the disposition of such property.
(iii) Items of income, gain, loss or deduction attributable
to the disposition of Partnership property having a
Book Value that differs from its adjusted basis for
tax purposes shall be computed by reference to the
Book Value of such property.
(iv) Items of depreciation, amortization and other cost
recovery deductions with respect to Partnership
property having a Book Value that differs from its
adjusted basis for tax purposes shall be computed by
reference to the property's Book Value in accordance
with Treasury Regulation Section
1.704-1(b)(2)(iv)(g).
(v) To the extent an adjustment to the adjusted tax basis
of any Partnership asset pursuant to Code Sections
732(d), 734(b) or 743(b) is required, pursuant to
Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to
be taken into account in determining Capital
Accounts, the amount of such adjustment to the
Capital Accounts shall be treated as an item of gain
(if the adjustment increases the basis of the asset)
or loss (if the adjustment decreases such basis).
3.4 INTEREST. No interest shall be paid by the
Partnership on Capital Contributions or on balances in Capital Accounts.
3.5 NO WITHDRAWAL. No Person shall be entitled to
withdraw any part of his Capital Contribution or Capital Account or to receive
any Distribution from the Partnership, except as expressly provided herein.
3.6 LOANS FROM PARTNERS. Loans by Partners to the
Partnership shall not be considered Capital Contributions. If any Partner
shall advance funds to the Partnership in excess
- 10 -
<PAGE> 15
of the amounts required hereunder to be contributed by him to the capital of
the Partnership, the making of such advances shall not result in any increase
in the amount of the Capital Account of such Partner. The amount of any such
advances shall be a debt of the Partnership to such Partner and shall be
payable or collectible in accordance with the terms and conditions upon which
such advances are made; provided that the terms of any such loan shall not be
less favorable to the Partnership than would be available to the Partnership
(without reference to the General Partner's financial condition or guaranties)
from unrelated lenders.
3.7 ISSUANCES OF UNITS. Except as provided herein, the
General Partner shall have sole and complete discretion in determining whether
to issue Units, the number of Units to be issued at any particular time, the
Capital Contribution for any Units issued, and all other terms and conditions
governing the issuance of Units.
ARTICLE IV
DISTRIBUTIONS AND ALLOCATIONS
4.1 DISTRIBUTIONS.
(a) Except as otherwise set forth in this Section 4.1,
the General Partner may in its sole discretion make Distributions at any time
or from time to time and Non-Tax Distributions shall be made in the following
order and priority:
(i) First, to the holders of Class E Common Units, the
Catch-Up Class E Distribution, according to such
holders' respective Class E Percentage Interests, and
no Distribution or portion thereof may be made
pursuant to paragraphs 4.1(a)(ii) through (v) below
until the entire Catch-Up Class E Distribution has
been made in full;
(ii) Second, to the holders of Preferred Units, an amount
equal to the aggregate Unpaid Yield (in the
proportion that each Partner's share of Unpaid Yield
bears to the aggregate Unpaid Yield) until each such
Partner has received Distributions in respect of such
Partner's Preferred Units in an amount equal to the
aggregate Unpaid Yield on such Partner's outstanding
Preferred Units as of the time of such Distribution,
and no Distribution or any portion thereof may be
made pursuant to paragraphs 4.1(a)(iii) through (v)
below until the entire amount of the Unpaid Yield on
the outstanding Preferred Units as of the time of
such Distribution has been paid in full;
(iii) Third, to the holders of Preferred Units, an amount
equal to the aggregate Unreturned Capital (in the
proportion that each Partner's share of Unreturned
Capital bears to the aggregate amount of Unreturned
Capital) until each such Partner has received
Distributions in respect of such Partner's Preferred
Units in an amount equal to the aggregate Unreturned
Capital on such Partner's
- 11 -
<PAGE> 16
Preferred Units as of the time of such Distribution,
and no Distribution or any portion thereof may be
made pursuant to paragraphs 4.1(a)(iv) through (v)
below until the entire amount of Unreturned Capital
on the outstanding Preferred Units as of the time of
such Distribution has been paid in full;
(iv) Fourth, to the holders of Class A Common Units and/or
Class B Common Units an amount (reduced by any prior
distributions under Section 4.1(a)(i) and this
Section 4.1(a)(iv)) equal to (i) in the case of any
Partner who acquired or owned Units as of or prior to
October 1, 1997, the Capital Account of such Partner
as of October 1, 1997 as set forth on Schedule I
("INITIAL CAPITAL ACCOUNT") and (ii) in the case of
any Partner who acquires Units after October 1, 1997,
the aggregate Capital Contributions made in exchange
for such Units, in the proportion that each Partner's
Initial Capital Account or Capital Contribution for
such Unit or Units, as appropriate, bears to the
aggregate Initial Capital Accounts and Capital
Contributions for all such Units and no Distribution
or portion thereof shall be made pursuant to paragraph
4.1(a)(v) below until the entire unpaid amount in
respect of each such Partner's Initial Capital Account
or Capital Contributions, as appropriate, has been
paid in full; and
(v) Fifth, after making Distributions required under
paragraphs (i) through (iv) above, (A) until the
Target One IRR has been paid, 100% of any further
Distribution shall be made to the Partners holding
Class A Common Units, according to their respective
Class A Percentage Interests, (B) after the Target
One IRR has been paid, until the Target Two IRR has
been paid, any further Distribution shall be made 90%
to the Partners which own Class A Common Units,
according to their respective Class A Percentage
Interests, and 10% to the Partners which own Class B
Common Units, according to their respective Class B
Percentage Interests, (C) after the Target Two IRR
has been paid, until the Target Three IRR has been
paid, any further Distribution shall be made 85% to
the Partners holding Class A Common Units, according
to their respective Class A Percentage Interests, and
15% to the Partners holding Class B Common Units,
according to their respective Class B Percentage
Interests, or (D) after the Target Three IRR has been
paid, any further Distribution shall be made 80% to
all Partners holding Class A Common Units, according
to their respective Class A Percentage Interests, and
20% to all Partners holding Class B Common Units,
according to their respective Class B Percentage
Interests.
(b) The Partnership shall distribute to each Partner
within forty-five (45) days after the close of each fiscal quarter an amount
equal to a percentage which the General Partner may determine in good faith
from time to time to represent the sum of the maximum marginal federal, state
and local income tax rates applicable to any Partner or its partners, if
applicable of
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(i) the Profits for such quarter allocated to such
Partner pursuant to Section 4.2, reduced by
(ii) the sum of (x) the Losses for such quarter allocated
to such Partner pursuant to Section 4.2 and (y) the
excess of the aggregate Losses over the aggregate
Profits for all prior fiscal quarters allocated to
such Partner pursuant to Section 4.2.
All distributions pursuant to this Section 4.1(b) made to a holder of a class
of Units on account of the Profits allocable to such class of Units shall be
made proportionately (based on the number of Units) to all holders of such
class of Units. For purposes of Section 4.1(a), all distributions pursuant to
this Section 4.1(b) made to a holder of Preferred Units on account of the
Profits allocable to Preferred Units shall be treated as distributions under
Section 4.1(a)(i) or (ii) and all distributions pursuant to this Section 4.1(b)
made to a holder of a class of Common Units on account of the Profits allocable
to such class of Units shall be treated as distributions under Section
4.1(a)(iii) or (iv).
(c) A Distribution pursuant to Section 4.1(a) or (b)
shall be made to the Persons shown on the Partnership's books and records as
Partners as of the date of such Distribution.
4.2 ALLOCATIONS. For each Fiscal Year of the
Partnership, after adjusting each Partner's Capital Account for all Capital
Contributions and distributions during such Fiscal Year and all special
allocations pursuant to Section 4.3 with respect to such Fiscal Year, all
Profits and Losses (other than Profits and Losses specially allocated pursuant
to Section 4.3) shall be allocated to the Partners' Capital Accounts in a
manner such that, as of the end of such Fiscal Year, the Capital Account of
each Partner (which may be either a positive or negative balance) shall be
equal to (i) the amount which would be distributed to such Partner, determined
as if the Partnership were to liquidate all of its assets for the Book Value
thereof and distribute the proceeds thereof pursuant to Section 13.3(c), minus
(ii) the sum of (A) such Partner's share of Minimum Gain (as determined
according to Treasury Regulation Section 1.704-2(d) and (g)(3)) and partner
nonrecourse debt minimum gain (as determined according to Treasury Regulation
Section 1.704-2(i)) and (B) the amount, if any, which such Partner is obligated
to contribute to the capital of the Partnership as of the last day of such
Fiscal Year.
4.3 SPECIAL ALLOCATIONS.
(a) Losses attributable to a partner nonrecourse debt (as
defined in Treasury Regulation Section 1.704-2(b)(4)) shall be allocated in the
manner required by Treasury Regulation Section 1.704-2(i)). If there is a net
decrease during a Taxable Year in partner nonrecourse debt minimum gain (as
defined in Treasury Regulation Section 1.704-2(i)(3)), Profits for such Taxable
Year (and, if necessary, for subsequent Taxable Years) shall be allocated to
the Partners in the amounts and of such character as determined according to,
and subject to the exceptions contained in, Treasury Regulation Section
1.704-2(i)(4).
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(b) Except as otherwise provided in Section 4.3(a), if
there is a net decrease in the Minimum Gain during any Taxable Year, each
Partner shall be allocated Profits for such Taxable Year (and, if necessary,
for subsequent Taxable Years) in the amounts and of such character as
determined according to, and subject to the exceptions contained in, Treasury
Regulation Section 1.704-2(f). This Section 4.3(b) is intended to be a minimum
gain chargeback provision that complies with the requirements of Treasury
Regulation Section 1.704-2(f), and shall be interpreted in a manner consistent
therewith.
(c) If any Limited Partner who unexpectedly receives an
adjustment, allocation, or distribution described in Treasury Regulation
Section 1.704-1(b)(2)(ii)(d)(4), (5), and (6) has an Adjusted Capital Account
Deficit as of the end of any Taxable Year, computed after the application of
Sections 4.3(a) and 4.3(b) but before the application of any other provision of
this Article IV, then Profits for such Taxable Year shall be allocated to such
Limited Partner in proportion to, and to the extent of, such Adjusted Capital
Account Deficits. This Section 4.3(c) is intended to be a qualified income
offset provision as described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d) and shall be interpreted in a manner consistent therewith.
(d) Profits and Losses described in Section 3.3(b)(v)
shall be allocated in a manner consistent with the manner that the adjustments
to the Capital Accounts are required to be made pursuant to Treasury Regulation
Section 1.704-1(b)(2)(iv)(j), (k) and (m).
(e) Subject to the other provisions of this Section 4.3,
if Profits or Losses are allocated for any Fiscal Period pursuant to Section
4.3(a), (b), (c) or (d), then subsequent allocations of Profits and Losses
shall be made, to the extent possible, to the Partners in such amounts so that
the net Profits and Losses allocated pursuant to this Section 4.3(e) and
Sections 4.3(a), (b), (c) and (d) are equal to the net Profits and Losses that
would have been allocated to the Partners if such allocations pursuant to
Sections 4.3(a), (b), (c) and (d) had not been made.
(g) If, and to the extent that, any Partner is deemed to
recognize any item of income, gain, loss, deduction or credit as a result of
any transaction between such Partner and the Partnership pursuant to Code
Sections 1272-1274, 7872, 483, 482 or any similar provision now or hereafter in
effect, and the General Partner determines that any corresponding Profit or
Loss of the Partnership should be allocated to the Partner who recognized such
item in order to reflect the Partners' economic interests in the Partnership,
then the General Partner may so allocate such Profit or Loss.
4.4 TAX ALLOCATIONS.
(a) The income, gains, losses, deductions and credits of
the Partnership will be allocated, for federal, state and local income tax
purposes, among the Partners in accordance with the allocation of such income,
gains, losses, deductions and credits among the Partners for computing their
Capital Accounts, except that if any such allocation is not permitted by the
Code or other applicable law, the Partnership's subsequent income, gains,
losses, deductions and credit will be allocated among the Partners so as to
reflect as nearly as possible the allocation set forth herein in computing
their Capital Accounts.
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<PAGE> 19
(b) Items of Partnership taxable income, gain, loss and
deduction with respect to any property contributed to the capital of the
Partnership shall be allocated among the Partners in accordance with Code
Section 704(c) (using the traditional method with curative allocations) so as
to take account of any variation between the adjusted basis of such property to
the Partnership for federal income tax purposes and its Book Value.
(c) If the Book Value of any Partnership asset is
adjusted pursuant to Section 3.3(b), subsequent allocations of items of taxable
income, gain, loss and deduction with respect to such asset shall take account
of any variation between the adjusted basis of such asset for federal income
tax purposes and its Book Value in the same manner as under Code Section 704(c)
(using the traditional method without curative allocations).
(d) Allocations of tax credits, tax credit recapture, and
any items related thereto shall be allocated to the Partners according to their
interests in such items as determined by the General Partner taking into
account the principles of Treasury Regulation Section 1.704-1(b)(4)(ii).
(e) Allocations pursuant to this Section 4.4 are solely
for purposes of federal, state and local taxes and shall not affect, or in any
way be taken into account in computing, any Partner's Capital Account or share
of Profits, Losses, Distributions or other Partnership items pursuant to any
provision of this Agreement.
4.5 CURATIVE ALLOCATIONS. If the General Partner
determines, after consultation with counsel experienced in income tax matters,
that the allocation of any item of Partnership income, gain, loss, deduction or
credit is not specified in this Article IV (an "unallocated item"), or that the
allocation of any item of Partnership income, gain, loss, deduction or credit
hereunder is clearly inconsistent with the Partners' economic interests in the
Partnership (determined by reference to the general principles of Treasury
Regulation Section 1.704-1(b) and the factors set forth in Treasury Regulation
Section 1.704-1(b)(3)(ii)) (a "misallocated item"), then the General Partner
may allocate such unallocated items, or reallocate such misallocated items, to
reflect such economic interests; provided that no such allocation will be made
without the prior consent of each Partner which would be affected thereby
(which consent no such Partner may unreasonably withhold).
4.6 INDEMNIFICATION AND REIMBURSEMENT FOR PAYMENTS ON BEHALF OF A
PARTNER. Except as otherwise provided herein, if the Partnership is required
by law (as determined by the General Partner) to make any payment on behalf of
the General Partner or a Unitholder in its capacity as such (including federal
withholding taxes, state personal property taxes, and state unincorporated
business taxes), then such Person shall indemnify the Partnership in full for
the entire amount paid (including interest, penalties and related expenses).
The General Partner may offset Distributions to which a Person is otherwise
entitled hereunder against such Person's obligation to indemnify the
Partnership under this Section 4.6.
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ARTICLE V
MANAGEMENT
5.1 AUTHORITY OF GENERAL PARTNER.
(a) The General Partner shall conduct, direct and
exercise full control over all activities of the Partnership. Except as
otherwise expressly provided in this Agreement, all management powers over the
business and affairs of the Partnership shall be exclusively vested in the
General Partner, and the Limited Partners (except as expressly set forth
herein) shall not have any right of control or management power over the
business and affairs of the Partnership except in their capacity as an officer
of the Partnership or the General Partner. Except as otherwise expressly
provided in this Agreement, and subject to the provisions of the Unit Purchase
Agreements, in addition to the powers now or hereafter granted to a general
partner of a limited partnership under applicable law or which are granted to
the General Partner under any other provisions of this Agreement, the General
Partner shall have full power and authority without any prior approval from any
other Partner to cause the Partnership to do all things deemed necessary or
desirable by the General Partner to conduct the business of the Partnership,
including, without limitation:
(i) to enter into, execute, acknowledge and deliver
any and all contracts, agreements or other
instruments to carry on the business of the
Partnership as set forth herein;
(ii) to borrow money and, as security therefor, to
mortgage, pledge or otherwise encumber any and all
assets of the Partnership;
(iii) to cause to be paid all amounts due and payable by
the Partnership to any Person and to collect all
amounts due to the Partnership;
(iv) to appoint officers and to delegate to such
officers such authority and duties as the General
Partner shall in its sole discretion determine;
(v) to employ agents, employees, managers,
accountants, attorneys, consultants and other
Persons to carry out the business and affairs of
the Partnership, whether or not any such Persons
so employed are affiliated with or related to any
Partner, and to pay such fees, expenses, salaries,
wages and other compensation to such Persons as
the General Partner shall in its sole discretion
determine (provided that, in the case of related
persons, the terms of any such arrangement shall
not be less favorable than would be available to
the Partnership from unrelated Persons);
(vi) to pay, extend, renew, modify, adjust, submit to
arbitration, prosecute, defend or compromise, upon
such terms as the General Partner may determine
and upon such evidence as it may deem sufficient,
any
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<PAGE> 21
obligation, suit, liability, cause of action or
claim, including taxes, either in favor of or
against the Partnership;
(vii) to pay any and all reasonable fees and to make any
and all reasonable expenditures in connection with
the organization of the Partnership, the offering
and sale of Units, the management of the business
and affairs of the Partnership and the carrying
out of the General Partners' obligations and
responsibilities under this Agreement and the
Delaware Act, and to enforce all rights of the
Partnership;
(viii) to prosecute, protest and defend or cause to be
protected and defended all proprietary rights,
including all trade names, trademarks and service
marks, and all licenses and permits and all
applications with respect thereto, which may be
held by the Partnership, and to prosecute and
defend all rights of the Partnership in connection
therewith;
(ix) to cause to be paid any and all taxes, charges and
assessments that may be levied, assessed or
imposed upon any of the assets of the Partnership,
unless the same are contested by the General
Partner in good faith;
(x) to establish one or more accounts for the
Partnership in such financial institutions as the
General Partner may from time to time designate;
(xi) to make Distributions periodically according to
the provisions of this Agreement;
(xii) to cause the Partnership to make equity
investments in, and advance loans to, joint
ventures, general or limited partnerships,
corporations or other relationships that the
General Partner deems desirable and to exercise
the Partnership's rights as a venturer or partner
of such ventures or partnerships, as the case may
be; and
(xiii) anything else affecting the rights and obligations
of the Partnership not otherwise restricted by
this Agreement.
Notwithstanding the foregoing, the General Partner shall not have the power or
authority to cause the Partnership to take any action which the Partnership is
prohibited from taking by the terms of any Unit Purchase Agreement.
(b) With respect to all of its obligations, powers and
responsibilities under this Agreement, the General Partner is authorized to
execute and deliver, for and on behalf of the Partnership, such promissory
notes and other evidences of indebtedness, contracts, agreements, assignments,
deeds, leases, loan agreements, mortgages and other security instruments and
agreements as it deems necessary or appropriate, all on such terms and
conditions as it deems proper.
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<PAGE> 22
5.2 ACTIONS REQUIRING APPROVAL OF LIMITED PARTNERS.
Nothing in Section 5.1 shall give the General Partner the authority to take any
action requiring the approval of the Limited Partners pursuant to Section 9.2
without obtaining such approval.
5.3 PARTNERSHIP QUALIFICATIONS AND FILINGS. The General
Partner shall cause to be filed such other certificates or documents as may be
determined by the General Partner in its sole discretion to be necessary or
appropriate for the continuation, qualification and operation of a limited
partnership (or a partnership in which the Limited Partners have limited
liability) in the State of Delaware and any other jurisdiction in which the
Partnership may elect to do business. Subject to applicable law, the General
Partner may omit from any and all filings in and reports to any state, and from
all amendments thereto, the names and addresses of the Partners, information
relating to the Partners' Capital Contributions and shares of Profits, Losses
and information relating to compensation of the Partners, or may state such
information in the aggregate rather than with respect to each individual
Partner. The General Partner shall not be required to deliver or mail a copy
of the Certificate of Limited Partnership or any amendment thereto to any
Limited Partner. Notwithstanding any of the foregoing provisions, the General
Partner will timely make all reports or filings which are necessary to preserve
the limited liability of the Limited Partners under applicable law.
5.4 RELIANCE BY THIRD PARTIES. Any other provision of
this Agreement to the contrary notwithstanding, no lender or purchaser
(including any purchaser of property from the Partnership) or other Person
dealing with the Partnership, shall be required to verify any representation by
the General Partner as to the extent of the interest in the assets of the
Partnership that the General Partner is entitled to encumber, sell or otherwise
use. Any such lender, purchaser or other Person shall be entitled to rely
exclusively on the representations of the General Partner as to its authority
to enter into such financing or sale arrangements and shall be entitled to deal
with the General Partner as if it were the sole party in interest therein, both
legally and beneficially. Each Limited Partner hereby waives any and all
defenses or other remedies that may be available against such lender, purchaser
or other Person to contest, negate or disaffirm any action of the General
Partner in connection with any sale or financing. In no event shall any person
dealing with the General Partner or the General Partner's representative with
respect to any business or property of the Partnership be obligated to inquire
into the necessity or expedience of any act or action of the General Partner or
the General Partner's representative. Every contract, agreement, deed,
mortgage, security agreement, promissory note or other instrument or document
executed by the General Partner or the General Partner's representative with
respect to any business or property of the Partnership shall be conclusive
evidence in favor of any and every Person relying thereon or claiming
thereunder that (a) at the time of the execution or delivery thereof this
Agreement was in full force and effect, (b) such instrument or document was
duly executed according to this Agreement and is binding upon the Partnership
and (c) the General Partner or the General Partner's representative was duly
authorized and empowered to execute and deliver any and every such instrument
or document for and on behalf of the Partnership.
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<PAGE> 23
5.5 COMPENSATION AND REIMBURSEMENT OF GENERAL PARTNER.
(a) Except as provided in this Section 5.5 or elsewhere
in this Agreement, the General Partner shall not be compensated for its
services as General Partner to the Partnership.
(b) The General Partner shall be reimbursed on a monthly
basis for (i) all actual out-of-pocket expenses, disbursements and advances it
pays or incurs in connection with the formation and business of the
Partnership, including all expenses, disbursements and advances for legal,
accounting, printing and banking matters, consultants and other third parties,
reasonable travel expenses, and filing fees, and (ii) that portion of the
General Partner's legal and accounting expenses, telephone, secretarial, travel
and entertainment expenses, office rent and other office expenses, salaries and
other compensation expenses of employees, and other expenses necessary or
appropriate to the conduct of the Partnership's business which is properly
allocable to the Partnership. The General Partner shall determine the expenses
which are allocable to the Partnership in any reasonable manner.
5.6 OUTSIDE ACTIVITIES. The General Partner, its
Affiliates and their respective stockholders, directors, officers, controlling
persons, partners and employees may have business interests and engage in
business activities in addition to those relating to the Partnership, except as
any such Person may otherwise agree with the Partnership in writing (including,
without limitation, the Investors Agreement and the Unit Purchase Agreements).
Neither the Partnership nor any Partner shall have any rights by virtue of this
Agreement or the partnership relationship created hereby in any such business
interests or activities of any such Person. The General Partner shall devote
to the management of the Partnership only such time as may reasonably be
required to cause the affairs of the Partnership to be conducted in an
efficient and businesslike manner.
5.7 DEALINGS WITH THE GENERAL PARTNER.
(a) The General Partner or any of its Affiliates may lend
to the Partnership funds needed by the Partnership for such periods of time as
the General Partner may determine; provided that the terms of any such loan
shall not be less favorable to the Partnership than would be available to the
Partnership (without reference to the General Partners' financial condition or
guaranties) from unrelated lenders.
(b) Neither the General Partner nor any of its Affiliates
shall sell, transfer or convey any property to, or purchase any property from,
the Partnership, directly or indirectly, except pursuant to transactions that
are fair and reasonable to the Partnership, as determined by the General
Partner in good faith.
5.8 RESOLUTION OF CONFLICTS OF INTEREST.
(a) Unless otherwise expressly provided herein, whenever
this Agreement or any other agreement contemplated herein provides that the
General Partner shall act in a manner which is, or provide terms which are,
fair and reasonable to the Partnership or any Limited Partner, the General
Partner shall determine such appropriate action or provide such terms
considering, in each
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<PAGE> 24
case, the relative interests of each party to such agreement, transaction or
situation and the benefits and burdens relating to such interests, any
customary or accepted industry practices, and any applicable United States
generally accepted accounting practices or principles.
(b) So long as the General Partner acts in good faith,
the resolution, action or terms so made, taken or provided by the General
Partner shall not constitute a breach of this Agreement or any other agreement
contemplated herein.
(c) Whenever in this Agreement the General Partner is
permitted or required to take any action or to make a decision in its "sole
discretion" or "discretion," with "complete discretion" or under a grant of
similar authority or latitude, the General Partner shall be entitled to
consider only such interests and factors as it desires, provided that the
General Partner shall act in good faith. Whenever in this Agreement a General
Partner is permitted or required to take any action or to make a decision in
its "good faith" or under another express standard, the General Partner shall
act under such express standard and shall not be subject to any other or
different standards imposed by this Agreement or any other agreement
contemplated herein. Each Limited Partner hereby agrees that any standard of
care or duty imposed in this Agreement or any other agreement contemplated
herein or under the Delaware Act or any other applicable law, shall be
modified, waived or limited in each case as required to permit the General
Partner to act or to make decisions under this Agreement or any other agreement
contemplated herein pursuant to the authority prescribed in this Section
5.8(c).
5.9 PURCHASE OF UNITS. The General Partner may cause the
Partnership to purchase or otherwise acquire Units, or may purchase or
otherwise acquire Units on behalf of the Partnership. As long as such Units
are owned by or on behalf of the Partnership, such Units shall not be
considered outstanding for any purpose. The General Partner and its Affiliates
may also purchase or otherwise acquire, or sell or otherwise dispose of, Units
for their own account (or as agent) and shall be entitled to exercise all
rights of a Limited Partner with respect to such Units.
5.10 INDEMNIFICATION.
(a) The Partnership shall indemnify and hold harmless the
General Partner and each Affiliate, officer, director, controlling person,
partner, employee or shareholder of the General Partner ("INDEMNIFIED PERSON")
from and against any and all losses, claims, damages, liabilities, expenses
(including reasonable legal fees and expenses), judgments, fines, settlements
and other amounts relating to any and all claims, demands, actions, suits or
proceedings, whether civil, criminal, administrative or investigative, which
relate to the General Partner's status or activities as the General Partner or
to the Partnership's property, business or affairs ("CLAIMS"). An Indemnified
Person's expenses paid or incurred in defending itself against any Claim shall
be reimbursed as paid or incurred. A Person shall be considered an Indemnified
Person whether or not such Person has the status required to be an Indemnified
Person at the time any such Claim is made or maintained. This Section 5.10
shall not apply with respect to any Indemnified Person for that portion of any
Claim determined by the final decision (from which an appeal cannot be taken or
is not timely taken) of a court of competent jurisdiction to have been caused
by his gross negligence, willful misconduct or knowing violation of law. Any
payments made to or on behalf of a Person who is later
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<PAGE> 25
determined not to be entitled to such payments shall be refunded to the
Partnership promptly following such determination. Nothing contained in this
Section 5.10 shall obligate any Limited Partner to pay any amount to the
Partnership or to any Indemnified Person in excess of his Capital Contribution.
(b) The right to indemnification and the advancement of
expenses conferred in this Section 5.10 shall not be exclusive of any other
right which any Person may have or hereafter acquire under any statute,
agreement, vote of Limited Partners or otherwise.
(c) The Partnership may maintain insurance, at its
expense, to protect any Person against any expense, liability or loss, to the
extent that the Partnership would have the power to indemnify such Person
against such expense, liability or loss under the Delaware Act.
5.11 LIMITATION OF LIABILITY. An Indemnified Person shall
not be liable to the Partnership or any Partner for any act or omission
performed or omitted by such Person pursuant to authority granted to such
Person by this Agreement; provided that such limitation of liability shall not
apply to the extent the act or omission was attributable to such Person's gross
negligence, willful misconduct or knowing violation of law. The General
Partner may exercise any of the powers granted to it by this Agreement and
perform any of the duties imposed upon it hereunder either directly or by or
through its agents, and the General Partner shall not be responsible for any
misconduct or negligence on the part of any such agent appointed by the General
Partner (so long as such agent was selected in good faith and with due care) to
the extent that such agent's misconduct or negligence is not caused by and does
not arise out of the General Partner's misconduct or gross negligence in
supervising the activities of such agent.
ARTICLE VI
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
6.1 LIMITATION OF LIABILITY. The Limited Partners shall
have no liability under this Agreement except as provided in this Agreement or
in the Delaware Act.
6.2 MANAGEMENT OF BUSINESS. No Limited Partner shall
take part in the operation, management or control (within the meaning of the
Delaware Act) of the Partnership's business or transact any business in the
Partnership's name, unless such Limited Partner is a Person employed or engaged
to transact any such business by or on behalf of a General Partner or the
Partnership. The transaction of any such business by a Limited Partner
employed or engaged to do so by or on behalf of the General Partner or the
Partnership shall not be deemed to constitute participation in control of the
Partnership and shall not affect, impair or eliminate the limitations on the
liability of a Limited Partner under this Agreement.
6.3 NO RIGHT OF PARTITION. No Limited Partner shall have
the right to seek or obtain partition by court decree or operation of law of
any Partnership property, or the right to own or use particular or individual
assets of the Partnership.
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<PAGE> 26
6.4 OUTSIDE ACTIVITIES. A Limited Partner may have
business interests and engage in business activities in addition to those
relating to the Partnership, including business interests and activities which
conflict with or are in direct competition with the Partnership, except as any
such Limited partner may otherwise agree with the Partnership in writing
(including, without limitation, the Investors Agreement and the Unit Purchase
Agreements). Neither the Partnership nor any of the other Limited Partners
shall have any rights by virtue of this Agreement in any business ventures of
any Limited Partner.
6.5 REPRESENTATIONS AND WARRANTIES OF PARTNERS. By
execution and delivery of this Agreement, each Limited Partner (solely on its
own behalf and not on behalf of any other Partner) represents and warrants that
(a) its interest in the Partnership is intended to be and is being acquired
solely for its own account for the purpose of investment and not with a view to
any sale or other disposition of all or any part thereof (provided the
disposition of its property shall be within its control), (b) it is aware that
interests in the Partnership have not been registered under the Securities Act,
that such interests cannot be sold or otherwise disposed of unless they are
registered thereunder or unless an exemption from such registration is
available, that the Partnership has no present intention of so registering such
interests under the Securities Act, and that accordingly such Limited Partner
is able and is prepared to bear the economic risk of making its Capital
Contribution and to suffer a complete loss of its investment, and (c) its
knowledge and experience in financial and business matters are such that it is
capable of evaluating the risks of making its Capital Contribution. The
foregoing representations and warranties may be relied upon by the Partnership,
by the General Partner and the other Limited Partners.
ARTICLE VII
BOOKS, RECORDS, ACCOUNTING AND REPORTS
7.1 RECORDS AND ACCOUNTING. The General Partner shall
keep, or cause to be kept, appropriate books and records with respect to the
Partnership's business, including all books and records necessary to provide
any information, lists and copies of documents required to be provided pursuant
to Section 7.3 or pursuant to applicable laws. All decisions as to accounting
matters, except as specifically provided to the contrary herein, shall be made
by the General Partner.
7.2 FISCAL YEAR. The Fiscal Year of the Partnership
shall end on December 31 of each year or such other annual accounting period as
may be established by the General Partner.
7.3 REPORTS.
(a) The General Partner shall deliver or cause to be
delivered to each Partner, within 120 days after the end of each Fiscal Year,
an annual report containing the following:
(i) a Partnership balance sheet as of the end of such
Fiscal Year, and Partnership statements of income,
changes in cash flows and changes in Partners' equity
for such Fiscal Year, each of which shall be prepared
according to United
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States generally accepted accounting principles and
audited by a firm of independent public accountants;
and
(ii) a general description of the Partnership's activities
during such Fiscal Year (including the result of any
matters submitted to a vote of the Limited Partners
during the last fiscal quarter of such Fiscal Year).
(b) The General Partner shall use reasonable efforts to
deliver or cause to be delivered, by March 1 of each year, to each Person who
was a Unitholder at any time during such Fiscal Year all information necessary
for the preparation of such Person's United States federal income tax returns,
including a statement showing such Person's share of income, gains, losses,
deductions and credits for such year for United States federal income tax
purposes and the amount of any Distributions made to or for the account of such
Person pursuant to this Agreement. Upon the written request of any such Person
made not later than 30 days after the end of each Fiscal Year, the General
Partner shall use reasonable efforts to deliver or cause to be delivered any
information necessary for the preparation of any state, foreign and local
income tax returns which must be filed by such Person.
7.4 TRANSMISSION OF COMMUNICATIONS. Each Person that
owns or controls Units on behalf of, or for the benefit of, another Person or
Persons shall be responsible for conveying any report, notice or other
communication received from the General Partner to such other Person or
Persons.
ARTICLE VIII
TAX MATTERS
8.1 PREPARATION OF TAX RETURNS. The General Partner
shall arrange for the preparation and timely filing of all returns required to
be filed by the Partnership.
8.2 TAX ELECTIONS. The Taxable Year shall be the Fiscal
Year set forth in Section 7.2, unless the General Partner shall determine
otherwise in its sole discretion and in compliance with applicable laws. The
General Partner shall, in its sole discretion, determine whether to make or
revoke any available election pursuant to the Code. Each Partner will upon
request supply the information necessary to give proper effect to such
election.
8.3 TAX CONTROVERSIES. The General Partner is designated
the "TAX MATTERS PARTNER" (as defined in Code Section 6231), and is authorized
and required to represent the Partnership (at the Partnership's expense) in
connection with all examinations of the Partnership's affairs by tax
authorities, including resulting administrative and judicial proceedings, and
to expend Partnership funds for professional services and costs associated
therewith. Each Partner agrees to cooperate with the General Partner and to do
or refrain from doing any or all things reasonably requested by the General
Partner with respect to the conduct of such proceedings.
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ARTICLE IX
VOTING; AMENDMENTS
9.1 VOTING RIGHTS.
(a) Anything herein to the contrary notwithstanding, the
Partners may dissolve the Partnership upon the affirmative vote of the owners
of a majority of the Common Units.
(b) At the General Partner's election, any action that
may be taken at a Partners' meeting may be taken without a meeting if the
General Partner solicits written consents to the action, and if within 90 days
after delivery of the request for written consents, such consents are received
from Partners owning not less than the minimum number of Units that would be
necessary to authorize or take such action at a meeting. A written consent to
the taking of any action shall have no force and effect if it is received more
than 90 days after the date of the General Partner's delivery of the written
request soliciting consents to such action. In the event any action is taken
pursuant to this Section 9.1 by written consent in lieu of a meeting of the
Partners, the General Partner will deliver notice to all of the Partners to
such effect. The General Partner shall be solely responsible for conducting
the solicitation of consents and for determining the validity and effect of
responses to the solicitation.
(c) With respect to Units that are held for a Person's
account by another Person (such as a broker, dealer, bank, trust company or
clearing corporation, or an agent of any of the foregoing) in whose name
ownership is registered, the Partnership may assume without inquiry that such
broker, dealer or other agent, in exercising any right in respect of such Units
on any matter, is exercising such rights according to the direction of the
Person on whose behalf such broker, dealer or other agent is holding such
Units.
9.2 AMENDMENTS.
(a) The General Partner (pursuant to its powers of
attorney from the Limited Partners), without the consent of any Limited
Partner, may amend any provision of this Agreement, and execute, swear to,
acknowledge, deliver, file and record whatever documents may be required in
connection therewith, to reflect:
(i) a change in the name of the Partnership or the
location of the principal place of business of the
Partnership;
(ii) admission, substitution, removal or withdrawal of
Partners in accordance with this Agreement;
(iii) a change that in the General Partner's reasonable
judgment does not adversely affect any Unitholder in
any material respect in its capacity as an owner of
Units, and is either (i) necessary or desirable to
satisfy any requirements, conditions or guidelines
contained in any opinion, directive,
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order, ruling or regulation of any United States
federal or state agency or judicial authority or
contained in any United States federal or state
statute, or (ii) required or contemplated by this
Agreement; or
(iv) a change that in the General Partner's reasonable
judgment does not adversely affect any Unitholder in
any material respect in its capacity as an owner of
Units, and (i) cures any ambiguity, (ii) corrects or
supplements any provisions in this agreement or (iii)
adds, changes or eliminates any provisions of this
Agreement.
(b) This Agreement may be amended upon the consent of the
General Partner and the affirmative vote of the owners of not less than a
majority of the Class A Common Units; provided, that without the consent of
each Partner directly affected thereby, no amendment shall convert a Unit into
a General Partnership Interest, modify the limited liability of a Limited
Partner, increase the liabilities or responsibilities of, or diminish the
rights or protections of the General Partner under this Agreement, or modify
the method provided in this Agreement for determining allocations and
Distributions and the definitions relating thereto. This Section 9.2(b) shall
only be amended with the approval by written consent or affirmative vote of all
Units which are owned by Partners.
ARTICLE X
TRANSFER OF PARTNERSHIP INTERESTS
10.1 TRANSFER IN GENERAL. THE TRANSFER OF ANY PARTNERSHIP
INTEREST IS SUBJECT TO THE RESTRICTIONS ON TRANSFER CONTAINED IN THE UNIT
PURCHASE AGREEMENTS AND THE INVESTORS AGREEMENT, WHICH RESTRICTIONS ARE
INCORPORATED HEREIN BY REFERENCE.
ARTICLE XI
ADMISSION OF PARTNERS
11.1 SUBSTITUTED LIMITED PARTNERS. A Person may request
admission as a Substituted Limited Partner on the form prescribed by the
General Partner. Such Person shall become a Substituted Limited Partner on the
date on which the General Partner (acting at the direction of a majority of the
disinterested members of the Board of Directors of the General Partner)
consents (in its sole discretion) thereto and such admission is shown on the
books and records of the Partnership.
11.2 ADDITIONAL LIMITED PARTNERS. A Person may be
admitted to the Partnership as an Additional Limited Partner only upon
furnishing to the General Partner (a) a letter of acceptance, in form
satisfactory to the General Partner, of all the terms and conditions of this
Agreement, including the power of attorney granted in Section 15.1, and (b)
such other documents
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or instruments as may be necessary or appropriate to effect his admission as a
Limited Partner. Such admission shall become effective on the date on which
the General Partner determines in its sole discretion that such conditions have
been satisfied and when any such admission is shown on the books and records of
the Partnership.
11.3 ADMISSION OF A SUCCESSOR GENERAL PARTNER. A Person
shall be admitted as a Successor General Partner if and only if (a) the Person
is the transferee of all of the General Partner's General Partnership Interest
in a transfer permitted under the Investors Agreement, or (b) the Person is
elected to be a Successor General Partner in the manner described in Section
12.3 or 13.2.
11.4 REPRESENTATIONS OF NEW PARTNERS. Each Person
admitted to the Partnership as a Substituted or Additional Limited Partner or
as a General Partner shall become a party to, and agree to be bound by, this
Agreement and shall make the representations contained in Section 6.5 and such
additional representations relating to the matters contemplated by the
Investors Agreement as the General Partner may request.
ARTICLE XII
WITHDRAWAL OR REMOVAL OF PARTNERS
12.1 WITHDRAWAL OF GENERAL PARTNER. The General Partner
shall not withdraw as the Partnership's general partner except as follows:
(a) The General Partner shall be deemed to have withdrawn
as the Partnership's general partner upon the effective date of the transfer of
all of its General Partnership Interest in a transfer permitted under the
Investors Agreement.
(b) The General Partner may withdraw as the Partnership's
general partner by delivering a notice of withdrawal to the Partners. Such
notice shall state the effective date of the General Partner's withdrawal,
which date shall be not less than 90 days subsequent to the date such notice is
mailed, and shall set forth rules and procedures for the nomination and
election of a Successor General Partner pursuant to Section 12.2. Unless such
notice is earlier revoked, the General Partner shall be deemed to have
withdrawn as the Partnership's general partner upon the earlier of (i) the
effective date stated in such notice, or (ii) the date a Successor General
Partner is admitted to the Partnership pursuant to Section 11.3.
(c) The General Partner shall have no right to withdraw
as the Partnership's general partner without the consent of a majority of the
Class A Common Units.
If the General Partner withdraws as the Partnership's general partner in
violation of this Section 12.1, the damages for which it may be held liable
under Section 17-602 of the Delaware Act (or otherwise as a result of such
withdrawal) shall be limited to the forfeiture of its General Partnership
Interest.
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12.2 ELECTION OF SUCCESSOR GENERAL PARTNER. If the
General Partner withdraws from the Partnership pursuant to Section 12.1(b), the
Partners may elect a Successor General Partner as the General Partner, by the
affirmative vote of Limited Partners which own at least a majority of the
Common Units which are owned by all Limited Partners. Any Person elected by
the Partners to be Successor General Partner shall be admitted to the
Partnership as Successor General Partner only upon the Partnership's receipt of
a written assumption by such Person of all of the General Partner's rights and
obligations hereunder (including the obligation to purchase the former General
Partner's General Partnership Interest pursuant to Section 12.3). If a
Successor General Partner is admitted to the Partnership pursuant to this
Section 12.2 on or before the effective date specified in the General Partner's
notice of withdrawal pursuant to Section 12.1(b), such Successor General
Partner shall continue the Partnership's business according to this Agreement.
12.3 PURCHASE OF GENERAL PARTNERSHIP INTEREST.
(a) Within 30 days following the admission of a Successor
General Partner to the General Partner pursuant to Section 12.2 or 13.2, the
former General Partner may, at its option, elect to sell its General
Partnership Interest to the Successor General Partner. Such election shall be
made by delivering to the Successor General Partner a written notice reasonably
indicating that the former General Partner is electing to sell its General
Partnership Interest pursuant to this Section 12.3. If the former General
Partner properly makes such election, the Successor General Partner shall
purchase such interest from the former General Partner for a purchase price,
payable in cash or cash equivalents within 120 days after the effective date of
the admission of the Successor General Partner as General Partner, equal to the
Fair Market Value of the former General Partner's Interest as of the time of
such General Partner's withdrawal or removal. For purposes of determining the
Fair Market Value of the former General Partner's Interest, the Fair Market
Value of the Partnership's assets will be determined according to Article XIV.
12.4 FORMER GENERAL PARTNER'S LIABILITIES. The General
Partner shall not be liable for Partnership debts and other liabilities and
obligations of the Partnership incurred after the effective date of the General
Partner's removal or withdrawal as General Partner, but shall continue to be
liable for Partnership debts and other liabilities and obligations of the
Partnership incurred before such effective date.
12.5 WITHDRAWAL OF LIMITED PARTNERS. No Limited Partner
shall have any right to withdraw from the Partnership without the prior written
consent of the General Partner. Upon a transfer of all of a Limited Partner's
Units in a transfer permitted by the Investors Agreement or in accordance with
such Limited Partner's Executive Agreement, such Limited Partner shall cease to
be a Limited Partner; provided that the transferor shall not be released from
liability to the Partnership for (a) any materially false statement made, or
caused to be made, by such transferor in the Certificate of Limited
Partnership, or (b) any obligation of such transferor to contribute cash or
other property to the Partnership.
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ARTICLE XIII
DISSOLUTION AND LIQUIDATION
13.1 DISSOLUTION. The Partnership shall not be dissolved
by the admission of Additional Limited Partners or Substituted Limited
Partners, by the admission of a Successor General Partner, or by the withdrawal
or removal of the General Partner (if there is a Successor General Partner), or
by the death, incompetency, incapacity, dissolution, bankruptcy, insolvency, or
termination of a Limited Partner. The Partnership shall dissolve, and its
affairs shall be wound up, upon:
(a) the expiration of its term as provided in Section
2.5;
(b) the withdrawal of the General Partner pursuant to
Section 12.1(b) if the Limited Partners do not elect a Successor General
Partner to continue the Partnership's business as provided by Section 12.2; or
(c) the occurrence of any event not specified in Section
13.1(b) that results in the General Partner ceasing to be the General Partner
under the Delaware Act.
13.2 CONTINUATION AFTER DISSOLUTION. Within 90 days
following a dissolution of the Partnership pursuant to Section 13.1(c),
pursuant to rules and procedures established by the Liquidator pursuant to
Section 13.3(b), the Limited Partners may elect to reconstitute the Partnership
and continue its business according to this Agreement upon the admission to the
Partnership of a Successor General Partner elected by the affirmative vote of
Limited Partners which own at least a "majority in interest" as defined by
Revenue Procedure 94-46. Any Person elected by the Limited Partners to be
Successor General Partner shall be admitted to the Partnership as Successor
General Partner only upon the Partnership's receipt of a written assumption by
such Person of all of the former General Partner's rights and obligations
hereunder (including the obligation to purchase the General Partner's Interest
pursuant to Section 12.4). Unless a Successor General Partner is admitted to
the Partnership within 90 days after dissolution, the Partnership shall be
liquidated pursuant to Section 13.3. If a Successor General Partner is
admitted to the Partnership pursuant to this Section 13.2 within 90 days after
dissolution, then:
(a) the reconstituted Partnership shall continue until
the end of the term set forth in Section 2.5 unless earlier dissolved according
to this Article XIII; and
(b) all necessary steps shall be taken to cancel this
Agreement and the Certificate of Limited Partnership and to enter into a new
partnership agreement and certificate of limited partnership, and the Successor
General Partner may for this purpose exercise the powers of attorney granted
the General Partner pursuant to Section 15.1; provided that the right of the
Limited Partners set forth above to elect a Successor General Partner and to
reconstitute and to continue the business of the Partnership shall not exist
and may not be exercised unless the Partnership has received an opinion of
counsel that (i) the exercise of the right would not result in the loss of
limited liability of any Limited Partner, and (ii) neither the Partnership nor
the reconstituted Partnership would be
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classified as other than a partnership for United States federal income tax
purposes upon the exercise of such right to continue.
13.3 LIQUIDATION.
(a) Upon dissolution of the Partnership, the General
Partner shall be the Liquidator, unless and until a successor Liquidator is
appointed as provided herein. The Liquidator shall agree not to resign at any
time without 30 days' prior written notice. The Liquidator, if other than the
General Partner, may be removed at any time, with or without cause, by notice
of removal and appointment of a successor Liquidator approved by a Majority
Interest. Within 30 days following the occurrence of any Event of Withdrawal
with respect to the Liquidator, a successor Liquidator may be elected by a
Majority Interest. The successor Liquidator shall succeed to all rights,
powers and duties of the former Liquidator. The right to appoint a successor
or substitute Liquidator in the manner provided herein shall be recurring and
continuing for so long as the functions and services of the Liquidator are
authorized to continue under the provisions hereof, and every reference herein
to the Liquidator shall be deemed to refer also to any such successor or
substitute Liquidator appointed in the manner herein provided. Except as
expressly provided in this Article XIII, the Liquidator appointed in the manner
provided herein shall have and may exercise, without further authorization or
consent of any of the parties hereto, all of the powers conferred upon the
General Partner under the terms of this Agreement (but subject to all of the
applicable limitations, contractual and otherwise, upon the exercise of such
powers to the extent necessary or desirable in the good faith judgment of the
Liquidator to carry out the duties and functions of the Liquidator hereunder
for and during such period of time as shall be reasonably required in the good
faith judgment of the Liquidator to complete the winding up and liquidation of
the Partnership as provided for herein). The Liquidator shall receive as
compensation for its services (i) if the Liquidator is the General Partner, the
compensation and reimbursements specified in Section 5.5, or (ii) if the
Liquidator is not a General Partner, a reasonable fee plus out-of-pocket costs
or such other compensation as a Majority Interest may approve.
(b) If the Partnership is dissolved pursuant to Section
13.1(c), the Liquidator shall establish reasonable rules and procedures for the
nomination and election of a Successor General Partner pursuant to Section
13.2. Pending such election, the Liquidator shall continue to operate the
Partnership's business in the ordinary course with a view to conserving the
Partnership's assets. If no Successor General Partner is admitted to the
Partnership pursuant to Section 13.2 within the time period specified therein,
the Liquidator shall proceed with the liquidation of the Partnership's assets
as provided in Section 13.3(c).
(c) The Liquidator shall liquidate the assets of the
Partnership, and apply and distribute the proceeds of such liquidation, in the
following order of priority, unless otherwise required by mandatory provisions
of applicable law:
(i) First, to the payment of the Partnership's debts and
obligations to its creditors, including sales
commissions and other expenses incident to any sale
of the assets of the Partnership.
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(ii) Second, to the establishment of and additions to such
reserves as the Liquidator may deem necessary or
appropriate.
(iii) Third, to the Partners, in accordance with Section
4.1.
The reserves established pursuant to subparagraph (ii) shall be paid over by
the Liquidator to a bank or other financial institution, to be held in escrow
for the purpose of paying any such contingent or unforeseen liabilities or
obligations and, at the expiration of such period as the Liquidator deems
advisable, such Reserves shall be distributed to the Partners in the priorities
set forth in this Section 13.3(c).
13.4 DISTRIBUTION IN KIND. The provisions of Section 13.3
which require the liquidation of the assets of the Partnership notwithstanding,
but subject to the order of priorities set forth therein, if upon dissolution
of the Partnership the Liquidator determines that an immediate sale of part or
all of the Partnership's assets would be impractical or would cause undue loss
to the Partners, the Liquidator may, in its sole discretion, defer for a
reasonable time the liquidation of any assets except those necessary to satisfy
Partnership liabilities (other than loans to the Partnership by Partners) and
reserves, and may, in its absolute discretion, distribute to the Partners, in
lieu of cash, as beneficiaries of a liquidating trust or otherwise and in
accordance with the provisions of Section 13.3(c), undivided interests in such
Partnership assets as the Liquidator deems not suitable for liquidation. Any
such distributions in kind shall be subject to such conditions relating to the
disposition and management of such properties as the Liquidator deems
reasonable and equitable and to any agreements governing the operating of such
properties at such time. The Liquidator shall determine the Fair Market Value
of any property distributed in accordance with the valuation procedures set
forth in Article XIV.
13.5 CANCELLATION OF CERTIFICATE OF LIMITED PARTNERSHIP.
Upon the completion of the distribution of Partnership property as provided in
Sections 13.3 and 13.4, the Partnership shall be terminated, and the Liquidator
(or the Limited Partners, if necessary) shall cause the cancellation of the
Certificate of Limited Partnership and all qualifications of the Partnership as
a foreign limited partnership in jurisdictions other than the State of Delaware
and shall take such other actions as may be necessary to terminate the
Partnership. The Partnership shall be deemed to continue in existence for all
purposes of this Agreement until it is terminated pursuant to this Section
13.5.
13.6 REASONABLE TIME FOR WINDING UP. A reasonable time
shall be allowed for the orderly winding up of the business and affairs of the
Partnership and the liquidation of its assets pursuant to Section 13.3 in order
to minimize any losses otherwise attendant upon such winding up.
13.7 RETURN OF CAPITAL. The Liquidator shall not be
personally liable for the return of Capital Contributions or any portion
thereof, it being understood that any such return shall be made solely from
Partnership assets.
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ARTICLE XIV
VALUATION
14.1 VALUATION IN GENERAL. The Fair Market Value of any
asset as of any date shall be the price a willing buyer would pay a willing
seller in an arm's-length transaction as determined using any reasonable
valuation method.
14.2 APPRAISALS FOR PURCHASE OF GENERAL PARTNER'S GENERAL
PARTNERSHIP INTEREST.
(a) If no agreement as to the Fair Market Value of the
Partnership's assets is reached between the Successor General Partner and the
former General Partner within 30 days after the date of any election under
Section 12.4(a), then the former General Partner shall within 10 days following
the expiration of such 30-day period appoint an appraiser experienced in
valuing assets of the type in question, and inform the Successor General
Partner in writing of the name and business address of the appraiser. The
appraiser shall make his own, independent appraisal of the asset(s) in dispute,
but he shall give the former General Partner and the Successor General Partner
an opportunity to meet with him prior to completing his appraisal. Except as
provided in Section 14.2(b), the appraiser's determination of the Fair Market
Value of the asset(s) in dispute will be made within 30 days of his
appointment, and will be final and binding on all concerned, absent manifest
error.
(b) If the Successor General Partner does not approve the
appraiser selected by the former General Partner, the Successor General Partner
may within 10 days following notification of such selection pursuant to Section
14.2(a) appoint an appraiser of his choice, experienced in valuing assets of
the type in question, and inform the former General Partner in writing of the
name and business address of the appraiser. The appraisers appointed by the
former General Partner and the Successor General Partner shall appoint a third
appraiser, also experienced in valuing assets of the type in question. Each of
the three appraisers shall make his own independent appraisal of the Fair
Market Value of the asset(s) in dispute, but the appraisers shall give the
Successor General Partner and the former General Partner an opportunity to meet
with them prior to completing their appraisal. The appraisers' determinations
of the Fair Market Value of the asset(s) in question shall be made within the
time period remaining for the payment required under Section 12.4(a). The
average of the two valuations that are closest to each other shall be
determined to be the Fair Market Value of the appraised asset(s) and such
determination shall be final and binding on all concerned, absent manifest
error.
(c) The cost of each appraisal shall be shared equally
among the Partnership, the Successor General Partner in question and the
General Partner in question.
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ARTICLE XV
GENERAL PROVISIONS
15.1 POWER OF ATTORNEY.
(a) Each Partner hereby constitutes and appoints the
General Partner and the Liquidator, with full power of substitution, as his
true and lawful agent and attorney-in-fact, with full power and authority in
his or its name, place and stead, to:
(i) execute, swear to, acknowledge, deliver, file and
record in the appropriate public offices (A) this
Agreement, all certificates and other instruments and
all amendments thereof which the General Partner
deems appropriate or necessary to form, qualify, or
continue the qualification of, the Partnership as a
limited partnership (or a partnership in which
limited partners have limited liability) in the State
of Delaware and in all other jurisdictions in which
the Partnership may conduct business or own property;
(B) all instruments which the General Partner deems
appropriate or necessary to reflect any amendment,
change, modification or restatement of this Agreement
in accordance with its terms; (C) all conveyances and
other instruments or documents which the General
Partner deems appropriate or necessary to reflect the
dissolution and liquidation of the Partnership
pursuant to the terms of this Agreement, including a
certificate of cancellation; and (D) all instruments
relating to the admission, withdrawal or substitution
of any Partner pursuant to Article XI or XII; and
(ii) sign, execute, swear to and acknowledge all ballots,
consents, approvals, waivers, certificates and other
instruments appropriate or necessary, in the
reasonable judgment of the General Partner, to make,
evidence, give, confirm or ratify any vote, consent,
approval, agreement or other action which is made or
given by the Partners hereunder or is consistent with
the terms of this Agreement and/or appropriate or
necessary (and not inconsistent with the terms of
this Agreement), in the reasonable judgment of the
General Partner, to effectuate the terms of this
Agreement; provided that when required by
Article IX or any other provision of
this Agreement which establishes a percentage of the
Limited Partners required to take any action, the
General Partner or the Liquidator may exercise the
power of attorney made in this subsection (ii) only
after the necessary vote, consent or approval by the
required percentage of the Limited Partners.
(b) The foregoing power of attorney is irrevocable and
coupled with an interest, and shall survive the death, incompetency,
disability, incapacity, dissolution, bankruptcy, insolvency or termination of
any Partner and the transfer of all or any portion of his or its Partnership
Interest and shall extend to such Partner's heirs, successors, assigns and
personal representatives.
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15.2 TITLE TO PARTNERSHIP ASSETS. Partnership assets
shall be deemed to be owned by the Partnership as an entity, and no Partner,
individually or collectively, shall have any ownership interest in such
Partnership assets or any portion thereof. Legal title to any or all
Partnership assets may be held in the name of the Partnership, the General
Partner or one or more nominees, as the General Partner may determine. The
General Partner hereby declares and warrants that any Partnership assets for
which legal title is held in its name or the name of any nominee shall be held
in trust by the General Partner or such nominee for the use and benefit of the
Partnership in accordance with the provisions of this Agreement. All
Partnership assets shall be recorded as the property of the Partnership on its
books and records, irrespective of the name in which legal title to such
Partnership assets is held.
15.3 RESTRICTIONS. Certain Partners have entered into an
Investors Agreement of even date herewith subjecting their Partnership
Interests to certain restrictions.
15.4 CONVERSION TO CORPORATE FORM. If, in accordance with
the terms and provisions of the Investors Agreement, the Partnership is to be
converted into corporate form (an "APPROVED CORPORATE CONVERSION"), each
Partner hereby consents to such Approved Corporate Conversion and agrees that
it will, in connection with such Approved Corporate Conversion, consent to and
take all actions and raise no objections against the Approved Corporate
Conversion. Each holder of Units shall take all necessary or desirable actions
in connection with the consummation of the Approved Corporate Conversion. The
obligations of the holders of Units hereunder with respect to the Approved
Corporate Conversion are subject to the satisfaction of the following
conditions: (i) upon the consummation of the Approved Corporate Conversion,
each holder of Units shall receive securities of the corporate entity into
which the Partnership is being converted which, if such corporate entity were
completely liquidated, would provide such holder with the same form of
consideration and the same portion of consideration such holder would have
received if the aggregate consideration had been distributed by the Partnership
in complete liquidation pursuant to the rights and preferences set forth herein
as in effect immediately prior to the Approved Corporate Conversion; (ii) if
any holders of a class or type of Units are given an option as to the form and
amount of securities to be received in exchange for such holder's Units in
connection with the Approved Corporate Conversion, each holder of such class or
type of Units shall be given the same option; and (iii) each holder of then
currently exercisable rights to acquire Units shall be given an opportunity to
exercise such rights prior to the consummation of the Approved Corporate
Conversion and to be treated in the Approved Corporate Conversion as holders of
such Units.
15.5 ADDRESSES AND NOTICES. Any notice, demand, request
or report required or permitted to be given or made to any Person under this
Agreement shall be in writing and shall be deemed given or made when delivered
in person or when sent by first class mail or by other commercially reasonable
means of written communication to the Person at his address as shown on the
Partnership's books and records. An affidavit or certificate of mailing
executed by the General Partner shall be conclusive (but not exclusive)
evidence of the date and fact of mailing of any such notice, demand, request or
report. Any notice to the General Partner or the Partnership shall be deemed
given if received by the General Partner at the principal office of the
Partnership designated pursuant to Section 2.4.
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15.6 BINDING EFFECT. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their heirs, executors,
administrators, successors, legal representatives and permitted assigns.
15.7 CREDITORS. None of the provisions of this Agreement
shall be for the benefit of or enforceable by any creditors of the Partnership,
and no creditor who makes a loan to the Partnership may have or acquire at any
time as a result of making the loan any direct or indirect interest in
Partnership Profits, Losses, Distributions, capital or property other than as a
secured creditor.
15.8 WAIVER. No failure by any party to insist upon the
strict performance of any covenant, duty, agreement or condition of this
Agreement or to exercise any right or remedy consequent upon a breach thereof
shall constitute waiver of any such breach or any other covenant, duty,
agreement or condition.
15.9 COUNTERPARTS. This Agreement may be executed in
separate counterparts, each of which will be an original and all of which
together shall constitute one and the same agreement binding on all the parties
hereto.
15.10 APPLICABLE LAW. THE PARTNERSHIP LAW OF THE STATE OF
DELAWARE WILL GOVERN ALL ISSUES CONCERNING THE RELATIVE RIGHTS OF THE
PARTNERSHIP AND ITS PARTNERS. ALL OTHER QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY AND INTERPRETATION OF THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL
LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF DELAWARE.
15.11 INVALIDITY OF PROVISIONS. If any provision of this
Agreement is or becomes invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not be affected thereby.
15.12 NUMBER AND GENDER. Whenever required by the context,
any pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa.
15.13 FURTHER ACTION. The parties shall execute and
deliver all documents, provide all information and take or refrain from taking
action as may be necessary or appropriate to achieve the purposes of this
Agreement.
15.14 INTEGRATION. This Agreement constitutes the entire
agreement among the parties hereto pertaining to the subject matter hereof and
supersedes all prior agreements and understandings pertaining thereto, other
than the Unit Purchase Agreements (as in effect as of the date of this
Agreement).
15.15 INCLUDING. Whenever the term "INCLUDING" is used
herein in connection with a listing of items included within a prior reference,
such listing shall be interpreted to be illustrative only, and shall not be
interpreted as a limitation on or exclusive listing of the items included
within the prior reference.
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15.16 ARBITRATION. If any dispute, claim or difference
arises out of this Agreement, or as to the rights and liabilities of the
parties hereunder or as to the breach or invalidity hereof, or in connection
with the construction of this Agreement (each such event being hereinafter
called a "DISPUTE"), the parties shall settle such Dispute exclusively by
binding arbitration in accordance with the Commercial Arbitration rules of the
American Arbitration Association in effect as of the date of commencement of
the arbitration; provided, however, that any such arbitration shall be presided
over by three arbitrators. The arbitration shall be held in San Diego,
California unless the parties mutually agree to have the arbitration held
elsewhere, and judgment upon the award made therein may be entered by any court
having jurisdiction thereof; provided, further, that noting contained in this
Section 15.15 shall be construed to limit or preclude a party from bringing any
action in any court of competent jurisdiction in the United States for
injunctive or other provisional relief to compel another party hereto to comply
with its obligations under this Agreement or any other agreement between or
among the parties during the pendency of the arbitration proceedings.
* * * * *
- 35 -
<PAGE> 40
IN WITNESS WHEREOF, the undersigned have executed or caused to
be executed on their behalf this Agreement of Limited Partnership as of the
date first written above.
GENERAL PARTNER: TRANSWESTERN COMMUNICATIONS COMPANY, INC.
By /s/ Laurence H. Bloch
------------------------------
Its Vice President
LIMITED PARTNERS:
THOMAS H. LEE EQUITY FUND III, L.P.
By: THL Equity Advisors Limited Partnership III
Its: General Partner
By: THL Equity Trust III
Its: General Partner
By:
------------------------------
Its:
------------------------------
CONTINENTAL ILLINOIS VENTURE CORPORATION
By: /s/ Marcus Wedner
------------------------------
Its: Managing Director
CIVC PARTNERS III
By: /s/ Marcus Wedner Its:
------------------------------
Managing Director
(SIGNATURE PAGE TO THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP)
<PAGE> 41
FIRST UNION INVESTORS, INC.
By /s/ Scott Perper
------------------------------
Its Senior Vice President
DAVID F. DUNNING TRUST
By /s/ James D. Dunning, Jr.
------------------------------
Its Trustee
JAMES D. DUNNING III, TRUST
By /s/ James D. Dunning, Jr.
------------------------------
Its Trustee
/s/ James D. Dunning, Jr.
------------------------------
James D. Dunning, Jr.
/s/ Laurence H. Bloch
------------------------------
Laurence H. Bloch
RICARDO PUENTE LIVING TRUST
By /s/ Ricardo Puente
------------------------------
Its Trustee
MARYBETH BRENNAN TRUST
By /s/ Marybeth Brennan
------------------------------
Its Trustee
/s/ Joan Fiorito
------------------------------
Joan Fiorito
(SIGNATURE PAGE TO THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP)
<PAGE> 42
WAZNY FAMILY TRUST
By /s/ Joseph L. Wazny
--------------------------------------
Its Trustee
/s/ Robert Bambace
--------------------------------------
Robert Bambace
/s/ Richard Beck
--------------------------------------
Richard Beck
/s/ Michael Bynum
--------------------------------------
Michael Bynum
/s/ Steve Cartlidge
--------------------------------------
Steve Cartlidge
/s/ Kim Kaznowski
--------------------------------------
Kim Kaznowski
/s/ Richard Mellert
--------------------------------------
Richard Mellert
/s/ Ita Shea-Oglesby
--------------------------------------
Ita Shea-Oglesby
/s/ Lois Elizabeth Speights
--------------------------------------
Lois Elizabeth Speights
/s/ Victoria Welch
--------------------------------------
Victoria Welch
(SIGNATURE PAGE TO THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP)
<PAGE> 43
THL -- CCI LIMITED PARTNERSHIP
By /s/ Wendy Masler
--------------------------------
Its Treasurer
--------------------------------
THOMAS H. LEE EQUITY FUND III, L.P.
By /s/ Warren C. Smith, Jr.
--------------------------------
Its
--------------------------------
THOMAS H. LEE FOREIGN FUND III, L.P.
By /s/ Warren C. Smith, Jr.
--------------------------------
Its
--------------------------------
/s/ David V. Harkins
------------------------------------
David V. Harkins
THE 1995 HARKINS GIFT TRUST
By /s/ Sheryll J. Harkins
--------------------------------
Sheryll Harkins
Its Trustee
/s/ Thomas R. Shepherd
------------------------------------
Thomas R. Shepherd
/s/ Scott A. Schoen
------------------------------------
Scott A. Schoen
/s/ C. Hunter Boll
------------------------------------
C. Hunter Boll
(SIGNATURE PAGE TO THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP)
<PAGE> 44
/s/ Scott M. Sperling
---------------------------------------
Scott M. Sperling
/s/ Anthony J. DiNovi
---------------------------------------
Anthony J. DiNovi
/s/ Thomas M. Hagerty
---------------------------------------
Thomas M. Hagerty
/s/ Warren C. Smith, Jr.
---------------------------------------
Warren C. Smith, Jr.
/s/ Seth W. Lawry
---------------------------------------
Seth W. Lawry
/s/ Joseph I. Incandela
---------------------------------------
Joseph I. Incandela
/s/ Kent R. Weldon
---------------------------------------
Kent R. Weldon
/s/ Terrence M. Mullen
---------------------------------------
Terrence M. Mullen
/s/ Todd M. Abbrecht
---------------------------------------
Todd M. Abbrecht
/s/ Wendy L. Masler
---------------------------------------
Wendy L. Masler
/s/ Andrew D. Flaster
---------------------------------------
Andrew D. Flaster
FIRST TRUST CORP., TRUSTEES FOR THE BENEFIT
OF KRISTINA A. WEINBERG WATTS IRA #
188608-0001
By
------------------------------------
Its
-----------------------------------
/s/ Andrew T. Mulderry
---------------------------------------
Andrew T. Mulderry
(SIGNATURE PAGE TO THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP)
<PAGE> 45
/s/ George R. Taylor
------------------------------------------
George R. Taylor
/s/ Charles W. Robins
------------------------------------------
Charles W. Robins
/s/ James Westra
------------------------------------------
James Westra
WCS TRUSTEE MARTHA MARKS IRR. FAMILY TRUST
By /s/ Warren C. Smith, Jr.
----------------------------------
Its Trustee
/s/ Charles A. Brizius
-------------------------------------
Charles A. Brizius
/s/ Jeffrey B. Kovach
-------------------------------------
Jeffrey B. Kovach
/s/ Anjan Mukherjee
-------------------------------------
Anjan Mukherjee
/s/ Charles S. Woo
-------------------------------------
Charles S. Woo
CIBC WG ARGOSY MERCHANT FUND 2, L.L.C.
By /s/ Jay Levine
----------------------------------
Its Managing Director
(SIGNATURE PAGE TO THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP)
<PAGE> 46
MATTHEW BLOCH GIFT TRUST
By /s/ Cindy C. Bloch
----------------------------
Cindy C. Bloch
Its Trustee
REISA BLOCH GIFT TRUST
By /s/ Cindy C. Bloch
----------------------------
Cindy C. Bloch
Its Trustee
RICARDO PUENTE 1995 TRUST
By /c/ Ricardo Puente
----------------------------
Ricardo Puente
Its Trustee
(SIGNATURE PAGE TO THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP)
<PAGE> 47
SCHEDULE I
<TABLE>
<CAPTION>
Preferred Units Common Units
---------------------- --------------------------------------------------
Class A Class B
---------------------- -----------------------
Capital Capital Capital
No. Contributions No. Contributions No. Contributions
----- ------------- ----- ------------- ----- --------------
<S> <C> <C> <C> <C> <C> <C>
GENERAL PARTNER
TransWestern Communications
Company, Inc.
LIMITED PARTNERS:
Thomas H. Lee Equity
Fund III, L.P.
Continental Illinois
Venture Corporation
CIVC Partners III
First Union Investors, Inc.
David F. Dunning Trust
James D. Dunning III, Trust
James D. Dunning, Jr.
Laurence H. Bloch
Ricardo Puente Living Trust
Marybeth Brennan Trust
Joan Fiorito
Wazny Family Trust
Robert Bambace
Richard Beck
Michael Bynum
Steve Cartlidge
Kim Kaznowski
Richard Mellert
Ita Shea-Oglesby
Lois Elizabeth Speights
Victoria Welch
THL--CCI Limited Partnership
<CAPTION>
Common Units
--------------------------------------------------
Class C Class D
---------------------- ----------------------
Capital Capital
No. Contributions No. Contributions
----- ------------- ----- -------------
<S> <C> <C> <C> <C>
GENERAL PARTNER
TransWestern Communications
Company, Inc.
LIMITED PARTNERS:
Thomas H. Lee Equity
Fund III, L.P.
Continental Illinois
Venture Corporation
CIVC Partners III
First Union Investors, Inc.
David F. Dunning Trust
James D. Dunning III, Trust
James D. Dunning, Jr.
Laurence H. Bloch
Ricardo Puente Living Trust
Marybeth Brennan Trust
Joan Fiorito
Wazny Family Trust
Robert Bambace
Richard Beck
Michael Bynum
Steve Cartlidge
Kim Kaznowski
Richard Mellert
Ita Shea-Oglesby
Lois Elizabeth Speights
Victoria Welch
THL--CCI Limited Partnership
</TABLE>
<PAGE> 48
<TABLE>
<CAPTION>
Preferred Units Common Units
---------------------- --------------------------------------------------
Class A Class B
---------------------- -----------------------
Capital Capital Capital
No. Contributions No. Contributions No. Contributions
----- ------------- ----- ------------- ----- --------------
<S> <C> <C> <C> <C> <C> <C>
Thomas H. Lee Equity Fund III, L.P.
Thomas H. Lee Foreign Fund III, L.P.
David V. Harkins
The 1995 Harkins Gift Trust
Thomas R. Shepherd
Scott A. Schoen
C. Hunter Boll
Scott M. Sperling
Anthony J. DiNovi
Thomas M. Hagerty
Warren C. Smith, Jr.
Seth W. Lawry
Joseph I. Incandela
Kent R. Weldon
Terrence M. Mullen
Todd M. Abbrecht
Wendy L. Masler
Andrew D. Flaster
[Watts Trust]
Andrew T. Mulderry
George R. Taylor
Charles W. Robins
James Westra
WCS Trustee Martha Marks Irr.
Family Trust
Charles A. Brizius
Jeffrey B. Kovach
Anjan Mukherjee
<CAPTION>
Common Units
--------------------------------------------------
Class C Class D
---------------------- ----------------------
Capital Capital
No. Contributions No. Contributions
----- ------------- ----- -------------
<S> <C> <C> <C> <C>
Thomas H. Lee Equity Fund III, L.P.
Thomas H. Lee Foreign Fund III, L.P.
David V. Harkins
The 1995 Harkins Gift Trust
Thomas R. Shepherd
Scott A. Schoen
C. Hunter Boll
Scott M. Sperling
Anthony J. DiNovi
Thomas M. Hagerty
Warren C. Smith, Jr.
Seth W. Lawry
Joseph I. Incandela
Kent R. Weldon
Terrence M. Mullen
Todd M. Abbrecht
Wendy L. Masler
Andrew D. Flaster
[Watts Trust]
Andrew T. Mulderry
George R. Taylor
Charles W. Robins
James Westra
WCS Trustee Martha Marks Irr.
Family Trust
Charles A. Brizius
Jeffrey B. Kovach
Anjan Mukherjee
</TABLE>
<PAGE> 49
<TABLE>
<CAPTION>
Preferred Units Common Units
---------------------- --------------------------------------------------
Class A Class B
---------------------- -----------------------
Capital Capital Capital
No. Contributions No. Contributions No. Contributions
----- ------------- ----- ------------- ----- --------------
<S> <C> <C> <C> <C> <C> <C>
Charles S. Woo
Matthew Bloch Gift Trust
Reisa Bloch Gift Trust
Ricardo Puente 1995 Trust
CIBC WG Argosy Merchant
Fund 2, L.L.C.
TOTAL
<CAPTION>
Common Units
--------------------------------------------------
Class C Class D
---------------------- ----------------------
Capital Capital
No. Contributions No. Contributions
----- ------------- ----- -------------
<S> <C> <C> <C> <C>
Charles S. Woo
Matthew Bloch Gift Trust
Reisa Bloch Gift Trust
Ricardo Puente 1995 Trust
CIBC WG Argosy Merchant
Fund 2, L.L.C.
TOTAL
</TABLE>
* Amounts represent the fair market value of property contributed.
<PAGE> 50
AMENDMENT 1. TO THIRD AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
THIS AMENDMENT 1. TO THIRD AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP (this "Amendment") is made as of November 6, 1997 by
TransWestern Communications Company, as general partner (the "General Partner")
of TransWestern Limited Partnership, L.P., a Delaware limited partnership (the
"Partnership").
1. Section 9.2 of the Partnership's Third Amended and
Restated Agreement of Limited Partnership, pursuant to the powers of attorney
granted by each of the Partnership's limited partners to the General Partner,
vests in the General Partner the sole authority and discretion to change the
name of the Partnership. Pursuant to such authority, the General Partner
hereby amends the Partnership Agreement as follows:
a. The cover page and the preamble to the
Partnership Agreement are each amended hereby by replacing the references to
"TransWestern Publishing Company, L.P." and "October 1, 1997" with
"TransWestern Holdings, L.P." and "November 6, 1997", respectively.
b. Section 2.2 of the Partnership is amended
hereby by replacing the reference to "TransWestern Publishing Company, L.P."
therein with "TransWestern Holding, L.P.".
2. Except as provided in paragraph 1, this Amendment
shall not constitute an amendment or waiver of any provision of the Partnership
Agreement, which shall continue and remain in full force and effect in
accordance with its terms.
3. All questions concerning the construction, validity
and interpretation of this Amendment shall be governed by and construed in
accordance with the internal law, and not the law of conflicts, of Delaware.
4. This Amendment shall be effective upon the execution
hereof and the filing by the General Partner of the certificate of amendment
reflecting the foregoing amendments with the State of Delaware and each of the
States where the Partnership is qualified to conduct business as of the date
hereof.
<PAGE> 51
IN WITNESS WHEREOF, this Amendment has been entered into as of
the date first written above.
TRANSWESTERN COMMUNICATIONS COMPANY, INC.
/s/ Laurence H. Bloch
-----------------------------------------
By: Laurence H. Bloch
Its: Vice President
<PAGE> 1
EXHIBIT 3.5
CERTIFICATE OF INCORPORATION
OF
TRANSWESTERN COMMUNICATIONS COMPANY, INC.
The undersigned incorporator, for the purpose of incorporating or
organizing a corporation under the General Corporation Law of the State of
Delaware, certifies:
FIRST: The name of the corporation is
TRANSWESTERN COMMUNICATIONS COMPANY, INC.
SECOND: The address of the Corporation's registered office in the
State of Delaware is 1209 Orange Street, in the City of Wilmington, County of
New Castle. The name of its registered agent at such address is The Corporation
Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH: The total number of shares of stock which the corporation
shall have authority to issue is Three Thousand (3,000) shares of Common Stock,
and the par value of each such share is One Dollar ($1.00).
FIFTH: The name and mailing address of the incorporator is Renee
E. Becnel, Morgan, Lewis & Bockius, 101 Park Avenue, New York, New York 10178.
SIXTH: Elections of directors need not be by ballot unless the
By- Laws of the Corporation shall so provide.
SEVENTH: The Board of Directors of the Corporation may make
By-Laws and from time to time may alter, amend or repeal By-Laws.
EIGHTH: No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit.
NINTH: Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or any class of them
<PAGE> 2
and/or between this Corporation and its stockholders or any class of them, any
court of equitable jurisdiction within the State of Delaware may, on the
application in a summary way of this Corporation or of any creditor or
stockholder thereof or on the application of any receiver or receivers appointed
for this Corporation under the provisions of section 291 of Title 8 of the
Delaware Code or on the application of trustees in dissolution or of any
receiver or receivers appointed for this Corporation under the provisions of
section 279 of Title 8 of the Delaware Code order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this Corporation, as the case
may be, and also on this Corporation.
IN WITNESS WHEREOF, I have signed this Certificate this 29th day
of April, 1993.
/s/ RENEE E. BECNEL
-----------------------------
Renee E. Becnel
<PAGE> 3
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
BEFORE PAYMENT OF CAPITAL
OF
TRANSWESTERN COMMUNICATIONS COMPANY, INC.
The undersigned, being the sole Director of TransWestern
Communications Company, Inc., a general corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware,
certifies:
FIRST: Article FOURTH of the Certificate of Incorporation of the
Corporation is hereby amended to read as follows:
"FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is Thirty
Thousand (30,000) shares of Common Stock, and the par
value of each such share is One Dollar ($1.00)."
SECOND: The Corporation has not received any payment for any of
its stock.
THIRD: The amendment has been duly adopted in accordance with the
provisions of Section 241 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, I have signed this certificate this 12th of
May, 1993.
/s/ Laurence H. Bloch
---------------------------------
Laurence H. Bloch
<PAGE> 1
EXHIBIT 3.6
AMENDED AND RESTATED BY-LAWS
OF
TRANSWESTERN COMMUNICATIONS COMPANY, INC.
A DELAWARE CORPORATION
(ADOPTED ON OCTOBER 1, 1997)
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the corporation in
the State of Delaware shall be located at 1209 Orange Street, Wilmington,
Delaware, County of New Castle 19805. The name of the corporation's registered
agent at such address shall be The Corporation Trust Company. The registered
office and/or registered agent of the corporation may be changed from time to
time by action of the board of directors.
Section 2. Other Offices. The corporation may also have offices at such
other places, both within and without the State of Delaware, as the board of
directors may from time to time determine or the business of the corporation
may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place and Time of Meetings. An annual meeting of the
stockholders shall be held each year within one hundred twenty (120) days after
the close of the immediately preceding fiscal year of the corporation for the
purpose of electing directors and conducting such other proper business as may
come before the meeting. The date, time and place of the annual meeting shall
be determined by the president of the corporation; provided, that if the
president does not act, the board of directors shall determine the date, time
and place of such meeting.
Section 2. Special Meetings. Special meetings of stockholders may be called
for any purpose and may be held at such time and place, within or without the
State of Delaware, as shall be stated in a notice of meeting or in a duly
executed waiver of notice thereof. Such meetings may be called at any time by
the board of directors, the president or the holders of shares entitled to cast
not less than a majority of the votes at the meeting.
Section 3. Place of Meetings. The board of directors may designate any
place, either within or without the State of Delaware, as the place of meeting
for any annual meeting or for any special meeting called by the board of
directors. If no designation is
<PAGE> 2
made, or if a special meeting be otherwise called, the place of meeting shall
be the principal executive office of the corporation.
Section 4. Notice. Whenever stockholders are required or permitted to take
action at a meeting, written or printed notice stating the place, date, time,
and, in the case of special meetings, the purpose or purposes, of such meeting,
shall be given to each stockholder entitled to vote at such meeting not less
than ten (10) nor more than sixty (60) days before the date of the meeting.
All such notices shall be delivered, either personally or by mail, by or at the
direction of the board of directors, the president or the secretary, and if
mailed, such notice shall be deemed to be delivered when deposited in the
United States mail, postage prepaid, addressed to the stockholder at his, her
or its address as the same appears on the records of the corporation.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends for the express purpose of objecting at
the beginning of the meeting to the transaction of any business because the
meeting is not lawfully called or convened.
Section 5. Stockholders List. The officer having charge of the stock ledger
of the corporation shall make, at least ten (10) days before every meeting of
the stockholders, a complete list of the stockholders entitled to vote at such
meeting arranged in alphabetical order, showing the address of each stockholder
and the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least ten (10)
days prior to the meeting, either at a place within the city where the meeting
is to be held, which place shall be specified in the notice of the meeting or,
if not so specified, at the place where the meeting is to be held. The list
shall also be produced and kept at the time and place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present.
Section 6. Quorum. The holders of a majority of the outstanding shares of
capital stock, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders, except as otherwise provided by
statute or by the certificate of incorporation. If a quorum is not present,
the holders of a majority of the shares present in person or represented by
proxy at the meeting, and entitled to vote at the meeting, may adjourn the
meeting to another time and/or place.
Section 7. Adjourned Meetings. When a meeting is adjourned to another time
and place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken.
At the adjourned meeting the corporation may transact any business which might
have been transacted at the original meeting. If the adjournment is for more
than thirty (30) days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 8. Vote Required. When a quorum is present, the affirmative vote of
the majority of shares present in person or represented by proxy at the meeting
and entitled to vote on the subject matter shall be the act of the
stockholders, unless the question is one
-2-
<PAGE> 3
upon which by express provisions of an applicable law or of the certificate of
incorporation a different vote is required, in which case such express
provision shall govern and control the decision of such question.
Section 9. Voting Rights. Except as otherwise provided by the General
Corporation Law of the State of Delaware or by the certificate of incorporation
of the corporation or any amendments thereto and subject to Section 3 of
Article VI hereof, every stockholder shall at every meeting of the stockholders
be entitled to one (1) vote in person or by proxy for each share of common
stock held by such stockholder.
Section 10. Proxies. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him or her
by proxy, but no such proxy shall be voted or acted upon after three (3) years
from its date, unless the proxy provides for a longer period. A duly executed
proxy shall be irrevocable if it states that it is irrevocable and if, and only
as long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A proxy may be made irrevocable regardless of whether the
interest with which it is coupled is an interest in the stock itself or an
interest in the corporation generally. Any proxy is suspended when the person
executing the proxy is present at a meeting of stockholders and elects to vote,
except that when such proxy is coupled with an interest and the fact of the
interest appears on the face of the proxy, the agent named in the proxy shall
have all voting and other rights referred to in the proxy, notwithstanding the
presence of the person executing the proxy. At each meeting of the
stockholders, and before any voting commences, all proxies filed at or before
the meeting shall be submitted to and examined by the secretary or a person
designated by the secretary, and no shares may be represented or voted under a
proxy that has been found to be invalid or irregular.
Section 11. Action by Written Consent. Unless otherwise provided in the
certificate of incorporation, any action required to be taken at any annual or
special meeting of stockholders of the corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent or
consents in writing, setting forth the action so taken and bearing the dates of
signature of the stockholders who signed the consent or consents, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted and
shall be delivered to the corporation by delivery to its registered office in
the state of Delaware, or the corporation's principal place of business, or an
officer or agent of the corporation having custody of the book or books in
which proceedings of meetings of the stockholders are recorded. Delivery made
to the corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested provided, however, that no consent or
consents delivered by certified or registered mail shall be deemed delivered
until such consent or consents are actually received at the registered office.
All consents properly delivered in accordance with this section shall be deemed
to be recorded when so delivered. No written consent shall be effective to
take the corporate action referred to therein unless, within sixty (60) days of
the earliest dated consent delivered to the corporation as required by this
-3-
<PAGE> 4
section, written consents signed by the holders of a sufficient number of
shares to take such corporate action are so recorded. Prompt notice of the
taking of the corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented in writing.
Any action taken pursuant to such written consent or consents of the
stockholders shall have the same force and effect as if taken by the
stockholders at a meeting thereof.
ARTICLE III
DIRECTORS
Section 1. General Powers. The business and affairs of the corporation
shall be managed by or under the direction of the board of directors.
Section 2. Number, Election and Term of Office. The number of directors
which shall constitute the board shall be nine (9). Thereafter, the number of
directors shall be established from time to time by in accordance with the
provisions of that certain Investors Agreement, dated as of October 1, 1997 by
and among the corporation and certain of its stockholders (the "Investors
Agreement"). The directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote in the election of directors. Except as provided in the Investors
Agreement and Section 4 of this Article III, the directors shall be elected in
this manner at the annual meeting of the stockholders. Each director elected
shall hold office until a successor is duly elected and qualified or until his
or her earlier death, resignation or removal as hereinafter provided.
Section 3. Removal and Resignation. The directors may only be removed,
with or without cause, as set forth in the Investors Agreement. Any director
may resign at any time upon written notice to the corporation.
Section 4. Vacancies. Vacancies and newly created directorships resulting
from any increase in the authorized number of directors may only be filled as
set forth in the Investors Agreement. Each director so chosen shall hold
office until a successor is duly elected and qualified or until his or her
earlier death, resignation or removal as herein provided.
Section 5. Annual Meetings. The annual meeting of each newly elected board
of directors shall be held without other notice than this by-law immediately
after, and at the same place as, the annual meeting of stockholders.
Section 6. Other Meetings and Notice. Regular meetings, other than the
annual meeting, of the board of directors may be held without notice at such
time and at such place as shall from time to time be determined by resolution
of the board. Special meetings of the board of directors may be called by or
at the request of the president on at least
-4-
<PAGE> 5
twenty-four (24) hours notice to each director, either personally, by
telephone, by mail, or by telegraph.
Section 7. Quorum, Required Vote and Adjournment. A majority of the total
number of directors shall constitute a quorum for the transaction of business.
The vote of a majority of directors present at a meeting at which a quorum is
present shall be the act of the board of directors. If a quorum shall not be
present at any meeting of the board of directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 8. Committees. The board of directors may, by resolution passed by
a majority of the whole board, designate one or more committees, each committee
to consist of one or more of the directors of the corporation, which to the
extent provided in such resolution or these by-laws shall have and may exercise
the powers of the board of directors in the management and affairs of the
corporation except as otherwise limited by law. The board of directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
Such committee or committees shall have such name or names as may be determined
from time to time by resolution adopted by the board of directors. Each
committee shall keep regular minutes of its meetings and report the same to the
board of directors when required.
Section 9. Committee Rules. Each committee of the board of directors may
fix its own rules of procedure and shall hold its meetings as provided by such
rules, except as may otherwise be provided by a resolution of the board of
directors designating such committee. Unless otherwise provided in such a
resolution, the presence of at least a majority of the members of the committee
shall be necessary to constitute a quorum. In the event that a member and that
member's alternate, if alternates are designated by the board of directors as
provided in Section 8 of this Article III, of such committee is or are absent
or disqualified, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in place of any such absent or disqualified member.
Section 10. Communications Equipment. Members of the board of directors or
any committee thereof may participate in and act at any meeting of such board
or committee through the use of a conference telephone or other communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in the meeting pursuant to this section shall
constitute presence in person at the meeting.
Section 11. Waiver of Notice and Presumption of Assent. Any member of the
board of directors or any committee thereof who is present at a meeting shall
be conclusively presumed to have waived notice of such meeting except when such
member attends for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened. Such member shall be conclusively presumed to have
assented to any action taken unless his or her dissent shall
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be entered in the minutes of the meeting or unless his or her written dissent
to such action shall be filed with the person acting as the secretary of the
meeting before the adjournment thereof or shall be forwarded by registered mail
to the secretary of the corporation immediately after the adjournment of the
meeting. Such right to dissent shall not apply to any member who voted in
favor of such action.
Section 12. Action by Written Consent. Unless otherwise restricted by the
certificate of incorporation, any action required or permitted to be taken at
any meeting of the board of directors, or of any committee thereof, may be
taken without a meeting if all members of the board or committee, as the case
may be, consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the board or committee.
ARTICLE IV
OFFICERS
Section 1. Number. The officers of the corporation shall be elected by the
board of directors and shall consist of a chairman, president, chief financial
officer, one or more vice-presidents, secretary, a treasurer, and such other
officers and assistant officers as may be deemed necessary or desirable by the
board of directors. Any number of offices may be held by the same person. In
its discretion, the board of directors may choose not to fill any office for
any period as it may deem advisable, except that the offices of president and
secretary shall be filled as expeditiously as possible.
Section 2. Election and Term of Office. The officers of the corporation
shall be elected annually by the board of directors at its first meeting held
after each annual meeting of stockholders or as soon thereafter as conveniently
may be. The president shall be elected annually by the board of directors at
the first meeting of the board of directors held after each annual meeting of
stockholders or as soon thereafter as conveniently may be. The president shall
appoint other officers to serve for such terms as he or she deems desirable.
Vacancies may be filled or new offices created and filled at any meeting of the
board of directors. Each officer shall hold office until a successor is duly
elected and qualified or until his earlier death, resignation or removal as
hereinafter provided.
Section 3. Removal. Any officer or agent elected by the board of directors
may be removed by the board of directors whenever in its judgment the best
interests of the corporation would be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Section 4. Vacancies. Any vacancy occurring in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the board
of directors for the unexpired portion of the term by the board of directors
then in office.
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Section 5. Compensation. Compensation of all officers shall be fixed by the
board of directors, and no officer shall be prevented from receiving such
compensation by virtue of his or her also being a director of the corporation.
Section 6 . Chairman of the Board. The chairman of the board shall have
the powers and perform the duties incident to that position. Subject to the
powers of the board of directors, he shall be in the general and active charge
of the entire business and affairs of the corporation. He shall preside at all
meetings of the board of directors and stockholders and shall have such other
powers and perform such other duties as may be prescribed by the board of
directors or provided in these by-laws. Whenever the president is unable to
serve, by reason of sickness, absence or otherwise, the chairman of the board
shall perform all the duties and responsibilities and exercise all the powers
of the president.
Section 7. The President. The president shall be the chief executive
officer of the corporation; shall preside at all meetings of the stockholders
and board of directors at which he is present; subject to the powers of the
board of directors, shall have general charge of the business, affairs and
property of the corporation, and control over its officers, agents and
employees; and shall see that all orders and resolutions of the board of
directors are carried into effect. The president shall execute bonds,
mortgages and other contracts requiring a seal, under the seal of the
corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the board of directors to some other officer or agent of
the corporation. The president shall have such other powers and perform such
other duties as may be prescribed by the board of directors, chairman or as may
be provided in these by-laws.
Section 8 . Chief Financial Officer. The chief financial officer of the
corporation shall, under the direction of the chief executive officer, be
responsible for all financial and accounting matters and for the direction of
the offices of treasurer and controller. The chief financial officer shall
have such other powers and perform such other duties as may be prescribed by
the chairman of the board, the chief executive officer or the board of
directors or as may be provided in these by-laws.
Section 9. Vice-presidents. The vice-president, or if there shall be more
than one, the vice-presidents in the order determined by the board of directors
or by the president, shall, in the absence or disability of the president, act
with all of the powers and be subject to all the restrictions of the president.
The vice-presidents shall also perform such other duties and have such other
powers as the board of directors, the chairman, the president or these by-laws
may, from time to time, prescribe.
Section 10. The Secretary and Assistant Secretaries. The secretary shall
attend all meetings of the board of directors, all meetings of the committees
thereof and all meetings of the stockholders and record all the proceedings of
the meetings in a book or books to be kept for that purpose. Under the
president's supervision, the secretary shall give, or cause to be given, all
notices required to be given by these by-laws or by law; shall have such powers
and perform such duties as the board of directors, the president or these
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by-laws may, from time to time, prescribe; and shall have custody of the
corporate seal of the corporation. The secretary, or an assistant secretary,
shall have authority to affix the corporate seal to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such assistant secretary. The board of directors may give general authority to
any other officer to affix the seal of the corporation and to attest the
affixing by his signature. The assistant secretary, or if there be more than
one, the assistant secretaries in the order determined by the board of
directors, shall, in the absence or disability of the secretary, perform the
duties and exercise the powers of the secretary and shall perform such other
duties and have such other powers as the board of directors, the chairman, the
president, or secretary may, from time to time, prescribe.
Section 11. The Treasurer and Assistant Treasurer. The treasurer shall have
the custody of the corporate funds and securities; shall keep full and accurate
accounts of receipts and disbursements in books belonging to the corporation;
shall deposit all monies and other valuable effects in the name and to the
credit of the corporation as may be ordered by the board of directors; shall
cause the funds of the corporation to be disbursed when such disbursements have
been duly authorized, taking proper vouchers for such disbursements; and shall
render to the president and the board of directors, at its regular meeting or
when the board of directors so requires, an account of the corporation; shall
have such powers and perform such duties as the board of directors, the
president or these by-laws may, from time to time, prescribe. If required by
the board of directors, the treasurer shall give the corporation a bond (which
shall be rendered every six (6) years) in such sums and with such surety or
sureties as shall be satisfactory to the board of directors for the faithful
performance of the duties of the office of treasurer and for the restoration to
the corporation, in case of death, resignation, retirement, or removal from
office, of all books, papers, vouchers, money, and other property of whatever
kind in the possession or under the control of the treasurer belonging to the
corporation. The assistant treasurer, or if there shall be more than one, the
assistant treasurers in the order determined by the board of directors, shall
in the absence or disability of the treasurer, perform the duties and exercise
the powers of the treasurer. The assistant treasurers shall perform such other
duties and have such other powers as the board of directors, the chairman, the
president or chief financial officer may, from time to time, prescribe.
Section 12. Other Officers, Assistant Officers and Agents. Officers,
assistant officers and agents, if any, other than those whose duties are
provided for in these by-laws, shall have such authority and perform such
duties as may from time to time be prescribed by resolution of the board of
directors.
Section 13. Absence or Disability of Officers. In the case of the absence
or disability of any officer of the corporation and of any person hereby
authorized to act in such officer's place during such officer's absence or
disability, the board of directors may by resolution delegate the powers and
duties of such officer to any other officer or to any director, or to any other
person whom it may select.
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ARTICLE V
INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS
Section 1. Nature of Indemnity. 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
(hereinafter a "proceeding"), by reason of the fact that he, or a person of
whom he is the legal representative, is or was a director or officer, of the
corporation or is or was serving at the request of the corporation 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 the corporation to the fullest extent which it is empowered to
do so unless prohibited from doing 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 the
corporation 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 heirs, executors and administrators;
provided, however, that, except as provided in Section 2 hereof, the
corporation 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 the corporation. The right to
indemnification conferred in this Article V shall be a contract right and,
subject to Sections 2 and 5 hereof, shall include the right to be paid by the
corporation the expenses incurred in defending any such proceeding in advance
of its final disposition. The corporation may, by action of its board of
directors, provide indemnification to employees and agents of the corporation
with the same scope and effect as the foregoing indemnification of directors
and officers.
Section 2. Procedure for Indemnification of Directors and Officers. Any
indemnification of a director or officer of the corporation under Section 1 of
this Article V or advance of expenses under Section 5 of this Article V shall
be made promptly, and in any event within thirty (30) days, upon the written
request of the director or officer. If a determination by the corporation that
the director or officer is entitled to indemnification pursuant to this Article
V is required, and the corporation fails to respond within sixty (60) days to a
written request for indemnity, the corporation shall be deemed to have approved
the request. If the corporation denies a written request for indemnification
or advancing of expenses, in whole or in part, or if payment in full pursuant
to such request is not made within thirty (30) days, the right to
indemnification or advances as granted by this Article V shall be enforceable
by the director or officer in any court of competent jurisdiction. Such
person's costs and expenses incurred in connection with successfully
establishing his right to indemnification, in whole or in part, in any such
action shall also be indemnified by the corporation. It shall be a defense to
any such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking, if any, has been tendered to the corporation) that
the claimant has not met the standards of conduct which make it permissible
under the General Corporation Law of the State of Delaware for the corporation
to indemnify the
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claimant for the amount claimed, but the burden of such defense shall be on the
corporation. Neither the failure of the corporation (including its board of
directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he has met the applicable
standard of conduct set forth in the General Corporation Law of the State of
Delaware, nor an actual determination by the corporation (including its board
of directors, independent legal counsel, or its stockholders) that the claimant
has not met such applicable standard of conduct, shall be a defense to the
action or create a presumption that the claimant has not met the applicable
standard of conduct.
Section 3. Article Not Exclusive. The rights to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Article V shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the certificate of incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 4. Insurance. The corporation may purchase and maintain insurance
on its own behalf and on behalf of any person who is or was a director,
officer, employee, fiduciary, or agent of the corporation or was serving at the
request of the corporation 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 the corporation would have the power to indemnify such
person against such liability under this Article V.
Section 5. Expenses. Expenses incurred by any person described in Section 1
of this Article V in defending a proceeding shall be paid by the corporation in
advance of such proceeding's final disposition unless otherwise determined by
the board of directors in the specific case upon receipt of an undertaking by
or on behalf of the director or officer to repay such amount if it shall
ultimately be determined that he or she is not entitled to be indemnified by
the corporation. Such expenses incurred by other employees and agents may be
so paid upon such terms and conditions, if any, as the board of directors deems
appropriate.
Section 6. Employees and Agents. Persons who are not covered by the
foregoing provisions of this Article V and who are or were employees or agents
of the corporation, or who are or were serving at the request of the
corporation as employees or agents of another corporation, 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 7. Contract Rights. The provisions of this Article V shall be
deemed to be a contract right between the corporation and each director or
officer who serves in any such capacity at any time while this Article V and
the relevant provisions of the General Corporation Law of the State of Delaware
or other applicable law are in effect, and any repeal or modification of this
Article V or any such law shall not affect any rights or obligations then
existing with respect to any state of facts or proceeding then existing.
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Section 8. Merger or Consolidation. For purposes of this Article V,
references to "the corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was
a director, officer, employee or agent of such constituent corporation, or is
or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under this Article
V with respect to the resulting or surviving corporation as he or she would
have with respect to such constituent corporation if its separate existence had
continued.
ARTICLE VI
CERTIFICATES OF STOCK
Section 1. Form. Every holder of stock in the corporation shall be entitled
to have a certificate, signed by, or in the name of the corporation by the
president or a vice-president and the secretary or an assistant secretary of
the corporation, certifying the number of shares of a specific class or series
owned by such holder in the corporation. If such a certificate is
countersigned (1) by a transfer agent or an assistant transfer agent other than
the corporation or its employee or (2) by a registrar, other than the
corporation or its employee, the signature of any such president,
vice-president, secretary, or assistant secretary may be facsimiles. In case
any officer or officers who have signed, or whose facsimile signature or
signatures have been used on, any such certificate or certificates shall cease
to be such officer or officers of the corporation whether because of death,
resignation or otherwise before such certificate or certificates have been
delivered by the corporation, such certificate or certificates may nevertheless
be issued and delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signature or signatures have
been used thereon had not ceased to be such officer or officers of the
corporation. All certificates for shares shall be consecutively numbered or
otherwise identified. The name of the person to whom the shares represented
thereby are issued, with the number of shares and date of issue, shall be
entered on the books of the corporation. Shares of stock of the corporation
shall only be transferred on the books of the corporation by the holder of
record thereof or by such holder's attorney duly authorized in writing, upon
surrender to the corporation of the certificate or certificates for such shares
endorsed by the appropriate person or persons, with such evidence of the
authenticity of such endorsement, transfer, authorization, and other matters as
the corporation may reasonably require, and accompanied by all necessary stock
transfer stamps. In that event, it shall be the duty of the corporation to
issue a new certificate to the person entitled thereto, cancel the old
certificate or certificates, and record the transaction on its books. The
board of directors may appoint a bank or trust company organized under the laws
of the United States or any state thereof to act as its transfer agent or
registrar, or both in connection with the transfer of any class or series of
securities of the corporation.
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Section 2. Lost Certificates. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates previously issued by the corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the
person claiming the certificate of stock to be lost, stolen, or destroyed.
When authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen, or destroyed certificate or
certificates, or his or her legal representative, to give the corporation a
bond sufficient to indemnify the corporation against any claim that may be made
against the corporation on account of the loss, theft or destruction of any
such certificate or the issuance of such new certificate.
Section 3. Fixing a Record Date for Stockholder Meetings. In order that the
corporation may determine the stockholders entitled to notice of or to vote at
any meeting of stockholders or any adjournment thereof, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the board of directors, and
which record date shall not be more than sixty (60) nor less than ten (10) days
before the date of such meeting. If no record date is fixed by the board of
directors, the record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders shall be the close of business on the
next day preceding the day on which notice is given, or if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the board of directors may fix a new record
date for the adjourned meeting.
Section 4. Fixing a Record Date for Action by Written Consent. In order
that the corporation may determine the stockholders entitled to consent to
corporate action in writing without a meeting, the board of directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the board of directors, and
which date shall not be more than ten (10) days after the date upon which the
resolution fixing the record date is adopted by the board of directors. If no
record date has been fixed by the board of directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the board of directors is required
by statute, shall be the first date on which a signed written consent setting
forth the action taken or proposed to be taken is delivered to the corporation
by delivery to its registered office in the State of Delaware, its principal
place of business, or an officer or agent of the corporation having custody of
the book in which proceedings of meetings of stockholders are recorded.
Delivery made to the corporation's registered office shall be by hand or by
certified or registered mail, return receipt requested. If no record date has
been fixed by the board of directors and prior action by the board of directors
is required by statute, the record date for determining stockholders entitled
to consent to corporate action in writing without a meeting shall be at the
close of business on the day on which the board of directors adopts the
resolution taking such prior action.
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Section 5. Fixing a Record Date for Other Purposes. In order that the
corporation may determine the stockholders entitled to receive payment of any
dividend or other distribution or allotment or any rights or the stockholders
entitled to exercise any rights in respect of any change, conversion or
exchange of stock, or for the purposes of any other lawful action, the board of
directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted, and which record
date shall be not more than sixty (60) days prior to such action. If no record
date is fixed, the record date for determining stockholders for any such
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
Section 6. Registered Stockholders. Prior to the surrender to the
corporation of the certificate or certificates for a share or shares of stock
with a request to record the transfer of such share or shares, the corporation
may treat the registered owner as the person entitled to receive dividends, to
vote, to receive notifications, and otherwise to exercise all the rights and
powers of an owner. The corporation shall not be bound to recognize any
equitable or other claim to or interest in such share or shares on the part of
any other person, whether or not it shall have express or other notice thereof.
Section 7. Subscriptions for Stock. Unless otherwise provided for in the
subscription agreement, subscriptions for shares shall be paid in full at such
time, or in such installments and at such times, as shall be determined by the
board of directors. Any call made by the board of directors for payment on
subscriptions shall be uniform as to all shares of the same class or as to all
shares of the same series. In case of default in the payment of any
installment or call when such payment is due, the corporation may proceed to
collect the amount due in the same manner as any debt due the corporation.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the corporation,
subject to the provisions of the certificate of incorporation, if any, may be
declared by the board of directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property, or in shares of the
capital stock, subject to the provisions of the certificate of incorporation.
Before payment of any dividend, there may be set aside out of any funds of the
corporation available for dividends such sum or sums as the directors from time
to time, in their absolute discretion, think proper as a reserve or reserves to
meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the corporation, or any other purpose and the
directors may modify or abolish any such reserve in the manner in which it was
created.
Section 2. Checks, Drafts or Orders. All checks, drafts, or other orders
for the payment of money by or to the corporation and all notes and other
evidences of indebtedness issued in the name of the corporation shall be signed
by such officer or
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officers, agent or agents of the corporation, and in such manner, as shall be
determined by resolution of the board of directors or a duly authorized
committee thereof.
Section 3. Contracts. The board of directors may authorize any officer or
officers, or any agent or agents, of the corporation to enter into any contract
or to execute and deliver any instrument in the name of and on behalf of the
corporation, and such authority may be general or confined to specific
instances.
Section 4. Loans. The corporation may lend money to, or guarantee any
obligation of, or otherwise assist any officer or other employee of the
corporation or of its subsidiary, including any officer or employee who is a
director of the corporation or its subsidiary, whenever, in the judgment of the
directors, such loan, guaranty or assistance may reasonably be expected to
benefit the corporation. The loan, guaranty or other assistance may be with or
without interest, and may be unsecured, or secured in such manner as the board
of directors shall approve, including, without limitation, a pledge of shares
of stock of the corporation. Nothing in this section contained shall be deemed
to deny, limit or restrict the powers of guaranty or warranty of the
corporation at common law or under any statute.
Section 5. Fiscal Year. The fiscal year of the corporation shall be fixed by
resolution of the board of directors.
Section 6. Corporate Seal. The board of directors shall provide a corporate
seal which shall be in the form of a circle and shall have inscribed thereon
the name of the corporation and the words "Corporate Seal, Delaware". The seal
may be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
Section 7. Voting Securities Owned By Corporation. Voting securities in any
other corporation held by the corporation shall be voted by the president,
unless the board of directors specifically confers authority to vote with
respect thereto, which authority may be general or confined to specific
instances, upon some other person or officer. Any person authorized to vote
securities shall have the power to appoint proxies, with general power of
substitution.
Section 8. Inspection of Books and Records. Any stockholder of record, in
person or by attorney or other agent, shall, upon written demand under oath
stating the purpose thereof, have the right during the usual hours for business
to inspect for any proper purpose the corporation's stock ledger, a list of its
stockholders, and its other books and records, and to make copies or extracts
therefrom. A proper purpose shall mean any purpose reasonably related to such
person's interest as a stockholder. In every instance where an attorney or
other agent shall be the person who seeks the right to inspection, the demand
under oath shall be accompanied by a power of attorney or such other writing
which authorizes the attorney or other agent to so act on behalf of the
stockholder. The demand under oath shall be directed to the corporation at its
registered office in the State of Delaware or at its principal place of
business.
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Section 9. Section Headings. Section headings in these by-laws are for
convenience of reference only and shall not be given any substantive effect in
limiting or otherwise construing any provision herein.
Section 10. Inconsistent Provisions. In the event that any provision of
these by-laws is or becomes inconsistent with any provision of the certificate
of incorporation, the General Corporation Law of the State of Delaware or any
other applicable law, the provision of these by-laws shall not be given any
effect to the extent of such inconsistency but shall otherwise be given full
force and effect.
ARTICLE VIII
AMENDMENTS
Except for Article III hereof, the Investors Agreement, these by-laws may be
amended, altered, or repealed and new by-laws adopted at any meeting of the
board of directors by a majority vote. The fact that the power to adopt,
amend, alter, or repeal the by-laws has been conferred upon the board of
directors shall not divest the stockholders of the same powers.
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EXHIBIT 4.2
[FORM OF FACE OF NOTE]
TRANSWESTERN HOLDINGS L.P.
(formerly TransWestern Publishing Company, L.P.)
TWP CAPITAL CORP.
11 7/8% SENIOR DISCOUNT NOTE DUE 2008
This Note is issued with original issue discount for purposes of
Section 1271 et seq. of the Internal Revenue Code. For each $1,000 of principal
amount at maturity of this Note, the issue price is $561.16 and the amount of
original issue discount is $438.84. The issue date of this Security is November
12, 1997 and the yield to maturity is 11 7/8%.
Number CUSIP
TransWestern Holdings L.P. (formerly TransWestern Publishing
Company, L.P.), a Delaware limited partnership (the "Company," which term
includes any successor corporation), and TWP Capital Corp., a Delaware
corporation (jointly and severally, together with the Company, the "Issuers"),
for value received promise to pay to or registered assigns the principal sum of
($ ), on November 15, 2008.
Interest Payment Dates: May 15 and November 15,
commencing May 15, 2003
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 Note
contained herein, which will for all purposes have the same effect as if set
forth at this place.
<PAGE> 2
IN WITNESS WHEREOF, the Issuers have caused this Note to be
signed manually or by facsimile by their duly authorized Officers.
TRANSWESTERN HOLDINGS L.P.
(formerly TransWestern Publishing
Company, L.P.)
By: TransWestern Communications
Company, Inc., its general
partner
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
TWP CAPITAL CORP.
By:
---------------------------------
Name:
Title:
By:
---------------------------------
Name:
Title:
Certificate of Authentication:
This is one of the 11 7/8% Senior
Discount Notes due 2008 referred to in
the within-mentioned Indenture
Dated:
WILMINGTON TRUST COMPANY,
as Trustee
By:
----------------------------------
Authorized Signatory
2
<PAGE> 3
(REVERSE SIDE)
TRANSWESTERN HOLDINGS L.P.
(formerly TransWestern Publishing Company, L.P.)
TWP CAPITAL CORP.
11 7/8% SENIOR DISCOUNT NOTE DUE 2008
1. INTEREST.
TransWestern Holdings L.P. (formerly TransWestern Publishing
Company, L.P.), a Delaware limited partnership (the "Company"), and TWP Capital
Corp., 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, 2003, at the rate of 11 7/8% per annum.
The Accreted Value of the Notes shall increase in the manner provided in the
Indenture. Commencing November 15, 2002, interest is payable at the option of
the Company, in whole but not in part, at the rate of 13 3/8% per annum by the
issuance of additional Notes (valued at 100% of the face amount thereof) in lieu
of cash interest; provided, however, that in connection with any redemption or
repurchase of the Notes as permitted or required by the Indenture and upon the
acceleration of the Notes, all accrued interest shall be payable solely in cash.
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, 2002.
The principal of this Note shall not bear or accrue interest
until November 15, 2002, except in the case of a default in payment of Accreted
Value or principal and/or premium, if any, upon acceleration, redemption or
purchase and, in such case, the overdue principal and any overdue premium shall
bear interest at the rate of 13 7/8% per annum (compounded semiannually on each
May 15 and November 15) (to the extent that the payment of such interest shall
be legally enforceable), from the dates such amounts are due until they are paid
or duly provided for. To the extent, but only to the extent, interest on amounts
in default constituting original issue discount prior to November 15, 2002 is
not permitted by law, original issue discount shall continue
3
<PAGE> 4
to accrete until paid or duly provided for. On or after November 15, 2002,
interest on overdue principal and premium, if any, and, to the extent permitted
by law, on overdue installments of interest will accrue, until the principal and
premium, if any, and overdue installments of interest are paid or duly provided
for, at the rate of 13 7/8% per annum. Interest on defaulted amounts is payable
at the option of the Company, in whole but not in part, at the rate of 15 7/8%
per annum by the issuance of additional Notes (valued at 100% of the face amount
thereof) in lieu of cash interest. Interest on defaulted amounts shall be
payable on a special record date as provided in the Indenture.
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 Accreted Value or principal, premium, if any, and
cash 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 Accreted Value or 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. 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
November 12, 1997 (the "Indenture") among the Issuers 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
4
<PAGE> 5
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 senior unsecured obligations of the Issuers limited
to $57,916,000 aggregate principal amount at maturity. 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. 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 a percentage
of principal amount at maturity), set forth below, plus accrued and unpaid
interest, if any, to the Redemption Date, if redeemed during the twelve month
period beginning on November 15 of each year listed below:
<TABLE>
<CAPTION>
Year Redemption Price
- ---- ----------------
<S> <C>
2002......................................... 105.938%
2003......................................... 103.958%
2004......................................... 101.979%
2005 and thereafter.......................... 100.000%
</TABLE>
Notwithstanding the foregoing, the Issuers, at their option, may
redeem all, but not less than all, of the aggregate principal amount of the
Notes outstanding at any time prior to November 15, 2002 at a redemption price
equal to 111.875% of the Accreted Value thereof, out of the Net Proceeds of one
or more Public Equity Offerings; provided, however, that any such redemption
occurs within 90 days following the closing of any such Public Equity Offering.
5
<PAGE> 6
6. 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, Accreted Value will cease to accrete or interest will cease to accrue, as
the case may be, on the Notes or portions thereof called for redemption unless
the Issuers shall fail to redeem any such Note.
7. 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 accor dance 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.
8. REGISTRATION RIGHTS.
Pursuant to the Registration Rights Agreement among the Issuers,
CIBC Oppenheimer Corp. and First Union Capital Markets Corp., 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
amounts 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.
9. DENOMINATIONS, TRANSFER, EXCHANGE.
6
<PAGE> 7
The Notes are in registered form without coupons in denominations
of $1,000 principal amount at maturity 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.
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
"aban doned 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 and the Trustee with the
consent of the Holders of at least a majority in principal amount at maturity 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 at maturity of the Notes then outstanding.
Without the consent of Holders, the Issuers 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
7
<PAGE> 8
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 at maturity of the Notes then outstanding, may
declare the Notes to be immediately due and payable in an amount equal to (x)
the Accreted Value of the Notes outstanding on the date of acceleration, if such
declaration is made on or prior to November 15, 2002, or (y) the entire
principal amount at maturity of the Notes outstanding on the date of
acceleration plus accrued but unpaid interest, if any, to the date of
acceleration, if such declaration is made after November 15, 2002, and (i) such
amounts shall become immediately due and payable or (ii) if there are any
amounts outstanding under the Senior Credit Facility or the Senior Subordinated
Notes, such amounts shall become due and payable upon the first to occur of an
acceleration of amounts outstanding under the Senior Credit Facility or the
Senior Subordinated Notes or five Business Days after receipt by the Company,
the representative of the lenders under the Senior Credit Facility and the
trustee under the indenture relating to the Senior Subordinated Notes 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
at maturity 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 accelerated Accreted Value, principal,
premium, if any, or interest that has become due solely because of the
8
<PAGE> 9
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, the Accreted Value or principal and all 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.
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 or their Affiliates, and may otherwise deal with the Issuers 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 shall not have any liability
for any obligations of the Issuers 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.
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
9
<PAGE> 10
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 HOLDINGS L.P., 8344
Clairemont Mesa Boulevard, San Diego, California 92111,
Attention: Executive Vice President - Chief Financial Officer.
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:
-------------------------------------
11
<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 4.18 of the
Indenture, check the appropriate box:
[ ] Section 4.10 [ ] Section 4.18
If you want to have only part of the Note purchased by the
pursuant to Section 4.10 or Section 4.18 of the Indenture, state the amount you
elect to have purchased:
$
------------------------
Date:
-------------------
Your Signature:
--------------------------------------------
(Sign exactly as your name appears on
the face of this Note)
- --------------------------
Signature Guaranteed
12
<PAGE> 1
EXHIBIT 10.1
MANAGEMENT AGREEMENT
This Management Agreement is entered into effective as of October 1,
1997 ("Effective Date") by and between Thomas H. Lee Company, a Massachusetts
sole proprietorship with a principal place of business at 75 State Street,
Boston, Massachusetts 02109 (the "Consultant"), and TransWestern Publishing
Company, L.P., a Delaware limited partnership ("TransWestern").
WHEREAS, the Consultant has staff specially skilled in corporate
finance, strategic corporate planning and other management skills and services;
and
WHEREAS, as of the date hereof, TransWestern has completed its
recapitalization pursuant to the Securities Purchase and Redemption Agreement
dated this date by and among TransWestern, its general partner and limited
partners, certain affiliates of the Consultant and the stockholders of
TransWestern Communications Company, Inc., the general partner of TransWestern
(the "Company"), together with the consummation of senior credit facilities and
subordinated debt financing (collectively, the "Recapitalization"); and
WHEREAS, TransWestern will require the Consultant's special skills and
management advisory services in connection with its general business operations;
and
WHEREAS, the Consultant is willing to provide such skills and services
to TransWestern.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties hereto, intending to be legally bound, do hereby agree as
follows:
1. Engagement. TransWestern hereby engages the Consultant for the Term
(as hereinafter defined) and upon the terms and conditions herein set forth to
provide consulting and management advisory services to TransWestern, as
requested by TransWestern. These services will be in connection with financial
and strategic corporate planning and such other management services as the
Consultant and TransWestern shall mutually agree. In consideration of the
remuneration herein specified, the Consultant accepts such engagement and agrees
to perform the services specified herein.
2. Term. The engagement hereunder shall be for a term commencing on the
date hereof and expiring on the first (1st) anniversary hereof (the "Term"),
provided, however, that the Consultant or TransWestern may terminate this
Agreement at any time upon thirty (30) days prior written notice. Upon
expiration of the Term, this Agreement shall automatically extend for successive
periods of one (1) year, unless the Consultant or TransWestern shall give notice
to the other at least thirty (30) days prior to the end of the Term (or any
annual extension thereof) indicating that it does not intend to renew the
Agreement. Upon final expiration of the Term (or any annual extension thereof)
all obligations as between the parties and/or any third party beneficiaries
shall be extinguished without recourse to any party under this Agreement.
<PAGE> 2
3. Services to be Performed. The Consultant shall devote reasonable time
and efforts to the performance of the consulting and management advisory
services contemplated by this Agreement. However, no precise number of hours is
to be devoted by the Consultant on a weekly or monthly basis. The Consultant may
perform services under this Agreement directly, through its employees or agents,
or with such outside consultants as the Consultant may engage for such purpose.
4. Compensation; Expense Reimbursement.
4.1 (a) In connection with the closing of the Recapitalization, on
the date hereof, TransWestern shall pay or cause to be paid a closing fee of
$5,000,000 ("Closing Fee") pro-rata to the Consultant and its affiliates and
other partners of TransWestern and other stockholders of the Company in
proportion to their respective post-Recapitalization equity interests as set
forth on Exhibit "A" attached hereto. For purposes of determining the
post-Recapitalization equity interest of the Consultant, the equity interest of
the Consultant shall be aggregated with the equity interests of all of the
Consultant's affiliates. The portion of the Closing Fee payable to Consultant
shall be paid directly to the Consultant and its affiliates as directed by
Consultant.
(b) In consideration of the management advisory services provided
by Consultant hereunder and other partners of TransWestern and stockholders of
the Company, TransWestern shall pay or cause to be paid a monthly management fee
of $41,666.67 on the last day of each month during the Term (the "Management
Fee"). Each monthly Management Fee shall be paid to the Consultant and other
partners of TransWestern and other stockholders of the Company or their
respective Permitted Transferees (as defined below) as set forth on Exhibit "B"
attached hereto; provided, however, that (i) with respect to any individual
listed on Exhibit "B" who is an employee of or a consultant to TransWestern or
the Company on the Effective Date, upon any expiration or termination of such
individual's employment or consultant relationship with TransWestern or the
Company, all of such individual's rights to receive a portion of the Management
Fee hereunder shall immediately terminate, and (ii) the right to receive a
portion of the Management Fee is not assignable or transferrable, except to a
Permitted Transferee. In the event of any sale, assignment or transfer by any
individual or entity listed on Exhibit "B" (a "Transferor") of their respective
post-recapitalization equity interests, other than to a Permitted Transferee of
such Transferor, the portion of the Management Fee payable to such Transferor
shall terminate pro-rata with respect to the portion of such
post-recapitalization equity interest transferred and the total Management Fee
payable each month thereafter by TransWestern shall be reduced by the amount of
the Management Fee so terminated. The portion of the Management Fee payable to
the non-Transferor individuals and entities listed on Exhibit "B" hereto shall
not be reduced or otherwise affected. The Management Fee shall not be payable
for partial months and no right to receive a portion of the Management Fee for
any month shall accrue until the last day of such month. As used herein, the
term "Permitted Transferee" shall mean (i) in the case of an individual, a
member of such individual's Family Group or a recipient pursuant to applicable
laws of devise and descent, or (ii) in the case of an entity, one or more
Affiliates of such entity. "Family Group" means an individual's spouse and
descendants (whether natural or adopted) and any trust solely for the benefit of
such
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<PAGE> 3
individual and/or any of such individual's spouse or descendants. "Affiliate" of
an entity means any other person, entity or investment fund controlling,
controlled by or under common control with such entity and any partner of such
entity which is a partnership.
(c) TransWestern acknowledges and agrees that the other partners
of TransWestern and stockholders of the Company are intended third party
beneficiaries of the covenants and obligations of TransWestern pursuant to
Section 4.1(a) and Section 4.1(b). TransWestern acknowledges and agrees that
said intended third party beneficiaries may assert against TransWestern any and
all rights and benefits which have been covenanted or granted to said intended
third party beneficiaries and/or to which said intended third party
beneficiaries may be otherwise entitled under the terms of this Agreement and/or
applicable law.
4.2 TransWestern shall reimburse the Consultant for all reasonable
out-of-pocket expenses incurred in connection with management advisory services
to be provided by the Consultant hereunder, including, without limitation,
reasonable travel, lodging and similar out-of-pocket costs reasonably incurred
by it in connection with or on account of its performance of services for
TransWestern hereunder. Reimbursement shall be made only upon presentation to
TransWestern by the Consultant of reasonably itemized documentation therefor.
5. Indemnification. In addition to its agreements and obligations under
this Agreement, TransWestern agrees to defend, indemnify and hold harmless the
Consultant and the person, entities or funds listed on Exhibit "A" hereto, and
their respective affiliates (including its officers, directors, stockholders,
partners, employees and agents) (individually and collectively, the "Indemnified
Parties") from and against any and all claims, liabilities, losses and damages
(or actions in respect thereof), in any way related to or arising out of the
performance by the Indemnified Parties of services under Sections 1 and 3 of
this Agreement (other than for expenses incurred described in Section 4 hereof
or for compensation for services rendered), and to reimburse the Indemnified
Parties for reasonable out-of-pocket legal and other expenses incurred by it in
connection with or relating to investigating, preparing to defend, or defending
any actions, claims or other proceedings (including any investigation or
inquiry) arising in any manner out of or in connection with this Agreement
(whether or not such indemnified person is a named party in such proceeding);
provided, however, that TransWestern shall not be responsible under this Section
5 for any claims, liabilities, losses, damages or expenses to the extent that
they are finally judicially determined to result from actions taken by the
Indemnified Parties due primarily to the Indemnified Parties' gross negligence
or willful misconduct.
6. Notice. All notices hereunder, to be effective, shall be in writing
and shall be mailed by certified mail, postage prepaid as follows:
(i) If to the Consultant:
Thomas H. Lee Company
75 State Street
Boston, Massachusetts 02109
Attention: Mr. Scott A. Schoen
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<PAGE> 4
(ii) If to TransWestern:
TransWestern Publishing Company, L.P.
8344 Clairemont Mesa Blvd.
San Diego, California 92111
Attention: President
7. Modifications. This Agreement constitutes the entire agreement
between the parties hereto with regard to the subject matter hereof, superseding
all prior understandings and agreements whether written or oral. This Agreement
may not be amended or revised except by a writing signed by the parties;
provided, however, that Section 4.1(a), Section 4.1(b) and Section 4.1(c) may
not be amended without the written consent of the intended third party
beneficiaries described in Section 4.1(c).
8. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns
but may not be assigned by either party without the prior written consent of the
other.
9. Captions. Captions have been inserted solely for the convenience of
reference and in no way define, limit or describe the scope or substance of any
provision and shall not affect the validity of any other provision.
10. Governing Law. This Agreement shall be construed under and governed
by the laws of the Commonwealth of Massachusetts, without reference to its
conflicts of law principles.
11. Counterparts. This Agreement may be signed in two counterparts, each
of which shall be deemed an original but which together shall constitute one and
the same instrument.
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<PAGE> 5
IN WITNESS WHEREOF, the parties have duly executed this Agreement as a
sealed instrument as of the date first above written.
THOMAS H. LEE COMPANY
By: /s/ Scott A. Schoen
---------------------------------------
Name: Scott A. Schoen
Title: Managing Director
TRANSWESTERN PUBLISHING
COMPANY, L.P.
By: TRANSWESTERN COMMUNICATIONS
COMPANY, INC., its general partner
By: /s/ Laurence H. Bloch
-------------------------------
Name: Laurence H. Bloch
Title: Vice President
5
<PAGE> 1
EXHIBIT 10.2
INVESTORS AGREEMENT
THIS AGREEMENT is made as of October 1, 1997, by and among TransWestern
Communications Company, Inc., a Delaware corporation (the "Company"),
TransWestern Publishing Company, L.P., a Delaware limited partnership (the
"Partnership"), each of the investors listed on the Schedule of Investors
attached hereto (the "Investors") and each of the executives listed on the
Schedule of Executives attached hereto (the "Executive"). Capitalized terms
used herein are defined in paragraph 8 hereof.
The parties hereto desire to enter into this Agreement for the
purposes, among others, of (i) establishing the composition of the Company's
Board of Directors (the "Board"), (ii) assuring continuity in the management
and ownership of the Company and the Partnership and (iii) limiting the manner
and terms by which the Stockholder Shares and the Partnership Securities may be
transferred.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties to this Agreement hereby agree as
follows:
1. Board of Directors.
(a) From and after the Closing (as defined in the Securities Purchase
and Redemption Agreement) and until the provisions of this paragraph 1 cease to
be effective, each Investor shall vote all of his Stockholder Shares (as
defined in paragraph 8 hereof) and any other voting securities of the Company
over which such Stockholder has voting control and will take all other
necessary or desirable actions within his control (whether in his capacity as a
stockholder, director, member of a board committee or officer of the Company or
otherwise), and the Company will take all necessary and desirable actions
within its control, in order to cause:
(i) subject to paragraph 1(g) below, the authorized number of
directors on the Board to be established at nine (9) directors, or in the
event the condition in 1(f) below is satisfied, the authorized number of
directors on the Board will be established at eight (8);
(ii) the election to the Board of
(A) five (5) representatives designated by Lee (the "Lee
Directors");
(B) each of the then current chairman and president of
the Partnership (the "Executive Directors");
<PAGE> 2
(C) two (2) representatives designated by CIVC (the
"CIVC Directors"); and
(D) one (1) CIVC Director to be a voting member of the
Board's audit committee, compensation committee,
and executive committee.
(iii) the removal from the Board (with or without cause) of any
representative designated hereunder by Lee, CIVC, or by the Executives at the
written request of Lee, CIVC, or the Executives, respectively, but only upon
such written request and under no other circumstances (in each case, determined
on the basis of a vote of the holders of a majority of the Common Units held by
such persons, respectively), provided that if any director elected pursuant to
(ii)(B) above ceases to be an employee of the Partnership he shall be removed
as a director promptly after his employment ceases; and
(iv) in the event that any representative designated hereunder by
CIVC, Lee, or by the Executives for any reason ceases to serve as a member of
the Board during his term of office or until any such representative is
initially designated, the resulting vacancy on the Board to be filled by a
representative designated by CIVC, Lee, or the Executives, respectively, as
provided hereunder, without any further action by the stockholders of the
Company.
(b) The Company shall pay the reasonable out-of-pocket expenses incurred by
each director in connection with attending the meetings of the Board and any
committee thereof.
(c) The right of Lee under this paragraph 1 will terminate at such time as
Lee and its Permitted Transferees (as defined in paragraph 2(e) hereof) hold in
the aggregate less than 30% of the Common Units held by such persons on the
date hereof.
(d) The rights of CIVC under this paragraph 1 will terminate at such time as
CIVC and its Permitted Transferees (as defined in paragraph 2(e) hereof) hold
in the aggregate less than 30% of the Common Units held by such persons on the
date hereof.
(e) The Board will not directly or indirectly approve or permit the Company
or the Partnership to take, engage or participate in any of the following
activities without the express approval of at least one of the CIVC Directors
or at least one of the Executive Directors:
(i) transfer of any material assets, business, or shares of any
subsidiaries;
(ii) convert to corporate form (or take other action having the effect
of preventing the Partnership from being treated as a partnership for federal
and state income tax purposes) other than in connection with a Qualified Public
Offering or any merger, consolidation or reorganization of the Company or the
Partnership that is not part of a Sale of the Company or Sale of the
Partnership other than a merger, consolidation or reorganization of any blocker
corporation established by Lee into the Company;
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<PAGE> 3
(iii) any amendment to the Partnership's Partnership Agreement or the
Company's Certificate of Incorporation or bylaws which is material or has
adverse impact on any of the Investors;
(iv) incur any indebtedness if after giving effect thereto the
Partnership would have an aggregate amount of indebtedness in excess of 5.5
times the Partnership's trailing twelve (12) months EBITDA (on a pro forma
basis giving effect to any acquisition completed on or before the date such
proposed indebtedness is incurred) provided, however, that this subparagraph
(iv) shall not restrict (a) working capital borrowings in the ordinary course
of business pursuant to a committed facility in effect as of Closing or entered
into after Closing in compliance with this subparagraph (iv); (b) indebtedness
incurred under committed facilities existing on the Closing in connection with
add-on acquisitions permitted under subparagraph (x) below, or (c) refinancings
which do not increase the aggregate amount of the Partnership's indebtedness
outstanding as of the date of any such refinancing;
(v) enter into any hedging agreements outside the ordinary course of
business;
(vi) enter into any new agreement or transaction or amend any existing
agreement with Lee or any party affiliated with, related to, or directly or
indirectly employed or owned by Lee or any of its affiliates;
(vii) appoint auditors;
(viii) liquidate or wind up its affairs other than directly as a part
of a Sale of the Company or Sale of the Partnership;
(ix) terminate any Executive, hire any other key executive or take any
action which results in a material diminution in compensation or responsibility
of any Executive or other key executives;
(x) make any material investment or acquisition other than acquisitions
in the yellow pages business for an aggregate purchase price (including assumed
liabilities, deferred payments, earnouts, and similar payments) less than $10
million in any transaction or series of related transactions; and/or
(xi) redeem or repurchase any shares of the Company or any partnership
interests of the Partnership other than (a) on a pro rata redemption in which
CIVC participates or (b) repurchases Securities from management pursuant to the
terms of the Executive Agreement.
(f) Notwithstanding anything herein to the contrary other than paragraph
1(c), if at any time Lee (together with its Permitted Transferees) owns less
Partnership Securities or Stockholder Shares than the amount of Partnership
Securities or Stockholder Shares then owned by CIVC, the Executives, and their
respective Permitted Transferees (taken as a group), then (i) the
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number of Lee Directors will be reduced from five (5) to three (3), and
(ii) the number of CIVC Directors will be increased from two (2) to three (3).
(g) The provisions of this paragraph 1 will terminate automatically and
be of no further force and effect upon the first to occur of (i) the tenth
anniversary of the date hereof unless extended by the parties hereto in
accordance with Section 218 of the Delaware General Corporation Law or (ii) a
Qualified Public Offering (as defined in paragraph 8 hereof).
2. Restrictions on Transfer of Securities.
(a) Transfer of Securities Other than Executive Securities. The
holders of Securities (other than Lee and CIVC) shall not sell, transfer,
assign, pledge, be redeemed, have repurchased, or otherwise dispose of (a
"Transfer") any interest in any Stockholder Shares or Partnership Securities
(other than Executive Securities pursuant to the Executive Agreements) without
the prior written consent of Lee (which consent will not be unreasonably
withheld), except pursuant to (i) the provisions of this paragraph 2, (ii)
pursuant to a Public Sale or (iii) pursuant to a Sale of the Company or Sale of
the Partnership. Notwithstanding the foregoing, neither Lee nor CIVC will
sell, transfer or otherwise convey any Securities to any person who directly or
indirectly owns (beneficially or otherwise) more than 5% of any class of
securities of any entity engaged in the yellow pages business without the prior
written consent of the other party other than pursuant to a Sale of the Company
or a Sale of the Partnership.
(b) Transfer of Executive Securities.
(i) Unvested Executive Securities. The holders of Executive
Securities shall not transfer any Executive Securities which are not
vested (as such term is used in such holder's Executive Agreement) except
pursuant to (A) the provisions of this paragraph 2, or (B) pursuant to a Sale
of the Company or a Sale of the Partnership, or (C) pursuant to the Executive
Agreements.
(ii) Vested Executive Securities. At least 30 days prior to
making any Transfer (other than a Public Sale) of Executive Securities
which have vested, the holder of such Executive Securities (the "Transferring
Partner") will deliver a written notice (the "Offer Notice") to the
Partnership and the other Partners (the "Other Partners"). The Offer Notice
will disclose in reasonable detail the proposed number of vested Executive
Securities to be transferred, the identity of the transferee(s) and the
proposed terms and conditions of the Transfer. First, the Partnership may
elect to purchase all (but not less than all) of such vested Executive
Securities specified in the Offer Notice at the price and on the terms
specified therein by delivering written notice of such election to the
Transferring Partner and the Other Partners as soon as practical but in any
event within ten days after the delivery of the Offer Notice. If the
Partnership has not elected to purchase all of such Executive Securities
within such ten-day period, the other Partners or a combination of the
Partnership and the other Partners may elect to purchase all (but not less
than all) of their Pro Rata Share (as defined below) of the Executive
Securities specified in the Offer Notice at the price and on the terms
specified therein by delivering written notice of such election to the
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<PAGE> 5
Transferring Partner as soon as practical but in any event within 20
days after delivery of the Offer Notice (the "Election Period"). Any
Executive Securities not elected to be purchased by the end of such
Election Period shall be reoffered by the Transferring Partner on a
pro rata basis to the Other Partners who have elected to purchase
their Pro Rata Share. If the Partnership or any Other Partners have
elected to purchase all of such vested Executive Securities from the
Transferring Partner, the transfer will be consummated as soon as
practical after the delivery of the election notices, but in any event
within 15 days after the expiration of the Election Period. If the
Partnership or any Other Partners have not elected to purchase all of
the vested Executive Securities being offered, the Transferring
Partner may, within 90 days after the expiration of the Election
Period, transfer all of such vested Executive Securities to the party
identified in the Offer Notice at the price and on the terms specified
in the Offer Notice. The purchase price specified in any Offer Notice
shall be payable solely in cash at the closing of the transaction or
in installments over time. Notwithstanding any provision herein to
the contrary, no vested Executive Securities may be pledged, except on
terms and conditions satisfactory to Lee. Each Other Partner's "Pro
Rata Share" shall be based upon such Partner's proportionate ownership
of Common Units on a fully diluted basis.
(c) Participation Rights. In the event of a Transfer of
Securities by Lee, at least 30 days prior to such Transfer (other than a
Public Sale), Lee will deliver a written notice (the "Sale Notice") to the
Company and the other Stockholders (the "Other Stockholders") if Lee is
transferring Stockholder Shares or to the Partnership and the Other Partners if
Lee is transferring Partnership Securities, specifying in reasonable detail the
identity of the prospective transferee(s), the Securities to be sold and the
terms and conditions of the Transfer. In the event that the Other Stockholders
or Other Partners (as the case may be) hold the type of Securities which are to
be transferred, they may elect to participate in the contemplated Transfer by
delivering written notice to Lee within 30 days after delivery of the Sale
Notice. If any Other Stockholder or Other Partner has elected to participate
in such Transfer, each of Lee and each such Other Stockholder or Other Partner
will be entitled to sell in the contemplated Transfer, at the same price and on
the same terms, a number of Securities equal to the product of (i) the quotient
determined by dividing the percentage of such Securities held by such person by
the aggregate percentage of such Securities owned by Lee and the Other
Stockholders and/or Other Partners participating in such sale and (ii) the
number of such Securities to be sold in the contemplated Transfer.
For example, if the Sale Notice contemplated a sale of 100 Stockholder
Shares by Lee, and if Lee at such time owns 30% of all Stockholder
Shares and if one Other Stockholder elects to participate and owns 20%
of all Stockholder Shares, Lee would be entitled to sell 60 shares
(30% / 50% x 100 shares) and the other Stockholder would be entitled
to sell 40 shares (20% / 50% x 100 shares).
Lee shall use its best efforts to obtain the agreement of the prospective
transferee(s) to the participation of the Other Stockholders and/or Other
Partners in any contemplated Transfer, and notwithstanding any provision herein
to the contrary, in the event that the prospective transferees do not allow
such participation, Lee may not transfer any of its Securities to the
prospective transferee(s).
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(d) Preemptive Rights.
(i) Neither the Company or the Partnership ("Issuer") will issue or
sell or otherwise transfer any "equity securities" (including any options,
warrants, securities convertible, exchangeable or exercisable into equity or
any other securities containing equity features) (an "Issuance") unless, at
least 30 days and not more than 60 days prior to such Issuance, Issuer notifies
each holder of Securities, in writing of the Issuance (including the price, the
purchaser(s) thereof and other terms thereof) and grants to each holder of
Securities in such Issuer, the right (the "Right") to subscribe for and
purchase such additional stock or other Securities so issued at the same price
and on the same terms to be issued in the Issuance such that, after giving
effect to the Issuance and exercise of the Right, the shares owned by such
holder shall represent the same percentage of total voting and economic
interests (on a fully diluted basis) in such Issuers as was owned by such
holder prior to the Issuance, or such lesser amount designated by such holder.
The Right may be exercised by such holder or its nominee at any time by written
notice by such holder to Issuer received within 30 days after receipt of notice
by such holder from Issuer of the Issuance. The closing of the purchase and
sale pursuant to the exercise of the Right shall occur at least 10 days after
Issuer receives notice of the exercise of the Right and concurrently with the
closing of the Issuance.
(ii) Notwithstanding the foregoing, the Right shall not apply to (A)
issuances of securities pro rata to all holders of Securities, as a dividend
on, subdivision of, or other distribution in respect of, Securities, (B)
options and sales of securities to management in the ordinary course of
business as approved by the Board (including under the Executive Agreements)
and (C) any warrants required to be issued in connection with senior
subordinated debt financing being provided by CIBC Wood Gundy Securities Corp.
and First Union Corporation in connection with the transactions contemplated by
the Securities Purchase and Redemption Agreement.
(iii) If all of the Issuance offered to the holders of securities of
such Issuer are not fully subscribed by such holders, the shares that are not
so subscribed for will be reoffered to such holders purchasing their full
allotment upon the terms set forth in this Section except that such holders
must exercise their purchase rights within five (5) days after the receipt of
such reoffer.
(iv) Upon the expiration of the offering periods described above,
Issuer will be free to sell such Issuance during the one hundred twenty (120)
days following such expiration on terms and conditions no more favorable to the
purchaser(s) thereof than those offered to such holders. Any shares of such
Issuance not sold after such one hundred twenty (120) days period must be
reoffered to the holders of securities of such Issuer pursuant to the terms of
this Section.
(v) If any holder of securities in such Issuer determines that it may
have a regulatory problem if issued securities of the class in the proposed
Issuance, the Issuer shall, upon written request of such holder, take all such
commercially reasonable actions requested by such holder to allow such holder
to purchase securities which are identical to the securities of the proposed
Issuance, except that such securities shall be non-voting and shall be
convertible into securities issued in the Issuance on such terms as are
requested by such holder in light of regulatory considerations then prevailing.
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(vi) Except for Issuances subject to subparagraph (i) above
or excluded from subparagraph (i) pursuant to subparagraph (ii), neither
the Company of the Partnership will authorize or issue any equity securities
including any stock appreciation rights or phantom stock rights (each right to
be considered on a per share basis).
(e) Permitted Transfers. The restrictions contained in this paragraph
2 shall not apply with respect to any Transfer of Securities by any Investor
(i) in the case of any individual Investor, pursuant to applicable laws of
descent and distribution or among such Investor's Family Group or (ii) in the
case of any Investor, among its Affiliates (collectively referred to herein as
"Permitted Transferees"); provided that the restrictions contained in this
paragraph 2 shall continue to be applicable to the Securities after any such
Transfer and provided further that the transferees of such Securities shall
have agreed in writing to be bound by the provisions of this Agreement
affecting the Securities so transferred. "Family Group" means an Investor's
spouse and descendants (whether natural or adopted) and any trust solely for
the benefit of the Investor and/or any of the Investor's spouse and/or
descendants. "Affiliate" of an Investor means any other person, entity or
investment fund controlling, controlled by or under common control with the
Investor and any partner of an Investor which is a partnership or any employee
of an Investor.
(f) Termination of Restrictions. The restrictions set forth in this
paragraph 2 will continue with respect to each Security until the earlier of
(i) the date on which such Security has been transferred in a Public Sale, (ii)
the tenth anniversary of the date of this Agreement, (iii) the consummation of
a Qualified Public Offering, (iv) with respect to Stockholder Shares, the
consummation of a Sale of the Company, and (v) with respect to Partnership
Securities, the consummation of a Sale of the Partnership.
3. Legend. Each certificate evidencing Securities and each certificate
issued in exchange for or upon the transfer of any Securities (if such
securities remain subject to the terms of this Agreement after such transfer)
shall be stamped or otherwise imprinted with a legend in substantially the
following form:
"The securities represented by this certificate are subject to an
Investors Agreement dated as of October 1, 1997 among the issuer of
such securities (the "Company") and certain of the Company'ssecurity
holders. A copy of such Investors Agreement will befurnished without
charge by the Company to the holder hereof upon written request."
The legend set forth above shall be removed from the certificates or notes
evidencing any Securities which cease to be subject to the terms of this
Agreement, in accordance with the definition of such term contained in
paragraph 8 hereof.
4. Transfer. Prior to transferring any Security (other than in a
Public Sale) to any person or entity, the transferring Stockholder or
transferring Partner will cause the prospective transferee to execute and
deliver to the Company or Partnership (as and case may be) and the Other
Stockholders or Other Partners (as the case may be) a counterpart of this
Agreement.
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5. Sale of the Company.
(a) If the Board and the holders of a majority of the Stockholder
Shares then outstanding approve a Sale of the Company (the "Approved Company
Sale"), the holders of Stockholder Shares will consent to and raise no
objections against the Approved Company Sale. If the Approved Company Sale is
structured as a (i) merger or consolidation, each holder of Stockholder Shares
shall waive any dissenters rights, appraisal rights or similar rights in
connection with such merger or consolidation or (ii) sale of stock, each holder
of Stockholder Shares shall agree to sell all of his Stockholder Shares and
rights to acquire Stockholder Shares on the terms and conditions approved by
the Board and the holders of a majority of the Stockholder Shares then
outstanding. Each holder of Stockholder Shares shall take all necessary or
desirable actions in connection with the consummation of the Approved Company
Sale as requested by the Company.
(b) The obligations of the holders of Stockholder Shares with respect
to the Approved Company Sale are subject to the satisfaction of the following
conditions: (i) upon the consummation of the Approved Company Sale, each holder
of Stockholder Shares shall receive the same form of consideration and the same
portion of consideration such holder would have received if the aggregate
consideration had been distributed by the Company in complete liquidation
pursuant to the rights and preferences set forth in the Company's Certificate
of Incorporation as in effect immediately prior to the consummation of the
Approved Company Sale; (ii) if any holders of a class of Stockholder Shares are
given an option as to the form and amount of consideration to be received, each
holder of such class of Stockholder Shares shall be given the same option; and
(iii) each holder of then currently exercisable rights to acquire a class of
Stockholder Shares shall be given an opportunity to exercise such rights prior
to the consummation of the Approved Company Sale and participate in such sale
as holders of such class of Stockholder Shares.
(c) If the Company or the holders of any of the Company's securities
enter into any negotiation or transaction for which Rule 506 (or any similar
rule then in effect) promulgated by the Securities Exchange Commission may be
available with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), each holder of Stockholder Shares will,
at the request of the Company, appoint either a purchaser representative (as
such term is defined in Rule 501) designated by the Company, in which event the
Company will pay the fees of such purchaser representative, or another
purchaser representative (reasonably acceptable to the Company), in which event
such holder will be responsible for the fees of the purchaser representative so
appointed.
(d) All holders of Stockholder Shares will bear their pro-rata share
(based upon the number of shares sold) of the costs of any sale of Stockholder
Shares pursuant to an Approved Company Sale to the extent such costs are
incurred for the benefit of all such holders of Stockholder Shares and are not
otherwise paid by the Company or the acquiring party. Costs incurred by the
holders of Stockholder Shares on their own behalf will not be considered costs
of the Approved Company Sale.
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(e) In no event will the Board or Stockholders enter into an agreement
for, or otherwise effect, a Sale of the Company unless it is in connection with
a contemporaneous Sale of the Partnership without the prior approval of the Lee
Directors and the CIVC Directors.
6. Sale of the Partnership.
(a) If the General Partner and the holders of a majority of the Class A
Common Units then outstanding approve a Sale of the Partnership (the "Approved
Partnership Sale"), the holders of Partnership Securities will consent to and
raise no objections against the Approved Partnership Sale. If the Approved
Partnership Sale is structured as a (i) merger or consolidation, each holder of
Partnership Securities shall waive any dissenters rights, appraisal rights or
similar rights in connection with such merger or consolidation or (ii) sale of
Partnership Securities, each holder of Partnership Securities shall agree to
sell all of his Partnership Securities and rights to acquire Partnership
Securities on the terms and conditions approved by the General Partner and the
holders of a majority of the Class A Common Units then outstanding. Each
holder of Partnership Securities shall take all necessary or desirable actions
in connection with the consummation of the Approved Partnership Sale as
requested by the Partnership.
(b) The obligations of the holders of Partnership Securities with
respect to the Approved Partnership Sale are subject to the satisfaction of the
following conditions: (i) upon the consummation of the Approved Partnership
Sale, each holder of Partnership Securities shall receive the same form of
consideration and the same portion of consideration such holder would have
received if the aggregate consideration had been distributed by the Partnership
in complete liquidation pursuant to the rights and preferences set forth in the
Partnership's Partnership Agreement as in effect immediately prior to the
consummation of the Approved Partnership Sale; (ii) if any holders of a class
or type of Partnership Securities are given an option as to the form and amount
of consideration to be received, each holder of such class or type of
Partnership Securities shall be given the same option; and (iii) each holder of
then currently exercisable rights to acquire Partnership Securities shall be
given an opportunity to exercise such rights prior to the consummation of the
Approved Partnership Sale and participate in such sale as holders of such
Partnership Securities.
(c) If the Partnership or any of the holders of the Partnership's
Securities enter into any negotiation or transaction for which Rule 506 (or any
similar rule then in effect) promulgated by the Securities Exchange Commission
may be available with respect to such negotiation or transaction (including a
merger, consolidation or other reorganization), each holder of Partnership
Securities will, at the request of the Partnership, appoint either a purchaser
representative (as such term is defined in Rule 501) designated by the
Partnership, in which event the Partnership will pay the fees of such purchaser
representative, or another purchaser representative (reasonably acceptable to
the Partnership), in which event such holder will be responsible for the fees
of the purchaser representative so appointed.
(d) All holders of Partnership Securities will bear their pro-rata
share (based upon the amount of securities sold) of the costs of any sale of
Partnership Securities pursuant to an Approved Partnership Sale to the extent
such costs are incurred for the benefit of all such holders
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<PAGE> 10
of Partnership Securities and are not otherwise paid by the Partnership or
the acquiring party. Costs incurred by the holders of Partnership Securities
on their own behalf will not be considered costs of the Approved Partnership
Sale.
7. Public Offering. In the event that the General Partner and the
holders of a majority of the Class A Common Units approve an initial public
offering and sale of equity securities of the Partnership (a "Public Offering")
pursuant to an effective registration statement under the Securities Act, the
holders of Securities will take all necessary or desirable actions in
connection with the consummation of the Public Offering. In the event that
such Public Offering is an underwritten offering and the managing underwriters
advise the Partnership in writing that in their opinion the capital structure
will adversely affect the marketability of the offering, each security holder
will vote for a recapitalization or exchange of the existing securities into
securities that the managing underwriters, the General Partner and the holders
of a majority of the Class A Common Units then outstanding find acceptable;
provided, that the resulting securities reflect and are consistent with the
rights and preferences set forth in the Partnership Agreement as in effect
immediately prior to such Public Offering and that the Partnership's Partners
are as a result of holding such resulting securities in substantially the same
economic position they were in prior to such recapitalization or exchange.
8. Definitions.
"CIVC" means, collectively, Continental Illinois Venture Corporation,
and CIVC Partners III.
"Class A Common Units" means the Partnership's Class A Common Units.
"Common Stock" means the Company's Common Stock, par value $.01 per
share.
"Common Unit" has the meaning given to such term in the Partnership
Agreement.
"Executive" means anyone who has executed or will execute an Executive
Agreement with the Partnership; provided that for purposes of paragraph 1
hereof, the Executive must also be employed by the Partnership.
"Executive Agreements" means the Executive Agreements by and between
the Partnership and each Executive relating to such Executive's Securities.
"Executive Securities" means the Partnership Securities and/or Common
Stock held by the Executives and/or their Permitted Transferees.
"General Partner" means the Company or any successor general partner of
the Partnership.
"Independent Third Party" means any person who, immediately prior to
the contemplated transaction, does not own in excess of 5% of the Company's
Common Stock or 5%
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<PAGE> 11
of the Partnership's Common Units on a fully-diluted basis (a "5% Owner)",
who is not controlling, controlled by or under common control with any such 5%
Owner and who is not the spouse or descendent (by birth or adoption) of any
such 5% Owner or a trust for the benefit of any such 5% Owner and/or such other
persons.
"Lee" means Thomas H. Lee Equity Fund III, L.P.
"Partner" means the General Partner or any of the limited partners of
the Partnership who are bound by the terms of this Agreement.
"Partnership Agreement" means that certain Third Amended and Restated
Agreement of Limited Partnership, dated as of the date hereof, by and among the
General Partner and the limited partners listed on Schedule I attached thereto,
as may be amended and restated from time to time.
"Partnership Securities" mean (i) any Common Units held by a Partner,
(ii) any Preferred Units held by a Partner, (iii) any equity securities issued
or issuable directly or indirectly with respect to the securities referred to
in clauses (i) and (iii) above by any of a split or dividend or in connection
with a combination of securities, recapitalization, merger, consolidation or
other reorganization, and (iv) any other securities of the Partnership held by
a Partner. As to any particular securities constituting Partnership
Securities, such securities will cease to be Partnership Securities when they
have been transferred in a Public Sale.
"Preferred Unit" has the meaning given to such term in the Partnership
Agreement.
"Public Sale" means any sale of Securities to the public pursuant to an
offering registered under the Securities Act or to the public through a broker,
dealer or market maker pursuant to the provisions of Rule 144 (or any similar
provision then in effect) adopted under the Securities Act.
"Qualified Public Offering" means the sale in an underwritten public
offering registered under the Securities Act of equity securities of the
Partnership (or its successor) having an aggregate value of at least $40
million.
"Sale of the Company" means the sale of the Company to an Independent
Third Party or group of Independent Third Parties pursuant to which such party
or parties acquire (i) capital stock of the Company possessing the voting power
under normal circumstances to elect a majority of the Company's board of
directors (whether by merger, consolidation, recapitalization, or sale or
transfer of the Company's capital stock) or (ii) all or substantially all of
the Company's assets determined on a consolidated basis.
"Sale of the Partnership" means the sale of the Partnership to an
Independent Third Party or group of Independent Third Parties pursuant to which
such party or parties acquire (i) equity securities of the Partnership
constituting a majority of the residual equity of the Partnership (whether
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by merger, consolidation, or sale or transfer of Preferred Units the Common
Units) or (ii) all or substantially all of Partnership's assets determined on a
consolidated basis.
"Securities" means the Stockholder Shares and the Partnership
Securities.
"Securities Act" means the Securities Act of 1933, as amended from time
to time.
"Securities Purchase and Redemption Agreement" means the Securities
Purchase and Redemption Agreement, dated as of August 27, 1997, as amended,
between TransWestern Communications Company, Inc. and the other parties
thereto.
"Stockholder" means any stockholder of the Company who is subject to
the terms of this Agreement.
"Stockholder Shares" means (i) any Common Stock held by any
Stockholder, (ii) any equity securities issued or issuable directly or
indirectly with respect to the Common Stock referred to in clause (i) above by
way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization, and
(iii) any other shares of any class or series of capital stock of the Company
held by a Stockholder. As to any particular shares constituting Stockholder
Shares, such shares will cease to be Stockholder Shares when they have been
transferred in a Public Sale.
9. Amendment and Waiver. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement will be
effective against the Company, the Partnership or the Investors unless such
modification, amendment or waiver is approved in writing by the Company, the
Partnership, the holders of at least a majority of the Stockholder Shares and a
majority of the Class A Common Units, respectively. The failure of any party
to enforce any of the provisions of this Agreement will in no way be construed
as a waiver of such provisions and will not affect the right of such party
thereafter to enforce each and every provision of this Agreement in accordance
with its terms.
10. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
11. Entire Agreement. Except as otherwise expressly set forth herein,
this document embodies the complete agreement and understanding among the
parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings, agreements or representations by or among
the parties, written or oral, which may have related to the subject matter
hereof in any way.
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<PAGE> 13
12. Successors and Assigns. Except as otherwise provided herein, this
Agreement will bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns, the Partnership and its successors and
assigns and the Stockholders and any subsequent holders of Stockholder Shares
and the Partners and any subsequent holders of Partnership Securities and the
respective successors and assigns of each of them, so long as they hold
Stockholder Shares and/or Partnership Securities.
13. Counterparts. This Agreement may be executed in separate
counterparts each of which will be an original and all of which taken together
will constitute one and the same agreement.
14. Remedies. The Company, the Partnership and the Investors shall be
entitled to enforce their rights under this Agreement specifically to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights existing in their favor. The parties hereto agree
and acknowledge that money damages may not be an adequate remedy for any breach
of the provisions of this Agreement and that any Investor may in its sole
discretion apply to any court of law or equity of competent jurisdiction for
specific performance and/or injunctive relief (without posting a bond or other
security) in order to enforce or prevent any violation of the provisions of
this Agreement.
15. Notices. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, or mailed first class mail
(postage prepaid) or sent by reputable overnight courier service (charges
prepaid) to the recipient at the address indicated on the schedules hereto, to
the Company or the Partnership at the address for Lee indicated on the
schedules hereto and to any subsequent holder of Securities subject to this
Agreement at such address as indicated by the Company's or the Partnership's
records, or at such address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
Notices will be deemed to have been given hereunder when delivered personally,
three days after deposit in the U.S. mail and one day after deposit with a
reputable overnight courier service.
16. Governing Law. The corporate law of the State of Delaware will
govern all issues concerning the relative rights of the Company and its
stockholders. The partnership law of the State of Delaware will govern all
issues concerning the relative rights of the Partnership and its Partners. All
questions concerning the construction, validity and interpretation of this
Agreement will be governed by the internal law, and not the law of conflicts,
of the State of Delaware.
17. Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
* * * * *
- 13 -
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
TRANSWESTERN PUBLISHING COMPANY, L.P.
By: TransWestern Communications
Company, Inc.
Its: General Partner
By: /s/ Laurence H. Bloch
--------------------------------------------
Its: Vice President
TRANSWESTERN COMMUNICATIONS COMPANY, INC.
By: /s/ Laurence H. Bloch
--------------------------------------------
Its: Vice President
THOMAS H. LEE EQUITY FUND III, L.P.
By: THL Equity Advisors Limited Partnership III
Its: General Partner
By: THL Equity Trust III
Its: General Partner
By:
-------------------------------------------
Its:
-------------------------------------------
CONTINENTAL ILLINOIS VENTURE CORPORATION
By: /s/ Marcus Wedner
---------------------------------------------
Its: Managing Director
<PAGE> 15
CIVC PARTNERS III
By: /s/ Marcus Wedner
------------------------------------------
Its: Managing Director
FIRST UNION INVESTORS, INC.
By /s/ Scott Perper
------------------------------------------
Its Senior Vice President
DAVID F. DUNNING TRUST
By /s/ James D. Dunning, Jr.
------------------------------------------
Its Trustee
JAMES D. DUNNING III, TRUST
By /s/ James D. Dunning, Jr.
------------------------------------------
Its Trustee
/s/ James D. Dunning, Jr.
-----------------------------------------------
James D. Dunning, Jr.
/s/ Laurence H. Bloch
-----------------------------------------------
Laurence H. Bloch
RICARDO PUENTE LIVING TRUST
By /s/ Ricardo Puente
------------------------------------------
Its Trustee
(SIGNATURE PAGE TO INVESTORS AGREEMENT)
<PAGE> 16
MARYBETH BRENNAN TRUST
By /s/ Marybeth Brennan
-------------------------------------------------
Its Trustee
/s/ Joan Fiorito
-------------------------------------------------
Joan Fiorito
WAZNY FAMILY TRUST
By /s/ Joseph L. Wazny
---------------------------------------------
Its Trustee
/s/ Robert Bambace
-------------------------------------------------
Robert Bambace
/s/ Richard Beck
-------------------------------------------------
Richard Beck
/s/ Michael Bynum
-------------------------------------------------
Michael Bynum
/s/ Steve Cartlidge
-------------------------------------------------
Steve Cartlidge
/s/ Kim Kaznowski
-------------------------------------------------
Kim Kaznowski
/s/ Richard Mellert
-------------------------------------------------
Richard Mellert
/s/ Ita Shea-Oglesby
-------------------------------------------------
Ita Shea-Oglesby
/s/ Lois Elizabeth Speights
-------------------------------------------------
Lois Elizabeth Speights
/s/ Victoria Welch
-------------------------------------------------
Victoria Welch
(SIGNATURE PAGE TO INVESTORS AGREEMENT)
<PAGE> 17
CIBC WG ARGOSY MERCHANT FUND 2, L.L.C.
By /s/ Jay Levine
--------------------------------------------
Its Managing Director
-------------------------------------------
THL -- CCI LIMITED PARTNERSHIP
By /s/ Wendy Masler
--------------------------------------------
Its Treasurer
-------------------------------------------
THOMAS H. LEE EQUITY FUND III, L.P.
By /s/ Warren C. Smith, Jr.
--------------------------------------------
Its
-------------------------------------------
THOMAS H. LEE FOREIGN FUND III, L.P.
By /s/ Warren C. Smith, Jr.
--------------------------------------------
Its
-------------------------------------------
/s/ David V. Harkins
-----------------------------------------------
David V. Harkins
THE 1995 HARKINS GIFT TRUST
By /s/ Sheryll J. Harkins
--------------------------------------------
Sheryll Harkins
Its Trustee
/s/ Thomas R. Shepherd
-----------------------------------------------
Thomas R. Shepherd
(SIGNATURE PAGE TO INVESTORS AGREEMENT)
<PAGE> 18
/s/ Scott A. Schoen
-----------------------------------------------
Scott A. Schoen
/s/ C. Hunter Boll
-----------------------------------------------
C. Hunter Boll
/s/ Scott M. Sperling
-----------------------------------------------
Scott M. Sperling
/s/ Anthony J. DiNovi
-----------------------------------------------
Anthony J. DiNovi
/s/ Thomas M. Hagerty
-----------------------------------------------
Thomas M. Hagerty
/s/ Warren C. Smith, Jr.
-----------------------------------------------
Warren C. Smith, Jr.
/s/ Seth W. Lawry
-----------------------------------------------
Seth W. Lawry
/s/ Joseph I. Incandela
-----------------------------------------------
Joseph I. Incandela
/s/ Kent R. Weldon
-----------------------------------------------
Kent R. Weldon
/s/ Terrence M. Mullen
-----------------------------------------------
Terrence M. Mullen
/s/ Todd M. Abbrecht
-----------------------------------------------
Todd M. Abbrecht
/s/ Wendy L. Masler
-----------------------------------------------
Wendy L. Masler
/s/ Andrew D. Flaster
-----------------------------------------------
Andrew D. Flaster
-----------------------------------------------
By
-------------------------------------------
Its
-------------------------------------------
(SIGNATURE PAGE TO INVESTORS AGREEMENT)
<PAGE> 19
/s/ Andrew T. Mulderry
-----------------------------------------------
Andrew T. Mulderry
/s/ George R. Taylor
-----------------------------------------------
George R. Taylor
/s/ Charles W. Robins
-----------------------------------------------
Charles W. Robins
/s/ James Westra
-----------------------------------------------
James Westra
WCS TRUSTEE MARTHA MARKS IRR. FAMILY TRUST
By /s/ Warren C. Smith, Jr.
--------------------------------------------
Its Trustee
/s/ Charles A. Brizius
-----------------------------------------------
Charles A. Brizius
/s/ Jeffrey B. Kovach
-----------------------------------------------
Jeffrey B. Kovach
/s/ Anjan Mukherjee
-----------------------------------------------
Anjan Mukherjee
/s/ Charles S. Woo
-----------------------------------------------
Charles S. Woo
(SIGNATURE PAGE TO INVESTORS AGREEMENT)
<PAGE> 20
MATTHEW BLOCH GIFT TRUST
By /s/ Cindy C. Bloch
--------------------------------------------
Cindy C. Bloch
Its Trustee
REISA BLOCH GIFT TRUST
By /s/ Cindy C. Bloch
--------------------------------------------
Cindy C. Bloch
Its Trustee
RICARDO PUENTE 1995 TRUST
By /s/ Ricardo Puente
--------------------------------------------
Ricardo Puente
Its Trustee
(SIGNATURE PAGE TO INVESTORS AGREEMENT)
<PAGE> 1
EXHIBIT 10.3
REGISTRATION AGREEMENT
THIS AGREEMENT is made as of October 1, 1997 by and among
TransWestern Publishing Company, L.P., a Delaware limited partnership (the
"Partnership"), and the persons listed on the signature page hereto. Unless
otherwise provided in this Agreement, capitalized terms used herein shall have
the meanings set forth in paragraph 8 hereof.
The parties hereto agree as follows:
1. Demand Registrations.
(a) Requests for Registration. At any time, the holders
of a majority of the Investor Registrable Securities may request registration
under the Securities Act of all or part of its Registrable Securities on Form
S-1 or any similar long-form registration ("Long-Form Registrations"),
registration under the Securities Act of all or part of its Registrable
Securities on Form S-2 or S-3 or any similar short-form registration
("Short-Form Registrations") if available. Each request for a Demand
Registration shall specify the approximate number of Registrable Securities
requested to be registered and the anticipated per share price range for such
offering. Within ten days after receipt of any such request, the Partnership
will give written notice of such requested registration to all other holders of
Registrable Securities and will include in such registration all Registrable
Securities with respect to which the Partnership has received written requests
for inclusion therein within 15 days after the receipt of the Partnership's
notice. All registrations requested pursuant to this paragraph 1(a) are
referred to herein as "Demand Registrations".
(b) Long-Form Registrations. The holders of a majority
of the Investor Registrable Securities will be entitled to request three (3)
Long-Form Registrations in which the Partnership will pay all Registration
Expenses. A registration will not count as one of such three (3) Long-Form
Registrations until it has become effective and neither the last nor any
subsequent Long-Form Registration will count as one of such three (3) Long-Form
Registrations unless the holders of Registrable Securities participating in
such Demand Registration are able to register and sell at least 90% of the
Registrable Securities requested to be included in such registration; provided
that in any event the Partnership will pay all Registration Expenses in
connection with any registration initiated as a Long-Form Registration whether
or not it has become effective.
(c) Short-Form Registrations. In addition to the
Long-Form Registrations provided pursuant to paragraph 1(b), the holders of a
majority of the Investor Registrable Securities will be entitled to request
three Short-Form Registrations in which the Partnership will pay all
Registration Expenses. Demand Registrations will be Short-Form Registrations
whenever the Partnership is permitted to use any applicable short form. After
the Partnership has become subject
<PAGE> 2
to the reporting requirements of the Securities Exchange Act, the Partnership
will use its best efforts to make Short-Form Registrations available for the
sale of Registrable Securities.
(d) Priority on Demand Registrations. The Partnership
will not include in any Demand Registration any securities which are not
Registrable Securities without the prior written consent of the holders of a
majority of the Investor Registrable Securities included in such registration.
If a Demand Registration is an underwritten offering and the managing
underwriters advise the Partnership in writing that in their opinion the number
of Registrable Securities and, if permitted hereunder, other securities
requested to be included in such offering exceeds the number of Registrable
Securities and other securities, if any, which can be sold, the Partnership
will include in such registration, prior to the inclusion of any securities
which are not Registrable Securities, the number of Registrable Securities
requested to be included which in the opinion of such underwriters can be sold
without adversely affecting the marketability of the Offering, pro rata among
the respective holders thereof on the basis of the amount of Registrable
Securities owned by each such holder.
(e) Restrictions on Demand Registrations. The
Partnership will not be obligated to effect any Demand Registration within six
months after the effective date of a previous Demand Registration.
(f) Selection of Underwriters. The holders of a majority
of the Investor Registrable Securities included in any such Demand Registration
will have the right to select the investment banker(s) and manager(s) to
administer the offering under such Demand Registration, subject to the
Partnership's approval which will not be unreasonably withheld.
(g) Other Registration Rights. Except as provided in
this Agreement or in any Registration Rights Agreement which may be entered
into in connection with any Permanent Financing (as defined in the Bridge
Securities Purchase Agreement dated as of October 1, 1997 among the
Partnership, the Company and the other parties listed on the signature pages
thereto) (the "Permanent Financing Registration Rights"), the Partnership will
not grant to any Persons the right to request the Partnership to register any
equity securities of the Partnership, or any securities convertible into or
exchangeable or exercisable for any such securities, as long as the Investors
hold at least 25% of the Investor Registrable Securities.
(h) Preemption of Demand Registrations. If the holders
of a majority of the Investor Registrable Securities request a Demand
Registration, the Partnership will have the right, but not the obligation, to
preempt such Demand Registration with a Piggyback Registration; provided that
this right may only be exercised one time. If the Partnership decides to
exercise this preemption right, it must give written notice of such decision to
holder(s) of a majority of the Investor Registrable Securities who requested
such Demand Registration within ten days of receipt of the notice requesting
such Demand Registration.
-2-
<PAGE> 3
2. Piggyback Registrations.
(a) Right to Piggyback. Whenever the Partnership
proposes to register any of its securities under the Securities Act (other than
pursuant to a Demand Registration or the Permanent Financing Registration
Rights) and the registration form to be used may be used for the registration
of Registrable Securities (a "Piggyback Registration"), the Partnership will
give prompt written notice to all holders of Registrable Securities of its
intention to effect such a registration and will include in such registration
all Registrable Securities with respect to which the Partnership has received
written requests for inclusion therein within 15 days after the receipt of the
Partnership's notice.
(b) Piggyback Expenses. The Registration Expenses of the
holders of Registrable Securities will be paid by the Partnership in all
Piggyback Registrations.
(c) Priority on Primary Registrations. If a Piggyback
Registration is an underwritten primary registration on behalf of the
Partnership, and the managing underwriters advise the Partnership in writing
that in their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold the Partnership will include
in such registration (i) first, the securities the Partnership proposes to
sell, (ii) second, Registrable Securities requested to be included in such
registration, pro rata among the holders of such Registrable Securities on the
basis of the number of shares owned by each such holder, and (iii) third, other
securities requested to be included in such registration.
(d) Priority on Secondary Registrations. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
the Partnership's securities, and the managing underwriters advise the
Partnership in writing that in their opinion the number of securities requested
to be included in such registration exceeds the number which can be sold the
Partnership will include in such registration (i) first, the securities
demanding such Registration and such Registrable Securities requested to be
included in such registration, pro rata among the holders of such securities
demanding the registration and such Registrable Securities on the basis of the
number of shares owned by each such holder, and (ii) second, other securities
requested to be included in such registration.
(e) Other Registrations. If the Partnership has
previously filed a registration statement with respect to Registrable
Securities pursuant to paragraph 1 or pursuant to this paragraph 2, and if such
previous registration has not been withdrawn or abandoned, the Partnership will
not file or cause to be effected any other registration of any of its
securities or securities convertible into or exchangeable or exercisable for
its securities under the Securities Act (except on Form S-8 or any successor
form), whether on its own behalf or at the request of any holder or holders of
such securities, until a period of at least six months has elapsed from the
effective date of such previous registration.
-3-
<PAGE> 4
3. Holdback Agreements.
(a) Each holder of Registrable Securities agrees not to
effect any public sale or distribution (including sales pursuant to Rule 144)
of securities of the Partnership, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and the 180-day period beginning on the effective date of any underwritten
Demand Registration or any underwritten Piggyback Registration in which
Registrable Securities are included (except as part of such underwritten
registration), unless the underwriters managing the registered public offering
otherwise agree.
(b) The Partnership agrees (i) not to effect any public
sale or distribution of their securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and during the 180-day period beginning on the effective date of any
underwritten Demand Registration or any underwritten Piggyback Registration
(except (a) as part of such underwritten registration or pursuant to
registrations on Form S-8 or any successor form and (b) for the grant of
options to employees and/or directors pursuant to any stock option plan for
employees and/or directors provided such options are not exercisable during
such period), unless the underwriters managing the registered public offering
otherwise agree, and (ii) to cause each holder of Registrable Securities
purchased or otherwise acquired from the Partnership at any time after the date
of this Agreement (other than in a registered public offering) to agree not to
effect any public sale or distribution (including sales pursuant to Rule 144)
of any such securities during any such period (except as part of any such
underwritten registration, if otherwise permitted), unless the underwriters
managing the registered public offering otherwise agree.
4. Registration Procedures. Whenever the holders of
Registrable Securities have requested that any Registrable Securities be
registered pursuant to this Agreement, the Partnership will use its best
efforts to effect the registration and the sale of such Registrable Securities
in accordance with the intended method of disposition thereof and pursuant
thereto the Partnership will as expeditiously as possible:
(a) prepare and file with the Securities and Exchange
Commission a registration statement with respect to such Registrable Securities
and use its best efforts to cause such registration statement to become
effective (provided that before filing a registration statement or prospectus
or any amendments or supplements thereto, the Partnership will furnish to the
counsel selected by the holders of a majority of the Registrable Securities
covered by such registration statement copies of all such documents proposed to
be filed);
(b) prepare and file with the Securities and Exchange
Commission such amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective for a period of not less than six months (or
such shorter period as the sellers of the Registrable Securities shall request)
and comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement during
such period in accordance with the intended methods of disposition by the
sellers of the Registrable Securities set forth in such registration statement;
-4-
<PAGE> 5
(c) furnish to each seller of Registrable Securities such
number of copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller;
(d) use its best efforts to register or qualify such
Registrable Securities under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other acts
and things which may be reasonably necessary or advisable to enable such seller
to consummate the disposition in such jurisdictions of the Registrable
Securities owned by such seller (provided that the Partnership will not be
required to (i) qualify generally to do business in any jurisdiction where it
would not otherwise be required to qualify but for this subparagraph, (ii)
subject itself to taxation in any such jurisdiction or (iii) consent to general
service of process in any such jurisdiction);
(e) notify each seller of such Registrable Securities, at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Partnership will
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
will not contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed on
each securities exchange on which similar securities issued by the Partnership
are then listed and, if not so listed, to be listed on the National Association
of Securities Dealers automated quotation system;
(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement;
(h) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other actions as
the holders of a majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities (including, without limitation,
effecting a stock split combination of securities, recapitalization or
reorganization);
(i) make available for inspection by any seller of
Registrable Securities, any underwriter participating in any disposition
pursuant to such registration statement and any attorney, accountant or other
agent retained by any such seller or underwriter, all financial and other
records, pertinent business documents and properties of the Partnership, and
cause the Partnership's officers, directors, partners, employees and
independent accountants to supply all information reasonably requested by any
such seller, underwriter, attorney, accountant or agent in connection with such
registration statement;
-5-
<PAGE> 6
(j) otherwise use its best efforts to comply with all
applicable rules and regulations of the Securities and Exchange Commission, and
make available to its security holders, as soon as reasonably practicable, an
earning statement covering the period of at least twelve months beginning with
the first day of the Partnership's first full calendar quarter after the
effective date of the registration statement, which earning statement shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder;
(k) in the event of the issuance of any stop order
suspending the effectiveness of a registration statement, or of any order
suspending or preventing the use of any related prospectus or suspending the
qualification of any securities included in such registration statement for
sale in any jurisdiction, the Partnership will use its reasonable best efforts
promptly to obtain the withdrawal of such order;
(l) use its best efforts to cause such Registrable Securities
covered by such registration statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to enable
the sellers thereof to consummate the disposition of such Registrable
Securities;
(m) obtain a cold comfort letter from the Partnership's
independent public accountants in customary form and covering such matters of
the type customarily covered by cold comfort letters as the holders of a
majority of the Registrable Securities being sold reasonably request (provided
that such Registrable Securities constitute at least 10% of the securities
covered by such registration statement); and
(n) provide a legal opinion of the Partnership's outside
counsel, dated the closing date under the underwriting agreement, with respect
to the registration statement, each amendment and supplement thereto, the
prospectus included therein (including the preliminary prospectus) and such
other documents relating thereto in customary form and covering such matters of
the type customarily covered by legal opinions of such nature.
The Partnership may require each seller of Registrable Securities as to which
any registration is being effected to furnish the Partnership such information
regarding such seller and the distribution of such securities as the
Partnership may from time to time reasonably request in writing.
5. Registration Expenses.
(a) All expenses incident to the Partnership's
performance of or compliance with this Agreement, including without limitation,
all registration and filing fees, fees and expenses of compliance with
securities or blue sky laws, printing expenses, messenger and delivery
expenses, and fees and disbursements of counsel for the Partnership and all
independent certified public accountants, underwriters (excluding discounts and
commissions) and other Persons retained by the Partnership (all such expenses
being herein called "Registration Expenses"), will be borne as provided in this
Agreement, except that the Partnership will, in any event, pay its internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expense of
any annual audit or quarterly review, the expense of any
-6-
<PAGE> 7
liability insurance and the expenses and fees for listing the securities to be
registered on each securities exchange on which similar securities issued by
the Partnership are then listed on the National Association of Securities
Dealers automated quotation system.
(b) In connection with each Demand Registration, the
Partnership will reimburse the holders of Registrable Securities covered by
such registration for the reasonable fees and disbursements of one counsel
chosen by the holders of a majority of the Registrable Securities initially
requesting such registration.
(c) To the extent Registration Expenses are not required
to be paid by the Partnership, each holder of securities included in any
registration hereunder will pay those Registration Expenses allocable to the
registration of such holder's securities so included, and any Registration
Expenses not so allocable will be borne by all sellers of securities included
in such registration in the proportion that the aggregate selling price of each
seller's securities bear to the aggregate selling price of the securities to be
so registered.
6. Indemnification.
(a) The Partnership agrees to indemnify, to the extent
permitted by law, each holder of Registrable Securities, its officers and
directors and each Person who controls such holder (within the meaning of the
Securities Act) against all losses, claims, damages, liabilities and expenses
caused by any untrue or alleged untrue statement of material fact contained in
any registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission of
a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as the same are caused by or
contained in any information furnished in writing to the Partnership by such
holder expressly for use therein or by such holder's failure to deliver a copy
of the registration statement or prospectus or any amendments or supplements
thereto after the Partnership has furnished such holder with a sufficient
number of copies of the same. In connection with an underwritten offering, the
Partnership will indemnify such underwriters, their officers and directors and
each Person who controls such underwriters (within the meaning of the
Securities Act) to the same extent as provided above with respect to the
indemnification of the holders of Registrable Securities.
(b) In connection with any registration statement in
which a holder of Registrable Securities is participating, each such holder
will furnish to the Partnership in writing such information and affidavits as
the Partnership reasonably requests for use in connection with any such
registration statement or prospectus and, to the extent permitted by law, will
indemnify the Partnership, its partners, directors and officers and each Person
who controls the Partnership (within the meaning of the Securities Act) against
any losses, claims, damages, liabilities and expenses resulting from any untrue
or alleged untrue statement of a material fact contained in the registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but only to the extent that such untrue statement or omission is
contained in any information or affidavit so furnished in writing by such
holder; provided that the obligation to indemnify will be individual to each
holder and will be limited to the net
-7-
<PAGE> 8
amount of proceeds received by such holder from the sale of Registrable
Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder will
(i) give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification and (ii) unless in such indemnified
party's reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist with respect to such claim, permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party. If such defense is assumed, the
indemnifying party will not be subject to any liability for any settlement made
by the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or
elects not to, assume the defense of a claim will not be obligated to pay the
fees and expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable
judgment of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to
such claim.
(d) The indemnification provided for under this Agreement
will remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified party or any officer, director, partner or
controlling Person of such indemnified party and will survive the transfer of
securities. The Partnership also agrees to make such provisions, as are
reasonably requested by any indemnified party, for contribution to such party
in the event the Partnership's indemnification is unavailable for any reason.
7. Participation in Underwritten Registrations. No
Person may participate in any registration hereunder which is underwritten
unless such Person (a) agrees to sell such Person's securities on the basis
provided in any underwriting arrangements approved by the Person or Persons
entitled hereunder to approve such arrangements and (b) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements
and other documents required under the terms of such underwriting arrangements.
8. Definitions.
"Common Units" means collectively the Partnership's Class A
Common Partnership Units and Class B Common Partnership Units.
"Executive" means anyone who has executed or will execute an
Executive Agreement with the Partnership.
"Executive Agreements" means the Agreements, between the
Partnership and certain Executives relating to the issuance of securities of
the Partnership dated as of the date hereof and as of certain future dates;
provided that pursuant to each such Executive Agreement the Executive who is a
party thereto agrees to be bound by the terms hereof.
-8-
<PAGE> 9
"Investor Registrable Securities" means the Registrable
Securities originally issued to the Investors pursuant to the Securities
Purchase and Redemption Agreement or otherwise acquired by the Investors.
"Investors" means Continental Illinois Venture Corporation,
CIVC Partners III and the Thomas H. Lee Equity Fund III, L.P., together with
their affiliates.
"Person" means an individual, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization and a government or any
department or agency thereof.
"Preferred Units" means the Partnership's Preferred
Partnership Units.
"Registrable Securities" means (i) any Preferred Units or
Common Units issued pursuant to the Securities Purchase and Redemption
Agreement, (ii) any Common Units issued to the Executives pursuant to the
Executive Agreements which constitute Common Units which have vested pursuant
to the terms of such Executive Agreements, (iii) any securities issued or
issuable with respect to the securities referred to in clauses (i) and (ii) in
connection with a recapitalization, merger, consolidation or other
reorganization, and (iv) any other Common Units held by Persons holding
securities described in clauses (i) through (iii) above (other than Common
Units which have not vested pursuant to the terms of the Executive Agreements).
As to any particular Registrable Securities, such securities will cease to be
Registrable Securities when they have been distributed to the public pursuant
to an offering registered under the Securities Act or sold to the public
through a broker, dealer or market maker in compliance with Rule 144 under the
Securities Act (or any similar rule then in force). For purposes of this
Agreement, a Person will be deemed to be a holder of Registrable Securities
whenever such Person has the right to acquire directly or indirectly such
Registrable Securities (upon conversion or exercise in connection with a
transfer of securities or otherwise, but disregarding any restrictions or
limitations upon the exercise of such right other than vesting), whether or not
such acquisition has actually been effected.
"Securities Act" means the Securities Act of 1933, as amended,
or any similar federal law then in force.
"Securities and Exchange Commission" includes any
governmental body or agency succeeding to the functions thereof.
"Securities Exchange Act" means the Securities Exchange Act of
1934, as amended, or any similar federal law then in force.
"Securities Purchase and Redemption Agreement" means that
certain Securities Purchase and Redemption Agreement, dated as of the date
hereof, between the Partnership, the Investors and certain other investors.
-9-
<PAGE> 10
9. Miscellaneous.
(a) No Inconsistent Agreements. The Partnership will not
hereafter enter into any agreement with respect to its securities which is
inconsistent with or violates the rights granted to the holders of Registrable
Securities in this Agreement.
(b) Adjustments Affecting Registrable Securities. The
Partnership will not take any action, or permit any change to occur, with
respect to its securities (other than actions taken by the Partnership in good
faith and in the ordinary course of business) which would materially and
adversely affect the ability of the holders of Registrable Securities to
include such Registrable Securities in a registration undertaken pursuant to
this Agreement or which would materially and adversely affect the marketability
of such Registrable Securities in any such registration (including, without
limitation, effecting a split, combination, or other recapitalization).
(c) Remedies. Any Person having rights under any
provision of this Agreement will be entitled to enforce such rights
specifically to recover damages caused by reason of any breach of any provision
of this Agreement and to exercise all other rights granted by law. The parties
hereto agree and acknowledge that money damages may not be an adequate remedy
for any breach of the provisions of this Agreement and that any party may in
its sole discretion apply to any court of law or equity of competent
jurisdiction (without posting any bond or other security) for specific
performance and for other injunctive relief in order to enforce or prevent
violation of the provisions of this Agreement.
(d) Amendments and Waivers. Except as otherwise provided
herein, the provisions of this Agreement may be amended or waived only upon the
prior written consent of the Partnership and the holders of at least a majority
of the Registrable Securities.
(e) Successors and Assigns. All covenants and agreements
in this Agreement by or on behalf of any of the parties hereto will bind and
inure to the benefit of the respective successors and assigns of the parties
hereto whether so expressed or not. In addition, whether or not any express
assignment has been made, the provisions of this Agreement which are for the
benefit of purchasers or holders of Registrable Securities are also for the
benefit of, and enforceable by, any subsequent holder of Registrable
Securities.
(f) Severability. Whenever possible, each provision of
this Agreement will be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability will
not affect any other provision or any other jurisdiction, but this Agreement
will be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.
(g) Entire Agreement. Except as otherwise expressly set
forth herein, this document embodies the complete agreement and understanding
among the parties hereto with respect to the subject matter hereof and
supersedes and preempts any prior understandings,
-10-
<PAGE> 11
agreements or representations by or among the parties, written or oral, which
may have related to the subject matter hereof in any way.
(h) Counterparts. This Agreement may be executed in
separate counterparts each of which will be an original and all of which taken
together will constitute one and the same agreement.
(i) Notices. Any notice provided for in this Agreement
shall be in writing and shall be either personally delivered, or mailed first
class mail (postage prepaid) or sent by reputable overnight courier service
(charges prepaid) to the recipient at the address indicated in the Investors
Agreement and to any subsequent holder of Securities subject to this Agreement
at such address as indicated by the Partnership's records, or at such address
or to the attention of such other person as the recipient party has specified
by prior written notice to the sending party. Notices will be deemed to have
been given hereunder when delivered personally, three days after deposit in the
U.S. mail and one day after deposit with a reputable overnight courier service.
(j) Governing Law. All issues concerning the
enforceability, validity and binding effect of this Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware, without
giving effect to any choice of law or conflict of law provision or rule
(whether of the State of Delaware or any other jurisdiction) that would cause
the application of the law of any jurisdiction other than the State of
Delaware.
(k) Descriptive Headings. The descriptive headings of
this Agreement are inserted for convenience only and do not constitute a part
of this Agreement.
* * * * *
-11-
<PAGE> 12
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
TRANSWESTERN PUBLISHING COMPANY, L.P.
By: TransWestern Communications
Company, Inc.
Its: General Partner
By: /s/ Laurence H. Bloch
--------------------------------
Its: Vice President
TRANSWESTERN COMMUNICATIONS COMPANY, INC.
By: /s/ Laurence H. Bloch
--------------------------------
Its: Vice President
THOMAS H. LEE EQUITY FUND III, L.P.
By: THL Equity Advisors Limited Partnership III
Its: General Partner
By: THL Equity Trust III
Its: General Partner
By:
--------------------------------
Its:
--------------------------------
CONTINENTAL ILLINOIS VENTURE CORPORATION
By: /s/ Marcus Wedner
--------------------------------
Its: Managing Director
(SIGNATURE PAGE TO REGISTRATION AGREEMENT)
<PAGE> 13
CIVC PARTNERS III
By: /s/ Marcus Wedner
--------------------------------
Its: Managing Director
FIRST UNION INVESTORS, INC.
By: /s/ Scott Perper
--------------------------------
Its: Senior Vice President
DAVID F. DUNNING TRUST
By /s/ James D. Dunning, Jr.
--------------------------------
Its Trustee
JAMES D. DUNNING III, TRUST
By /s/ James D. Dunning, Jr.
--------------------------------
Its Trustee
By /s/ James D. Dunning, Jr.
--------------------------------
James D. Dunning, Jr.
By /s/ Laurence H. Bloch
--------------------------------
Laurence H. Bloch
RICARDO PUENTE LIVING TRUST
By /s/ Ricardo Puente
--------------------------------
Its Trustee
(SIGNATURE PAGE TO REGISTRATION AGREEMENT)
<PAGE> 14
MARYBETH BRENNAN TRUST
By /s/ Marybeth Brennan
--------------------------------
Its Trustee
/s/ Joan Fiorito
----------------------------------
Joan Fiorito
WAZNY FAMILY TRUST
By /s/ Joseph L. Wazny
--------------------------------
Its Trustee
/s/ Robert Bambace
----------------------------------
Robert Bambace
/s/ Richard Beck
--------------------------------
Richard Beck
/s/ Michael Bynum
--------------------------------
Michael Bynum
/s/ Steve Cartlidge
----------------------------------
Steve Cartlidge
/s/ Kim Kaznowski
----------------------------------
Kim Kaznowski
/s/ Richard Mellert
----------------------------------
Richard Mellert
/s/ Ita Shea-Oglesby
----------------------------------
Ita Shea-Oglesby
/s/ Lois Elizabeth Speights
----------------------------------
Lois Elizabeth Speights
/s/ Victoria Welch
--------------------------------
Victoria Welch
(SIGNATURE PAGE TO REGISTRATION AGREEMENT)
<PAGE> 15
THL -- CCI LIMITED PARTNERSHIP
By /s/ Wendy Masler
--------------------------------
Its Treasurer
THOMAS H. LEE EQUITY FUND III, L.P.
By /s/ Warren C. Smith, Jr.
--------------------------------
Its
--------------------------------
THOMAS H. LEE FOREIGN FUND III, L.P.
By /s/ Warren C. Smith, Jr.
--------------------------------
Its
--------------------------------
/s/ David V. Harkins
-----------------------------------
David V. Harkins
THE 1995 HARKINS GIFT TRUST
By /s/ Sheryll J. Harkins
-----------------------------------
Sheryll Harkins
Its
--------------------------------
/s/ Thomas R. Shepherd
------------------------------------
Thomas R. Shepherd
/s/ Scott A. Schoen
------------------------------------
Scott A. Schoen
/s/ C. Hunter Boll
------------------------------------
C. Hunter Boll
(SIGNATURE PAGE TO REGISTRATION AGREEMENT)
<PAGE> 16
/s/ Scott M. Sperling
--------------------------------
Scott M. Sperling
/s/ Anthony J. DiNovi
--------------------------------
Anthony J. DiNovi
/s/ Thomas M. Hagerty
--------------------------------
Thomas M. Hagerty
/s/ Warren C. Smith, Jr.
--------------------------------
Warren C. Smith, Jr.
/s/ Seth W. Lawry
--------------------------------
Seth W. Lawry
/s/ Joseph I. Incandela
--------------------------------
Joseph I. Incandela
/s/ Kent R. Weldon
--------------------------------
Kent R. Weldon
/s/ Terrence M. Mullen
--------------------------------
Terrence M. Mullen
/s/ Todd M. Abbrecht
--------------------------------
Todd M. Abbrecht
/s/ Wendy L. Masler
--------------------------------
Wendy L. Masler
/s/ Andrew D. Flaster
--------------------------------
Andrew D. Flaster
By
-----------------------------
Its
----------------------------
/s/ Andrew T. Mulderry
--------------------------------
Andrew T. Mulderry
(SIGNATURE PAGE TO REGISTRATION AGREEMENT)
<PAGE> 17
/s/ George R. Taylor
--------------------------------
George R. Taylor
/s/ Charles W. Robins
--------------------------------
Charles W. Robins
/s/ James Westra
--------------------------------
James Westra
WCS TRUSTEE MARTHA MARKS IRR. FAMILY TRUST
By /s/ Warren C. Smith, Jr.
--------------------------------
Its Trustee
/s/ Charles A. Brizius
----------------------------------
Charles A. Brizius
/s/ Jeffrey B. Kovach
--------------------------------
Jeffrey B. Kovach
/s/ Anjan Mukherjee
--------------------------------
Anjan Mukherjee
/s/ Charles S. Woo
--------------------------------
Charles S. Woo
CIBC WG ARGOSY MERCHANT FUND 2, L.L.C.
By /s/ Jay Levine
---------------------------
Its Managing Director
(SIGNATURE PAGE TO REGISTRATION AGREEMENT)
<PAGE> 18
MATTHEW BLOCH GIFT TRUST
By /s/ Cindy C. Bloch
--------------------------------
Cindy C. Bloch
Its Trustee
REISA BLOCH GIFT TRUST
By /s/ Cindy C. Bloch
--------------------------------
Cindy C. Bloch
Its Trustee
RICARDO PUENTE 1995 TRUST
By /s/ Ricardo Puente
--------------------------------
Ricardo Puente
Its Trustee
(SIGNATURE PAGE TO REGISTRATION AGREEMENT)
<PAGE> 1
EXHIBIT 12.1
SCHEDULE RE: COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEARS ENDED APRIL 30; OCTOBER 31,
-------------------------------------------------- ---------------
1993 1994 1995 1996 1997 1996 1997
------ ------ ------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Income before extraordinary item and contribution
to Equity Compensation Plan .................................. $1,745 $1,486 $ 8,064 $ 9,079 $10,685 $ 730 --
Interest expense including amortization of debt issuance costs.. 312 2,951 4,345 6,630 7,816 4,029 --
Interest portion of Rental Expense ............................. 341 439 428 438 467 234
------ ------ ------- ------- ------- ------ ----
Earnings ....................................................... $2,428 $4,876 $12,837 $16,147 $18,968 $4,993 --
====== ====== ======= ======= ======= ====== ====
Interest expenses including amortization of
debt issuance costs .......................................... $ 342 $2,951 $ 4,345 $ 7,816 $ 7,816 $4,029 $
Interest portion of Rental Expense ............................. 341 439 428 438 467 234
------ ------ ------- ------- ------- ------ ----
Fixed Charges .................................................. $ 683 $3,390 $ 4,773 $ 7,068 $ 8,283 $4,263 $
====== ====== ======= ======= ======= ====== ====
Ratio of Earnings to Fixed Charges ............................. 3.55 1.44 2.69 2.28 2.29 1.17 --
====== ====== ======= ======= ======= ====== ====
</TABLE>
<PAGE> 1
EXHIBIT 21.1
TransWestern Holdings L.P. Subsidiaries:
<TABLE>
<CAPTION>
NAME OF SUBSIDIARY STATE OR OTHER JURISDICTION OF NAMES UNDER WHICH SUCH
INCORPORATION OR ORGANIZATION SUBSIDIARY DOES BUSINESS
- ------------------------------------ ------------------------------ ------------------------
<S> <C> <C>
TWP Capital Corp. Delaware n/a
TransWestern Publishing Company LLC Delaware n/a
</TABLE>
TransWestern Publishing Company LLC Subsidiaries:
<TABLE>
<CAPTION>
NAME OF SUBSIDIARY STATE OR OTHER JURISDICTION OF NAMES UNDER WHICH SUCH
INCORPORATION OR ORGANIZATION SUBSIDIARY DOES BUSINESS
- ------------------------------------ ------------------------------ ------------------------
<S> <C> <C>
TWP Capital Corp. II Delaware n/a
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNEST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated June 6, 1997 except for "Organization, Business
Activity and Basis of Presentation" under Note 1, as to which the date is
November 6, 1997, in the Registration Statement (Form S-4) and related
Prospectus of TransWestern Holdings L.P.
ERNST & YOUNG LLP
San Diego, California
December 12, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001050935
<NAME> TRANSWESTERN HOLDINGS LP
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> APR-30-1997 APR-30-1998
<PERIOD-START> MAY-01-1996 MAY-01-1997
<PERIOD-END> APR-30-1997 OCT-31-1997
<CASH> 1,254 2,223
<SECURITIES> 0 0
<RECEIVABLES> 30,905 25,001
<ALLOWANCES> 7,626 7,771
<INVENTORY> 0 0
<CURRENT-ASSETS> 31,463 28,345
<PP&E> 5,938 6,519
<DEPRECIATION> 3,098 3,638
<TOTAL-ASSETS> 48,231 48,753
<CURRENT-LIABILITIES> 31,439 27,483
<BONDS> 67,514 173,875
0 0
0 0
<COMMON> 0 0
<OTHER-SE> (50,722) (152,605)
<TOTAL-LIABILITY-AND-EQUITY> 48,231 48,753
<SALES> 91,414 38,254
<TOTAL-REVENUES> 91,414 38,254
<CGS> 0 0
<TOTAL-COSTS> 64,041 35,975
<OTHER-EXPENSES> (48) 107
<LOSS-PROVISION> 8,920 3,747
<INTEREST-EXPENSE> 7,816 4,333
<INCOME-PRETAX> 10,685 (5,908)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 10,685 (5,908)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 1,391
<CHANGES> 0 0
<NET-INCOME> 10,685 (7,299)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
