<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 18, 1999
REGISTRATION NO. 333-72075
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TOWN PAGES HOLDINGS PLC
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
ENGLAND AND WALES 7361 NOT APPLICABLE
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation or organization) Classification Code Number)
</TABLE>
11 MARKET SQUARE
ALTON, HAMPSHIRE
ENGLAND
GU34 1HD
UNITED KINGDOM
TELEPHONE: 011-44-1420-543-468; FACSIMILE: 011-44-1420-541-322
(Address and telephone number
of Registrant's principal executive offices)
GREENBERG TRAURIG
200 PARK AVENUE, 15(TH) FLOOR
NEW YORK, NEW YORK 10166
REFERENCE: TOWN PAGES
TELEPHONE: (212) 801-9200; FACSIMILE: (212) 801-6400
(Name, address and telephone number of agent for service)
------------------------------
COPIES OF COMMUNICATIONS TO:
<TABLE>
<S> <C>
ANDREW J. COSENTINO, ESQ. LAWRENCE B. FISHER, ESQ.
GREENBERG TRAURIG ORRICK, HERRINGTON & SUTCLIFFE LLP
200 PARK AVENUE, 15(TH) FLOOR 30 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10166 40(TH) FLOOR
TELEPHONE: (212) 801-9304 NEW YORK, NEW YORK 10112
FACSIMILE: (212) 801-6400 TELEPHONE: (212) 506-5000
FACSIMILE: (212) 506-3730
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
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. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) PRICE(1) FEE(3)
<S> <C> <C> <C> <C>
Ordinary Shares (2).............................. 2,645,000 $10.00 $26,450,000 $7,353.00
</TABLE>
(1) Estimated solely for purposes of determining the registration fee pursuant
to Rule 457 under the Securities Act.
(2) American depositary shares evidenced by American depositary receipts
issuable on deposit of the ordinary shares registered hereby are being
registered pursuant to a separate Registration Statement on Form F-6.
(3) A filing fee of $6,394.00 was previously paid by the registrant on February
10, 1999.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON THE DATE OR
DATES AS MAY BE NECESSARY TO DELAY OUR EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH 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 THE DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT
TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 18, 1999
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
INITIAL PUBLIC OFFERING PROSPECTUS
[LOGO]
2,300,000 AMERICAN DEPOSITARY SHARES
------------------
Town Pages Holdings plc produces and delivers
TownPages(-Registered Trademark-), an interactive Internet information service
in the United Kingdom.
We are offering 2,300,000 American depositary shares of Town Pages Holdings
plc, an English company. The ADSs are being offered only in the United States.
Each ADS represents one of our ordinary shares, which for an English company are
equivalent generally to shares of common stock of a United States corporation.
Our ADSs will be evidenced by American depositary receipts.
Prior to this offering, there has been no public market for our ADSs or
ordinary shares. We estimate that the initial public offering price will be $10
per ADS.
We have applied to list our ADSs on the Nasdaq National Market under the
symbol "TPGS."
Investing in our ADSs involves numerous risks. See "Risk Factors" beginning
on page 6. Also, our controlling shareholder and other existing shareholders
will derive personal benefits from this offering. See "Risk Factors" and
"Related Party Transactions" on page 57.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PER ADS TOTAL
<S> <C> <C>
Initial Public Offering Price.................................. $ $
Underwriting Discount.......................................... $ $
Total Proceeds, before expenses,
to Town Pages Holdings plc................................... $ $
</TABLE>
The underwriters may, under certain circumstances, purchase up to an
additional 345,000 ADSs from Town Pages Holdings plc at the initial public
offering price less the underwriting discount.
Delivery of the ADSs will be made on or about March , 1999 in New York,
New York, against payment in immediately available funds.
------------------------
SECURITY CAPITAL TRADING, INC.
----------------
Prospectus dated March , 1999
------------------------
<PAGE>
ARTWORK FOR PROSPECTUS INSIDE FRONT COVER PAGE CONSISTS OF TWO PICTURES OF
TOWNPAGES KIOSKS AND ONE COPY OF A PRINT ADVERTISEMENT OF THE TOWNPAGES SERVICE.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
PROSPECTUS SUMMARY............................... 1
RISK FACTORS..................................... 6
EXCHANGE RATE INFORMATION........................ 18
USE OF PROCEEDS.................................. 19
DIVIDEND POLICY.................................. 20
CAPITALIZATION................................... 21
DILUTION......................................... 22
SELECTED FINANCIAL DATA.......................... 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS............ 24
BUSINESS......................................... 31
MANAGEMENT....................................... 46
PRINCIPAL STOCKHOLDERS........................... 56
<CAPTION>
PAGE
-----
<S> <C>
RELATED PARTY TRANSACTIONS....................... 57
DESCRIPTION OF SHARE CAPITAL..................... 59
DESCRIPTION OF AMERICAN DEPOSITARY RECEIPTS...... 64
TAXATION......................................... 71
SHARES ELIGIBLE FOR FUTURE SALE.................. 76
UNDERWRITING..................................... 77
LEGAL MATTERS.................................... 79
EXPERTS.......................................... 79
ADDITIONAL INFORMATION........................... 79
SERVICE OF PROCESS AND ENFORCEMENT OF
LIABILITIES.................................... 80
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS....... F-1
</TABLE>
------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY BE USED ONLY WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
IN CONNECTION WITH AN UNDERWRITTEN OFFERING, THE SEC RULES PERMIT THE
UNDERWRITERS TO ENGAGE IN TRANSACTIONS THAT STABILIZE THE PRICE OF OUR
SECURITIES. THESE TRANSACTIONS MAY INCLUDE, AMONG OTHER THINGS, PURCHASES FOR
THE PURPOSE OF FIXING OR MAINTAINING THE PRICE OF OUR SECURITIES AT A LEVEL THAT
IS HIGHER THAN THE MARKET WOULD DICTATE IN THE ABSENCE OF SUCH TRANSACTIONS. WE
DO NOT KNOW WHETHER THE UNDERWRITERS WILL ENGAGE IN ANY TRANSACTIONS OF THAT
SORT. IF THE UNDERWRITERS ENGAGE IN ANY TRANSACTIONS, OF THAT TYPE, THEY MAY
DISCONTINUE THEM AT ANY TIME.
------------------------
i
<PAGE>
PROSPECTUS SUMMARY
YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION REGARDING US AND THE SECURITIES WE ARE OFFERING FOR SALE BY MEANS OF
THIS PROSPECTUS AND OUR FINANCIAL STATEMENTS AND NOTES THERETO APPEARING
ELSEWHERE IN THIS PROSPECTUS. THE SUMMARY HIGHLIGHTS INFORMATION CONTAINED
ELSEWHERE IN THIS PROSPECTUS. IT IS NOT COMPLETE AND MAY NOT CONTAIN ALL OF THE
INFORMATION THAT YOU SHOULD CONSIDER BEFORE INVESTING IN THE ADSS.
------------------------
We publish our financial statements in pounds sterling. For your
convenience, this prospectus contains translations of certain pound sterling
amounts into United States dollar amounts. Unless otherwise indicated, all
amounts expressed in United States dollars are based upon conversions of amounts
of pounds sterling into United States dollars at the rate of $1.6628 per pound
sterling, the noon buying rate in New York City for cable transfers in pounds
sterling certified for customs purposes by the Federal Reserve Bank of New York
on December 31, 1998. See "Exchange Rate Information" for historical information
regarding the noon buying rate. We have not actually converted our assets in
pounds sterling into United States dollars. If we were to convert our assets in
pounds sterling into United States dollars the conversion would be at a
different rate.
------------------------
THE COMPANY
GENERAL BACKGROUND
We produce and deliver TownPages, an Internet-based interactive service
designed to provide comprehensive, up-to-date locally-focused information about
specified towns and cities in the United Kingdom in a graphically pleasing
format. TownPages, a portal to the Internet, is accessible through standard
connections to our Web site at www.townpages.co.uk. Our free-to-use touch-screen
public information point kiosks are a key element of our information delivery
system. We seek to place our kiosks at high traffic, high visibility locations
in covered communities. Our kiosks are intended to improve our brand recognition
and to generate additional traffic on TownPages. We believe that our
touch-screen kiosks are easily operated by people with no previous Internet or
computer experience. We currently rely on third parties to manufacture,
assemble, install and service our kiosks.
We believe that as users spend more time on the Web, they are increasingly
seeking information about local events, places of interest, shopping and other
information regarding the communities where they spend most of their time and
money. Businesses, in turn, are seeking cost-effective means to target
advertising and direct marketing efforts based on demographic characteristics,
specific interests, and geographic locations.
TownPages users can access information about each covered community's local
government and its services, tourist attractions, hotels, restaurants, public
transportation timetables, shopping, real estate listings, employment
opportunities, arts and entertainment events, community activities, recreation,
businesses, professional services, and local news, sports and weather.
Interactive sections, including our Town Diaries and Message Boards and
E-commerce features that we are beginning to introduce, permit users to enter
and edit information about local events, exchange messages and make certain
purchases.
We believe that business, governmental agency, and not-for-profit
subscribers can use TownPages to reach audiences targeted topically and
geographically on a more cost-effective basis than through traditional printed
advertising media. Our Internet-based systems and computer processing
capabilities permit quick updating and expansion of customers' displays and Web
sites, and rapid data collection, monitoring, and processing.
During the past 30 months, we tested the TownPages Web site, the
effectiveness of our touch-screen kiosks and our business plan to sell
advertisements and use local content to attract
1
<PAGE>
users to TownPages in a small town and a small city in the United Kingdom. We
intend to expand the TownPages database to cover, and install approximately
3,450 touch-screen public information point kiosks in, substantially all of the
major towns and cities in the United Kingdom during a three year national
roll-out of TownPages.
REVENUE SOURCES. We list certain basic contact information for local
governments and businesses free of charge. We charge subscribing advertisers for
more extensive listings and related services, including designing, producing and
maintaining Web sites and content on TownPages. Most of our enhanced format
services are sold under one year contracts. Banner display space is currently
sold for three month periods. We plan to expand our revenue sources as our
TownPages service, and use of the Internet itself, continue to expand and
change.
OPERATIONS TO DATE. As of the date of this prospectus, we have eight touch
screen kiosks in operation. From the commencement of our business in November
1995 through June 1998, we only had aggregate revenues of L25,620 ($42,601) and
incurred L1,110,214 ($1,846,064) in losses during that period. Our revenues have
increased since commercial operations commenced in the late spring of 1998.
Revenues for the third and fourth quarters of 1998 were L28,548 ($47,470) and
L1,080,519 ($1,796,687), respectively. We incurred losses of L444,184 ($738,589)
in the third quarter of 1998 and profits of L160,777 ($267,340) in the fourth
quarter. Work in the fourth quarter of 1998 on Web design contracts for four
customers accounted for approximately 96% of our 1998 net revenues.
OUR STRATEGY
We aim to make TownPages the United Kingdom's premier branded free use and
paid advertising, locally-focused information provider on the Internet by:
- LEVERAGING OUR MODEL TO ROLL OUT THE TOWNPAGES SERVICE.
- INSTALLING APPROXIMATELY 3,450 TOWNPAGES TOUCH-SCREEN PUBLIC INFORMATION
POINT KIOSKS DURING THE NATIONAL ROLL-OUT IN THE UNITED KINGDOM.
- ENTERING INTO EXCLUSIVE INFORMATION SERVICE ARRANGEMENTS WITH LOCAL
GOVERNMENTS IN THE UNITED KINGDOM TO OBTAIN LOCALLY-FOCUSED CONTENT.
- EXPANDING STRATEGIC PARTNERSHIPS WITH INFORMATION PROVIDERS.
- CONTINUING TO BUILD STRATEGIC RELATIONSHIPS WITH OTHER BUSINESSES.
- PURSUING ADDITIONAL REVENUE-GENERATING ACTIVITIES, INCLUDING EXPANDED
FOCUS ON E-COMMERCE.
- CONTINUALLY ENHANCING TOWNPAGES' FUNCTIONALITY AND PERFORMANCE.
CORPORATE BACKGROUND
Our wholly-owned subsidiary, Town Pages Limited, was incorporated and
started operations in 1995 as an English corporation. Town Pages Holdings plc
was incorporated in July 1998 as an English corporation, and acquired all of the
shares of Town Pages Limited on December 15, 1998. Our principal executive
offices are at 11 Market Square, Alton, Hampshire GU34 1HD, United Kingdom,
telephone: 011-44-1420-543-468; facsimile: 011-44-1420-541-322.
USE OF PROCEEDS
We intend to use the net proceeds of this offering:
- to roll out the TownPages service across the United Kingdom,
- to retire indebtedness, and
- for general corporate purposes.
RISK FACTORS
An investment in the securities we are offering involves a high degree of
risk. Prospective investors should carefully review the section entitled "Risk
Factors" as well as other information provided in this prospectus.
2
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
ADSs offered by us........................... 2,300,000 ADSs, representing 2,300,000
ordinary shares.
Ordinary shares to be outstanding after the
offering................................... 7,300,000 ordinary shares.
Voting Rights................................ Holders of American depositary receipts
representing the ADSs, acting through Bankers
Trust Company, are entitled to the same
voting rights as holders of ordinary shares.
Dividends.................................... The ordinary shares represented by the ADSs
will be eligible for any dividend declared in
respect of any period subsequent to the
closing of this offering. No dividends will
be paid for the foreseeable future.
Proposed Nasdaq National Market Symbol....... "TPGS" for the ADSs.
</TABLE>
------------------------
EXCEPT AS NOTED, ALL OF THE INFORMATION IN THIS PROSPECTUS ASSUMES THAT
NEITHER THE WARRANTS TO BE ISSUED TO THE REPRESENTATIVE OF THE UNDERWRITERS OR
THE UNDERWRITERS' OVER-ALLOTMENT OPTION ARE EXERCISED, AND DOES NOT REFLECT THE
ISSUANCE OF ANY OF OUR 700,000 ORDINARY SHARES AVAILABLE FOR FUTURE GRANTS OF
OPTIONS UNDER OUR EXECUTIVE SHARE OPTION PLAN, INCLUDING OPTIONS COVERING
190,000 ORDINARY SHARES WHICH WE PLAN TO ISSUE TO CERTAIN DIRECTORS, OFFICERS,
AND EMPLOYEES EFFECTIVE AS OF THE COMMENCEMENT OF THIS OFFERING.
------------------------
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These forward-looking
statements are not historical facts, but rather are based on our current
expectations, estimates and projections about our industry, our beliefs and
assumptions. Words including "may," "could," "would," "will," "anticipates,"
"expects," "intends," "plans," "projects," "believes," "seeks," "estimates" and
similar expressions are intended to identify forward-looking statements. These
statements are not guarantees of future performance and are subject to certain
risks, uncertainties and other factors, some of which are beyond our control,
are difficult to predict and could cause actual results to differ materially
from those expressed or forecasted in the forward-looking statements. These
risks and uncertainties are described in "Risk Factors" and elsewhere in this
prospectus. We caution you not to place undue reliance on these forward-looking
statements, which reflect our management's view only as of the date of this
prospectus. We are not obligated to update these statements or publicly release
the result of any revisions to them to reflect events or circumstances after the
date of this prospectus or to reflect the occurrence of unanticipated events.
------------------------
ACQUISITION OF TOWN PAGES LIMITED
Town Pages Holdings plc was incorporated on July 31, 1998. We acquired all
of the share capital of Town Pages Limited on December 15, 1998. In that
transaction, we exchanged approximately 66.208 of our ordinary shares for each
ordinary share owned by a shareholder of Town Pages Limited. Town Pages Holdings
plc conducted no operations prior to that acquisition transaction. Town Pages
Holdings plc has no material assets or liabilities other than our ownership
interest in Town Pages Limited.
3
<PAGE>
Consequently, all references in this prospectus to operations and financial
condition for all fiscal periods prior to that date are to the operations and
financial condition of Town Pages Limited. Town Pages Limited had virtually no
operations, revenues, or expenses during the period from November 5, 1995
through December 31, 1995.
------------------------
REPORTS AND FILINGS TO BE MADE BY US
We have agreed to furnish or make available to our shareholders and to file
with the Commission reports on the forms under the Exchange Act required to be
filed by foreign issuers. In accordance with the requirements of the Exchange
Act, we will file an annual report on Form 20-F and other information under
cover of Form 6-K with the Commission. We have also agreed to furnish or make
available to our shareholders and file with the Commission reports that are
substantially similar in form, content and frequency as the reports that we
would be required to file if we were a United States corporation filing reports
under the Exchange Act, including reports similar to those filed on Form 10-Q
Quarterly Reports and Form 8-K Periodic Reports. We have agreed to furnish
copies of these reports to Bankers Trust Company promptly after they have been
filed with the Commission. Our financial statements included in those reports
will be prepared in accordance with United States generally accepted accounting
principles, will express all amounts in British pounds sterling and will also
indicate the appropriate amounts in United States dollars in accordance with the
rules of the Commission. As a foreign private issuer we are exempt from the
rules under the Exchange Act prescribing the furnishing and content of proxy
statements and prohibiting short-swing trading by, and requiring certain share
ownership reporting by, directors, officers, and 10% shareholders.
4
<PAGE>
SUMMARY FINANCIAL DATA
The data below has been prepared in accordance with United States generally
accepted accounting principles except as noted in the next sentence, and is
derived from the consolidated financial statements and the notes thereto
appearing elsewhere in this prospectus, audited by Ernst & Young, independent
auditors. For your convenience, certain pounds sterling amounts have been
translated into U.S. dollar amounts at the December 31, 1998 noon buying rate in
New York City for cable transfers. See "Exchange Rate Information." Pro forma
summary financial data has been adjusted to give effect to the conversion of
L850,000 ($1,413,380) of our indebtedness to affiliates into Series A preferred
shares. See "Related Party Transactions." Pro forma as adjusted summary balance
sheet data has been adjusted to give effect to the sale by us of 2,300,000 ADSs
at an assumed initial public offering price of L6.01 ($10.00) per ADS.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1996 1997 1998 1998
-------------- ----------- ------------ -------------
AMOUNTS IN POUNDS STERLING AMOUNTS IN
U.S. DOLLARS
<S> <C> <C> <C> <C>
SUMMARY OF OPERATIONS DATA
Revenues............................................... L 6,225 L 8,359 L1,120,103 $ 1,862,507
Gross profit/(loss).................................... (15,525) (35,422) 376,473 625,999
Operating expenses..................................... 149,809 293,655 1,176,733 1,956,671
Net loss............................................... L(166,909) L(346,564) L (872,096) $ (1,450,121)
Basic and diluted net loss per ordinary share.......... L (0.10) L (0.07) L (0.17) $ (0.29)
-------------- ----------- ------------ -------------
-------------- ----------- ------------ -------------
Shares used in computing basic and diluted net
loss per ordinary share.............................. 1,672,225 5,000,000 5,000,000 5,000,000
-------------- ----------- ------------ -------------
-------------- ----------- ------------ -------------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ACTUAL PRO FORMA PRO FORMA AS ADJUSTED
---------------------------- -------------------------- ----------------------------
$ $ $
L L L
Balance sheet data:
Working capital................ L(1,345,949) $ (2,238,044) L(495,949) $ (824,664) L10,936,576 $ 18,185,336
Total assets................... 1,631,931 2,713,575 1,631,931 2,713,575 12,126,063 20,163,215
Deferred revenue............... 228,244 379,524 228,244 379,524 228,244 379,524
Debenture loan................. 1,682,190 2,797,146 832,190 1,383,766 -- --
Total shareholder's equity (net
capital deficiency).......... L(1,221,121) $ (2,030,480) L(371,121) $ (617,100) L11,061,404 $ 18,392,900
</TABLE>
5
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE MAKING A
DECISION TO INVEST IN US. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR
BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS COULD BE MATERIALLY
ADVERSELY AFFECTED. IF THAT HAPPENS, THE TRADING PRICE OF OUR ADSS COULD
DECLINE, AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT. THIS PROSPECTUS
CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. OUR
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF MANY FACTORS, INCLUDING THE RISKS
FACED BY US DESCRIBED BELOW AND ELSEWHERE IN THIS PROSPECTUS.
WE HAVE A SHORT OPERATING HISTORY
We commenced our business in November 1995 but conducted no meaningful
operations until 1996 and only conducted experimental prototype operations from
that date until the Spring of 1998. Accordingly, we have a limited operating
history upon which you can evaluate our business and prospects. Our historical
data is of limited value in projecting future operating results. You must
consider our business in light of the risks, expenses and problems frequently
encountered by companies with a limited operating history.
WE HAVE INCURRED NET LOSSES SINCE COMMENCING BUSINESS AND EXPECT FUTURE LOSSES
We have had limited revenues to date. We have not shown a profit in our
annual operations to date. We have incurred accumulated net losses since
inception through December 31, 1998 of approximately L1.4 million ($2.3
million). We had an accumulated stockholders' deficit of approximately L1.2
million ($2.0 million) at December 31, 1998. Since we intend to continue to
heavily invest in personnel, brand promotion, infrastructure and expansion into
additional markets, we expect significant additional net losses to continue on
an annual and quarterly basis until at least late in the year 2000. Our sales
may not continue to grow, we may never achieve profitability and, if we do
achieve profitability, we may not be able to maintain profitability.
OUR FUTURE REVENUES ARE UNPREDICTABLE AND OUR FINANCIAL RESULTS MAY FLUCTUATE
Our historical financial data is not reliable as a basis upon which to
predict our future revenues or operating expenses for a number of reasons,
including our limited operating history, the emerging nature of our Internet
industry category, and our growth strategy. Our financial results may fluctuate
significantly because of several factors, many of which are beyond our control.
These factors include:
- specific economic conditions relating to the Internet,
- usage of the Internet,
- demand for advertising on our Web site and demand for Internet-based
advertising in general,
- changes in advertising rates as a result of competition or other factors,
- seasonal trends in advertising,
- the advertising budgets of our existing and potential customers,
- demand for enhanced listing services on our Web site,
- changes in our distribution relationships with Internet service providers
or other third parties,
- demand for our services,
- incurrence of costs relating to acquisitions of businesses or
technologies,
- incurrence of other charges in connection with the services offered by us
and our competitors,
- introduction of enhanced services by us or our competitors,
- market acceptance of new services,
- delays in the introduction of services or enhancements provided by us or
our competitors,
6
<PAGE>
- changes in our pricing policies or those of our competitors,
- capacity constraints, dependencies on Internet/telecommunications/computer
infra-structure, and related technical difficulties, downtimes, or
"Internet brownouts," and
- general economic conditions.
The relatively new industry in which we are engaged has not been tested in a
recessionary economic environment where budget constraints and contraction in
income available for discretionary purchases could reduce the use of our
services.
WE MAY NEED TO RAISE ADDITIONAL CAPITAL IN THE FUTURE
We had a working capital deficit of L1,345,949 ($2,238,044) at December 31,
1998. We will depend upon the net proceeds of this offering, revenues from
operations, and borrowings under a credit facility which we will seek to
establish upon completion of this offering, to meet our capital expenditure
requirements and fund continued losses during our projected three year United
Kingdom roll out. There is no assurance that we will achieve projected revenues,
that bank borrowings will be available to us on commercially attractive terms or
at all, or that the costs actually incurred to expand TownPages over the next
three years will not exceed our budget. Also, if we elect to expand our
operations outside the United Kingdom or to add services or other capabilities
not presently contemplated in our three year plan, either alone or with a
strategic partner, the net proceeds from this offering, revenues from operations
and any available bank borrowings may be insufficient to meet our capital
requirements for that expansion. If additional funds were to be required for any
of those reasons, we would be unable to complete our expansion as planned and
our business and financial condition would be seriously adversely affected if we
were unable to raise additional funds on acceptable terms, in timely fashion, or
at all. There is no assurance that any additional financing will be available on
commercially attractive terms, in timely fashion, in sufficient amounts, or at
all.
If we raise additional funds through the issuance of equity or convertible
debt securities, the percentage ownership of Town Pages Holdings plc held by
existing shareholders, including holders of our ADSs, will be reduced and those
shareholders may experience significant dilution. In addition, new securities
may contain certain rights, preferences or privileges that are senior to those
of our ordinary shares and ADSs. See "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
OUR BUSINESS IS INCREASINGLY COMPETITIVE
The markets for local interactive content and services are highly fragmented
and intensely competitive. There are relatively low barriers to entry so we
expect competition to intensify. We compete on the Internet with Internet
service providers, online service providers, search engine and other site
aggregation companies, services that sponsor communities of personal Web sites,
and various Web site operators and content providers. We also compete with more
traditional advertising media, such as print, radio, and television media, for a
share of advertisers' total advertising budgets.
UNITED KINGDOM COMPETITORS COULD DUPLICATE OUR STRATEGY AND REDUCE ITS
EFFECTIVENESS
United Kingdom-based companies, such as British Telecommunications plc (BT
Touchpoint), KDM International plc (County Web), Freepages plc (Scoot), Thomson
Directories Ltd. (ThomWeb), Yellow Pages, a division of British
Telecommunications plc (Yell), and Time Out Group Ltd. (TimeOut.com) all offer
services in the United Kingdom that offer some of the features of TownPages.
British Telecommunications completed a test program in mid-1998 of approximately
200 touch-screen kiosks offering the BT Touchpoint service. A competing kiosk
program could dilute our sales and the marketing effectiveness of the kiosks
which are a central part of our own strategy. Other non-United Kingdom-based
companies
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could enter the market and duplicate our strategy as well.
MANY ACTUAL AND POTENTIAL COMPETITORS HAVE STRONG BRAND NAMES OR GREATER
RESOURCES THAN US
Many of our current and potential competitors have substantially greater
human and financial resources, experience, and brand name recognition than us.
These companies may have significant competitive advantages through other lines
of business and existing business relationships.
Some U.K.-based companies, such as British Telecommunications, have
substantially greater resources than we do. Some U.K.-based services, such as
ThomWeb, Yell, and TimeOut.com, have strong brand name recognition with which to
compete against us.
World-wide, there are services presently focused on countries other than the
United Kingdom whose high brand recognition and financial and other resources
far in excess of our own could make them serious competitive threats in the
future. Digital City, operated by Digital City, Inc., a company wholly-owned by
America Online, Inc. and Tribune Company, Sidewalk, operated by Microsoft
Corporation, Zip 2, operated by Zip2 Corporation, CitySearch, operated by
Ticketmaster Online-CitySearch, and Around Town operated by WebTV Networks,
Inc., which is owned by Microsoft Corporation, all fall into that category.
Services including GeoCities, TheGlobe.com, and Xoom sponsor communities of
personal Web sites which also seek to create topically or geographically
segregated online audiences for advertisers. GeoCities, recently opened an
office in London, England. Search engine and other site aggregation companies
such as Excite, Inc., which operates City.Net, Lycos, Inc., which operates Lycos
City Guide, and Yahoo! Inc., which operates Yahoo! Local, primarily aggregate
links to sites providing local content, but are also potential competitors, as
shown by Yahoo! Inc.'s announcement of an agreement to acquire GeoCities.
WE MUST EXPAND QUICKLY OR COMPETITORS MAY COPY OR BLOCK OUR STRATEGY
We believe that we must rapidly establish the TownPages service as the
premier branded free use and paid advertising, locally-focused information
provider on the Internet in the United Kingdom in order to attract the maximum
amount of traffic to our Web site and increase our customer base. If we fail to
do so, competitors may copy our business strategy or take other steps to prevent
us from obtaining a leading market share in those markets and adversely affect
our business. Therefore, we intend to deploy significant resources and pursue an
aggressive brand marketing and growth strategy and roll out the TownPages
service to cover every major town and city in the United Kingdom during the
three years following completion of this offering.
WE HAVE NOT OPERATED TOWNPAGES ON A BROAD SCALE AND WE DO NOT HAVE EXPERIENCE IN
MANAGING RAPID GROWTH
To date, we have only introduced TownPages into Alton and Winchester, a
small town and a small city near London, England. There is no assurance that we
will successfully manage the planned launch of TownPages in additional markets
in a cost-effective or timely manner while maintaining high levels of service
and reliability necessary to establish and maintain a reputation for quality.
THE PLANNED EXPANSION OF TOWNPAGES WILL STRAIN OUR RESOURCES
The pursuit of our business strategy will place a significant strain on our
managerial, operational and financial resources. We will need to improve our
financial and management controls, reporting systems and procedures. We will
also have to expand, train and manage our work force for marketing, sales and
technical support, product development, site design, and network and equipment
repair and maintenance, and manage multiple relationships with various
customers, strategic partners and other third parties. We will need to
continually expand and upgrade our technology infrastructure and systems and
ensure continued high levels of
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service, speedy operation, and reliability. In addition, we will have to improve
our methods for measuring the performance and commercial success of our
different products to better respond to advertiser demands for information on
product effectiveness and to better determine which products and services can be
developed most profitably.
To achieve our objectives, we may have to acquire technologies or products
or enter into strategic alliances and acquisitions, although we have no plans or
agreements to do so at the present time. For those initiatives to succeed, we
must make our existing technology, business, and systems work effectively with
those of our strategic partners and any acquired properties without undue
expense, distraction of management from other priorities or other disruptions to
our existing business.
OUR BRAND AND REPUTATION WILL BE DAMAGED IF WE FAIL TO SUCCESSFULLY MANAGE OUR
PLANNED EXPANSION
If our service, or any new feature, is not received favorably, whether due
to any shortcoming in our product or operations or factors beyond our control,
our reputation and the TownPages brand will be damaged. Our business, financial
condition, and results of operations will be materially adversely affected if we
fail to manage growth challenges successfully.
WE MUST TAKE THE RISK OF INTRODUCING NEW SERVICES IN ORDER TO COMPETE
We plan to introduce new and expanded services, including E-commerce
services, on TownPages in order to generate additional revenues, attract more
consumers and respond to competition. There can be no assurance that we will be
able to offer any new services in a cost-effective or timely manner or that any
efforts will be successful. Furthermore, any new service we launch that is not
favorably received by consumers could damage our reputation or our brand name.
Expansion of our services in this manner will also require significant
additional expenses and development and may strain our management, financial and
operational resources. Our inability to generate revenues from expanded services
sufficient to offset their cost could have a material adverse effect on our
business, financial condition and results of operations.
ESTABLISHING AND MAINTAINING OUR BRAND RECOGNITION AND REPUTATION ARE ESSENTIAL
TO OUR SUCCESS
We believe that our success will depend to a large degree on our ability to
successfully establish and maintain our brand recognition and reputation. In
order to maintain a good reputation and strong brand name, we will need to
invest heavily in our marketing and maintain high standards for actual and
perceived quality, usefulness, reliability, security and ease of use of our
services. Even if we continue to provide good service to our customers, factors
outside of our control, including actions by organizations that are mistaken for
us, could affect our brand and the perceived quality of our services, thereby
damaging our business.
WE RELY UPON THIRD PARTIES FOR EQUIPMENT AND FOR KIOSK MANUFACTURE, ASSEMBLY,
INSTALLATION, MAINTENANCE AND REPAIR
Although our computer and network hardware and our kiosks are assembled from
standard components which may be outsourced from a number of manufacturers and
distributors, we have no equipment manufacturing capacity and will be dependent
upon the timely delivery of quality equipment by those manufacturers and
distributors. Furthermore, our kiosk assembly and installation capacity, and our
equipment and kiosk maintenance and repair capacity, is quite limited. We will
be dependent upon third party services for the timely, cost-effective, and
proper installation, maintenance, and repair of our touch-screen kiosks and for
the maintenance and repair of our equipment and network infrastructure. Failure
by any of these third parties to perform as we require could materially
adversely affect our business, operations, and financial condition.
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KEVIN R. LEECH CONTROLS US
After we complete this offering, a corporation wholly-owned by Kevin R.
Leech, one of our directors, will beneficially own 61.6% of our outstanding
ordinary shares. Accordingly, Mr. Leech will control us and will have the
ability to elect and/or remove all of the members of our board of directors and
to approve significant corporate transactions, including key mergers and
acquisitions and subsequent financing transactions. He will also have the
ability to delay or prevent a change in our control and to discourage a
potential acquiror of us or our shares.
KEVIN R. LEECH, A DIRECTOR AND OUR PRINCIPAL STOCKHOLDER, WILL RECEIVE CERTAIN
BENEFITS FROM THIS OFFERING AND MAY HAVE CONTINUING CONFLICTS OF INTEREST
Mr. Leech is a director and principal shareholder of other high-technology
companies, including topjobs.net plc. He is a 25% shareholder of Leisure
Concepts International, which owns 50% of Travel the Net Ltd., currently one of
our largest customers and the exclusive provider of the travel "channel" on
TownPages. While we do not believe that those companies represent a competitive
threat to us now or in the foreseeable future, it is possible that they may be
competitors at some future date, or that conflicts of interest may arise from
those relationships.
Upon completion of this offering, a corporate affiliate wholly-owned by Mr.
Leech will convert L850,000 ($1,413,380) owed to it by Town Pages Limited into
850,000 of our Series A preferred shares, which will have priority over our
ordinary shares with respect to dividend and liquidation rights and are
convertible into ordinary shares at 120% of the initial public offering price
per ADS, commencing one year from the completion of this offering. Upon
completion of this offering, the balance of the indebtedness owed to that
corporate affiliate, presently anticipated to be approximately L1,047,000
($1,741,000) will be repaid from the net proceeds of this offering. See "Related
Party Transactions."
CERTAIN OTHER EXECUTIVE OFFICERS WORK FOR OTHER COMPANIES AND MAY HAVE CONFLICTS
OF INTEREST
Mr. Andrew Neville Lyndon-Skeggs, our President and Managing Director, is
the founder, Managing Director, and the beneficial owner of all of the shares of
Westbrook Property Developments Ltd., which has assigned the lease for our
executive offices to our operating subsidiary. See "Related Party Transactions."
Mr. Lyndon-Skeggs' responsibilities with regard to that company could
potentially prevent him from working full-time as our President and Managing
Director, although that has not occurred to date and we do not expect that to
occur in the future. Westbrook Property Developments Ltd. is not one of our
competitors nor is it expected to be a competitor at any time in the foreseeable
future.
Mr. Richard J. Smith, our Chief Financial Officer, devotes the greater part
of his time to his duties as the Finance Director for Kevin R. Leech's portfolio
of investments, rather than to duties as our Chief Financial Officer. Although
we believe that Mr. Smith is devoting sufficient time to the duties presently
required of him as our Chief Financial Officer, we are currently engaged in a
search for a full-time Chief Financial Officer, to be engaged as soon as
possible after the completion of this offering. However, there is no assurance
that we will be successful in replacing Mr. Smith in that position quickly or at
all. Mr. Smith's role as Finance Director for Mr. Leech's portfolio of
investments could result in a conflict of interest at some time, but we do not
currently anticipate that any material conflict of interest will occur in the
foreseeable future.
Mr. Barry B. J. Charles, our Vice President, devotes the greater part of his
time to various projects as a consultant and to his personal investments, rather
than to duties as our Vice President. Mr. Charles' other interests could result
in a conflict of interest at some time, but we are not aware of any situation in
which he is presently involved which is likely to constitute a conflict of
interest in the foreseeable future.
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WE CURRENTLY DEPEND ON A SMALL NUMBER OF CUSTOMERS FOR A LARGE PORTION OF OUR
REVENUES
A total of L1,079,264 ($1,794,600), or approximately 96%, of the L1,120,103
($1,862,507) revenues we earned in our fiscal year ended December 31, 1998, was
earned for Web site design services under a total of four contracts with four
customers. Our work for Travel the Net Ltd., All-Cars.com Ltd., Location
Developments Limited, and Medic Media Inc. accounted for approximately 14%, 19%,
33%, and 30%, respectively, of our revenues. Our business and financial
condition would be materially adversely affected if we do not obtain substantial
additional business from those customers, or if we lose the business of any of
those customers, and if we fail to obtain substantial additional business from
other customers.
WE CURRENTLY DEPEND ON TWO SUBCONTRACTORS TO PERFORM A SUBSTANTIAL AMOUNT OF
THE SERVICES UNDER THE FOUR WEB SITE DESIGN CONTRACTS THAT CURRENTLY ACCOUNT FOR
A LARGE PORTION OF OUR REVENUES
If the subcontractors who are performing a substantial part of the four Web
site design contracts that currently account for a large portion of our revenues
be unable or unwilling to perform their obligations under the subcontract
agreements, our business and financial condition could be materially adversely
affected.
WE MAY NOT BE ABLE TO SUCCESSFULLY PROTECT OUR PROPRIETARY RIGHTS
Our success and ability to compete is dependent in part on the protection of
our original content for the Internet and on the goodwill associated with our
trademarks, trade names and trade secrets. A substantial amount of uncertainty
exists concerning the application of copyright laws to the Internet, and there
can be no assurance that existing laws will provide adequate protection for our
original content. In addition, because copyright laws do not prohibit
independent development of similar content, there can be no assurance that
copyright laws will provide us with any competitive advantage.
We will rely on trade secret and copyright laws to protect the proprietary
technologies, primarily in the form of software, that we may develop in the
future to manage and improve our Web site and advertising services, but there
can be no assurance that those laws will provide sufficient protection to us,
that others will not develop technologies that are similar or superior to ours,
or that third parties will not copy or otherwise obtain and use our technologies
without authorization.
Policing unauthorized use of our proprietary technology and other
intellectual property rights could entail significant expense and could be
difficult or impossible, particularly given the global nature of the Internet
and the fact that the laws of other countries may afford us little or no
effective protection of our intellectual property.
In addition, we rely on certain technology licensed from third parties, and
may be required to license additional technology in the future. There can be no
assurance that these third-party technology licenses will be available or will
continue to be available to us on acceptable commercial terms or at all. If we
are unable to enter into and maintain any of these technology licenses, it could
damage our business.
OTHER COMPANIES MAY CLAIM WE ARE INFRINGING UPON THEIR PROPRIETARY TECHNOLOGY
Given the nature of our business, we can not give assurance that third
parties will not bring claims of copyright or trademark infringement against us
or claim that our use of certain technologies violates a patent. Further, there
can be no assurance that third parties will not claim that we have
misappropriated their creative ideas or formats or otherwise infringed on their
proprietary rights in connection with our Internet content. We are not aware of
any claims. Any claims of infringement, with or without merit, could be time
consuming to defend, result in costly litigation, divert management attention,
require us to enter into costly royalty or licensing arrangements or prevent us
from using important technologies or methods, any of which could damage our
business and financial condition.
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WE NEED TO CONTINUALLY OBTAIN OR DEVELOP AND DISPLAY USEFUL CONTENT IN AN
ATTRACTIVE FASHION TO ATTRACT USERS AND ADVERTISERS
Our success depends in part upon our ability to deliver interactive,
locally-focused content in order to attract consumers with demographic
characteristics valuable to our customers. Rapidly changing technology, emerging
industry standards and consumer requirements that are subject to rapid change
and frequent new service introductions characterize the markets for our
services. These characteristics are exacerbated by the emerging nature of the
local interactive content and service market and the expectation that many
companies may introduce new Internet products and services addressing this
market in the near future. There can be no assurance that we will be successful
in obtaining or developing and providing new content and services or enhancing
our existing local information services on a timely basis, or that our content
and services will effectively address requirements of consumers or our customers
or achieve market acceptance.
WE MAY BE HELD LIABLE FOR ONLINE CONTENT PROVIDED BY THIRD PARTIES
We may face potential liability for defamation, negligence, copyright,
patent or trademark infringement and other claims based on the nature and
content of the materials that appear on TownPages. Claims of this type have been
brought, and sometimes successfully pressed, against online services. Although
we carry general liability insurance, our insurance may not cover all claims or
may not be adequate to indemnify us for any liability that may be imposed. Any
imposition of liability, particularly liability that is not covered by insurance
or is in excess of our insurance coverage, could have a material adverse effect
on our reputation, business, financial condition and results of operations.
USERS MAY CONFUSE OTHER COMPANIES' DOMAIN NAMES WITH OUR OWN
We have registered with the InterNIC registration service, the Internet
domain names www.townpages.co.uk and www.townpages.org. However, there are other
substantially similar domain names which are registered by companies which may
compete with us. In addition, new domains may be added in the future, allowing
combinations and similar domain names that may be confusingly similar to our
own. There can be no assurance that potential users and advertisers will not
confuse our domain name with other similar domain names. If that confusion
occurs,
- we may lose business to a competitor, and
- have to adjust our advertising rates and service fees accordingly, or
- some users of our services may have negative experiences with other
companies on their Web sites that those users erroneously associate with
us. See "Business--Intellectual Property."
OUR BUSINESS DEPENDS ON ACCEPTANCE OF THE INTERNET AS AN EFFECTIVE ADVERTISING
MEDIUM AND COMMUNICATIONS AND INFORMATION SEARCH TOOL
The Internet is still a relatively new medium for advertising,
communications, and information search and retrieval. Advertisers may not agree
with our view that Internet advertising can be an effective means for satisfying
their needs. We may be unable to persuade a large enough number of consumers and
advertisers that our service satisfies their needs and does so better than
traditional methods for advertising, communications, or information search and
retrieval, or other Internet providers. Use of the Internet by consumers and
advertisers would be hindered if the reliability, speed, security, and ease in
use of the Internet and increased access to the Internet, through personal
computers or otherwise, does not continue to improve. Also, as consumers and
potential customers develop an awareness of how best to use the Internet, they
may find that our Web site and services do not satisfy their demands. If that
happens, we may be unable to adapt our services to meet those demands.
Furthermore, potential customers may not agree on standards for determining how
to measure the effectiveness of Internet advertising, or whether it is more
effective than traditional advertising methods.
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OUR BUSINESS COULD BE HARMED BY ACTUAL OR THREATENED PENETRATION OF OUR NETWORK
SECURITY
Although we are not aware of any attempts by programmers or "hackers" to
penetrate our network security, there can be no assurance that those actions
will not occur in the future. A party who is able to penetrate our network
security could misappropriate proprietary information or cause interruptions in
the operation of TownPages, which could have a material adverse effect on our
business, financial condition and results of operations. We may be required to
expend significant capital and resources to protect against the threat of
security breaches or to alleviate problems caused by security breaches. Concerns
over the security of Internet transactions and the privacy of users may also
inhibit the growth of the Internet, particularly as a means of conducting
commercial transactions. Security breaches or the inadvertent transmission of
computer viruses could expose us to a risk of loss or litigation and possible
liability. We do not have "errors and omissions" or other insurance coverage
specifically against losses which might be incurred due to computer viruses or
product defects. Our business, results of operations, and financial condition
could be materially adversely effected if contractual provisions attempting to
limit our liability in these areas are not successful or enforceable, or if
other parties do not accept these contractual provisions as part of our
agreements.
OUR BUSINESS DEPENDS SPECIFICALLY ON THE INTERNET INFRASTRUCTURE
Many of the Internet service providers, online service providers and other
Web site operators on whom we depend have experienced significant service
slowdowns, malfunctions, outages and capacity limitations. We also depend upon
the reliability, speed, data capacity, ease of use, accessibility and security
of the Internet as well as its continued development and acceptance for
commercial use generally. A satisfactory Internet experience may also depend on
the proper functioning and the continued development of equipment such as high
speed modems and personal computers. New protocols or standards have been
developed to handle new systems and increased level of activity at higher speeds
in compliance with governmental regulations. Not all software and equipment
protocols and standards are compatible. Users may experience difficulties due to
computer-related, telecommunications, or other equipment, software, or system
failures or shortcomings unrelated to our services. If users experience these
difficulties, our reputation could be harmed. Moreover, failure of Internet
service providers or online service providers to provide access to the Internet
to our customers and users would prevent them from accessing our Web site, which
could result in reducing the marketability of our services and an eventual loss
of customers.
WE MUST CONSTANTLY ADAPT TO RAPID TECHNOLOGICAL CHANGE
Our industry is characterized by rapidly changing technology, evolving
industry standards, frequent new service and product introductions and
enhancements, and changing customer demands. Our success will depend, in part,
on our ability to adapt rapidly to these developments. We must maintain adequate
financial and technical resources to adapt to these changes or our systems and
technologies could become incompatible or inefficient due to rapidly evolving
software, computer hardware, and telecommunications standards.
OUR BUSINESS WOULD BE HARMED IF SERVICE WAS INTERRUPTED DUE TO HARDWARE,
SOFTWARE, TELECOMMUNICATIONS OR OTHER BREAKDOWNS
Our operations may be interrupted if the computer, computer-related,
telecommunications, or other equipment and software owned by us or by service
providers upon whom we depend are damaged or prevented from operating. If we
experience a temporary or permanent business interruption, whether due to a
casualty or an operating malfunction, as a result of a move or otherwise, our
business, operations, and financial condition could be adversely affected. We do
not have any business interruption insurance, and our property insurance may not
cover that type of loss.
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YEAR 2000 RISK MAY ADVERSELY AFFECT US
The Year 2000 issue refers to the potential failures that computer systems
may incur as a result of the date change from 1999 to 2000. Virtually every
computer operation will be affected in some way by the Year 2000 issue. It is
uncertain what impact the Year 2000 issue will have on the Internet and the Web,
but major disruption is possible. We rely on telecommunications carriers to
transmit our Internet traffic over local and long distance networks. If their
networks fail for an extended period of time due to the Year 2000 issue, we will
no longer be able to operate our business, and the resulting inability of users
of our Web site to fully utilize our services would cause our business to
suffer.
We have assessed the extent to which the Year 2000 issue affects our
internal systems. Based upon our experience to date, we have commenced a
program, currently budgeted at approximately L5,000 ($8,300), which we believe
will correct any problems. However, there can be no assurance that actual costs
of compliance will not significantly exceed this amount. We are also currently
assessing the extent to which the Year 2000 issue will affect the systems of
companies upon which we rely or with which we have strategic relationships. Any
failure by these companies to resolve any Year 2000 issues on a timely basis, or
in a manner that is compatible with our systems, could significantly damage our
business and financial condition. Although we expect to incur costs in
correcting any Year 2000 issues arising as a result of our suppliers' handling
of their own Year 2000 issues, we cannot currently estimate those costs. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-- Year 2000."
WE ARE DEPENDANT ON OUR KEY MANAGEMENT
We depend upon our senior management team, led by Andrew Neville
Lyndon-Skeggs, to successfully implement our business strategy. If Mr.
Lyndon-Skeggs or other members of the senior management team become unable or
unwilling to continue in their present positions, our business and financial
conditions could be damaged. We do not currently maintain key man life insurance
on any of our officers.
WE MAY NOT BE ABLE TO ATTRACT AND RETAIN NEEDED TECHNICAL PERSONNEL
Currently, a large portion of our business involves Web site design,
development and maintenance and network and kiosk operations, maintenance and
repair. Our success depends in large part upon our ability to attract, train,
motivate and retain qualified technical personnel. We may be unable to do so,
particularly in view of the strong competition for individuals with Internet and
related technical experience.
WE MAY BECOME SUBJECT TO BURDENSOME GOVERNMENT REGULATION
There are currently few laws and regulations directly applicable to access
to or commerce on the Internet. However, due to the increasing popularity and
use of the Internet, it is possible that a number of laws and regulations may be
adopted, or existing laws or regulations may be applied differently, with
respect to the Internet, covering issues such as user privacy, pricing and
quality of services. These laws and regulations could hinder growth in use of
the Internet generally and decrease the acceptance of the Internet as a
communications and commercial medium, and could thereby cause our business to
suffer. In addition, several telecommunications carriers are seeking to have
telecommunications over the Internet regulated by agencies such as the Federal
Communications Commission in the United States in the same manner as other
telecommunications services. The costs of communicating on the Internet could
increase substantially as a result of this type of regulation in the United
States, the United Kingdom, or elsewhere, potentially slowing the growth in use
of the Internet.
The placement and operation of our external kiosks are also subject to
various local zoning and similar laws and regulations which could delay,
preclude, or increase the cost of kiosk installation and operation.
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WE MAY USE THE OFFERING PROCEEDS IN A MANNER DIFFERENT THAN THE ALLOCATIONS
INDICATED IN THIS PROSPECTUS
The proposed allocation of the net proceeds of the offering represents our
best estimate of the expected utilization of funds to finance our activities in
accordance with our management's current objectives and market conditions. Our
management and board of directors may actually allocate the funds in
significantly different proportions depending upon their assessment of our needs
at the time.
NEW INVESTORS WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION
The purchasers of our ADSs will incur immediate substantial dilution in net
tangible book value per share from the initial public offering price in the
amount of L4.49 ($7.48), assuming an initial public offering price of L6.01
($10.00) per ADS. Additional dilution may occur upon the conversion of our
Series A preferred shares, which will be issued to an affiliate of our
controlling shareholder simultaneously with the closing of this offering in
exchange for about L850,000 ($1,413,380) of debt. You may also be further
diluted if future stock options to purchase our ordinary shares or ADSs or if
the warrants to be issued to the underwriters' representative at the closing of
this offering are exercised. We plan to issue options covering 190,000 of our
ordinary shares, exercisable at the initial public offering price, to certain
directors, officers, and employees upon commencement of this offering.
EXISTING SHAREHOLDERS WILL BENEFIT DISPROPORTIONATELY FROM THIS OFFERING
Existing shareholders will benefit if a market for their securities develops
upon completion of this offering. Current stockholders will experience an
immediate increase in net tangible book value per ordinary share of L1.59 or
$2.64 per share, assuming an initial public offering price of L6.01 ($10.00) per
ADS. The average price per share paid by existing stockholders for their
ordinary shares is L0.03 ($0.06) per share, meaning that those stockholders
would have an average unrealized gain of L5.98 ($9.94) per ordinary share and an
aggregate unrealized gain of L29,900,000 ($49,700,000) upon the completion of
this offering, assuming a L6.01 ($10.00) initial public offering price per ADS.
See "Dilution."
In December 1998, certain business associates of Mr. Kevin R. Leech,
received, indirectly through Wing Capital Limited, immediately exercisable ten
year options from an affiliate of Mr. Leech to acquire from that affiliate
200,000 of our ordinary shares at a per share exercise price equal to L0.03
($0.06) per share. Those business associates would experience the same increase
in net tangible book value per share, and will realize the same average amount
of gain as our existing stockholders if they exercise the options immediately
upon completion of this offering. See "Related Party Transactions."
THE PRICE OF OUR SECURITIES MAY BE HIGHLY VOLATILE
The stock markets generally, and the Internet sector in particular, have
experienced and are likely to continue to experience, significant price and
volume fluctuations. This could result in sharp decreases in the price of the
securities we are offering hereby no matter how well or poorly we perform. The
trading price of our securities could also fluctuate significantly in response
to fluctuations in quarterly operating results, failures to meet analysts'
expectations, developments in the Internet industry and our business, and other
factors.
WE DO NOT PLAN TO PAY CASH DIVIDENDS
We are prohibited from paying cash dividends on our ordinary shares in any
year in which we do not first declare and pay a 9% dividend on our Series A
preferred shares. In any case, we do not currently intend to pay any cash
dividends. In addition, if we intended to pay dividends, under English corporate
law dividends are only payable out of distributable reserves, which are
essentially equivalent to retained earnings. We currently have no distributable
reserves and we cannot determine at this time if or when we will generate any.
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A SUBSTANTIAL NUMBER OF OUR ORDINARY SHARES ARE ELIGIBLE FOR FUTURE SALE
The market price of our ADSs could drop as a result of sales of substantial
amounts of our ordinary shares or ADSs in the public market following this
offering or the perception that such sales may occur. These factors could also
make it more difficult for us to raise funds through future offerings of stock.
The 2,300,000 ordinary shares in the form of ADSs that we are offering will
be freely tradable without restriction except for any shares purchased by our
"affiliates" as defined in Rule 144 under the Securities Act. In addition, if
the underwriters exercise their over-allotment option in part or in full, up to
345,000 additional ADSs will be issued and freely tradable, except for ordinary
shares purchased by our "affiliates."
Our remaining 5,000,000 outstanding ordinary shares are "restricted
securities" as defined in Rule 144. Those shares may only be resold if there is
an effective registration statement under the Securities Act covering those
shares or an exemption from registration under Rule 144 or otherwise is
available. The holders of all currently outstanding 5,000,000 ordinary shares
have agreed that they will not sell any ordinary shares without the prior
consent of the representative of the underwriters for a period of 365 days from
the effective date. We intend to register all ordinary shares reserved for
issuance under our stock option plan. Ordinary shares covered by such
registration will be eligible for resale in the public market, subject to Rule
144 limitations applicable to "affiliates" and to the lock-up agreements
described above.
Our stock options and warrants are likely to be exercised, if at all, at a
time when we otherwise could obtain a price for the sale of our ordinary shares
or ADSs that is higher than the exercise price per share of the options or
warrants. Any such exercise or the possibility of such exercise may impede our
efforts to obtain additional financing through the sale of additional securities
or make such financing more costly.
PREEMPTIVE RIGHTS MAY NOT BE AVAILABLE TO OUR ADS HOLDERS
Under English corporate law, whenever we issue new shares for cash, subject
to limited exceptions, we must grant to all of our shareholders, including
holders of our ADSs, preemptive rights to purchase a sufficient number of shares
to maintain their existing ownership percentage. These statutory preemptive
rights will not apply to our authorized but currently unissued shares for the
period commencing December 15, 1998 and ending on December 31, 2003, but will
apply thereafter. In any event, we may not be able to offer preemptive rights to
U.S. holders of ADSs unless an effective registration statement exists under the
Securities Act covering those rights and the underlying shares. We intend to
evaluate at the time of any rights offering the costs and potential liabilities
and benefits to us of enabling U.S. holders of ADSs to exercise preemptive
rights, and then make a decision whether to file such a registration statement.
If holders of ADSs are unable to exercise preemptive rights because no
registration statement is filed or effective, Bankers Trust will attempt to sell
the holders' preemptive rights if a viable secondary market exists and a profit
can be realized after expenses. Bankers Trust would then distribute the net
proceeds of the sale, net of Bankers Trust's fees and expenses, to the holders
of the ADSs. The equity interests of the holders of ADSs would be diluted
proportionately if they are unable to exercise preemptive rights.
YOU MAY BE SUBJECT TO BOTH UNITED STATES AND UNITED KINGDOM TAXES
We strongly urge you to consult with your tax advisors concerning the
consequences of investing in our ADSs. Our ADSs are being offered in the United
States, but we are organized under the laws of England and Wales. A U.S. holder
of our ADSs will be treated as the owner of the underlying ordinary shares for
purposes of U.S. and U.K. tax laws. Therefore, U.S. federal, state and local tax
laws and U.K. tax laws will apply to ownership of our ADSs and the underlying
ordinary shares. Tax laws of other jurisdictions may also apply.
16
<PAGE>
MARKET PRICE OF OUR ADSS MAY BE SUBJECT TO FOREIGN EXCHANGE FLUCTUATIONS
Fluctuations in the exchange rate between the British pound sterling and the
U.S. dollar are likely to affect the market price of the ADSs. For example, even
though our financial statements are reported in British pounds sterling, if the
value of the British pound sterling falls against the U.S. dollar, our earnings
per share in U.S. dollars would be reduced. This may adversely affect the price
at which our ADSs trade on U.S. securities markets.
UNITED STATES CIVIL LIABILITIES MAY NOT BE ENFORCEABLE AGAINST US
All of our directors and executive officers and certain of the experts named
in this prospectus are not residents of the United States and virtually all of
the assets of these persons and virtually all of our assets are located outside
the United States. As a result, it may not be possible for you to serve summons
and complaints within the United States upon these persons. Similarly, it may
not be possible to enforce in U.S. courts, against these persons or against us,
judgments of the U.S. courts based upon civil liability provisions of the U.S.
federal or state securities laws. In addition, it may be difficult for you in
original suits or in suits for the enforcement of judgments of U.S. courts to
enforce certain civil liabilities based upon U.S. federal or state securities
laws in England against us or our directors or executive officers, or our
experts.
UNDER U.K. LAW A VOTE OF 75% OF THE STOCKHOLDERS IS REQUIRED TO APPROVE CERTAIN
SIGNIFICANT CORPORATE TRANSACTIONS.
Under English law we are required to obtain the vote or consent of holders
of 75% of our outstanding ordinary shares to complete certain significant
transactions, including a merger with another corporation in some circumstances.
This may make it more difficult for us to complete a merger or sale of our
company which is deemed beneficial by our board of directors.
17
<PAGE>
USE OF PROCEEDS
We estimate that we will receive net proceeds of approximately L11,432,525
($19,010,000) from our sale of the 2,300,000 ADSs offered by this prospectus,
assuming an initial public offering price of L6.01 ($10.00) per ADS. If the
underwriters fully exercise their over-allotment option, we will receive net
proceeds of approximately L13,237,613 ($22,011,500). That amount is after
deducting estimated underwriting discounts and commissions and other fees and
expenses payable by us.
We expect to use approximately L10,286,595 ($17,104,550) of the net proceeds
to facilitate the roll out of the TownPages service in the United Kingdom and
related operations over the 12 months following completion of the offering in
the event we do not generate revenues from operations or obtain bank financing.
We intend to use approximately L1,047,000 ($1,741,000) of the net proceeds to
retire indebtedness, unless we refinance our indebtedness upon the completion of
this offering. The balance of the net proceeds, if any, including any amounts
not used to repay indebtedness, will be used for general corporate purposes.
To achieve our expansion and growth plans, we may also use a portion of the
net proceeds to acquire or invest in companies, technologies or expertise
complementary to our business. From time to time we evaluate potential
acquisitions of companies, technologies and expertise. We have no agreements for
acquisitions or investments of that nature at this time.
We currently intend to use funds for the expansion of the TownPages service
primarily for the following purposes:
- hiring and training additional marketing, sales, design, technical, and
administrative personnel;
- purchasing and installing approximately 3,450 touch-screen public
information point kiosks in the targeted towns and cities during the next
three years;
- introducing and incorporating into TownPages additional internal and
external Web sites offering new information and services;
- enhancing our server and networking infrastructure; and
- sales and marketing campaigns.
The proposed allocation of the net proceeds of the offering represents our
management's best estimate of and current intention concerning the expected use
of funds to finance our activities in accordance with our management's current
objectives and market conditions. Our management and board of directors may
allocate the funds in significantly different proportions depending upon their
assessment of our needs at the time. Pending use of funds as described above, we
intend to invest the net proceeds in investment-grade, interest-bearing
securities in the United Kingdom. See "Management's Discussion and Analysis of
Financial Condition and Results of Operation--Liquidity and Capital Resources."
Our working capital is currently provided pursuant to a discretionary
secured operating line of credit for our operating subsidiary, Town Pages
Limited, with Glen Investments Limited. Kevin R. Leech, a member of our board of
directors and the principal beneficial owner of our ordinary shares, is the
beneficial owner of 100% of the outstanding share capital of Glen Investments
Limited. Advances under the line of credit bear interest at 9% per annum, are
payable on demand, and are secured by a first security interest in all assets
and property of Town Pages Limited, our operating subsidiary. At December 31,
1998, Town Pages Limited owed approximately L1.8 million ($3.0 million)
inclusive of interest, under the line of credit. Upon completion of the
offering, L850,000 ($1,413,380), of the amount outstanding to Glen Investments
Limited, including interest, will be converted into 850,000 shares of our 9%
Series A preferred shares. The balance of the outstanding loans and indebtedness
will be repaid from the net proceeds of this offering or will be refinanced. We
are seeking to establish a
19
<PAGE>
new credit facility from a commercial lender effective upon completion of this
offering of up to L3.0 million ($5.0 million). We contemplate that any new line
of credit shall be secured by a first security interest in all of our assets and
advances under that line of credit shall be based upon agreed upon percentages
of our eligible accounts receivable. As of the date of this prospectus, we do
not have a commitment from any lender for a proposed credit facility. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Related Party Transactions."
Our management believes that the net proceeds of this offering, together
with revenues from current contracts and with borrowings under the contemplated
credit facility, will be sufficient to meet our projected cash needs through at
least the next 12 months. Also, our management believes that the net proceeds of
this offering, together with anticipated revenues from our operations and
borrowings under the contemplated credit facility, will be sufficient to meet
our projected cash needs through the next 36 months. However, there is no
assurance that we will achieve projected revenues, that bank borrowings will be
available to us on commercially attractive terms or at all, or that the costs
actually incurred to expand TownPages over the next three years will not exceed
our budget. Also, if we elect to expand our operations outside the United
Kingdom or to add services or other capabilities not presently contemplated in
our three year plan, either alone or with a strategic partner, the net proceeds
from this offering and any available bank borrowings may be insufficient to meet
our capital requirements for that expansion. If additional funds are required
for any of those reasons, we would be unable to complete our expansion as
planned and our business and financial condition would be seriously adversely
affected if we are unable to raise additional funds on acceptable terms, in
timely fashion, or at all. There is no assurance that any additional financing
will be available on commercially attractive terms, in timely fashion, in
sufficient amounts, or at all.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our securities. We
currently intend to retain future earnings, if any, to finance the development
and expansion of our business and, therefore, we do not anticipate paying any
cash dividends on our securities in the foreseeable future. Therefore, we do not
anticipate paying any cash dividends on our ordinary shares or ADSs in the
foreseeable future. Also, the terms of our Series A preferred shares prohibit
the payment of cash dividends on our ordinary shares in any year until we also
declare and pay a 9% dividend on our Series A preferred shares.
20
<PAGE>
CAPITALIZATION
The following table shows the short-term debt and capitalization of Town
Pages Holdings plc as of December 31, 1998, as follows: (1) our actual short
term debt and capitalization, (2) on a pro forma basis after giving effect to
the conversion of L850,000 ($1,413,380) of short-term debt due to Glen
Investments Limited into 850,000 shares of our Series A preferred shares, and
(3) pro forma as adjusted to give effect to the sale of the 2,300,000 ADSs
offered by us at an assumed initial public offering price of L6.01 ($10.00) per
ADS after deducting underwriting discounts and commissions and estimated
offering expenses and the application of the net proceeds as described in "Use
of Proceeds." This table should be read in conjunction with our consolidated
financial statements and the notes included elsewhere in this prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ACTUAL PRO FORMA PRO FORMA AS ADJUSTED
---------------------- ---------------------- ----------------------
L $ L $ L $
Short-term debt to affiliate................... L 1,682,190 $2,797,146 L 832,190 $1,383,766 L -- $ --
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Stockholders' equity
(net capital deficiency)
Redeemable convertible preferred shares, L1
par value; 5,000,000 shares authorized and
no shares issued and outstanding, actual;
5,000,000 shares authorized, and 850,000
Series A shares issued and outstanding, pro
forma; 5,000,000 shares authorized, and
850,000 Series A preferred shares issued
and outstanding, pro forma as adjusted..... -- -- 850,000 1,413,380 850,000 1,413,380
Common stock 1p par value; 20,000,000
ordinary shares authorized, 5,000,000
ordinary shares issued and outstanding,
actual; 20,000,000 ordinary shares
authorized, and 5,000,000 ordinary shares
issued and outstanding, pro forma;
20,000,000 ordinary shares authorized,
7,300,000 ordinary shares issued and
outstanding, pro forma as adjusted......... 50,000 83,140 50,000 83,140 73,000 121,384
Additional paid-in capital................... 122,500 203,693 122,500 203,693 11,532,025 19,175,448
Accumulated deficit.......................... (1,393,621) (2,317,313) (1,393,621) (2,317,313) (1,393,621) (2,317,312)
---------- ---------- ---------- ---------- ---------- ----------
Total stockholders' equity (deficit)......... (1,221,121) (2,030,480) (371,121) (617,100) 11,061,404 18,392,900
---------- ---------- ---------- ---------- ---------- ----------
Total capitalization....................... L(1,221,121) $(2,030,480) L(371,121) $ (617,100) L11,061,404 $18,392,900
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
21
<PAGE>
DILUTION
Our pro forma net tangible book deficit, giving effect to the issuance of
850,000 Series A preferred shares to a corporate affiliate of Kevin R. Leech in
exchange for L850,000 ($1,413,380) principal amount of our indebtedness, as of
December 31, 1998, was L371,121 ($617,100) or (L0.07) ($0.12) per ordinary
share. Net tangible book value per share represents the amount of net tangible
assets, less total liabilities, divided by the number of ordinary shares
outstanding. After giving effect to the sale by us of 2,300,000 ADSs offered by
this prospectus at an assumed initial public offering price of L6.01 ($10.00)
per ADS, our pro forma net tangible book value as of December 31, 1998 would
have been L11.1 million ($18.4 million), or L1.52 ($2.52) per ordinary share.
This represents an immediate increase in net tangible book value of L1.59
($2.64) per share to existing stockholders and an immediate dilution of L4.49
($7.48) per share to new investors. The following table illustrates this per
share dilution:
<TABLE>
<S> <C> <C> <C> <C>
Assumed initial public offering per ADS, representing the
mid-point of the filing range............................... L6.01 $ 10.00
Pro forma net tangible book deficit per share at December
31, 1998.................................................. L(0.07) $ (0.12)
Increase in net tangible book value per share attributable
to new investors.......................................... L 1.59 $ 2.64
--------- --------- --------- ---------
Net tangible book value per share after this offering......... L1.52 $ 2.52
--------- ---------
Dilution per share to new investors........................... L4.49 $ 7.48
--------- ---------
--------- ---------
</TABLE>
Assuming the exercise in full of the underwriters' over-allotment option,
our pro forma net tangible book value at December 31, 1998 would have been
approximately L1.68 ($2.80) per share, representing an immediate increase in net
tangible book value of L1.75 ($2.92) per share, to our existing stockholders and
an immediate dilution in net tangible book value of L4.33 ($7.20) per share to
new investors.
The following table summarizes, as of December 31, 1998, the differences in
the number of ordinary shares or ADSs purchased from us, the total consideration
paid to us, and the average price paid per ordinary share/ADS purchased by
existing and new investors, assuming that the 2,300,000 ADSs offered by this
prospectus are sold by us at an assumed initial public offering price of L6.01
($10.00) per ADS.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------------- --------------------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT AMOUNT % PER SHARE
---------- ----------- ------------- ------------- --------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Existing stockholders............... 5,000,000 68.5% L 172,500 $ 286,833 1.23% L0.03 $ 0.06
New investors....................... 2,300,000 31.5% L13,832,090 $ 23,000,000 98.77% L6.01 $ 10.00
---------- ----- ------------- ------------- --------- --------- ---------
Total........................... 7,300,000 100.0% L14,004,590 $ 23,286,833 100.00%
---------- ----- ------------- ------------- ---------
---------- ----- ------------- ------------- ---------
</TABLE>
22
<PAGE>
SELECTED FINANCIAL DATA
The following selected consolidated financial data with respect to our
consolidated statement of operations for each of the three years in the period
ended December 31, 1998 and with respect to our consolidated balance sheets at
December 31, 1996, 1997 and 1998, has been prepared in accordance with United
States generally accepted accounting principles except as noted in the next
sentence, and is derived from the consolidated financial statements and the
notes thereto appearing elsewhere in this prospectus audited by Ernst & Young,
independent auditors. The selected consolidated statement of operations data for
the period from November 5, 1995 to December 31, 1995 and the consolidated
balance sheet data at December 31, 1995 are derived from unaudited financial
statements. The unaudited financial statements include all adjustments,
consisting only of normal recurring adjustments, that we consider necessary for
a fair presentation of our financial position at December 31, 1995 and the
results of operations for the period then ended. For your convenience, certain
pounds sterling amounts have been translated into U.S. dollar amounts at the
December 31, 1998 noon buying rate in New York City for cable transfers. See
"Exchange Rate Information." The data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and those consolidated financial statements and the
notes thereto.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
NOVEMBER 5, 1995
(INCEPTION) TO
DECEMBER 31, FOR THE YEARS ENDED DECEMBER 31
----------------- -------------------------------------------------------
1995 1996 1997 1998 1998
----------------- ------------ ------------ ------------ -------------
AMOUNTS IN POUNDS STERLING AMOUNTS IN
U.S. DOLLARS
<S> <C> <C> <C> <C> <C>
Net revenues......................... L -- L 6,225 L 8,359 L1,120,103 $ 1,862,507
Cost of Revenues..................... -- 21,750 43,781 743,630 1,236,508
Operating Expenses:
Research and development........... -- 21,148 40,832 67,910 112,921
Sales and Marketing................ -- 24,943 20,194 351,633 584,695
General and administrative......... 8,052 94,429 220,057 715,168 1,189,181
Depreciation and amortization...... -- 9,289 12,572 42,022 69,874
-------- ------------ ------------ ------------ -------------
Total Operating expenses............. 8,052 149,809 293,655 1,176,733 1,956,671
Loss from operations................. (8,052) (165,334) (329,077) (800,260) (1,330,672)
Other income (expense)............... -- (1,575) (17,487) (71,836) (119,449)
-------- ------------ ------------ ------------ -------------
Net loss............................. L (8,052) L (166,909) L (346,564) L (872,096) $ (1,450,121)
-------- ------------ ------------ ------------ -------------
-------- ------------ ------------ ------------ -------------
Basic and diluted net loss per
share.............................. L (0.03) L (0.10) L (0.07) L (0.17) $ (0.29)
-------- ------------ ------------ ------------ -------------
-------- ------------ ------------ ------------ -------------
Shares used in computing basic and
diluted net loss per share......... 236,626 1,672,225 5,000,000 5,000,000 5,000,000
-------- ------------ ------------ ------------ -------------
-------- ------------ ------------ ------------ -------------
</TABLE>
BALANCE SHEET DATA
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995 1996 1997 1998 1998
--------- --------- ---------- ------------ ------------
AMOUNTS IN POUNDS STERLING AMOUNTS IN
U.S. DOLLARS
Cash and cash equivalents........................... L 43 L 2,408 L 12,868 L 33,868 $ 56,316
Deferred revenue.................................... -- -- -- 228,244 379,524
Total assets........................................ 1,948 20,544 36,437 1,631,931 2,713,575
Total shareholders' equity (net capital
deficiency)....................................... (3,052) (2,461) (349,025) (1,221,121) (2,030,480)
</TABLE>
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS INCLUDES FORWARD-LOOKING STATEMENTS WITH RESPECT TO
OUR FUTURE FINANCIAL PERFORMANCE. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT
TO VARIOUS RISKS AND UNCERTAINTIES, INCLUDING THE FACTORS DESCRIBED UNDER "RISK
FACTORS" AND ELSEWHERE IN THIS PROSPECTUS, THAT COULD CAUSE OUR ACTUAL RESULTS
TO DIFFER MATERIALLY FROM HISTORICAL RESULTS OR THOSE CURRENTLY ANTICIPATED.
OVERVIEW
We produce and deliver, through our wholly-owned operating subsidiary, Town
Pages Limited, an Internet-based interactive service, TownPages, designed to
provide comprehensive, up-to-date locally-focused information about covered
towns and cities in the United Kingdom.
From the commencement of our business in November 1995 through June of 1998,
we only had aggregate revenues of L25,620 and incurred L1,110,214 in losses
during that period. During that time, we primarily engaged in experimental
prototype operations in Alton, England. We began offering the TownPages service
on a commercial basis in Winchester, England in June 1998, after installing
seven touch-screen public information point kiosks in Winchester, England in
late May, 1998. An eighth touch-screen kiosk was temporarily installed in
Brighton, England in July 1998 and has recently been moved to Andover, England,
which is closer to the Winchester area. Our revenues have increased since
commercial operations commenced in the late spring of 1998. Revenues for the
third and fourth quarters of 1998 were L28,548 and L1,080,519 ($1,796,687),
respectively. We incurred losses of L444,184 for the third quarter of 1998 and
earned profits of L160,777 ($267,340) for the fourth quarter of 1998. Revenues
for the year ended December 31, 1998 were L1,120,103 ($1,862,507). We incurred
an aggregate loss of L872,096 ($1,450,121) for 1998. We have incurred
substantial losses since our inception. As of December 31, 1998, we had an
accumulated deficit of approximately L1.4 million ($2.3 million). The profits in
the fourth quarter arose from increased complex Web site design services
revenue, which was not completely offset by the expenses incurred in expanding
the TownPages service. Work in December 1998 on complex Web site design services
contracts for four customers accounted for approximately 96% of our 1998
revenues. We expect significant additional net losses to continue on an annual
and quarterly basis until at least late in the year 2000.
During the three year period commencing upon the completion of this
offering, we intend to roll out the TownPages service across the United Kingdom,
expanding the TownPages database to cover, and installing approximately 3,450
kiosks in, substantially all of the major towns and cities in the United
Kingdom. We may also explore opportunities in other appropriate markets in
Europe and elsewhere in the future.
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997.
ADVERTISING REVENUES
Advertising revenues increased to L40,839 ($67,907) for the year ended
December 31, 1998, from L5,063 for the year ended December 31, 1997. The
increase was due primarily to the commencement of commercial operations of
TownPages in Winchester, England and an increase in the number of subscribers to
the TownPages service. We installed seven TownPages kiosks in Winchester,
England in late May 1998 and a kiosk in Brighton, England in July 1998. We
anticipate that revenues from those combined programs will account for a
substantial amount of net revenues in the future.
CONTRACT REVENUE AND OTHER
Contract and other revenues increased to L1,079,264 ($1,794,600), of which
L159,742 ($265,619) are with a related party, for the year ended December 31,
1998 from L3,296 for the year ended
24
<PAGE>
December 31, 1997. The increase was due to the commencement of four contracts
for complex Web site design services during the fourth quarter of 1998. Revenues
of L1,079,264 ($1,794,600), of which L159,742 ($265,619) are with a related
party, were recognized under these contracts in 1998. These four contracts
accounted for 19%, 14%, 30% and 33% respectively of total net revenues for the
year ended December 31, 1998. See "Risk Factors" and "Related Party
Transactions--Travel the Net Ltd." We anticipate that revenues from Web site
design services will form a lesser percentage of total revenues as advertising
and other services develop.
Our management performs ongoing credit evaluations of our customers'
financial condition and generally does not require collateral on accounts
receivable. When required, we maintain allowances for credit losses and those
losses have not been material to date. There was no allowance for doubtful
accounts as of either December 31, 1997 or December 31, 1998.
MAINTENANCE AND HOSTING COSTS
Maintenance and hosting costs consist primarily of Internet connection
charges, Web site equipment leasing costs, purchase and installation of public
information point kiosks, repair and maintenance of equipment and systems,
collection, development, and processing for display on TownPages of
locally-focused content. Maintenance and hosting costs increased to L179,776
($298,932) for the year ended December 31, 1998, from zero for the year ended
December 31, 1997. The actual pound sterling increase in maintenance and hosting
costs was primarily due to the costs associated with the installation and
maintenance of the eight TownPages kiosks. We anticipate that those costs will
continue to grow in absolute amounts for the foreseeable future as we pursue our
expansion plan.
COSTS OF CONTRACT AND OTHER REVENUES
Cost of contract and other revenues consists primarily of certain Web site
design costs and related operating costs. Cost of contract and other revenues
increased to L563,854 ($937,576) for the year ended December 31, 1998 from
L43,781 for the year ended December 31, 1997. The increase was due to the
commencement of four contracts for Web site design services during the fourth
quarter of 1998. Costs of L526,044 ($874,706), directly related to these
contracts, were incurred in the quarter. We anticipate that those costs will
continue to grow in absolute amounts for the foreseeable future as we pursue our
expansion plan.
OPERATING EXPENSES
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses include expenses associated with the
development of services, products and our Web site and consist principally of
personnel costs, overhead costs, editorial costs, equipment depreciation and
supplies. These costs have been charged to research and development expenses as
incurred. Research and development expenses increased to L67,910 ($112,921) for
the year ended December 31, 1998, from L40,832 for the year ended December 31,
1997. The pounds sterling increase in research and development expenses was
primarily due to the roll-out of TownPages into the Winchester, England market
and attendant increases in the number of personnel involved in the development
of our Web site. We expect that research and development expenses will grow
significantly in pounds sterling for the foreseeable future as we pursue our
expansion strategy and devote substantial resources to the development of
services, products and our Web site.
SALES AND MARKETING EXPENSES
Sales and marketing expenses consist primarily of salaries of sales and
marketing personnel, commissions, advertising and other marketing related
expenses. Sales and marketing expenses also include personnel costs and costs
associated with our radio, bus, direct mailings, printed ads, film trailer
advertising and telesales campaigns in the United Kingdom. Sales and marketing
expenses increased to L351,633 ($584,695) for the year ended December 31, 1998,
from L20,194 for the year ended
25
<PAGE>
December 31, 1997. The pounds sterling increase in sales and marketing expenses
was primarily due to the roll-out of TownPages into the Winchester, England
market and attendant increases in the number of sales personnel, increased sales
commissions and increased expenses associated with promotion and marketing
efforts. We expect that sales and marketing expenses will grow significantly in
pounds sterling for the foreseeable future as we pursue our expansion and
branding strategy and hire additional sales and marketing personnel.
GENERAL AND ADMINISTRATIVE
General and administrative expenses consist primarily of salaries and
related costs for general corporate functions, including finance, accounting,
facilities and legal and other fees for professional services. General and
administrative expenses increased to L715,168 ($1,189,181) in the year ended
December 31, 1998, from L220,057 for the year ended December 31, 1997. The
pounds sterling increase in general and administrative expenses was primarily
due to increases in the number of personnel to support the growth of our
business, increases in recruiting costs related to filling key senior executive
positions and costs associated with the preparation and updating of our business
plan. General and administrative expenses decreased as a percentage of net
revenues because of the growth in net revenues. We expect that we will incur
additional general and administrative expenses in pounds sterling for the
foreseeable future as we hire additional personnel and incur additional expenses
related to the growth of the business and our operations as a public company.
INTEREST EXPENSE, NET
Interest expense, net includes income from our cash and investments and
expenses related to our financing obligations. Interest expense, net increased
to L71,836 ($119,449) for the year ended December 31, 1998, from L17,487 for the
year ended December 31, 1997. The increase in pounds sterling was primarily due
to an increase in borrowings from an affiliate of Kevin R. Leech, a director
and, through a corporate affiliate, the owner of 90% of our share capital. We
anticipate that this interest expense will decrease significantly after the
affiliate converts the indebtedness into our Series A preferred shares. We
anticipate that the balance of this interest expense will be eliminated when the
balance of the indebtedness to the affiliate is repaid or refinanced at the
closing. However, the reductions will be offset to the extent the indebtedness
to the affiliate is refinanced at the closing or we have borrowings under the
contemplated credit facility to finance our expansion or for other corporate
purposes.
NET LOSS
Although our net revenues increased for the year ended December 31, 1998, as
compared to the year ended December 31, 1997, a substantial increase in
operating expenses to finance the continued development of TownPages, increased
penetration of existing markets and expansion into additional markets caused us
to incur a net loss of L872,096 ($1,450,121) for the year ended December 31,
1998, as compared to a net loss of L346,564 for the year ended December 31,
1997. We anticipate that losses will continue on an annual and quarterly basis
until at least late in the year 2000.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE YEAR ENDED DECEMBER 31, 1996
NET REVENUES
Net revenues increased to L8,359 for the year ended December 31, 1997, from
L6,225 for the year ended December 31, 1996. The increase in net revenues was
due primarily to an increase in the number of advertisers subscribing to our
products and services. During these periods all of our net revenues were derived
from sales made to customers based in the United Kingdom.
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COST OF REVENUES
Cost of revenues consists primarily of Internet connection charges, Web site
equipment leasing costs, purchase and installation of public information point
kiosks, depreciation, repair and maintenance of equipment and systems,
collection, development, and processing for display on TownPages of
locally-focused content, certain Web site design costs, and related operations
costs. Costs of revenues increased to L43,781 for the year ended December 31,
1997, from L21,750 for the year ended December 31, 1996. This increase in costs
of revenues in pounds sterling was due primarily to the continued growth in
expenditures to develop and test market TownPages in Alton, England, which was
only nominally offset by an insignificant increase in revenues during this
testing and development phase as compared with the prior period. We anticipate
that these costs will continue to grow in absolute amounts for the foreseeable
future as we expand our operations in existing markets and enter new markets.
OPERATING EXPENSES
RESEARCH AND DEVELOPMENT
Research and development expenses include expenses associated with the
development of services, products and our Web site and consist principally of
personnel costs, overhead costs, editorial costs, equipment depreciation and
supplies. These costs have been charged to research and development expenses as
incurred. Research and development expenses increased to L40,832 for the year
ended December 31, 1997, from L21,148 for the year ended December 31, 1996. We
expect that research and development expenses will grow significantly in pounds
sterling for the foreseeable future as we pursue our expansion strategy and
devote substantial resources to the development of services, products and our
Web site.
SALES AND MARKETING EXPENSES
Sales and marketing expenses consist primarily of salaries of sales and
marketing personnel, commissions, advertising and other marketing related
expenses. Sales and marketing expenses also include personnel costs and costs
associated with our radio, bus, direct mailings, print advertising, film trailer
advertising and telesales campaigns in the United Kingdom. Sales and marketing
expenses decreased to L20,194 for the year ended December 31, 1997, from L24,943
for the year ended December 31, 1996. The decrease in sales and marketing
expenses was due to TownPages incurring start-up costs in respect of promotional
items in the year ended December 31, 1996. We expect that sales and marketing
expenses will grow significantly in pounds sterling for the foreseeable future
as we pursue our expansion and branding strategy and hires additional sales and
marketing personnel.
GENERAL AND ADMINISTRATIVE
General and administrative expenses consist primarily of salaries and
related costs for general corporate functions, including finance, accounting,
facilities and legal and other fees for professional services. General and
administrative expenses increased to L220,057 for the year ended December 31,
1997, from L94,429 for the year ended December 31, 1996. General and
administrative expenses increased both in pounds sterling and as a percentage of
net revenues primarily due to increases in the number of personnel to support
the growth of our business, and increases in recruiting costs related to filling
key senior executive positions, which were only nominally offset by an
insignificant increase in net revenues during this testing and development phase
as compared with the prior period. We expect that we will incur additional
general and administrative expenses in pounds sterling as we hire additional
personnel and incur additional expenses related to the growth of the business
and our operations as a public company.
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INTEREST EXPENSE, NET
Interest expense, net includes income from our cash and investments and
expenses related to our financing obligations. Interest expense, net increased
to L17,487 for the year ended December 31, 1997, from L1,575 for the year ended
December 31, 1996. The increase in pounds sterling was primarily due to an
increase in borrowings from an affiliate of Kevin R. Leech, one of our directors
and our principal stockholder.
NET LOSS
We incurred a net loss of L346,564 for the year ended December 31, 1997, as
compared to a net loss of L166,909 for the year ended December 31, 1996. The
increase in pounds sterling was primarily due to a substantial increase in
operating expenses to finance the continued testing, development and enhancement
of TownPages, which was only nominally offset by an insignificant increase in
revenues as compared with the prior period.
LIQUIDITY AND CAPITAL RESOURCES
Since February 1996, we have financed our operations primarily through a
discretionary secured operating line of credit for our Town Pages Limited
subsidiary with Glen Investments Limited. Kevin R. Leech, a member of our board
of directors and the principal beneficial owner of our ordinary shares, is the
beneficial owner of 100% of the outstanding share capital of Glen Investments
Limited. Advances under the line of credit bear interest at 9% per annum, are
payable on demand, and are secured by a first security interest in all of the
assets and property of Town Pages Limited, our operating subsidiary. At December
31, 1998, we owed approximately L1.8 million ($3.0 million) inclusive of
interest, under the line of credit. Upon completion of this offering, L850,000
($1,413,380) of the amount anticipated to be outstanding to Glen Investments
Limited, including interest, will be converted into 850,000 shares of our 9%
Series A preferred shares. The balance of the outstanding loans and indebtedness
owed to Glen Investments Limited will be repaid from the net proceeds of this
offering or will be refinanced. We are seeking to establish a new credit
facility from a commercial lender effective upon completion of this offering of
up to L3.0 million ($5.0 million). We contemplate that any new line of credit
shall be secured by a first security interest in all of our assets and advances
under that line of credit shall be based upon agreed upon percentages of our
eligible accounts receivable. As of the date of this prospectus, we do not have
a commitment from any lender for any proposed credit facility. See "Related
Party Transactions."
Net cash used in operating activities increased to L271,718 for the year
ended December 31, 1997 from L142,718 in the year ended December 31, 1996, and
increased to L1,214,000 ($2,018,639) for the year ended December 31, 1998, as
compared to L271,718 for the year ended December 31, 1997. The increase in net
cash used resulted primarily from increasing net losses and accounts receivable,
partially offset by increases in accrued expenses.
Net cash used in investing activities decreased to L16,746 for the year
ended December 31, 1997 from L22,417 in the year ended December 31, 1996, and
increased to L148,266 ($246,537) for the year ended December 31, 1998, as
compared to L16,746 for the year ended December 31, 1997. The increase in net
cash used in investing activities resulted primarily from purchases of equipment
and eight touch-screen public information point kiosks.
Net cash provided by financing activities increased to L298,924 for the year
ended December 31, 1997 from L167,500 in the year ended December 31, 1996, and
increased to L1,383,266 ($2,300,095) for the year ended December 31, 1998, as
compared to L298,924 for the year ended December 31, 1997. The increase in net
cash provided by financing activities resulted primarily from advances from Glen
Investments Limited under the line of credit facility.
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YEAR 2000
The Year 2000 issue refers to the potential failures that computer systems
may incur as a result of the date change from 1999 to 2000. Many existing
computer programs use only two digits to identify a year in the date field.
These programs were designed without considering the impact of the upcoming
change of the century. As a result, computer systems using these programs may be
unable to properly recognize date-sensitive data resulting in the creation of
erroneous information or system failure.
We rely on telecommunications carriers to transmit our Internet traffic over
local and long distance networks. It is uncertain what impact the Year 2000
issue will have on the Internet and the Web, or on the ability of users to use
their computers to access our services, but major disruption is possible. A
possible worst case Year 2000 scenario for us would be if the telecommunications
carriers' systems failed. If their networks fail for an extended period of time
due to the Year 2000 issue, we will no longer be able to operate our business.
In the event our telecommunications carriers' systems are not Year 2000
compliant on a timely basis, we will seek services through carriers who are Year
2000 compliant. However, there is no assurance that this can be accomplished in
a cost-effective manner.
We have taken a number of steps to address the Year 2000 issue. We have
completed testing of our hardware, software and data sets according to Year 2000
compliance standards we established internally as the first phase of our Year
2000 compliance certification process. As the next phase of our Year 2000
compliance certification process, we are rechecking these systems in accordance
with Year 2000 compliance standards officially established by the British
Standards Institute. As a parallel phase of our Year 2000 compliance
certification process, we are requesting and receiving certifications from the
various vendors of our hardware, software and microprocessor-embedded equipment
that the products they have provided to us are fully Year 2000 compliant. Where
it is necessary to achieve Year 2000 compliance, we are obtaining upgrades from
these vendors. Any failure by our vendors to resolve any Year 2000 issues on a
timely basis, or in a manner that is compatible with our systems, could
significantly damage our business and financial condition. In the event our
vendors do not become Year 2000 compliant on a timely basis, we will seek
products and services from vendors who are Year 2000 compliant. However, there
can be no assurance that this can be accomplished in a cost-effective manner.
Although our management expects to incur costs in correcting any Year 2000
issues arising as a result of our suppliers handling of their own Year 2000
issues, our management cannot currently estimate those costs. In the process of
testing our hardware, software, data sets and microprocessor embedded equipment,
we have not encountered any significant problems to date and expect to be fully
Year 2000 compliant by mid-1999. Based on our experience to date, we have only
budgeted approximately L5,000 ($8,300) for completion of our Year 2000
remediation efforts. However, there can be no assurance that actual costs of
compliance will not significantly exceed this amount.
EFFECTS OF THE EURO
Under the terms of the Treaty on European Economic and Monetary Union, as of
January 1, 1999, the euro was introduced as a common currency among the eleven
members of the European Union that are participating in this phase of European
Economic and Monetary Union, commonly referred to as EMU. Although the
individual currencies of these countries will continue to be used until the end
of 2001, their exchange rates with the euro are fixed. The Euro is now being
used for transactions that do not involve payment using physical notes and coins
of the participating countries. The individual currencies will be replaced with
euro notes and coins at the start of 2002 when all countries participating in
the EMU are expected to operate with the euro as their exclusive common
currency.
The current government of the United Kingdom has stated that the United
Kingdom will not participate in EMU and adopt the euro until after the next
general election, at the earliest. We are currently working on the assumption
that the next general election will be in 2001 or 2002 and that the United
Kingdom will enter the EMU shortly thereafter following confirmation of the
government's decision through a referendum.
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We do not currently operate in any countries that have adopted the euro and
we therefore do not face a significant currency or competitive exposure to the
euro. However, in the future we may expand into a number of these countries.
In the event that the United Kingdom adopts the euro, we would face a number
of costs in altering our accounting-related systems for the new currency,
although at present it is too early to estimate what these costs might be.
Adoption of the euro in the United Kingdom would also create greater
transparency between prices offered to our customers in different countries that
participate in EMU.
A significant amount of uncertainty exists as to the effect that the euro
will have on the marketplace. We are assessing the effect that the euro
introduction will have on our internal systems and the sale of our products and
services. We expect to take appropriate actions based on the results of this
assessment. Currently, we do not believe that the adoption of the euro by eleven
countries of the European Union will have an adverse impact on our liquidity or
financial condition.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS No. 130, "REPORTING COMPREHENSIVE
INCOME." This statement requires that changes in comprehensive income be shown
in a financial statement that is displayed with the same prominence as other
financial statements. The statement is effective for annual periods beginning
after December 15, 1997 and we adopted its provisions in fiscal 1998.
Reclassification for earlier periods is required for comparative purposes. To
date, the statement has not had a material impact on our financial position or
results of operations.
In June 1997, the FASB issued SFAS No. 131, "DISCLOSURE ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION," which changes the way public companies
report information about operating segments. SFAS No. 131, which is based on the
management approach to segment reporting, establishes requirements to report
selected segment information quarterly and to report entity-wide disclosures
about products and services, major customers, and the material countries in
which the entity holds assets and reports revenue. To date, the statement has
not had a material impact on our financial position or results of operations.
In February 1998, FASB issued SFAS No. 132, "EMPLOYERS' DISCLOSURES ABOUT
PENSION AND OTHER POSTRETIREMENT BENEFITS," which revises employers' disclosures
about pension and other postretirement benefit plans. SFAS No. 132 does not
change the measurement or recognition of those plans. SFAS No. 132 is effective
for fiscal years beginning after December 15, 1997. The adoption of SFAS No. 132
did not have an impact on our results of operations, financial position, or cash
flows.
In March 1998, the American Institute of Certified Public Accounts issued
Statement of Position 98-1, "Accounting for the Cost of Computer Software
Developed or Obtained for Internal Use." SOP 98-1 is effective for financial
statements for years beginning after December 15, 1998. SOP 98-1 provides
guidance over accounting for computer software development or obtained for
internal use including the requirement to capitalize specified costs and
amortization of these costs. We do not expect the adoption of this standard to
have a material effect on our capitalization policy.
In April 1998, AICPA issued SOP 98-5, "REPORTING ON THE COSTS OF START-UP
ACTIVITIES." SOP 98-5, which is effective for fiscal years beginning after
December 15, 1998, provides guidance on the financial reporting of start-up
costs and organization costs. It requires costs of start up activities and
organization costs to be expensed as incurred. As we have expensed these costs
historically, the adoption of this standard is not expected to have a
significant impact on our results of operations, financial position or cash
flows.
In June 1998, FASB issued SFAS No. 133, "ACCOUNTING FOR DERIVATIVES AND
HEDGING ACTIVITIES," which establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives) and for hedging
activities. SFAS No. 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. The adoption of SFAS No. 133 is not expected to
have an impact on our results of operations, financial position, or cash flows.
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BUSINESS
OVERVIEW
We produce and deliver TownPages, an Internet-based interactive service
designed to provide comprehensive, up-to-date locally-focused information about
specified towns and cities in the United Kingdom. In addition to being a local
information content provider, TownPages is a portal to the Internet for
consumers. The service is accessible through standard Internet connections to
the TownPages Web site at www.townpages.co.uk. Our free-to-use touch-screen
public information point kiosks are a key element of the TownPages information
delivery system.
TownPages has been successfully tested in Winchester and Alton,
respectively, a small city (population approximately 100,000 in 1995) and a
small town (population approximately 16,000 in 1995) near London, England. As of
December 31, 1998, seven TownPages touch-screen kiosks were installed and
operating in and near Winchester and Alton and one was operating in nearby
Andover, England (population approximately 12,000 in 1995). During experimental
prototype operations in Alton, when we were primarily testing and developing the
systems and format of TownPages, we only had revenues of approximately L25,620
($42,601) from inception in late 1995 through June 1998. We incurred losses of
L1,110,214 ($1,846,064) during that period. We began offering the TownPages
service on a commercial basis in June 1998, after installing seven touch-screen
kiosks in Winchester, England in late May 1998. Our initial advertising campaign
to announce TownPages service in the Winchester area was launched at the end of
May 1998. Our revenues have increased since commercial operations commenced in
the late Spring of 1998. Revenues for the third and fourth quarters of 1998 were
L28,548 ($47,470) and L1,080,519 ($1,796,687), respectively. We incurred losses
of L444,184 ($738,589) for the third quarter of 1998 and earned profits of
L160,777 ($267,340) for the fourth quarter of 1998. The profits in the fourth
quarter arose from increased complex Web site design services revenue, which was
not completely offset by the expenses incurred in expanding the TownPages
Service. Work in December 1998 on Web site design services contracts for four
customers accounted for approximately 96% of our 1998 revenues. These customers
are four United Kingdom companies known as Travel the Net Limited
(travelthenet.com), All-Cars.com Limited (all-cars.com), Medic Media Inc.
(pharmachannel.com) and Location Developments Limited (eshoppingcentre.com). Mr.
Kevin Leech, our principal shareholder and one of our directors, owns 25% of a
company that owns 50% of Travel the Net Limited. See "Related Party
Transactions--Travel the Net Ltd."
INDUSTRY BACKGROUND AND TRENDS
THE INTERNET
The Internet is an increasingly significant global medium for
communications. The increasing functionality, accessibility and overall usage of
the Internet and online service providers, such as America Online and The
Microsoft Network, have made the Internet an attractive commercial medium. The
portion of the Internet known as the Web, which has become almost synonymous
with the Internet as a whole, has experienced the fastest growth and the most
acceptance among ordinary users. Matrix Information and Director Services
currently estimates that total worldwide Internet usage is expected to grow from
57 million in 1997 to more than 700 million in 2001. According to NOP Research,
over 6 million adults in the United Kingdom used the Internet during the 12
months ended June 1997, and approximately 9 million adults in the United Kingdom
were expected to have used the Internet by June 1998. Growth in Internet usage
has been fueled by a number of factors, including the availability of a growing
number of useful products and services via the Internet, the large and growing
installed base of personal computers in the workplace and home, advances in the
performance and speed of personal computers and modems, improvements in network
infrastructure, easier and cheaper access to the Internet and increased
awareness of the Internet among businesses and consumers. As Internet
accessibility, usage and functionality continue to grow, the Internet is
increasingly being used as a medium for direct communication among users, such
as E-Mail and bulletin boards, as well as a rapidly growing sales and marketing
channel.
A growing number of users have transacted business over the Web, including
trading securities, buying goods, purchasing airline tickets and paying bills.
For example, according to Nielsen Media Research, as of October 1998, more than
20% of United States Internet users have made a purchase over the Web. As
E-commerce increases, advertisers and direct marketers are increasingly seeking
to use the Web to locate customers, advertise and facilitate transactions.
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According to The Georgia Institute of Technology's Graphic, Visualization &
Usability Center's Ninth World Wide Web User Survey, approximately 81% of all
Web users in 1998 will be in either relatively high income management,
professional or technical job categories or in education categories, including
students. These are consumer categories that many advertisers desire to reach.
EXISTING INTERNET SERVICES AND THE TOWNPAGES SOLUTION
As users spend more time on the Web, our management believes, they are
increasingly seeking information about local events, places of interest,
shopping, and other information regarding the communities where they spend most
of their time and money. Our management believes that many businesses, in turn,
are seeking cost-effective means to target advertising and direct marketing
efforts based on demographic characteristics, specific interests, and geographic
locations.
Our management believes that consumers who attempt to use general purpose
search engines and navigational guides to access locally-focused content from
third-party Web sites may find it difficult to locate the information they seek
because it may be scattered at many unrelated Web sites, not locally focused, or
out or date or not comprehensive. From an advertiser's perspective, in many
instances, traditional print, television, and radio advertising media is not
well designed to cost-effectively target audiences segmented topically or
geographically. Traditional media is not designed to allow quick revision of the
message or delivery of detailed information on a cost-effective basis, if at
all. Also, we believe traditional media does not provide advertisers a means for
monitoring and evaluating advertisement effectiveness, receiving and processing
consumer response effectively or quickly, or interacting with consumers on a
real-time basis. As a result, our management believes, a significant opportunity
exists for a local town or city guide that meets consumers' demands for
easily-accessible, comprehensive local information, and businesses' objectives
for targeting, interacting with, and selling to these consumers.
In contrast, TownPages provides comprehensive, up-to-date information about
covered localities in a graphically pleasing format. Consumers can readily
access TownPages to make targeted searches of all of the content on the
TownPages site. TownPages users can obtain comprehensive, locally-focused
information about governmental departments and services, tourist attractions,
hotels, restaurants, public transportation timetables, shopping, real estate
listings, employment opportunities, arts and entertainment events, community
activities, recreation, businesses, professional services, and local news,
sports and weather. Interactive sections, such as Town Diaries and Message
Boards, and new E-commerce features that we are beginning to introduce, permit
users to enter and edit information about local events, exchange messages, and
make certain purchases on TownPages.
Our management believes that our business, governmental, and not-for-profit
subscribers can use TownPages to reach targeted audiences both topically and
geographically on a more cost-effective basis, than through traditional printed
advertising media. Installation of our free-to-use touch-screen public
information point kiosks at strategic locations in covered communities both
improves TownPages' brand recognition and helps to generate additional traffic.
In addition, TownPages uses Internet-based systems and computer processing
capabilities to permit quick updating and expansion of customers' displays and
Web sites, and rapid collection, monitoring, and processing of consumer data.
GROWTH STRATEGY AND BUSINESS MODEL
We aim to make TownPages the United Kingdom's premier branded free-use and
paid-advertising, locally-focused information provider on the Internet. We
intend to pursue the following strategies to achieve that goal:
- LEVERAGE OUR MODEL TO RAPIDLY ROLL OUT THE TOWNPAGES SERVICE. We intend to
roll out the TownPages service across the United Kingdom over the three
years following the completion of this offering. During that time, we plan
to expand our database to cover, and install touch-screen public
information point kiosks in, substantially all the major towns and cities
in the United Kingdom. We plan to cover the four major metropolitan
centers in the United Kingdom within the next 18 - 24 months. We may also
explore opportunities in other appropriate markets in Europe and elsewhere
in the future.
- INSTALL ADDITIONAL TOWNPAGES TOUCH-SCREEN PUBLIC INFORMATION POINT KIOSKS
DURING THE NATIONAL ROLL-OUT. During the three year period commencing
immediately upon completion of this offering, we plan to install
approximately 3,450 touch-screen information point kiosks in the United
Kingdom including the 8 kiosks currently in-place. Our management believes
that if we rapidly place a
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substantial number of our touch-screen public information point kiosks in
strategically selected cities and towns, we will obtain a competitive
advantage. Our management believes that businesses and local governments
like the TownPages kiosk concept because, based upon our experience to
date, the touch-screen kiosks are easy to use by individuals who are not
necessarily regular Internet users or have no other regular access to the
Internet. In addition, the kiosks promote and reinforce the TownPages
brand and generate additional traffic on TownPages.
- ENTER INTO EXCLUSIVE INFORMATION SERVICE ARRANGEMENTS WITH LOCAL
GOVERNMENTS IN THE UNITED KINGDOM. We intend to enter into as many
contracts with local governments as possible to obtain the right to
incorporate locally-focused information available through those local
governments into TownPages. Based on our contacts to date with
approximately 60 of the approximately 470 larger local and regional
councils in the United Kingdom, many of those local governmental bodies
appear to desire to obtain a service of the type offered by TownPages. The
councils appear to want to communicate more effectively with constituents
and promote the use of information technology by a broader segment of the
population. Our management believes that exclusive relationships with the
councils will provide us with a competitive advantage in those
communities, and possibly permit us to achieve our goal of becoming the
leading branded Internet-based, locally-focused information provider in
the United Kingdom.
- EXPAND STRATEGIC PARTNERSHIPS WITH INFORMATION PROVIDERS. We intend to
continue to seek additional content, further establish and strengthen the
TownPages brand, and achieve improved access to, and increased traffic on,
the TownPages service, through alliances with other information providers.
- CONTINUE TO BUILD STRATEGIC RELATIONSHIPS WITH OTHER BUSINESSES. We will
continue to build and seek additional strategic and other relationships
with local and national businesses to increase revenues, add content,
generate additional traffic, and validate and strengthen the TownPages
brand.
- PURSUE ADDITIONAL REVENUE-GENERATING ACTIVITIES, INCLUDING EXPANDED FOCUS
ON E-COMMERCE. We plan to expand our revenue sources as opportunities
present themselves to use the TownPages service as a platform for taking
advantage of commercial opportunities on the Internet.
- CONTINUALLY ENHANCE TOWNPAGES' FUNCTIONALITY AND PERFORMANCE. We intend to
continually upgrade our software and systems and user interfaces to take
advantage of developing Internet and emerging information technology
delivery capabilities. Our objective is to anticipate customers' needs and
develop and maintain a leadership position in the growth of this industry
sector by providing effective services in an attractive, easy-to-use
format.
PRODUCTS AND SERVICES
THE TOWNPAGES HOME PAGE
The TownPages home page is the initial stop for all users of TownPages at
our Web site at www.townpages.co.uk. Users may access information either on a
national (currently United Kingdom) or local basis. The "national" section of
the home page leads to various Web sites, advertisers, and information services
displayed on TownPages. In keeping with the "touch-screen" feel of the service,
users can "press" buttons to arrive at various topically-differentiated
destinations. As of January 31, 1999, these destination settings include
"Community," "News," "Weather," Timetables," "Property," "Jobs," "Shopping,"
"Cars," "Leisure," and "Free E-Mail."
If the user selects a particular town or city destination from the "local"
section of the TownPages home page, the user arrives at the local TownPages home
page for that town or city or the nearest covered community. This is the primary
entry to all of the TownPages information and services pertaining to the chosen
town or city. The look and feel is designed to be easy to use, both for users
who access TownPages via standard connections to the Internet and for users at
TownPages touch-screen public information point kiosks. There are "buttons" to
"press" to access various topically differentiated destinations. Currently,
these are "Local Directory," "Leisure," "News & Events," "Property,"
"Community," "Tourism," "Jobs," and "Special Offers." There are also separate
"buttons" which allow the user to choose the "Local Directory," "Kiosk
Information," "Kid's Pages," "Search," "Local Area Index," enter
TownPages-sponsored promotional competitions, and obtain various local news
stories. The local home page also announces various community events, such as
art exhibitions,
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special events and performances. Users on any TownPages local home page may
return to the primary TownPages home page at any time.
The various "buttons" link the user to sites which provide comprehensive
information and services using an interactive, graphical user interface:
- LOCAL DIRECTORY--Local businesses and services, organized from "A" to "Z"
by category.
- LEISURE--Local leisure options, organized alphabetically within the
following categories linked to this page: "Food & Drink," "Sports,"
"Arts," and "Entertainment."
- NEWS & EVENTS--Local news content can be accessed by choosing "Stories."
Interactive services allow users to send and receive E-Mail and post
announcements of special events and other items of interest on a community
bulletin board by selecting "Message" or "Diary."
- PROPERTY--Local real estate listings.
- COMMUNITY--Information concerning various local services and community
organizations. Information concerning local medical services and related
topics of interest can be found under "Health." Local educational
institutions, from pre-school through post-graduate, are described under
"Education." "Societies" is the place where various community
organizations, club, hobby, and special interest groups are listed.
Information concerning governmental officials, departments, and services
can be found by choosing "Councils."
- TOURISM--Local "History," "Maps," "Hotels," and "Places of Interest" can
be obtained here.
- JOBS--Local employment listings.
- SPECIAL OFFERS--Various promotions.
- KIOSK INFORMATION--The touch-screen public information point kiosks
located nearest to the user can be located through this page.
- KID'S PAGES--Games, fun activities and child-oriented competitions.
- SEARCH--A means for locating a particular area of interest on TownPages.
- LOCAL AREA INDEX--A navigational guide to relevant sections of the
TownPages Web site.
DIFFERENTIATED PRESENCE ON THE WEB FOR LOCAL AND REGIONAL BUSINESSES AND
ORGANIZATIONS
We create and maintain Web sites and on line displays on TownPages sites for
business, governmental agency, and not-for-profit advertisers. TownPages
aggregates the Web sites and displays in our locally-focused, comprehensive town
and city guide environment. By aggregating a customer's Web site or display with
those of numerous other businesses in a comprehensive branded local town and
city guide, TownPages provides topical and geographic context to a customer's
Web presence in an effort to help generate significant Internet traffic. Our
Internet-based system permits quick updating and expansion of sites and
displays, and rapid collection, monitoring and processing of consumer data. Our
management believes that TownPages offers advertisers the opportunity to reach
and interact with targeted audiences in a cost-effective manner.
We list certain basic contact information for local governments, and a
simple line entry for businesses and organizations, on TownPages free of charge.
However, we also offer subscribers integrated solutions, for a fee, to establish
attractive, customized, multi-page Web sites including design, layout,
photography, posting of updated information, hosting and maintenance. Businesses
and organizations purchasing our enhanced services are able to provide a
targeted audience up-to-date information about their products and services,
including photographs, prices, store location, schedules of live entertainment,
specials or sales and other relevant information. Most of our enhanced format
services are sold under one year contracts, and banner display space is
currently sold for three month periods. Enhanced displays range from a
relatively simple templated display to a complex multi-level customer Web site
with multi-media and interactive features, and includes formats with multiple
photos or graphics and banner advertisement on high traffic locations.
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The following table summarizes our display products and services, and prices
as of December 31, 1998 (excluding VAT; all prices are approximate and subject
to change, and design charges may vary):
<TABLE>
<CAPTION>
PRODUCTS AND SERVICE PRICES
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
LINE ENTRY--a line entry similar to a "yellow- Free-of-charge.
pages"-type classified listing
TEMPLATED DISPLAY--a relatively simple display of text Approximately L50 ($83) per annum with a charge of
and one picture or logo. approximately L10 ($17) per change.
ENHANCED TEMPLATED DISPLAY--larger display of text with Approximately L150 ($249) per annum with a charge of
additional graphic content including additional approximately L10 ($17) per change.
pictures and an E-mail link to a pre-existing existing
E-mail address.
WEB SITE--a custom-designed Web site, usually consisting First year charges are approximately L250 ($415) for the
of multiple pages or linked sites, frequently first page and approximately L100 ($166) for each page
incorporating multi-media features. thereafter. Additional charges apply for special effects
and E-commerce features. Annual renewal charges vary
depending on the size of the Web site, but are generally
at least 20% of the original cost plus L250 ($415)
(including maintenance).
COMPLEX WEB SITE--a complex custom-designed Web site. Priced per individual negotiated contract.
BANNERS--graphical advertising banners or news stories, Approximately L50--L450 ($83--$748) for each 3 month
with links to advertiser's content on other TownPages period, depending upon the location and prominence of
sites. the banner on the TownPages site and other factors.
</TABLE>
EXPANSION INTO E-COMMERCE AND OTHER SERVICES FROM THE TOWNPAGES PLATFORM
We plan to offer electronic commerce functionality and other innovative
features to allow businesses to better serve consumers through the Internet and
our touch-screen public information point kiosks. Services that we intend to
seek to offer in the future include online purchase and payment for goods and
services, online ticketing, reservations, sales events notifications, electronic
coupons, newsletters and other transactions. These types of services will offer
us the opportunity to further attract both consumers and businesses to our sites
and to derive revenues through increased fees from businesses for additional
services and potentially from online product sales.
We are beginning to offer electronic commerce services to businesses seeking
to complete sales online. We recently completed a test program with TicketLink
to provide online theater information services and facilitating theater ticket
purchasing through an E-mail and telephone call-back link at a TownPages kiosk
which was temporarily located in Brighton, England. We plan to offer that type
of service at more TownPages kiosks in 1999. We also plan to introduce online
ticket purchasing capabilities in 1999, first, for theater tickets and
ultimately for tickets for other types of entertainment, such as sports, movies,
concerts, theme parks, and special events, and also for tickets for various
forms of transportation.
MULTI-PLATFORM ACCESS TO TOWNPAGES
TownPages is accessible through standard Internet connections to our Web
site. However, TownPages information and services can also be obtained through
our free-to use touch-screen public information point kiosks. Our management
believes that the kiosks are a key element of the TownPages service that sets us
apart from many other current United Kingdom providers of Internet-based
community information services. Our management believes that the touch-screen
kiosk delivery system is particularly important in a market like the United
Kingdom in which, when compared to the United States market, for example,
familiarity with and use of the Internet by the general population is in a
relatively early stage.
To enhance the TownPages brand and establish a leading market position, we
have installed and plan to install our touch-screen public information point
kiosks at strategic locations in designated communities throughout the United
Kingdom where visitors are likely to desire information about local
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services or events, such as supermarkets, shopping centers, hotel lobbies, bus
and railroad stations, colleges, libraries, and tourist information centers. As
of December 31, 1998, we had installed seven kiosks in the Winchester, England
area and one kiosk in nearby Andover, England.
The TownPages kiosks currently are manufactured by original equipment
manufacturers in the United Kingdom to our specifications from standard
components which our management believes are readily obtainable from a number of
different manufacturers. The kiosks are designed to be user-friendly for
individuals who have little or no familiarity with, or access to, computers or
the Internet. Currently, all of our eight operating kiosks are indoors, but we
envision a number of different kiosk types, each one appropriate for a different
location, such as standing, desk, desktop, wall-mounted, through-glass, and
outdoor kiosks. We anticipate that in the future, depending upon location, some
TownPages kiosks may have attached peripherals, such as printers, credit card
readers, and telephone handsets.
Each kiosk offers users the same access to TownPages information and
services as is available through standard Internet connections. However, a kiosk
user will be restricted to the TownPages information service and associated
permitted Web sites of our business and government customers and, therefore,
will not be able to freely "surf" the Web in public places.
STRATEGIC RELATIONSHIPS
We have developed, and intend to continue to seek to develop, strategic
relationships with information providers, service organizations and businesses
to generate additional traffic on TownPages, obtain additional local content,
and establish a strong branded local presence in each covered community
thoughout the United Kingdom.
TELEVISION AND RADIO
As we commence our planned national roll-out in the United Kingdom, we will
increasingly seek to enter into co-promotion agreements with local television
and radio stations. These arrangements generally will offer content sharing and
co-promotion. We expect that we will either (a) assist any television or radio
station with which it enters such an agreement to develop a multimedia Web site
within TownPages, or (b) will incorporate that station's Web site into
TownPages, while our strategic partner will offer promotion and a recognized
brand within the market. We hope to receive significant on-air promotion from
these television and radio stations that will increase brand awareness and drive
traffic to TownPages. In connection with the Winchester launch, we purchased a
small number of radio spots, which ran for approximately two weeks, to advertise
TownPages on two FM channels which cover Hampshire county, and particularly
Winchester. We will continue to purchase paid advertising in connection with
product launches.
NEWSPAPERS
For similar reasons, we seek to enter into arrangements with regional
newspapers in the communities which we service to engage in joint promotion of
classified advertising in exchange for benefits such as reciprocal advertising,
use of archived materials, and a daily news service. For example, we currently
obtain daily and weekly news in exchange for online promotion of the HAMPSHIRE
CHRONICLE, the local newspaper covering the Winchester, England area. Our
management hopes to expand the number and nature of those arrangements to
provide additional revenues and brand development opportunities for TownPages.
LOCAL BUSINESS ORGANIZATIONS
We seek to enter into relationships with local and regional business groups
in order to obtain additional local content, facilitate introductions to local
businesses, and associate the TownPages brand with organizations having a
well-known, respected presence in the local communities. For example, we work
with Business Link, a quasi-governmental organization in the United Kingdom
established primarily to promote small businesses on a county by county basis,
and with local Chambers of Commerce for these purposes. We are a member of the
Winchester and the Southampton and Fareham Chambers of Commerce, and various
industry and other smaller local chambers of commerce and other organizations
such as Hampshire Ambassadors, a local organization for the promotion of
Hampshire business, and Hampshire Business Link. We intend to expand our
relationships with local organizations across England as we roll out the
TownPages service.
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LOCAL AND REGIONAL GOVERNMENTS
Before entering any community, we seek the right, typically on an exclusive
basis and for an initial term of up to three years, to incorporate
locally-focused information available through that local government into a
commercial, locally-focused Internet information service. In return, we agree to
display that information on TownPages and to install a specified number of
TownPages public information point kiosks in the community. For a fee, which
will vary depending upon the size and complexity of the Web site, we will design
Web sites for local governments which either have no Web sites or want to
upgrade their Web sites, or modify their Web sites to make them more easily
useable through touch-screen kiosks. We also offer, for a fee, enhanced
displays, placement of additional kiosks, and maintenance of the local
government Web site. We will make alternative arrangements to obtain local
content concerning a particular community if we are unable to reach agreement
with a local government.
The local governments in the United Kingdom are called "councils." The
smallest councils cover parishes. Larger councils cover towns or cities, and the
largest ones cover regions. There are approximately 470 local and regional
councils in the United Kingdom, excluding smaller town councils and parish
councils. The councils are quite powerful, and have a significant and pervasive
influence in local business communities. In part, this is due to the fact that
the councils covering towns, cities, and regions exercise at the local level
many powers and perform many functions which are assigned separately to state
and city governments in the United States.
As we prepare for the national roll-out of TownPages in the United Kingdom,
we have begun the process of negotiating arrangements with councils throughout
the United Kingdom. As of January 31, 1999, we have entered into agreements with
Bracknell Forest Borough Council and St. Edmonsbury Borough Council, for initial
terms of three years and one year, respectively, to incorporate locally-focused
information available through them into TownPages, to the exclusion of any other
commercial, locally-focused Internet information service. Under the terms of
these contracts, we will install four and six kiosks in these communities,
respectively. As of January 31, 1999, we are negotiating letters of intent,
which we generally will not consummate until we receive funding for the
installation of kiosks, with 14 other councils. Our experience to date is that
many councils appear to desire to bring a service like TownPages into their
communities.
We believe that exclusive relationships with councils will provide us with a
competitive advantage, not only in each community, but nationally if we achieve
our goal to be the first to establish those relationships with a majority of the
councils. In turn, our management believes that each council benefits by making
its information and other community information more readily accessible to the
community. The TownPages relationship provides an additional local benefit
because TownPages' easy-to-use touch-screen kiosks, which are conveniently
located in publicly accessible locations, make the service widely available to
everyone in the community, not only to those with access to, or knowledge of,
computers or the Internet.
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RELATIONSHIPS WITH BUSINESSES WITH STRONG REGIONAL AND NATIONAL BRANDS
Despite limited operations to date, while we were primarily engaged in
prototype testing and development, approximately 400 businesses placed paid
advertisements on TownPages as of December 31, 1998. We are seeking to expand
the use of TownPages for advertising and other services, not only by small and
mid-sized local businesses in the communities for which we have developed "local
pages," but also by large national and international concerns. Our management
believes that support of the TownPages service by those companies will provide
access to many additional users and also further strengthen and validate the
TownPages brand, both in local communities and nationally in the United Kingdom.
As of December 31, 1998, a total of eight TownPages kiosks were installed in
facilities operated by Sainsbury's and Tesco, the largest and second largest
food retailers in the United Kingdom, South West Trains, the operator of rail
services throughout southwest England, The Wessex Hotel, a Forte Hotel, King
Alfred's College, Royal Hampshire County Hospital, and The Brooks Shopping
Centre.
We recently conducted a successful test program with TicketLink, described
above, for delivery of online theatre information and facilitating ticket
purchasing. We are currently conducting a test program with Property Sight, a
United Kingdom Internet-based real estate listing service, for listing
approximately 7,000 real estate properties for sale on the Internet. We intend
to continue to develop strategic and other relationships with local and national
businesses to increase revenues, add content, generate additional traffic, and
validate and strengthen the TownPages brand.
PLANNED UNITED KINGDOM ROLL-OUT OF TOWNPAGES
The linchpin of our strategy is to be the first service of our kind with
public information point kiosks to establish a national branded presence in the
United Kingdom. Starting immediately upon the consummation of this offering and
during the ensuing three years, we intend to roll out our service across the
United Kingdom, expanding the TownPages database to cover, and installing
approximately 3,450 kiosks in, substantially all of the major towns and cities
in the United Kingdom.
For purposes of the rollout, we have divided the United Kingdom into 23
regions. The regions (listed geographically rather than in roll-out order) are:
1. SOUTH WEST
2. MID SOUTH WEST
3. MID SOUTH EAST
4. SOUTH EAST
5. BRISTOL
6. HOME COUNTIES
7. EAST ANGLIA
8. WALES
9. LONDON
10. BIRMINGHAM
11. LEICESTER
12. LIVERPOOL
13. MIDLAND
14. MANCHESTER
15. NORTH MIDLANDS
16. SHEFFIELD
17. LINCS/YORKSHIRE
18. CUMBRIA
19. NEWCASTLE
20. GLASGOW
21. EDINBURGH
22. NORTHERN SCOTLAND
23. NORTHERN IRELAND
The roll-out plan is designed to:
( Introduce TownPages into the major population centers in the United
Kingdom--London, Manchester, Birmingham and Glasgow--first, and then
spread across the United Kingdom. We plan for TownPages to penetrate the
four major metropolitan markets in the United Kingdom within the 18-24
month period after the completion of this offering, except that the
rollout in the London market, which is very large, is expected to take
approximately 30 months.
( Achieve penetration of broadly separated geographic markets from the
outset to support the "national" marketing strategy.
( Benefit from developing brand awareness as TownPages coverage expands
incrementally in and around each of the initially targeted markets.
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We have initially focused on the United Kingdom because our management
believes that the locally-focused information service we offer has particular
value for the relatively concentrated population in the United Kingdom.
SALES AND MARKETING
Our marketing goal is to position TownPages as the United Kingdom's premier
branded free-use and paid-advertising, locally-focused information provider on
the Internet. Our approach is to establish and strengthen both national and
local branding with local service delivery which fulfills user and customer
needs for locally-focused content and presence.
Our management believes that the techniques used to educate users and
customers in Winchester and Alton and establish the TownPages brand in those
communities can be adapted to allow the development of an effective strategy in
other markets of varying maturity. During our prototype testing and development
operations to date, and our commercial roll-out of TownPages in Winchester in
the third and fourth quarters of 1998, we advertised primarily in local and
regional newspapers, publications, sales promotions and forums. We have also
advertised with radio, bus, direct mailings, film trailer advertising, and
telesales campaigns.
Our management generally intends for the service launch in a particular
community to be a high-profile community event designed to arouse user interest
in, and awareness of, the TownPages service. For example, in Winchester, the
kick-off advertising campaign in late May 1998 commenced with a parade through
the streets of Winchester and associated handing out of promotional items and
leafleting. Leaflet drops in local newspapers and at kiosks sites,
demonstrations at kiosk locations, press releases and film trailer advertising
in local movie theaters followed.
The related business customer-oriented launch in Winchester was an event at
a local hotel presided over by the local Member of Parliament and attended by
local businessmen and community figures. A direct mail campaign aimed at
business customers, with follow-up telesales calls, followed. Press releases and
local advertisements in the local press and local government publications were
also designed to encourage businessmen to advertise on the TownPages service.
A second advertising campaign in Winchester commenced in mid-September 1998.
Users were targeted by press releases, posters near kiosk sites, and
competitions. To reach business customers, we did several direct mailings,
engaged in a two-week radio campaign, and placed advertising on local buses and
in certain business areas of the town. The third advertising campaign, commenced
in mid-November 1998 and was mainly designed to sell banner advertising to
businesses, centered around telesales calls followed up by salesman visits to
targeted businesses.
We expect that the expansion of our locally-focused service will continue to
require extensive local advertisement to develop brand familiarity and encourage
initial sales of advertising to local businessmen. However, we plan to expand
our regional and national advertising with the planned national roll-out of the
TownPages service in the United Kingdom, and to increasingly emphasize radio and
television advertising.
OPERATIONS AND INFRASTRUCTURE
We have no manufacturing capacity and only limited equipment maintenance
capabilities. Consequently, we rely upon third parties for our equipment,
including our kiosks, and for installation, repair, and maintenance. The kiosks
are assembled from standard components available from a variety of suppliers. We
intend to enter more formal arrangements with third party providers of equipment
and installation, maintenance, and repair services in order to support the
planned expansion of TownPages to cities and towns across the United Kingdom.
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We use licensed software site design tools to enable us to build customized
displays and Web sites for customers. The production process is currently
managed at our headquarters location. Display and Web site creation follows a
standard procedure.
In connection with constructing a TownPages "Local" home page to cover a
particular town or city, we must acquire basic data concerning businesses in the
community. The process starts with the purchase of a business listing for the
locality, supplemented by business data obtained from the local government and
various other groups. The list is converted into TownPages business categories
during the process of loading the data into our contact management database. We
use Goldmine software for our contact management database. Once loaded, the
business data is available for our telemarketing organization to verify the
existence and data concerning each business and validate the business category
placement.
We have nearly completed the process of synchronizing the TownPages
database, with Goldmine as our user interface, across all the TownPages business
units, and ensuring easy access to the database by all of our customer contact
personnel. The objective is to provide reliable management and updating of the
database as automatically as possible. For example, if a business informs us
that its telephone number has changed, the sales representative receiving the
call is able to immediately make the change on Goldmine, resulting in the
correction appearing on the live Web site automatically with no further human
intervention the next day. Similarly, if the telesales division sells a
mini-display ad for placement on TownPages, the mini-display appears
automatically on the live Web site with no further human intervention within two
working days after the mini-display data has been inputted into Goldmine. The
Goldmine system is also used to track sales of mini-displays, displays, links,
higher value Web sites, advertising, and other products and services. To achieve
this, the underlying TownPages site database is synchronized on a daily schedule
with the Webserver database, so that the up-to-date business listings are
available for display on the live Web site.
Representatives in the field work with customers who wish to place
advertisements or otherwise establish sites on TownPages to design their
displays and sites and gather images and text. We are seeking to encourage
customers to use templated displays and enhanced templated displays in order to
facilitate more automatic entry of data into the TownPages database, as well as
more rapid updating of displays and more sophisticated monitoring of consumer
responses. Once content is collected, data entry personnel input the text, and
graphic designers combine the text and scanned images to create custom displays
and sites designed to reflect the nature and style of each customer. Once the
display and Web site designers have completed their work, the display or Web
site is checked for accuracy and published online after customer proofing. The
entire process, from our receipt of content to putting a site online, takes
approximately 2 days to complete in the case of a templated display, and
approximately 1 week or more to complete in the case of a more elaborate Web
site, depending on the size and complexity of the Web site. Management believes
that the systems and processes we have developed to produce displays and Web
sites allow us to create high quality, informative, interactive, multi-media
displays and sites in a cost-effective and timely manner.
The core of the TownPages Web site is database driven, to facilitate the
planned national roll-out in the United Kingdom. When additional sections of
TownPages are converted to service from the database, rather than a large
collection of HTML pages, the TownPages service will operate more quickly and
reliably. Also, the changeover to a data-driven structure will make it easier
for us to expand the TownPages database as TownPages service is extended to
cover each additional town or city. Third party sites are indexed within the
TownPages search index by means of Verity Spider software we license, thereby
further expediting the task of increasing the data accessible on the TownPages
system.
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COMPETITION
The markets for locally-focused, Internet-based, interactive information and
advertising content and related services are highly competitive, particularly in
markets in which Internet use is more established and commercialization is more
advanced. Barriers to entry are relatively insubstantial. Our competitors
include Internet-based services and traditional media.
Potential Internet-based competitors include companies and services
organized specifically to provide locally-focused interactive content and
services, such as CitySearch, a service of TicketMaster Online-CitySearch, Inc.,
Digital City, a service of Digital City, Inc., a company wholly owned by America
Online Inc. and Tribune Company, Sidewalk, a service of Microsoft Corporation,
Zip2, a service operated by Zip2 Corporation, and Around Town, a service
operated by WebTV Networks, Inc., which is owned by Microsoft Corporation. Other
services, such as GeoCities, TheGlobe.com, and Xoom, sponsor communities of
personal Web sites, thereby creating audiences for advertisers which may be
topically or geographically segregated. We also compete against search engine
and other site aggregation services, such as City.Net, which is offered by
Excite, Inc., Lycos City Guide, offered by Lycos, Inc., and Yahoo! Local,
offered by Yahoo! Inc., which primarily serve to aggregate links to sites
providing local content. Currently, none of these companies is conducting
significant operations providing locally-focused information and advertisements
generally aimed at towns and cities in the United Kingdom, but GeoCities
recently opened an office in London, England. In addition, CitySearch is now
offered in some locations, such as in New York City, through touch-screen
kiosks.
In addition, services offered by media companies may compete with us. For
example, Cox Interactive Media and Knight-Ridder, Inc., as well as a number of
telecommunications and cable companies and Internet service providers, such as
SBC Communications Inc. (At Hand) and US West, Inc. (Dive-In), provide local
interactive programming.
United Kingdom-based companies, such as British Telecommunications plc (BT
Touchpoint), KDM International plc (County Web), Freepages plc (Scoot), Thomson
Directories Ltd. (ThomWeb), and Yellow Pages, a division of British
Telecommunications plc (Yell), and Time Out Group Ltd. (TimeOut.com) are
competitors. British Telecommunications has tested its BT Touchpoint service
which, like TownPages, was offered on touch-screen kiosks, and included
community information.
ThomWeb, owned by Thomson Directories Ltd., is an Internet site enabling
users to access and search the Thomson Directories database by name,
classification or heading. ThomWeb benefits from the well-established brand name
of Thomson Directories, which is reinforced by regular household door drops of
free printed Thomson directories. ThomWeb carries extensive "Yellow Pages"--type
business listings. The service includes a "Local Information" section with
certain basic information on approximately 120 towns and cities in the United
Kingdom.
Another United Kingdom service, Yell, was launched in January 1996 as a Web
site produced by Yellow Pages, a division of British Telecommunications plc,
featuring a United Kingdom online classified directory. Users are able to search
through a business listing of approximately 1.6 million businesses by business
type, business name, or location. Yell is primarily a "Yellow Pages"--type
business listings service, with some maps and links to Web sites of listed
businesses.
County Web is a service that offers certain business listings and
advertisements, local and national news, weather information, and a "life-style"
section which includes items on property, cars, jobs, leisure, world links,
sports, travel, television, radio and video. Information is organized on a
county-by-county basis in England, Scotland and Wales and by town in certain
areas.
Scoot is a service which provides classified and corporate information by
telephone and via the Internet. Scoot permits searches to locate businesses by
business type, company name, and area/town. Scoot also offers a movie guide and
a product guide which permits searches in the following categories: books,
business to business, charity, computers & games, electrical goods, fashion,
food & drink,
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health & beauty, home & garden, kids stuff, law & finance, motoring, music &
events, sport & fitness, travel, and video.
TimeOut.com is an online city guide which aims to cover the world's largest
cities. Each city guide includes ten sections: Living Guide, Accommodation,
Sightseeing, Essential Information, Entertainment, Eating and Drinking,
Shopping, Kids, Gay and Lesbian, and Web links.
To management's knowledge, none of the foregoing United Kingdom-based
services, other than BT Touchpoint, is delivered through touch-screen kiosks,
and none of them appear to host or link to local governments.
There are also numerous niche competitors that may focus on a specific
category or a geographic region and compete with specific content offerings
provided by TownPages. For example, online services such as Top Jobs on the Net,
specializing in job management, professional, and technical job listings, and
Property Sight, specializing in real estate listings, are active in the United
Kingdom.
We may also compete with online services and other Web site operators, as
well as traditional media such as television, radio and print, for a share of
advertisers' total advertising budgets. Some of these companies have introduced,
or may introduce in the future, online services which mainly act as an adjunct
to the primary traditional media information delivery system.
We believe that the principal competitive factors in out markets include
depth, quality and comprehensiveness of content, ease of use, distribution,
search capability, service reliability and accessibility, and brand recognition.
Many of our current and potential competitors have substantially greater human
and financial resources, experience, and brand name recognition than us, and may
have significant competitive advantages through other lines of business and
existing relationships. Furthermore, these competitors may introduce new
Internet products and services addressing these markets in the future. There can
be no assurance that our competitors will not develop services that are superior
to our services or that achieve greater market acceptance than our offerings.
There can be no assurance that we will be able to successfully compete
against our current or future competitors. Competition could have a material
adverse effect on our ability to consummate exclusive arrangements with councils
or enter into strategic business alliances, or on its business, financial
condition and results of operations. Furthermore, as a strategic response to
changes in the competitive environment, we may make certain pricing, service or
marketing decisions or enter into acquisitions or new ventures that could have a
material adverse effect on our business, financial condition and results of
operations.
INTELLECTUAL PROPERTY
Our success and ability to compete depends in part on the protection of our
original content for the Internet and on the goodwill associated with our
trademarks, trade names, service marks and other proprietary rights. We rely on
copyright laws to protect the original content that we develop for the Internet.
In addition, we rely on trademark laws to provide additional protection for the
appearance of our Web site. A substantial amount of uncertainty exists
concerning the application of copyright laws to the Internet, and there can be
no assurance that existing laws will provide adequate protection for our
original content. In addition, because copyright laws do not prohibit
independent development of similar content, there can be no assurance that
copyright laws will provide any competitive advantage to us.
We have registered "TownPages," "Town Pages," and "Town-Pages" as trademarks
in the United Kingdom. We also assert common law protection on certain names and
marks that we have used in connection with our business activities.
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Our management may explore opportunities in other markets in Europe and
elsewhere from time to time. If we pursue any opportunities in those markets, we
may incur additional risks because some foreign jurisdictions offer less
protection for intellectual property than jurisdictions like the United Kingdom,
where we currently do business, or the United States.
We have registered the following Internet domain names with the InterNIC
registration service:
townpages.co.uk
townpages.org
However, other companies have registered domain names that may be
confusingly similar to our domain name with the result that our business,
operations, and financial condition could be materially adversely affected by
the operations of those other companies. For example, Omnisys Corporation owns
and operates a Web site at www.townpages.com through which it hosts and provides
links to Web sites for various Internet Service Providers and content providers,
as well as related services. Cape Coral, Florida, Fort Myers, Florida, Amarillo,
Texas, and San Antonio, Texas, are the four communities currently served by Web
sites through this service, which is called Community Web Pages. To our
management's knowledge, this service is not currently being utilized to compete
with us in the United Kingdom or Europe. Alton.Org, the registered owner of
www.townpages.net, owns a Web site which is intended to provide various
information concerning Alton, England and surrounding villages. Alton was the
site for our initial prototype testing. Locally-focused information concerning
Epsom and Ewell, small communities in England, is provided at a Web site at
www.epsom.townpage.co.uk. That Web site was created by Internetworks Ltd., which
states on the site that it is an Internet service company that can provide a
"TownPage" for any other town which engages its services. This site is now
linked to TownPages.
We will rely on trade secret and copyright laws to protect the proprietary
technologies that we may develop to manage and improve our Web site and
advertising services, but there can be no assurance that those laws will provide
us with sufficient protection, that others will not develop technologies that
are similar or superior to ours, or that third parties will not copy or
otherwise obtain and use our technologies without authorization. We have no
patents or patent applications filed or pending.
In addition, we rely on certain technology licensed from third parties, and
may be required to license additional technology in the future, for use in
managing our Web site and providing related services to users and advertising
customers. There can be no assurance that these third party technology licenses
will be available or will continue to be available to us on acceptable
commercial terms or at all. The inability to enter into and maintain any of
these technology licenses could have a material adverse effect on our business,
financial condition and operating results.
Policing unauthorized use of our proprietary technology and other
intellectual property rights could entail significant expense and could be
difficult or impossible, particularly given the global nature of the Internet
and the fact that the laws of other countries may afford us little or no
effective protection of our intellectual property. In addition, there can be no
assurance that third parties will not bring claims of copyright or trademark
infringement against us or claim that our use of certain technologies violates a
patent. We anticipate an increase in patent infringement claims involving
Internet-related technologies as the number of products and competitors in this
market grows and as related patents are issued. Further, there can be no
assurance that third parties will not claim that we have misappropriated their
creative ideas or formats or otherwise infringed upon their proprietary rights
in connection with our Internet content. Any claims of infringement, with or
without merit, could be time consuming to defend, result in costly litigation,
divert management attention, require us to enter into costly royalty or
licensing arrangements or prevent us from using important technologies or
methods, any of which could have a material adverse effect on our business,
financial condition or operating results.
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GOVERNMENT REGULATION
We are and will be subject to laws and regulations applicable to businesses
generally in the countries in which we operate. Currently, there are relatively
few laws and regulations directly applicable to access to and commerce on the
Internet. However, due to the increasing popularity and use of the Internet, it
is possible that a number of laws and regulations may be adopted, or that
existing laws or regulations may be applied differently, with respect to the
Internet, covering issues such as user privacy, pricing, and characteristics and
quality of products and services. For example, the European Union has adopted a
Directive on Privacy, effective on October 24, 1998. The Directive establishes
minimum standards for the collection and use of personal identifying information
in the European Union, and prohibits the transfer of this information to
countries whose privacy standards are deemed inadequate. Any such laws and
regulations could hinder growth in use of the Internet generally, and decrease
the acceptance of the Internet as a communications and commercial medium, and
could thereby have a material adverse effect on our business, results of
operations, and financial condition.
In addition, several telecommunications carriers are seeking to have
telecommunications over the Internet regulated by agencies such as the Federal
Communications Commission in the United States in the same manner as other
telecommunications services. Local telephone carriers, such as Pacific Bell in
the United States, have petitioned the FCC to regulate Internet service
providers and online service providers in a manner similar to long distance
telephone carriers and to impose higher access fees on the Internet service
providers and online service providers. The costs of communicating on the
Internet could increase substantially as a result of any such regulation in the
United States, the United Kingdom, or elsewhere, potentially slowing the growth
in use of the Internet.
We may be subject to various government laws and regulations, in the United
Kingdom and elsewhere, that regulate advertising in media, which may include the
Internet. Those laws and regulations typically require advertisers and
advertising agencies to have substantiation for advertising claims before
disseminating advertisements. Such laws and regulations can prohibit the
dissemination of false, deceptive, misleading, and unfair advertising, and may
grant certain governmental agencies enforcement powers to impose and seek civil
penalties, consumer redress, injunctive relief and/or other remedies.
The placement and operation of our kiosks are also subject to various local
zoning and similar laws and regulations which could delay, preclude, or increase
the cost of kiosk installation and operation.
INSURANCE
We believe that our insurance coverage for our business is generally in
accordance with industry standards and is adequate in light of our business and
the risks to which we are subject, except that we do not presently maintain
"errors and omissions" insurance. We also currently do not maintain key man life
insurance, although we plan to obtain such insurance upon completion of this
offering. Any failure to maintain adequate insurance could have a material
adverse effect on our business and financial condition.
EMPLOYEES
We have 21 full-time employees as of December 31, 1998, of whom 9 are
design, production and technical personnel, 9 are sales and marketing personnel
and 3 are general, administrative and executive management personnel. Two of our
executives, Mr. Richard Smith, our interim Chief Financial Officer, and Mr.
Barry Charles, our Vice President, are employed by us on a part-time basis. None
of our employees is covered by a collective bargaining agreement and our
management considers relations with employees and consultants to be good. We are
presently employing two subcontractors to
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perform a substantial part of the four Web site design contracts that currently
account for a large portion of our revenues. We expect that we may subcontract
work from time to time in the future when the need arises, but we intend to
increase our own staff to handle projects as circumstances permit.
FACILITIES
Our executive office are located at 11 Market Square, Alton, Hampshire,
England GU34 1HD, United Kingdom, where we occupy approximately 242 square
meters (approximately 2,540 square feet) of office space under a lease assigned
to it by Westbrook Property Developments Ltd. for L1. We pay approximately
L36,000 ($59,860) per year in rent under the lease. Westbrook Property
Developments Ltd. leased the premises from Lloyds Bank plc. in 1989 for a 25
year term. Prior to the assignment, Westbrook licensed the space to us. The
lease terminates on September 28, 2014. Andrew Neville Lyndon-Skeggs, our
President, is the founder, Managing Director, and the beneficial owner of all of
the shares of Westbrook Property Developments Ltd. See "Related Party
Transactions."
While we presently have no other facilities, we anticipate that in
connection with the planned expansion of our operations we will add facilities
as appropriate.
LEGAL PROCEEDINGS
We are not involved in any pending or, to our knowledge, threatened legal
proceedings. We may from time to time become a party to various legal
proceedings arising in the ordinary course of business.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our executive officers and directors, and their ages at December 31, 1998,
are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ------------------------------------ --- ---------------------------------------------------------------------
<S> <C> <C>
Viscount Edward James Wingfield
Lifford........................... 49 Chairman of the Board and Director
Andrew Neville Lyndon-Skeggs........ 49 President, Managing Director and Chief Executive Officer
Richard J. Smith.................... 51 Chief Financial Officer and Director
Barry B. J. Charles................. 60 Vice President and Director
Kevin R. Leech...................... 55 Director
Nigel E. C. Talbot-Ponsonby......... 52 Director
Howard E. Flight, M.P............... 50 Director
Simon J. Ward....................... 54 Director
</TABLE>
Our amended Articles of Association provide that at the first annual general
meeting of our shareholders, all of our directors shall retire from office. In
English companies, when a director ceases to be a director, whether voluntarily
or otherwise, we say that the director has "retired." Our directors are subject
to retirement by rotation. At every one of our subsequent annual general
meetings, one-third of our directors who are subject to retirement by rotation
or, if their number is not three or a multiple of three, the number nearest to
one-third of our directors, shall retire from office. If there is only one
director who is subject to retirement by rotation, that director shall retire.
Subject to the provisions of the U.K. Companies Act 1985, the directors to
retire by rotation shall be those who have been longest in office since their
last appointment or retirement. As between persons who became or were last
reappointed directors on the same day, those to retire shall be determined by
lot unless they otherwise agree among themselves. If a director retires by
rotation and the vacancy is not filled by the shareholders, the retiring
director shall be deemed to have been reappointed if he is willing to be
reappointed. However, the director in that situation shall not be deemed to be
reappointed, if the shareholders determine not to fill the vacancy or a
resolution to reappoint the director is voted upon and defeated. Our
shareholders holding a majority of our ordinary shares may remove any director
from office at any time, with or without cause.
We have granted to the representative of the underwriters the right, for a
period of 5 years from the closing of the offering, to nominate a designee of
the representative for election to our board of directors. The representative
has not yet exercised its right to designate such a person. If the
representative elects not to exercise this right, then the representative may
designate one person to attend meetings of our board of directors.
BACKGROUND INFORMATION CONCERNING EXECUTIVE OFFICERS AND DIRECTORS
VISCOUNT EDWARD JAMES WINGFIELD LIFFORD. Lord Lifford is an investment
manager and has worked on behalf of a wide range of clients over the past
twenty-five years. In 1990 Lord Lifford was affiliated with the firm Neilson
Cobbold, where he managed funds for clients. That company was acquired by
Rathbone Bros. in 1996. He is now a director of Rathbone Bros. and is
responsible for managing several billion pounds of discretionary money both in
the United Kingdom and internationally. He is also a director of City of
Winchester Investments plc and Winchester Cottage Improvement Society plc. Lord
Lifford joined us in December 1998 as chairman of our board of directors.
ANDREW NEVILLE LYNDON-SKEGGS. Mr. Lyndon-Skeggs was a founder of Town Pages
Limited in 1995 and has served as President and Managing Director of that
company since September 1995 and of Town Pages Holdings plc since our formation
in 1998. He graduated from Cambridge University with a degree in Land Economy in
1970, and has also received a Master of Arts degree, with highest honors, from
Cambridge. From 1970 to 1972, Mr. Lyndon-Skeggs worked as a commercial property
negotiator
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for Savills. He then obtained a position with Trafalgar House plc where he
undertook commercial and residential property developments. In 1978 Mr.
Lyndon-Skeggs took a position with Wates Developments, working on residential
developments in central London. In 1981, Mr. Lyndon-Skeggs founded Westbrook
Property Developments Ltd., a company engaged in commercial, healthcare and
residential developments. He remains the Managing Director of that company,
although daily management is now handled by a Project Manager. Mr. Lyndon-Skeggs
is responsible for our overall leadership and management.
RICHARD J. SMITH. Mr. Smith has served as our interim Chief Financial
Officer and as a director since December 1998. Mr. Smith is a Fellow of the
Association of Chartered Certified Accountants, qualifying in 1970. In 1972, he
moved to Jersey (Channel Islands) and after working as an audit manager for
three years moved to Hambros Channel Islands Trust Corporation as their
accountant. In 1978, he took a position as Finance Controller with Avis Channel
Islands car rental and motor dealership operations. After the disposal of those
businesses by Avis, he became Chief Executive for the new private owner. In 1986
he moved back into the finance industry as Deputy Finance Manager for Save &
Prosper in Jersey, Channel Islands, a Robert Fleming fund management subsidiary.
Since 1988, Mr. Smith has acted as a Finance Director for Kevin R. Leech's
portfolio of investments.
BARRY B. J. CHARLES. Mr. Charles is trained as an electronics engineer.
After working as a design engineer, he joined the Radio Corporation of America
in 1965, where he held a number of positions in sales, marketing and executive
management, including a European assignment at RCA's operations in Belgium. In
1983, Mr. Charles became President of Pacesetter Electronics International,
Inc., an international distributor of electronic components and systems with
operations in North America, the United Kingdom, Australia and New Zealand. In
1986, this group was sold to Eurodis Electron plc (formerly Electron House plc),
a United Kingdom company listed on the London Stock Exchange and Mr. Charles
joined their Board of Directors. Eurodis is a large, pan-European distributor of
electronic components and systems. Mr. Charles was named Group Managing Director
of Eurodis in 1990, Group Chief Executive of Eurodis in 1993 and Vice Chairman
(semi-retired) of Eurodis in 1998. Mr. Charles joined us in December 1998 as a
Vice President and director.
HOWARD E. FLIGHT, M.P. In 1971, Mr. Flight joined the firm N.M. Rothschild &
Co. Ltd as an investment advisor. In 1977, he joined Wardley Ltd. (the Hong Kong
Bank's Merchant Bank). In 1979, he joined Guiness Mahon, becoming a director in
1983. In 1987, he became Joint Managing Director of Guiness Flight on its
formation where he is responsible for the company's currency and fixed interest
operations, for business development in India, the United States institutional
markets and for the private client business. Mr. Flight entered Parliament as
the Conservative M.P. for Arundel & South Downs in May 1997. In 1998, Guiness
Flight merged with Investec Asset Management and Mr. Flight became the Joint
Chairman of Investec Guiness Flight. Mr. Flight received his MBA degree from the
University of Michigan. Mr. Flight joined us in December 1998 as a director.
KEVIN R. LEECH. Mr. Leech is the Executive Chairman of ML Laboratories plc,
a United Kingdom company listed on the London Stock Exchange which is engaged in
the research and development of ethical pharmaceuticals and related products. He
is the co-founder of ML and controls 53% of its equity. He is also Executive
Chairman of Queensborough Holdings plc, a United Kingdom company listed on the
London Stock Exchange whose principal activities are in the leisure sector, and
of which he owns 29.7%. In addition, Mr. Leech is a director and principal
shareholder of numerous privately-owned companies resulting from his role as a
provider of private venture capital. The activities of the companies are varied
and include other leisure and technology-related companies, including The
Corporate Net plc. See "Related Party Transactions." Mr. Leech is also the
beneficial owner, directly or indirectly, of Glen Investments Limited and of
Raven Ventures Limited, both of which are private investment companies. See
"Related Party Transactions." In October 1998, Mr. Leech was awarded an
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honorary Doctorate of Laws degree from the University of Manchester. Mr. Leech
joined us in December 1998 as a director.
NIGEL E.C. TALBOT-PONSONBY. Mr. Talbot-Ponsonby is a Fellow of the Royal
Institution of Chartered Surveyors having qualified in the United Kingdom in
1974. He then joined the firm of Strutt and Parker, Consultant Surveyors, where
he specialized in Estate Business Management and the leisure industry sector. He
subsequently joined Humberts, Chartered Surveyors, in Lincolns' Inn Fields,
London to establish their new joint venture vehicle, Humberts Landplan, with
Williams & Glyns Bank Ltd., specializing in tax planning and the leisure sector.
He was a partner in Humberts for 16 years, subsequently becoming an equity
partner and co-founded Humberts Leisure. In 1991, he led a management buy-out of
the leisure division's consultancy business using city funding to create
Humberts Leisure Limited, International Leisure Business Specialists, which now
operates throughout the United Kingdom and Europe and of which he is Executive
Chairman. Mr. Talbot-Ponsonby joined us in December 1998 as a director.
SIMON J. WARD. Mr. Ward became qualified as a chartered accountant in the
United Kingdom in 1968. He joined the Middle East branch of Ernst & Young and
became a partner in 1974 where he worked in East Africa, Kuwait, Saudi Arabia
and the United Arab Emirates. He returned to the United Kingdom in 1988 and
established the firm Cuthbert Ward in 1991, which firm was later merged with
Fellowes and Co. to form CW Fellowes Limited. CW Fellowes Limited served as the
independent business advisor of Town Pages Limited from 1995 to 1997. Mr. Ward
specializes in advising growing businesses particularly in an international
environment. Mr. Ward joined us in December 1998 as a director.
BACKGROUND INFORMATION CONCERNING CERTAIN KEY EMPLOYEES
JAMES WILKINSON. Mr. Wilkinson has served as our Vice President-Information
Technology since December 1997. He received a 1(st) class honors degree in
Applied Mathematics from Dublin University in 1974. He is a professional
analyst/programmer with almost 25 years of high and low level software design
experience. From September 1974 through December 1997, he was employed by
International Business Machines, Inc. in various programming, software design,
IBM PC system architecture and product development team leader capacities,
including work on various IBM PC display adapters and video device drivers.
Consequently, he has a great deal of experience with and knowledge of PC display
adapters, PC hardware, PC architecture, small systems architecture, operating
systems, programming techniques and programming languages.
ALAN SMITH. Mr. Smith has served as our Commercial and Councils Manager
since November 1997. He received a Retail degree from Millbank College,
Liverpool, England, in 1971, and a Retail degree in Business Management from
Halton, Cheshire, England in 1976. Mr. Smith was employed by the Journal of
Commerce in Liverpool, England from 1975 to 1980, and by Link House Magazines,
publishers of various weekly and monthly periodicals in the United Kingdom, from
1980 to 1985. In each case, he progressed from an account manager position to a
position as sales manager responsible for several publications. Mr. Smith
operated his own advertising and public relations agency from 1988 to 1994, and
a business and marketing consultant business from 1994 to 1996. Mr. Smith was a
consultant to The Corporate Net Ltd., presently known as topjobs.net plc, a
company which owns and operates a Web site offering recruitment advertising in
the United Kingdom, Ireland, and Switzerland, from July 1996 to October 1996. In
November 1996, Mr. Smith became General Manager of The Corporate Net Ltd., and
in February 1997 he became Commercial Manager, in which capacity he was
responsible for setting up exclusive marketing programs with America OnLine,
Riley Advertising, and others.
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COMMITTEES OF THE BOARD OF DIRECTORS
On December 15, 1998, our board of directors established an audit committee
and a compensation committee. The audit committee, initially comprised of
Messrs. Flight, Leech, Lifford, Talbot-Ponsonby, and Ward, has responsibility
for, among other things, the planning and review of our annual and periodic
reports and accounts and the involvement of our auditors in that process,
focusing particularly on compliance with legal requirements and accounting
standards and the rules of the Amex, the Commission, and the United Kingdom, and
the establishment of an effective system of internal financial controls. The
audit committee makes recommendations to our board of directors regarding the
independent auditors to be nominated for ratification by our shareholders and
those other matters, but the ultimate responsibility for those matters remains
with our board of directors. The compensation committee, which is initially
comprised of Messrs. Flight, Leech, Lifford, Talbot-Ponsonby, and Ward, will
recommend to our board of directors compensation plans and arrangements,
including awards of any stock options, with respect to our executive officers,
directors, and key personnel. Our board of directors does not currently have and
does not currently intend to establish an executive committee or a nominating
committee, as those functions are to be performed by our entire board of
directors.
COMPENSATION OF DIRECTORS FOR ATTENDANCE AT MEETINGS
We expect to enter into agreements with our independent directors prior to
the consummation of this offering. The agreements will provide that each
independent director other than Viscount James Lifford will be paid L6,000
($9,977) per year for attending all of the meetings of our board of directors.
Viscount James Lifford is paid L12,000 ($19,954) per year to serve as our
chairman. Our executive directors, who are also our employees, will receive no
cash compensation for serving on the board of directors. All directors are
reimbursed for their reasonable expenses incurred to attend meetings of our
board. We anticipate that our board of directors will hold regularly scheduled
meetings quarterly.
DIRECTORS' INTERESTS
Other than as disclosed under "Principal Stockholders" and under
"Management--Option Grants," none of our directors has any interest in our
issued share capital which is required to be notified to us under Section 324 or
Section 328 of the U.K. Companies Act 1985, or is required under Section 325 of
the U.K. Companies Act 1985 to be entered into the register referred to in that
Section; nor are there any of those interests of any person connected with any
director within the meaning of Section 346 of the U.K. Companies Act 1985 the
existence of which is known to, or could with reasonable diligence be
ascertained by, that director. Mr. Andrew Neville Lyndon-Skeggs and Mr. Kevin R.
Leech each have material transactions with us in addition to their status as
directors or officers. See "Related Party Transactions" for a discussion of
those transactions. Our officers and directors are paid certain amounts for the
performance of their duties. See "Management-- Compensation of Directors for
Attendance at Meetings; Employment Agreements."
EXECUTIVE COMPENSATION
The following table presents information relating to compensation awarded
to, earned by or paid to our Chief Executive Officer. He was our only executive
officer whose compensation exceeded L60,000 ($99,768) during our fiscal year
ended December 31, 1998.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED OTHER ANNUAL
NAME AND PRINCIPAL POSITION DECEMBER 31, SALARY BONUS ($) COMPENSATION
- -------------------------------- --------------- --------------------- -------------------- --------------------
Andrew Neville Lyndon-Skeggs,... 1998 L65,000 $ 108,082 L-- $ -- L7,000 $ 11,640
President and Chief Executive
Officer
</TABLE>
The aggregate value of benefits to be reported under the "Other Annual
Compensation" column did not exceed the lesser of L30,070 ($50,000) or 10% of
the total of annual salary and bonus reported for Mr. Lyndon-Skeggs. These
amounts do not include amounts expended by us for automobiles made available to
our officers, expenses reimbursed to officers (including business travel,
professional and business association dues and expenses) and other benefits
commonly reimbursed or paid by companies in the United Kingdom.
The aggregate compensation paid to all persons who served in the capacity of
director or executive officer during our fiscal year ended December 31, 1998 (8
persons) was approximately L65,000 ($108,082).
EMPLOYMENT AGREEMENTS
We intend to enter into new employment agreements with certain of our key
employees prior to the effective date of the registration statement of which
this prospectus is a part. Our management anticipates that each of these
employment agreements will be for a one year term or less, renewable by mutual
agreement of the parties thereto, and that the employment agreements will
provide, among other things, that each of the employees party thereto shall
provide services to us on a full-time basis. The agreements shall contain
post-termination restrictive covenants relating to non-competition with us,
non-solicitation of our customers, non-dealing with our customers and
non-solicitation of our suppliers and employees. In addition, each employment
agreement shall contain an express obligation of confidentiality in respect of
our trade secrets and confidential information and provide for us to own any
intellectual property rights created by the executives in the course of their
employment.
Pending negotiation, execution, and delivery of those agreements, each of
our officers and key employees has entered into an agreement, cancelable by
either party on short notice (generally 30-90 days' notice), to provide services
to us. Under the terms of his employment agreement, Mr. Andrew Neville
Lyndon-Skeggs, our President and Managing Director, is paid L80,000 ($133,024)
base salary per year plus a bonus of L20,000 ($33,256) per year.
Mr. Richard J. Smith and Mr. Barry B. J. Charles, our Chief Financial
Officer and our Vice President, respectively, only devote a small portion of
their working hours each week to our business. Their salaries are L20,000
($33,256) per year and L30,000 ($49,884) per year, respectively. Town Pages is
currently searching for a new, full-time Chief Financial Officer. There can be
no assurance that a full-time Chief Financial Officer will be hired prior to the
closing of this offering. Mr. Andrew Neville Lyndon-Skeggs holds the top
managerial position of another company which he owns, but he devotes
substantially all of his working hours to our business. Because of their
involvement in other businesses, situations could arise in the future which
could result in conflicts of interest for certain of our executive officers and
directors, but we do not presently anticipate that any such events to occur in
the foreseeable future. Certain of our officers and directors will benefit from
the completion of this offering, either because they are existing shareholders
or because of other transactions with us. See "Risk Factors" and "Related Party
Transactions."
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Each of our executive officers has the right to participate in the various
share option schemes and plans described below. If any of our directors is
removed from office without cause on less than six months notice, the director
will continue to receive fees for attending directors' meetings for the balance
of the six months.
EXECUTIVE SHARE OPTION PLAN
We operate a share option plan, The Town Pages Executive Share Option Plan,
under which our directors and employees may acquire ordinary shares. Awards
under the plan are not pensionable and the plan is not designed to be a plan
approved by the U.K. Inland Revenue. A summary of the plan follows.
NUMBER OF ORDINARY SHARES. An aggregate of 10% of the ordinary shares issued
and outstanding from time to time may be issued or issuable under the plan and
all other employee share schemes or plans which may be established by us in the
future. For the purposes of this limit, options which lapse or ordinary shares
held in treasury are not taken into account. Upon completion of this offering,
an aggregate of 700,000 ordinary shares shall be issuable under the plan.
ELIGIBILITY. Full-time executive directors and all of our employees and any
of our subsidiaries (designated by the directors) who are not within two years
of their normal retirement date are eligible to participate in the plan.
GRANT OF OPTIONS. Options will be granted by our compensation committee, a
majority of which consists of independent directors. Options will normally only
be granted concurrently with or within 42 days of this offering or the
announcement of our annual or interim results.
PERFORMANCE CONDITIONS. The compensation committee may grant options subject
to performance conditions which are intended to link the exercise of options to
sustained improvements in our underlying financial performance. It is not
intended that options granted concurrently with this offering will be granted
subject to performance conditions.
OPTION PRICE. Options will be granted at option prices to be determined by
the compensation committee, which, excluding options granted concurrently with
this offering, shall not be a less than 100% of the fair market value of the
ordinary shares on the date of grant. Fair market value is defined as a value
for the ordinary shares based on the closing price of the ADSs offered hereby,
as traded on the Amex or the other principal U.S. market for our securities, on
the business day immediately preceding the date of grant. Where ordinary shares
are to be subscribed on the exercise of an option, the option price cannot be
less than the nominal value of an ordinary share.
LIMITATION ON EMPLOYEE PARTICIPATION. An employee's participation is limited
so that, excluding any options granted concurrently with this offering, the
aggregate price payable for ordinary shares under option in any ten-year period
does not exceed a multiple of ten times the employee's remuneration. This limit
applies to options granted under the plan and any other executive share plan
established by us or associated companies.
EXERCISE OF OPTIONS. Options will normally be exercisable, subject to any
performance condition being satisfied and the optionholder remaining a director
or employee of ours or of any of our subsidiaries, on the third anniversary of
grant. Options may also be exercised early in certain circumstances, for
example, upon an optionholder ceasing to be an employee due to death, injury,
ill health, disability, redundancy, retirement, or following our sale of a
subsidiary or division in which the optionholder works, or in certain
circumstances where the optionholder is transferred to work overseas, or in the
event of a takeover or winding up of our company. Options are not transferable
and may only be exercised by the persons to whom they are granted, except that
in the case of the death of the optionholder, options may be transferred to his
or her heirs or estate.
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EXCHANGE OF OPTIONS. In the event we are taken over, optionholders may,
subject to the consent of the acquiring company, exchange their options for
options for ordinary shares or shares in the acquiring company, or other
associated compensation in the acquiring company.
ISSUES OF ORDINARY SHARES. Ordinary shares issued upon the exercise of
options will rank equally with ordinary shares of the same class in issue on the
date of allotment except in respect of rights arising by reference to a prior
record date.
VARIATION IN SHARE CAPITAL. Options may be adjusted following certain
variations in our share capital, including a capitalization or rights issue.
TERMINATION OF THE PLAN. No options may be granted under the plan after the
tenth anniversary of the adoption of the plan.
AMENDMENTS. The directors may amend the plan, except that amendments
relating to eligibility to participate in the plan, the limitations on the
benefits of optionholders under the plan, the number of ordinary shares which
may be issued under the plan, and the basis for determining the exercise price
of options may not be made to the advantage of optionholders without prior
approval of our shareholders in a general meeting, except for minor amendments
relating to tax and administrative matters. Additionally no amendments which
would adversely effect the rights of existing optionholders may be made without
their consent.
OPTION GRANTS.
Upon the commencement of this offering, we plan to issue to certain of our
officers, directors and employees options to purchase an aggregate of 190,000 of
our ordinary shares, exercisable at the initial public offering price of the
ADSs. The following table lists the names, executive offices, and number of
options to be granted upon the commencement of this offering to our executive
officers and directors, assuming an exercise price of $10.00 per ordinary share:
<TABLE>
<CAPTION>
NUMBER OF
NAME OF OPTION HOLDER OFFICE ORDINARY SHARES
- ------------------------------------ ---------------------------------------------------------- ---------------
<S> <C> <C>
Viscount Edward James Wingfield
Lifford........................... Chairman of the Board and Director 7,500
Andrew Neville Lyndon-Skeggs........ President, Managing Director and Chief Executive Officer 70,000
Richard J. Smith.................... Chief Financial Officer and Director 20,000
Barry B.J. Charles.................. Vice President and Director 5,000
Kevin R. Leech...................... Director 5,000
Nigel E. C. Talbot-Ponsonby......... Director 5,000
Howard E. Flight, M.P............... Director 5,000
Simon J. Ward....................... Director 5,000
</TABLE>
All of the options granted are for a period of ten years and are normally
exercisable only after three years from the date of grant provided that the
holder's continuous full-time employment with us does not terminate during that
three year period. Earlier exercise of these options is permitted in limited
circumstances (See "Executive Share Option Plan" above).
PENSION PLAN.
We sponsor a defined contribution pension plan for our directors, officers
and employees. All employees are eligible to join the plan and can make
contributions into the plan. At the discretion of our board of directors, we
contribute amounts up to 10% of participating employees' annual compensation
into the plan. Total contributions for all employees for the period ended
December 31, 1996, and the years ended December 31, 1997 and December 31, 1998
were zero, L9,429 ($15,679), and L19,327 ($32,137), respectively. The plan is
administered by Pembroke Asset Management Ltd., Southampton, United Kingdom.
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BOARD ACTION AND POWERS
Our amended Articles of Association in effect upon completion of this
offering provide that, unless otherwise determined by ordinary resolution, our
board of directors shall consist of not less than two nor more than ten members.
Except as noted below, the board of directors may at any time appoint any
person to be a director either to fill a vacancy or as an additional director,
provided that the number of directors does not exceed ten. Any person so
appointed by the board of directors shall hold office only until the next annual
general meeting of shareholders and shall then be eligible for election by the
shareholders but shall not be taken into account in determining the number of
directors who are to retire by rotation at such meeting as set out below. At
each annual general meeting of shareholders, one-third of the directors (or, if
their number is not a multiple of three, the number nearest to but not greater
than one-third) shall retire from office by rotation. The directors to retire by
rotation shall include (as far as may be necessary to obtain the number
required) any director who wishes to retire and not to offer himself for
reelection, and shall then include those members who have served the longest on
the board of directors. A retiring director shall be eligible for immediate
re-election.
Any provisions of the U.K. Companies Act 1985 or other United Kingdom
statutes applicable to us which would have the effect of rendering any person
ineligible for appointment as a director or liable to vacate office as a
director on account of his having reached any specified age or of requiring
special notice or any other special formality in connection with the appointment
or election of any director over a specified age, shall not apply to us.
Directors shall not be required to hold any of our ordinary shares by way of
qualification. A director who is not a shareholder shall nevertheless be
entitled to attend and speak at shareholders' meetings.
BORROWING POWERS. Subject to the limitations noted below, the directors may
exercise all our powers to borrow money, and to mortgage or charge our
undertaking, property and uncalled capital or any part or parts thereof, and to
issue debentures and other securities, whether outright or as collateral
security for any debt, liability or obligation of us or of any third party. The
directors shall restrict our borrowings and exercise all voting and other
rights, powers or control or rights of influence exercisable by us and any of
our subsidiaries or in relation to our subsidiaries so that the aggregate amount
for the time being outstanding of all money borrowed by us and for the time
being remaining outstanding of all money borrowed by us (exclusive of borrowings
owed by us to any subsidiary or by any subsidiary to us or another subsidiary)
shall not at any time without the previous sanction of an ordinary resolution of
our shareholders exceed the sum of two times shareholders equity as set forth in
our consolidated balance sheet for our most recent fiscal year, from time to
time, as audited by our independent public accountants.
REMUNERATION AND EXPENSES. The remuneration of the directors will be
determined by the directors but shall not in the aggregate exceed L250,000
($415,700) per year (disregarding any compensation payable to directors in their
capacity as executives) or such higher amount as may from time to time be
determined by an ordinary resolution of our board. Such remuneration shall
(unless such resolution otherwise provides) be divisible among the directors as
they may agree or, failing agreement, equally, except that any director who
shall hold office for only part of the period with respect to which such
remuneration is payable shall be entitled only to rank in such division for a
proportion of remuneration related to the period during which he has held
office. Any director who holds any executive office (including for this purpose
the office of chief executive officer or vice-chairman of the board of
directors, whether or not such office is held in an executive capacity) or who
serves on any committee of the directors, or who otherwise performs services
which in the opinion of the directors are outside the scope of the ordinary
duties of a director, may be paid such extra remuneration by way of salary,
commission or otherwise or may receive such other benefits as the
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directors may determine. The directors may repay to any director all reasonable
expenses as he may incur in attending and returning from meetings of the
directors or of any committee of the directors or shareholders' meetings or
otherwise in connection with our business.
PENSIONS AND OTHER BENEFITS. The directors shall have the power to pay and
agree to pay gratuities, pensions or other retirement superannuation, death or
disability benefits to (or to any person in respect of) any director or
ex-director and, for the purpose of providing any such gratuities, pensions, or
other benefits, to contribute to such scheme or to pay premiums.
INDEMNIFICATION AND INSURANCE. Our directors and officers (excluding
auditors) shall be indemnified by us out of our own funds against and/or
exempted by us from all costs, charges, losses, expenses and liabilities
incurred by him in the actual or purported execution and/or discharge of his
duties and/or the exercise or purported exercise of his powers and/or otherwise
in relation to or in connection with his duties, powers or office. This
indemnification includes (without prejudice to the generality of the foregoing)
any liability incurred by him in investigating, preparing for and defending any
inquiries or investigation, claim or proceedings, civil or criminal, which
relate to anything done or omitted or alleged to have been done or omitted by
him as an officer, director, or employee of our company and in which judgment is
given in his favor (or the proceedings are otherwise disposed of without any
finding or admission of any material breach of duty on his part) or in which he
is acquitted or in connection with any application under any statute for relief
from liability with respect to any such act or omission in which relief is
granted to him by a court. In that regard, we shall have the power to advance
funds to any such officer, director or employee in payment of all costs,
charges, losses, expenses, and liabilities incurred by him in investigating,
preparing for or defending any such inquiries, investigations, claims or
proceedings whatsoever. Our ability to indemnify or exempt our officers and
directors from liability is limited by the provisions of the U.K. Companies Act
1985. In addition, the board of directors shall have power to purchase and
maintain insurance for or for the benefit of any person who is or was at any
time a director or officer of any "relevant company" (as defined below) or who
is or was at any time a trustee of any pension fund or employees' share scheme
in which employees of any relevant company are interested including (without
prejudice to the generality of the foregoing) insurance against any liability
incurred by such person in respect of any act or omission in the actual or
purported execution and/or discharge of his or her duties and/or in the exercise
or purported exercise of his or her powers and/or otherwise in relation to his
or her duties, power, or offices in relation to any relevant company, or any
such pension fund or employees' share scheme. For purposes of this paragraph,
"relevant company" shall mean us, any holding company of ours or any other body,
whether or not incorporated, in which we or such holding company or any of the
predecessors of us or of such holding company has or had any interest whether
direct or indirect or which is in any way allied to or associated with us, or
any subsidiary of us, or of such other body.
At present, there is no pending litigation or proceeding involving a
director or executive officer of ours where indemnification will be required or
permitted. We are not aware of any threatened litigation or proceeding which may
result in a claim for such indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of our company
under the provisions, described above, or otherwise, we have been advised that
in the opinion of the Commission, this type of indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
INTERESTED DIRECTOR TRANSACTIONS. Subject to certain provisions of the U.K.
Companies Act 1985 designed to enforce fair dealing by directors and prevent
their taking financial advantage, and provided that a director has disclosed to
the directors the nature and extent of any interest, a director
(1) may be party to or otherwise interested in any contract, transaction, or
arrangement with us or in which we are otherwise interested,
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(2) may be a director or other officer of or employed by a party to any
contract, transaction or arrangement with or otherwise interested in any
body corporate promoted by us or in which we are in any way interested
and
(3) he (or any firm of which he is a partner, employee or member) may act in
a professional capacity for us (other than as auditor) and be remunerated
therefore and shall not (save as otherwise agreed by him) be accountable
to us for any benefit which he derives from any such contract,
transaction or arrangement or from any such office or employment or from
any interest in any such body corporate or for such remuneration.
No such contract, transaction or arrangement shall be liable to be avoided
on the grounds of any such interest or benefit.
Except as otherwise provided below, a director shall not vote in respect of
any contract or arrangement or any other proposal whatsoever in which he has any
material interest otherwise than by virtue of interests in shares or debentures
or other securities of, or otherwise in or through, us. A director shall not be
counted in the quorum of a meeting in relation to any resolution on which he is
not entitled to vote. Provided that a director has disclosed the nature and
extent of his interests, a director shall (in the absence of some other material
interest than is indicated below) be entitled to vote (and be counted in the
quorum) in respect of any resolution concerning any of the following matters:
(1) the giving of any security, guarantee or indemnity with respect to (a)
money lent or obligations incurred by him or by any other person at the request
of or for the benefit of we or any of our subsidiaries, or (b) a debt or other
obligation of ours or any of our subsidiaries for which he himself has assumed
responsibility in whole or in part under a guarantee or indemnity or by the
giving of security;
(2) any proposal concerning an offer of shares or debentures or other
securities of or by us or any of our subsidiaries in which offer he is or may be
entitled to participate as a holder of securities or in the underwriting or
subunderwriting of which he is to participate;
(3) any proposal concerning any other body corporate in which he is
interested, directly or indirectly, and whether as an officer or shareholder or
otherwise, provided that he (together with persons connected with him within the
meaning of Section 346 of the U.K. Companies Act 1985) does not have any
interest (as that term is used in Sections 198 to 211 of the U.K. Companies Act
1985) in 1% or more of the issued equity share capital of any class of such body
corporate (or of any third company through which his interest is derived) or of
the voting rights available to members of the relevant body corporate (any such
interest being deemed for the purpose of the Articles to be a material interest
in all circumstances);
(4) any proposal relating to an arrangement for the benefit of our employees
or any of our subsidiaries which does not award him any privilege or benefit not
generally awarded to the employees to whom such arrangement relates; and
(5) any proposal concerning insurance which we propose to maintain or
purchase for the benefit of directors or for the benefit of persons who include
directors.
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PRINCIPAL STOCKHOLDERS
The following table contains information concerning (1) those persons whom
we know beneficially own more than 5% of our outstanding ordinary shares, (2)
our directors, (3) our chief executive officer, and (4) all of our directors and
officers as a group. Unless otherwise indicated in the footnotes below, this
information is based on share ownership as of December 31, 1998. Except as
otherwise noted, the persons named in this table, based upon information
provided by those persons to us, have sole voting and investment power with
respect to all ordinary shares beneficially owned by them. Unless otherwise
indicated, the address of each beneficial owner is c/o Town Pages Holdings plc,
11 Market Square, Alton, Hampshire, England GU34 1HD, United Kingdom. Ordinary
shares beneficially owned and percentage of ownership are based on 5,000,000
ordinary shares outstanding before this offering and 7,300,000 ordinary shares
to be outstanding after the completion of this offering. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission and generally includes voting or dispositive power with respect to
our ordinary shares. An asterisk (*) indicates beneficial ownership of less than
1% of outstanding ordinary shares or voting power.
<TABLE>
<CAPTION>
PERCENTAGE OF OUTSTANDING
ORDINARY SHARES
NUMBER OF ORDINARY BENEFICIALLY OWNED
SHARES --------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED BEFORE OFFERING AFTER OFFERING
- --------------------------------------------------------------- ------------------- --------------- ---------------
<S> <C> <C> <C>
Raven Ventures Limited......................................... 4,500,000 90.00% 61.64%
La Motte Chambers
St. Helier, Jersey,
Channel Islands JE11BJ
Kevin R. Leech................................................. 4,500,000 90.00% 61.64%
La Motte Chambers
St. Helier, Jersey,
Channel Islands JE11BJ
Andrew Neville Lyndon-Skeggs................................... 279,000 5.58% 3.82%
Wing Capital Limited........................................... 200,000 4.00% 2.74%
25 Turnbulls Lane, Gibraltar
L.W. Cole...................................................... 200,000 4.00% 2.74%
25 Turnbulls Lane, Gibraltar
Barry B. J. Charles............................................ 27,500 * *
Howard E. Flight, M.P.......................................... 7,000 * *
Viscount E. J. Wingfield Lifford............................... 14,000 * *
Nigel E. C. Talbot-Ponsonby.................................... 14,000 * *
All directors and executive officers as a group
(8 persons).................................................. 4,841,500 96.83% 66.32%
</TABLE>
Raven Ventures Limited is a Guernsey (Channel Islands) corporation. Kevin R.
Leech, one of our directors, beneficially owns 100% of the outstanding shares of
Raven Ventures Limited.
The securities owned by Wing Capital Limited, a Gibraltar corporation,
consist of immediately exercisable ten year options to acquire 200,000 of our
ordinary shares owned by Raven Ventures Limited, exercisable at L0.03 ($0.06)
per share, the average price per share paid for those ordinary shares. See
"Related Party Transactions." L.W. Cole, a private investor, is the indirect
beneficial owner of 100% of the outstanding shares of Wing Capital Limited.
Mr. Charles' holdings listed in the table above include 7,000 ordinary
shares owned beneficially and of record by Mrs. Barry Charles, as to which Mr.
Barry Charles disclaims beneficial ownership.
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RELATED PARTY TRANSACTIONS
LOANS AND ADVANCES FROM AFFILIATES
Since February 1996, we have financed our operations primarily through a
discretionary operating line of credit with Glen Investments Limited, a
corporate affiliate of Kevin R. Leech. Mr. Leech is a member of our board of
directors. As of the date of this prospectus, he is the beneficial owner of
approximately 90% of our ordinary shares, and on the closing of this offering he
will be the beneficial owner of approximately 61.6% of our ordinary shares.
Advances under the line of credit bear interest at 9% per annum, are payable on
demand, and are secured by a first security interest in all of the assets and
property of Town Pages Limited, our operating subsidiary. As of December 31,
1998, an aggregate of approximately L1.8 million ($3.0 million) was outstanding
under this credit facility, inclusive of accrued and unpaid interest. We believe
that the terms of the discretionary line of credit are comparable to those
available to us on an arm's length basis with unaffiliated lenders in the area.
Simultaneous with consummation of the offering, Glen Investments Limited
shall convert L850,000 ($1,413,380), of the indebtedness anticipated to be then
outstanding to Glen Investments Limited, including interest, into 850,000 shares
of our 9% Series A preferred shares. See "Description of Share
Capital--Preferred shares" for a description of the terms of the 9% Series A
preferred shares.
The balance of our outstanding indebtedness to Glen Investments Limited in
respect to the line of credit will be repaid from the net proceeds of this
offering or will be refinanced. We will seek to establish a new credit facility
from a commercial lender effective upon completion of this offering of up to
L3.0 million ($5.0 million). We contemplate that any new line of credit shall be
secured by a first security interest in all of our assets and advances under
such line of credit shall be based upon agreed upon percentages of our eligible
accounts receivable. As of the date of this prospectus, we do not have a
commitment from any lender for a proposed credit facility.
CERTAIN INVESTMENT TRANSACTIONS
In February 1996, Glen Investments Limited, a Channel Islands (Jersey)
corporation wholly-owned by Kevin R. Leech, agreed to provide the discretionary
operating line of credit to Town Pages Limited, now our operating subsidiary. In
three separate transactions between June 14, 1996 and November 12, 1996, Glen
Investments Limited purchased a total of 57,395 ordinary shares of Town Pages
Limited (approximately 76% of its share capital) for an aggregate sum of
L100,000 ($166,280). In December 1998, the percentage of Town Pages Limited's
share capital owned by Glen Investments Limited was increased to 90% through the
pro rata transfer of ordinary shares owned by the minority shareholders of Town
Pages Limited, and Glen Investments Limited transferred its ordinary shares of
Town Pages Limited to Raven Ventures Limited, another corporate affiliate of
Kevin R. Leech.
On December 15, 1998, Town Pages Holdings plc, which was incorporated in
England and Wales on July 31, 1998, acquired all of the outstanding shares of
Town Pages Limited. In that transaction, each shareholder of Town Pages Limited
received approximately 66.208 of our ordinary shares in exchange for each
ordinary share of Town Pages Limited owned by those shareholders. Town Pages
Holdings plc did not conduct any business prior to the exchange transaction. As
a result, Mr. Kevin R. Leech, a member of our board of directors is, as of the
date of this prospectus, the beneficial owner, indirectly through Raven Ventures
Limited, of approximately 90% of our ordinary shares. See "Principal
Stockholders."
TOPJOBS.NET PLC
Mr. Kevin R. Leech is the beneficial owner, through a wholly-owned corporate
affiliate, of approximately 80% of the currently outstanding share capital of
topjobs.net plc. Topjobs.net plc owns and operates a Web site in the United
Kingdom, Ireland, and Switzerland for recruitment advertising,
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known as Top Jobs on the Net. Whereas the job listings on Town Pages are
primarily targeted to the local community and presented in a bulletin board or
banner format, topjobs.net plc is focused on offering a variety of recruitment
services for corporations and recruiting firms advertising for a national or
international pool of management, technical, and professional positions in an
expanded display format. Although it is possible that topjobs.net plc may
ultimately represent a competitor in the United Kingdom and elsewhere, we do not
believe that this will happen in the foreseeable future. We have been informed
that topjobs.net plc is in the process of raising additional capital, either
through an initial public offering or private placement of its securities.
TRAVEL THE NET LTD.
Mr. Leech is a 25% shareholder of Leisure Concepts International, which owns
50% of Travel the Net Ltd. Travel the Net Ltd. is a development stage company
which provides travel information and reservation services over the Internet.
Travel the Net Ltd. is the exclusive provider of the travel "channel" on
TownPages. Travel the Net Ltd. is currently one of our largest customers,
accounting for approximately 14% of our revenues for our fiscal year ended
December 31, 1998. Although it is possible that Travel the Net Ltd. may
ultimately represent a competitor in the United Kingdom and elsewhere, we do not
believe that this will happen in the foreseeable future.
OFFICE SPACE LEASE ASSIGNMENT FROM WESTBROOK PROPERTY DEVELOPMENTS LTD.
Our executive office is located at 11 Market Square, Alton, Hampshire,
England GU34 1HD, United Kingdom, where we occupy approximately 242 square
meters (approximately 2,540 square feet) of office space under a lease assigned
to us by Westbrook Property Developments Ltd. for L1. We pay approximately
L36,000 ($59,860) per year in rent under the lease. Westbrook Property
Developments Ltd. leased the premises from Lloyds Bank plc. in 1989 for a 25
year term. Prior to the assignment, Westbrook licensed use of the space to us.
The lease terminates on September 28, 2014. Andrew Neville Lyndon-Skeggs, our
President and Managing Director, is the founder, Managing Director, and the
beneficial owner of all of the shares of Westbrook Property Developments Ltd. We
believe that the terms of the lease are comparable to those available to us on
an arm's length basis with unaffiliated lessors in the area.
OTHER MATTERS
In December 1998, and in connection with its agreement to continue its
funding commitment to Town Pages Limited, Glen Investments Limited, an affiliate
of Kevin R. Leech, agreed to grant to Wing Capital Limited immediately
exercisable options to acquire 200,000 of our ordinary shares owned by Glen
Investments Limited. Glen Investments Limited then transferred all of our
ordinary shares it then owned to Raven Ventures Limited, another corporate
affiliate of Kevin R. Leech, subject to the options. The options are exercisable
at any time over a period of ten years at a per share exercise price equal to
L0.03 ($0.06) per ordinary share, the average price per ordinary share paid by
Glen Investments Limited for those ordinary shares. In consideration for those
options, Wing Capital Limited, a Gibraltar corporation owned by certain business
associates of Kevin R. Leech, and its shareholders severally agreed to indemnify
Glen Investments Limited for up to 4.0% of any losses incurred under the line of
credit extended to us by Glen Investments Limited.
Simon J. Ward, one of the members of our board of directors, is also a
director of CW Fellowes Limited, our operating subsidiary's independent business
advisor from 1995 to 1997. In 1998 we paid a total of L62,573 ($104,047) in
professional fees to CW Fellowes.
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DESCRIPTION OF SHARE CAPITAL
The following summarizes information about our capital structure and related
summary information about provisions of our Memorandum of Association and
Articles of Association and applicable English law, and the rights of holders of
our preferred shares and ordinary shares. This summary information is not
complete. You should refer to our Memorandum of Association and Articles of
Association, copies of which have been filed as exhibits to the registration
statement of which this prospectus is part and which are available for
inspection as part of our registration statement, if you would like further
information.
GENERAL
Our authorized share capital is 20,000,000 ordinary shares of 1p nominal
value per ordinary share, and 5,000,000 Series A preferred shares of L1.00
nominal value per preferred share.
PREFERRED SHARES
Our Articles of Association authorize our board of directors, by resolution,
to issue the preferred shares in such number as the board of directors may, from
time to time, determine without any further vote or action by the shareholders.
Any preferred shares so issued would have priority over the ordinary shares with
respect to dividend or liquidation rights, or both.
Upon consummation of this offering, a corporate affiliate of Kevin R. Leech,
a member of our board of directors and our principal stockholder, will exchange
L850,000 ($1,413,380) principal amount of 9% demand notes payable by us for an
aggregate of 850,000 9% Series A preferred shares of Town Pages Holdings plc.
The holders of the 9% Series A preferred shares will be entitled to receive
annual non-cumulative dividends out of funds legally available therefor, and
each of those shares will have a preference in the amount of L1 ($1.6628) over
the ordinary shares in the event of our liquidation or dissolution. The terms of
our 9% Series A preferred shares prohibit the payment of cash dividends on our
ordinary shares in any year until we also declare and pay a 9% dividend on our
Series A preferred shares. The 9% Series A preferred shares will not be entitled
to vote and will not be redeemable, except by mutual agreement of Town Pages
Holdings plc and the holder commencing no earlier than 12 months after the
completion of this offering. Those Series A preferred shares will be convertible
into ordinary shares, at the option of the holder, at any time commencing 12
months after the completion of this offering, at a conversion price equal to
L ($ ), which sum is 120% of the initial public offering price of the
ADSs offered hereby. See "Related Party Transactions."
ORDINARY SHARES
As of the date of this prospectus, 5,000,000 of our ordinary shares are
issued and outstanding and are fully paid or credited as fully paid, each of
which are in registered form. Upon completion of this offering, 7,300,000
ordinary shares will be issued and fully paid (7,645,000 ordinary shares if the
underwriters' overallotment option is exercised in full), each of which will be
in registered form. No holder of ordinary shares will be required to make
additional contributions of capital in respect of those shares in the future.
ISSUE OF SHARES
Subject to any special rights previously conferred on the holders of any
issued shares or class of shares, any share of ours may be issued with any
preferred, deferred, or other special rights. They may also be issued subject to
any restrictions, whether as regards dividends, return of capital, voting, or
otherwise, as an ordinary resolution of a general meeting of our shareholders
may from time to time determine, and subject to any determination by them, as
our board of directors may determine. We may issue redeemable shares provided
that there are shares in issue at the time which are not redeemable.
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Subject to the provisions of the U.K. Companies Act 1985, the authorized but
unissued shares are at the disposal of the directors who may issue, grant
options over or otherwise dispose of them to those persons and on whatever terms
they deem appropriate.
By virtue of Section 80 of the U.K. Companies Act 1985, our directors may
not, subject to limited exceptions in respect of employee share schemes,
exercise any power to issue shares (or grant any right to subscribe for or
convert other securities into shares) unless they have been authorized to do so
by an ordinary resolution. Any authorization must state the maximum amount of
shares which may be issued under it and the date of which it will expire, which
must not be more than five years from the date the resolution is passed. On
December 15, 1998, an ordinary resolution was passed authorizing the Directors
pursuant to Section 80 of the U.K. Companies Act 1985 to exercise all their
powers to issue shares up to an aggregate of the whole of our authorized but
unissued share capital, until December 31, 2003.
If ordinary shares are to be issued for cash, Section 89 of the U.K.
Companies Act 1985, requires, subject to limited exceptions in respect of
employee share schemes, that those shares first be offered to existing holders
of shares in proportion to their holdings. However, Section 95 of the U.K.
Companies Act 1985 provides that in certain circumstances the directors of a
company may by special resolution be given power to issue shares as if Section
89 did not apply. On December 15, 1998, a special resolution was passed
disapplying the provisions of Section 89 in respect of the issue of shares in
connection with a rights issue and otherwise in respect of the issue of shares
up to an aggregate of the whole of our authorized but unisssued share capital,
that authority to expire at the close of business on December 31, 2003.
See "Risk Factors" for limitations on exercise of preemptive rights.
ALTERATION OF SHARE CAPITAL
We may from time to time by ordinary resolution of our shareholders in a
general meeting:
(1) increase our share capital by the sum, to be divided into shares of
those amounts, as the resolution shall prescribe;
(2) consolidate and divide all or any of our share capital into shares of
larger amount than our existing shares;
(3) cancel any shares which, at the date of the passing of the resolution,
have not been taken, or agreed to be taken, by any person and diminish
the amount of our capital by the amount of the shares so canceled; and
(4) subdivide our shares, or any of them, into shares of smaller amount than
is fixed by our Memorandum of Association (provided that the proportion
between the amount paid and the amount, if any, unpaid on each reduced
share must be the same as on the share from which the reduced share is
derived), and so that the resolution whereby any share is subdivided may
determine that, as between the holders of the shares resulting from that
subdivision, one or more of the shares may, as compared with the others,
have any preferred, deferred, or other special rights or be subject to
any restrictions, as we have power to attach to unissued or new shares.
We may purchase or enter into a contract under which we will or may purchase
any of our own shares of any class (including any redeemable shares, if any then
exist) provided that the required shareholder approval is obtained. However,
shares may only be repurchased out of distributable profits or the proceeds of a
fresh issue of shares made for the purpose, and any premium (if any is
applicable) must, subject to certain exceptions, be paid out of distributable
profits. If there shall be in issue any shares convertible into equity share
capital of the class proposed to be purchased, then we shall not purchase or
enter into a contract under which we will or may purchase those equity shares
unless either the terms of issue of those convertible shares include provisions
permitting us to purchase our own
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equity shares or the purchase, or contract, has first been approved by an
extraordinary resolution passed at a separate meeting of the holders of those
convertible shares.
We may by special resolution of our shareholders in a general meeting reduce
our share capital or any capital redemption reserve, share premium account, or
other undistributable reserve in any way, subject in each case to confirmation
by the English courts.
DIVIDEND RIGHTS
Holders of ordinary shares are entitled to receive those dividends as may be
recommended by our board of directors and declared by us in a general meeting,
but no larger dividend may be declared than is recommended by our board of
directors, and we, in a general meeting may declare a smaller dividend, and
those interim dividends as our board of directors may decide. However, the terms
of our Series A preferred shares prohibit the payment of cash dividends on our
ordinary shares in any year until we also declare and pay a 9% non-cumulative
dividend on our Series A preferred shares during that year.
Our board of directors may fix a date as the record date by reference to
which a dividend on the ordinary shares or the preferred shares will be declared
or paid, whether or not it is before the date on which the declaration is made.
Any dividend on the ordinary shares or the preferred shares unclaimed for a
period of 12 years from our date of payment shall be forfeited and shall revert
to us. No dividend on an ordinary share or a preferred share will bear interest.
RIGHTS IN LIQUIDATION
Subject to the rights attached to the Series A preferred shares described
above and any other shares issued on special terms and conditions, upon our
liquidation or winding up, after all our debts and liabilities and the expenses
of the liquidation have been discharged, any surplus assets will be divided
among the holders of ordinary shares in proportion to their holdings after
deducting any amounts remaining unpaid in respect of those shares.
NOTIFICATION OF INTEREST IN ORDINARY SHARES
Section 198 of the U.K. Companies Act 1985 obliges any person (subject to
exception) who acquires an interest of 3% or more in the ordinary shares to
notify us of his interest within two business days following the day on which
the obligation to notify arises. After the 3% level is exceeded, similar
notification must be made in respect of whole percentage figure increases or
decreases, rounded down to the next whole number. For the purposes of the
notification obligation, the interest of a person in the shares means any kind
of interest in shares (subject to certain exceptions) including any shares (1)
in which his spouse or his child or stepchild, is interested, (2) in which a
corporate body is interested where either (a) that corporate body or its
directors are accustomed to act in accordance with that person's directions or
instructions, or (b) that person controls one third or more of the voting power
of that corporation body, or (3) in which another party is interested where the
person and that other party are parties to a "concert party" agreement under
Section 204 of the U.K. Companies Act 1985 and any interest in shares is in fact
acquired by any one of the parties pursuant to the agreement. A "concert party"
agreement is an agreement which provides for one or more parties to it to
acquire interests in shares of a particular company and imposes obligations or
restrictions on any one or more of the parties as to the use, retention or
disposal of the interests.
In addition, Section 212 of the U.K. Companies Act 1985 enables us, by
notice in writing, to require a person whom we know or have reasonable cause to
believe to be, or to have been at any time during the three years immediately
preceding the date on which the notice is issued, interested in shares to
confirm that fact or (as the case may be) to indicate whether or not that is the
case, and where he holds or has during this relevant time held an interest in
the shares, to give further information as may be required relating to his
interest and any other interest in the shares of which he is aware.
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In addition to the restrictions on the rights attaching to shares imposed by
the U.K. Companies Act 1985 for noncompliance with Section 212 of that Act, our
Memorandum and Articles of Association apply additional restrictions. The
restrictions imposed or applied can potentially include disenfranchisement, loss
of entitlement to dividends and other payments and restrictions on alienability.
VOTING RIGHTS OF ORDINARY SHARES AND SHAREHOLDER MEETINGS
Under English law, there are two types of general meeting of shareholders,
annual general meetings and extraordinary general meetings. An annual general
meeting must be held at least once in each calendar year and not later than 15
months from the previous annual general meeting. At the annual general meeting
matters such as the election of directors, appointment of auditors and the
fixing of their remuneration, approval of the annual accounts and the directors'
report and declaration of dividends are dealt with. Any other general meeting is
known as an extraordinary general meeting.
The directors may convene an extraordinary general meeting and must convene
one if demanded by holders of not less than 10% of the paid-up shares. An annual
general meeting and an extraordinary general meeting called to pass a special
resolution must be called by at least 21 clear days' notice specifying the
place, day and time of the meeting and the general nature of the business to be
transacted. No business may be transacted at any general meeting unless a quorum
of two persons entitled to vote on the business to be transacted is present in
person or by proxy.
At a general meeting, a simple majority of the votes cast is sufficient to
pass an ordinary resolution. A special resolution requires a majority of not
less than 75% of the votes of those shareholders as (being entitled to do so)
vote in person or by proxy on the resolution in question. A small number of
matters relating to variation of the rights attaching to different classes of
shares and proceedings in a winding-up require the authority of an extraordinary
resolution, which requires the same majority as a special resolution (which
includes matters such as amending our Articles of Association or approving a
sale of our company through merger or sale of substantially all of our assets).
Subject to the restrictions referred to in the following paragraph, at a
meeting of shareholders every holder of shares who (being an individual) is
present in person or (being a corporation) is present by a representative or
proxy not being himself a member shall have one vote on a show of hands, and on
a poll, every holder of shares present in person or by proxy shall have one vote
for every share held. Shareholders are not entitled to cumulative voting rights.
A poll can be demanded by:
(1) the chairman of the meeting,
(2) not less than three shareholders present in person or by proxy having
the right to vote at the meeting,
(3) a holder or holders of shares or his or their proxy representing not
less than 10% of the total voting rights of all shareholders having the right to
attend and vote at the meeting or by
(4) a holder or holders of shares or his or their proxy conferring a right
to attend and vote at the meeting on which an aggregate sum has been paid up
equal to not less than one tenth of the total sum paid up on all shares
conferring that right.
A holder of shares shall not be entitled (save as a proxy for another
member) to be present or vote at any general meeting:
- (a) in respect of any shares held by him in relation to which he or any
other person appearing to be interested in those shares has been served
with a notice under Section 212 of the U.K. Companies Act 1985, requiring
him to provide information in accordance with that section and containing
a statement that upon failure to supply such information before the
expiration period specified in the notice (which may not be less than 28
days) the registered holder of the share is not entitled to vote in
respect of those shares, and the person on whom such notice was served
fails to supply the information within the specified period; or
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- (b) unless all amounts presently payable by him in respect of such shares
have been paid.
All or any of the rights or privileges attached to the shares may, subject to
certain provisions of the U.K. Companies Act 1985, be varied either with the
consent in writing of the holders of 75% in nominal value of the issued shares
or with the sanction of an extraordinary resolution passed at a separate meeting
of the holders of shares, but not otherwise.
TRANSFER OF SHARES
The instrument of transfer of a share may be in any usual form or in any
other form of which the directors approve and shall be executed by or on behalf
of the transferor and, unless the share is fully paid, by or on behalf of the
transferee. The directors may, in their absolute discretion without giving any
reason therefor, refuse to register the transfer of a share which is not fully
paid provided that any such refusal will not prevent dealings in the shares from
taking place on an open and proper basis. The directors may decline to register
a transfer to person known to be a minor, bankrupt or person who is mentally
disordered at a patient for the purpose of any statute relating to mental
health. Subject thereto, the Articles of Association contain no restrictions on
the registration of transfers of fully paid shares provided that all stamp duty
payable on the shares has been paid and the transfers are accompanied by any
certificate for the shares and such other evidence, if any, as the directors may
require to prove the title of the intending transferor or his right to transfer
the shares and is the case of a transfer to joint holders, and to no more than
four such joint holders. The register of members, i.e. shareholders, may be
closed at such times and for such periods as the directors may determine not
exceeding thirty days in each year. We have resolved that title to any shares
may be transferred by means of CREST being a relevant system for the purposes of
the Uncertified Securities Regulations 1995.
ISSUANCE OF AMERICAN DEPOSITARY SHARES
The terms of the Deposit Agreement entered into by Town Pages with the
depositary permit the issuance of ADRs evidencing ADSs for ordinary shares
accepted for deposit by the depositary. Ordinary shares may be deposited with
the depositary upon the receipt by the depositary of evidence that any necessary
approvals have been waived or granted by any governmental or quasi-governmental
body in England and Wales and also an opinion that the ordinary shares are not
deemed Restricted Securities as defined in the Deposit Agreement.
ISSUANCE OF RESTRICTED AMERICAN DEPOSITARY SHARES
The terms of the Deposit Agreement entered into by Town Pages with the
depositary permit the issuance of Restricted ADRs evidencing Restricted ADSs for
ordinary shares that are deemed restricted securities under Rule 144(a)(3) of
the Securities Act, are held by affiliates of Town Pages as defined in the
Securities Act, or are subject to a lock-up agreement between the shareholder
and the underwriter, once those ordinary shares are accepted for deposit by the
depositary. Ordinary shares may be deposited with the depositary upon the
receipt by the depositary of an opinion of U.S. counsel that the issuance of the
Restricted ADRs and Restricted ADSs does not violate the Securities Act or the
terms of the lock-up agreement. The Restricted ADRs will be legended and will be
transferable only upon delivery to the depositary of an opinion of U.S. counsel
setting forth the conditions upon which the Restricted ADRs are transferable
under the applicable securities laws and that the transfer restrictions set
forth in the legend on the Restricted ADRs are no longer applicable.
REGISTRAR AND TRANSFER AGENT
The registrar and transfer agent for the ordinary shares is Lloyds Bank
Registrars, The Causeway, Worthing, West Sussex BN99 6DA England, United
Kingdom.
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DESCRIPTION OF AMERICAN DEPOSITARY RECEIPTS
The following is a summary of the deposit agreement. Because it is a
summary, it does not contain all the information that may be important to you.
For more complete information, you should read the entire deposit agreement and
the ADR. You can read a copy of the deposit agreement which is filed as an
exhibit to the registration statement of which this prospectus forms part. You
may also copy the deposit agreement, which is located at the Commission's Public
Reference Room at 450 Fifth Street, N.W. Washington, D.C. 20549. You may obtain
information on the operation of the Public Reference Room by calling the
Commission at 1-800-732-0330 or through the Commission's Internet site (http://
www.sec.gov).
Bankers Trust Company, as our depositary, will issue ADRs. Each ADR will
represent an ownership interest in one ordinary share (or the right to receive
one ordinary share) which we will deposit with the custodian in England under
the deposit agreement among ourselves, the depositary and yourself as a holder
or beneficial owner of an ADR. Each ADR will also represent securities, cash or
other property deposited with the depositary but not distributed to ADR holders.
The depositary's office is located at Four Albany Street, New York, New York
10006.
You may hold ADRs either directly or indirectly through your broker or other
financial institution. If you hold ADRs directly, you are an ADR holder. This
description assumes you hold your ADRs directly. If you hold ADRs indirectly,
you must rely on the procedures of your broker or other financial institution to
assert the rights of ADR holders described in this section. You should consult
with your broker or financial institution to find out what those procedures are.
Because the depositary will actually own the shares, you must rely on it to
exercise the rights of a shareholder. The obligations of the depositary are set
out in the deposit agreement. The deposit agreement and ADRs are governed by New
York law.
ORDINARY SHARE DIVIDENDS AND OTHER DISTRIBUTIONS
HOW WILL YOU RECEIVE DIVIDENDS AND OTHER DISTRIBUTIONS ON THE ORDINARY SHARES?
The depositary has agreed to pay to you the cash dividends or other
distributions it or the custodian receives on shares or other deposited
securities. You will receive these distributions in proportion to the number of
shares underlying your ADR.
- CASH. The depositary will convert cash distributions we pay on the
ordinary shares into U.S. dollars, if it can do so on a reasonable basis
and can transfer the U.S. dollars to the United States on a reasonable
basis. Before making a distribution, the depositary will deduct (1) its
expenses in converting and transferring cash, including obtaining the
approval of a government authority therefor, and (2) any taxes withheld.
IF THE EXCHANGE RATES FLUCTUATE DURING A TIME WHEN THE DEPOSITARY CANNOT
CONVERT THE CURRENCY, YOU MAY LOSE SOME OR ALL OF THE VALUE OF THE
DISTRIBUTION.
- ORDINARY SHARES. The depositary will distribute new ADRs representing any
ordinary shares we distribute as a dividend or free distribution if we
furnish the depositary promptly with satisfactory evidence that it is
legal to do so. If the depositary does not distribute new ADRs, each ADR
will represent its proportionate interest in any additional shares we
distribute. The depositary will only distribute whole ADRs. It will sell
shares which would require it to issue a fractional ADR and distribute the
net proceeds in the same way as it does with cash.
- RIGHTS. If we offer holders of our securities any rights, preferences or
privileges to subscribe for additional shares or any other rights,
preferences or privileges, the depositary will make these rights,
preferences or privileges available to you in the manner it deems best, in
its own discretion, but after consulting us, to the extent that we first
furnish the depositary with satisfactory evidence that it is legal to do
so. If we don't furnish this evidence and it is practical
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to sell the rights, the depositary will sell the rights and distribute the
U.S. dollar proceeds in the same way as it does with cash. If the
depositary determines that it is lawful to make such rights, preferences
or privileges available to only certain ADR holders but not to others, the
depositary may distribute the rights, preferences and privileges to any
holders to whom it determines the distribution is lawful in proportion to
the number of shares underlying such holder's ADRs. In the event the
depositary would otherwise not distribute the rights, if you request the
distribution of warrants or other instruments in order to exercise the
rights to which you are entitled, the depositary will make such rights
available to you upon written notice from us that we have elected to
permit such rights to be executed. The depositary will not distribute
rights, preferences or privileges to ADR holders unless both the rights,
preferences or privileges and the securities to which such rights,
preferences or privileges relate are either exempt from registration under
the Securities Act with respect to a distribution to ADR holders or are
registered under the provisions of such Act. The depositary may allow
rights that are not distributed or not sold to lapse. IN THAT CASE, YOU
WILL RECEIVE NO VALUE FOR THEM.
- IF THE DEPOSITARY MAKES RIGHTS AVAILABLE TO YOU, IT WILL EXERCISE THE
RIGHTS AND PURCHASE THE ORDINARY SHARES ON YOUR BEHALF. The depositary
will then deposit the ordinary shares and issue ADRs to you. It will only
exercise rights if you pay the exercise price and any other charges the
rights require you to pay. U.S. securities laws may restrict the sale,
deposit, cancellation, and transfer of the ADRs issued after exercise. For
example, you may not be able to trade the ADRs freely in the United
States. In this case, you would not be permitted to purchase such
securities or otherwise exercise such rights, preferences or privileges,
and the depositary would, to the extent possible, dispose of such rights,
preferences or privileges for your account as provided in the deposit
agreement. YOU HAVE NO ASSURANCE THAT YOU WILL BE ABLE TO EXERCISE RIGHTS,
PREFERENCES AND PRIVILEGES ON THE SAME TERMS AND CONDITIONS AS THE HOLDERS
OF THE ORDINARY SHARES.
- OTHER DISTRIBUTIONS. The depositary will send to you anything else we
distribute on deposited securities by any means it thinks is legal, fair
and practical. If it cannot make the distribution in that way, the
depositary will adopt a method it thinks equitable and practical for the
purpose of effecting such distribution, including distributing from the
sale of what we distributed any net proceeds to you in U.S. dollars, in
the same way as it does with cash.
To the extent the depositary decides any distribution to you is not
practical, it may make any other distribution it believes is practical,
including distributions of foreign currency, securities or property. It may
retain any of the same as deposited securities without paying interest on or
investing it. Each ADR will represent the additional distribution received by
the depositary.
YOU HAVE NO ASSURANCE FROM THE DEPOSITARY THAT THEY WILL BE ABLE TO EFFECT
ANY CURRENCY CONVERSION OR TO SELL ANY DISTRIBUTED PROPERTY, RIGHTS OR OTHER
SECURITIES TIMELY OR AT A SPECIFIED RATE OR PRICE.
RECORD DATE
Whenever:
- any cash dividend or cash distribution is to become payable or any
distribution other than cash is to be made,
- rights, preferences and privileges are to be issued,
- the depositary finds it necessary or convenient in connection with the
giving of any notice, solicitation of any consent or any other matter,
- the depositary receives notice of any meeting of holders of shares or
other deposited securities, or
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- for any reason the depositary causes a change in the number of shares that
are represented by each ADR,
the depositary, after consulting us, will fix a record date, as close as
practicable to the record date fixed by us with respect to the shares, for
determining which holders of ADRs are:
- entitled to receive such dividend, distribution, rights, preferences,
privileges or the net proceeds of the sale thereof,
- entitled to give instructions for the exercise of voting rights to any
meeting,
- entitled to receive such notice or solicitation, or
- entitled to act in respect of any other matter.
For determining the date on or after which each ADR will represent a changed
number of our shares, as the case may be.
DEPOSIT, WITHDRAWAL AND CANCELLATION
HOW DOES THE DEPOSITARY ISSUE ADRS?
The depositary will issue ADRs if you or your broker deposit ordinary shares
or evidence of rights to receive ordinary shares with the custodian. Upon
payment of its fees and expenses and of any taxes or charges, such as stamp
taxes or stock transfer taxes or fees, the depositary will register the
appropriate number of ADRs in the names you request and will deliver ADRs at its
office to the persons you request.
HOW DO ADR HOLDERS WITHDRAW AN ADR AND OBTAIN ORDINARY SHARES?
You may turn in your ADRs at the depositary's office. Upon payment of fees
and expenses and of any taxes or charges, the depositary will deliver (1) the
underlying ordinary shares to an account designated by you with Electronic
Book-Entry Settlement System and any other securities, property and cash to you
or as ordered by you or (2) at your risk, expense and request, the depositary
will deliver the deposited securities at its office or at any other place that
you specify.
The depositary will not accept for surrender an ADR representing less than
one ordinary share. If you surrender an ADR representing other than a whole
number of ordinary shares, it will deliver to you (1) the appropriate whole
number of ordinary shares and (2) the cash proceeds from the sale of such
fractional entitlements represented by such surrendered ADR.
VOTING RIGHTS
HOW DO YOU VOTE?
You may instruct the depositary to vote the ordinary shares underlying your
ADRs.
The depositary will notify you of the upcoming vote and arrange to deliver
our voting materials to you. The materials will (1) describe the matters to be
voted on and (2) explain how you, on a certain date, may instruct the depositary
to vote the ordinary shares or other deposited securities underlying your ADRs
as you direct. For instructions to be valid, the depositary must receive them on
or before the date specified. The depositary will try, as practical, subject to
the provisions of and governing the underlying shares or other deposited
securities, to vote or have its agents vote the ordinary shares or other
deposited securities as you instruct. The depositary will only vote or attempt
to vote as you instruct.
We can not assure you that you will receive from the depositary the voting
materials in time to ensure that you can instruct the depositary to vote your
ordinary shares. In addition, the depositary and
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its agents are not responsible for failing to carry out voting instructions or
for the manner of carrying out voting instructions. THIS MEANS THAT YOU MAY NOT
BE ABLE TO EXERCISE YOUR RIGHT TO VOTE AND THERE MAY BE NOTHING YOU CAN DO IF
YOUR ORDINARY SHARES ARE NOT VOTED AS YOU REQUESTED.
<TABLE>
<CAPTION>
ADR HOLDERS MUST PAY: FOR:
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
$5.00 per 100 ADRs (or portion thereof) - Each issuance of an ADR, including as a result of a
distribution of shares or rights or the
reclassification of deposited securities or any
recapitalization, reorganization, merger or
consolidation or sale of assets
- Each withdrawal of an ADR
A fee of $1.50 per receipt - Any combination of split-up of receipts
Register or transfer fees - Transfer and registration of shares on any applicable
register payable by you when you deposit or withdraw
shares
$2.00 per 100 ADRs (or portion thereof) - Any cash distribution
Expense of the depositary - Conversion of foreign currency to U.S. dollars
Expenses of the depositary - Cable, telex and facsimile transmission expenses
Taxes and other governmental charges the depositary or - As necessary
the custodian have to pay on any ADR, or share
underlying an ADR, for example, stock transfer taxes,
stamp duty or withholding taxes
</TABLE>
PAYMENT OF TAXES
You have to pay any taxes payable by or on behalf of the depositary or the
custodian with respect to the ADRs, other deposited securities or any
distribution thereon to the depositary. Until you pay those taxes, the
depositary may refuse to effect a registration, registration of transfer,
split-up, combination or withdrawal of the deposited securities.
The depositary may deduct the amount of any taxes owed from any payments to
you. It may also sell deposited securities or property, other than cash, by
public or private sale, to pay any taxes owed. You will remain liable if the
proceeds of the sale are not enough to pay the taxes. If the depositary sells
deposited securities, it will, if appropriate, reduce the number of ADRs to
reflect the sale and will pay to you any proceeds, or send to you any cash or
other property, remaining after it has paid the taxes.
The depositary or the custodian will remit to the relevant governmental
authority any amounts required to be withheld by either of them in connection
with a distribution. We will similarly remit any amounts so owed by us.
RECLASSIFICATIONS, RECAPITALIZATIONS AND MERGERS
If we:
- Change the nominal or par value of our shares
- Reclassify, split up or consolidate any of the deposited securities
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- Recapitalize, reorganize, merge, consolidate, sell all or substantially
all of our assets, or take any similar action
Then:
- The cash, shares or other securities received by the depositary will
become deposited securities. Each ADR will automatically represent its
equal share of the new deposited securities.
- The depositary may also issue new ADRs or ask you to surrender your
outstanding ADRs in exchange for new ADRs identifying the new deposited
securities.
- If any security so received may not be lawfully distributed to you, the
depositary may, after consultation with us, sell such security and
allocate, the net proceeds of such sale for your account.
REPORTS
We will furnish to the depositary and the custodian: (1) summaries in
English or English-language versions of any reports, notices and other
communications that we generally transmit to holders of our shares or other
deposited securities, (2) English-language versions of our annual and quarterly
reports, in each case prepared in accordance with the applicable requirements of
the Commission, (3) a copy of our Memorandum and Articles of Associations and
(4) promptly upon any amendment thereto or change therein, a copy of such
amendment or changed version. The depositary will make items (1) through (4)
listed above available for your inspection at its corporate trust office and at
the office of the custodian.
Upon our request, the depositary will promptly mail to you such notices,
reports and communications, which we generally make available to the holders of
our shares and other deposited securities, and will make a copy of such notices,
reports and communications available to you for inspection at its corporate
trust office.
AMENDMENT AND TERMINATION
HOW MAY THE DEPOSIT AGREEMENT BE AMENDED?
We may agree with the depositary to amend the deposit agreement and the ADRs
without your consent for any reason. If the amendment imposes or increases fees
or charges, except for taxes and other governmental charges or certain expenses
of the depositary or prejudices an important right of ADR holders, it will only
become effective 30 days after the depositary notifies you of the amendment. AT
THE TIME AN AMENDMENT BECOMES EFFECTIVE, YOU ARE CONSIDERED, BY CONTINUING TO
HOLD YOUR ADR, TO AGREE TO THE AMENDMENT AND TO BE BOUND BY THE ADRS AND THE
DEPOSIT AGREEMENT AS AMENDED.
No amendment will impair your right to surrender your ADR and receive the
underlying securities and all money and other property, if any, to which your
ADR entitles you. If a governmental body adopts new laws, regulations or rules
which require the deposit agreement or ADR to be amended, we and the depositary
may make the necessary amendment, which could take effect before you receive
notice of the amendment.
HOW MAY THE DEPOSIT AGREEMENT BE TERMINATED?
The depositary will terminate the agreement if we ask it to do so. The
depositary may also terminate the agreement at its own initiative. If we
terminate the agreement, you must be given 30 days notice of such termination.
If the depositary terminates the agreement, you must be given 90 days notice of
such termination.
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After termination, the depositary will be required to do only the following
under the deposit agreement: (1) collect and hold distributions on the deposited
securities, (2) sell rights and other property, and convert deposited securities
into cash, as provided in the deposit agreement and (3) deliver shares and other
deposited securities upon the cancellation of the ADRs. At any time after one
year from the termination date, the depositary may sell any remaining deposited
securities by public or private sale. After the expiration of one year from the
date of expiration, the depositary may sell any deposited securities it then
holds and may hold, uninvested, the money it received on the sale, as well as
any other cash it is holding under the deposit agreement for the pro rata
benefit of the ADR holders that have not surrendered their ADRs. It has no
liability for interest. After making any sale, the depositary's only obligations
will be to account for the money and other cash and its obligations with respect
to indemnification.
LIMITATIONS ON OBLIGATIONS AND LIABILITY TO ADR HOLDERS
LIMITS ON OUR OBLIGATIONS AND THE OBLIGATIONS OF THE DEPOSITARY; LIMITS ON
LIABILITY TO HOLDERS OF ADRS
The deposit agreement expressly limits our obligations and the obligations
of the depositary. It also limits our liability and the liability of the
depositary. We and the depositary:
- are only obligated to take the actions specifically set forth in the
deposit agreement without gross negligence or bad faith;
- are not liable if either of us is prevented or delayed by law or
circumstances beyond our control from performing our obligations under the
deposit agreement;
- are not liable if either of us exercises discretion permitted under the
Agreement;
- have no obligation to become involved in a lawsuit or other proceeding
related to the ADRs or the deposit agreement on your behalf of any other
party; unless it has been provided an indemnity;
- may rely upon any document we believe in good faith to be genuine and to
have been signed or presented by the proper party;
- will not be liable for any action or inaction while relying on advice or
information from legal counsel, other advisor, yourself or anyone else
competent to give advice or information;
- will not be responsible for failing to carry out instructions to vote
securities or for the manner in which same are voted or the effect of the
vote.
The depositary may own and deal in our securities and in ADRs.
In the deposit agreement, we and the depositary agree to indemnify each
other under certain circumstances.
REQUIREMENTS FOR DEPOSITARY ACTIONS
Before the depositary will issue or register transfer of an ADR, make a
distribution on an ADR, or permit withdrawal of shares, the depositary may
require:
- payment of stock transfer or other taxes or other governmental charges and
transfer or registration fees charged by third parties for the transfer of
any shares or other deposited securities;
- production of satisfactory proof of the identity and genuineness of any
signature or other information it deems necessary; and
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- compliance with regulations it may establish, from time to time,
consistent with the deposit agreement, including presentation of transfer
documents.
The depositary may refuse to deliver, transfer, or register transfers of
ADRs generally when our transfer books, or the transfer books of the depositary
are closed or at any time if we or the depositary think it advisable to do so.
YOUR RIGHT TO RECEIVE THE ORDINARY SHARES UNDERLYING YOUR ADRS
You have the right to cancel your ADRs and withdraw the underlying shares at
any time except;
- When temporary delays arise because: (1) the depositary or we has/have
closed its/our transfer books; (2) the transfer of shares is blocked to
permit voting at a shareholder's meeting; or (3) we are paying a dividend
on the shares.
- When you or other ADR holders seeking to withdraw shares owe money to pay
fees, taxes and similar charges.
- When it is necessary to prohibit withdrawals in order to comply with any
laws or governmental regulations that apply to ADRs or to the withdrawal
of shares or other deposited securities.
This right to withdrawal may not be limited by any other provisions of the
deposit agreement.
PRE-RELEASE OF ADRS
In certain circumstances, subject to the provisions of the deposit
agreement, the depositary may issue ADRs before deposit of the underlying
shares. This is called a pre-release of the ADRs. A pre-release is closed out as
soon as the underlying shares are delivered to the depositary. The depositary
may pre-release ADRs only under the following conditions:
(1) before or at the time of the pre-release, the person to whom the
pre-release is being made must represent to the depositary in writing that it or
its customer owns the shares or ADRs to be deposited;
(2) the pre-released ADRs must be fully collateralized with cash or other
property the depositary deems appropriate held by the depositary for your
benefit; and
(3) the depositary must be able to close out the pre-release on not more
than five (5) business days' notice.
In addition, the depositary will limit the number of ADRs that may be
outstanding at any time as a result of pre-release to not more than 30% of all
ADRs, although the depositary may disregard the limit from time to time, if it
deems appropriate and may change this limit for purposes of general application.
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TAXATION
The following generally summarizes the principal United States federal and
United Kingdom tax consequences of the purchase, ownership and disposition of
ADSs evidenced by ADRs and, except as provided explicitly below, ordinary
shares, to beneficial owners that, for United States federal income tax
purposes, are citizens or residents of the United States (who are not also
resident individuals or, in the case of the individuals, ordinarily resident in
the United Kingdom for United Kingdom tax purposes), corporations or
partnerships created or organized under the laws of the United States or any
state thereof, estates the income of which is subject to United States federal
income taxation regardless of our source or a trust if a court within the United
States is able to exercise primary supervision over the administration and
control of the trust and one or more United States persons have the authority to
control all substantial decisions of the trust (collectively "United States
Holders"); provided, however, to the extent and in accordance with the
procedures provided in Notice 98-25 (released by the Service on April 14, 1998)
and future Treasury Regulations which will incorporate Notice 98-25, certain
trusts in existence on August 20, 1996, and treated as United States persons
prior to this date, which elect to continue to be treated as United States
persons will also be considered United States Holders. United Kingdom resident
corporate shareholders will not normally be liable for United Kingdom
Corporation Tax on any dividends received. The discussion of United States tax
consequences represents the opinion of Greenberg Traurig and the discussion of
United Kingdom tax consequences represents the opinion of McFadden, Pilkington &
Ward.
The statements regarding the United States and United Kingdom tax laws set
out below (1) are based on the laws in force and as interpreted by the relevant
taxation authorities as of the date of this prospectus and are subject to any
changes in the United States or the United Kingdom law, or on the interpretation
thereof by the relevant taxation authorities or in the double taxation
conventions between the United States and the United Kingdom (the
"Conventions"), occurring after this date, (2) are based in part, on
representations of Bankers Trust, and (3) assume that each obligation in the
Deposit Agreement and any related agreement will be performed in accordance with
our terms.
The summary is of a general nature only and does not discuss all aspects of
United States and United Kingdom taxation that may be relevant to a particular
investor. For example, this summary deals only with ADRs held as capital assets
and does not address special classes of purchasers, such as dealers in
securities, United States Holders whose functional currency is not the United
States dollar, insurance companies, tax exempt organizations, financial
institutions and persons subject to the alternative minimum tax that may be
subject to special rules are not discussed below. Neither does the following
summary address the tax treatment of United States Holders who own, directly or
by attribution, 10% or more of our outstanding voting share capital. Except as
otherwise expressly provided herein, this summary does not discuss foreign,
state, local, estate or gift tax consequences to owners of ADSs and ordinary
shares. Since our purpose is limited to brief consideration of the more commonly
relevant provisions, in no case should this summary be taken as constituting
advice to an investor as to how he will or will not be taxed in any jurisdiction
and in no circumstances is it to substitute for professional advice. We believe,
and the discussion therefore assumes, that it is not and will not become a
passive foreign investment company with the meaning of Section 1297 of the
Internal Revenue Code of 1986, as amended (the "Code") for U.S. federal income
tax purposes.
PROSPECTIVE PURCHASERS OF ADSS ARE STRONGLY URGED TO CONSULT WITH THEIR OWN
TAX ADVISORS WITH RESPECT TO THE CONTENTS OF THIS SUMMARY AND THE UNITED STATES
FEDERAL, STATE AND LOCAL TAX CONSEQUENCES, THE UNITED KINGDOM TAX CONSEQUENCES
AND TAX CONSEQUENCES IN OTHER JURISDICTIONS, OF THE OWNERSHIP OF ADSS AND THE
SHARES REPRESENTED THEREBY AS APPLICABLE IN THEIR PARTICULAR TAX SITUATIONS.
For purposes of the Conventions and the Code, United States Holders will be
treated as the owners of the ordinary shares represented by ADSs evidenced by
ADRs.
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TAXATION OF DIVIDENDS
TAX TREATMENT OF U.K. HOLDERS. Under current United Kingdom law, we will be
required when paying a dividend in respect of the ordinary shares to account to
the United Kingdom Inland Revenue for a payment known as "advance corporation
tax." At present, the rate of ACT is equal to one-quarter of the amount of the
dividend. Dividends carry a tax credit equal to one-quarter of the cash
dividend, amounting to 20% of the sum of the cash dividend paid and the
associated tax credit. The tax credit will be available to offset a United
Kingdom resident individual's liability to United Kingdom income tax in respect
of the dividend, and may, if the United Kingdom resident is a non-taxpayer, be
reclaimed from the United Kingdom Inland Revenue in cash. A basic rate taxpayer
will have no further liability for tax on the dividend, but a higher rate
taxpayer will be subject to an additional tax liability on the difference
between the higher rate tax liability and the value of the tax credit. United
Kingdom resident trustees of discretionary trusts liable to account for income
tax at 34% on the trust's income may also be required to account for additional
tax. A United Kingdom resident corporate shareholder will not normally be liable
to United Kingdom corporation tax on any dividend received from us and will be
entitled to offset the related ACT on the dividend against ACT due on its own
qualifying distributions. In his United Kingdom "Green" Budget announcement made
on November 25, 1997, the United Kingdom Chancellor of the Exchequer announced
the abolition of ACT effective April 6, 1999, which was confirmed in his Budget
on March 17, 1998.
Effective on April 6, 1999, the tax credit attaching to dividends will be
reduced to one-ninth of a cash dividend. Although the credit will be available
to offset a United Kingdom resident individual's basic rate liability to United
Kingdom income tax in respect of the dividend, this tax credit will not be
refundable.
TAX TREATMENT OF U.S. HOLDERS. We do not intend to pay a dividend prior to
April 6, 1999. An Eligible United States Holder (as defined below) is entitled
under the Convention relating to income taxes (the "Income Tax Convention") and
current United Kingdom law to claim from the United Kingdom Inland Revenue a
refund (a "Treaty Payment") for an amount equal to the amount of the tax credit
to which an individual resident in the United Kingdom for United Kingdom tax
purposes would have been entitled had he received the dividend (the "Tax Credit
Amount"), subject to a United Kingdom withholding tax of 15% of the sum of the
dividend paid and the related Tax Credit Amount. For example, assuming
continuance of the Tax Credit Amount at the rate of 25% of the amount of the
dividend, a dividend payment of 80p to such an eligible United States Holder
would generally entitle the Eligible United States Holder to a Treaty Payment of
5p (a Tax Credit Amount of 20p, reduced by 15% of the sum of the dividend and
the Tax Credit Amount, or 15p) from the United Kingdom Inland Revenue giving a
total realization of 85p (before applicable United States taxes). An Eligible
United States Holder will effectively cease to be entitled to a Treaty Payment
in relation to dividends paid by our company on or after April 6, 1999 because,
following the reduction of the Tax Credit Amount, the 15% withholding tax would
exceed the Tax Credit Amount. For example if the dividend is 80p, the reduced
Tax Credit Amount would be 8.89p, less than the 15% withholding tax of 13.35p
and, therefore, no Treaty Payment would be made.
For United States federal income tax purposes, the gross amount of a
dividend plus the Tax Credit Amount (a) will be included in gross income by an
Eligible United States Holder (at the dollar value of the dividend payment, on
the date of the receipt by Bankers Trust, regardless of whether the dividend is
converted into dollars) and (b) will be treated as foreign source dividend
income to the extent paid out of our current or accumulated earnings and profits
as determined for United States federal income tax purposes. Any difference
between the United States dollar amount included in income and the United States
dollars actually received may constitute ordinary foreign currency gain or loss.
Subject to certain limitations, the United Kingdom withholding tax (which, after
April 5, 1999, will be equal to the Tax Credit Amount) will be treated as a
foreign income tax eligible for direct credit against such Eligible United
States Holder's federal income taxes.
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For purposes of the foreign tax credit limitations, dividends distributed by
us will generally constitute "passive income" or, in the case of certain United
States Holders, "financial services income." The consequences of these
limitations will depend on the nature and sources of each United States Holder's
income and the deduction appropriately allocated or apportioned thereto. No
dividends received deduction will be allowed with respect to dividends paid by
us. If dividends paid by us were to exceed our current and accumulated earnings
and profits as determined for federal income tax purposes, such excess would be
treated as a non-taxable return of capital to the extent of the United States
Holder's adjusted basis in the ADSs or ordinary shares, and any excess would be
treated as capital gain.
For purposes of this prospectus, the term "Eligible United States Holder"
means a United States Holder that is a beneficial owner of an ADS or ordinary
share and of the cash dividend paid on that security and that satisfies the
following conditions: the United States Holder
(1) is an individual or a corporation resident in the United States for the
purposes of the Income Tax Convention (and, in the case of a corporation,
is not also resident in the United Kingdom for United Kingdom tax
purposes),
(2) holds the ADSs or ordinary shares in a manner which is not effectively
connected with a permanent establishment in the United Kingdom through
which such United States Holder carries on business or with a fixed base
in the United Kingdom from which such United States Holder performs
independent personal services,
(3) under certain circumstances, is not an investment or holding company 25%
or more of the capital of which is owned, directly or indirectly, by
persons that are not individuals resident in, and are not nationals of,
the United States,
(4) under certain circumstances, is not exempt from federal income tax on
dividend income in the United States, and
(5) is a United States partnership, trust or estate, but only to the extent
that the income derived by such partnership, trust or estate is subject
to United States tax as the income of a United States resident either in
its hands or in the hands of its partners or beneficiaries, as the case
may be.
Special rules apply to a corporation which owns or, alone or together with
one or more associated corporations, controls, directly or indirectly, 10% or
more of our voting shares.
TAXATION OF CAPITAL GAINS
A United States Holder who is not resident or ordinarily resident or
domiciled in the United Kingdom for United Kingdom tax purposes will not be
liable for United Kingdom tax on capital gains realized on the disposal of ADSs
or ordinary shares, at the time of disposal, unless the United States Holder is
carrying on a trade, profession or vocation in the United Kingdom through a
branch or agency which constitutes a permanent establishment, and the ADSs or
ordinary shares are or have been used, held or acquired for the purposes of such
trade, profession or vocation of such branch or agency.
Upon the sale or other disposition of an ordinary share or ADS, a United
States Holder will generally recognize gain or loss for United States federal
income tax purposes in an amount equal to the difference between the U.S. dollar
value of the amount realized on such sale or disposition and the United States
Holder's adjusted tax basis (determined in U.S. dollars) in the ordinary share
or ADS. Such gain or loss will be capital gain or loss if the United States
Holder holds our ordinary share or ADS as a capital asset. Prospective investors
should consult their tax advisors regarding the United States federal income tax
treatment of capital gains (which may be taxed at lower rates than ordinary
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income for certain taxpayers who are individuals) and losses (the deductibility
of which is subject to limitations).
A United States Holder that is liable for both United Kingdom and United
States tax on a gain on the disposal of the ADSs or ordinary shares will
generally be entitled, subject to certain limitations and under the terms of the
Income Tax Convention, to credit the amount of United Kingdom capital gains or
corporation tax, as the case may be, paid in respect of such gain against such
United States Holder's United States federal income tax liability in respect of
such gain. United States Holders should seek professional tax advice to
determine their entitlement to credit United Kingdom tax against their United
States federal income tax liability.
ESTATE AND GIFT TAXES
An ordinary share or ADR held by an individual United States Holder whose
domicile is determined to be in the United States for purposes of the Estate Tax
Treaty and who is not a national of the United Kingdom will not generally be
subject to United Kingdom inheritance tax on such individual's death or on a
lifetime transfer of the ordinary share or ADR except in certain cases where the
ordinary share or ADR (1) is part of the business property of a United Kingdom
permanent establishment of an enterprise of the United States Holder or (2)
pertains to a United Kingdom fixed base used for the performance of independent
personal services. The Estate Tax Treaty generally provides a credit against
United States federal estate or gift tax liability for the amount of any tax
paid in the United Kingdom in a case where the ordinary share or ADR is subject
to both United Kingdom inheritance tax and to United States federal estate or
gift tax. Similarly, an ordinary share or ADR comprised in a settlement
generally will not be chargeable to United Kingdom inheritance tax if the
settlement was made when the settlor was domiciled in the United States and was
not a national of the United Kingdom. An individual United States Holder will be
subject to United States estate and gift taxes with respect to the ordinary
shares or ADRs in the same manner and to the same extent as with respect to
other types of personal property.
UNITED KINGDOM STAMP DUTY AND STAMP DUTY RESERVE TAX
SDRT at the then applicable rate arises upon the deposit with Bankers Trust
of the ordinary shares in exchange for ADSs evidenced by ADRs. The current rate
of SDRT on the deposit of ordinary shares is 1.5%. In certain cases, United
Kingdom SD could also arise on the deposit and the current rate is 1.50 United
Kingdom pounds sterling per 100 pounds sterling (or part thereof). The amount of
SDRT payable will be reduced by any SD paid in connection with the same
transaction. SDRT will be payable by Bankers Trust in the first instance. In
accordance with the terms of the Deposit Agreement, holders of ADRs must pay an
amount in respect of such tax to Bankers Trust, except in connection with the
initial issuance and deposit of the ordinary shares with Bankers Trust.
Provided that the instrument of transfer is not executed in the United
Kingdom and remains at all subsequent times outside the United Kingdom, no
United Kingdom SD will be payable on the acquisition or transfer of ADSs. Nor
will an agreement to transfer ADRs give rise to a liability to SDRT.
A transfer of ordinary shares by Bankers Trust or our nominee to the
relative ADR holder when the ADR holder is not transferring beneficial ownership
will give rise to United Kingdom SD at the rate of 0.50 pounds sterling per
transfer.
Transfers of ordinary shares, as opposed to ADSs, will normally give rise to
a charge to United Kingdom SD at the rate of 0.50 United Kingdom pounds sterling
per 100 pounds sterling (or part thereof) of the price payable for the ordinary
shares at the time of the transfer or agreement to transfer. SD and SDRT are
usually the liability of the purchaser. Where such ordinary shares are later
transferred to Bankers Trust, further SDRT will normally be payable upon the
deposit at the rate of
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1.5% of the value of the ordinary shares at the time of transfer. In certain
cases, United Kingdom SD could also arise in the transfer at the rate of l.50
pounds sterling per 100 pounds sterling (or part thereof), subject to the amount
of any SDRT being reduced by such SD on the same transaction.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to dividend
payments (or other taxable distributions) in respect of ADSs or ordinary shares
made within the United States to a non-corporate United States person, and
"backup withholding" at a rate of 31% will apply to such payments if the holder
or beneficial owner fails to provide an accurate taxpayer identification number
in the manner required by the United States law and applicable regulations, if
there has been notification from the Internal Revenue Service of a failure by
the holder or beneficial owner to report all interest or dividends required to
be shown on its federal income tax returns or, in certain circumstances, if the
holder or beneficial owner fails to comply with applicable certification
requirements. Certain corporations and persons that are not United States
persons may be required to establish their exemption from information reporting
and backup withholding by certifying their status on Internal Revenue Service
Forms W-8 or W-9.
In general, payment of the proceeds from the sale of ADSs or ordinary shares
to or through a United States office of a broker is subject to both United
States backup withholding and information reporting unless the holder or
beneficial owner certifies its non-United States status under penalties of
perjury or otherwise establishes an exemption. United States information
reporting and backup withholding generally will not apply to a payment made
outside the United States of the proceeds of a sale of ADSs or ordinary shares
through an office outside the United States of a non-United States broker.
However, United States information reporting requirements (but not backup
withholding) will apply to a payment made outside the United States of the
proceeds of a sale of ADSs or ordinary shares through an officer outside the
United States of a broker (i) that is a United States person, (ii) that derives
50% or more of its gross income for a specified three-year period from the
conduct of a trade or business in the United States, (iii) that is a "controlled
foreign corporation" as to the United States, or (iv) with respect to payments
made after December 31, 1999, that is a foreign partnership, if at any time
during its tax year, one or more of its partners are U.S. persons (as defined in
United States Treasury Regulations) who in the aggregate hold more than 50% of
the income or capital interest in the partnership or if, at any time during its
tax year, such foreign partnership is engaged in a United States trade or
business, unless the broker has documentary evidence in its files that the
holder or beneficial owner is a non-United States person or the holder or
beneficial owner otherwise establishes an exemption.
Amounts withheld under the backup withholding rules may be credited against
a holder's tax liability, and a holder may obtain a refund of any excess amounts
withheld under the backup withholding rules by filing the appropriate claim for
refund with the United States Internal Revenue Service.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has not been any public market for our
securities and there can be no assurance that a significant public market for
any of our securities will be developed or sustained after this offering. Sales
of substantial amounts of ordinary shares or ADSs in the public market after
this offering, or the possibility of those sales occurring, could adversely
affect prevailing market prices of our ordinary shares or ADSs or our future
ability to raise capital through an offering of equity securities. We are unable
to predict the number of ordinary shares or ADSs that will be sold after this
offering, whether in the public markets or under Rule 144 under the Securities
Act or otherwise, as this will depend on the market price of our securities,
personal circumstances of the seller, and other factors.
Upon the completion of this offering, we will have outstanding 7,300,000
ordinary shares, assuming no exercise of the underwriters' overallotment option.
Of those ordinary shares, the 2,300,000 ADSs sold in this offering, assuming no
exercise of the underwriters' over-allotment option, will be freely tradable in
the public market without restriction under the Securities Act, unless purchased
by our "affiliates," as defined in Rule 144 under the Securities Act.
The remaining 5,000,000 ordinary shares outstanding are "restricted
securities," as defined in Rule 144 under the Securities Act. These restricted
securities were issued and sold by us in private transactions in reliance upon
exemptions from registration under the Securities Act. Restricted securities may
be sold in the public market only if they are registered or if they qualify for
an exemption from registration under Rules 144 or 701 under the Securities Act,
which are summarized below.
Under the terms of certain "lock-up" agreements, all of our officers,
directors and stockholders have agreed, subject to certain limited exceptions,
not to offer, sell, contract to sell, grant any option to purchase or otherwise
dispose of any of our ordinary shares or any securities exercisable for or
convertible into our ordinary shares owned by them for a period of 365 days from
the effective date of the registration statement of which this prospectus is a
part. These agreements provide that the representative of the underwriters may,
in its sole discretion and at any time without notice, release all or a portion
of the shares subject to these lock-up agreements; however, the representative
has no current intention to do so.
In general, under Rule 144, beginning 90 days after the completion of this
offering, a person, or persons whose shares are aggregated, who has beneficially
owned restricted securities for at least one year, including the holding period
of any prior owner who is not an affiliate of ours, would be entitled to sell
within any three-month period a number of ordinary shares that does not exceed
the greater of (1) one percent of the then outstanding ordinary shares,
approximately 70,000 shares following this offering, or (2) the average weekly
trading volume of the ordinary shares or ADSs during the four calendar weeks
preceding that sale. Sales under Rule 144 are also subject to certain manner of
sale and notice requirements and to the availability of current public
information about us. Under Rule 144(k), a person who is not deemed to have been
an affiliate of ours at any time during the 90 days preceding a sale and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner who is not an affiliate of ours,
is entitled to sell such ordinary shares without complying with the manner of
sale, public information, volume limitation or notice provisions of Rule 144.
Non-affiliates may resell our securities issued under Rule 701 in reliance upon
Rule 144 without having to comply with Rule 144's public information, holding,
volume, and notice requirements. Our affiliates may resell our securities issued
under Rule 701 in reliance upon Rule 144 without compliance with Rule 144's
holding period requirements.
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UNDERWRITING
Subject to the terms and conditions of the underwriting agreement, the form
of which is filed as an exhibit to the registration statement filed with the
Commission of which this prospectus is a part, the underwriters named below
have, severally and not jointly, agreed through Security Capital Trading, Inc.,
as the representative of the underwriters, to purchase from us, and we have
agreed to sell to the underwriters, the aggregate number of ADSs set forth
opposite their respective names:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS ADSS
- --------------------------------------------------------------------------------- ----------
<S> <C>
Security Capital Trading, Inc....................................................
----------
Total........................................................................ 2,300,000
----------
----------
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters under that agreement are subject to certain conditions precedent,
including the absence of any material adverse change in our business and the
receipt of certain certificates, opinions and letters from our counsel and our
independent public accountants. The underwriters are committed to take and to
pay for all of the ADSs offered hereby, if any are purchased. In the event of a
default by any of the underwriters, purchase commitments of the non-defaulting
underwriters may be increased or the underwriting agreement may be terminated.
The underwriters have advised us that they propose to offer all or part of
the ADSs offered hereby directly to the public initially at the price set forth
on the cover page of this prospectus. They have also advised us that they may
offer ADSs to certain dealers at a price that represents a concession of not
more than $ per ADS, and that the underwriters may allow, and these dealers
may reallow, a concession of not more than $ per ADS to certain other
dealers. After the commencement of this offering, the price to the public and
the concessions may be changed.
We have granted to the underwriters an option, exercisable within 30 days
after the effective date of the registration statement of which this prospectus
is a part, to purchase up to an additional 345,000 ADSs at the same price per
ADS as the initial 2,300,000 ADSs to be purchased by the underwriters. The
underwriters may exercise this option only to cover over-allotments, if any. To
the extent the underwriters exercise this option, each of the underwriters will
have a firm commitment, subject to certain conditions, to purchase the same
percentage of the additional ADSs as the percentage of the initial 2,300,000
ADSs to be purchased by that underwriter.
We have agreed to indemnify the underwriters and their controlling persons
against certain liabilities, including certain liabilities under the Securities
Act, and to contribute to payments the underwriters and their controlling
persons may be required to make in respect thereof.
We have agreed to pay the representative of the underwriters a
non-accountable expense allowance equal to 3% of the gross proceeds of this
offering, of which $50,000 has been paid as of the date of this prospectus. We
have also agreed to pay all expenses in connection with qualifying the
securities under the laws of those states the representative may designate,
including fees and expenses of counsel retained for such purposes by the
representative and the costs and disbursements in connection with qualifying the
offering with the National Association of Securities Dealers, Inc.
We have agreed to issue to the representative of the underwriters, for a
total of $20.00, warrants to purchase an aggregate of 200,000 ADSs exercisable
for a period of four years commencing one year after the effective date of the
registration statement of which this prospectus is a part, at a price equal to
120% of the initial public offering price of the ADSs. The representative's
warrants contain anti-dilution provisions providing for automatic adjustments of
the exercise price and number of shares issuable on exercise price and number of
shares issuable on exercise of the representative's warrants
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upon the occurrence of some events, including stock dividends, stock splits,
mergers, acquisitions and recapitalizations. The representative's warrants
contain certain registration rights relating to the 200,000 ADSs issuable
thereunder. For the life of the representative's warrants, the representative
will have the opportunity to profit from a rise in the market price for the
200,000 ADSs. The holders of the representative's warrants will have no voting,
dividend or other stockholder rights with respect to those warrants. The holders
of ADSs issued upon exercise of those warrants will have the voting, dividend,
and other stockholder rights of holders of ADSs.
We have also granted to the representative of the underwriters the right,
for a period of 5 years from the closing of this offering, to nominate a
designee of the representative for election to our board of directors. The
representative has not yet exercised its right to designate this person. If the
representative elects not to exercise this right, then the representative may
designate one person to attend meetings of our board of directors.
We have also agreed to retain the representative of the underwriters as our
financial consultant for a period of 12 months from the completion of this
offering and to pay the representative of the underwriters a monthly retainer of
$10,000.
We and our officers, directors and present shareholders have agreed that,
for a period of 365 days after the completion of this offering, without the
prior written consent of the representative of the underwriters, none of us will
sell or otherwise dispose of any of our respective equity securities or
securities convertible into equity securities of Town Pages Holdings plc,
including without limitation ordinary shares, directly or indirectly, except for
the sale of ordinary shares to the underwriters under the terms of the
underwriting agreement.
The representative of the underwriters has informed us that the underwriters
do not expect any sales of the ADSs offered by this prospectus to be made to
discretionary accounts controlled by the underwriters.
Prior to this offering, there has been no established market in the United
States or elsewhere for our securities. The public offering price will be
determined by us in consultation with the representative of the underwriters. It
is expected that the price determination will take several factors into account,
including our results of operations, our future prospects and the prevailing
market and economic conditions at the time of this offering. There can be no
assurance that an active trading market will develop for any of the securities
offered by this prospectus, or that any of such securities will trade in the
public market subsequent to this offering at or above the initial public
offering price, or at all.
The representative, on behalf of the underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids. Over-allotment involves syndicate sales in excess of this offering
size, which creates a syndicate short position. Stabilizing transactions permit
bids to purchase the ADSs being offered so long as the stabilizing bids do not
exceed a specified maximum. Syndicate covering transactions involve purchases of
the ADSs in the open market after the distribution has been completed in order
to cover syndicate short positions. Penalty bids permit the representative to
reclaim a selling concession from a syndicate member when the ADSs originally
sold by the syndicate member are purchased in a syndicate covering transaction
to cover syndicate short positions. Stabilizing transactions, syndicate covering
transactions and penalty bids may cause the price of the ADSs to be higher than
it would otherwise be in the absence of such transactions. These transactions
may be effected on the Amex or otherwise and, if commenced, may be discontinued
at any time. In addition, the underwriters may engage in passive market making
transactions in our securities on the Amex in accordance with Rule 103 of
Regulation M. Neither we nor the underwriters make any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the securities offered by this
prospectus.
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Each underwriter has covenanted with us that it will not offer in the United
Kingdom by means of any document other than this prospectus any ADSs and will
not offer to persons in the United Kingdom except to persons whose ordinary
activities involve them in acquiring, holding, managing, or disposing of
investments, as principal or agent, for the purposes of their businesses or
otherwise in circumstances which do not constitute an offer to the public within
the meaning of the U.K. Companies Act 1985. Each of the underwriters has also
agreed that it will comply with all applicable provisions of the Financial
Services Act 1986 with respect to anything done by it in relation to the
securities offered by this prospectus in, from, or otherwise involving the
United Kingdom. Each underwriter has undertaken to us that in the United Kingdom
it will only deliver this prospectus to persons who are of a kind described in
Article 11(3) of the Financial Services Act 1986 (Investment Advertising)
(Exemptions) Order 1995 or Article 8(1) of the Financial Services Act 1986
(Investment Advertisements) (Exemption) (No. 2) Order 1995 or who are otherwise
a person to whom the document lawfully be issued.
LEGAL MATTERS
The validity of the ADSs offered by this prospectus will be passed upon for
us by Greenberg Traurig, New York, New York, our special United States counsel.
Certain legal matters relating to this offering will be passed upon for the
underwriters by Orrick, Herrington & Sutcliffe LLP. The validity of the issuance
of the ordinary shares represented by the ADSs and certain other legal maters
relating to the laws of the United Kingdom will be passed upon by McFadden
Pilkington & Ward, our English counsel. Greenberg Traurig and Orrick, Herrington
& Sutcliffe LLP will rely, without independent verification, upon McFadden
Pilkington & Ward with respect to matters governed by the laws of the United
Kingdom.
EXPERTS
The financial statements of Town Pages Holdings plc as at December 31, 1997
and 1998, and for the years ended December 31, 1996, 1997 and 1998, have been
audited by Ernst & Young, independent auditors, as set forth in their report
included herein. The financial statements have been included in reliance upon
that report given upon the authority of that firm as experts in accounting and
auditing.
ADDITIONAL INFORMATION
We have filed with the Commission a registration statement on Form F-1 under
the Securities Act, with respect to the securities offered by this prospectus.
In this prospectus we refer to that registration statement, together with all
amendments, exhibits and schedules to that registration statement, as "the
registration statement."
As is permitted by the rules and regulations of the Commission, this
prospectus, which is part of the registration statement, omits certain
information, exhibits, schedules and undertakings set forth in the registration
statement. For further information with respect to us, and the securities
offered by this prospectus, reference is made to the registration statement.
Statements contained in this prospectus as to the contents of any contract or
other document referred to herein are not necessarily complete and, in each
instance, reference is made to the copy of the contract or other document filed
as an exhibit to the registration statement, each such statement being qualified
in all respects by this reference.
We will be subject to the reporting requirements of the Securities Exchange
Act of 1934, as applicable to foreign private issuers. In accordance with the
requirements, we will file an annual report on Form 20-F and other information
under cover of Form 6-K with the Commission. Our reports and other information
may be inspected and copied at the following public reference facilities
maintained by the Commission:
- 450 Fifth Street, N.W., Washington, D.C. 20549
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- Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661
- 7 World Trade Center, Room 1400, 13th Floor, New York, New York 10048
Copies of this material may also be obtained from the Public Reference Room
of the Commission at 450 Fifth Street, N.W. Washington, D.C. 20549 at prescribed
rates. Information on the operation of the Public Reference Room may be obtained
by calling the Commission at 1 (800) 732-0330. Our filings, including the
registration statement of which this prospectus is a part, will also be
available to you on the Commission's Internet site (http://www.sec.gov).
Bankers Trust, as depositary in respect of the ADSs, will distribute on our
behalf to the holders of ADSs on an annual basis after receipt from us, an
annual report and quarterly interim reports in English. The annual report will
include approximate reconciliations of consolidated net income and shareholders'
equity to U.S. GAAP to the extent that they are not prepared in accordance with
U.S. GAAP. The consolidated financial statements in the annual reports will be
examined by our independent public accountants and include their opinion on the
statements. We have applied for the listing of our ADSs on the Nasdaq National
Market under the symbol "TPGS." You may obtain certain information about us on
Nasdaq's Internet site (http://www.Nasdaq-Amex.com).
SERVICE OF PROCESS AND ENFORCEMENT OF LIABILITIES
Town Pages Holdings plc is registered and exists under the laws of England
and Wales. Our directors and officers and certain of our experts named in this
prospectus are not residents of the United States, and a substantial portion of
their assets and our assets are located outside of the United States. As a
result, it may be difficult or not possible for investors to effect service of
process within the United States upon these persons or to enforce outside the
United States judgments obtained against these persons in U.S. courts, or to
enforce in U.S. courts judgments obtained against these persons in courts in
jurisdictions outside the United States, in each case, in any action, including
actions predicated upon the civil liability provisions of the Federal or state
securities laws of the United States. We have been advised by McFadden
Pilkington & Ward, that there is doubt as to the enforceability against persons
in England in actions for enforcement of judgements of U.S. courts of civil
liabilities predicated solely upon the U.S. federal securities laws. Also,
investors may find it difficult to enforce liabilities based upon the civil
liability provisions of the U.S. federal securities laws against us, our
officers, directors and foreign-resident experts named in this prospectus in an
original action in a United Kingdom court.
80
<PAGE>
TOWN PAGES HOLDINGS PLC
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Auditors............................................................................. F-2
Consolidated Balance Sheets as of December 31, 1997 and December 31, 1998.................................. F-3
Consolidated Statements of Operations for the years ended December 31, 1996, December 31, 1997 and December
31, 1998................................................................................................. F-4
Consolidated Statements of Stockholders' Equity (Net Capital Deficiency) for the years ended December 31,
1996, December 31, 1997 December 31, 1998................................................................ F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1996, December 31, 1997 and December
31, 1998................................................................................................. F-6
Notes to the Consolidated Financial Statements............................................................. F-7
</TABLE>
F-1
<PAGE>
_______[LOGO]_______
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of
Town Pages Holdings plc
We have audited the accompanying consolidated balance sheets of Town Pages
Holdings plc as of December 31, 1997 and 1998 and the related consolidated
statements of operations, stockholders' equity (net capital deficiency) and cash
flows for each of the three years in the period ended December 31, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with United Kingdom auditing
standards, which do not differ in any significant respect from auditing
standards generally accepted in the United States. 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Town Pages
Holdings plc at December 31, 1997 and 1998 and the consolidated results of its
operations and its cash flows consolidated for each of the three years in the
period ended December 31, 1998, in conformity with accounting principles
generally accepted in the United States.
/s/ Ernst & Young
Reading, England
January 15, 1999
F-2
<PAGE>
TOWN PAGES HOLDINGS PLC
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------- DECEMBER 31,
1997 1998 1998
------------ ------------ ------------
AMOUNTS IN
AMOUNTS IN POUNDS STERLING U.S. DOLLARS
--------------------------
<S> <C> <C> <C>
(NOTE 1)
------------
ASSETS
Current assets
Cash and cash equivalents.............................................. L 12,868 L 33,868 $ 56,316
Accounts receivable.................................................... -- 590,350 981,634
Receivable from related party (Note 6)................................. -- 235,000 390,758
Unbilled receivables................................................... -- 422,872 703,152
Other receivables...................................................... 4,985 1,700 2,826
Prepaid expenses....................................................... -- 223,313 371,325
------------ ------------ ------------
Total current assets............................................... 17,853 1,507,103 2,506,011
Equipment and fixtures:
Computer equipment................................................... 35,450 136,140 226,374
Furniture and fixtures............................................... 4,995 14,677 24,405
Equipment............................................................ -- 37,894 63,010
------------ ------------ ------------
40,445 188,711 313,789
Less accumulated depreciation........................................ 21,861 63,883 106,225
------------ ------------ ------------
18,584 124,828 207,564
------------ ------------ ------------
L 36,437 L1,631,931 $2,713,575
------------ ------------ ------------
------------ ------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
CURRENT LIABILITIES
Accounts payable....................................................... L 36,934 L 248,108 $ 412,554
Accrued expenses and other liabilities................................. 15,819 127,099 211,340
Accrued interest....................................................... 19,988 106,203 176,594
Taxes and social security payable...................................... 13,797 49,239 81,875
Deferred Income........................................................ -- 228,244 379,524
Amounts payable under Web site design agreements....................... -- 411,969 685,022
Debenture loans from stockholder (Note 2).............................. 298,924 1,682,190 2,797,146
------------ ------------ ------------
Total current liabilities.......................................... 385,462 2,853,052 4,744,055
Commitments (Note 3)
STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
9% Series A redeemable convertible preferred stock, L1 par value,
5,000,000 shares authorized, none issued and outstanding at December
31, 1997 and December 31, 1998......................................... -- -- --
Ordinary shares: L0.01 par value; 20,000,000 shares authorized;
5,000,000 issued and outstanding at December 1997 and December 31,
1998................................................................... 50,000 50,000 83,140
Additional paid in capital............................................. 122,500 122,500 203,693
Accumulated deficit.................................................... (521,525) (1,393,621) (2,317,313)
------------ ------------ ------------
Total stockholders' equity (net capital deficiency)................ (349,025) (1,221,121) (2,030,480)
------------ ------------ ------------
L 36,437 L1,631,931 $2,713,575
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See accompanying notes
F-3
<PAGE>
TOWN PAGES HOLDINGS PLC
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1996 1997 1998 1998
--------------- ------------ ------------ -------------
AMOUNTS IN
AMOUNTS IN POUNDS STERLING U.S. DOLLARS
-------------------------------------------
<S> <C> <C> <C> <C>
(NOTE 1)
-------------
Revenues:
Advertising revenues................................ L 5,561 L 5,063 L 40,839 $ 67,907
Contract revenues and other......................... 664 3,296 919,522 1,528,981
Contract revenue from related parties............... -- -- 159,742 265,619
--------------- ------------ ------------ -------------
Total revenues.................................... 6,225 8,359 1,120,103 1,862,507
Cost of revenues
Maintenance and hosting costs....................... -- -- 179,776 298,932
Cost of contract revenues and other................. 21,750 43,781 563,854 937,576
--------------- ------------ ------------ -------------
Total cost of revenues............................ 21,750 43,781 743,630 1,236,508
--------------- ------------ ------------ -------------
Gross profit (loss)................................... (15,525) (35,422) 376,473 625,999
Operating expenses
Research and development............................ 21,148 40,832 67,910 112,921
Sales and marketing................................. 24,943 20,194 351,633 584,695
General and administrative.......................... 94,429 220,057 715,168 1,189,181
Depreciation and amortisation....................... 9,289 12,572 42,022 69,874
--------------- ------------ ------------ -------------
Total operating expenses.......................... 149,809 293,655 1,176,733 1,956,671
--------------- ------------ ------------ -------------
Operating loss........................................ (165,334) (329,077) (800,260) (1,330,672)
Interest expense...................................... (2,211) (17,845) (91,385) (151,955)
Interest income....................................... 636 358 1,500 2,494
Other income.......................................... -- -- 18,049 30,012
--------------- ------------ ------------ -------------
Net loss.............................................. L (166,909) L (346,564) L (872,096) $ (1,450,121)
--------------- ------------ ------------ -------------
--------------- ------------ ------------ -------------
Basic and diluted net loss per share.................. L (0.10) L (0.07) L (0.17) $ (0.29)
--------------- ------------ ------------ -------------
--------------- ------------ ------------ -------------
Shares used in computing basic and diluted net loss
per share........................................... 1,672,225 5,000,000 5,000,000 5,000,000
--------------- ------------ ------------ -------------
--------------- ------------ ------------ -------------
</TABLE>
See accompanying notes
F-4
<PAGE>
TOWN PAGES HOLDINGS PLC
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL
ORDINARY PAID-IN ACCUMULATED
SHARES CAPITAL DEFICIT TOTAL TOTAL
--------- ---------- ------------- ------------- -------------
AMOUNTS IN POUNDS STERLING
---------------------------------------------------
AMOUNTS IN
U.S. DOLLARS
(NOTE 1)
-------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995................. L 5,000 L -- L (8,052) L (3,052) $ (5,075)
Issuance of ordinary shares for cash......... L45,000 L122,500 L -- L 167,500 $ 278,519
Net loss..................................... -- -- (166,909) (166,909) (277,536)
--------- ---------- ------------- ------------- -------------
Balance at December 31, 1996................. 50,000 122,500 (174,961) (2,461) (4,092)
Net loss..................................... -- -- (346,564) (346,564) (576,267)
--------- ---------- ------------- ------------- -------------
Balance at December 31, 1997................. 50,000 122,500 (521,525) (349,025) (580,359)
Net loss..................................... -- -- (872,096) (872,096) (1,450,121)
--------- ---------- ------------- ------------- -------------
Balance at December 31, 1998................. L50,000 L122,500 L(1,393,621) L(1,221,121) $ (2,030,480)
--------- ---------- ------------- ------------- -------------
--------- ---------- ------------- ------------- -------------
</TABLE>
See accompanying notes
F-5
<PAGE>
TOWN PAGES HOLDINGS PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1996 1997 1998 1998
--------------- ----------- ------------- -------------
AMOUNTS IN
AMOUNTS IN POUNDS STERLING U.S. DOLLARS
-------------------------------------------
<S> <C> <C> <C> <C>
(NOTE 1)
-------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss............................................. L(166,909) L(346,564) L (872,096) $ (1,450,121)
Adjustments to reconcile net loss to net cash
provided by operating activities
Depreciation....................................... 9,289 12,572 42,022 69,874
Changes in operating assets and liabilities:
Accounts receivable.............................. (100) 100 (590,350) (981,634)
Receivables from related party................... -- -- (235,000) (390,758)
Other receivable................................. (2,253) (2,109) 3,285 5,462
Unbilled Receivables............................. -- -- (422,872) (703,152)
Prepaid expenses................................. -- -- (223,313) (371,325)
Other current assets............................. (750) 750 -- --
Accounts payable................................. 5,407 26,527 211,174 351,140
Accrued expenses and other liabilities........... 8,593 7,226 111,280 185,036
Accrued interest................................. 143 19,845 86,215 143,358
Taxes and social security payable................ 3,862 9,935 35,442 58,933
Deferred Income.................................. -- -- 228,244 379,525
Amounts payable under long term Contracts........ -- -- 411,969 685,023
--------------- ----------- ------------- -------------
Net cash used in operating activities................ (142,718) (271,718) (1,214,000) (2,018,639)
--------------- ----------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment and fixtures.................. (22,417) (16,746) (148,266) (246,537)
--------------- ----------- ------------- -------------
Net cash used in investing activities................ (22,417) (16,746) (148,266) (246,537)
--------------- ----------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debenture loan from stockholder........ -- 298,924 1,383,266 2,300,095
Proceeds from issuance of ordinary shares............ 167,500 -- -- --
--------------- ----------- ------------- -------------
Net cash provided by financing activities............ 167,500 298,924 1,383,266 2,300,095
--------------- ----------- ------------- -------------
Net increase in cash and cash equivalents............ 2,365 10,460 21,000 34,919
Cash and cash equivalents at the beginning of the
year............................................... 43 2,408 12,868 21,397
--------------- ----------- ------------- -------------
Cash and cash equivalents at the end of the year..... L 2,408 L 12,868 L 33,868 $ 56,316
--------------- ----------- ------------- -------------
--------------- ----------- ------------- -------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid........................................ L 68 L -- L -- $ --
--------------- ----------- ------------- -------------
--------------- ----------- ------------- -------------
</TABLE>
See accompanying notes
F-6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Town Pages Holdings plc produces and delivers Town Pages, an Internet-based
interactive service organized to provide comprehensive, locally-focused
information about specified towns and cities. The Company was incorporated in
England and Wales on July 31, 1998.
At December 31, 1998, the Company and its subsidiary had incurred recurring
net losses and, as of that date, had an accumulated consolidated deficit of
approximately L1.4 million. Substantially all of the losses have been financed
through debenture loans from a related party (see notes 2 and 6). Management
believes that it will be able to obtain additional funds through private or
public equity, bank credit facilities, or refinancing of the existing facility
with Glen Investments Limited. In the event that adequate funds are not
available from these sources, the Company will reduce its level of spending. In
these circumstances, and in the event that there is no public offering, Glen
Investments Limited has given an undertaking that they will provide sufficient
funds to the Company so that it is able to continue to meet its obligations as
they fall due for the next twelve months.
BASIS OF PRESENTATION
The financial statements have been prepared in accordance with accounting
principles generally accepted in the United States. These financial statements
do not comprise the Company's "statutory accounts" within the meaning of Section
240 of the U.K. Companies Act 1985 ("the Act"). Statutory accounts for the year
ended December 31, 1998 will be delivered to the Registrar of Companies for
England and Wales in due course. Statutory accounts of Town Pages Limited for
the years ended December 31, 1997 and 1996 have been so delivered. Town Pages
Limited was exempt from the requirement to cause an audit report of its
statutory accounts in accordance with Section 240 of the Act for the years ended
December 31, 1997 and 1996. The accountants' reports on such accounts made for
the purposes of section 249A of the Act were unqualified.
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary. All significant intercompany transactions and
balances have been eliminated upon consolidation.
In December, 1998 the Company acquired Town Pages Limited in a transaction
accounted for as a reorganization of companies under common control in a manner
similar to pooling of interests. The transaction was effected by means of a
share exchange whereby each share of Limited's ordinary stock was converted into
approximately 66.208 ordinary shares of the Company.
The financial statements expressed in pounds sterling as of December 31,
1998 were translated into United States Dollars, solely for the convenience of
the reader, at the prevailing exchange rate of L1 = $1.6628. These translations
should not be construed as representations that the pound sterling amounts
actually represent U.S. dollar amounts or that they could be converted into U.S.
dollars at the rate indicated or at any other rate.
REVENUE RECOGNITION
The Company's advertising revenues are derived principally from short-term
advertising contracts which are recognized ratably over the term of the
contract. Certain advertising contracts contain a guaranteed number of
impressions (a view of an advertisement by a customer). To the extent that the
F-7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
impression deliveries are falling short of the guarantees, the Company defers
recognition of the corresponding revenues.
Subscription revenues are for the set-up of customers on the TownPages
directory. These fees are recognized ratably over the term of the subscription
period which is generally one year.
The Company's contract revenues are derived principally from services
performed under development contracts for the design, coordination, and
integration of the customer's content and links into the Town Pages directory.
Fees for these services are recognized as the service is performed. These fees
are recognized as revenue once the related activities have been performed and/or
the customer's web links are available on the Town Pages directory.
Revenues from web site design agreements are recognized using the percentage
of completion method where reliable estimates of costs to complete the contracts
are available. If reliable estimates of costs to complete are not available, the
completed contract method is used. Revenues under web site design agreements
were L1,079,264 for the year ended December 31, 1998. This amount included
unbilled receivables of L422,872. Unbilled receivables will be billed in
accordance with billing schedules specified in the contracts to which they
relate.
Deferred revenue is primarily comprised of payments received from web site
design contracts in advance of revenue recognition and billings in excess of
recognized revenue relating to advertising contracts.
EQUIPMENT AND FIXTURES
Depreciation is provided so as to write down the cost of property and
equipment to their estimated residual value over their expected useful lives
which is typically 3-4 years. The principal annual depreciation rates and
methods of calculation are as follows:
<TABLE>
<S> <C>
Computer equipment 3 years straight line
Furniture and 4 years reducing
fixtures balance
Equipment 3 years straight line
</TABLE>
INCOME TAXES
Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards No. 109, "ACCOUNTING FOR INCOME TAXES." Under the asset and
liability method of Statement No. 109, deferred income tax assets and
liabilities are recognized for the future tax consequences attributable to
carryforward losses and differences between the financial statement carrying
amounts of existing assets and liabilities, and their respective tax bases.
Deferred income tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Deferred income tax assets
are recorded at their likely realizable amount.
USE OF ESTIMATES
The preparation of financial statements in conformity with United States
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
F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Certain estimates used by management are particularly susceptible to
significant changes. Management believes that as of December 31, 1997 and 1998
the estimates used are adequate based on the information currently available.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts for the Company's financial instruments, including
cash, accounts receivable, accounts payable, accrued expenses and long-term debt
approximate fair values.
However, considerable judgment is required in interpreting market data to
develop estimates of fair value. Therefore, the estimates are not necessarily
indicative of the amounts which could be realized or would be paid in a current
market exchange. The effect of using different market assumptions and/or
estimation methodologies may be material to the estimated fair value amount.
CASH AND CASH EQUIVALENTS
The Company considers investments in highly liquid instruments purchased
with an original maturity of 90 days or less to be cash equivalents. Such
amounts are stated at cost which approximates market value.
CONCENTRATIONS OF CREDIT AND OTHER RISKS
The Company performs ongoing credit evaluations of its customers' financial
condition and, generally, does not require collateral on accounts receivable.
When required, the Company maintains allowances for credit losses and such
losses have been within management's expectations. The Company's services are
provided to customers in the United Kingdom. There was no allowance for doubtful
accounts established for the periods presented and write-offs of accounts
receivable have not been significant.
The Company has entered into four contracts for the provision of Web site
design services. Amounts payable under web site design agreements consist of
amounts payable to third party subcontractors and suppliers in connection with
these four contracts which accounted for 19%, 14%, 30% and 33%, respectively, of
total net revenues for the year ended December 31, 1998. A substantial amount of
the services under these contracts has been performed by two subcontractors.
Should the subcontractors be unable to perform their obligations under the
subcontract agreements then the provision of certain services could be delayed
as the Company enters into arrangements with other vendors.
PENSION PLAN
The Company sponsors defined contribution pension plans for the directors
and employees. The pension charge represents the amounts payable by the Company
to the plans. All employees are eligible to join the plan and can make
contributions into the plan. The Company contributes into the plans per the
discretion of the board of directors. Contributions for all plans for the years
ended December 31, 1996, December 31, 1997 and December 31, 1998 were zero,
L9,429, and L19,327, respectively.
F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RESEARCH AND DEVELOPMENT
Research and development costs are charged to expense as incurred.
ADVERTISING
Costs related to advertising are expensed as incurred. Advertising expense
was L24,943, L14,135, and L44,861 for the years ended December 31, 1996,
December 31, 1997 and December 31, 1998 respectively.
PER SHARE AMOUNTS
In 1997, the FASB issued Statement No. 128 "EARNINGS PER SHARE." Under
Statement 128, basic loss per share is computed on the basis of weighted average
common shares outstanding. Diluted loss per share considers potential common
stock instruments in the calculation. Effective February 3, 1998, Staff
Accounting Bulletin No. 98 was issued and amends the existing SEC staff guidance
primarily to give effect to Statement 128. Topic 4.D of SAB 98 essentially
eliminated the cheap stock (convertible preferred stock, redeemable convertible
preferred stock, common stock and common equivalent shares issued by a company
at prices below the initial public offering price during the twelve-month period
prior to the offering) calculation from an initial public offering.
The Company has excluded all convertible debt, warrants and employee stock
options from the computation of diluted earnings per share because all such
securities are anti-dilutive for all periods presented.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS No. 130, "REPORTING COMPREHENSIVE
INCOME". This Statement requires that changes in comprehensive income be shown
in a financial statement that is displayed with the same prominence as other
financial statements. The Statement is effective for annual periods beginning
after December 15, 1997. To date, the Statement has not had a material impact on
the Company's financial position or results of operations.
In June 1997, the FASB issued SFAS No 131, "DISCLOSURE ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION," which changes the way public companies
report information about operating segments. SFAS No. 131, which is based on the
management approach to segment reporting, establishes requirements to report
selected segment information quarterly and to report entity-wide disclosures
about products and services, major customers, and the material countries in
which the entity holds assets and reports revenue. The Statement is effective
for annual periods beginning after December 15, 1997 and the Company adopted its
provisions in fiscal 1998. The Statement does not have a material impact on its
financial position or results of operations.
In June 1998, FASB issued SFAS No. 133, "Accounting for Derivatives and
Hedging Activities," which establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives) and for hedging
activities. SFAS No. 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. The adoption of SFAS No. 133 is not expected to
have an impact on the Company's results of operations, financial position, or
cash flows.
F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2 DEBENTURE LOANS
To date, the Company has financed its operations primarily through direct
loans made by Glen Investments Limited, a corporation owned by the majority
shareholder of the Company, who is a member of its board of directors, to Town
Pages Limited. The loan has been established as a 9% line of credit facility
which is due upon demand or at the time of an initial public offering. There is
no specific limit on the line of credit, but it is at the discretion of Glen
Investments Limited. The loan is secured by first liens on substantially all of
the assets and properties of Town Pages Limited.
Upon the closing of an initial public offering, L850,000 of the outstanding
balance on the credit facility will convert into 850,000 shares of Town Pages
Holding plc Series A preferred stock. The Series A preferred shares will be
convertible into ordinary shares, at the option of the holder, at any time
commencing 12 months after the completion of the initial public offering of the
Company's securities, at a conversion price equal to the sum which is 120% of
the per share offering price of the Company's securities offered in the
Company's initial public offering. The remaining outstanding balance will be
paid through the proceeds received from the offering.
3 COMMITMENTS
OPERATING LEASES
The Company occupied office space under a short term operating license from
Westbrook Property Development Ltd., a company owned by the President and CEO of
the Company. Subsequent to the balance sheet date, Westbrook Property
Development Ltd. assigned for L1 its lease of that property to the Company. The
lease expires in 2014.
Rent expense was L2,640, L32,000, and L40,300 for the years ended December
31, 1996, December 31, 1997 and December 31, 1998, respectively, which was all
paid to the related party discussed above.
4 STOCKHOLDERS EQUITY
PREFERRED STOCK
In December 1998, the Company's shareholders passed a resolution whereby the
articles of association of the Company were amended to increase the share
capital of the Company to allow for the creation of a class of Series A
preferred stock, L1 par value, whereby the Company is authorized to issue up to
5,000,000 shares. The Series A preferred stock will not be redeemable, except by
mutual agreement of the Company and the holder commencing no earlier than 12
months after the completion of the initial public offering of the Company's
shares. The shares are non voting. The preferred stockholders are entitled to
non-cumulative dividends at a 9% coupon rate. The liquidation rate of the Series
A preferred shares are at their par value, and the Series A preferred shares
have preference in that amount in liquidation or dissolution over the ordinary
shares. The terms of the Series A preferred shares prohibit the payment of cash
dividends on the ordinary shares in any year until the Company also declares and
pays a 9% dividend on the Series A preferred shares. The Series A preferred
shares are convertible into ordinary shares, at the option of the holder, at any
time commencing 12 months after the completion of the initial public offering of
the Company's securities, at a conversion price which sum is 120% of the per
share offering price of the Company's securities offered in the Company's
initial public offering.
F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4 STOCKHOLDERS EQUITY (CONTINUED)
STOCK OPTION PLAN
In December, 1998 the board of directors approved a Stock Option Plan, the
Town Pages Executive Share Option Plan (the "Executive Plan") in the Company,
whereby the Directors and employees may acquire ordinary shares. Upon completion
of an initial public offering, 700,000 ordinary shares will be issuable under
the Executive Plan. Options will be granted by the compensation committee which
consists wholly of outside directors. Options will be granted at prices to be
determined by the compensation committee, which shall not be less than 100% of
the fair market value of the ordinary shares on the date of grant. Options
generally vest over a three year period from the date of grant.
5 INCOME TAX
Due to operating losses and the inability to recognize a corporation tax
benefit therefrom, there is no provision for income taxes for 1996, 1997 or
1998.
Deferred income taxes reflect the net tax effects of temporary difference
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amount used for corporation tax purposes. Significant
components of the Company's deferred tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
<S> <C> <C> <C>
1996 1997 1998
--------- ---------- ----------
Net operating loss carryforwards........................... L34,061 L101,808 L251,016
Depreciation............................................... 512 1,389 1,052
--------- ---------- ----------
Total deferred tax assets.................................. 34,573 103,197 252,068
Valuation allowance........................................ (34,573) (103,197) (252,068)
--------- ---------- ----------
Net deferred tax asset..................................... L -- L -- L --
--------- ---------- ----------
--------- ---------- ----------
</TABLE>
Because of the Company's lack of earnings history, the deferred tax assets
have been fully offset by a valuation allowance. The valuation allowance
increased by L68,624 and L148,871 during the years ended December 31, 1997 and
December 31, 1998, respectively. As of December 31, 1998, the Company had net
operating loss carryforwards of approximately L1,255,000. There is no expiration
date on the operating losses.
6 RELATED PARTIES
As further discussed in note 3, the Town Pages Limited occupies its office
space under a lease assigned to the Company by Westbrook Property Development
Ltd.
As further discussed in note 2, the Company has been financed principally
from debenture loans provided from Glen Investments Limited. Balances payable to
the shareholder at December 31, 1997 and December 31, 1998 were L298,924 and
L1,682,190, respectively.
In three separate transactions between June 14, 1996 and November 12, 1996,
Glen Investments Limited purchased a total of 57,395 ordinary shares of Town
Pages Limited (approximately 76%) of its share capital) for an aggregate sum of
L100,000. In December 1998, the percentage of Town Pages Limited's share capital
owned by Glen Investments Limited was increased to 90% through the pro rata
transfer of ordinary shares owned by the minority shareholders of Town Pages
Limited. Glen
F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6 RELATED PARTIES (CONTINUED)
Investments Limited transferred its ordinary shares of Town Pages Limited to
Raven Ventures Limited, another corporate affiliate of the Company's majority
shareholder.
The majority shareholder of the Company, who is also a director of the
Company, is a 25% shareholder of Leisure Concepts International, which owns 50%
of Travel the Net Ltd. Travel the Net Ltd. is a development stage company which
provides travel information and reservation services over the Internet. Travel
the Net Ltd. is the exclusive provider of the travel "channel" on TownPages.
Travel the Net Ltd. is currently one of the Company's largest customers,
accounting for approximately 14% of revenues for the fiscal year ended December
31, 1998.
7 INITIAL PUBLIC OFFERING
In December, 1998, the board of directors authorized the filing of a
registration statement with the Securities and Exchange Commission permitting
the company to sell shares of its ordinary stock to the public. If the offering
is consummated under terms presently anticipated, the debenture loan will be
transferred from Town Pages Limited to the Company and L850,000 of the debenture
loans will be converted into 850,000 shares of Series A preferred stock. The
remainder of the debenture loan will be repaid with the proceeds from the
offering, bank credit facilities, or refinancing of the existing facility with
Glen Investments Limited.
F-13
<PAGE>
ARTWORK FOR PROSPECTUS INSIDE BACK COVER PAGE CONSISTS OF VIEWS OF FOUR
DIFFERENT TOWNPAGES WEBSITE PAGES.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR
TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST NOT RELY ON ANY
UNAUTHORIZED INFORMATION OR REPRESENTATIONS. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE UNDER THIS PROSPECTUS IMPLIES THAT THERE HAS BEEN
NO CHANGE IN OUR AFFAIRS SINCE THE DATE OF THIS PROSPECTUS OR THAT THE
INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT AS OF ANY DATE SUBSEQUENT TO
THE DATE OF THIS PROSPECTUS. THIS PROSPECTUS IS AN OFFER TO SELL ONLY THE
SECURITIES OFFERED HEREBY, BUT ONLY UNDER CIRCUMSTANCES AND IN JURISDICTIONS
WHERE IT IS LAWFUL TO DO SO. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS
CURRENT ONLY AS OF ITS DATE.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary.............................. 1
Risk Factors.................................... 6
Exchange Rate Information....................... 18
Use of Proceeds................................. 19
Dividend Policy................................. 20
Capitalization.................................. 21
Dilution........................................ 22
Selected Financial Data......................... 23
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 24
Business........................................ 31
Management...................................... 46
Principal Stockholders.......................... 56
Related Party Transactions...................... 57
Description of Share Capital.................... 59
Description of American Depositary Receipts..... 64
Taxation........................................ 71
Shares Eligible for Future Sale................. 76
Underwriting.................................... 77
Legal Matters................................... 79
Experts......................................... 79
Additional Information.......................... 79
Service of Process and Enforcement of 80
Liabilities...................................
Index to Consolidated Financial Statements...... F-1
</TABLE>
--------------------------
UNTIL , 1999 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
2,300,000 ORDINARY SHARES
AMERICAN DEPOSITARY
RECEIPTS
[LOGO]
TOWN PAGES HOLDINGS PLC
---------------------
PROSPECTUS
---------------------
SECURITY CAPITAL
TRADING, INC.
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all costs and expenses payable by Town Pages
Holdings plc, the registrant, in connection with the sale and distribution of
the securities being registered, other than underwriting discounts and
commissions. All amounts shown are estimates except the Securities and Exchange
Commission registration fee and the NASD filing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............................. $ 7,353
NASD filing fee................................................................. 2,800
Nasdaq listing fee.............................................................. 35,000
Accounting fees and expenses.................................................... 260,000
Legal fees and expenses......................................................... 350,000
Printing and engraving expenses................................................. 175,000
Transfer agent and registrar fees............................................... 10,000
Blue Sky fees and expenses...................................................... 15,000
Directors' and Officers' Insurance.............................................. 35,000
Miscellaneous expenses.......................................................... 109,847
---------
Total........................................................................... $1,000,000
</TABLE>
Item 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Except as hereinafter set forth, there is no provision of the Memorandum and
Articles of Association or any contract, arrangement or statute under which any
of our directors or officers is insured for or indemnified in any manner against
any liability that he may incur in his capacity as such.
Our Articles of Association provide that, subject to the provisions of the
U.K. Companies Act 1985, every director, secretary or other officer (which
expression excludes an auditor) of ours shall be indemnified by us out of our
own funds against and/or exempted by us from all costs, charges, losses,
expenses and liabilities incurred by him in the actual or purported execution
and/or discharge of his duties and/or the exercise or purported exercise of his
powers and/or otherwise in relation to or in connection with his duties, powers
of office, including (without prejudice to the generality of the foregoing) any
liability incurred by him in defending any proceedings, civil or criminal, which
relate to anything done or omitted or alleged to have been done or omitted by
him as an officer or employee of ours and in which judgement is given in his
favour (or the proceedings are otherwise disposed of without any finding or
admission of any material breach of duty on his part) or in which he is
acquitted or in connection with any application under any statute for relief
from liability in respect of any such act or omission in which relief is granted
to him by a court, unless incurred through their own wilful neglect or default.
In addition, the Board of Directors shall have power to purchase and maintain
insurance for or for the benefit of any person who is or was at any time a
director, officer or employee of any "Relevant Company" (as defined below) or
who is or was at any time a trustee of any pension fund or employees' share
scheme in which employees of any Relevant Company are interested, including
(without prejudice to the generality of the foregoing) insurance against any
liability incurred by such persons in respect of any act or omission in the
actual or purported execution and/or discharge of their duties and/or in the
exercise or purported exercise of his or her powers and/or otherwise in relation
to his or her duties, power or offices in relation to any Relevant Company, or
any such pension fund or employees' share scheme. For these purposes, "Relevant
Company" shall mean us, any holding company of ours or any other body, whether
or not incorporated, in which we or such holding company or any of our
predecessors or of such holding company has or had any interest whether direct
or indirect or which is in any way allied to or associated with us, or any
subsidiary undertaking of ours or of such other body.
II-1
<PAGE>
Section 310 of the U.K. Companies Act 1985 provides:
(1) This section applies to any provision, whether contained in a company's
articles or in any contract with us or otherwise, for exempting any officer
of ours or any person (whether an officer or not) employed by us as auditor
from, or indemnifying him against, any liability which by virtue of any rule
of law would otherwise attach to him in respect of any negligence, default,
breach of duty or breach of trust of which he may be guilty in relation to
us.
(2) Except as provided by the following sub-section, any such provision is void.
(3) This section does not prevent a company:
(a) from purchasing and maintaining for any such officer or auditor
insurance against any such liability; or
(b) from indemnifying any such officer or auditor against any liability
incurred by him:
(i) in defending any proceedings (whether civil or criminal) in which
judgement is given in his favor or he is acquitted; or
(ii) in connection with any application under section 144(3) or (4)
(acquisition of shares by innocent nominee) or section 727 (general
power to grant relief in case of honest and reasonable conduct) in
which relief is granted to him by the court.
Our directors and officers are insured against certain liabilities which
they may incur in their capacity as such under a liability insurance policy
carried by us.
Reference is made to Section 7 of the Underwriting Agreement filed as
Exhibit 1.1 hereto for a description of the indemnification arrangements for
this offering.
Item 15. RECENT SALES OF UNREGISTERED SECURITIES.
All securities sold by the registrant during this period sold outside the
United States to foreign persons and were therefore not subject to Section 5 of
the Securities Act. There were no underwriters employed in connection with any
of those transactions.
Item 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1* Articles of Association of Town Pages Holdings plc.
3.2* Memorandum of Association of Town Pages Holdings plc.
4.1* Form of American Depositary Receipts.
4.2* Specimen of Ordinary Share Certificate.
4.3* Form of Representative's Warrant Agreement between us and the Representative, including the form of
Representative's Warrant.
5.1** Opinion of McFadden, Pilkington & Ward as to the legality of certain securities being issued.
8.1* Opinion of Greenberg Traurig as to certain United States federal income tax matters.
8.2* Opinion of McFadden, Pilkington & Ward as to certain United Kingdom income tax matters.
10.1* 1998 Executive Share Option Plan.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.2* Employment Agreement between Town Pages Holdings plc and Andrew Neville Lyndon-Skeggs.
10.3* Employment Agreement between Town Pages Holdings plc and Richard J. Smith.
10.4* Employment Agreement between Town Pages Holdings plc and Barry B.J. Charles.
10.5* Form of Agreement between Town Pages Holdings plc and each non-executive member of the board of
directors.
10.6* Agreement between Town Pages Holdings plc and Viscount Lifford.
10.7* Services Agreement between Town Pages Limited and Travel the Net Ltd. dated September 30, 1998.
10.8* Services Agreement between Town Pages Limited and AllCars.com Ltd. dated September 30, 1998.
10.9* Services Agreement between Town Pages Limited and Medic Media Inc. dated October 19, 1998.
10.10* Services Agreement between Town Pages Limited and Location Developments Limited (eshoppingcentre.com)
dated November 10, 1998.
21.1* Subsidiaries of Town Pages Holdings plc.
23.1* Consent of McFadden, Pilkington & Ward (included in the opinion filed as Exhibit 5.1).
23.3** Consent of Ernst & Young
24.1* Powers of Attorney (set forth on signature page of the Registration Statement)
27.1* Financial Data Schedule
</TABLE>
- ------------------------
* Previously filed.
** Filed herewith.
(b) Financial Statement Schedules.
None.
Item 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant under the provisions referenced in Item 14 of
this registration statement, or otherwise, the registrant has 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 registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant 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
hereunder, the registrant will, unless in the opinion of our counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it
is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
II-3
<PAGE>
(b) The undersigned registrant hereby undertakes that:
(1) 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 the form
of prospectus filed by the registrant under 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; and
(2) 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 this offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Alton, England, the
United Kingdom, on the 15th day of March 1999.
<TABLE>
<S> <C> <C>
TOWN PAGES HOLDINGS PLC
By /s/ ANDREW NEVILLE LYNDON-SKEGGS
-----------------------------------------
Andrew Neville Lyndon-Skeggs
Managing Director and Chief Executive
Officer
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ ANDREW NEVILLE Managing Director and Chief
LYNDON-SKEGGS * Executive Officer
- ------------------------------ (Principal Executive March 15, 1999
Andrew Neville Lyndon-Skeggs Officer)
/s/ VISCOUNT EDWARD JAMES Chairman of the Board
WINGFIELD LIFFORD *
- ------------------------------ March 15, 1999
Viscount Edward James
Wingfield Lifford
/s/ BARRY B.J. CHARLES * Director
- ------------------------------ March 15, 1999
Barry B.J. Charles
Director (Principal
/s/ RICHARD J. SMITH * Financial Officer and
- ------------------------------ Principal Accounting March 15, 1999
Richard J. Smith Officer)
/s/ KEVIN R. LEECH * Director
- ------------------------------ March 15, 1999
Kevin R. Leech
/s/ NIGEL E.C. Director
TALBOT-PONSONBY *
- ------------------------------ March 15, 1999
Nigel E.C. Talbot-Ponsonby
Director
- ------------------------------ , 1999
Howard Flight, M.P.
II-5
<PAGE>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ SIMON WARD * Director
- ------------------------------ March 15, 1999
Simon Ward
MSK Industries, Inc.
By: /s/ ANDREW TURNER, CFO * Authorized United States
- ------------------------------ Representative
Andrew Turner, March 15, 1999
Chief Financial Officer
*By: /s/ ANDREW NEVILLE
LYNDON-SKEGGS
- ------------------------------
Andrew Neville Lyndon-Skeggs,
Attorney-in-fact
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form F-1 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Alton, England, the United Kingdom, on the 15th day
of March 1999.
<TABLE>
<S> <C> <C>
TOWN PAGES HOLDINGS PLC
By /s/ ANDREW NEVILLE LYNDON-SKEGGS
-----------------------------------------
Andrew Neville Lyndon-Skeggs
Managing Director and Chief Executive
Officer
</TABLE>
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ------------- ---------------------------------------------------------------------------------------------- -----------
<C> <S> <C>
1.1* Form of Underwriting Agreement.
3.1* Articles of Association of Town Pages Holdings plc.
3.2* Memorandum of Association of Town Pages Holdings plc.
4.1* Form of American Depositary Receipts.
4.2* Specimen of Ordinary Share Certificate.
4.3* Form of Representative's Warrant Agreement between us and the Representative, including the
form of Representative's Warrant.
5.1** Opinion of McFadden, Pilkington & Ward as to the legality of certain securities being issued.
8.1* Opinion of Greenberg Traurig as to certain United States federal income tax matters.
8.2* Opinion of McFadden, Pilkington & Ward as to certain United Kingdom income tax matters.
10.1* 1998 Executive Share Option Plan.
10.2* Employment Agreement between Town Pages Holdings plc and Andrew Neville Lyndon-Skeggs.
10.3* Employment Agreement between Town Pages Holdings plc and Richard J. Smith.
10.4* Employment Agreement between Town Pages Holdings plc and Barry B.J. Charles.
10.5* Form of Agreement between Town Pages Holdings plc and each non-executive member of the board
of directors.
10.6* Agreement between Town Pages Holdings plc and Viscount Lifford.
10.7* Services Agreement between Town Pages Limited and Travel the Net Ltd. dated September 30,
1998.
10.8* Services Agreement between Town Pages Limited and AllCars.com Ltd. dated September 30, 1998.
10.9* Services Agreement between Town Pages Limited and Medic Media Inc. dated October 19, 1998.
10.10* Services Agreement between Town Pages Limited and Location Developments Limited
(eshoppingcentre.com) dated November 10, 1998.
21.1* Subsidiaries of Town Pages Holdings plc.
23.1* Consent of McFadden, Pilkington & Ward (included in the opinion filed as Exhibit 5.1).
23.3** Consent of Ernst & Young
24.1* Powers of Attorney (set forth on signature page of the Registration Statement)
27.1* Financial Data Schedule
</TABLE>
- ------------------------
* Previously filed.
** Filed herewith.
<PAGE>
Exhibit 5.1
March __, 1999
Town Pages Holdings plc
11 Market Square
Alton, Hampshire GU34 1HD
Ladies and Gentlemen:
1. We have acted as English law advisers to Town Pages Holdings plc, a
public company limited by shares incorporated under the laws of England
and Wales, in connection with:
1.1 an offer ("Offer") of American Depositary Shares ("ADSs") representing
ordinary shares of the Company, 1p per share nominal value ("Shares"),
which have been registered under the US Securities Act of 1933, as
amended, pursuant to a registration statement on Form F-1 (File No.
333-72075) of the Company filed with the Securities and Exchange
Commission on February 10, 1999, as amended by Amendment No. 1 filed on
February 24, 1999 (collectively, "Registration Statement").
2. For the purposes of giving this opinion we have examined originals or
copies, certified or otherwise identified to our satisfaction, such
corporate records, agreements, documents and other instruments and such
other certificates or comparable documents of public officials and of
officers and representatives of the Company, as we have deemed relevant
and necessary as a basis for the opinions hereinafter set forth
including in particular:
2.1 the Memorandum of Association of the Company ("Memorandum") and
Articles of Association of the Company ("Articles") as are in effect at
the date of this opinion;
2.2 a copy of minutes of a meeting dated 15, December 1998 of the Board of
Directors of the Company evidencing the Board of Directors' approval of
the Company entering into the Offer and the transactions contemplated
thereby.
3. In such examination and thus in giving this opinion, we have assumed:
3.1 that all documents submitted to us as copies conform to the originals;
3.2 that there have been no amendments to the Memorandum or the Articles
from the form we have reviewed;
3.3 that the resolutions of the Board of Directors of the Company referred
to in paragraph 2.2 above have not been amended or rescinded and are in
full force and effect;
3.4 that the Company has not passed a members' voluntary resolution for the
winding up of the Company, no petition has been presented or order made
by a court for the winding up, dissolution or administration of the
Company, and no receiver, trustee, administrator
<PAGE>
or similar officer has been appointed in relation to the Company or any
of its assets or revenues. In that respect, we confirm that we carried
out:
3.4.1. a search in the Companies Registry on March __, 1999 against
the Company and at the time of the search, it revealed no
evidence of any such event occurring; and
3.4.2. a telephone search at the Central Registry of Winding Up
Petitions against the Company on March __, 1999 which revealed
no evidence of such events occurring.
3.5 that where any consents, directions, authorizations, approvals or
instructions have to be obtained under any statute, by-law, ordinance,
decree or other regulation or practice in respect of the Shares, they
have been obtained or they will be forthcoming;
3.6 that where any liability or obligation or right or benefit of a holder
of the Shares or issue of the Shares is dependent upon the satisfaction
of conditions precedent that such conditions have been or will be duly
and properly satisfied;
3.7 that there are no agreements or arrangements in existence, made prior
to the Offer, which affect the enforceability of the Offer or the
Shares in accordance with their terms;
3.8 that any document referred to in this opinion and executed or to be
executed by the Company or its subsidiary has been or will be properly
authorized, executed and delivered in accordance with the laws of the
state of New York and of the United States and of any other relevant
jurisdiction (other than England and Wales);
3.9 that you have relied and will continue to rely as to matters governed
by the laws of the state of New York and of the United States upon the
opinion or opinions of Greenberg Traurig, special United States counsel
for the Company;
3.10 that there are no facts or circumstances in existence and no events
have occurred which would render the issue and allotment of the Shares
void or voidable or repudiated or frustrated or capable of rescission
for any reason, and in particular (but without limitation) by reason of
lack of consideration or any fraud or misrepresentation on the part of
any of the parties thereto.
4. As to all questions of fact material to this opinion that have not been
independently established, we have relied upon certificates or
comparable documents of officers and representatives of the Company.
5. This opinion is given on the basis that it is governed by and will be
construed in accordance with the laws of England and Wales. In
particular, we express no opinion as to the enforceability, outside
England and Wales, of any order or judgment obtained in the English
courts.
2
<PAGE>
6. Based on the foregoing, and subject to the qualifications stated
herein, we are of the opinion that, save as disclosed in the
Registration Statement;
6.1 each of the Company and Town Pages Limited ("TPL") has been duly
incorporated and is validly existing under the laws of England and
Wales;
6.2 when:
6.2.1. the Registration Statement has become effective under the US
Securities Act of 1933, as amended;
6.2.2. the terms of the Shares and the terms of the issuance and sale
of the Shares have been duly established as contemplated in
the Registration Statement so as not to violate the applicable
law or result in default under or breach of any agreement or
instrument binding on the Company or TPL and so as not to
comply with any requirement or restriction imposed by a court
or government body having jurisdiction over the Company or
TPL; and
6.2.3. the Shares have been issued and sold as contemplated in the
Registration Statement;
then:
the Shares have, insofar as English law governs the formalities of
authorization, issuance and allotment, been duly authorized, issued and
allotted by the Company except (x) the enforceability thereof may be
limited by bankruptcy, insolvency, fraudulent conveyance, preference,
reorganization, moratorium, the ability of the English Courts to stay
proceedings if concurrent proceedings are being brought elsewhere or
similar laws now or hereafter in effect relating to creditors' rights
or remedies generally, (y) the availability of equitable remedies may
be limited by equitable principles of general applicability and the
discretion of the court before which any proceeding may be brought and
(z) the enforceability of the rights to indemnification thereunder may
be limited by US federal and state securities laws and public policy
considerations.
7. This opinion is delivered as of the date of this letter and addressed
to you and is solely for your benefit in connection with the Offer and
accordingly it may not be relied upon for any other purpose or by any
other person or entity.
3
<PAGE>
8. We consent to the filing of this opinion as an exhibit to the
Registration Statement relating to the Shares and to references to us
under the headings "Service of Process and Enforcement of Liabilities"
and "Legal Matters" in the Registration Statement relating to the
Shares.
Yours faithfully
McFADDEN PILKINGTON & WARD
<PAGE>
EXHIBIT 23.3
CONSENT OF ERNST & YOUNG, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Summary
Financial Data", "Selected Financial Data" and "Experts" and to the use of our
report dated January 15, 1999, in the Registration Statement (Form F-1 No.
333-72075) and related Prospectus of Town Pages Holdings plc for the
registration of 2,645,000 of its ordinary shares.
/s/ Ernst & Young
Reading, England
March 17, 1999
