<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 6, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
------------------
PRIMEDIA INC.
(FORMERLY KNOWN AS K-III COMMUNICATIONS CORPORATION)
(Exact name of Registrant as specified in its charter)
--------------------------
<TABLE>
<S> <C> <C>
DELAWARE 2721 13-3647573
(state or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Code Number) Identification No.)
</TABLE>
------------------------------
745 FIFTH AVENUE
NEW YORK, NEW YORK 10151
(212) 745-0100
(Address, including ZIP Code, and telephone number, including area code.
of Registrant's principal executive office)
--------------------------
SEE TABLE OF ADDITIONAL REGISTRANTS
------------------------------
ANN M. RIPOSANU, ESQ.
PRIMEDIA INC.
745 FIFTH AVENUE
NEW YORK, NEW YORK 10151
(212) 745-0100
(Name, address, including ZIP Code, and telephone number, including area code,
of agent for service)
--------------------------
COPY TO:
GARY I. HOROWITZ, ESQ.
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
(212) 455-2000
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
OF SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT/SHARE(1) OFFERING PRICE(1) FEE
<S> <C> <C> <C> <C>
7 5/8% Senior Notes due 2008 $250,000,000 100% $250,000,000 $73,750
Guarantees of the 7 5/8%
Senior Notes due 2008....... $250,000,000 None(2) None(2) None(2)
$8.625 Series H Exchangeable
Preferred Stock Redeemable
2010........................ 2,500,000 Shares $100 $250,000,000 $73,750
8 5/8% Class H Subordinated
Exchange Debentures due
2010........................ $250,000,000 None(3) None(3) None(3)
Totals........................ $500,000,000 $147,500
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) No separate consideration will be received for the guarantees of the 7 5/8%
Senior Notes due 2008 by subsidiaries of PRIMEDIA Inc.
(3) No separate consideration will be received for the 8 5/8% Class H
Subordinated Exchange Debentures due 2010 issuable upon exchange of the
$8.625 Series H Exchangeable Preferred Stock.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT 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 SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
STATE OR OTHER
JURISDICTION OF PRIMARY STANDARD I.R.S.
EXACT NAME OF INCORPORATION INDUSTRIAL EMPLOYER
REGISTRANT AS SPECIFIED OR CLASSIFICATION IDENTIFICATION
IN ITS CHARTER ORGANIZATION CODE NUMBER NUMBER
- --------------------------------------------------------------------------- --------------- ------------------- ------------
<S> <C> <C> <C>
The Apartment Guide of Nashville, Inc. .................................... Tennessee 2741 62-1224076
Argus Publishers Corporation............................................... California 2721 95-2219151
American Heat Video Productions, Inc. ..................................... Missouri 8299 43-1418177
ASTN, Inc. ................................................................ Delaware 8299 75-2590386
A WEP Company.............................................................. California 2721 95-4129732
Bacon's Information, Inc. ................................................. Delaware 7389 36-4011543
Bankers Consulting Company................................................. Missouri 8299 43-1771756
Bowhunter Magazine, Inc. .................................................. Pennsylvania 2721 23-2667502
Canoe & Kayak, Inc. ....................................................... Delaware 2721 41-1895510
Cardinal Business Media, Inc. ............................................. Delaware 2721 23-2695564
Cardinal Business Media Holdings, Inc. .................................... Delaware 2721 23-2695951
Channel One Communications Corp. .......................................... Delaware 4833 13-3783278
Climbing, Inc. ............................................................ Delaware 2721 41-1885204
Cover Concepts Marketing Services, LLC..................................... Delaware 7319 04-3370389
Cowles Business Media, Inc. ............................................... Connecticut 2721 06-0935977
Cowles Enthusiast Media, Inc. ............................................. Pennsylvania 2721 23-1577768
Cowles History Group, Inc. ................................................ Virginia 2721 54-1606227
CSK Publishing Company Incorporated........................................ Delaware 2721 13-3023395
Cumberland Publishing, Inc. ............................................... Maryland 2721 52-1758147
DRF Finance, Inc. ......................................................... Delaware 2721 13-3616341
Daily Racing Form, Inc. ................................................... Delaware 2721 13-3616342
Data Book, Inc. ........................................................... Georgia 2741 58-1482678
The Electronics Source Book, Inc. ......................................... Delaware 2741 36-0645610
Excellence in Training Corporation......................................... Delaware 8299 75-2532442
Films for the Humanities & Sciences, Inc. ................................. Delaware 7812 13-1932571
Funk & Wagnalls Yearbook Corp. ............................................ Delaware 2731 13-3603787
Gareth Stevens, Inc. ...................................................... Wisconsin 2731 39-1462742
GO LO Entertainment, Inc. ................................................. California 7389 95-4307031
Guinn Communications, Inc. ................................................ Tennessee 2741 62-1486552
Haas Publishing Companies, Inc. ........................................... Delaware 2741 58-1858150
Health & Sciences Network, Inc. ........................................... California 8299 95-3654568
Horse & Rider, Inc. ....................................................... California 2721 33-0480523
Intermodal Publishing Company, Ltd. ....................................... New York 2721 13-2633752
IDTN Leasing Corporation................................................... Delaware 8299 13-3414420
Industrial Training Systems Corporation.................................... New Jersey 8299 22-2070040
IntelliChoice, Inc. ....................................................... California 2721 77-0168905
Intertec Market Reports, Inc. ............................................. Delaware 2721 36-1534790
Intertec Presentations, Inc. .............................................. Colorado 2721 84-0840004
Intertec Publishing Corporation............................................ Delaware 2721 48-1071277
K-III HPC, Inc. ........................................................... Delaware 6719 58-2105885
K-III Prime Corporation.................................................... Delaware 6719 13-3631019
Kitplanes Acquisition Company.............................................. Delaware 2721 95-4617433
Law Enforcement Television Network, Inc. .................................. Texas 8299 75-2257839
Lifetime Learning Systems, Inc. ........................................... Delaware 2741 13-3783276
Little Rock Apartment Guide, Inc. ......................................... Arkansas 2741 74-2298918
Lockert Jackson & Associates, Inc. ........................................ Washington 8299 91-1395126
Low Rider Publishing Group, Inc. .......................................... California 2721 95-4307029
McMullen Argus Publishing, Inc. ........................................... California 2721 95-2663753
Memphis Apartment Guide, Inc. ............................................. Tennessee 2741 62-0964956
Musical America Publishing, Inc. .......................................... Delaware 2721 13-2782528
Nelson Information, Inc. .................................................. Delaware 2741 13-3740812
Pictorial, Inc. ........................................................... Indiana 2731 35-1616640
Plaza Communications, Inc. ................................................ California 2721 95-3053189
PRIMEDIA Holdings III Inc. ................................................ Delaware 6719 13-3617238
PRIMEDIA Information Inc. ................................................. Delaware 2721 13-3555670
PRIMEDIA Magazines Inc. ................................................... Delaware 2721 13-3616344
PRIMEDIA Magazines Finance Inc. ........................................... Delaware 2721 13-3616343
PRIMEDIA Reference Inc. ................................................... Delaware 2731 13-3603781
PRIMEDIA Special Interest Publications Inc. ............................... Delaware 2721 52-1654079
PRIMEDIA Workplace Learning, Inc. ......................................... Texas 8299 75-2110878
QWIZ, Inc. ................................................................ Delaware 7372 58-2302364
R.E.R. Publishing Corporation.............................................. New York 2721 13-3090623
RetailVision, Inc. ........................................................ Delaware 2721 03-0339898
Simba Information, Inc. ................................................... Connecticut 2721 06-1281600
Southwest Art, Inc. ....................................................... Delaware 2721 76-0233343
Straight Down, Inc. ....................................................... California 2721 95-3824415
Symbol of Excellence Publishers, Inc. ..................................... Alabama 2721 63-0845698
Tel-A-Train, Inc. ......................................................... Delaware 8299 75-2532446
The Virtual Flyshop, Inc. ................................................. Colorado 2721 84-1318377
TI-IN Acquisition Corporation.............................................. Texas 8299 75-2478738
Vegetarian Times, Inc. .................................................... Illinois 2721 36-3636836
Weekly Reader Corporation.................................................. Delaware 2721 13-3603780
Westcott Communications Michigan, Inc. .................................... Michigan 8299 38-2955660
Westcott ECI, Inc. ........................................................ Texas 8299 75-2475419
Western Empire Publications, Inc. ......................................... Delaware 2721 95-3363328
</TABLE>
The address, including zip code, and telephone number, including area code,
of each additional registrant's principal executive office is 745 Fifth Avenue,
New York, New York 10151 (212-745-0100).
<PAGE>
The financial statements of the guarantor subsidiaries are omitted because
PRIMEDIA Inc. ("PRIMEDIA") believes the separate financial statements would not
be material to the shareholders and potential investors. The total assets,
revenues, income or equity of non-guarantor subsidiaries, both individually and
on a combined basis are inconsequential in relation to the total assets,
revenues, income or equity of PRIMEDIA. All of the equity securities of each of
the additional registrants set forth in the table above are owned, either
directly or indirectly, by PRIMEDIA, and there has been no default during the
preceding 36 calendar months with respect to any indebtedness or material
long-term leases of PRIMEDIA or any of the additional registrants.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED MAY 6, 1998
PROSPECTUS
, 1998
[LOGO]
OFFER TO EXCHANGE
$1,000 IN PRINCIPAL AMOUNT OF ITS 7 5/8% SENIOR NOTES DUE 2008 FOR EACH $1,000
IN PRINCIPAL AMOUNT OF ITS OUTSTANDING 7 5/8%
SENIOR NOTES DUE 2008
OFFER TO EXCHANGE
ITS $8.625 SERIES H EXCHANGEABLE PREFERRED STOCK REDEEMABLE 2010 (LIQUIDATION
PREFERENCE $100 PER SHARE) (EXCHANGEABLE AT THE OPTION OF PRIMEDIA) FOR UP TO
2,500,000 SHARES OF ITS $8.625 SERIES G EXCHANGEABLE PREFERRED STOCK
REDEEMABLE 2010 (LIQUIDATION PREFERENCE $100 PER SHARE)
(EXCHANGEABLE AT THE OPTION OF PRIMEDIA)
---------------------------
PRIMEDIA Inc., a Delaware corporation ("PRIMEDIA" or the "Company"), hereby
offers, upon the terms and subject to the conditions set forth in this
Prospectus (this "Prospectus") and the accompanying Letters of Transmittal (the
"Letters of Transmittal") (i) to exchange (the "Note Exchange Offer") up to
$250,000,000 aggregate principal amount of a new series of its 7 5/8% Senior
Notes due 2008 (the "New Notes") for up to $250,000,000 aggregate principal
amount of its outstanding 7 5/8% Senior Notes due 2008 (the "Old Notes") and
(ii) to exchange (the "Preferred Stock Exchange Offer" and, together with the
Note Exchange Offer, the "Exchange Offers") one share of its $8.625 Series H
Exchangeable Preferred Stock Redeemable 2010, par value $.01 per share,
liquidation preference $100.00 per share (the "New Preferred Stock"), for each
outstanding share of its $8.625 Series G Exchangeable Preferred Stock Redeemable
2010, par value $.01 per share, liquidation preference $100.00 per share (the
"Old Preferred Stock"), of which 2,500,000 shares are outstanding. There will be
no cash proceeds to PRIMEDIA from the Exchange Offers.
---------------------------
The form and terms of the New Notes and New Preferred Stock are the same as
the form and terms of the Old Notes and the Old Preferred Stock except that (i)
the New Notes and the shares of New Preferred Stock will have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), and thus
will not bear restrictive legends restricting their transfer pursuant to the
Securities Act and (ii) holders of New Notes and/or New Preferred Stock will not
be entitled to certain rights of holders of the Old Notes and the Old Preferred
Stock, respectively, under the Registration Rights Agreement (as defined) which
will terminate upon the consummation of the Exchange Offers. See "The Exchange
Offers--Consequences of Failure to Exchange." The Old Notes and the New Notes
are sometimes referred to herein collectively as the "Notes." The Old Preferred
Stock and the New Preferred Stock are sometimes referred to herein collectively
as the "Preferred Stock." The New Preferred Stock is exchangeable into 8 5/8%
Class H Subordinated Exchange Debentures due 2010 (the "New Subordinated
Debentures"), in whole but not in part, at the option of PRIMEDIA on any
scheduled dividend payment date. Holders of New Preferred Stock will be entitled
to receive the principal amount of the New Subordinated Debentures equal to
$100.00 for each $100.00 of liquidation preference of New Preferred Stock held
by such holders at the time of exchange plus an amount per share in cash equal
to all accrued but unpaid dividends thereon to the date of exchange. The form
and terms of the New Subordinated Debentures will be the same as the form and
terms of the 8 5/8% Class G Subordinated Exchange Debentures due 2010 (the "Old
Subordinated Debentures"), except that the New Subordinated Debentures will have
been registered under the Securities Act pursuant to the Registration Statement
of which this Prospectus is a part. The New Subordinated Debentures and the Old
Subordinated Debentures are sometimes referred to herein collectively as the
"8 5/8% Subordinated Debentures," and the New Notes, the New Preferred Stock and
the New Subordinated Debentures are sometimes referred to herein collectively as
the "Securities." As of December 31, 1997, the amount of pro forma senior
indebtedness (including indebtedness and other current and non-current
liabilities of PRIMEDIA's subsidiaries), was approximately $1,908.7 million and
the aggregate liquidation preference of the pro forma outstanding preferred
stock was approximately $575.0 million, all of which preferred stock ranks pari
passu with the Preferred Stock.
Interest on the New Notes shall accrue from the last interest payment date
on which interest was paid on the Old Notes surrendered in exchange therefor or,
if no interest has been paid, from the original date of issuance of the Old
Notes. The Notes are fully and unconditionally guaranteed jointly and severally
by all the wholly-owned domestic Restricted Subsidiaries (as defined) of the
Company. Dividends on the New Preferred Stock will accrue and will be cumulative
from the last dividend payment date on which dividends were paid on the shares
of Old Preferred Stock surrendered in exchange therefor or, if no dividends have
been paid, from the original date of issuance of the Old Preferred Stock.
----------------------------------
The Old Notes and the Old Preferred Stock were originally issued and sold on
February 17, 1998 in transactions not registered under the Securities Act, in
reliance upon the exemption provided in Section 4(2) of the Securities Act.
Accordingly, the Old Notes and the Old Preferred Stock may not be reoffered,
resold or otherwise pledged, hypothecated or transferred in the United States
unless so registered or unless an applicable exemption from the registration
requirements of the Securities Act is available. Based on interpretations by the
staff of the Securities and Exchange Commission set forth in no-action letters,
the Company believes that the New Notes and the New Preferred Stock issued
pursuant to the Exchange Offers in exchange for Old Notes and Old Preferred
Stock may be offered for resale, resold and otherwise transferred by holders
thereof (other than any such holder which is an "affiliate" of PRIMEDIA within
the meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Notes and New Preferred Stock is acquired in the ordinary course
of such holder's business, such holders have no arrangement with any person to
participate in the distribution of such New Notes and New Preferred Stock and
neither such holders nor any other person is engaging in or intends to engage in
a distribution of such New Notes and New Preferred Stock. However PRIMEDIA has
not sought, and does not intend to seek, its own no-action letter, and there can
be no assurance that the staff of the Securities and Exchange Commission would
make a similar determination with respect to the Exchange Offers. Each
broker-dealer that receives New Notes or New Preferred Stock for its own account
pursuant to the Exchange Offers where the Old Notes or the Old Preferred Stock,
as the case may be, were acquired by such broker-dealer as a result of
market-making or other trading activities, may be a statutory underwriter and
must acknowledge that it will deliver a prospectus in connection with any resale
of such New Notes or New Preferred Stock. The Letters of Transmittal relating to
the Exchange Offers state that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act. This Prospectus, as it
may be amended or supplemented from time to time, may be used by a broker-dealer
in connection with New Notes or New Preferred Stock received in exchange for Old
Notes or Old Preferred Stock, as the case may be, where such Old Notes or Old
Preferred Stock were acquired by such broker-dealer as a result of market-making
activities or other trading activities. PRIMEDIA will, for a period of 90 days
after the Expiration Date (as defined herein), make copies of this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution."
The New Notes, the New Preferred Stock, and the New Subordinated Debentures
which may be issued in exchange therefor, constitute new issues of securities
with no established trading market. Any Old Notes and shares of Old Preferred
Stock not tendered and accepted in the Exchange Offers will remain outstanding.
To the extent that Old Notes and shares of Old Preferred Stock are tendered and
accepted in the Exchange Offers, a holder's ability to sell untendered Old Notes
and shares of Old Preferred Stock could be adversely affected. No assurance can
be given as to the liquidity of the trading market for the Old Notes and Old
Preferred Stock or, if issued in exchange for Old Preferred Stock, the Old
Subordinated Debentures. See "Risk Factors--Lack of Public Market."
PRIMEDIA will accept for exchange any and all Old Notes and/or shares of Old
Preferred Stock validly tendered and not withdrawn prior to 5:00 p.m., New York
City time, on June , 1998, unless extended by PRIMEDIA in its sole discretion
(such date as it may be so extended, the "Expiration Date"). The Company will
not extend the Exchange Offer beyond , 1998. Tenders of Old Notes and
shares of Old Preferred Stock may be withdrawn at any time prior to the
Expiration Date. The Exchange Offers are subject to certain customary
conditions. See "The Exchange Offers."
Approximately 78% of the shares of common stock of PRIMEDIA (on a fully diluted
basis) is held by certain investment partnerships, of which KKR Associates, an
affiliate of KKR, is the general partner. Consequently, KKR Associates and its
general partners have the power to approve any corporate action requiring
stockholder approval. See "Risk Factors--Control by KKR."
----------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 22 FOR A DESCRIPTION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
AVAILABLE INFORMATION
PRIMEDIA has filed with the Securities and Exchange Commission (the
"Commission" or "SEC") a Registration Statement on Form S-4 (the "Registration
Statement") under the Securities Act for the registration of the Securities
offered hereby. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement, certain items of which are contained in exhibits and schedules to the
Registration Statement as permitted by the rules and regulations of the
Commission. For further information with respect to PRIMEDIA and the Securities
offered hereby, reference is made to the Registration Statement, including the
exhibits thereto, and financial statements and notes filed as a part thereof. In
addition, PRIMEDIA has agreed to furnish to holders of the Old Notes and the Old
Preferred Stock, and prospective purchasers thereof, the information required to
be delivered pursuant to Rule 144A(d)(4) under the Securities Act until the
consummation of the Exchange Offers.
PRIMEDIA is subject to the informational requirements of the Securities and
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy or information statements and other information
with the Commission. The Registration Statement and the exhibits and schedules
thereto, as well as such reports and other information filed by PRIMEDIA with
the Commission may be inspected and copied, at prescribed rates, at the public
reference facilities of the Commission, 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549, and at the Commission's regional offices at Seven World
Trade Center, 13th Floor, New York, New York 10048, and Citicorp Center, 500
West Madison Street, Suite 1400, Chicago. Illinois 60661. Such material may also
be accessed electronically by means of the Commission's home page on the
Internet (http://www.sec.gov). Reports and other information concerning PRIMEDIA
are also available for inspection and copying at the offices of the New York
Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated into this Prospectus by reference:
(a) the Annual Report on Form 10-K for the fiscal year ended December 31,
1997; and
(b) the Current Report on Form 8-K dated February 9, 1998.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the Exchange Offers shall be deemed to be incorporated by
reference in this Prospectus and to be a part of this Prospectus from the date
of the filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference in this Prospectus shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained in this Prospectus or in any subsequently
filed document which also is or is deemed to be incorporated by reference in
this Prospectus modifies or supersedes such statement. Any statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON WRITTEN OR ORAL
REQUEST FROM: CORPORATE SECRETARY, PRIMEDIA INC., 745 FIFTH AVENUE, NEW YORK,
NEW YORK 10151, (212) 745-0100. IN ORDER TO ENSURE TIMELY DELIVERY OF THE
DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
, 1998.
2
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO APPEARING
ELSEWHERE IN THIS PROSPECTUS OR INCORPORATED BY REFERENCE HEREIN. UNLESS THE
CONTEXT OTHERWISE INDICATES, THE TERM "COMPANY" OR "PRIMEDIA" MEANS THE COMBINED
BUSINESS OPERATIONS OF PRIMEDIA INC. (AND ITS PREDECESSORS) AND ITS
SUBSIDIARIES. PLEASE REFER TO "GLOSSARY OF CERTAIN DEFINED TERMS" FOR
DEFINITIONS OF CERTAIN CAPITALIZED TERMS USED IN THIS PROSPECTUS. PROSPECTIVE
INVESTORS SHOULD CAREFULLY CONSIDER THE FACTORS SET FORTH UNDER THE CAPTION
"RISK FACTORS." MARKET SHARE DATA CONTAINED HEREIN IS BASED UPON A PRODUCT'S
SHARE OF ADVERTISING OR CIRCULATION, DEPENDING ON THE PRODUCT AS COMPARED TO ITS
DIRECT COMPETITION.
THE COMPANY
GENERAL
PRIMEDIA is the authoritative source of specialized information for highly
targeted audiences in the education, business and special interest consumer
markets. Most of the Company's products have leadership positions in the niche
markets in which such products compete: specialty magazines (E.G., SEVENTEEN,
AMERICAN BABY, SOAP OPERA DIGEST, TRUCKIN', SEW NEWS and TELEPHONY); education
(E.G., CHANNEL ONE NETWORK, WEEKLY READER and PRIMEDIA WORKPLACE LEARNING); and
information (E.G., APARTMENT GUIDES, WARD'S, THE WORLD ALMANAC and BACON'S).
The Company has achieved substantial sales growth through the development of
its franchises, combined with its operating expertise and a successful
acquisition strategy. From 1993 through 1997, net sales have grown at a compound
annual rate of 15%, to $1,487.6 million. The operating loss in 1997 was $20.8
million compared to $7.7 million in 1993 (after deductions for amortization,
depreciation, provision for loss on the sales of businesses and other of $322.8
million in 1997 and $145.9 million in 1993).
The Company had net income (loss) of $(172.8) million, $8.0 million and
$(75.4) million for the years ended December 31, 1997, 1996 and 1995,
respectively. The Company's deficiency of earnings to fixed charges was $159.1
million, $35.7 million and $135.0 million for the years ended December 31, 1997,
1996 and 1995, respectively. The Company's deficiency of earnings to fixed
charges plus preferred stock dividends was $224.2 million, $79.2 million and
$164.0 million for the years ended December 31, 1997, 1996 and 1995,
respectively. The Company's pro forma deficiency of earnings to fixed charges
and earnings to fixed charges plus preferred stock dividends was $141.8 million
and $201.4 million, respectively, for the year ended December 31, 1997. See
"Unaudited Pro Forma Consolidated Financial Data."
GROWTH STRATEGY
PRIMEDIA's strategy is to address growing needs in today's information
economy. Technology has created a flood of information. Consequently, management
believes the key role of the media is shifting from making information broadly
available across all audiences to sifting out and qualifying information for the
benefit of specific audiences. The Company's products are authoritative
information sources meeting customers' particular needs in the most beneficial
formats--print, electronic, and multimedia. Its pursuit of this strategy in its
targeted markets has enabled PRIMEDIA to achieve an average market share across
all products of 60%, with 80% ranking number one or two in their markets.
PRIMEDIA provides authoritative information in six areas that show superior
growth: specialty consumer magazines and technical and trade magazines in the
specialty magazine segment; classroom learning and workplace learning in the
education segment; and consumer and business information products in the
information segment. See "--Business Segments." In each of these six areas, the
Company offers authoritative information products that have a branded presence
and leading market positions.
The Company is taking advantage of fundamental growth trends in these six
markets. The Company's specialty magazines take advantage of trends in the
specialty consumer market where advertising growth
3
<PAGE>
has outpaced general interest magazine, broadcast television, radio and
newspaper advertising growth since 1989. In classroom and workplace learning,
PRIMEDIA is building on rising elementary and secondary school enrollments,
increased spending on supplementary educational materials and the rapid growth
in outsourced workplace education. The Company's consumer and business
information products are capitalizing on the trend towards targeted marketing,
and away from general interest sources such as newspapers, and the increased
spending by businesses for information.
The Company seeks to maximize its operating performance by capitalizing on
its leading position in each of these growing markets. Each of PRIMEDIA's six
growth vehicles has opportunities for expansion through both internal organic
development and product line acquisitions. Organic growth results from both
market expansion and product innovation in conventional and new media formats.
Growth through product line acquisition is made possible by the constant
availability of leading brands for sale in niche markets in PRIMEDIA's six
growth areas. To support this aspect of growth, the Company has successfully
developed a selective and disciplined process of identifying, evaluating and
integrating acquired companies. A major source of funds for these product line
acquisitions is the cash generated by the Company's operations, which by their
nature have high operating margins and low capital requirements. Net capital
expenditures were $31.1 million in 1997 and $28.8 million in 1996 or 2.1% of net
sales in each respective year. Additionally, cash available for reinvestment is
amplified because the Company pays virtually no income taxes largely as a result
of having structured most of its acquisitions to create tax-deductible
amortization of intangible assets which results in net operating losses.
On November 18, 1997, the Company changed its name to PRIMEDIA Inc. to
reflect better the "prime" positioning the Company has in its six areas of
specialized "media." On November 18, 1997, the Company's New York Stock Exchange
symbol was changed from KCC to PRM.
MANAGEMENT
The Company was founded in 1989 by William F. Reilly, Charles G. McCurdy and
Beverly C. Chell, former members of senior management of Macmillan, Inc.,
together with Kohlberg Kravis Roberts & Co., L.P. ("KKR"). PRIMEDIA's Chairman
and CEO, William F. Reilly, has 28 years of experience in operations, finance
and development. Charles G. McCurdy, President, and Beverly C. Chell, Vice
Chairman and General Counsel, have 15 and 28 years, respectively, of finance,
development and operations related experience. At PRIMEDIA, they have recruited
and developed a cadre of strong, seasoned operating managers.
The Company's management, including the executives named above, have
invested in excess of $23 million in the Common Stock through March 31, 1998.
Assuming the exercise of all stock options, and giving effect to the KKR Fund
Investment, management would have owned approximately 11%, in the aggregate, of
the Company's outstanding Common Stock as of such date.
BUSINESS SEGMENTS
The Company organizes its business into three operating segments: specialty
magazines, education and information. These segments accounted for approximately
51%, 25% and 24%, respectively, of PRIMEDIA's net sales of $1,487.6 million for
the year ended December 31, 1997.
SPECIALTY MAGAZINES
The specialty magazines segment consists of specialty consumer magazines and
technical and trade magazines. In 1997, 60% of the Company's specialty consumer
magazines and nearly 50% of its technical and trade magazines were ranked number
one in their respective markets. According to the WALL STREET JOURNAL, PRIMEDIA
is the largest magazine publisher in the United States by ad page count. Some of
the Company's specialty consumer magazines include SOAP OPERA DIGEST, SEVENTEEN,
NEW YORK, CHICAGO,
4
<PAGE>
TRUCKIN' and SEW NEWS; some of the Company's leading technical and trade
publications include TELEPHONY, FLEET OWNER and AMERICAN PRINTER.
EDUCATION
The Company is a leading provider of supplemental educational materials and
programming in the United States, targeting both classroom and workplace
learning. PRIMEDIA's best-known brands in classroom learning include CHANNEL ONE
and WEEKLY READER, and in workplace learning, PRIMEDIA Workplace Learning,
formerly known as Westcott Communications. Classroom learning takes advantage of
the growth in spending on supplementary educational materials and the projected
increases in elementary and secondary school enrollments over the next decade
(in particular, school enrollments are expected to rise 7% between 1995 and
2005). Workplace learning focuses on the $69 billion training market, of which
the outsourced segment is the fastest growing portion, which is expected to rise
142% between 1995 and 2005.
INFORMATION
The Company produces over 170 highly targeted consumer and business
information products, most of which hold dominant positions in their niche
markets. The Company's premier consumer information products include APARTMENT
GUIDES, THE WORLD ALMANAC and such specialty reference products as FACTS ON FILE
NEWS SERVICES, which is used by public and institutional libraries. Its leading
business information products include BACON'S for public relations professionals
and INTERNATIONAL TRADE GUIDES for import/ export professionals. The growth in
advertising supported consumer information (E.G.--targeted free publications,
such as APARTMENT GUIDES) is being driven by advertisers' need to reach their
customers as cost effectively as possible. From 1995 to 2005, advertising
revenue generated from free shopping guides is expected to nearly double.
Consequently, APARTMENT GUIDES and PRIMEDIA's other targeted free publications
should continue to provide significant opportunities for growth through new
ventures and acquisitions. PRIMEDIA's business information products capitalize
on the growth in business spending on information which is expected to increase
8% on a compound annual basis, between 1995 and 2005.
RECENT DEVELOPMENTS
INVESTMENT BY KKR 1996 FUND L.P.
On March 18, 1998, KKR 1996 Fund L.P., a Delaware limited partnership
affiliated with KKR (the "KKR Fund"), purchased 16,666,667 shares of newly
issued common stock from the Company for $200 million (the "KKR Fund
Investment"). The net proceeds from the KKR Fund Investment were used to repay
borrowings outstanding under the Credit Facilities, which amounts may be
reborrowed for general corporate purposes including acquisitions. See "Summary
Consolidated Financial Data" and "Unaudited Pro Forma Consolidated Financial
Data."
ACQUISITIONS
On March 19, 1998, the Company completed the acquisition of the stock of
Cowles Enthusiast Media and Cowles Business Media (together, "Cowles") from
McClatchy Newspapers, Inc. ("McClatchy") for approximately $200 million (the
"Cowles Acquisition"). With the Cowles Acquisition, the Company added 25
enthusiast titles to its specialty consumer magazines group, and 11 technical
and trade magazines and 15 trade shows to its technical and trade magazines
group.
For the period from January 1, 1998 through April 16, 1998, in addition to
the Cowles Acquisition, the Company had completed four product-line acquisitions
in the specialty magazines and information segments. The aggregate purchase
price for such acquisitions was approximately $12 million.
5
<PAGE>
NON-CORE BUSINESSES SOLD
As a part of its strategy to focus on areas of its business that have the
greatest potential for growth, the Company divested certain businesses that do
not fit within its growth vehicles. Those businesses are Krames Communications,
the Katharine Gibbs Schools, Newbridge Book Clubs, Newbridge Educational
Publishing, NEW WOMAN magazine, STAGEBILL, and INTERTEC MAILING SERVICES. The
net proceeds from the completed sales of Non-Core Businesses (as defined below)
were used to repay borrowings outstanding under the Credit Facilities, which
amounts may be reborrowed for general corporate purposes including acquisitions.
The Company intends to divest DAILY RACING FORM during 1998. The above
businesses are collectively referred to as the "Non-Core Businesses".
The following table presents unaudited combined operating results for the
year ended December 31, 1997 for the Non-Core Businesses. There can be no
assurance that the remaining Non-Core Business will be divested.
<TABLE>
<CAPTION>
(IN
THOUSANDS)
-------------
<S> <C>
Sales, net..................................................................... $ 247,351
Operating loss................................................................. (131,397)
Depreciation and amortization.................................................. 146,970
</TABLE>
DIVESTITURES
On April 23, 1998, the Company entered into a definitive stock purchase
agreement to sell Nelson Information, Inc., a leading information provider in
the financial services industry, to Thomson Information Services Inc.
SERIES E EXCHANGE OFFER
The Company consummated an exchange offer on February 17, 1998 (the "Series
E Exchange Offer") pursuant to which each share of its $9.20 Series E
Exchangeable Preferred Stock (the "Series E Preferred Stock") was exchanged at
the option of the holder thereof for a share of $9.20 Series F Exchangeable
Preferred Stock (the "Series F Preferred Stock"). The Series F Preferred Stock
is registered under the Securities Act, and otherwise has the same terms as the
Series E Preferred Stock.
REDEMPTION OF $11.625 SERIES B EXCHANGEABLE PREFERRED STOCK
On March 20, 1998, the Company used net proceeds of approximately $169.2
million from the offering of the Old Notes and the Old Preferred Stock to redeem
all of the issued and outstanding shares of its $11.625 Series B Preferred Stock
Redeemable 2005, par value $.01 per share, (the "Series B Preferred Stock"), at
a redemption price of $105.80 per share plus accrued and unpaid dividends to the
redemption date.
TERMINATION OF DEFINED BENEFIT PENSION PLAN
In January 1998, the Company elected to terminate its defined benefit
pension plan effective March 31, 1998. In connection with this termination, the
Company froze benefit accruals effective December 31, 1997. In the opinion of
the Company's management, the plan benefits payable on the termination are
adequately accrued for and will not have a material impact on the Company's
consolidated financial statements. Active plan participants will be eligible to
participate in the Company's defined contribution plans.
TERMINATION OF NEW CREDIT FACILITY
On April 20, 1998, the New Credit Facility expired. As a result, the Company
has total commitments of $1.4 billion and can borrow up to $1.5 billion in the
aggregate under its Bank Credit Facilities.
6
<PAGE>
FIRST QUARTER OPERATING RESULTS
The following represents certain operating and balance sheet data for the
quarter ended and as of March 31, 1998:
<TABLE>
<CAPTION>
(IN
THOUSANDS)
<S> <C>
OPERATING DATA:
Sales, net..................................................................... $ 344,986
Depreciation and amortization.................................................. 40,606
Operating income............................................................... 24,282
Interest expense............................................................... 33,421
Net loss....................................................................... (9,732)
Preferred stock dividends and redemption premium............................... 23,485
Loss applicable to common shareholders......................................... (33,217)
BALANCE SHEET DATA:
Cash and cash equivalents...................................................... $ 29,566
Long-term debt, excluding current maturities................................... 1,640,335
Exchangeable preferred stock................................................... 557,430
</TABLE>
7
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[LOGO]
<TABLE>
<CAPTION>
SPECIALTY MEDIA EDUCATION INFORMATION
<S> <C> <C>
SPECIALTY CONSUMER MAGAZINES CLASSROOM LEARNING CONSUMER DIRECTORIES
- -73 Publications -Channel One News -74 Consumer Guides in 28
(including Soap Opera Digest, -Weekly Reader States
Seventeen, American Baby, -Films for the Humanities (including Apartment Guide,
Automobile, Modern Bride, and Sciences MicroTimes and new homes
New York, Chicago, Low Rider, guides)
Sew News and Dog World) -Specialized Reference
Products
(including The World Almanac
and
Facts on File News Service)
TECHNICAL AND TRADE MAGAZINES WORKPLACE LEARNING BUSINESS DIRECTORIES
- -63 Publications -Westcott Communications -70 Specialized Directories
(including Telephony, -Executive Education Network (including Nelson's, Bacon's,
Cellular -Interactive Distance Ward's
Business, Soybean Digest, Training Network Automotive Reports, Aircraft
Fleet Owner, National -18 other product lines Bluebook and Pacific Shipper)
Real Estate Investor and
Transmission and
Distribution)
</TABLE>
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THE EXCHANGE OFFERS
<TABLE>
<S> <C>
Registration Rights
Agreement; Effect on
Holders.................... The Old Notes and Old Preferred Stock were sold by PRIMEDIA on
February 17, 1998 to Salomon Brothers Inc and Morgan Stanley
& Co. Incorporated, as the initial purchasers (the "Initial
Purchasers") pursuant to a Purchase Agreement dated February
11, 1998 between PRIMEDIA and the Initial Purchasers (the
"Purchase Agreement"). The Initial Purchasers subsequently
sold the Old Notes and the Old Preferred Stock to qualified
institutional buyers and non-U.S. persons in reliance on
Rule 144A and Regulation S, respectively, under the
Securities Act. Pursuant to the Purchase Agreement, PRIMEDIA
and the Initial Purchasers entered into a Registration
Rights Agreement dated as of February 17, 1998 (the
"Registration Rights Agreement") which grants the holders of
the Old Notes and the Old Preferred Stock certain exchange
and registration rights. These Exchange Offers are intended
to satisfy such rights. Therefore, the holders of the
Securities are not entitled to any exchange or registration
rights with respect thereto. All untendered Old Notes and
shares of Old Preferred Stock will continue to be subject to
the restrictions on transfer described under "The Exchange
Offers-- Consequences of Failure to Exchange." To the extent
that Old Notes and shares of Old Preferred Stock are
tendered and accepted in the Exchange Offers, the trading
market for untendered Old Notes and shares of Old Preferred
Stock could be adversely affected. See "The Exchange
Offers--Purpose and Effect of the Exchange Offers" and
"--Consequences of Failure to Exchange" and "Risk
Factors--Lack of Public Market."
The Note Exchange Offer Up to $250,000,000 in principal amount of New Notes will be
exchanged for up to $250,000,000 in aggregate principal
amount of Old Notes. PRIMEDIA will issue the New Notes to
holders on the earliest possible date following the
Expiration Date.
The Preferred Stock
Exchange Offer........... One share of New Preferred Stock will be exchanged for each
share of Old Preferred Stock. As of the date hereof, 2,500,000
shares of Old Preferred Stock are outstanding. PRIMEDIA will
issue the New Preferred Stock to holders on the earliest
practicable date following the Expiration Date.
Expiration Date............ 5:00 p.m., New York City time, on , 1998 unless the
Exchange Offers are extended by PRIMEDIA in its sole
discretion, in which case the term "Expiration Date" means
the latest date and time to which the Exchange Offers are
extended. The Company will not extend the Exchange Offers
beyond , 1998.
</TABLE>
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<S> <C>
Conditions to the Exchange
Offers................... The Exchange Offers are not conditioned upon any minimum
aggregate principal amount of Old Notes or minimum number of
shares of Old Preferred Stock being tendered for exchange.
However, the Exchange Offers are subject to certain
customary conditions, which may be waived by PRIMEDIA. See
"The Exchange Offers--Conditions of the Exchange Offers."
PRIMEDIA reserves the right to terminate the Exchange Offers
if any of such conditions have not been satisfied and to
amend the Exchange Offers at any time prior to the
Expiration Date.
Procedures for Tendering
the Old Notes and the Old
Preferred Stock.......... See "The Exchange Offers--Procedures for Tendering" and
"--Guaranteed Delivery Procedures."
Withdrawal Rights.......... Tenders may be withdrawn at any time prior to the Expiration
Date. See "The Exchange Offers--Withdrawal of Tenders."
Acceptance of the Old Notes
and the Old Preferred
Stock and Delivery of the
New Notes and the
New Preferred Stock...... PRIMEDIA will accept for exchange any and all Old Notes and
shares of Old Preferred Stock which are properly tendered in
the Exchange Offers prior to the Expiration Date. The New
Notes and shares of New Preferred Stock issued pursuant to
the Exchange Offers will be delivered on the earliest
practicable date following the Expiration Date. See "The
Exchange Offers--Terms of the Exchange Offers."
Certain Tax
Considerations........... For a discussion of certain federal income tax consequences of
the exchange of the Old Notes and the Old Preferred Stock, see
"Certain Federal Income Tax Considerations."
Exchange Agent............. The Bank of New York is serving as the exchange agent (the
"Exchange Agent") in connection with the Exchange Offers.
</TABLE>
TERMS OF THE NOTES, THE PREFERRED STOCK AND THE 8 5/8% SUBORDINATED DEBENTURES
The Exchange Offers apply to $250,000,000 aggregate principal amount of the
Old Notes and 2,500,000 shares of the Old Preferred Stock. The form and terms of
the New Notes and the New Preferred Stock are the same as the form and terms of
the Old Notes and the Old Preferred Stock except that the New Notes and the
shares of New Preferred Stock will have been registered under the Securities Act
and thus will not bear restrictive legends restricting their transfer pursuant
to the Securities Act. The form and terms of the New Subordinated Debentures
will be the same as the Old Subordinated Debentures. See "Description of
Preferred Stock and 8 5/8% Subordinated Debentures."
THE NOTES
<TABLE>
<S> <C>
Maturity Date.............. April 1, 2008.
Interest Payment Dates..... April 1 and October 1 of each year, commencing October 1,
1998.
Optional Redemption........ The Notes are redeemable at the option of PRIMEDIA, in whole
or in part, at any time on or after April 1, 2003, at the
redemption prices set forth herein, plus accrued and unpaid
interest to the redemption date. See "Description of Notes."
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
Change of Control.......... In the event of a Change of Control (i) each holder of the
Notes will have the right to require PRIMEDIA to repurchase
such holder's Notes at a purchase price equal to 101% of the
principal amount thereof, plus accrued and unpaid interest
to the repurchase date and (ii) PRIMEDIA will have the
option to redeem the Notes, in whole or in part, at the
redemption prices set forth herein, plus accrued and unpaid
interest to the redemption date. The redemption prices for
optional redemptions by PRIMEDIA in the event of a Change of
Control will in all cases be equal to or greater than the
repurchase price to be paid to holders who elect to have
PRIMEDIA repurchase their Notes after a Change of Control.
Because of the highly leveraged nature of PRIMEDIA, there
can be no assurance that PRIMEDIA will have sufficient funds
to repurchase the Notes in the event of a Change of Control.
See "Description of Notes."
"Change of Control" means such time as (i) a "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2)
of the Exchange Act), other than KKR and its Affiliates (as
defined), becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act) of more than (A) 35% of the
total voting power of the then outstanding voting stock of
PRIMEDIA and (B) the total voting power of the then
outstanding voting stock of PRIMEDIA beneficially owned by
KKR and its Affiliates or (ii) during any period of two
consecutive calendar years, individuals who at the beginning
of such period constituted PRIMEDIA's Board of Directors
(together with any new directors whose election by
PRIMEDIA's Board of Directors or whose nomination for
election by PRIMEDIA's shareholders was approved by a vote
of at least two-thirds of the Directors then still in office
who either were Directors at the beginning of such period or
whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of
the directors then in office.
Indebtedness under the Credit Facilities will automatically
accelerate upon the earlier of 30 days from the Change of
Control and the date payment is required to be made in
respect of any tendered Notes. At December 31, 1997, after
giving pro forma effect to the Offerings, the KKR Fund
Investment and the application of the net proceeds therefrom
(a portion of which was used to redeem the Series B
Preferred Stock), the aggregate principal amount of
indebtedness under the Credit Facilities would have been
approximately $707.7 million. See "Description of Certain
Indebtedness." If the Company has insufficient funds with
which to repay the indebtedness under the Credit Facilities
and to repurchase the Notes, the holders of the Notes will
have a claim on the funds of the Company equal to that of
the lenders under the Credit Facilities.
Neither the trustee for the Notes, the Company nor its Board
of Directors will be able to waive the Change of Control
obligation of the Company. In the case of a leveraged buyout
in which KKR and its Affiliates maintain or increase their
voting control of the Company, such leveraged buyout will
not result in a "Change of Control."
</TABLE>
11
<PAGE>
<TABLE>
<S> <C>
Guarantees................. The Notes are fully and unconditionally guaranteed on a senior
basis, jointly and severally, by each of the domestic
Restricted Subsidiaries other than Partially Owned
Restricted Subsidiaries (as defined), which guarantees rank
PARI PASSU with such subsidiaries' guarantees of PRIMEDIA's
obligations under the Credit Facilities and the Outstanding
Notes. In the event that any guarantee would constitute or
result in a violation of any applicable fraudulent
conveyance or similar law of any relevant jurisdiction, the
liability of any guarantor under such guarantee would be
reduced to the maximum amount permissible under the
applicable fraudulent conveyance or similar law.
Ranking.................... The Notes rank PARI PASSU with the obligations of PRIMEDIA
under the Credit Facilities and the Outstanding Notes. At
December 31, 1997, after giving pro forma effect to the
Offerings, the KKR Fund Investment and the application of
the net proceeds therefrom (a portion of which was used to
redeem the Series B Preferred Stock), the aggregate
principal amount of indebtedness under the Credit Facilities
would have been approximately $707.7 million and under the
Senior Notes would have been $647.5 million. None of such
indebtedness will be secured. The Notes will rank senior in
right of payment to all future subordinated indebtedness of
the Company. Such subordinated indebtedness will be limited
to the Class D Subordinated Debentures, the Class F
Subordinated Debentures and the 8 5/8% Subordinated
Debentures, if and when the same are issued at the option of
PRIMEDIA in exchange for the Series D Preferred Stock, the
Series F Preferred Stock and the Series G Preferred Stock
respectively, and additional subordinated indebtedness that
is permitted to be incurred by the terms of the Credit
Facilities, the Senior Note Indentures and such other
indebtedness as PRIMEDIA may have outstanding from time to
time. As of the date of this Prospectus, the Company has no
subordinated indebtedness outstanding. The Company has no
current intention to issue subordinated indebtedness. As
used herein the statement that certain indebtedness ranks
PARI PASSU with other indebtedness means only that in the
event of the bankruptcy or insolvency of the debtor, the
holders of such certain indebtedness and such other
indebtedness will have an equal claim on money or other
property of the debtor available for distribution.
Certain Covenants.......... The Note Indenture pursuant to which the Old Notes have been
issued and the New Notes will be issued contains certain
covenants which, among other things, limit the ability of
the Company to (i) incur indebtedness, (ii) create liens,
(iii) sell assets, (iv) engage in mergers, consolidations or
transactions with affiliates, (v) make investments in
certain subsidiaries, (vi) pay dividends on or repurchase or
retire capital stock and (vii) make certain other Restricted
Payments (as defined). See "Description of Notes--Certain
Covenants."
Sinking Fund............... There will be no sinking fund payments for the Notes.
THE PREFERRED STOCK
Dividends.................. Cumulative at $8.625 per annum from the date of issuance and
payable quarterly in cash on January 1, April 1, July 1 and
October 1 of each year, commencing July 1, 1998. The Company
presently intends to
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
pay such dividends, even in the absence of earnings and
profits, through cash flow generated from operations.
Dividends on the Old Preferred Stock have accrued and are
cumulative from the original date of issuance thereof to the
date on which shares of Old Preferred Stock are surrendered
and shall be paid on the first dividend payment date after
the date the New Preferred Stock is exchanged for the Old
Preferred Stock. Dividends on the New Preferred Stock will
accrue and be cumulative from the date the New Preferred
Stock is exchanged for the Old Preferred Stock. For federal
income tax purposes, distributions with respect to the
Preferred Stock will not qualify as dividends and will be
treated as a return of capital until the Company has
earnings and profits as determined under applicable federal
income tax principles. See "Certain Federal Income Tax
Considerations."
Liquidation Preference..... $100 per share, plus accrued and unpaid dividends.
Voting..................... Holders of the Preferred Stock have no general voting rights
except as provided by law and as provided in the Certificate
of Designations therefor. Upon the failure of the Company to
pay dividends in cash for more than six consecutive
quarters, holders of a majority of the outstanding shares of
Series D Preferred Stock, Series F Preferred Stock and
Preferred Stock voting together as a class, will be entitled
to elect two members to the Board of Directors of PRIMEDIA.
See "Description of Preferred Stock and 8 5/8% Subordinated
Debentures--The Preferred Stock--Voting Rights."
Mandatory Redemption....... PRIMEDIA is required to redeem the Preferred Stock on April 1,
2010 at a redemption price equal to the liquidation preference
plus accrued and unpaid dividends to the redemption date.
Optional Redemption........ At any time on or after April 1, 2003, the Preferred Stock is
redeemable, at the option of PRIMEDIA, at the redemption
prices set forth herein, plus accrued and unpaid dividends
to the redemption date. See "Description of Preferred Stock
and 8 5/8% Subordinated Debentures--The Preferred
Stock--Optional Redemption."
Optional Redemption Upon
Public Equity Offering... At any time prior to April 1, 2001, PRIMEDIA may, at its
option, redeem, in whole or in part, up to $125.0 million of
the aggregate liquidation preference of the Preferred Stock
at a price per share of $108.625, plus accrued and unpaid
dividends to the redemption date, with the net proceeds of
one or more Public Equity Offerings (as defined), PROVIDED
such redemption occurs within 180 days of such Public Equity
Offering. See "Description of Preferred Stock and 8 5/8%
Subordinated Debentures--The Preferred Stock--Optional
Redemption."
Ranking.................... The Preferred Stock ranks PARI PASSU with the Series D
Preferred Stock, the Series F Preferred Stock and any Future
Parity Securities (as defined) and senior to all Junior
Securities (as defined). As of December 31, 1997, 2,000,000
shares of Series D Preferred Stock ($200,000,000 aggregate
liquidation preference) were issued and outstanding and
1,250,000 shares of Series E Preferred Stock
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
($125,000,000 aggregate liquidation preference) were issued
and outstanding (all of which shares of Series E Preferred
Stock subsequently were exchanged for shares of Series F
Preferred Stock pursuant to the Series E Exchange Offer).
The Company has agreed in the Certificate of Designations
relating to the Preferred Stock not to issue any other
preferred stock which by its terms is senior to the Series D
Preferred Stock, Series F Preferred Stock and Preferred
Stock. See "Description of Preferred Stock and 8 5/8%
Subordinated Debentures--The Preferred Stock--Limitation on
Issuance of Senior Preferred Stock" and "Description of
Capital Stock of the Company."
Exchange Feature........... The Preferred Stock is exchangeable on any scheduled dividend
payment date into 8 5/8% Subordinated Debentures, in whole but
not in part, at the option of PRIMEDIA. See "Description of
Preferred Stock and 8 5/8% Subordinated Debentures--The
Preferred Stock-- Exchange."
8 5/8% SUBORDINATED
DEBENTURES
Maturity Date.............. April 1, 2010.
Interest Payment Dates..... January 1, April 1, July 1 and October 1 of each year,
commencing with the first of such dates to occur after the
issuance of the 8 5/8% Subordinated Debentures.
Optional Redemption........ On or after April 1, 2003, the 8 5/8% Subordinated Debentures
are redeemable, in whole or in part, at the option of
PRIMEDIA, at the redemption prices set forth herein, plus
accrued and unpaid interest to the redemption date. See
"Description of Preferred Stock and 8 5/8% Subordinated
Debentures--The Subordinated Debentures-- Optional
Redemption."
Optional Redemption Upon
Public Equity Offering... At any time prior to April 1, 2001, PRIMEDIA may, at its
option, redeem, in whole or in part, up to $125.0 million of
the aggregate principal amount of the 8 5/8% Subordinated
Debentures at 108.625% of their principal amount, plus
accrued and unpaid interest to the redemption date with the
net proceeds of one or more Public Equity Offerings,
PROVIDED such redemption occurs within 180 days of such
Public Equity Offering. See "Description of Preferred Stock
and 8 5/8% Subordinated Debentures--The 8 5/8% Subordinated
Debentures--Optional Redemption."
Change of Control.......... In the event of a Change of Control (i) each holder of the
8 5/8% Subordinated Debentures will have the right to require
PRIMEDIA to repurchase such holder's 8 5/8% Subordinated
Debentures at a purchase price equal to 101% of the
principal amount thereof plus accrued and unpaid interest to
the repurchase date and (ii) PRIMEDIA will have the option
to redeem the 8 5/8% Subordinated Debentures, in whole or in
part, at the redemption prices set forth herein, plus
accrued and unpaid interest to the redemption date. The
redemption prices for optional redemptions in the event of a
Change of Control will in all cases be equal to or
</TABLE>
14
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<TABLE>
<S> <C>
greater than this repurchase price. Notwithstanding the
foregoing, PRIMEDIA shall not be required to make any such
repurchase unless PRIMEDIA shall have either repaid all
outstanding Senior Indebtedness (as defined) or obtained the
requisite consents, if any, under all agreements governing
all such outstanding Senior Indebtedness to permit the
repurchase of the 8 5/8% Subordinated Debentures. Because of
the substantial indebtedness of the Company, there can be no
assurance that PRIMEDIA will have sufficient funds to
repurchase the 8 5/8% Subordinated Debentures in the event
of a Change of Control. See "Description of Preferred Stock
and 8 5/8% Subordinated Debentures--The 8 5/8% Subordinated
Debentures--Change of Control."
Ranking.................... The 8 5/8% Subordinated Debentures (i) will rank PARI PASSU
with the Class D Subordinated Debentures and Class F
Subordinated Debentures, (ii) will be subordinate to all
existing and future Senior Indebtedness of PRIMEDIA and
(iii) effectively will be subordinate to the creditors,
including trade creditors, of PRIMEDIA's subsidiaries. As of
December 31, 1997, the amount of pro forma senior
indebtedness (including indebtedness and other current and
non-current liabilities of PRIMEDIA and its subsidiaries),
was approximately $1,908.7 million. None of such
indebtedness is secured.
Certain Covenants.......... The 8 5/8% Debenture Indenture contains certain covenants
which, among other things, limit the ability of the Company
(i) to engage in certain mergers, consolidations and sales
of assets, (ii) to engage in certain transactions with
Affiliates (as defined) and (iii) to pay dividends on or
retire or repurchase capital stock.
</TABLE>
USE OF PROCEEDS
There will be no proceeds to PRIMEDIA from the Exchange Offers.
RISK FACTORS
Holders of the Old Notes and the Old Preferred Stock should take into
account the specific considerations set forth under "Risk Factors" as well as
the other information set forth in this Prospectus before tendering Old Notes
and shares of Old Preferred Stock in exchange for New Notes and shares of New
Preferred Stock.
15
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following tables present summary consolidated financial data derived
from the Company's audited consolidated financial statements for the years ended
December 31, 1997, 1996 and 1995. In addition, the following tables present
summary consolidated financial data relating to the Company's unaudited pro
forma consolidated operating results for the year ended December 31, 1997 and
the Company's unaudited pro forma consolidated balance sheet at December 31,
1997.
The summary unaudited pro forma consolidated operating data for the year
ended December 31, 1997 give effect to the following transactions and events as
if they had occurred on January 1, 1997: (i) the offering of the Series E
Preferred Stock consummated on September 26, 1997 (the "Series E Offering") and
the redemption of its Senior Preferred Stock with a portion of the proceeds
therefrom (the "Senior Preferred Stock Redemption"), (ii) the offering of the
Old Notes and the Old Preferred Stock (the "Offerings") and the redemption of
the Series B Preferred Stock with a portion of the proceeds therefrom (the
"Series B Preferred Stock Redemption") and (iii) the KKR Fund Investment. The
adjustments to reflect the Series E Offering, the Senior Preferred Stock
Redemption, the Offerings, the Series B Preferred Stock Redemption and the KKR
Fund Investment are hereinafter referred to as the "Pro Forma Adjustments." The
summary unaudited pro forma consolidated balance sheet data at December 31, 1997
gives effect to the Offerings, the Series B Preferred Stock Redemption and the
KKR Fund Investment as if they had occurred on December 31, 1997.
The summary unaudited pro forma consolidated financial data does not purport
to represent what the Company's consolidated results of operations or financial
condition would actually have been if the transactions that give rise to the Pro
Forma Adjustments had in fact occurred on the dates assumed in making such
adjustments and do not purport to project the consolidated results of operations
or financial condition of the Company for any future date or period. The
following information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations," the
Company's historical consolidated financial statements and the notes thereto and
the unaudited pro forma consolidated financial data and the notes thereto
included elsewhere in this Prospectus.
16
<PAGE>
PRIMEDIA INC.
AND SUBSIDIARIES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
<S> <C> <C> <C> <C>
1997 1997 1996 1995
PRO FORMA(1) ACTUAL ACTUAL ACTUAL
------------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
OPERATING DATA:
Sales, net............................................... $ 1,487,595 $ 1,487,595 $ 1,374,449 $ 1,046,329
Depreciation and amortization............................ 184,165 184,165 190,702 192,276
Other charges(2)......................................... 138,640 138,640 -- 50,114
Operating income (loss).................................. (20,793) (20,793) 85,901 (26,275)
Interest expense......................................... 118,767 136,625 124,601 105,837
Income tax benefit(3).................................... 1,685 1,685 53,300 59,600
Income (loss) before extraordinary charge................ (140,159) (157,439) 17,597 (75,435)
Extraordinary charge--extinguishment of debt(4).......... -- (15,401) (9,553) --
Net income (loss)........................................ (140,159) (172,840) 8,044 (75,435)
Preferred stock dividends(5)............................. 59,591 65,073 43,526 28,978
Loss applicable to common shareholders................... (199,750) (237,913) (35,482) (104,413)
Basic and diluted loss applicable to common shareholders
per common share(6):
Loss before extraordinary charge....................... $ (1.37) $ (1.72) $ (.20) $ (.92)
------------- ----------- ----------- -----------
------------- ----------- ----------- -----------
Net loss............................................... $ (1.37) $ (1.84) $ (.27) $ (.92)
------------- ----------- ----------- -----------
------------- ----------- ----------- -----------
Basic and diluted common shares outstanding(6)......... 145,971,567 129,304,900 128,781,518 113,218,711
------------- ----------- ----------- -----------
------------- ----------- ----------- -----------
OTHER DATA:
EBITDA(7)................................................ $ 302,012 $ 302,012 $ 276,603 $ 216,115
Capital expenditures, net................................ 31,108 31,108 28,790 23,414
Net cash provided by operating activities................ 143,362 125,360 150,192 64,062
Net cash used in investing activities.................... (185,725) (185,725) (721,709) (318,712)
Net cash provided by financing activities................ 38,866 46,688 580,946 263,644
Deficiency of earnings to fixed charges(8)(9)............ (141,844) (159,124) (35,703) (135,035)
Deficiency of earnings to fixed charges and preferred
stock dividends(8)(9).................................. (201,435) (224,197) (79,229) (164,013)
Ratio of EBITDA to interest expense...................... 2.5x 2.2x 2.2x 2.0x
Ratio of EBITDA to interest expense and dividends on
preferred stock........................................ 1.7x 1.5x 1.6x 1.6x
Leverage ratio(10)....................................... 4.6x 5.4x 5.4x 4.9x
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997
-------------------------
<S> <C> <C>
PRO FORMA(1) ACTUAL
-------------- ---------
(DOLLARS IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents............................................................. $ 22,978 $ 22,978
Working capital deficiency(11)........................................................ (143,192) (146,245)
Intangible assets, net................................................................ 1,772,053 1,772,053
Total assets.......................................................................... 2,491,765 2,485,990
Long-term debt(12).................................................................... 1,394,739 1,656,541
Exchangeable preferred stock.......................................................... 554,374 470,280
Common stock subject to redemption.................................................... 4,376 4,376
Total shareholders' equity (deficiency)............................................... 24,313 (162,223)
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
17
<PAGE>
(1) The 1997 summary pro forma consolidated operating data reflects the
reduction in interest expense, increase in amortization of deferred
financing costs and adjustments to preferred stock dividends as a result of
the Series E Offering, Senior Preferred Stock Redemption, the Offerings,
Series B Preferred Stock Redemption and the KKR Fund Investment as well as
the elimination of the extraordinary charge. The 1997 summary pro forma
consolidated balance sheet data reflects the net reduction in long-term debt
and accrued expenses and the net increases in exchangeable preferred stock
and deferred financing costs associated with the Offerings, the Series B
Preferred Stock Redemption and the KKR Fund Investment. Amounts repaid under
the Credit Facilities may be reborrowed for general corporate purposes,
including acquisitions. The increase in total shareholders' equity reflects
the KKR Fund Investment offset by the difference between the carrying value
and redemption value of the Series B Preferred Stock and the payment of a
premium on the redemption of the Series B Preferred Stock.
(2) Represents net provision in 1997 and 1995 for loss on the sales of
businesses and provision in 1995 for restructuring and other costs.
(3) At December 31, 1997, 1996 and 1995, management of the Company reviewed
recent operating results for the years then ended and projected future
operating results for the years through December 31, 2003. At December 31,
1997 the Company's management determined that no adjustment to net deferred
income tax assets was required. For the year ended December 31, 1997, the
Company recorded an income tax carryback claim of $1,685. At December 31,
1997, the Company had net operating loss carryforwards ("NOLs") of
approximately $749,000 which will be available to reduce future taxable
income. In addition to the NOLs, management estimates that approximately
$864,000 of unamortized goodwill and other intangible assets will be
available as deductions from any future taxable income. At December 31, 1996
and 1995, management had determined that a portion of the net deferred
income tax assets would likely be realized. Accordingly, the Company
recorded an income tax benefit of $53,300 in 1996 and $59,600 in 1995.
(4) Represents the write-off of unamortized deferred financing costs and
premiums paid on the redemption of the 10 5/8% Senior Notes for the years
ended December 31, 1997 and 1996.
(5) In 1997, the Company recorded a preferred stock dividend accrual in the
amount of $9,517. Of the total dividend accrual recorded in 1997, the
amounts that relate to prior periods were immaterial.
(6) Basic and diluted loss per common share, as well as the basic and diluted
common shares outstanding, were computed as described in Note 17 of the
notes to the consolidated financial statements included elsewhere in this
Prospectus. The pro forma basic and diluted loss per common share as well as
the pro forma basic and diluted common shares outstanding, were computed as
described in Note 4 of the notes to the Unaudited Pro Forma Consolidated
Financial Data for the year ended December 31, 1997 included elsewhere in
the Prospectus. Previously reported loss per share amounts have been
restated as required by the adoption of a new accounting pronouncement.
(7) Earnings before interest, taxes, depreciation, amortization and provision
for one-time charges ("EBITDA") is not intended to represent cash flow from
operations and should not be considered as an alternative to net income
(loss) as an indicator of the Company's operating performance or to cash
flows as a measure of liquidity. The Company believes EBITDA is a standard
measure commonly reported and widely used by analysts, investors and other
interested parties in the media industry. Accordingly, this information has
been disclosed herein to permit a more complete comparative analysis of the
Company's operating performance relative to other companies in its industry.
This measure may not be comparable to similarly titled measures used by
other companies.
(8) The deficiency of earnings to fixed charges consists of income (loss) before
income taxes and extraordinary charge plus fixed charges. Fixed charges
consist of interest expense on long-term debt and other non-current
obligations (including current maturities of long-term debt), amortization
of deferred financing costs and that portion of operating rental expense
that represents interest.
(9) Income (loss) before income taxes and extraordinary charge includes non-cash
charges for depreciation and amortization of property and equipment,
prepublication costs, intangible assets, excess of purchase price over net
assets acquired and deferred financing costs, net provision for loss on the
sales of businesses, restructuring and other costs and non-cash interest
expense on an acquisition obligation, distribution advance and other current
liability. Pro forma non-cash charges totaled $327,941 for the year ended
December 31, 1997. Actual non-cash charges totaled $327,219, $192,895 and
$241,536 for the years ended December 31, 1997, 1996 and 1995, respectively.
On a pro forma basis and after eliminating such non-cash charges, earnings
would have exceeded fixed charges and fixed charges plus cash preferred
stock dividends by $186,097 and $126,506 for the year ended December 31,
1997. Adjusted to eliminate non-cash charges, actual earnings would have
exceeded fixed charges and fixed charges plus cash preferred stock dividends
by approximately $168,095 and $107,473, $157,192 and $130,248 and $106,501
and $95,001 for the years ended December 31, 1997, 1996 and 1995,
respectively.
(10) The leverage ratio on an actual and pro forma basis represents the ratio of
consolidated debt (which includes total indebtedness, deferred purchase
price liabilities, outstanding letters of credit, capitalized lease
obligations and the principal amount outstanding under the acquisition
obligation) to EBITDA, as defined in the Company's credit agreements, for
the twelve months ended December 31, 1997, 1996 and 1995.
(11) Includes current maturities of long-term debt and assets held for sale as
of December 31, 1997.
(12) Excludes current maturities of long-term debt.
18
<PAGE>
GLOSSARY OF CERTAIN DEFINED TERMS
<TABLE>
<S> <C>
8 1/2% Senior Notes.................... The $300,000,000 principal amount of 8 1/2% Senior
Notes due 2006 issued by PRIMEDIA.
8 5/8% Debenture Indenture............. The Indenture governing the Old Subordinated
Debentures and, upon exchange, the New
Subordinated Debentures, if and when issued.
8 5/8% Subordinated Debentures......... The collective reference to the Old Subordinated
Debentures and the New Subordinated Debentures.
10 1/4% Senior Notes................... The $100,000,000 principal amount of 10 1/4% Senior
Notes due 2004 issued by PRIMEDIA.
Bank Credit Facilities................. The $1.5 billion credit facilities with The Chase
Manhattan Bank, The Bank of New York, Bankers
Trust Company and The Bank of Nova Scotia, as
agents.
Class D Debenture Indenture............ The Indenture governing the Class D Subordinated
Debentures, if and when issued.
Class D Subordinated Debentures........ The 10% Subordinated Exchange Debentures due 2008,
issuable upon exchange of the Series D Preferred
Stock.
Class F Debenture Indenture............ The Indenture governing the Class F Subordinated
Debentures, if and when issued.
Class F Subordinated Debentures........ The 9.20% Subordinated Exchange Debentures due
2009, issuable upon exchange of the Series F
Preferred Stock.
Common Stock........................... The common stock, par value $.01 per share, of
PRIMEDIA.
Credit Facilities...................... The collective reference to the Bank Credit
Facilities and the New Credit Facility.
Debenture Exchange Offer............... The offer by PRIMEDIA to holders of Old
Subordinated Debentures to exchange the same for
the New Subordinated Debentures.
New Credit Facility.................... The $150 million credit facility with The Chase
Manhattan Bank, The Bank of New York, Bankers Trust
Company and The Bank of Nova Scotia, as agents.
New Notes.............................. The $250,000,000 principal amount of 7 5/8% Senior
Notes due 2008 being exchanged hereby for the Old
Notes.
New Preferred Stock.................... The 2,500,000 shares of Series H Exchangeable
Preferred Stock due 2010, par value $.01 per share,
being exchanged hereby for the Old Preferred
Stock.
New Subordinated Debentures............ The 8 5/8% Class H Subordinated Exchange Debentures
due 2010 issuable upon exchange of the New
Preferred Stock.
</TABLE>
19
<PAGE>
<TABLE>
<S> <C>
Note Indenture......................... The Indenture, dated as of February 17, 1998,
governing the Old Notes and, upon exchange, the New
Notes, between PRIMEDIA and The Bank of New York,
as trustee.
Note Exchange Offer.................... The offer by PRIMEDIA to holders of the Old Notes
to exchange the same for New Notes.
Notes.................................. The collective reference to the Old Notes and the
New Notes.
Old Notes.............................. The $250,000,000 principal amount of outstanding
7 5/8% Senior Notes due 2008 issued by PRIMEDIA.
Old Preferred Stock.................... The 2,500,000 shares of outstanding $8.625 Series G
Exchangeable Preferred Stock Redeemable 2009, par
value $.01 per share, liquidation preference $100
per share.
Old Subordinated Debentures............ The 8 5/8% Subordinated Exchange Debentures due
2010, issuable upon exchange of the Old Preferred
Stock.
Outstanding Note Indentures............ The collective reference to the indentures
governing the Outstanding Notes.
Outstanding Notes...................... The collective reference to the 10 1/4% Senior
Notes and the 8 1/2% Senior Notes.
Preferred Stock........................ The collective reference to the Old Preferred Stock
and the New Preferred Stock.
Preferred Stock Exchange Offer......... The offer by PRIMEDIA to holders of the Old
Preferred Stock to exchange the same for the New
Preferred Stock.
Securities............................. The collective reference to the New Notes, the New
Preferred Stock and the New Subordinated
Debentures, if and when issued.
Senior Note Indentures................. The collective reference to the indentures
governing the Senior Notes.
Senior Notes........................... The collective reference to the Outstanding Notes
and the Notes.
Senior Preferred Stock................. The 4,000,000 Shares of $2.875 Senior Exchangeable
Preferred Stock, par value $.01 per share,
liquidation preference $25.00 per share which
were redeemed with the net proceeds of the Series
E Offering.
Series B Preferred Stock............... The 1,576,036 Shares of $11.625 Series B
Exchangeable Preferred Stock Redeemable 2005, par
value $.01 per share, liquidation preference
$100.00 per share, plus dividends which are paid
in kind from time to time thereon, which were
redeemed with a portion of the net proceeds of
the Offerings.
</TABLE>
20
<PAGE>
<TABLE>
<S> <C>
Series D Preferred Stock............... The 2,000,000 Shares of $10.000 Series D
Exchangeable Preferred Stock Redeemable 2008, par
value $.01 per share, liquidation preference
$100.00 per share.
Series F Preferred Stock............... The 1,250,000 Shares of $9.20 Series F Exchangeable
Preferred Stock Redeemable 2009, par value $.01
per share, liquidation preference $100.00 per
share.
Subordinated Debenture Indentures...... The collective reference to the Class D Debenture
Indenture, the Class F Debenture Indenture and
the 8 5/8% Debenture Indenture.
Subordinated Debentures................ The collective reference to the Class D
Subordinated Debentures, the Class F Subordinated
Debentures and the 8 5/8% Subordinated
Debentures.
</TABLE>
21
<PAGE>
RISK FACTORS
HOLDERS OF OLD NOTES AND OLD PREFERRED STOCK SHOULD TAKE INTO ACCOUNT THE
CONSIDERATIONS SET FORTH BELOW AS WELL AS THE OTHER INFORMATION SET FORTH IN
THIS PROSPECTUS BEFORE TENDERING THEIR OLD NOTES AND SHARES OF OLD PREFERRED
STOCK IN EXCHANGE FOR NEW NOTES AND SHARES OF NEW PREFERRED STOCK OFFERED
HEREBY. THE RISK FACTORS SET FORTH BELOW ARE GENERALLY APPLICABLE TO THE OLD
NOTES AND OLD PREFERRED STOCK AS WELL AS THE NEW NOTES AND NEW PREFERRED STOCK.
CERTAIN INFORMATION INCLUDED IN OR INCORPORATED BY REFERENCE INTO THIS
PROSPECTUS UNDER THIS SECTION AND UNDER THE CAPTIONS "SUMMARY--GROWTH STRATEGY,"
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS," "BUSINESS" AND ELSEWHERE INCLUDE "FORWARD-LOOKING STATEMENTS"
WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, AND
IS SUBJECT TO THE SAFE HARBOR CREATED BY THAT ACT. THERE ARE SEVERAL IMPORTANT
FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
ANTICIPATED BY THE FORWARD-LOOKING STATEMENTS CONTAINED IN SUCH DISCUSSIONS.
ADDITIONAL INFORMATION ON THE RISK FACTORS WHICH COULD AFFECT THE COMPANY'S
FINANCIAL RESULTS IS INCLUDED IN THIS PROSPECTUS AND IN OTHER DOCUMENTS
INCORPORATED BY REFERENCE HEREIN.
SUBSTANTIAL INDEBTEDNESS
The Company has substantial indebtedness and intends to incur additional
indebtedness under the Credit Facilities to finance acquisitions. At December
31, 1997, the Company had a ratio of consolidated debt to total equity
(including all preferred stock and Common Stock subject to redemption) of 5.3 to
1. At December 31, 1997, on a pro forma basis after giving effect to the
Offerings, the KKR Fund Investment and the application of the net proceeds
therefrom, the Company would have had a ratio of consolidated debt to total
equity (including all preferred stock and Common Stock subject to redemption) of
2.4 to 1. See "Capitalization" and "Unaudited Pro Forma Consolidated Financial
Data." The indebtedness of the Company requires a substantial portion of the
Company's cash flow to be dedicated to the payment of principal and interest on
indebtedness, thereby reducing funds available for capital expenditures and
future business opportunities. For the fiscal year ended December 31, 1997,
there were no scheduled maturities on outstanding indebtedness and the Company
made cash interest payments of $142.4 million.
At December 31, 1997, borrowings under the Credit Facilities, on a pro forma
basis after giving effect to the Offerings, the KKR Fund Investment and the
application of the net proceeds therefrom, were approximately $707.7 million.
Such borrowings bear interest at floating rates based on the federal funds rate,
the prime lending rate or LIBOR. Increases in interest rates on indebtedness
under the Credit Facilities would increase the Company's interest payment
obligations and could have an adverse effect on the Company. The weighted
average interest rate on the Credit Facilities was 7.11% for the year ended
December 31, 1997. As of December 31, 1997, the weighted average interest rate
on the Credit Facilities was 7.05%.
RESTRICTIVE COVENANTS
The agreements governing the Company's indebtedness impose certain operating
and financial restrictions on the Company. Such restrictions prohibit or limit,
among other things, the ability of the Company to change the nature of its
business, incur additional indebtedness, create liens on its assets, sell
assets, engage in mergers, consolidations or transactions with its affiliates,
make investments in or loans to certain subsidiaries or make guarantees or
certain restricted payments. The Company is restricted from declaring or making
dividend payments on its common or preferred stock. Under the Company's most
restrictive debt covenants, the Company must maintain a minimum interest
coverage ratio of 1.8 to 1 and maintain a minimum fixed charge coverage ratio of
1.05 to 1. For the fiscal year ended December 31, 1997, the Company's interest
coverage ratio and fixed charge coverage ratio was 2.24 and 1.45, respectively.
These restrictions, in combination with the leveraged nature of the Company,
could limit the ability of the Company to effect future acquisitions or
financings or otherwise restrict corporate activities. Failure to comply with
the terms of such restrictions could result in the acceleration of the
indebtedness governed by
22
<PAGE>
such agreements. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
DEFICIENCIES OF EARNINGS TO COVER FIXED CHARGES AND FIXED CHARGES PLUS PREFERRED
STOCK DIVIDENDS
The Company's earnings are inadequate to cover fixed charges and fixed
charges plus preferred stock dividends on a pro forma basis by $141.8 million
and $201.4 million, respectively, for the year ended December 31, 1997. Fixed
charges consist of interest expense on long-term debt and other non-current
obligations (including current maturities on long-term debt), amortization of
deferred financing costs and that portion of operating rental expense that
represents interest. Such earnings have been reduced by pro forma non-cash
charges (including depreciation, amortization, provision for loss on the sales
of businesses and non-cash interest expense) of approximately $327.9 million for
the year ended December 31, 1997. Adjusted to eliminate these pro forma non-cash
charges, earnings would have exceeded fixed charges and fixed charges plus cash
preferred stock dividends, on a pro forma basis, by approximately $186.1 million
and $126.5 million, respectively, for the year ended December 31, 1997. Based on
historical evidence of the Company's earnings exceeding fixed charges and fixed
charges plus cash preferred dividends after eliminating non-cash charges, the
Company believes it will continue to generate sufficient cash flow to service
its interest and dividend payments. Additionally, the Company has historically
had and continues to have access to capital markets to refinance and extend
maturities on its debt and preferred stock. However, there can be no assurance
that the Company will have access to capital markets when such debt and
preferred stock mature. Based on current outstanding borrowings under the Credit
Facilities and outstanding indebtedness under the Senior Notes, there will be no
required payments until the year 2000. At that time, the first principal payment
is scheduled at $100 million and principal payments will not exceed $300 million
until the year 2006.
ACCELERATION OF CREDIT FACILITIES AND SENIOR NOTES
In the event that the Company is unable to generate cash flow sufficient to
meet required payments or does not make required payments of principal and
interest on its indebtedness under the Credit Facilities or is otherwise in
default with respect to the covenants thereunder or under the Senior Note
Indentures or the Subordinated Debenture Indentures, if entered into, the
holders of indebtedness under the Credit Facilities could elect to declare all
of the funds borrowed pursuant thereto to be due and payable together with
accrued and unpaid interest and to terminate their commitments under the Credit
Facilities. Neither the Credit Facilities nor the Senior Notes are secured by
the pledge of assets, subsidiary securities or any other security. The final
stated maturity of indebtedness under the Credit Facilities and the Senior
Notes, and Class D Subordinated Debentures, if issued, and Class F Subordinated
Debentures, if issued, is earlier than the final stated maturity of the
Preferred Stock. Any default under the documents governing the indebtedness of
the Company could have a significant adverse effect on the market value of the
Preferred Stock.
LOSSES AFTER AMORTIZATION OF INTANGIBLES AND EXCESS PURCHASE PRICE
The Company had a loss applicable to common shareholders for the years ended
December 31, 1997, 1996 and 1995 of $237.9 million, $35.5 million and $104.4
million, respectively. Included in the loss for such periods are the
amortization of intangible assets and excess of purchase price over net assets
acquired and other in the aggregate amounts of $146.8 million, $152.5 million
and $166.5 million for 1997, 1996 and 1995, respectively.
There can be no assurance that the Company will have net income applicable
to common shareholders in the future.
23
<PAGE>
FRAUDULENT CONVEYANCE CONSIDERATIONS
As of December 31, 1997, all of the assets of the Company were held by
PRIMEDIA's subsidiaries and for the year ended December 31, 1997, all of the
Company's operating revenues were derived from operations of PRIMEDIA's
subsidiaries. Therefore, PRIMEDIA's ability to make payments when due to holders
of the Notes is dependent upon the receipt of sufficient funds from its
subsidiaries. PRIMEDIA's obligations under the Notes are fully and
unconditionally guaranteed on a joint and several basis by its domestic
Restricted Subsidiaries other than its Partially Owned Restricted Subsidiaries.
If a Guarantee (as defined) is set aside or "avoided" under applicable
provisions of the federal bankruptcy law or comparable provisions of state
fraudulent transfer law, an event of default with respect to debt under the
Credit Facilities would occur, which could result in acceleration of such debt.
In addition, holders of the Notes would cease to have any claim in respect of a
Guarantor (as defined) and would be creditors solely of PRIMEDIA and any
Guarantor whose Guarantee was not avoided or held unenforceable. In such event,
a court might require that any prior payments in respect of such debt (or an
equivalent amount) be returned to or for the benefit of existing or future
creditors of such Guarantor. There can be no assurance that, after providing for
all prior claims, there would be sufficient assets to satisfy the claims of the
holders of the Notes relating to any voided portions of any of the Guarantees.
Under applicable federal bankruptcy law or comparable provisions of state
fraudulent transfer law, a Guarantee could be avoided or claims in respect of
any such Guarantee could be subordinated to all other debts of the relevant
Guarantor if such Guarantor at the time it incurred obligations (whether at the
time such Guarantee was entered into or at the time guaranteed indebtedness is
incurred) under such Guarantee (a)(i) was or is insolvent or rendered insolvent
by reason of such incurrence or (ii) was or is engaged in a business or
transaction for which the assets remaining with such Guarantor constituted
unreasonably small capital or (iii) intended or intends to incur, or believed or
believes that it would incur, debts beyond its ability to pay such debts as they
mature, and (b) any such Guarantor received or receives less than reasonably
equivalent value or fair consideration in connection with the making of such
Guarantee.
The measures of insolvency for purposes of the foregoing considerations will
vary depending upon the law applied in any such proceeding. Generally, however,
a Guarantor would be considered insolvent if the sum of its debts, including
contingent liabilities, were greater than the fair saleable value of all of its
assets at a fair valuation or if the present fair saleable value if its assets
were less than the amount that would be required to pay its probable liability
on its existing debts, including contingent liabilities, as they become absolute
and mature.
The Company believes that none of the Guarantors will be, at the time the
Guarantees are given, insolvent under the forgoing standards, that none of the
Guarantors is engaged in a business or transaction for which its remaining
assets constituted unreasonably small capital and that none of the Guarantors
intended or intends or will intend to incur debts beyond its ability to pay such
debts as they mature. There can be no assurance, however, that a court passing
on such questions would agree with the Company.
SUBORDINATION OF PREFERRED STOCK AND 8 5/8% SUBORDINATED DEBENTURES; HOLDING
COMPANY STRUCTURE
The Preferred Stock is junior in right of payment to all existing and future
liabilities and obligations (whether or not for borrowed money) of PRIMEDIA
(other than Common Stock, Series D Preferred Stock, Series F Preferred Stock and
any preferred stock of PRIMEDIA which by its terms is on parity with or junior
to the Preferred Stock).
The 8 5/8% Subordinated Debentures will rank PARI PASSU with the Class D
Subordinated Debentures and Class F Subordinated Debentures, if any, but will be
subordinated to all existing and future senior indebtedness of the Company,
including the Senior Notes and the obligations of the Company under the Credit
Facilities. The 8 5/8% Subordinated Debentures will not be guaranteed by any
subsidiary of the
24
<PAGE>
Company. In addition, the 8 5/8% Subordinated Debentures will be unsecured
obligations of PRIMEDIA. In the event of bankruptcy, liquidation or
reorganization of the Company, the assets of PRIMEDIA will be available to pay
obligations on the 8 5/8% Subordinated Debentures only after all Senior Notes,
obligations under the Credit Facilities and other senior indebtedness of
PRIMEDIA have been paid in full. The 8 5/8% Debenture Indenture will not
prohibit the incurrence by PRIMEDIA of additional indebtedness that is senior to
or PARI PASSU with the 8 5/8% Subordinated Debentures.
The operations of PRIMEDIA are and will be conducted through its
subsidiaries, and, therefore, PRIMEDIA is dependent on the cash flow of its
subsidiaries to meet its obligations. Because the assets of PRIMEDIA are and
will be held by operating subsidiaries, the claims of holders of the Preferred
Stock and the 8 5/8% Subordinated Debentures (which are not guaranteed by the
operating subsidiaries) will be structurally subordinate to all existing and
future liabilities and obligations (whether or not for borrowed money),
including guarantees of indebtedness under the Credit Facilities and Senior Note
Indentures and trade payables and advances of such subsidiaries. The amount of
pro forma senior indebtedness (including indebtedness and other current and
non-current liabilities of PRIMEDIA's subsidiaries) as of December 31, 1997
would have been approximately $1,908.7 million. None of such indebtedness is
secured.
The Notes will not be guaranteed by Partially Owned Restricted Subsidiaries
and will be structurally subordinated to all liabilities and obligations
(whether or not for borrowed money), including trade payables and advances of
such Partially Owned Restricted Subsidiaries. Currently, the Company does not
have any Partially Owned Restricted Subsidiaries.
CONTROL BY KKR
Approximately 78% of the shares of Common Stock (on a fully diluted basis
after giving effect to the KKR Fund Investment) is held by certain investment
partnerships, of which KKR Associates, a New York limited partnership and an
affiliate of KKR, is the general partner (the "Common Stock Partnerships"). KKR
Associates has sole voting and investment power with respect to such shares.
Consequently, KKR Associates and its general partners, four of whom are also
directors of PRIMEDIA, control the Company and have the power to elect all of
its directors and approve any action requiring stockholder approval, including
adopting amendments to PRIMEDIA's Certificate of Incorporation and approving
mergers or sales of all or substantially all of the Company's assets.
EFFECT OF INCREASES IN PAPER AND POSTAGE COSTS
The price of paper is a significant expense of the Company relating to its
print products and direct mail solicitations and began to rise around mid-year
1994 and continued to rise more dramatically in 1995 and early 1996. In mid-1996
paper prices began to fall. In particular, the Company's average purchase price
for paper decreased approximately 19.8% in 1997 over 1996. Paper price increases
may have an adverse effect on the Company's future results but the Company has
in the past been able to implement measures to offset such increases. Postage
for product distribution and direct mail solicitations is also a significant
expense of the Company. The Company uses the U.S. Postal Service for
distribution of many of its products and marketing materials. Postage costs
increase periodically and can be expected to increase in the future. No
assurances can be given that the Company can pass such cost increases through to
its customers. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Impact of Inflation."
LACK OF PUBLIC MARKET
The Notes and the Preferred Stock constitute new issues of securities with
no established trading market. In addition, because the Exchange Offers are not
conditioned upon any minimum number of Old Notes and shares of Old Preferred
Stock being tendered for exchange, the number of New Notes and shares of New
Preferred Stock issued could be quite small, which could have an adverse effect
on the
25
<PAGE>
liquidity of the New Notes and the New Preferred Stock. Also, to the extent that
Old Notes and shares of Old Preferred Stock are tendered and accepted in the
Exchange Offers, a holder's ability to sell untendered Old Notes and shares of
Old Preferred Stock could be adversely affected. Therefore, no assurance can be
given as to the liquidity of the trading market for the Notes and the Preferred
Stock.
CONSEQUENCES OF FAILURE TO TENDER
The Old Notes and shares of Old Preferred Stock which are not exchanged for
New Notes and shares of New Preferred Stock pursuant to the Exchange Offers will
remain restricted securities within the meaning of Rule 144 of the Securities
Act. Accordingly, such Old Notes and shares of Old Preferred Stock may be resold
under limited circumstances, as discussed in "The Exchange Offers--Consequences
of Failure to Tender." The liquidity of the Old Notes and Old Preferred Stock
could be adversely affected by the Exchange Offers. Following consummation of
the Exchange Offers, holders of the Old Notes and Old Preferred Stock will have
no further registration rights under the Registration Rights Agreement.
RISKS RELATING TO A CHANGE OF CONTROL
The agreements governing the Company's indebtedness, including the Note
Indenture and the 8 5/8% Debenture Indenture, contain change of control
provisions which, under certain circumstances, may require the Company to
repurchase such indebtedness upon a change of control. Because of the
substantial indebtedness of the Company, there can be no assurance that the
Company would have sufficient financial resources available to repurchase all of
such indebtedness in the event of a change in control.
USE OF PROCEEDS
There will be no cash proceeds to the Company from the Exchange Offers. The
net proceeds to the Company from the Offerings were approximately $488 million
(after deducting Initial Purchasers' discounts and commissions but before
deducting other expenses of the Offerings).
The Company used approximately $169.2 million of the net proceeds from the
Offerings to redeem all of the outstanding Series B Preferred Stock, having an
aggregate liquidation preference of $157.6 million (including dividends paid in
kind from time to time thereon), at a redemption price of $105.80 per share,
plus accrued and unpaid dividends to the redemption date. The Company used the
remainder of the net proceeds from the Offerings and the net proceeds from the
KKR Fund Investment to repay borrowings outstanding under its Credit Facilities,
which amounts may be reborrowed for general corporate purposes including
acquisitions. Such borrowings under the Credit Facilities were incurred for
general corporate purposes, mature on various dates beginning 1999 through 2004
and bore interest at a weighted average floating rate of 7.05% as of December
31, 1997. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
26
<PAGE>
CAPITALIZATION
The following table sets forth, at December 31, 1997 (i) the actual cash and
cash equivalents and the consolidated capitalization of the Company, and (ii)
the pro forma cash and cash equivalents and the consolidated capitalization of
the Company as adjusted to give effect to the Offerings, the KKR Fund Investment
and the application of the estimated net proceeds therefrom as described under
"Use of Proceeds." The information below should be read in conjunction with the
Company's consolidated financial statements and the notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997
--------------------------
<S> <C> <C>
ACTUAL PRO FORMA
------------ ------------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents............................................................. $ 22,978 $ 22,978
------------ ------------
------------ ------------
Long-term debt:
Borrowings under Credit Facilities.................................................. $ 1,218,101 $ 707,737
10 1/4% Senior Notes due 2004....................................................... 100,000 100,000
8 1/2% Senior Notes due 2006, net................................................... 298,902 298,902
7 5/8% Senior Notes due 2008/New Notes, net(1)...................................... -- 248,562
Acquisition Obligation Payable(2)................................................... 53,871 53,871
------------ ------------
Total indebtedness................................................................ 1,670,874 1,409,072
Less current maturities......................................................... (14,333) (14,333)
------------ ------------
Total long-term debt.............................................................. 1,656,541 1,394,739
$11.625 Series B Exchangeable Preferred Stock......................................... 155,281 --
$10.00 Series D Exchangeable Preferred Stock.......................................... 194,495 194,495
$9.20 Series E Exchangeable Preferred Stock........................................... 120,504 120,504
$8.625 Series G Exchangeable Preferred Stock/New Preferred Stock (3).................. -- 239,375
Common stock subject to redemption(4)................................................. 4,376 4,376
Shareholders' equity (deficiency):
Common stock and additional paid-in capital(5)...................................... 781,489 977,166
Accumulated deficit(6).............................................................. (929,011) (938,152)
Cumulative foreign currency translation adjustments................................. (1,543) (1,543)
Common stock in treasury, at cost................................................... (13,158) (13,158)
------------ ------------
Total shareholders' equity (deficiency)......................................... (162,223) 24,313
------------ ------------
Total capitalization.................................................................. $ 1,968,974 $ 1,977,802
------------ ------------
------------ ------------
</TABLE>
- ------------------------
(1) Reflects reduction for de minimis original issue discount.
(2) Represents the present value at December 31, 1997 of the principal and
interest obligations under notes payable issued in connection with the
acquisition of certain specialty consumer magazines and the DAILY RACING
FORM.
(3) Represents net proceeds to the Company after deduction of issuance costs and
de minimis issuance discount.
(4) Represents Common Stock that employees have the right to resell to the
Company under certain circumstances including termination of employment in
connection with the sale of the business for which they work, death,
disability or retirement after age 65. The resale feature expires five years
after the effective purchase date of the Common Stock. Since inception of
the Company, none of the employees has exercised such resale feature and the
likelihood of significant resales is considered by management to be remote.
(5) Does not include 11,562,930 shares of Common Stock issuable upon exercise of
stock options, 8,953,280 of which were then exercisable as of December 31,
1997.
(6) The accumulated deficit includes non-cash expenses related to the
accumulated amortization of intangible assets, the excess of the purchase
price over the net assets acquired and other, deferred financing costs, the
write-offs of the unamortized balance of deferred financing costs associated
with all previous financings, net provision for loss on sales of businesses
and restructuring and other costs in the aggregate amount of approximately
$1,219,300 at December 31, 1997 net of a non-cash income tax benefits
aggregating $155,000 through December 31, 1997.
27
<PAGE>
SELECTED FINANCIAL INFORMATION
The selected consolidated financial information is derived from the
historical consolidated financial statements of the Company. The following
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the historical
consolidated financial statements and notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------
<S> <C> <C> <C> <C>
1997 1996 1995 1994
------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
OPERATING DATA:
Sales, net...................................................... $ 1,487,595 $ 1,374,449 $ 1,046,329 $ 964,648
Depreciation and amortization................................... 184,165 190,702 192,276 136,866
Other charges(1)................................................ 138,640 -- 50,114 15,025
Operating income (loss)(2)...................................... (20,793) 85,901 (26,275) 10,203
Interest expense................................................ 136,625 124,601 105,837 78,351
Income tax benefit(3)........................................... 1,685 53,300 59,600 42,100
Income (loss) before extraordinary charge....................... (157,439) 17,597 (75,435) (29,529)
Extraordinary charge-extinguishment of debt(4).................. (15,401) (9,553) -- (11,874)
Net income (loss)(2)............................................ (172,840) 8,044 (75,435) (41,403)
Preferred stock dividends(5).................................... 65,073 43,526 28,978 25,959
Loss applicable to common shareholders.......................... (237,913) (35,482) (104,413) (67,362)
Basic and diluted loss applicable to common shareholders per
common share(2)(6):
Loss before extraordinary charge.............................. $ (1.72) $ (.20) $ (.92) $ (.55)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net loss...................................................... $ (1.84) $ (.27) $ (.92) $ (.67)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Basic and diluted common shares outstanding................... 129,304,900 128,781,518 113,218,711 101,171,427
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
OTHER DATA:
EBITDA(7)....................................................... $ 302,012 $ 276,603 $ 216,115 $ 162,094
Capital expenditures, net....................................... 31,108 28,790 23,414 14,184
Net cash provided by operating activities....................... 125,360 150,192 64,062 64,890
Net cash used in investing activities........................... (185,725) (721,709) (318,712) (442,126)
Net cash provided by financing activities....................... 46,688 580,946 263,644 383,924
Deficiency of earnings to fixed charges(8)(9)................... (159,124) (35,703) (135,035) (71,629)
Deficiency of earnings to fixed charges and preferred stock
dividends(8)(9)............................................... (224,197) (79,229) (164,013) (97,588)
<CAPTION>
<S> <C>
1993
-----------
OPERATING DATA:
Sales, net...................................................... $ 844,748
Depreciation and amortization................................... 143,267
Other charges(1)................................................ 2,644
Operating income (loss)(2)...................................... (7,669)
Interest expense................................................ 74,336
Income tax benefit(3)........................................... --
Income (loss) before extraordinary charge....................... (86,496)
Extraordinary charge-extinguishment of debt(4).................. --
Net income (loss)(2)............................................ (86,496)
Preferred stock dividends(5).................................... 22,290
Loss applicable to common shareholders.......................... (108,786)
Basic and diluted loss applicable to common shareholders per
common share(2)(6):
Loss before extraordinary charge.............................. $ (1.22)
-----------
-----------
Net loss...................................................... $ (1.22)
-----------
-----------
Basic and diluted common shares outstanding................... 89,295,531
-----------
-----------
OTHER DATA:
EBITDA(7)....................................................... $ 138,242
Capital expenditures, net....................................... 11,485
Net cash provided by operating activities....................... 27,072
Net cash used in investing activities........................... (95,669)
Net cash provided by financing activities....................... 63,579
Deficiency of earnings to fixed charges(8)(9)................... (86,496)
Deficiency of earnings to fixed charges and preferred stock
dividends(8)(9)............................................... (108,786)
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------------------------------
1997 1996 1995 1994
----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................................... $ 22,978 $ 36,655 $ 27,226 $ 18,232
Working capital (deficiency)(10).................................... (146,245) (44,705) (56,560) 1,338
Intangible assets, gross............................................ 2,508,650 2,649,805 1,996,564 1,656,590
Less accumulated amortization................................... 736,597 896,824 762,393 602,542
----------- ----------- ----------- -----------
Intangible assets, net.............................................. 1,772,053 1,752,981 1,234,171 1,054,048
Total assets........................................................ 2,485,990 2,552,215 1,881,416 1,589,692
Long-term debt(11).................................................. 1,656,541 1,565,686 1,134,916 1,034,689
Exchangeable preferred stock........................................ 470,280 442,729 231,606 216,229
Common stock subject to redemption.................................. 4,376 5,957 28,022 16,552
Shareholders' equity (deficiency):
Common stock.................................................... 1,298 1,283 1,259 1,053
Additional paid-in capital...................................... 780,191 772,642 748,194 572,940
Accumulated deficit............................................. (929,011) (691,098) (655,616) (551,203)
Cumulative foreign currency translation adjustments............. (1,543) (1,270) (1,275) (1,324)
Common stock in treasury, at cost............................... (13,158) -- -- --
----------- ----------- ----------- -----------
Total shareholders' equity (deficiency)............................. $ (162,223) $ 81,557 $ 92,562 $ 21,466
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
<CAPTION>
1993
-----------
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................................... $ 11,544
Working capital (deficiency)(10).................................... 3,605
Intangible assets, gross............................................ 1,343,482
Less accumulated amortization................................... 504,538
-----------
Intangible assets, net.............................................. 838,944
Total assets........................................................ 1,166,502
Long-term debt(11).................................................. 661,297
Exchangeable preferred stock........................................ 202,453
Common stock subject to redemption.................................. 25,287
Shareholders' equity (deficiency):
Common stock.................................................... 947
Additional paid-in capital...................................... 488,541
Accumulated deficit............................................. (483,841)
Cumulative foreign currency translation adjustments............. (1,220)
Common stock in treasury, at cost............................... --
-----------
Total shareholders' equity (deficiency)............................. $ 4,427
-----------
-----------
</TABLE>
(FOOTNOTES ON THE FOLLOWING PAGE)
28
<PAGE>
(1) Represents net provision for loss on the sales of businesses in 1997, 1995
and 1994, provision for restructuring and other costs in 1995 and provision
for write-down of real estate no longer utilized in 1993.
(2) Adoption of a change in method of accounting for direct-response advertising
costs effective July 1, 1994, resulted in an increase in operating income
(decrease in operating loss), an equal decrease in net loss (increase in net
income) and a decrease in basic and diluted loss per common share of
approximately $3,128 ($.02 per share), $2,000 ($.02 per share), $11,800
($.10 per share) and $9,800 ($.10 per share) for the years ended December
31, 1997, 1996, 1995 and 1994, respectively.
(3) At December 31, 1997, 1996, 1995 and 1994, management of the Company
reviewed recent operating results for the years then ended and projected
future operating results for the years through December 31, 2003. At
December 31, 1997, the Company's management determined that no adjustment to
net deferred income tax assets was required. In prior years, management
determined that a portion of the net deferred income tax assets at December
31, 1996, 1995 and 1994 would likely be realized. Accordingly, the Company
recorded an income tax benefit of $53,300 in 1996, $59,600 in 1995 and
$42,100 in 1994. For the year ended December 31, 1997, the Company recorded
an income tax carryback claim of $1,685. At December 31, 1997, the Company
had net operating loss carryforwards ("NOLs") of approximately $749,000
which will be available to reduce future taxable income. In addition to the
NOLs, management estimates that approximately $864,000 of unamortized
goodwill and other intangible assets will be available as deductions from
any future taxable income.
(4) Represents the write-off of unamortized deferred financing costs. For the
years ended December 31, 1997 and 1996, amount also includes the premiums
paid on the redemptions of the 10 5/8% Senior Notes.
(5) In 1997, the Company recorded a preferred stock dividend accrual in the
amount of $9,517. Of the total dividend accrual recorded in 1997, the
amounts that relate to prior periods were not material.
(6) Basic and diluted loss per common share, as well as the basic and diluted
common shares outstanding, were computed as described in Note 17 of the
notes to the audited consolidated financial statements included elsewhere in
this Prospectus. Previously reported loss per share amounts have been
restated as required by the adoption of a new accounting pronouncement.
(7) Earnings before interest, taxes, depreciation, amortization and provision
for one-time charges ("EBITDA") is not intended to represent cash flow from
operations and should not be considered as an alternative to net income
(loss) as an indicator of the Company's operating performance or to cash
flows as a measure of liquidity. The Company believes EBITDA is a standard
measure commonly reported and widely used by analysts, investors and other
interested parties in the media industry. Accordingly, this information has
been disclosed herein to permit a more complete comparative analysis of the
Company's operating performance relative to other companies in its industry.
This measure may not be comparable to similarly titled measures used by
other companies.
(8) The deficiency of earnings to fixed charges consists of loss before income
taxes and extraordinary charge plus fixed charges. Fixed charges consist of
interest expense on long-term debt and other non-current obligations
(including current maturities of long-term debt), amortization of deferred
financing costs and that portion of operating rental expense that represents
interest.
(9) Income (loss) before income taxes and extraordinary charge includes non-cash
charges for depreciation and amortization of property and equipment,
prepublication costs, intangible assets, excess of purchase price over net
assets acquired and deferred financing costs, provision for write-down of
real estate no longer utilized, net provision for loss on the sales of
businesses, restructuring and other costs and non-cash interest expense on
an acquisition obligation, distribution advance and other current liability.
These non-cash charges totaled $327,219, $192,895, $241,536, $160,778 and
$157,964 for the years ended December 31, 1997, 1996, 1995, 1994 and 1993,
respectively. Adjusted to eliminate such non-cash charges, earnings would
have exceeded fixed charges and fixed charges plus cash preferred stock
dividends by approximately $168,095 and $107,473 for 1997, $157,192 and
$130,248 for 1996, $106,501 and $95,001 for 1995, $89,149 and $77,649 for
1994 and $71,468 and $59,968 for 1993.
(10) Includes current maturities of long-term debt and asset held for sale.
(11) Excludes current maturities of long-term debt.
29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS).
INTRODUCTION
The following discussion and analysis of the Company's financial condition
and results of operations should be read in conjunction with the Company's
historical consolidated financial statements and notes thereto included herein.
The Company organizes its businesses into three segments: specialty magazines,
education and information. The specialty magazines segment has in prior periods
been referred to as the specialty media segment, but the Company believes the
new name is more reflective of the focus of the segment.
Management believes a meaningful comparison of the results of operations for
1997, 1996 and 1995 is obtained by using segment information. This year, the
Company begins presenting results from continuing businesses ("Continuing
Businesses") which exclude the results of the non-core businesses ("Non-Core
Businesses"), which are either sold businesses or businesses held for sale. The
Non-Core Businesses include Krames Communications Incorporated ("Krames"), The
Katharine Gibbs Schools, Inc. ("Katharine Gibbs"), NEW WOMAN, Intertec Mailing
Services, Newbridge Communications, Inc. (excluding Films for the Humanities and
Sciences), and STAGEBILL which have been divested and THE DAILY RACING FORM
which is being held for sale. Management believes that this presentation is the
most useful way to analyze the historical trends of its businesses.
SELECTED FINANCIAL DATA
PRIMEDIA is a targeted information company, focused on highly specialized
niches of the specialty magazine, education and information markets.
SPECIALTY MAGAZINES (57.9% of sales from Continuing Businesses, 67.0% of
operating income from Continuing Businesses before corporate overhead and 50.5%
of EBITDA from Continuing Businesses before corporate overhead): Includes 67
specialty consumer magazines such as SEVENTEEN, SOAP OPERA DIGEST, NEW YORK,
CHICAGO, AMERICAN BABY and LOW RIDER plus 65 technical and trade magazines
including TELEPHONY, FLEET OWNER and REGISTERED REPRESENTATIVE.
This group focuses on reaching enthusiasts, or those interested in the key
topics (hobbies, lifestyles, industry, etc.) that its customers demand, while
providing its advertisers with the most efficient mechanism for reaching the
targeted audience through print, Internet and other allied products.
EDUCATION (18.6% of sales from Continuing Businesses, 5.2% of operating
income from Continuing Businesses before corporate overhead and 22.9% of EBITDA
from Continuing Businesses before corporate overhead): Includes classroom
learning products such as CHANNEL ONE NEWS, WEEKLY READER and Films for the
Humanities and Sciences, plus PRIMEDIA Workplace Learning (formerly Westcott
Communications, Inc.).
The classroom learning group targets grades Kindergarten through 12 with
highly targeted supplemental periodical, video and network products to help
teach students. The workplace learning group is the leading provider of high
quality workplace learning programs in such fields as healthcare, automotive,
banking and insurance.
INFORMATION (23.5% of sales from Continuing Businesses, 27.8% of operating
income from Continuing Businesses before corporate overhead and 26.6% of EBITDA
from Continuing Businesses before corporate overhead): Includes over 70 consumer
guides such as APARTMENT GUIDES, MICROTIMES and new homes guides; specialized
reference products such as THE WORLD ALMANAC and FACTS ON FILE NEWS SERVICES;
and nearly 100 specialized directories and databases.
30
<PAGE>
The information segment produces consumer and business information products
in a variety of formats for decision makers in business, professional and
special interest consumer markets. The information is compiled and sold as
reference works, CD-ROMs, almanacs and directories.
In 1997, PRIMEDIA executed a focusing program to accelerate growth, divest
Non-Core Businesses, and strengthen its balance sheet. Proceeds from the sales
of the Non-Core Businesses, excluding THE DAILY RACING FORM which is expected to
be sold in 1998, were $171,575 net of direct selling expenses. The Company
incurred a provision for loss on sales of businesses in the 1997 third quarter
of $138,640, primarily associated with the write-down of the net assets of THE
DAILY RACING FORM.
Additional selected financial data for the Company organized on the
foregoing basis are presented below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Sales, Net:
Continuing Businesses:
Specialty Magazines............................................... $ 718,134 $ 635,392 $ 409,308
Education......................................................... 230,057 181,972 127,660
Information....................................................... 292,053 249,936 202,240
------------ ------------ ------------
Subtotal........................................................ 1,240,244 1,067,300 739,208
Non-Core Businesses................................................... 247,351 307,149 307,121
------------ ------------ ------------
Total........................................................... $ 1,487,595 $ 1,374,449 $ 1,046,329
------------ ------------ ------------
------------ ------------ ------------
Depreciation, Amortization and Other Charges(1):
Continuing Businesses:
Specialty Magazines............................................... $ 66,134 $ 71,424 $ 53,347
Education......................................................... 64,326 51,706 77,320
Information....................................................... 45,276 37,306 54,052
Corporate......................................................... 99 779 703
------------ ------------ ------------
Subtotal........................................................ 175,835 161,215 185,422
Non-Core Businesses................................................... 146,970 29,487 56,968
------------ ------------ ------------
Total........................................................... $ 322,805 $ 190,702 $ 242,390
------------ ------------ ------------
------------ ------------ ------------
Operating Income (Loss):
Continuing Businesses:
Specialty Magazines............................................... $ 91,295 $ 64,971 $ 36,504
Education......................................................... 7,130 7,232 (32,126)
Information....................................................... 37,823 36,668 4,513
Corporate......................................................... (25,644) (22,276) (17,737)
------------ ------------ ------------
Subtotal........................................................ 110,604 86,595 (8,846)
Non-Core Businesses................................................... (131,397) (694) (17,429)
------------ ------------ ------------
Total........................................................... (20,793) 85,901 (26,275)
</TABLE>
(CONTINUED ON FOLLOWING PAGE)
31
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1997 1996 1995
------------ ------------ ------------
Other Income (Expense):
<S> <C> <C> <C>
Interest expense...................................................... (136,625) (124,601) (105,837)
Amortization of deferred financing and organizational costs........... (3,071) (3,662) (3,135)
Other, net............................................................ 1,365 6,659 212
------------ ------------ ------------
Loss before income tax benefit and extraordinary charge................. (159,124) (35,703) (135,035)
Income tax benefit...................................................... 1,685 53,300 59,600
------------ ------------ ------------
Income (loss) before extraordinary charge............................... (157,439) 17,597 (75,435)
Extraordinary charge--extinguishment of debt............................ (15,401) (9,553) --
------------ ------------ ------------
Net income (loss)....................................................... $ (172,840) $ 8,044 $ (75,435)
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
- ------------------------
(1) Other charges includes net provision for loss on the sales of businesses in
1997 and 1995 and provision for restructuring and other costs in 1995.
RESULTS OF OPERATIONS
1997 COMPARED TO 1996
Sales from Continuing Businesses increased 16.2% to $1,240,244 in 1997 from
$1,067,300 in 1996 due to sales increases in all segments. Sales as reported,
including the Non-Core Businesses, increased by 8.2% in 1997 over 1996.
Operating income from Continuing Businesses increased 27.7% to $110,604
during 1997 from $86,595 during 1996. This increase is attributable to the sales
increase as well as declines in paper costs which began declining in 1996.
Interest expense increased by $12,024 or 9.7% in 1997 over 1996 reflecting
increased borrowings associated with acquisitions.
The loss before income tax benefit and extraordinary charge increased by
$123,421 to $159,124 during 1997 compared to $35,703 during 1996. This increase
is attributable to the provision for loss on the sales of businesses of $138,640
recorded during the third quarter of 1997.
At December 31, 1997 and 1996, management of the Company reviewed recent
operating results for the years then ended and projected future operating
results for the years through 2003. The Company's management determined that no
adjustment to net deferred income tax assets was required at December 31, 1997
and that an income tax benefit of $53,300 should be recognized at December 31,
1996. The Company reported a Federal income tax carryback claim of $1,685 in
1997.
The extraordinary charge in 1997 reflects the aggregate premium paid of
$9,537 on the redemption of the Company's 10 5/8% Senior Notes and an additional
write-off of related deferred financing costs of $5,864. The extraordinary
charge of $9,553 in 1996 resulted primarily from the write-off of deferred
financing costs relating to the replacement of the Company's then existing
credit facilities with new credit facilities.
SPECIALTY MAGAZINES
Results from Continuing Businesses exclude NEW WOMAN, STAGEBILL and Intertec
Mailing Services. Sales from Continuing Businesses increased 13.0% to $718,134
in 1997 from $635,392 in 1996 due largely to $24,388 of advertising and
circulation growth at SEVENTEEN, which achieved record revenues in 1997, and at
SOAP OPERA DIGEST, which became a weekly publication during 1997. Technical and
trade magazines also showed strong growth, and revenue from Internet
advertising, while still a small portion of the segment,
32
<PAGE>
grew significantly. Acquisitions such as LOW RIDER, MUSCLE MUSTANG, SURFING,
REGISTERED REPRESENTATIVE and MIX, also contributed $51,544 to the sales growth.
Operating income from Continuing Businesses increased 40.5% to $91,295 in
1997 from $64,971 in 1996 due to the sales increase as well as declines in paper
costs which began declining in 1996.
EDUCATION
Results from Continuing Businesses exclude Krames, Katharine Gibbs and
Newbridge (excluding Films for the Humanities and Sciences). Sales from
Continuing Businesses increased 26.4% to $230,057 from $181,972 in 1996. The
increase is attributable to advertising growth at CHANNEL ONE, and the
acquisitions of PRIMEDIA Workplace Learning, QWIZ, Cover Concepts and Pictorial
which added $43,995 to sales growth.
Operating income from Continuing Businesses decreased 1.4% to $7,130 in 1997
from $7,232 in 1996 due primarily to increased goodwill and other intangible
amortization expense resulting from acquisitions.
INFORMATION
Results from Continuing Businesses exclude THE DAILY RACING FORM. Sales from
Continuing Businesses increased 16.9% to $292,053 from $249,936 in 1996. This
increase is largely attributable to approximately a $32,000 increase at the
apartment guides, including the start-up of new guides and acquisitions, and
strong performance at BACON'S and the directory units.
Operating income from Continuing Businesses increased 3.1% to $37,823 in
1997 from $36,668 in 1996, largely attributable to the strong sales increases at
the apartment guides partially offset by an $8,000 increase in amortization
expense resulting from acquisitions and increases in other operating expenses.
CORPORATE
Corporate expenses increased 15.1% to $25,644 in 1997 from $22,276 in 1996,
largely attributable to an increase in corporate headcount to accommodate the
growth of the Company as well as a one-time executive death benefit.
NON-CORE BUSINESSES
Sales from Non-Core Businesses declined 19.5% to $247,351 from $307,149 in
1996. Most of this decline resulted from the divestitures of Krames, Katharine
Gibbs and NEW WOMAN during 1997, and lower revenue levels at Newbridge
(excluding Films for the Humanities and Sciences) and THE DAILY RACING FORM. The
operating loss from Non-Core Businesses increased to $131,397 in 1997 from $694
in 1996, attributable to the $138,640 provision for the loss on the sales of
businesses.
1996 COMPARED TO 1995
Sales from Continuing Businesses increased 44.4% to $1,067,300 in 1996 from
$739,208 in 1995. Sales increased due to internal growth in all segments as well
as the impact of acquisitions. Specifically, the acquisitions of Cahners
Consumer Magazines ("Cahners"), PRIMEDIA Workplace Learning and the trade
magazines of Argus Inc. ("Argus") added approximately $199,144 to sales growth.
Sales as reported, including the Non-Core Businesses, increased by 31.4% in 1996
over 1995.
Operating income (loss) from Continuing Businesses increased to $86,595
during 1996 from $(8,846) during 1995. This improvement was driven by increases
in sales, the impact of acquisitions and the impact of several one-time,
principally non-cash charges totaling $68,072 in the second quarter of 1995.
This increase was achieved despite an increase in average purchase prices for
paper in the first half of 1996.
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<PAGE>
Interest expense increased by $18,764 or 17.7% in 1996 over 1995 primarily
due to increased borrowings associated with acquisitions.
The Company reported an income tax benefit of $53,300 in 1996 compared to
$59,600 in 1995 associated with the partial recognition of NOLs and other
deferred income tax assets. At the end of each year, the Company reviewed its
recent operating results and projected future operating results and determined
that there should be sufficient future taxable income so that a portion of the
net deferred income tax assets would likely be realized. Such future taxable
income is determined principally from management's projection of future
operating results in conjunction with scheduled reductions in intangible asset
amortization expense. The amount of the net deferred tax asset considered
realizable, however, could be reduced in the near term if estimates of future
taxable income during the carryforward period are reduced. Such reductions in
taxable income could occur as a result of many external factors including but
not limited to increased paper and postage costs and rates of interest.
The $9,553 extraordinary charge in 1996 reflects the aggregate premium paid
on the redemptions of the Company's 10 5/8% Senior Notes and the write-off of
unamortized deferred financing costs. The Company reported consolidated net
income of $8,044 in 1996 versus a consolidated net loss of $75,435 in 1995.
SPECIALTY MAGAZINES
Results from Continuing Businesses exclude NEW WOMAN, STAGEBILL and Intertec
Mailing Services. Sales from Continuing Businesses increased 55.2% to $635,392
in 1996 from $409,308 in 1995 due largely to growth of existing properties as
well as the impact of the Cahners and Argus acquisitions. The increases at the
existing properties were primarily due to the double-digit organic revenue
growth at the specialty consumer magazines led by SEVENTEEN, SOAP OPERA DIGEST,
TRUCKIN' and CRAFTS. The full year effect of Argus, acquired in December 1995,
and Cahners, acquired in January 1996, contributed $51,459 and $95,397,
respectively, to the 1996 sales growth.
Operating income from Continuing Businesses increased by $28,467 or 78.0% in
1996 over 1995. This increase was the result of an increase in sales partially
offset by an increase in average paper prices in 1996 over 1995.
EDUCATION
Results from Continuing Businesses exclude Krames, Katharine Gibbs and
Newbridge (excluding Films for the Humanities and Sciences). Sales from
Continuing Businesses increased 42.5% to $181,972 in 1996 from $127,660 in 1995.
The growth is attributable to sales increases at WEEKLY READER and Films for the
Humanities and Sciences and the addition of PRIMEDIA Workplace Learning.
Operating income (loss) from Continuing Businesses increased to $7,232 in
1996 from $(32,126) in 1995. This improvement is primarily due to the one-time
charges in the second quarter of 1995 for the provision for loss associated with
the sale of Newfield Publications, Inc.
INFORMATION
Results from Continuing Businesses exclude THE DAILY RACING FORM. Sales from
Continuing Businesses increased 23.6% to $249,936 in 1996 from $202,240 in 1995.
This increase is largely attributable to double-digit organic growth at the
apartment guides as well as the impact of acquisitions which contributed
approximately $17,600 to the increase in sales.
Operating income from Continuing Businesses increased to $36,668 in 1996
from $4,513 in 1995, largely attributable to the increase in sales and a
decrease in amortization expense. Goodwill and intangible amortization expense
decreased by $24,277 in 1996 over 1995 primarily as a result of an
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adjustment to the carrying values of goodwill and other intangibles totaling
approximately $18,000 in the second quarter of 1995.
CORPORATE
Corporate expenses increased 25.6% to $22,276 in 1996 from $17,737 in 1995,
largely attributable to an increase in corporate headcount to accommodate the
growth of the Company.
NON-CORE BUSINESSES
The operating loss from Non-Core Businesses decreased to $694 in 1996 from
$17,429 in 1995, attributable to the one-time restructuring charge recorded in
1995.
LIQUIDITY AND CAPITAL RESOURCES
The following table sets forth certain information regarding the Company's
EBITDA and other net cash flow items. Data is presented for both Continuing
Businesses and Non-Core Businesses.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
EBITDA(1):
Continuing Businesses:
Specialty Magazines.................................................... $ 157,429 $ 136,395 $ 89,851
Education.............................................................. 71,456 58,938 45,194
Information............................................................ 83,099 73,974 58,565
Corporate.............................................................. (25,545) (21,497) (17,034)
----------- ----------- -----------
Subtotal............................................................. 286,439 247,810 176,576
Non-Core Businesses...................................................... 15,573 28,793 39,539
----------- ----------- -----------
Total................................................................ $ 302,012 $ 276,603 $ 216,115
----------- ----------- -----------
----------- ----------- -----------
Net Cash Provided by (Used in) Operating Activities:
Continuing Businesses:
Specialty Magazines.................................................... $ 152,323 $ 125,437 $ 69,853
Education.............................................................. 57,103 59,063 26,716
Information............................................................ 66,690 61,106 64,646
Corporate.............................................................. (162,248) (129,090) (111,521)
----------- ----------- -----------
Subtotal............................................................. 113,868 116,516 49,694
Non-Core Businesses...................................................... 11,492 33,676 14,368
----------- ----------- -----------
Total................................................................ $ 125,360 $ 150,192 $ 64,062
----------- ----------- -----------
----------- ----------- -----------
Net Cash Provided by (Used in) Investing Activities:
Continuing Businesses:
Specialty Magazines.................................................... $ (137,414) $ (213,203) $ (234,755)
Education.............................................................. (165,657) (434,603) 10,441
Information............................................................ (46,397) (58,813) (82,371)
Corporate.............................................................. (1,740) (1,735) (2,424)
----------- ----------- -----------
Subtotal............................................................. (351,208) (708,354) (309,109)
Non-Core Businesses...................................................... 165,483 (13,355) (9,603)
----------- ----------- -----------
Total................................................................ $ (185,725) $ (721,709) $ (318,712)
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Net Cash Provided by (Used in) Financing Activities:
Continuing Businesses:
Specialty Magazines.................................................... $ (4,318) $ (10,073) $ (5,332)
Education.............................................................. (1,586) (2,653) (160)
Information............................................................ (2,982) (4,698) (2,094)
Corporate.............................................................. 54,656 600,156 272,293
----------- ----------- -----------
Subtotal............................................................. 45,770 582,732 264,707
Non-Core Businesses...................................................... 918 (1,786) (1,063)
----------- ----------- -----------
Total................................................................ $ 46,688 $ 580,946 $ 263,644
----------- ----------- -----------
----------- ----------- -----------
Excess (Deficiency) Of Earnings to Fixed Charges (2) from:
Continuing Businesses:
Specialty Magazines.................................................... $ 89,025 $ 66,161 $ 30,336
Education.............................................................. 6,186 5,576 (32,973)
Information............................................................ 32,734 36,061 2,884
Corporate.............................................................. (152,834) (140,005) (113,972)
----------- ----------- -----------
Subtotal............................................................. (24,889) (32,207) (113,725)
Non-Core Businesses...................................................... (134,235) (3,496) (21,310)
----------- ----------- -----------
Total.................................................................. $ (159,124) $ (35,703) $ (135,035)
----------- ----------- -----------
----------- ----------- -----------
Excess (Deficiency) of Earnings to Fixed Charges and Preferred Stock
Dividends (2) from:
Continuing Businesses:
Specialty Magazines.................................................... $ 89,025 $ 66,161 $ 30,336
Education.............................................................. 6,186 5,576 (32,973)
Information............................................................ 32,734 36,061 2,884
Corporate.............................................................. (217,907) (183,531) (142,950)
----------- ----------- -----------
Subtotal............................................................. (89,962) (75,733) (142,703)
Non-Core Businesses.................................................... (134,235) (3,496) (21,310)
----------- ----------- -----------
Total................................................................ $ (224,197) $ (79,229) $ (164,013)
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
- ------------------------
(1) Earnings before interest, taxes, depreciation, amortization and provision
for one-time charges ("EBITDA") is not intended to represent cash flow from
operations and should not be considered as an alternative to net income
(loss) as an indicator of the Company's operating performance or to cash
flows as a measure of liquidity. The Company believes EBITDA is a standard
measure commonly reported and widely used by analysts, investors and other
interested parties in the media industry. Accordingly, this information has
been disclosed herein to permit a more complete comparative analysis of the
Company's operating performance relative to other companies in its industry.
(2) The deficiency of earnings to fixed charges consists of loss before income
taxes plus fixed charges. Loss before income taxes includes (i) depreciation
or amortization of prepublication costs, deferred financing costs, property
and equipment, intangible assets and excess of purchase price over net
assets acquired, (ii) interest expense, (iii) net provision for loss on
sales of businesses, (iv) restructuring and other costs, and (v) that
portion of operating rental expense that represents interest. Prepublication
costs include editorial, artwork, composition and printing plate costs
incurred prior to publication date. Fixed charges consist of interest
expense on long-term debt and other non-current obligations (including
current maturities of long-term debt), amortization of deferred financing
costs and that portion of operating rental expense that represents interest.
Consolidated working capital deficiency including current maturities of
long-term debt was $146,245 at December 31, 1997 compared to $44,705 at December
31, 1996. Consolidated working capital deficiency reflects certain industry
working capital practices and accounting principles, including the expensing of
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<PAGE>
editorial and product development costs when incurred and the recording of
unearned subscription income as a current liability. Advertising costs are
expensed when the promotional activities occur except for certain
direct-response advertising costs which are capitalized and amortized over the
estimated period of future benefit.
1997 COMPARED TO 1996
Consolidated EBITDA from Continuing Businesses increased by 15.6% to
$286,439 in 1997 from $247,810 in 1996 because of higher revenues, paper price
declines and acquisitions of new businesses.
EBITDA from Continuing Businesses in the Specialty Magazines segment
increased 15.4% in 1997 to $157,429 from $136,395 in 1996. This increase is
attributable to strong organic revenue growth, paper price declines and
acquisitions.
EBITDA from Continuing Businesses in the Education segment increased 21.2%
to $71,456 in 1997 from $58,938 in 1996 due to advertising revenue growth at
CHANNEL ONE and the inclusion of acquisitions including PRIMEDIA Workplace
Learning.
EBITDA from Continuing Businesses in the Information segment increased 12.3%
in 1997 to $83,099 from $73,974 in 1996 primarily due to growth at the APARTMENT
GUIDES which was attributable to increased advertising revenue and the impact of
acquisitions.
EBITDA from Non-Core Businesses declined 45.9% to $15,573 in 1997 from
$28,793 in 1996, due to sales declines at Newbridge (excluding Films for the
Humanities and Sciences) and THE DAILY RACING FORM.
The reported net cash provided by operating activities during the year ended
December 31, 1997, after interest payments of $142,421, was $125,360, a decrease
of $24,832 over the 1996 period, due primarily to an increase in interest
payments.
The reported net cash used in investing activities decreased in 1997 as a
result of decreased acquisition activities. The Company spent $326,192 for
acquisitions during 1997 compared with $700,990 in 1996. The reported net
capital expenditures were $31,108 during the 1997 period, an 8.1% increase from
$28,790 in 1996. Increased investment in production and new product technology
is expected to result in increased capital spending in 1998.
The reported net cash provided by financing activities decreased in 1997 as
a result of reduced debt and stock issuances during 1997 as well as the
redemption of certain outstanding borrowings.
The Company's earnings (defined as pretax income or loss before
extraordinary charge) from Continuing Businesses were inadequate to cover fixed
charges and fixed charges plus preferred stock dividends by $24,889 and $89,962
and $32,207 and $75,733 for 1997 and 1996, respectively. Fixed charges consist
of interest expense on long-term debt and other non-current obligations
(including current maturities on long-term debt), amortization of deferred
financing costs and that portion of operating rental expense that represents
interest. Such earnings have been reduced by non-cash charges from Continuing
Businesses (including depreciation, amortization and non-cash interest expense)
of $179,857 and $162,408 for the years ended December 31, 1997 and 1996,
respectively. Adjusted to eliminate these non-cash charges, earnings from
Continuing Businesses would have exceeded fixed charges and fixed charges plus
cash preferred stock dividends, by $154,968 and $94,346 and $130,201 and
$103,257 for the years ended December 31, 1997 and 1996, respectively.
1996 COMPARED TO 1995
Consolidated EBITDA from Continuing Businesses increased by 40.3% to
$247,810 in 1996 from $176,576 in 1995 because of growth from existing
operations, new product additions and acquisitions of businesses.
37
<PAGE>
EBITDA from Continuing Businesses in the Specialty Magazines segment
increased 51.8% in 1996 to $136,395 from $89,851 in 1995 due to strong organic
growth in circulation and advertising as well as acquisitions.
EBITDA from Continuing Businesses in the Education segment increased 30.4%
to $58,938 in 1996 from $45,194 in 1995 due to advertising revenue growth at
CHANNEL ONE and the inclusion of the acquisition of PRIMEDIA Workplace Learning.
EBITDA from Continuing Businesses in the Information segment increased 26.3%
in 1996 to $73,974 from $58,565 in 1995 due to increased advertising revenues in
the apartment guides and a portion of Intertec as well as the inclusion of
acquisitions.
EBITDA from Non-Core Businesses declined 27.2% to $28,793 in 1996 from
$39,539 in 1995, primarily due to the sales decline at Newbridge (excluding
Films for the Humanities and Sciences).
The reported net cash provided by operating activities during the year ended
December 31, 1996, after interest payments of $111,752, was $150,192, an
increase of $86,130 over the 1995 period, primarily due to EBITDA growth.
The reported net cash used in investing activities increased as a result of
increased acquisition activities, substantially all of which were financed with
borrowings under the then existing credit agreements and funds from operations.
Payments for businesses acquired of $700,990 were made during the year ended
December 31, 1996 as compared to $353,954 in 1995. The reported net capital
expenditures were $28,790 during the 1996 period, a 23.0% increase from $23,414
in 1995. These expenditures included data processing equipment, televisions,
videocassette recorders, satellite dishes, furniture and leasehold improvements
and were financed with net cash provided by operations.
The reported net cash provided by financing activities increased in 1996 as
a result of increased debt and preferred stock issuances.
The Company's earnings (defined as pretax income or loss before
extraordinary charge) from Continuing Businesses were inadequate to cover fixed
charges and fixed charges plus preferred stock dividends by $32,207 and $75,733
and $113,725 and $142,703 for 1996 and 1995, respectively. Fixed charges consist
of interest expense on long-term debt and other non-current obligations
(including current maturities on long-term debt), amortization of deferred
financing costs and that portion of operating rental expense that represents
interest. Such earnings have been reduced by non-cash charges from Continuing
Businesses (including depreciation, amortization, provision for loss on the
sales of businesses, non-cash interest expense and other) of $162,408 and
$189,879 for the years ended December 31, 1996 and 1995, respectively. Adjusted
to eliminate these non-cash charges, earnings from Continuing Businesses would
have exceeded fixed charges and fixed charges plus cash preferred stock
dividends, by $130,201 and $103,257 and $76,154 and $64,654 for the years ended
December 31, 1996 and 1995, respectively.
NET OPERATING LOSS CARRYFORWARDS
At December 31, 1997, the Company had NOLs of approximately $749,000 which
will be available to reduce future taxable income. In addition, management
estimates that approximately $864,000 of unamortized goodwill and other
intangible assets will be available as deductions from any future taxable
income.
FINANCING ARRANGEMENTS
In January 1997, the Company purchased, in aggregate, $20,850 of the 10 5/8%
Senior Notes at a weighted average price of 105%, plus accrued and unpaid
interest from various brokers on the open market. On May 1, 1997, the Company
redeemed the $212,400 remaining principal amount of the 10 5/8% Senior Notes at
104% plus accrued and unpaid interest. The aggregate premium paid and the
write-off of related deferred financing costs are classified as an extraordinary
charge and are recorded at an aggregate
38
<PAGE>
value of $15,401 on the accompanying statement of consolidated operations for
the year ended December 31, 1997.
On April 21, 1997, the Company entered into a new 364-day credit facility
with The Chase Manhattan Bank, the Bank of New York, Bankers Trust Company and
the Bank of Nova Scotia as agents (the "New Credit Facility") which expires
April 20, 1998 (see "Recent Developments"). Under the terms of the New Credit
Facility, the Company has commitments of $150,000 which can be borrowed in the
form of revolving loans to be used for general corporate and working capital
purposes as well as to finance certain future acquisitions.
The amounts borrowed pursuant to the New Credit Facility bear interest at
rates per annum identical to those in the previously existing credit facilities
("Bank Credit Facilities"). The New Credit Facility combined with the Bank
Credit Facilities are collectively referred to as the "Credit Facilities." At
December 31, 1997, the Company had two interest rate swap agreements in effect
with an aggregate notional amount of $200,000 and an interest rate cap agreement
based on a notional principal amount of $100,000. Under the outstanding swap
agreements, the Company receives a floating rate of interest based on
three-month LIBOR, which resets quarterly, and pays a fixed rate of interest,
each quarter, for the term of the agreements. As of December 31, 1997, the
weighted average variable rate and weighted average fixed rate were 5.88% and
6.68%, respectively. In addition, in July 1997, the Company entered into four,
three-year and two, four-year interest rate swap agreements, with an aggregate
notional amount of $600,000. Under these new swap agreements, which commence on
January 2, 1998, the Company will receive a floating rate of interest based on
three-month LIBOR, which resets quarterly, and the Company will pay a fixed rate
of interest, each quarter, for the terms of the respective agreements.
The Company is exposed to credit risk in the event of nonperformance by
counterparties to its interest rate swap and cap agreements. Credit risk is
limited by entering into such agreements with primary dealers only; therefore,
the Company does not anticipate that nonperformance by counterparties will
occur. Notwithstanding this, the Company's treasury department monitors
counterparty credit ratings at least quarterly through reviewing independent
credit agency reports. Both current and potential exposure are evaluated, as
necessary, by obtaining replacement cost information from alternative dealers.
Potential loss to the Company from credit risk on these agreements is limited to
amounts receivable, if any. The Company enters into these agreements solely to
hedge its interest rate risk.
Under the Credit Facilities, at December 31, 1997, the Company has total
commitments of $1,550,000 and can borrow up to $1,650,000 in the aggregate. As
of December 31, 1997, aggregate borrowings under the Credit Facilities were
$1,218,101. As of December 31, 1997, the amounts borrowed under the Credit
Facilities bore interest at a weighted average variable interest rate of 7.05%.
Also, at December 31, 1997, the Company had outstanding $100,000 of 10 1/4%
Senior Notes, $300,000 of 8 1/2% Senior Notes, 1,576,036 shares of $11.625
Series B Exchangeable Preferred Stock, 2,000,000 shares of $10.00 Series D
Exchangeable Preferred Stock and 1,250,000 shares of $9.20 Series E Exchangeable
Preferred Stock.
The above indebtedness, among other things, limits the ability of the
Company to change the nature of its businesses, incur indebtedness, create
liens, sell assets, engage in mergers, consolidations or transactions with
affiliates, make investments in or loans to certain subsidiaries, issue
guarantees and make certain restricted payments including dividend payments on
its common stock. Under the Company's most restrictive debt covenants, the
Company must maintain a minimum interest coverage ratio of 1.8 to 1 and a
minimum fixed charge coverage ratio of 1.05 to 1 and its maximum allowable
leverage ratio is 6.0 to 1. The Company believes it is in compliance with the
financial and operating covenants of its principal financing arrangements.
Borrowings under the above indebtedness are guaranteed by each of the domestic
wholly-owned subsidiaries of the Company. Such guarantees are full,
unconditional and joint and several. The separate financial statements of the
domestic subsidiaries are not presented because the Company believes the
separate financial statements would not be material to the shareholders and
potential investors. The Company's foreign subsidiaries are not guarantors of
the above indebtedness. The total assets, revenues,
39
<PAGE>
income or equity of such foreign subsidiaries, both individually and on a
combined basis, are inconsequential in relation to the total assets, revenues,
income, or equity of the Company.
The aggregate mandatory reductions of the commitments under the Credit
Facilities are $150,000 in 1998, $90,000 in 1999, $280,000 per year in 2000
through 2003 with a final reduction or paydown of $190,000 in 2004. The 10 1/4%
Senior Notes mature in June 2004 and the 8 1/2% Senior Notes mature in February
2006. The per annum principal and interest payments relating to an acquisition
obligation are scheduled to be $14,333, $21,167, $19,167, and $8,833 to be made
in semi-annual installments in 1998 through 2001, respectively. The Company's
aggregate lease obligations for 1998, 1999 and 2000 are expected to be
approximately $30,000, $27,000 and $24,000, respectively. The Company believes
its liquidity, capital resources and cash flow are sufficient to fund planned
capital expenditures, working capital requirements, interest and principal
payments on its debt, the payment of preferred stock dividends and other
anticipated expenditures for the foreseeable future.
RECENT ACCOUNTING PRONOUNCEMENTS
In 1997, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share" which became effective for the Company's
1997 consolidated financial statements beginning in the fourth quarter of 1997.
SFAS No. 128 eliminates the disclosure of primary earnings per share which
includes the dilutive effect of stock options, warrants and other convertible
securities ("Common Stock Equivalents") and instead requires reporting of
"basic" earnings per share, which excludes Common Stock Equivalents.
Additionally, SFAS No. 128 changes the methodology and criteria for calculating
and reporting fully diluted earnings per share. The adoption of this new
accounting standard did not have a material effect on the reported loss per
share of the Company. SFAS No. 128 also required previously reported loss per
share to be restated.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income" and SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information," which become effective for the
Company's 1998 consolidated financial statements. SFAS No. 130 requires the
disclosure of comprehensive income, defined as the change in equity of a
business enterprise during a period from transactions and other events and
circumstances from non-owner sources, in the Company's consolidated financial
statements. SFAS No. 131 requires that a public business enterprise report
certain financial and descriptive information about its reportable operating
segments. In the opinion of the Company's management, it is not anticipated that
the adoption of these new accounting standards will have a material effect on
the consolidated financial statements of the Company.
In February 1998, the Financial Accounting Standards Board issued SFAS No.
132, "Employers' Disclosures about Pensions and Other Postretirement Benefits,"
which becomes effective for the Company's 1998 consolidated financial
statements. SFAS No. 132 standardizes the disclosure requirements for pensions
and other postretirement benefits to the extent practicable, requires additional
information on changes in the benefit obligations and fair values of plan assets
that will facilitate financial analysis, and eliminates certain previously
required disclosures. In the opinion of the Company's management, it is not
anticipated that the adoption of this new accounting standard will have a
material effect on the consolidated financial statements of the Company.
RECENT DEVELOPMENTS
In January 1998, the Company elected to terminate its defined benefit
pension plan effective March 31, 1998. In connection with this termination, the
Company froze benefit accruals effective December 31, 1997. In the opinion of
the Company's management, the plan benefits payable on the termination are
adequately accrued for and will not have a material impact on the Company's
consolidated financial statements. Active plan participants will be eligible to
participate in the Company's defined contribution plans.
40
<PAGE>
On February 17, 1998, the Company exchanged the 1,250,000 shares of its
$9.20 Series E Exchangeable Preferred Stock for 1,250,000 shares of $9.20 Series
F Exchangeable Preferred Stock ("Series F Preferred Stock"). The terms of the
Series F Preferred Stock are the same as the $9.20 Series E Exchangeable
Preferred Stock except that the Series F Preferred Stock has been registered
under the Securities Act of 1933.
On February 17, 1998, the Company completed a private offering of 2,500,000
shares of $8.625 Series G Exchangeable Preferred Stock for $250,000 and $250,000
principal amount of 7 5/8% Senior Notes Due 2008. The net proceeds of these
offerings were used to redeem all of the Company's outstanding $11.625 Series B
Exchangeable Preferred Stock at $105.80 per share plus accrued and unpaid
dividends to the redemption date and to reduce outstanding borrowings under the
Credit Facilities, which amounts may be reborrowed for general corporate
purposes including acquisitions.
On March 18, 1998, KKR 1996 Fund L.P., a Delaware limited partnership
affiliated with KKR (the "KKR Fund"), purchased 16,666,667 shares of newly
issued common stock from the Company for $200,000 (the "KKR Fund Investment").
The net proceeds from the KKR Fund Investment were used to repay borrowings
outstanding under the Credit Facilities, which amounts may be reborrowed for
general corporate purposes including acquisitions.
On March 19, 1998, the Company completed the acquisition of the stock of
Cowles Enthusiast Media and Cowles Business Media (together, "Cowles") from
McClatchy Newspapers, Inc. ("McClatchy") for approximately $200,000 (the "Cowles
Acquisition"). With the Cowles Acquisition, the Company added 25 enthusiast
titles to its specialty consumer magazines group, and 11 technical and trade
magazines and 15 trade shows to its technical and trade magazines group.
For the period from January 1, 1998 through April 16, 1998, in addition to
the Cowles Acquisition, the Company had completed four product-line acquisitions
in the specialty magazines and information segments. The aggregate purchase
price for such acquisitions was approximately $12,000.
On April 20, 1998, the New Credit Facility expired. As a result, the Company
has total commitments of $1,400,000 and can borrow up to $1,500,000 in the
aggregate under its Bank Credit Facilities.
On April 23, 1998, the Company entered into a definitive stock purchase
agreement to sell Nelson Information, Inc., a leading information provider in
the financial services industry, to Thomson Information Services Inc.
IMPACT OF INFLATION
The impact of inflation was immaterial during 1997 and 1996. Paper prices,
which had risen significantly during 1995 and early 1996, declined around
mid-year 1996 and continued that trend through the first six months of 1997.
Moderate paper price increases occurred in July 1997 for most of the grades of
paper used by the Company. During 1997, paper costs represented approximately
7.8% of the Company's total operating costs and expenses. Postage for product
distribution and direct mail solicitations is also a significant expense of the
Company. The Company uses the U.S. Postal Service for distribution of many of
its products and marketing materials. Postage costs increase periodically and
can be expected to increase in the future. In the past, the effects of inflation
on operating expenses have substantially been offset by PRIMEDIA's ability to
increase selling prices. No assurances can be given that the Company can pass
such cost increases through to its customers. In addition to pricing actions,
the Company is continuing to examine all aspects of the manufacturing and
purchasing processes to identify ways to offset some of these price increases.
YEAR 2000
The Company has evaluated the potential impact of the situation commonly
referred to as the "Year 2000 problem". The Year 2000 problem, which is common
to most corporations, relates to the inability of
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information systems, primarily computer software programs, to recognize and
process properly date information related to the year 2000 and beyond. An
assessment of the Company's systems indicates that the costs associated with
solving the Year 2000 problem will not be material, due largely to investments
already made in information systems in recent years. A significant portion of
the Company's efforts related to this issue involves assessing vendor compliance
and developing contingency plans to deal with situations where significant
vendors are perceived to be unable to fix in a timely manner their Year 2000
problem.
FORWARD-LOOKING INFORMATION
This report contains certain forward-looking statements concerning the
Company's operations, economic performance and financial condition. These
statements are based upon a number of assumptions and estimates which are
inherently subject to uncertainties and contingencies, many of which are beyond
the control of the Company, and reflect future business decisions which are
subject to change. Some of these assumptions may not materialize and
unanticipated events will occur which can affect the Company's results.
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BUSINESS
GENERAL
PRIMEDIA is the authoritative source of specialized information for highly
targeted audiences in the education, business and special interest consumer
markets. Most of the Company's products have leadership positions in the
specialty niche markets in which such products compete: specialty media (E.G.,
SEVENTEEN, AMERICAN BABY, SOAP OPERA DIGEST, TRUCKIN', SEW NEWS and TELEPHONY);
education (E.G., CHANNEL ONE NETWORK, WEEKLY READER and PRIMEDIA Workplace
Learning); and information (E.G., APARTMENT GUIDES, WARD'S, THE WORLD ALMANAC
and BACON'S).
The Company has achieved substantial sales growth through the development of
its franchises, combined with its operating expertise and successful acquisition
strategy. From 1993 through 1997, net sales have grown at a compound annual rate
of 15% to $1,487.6 million. The operating loss in 1997 was $20.8 million
compared to $7.7 million in 1993 (after deductions for amortization,
depreciation, provision for loss on the sales of businesses and other of $322.8
million in 1997 and $145.9 million in 1993).
The Company had net income (loss) of $(172.8) million, $8.0 million and
$(75.4) million for the years ended December 31, 1997, 1996 and 1995,
respectively. The Company's deficiency of earnings to fixed charges was $159.1
million, $35.7 million and $135.0 million for the years ended December 31, 1997,
1996 and 1995, respectively. The Company's deficiency of earnings to fixed
charges plus preferred stock dividends was $224.2 million, $79.2 million and
$164.0 million for the years ended December 31, 1997, 1996 and 1995,
respectively. The Company's pro forma deficiency of earnings to fixed charges
and earnings to fixed charges plus preferred stock dividends was $141.8 million
and $201.4 million, respectively, for the year ended December 31, 1997.
Approximately 52% of PRIMEDIA's publications are controlled circulation and
the remaining 48% are paid circulation. For the year ended December 31, 1997,
PRIMEDIA's controlled circulation publications generated approximately 48% of
publication advertising revenue and 6% of circulation revenue and the paid
circulation publications generated approximately 52% of publication advertising
revenue and 94% of circulation revenue.
GROWTH STRATEGY
PRIMEDIA's strategy is to address growing needs in today's information
economy. Technology has created a flood of information. Consequently, management
believes the key role of the media is shifting from making information broadly
available across all audiences to sifting out and qualifying information for the
benefit of specific audiences. The Company's products are authoritative
information sources meeting customers' particular needs in the most beneficial
formats--print, electronic, and multimedia. Its pursuit of this strategy in its
targeted markets has enabled PRIMEDIA to achieve an average market share across
all products of 60%, with 80% ranking number one or two in their markets.
PRIMEDIA provides authoritative information in six areas that show superior
growth: specialty consumer magazines and technical and trade magazines in the
specialty magazine segment; classroom learning and workplace learning in the
education segment; and consumer information and business information products in
the information segment. In each of these six areas, the Company offers
authoritative information products that have a branded presence and leading
market positions.
The Company is taking advantage of fundamental growth trends in these six
markets. The Company's specialty magazines take advantage of trends in the
specialty consumer market where advertising growth has outpaced general interest
magazine, broadcast television, radio and newspaper advertising growth since
1989. In classroom and workplace learning, PRIMEDIA is building on rising
elementary and secondary school enrollments, increased spending on supplementary
educational materials and the rapid growth in outsourced workplace education.
The Company's consumer and business information products are capitalizing on the
trend towards targeted marketing and away from general interest sources such as
newspapers and the increased spending by businesses for information.
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The Company seeks to maximize its operating performance by capitalizing on
its leading position in each of these growing markets. Each of PRIMEDIA's six
growth vehicles has opportunities for expansion through both internal organic
development and product line acquisitions. Organic growth results from both
market expansion and product innovation in conventional and new media formats.
Growth through product line acquisition is made possible by the constant
availability of leading brands for sale in niche markets in PRIMEDIA's six
growth areas. To support this aspect of growth, the Company has successfully
developed a selective and disciplined process of identifying, evaluating and
integrating acquired companies. A major source of funds for these product line
acquisitions is the cash generated by the Company's operations, which by their
nature have high operating margins and low capital requirements. Net capital
expenditures were $31.1 million in 1997 and $28.8 million in 1996, or 2.1% of
net sales in each respective year. Additionally, cash available for reinvestment
is amplified because the Company pays virtually no income taxes largely as a
result of having structured most of its acquisitions to create tax-deductible
amortization of intangible assets which results in net operating losses.
SPECIALTY MAGAZINES
The specialty magazine segment consists of specialty consumer magazines and
technical and trade magazines. In 1997, 60% of the Company's specialty consumer
magazines and nearly 50% of its technical and trade magazines were ranked number
one in their respective markets. According to the WALL STREET JOURNAL, PRIMEDIA
is the largest magazine publisher in the United States by ad page count. Some of
the Company's specialty consumer magazines include SOAP OPERA DIGEST, SEVENTEEN,
NEW YORK, CHICAGO TRUCKIN' and SEW NEWS, while leading technical and trade
publications include TELEPHONY, FLEET OWNER and AMERICAN PRINTER. Advertising in
specialty consumer magazines grew at a 9.5% compound annual growth rate between
1991 and 1996, outpacing advertising growth in general interest magazines,
radio, broadcast television and newspapers.
SPECIALTY CONSUMER MAGAZINES
The Company's specialty consumer magazines include SOAP OPERA DIGEST, MODERN
BRIDE, SEVENTEEN, AMERICAN BABY, over 36 automotive magazines and 13 local
bridal, as well as sewing, crafts and other titles. The principal sources for
specialty consumer magazines' sales are advertising and circulation. In the year
ended December 31, 1997, approximately 54% of the specialty consumer magazines'
sales were from advertising, 42% were from circulation and 4% were from other
sources.
SOAP OPERA DIGEST and SOAP OPERA WEEKLY are the leading publications
covering soap operas aired on network television. SOAP OPERA DIGEST was a
bi-weekly publication through 1996. In the spring of 1997, SOAP OPERA DIGEST
became a weekly publication with an average circulation of 1.1 million per week.
SOAP OPERA WEEKLY had an average 1997 circulation of 465,000. Both publications
are distributed mainly at supermarket, convenience store and drugstore checkout
counters with Soap Opera Digest also having a significant subscriber base. They
compete for circulation on the basis of editorial content and quality against
such publications as SOAP OPERA NEWS and SOAP OPERA MAGAZINE, both of which have
substantially lower circulation.
SEVENTEEN is the leading young womans' fashion and beauty magazine based on
both circulation and advertising pages, with fashion, boys, beauty, talent and
lifestyle editorial targeted to girls aged 12 to 19. SEVENTEEN is the largest
circulation teen and fashion and beauty magazine in the United States with a
monthly rate base of 2.3 million. Its principal competitor is YM. SEVENTEEN
competes for circulation based on the nature and quality of its editorial.
AMERICAN BABY, a baby care publication distributed monthly to approximately
1.7 million expectant and new parents, contains articles on all aspects of
pregnancy and baby care. While the magazine competes with PARENTS, PARENTING and
CHILD for the larger childcare market, AMERICAN BABY'S principal competitor is
BABY TALK. AMERICAN BABY also offers several ancillary products including
sampling and couponing programs and a cable television show.
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The Company's other specialty consumer magazines include AUTOMOBILE, which
caters to the high-end automotive market, MODERN BRIDE, a guide to bridal
fashions, home furnishings and honeymoons, the city magazines NEW YORK and
CHICAGO, TRUCKIN' the leading truck customization publication. SEW NEWS, the
premier sewing title, and DOG WORLD, the leading publication for dog breeders.
The Company's sales of automotive titles are primarily newsstand driven, the
sewing and crafts titles are primarily sold by subscription, and the other
titles have significant sales both by subscription and on the newsstand.
Subscriptions are obtained using printed advertisements, direct mail,
clearinghouses and subscription cards in each magazine.
In 1997, the Company acquired CONTEMPORARY BRIDE OF DETROIT, SHOTGUN NEWS,
SURFING, CAR AUDIO AND ELECTRONICS, VETTE, MUSCLE MUSTANGS, LOW RIDER, and
several other related titles. As a result of the Cowles Acquisition, the Company
added 25 enthusiast titles to its specialty consumer magazines group.
Readers value specialty consumer magazines for their editorial content and
also rely on them as a catalog of products in the relevant topic area. This
catalog aspect makes the specialty consumer magazines an important media buy for
advertisers. Advertising sales for the Company's specialty consumer magazines
are generated by a combination of in-house staff and outside advertising firms.
The magazines compete for advertising on the basis of circulation and the niche
markets they serve. Each of the Company's specialty consumer magazines faces
competition in its subject area from a variety of publishers, and competes for
readers on the basis of high quality, targeted editorial, which is provided by
in-house writers and freelance authors.
BRAND LEVERAGING
In 1997, SEVENTEEN established a brand licensing program centered around the
launch of select categories of SEVENTEEN-branded merchandise. This merchandise
will begin to appear in retail outlets in mid-1998.
Major 1997 launches of websites were for SOAP OPERA DIGEST
(www.soapdigest.com) and NEW YORK MAGAZINE (www.newyorkmag.com). The Company now
has websites for the vast majority of its specialty consumer magazines. In 1997,
the Company launched numerous special issues of titles including, but not
limited to, SEVENTEEN, AUTOMOBILE MAGAZINE, HORTICULTURE and TRUCKIN'.
TECHNICAL AND TRADE MAGAZINES
The Company publishes 65 technical and trade magazines that provide vital
information to professionals in fields such as telecommunications (TELEPHONY and
WIRELESS REVIEW), agriculture (SOYBEAN DIGEST), transportation (FLEET OWNER) and
real estate (NATIONAL REAL ESTATE INVESTOR). In 1997, 31 of these publications
ranked number one and approximately 72% of these publications ranked number one
or two, in the fields they serve based on advertising pages. These magazines are
distributed primarily on a "controlled circulation" basis to members of a
targeted industry group and provide career and business-enhancing technical and
tutorial editorial content. Capitalizing on the centralized circulation,
fulfillment, production and other back office services, new titles can be
spun-off from existing titles or acquired and integrated.
During 1997, approximately 78% of the sales of the technical and trade
titles were generated from advertising. Because each of the technical and trade
magazines is distributed almost exclusively to purchasing decision makers in a
targeted industry group, product and service providers are able to focus their
advertising. The advertising rates charged are based on the size of the
circulation within the target group as well as competitive factors. These
magazines compete for advertising on the basis of advertising rates,
circulation, reach, editorial content and readership commitment. Advertising
sales are made by in-house sales forces, supplemented by independent
representatives in selected regions and overseas. Classified advertising is sold
through telemarketing. Magazine editorial is provided by in-house writers and
freelance authors, well-known in their specific industry niches. In addition to
its technical and trade magazines, the Company sponsors seminars and trade
shows, including LIGHTING DIMENSIONS INTERNATIONAL,
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INTERNATIONAL WIRELESS COMMUNICATIONS EXPO and THE SATELLITE COMMUNICATIONS EXPO
& CONFERENCE, serving the advertisers and readers of the corresponding
publications.
In 1997, the Company announced a joint venture with Cheng Cheng Enterprises
Holdings (China) Ltd. to publish technical and trade magazines in China.
Additionally, the Company acquired both Cardinal Business Media, Inc., a leading
publisher of technical entertainment business magazines and REGISTERED
REPRESENTATIVES, the leading magazine for retail brokers. As a result of the
Cowles Acquisition, the Company added 11 technical and trade magazines and 15
trade shows to its technical and trade magazines group.
BRAND LEVERAGING
In the technical and trade magazine segment, the Company launched numerous
new media products including 14 websites and a CD-ROM for ELECTRICAL
WHOLESALING. The Company maintains 14 other sites for technical and trade
magazines. Many of these sites carry paid advertising.
EDUCATION
The Company is a leading provider of supplementary educational materials and
programming in the United States, targeting both classroom and workplace
learning. PRIMEDIA's best-known brands in classroom learning include CHANNEL ONE
and WEEKLY READER, and in workplace learning, PRIMEDIA Workplace Learning,
formerly known as Westcott Communications. Classroom learning takes advantage of
the growth in spending on supplementary educational materials and the projected
increases in elementary and secondary school enrollments over the next decade
(in particular, school enrollments are expected to rise 7% between 1995 and
2005). Workplace learning focuses on the $69 billion training market of which
the outsourced segment is the fastest growing portion, expected to rise 142%
between 1995 and 2005.
CLASSROOM LEARNING
The Company operates CHANNEL ONE NETWORK, WEEKLY READER and Films for the
Humanities and Sciences.
CHANNEL ONE'S NETWORK news program, CHANNEL ONE NEWS, is the only daily news
program targeted to secondary school students. CHANNEL ONE NEWS broadcasts every
school day via satellite to approximately eight million students and 350,000
educators and approximately 12,000 secondary schools in the United States.
CHANNEL ONE NETWORK pioneered the delivery of world events and educational
programming into classrooms via satellite. Its award-winning daily news
broadcast reaches more students than any other electronically delivered
educational product. CHANNEL ONE NEWS has ten times the teenage audience of the
evening newscasts of ABC, CBS, NBC and cable networks combined.
Schools sign up for CHANNEL ONE NETWORK service under a three-year contract
pursuant to which they agree to show CHANNEL ONE NEWS, in its entirety, at least
90% of all school days. CHANNEL ONE NETWORK provides to schools a turnkey system
of video cassette recorders and networked televisions. These products and
services are provided to schools at no charge; sales are generated by two
minutes of advertising shown during the 12-minute daily newscast. Substantially
all school contracts have come up for renewal at least once and approximately
99% have been renewed in each renewal cycle.
CHANNEL ONE NEWS is produced at CHANNEL ONE NETWORK'S Los Angeles studio,
using staff anchors and correspondents who report from U.S. and international
locations. CHANNEL ONE NETWORK has a library of over 1,500 broadcasts including
approximately 200 single subject series, 60 of which have been released as
educational videos.
CHANNEL ONE NEWS has no direct competition in the schools but does compete
for advertising dollars with other media aimed at teenagers. The Company's
primary competitive advantage is its total audience of over eight million
teenagers each school day. For 1997, approximately 64% of CHANNEL ONE NEWS'
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advertising sales were from contracts having terms of three or more years. The
top five advertisers in 1997 by dollars were PepsiCo, M&M Mars, Quaker Oats,
Reebok and Nintendo, which together accounted for approximately 56% of
advertising sales, and 93% of which was pursuant to multi-year contracts
expiring between June 1998 and December 1999.
CHANNEL ONE'S THE CLASSROOM CHANNEL offers a range of instructional
programming to enhance the schools' curriculum. THE CLASSROOM CHANNEL offers an
average of 80 minutes of daily programming at no charge to schools. In 1997,
CHANNEL ONE NETWORK expanded its franchise by expanding the distribution of THE
COLLEGE CHANNEL, a college preparation service produced in conjunction with The
Princeton Review, to more than 5,000 high schools; increasing the traffic on its
CHANNELONE.COM on-line network by more than 100%; licensing its programming in
Thailand; and renewing its weekly ONEZONE news program for a second broadcast
season on public television. Additionally, in 1997, CHANNEL ONE NETWORK acquired
Cover Concepts, a publisher of customized school book covers.
WEEKLY READER is the best-known and highest-circulation student newspaper in
the United States, with over 6.6 million subscriptions for elementary school
students alone. WEEKLY READER and its related products are sold in approximately
70% of all elementary schools and 59% of all secondary schools, and for the
1996-1997 school year had a 55% share of the elementary school market and a 38%
share of the secondary school market.
Eight separate editions of WEEKLY READER, each consisting of 26 issues per
year, are distributed to elementary school students. Each edition is written and
designed for a particular reading and comprehension level in order to bring
current world news to children at a level commensurate with their comprehension
abilities. A teacher's guide with background information, discussion topics and
follow-up questions is included with each edition. In order to capitalize on its
large teacher and school customer base for organic growth, WEEKLY READER
launched SCIENCE SPIN, an optional monthly supplement with separate editions for
grades K to 6. SCIENCE SPIN achieved an initial circulation of 510,000 in its
first year of publication. Every full-color issue contains current and
interesting science new tailored to student reading levels and the school
curriculum.
For the secondary school market, WEEKLY READER publishes eight other
periodicals: READ MAGAZINE, WRITING, CURRENT EVENTS, CURRENT SCIENCE, CURRENT
HEALTH I AND II, CAREER WORLD and KNOW YOUR WORLD EXTRA. These periodicals
provide current information and skills practice in the curriculum areas of
language arts, science, health and remedial reading. Editorial materials for
these publications are generated by in-house writers and freelance authors. The
Company's main competitors in these markets are Scholastic Corporation and Timer
Warner, Inc. WEEKLY READER generally competes on the basis of editorial quality,
content and value.
Films is the exclusive distributor of approximately 6,500 educational videos
as well as videodiscs, CD-ROMs and related products that are sold primarily by
direct mail to teachers, instructors and librarians serving primarily grades 8
to 12 and college markets. Films is the largest distributor of such products to
colleges and high schools and competes on the basis of quality and breadth of
the subject matter it markets. In 1997, Films acquired the exclusive right to
distribute the non-theatrical British Broadcasting Corporation videos to the
U.S. education markets.
WORKPLACE LEARNING
PRIMEDIA Workplace Learning, formerly Westcott Communications, Inc., is a
leading provider of high quality workplace educational materials including video
programming, print and computer based products. PRIMEDIA Workplace Learning has
approximately 20,000 corporate and institutional subscribers. The group's
satellite-delivered and video programming reaches three million professionals
each year on more than 20 networks and is the premier provider of
electronically-delivered workplace training in such fields as automotive,
healthcare, banking, and insurance.
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The Company's leading networks include the Executive Education Network
("EXEN") and the Interactive Medical Network ("IMN"). EXEN delivers executive
education courses taught by professors from leading business schools including
Harvard University, Colombia University and the University of Southern
California to corporate and professional clients nationwide.
In 1997, PRIMEDIA Workplace Learning launched two networks: the WORKPLACE
TRAINING NETWORK ("WTN") which provides satellite-delivered information on
industrial safety and training and the PRIMEDIA FINANCIAL NETWORK ("PFN") which
provides training for financial professionals, delivered by satellite and video.
PRIMEDIA WORKPLACE LEARNING does not have any multi-industry competitors in
the workplace learning market. The Company competes with a number of businesses
and governmental agencies that provide videotaped training material, consulting
services and instruction at via television, print, video, internet or seminars.
In 1997, PRIMEDIA Workplace Learning acquired Pictorial, the largest
provider of specialized training and certification products for the insurance
industry, and QWIZ, the leading provider of computer-based office skills
testing. Both acquisitions add training and testing expertise in growth
industries.
INFORMATION
The Company produces over 170 highly targeted consumer and business
information products, most of which hold dominant positions in their niche
markets. The Company's premier consumer information products include APARTMENT
GUIDES, THE WORLD ALMANAC and such specialty reference products as FACTS ON FILE
NEWS SERVICES which is used by public and institutional libraries. Its leading
business information products include BACON'S for public relations professionals
and INTERNATIONAL TRADE GUIDES for import/ export professionals.
The growth in advertising supported consumer information (E.G.--targeted
free publications, such as the APARTMENT GUIDES) is being driven by the
advertisers' need to reach their customers as cost effectively as possible. From
1995 to 2005, advertising revenue generated from free shopping guides is
expected to nearly double. Consequently, APARTMENT GUIDES and PRIMEDIA's other
targeted free publication should continue to provide significant opportunities
for growth through new ventures and acquisitions. PRIMEDIA's business
information products capitalize on the growth in business spending on
information which is expected to increase 8% on a compound annual basis, between
1995 and 2005.
CONSUMER INFORMATION
The Company publishes over 70 consumer directories and specialized reference
products. These products are distributed nationally in retail outlets and are
sold to public and institutional libraries. The Company publishes and
distributes consumer guides in three categories: rental apartments, new homes
and computer shopping. The Company's leading reference products include THE
WORLD ALMANAC, FACTS ON FILE NEWS SERVICES and the Gareth Stevens line of
juvenile reference works.
The Company is the leading publisher of rental apartment guides in the
United States with 63 local versions of its apartment guides, each of which is
published no less frequently than quarterly and provides informational listings
about featured apartment communities. All listed apartments are carried on the
Internet at WWW.APTGUIDES.COM. These listings are paid for by apartment
community managers, who need to fill vacant apartments, and who represent 100%
of the apartment guide sales. The Company is the dominant information provider
in apartment guides. The Company's only national competitor, FOR RENT, is
present in 37 of the Company's markets. In those markets, on average, the
Company captured 52% of total 1997 advertising pages, with FOR RENT capturing
43% of such advertising pages.
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In 1997, the Company acquired apartment guides in Dayton, Nashville, Memphis
and Little Rock, and made its most successful launch ever in Salt Lake City.
Additionally, the Company acquired a new homes guide in Austin.
The Company's DistribuTech Division is the nation's largest distributor of
free publications, including its own consumer directories and over 600 other
titles. In 1997, DistribuTech managed the distribution of its and other
publishers' free publications to over 19,000 grocery, convenience and drug
stores in 65 U.S. cities, as well as universities, military bases and major
employers. The majority of these locations are operated under exclusive
distribution agreements. The Company's consumer information guides typically are
displayed in free standing, multi-pocket racks. DistribuTech generates
substantial revenues by leasing the rack pockets that are not used for the
Company's publications to other publications that it also distributes.
DistribuTech competes on the basis of its prime retail locations for its rack
program.
THE WORLD ALMANAC is the leading almanac in the English language ranked by
unit sales and data content with approximately 1.0 million copies of the 1998
edition sold as of December 31, 1997. In 1997, the Company published the third
annual edition of THE WORLD ALMANAC FOR KIDS, which sold approximately 220,000
copies. THE WORLD ALMANAC licenses its content for use on seven CD-ROM products
and six on-line services. The Company's World Almanac Education Division sells
reference books to the school and library market by catalog. Facts on File News
Services publishes subscription products that are sold to schools and libraries.
The flagship product, WORLD NEWS DIGEST, published weekly, is available in
print, CD-ROM and on-line formats, and has a subscriber base of approximately
7,000.
Gareth Stevens, a publisher and distributor of juvenile reference works and
a distributor of multi-media products, was acquired by the Company in February
1997. Gareth Stevens has a title list of approximately 800 titles and its market
focus is North America's primary and secondary school libraries and public
libraries. Funk & Wagnalls' New Encyclopedia licenses its editorial content, for
electronic delivery, to Microsoft Corporation as the textual basis for
Microsoft's ENCARTA CD-ROM product and for use on four CD-ROM products and five
on-line services. The Company experiences competition for its reference products
from a variety of other print and electronic products from a variety of
publishers and competes based on the quality of its content and price.
BUSINESS INFORMATION
The Company publishes approximately 100 specialized directories and
databases focused on the specialized information needs of professionals in such
areas as commerce, public relations and transportation. The databases are
compiled by an in-house editorial staff, marketed directly to subscribers and
advertisers primarily by an in-house sales staff and distributed predominantly
on a paid subscription basis. Products are available in the most appropriate
format for the customer: Internet, CD-ROM or print. The Company's Bacon's unit
publishes MEDIASOURCE, a CD-ROM directory for public relations and media
professionals, as well as print directories including BACON'S INTERNATIONAL
MEDIA DIRECTORY and BACON'S BUSINESS MEDIA DIRECTORY. To complement its public
relations directories, the Company operates a periodicals clipping service.
The Company also publishes newsletters that provide in-depth information on
selected markets. WARD'S AUTOMOTIVE REPORTS is recognized as the authoritative
source for industry-wise statistics on automotive production and sales. This
newsletter competes on the basis of the nature and quality of its editorial
content. In addition, the Company publishes, in print and electronic formats,
used vehicle valuation information. Other databases include THE ELECTRONICS
SOURCEBOOK AND AC-U-KWIK.
Most of the business information products published by the Company have no
competition. Where competition does exist, in most cases, the Company's
publication is dominant. Competition, is on the basis of price and quality of
data. Management believes that the comprehensiveness and quality of its data and
the specialized focus of its publications have prevented others from launching
competing publications or competing effectively.
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In 1997, the Company acquired INTELLICHOICE, the leading provider of
Internet-based automobile cost information over the life of the automobile and
released several CD-ROM products, including THE BLUEBOOK OF LOGISTICS EXECUTIVES
and ELECTRICAL WHOLESALING.
NON-CORE BUSINESSES SOLD
As a part of its strategy to focus on areas of its business that have the
greatest potential for growth, the Company divested certain businesses that do
not fit within its growth vehicles. Those businesses are Krames Communications,
the Katharine Gibbs Schools, Newbridge Book Clubs, Newbridge Educational
Publishing, NEW WOMAN magazine, STAGEBILL, and INTERTEC MAILING SERVICES. The
net proceeds from the completed sales of Non-Core Businesses were used to repay
borrowings outstanding under the Credit Facilities, which amounts may be
reborrowed for general corporate purposes including acquisitions. The Company
intends to divest DAILY RACING FORM during 1998. The above businesses are
collectively referred to as the Non-Core Businesses.
The following table presents unaudited combined operating results for the
year ended December 31, 1997 for the Non-Core Businesses. There can be no
assurance that the remaining Non-Core Business will be divested.
<TABLE>
<CAPTION>
(IN
THOUSANDS)
-------------
<S> <C>
Sales, net .................................................................... $ 247,351
Operating loss ................................................................ (131,397)
Depreciation and amortization.................................................. 146,970
</TABLE>
In addition, on April 23, 1998, the Company entered into a definitive stock
purchase agreement to sell Nelson Information, Inc., a leading information
provider in the financial services industry, to Thomson Information Services
Inc.
PRODUCTION AND FULFILLMENT
Virtually all of the Company's print products are printed and bound by
independent printers. The Company believes that outside printing services at
competitive prices are readily available. With the exception of PRIMEDIA
Workplace Learning and Films which produce video products in-house, and most
Internet sites, all other production of electronic and video products is
performed by third party vendors.
The principal raw material used in the Company's products is paper. The
Company has paper supply contracts and, in almost all cases, supplies paper used
by its outside printers. The Company believes that even if at some point in the
future paper is in limited supply, the existing arrangements providing for the
supply of paper will be adequate. The Company was able to meet its paper
requirements during 1997. In 1997, approximately 39% and 34% of the Company's
paper purchases were supplied through Lindenmeyr Central and Bulkley Dunton,
respectively. The Company's relationship with these suppliers is good and is
expected to continue to be good for the foreseeable future.
Many of the Company's products are packaged and delivered to the U.S. Postal
Service directly by the printer. Other products are sent from warehouses and
other facilities operated by the Company.
COMPANY ORGANIZATION
PRIMEDIA was incorporated on November 22, 1991 in the State of Delaware. The
principal executive office of the Company is located at 745 Fifth Avenue, New
York, New York 10151, telephone number (212) 745-0100.
On November 18, 1997, the Company changed its name to PRIMEDIA Inc. to
reflect better the "prime" positioning the Company has in its six areas of
specialized "media." On November 18, 1997, the Company's New York Stock Exchange
symbol was changed from KCC to PRM.
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<PAGE>
MANAGEMENT
The following table sets forth the name, age as of December 31, 1997 and
position of the senior management and directors of PRIMEDIA:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
William F. Reilly.................................... 59 Chairman of the Board and Chief Executive Officer and
Director
Charles G. McCurdy................................... 42 President and Director
Beverly C. Chell..................................... 55 Vice Chairman, General Counsel, Secretary and
Director
Meyer Feldberg....................................... 56 Director
Perry Golkin......................................... 44 Director
Henry R. Kravis...................................... 53 Director
George R. Roberts.................................... 54 Director
Michael T. Tokarz.................................... 48 Director
Jack L. Farnsworth................................... 52 Executive Vice President
James A. Warner...................................... 45 Vice President
Richard J. LeBrasseur................................ 55 Vice President
Michaelanne C. Discepolo............................. 45 Vice President
George Philips....................................... 67 Vice President
Douglas B. Smith..................................... 37 Vice President and Treasurer
Curtis A. Thompson................................... 46 Vice President and Controller
</TABLE>
Mr. Reilly is Chairman of the Board, Chief Executive Officer and a Director
of PRIMEDIA and has served in such capacities since November 1991. Mr. Reilly is
also a director of FMC Corporation. Mr. Reilly is Chairman of the Executive
Committee of PRIMEDIA.
Mr. McCurdy is President and a Director of PRIMEDIA and has served in such
capacities since November 1991 and was also Treasurer from 1991 to August 1993.
Ms. Chell is Vice Chairman, General Counsel, Secretary and a Director of
PRIMEDIA. Ms. Chell has served as Vice Chairman, General Counsel and Secretary
since November 1991 and as a Director since March 1992. She is also a director
of Mecklermedia Corporation.
Professor Feldberg is Professor and Dean of the Columbia University Graduate
School of Business and has been since 1989. He joined the Board in January 1997.
He is also a director of Federated Department Stores, Inc. and Revlon, Inc. He
is the sole member of the Audit Committee.
Mr. Golkin became a Director of PRIMEDIA in November 1991. He is a General
Partner of KKR Associates and was a General Partner of KKR from January 1, 1995
until January 1, 1996 when he became a member of the limited liability company
which serves as the general partner of KKR. Prior to 1995, Mr. Golkin was an
executive at KKR. He is also a director of Walter Industries, Inc. Mr. Golkin is
a member of the Compensation and Executive Committees of PRIMEDIA.
Mr. Kravis became a Director of PRIMEDIA in November 1991. He is a Founding
Partner of KKR and KKR Associates. Effective January 1, 1996, he became a
managing member of the Executive Committee of the limited liability company
which serves as the general partner of KKR. He is also director of Amphenol
Corporation, AutoZone, Inc., Borden Inc., Bruno's, Inc., Evenflo & Spalding
Holdings Corporation, The Gillette Company, IDEX Corporation, KinderCare
Learning Centers, Inc., Owens-
51
<PAGE>
Illinois Group, Inc., Owens-Illinois, Inc., Randall's Food Markets, Inc., RELTEC
Corporation, Safeway, Inc., Sotheby's Holdings, Inc., Union Texas Petroleum
Holdings, Inc. and World Color Press, Inc. Mr. Kravis is Chairman of the
Compensation Committee and serves on the Executive Committee of PRIMEDIA.
Mr. Roberts became a Director of PRIMEDIA in March 1992. He is a Founding
Partner of KKR and KKR Associates. Effective January 1, 1996, he became a
managing member of the Executive Committee of the limited liability company
which serves as the general partner of KKR. He is also director of Amphenol
Corporation, AutoZone, Inc., Borden Inc., Bruno's, Inc., Evenflo & Spalding
Holdings Corporation, IDEX Corporation, KinderCare Learning Centers, Inc.,
Owens-Illinois Group, Inc., Owens-Illinois, Inc., Randall's Food Markets, Inc.,
RELTEC Corporation, Safeway, Inc., Union Texas Petroleum Holdings, Inc. and
World Color Press, Inc.
Mr. Tokarz became a Director of PRIMEDIA in November 1991. He is a General
Partner of KKR Associates and was a General Partner of KKR from January 1, 1993
until January 1, 1996 when he became a member of the limited liability company
which serves as the general partner of KKR. Prior to 1993, Mr. Tokarz was an
executive at KKR. He is also a director of Evenflo & Spalding Holdings
Corporation, IDEX Corporation, Safeway, Inc. and Walter Industries, Inc. Mr.
Tokarz is a member of the Compensation and Executive Committees of PRIMEDIA.
Mr. Farnsworth has been Executive Vice President of PRIMEDIA since May 1997,
Vice President of PRIMEDIA since May 1992, President of PRIMEDIA Information
Group since May 1992 and President of PRIMEDIA Workplace Learning since June
1996.
Mr. Warner has been a Vice President of PRIMEDIA since March 1998 and
President of PRIMEDIA Specialty Magazines since February 1998. Prior to that
time, he was President of the CBS Television Network starting in 1995. From 1989
to 1995 he was President of CBS Enterprises.
Mr. LeBrasseur has been a Vice President of PRIMEDIA since March 1998,
President of the Supplemental Education Group since October 1997 and President
and Chief Executive Officer of Weekly Reader Corporation since April 1993.
Mr. Philips has been a Vice President of PRIMEDIA since May 1992.
Ms. Discepolo is a Vice President, Human Resources of PRIMEDIA and has
served in such capacity since January 1993. She joined the Company in March 1991
as Director of Human Resources.
Mr. Smith has been a Vice President of PRIMEDIA since May 1997 and Treasurer
of PRIMEDIA since August 1993. Prior to that time he was at The Bank of New York
starting in 1982 holding various positions. He held the position of Senior Vice
President prior to joining PRIMEDIA.
Mr. Thompson is Vice President and Controller of PRIMEDIA and has served in
such capacities since November 1991.
Messrs. Kravis and Roberts are first cousins.
The By-Laws of PRIMEDIA provide for a Board of Directors of at least one but
not more than 15 directors. In accordance with the By-Laws, the Board of
Directors has fixed the number of directors at eight. Officers serve at the
discretion of the Board of Directors.
Messrs. Reilly, Kravis, Tokarz and Golkin comprise the Executive Committee
of the Board of Directors and Messrs. Kravis, Tokarz and Golkin comprise the
Compensation Committee of the Board of Directors. The Audit Committee, which
reviews the scope and results of audit and non-audit services performed by the
Company's independent accountants, consists solely of Professor Feldberg.
52
<PAGE>
THE EXCHANGE OFFERS
PURPOSE AND EFFECT OF THE EXCHANGE OFFERS
The Old Notes and the Old Preferred Stock were issued by PRIMEDIA on
February 17, 1998 (the "Closing Date") to the Initial Purchasers, pursuant to
the Purchase Agreement. The Initial Purchasers subsequently sold the Old Notes
and the Old Preferred Stock to qualified institutional buyers in reliance on
Rule 144A and to non-U.S. persons pursuant to Regulation S, respectively, under
the Securities Act. As a condition to the Purchase Agreement, PRIMEDIA and the
Initial Purchasers entered into the Registration Rights Agreement on February
17, 1998. Pursuant to the Registration Rights Agreement, PRIMEDIA agreed to file
with the SEC a registration statement under the Securities Act with respect to
the Exchange Offers following the Closing Date, (ii) to use its reasonable best
efforts to cause such registration statement to become effective under the
Securities Act at the earliest possible time thereafter, but in no event later
than 180 days after the Closing Date, and (iii) upon effectiveness of the
registration statement, to commence the Exchange Offers. A copy of the
Registration Rights Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The Registration Statement is
intended to satisfy PRIMEDIA's obligations under the Registration Rights
Agreement and the Purchase Agreement.
As a result of the effectiveness of the Registration Statement of which this
Prospectus is a part, payment of certain liquidated damages provided for in the
Registration Rights Agreement will not occur. Following the consummation of the
Exchange Offers, holders of Old Notes and shares of Old Preferred Stock will not
have any further registration rights and the Old Notes and Old Preferred Stock
will continue to be subject to certain restrictions on transfer. See
"--Consequences of Failure to Exchange." Accordingly, the liquidity of the
market for the Old Notes and Old Preferred Stock could be adversely affected.
TERMS OF THE EXCHANGE OFFERS
Upon the terms and subject to the conditions set forth in this Prospectus
and in the applicable Letter of Transmittal, PRIMEDIA will accept (i) any Old
Notes in principal amounts of $1,000 validly tendered and not withdrawn prior to
the Expiration Date and (ii) any and all shares of Old Preferred Stock validly
tendered and not withdrawn prior to the Expiration Date. PRIMEDIA will issue (i)
New Notes in principal amounts of $1,000 for each $1,000 principal amount
outstanding of the Old Notes and (ii) one share of New Preferred Stock in
exchange for each share of Old Preferred Stock, accepted in the Exchange Offers.
Holders may tender some or all of their Old Notes or shares of Old Preferred
Stock pursuant to the Exchange Offers.
The form and terms of the New Notes and the New Preferred Stock are the same
as the form and terms of the Old Notes and the Old Preferred Stock except that
the New Notes and the shares of New Preferred Stock will have been registered
under the Securities Act and hence will not bear legends restricting their
transfer pursuant to the Securities Act.
As of the date of this Prospectus, $250,000,000 principal amount of Old
Notes and 2,500,000 shares of Old Preferred Stock were outstanding. Only a
registered holder of the Old Notes and the Old Preferred Stock (or such holder's
legal representative or attorney-in-fact) as reflected on the records of the
transfer agent and registrar for the Notes or the Preferred Stock may
participate in the Exchange Offers. There will be no fixed record date for
determining registered holders of the Old Notes or the Old Preferred Stock
entitled to participate in the Exchange Offers.
Holders of the Old Preferred Stock do not have any appraisal or dissenters'
rights under the General Corporation Law of Delaware or the Certificate of
Designations for the Old Preferred Stock in connection with the Preferred Stock
Exchange Offer. PRIMEDIA intends to conduct the Exchange Offers in accordance
with the applicable requirements of the Exchange Act and the rules and
regulations of the Commission thereunder.
53
<PAGE>
PRIMEDIA shall be deemed to have accepted validly tendered Old Notes or
shares of Old Preferred Stock when, as and if PRIMEDIA has given oral or written
notice thereof to the Exchange Agent. The Exchange Agent will act as agent for
the tendering holders of the Old Notes or the Old Preferred Stock for the
purposes of receiving the New Notes or the New Preferred Stock from PRIMEDIA.
If any tendered Old Notes or shares of Old Preferred Stock are not accepted
for exchange because of an invalid tender, the occurrence of certain other
events set forth herein or otherwise, certificates for any such unaccepted Old
Notes or shares of Old Preferred Stock will be returned, without expense, to the
tendering holder thereof as promptly as practicable after the Expiration Date.
Holders who tender Old Notes or shares of Old Preferred Stock in the
Exchange Offers will not be required to pay brokerage commissions or fees or,
subject to the instructions in the applicable Letter of Transmittal, transfer
taxes with respect to the exchange of Old Notes or shares of Old Preferred Stock
pursuant to the Exchange Offers. PRIMEDIA will pay all charges and expenses,
other than certain applicable taxes, in connection with the Exchange Offers. See
"--Fees and Expenses."
Each broker-dealer that receives New Notes or New Preferred Stock for its
own account in exchange for Old Notes or Old Preferred Stock, where such New
Notes or New Preferred Stock were acquired by such broker-dealer as a result of
market-making activities or other trading activities must acknowledge that it
will deliver a prospectus in connection with any resale of such New Notes or New
Preferred Stock. See "Plan of Distribution."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1998, unless PRIMEDIA, in its sole discretion, extends the Exchange
Offers, in which case the term "Expiration Date" shall mean the latest date and
time to which the Exchange Offers is extended. The Company will not extend the
Exchange Offer beyond , 1998.
In order to extend the Exchange Offers, PRIMEDIA will notify the Exchange
Agent of any extension by oral or written notice and will make a public
announcement thereof, each prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date.
PRIMEDIA reserves the right, (i) to delay accepting any Old Notes or shares
of Old Preferred Stock, (ii) to extend the Exchange Offers, (iii) if any of the
conditions set forth below under "--Conditions of the Exchange Offer" shall not
have been satisfied, to terminate the Exchange Offers, by giving oral or written
notice of such delay, extension or termination to the Exchange Agent, or (iv) to
amend the terms of the Exchange Offers in any manner. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by a public announcement thereof. If the Exchange Offers are amended
in a manner determined by PRIMEDIA to constitute a material change, PRIMEDIA
will promptly disclose such amendments by means of a prospectus supplement that
will be distributed to the registered holders of the Old Notes and the Old
Preferred Stock, and PRIMEDIA will extend the Exchange Offers for a period of
five to ten business days, depending upon the significance of the amendment and
the manner of disclosure to the registered holders, if the Exchange Offers would
otherwise expire during such five to ten business day period.
Without limiting the manner in which PRIMEDIA may choose to make public
announcement of any delay, extension, termination or amendment of the Exchange
Offers, PRIMEDIA shall not have an obligation to publish, advertise, or
otherwise communicate any such public announcement, other than by making a
timely release to the Dow Jones News Service.
PROCEDURES FOR TENDERING
Only a registered holder (which term, for the purposes described herein,
shall include any participant in The Depository Trust Company (also referred to
as a book-entry transfer facility) whose name appears
54
<PAGE>
on a security listing as the owner of the Old Notes or the Old Preferred Stock)
of Old Notes or shares of Old Preferred Stock may tender such Old Notes or
shares of Old Preferred Stock in the Exchange Offers. To tender in the Exchange
Offers a holder must complete, sign and date the applicable Letter of
Transmittal, or a facsimile thereof, have the signatures thereon guaranteed if
required by the applicable Letter of Transmittal and mail or otherwise deliver
such Letter of Transmittal or such facsimile, together with the Old Notes or the
shares of Old Preferred Stock and any other required documents, to the Exchange
Agent at the appropriate address set forth below under "Exchange Agent" for
receipt prior to the Expiration Date (or comply with the procedure for
book-entry transfer described below).
The tender by a holder will constitute an agreement between such holder and
PRIMEDIA in accordance with the terms and subject to the conditions set forth
herein and in the applicable Letter of Transmittal.
THE METHOD OF DELIVERY OF THE OLD NOTES OR THE SHARES OF OLD PREFERRED STOCK
AND THE APPLICABLE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE
EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY
MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE
EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL, OLD NOTES
OR SHARES OF OLD PREFERRED STOCK SHOULD BE SENT TO PRIMEDIA. HOLDERS MAY REQUEST
THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES
TO EFFECT THE ABOVE TRANSACTION FOR SUCH HOLDERS.
The Exchange Agent will make a request promptly after the date of this
Prospectus to establish accounts with respect to the Old Notes and the Old
Preferred Stock at the book-entry transfer facility for the purpose of
facilitating the Exchange Offers, and subject to the establishment thereof, any
financial institution that is a participant in the book-entry transfer
facility's system may make book-entry delivery of Old Notes and/or shares of Old
Preferred Stock by causing such book-entry transfer facility to transfer such
Old Notes and/or shares of Old Preferred Stock into the Exchange Agent's account
with respect to the Old Notes and/or shares of Old Preferred Stock in accordance
with the book-entry transfer facility's procedures for such transfer. Although
delivery of Old Notes and/or shares of Old Preferred Stock may be effected
through book-entry transfer into the Exchange Agent's accounts at the book-entry
transfer facility, an appropriate Letter of Transmittal with any required
signature guarantee and all other required documents must in each case be
transmitted to and received or confirmed by the Exchange Agent at its address
set forth on the back cover page of this Prospectus on or prior to the
Expiration Date, or, if the guaranteed delivery procedures described below are
complied with, within the time period provided under such procedures.
Any beneficial owner whose Old Notes or shares of Old Preferred Stock are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee and who wishes to tender should contact the registered holder
promptly and instruct such registered holder to tender on such beneficial
owner's behalf. See "Instruction to Registered Holder from Beneficial Owner"
included with each Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined below) unless
the Old Notes or shares of Old Preferred Stock tendered pursuant thereto are
tendered (i) by a registered holder who has not completed the box entitled
"Special Delivery Instructions" on the appropriate Letter of Transmittal, or
(ii) for the account of an Eligible Institution. In the event that signatures on
a Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantee must be by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank
55
<PAGE>
or trust company having an office or correspondent in the United States or an
"eligible guarantor institution" within the meaning of Rule 17Ad-15 under the
Exchange Act (each an "Eligible Institution").
If a Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes or any shares of Old Preferred Stock listed therein,
such Old Notes or shares of Old Preferred Stock must be endorsed or accompanied
by a properly completed stock power, signed by such registered holder as such
registered holder's name appears on such Old Notes or shares of Old Preferred
Stock.
If a Letter of Transmittal, Old Notes or any shares of Old Preferred Stock
or stock powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
evidence satisfactory to PRIMEDIA of their authority to so act must be submitted
with such Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Old Notes or shares of Old
Preferred Stock will be determined by PRIMEDIA in its sole discretion, which
determination will be final and binding. PRIMEDIA reserves the absolute right to
reject any and all Old Notes or shares of Old Preferred Stock not properly
tendered or any Old Notes or shares of Old Preferred Stock PRIMEDIA's acceptance
of which would, in the opinion of counsel for PRIMEDIA, be unlawful. PRIMEDIA
also reserves the right to waive any defects, irregularities or conditions of
tender as to particular Old Notes or shares of Old Preferred Stock. PRIMEDIA's
interpretation of the terms and conditions of the Exchange Offers (including the
instructions in the Letters of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Old Notes or the shares of Old Preferred Stock must be cured within such time
as PRIMEDIA shall determine. Although PRIMEDIA intends to notify holders of
defects or irregularities with respect to tenders of Old Notes or the shares of
Old Preferred Stock, neither PRIMEDIA, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tenders of Old
Notes or the shares of Old Preferred Stock will not be deemed to have been made
until such defects or irregularities have been cured or waived. Any Old Notes or
shares of Old Preferred Stock received by the Exchange Agent that are not
validly tendered and as to which the defects or irregularities have not been
cured or waived will be returned by the Exchange Agent to the tendering holders,
unless otherwise provided in the applicable Letter of Transmittal, as soon as
practicable following the Expiration Date.
By tendering, each registered holder will represent to PRIMEDIA that, among
other things, (i) the New Notes or the New Preferred Stock to be acquired by the
holder and any beneficial owner(s) of the Old Notes or the Old Preferred Stock
("Beneficial Owner(s)") in connection with the Exchange Offers are being
acquired by the holder and any Beneficial Owner(s) in the ordinary course of
business of the holder and any Beneficial Owner(s), (ii) the holder and each
Beneficial Owner are not participating, do not intend to participate, and have
no arrangement or understanding with any person to participate, in the
distribution of the New Notes or the New Preferred Stock, (iii) the holder and
each Beneficial Owner acknowledge and agree that any person participating in the
Exchange Offers for the purpose of distributing the New Notes or the New
Preferred Stock must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction of the New Notes or the New Preferred Stock acquired by such person
and cannot rely on the position of the Staff of the Commission set forth in the
no-action letters that are discussed herein under "--Resales of the New Notes or
the New Preferred Stock", (iv) the holder and each Beneficial Owner understands
that a secondary resale transaction described in clause (iii) above should be
covered by an effective registration statement containing the selling
securityholder information required by Item 507 of Regulation S-K of the
Commission, and (v) neither the holder nor any Beneficial Owner(s) is an
"affiliate," as defined under Rule 405 of the Securities Act, of PRIMEDIA except
as otherwise disclosed to PRIMEDIA in writing.
Each broker-dealer who holds Old Notes or Old Preferred Stock acquired for
its own account as a result of market-making activities or other trading
activities and who receives New Notes or New Preferred Stock in the Exchange
Offers may be a statutory underwriter and must acknowledge that it will deliver
a
56
<PAGE>
prospectus in connection with any resale of such New Notes or New Preferred
Stock. By so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of New Notes
or New Preferred Stock received in exchange for Old Notes or Old Preferred Stock
where such Old Notes or Old Preferred Stock were acquired by such broker-dealer
as a result of market-making activities or other trading activities. PRIMEDIA
will, for a period of 90 days after the Expiration Date, make copies of this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes or shares of Old Preferred Stock
and (i) whose Old Notes or shares of Old Preferred Stock are not immediately
available, or (ii) who cannot deliver their Old Notes or shares of Old Preferred
Stock, the applicable Letter of Transmittal or any other required documents to
the Exchange Agent prior to the Expiration Date or complete the procedure for
book-entry transfer on a timely basis, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of Guaranteed
Delivery (by facsimile transmission, mail or hand delivery) setting forth the
name and address of the holder, the certificate number(s) of such Old Notes or
shares of Old Preferred Stock and the principal amount of Old Notes or the
number of shares of Old Preferred Stock being tendered, stating that the tender
is being made thereby and guaranteeing that, within three business days after
the Expiration Date, the applicable Letter of Transmittal (or facsimile thereof)
together with the certificate(s) representing the Old Notes or shares of Old
Preferred Stock (or a confirmation of book-entry transfer of such Old Notes or
shares of Old Preferred Stock into the Exchange Agent's account at the
book-entry transfer facility) and any other documents required by such Letter of
Transmittal will be deposited by the Eligible Institution with the Exchange
Agent; and
(c) Such properly completed and executed Letter of Transmittal (or facsimile
thereof), as well as the certificate(s) representing all tendered Old Notes or
shares of Old Preferred Stock in proper form for transfer and all other
documents required by such Letter of Transmittal are received by the Exchange
Agent within three business days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Old Notes or shares of Old Preferred
Stock according to the guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of the Old Notes or shares of
Old Preferred Stock may be withdrawn at any time prior to the Expiration Date
or, if tendered notes or shares have not yet been accepted for exchange, after
the expiration of forty business days from the commencement of the Exchange
Offers.
To withdraw a tender of Old Notes or shares of Old Preferred Stock in the
Exchange Offers, a written or facsimile transmission notice of withdrawal must
be received by the Exchange Agent at its address set forth herein prior to the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having deposited the Old Notes or shares of Old Preferred Stock to be
withdrawn (the "Depositor"), (ii) identify the Old Notes or shares of Old
Preferred Stock to be withdrawn (including the certificate number or numbers and
principal amount of Notes or number of shares), and (iii) be signed by the
holder in the same manner as the original signature on the Letter of Transmittal
by which such Old
57
<PAGE>
Notes or shares of Old Preferred Stock were tendered (including any required
signature guarantees). If Old Notes or shares of Old Preferred Stock have been
tendered pursuant to the procedure for book-entry transfer, any notice of
withdrawal must specify the name and number of the account at the book-entry
transfer facility to be credited with the withdrawn Old Notes or shares of Old
Preferred Stock or otherwise comply with the book-entry facility procedure. All
questions as to the validity, form and eligibility (including time of receipt)
of such notices will be determined by PRIMEDIA in its sole discretion, which
determination shall be final and binding on all parties. Any Old Notes or shares
of Old Preferred Stock so withdrawn will be deemed not to have been validly
tendered for purposes of the Exchange Offers and no New Notes or shares of New
Preferred Stock will be issued with respect thereto unless the Old Notes or
shares of Old Preferred Stock so withdrawn are validly retendered. Properly
withdrawn Old Notes or shares of Old Preferred Stock may be retendered by
following one of the procedures described above under "--Procedures for
Tendering" at any time prior to the Expiration Date.
Any Old Notes or shares of Old Preferred Stock which have been tendered but
which are not accepted for exchange due to rejection of tender or termination of
the Exchange Offers, or which have been validly withdrawn, will be returned as
soon as practicable to the holder thereof without cost to such holder.
CONDITIONS OF THE EXCHANGE OFFERS
Notwithstanding any other term of the Exchange Offers, PRIMEDIA shall not be
required to accept for exchange, or exchange New Notes or shares of New
Preferred Stock for, any Old Notes or shares of Old Preferred Stock, and may
terminate the Exchange Offers as provided herein before the acceptance of such
Old Notes or shares of Old Preferred Stock, if:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offers
which, in the sole judgment of PRIMEDIA, might materially impair the ability
of PRIMEDIA to proceed with the Exchange Offers or materially impair the
contemplated benefits of the Exchange Offers to PRIMEDIA, or any material
adverse development has occurred in any existing action or proceeding with
respect to PRIMEDIA or any of its subsidiaries; or
(b) any change, or any development involving a prospective change, in
the business or financial affairs of PRIMEDIA or any of its subsidiaries has
occurred which, in the sole judgment of PRIMEDIA, might materially impair
the ability of PRIMEDIA to proceed with the Exchange Offers or materially
impair the contemplated benefits of the Exchange Offers to PRIMEDIA; or
(c) any law, statute, rule or regulation is proposed, adopted or
enacted, which, in the sole judgment of PRIMEDIA, might materially impair
the ability of PRIMEDIA to proceed with the Exchange Offer or materially
impair the contemplated benefits of the Exchange Offers to PRIMEDIA; or
(d) any governmental approval has not been obtained, which approval
PRIMEDIA shall, in its sole discretion, deem necessary for the consummation
of the Exchange Offers as contemplated hereby.
If PRIMEDIA determines in its sole discretion that any of the conditions are
not satisfied, PRIMEDIA may (i) refuse to accept any Old Notes or shares of Old
Preferred Stock and return all tendered Old Notes or shares of Old Preferred
Stock to the tendering holders, (ii) extend the Exchange Offers and retain all
Old Notes or shares of Old Preferred Stock tendered prior to the Expiration
Date, subject, however, to the rights of holders to withdraw such Old Notes or
shares of Old Preferred Stock (see "--Withdrawal of Tenders") or (iii) waive
such unsatisfied conditions with respect to the Exchange Offers and accept all
validly tendered Old Notes or shares of Old Preferred Stock which have not been
withdrawn. If such determination or waiver constitutes a material change to the
Exchange Offers, PRIMEDIA will promptly disclose such determination or waiver by
means of a prospectus supplement
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that will be distributed to the registered holders, and PRIMEDIA will extend the
Exchange Offers for a period of five to ten business days, depending upon the
significance of the waiver and the manner of disclosure to the registered
holders, if the Exchange Offers would otherwise expire during such five to ten
business day period.
EXCHANGE AGENT
The Bank of New York has been appointed as Exchange Agent for the Exchange
Offers. Questions and requests for assistance, requests for additional copies of
this Prospectus or of Letters of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent addressed as
follows:
QUESTIONS AND REQUESTS RELATING TO THE NOTE EXCHANGE OFFER:
<TABLE>
<S> <C> <C>
BY MAIL: FACSIMILE TRANSMISSIONS: BY HAND OR OVERNIGHT DELIVERY:
The Bank of New York (Eligible Institutions Only) The Bank of New York
101 Barclay Street, 7E (212) 815-6339 101 Barclay Street
New York, New York 10286 CONFIRM BY TELEPHONE: Corporate Trust Services Window
Attn: Reorganization Section, (212) 815-4146 Ground Level
7E: Vincent Jhingor FOR INFORMATION CALL: New York, New York 10286
(Registered or Certified Mail (212) 815-4146 Attn: Reorganization Section,
Recommended) 7E: Vincent Jhingor
</TABLE>
QUESTIONS AND REQUESTS RELATING TO THE PREFERRED STOCK EXCHANGE OFFER:
<TABLE>
<S> <C> <C>
BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER:
Tender & Exchange (For Eligible Institutions Tender & Exchange
Department Only) Department
P.O. Box 11248 (212) 815-6213 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, NY 10286-1248 CONFIRM FACSIMILE BY New York, NY 10286
TELEPHONE:
(For Confirmation Only)
(800) 507-9357
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by PRIMEDIA. The principal
solicitation is being made by mail; however, additional solicitation may be made
by telecopy, telephone or in person by officers and regular employees of
PRIMEDIA and its affiliates.
PRIMEDIA has not retained any dealer-manager in connection with the Exchange
Offers and will not make any payments to brokers, dealers or others soliciting
acceptance of the Exchange Offers. PRIMEDIA, however, will pay the Exchange
Agent reasonable and customary fees for its services and will reimburse it for
its reasonable out-of-pocket expenses in connection therewith.
The cash expenses to be incurred in connection with the Exchange Offers will
be paid by PRIMEDIA and are estimated in the aggregate to be approximately
$300,000. Such expenses include fees and expenses of the Exchange Agent and
transfer agent and registrar, accounting and legal fees and printing costs,
among others.
PRIMEDIA will pay all transfer taxes, if any, applicable to the exchange of
the Old Notes or the Old Preferred Stock pursuant to the Exchange Offers. If,
however, a transfer tax is imposed for any reason other than the exchange of the
Old Notes or the Old Preferred Stock pursuant to the Exchange Offers, then the
amount of any such transfer taxes (whether imposed on the registered holder or
any other persons) will be payable by the tendering holder. If satisfactory
evidence of payment of such taxpayers or
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exemption therefrom is not submitted with the applicable Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
holder.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes or the shares of Old Preferred Stock which are not exchanged
for New Notes or shares of New Preferred Stock pursuant to the Exchange Offers
will remain restricted securities within the meaning of Rule 144 of the
Securities Act. Accordingly, such Old Notes or the shares of Old Preferred Stock
may be resold only (i) to PRIMEDIA, its subsidiaries or the Initial Purchasers,
(ii) inside the United States to a qualified institutional buyer in compliance
with Rule 144A under the Securities Act, (iii) inside the United States to an
institutional accredited investor that, prior to such transfer, furnishes to
PRIMEDIA a signed letter containing certain representations and agreements
relating to the restrictions on transfer of this security (the form of which
letter can be obtained from PRIMEDIA) and if such transfer is in respect of an
aggregate liquidation preference of securities at the time of transfer of less
than $100,000 an opinion of counsel acceptable to PRIMEDIA that such transfer is
in compliance with the Securities Act, (iv) outside the United States in an
offshore transaction in compliance with Rule 904 of Regulation S under the
Securities Act, (v) pursuant to the exemption from registration provided by Rule
144 under the Securities Act (if available), or (vi) pursuant to an effective
registration statement under the Securities Act, in each case in accordance with
any applicable securities laws of any state of the United States and subject to
certain requirements of the transfer agent and registrar being met. The
liquidity of the Old Notes or the Old Preferred Stock could be adversely
affected by the Exchange Offers. Following the consummation of the Exchange
Offers, holders of the Old Notes or the Old Preferred Stock will have no further
registration rights under the Registration Rights Agreement.
ACCOUNTING TREATMENT
The carrying value of the Old Notes or the Old Preferred Stock is not
expected to be materially different from the fair value of the New Notes or the
New Preferred Stock at the time of the exchange. Accordingly, no gain or loss
for accounting purposes will be recognized. The expenses of the Exchange Offers
associated with the New Notes will be reported as a non-current asset and
amortized over the term of the New Notes. The expenses of the Exchange Offers
associated with the New Preferred Stock will be reported as a reduction in the
carrying value of the New Preferred Stock. Such carrying value of the New
Preferred Stock will increase to the amount of the redemption value of the New
Preferred Stock over the term of the New Preferred Stock.
RESALES OF THE NEW NOTES AND THE NEW PREFERRED STOCK
With respect to resales of the New Notes or the New Preferred Stock, based
on interpretations by the staff of the SEC set forth in no-action letters issued
to third parties, and in a previous no-action letter issued to PRIMEDIA for its
exchange offer of the Series B Preferred Stock, PRIMEDIA believes that a holder
(other than a person that is an "affiliate" of PRIMEDIA within the meaning of
Rule 405 under the Securities Act) who exchanges Old Notes or shares of Old
Preferred Stock for New Notes or shares of New Preferred Stock in the ordinary
course of business and who is not participating, does not intend to participate,
and has no arrangement or understanding with any person to participate, in the
distribution of the New Notes or the New Preferred Stock, will be allowed to
resell the New Notes or the New Preferred Stock to the public without further
registration under the Securities Act and without delivering to the purchasers
of the New Notes or the New Preferred Stock a prospectus that satisfies the
requirements of Section 10 thereof. However, if any holder acquires New Notes or
shares of New Preferred Stock in the Exchange Offers for the purpose of
distributing or participating in a distribution of the New Notes or the New
Preferred Stock, such holder cannot rely on the position of the staff of the SEC
in such no-action letter and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction, unless an exemption from registration is otherwise
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<PAGE>
available. Each broker-dealer that receives New Notes or New Preferred Stock for
its own account in exchange for Old Notes or Old Preferred Stock, where such Old
Notes or Old Preferred Stock were acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such New Notes or New
Preferred Stock. See "Plan of Distribution."
As contemplated by the above no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offers is required to represent to
PRIMEDIA in the applicable Letter of Transmittal that (i) the holder is not an
"affiliate" of PRIMEDIA within the meaning of Rule 405 of the Securities Act,
(ii) the New Notes or shares of New Preferred Stock are to be acquired by the
holder in the ordinary course of business, (iii) the holder is not engaging and
does not intend to engage, in the distribution of the New Notes or the New
Preferred Stock, and (iv) the holder acknowledges that if such holder
participates in such Exchange Offers for the purpose of distributing the New
Notes or the New Preferred Stock such holder must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with a
secondary resale of the New Notes or the New Preferred Stock and cannot rely on
the above no-action letter; however, holders of the New Notes or the New
Preferred Stock will have no registration rights under the Registration Rights
Agreement.
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DESCRIPTION OF NOTES
The form and terms of the New Notes are the same as the form and terms of
the Old Notes except that (i) the New Notes will have been registered under the
Securities Act and thus will not bear restrictive legends restricting their
transfer pursuant to the Securities Act and (ii) holders of New Notes will not
be entitled to certain rights of holders of Old Notes under the Registration
Rights Agreement which will terminate upon the consummation of the Note Exchange
Offer. The summary contained herein of certain provisions of the Notes does not
purport to be completed and is qualified in its entirety by reference to the
provisions of the Note Indenture.
GENERAL
The Old Notes have been and the New Notes will be issued pursuant to the
Note Indenture entered into among PRIMEDIA, the Guarantors and The Bank of New
York, as trustee (the "Trustee"). The terms of the Notes include those stated in
the Note Indenture and those made part of the Note Indenture by reference to the
Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). The Notes
are subject to all such terms, and holders of the Notes are referred to the Note
Indenture and the Trust Indenture Act for a statement thereof. A copy of the
Note Indenture is available upon request. The definitions of certain terms used
in the following summary are set forth below under "--Certain Definitions."
Other terms used in this summary but not defined in this Prospectus shall have
the meanings given to them in the Note Indenture.
The Notes rank senior in right of payment to all subordinated indebtedness
of the Company, and will be guaranteed on a senior basis by each of the domestic
wholly-owned Restricted Subsidiaries of PRIMEDIA. Such subordinated indebtedness
will be limited to the Class D Subordinated Debentures, Class F Subordinated
Debentures and 8 5/8% Subordinated Debentures, if and when the same are issued
at the option of PRIMEDIA in exchange for the Series D Preferred Stock, Series F
Preferred Stock and Preferred Stock, respectively, and additional subordinated
indebtedness that is permitted to be incurred by the terms of the Credit
Facilities, the Senior Note Indentures and such other senior indebtedness as
PRIMEDIA may have outstanding from time to time. When the New Notes are issued,
the Company will have no subordinated indebtedness outstanding. The Company has
no current intention to issue subordinated indebtedness. The Notes rank PARI
PASSU in right of payment with all senior indebtedness, including the Company's
obligations under the Credit Facilities and the Outstanding Notes. As used
herein, the statement that certain indebtedness ranks PARI PASSU with other
indebtedness means only that in the event of the bankruptcy or insolvency of the
debtor such certain indebtedness and such other indebtedness will have an equal
claim on money or other property of the debtor available for distribution. Based
on outstanding indebtedness at December 31, 1997, after giving effect to the
Offerings, the KKR Fund Investment and the application of the net proceeds
therefrom, the aggregate principal amount of indebtedness under the Credit
Facilities would have been approximately $707.7 million and indebtedness under
the Senior Notes would have been $647.5 million, none of which would have been
secured. The Company's obligations under the Notes are effectively subordinated
to any liabilities and obligations (whether or not for borrowed money),
including trade credit, of any Subsidiaries of the Company that are not
Guarantors.
The operations of PRIMEDIA are and generally will be conducted through its
subsidiaries, and, therefore, PRIMEDIA depends upon the cash flow of its
subsidiaries to meet its obligations, including its obligations under the Notes.
The Notes are guaranteed on a senior basis by each of the domestic wholly-owned
Restricted Subsidiaries of PRIMEDIA. As a result, the claims of holders of the
Notes will be at least PARI PASSU with all existing and future liabilities and
obligations (whether or not for borrowed money), including trade credit, of such
subsidiaries. The Note Indenture, however, permits the Company to organize
Unrestricted Subsidiaries, Partially Owned Restricted Subsidiaries and foreign
Restricted Subsidiaries which would not be required to guarantee the Notes or
any other indebtedness of the Company.
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<PAGE>
PRINCIPAL, MATURITY, AND INTEREST
The Notes initially are limited in aggregate principal amount to $250.0
million and will mature on April 1, 2008. Additional Notes may be issued from
time to time, subject to the provisions of the Indenture described below under
the caption INCURRENCE OF INDEBTEDNESS. The Old Notes, New Notes and any
additional Notes subsequently issued would be treated as a single class for all
purposes under the Indenture, including, without limitation, waivers,
amendments, redemptions and offers to purchase. Interest on the Old Notes has
accrued from the date of issuance at the rate of 7 5/8% per annum and is payable
semi-annually on April 1 and October 1, commencing on October 1, 1998, to
holders of record on the immediately preceding March 15 and September 15.
Interest on the New Notes will accrue from the date the New Notes are exchanged
for the Old Notes. Interest will be computed on the basis of a 360-day year
consisting of twelve 30-day months. The Notes will be payable both as to
principal and interest at the office or agency of PRIMEDIA maintained for such
purpose within or without the City and State of New York or, at the option of
PRIMEDIA, payment of interest may be made by check mailed to the holders of the
Notes at their respective addresses set forth in the register of holders of
Notes. Until otherwise designated by PRIMEDIA, its office or agency in New York
will be the office of the Trustee maintained for such purpose. The New Notes
will be issued in registered form, without coupons, in denominations of $1,000
and integral multiples thereof.
OPTIONAL REDEMPTION
The Notes are not redeemable at PRIMEDIA's option before April 1, 2003
(other than in connection with a Change of Control, as described below).
Thereafter, the Notes will be subject to redemption at the option of PRIMEDIA,
in whole or in part, upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of the principal amount) set forth
below plus accrued and unpaid interest thereon to the applicable redemption
date, if redeemed during the twelve-month period beginning April 1 of the years
indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---------------------------------------------------------------------------------- -----------
<S> <C>
2003.............................................................................. 103.813%
2004.............................................................................. 102.542
2005.............................................................................. 101.271
2006 and thereafter............................................................... 100.000
</TABLE>
The Credit Facilities restrict the optional redemption or the repayment of
the Notes, and the Outstanding Note Indentures make such redemption or
prepayment a Restricted Payment (as defined in the Outstanding Note Indentures).
SINKING FUND
There will be no sinking fund payments for the Notes.
CHANGE OF CONTROL
HOLDERS' RIGHT TO REQUIRE REPURCHASE UPON CHANGE OF CONTROL. Upon the
occurrence of a Change of Control, each holder shall have the right to require
the repurchase of such holder's Notes pursuant to the offer described below (the
"Change of Control Offer") at a purchase price equal to 101% of the aggregate
principal amount plus accrued and unpaid interest, if any, to the date of
purchase (the "Change of Control Payment"). The redemption prices for optional
redemptions in the event of a Change of Control would in all cases be equal to
or greater than this repurchase price. Because of the highly leveraged nature of
the Company, there can be no assurance that PRIMEDIA will have sufficient funds
to repurchase the Notes in the event of a Change of Control. The right of the
holders of the Notes to require PRIMEDIA to repurchase the Notes in the event of
a Change of Control cannot be waived by the Trustee, PRIMEDIA or
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PRIMEDIA's Board of Directors. Within 40 days following any Change of Control,
PRIMEDIA shall mail a notice to each holder stating: (1) that the Change of
Control Offer is being made pursuant to the CHANGE OF CONTROL covenant and that
all Notes tendered will be accepted for payment; (2) the purchase price and the
purchase date, which shall be no earlier than 30 days nor later than 60 days
from the date such notice is mailed (the "Change of Control Payment Date"); (3)
that any Note not tendered will continue to accrue interest; (4) that, unless
the Company defaults in the payment of the Change of Control Payment, all Notes
accepted for payment pursuant to the Change of Control Offer shall cease to
accrue interest after the Change of Control Payment Date; (5) that holders
electing to have any Notes purchased pursuant to a Change of Control Offer will
be required to surrender the Notes, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Note completed, to the Paying Agent at the
address specified in the notice prior to the close of business on the Business
Day preceding the Change of Control Payment Date; (6) that holders will be
entitled to withdraw their election if the Paying Agent receives, not later than
the close of business on the third Business Day preceding the Change of Control
Payment Date, a telegram, telex, facsimile transmission or letter setting forth
the name of the holder, the principal amount of the Notes delivered for
purchase, and a statement that such holder is withdrawing his election to have
such Notes purchased and (7) that holders whose Notes are being purchased only
in part will be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered; provided that each Holder will tender Notes,
and each Note purchased and each such new Note issued by PRIMEDIA will be in a
principal amount of $1,000 or integral multiples thereof.
On the Change of Control Payment Date, PRIMEDIA will, to the extent lawful,
(1) accept for payment Notes or portions thereof tendered pursuant to the Change
of Control Offer, (2) deposit with the Paying Agent (as defined in the Note
Indenture) an amount equal to the Change of Control Payment in respect of all
Notes or portions thereof so tendered and (3) deliver or cause to be delivered
to the Trustee, the Notes so accepted together with an officers' certificate
stating the Notes or portions thereof that were tendered to PRIMEDIA. The Paying
Agent shall promptly mail to each holder of Notes so accepted, payment in an
amount equal to the purchase price for such Notes, and the Trustee shall
promptly authenticate and mail to such holder a new Note equal in principal
amount to any unpurchased portion of the Notes surrendered; PROVIDED that each
such new Note shall be in a principal amount of $1,000 or integral multiples
thereof. PRIMEDIA will publicly announce the results of the Change of Control
Offer on or as soon as practicable after the Change of Control Payment Date.
Indebtedness under the Credit Agreements will automatically accelerate upon
the earlier of 30 days from the Change of Control and the Change of Control
Payment Date. If the Company has insufficient funds with which to repay the
indebtedness under the Credit Agreements and to repurchase the Notes, the
holders of the Notes will have a claim on the funds of the Company equal to that
of the lenders under the Credit Agreements.
OPTIONAL REDEMPTION UPON CHANGE OF CONTROL. In addition to the rights set
forth under "Optional Redemption," the Notes will be redeemable, at the option
of PRIMEDIA, in whole or in part, at any time within 160 days after a Change of
Control upon not less than 30 nor more than 60 days' prior notice to each holder
of Notes to be redeemed, at a redemption price equal to the sum of (i) the then
outstanding principal amount thereof plus (ii) accrued and unpaid interest, if
any, to the redemption date plus (iii) the Applicable Premium. The following
definitions are used to determine the Applicable Premium:
"Applicable Premium" with respect to the Notes shall be calculated with
respect to the date of redemption and shall equal the greater of (i) 1.0% of the
then outstanding principal amount of such Notes and (ii) the excess of (A) the
present value of the required interest and principal payments due on such Notes,
computed using a discount rate equal to the Treasury Rate plus the Applicable
Spread, over (B) the then outstanding principal amount of such Notes.
"Applicable Spread", for purposes of the Note Indenture, is defined as one
half of one percent.
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"Treasury Rate", for purposes of the Note Indenture, is defined as the yield
to maturity at the time of computation of United States Treasury securities with
a constant maturity (as compiled by and published in the most recent Federal
Reserve Statistical Release H.15 (519) which has become publicly available at
least two business days prior to the date fixed for prepayment (or, if such
Statistical Release is no longer published, any publicly available source of
similar market data)) most nearly equal to the then remaining Average Life of
the Notes; PROVIDED, that if the Average Life of the Notes is not equal to the
constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given, except that if the Average Life of the Notes is less than one year, the
weekly average yield on actually traded United States Treasury securities
adjusted to a constant maturity of one year shall be used.
The redemption prices in an optional redemption upon a Change of Control
will in all cases be equal to or higher than the price applicable to a
repurchase upon a Change of Control required by a holder. If PRIMEDIA were to
effect an optional Change of Control redemption before the Change of Control
Payment Date, holders that had previously tendered Notes to PRIMEDIA for
repurchase could withdraw such tenders prior to the Change of Control Payment
Date so as to participate in the optional redemption. However, PRIMEDIA would
have no obligation to announce such an optional Change of Control redemption
prior to the closing of the mandatory Change of Control Offer.
PRIMEDIA will comply with the requirements of Rule 14e-1 under the Exchange
Act and any other securities laws and regulations thereunder to the extent such
laws and regulations are applicable in connection with the repurchase of the
Notes triggered by a Change of Control.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed at any time, selection of
the Notes for redemption will be made by the Trustee in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes are listed or, if the Notes are not listed on a national securities
exchange, on a pro rata basis, by lot or by such method as the Trustee shall
deem fair and appropriate; PROVIDED that no Notes of $1,000 or less shall be
redeemed in part. Notice of redemption shall be mailed by first class mail at
least 30 but not more than 60 days before the redemption date to each holder of
Notes to be redeemed at its registered address. If any Note is to be redeemed in
part only, the notice of redemption that relates to such Note shall state the
portion of the principal amount thereof to be redeemed. A new Note in principal
amount equal to the unredeemed portion thereof will be issued in the name of the
holder thereof upon cancellation of the original Note. On and after the
redemption date, interest ceases to accrue on Notes or portions of them called
for redemption.
CERTAIN COVENANTS
LIMITATIONS ON RESTRICTED PAYMENTS. PRIMEDIA will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, (i) declare or
pay any dividend or make any distribution on account of PRIMEDIA or any of its
Restricted Subsidiaries' Capital Stock or other Equity Interests (other than (A)
dividends or distributions payable in Equity Interests (other than Redeemable
Stock) of PRIMEDIA or such Restricted Subsidiary or (B) dividends or
distributions payable to PRIMEDIA or any of its Restricted Subsidiaries), (ii)
(A) voluntarily purchase, redeem or otherwise acquire or retire for value any
preferred stock of PRIMEDIA or any of its Restricted Subsidiaries which, by its
terms, is exchangeable for any Indebtedness ("Exchangeable Preferred Stock")
that is PARI PASSU with or subordinated in right of payment to the Notes or (B)
purchase, redeem or otherwise acquire or retire for value any Equity Interests
(other than Exchangeable Preferred Stock) of PRIMEDIA or any of its Restricted
Subsidiaries (other than any such Equity Interests purchased from PRIMEDIA or
any of its Restricted Subsidiaries), (iii) voluntarily purchase, repay, redeem,
defease (including, but not limited to, covenant or legal defeasance) or
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<PAGE>
otherwise acquire or retire for value any Indebtedness (other than (A) the
Notes, (B) Indebtedness under the Credit Facilities, (C) Indebtedness permitted
under clause (v) or (vi) of the second paragraph of the INCURRENCE OF
INDEBTEDNESS covenant and any extension, refinancing, renewal, replacement,
substitution or refunding thereof permitted under clause (vii) of the second
paragraph of the INCURRENCE OF INDEBTEDNESS covenant or (D) Indebtedness between
and among PRIMEDIA and its Restricted Subsidiaries) that is PARI PASSU with or
subordinated in right of payment to the Notes (other than in connection with the
refunding or refinancing of such Indebtedness) or (iv) make Investments in
Restricted Payment Unrestricted Subsidiaries (the foregoing actions set forth in
clauses (i) through (iv) being referred to as "Restricted Payments"), if, at the
time of such Restricted Payment:
(a) a Default or Event of Default shall have occurred and be continuing
or shall occur as a consequence thereof; or
(b) PRIMEDIA could not incur at least $1.00 of additional Indebtedness
pursuant to the first paragraph of the INCURRENCE OF INDEBTEDNESS covenant
(without giving effect to clauses (i) through (xv) of the second paragraph
thereof), which calculation shall be made on a pro forma basis deducting
from Adjusted Consolidated Net Income the amount of any Investment PRIMEDIA
has made in an Unrestricted Subsidiary during the relevant period and any
Investment PRIMEDIA intends to make in an Unrestricted Subsidiary, to the
extent that such Investment is made with amounts included in Adjusted
Consolidated Net Income as a result of Transfers described in clause (c)(x)
below or clause (c)(y) of the INVESTMENTS IN UNRESTRICTED SUBSIDIARIES
covenant; or
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made after May 13, 1992, exceeds the sum of the
following: (w) 50% of the amount of the Adjusted Consolidated Net Income
(other than amounts included in the next succeeding clause (c)(x)) of
PRIMEDIA for the period (taken as one accounting period) from the beginning
of the first quarter commencing immediately after May 13, 1992, through the
end of PRIMEDIA's fiscal quarter ending immediately prior to the time of
such Restricted Payment (or, if Adjusted Consolidated Net Income for such
period is a deficit, 100% of such deficit); PLUS (x) 100% of the amount of
all Transfers from a Restricted Payment Unrestricted Subsidiary up to the
aggregate amount of the Investment (after taking into account all prior
Transfers from such Restricted Payment Unrestricted Subsidiary) in such
Restricted Payment Unrestricted Subsidiary (valued in each case as provided
in the definition of "Investment"); PLUS (y) in the event of a designation
of a Restricted Payment Unrestricted Subsidiary as a Restricted Subsidiary,
100% of an amount equal to the greater of (A) the fair market value of such
Subsidiary as determined by the Board of Directors in good faith (or, if
such fair market value may exceed $25.0 million, as determined in writing by
an independent investment banking firm of nationally recognized standing) at
the time of the redesignation of such Restricted Payment Unrestricted
Subsidiary as a Restricted Subsidiary and (B) the Consolidated Net Cash Flow
generated by such Subsidiary for the period (taken as one accounting period)
from the beginning of its first fiscal quarter commencing immediately after
the date of its designation as a Restricted Payment Unrestricted Subsidiary
through such Subsidiary's fiscal quarter ending immediately prior to its
designation as a Restricted Subsidiary (or if such Consolidated Net Cash
Flow for such period is a deficit, 100% of such deficit); PLUS (z) 100% of
the aggregate net cash proceeds received by PRIMEDIA from (i) the issuance
or sale of Equity Interests of PRIMEDIA (other than such Equity Interests
issued or sold to a Restricted Subsidiary of PRIMEDIA and other than
Redeemable Stock) or (ii) the sale of the stock of an Unrestricted
Subsidiary or the sale of all or substantially all of the assets of an
Unrestricted Subsidiary to the extent that a liquidating dividend is paid to
PRIMEDIA or any Restricted Subsidiary from the proceeds of such sale;
PROVIDED, however, that for purposes of making Investments in Unrestricted
Subsidiaries, if the amount determined in accordance with clauses (w) or (y)
above is a deficit, such deficit shall be excluded from the computation of
this clause (c); and PROVIDED, further, that all such amounts applied
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pursuant to this clause (c) shall not be available for application under
clause (c) of the INVESTMENTS IN UNRESTRICTED SUBSIDIARIES covenant.
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the Note
Indenture; (ii) (A) the retirement of any shares of PRIMEDIA's Capital Stock
(the "Retired Capital Stock") either (1) in exchange for or (2) out of the net
proceeds of the substantially concurrent sale (other than to a Restricted
Subsidiary of PRIMEDIA) of other shares of, PRIMEDIA's Capital Stock (the
"Refunding Capital Stock") other than any Redeemable Stock, and (B) if
immediately prior to such retirement of such Retired Capital Stock the
declaration and payment of dividends thereon was permitted under either clause
(iii) or (vii) of this paragraph, the declaration and payment of dividends on
the Refunding Capital Stock in an aggregate amount per year no greater than the
aggregate amount of dividends per year that was declarable and payable on such
Retired Capital Stock immediately prior to such retirement; (iii) the
declaration and payment of dividends to the holders of the Series D Preferred
Stock, Series F Preferred Stock and Preferred Stock; (iv) the repurchase,
redemption or other acquisition or retirement for value of any Equity Interests
of PRIMEDIA issued to present and former members of management of PRIMEDIA and
its Subsidiaries pursuant to subscription and option agreements in effect on the
date of the Note Indenture and Equity Interests of PRIMEDIA issued to future
members of management pursuant to subscription agreements executed subsequent to
the date of the Note Indenture, containing provisions for the repurchase of such
Equity Interests upon death, disability or termination of employment of such
persons which are substantially identical to those contained in the subscription
agreements in effect on the date of the Note Indenture; (v) the declaration and
payment of dividends on the Common Stock of up to $25.0 million per annum plus
6% per annum of the net proceeds received at any time by PRIMEDIA from (a) the
issue or sale of Common Stock or (b) (1) the issuance of securities convertible
into Common Stock (other than any such convertible securities issued to (A)
members of the Company's management or its Board of Directors and (B) any
Subsidiary of the Company) and (2) the conversion of such convertible securities
into Common Stock, in both cases at the time of such conversion into Common
Stock; (vi) the repurchase, redemption or other acquisition or retirement for
value of Indebtedness of PRIMEDIA which is subordinated in right of payment to
the Notes either (A) in exchange for or (B) with the proceeds of the issuance
of, Equity Interests (other than Redeemable Stock) of PRIMEDIA; (vii) the
declaration and payment of dividends to holders of any class or series of
PRIMEDIA's preferred stock issued after the date of the Note Indenture
(including, without limitation, the declaration and payment of dividends on
Refunding Capital Stock in excess of the dividends declarable and payable
thereon pursuant to clause (ii) of this paragraph); PROVIDED that at the time of
such issuance PRIMEDIA's Fixed Charge Coverage Ratio, after giving effect to
such issuance, would be greater than 1.25 to 1; (viii) the redemption,
repurchase or other acquisition or retirement for value of any Indebtedness of
PRIMEDIA which is subordinated in right of payment to the Notes (A) with the
proceeds of, or in exchange for, Indebtedness incurred pursuant to clause (vii)
of the second paragraph of the INCURRENCE OF INDEBTEDNESS covenant or (B) if,
after giving effect to such redemption, repurchase or retirement, PRIMEDIA could
incur at least $1.00 of Indebtedness under the first paragraph of the INCURRENCE
OF INDEBTEDNESS covenant (without giving effect to clauses (i) through (xv) of
the second paragraph thereof); (ix) the retirement of the Series D Preferred
Stock, Series F Preferred Stock and Preferred Stock in exchange for the issuance
of the Class D Subordinated Debentures, Class F Subordinated Debentures and
8 5/8% Subordinated Debentures, respectively, pursuant to the respective
certificates of designations relating thereto, (x) the purchase of Class D
Subordinated Debentures, Class F Subordinated Debentures and 8 5/8% Subordinated
Debentures in accordance with the CHANGE OF CONTROL covenants in the Class D
Debenture Indenture, Class F Debenture Indenture and 8 5/8% Debenture Indenture,
respectively; (xi) Investments in Unrestricted Subsidiaries having an aggregate
fair market value, when taken together with all other Investments made pursuant
to this clause (xi) that are at that time outstanding, not to exceed $50.0
million at the time of such Investment (with the fair market value of each
Investment being measured at the time made and without giving effect to
subsequent changes in value); (xii) the repurchase,
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retirement or other acquisition for value of Equity Interests of the Company
which are not held by KKR or any of its Affiliates; PROVIDED, that (A) the
aggregate Restricted Payments made under this clause (xii) shall not exceed $75
million and (B) immediately after giving effect to each Restricted Payment made
pursuant to this clause (xii) on a pro forma basis, PRIMEDIA could incur at
least $1.00 of additional Indebtedness pursuant to the first paragraph of the
INCURRENCE OF INDEBTEDNESS covenant and (xiii) other Restricted Payments in an
aggregate amount not to exceed $25 million; PROVIDED that in determining the
aggregate amount expended for Restricted Payments in accordance with paragraph
(c) above, (1) no amounts expended under clauses (ii)(A)(1), (vi)(A), (viii) and
(ix) of this paragraph will be included, (2) 100% of the amounts expended under
clauses (ii)(A)(2), (iv), (v), (vi)(B), (vii), (x), (xi), (xii) and (xiii) of
this paragraph will be included, (3) 50% of the amounts expended under clause
(iii) of this paragraph will be included, (4) amounts expended under clause
(ii)(B) of this paragraph will be included to the extent previously included for
the Retired Capital Stock and (5) 100% of the amounts expended under clause (i)
to the extent not included under subclauses (1) through (4) of this proviso will
be included. For the purposes of determining compliance with this covenant, in
the event that a Restricted Payment meets the criteria of more than one of the
categories of permitted Restricted Payments described in clauses (i) through
(xiii) above or is entitled to be incurred pursuant to the first paragraph of
this covenant (including clauses (a), (b) and (c) thereof), PRIMEDIA shall, in
its sole discretion, classify such Restricted Payment in any manner that
complies with the covenants described above and such Restricted Payment will be
treated as having been made pursuant to only one of such clauses or pursuant to
the first paragraph hereof.
Not later than the date of making any Restricted Payment, PRIMEDIA shall
deliver to the Trustee an Officer's Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by the RESTRICTED PAYMENTS covenant were computed, which calculations
may be based on the Company's latest available internal financial statements.
INVESTMENTS IN UNRESTRICTED SUBSIDIARIES. PRIMEDIA will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, make any Investment
in any Unrestricted Subsidiary, if at the time of such Investment:
(a) a Default or Event of Default shall have occurred and be continuing
or shall occur as a consequence thereof; or
(b) immediately before such Investment, PRIMEDIA would not be permitted
to incur at least $1.00 of Indebtedness pursuant to the first paragraph of
the INCURRENCE OF INDEBTEDNESS covenant (without giving effect to clauses
(i) through (xv) of the second paragraph thereof), which calculation shall
be made on a pro forma basis deducting from Adjusted Consolidated Net Income
the amount of any Investment PRIMEDIA has made in an Unrestricted Subsidiary
during the relevant period and any Investment PRIMEDIA intends to make in an
Unrestricted Subsidiary, to the extent that such Investment is made with
amounts included in Adjusted Consolidated Net Income as a result of the
Transfers described in clause (c)(x) of the LIMITATIONS ON RESTRICTED
PAYMENTS covenant or clause (c)(y) below; or
(c) such Investment, together with the aggregate of all other
Investments in Unrestricted Subsidiaries made after May 13, 1992, exceeds
(w) the aggregate Consolidated Net Cash Flow of PRIMEDIA for the period
(taken as one accounting period) from the beginning of the first quarter
immediately after May 13, 1992, to the end of PRIMEDIA's most recently ended
fiscal quarter at the time of such Investment; PLUS (x) 100% of the
aggregate net cash proceeds received by PRIMEDIA from (i) the issue or sale
of Equity Interests of PRIMEDIA (other than such Equity Interests issued or
sold to a Restricted Subsidiary of PRIMEDIA and other than Redeemable Stock)
or (ii) the sale of the stock of an Unrestricted Subsidiary or the sale of
all or substantially all of the assets of an Unrestricted Subsidiary to the
extent that a liquidating dividend is paid to PRIMEDIA or any Restricted
Subsidiary from the proceeds of such sale; PLUS (y) 100% of the amount of
all Transfers from a Net Cash Flow Unrestricted Subsidiary up to the
aggregate Investment (after taking into account all prior Transfers from
such Net Cash Flow Unrestricted Subsidiary) in such Net Cash Flow
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Unrestricted Subsidiary resulting from such payments or transfers of assets
(valued in each case as provided in the definition of "Investment"); PLUS
(z) in the event of a designation of a Net Cash Flow Unrestricted Subsidiary
as a Restricted Subsidiary, 100% of an amount equal to the greater of (A)
the fair market value of such Subsidiary as determined by the Board of
Directors in good faith (or, if such fair market value may exceed $25.0
million, as determined in writing by an independent investment banking firm
of nationally recognized standing) at the time of the redesignation of such
Net Cash Flow Unrestricted Subsidiary as a Restricted Subsidiary and (B) the
Consolidated Net Cash Flow generated by such Subsidiary for the period
(taken as one accounting period) from the beginning of its first fiscal
quarter commencing immediately after the date of its designation as a Net
Cash Flow Unrestricted Subsidiary through such Subsidiary's fiscal quarter
ending immediately prior to its designation as a Restricted Subsidiary (or
if such Consolidated Net Cash Flow for such period is a deficit, 100% of
such deficit):
PROVIDED that all such amounts applied pursuant to this clause (c) shall not
be available for application under clause (c) of the RESTRICTED PAYMENTS
covenant.
The foregoing limitations will not apply to an Investment to the extent that
it is (i) to capitalize a Restricted Payment Unrestricted Subsidiary permitted
pursuant to the LIMITATIONS ON RESTRICTED PAYMENTS covenant; (ii) funded by the
issuance of Equity Interests of PRIMEDIA to the extent net proceeds are not used
to fund an optional redemption of Notes and (iii) Investments in Unrestricted
Subsidiaries having an aggregate fair market value, when taken together with all
other Investments made pursuant to this clause (iii) that are at that time
outstanding, not to exceed $50.0 million at the time of such Investment (with
the fair market value of each Investment being measured at the time made and
without giving effect to subsequent changes in value). For the purposes of
determining compliance with this covenant, in the event that the making of an
Investment in an Unrestricted Subsidiary meets the criteria of more than one of
the categories of permitted Investments in Unrestricted Subsidiaries described
in clauses (i) through (iii) above or is entitled to be incurred pursuant to the
first paragraph of this covenant (including clauses (a), (b) and (c) thereof),
PRIMEDIA shall, in its sole discretion, classify such Investment in an
Unrestricted Subsidiary in any manner that complies with the covenants described
above and Investment in an Unrestricted Subsidiary will be treated as having
been made pursuant to only one of such clauses or pursuant to the first
paragraph hereof.
All Net Cash Flow Unrestricted Subsidiaries of PRIMEDIA shall at all times
remain wholly-owned, directly or indirectly, by PRIMEDIA or a wholly-owned
Restricted Subsidiary of PRIMEDIA.
Not later than the date of making any Investment described above, PRIMEDIA
shall deliver to the Trustee an Officer's Certificate stating that such
Investment is permitted (including, without limitation, whether such Investment
is capitalizing a Net Cash Flow Unrestricted Subsidiary or a Restricted Payment
Unrestricted Subsidiary) and setting forth the basis upon which the calculations
required by the INVESTMENTS IN UNRESTRICTED SUBSIDIARIES covenant were computed,
which calculations may be based on the Company's latest available internal
financial statements.
DIVIDENDS AND PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES. PRIMEDIA will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (i) pay dividends or make any other distributions on
its Capital Stock, or any other interest or participation in, or measured by,
its profits, owned by PRIMEDIA or any of its Restricted Subsidiaries, or pay any
Indebtedness owed to PRIMEDIA or any of its Restricted Subsidiaries, (ii) make
loans or advances to PRIMEDIA or any of its Restricted Subsidiaries or (iii)
transfer any of its properties or assets to PRIMEDIA or any of its Restricted
Subsidiaries, except for such encumbrances or restrictions existing under or by
reason of: (A) the terms (as in effect on the date of the Note Indenture) of the
Existing Indebtedness, (B) the terms (as in effect on the date of the Note
Indenture) of the Credit Facilities and the Outstanding Notes and Outstanding
Note Indentures, (C) the terms of Indebtedness of PRIMEDIA incurred in
accordance with the INCURRENCE OF INDEBTEDNESS covenant; PROVIDED that such
terms of any such Indebtedness constitute no greater encumbrance or restriction
on the ability of any Restricted Subsidiary
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to pay dividends or make distributions, make loans or advances or transfer
properties or assets than is permitted by this covenant, (D) the terms of the
Note Indenture and the Notes, (E) applicable law, (F) customary non-assignment
provisions entered into in the ordinary course of business and consistent with
past practices, (G) the terms of purchase money obligations for property
acquired in the ordinary course of business, but only to the extent that such
purchase money obligations restrict or prohibit the transfer of the property so
acquired, (H) the terms of the Class D Subordinated Debentures, the Class D
Debenture Indenture, Class F Subordinated Debentures, Class F Debenture
Indenture, 8 5/8% Subordinated Debentures and 8 5/8% Debenture Indenture, (I)
any encumbrance or restriction with respect to a Subsidiary of PRIMEDIA that is
not a Subsidiary of PRIMEDIA on the date of the Note Indenture, which
encumbrance or restriction is in existence at the time such person becomes a
Subsidiary of PRIMEDIA or is created on the date it becomes a Subsidiary of
PRIMEDIA, (J) any encumbrance or restriction with respect to a Subsidiary of
PRIMEDIA imposed pursuant to an agreement which has been entered into for the
sale or disposition of all or substantially all the Capital Stock or assets of
such Subsidiary, (K) customary provisions in joint venture agreements and other
similar agreements entered into in the ordinary course of business, (L)
customary provisions contained in leases and other agreements entered into in
the ordinary course of business, (M) the terms of any Indebtedness for borrowed
money of any Partially Owned Restricted Subsidiary or (N) any encumbrance or
restriction existing under any agreement which refinances or replaces the
agreements described in clauses (A), (B), (D), (H), (K), (L) and (M), PROVIDED
that the terms and conditions of any such encumbrances or restrictions contained
in any such agreement constitute no greater encumbrance or restriction on the
ability of any Restricted Subsidiary to pay dividends or make distributions,
make loans or advances or transfer properties or assets than those under or
pursuant to the agreement evidencing the Indebtedness or obligations refinanced.
Nothing contained in this covenant shall prevent PRIMEDIA or a Restricted
Subsidiary from entering into any agreement permitting or providing for the
incurrence of Liens otherwise permitted by the LIMITATION ON LIENS covenant.
INCURRENCE OF INDEBTEDNESS. PRIMEDIA will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable with respect
to any Indebtedness unless PRIMEDIA's Debt to Consolidated Cash Flow Ratio for
its four full fiscal quarters ending immediately prior to the date such
additional Indebtedness is created, incurred, issued, assumed or guaranteed
would have been no greater than 6 to 1, and such Indebtedness is not senior in
right of payment to the Notes; PROVIDED that such calculation shall give effect
to (A) the incurrence of any Indebtedness (after giving effect to the
application of the proceeds thereof) in connection with the simultaneous
acquisition of any person, business, property or assets, and (B) the
Consolidated Cash Flow generated by such acquired person, business, property or
assets, giving effect in each case to such incurrence of Indebtedness,
application of proceeds and Consolidated Cash Flow as if such acquisition had
occurred at the beginning of such four quarter period. For purposes of the
foregoing provision, cash flow generated by any acquired person, business,
property or asset shall be determined on the same basis as the definition of
Consolidated Cash Flow and shall be based on the actual earnings before
interest, taxes, depreciation and amortization of such acquired person,
business, property or asset during the immediately preceding four full fiscal
quarters PLUS (y) (i) the savings in cost of goods sold that would have resulted
during that period from the effect of using the Company's actual costs for
comparable goods and services during that period and (ii) other savings in cost
of goods sold or eliminations of selling, general and administrative expenses as
determined by PRIMEDIA in good faith in its consideration of such acquisitions
and consistent with the Company's experiences in acquisitions of similar
businesses MINUS (z) the incremental expenses that would be included in cost of
goods sold and selling, general and administrative expenses that would have been
incurred by the Company in the operation of such acquired person, business,
property or assets during such period.
The foregoing limitations will not apply to the incurrence of (i)
Indebtedness pursuant to the Credit Facilities (PROVIDED that the principal
amount of such Indebtedness shall not exceed $1.65 billion, less the amount of
all repayments made in respect of term loans and of all permanent commitment
reductions with respect to revolving loans (except to the extent, and only to
the extent, that any required repayments of principal in connection with such
commitment reduction are not made) made under the Credit Facilities
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(excluding such repayments and commitment reductions which occur substantially
contemporaneously with a refinancing or a refunding thereof)), plus any amounts
then available under clause (vi) of this paragraph; (ii) Existing Indebtedness;
(iii) Indebtedness represented by the Outstanding Notes; (iv) the Class D
Subordinated Debentures issued in exchange for all the outstanding Series D
Preferred Stock, the Class F Subordinated Debentures issued in exchange for all
the outstanding Series F Preferred Stock and the 8 5/8% Subordinated Debentures
issued in exchange for all the outstanding Preferred Stock; (v) Capital Lease
Obligations in an aggregate principal amount which, when aggregated with the
principal amount of all other Capital Lease Obligations then outstanding and
incurred pursuant to this clause (v) and including all Refinancing Indebtedness
(as defined below) incurred to refund, refinance or replace any other
Indebtedness incurred pursuant to this clause (v), does not exceed 5% of Total
Assets; (vi) Indebtedness in an aggregate principal amount equal to the greater
of (A) $225 million in the aggregate at any one time outstanding for PRIMEDIA
and its Restricted Subsidiaries or (B) Indebtedness created, incurred, issued,
assumed or guaranteed (x) by PRIMEDIA at any one time outstanding not in excess
of 7% of the Consolidated Net Worth of PRIMEDIA at the time of such creation,
incurrence, issuance, assumption or guarantee or (y) by any Restricted
Subsidiary of PRIMEDIA at any one time outstanding not in excess of 7% of the
Consolidated Net Worth of such Restricted Subsidiary at the time of such
creation, incurrence, issuance, assumption or guarantee; (vii) Indebtedness
created, incurred, issued, assumed or guaranteed in exchange for or the proceeds
of which are used to extend, refinance, renew, replace, substitute or refund
Indebtedness referred to in clauses (i) through (vi) above, including additional
Indebtedness incurred to pay premiums and fees in connection therewith (the
"Refinancing Indebtedness"); PROVIDED, that (A) the principal amount of such
Refinancing Indebtedness shall not exceed the principal amount of Indebtedness
(including unused commitments and additional Indebtedness incurred to pay
premiums and fees in connection therewith ) so extended, refinanced, renewed,
replaced, substituted or refunded PLUS any amounts then available under clause
(vi) of this paragraph, (B) in the case of Refinancing Indebtedness for
Indebtedness permitted under clauses (ii) and (iv) of this paragraph, the
Refinancing Indebtedness permitted under clauses (ii) and (iv) of this paragraph
shall have an Average Life equal to or greater than the Average Life of the
Indebtedness being extended, refinanced, renewed, replaced, substituted or
refunded and (C) the Refinancing Indebtedness for Indebtedness permitted under
clauses (ii) and (iv) of this paragraph shall rank, in right of payment, no more
senior than such Indebtedness being extended, refinanced, renewed, replaced,
substituted or refunded and the Refinancing Indebtedness for Indebtedness
permitted under clauses (i), (iii), (v) and (vi) of this paragraph shall rank,
in right of payment, PARI PASSU with or junior to the Notes; (viii) intercompany
Indebtedness incurred in connection with Investments in Unrestricted
Subsidiaries; PROVIDED that such Investments are permitted by the LIMITATIONS ON
RESTRICTED PAYMENTS covenant or the INVESTMENTS IN UNRESTRICTED SUBSIDIARIES
covenant; (ix) Indebtedness under Currency Agreements and Interest Rate
Agreements, PROVIDED that in the case of Currency Agreements which relate to
other Indebtedness, such Currency Agreements do not increase the Indebtedness of
PRIMEDIA outstanding other than as a result of fluctuations in foreign currency
exchange rates; (x) Indebtedness arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or from
guarantees or letters of credit, surety bonds or performance bonds securing any
obligations of PRIMEDIA or any Restricted Subsidiary of PRIMEDIA pursuant to
such agreements, incurred or assumed by the acquired Subsidiary in connection
with the acquisition or disposition of any business, assets or Restricted
Subsidiary of PRIMEDIA, other than guarantees or similar credit support by
PRIMEDIA of Indebtedness incurred by any person acquiring all or any portion of
such business, assets or Restricted Subsidiary for the purpose of financing such
acquisition; PROVIDED that the maximum aggregate liability in respect of all
such Indebtedness in the nature of such guarantees shall at no time exceed the
gross proceeds actually received from the sale of such business, assets or
Restricted Subsidiary; (xi) Indebtedness arising from the honoring by a bank or
other financial institution of a check, draft or similar instrument
inadvertently (except in the case of daylight overdrafts, which will not be, and
will not be deemed to be, inadvertent) drawn against insufficient funds in the
ordinary course of business, provided that such Indebtedness is extinguished
within three business days of its incurrence; (xii) Indebtedness of an entity at
the time it is acquired as a Restricted Subsidiary, PROVIDED that such
Indebtedness was not incurred or assumed by such entity in connection with or in
anticipation of such acquisition; (xiii) Indebtedness between PRIMEDIA and any
Restricted Subsidiary; (xiv) Non-Compete Notes, not to
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exceed $50.0 million in aggregate principal amount less the amount of all
principal repayments made in respect thereof; and (xv) PRIMEDIA's Obligations
arising from the repurchase, redemption or other acquisitions of Capital Stock
from management investors to the extent permitted by the LIMITATIONS ON
RESTRICTED PAYMENTS covenant. For the purposes of determining the aggregate
Indebtedness of any referent person, Indebtedness shall not include guarantees
by any other person of such Indebtedness. For the purposes of determining
compliance with this covenant, in the event that an item of Indebtedness meets
the criteria of more than one of the categories of permitted Indebtedness
described in clauses (i) through (xv) above or is entitled to be incurred
pursuant to the first paragraph of this covenant, PRIMEDIA shall, in its sole
discretion, classify such item of Indebtedness in any manner that complies with
the covenants described above and such item of Indebtedness will be treated as
having been incurred pursuant to only one of such clauses or pursuant to the
first paragraph hereof. Accrual of interest, the accretion of accreted value and
the payment of interest in the form of additional Indebtedness will not be
deemed to be an incurrence of Indebtedness for purposes of this covenant.
LIMITATIONS ON LIENS. PRIMEDIA will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Lien (other than Permitted Liens) on any of its assets or
any income or profits therefrom or assign or convey any right to receive income
therefrom unless the Notes are equally and ratably secured.
LIMITATIONS ON ASSET SALES. PRIMEDIA will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, consummate an Asset Sale
(including the sale of any of the stock of any Subsidiary) unless at least 100%
of the Net Proceeds from such Asset Sale (or, in the case of a Partially Owned
Restricted Subsidiary, PRIMEDIA's Pro Rata Portion thereof, after repayment by
such Partially Owned Restricted Subsidiary of its Indebtedness) are applied
first to repay Obligations or reduce commitments under the Credit Facilities in
accordance with the terms thereof and second to offer to redeem at par the
Outstanding Notes and third to offer to redeem at par the Notes. The foregoing
application of Net Proceeds from Asset Sales is not required in the case of (i)
sales or dispositions generating cash proceeds of less than, with respect to
PRIMEDIA and its Restricted Subsidiaries, $2,500,000 and (ii) sales and
dispositions as to which PRIMEDIA delivers a reinvestment notice and the
proceeds are so reinvested in one or more communications, publishing,
information, education or media assets or businesses within twelve months of the
date the relevant Asset Sale is consummated. Notwithstanding the foregoing,
neither PRIMEDIA nor its Restricted Subsidiaries will be required to apply the
Net Proceeds from any Asset Sale (i) to the extent that the aggregate Net
Proceeds from such Asset Sale, together with the Net Proceeds, if any, of any
other Asset Sale which have not been previously applied, are less than
$25,000,000 or (ii) to the extent that, and for so long as, such Net Proceeds
cannot be so applied as a result of an encumbrance or restriction permitted
pursuant to the LIMITATIONS ON LIENS covenant. The procedure for offering to
redeem the Notes in connection with Asset Sales is substantially the same as the
mechanism for redeeming the Notes in connection with a Change of Control.
TRANSACTIONS WITH AFFILIATES. Neither PRIMEDIA nor any of its Restricted
Subsidiaries will make any loan, advance, guarantee or capital contribution to,
or for the benefit of, or sell, lease, transfer or otherwise dispose of any of
its properties or assets to, or for the benefit of, or purchase or lease any
property or assets from, or enter into or amend any contract, agreement or
understanding with, or for the benefit of, (i) any person (or any Affiliate of
such person) holding 10% or more of any class of Capital Stock of PRIMEDIA or
any of its Restricted Subsidiaries or (ii) any Affiliate of PRIMEDIA or any of
its Restricted Subsidiaries (each an "Affiliate Transaction") involving
aggregate payments or consideration in excess of $5.0 million, unless (a) such
Affiliate Transaction is on terms that are not materially less favorable to the
Company or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (b) the Company delivers to the Trustee
with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $10.0 million, a
resolution adopted by the majority of the Board of Directors approving such
Affiliate Transaction and set forth in an Officers' Certificate certifying that
such Affiliate Transaction complies with clause (a) above.
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The foregoing restriction shall not apply to (i) the payment of an annual
fee to KKR for the rendering of management consulting and financial services to
PRIMEDIA and its Restricted Subsidiaries in an aggregate amount which is
reasonable in relation thereto, (ii) the payment of transaction fees to KKR in
amounts which are in accordance with past practices for the rendering of
financial advice and services in connection with acquisitions, dispositions and
financings by PRIMEDIA and its Subsidiaries, (iii) loans to officers, directors
and employees of PRIMEDIA and its Subsidiaries for business or personal purposes
and other loans and advances to such officers, directors and employees for
travel, entertainment, moving and other relocation expenses made in the ordinary
course of business of PRIMEDIA and its Subsidiaries, (iv) any Restricted
Payments not prohibited by the LIMITATIONS ON RESTRICTED PAYMENTS covenant or
any Investment not prohibited by the INVESTMENTS IN UNRESTRICTED SUBSIDIARIES
covenant, (v) transactions between or among any of PRIMEDIA and its Restricted
Subsidiaries, (vi) allocation of corporate overhead to Unrestricted Subsidiaries
on a basis not materially less favorable to PRIMEDIA than such allocations to
Restricted Subsidiaries or (vii) the payment of reasonable and customary fees
paid to, and indemnity provided on behalf of, officers, directors, employees or
consultants of PRIMEDIA or any Restricted Subsidiary.
MERGER, CONSOLIDATION, OR SALE OF ASSETS. PRIMEDIA may not consolidate
with, merge with or into, or transfer all or substantially all of its assets (as
an entirety or substantially as an entirety in one transaction or a series of
related transactions), to any person (except a wholly-owned Restricted
Subsidiary, PROVIDED that in connection with any merger of PRIMEDIA with a
Restricted Subsidiary of PRIMEDIA, no consideration (other than common stock in
the surviving corporation or PRIMEDIA) shall be issued or distributed to the
shareholders of PRIMEDIA) or permit any person to merge with or into it unless:
(i) PRIMEDIA shall be the continuing person, or the person (if other than
PRIMEDIA) formed by such consolidation or into which PRIMEDIA is merged or to
which the properties and assets of PRIMEDIA are transferred shall be a
corporation organized and existing under the laws of the United States or any
State thereof or the District of Columbia and shall expressly assume, by a
supplemental indenture, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all of the obligations of PRIMEDIA under the Notes
and Note Indenture; (ii) immediately after giving effect to such transaction on
a pro forma basis (a) no Default and no Event of Default under the Note
Indenture shall have occurred and be continuing and (b) PRIMEDIA could incur at
least $1.00 of additional Indebtedness pursuant to the first paragraph of the
INCURRENCE OF INDEBTEDNESS covenant and (iii) immediately after giving effect to
such transaction on a pro forma basis, the Fixed Charge Coverage Ratio of the
surviving entity is at least 1:1; PROVIDED that if the Fixed Charge Coverage
Ratio of PRIMEDIA before giving effect to such transaction is within the range
set forth in column (A) below, then the pro forma Fixed Charge Coverage Ratio of
the surviving entity shall be at least equal to the lesser of (x) the ratio
determined by multiplying the percentage set forth in Column B by the Fixed
Charge Coverage Ratio of PRIMEDIA prior to such transaction, and (y) the ratio
set forth in Column C below:
<TABLE>
<CAPTION>
(B)
(A) -- (C)
- --------------------------------------------------------------------------------- ---------
<S> <C> <C>
1.11:1 to 1.99:1................................................................. 90% 1.5:1
2.00:1 to 2.99:1................................................................. 80% 2.1:1
3.00:1 to 3.99:1................................................................. 70% 2.4:1
4.00:1 or more................................................................... 60% 2.5:1
</TABLE>
PAYMENTS FOR CONSENT. Neither PRIMEDIA nor any of its Subsidiaries shall,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms of provisions
of the Note Indenture or the Notes unless such consideration is offered to be
paid or agreed to be paid to all holders of the Notes which so consent, waive or
agree to amend in the time frame set forth in solicitation documents relating to
such consent, waiver or agreement.
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GUARANTEES
GUARANTEES. The Notes are fully and unconditionally guaranteed on a senior
basis, jointly and severally, by each of the domestic Restricted Subsidiaries
other than Partially Owned Restricted Subsidiaries (collectively, the
"Guarantors"). In the event that any guarantee would constitute or result in a
violation of any applicable fraudulent conveyance or similar law of any relevant
jurisdiction, the liability of any Guarantor under such guarantee would be
reduced to the maximum amount permissible under the applicable fraudulent
conveyance or similar law. The foregoing guarantees (the "Guarantees") rank PARI
PASSU with the guarantees made for the benefit of the lenders under the Credit
Facilities and with guarantees made for the benefit of the holders of the
Outstanding Notes. No Unrestricted Subsidiary or Partially Owned Restricted
Subsidiary shall become a guarantor of any Indebtedness of PRIMEDIA or any
Restricted Subsidiaries unless such Unrestricted Subsidiary or Partially Owned
Restricted Subsidiary becomes a guarantor of the Notes. The Company does not
currently have any Partially Owned Restricted Subsidiaries.
RELEASES OF GUARANTEES. Upon the sale or disposition (by merger or
otherwise) of any Guarantor by PRIMEDIA or any subsidiary of PRIMEDIA to any
entity that is not an affiliate of PRIMEDIA or any of its subsidiaries and which
sale or disposition is otherwise in compliance with the terms of the Note
Indenture, each such Guarantor is sold or disposed of for at least fair market
value (evidenced by a resolution of the Board of Directors of PRIMEDIA set forth
in an Officer's Certificate delivered to the Trustee) (the foregoing proviso
shall not apply to the sale or disposition of a Guarantor in a foreclosure
proceeding to the extent that such proviso would be inconsistent with the
requirements of the Uniform Commercial Code).
THE GUARANTORS. The Guarantors on the date of this Prospectus are set forth
below:
The Apartment Guide of Nashville, Inc.
Argus Publishers Corporation
American Heat Video Productions, Inc.
ASTN, Inc.
A WEP Company
Bacon's Information, Inc.
Bankers Consulting Company
Bowhunter Magazine, Inc.
Canoe & Kayak, Inc.
Cardinal Business Media, Inc.
Cardinal Business Media Holdings, Inc.
Channel One Communications Corp.
Climbing, Inc.
Cover Concepts Marketing Services, LLC
Cowles Business Media, Inc.
Cowles Enthusiast Media, Inc.
Cowles History Group, Inc.
CSK Publishing Company Incorporated
Cumberland Publishing, Inc.
DRF Finance, Inc.
Daily Racing Form, Inc.
Data Book, Inc.
The Electronics Source Book, Inc.
Excellence in Training Corporation
Films for the Humanities & Sciences, Inc.
Funk & Wagnalls Yearbook Corp.
Gareth Stevens, Inc.
GO LO Entertainment, Inc.
Guinn Communications, Inc.
Haas Publishing Companies, Inc.
Health & Sciences Network, Inc.
Horse & Rider, Inc.
Intermodal Publishing Company, Ltd.
IDTN Leasing Corporation
Industrial Training Systems Corporation
IntelliChoice, Inc.
Intertec Market Reports, Inc.
Intertec Presentations, Inc.
Intertec Publishing Corporation
K-III HPC, Inc.
K-III Prime Corporation
Kitplanes Acquisition Company
Law Enforcement Television Network, Inc.
Lifetime Learning Systems, Inc.
Little Rock Apartment Guide, Inc.
Lockert Jackson & Associates, Inc.
Low Rider Publishing Group, Inc.
McMullen Argus Publishing, Inc.
Memphis Apartment Guide, Inc.
Musical America Publishing, Inc.
Nelson Information, Inc.
Pictorial, Inc.
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Plaza Communications, Inc.
PRIMEDIA Holdings III Inc.
PRIMEDIA Information Inc.
PRIMEDIA Magazines Inc.
PRIMEDIA Magazines Finance Inc.
PRIMEDIA Reference Inc.
PRIMEDIA Special Interest Publications Inc.
PRIMEDIA Workplace Learning, Inc.
QWIZ, Inc.
R.E.R. Publishing Corporation
RetailVision, Inc.
Simba Information, Inc.
Southwest Art, Inc.
Straight Down, Inc.
Symbol of Excellence Publishers, Inc.
Tel-A-Train, Inc.
The Virtual Flyshop, Inc.
TI-IN Acquisition Corporation
Vegetarian Times, Inc.
Weekly Reader Corporation
Westcott Communications Michigan, Inc.
Westcott ECI, Inc.
Western Empire Publications, Inc.
The Company currently does not have any Partially Owned Restricted
Subsidiaries.
EVENTS OF DEFAULT AND REMEDIES
The Note Indenture provides that each of the following constitutes an "Event
of Default": (i) the failure to make any payment of interest on the Notes when
the same becomes due and payable and the continuance of such failure for a
period of 30 days; (ii) the failure to make any payment when due of principal or
premium on the Notes, whether at maturity, or upon acceleration, redemption or
otherwise; (iii) failure by PRIMEDIA to comply with any of its other agreements
in the Note Indenture or the Notes and such Default continues for 30 days after
receipt of a written notice from the Trustee or holders of at least 30% of the
aggregate principal amount of the Notes then outstanding, specifying such
Default and requiring that it be remedied; (iv) default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by PRIMEDIA or any of
its Restricted Subsidiaries (or the payment of which is guaranteed by PRIMEDIA
or any of its Restricted Subsidiaries) whether such Indebtedness or guarantee is
now existing or thereafter created in the future, if either (A) such default is
the failure to pay the final scheduled principal installment in an amount of at
least $10 million in respect of any such Indebtedness on the stated maturity
date thereof (after giving effect to any extension of such maturity date by the
holder of such Indebtedness and after the expiration of any grace period in
respect of such final scheduled principal installment contained in the
instrument under which such Indebtedness is outstanding) or (B) as a result of
such default the maturity of such Indebtedness has been accelerated prior to its
express maturity and the principal amount of such Indebtedness, together with
the principal amount of any other such Indebtedness the maturity of which has
been accelerated, aggregates $20 million or more; provided that an Event of
Default shall not be deemed to occur with respect to any accelerated
indebtedness which is repaid or prepaid within 20 days after such declaration;
(v) failure by PRIMEDIA or any of its Restricted Subsidiaries to pay certain
final judgments that exceed $15 million individually or $25 million in the
aggregate, which judgments are not discharged, satisfied, stayed, annulled or
rescinded within 60 days after their entry; (vi) certain events of bankruptcy or
insolvency with respect to PRIMEDIA or any of its Restricted Subsidiaries; and
(vii) except as permitted by the Note Indenture and the Notes, the cessation of
the effectiveness of the guarantees or the finding in any judicial proceeding
that the Guarantees are unenforceable or invalid or the denial or disaffirmation
by any guarantor of its obligations under its Guarantee. The term "Default"
means any event which is, or after notice or passage of time or both would be,
an Event of Default.
If a Default or an Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to each holder of the Notes a
notice of the Default or Event of Default within 30 days after it occurs or, if
later, within 10 days after such Default or Event of Default becomes known to
the Trustee, unless such Default or Event of Default has been cured. Except in
the case of a Default or Event of Default in the payment of principal of,
premium, if any, or interest on any Note or that results from a failure to
comply with the CHANGE OF CONTROL covenant, the Trustee may withhold the notice
if and so long
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as a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interest of the holders of the Notes.
If an Event of Default (other than an Event of Default with respect to
PRIMEDIA resulting from bankruptcy, insolvency or reorganization) occurs and is
continuing, the Trustee by written notice to PRIMEDIA, or the holders of at
least 30% of the principal amount of the Notes then outstanding by written
notice to PRIMEDIA and the Trustee, may, and such Trustee at the request of such
holders shall, declare all unpaid principal of, premium, if any, and accrued
interest on the Notes to be due and payable, as specified below. Upon a
declaration of acceleration, such principal, premium, if any, and accrued
interest shall be due and payable immediately. If an Event of Default resulting
from certain events of bankruptcy, insolvency or reorganization occurs with
respect to PRIMEDIA, all unpaid principal of, premium, if any, and accrued
interest on the Notes then outstanding shall IPSO FACTO become and be
immediately due and payable without any declaration, notice or other act on the
part of the Trustee or any holder. The holders of at least a majority in
principal amount of the Notes by notice to the Trustee may rescind an
acceleration and its consequences upon conditions provided in the Note
Indenture. Subject to certain restrictions set forth in the Note Indenture, the
holders of at least a majority in principal amount of the outstanding Notes by
notice to the Trustee may waive an existing Default or Event of Default and its
consequences (including waivers obtained in connection with a tender offer or
exchange offer for Notes), except a continuing Default or Event of Default in
the payment of principal of, premium, if any, or interest on, the Notes
(including, without limitation, pursuant to any mandatory or optional redemption
obligation under the Note Indenture) or a continuing Default or Event of Default
resulting from the failure to comply with the CHANGE OF CONTROL or LIMITATIONS
ON ASSET SALES covenants. When a Default or Event of Default is waived, it is
cured and ceases. A holder of Notes may not pursue any remedy with respect to
the Note Indenture, the Notes or any Guarantee unless: (1) the holder gives to
the Trustee written notice of a continuing Event of Default; (2) the holders of
at least 30% in principal amount of such Notes outstanding make a written
request to the Trustee to pursue the remedy; (3) such holder or holders offer to
the Trustee indemnity satisfactory to the Trustee against any loss, liability or
expense (including, without limitation, fees of counsel); (4) the Trustee does
not comply with the request within 30 days after receipt of the request and the
offer of indemnity; and (5) during such 30-day period the Holders of a majority
in principal amount of the outstanding Notes do not give the Trustee a direction
which is inconsistent with the request.
PRIMEDIA is required to deliver to the Trustee annually a statement
regarding compliance with the Note Indenture, and PRIMEDIA is required upon
becoming aware of any Default or Event of Default to deliver a statement to the
Trustee specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND SHAREHOLDERS
No director, officer, employee, incorporator or shareholder of PRIMEDIA, as
such, shall have any liability for any obligations of PRIMEDIA under the Notes,
the Note Indenture or the Guarantees or for any claim based on, in respect of,
or by reason of, such obligations or their creation. Each holder of the Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the
view of the Commission that such a waiver is against public policy.
DEFEASANCE AND DISCHARGE OF THE NOTE INDENTURE AND THE NOTES
If PRIMEDIA irrevocably deposits, or causes to be deposited, in trust with
the Trustee or the Paying Agent, at any time prior to the stated maturity of the
Notes or the date of redemption of all the outstanding Notes, as trust funds in
trust, money or direct noncallable obligations of or guaranteed by the United
States of America in an amount sufficient (without reinvestment thereof) to pay
timely and discharge the entire principal of the then outstanding Notes and all
interest due thereon to maturity or redemption, the Note Indenture shall cease
to be of further effect as to all outstanding Notes (except,
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among other things, as to (i) remaining rights of registration of transfer and
substitution and exchange of the Notes, (ii) rights of holders to receive
payment of principal of and interest on the Notes, and (iii) the rights,
obligations and immunities of the Trustee).
TRANSFER AND EXCHANGE
A holder may transfer or exchange Notes in accordance with the Note
Indenture. The Registrar and the Trustee may require a holder, among other
things, to furnish appropriate endorsements and transfer documents, and PRIMEDIA
may require a holder to pay any taxes and fees required by law or permitted by
the Note Indenture. PRIMEDIA is not required to transfer or exchange any Note
selected for redemption. Also, PRIMEDIA is not required to transfer or exchange
any Note for a period of 15 days before a selection of Notes to be redeemed.
The registered holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next succeeding paragraph, the Note Indenture, the
Guarantees or the Notes may be amended or supplemented with the consent of the
holders of at least 51% in principal amount of the Notes then outstanding
(including consents obtained in connection with a tender offer or exchange offer
for Notes and the New Notes), and any existing default or compliance with any
provision of the Note Indenture or the Notes may be waived with the consent of
the holders of 51% in principal amount of the then outstanding Notes and the New
Notes (including consents obtained in connection with a tender offer or exchange
offer for Notes).
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting holder of Notes) (i) reduce
the principal amount of Notes whose holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed maturity
of any Note or alter the provisions with respect to the redemption or purchase
price in connection with repurchases of the Notes with proceeds of Asset Sales,
upon a Change of Control or otherwise, (iii) reduce the rate of or change the
time for payment of interest on any Note, (iv) waive a Default or Event of
Default in the payment of principal of or premium, if any, or interest on the
Notes or that resulted from a failure to comply with the CHANGE OF CONTROL or
LIMITATIONS ON ASSET SALES covenants (except a rescission of acceleration of the
Notes by the holders of at least 51% in aggregate principal amount of the Notes
and the New Notes), (v) make any Notes payable in money other than that stated
in the Notes, (vi) make any change in the provisions of the Note Indenture
relating to waivers of past Defaults or the rights of holders of Notes to
receive payments of principal of or interest on the Notes, (vii) waive a
redemption payment with respect to any Note or (viii) make any change in the
foregoing.
Notwithstanding the foregoing, without the consent of any holder of the
Notes, PRIMEDIA and the Trustee may amend or supplement the Note Indenture or
the Notes to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of PRIMEDIA's obligations to holders of the Notes in
the case of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the holders of the Notes or that does not
adversely affect the legal rights under the Note Indenture of any such holder,
or to comply with requirements of the Commission in order to effect or maintain
the qualification of the Note Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Note Indenture contains certain limitations on the rights of the
Trustee, should it become a creditor of PRIMEDIA, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in
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other transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within ninety days, apply to the Commission for
permission to continue or resign.
The holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Note Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent person in the
conduct of its own affairs. Subject to such provisions, the Trustee will be
under no obligation to exercise any of its rights or powers under the Note
Indenture at the request of any of the holders of the Notes, unless they shall
have offered to the Trustee security and indemnity satisfactory to it against
any loss, liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Note Indenture
without charge by writing to: PRIMEDIA Inc., 745 Fifth Avenue, New York, NY
10151, Attention: Warren Bimblick, Vice President, Investor Relations.
BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the New Notes will be issued in fully
registered form, without coupons. The New Notes will be deposited with, or on
behalf of, The Depository Trust Company, New York, New York ("DTC"), and
registered in the name of Cede & Co. ("Cede") as DTC's nominee, in the form of
one or more global New Notes.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Note Indenture.
Reference is made to the Note Indenture for a full disclosure of all such terms,
as well as any other capitalized terms used herein for which no definition is
provided.
"Adjusted Consolidated Net Income" means, with respect to any person for any
period, (i) the Consolidated Net Income of such person for such period, plus
(ii) in the case of PRIMEDIA and its Restricted Subsidiaries, all cash received
during such period by PRIMEDIA or any Restricted Subsidiary from its
Unrestricted Subsidiaries from the payment of dividends or distributions
(including tax sharing payments and loans or advances which are junior in right
of payment to the Notes and have a longer Average Life than the Notes), but only
to the extent such cash payments are not otherwise included in "Adjusted
Consolidated Net Income." Each item of Adjusted Consolidated Net Income will be
determined in conformity with GAAP, except that, for purposes of the application
of Accounting Principles Board Opinions Nos. 16 and 17, such person may select
any amortization practice allowable by GAAP up to 40 years, notwithstanding the
use of a different amortization in such person's consolidated financial
statements. Any designation of a Subsidiary of PRIMEDIA as a Restricted
Subsidiary or Unrestricted Subsidiary at or prior to the time of the calculation
of Adjusted Consolidated Net Income of a Subsidiary will be treated as if it had
occurred at the beginning of the applicable period.
"Affiliate" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. A person shall be deemed to "control"
(including the correlative meanings, the terms "controlling," "controlled by,"
and "under common control with") another person if the controlling person
possesses, directly or indirectly, the power to direct or cause the direction of
the management or policies of the controlled person, whether through ownership
of voting securities, by agreement or otherwise.
"Asset Sale" means, with respect to any person, the sale, lease, conveyance,
disposition or other transfer by the referent person of any of its assets
(including by way of a sale-and-leaseback and including
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the sale or other transfer of any of the Capital Stock of any Subsidiary of the
referent person); provided, that notwithstanding the foregoing, the term "Asset
Sale" shall not include the sale, lease, conveyance, disposition or other
transfer of (i) with respect to any Unrestricted Subsidiary, (A) any assets not
constituting all or substantially all of the assets of any Net Cash Flow
Unrestricted Subsidiary and (B) any Capital Stock or any assets of any
Restricted Payment Unrestricted Subsidiary, (ii) all or substantially all of the
assets of PRIMEDIA, as permitted pursuant to the MERGER, CONSOLIDATION OR SALE
OF ASSETS covenant, (iii) any assets between PRIMEDIA, any Restricted Subsidiary
or any Unrestricted Subsidiary, (iv) any sale, conveyance, disposition or other
transfer of (A) cash and cash equivalents, (B) inventory in the ordinary course
of business and (C) any other tangible or intangible asset, in each case in the
ordinary course of business of PRIMEDIA or its Restricted Subsidiaries or (v)
the sale or discount, in each case without recourse, of accounts receivable
arising in the ordinary course of business, but only in connection with the
compromise or collection thereof.
"Average Life" means, as of the date of determination, with respect to any
debt security, the quotient obtained by dividing (i) the sum of the products of
the numbers of years from the date of determination to the dates of each
successive scheduled principal payment (assuming the exercise by the obligor of
such debt security of all unconditional (other than as to the giving of notice)
extension options of each such scheduled payment date) of such debt security
multiplied by the amount of such principal payment by (ii) the sum of all such
principal payments.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease which
would at such time be so required to be capitalized on the balance sheet in
accordance with GAAP.
"Capital Stock" means any and all shares, interests, participations, rights
or other equivalents (however designated) of corporate stock.
"Change of Control" means such time as (i) a "person" or "group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), other than KKR and
its Affiliates, becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act) of more than (A) 35 percent (35%) of the total voting power of
the then outstanding voting stock of PRIMEDIA and (B) the total voting power of
the then outstanding voting stock of PRIMEDIA beneficially owned by KKR and its
Affiliates or (ii) during any period of two consecutive calendar years,
individuals who at the beginning of such period constituted PRIMEDIA's Board of
Directors (together with any new directors whose election by PRIMEDIA's Board of
Directors or whose nomination for election by PRIMEDIA's shareholders was
approved by a vote of at least two-thirds of the Directors then still in office
who either were Directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the directors then in office.
"Consolidated Cash Flow" means, with respect to any person for any period,
the Adjusted Consolidated Net Income of such person for such period plus (a) (i)
with respect to any Restricted Subsidiary other than a Partially Owned
Restricted Subsidiary, provision for taxes based on income or profits to the
extent such provision for taxes was included in computing Adjusted Consolidated
Net Income and (ii) with respect to any Partially Owned Restricted Subsidiary,
the Pro Rata Portion of any provision for taxes based on income or profits to
the extent such provision for taxes was included in computing Adjusted
Consolidated Net Income, plus (b) (i) with respect to any Restricted Subsidiary
other than a Partially Owned Restricted Subsidiary, consolidated Interest
Expense, whether paid or accrued, to the extent such expense was deducted in
computing Adjusted Consolidated Net Income (including amortization of original
issue discount and non-cash interest payments), and (ii) with respect to any
Partially Owned Restricted Subsidiary, the Pro Rata Portion of consolidated
Interest Expense, whether paid or accrued, to the extent such expense was
deducted in computing Adjusted Consolidated Net Income (including amortization
of original issue discount and non-cash interest payments), plus (c) (i) with
respect to any Restricted Subsidiary other than a Partially Owned Restricted
Subsidiary, depreciation, amortization and other non-
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cash charges to the extent such depreciation, amortization and other non-cash
charges were deducted in computing Adjusted Consolidated Net Income (including
amortization of goodwill and other intangibles) and (ii) with respect to any
Partially Owned Restricted Subsidiary, the Pro Rata Portion of depreciation,
amortization and other non-cash charges to the extent such depreciation,
amortization and other non-cash charges were deducted in computing Adjusted
Consolidated Net Income (including amortization of goodwill and other
intangibles) ; provided, with respect to the calculation of a person's Debt to
Consolidated Cash Flow Ratio, that if, during such period, (a) such person or
any of its Subsidiaries shall have made any Asset Sales (other than, in the case
of PRIMEDIA and its Restricted Subsidiaries, sales of the Capital Stock of or
any assets of Unrestricted Subsidiaries which constitute Asset Sales),
Consolidated Cash Flow of such person for such period shall be reduced by an
amount equal to the Consolidated Cash Flow (if positive), to the extent such
Consolidated Cash Flow was included in computing Consolidated Cash Flow,
directly attributable to the assets or Capital Stock which are the subject of
such Asset Sales for such period or increased by an amount equal to the
Consolidated Cash Flow (if negative), to the extent such Consolidated Cash Flow
was included in computing Consolidated Cash Flow, directly attributable thereto
for such period and (b) such person or any of its Subsidiaries (other than, in
the case of PRIMEDIA and its Restricted Subsidiaries, Unrestricted Subsidiaries)
has made any acquisition of assets or Capital Stock (occurring by merger or
otherwise), including without limitation, any acquisition of assets or Capital
Stock occurring in connection with a transaction causing a calculation to be
made hereunder, Consolidated Cash Flow of such person shall be calculated
(notwithstanding clause (a) of the definition of Consolidated Net Income) as if
such acquisition of assets or Capital Stock (including the incurrence of any
Indebtedness in connection with any such acquisition and the application of the
proceeds thereof) took place on the first day of such period. Consolidated Cash
Flow of such person shall be determined for any period without regard to changes
in Working Capital of such person and its Subsidiaries during such period.
"Consolidated Fixed Charges" means, with respect to any person for any
period, the (a) consolidated Interest Expense, whether paid or accrued, to the
extent such expense was deducted in computing Adjusted Consolidated Net Income
(including amortization of original issue discount and non-cash interest
payments) and (b) the amount of all cash dividend payments on all series of
preferred stock other than cash dividends on preferred stock of Unrestricted
Subsidiaries and cash dividends paid to such person or its Subsidiaries;
PROVIDED, that with respect to Partially Owned Restricted Subsidiaries, only the
Pro Rata Portion of any amounts covered by clauses (a) and (b) above shall be
included in calculating Consolidated Fixed Charges; provided further that if
during such period (i) such person or any of its Subsidiaries shall have made
any Asset Sales (other than, in the case of PRIMEDIA and its Restricted
Subsidiaries, sales of the Capital Stock of or any assets of Unrestricted
Subsidiaries which constitute Asset Sales). Consolidated Fixed Charges of such
person for such period shall be reduced by an amount equal to the Consolidated
Fixed Charges directly attributable to the assets which are the subject of such
Asset Sales for such period and (ii) such person or any of its Subsidiaries
(other than, in the case of PRIMEDIA and its Restricted Subsidiaries,
Unrestricted Subsidiaries) has made any acquisition of assets or Capital Stock
(occurring by merger or otherwise), including, without limitation, any
acquisition of assets or Capital Stock occurring in connection with the
transaction causing a calculation to be made hereunder, Consolidated Fixed
Charges of such person shall be calculated as if such acquisition of assets or
Capital Stock (including the incurrence of any Indebtedness in connection with
any such acquisition and the application of the proceeds thereof) took place on
the first day of such period.
"Consolidated Net Cash Flow" means, with respect to any person for any
period, the aggregate Consolidated Cash Flow of such person for such period,
MINUS (a) capital expenditures of such person and its Subsidiaries (and in the
case of PRIMEDIA and its Restricted Subsidiaries, excluding Unrestricted
Subsidiaries and, in the case of Partially Owned Restricted Subsidiaries,
including only the Pro Rata Portion thereof), MINUS (b) the aggregate amount of
all cash dividends paid by such person and its Subsidiaries (and in the case of
PRIMEDIA and its Restricted Subsidiaries, excluding Unrestricted Subsidiaries
and, in the case of Partially Owned Restricted Subsidiaries, including only the
Pro Rata
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Portion thereof) to holders of its Capital Stock other than to such person or
its Subsidiaries, MINUS (c) the aggregate amount of all taxes based on income or
profits paid by such person and its Subsidiaries (and in the case of PRIMEDIA
and its Restricted Subsidiaries, excluding Unrestricted Subsidiaries and, in the
case of Partially Owned Restricted Subsidiaries, including only the Pro Rata
Portion thereof) other than to such person or its Subsidiaries MINUS (d) cash
Interest Expense of such person and its Subsidiaries (and in the case of
PRIMEDIA and its Restricted Subsidiaries, excluding Unrestricted Subsidiaries
and, in the case of Partially Owned Restricted Subsidiaries, including only the
Pro Rata Portion thereof), MINUS, (e) repayments of principal of Indebtedness by
such person and its Subsidiaries (and in the case of PRIMEDIA and its Restricted
Subsidiaries, excluding Unrestricted Subsidiaries and, in the case of Partially
Owned Restricted Subsidiaries, including only the Pro Rata Portion thereof),
MINUS (f) any increases in Working Capital of such person and its Subsidiaries
(and in the case of PRIMEDIA and its Restricted Subsidiaries, excluding
Unrestricted Subsidiaries and, in the case of Partially Owned Restricted
Subsidiaries, including only the Pro Rata Portion thereof), and PLUS (g) any
decreases in Working Capital of such person and its Subsidiaries (and in the
case of PRIMEDIA and its Restricted Subsidiaries, excluding Unrestricted
Subsidiaries and, in the case of Partially Owned Restricted Subsidiaries,
including only the Pro Rata Portion thereof), in each case, for such period and
determined in accordance with GAAP; PROVIDED that in calculating the amount
referred to in clause (f) or (g) above, as the case may be, for any period
during which PRIMEDIA or any of its Restricted Subsidiaries has consummated an
Asset Sale (other than, in the case of PRIMEDIA and its Restricted Subsidiaries,
sales of Capital Stock of, cash or any assets of Unrestricted Subsidiaries which
constitute Asset Sales), the portion of the change in Working Capital for such
period attributable to the entity or business sold or purchased shall be based
(x) in the case of such an Asset Sale, on the change in Working Capital
attributable to the entity or business sold from the first day of such period to
the date of the consummation of such sale and (y) in the case of an acquisition,
on the change in Working Capital attributable to the entity or business acquired
from the date of consummation of such acquisition to the last day of such
period.
"Consolidated Net Income" means, with respect to any person for any period,
the aggregate net income (or loss) of such person and its Subsidiaries (and in
the case of PRIMEDIA and its Restricted Subsidiaries, excluding Unrestricted
Subsidiaries and, with respect to any Partially Owned Restricted Subsidiary,
including only the Pro Rata Portion of the net income (or loss) of such
Partially Owned Restricted Subsidiary as of any date of determination of
Consolidated Net Income for PRIMEDIA and its Restricted Subsidiaries) for such
period, on a consolidated basis, determined in accordance with GAAP, provided
that (i) the net income (or loss) of any person which is not a Subsidiary or is
accounted for by the equity method of accounting shall be included only to the
extent of the amount of cash dividends or distributions (including tax sharing
payments and loans or advances which are junior in right of payment to the Notes
and have a longer Average Life than the Notes) paid to the referent person or a
Subsidiary of the referent person, (ii) except to the extent includable pursuant
to the foregoing clause (i), the income (or loss) of any person accrued prior to
the date it becomes a Subsidiary of such person or is merged into or
consolidated with such person or any of its Subsidiaries or that person's assets
are acquired by such person or any of its Subsidiaries shall be excluded, (iii)
any gains or losses attributable to Asset Sales net of related tax costs or tax
benefits, as the case may be, shall be excluded and (iv) the net income of any
Unrestricted Subsidiary (and, solely for purposes of the RESTRICTED PAYMENTS
covenant, the net income of any Partially Owned Restricted Subsidiary) shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Unrestricted Subsidiary (or, solely for the purposes of
the RESTRICTED PAYMENTS covenant, any Partially Owned Restricted Subsidiary) of
that net income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary or its stockholders that, in each such case, has not been legally
waived or otherwise satisfied.
"Consolidated Net Worth" means, at any date of determination, the sum of the
Capital Stock and additional paid-in capital plus retained earnings (or minus
accumulated deficit) of the referent person and
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its Subsidiaries on a consolidated basis, less amounts attributable to
Redeemable Stock, each item to be determined in conformity with GAAP (excluding
the effects of foreign currency exchange adjustments under Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 52), except that
all effects of the application of Accounting Principles Board Opinions Nos. 16
and 17 and related interpretations shall be disregarded.
"Credit Facilities" means, collectively, the Bank Credit Facility and the
New Credit Facility, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, in each
case as amended, modified, renewed, refunded or refinanced from time to time, as
permitted in clause (i) of the second paragraph of the INCURRENCE OF
INDEBTEDNESS covenant.
"Currency Agreement" means the obligations of any person pursuant to any
foreign exchange contract, currency swap agreement or other similar agreement or
arrangement designed to protect such person or any of its subsidiaries against
fluctuations in currency values.
"Debt to Consolidated Cash Flow Ratio" means the ratio of all Indebtedness
of PRIMEDIA and its Restricted Subsidiaries to Consolidated Cash Flow.
"Equity Interests" means Capital Stock, warrants, options or other rights to
acquire Capital Stock (but excluding any debt security which is convertible
into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means Indebtedness of PRIMEDIA and its Subsidiaries
(other than the Credit Facilities and the Outstanding Notes) in existence on the
date of the Note Indenture, until such amounts are repaid.
"Fixed Charge Coverage Ratio" means the ratio of Consolidated Cash Flow to
Consolidated Fixed Charges.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession,
which are applicable to the circumstances as of the date of the Note Indenture.
"Indebtedness" of any person is defined as any indebtedness, contingent or
otherwise, in respect of borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such person or only to a portion
thereof), or evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement obligations with respect thereto) or
representing the balance deferred and unpaid of the purchase price of any
property (including pursuant to financing leases), if and to the extent any of
the foregoing indebtedness would appear as a liability upon a balance sheet of
such person prepared in accordance with GAAP (except that any such balance that
constitutes a trade payable and/or an accrued liability arising in the ordinary
course of business shall not be considered Indebtedness), and shall also
include, to the extent not otherwise included, any Capital Lease Obligations,
the maximum fixed repurchase price of any Redeemable Stock, indebtedness secured
by a Lien to which the property or assets owned or held by such person is
subject, whether or not the obligations secured thereby shall have been assumed,
guarantees of items that would be included within this definition to the extent
of such guarantees (exclusive of whether such items would appear upon such
balance sheet), and net liabilities in respect of Currency Agreements and
Interest Rate Agreements. For purposes of the preceding sentence, the maximum
fixed repurchase price of any Redeemable Stock which does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Redeemable Stock as if such Redeemable Stock were repurchased on any date on
which Indebtedness shall be required to be determined pursuant to the Note
Indenture, provided that if such Redeemable Stock is not then permitted to be
repurchased, the repurchase price shall be the book value of such Redeemable
Stock. The amount of Indebtedness of any person at any date shall be without
duplication (i) the outstanding balance at such date of all unconditional
obligations as described above and the maximum liability of any such contingent
obligations at such
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date and (ii) in the case of Indebtedness of others secured by a Lien to which
the property or assets owned or held by such person is subject, the lesser of
the fair market value at such date of any asset subject to a Lien securing the
Indebtedness of others and the amount of the Indebtedness secured. For the
purpose of determining the aggregate Indebtedness of PRIMEDIA and its Restricted
Subsidiaries, such Indebtedness shall exclude (a) the Indebtedness of any
Unrestricted Subsidiary of PRIMEDIA or any Unrestricted Subsidiary of a
Restricted Subsidiary and (b) with respect to any Partially Owned Restricted
Subsidiary, the Pro Rata Portion of any Indebtedness of any Partially Owned
Restricted Subsidiary of PRIMEDIA or any Partially Owned Restricted Subsidiary
of a Restricted Subsidiary pursuant to which the lender thereunder does not have
recourse to any of the assets of PRIMEDIA or any of its Restricted Subsidiaries.
"Interest Expense" means, with respect to any person, for any period, the
aggregate amount of interest in respect of Indebtedness (including all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing and the net cost (benefit)
associated with Interest Rate Agreements, and excluding amortization of deferred
finance fees and interest recorded as accretion in the carrying value of
liabilities (other than Indebtedness) recorded at a discounted value) and all
but the principal component of rentals in respect of Capital Lease Obligations,
paid, accrued or scheduled to be paid or accrued by such person during such
period.
"Interest Rate Agreements" means the obligations of any person pursuant to
any interest rate swap agreement, interest rate collar agreement or other
similar agreement or arrangement designed to protect such person or any of its
subsidiaries against fluctuations in interest rates.
"Investment" means any direct or indirect advance, loan (other than advances
to customers in the ordinary course of business, which are recorded as accounts
receivable on the balance sheet of any person or its Subsidiaries) or other
extension of credit or capital contribution to (by means of any transfer of cash
or other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition of Capital Stock,
bonds, notes, debentures or other securities issued by any other person. For the
purposes of the RESTRICTED PAYMENTS and INVESTMENT IN UNRESTRICTED SUBSIDIARIES
covenants described above, (i) "Investment" shall include and be valued at the
fair market value of the net assets of any Restricted Subsidiary at the time
that such Restricted Subsidiary is designated an Unrestricted Subsidiary and
shall exclude the fair market value of the net assets of any Unrestricted
Subsidiary at the time that such Unrestricted Subsidiary is designated a
Restricted Subsidiary and (ii) any property transferred to or from an
Unrestricted Subsidiary shall be valued at fair market value at the time of such
transfer, in each case as determined by the Board of Directors of PRIMEDIA in
good faith.
"Lien" means any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind, whether or not filed, recorded or otherwise perfected
under applicable law (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to
sell or give any security interest in and any filing or other agreement to give
any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction).
"Net Cash Flow Unrestricted Subsidiary" means an Unrestricted Subsidiary
which is not a Restricted Payment Unrestricted Subsidiary.
"Net Proceeds" shall mean, with respect to any Asset Sale, the aggregate
cash proceeds (including any cash received by way of deferred payment pursuant
to a note receivable issued in connection with such Asset Sale, other than the
portion of such deferred payment constituting interest, and including any
amounts received as disbursement or withdrawals from any escrow or similar
account established in connection with any such Asset Sale, but, in either such
case, only as and when so received) received by PRIMEDIA or any of its
Subsidiaries in respect of such Asset Sale, net of (i) the cash expenses of such
sale (including, without limitation, the payment of principal, premium, if any,
and interest on Indebtedness required to be paid as a result of such Asset Sale
(other than the Senior Notes and amounts repaid pursuant to the Credit
Facilities) and legal, accounting and investment banking fees and sales
commissions), (ii) taxes paid or payable as a result thereof, (iii) any portion
of cash proceeds which PRIMEDIA
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determines in good faith should be reserved for post-closing adjustments, it
being understood and agreed that on the day that all such post-closing
adjustments have been determined, the amount (if any) by which the reserved
amount in respect of such Asset Sale exceeds the actual post-closing adjustments
payable by PRIMEDIA or any of its Subsidiaries shall constitute Net Proceeds on
such date and (iv) any relocation expenses and pension, severance and shutdown
costs incurred as a result thereof.
"Obligations" means any principal, interest, penalties, fee,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Partially Owned Restricted Subsidiary" means any Restricted Subsidiary
other than a wholly-owned Restricted Subsidiary.
"Permitted Liens" means (i) Liens for taxes, assessments, governmental
charges or claims which are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted and for which a reserve
or other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made; (ii) statutory Liens of landlords and carriers',
warehousemen's, mechanics', suppliers', materialmen's, repairmen's, or other
like Liens arising in the ordinary course of business and with respect to
amounts not yet delinquent or being contested in good faith by appropriate
proceedings, if a reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP shall have been made therefor; (iii) Liens
incurred or deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security; (iv) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal bonds,
government contracts, performance and return-of-money bonds and other
obligations of a like nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money); (v) easements,
rights-of-way, restrictions, minor defects or irregularities in title and other
similar charges or encumbrances not interfering in any material respect with the
business of PRIMEDIA or any of its Subsidiaries incurred in the ordinary course
of business; (vi) Liens (including extensions and renewals thereof) upon real or
tangible personal property acquired after the date of the Note Indenture,
PROVIDED that (a) any such Lien is created solely for the purpose of securing
Indebtedness representing, or incurred to finance, refinance or refund, the cost
(including the cost of construction) of the item of property subject thereto,
(b) the principal amount of the Indebtedness secured by such Lien does not
exceed 100% of such cost, (c) such Lien does not extend to or cover any other
property other than such item of property and any improvements on such item and
(d) the incurrence of such Indebtedness is permitted by the INCURRENCE OF
INDEBTEDNESS covenant; (vii) Liens securing reimbursement obligations with
respect to letters of credit which encumber documents and other property
relating to such letters of credit and the products and proceeds thereof; (viii)
Liens in favor of customs and revenue authorities arising as a matter of law to
secure payment of customs duties in connection with the importation of goods;
(ix) judgment and attachment Liens not giving rise to an Event of Default; (x)
leases or subleases granted to others not interfering in any material respect
with the business of PRIMEDIA or any of its Subsidiaries; (xi) Liens encumbering
customary initial deposits and margin deposits, and other Liens incurred in the
ordinary course of business and which are within the general parameters
customary in the industry, in each case securing Indebtedness under Interest
Rate Agreements and Currency Agreements; (xii) Liens encumbering deposits made
to secure obligations arising from statutory, regulatory, contractual or
warranty requirements of PRIMEDIA or its Subsidiaries; (xiii) Liens arising out
of consignment or similar arrangements for the sale of goods entered into by
PRIMEDIA or any of its Subsidiaries in the ordinary course of business of
PRIMEDIA and its Subsidiaries; (xiv) any interest or title of a lessor in the
property subject to any Capital Lease Obligation or operating lease; (xv) Liens
arising from filing Uniform Commercial Code financing statements regarding
leases; (xvi) Liens permitted by the Credit Facilities as in effect on the date
of the Note Indenture; (xvii) Liens securing Indebtedness described in clause
(xii) of the second paragraph of the INCURRENCE OF INDEBTEDNESS covenant;
(xviii) Liens between PRIMEDIA and any Restricted Subsidiary or between
Restricted Subsidiaries; (xix) Liens securing letters of credit in an amount not
to exceed $75 million in the aggregate at any one time; (xx) Liens in an amount
not to exceed $50
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million in the aggregate at any one time and (xxi) Liens incurred by Partially
Owned Restricted Subsidiaries which do not exceed 10% of Total Assets in the
aggregate at any one time.
"PRO RATA PORTION" means, with respect to any Partially Owned Restricted
Subsidiary, the percentage of such Partially Owned Restricted Subsidiary's
outstanding Equity Interests beneficially owned by PRIMEDIA and its Restricted
Subsidiaries.
"Redeemable Stock" means any Equity Interest which, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable before the stated maturity of the Notes), or upon the happening of
any event, matures or is mandatorily redeemable, in whole or in part, prior to
the stated maturity of the Notes, or is, by its terms or upon the happening of
any event, redeemable at the option of the holder thereof, in whole or in part,
at any time prior to the stated maturity of the Notes except for Equity
Interests of PRIMEDIA issued to present and former members of management of
PRIMEDIA and its Subsidiaries pursuant to subscription and option agreements in
effect on the date of the Note Indenture and common stock and options of
PRIMEDIA issued to future members of management of PRIMEDIA and its Subsidiaries
pursuant to subscription agreements executed subsequent to the date of the Note
Indenture containing provisions for the repurchase of such common stock and
options upon death, disability or termination of employment of such persons
which are substantially identical to those contained in the subscription
agreements in effect on the date of the Note Indenture; PROVIDED that for
purposes of the "LIMITATION OF RESTRICTED PAYMENTS" covenant and that for
purposes of the definition of Indebtedness, Redeemable Stock does not include
the Series B Preferred Stock, the Series D Preferred Stock, the Series E
Preferred Stock, the Series F Preferred Stock and the Series G Preferred Stock.
"Restricted Payment Unrestricted Subsidiary" means an Unrestricted
Subsidiary which was capitalized exclusively with a permitted Restricted Payment
or with the proceeds from the issuance of an Equity Interest by PRIMEDIA or with
the proceeds of the sale of stock or substantially all of the assets of any
other Unrestricted Subsidiary which was capitalized with such funds to the
extent that a liquidating dividend is paid to PRIMEDIA for any Restricted
Subsidiary from the proceeds of such sale.
"Restricted Subsidiary" means a Subsidiary of PRIMEDIA which at the time of
determination is not an Unrestricted Subsidiary. The Board of Directors may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED
that immediately after giving effect to such designation, PRIMEDIA could incur
at least $1.00 of additional Indebtedness pursuant to the first paragraph of the
INCURRENCE OF INDEBTEDNESS covenant on a pro forma basis taking into account
such designation.
"Subsidiary" of any person means any corporation, association or other
business entity of which more than 50% of the total voting power of shares of
Capital Stock entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by such person or one or more of
the other Subsidiaries of that person or a combination thereof.
"Total Assets" means the total consolidated assets of the Company and its
Restricted Subsidiaries.
"Transfers" means (i) any payment of interest on Indebtedness, dividends or
repayments of loans or advances and (ii) any other transfers of assets, in each
case from an Unrestricted Subsidiary to PRIMEDIA or any of its Restricted
Subsidiaries.
"Unrestricted Subsidiary" means (i) any Subsidiary of PRIMEDIA which at the
time of determination is an Unrestricted Subsidiary (as designated by the Board
of Directors of PRIMEDIA, as provided below) and (ii) any subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
PRIMEDIA (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or
owns, or holds any Lien on, any property of, any other Subsidiary of PRIMEDIA
which is not a Subsidiary of the Subsidiary to be so designated; PROVIDED that
(a) PRIMEDIA certifies that such designation complies with the LIMITATION ON
RESTRICTED PAYMENTS AND INVESTMENTS IN UNRESTRICTED SUBSIDIARIES covenants, and
(b) the Subsidiary to be so designated
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has not at the time of designation, and does not thereafter, create, incur,
issue, assume, guarantee or otherwise become directly or indirectly liable with
respect to any Indebtedness pursuant to which the lender has recourse to any of
the assets of PRIMEDIA or any of its Restricted Subsidiaries. The Board of
Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; PROVIDED that immediately after giving effect to such designation,
PRIMEDIA could incur at least $1.00 of additional Indebtedness pursuant to the
first paragraph of the INCURRENCE OF INDEBTEDNESS covenant on a pro forma basis
taking into account such designation.
"Working Capital" means, with respect to any person for any period, the
current assets of such person and its Subsidiaries (and in the case of PRIMEDIA
and its Restricted Subsidiaries, excluding Unrestricted Subsidiaries and, in the
case of Partially Owned Restricted Subsidiaries, including only the Pro Rata
Portion thereof) on a consolidated basis, after excluding therefrom cash and
cash equivalents and deferred income taxes, less the current liabilities of such
person and its Subsidiaries (and in the case of PRIMEDIA and its Restricted
Subsidiaries, excluding Unrestricted Subsidiaries and, in the case of Partially
Owned Restricted Subsidiaries, including only the Pro Rata Portion thereof) on a
consolidated basis, after excluding therefrom, in each case to the extent
otherwise included therein, all short-term Indebtedness for borrowed money, the
current portion of any long-term Indebtedness, liabilities arising from the
honoring by a bank or other financial institution of a check, draft or similar
instrument inadvertently (except in the case of daylight overdrafts, which will
not be, and will not be deemed to be, inadvertent) drawn against insufficient
funds in the ordinary course of business, PROVIDED that such liabilities are
extinguished within three business days of this incurrence, and deferred income
taxes of such person and its Subsidiaries (and in the case of PRIMEDIA and its
Restricted Subsidiaries, excluding Unrestricted Subsidiaries and, in the case of
Partially Owned Restricted Subsidiaries, including only the Pro Rata Portion
thereof).
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DESCRIPTION OF PREFERRED STOCK AND 8 5/8% SUBORDINATED DEBENTURES
The form and terms of the New Preferred Stock are the same as the form and
terms of the Old Preferred Stock except that (i) the New Preferred Stock will
have been registered under the Securities Act and thus will not bear restrictive
legends restricting their transfer pursuant to the Securities Act and (ii)
holders of New Preferred Stock will not be entitled to certain rights of holders
of the Old Preferred Stock under the Registration Rights Agreement which will
terminate upon the consummation of the Exchange Offers. The form and terms of
the New Subordinated Debentures will be the same as the Old Subordinated
Debentures, except that the New Subordinated Debentures will have been
registered under the Securities Act. Set forth herein is a summary of the
material terms of the Preferred Stock and the 8 5/8% Subordinated Debentures.
Such summary does not purport to be complete and is qualified in its entirety by
reference to the provisions of the Certificate of Designations for the Old
Preferred Stock, the Certificate of Designations for the New Preferred Stock
(together, the "Certificates of Designations") and the 8 5/8% Debenture
Indenture (which relates to both the Old Subordinated Debentures and the New
Subordinated Debentures) relating thereto.
THE PREFERRED STOCK
GENERAL
2,500,000 shares of the New Preferred Stock and the Old Preferred Stock with
a liquidation preference of $100.00 per share will be or have been,
respectively, authorized for issuance pursuant to the respective Certificates of
Designations. The Preferred Stock ranks junior in right of payment to all
liabilities and obligations (whether or not for borrowed money) of PRIMEDIA
(other than Common Stock of PRIMEDIA, the Series D Preferred Stock, the Series F
Preferred Stock and any preferred stock of PRIMEDIA which by its terms is on
parity with or junior to the Preferred Stock). In addition, creditors and
stockholders of PRIMEDIA's subsidiaries will also have priority over the
Preferred Stock with respect to claims on the assets of such subsidiaries. See
"Risk Factors--Subordination of Preferred Stock and 8 5/8% Subordinated
Debentures; Holding Company Structure." The Preferred Stock is fully paid and
non-assessable and holders thereof will have no preemptive rights in connection
therewith.
Neither the stated value nor the liquidation preference of the Preferred
Stock is necessarily indicative of the price at which shares of Preferred Stock
will actually trade at or after the time of the issuance, and the Preferred
Stock may trade at prices below its stated value. The market price of the
Preferred Stock can be expected to fluctuate with changes in the market and
economic conditions, the financial condition and prospects of the Company and
other factors that generally influence the market prices of securities.
RANK
The Preferred Stock's dividend rights and rights on liquidation, winding-up
and dissolution, rank (i) senior to all classes of Common Stock and each other
class of capital stock or series of preferred stock established by the board of
directors of PRIMEDIA which does not expressly provide that it ranks senior to
or on a parity with the Preferred Stock as to dividend rights and rights on
liquidation, winding-up and dissolution (collectively referred to with the
Common Stock as "Junior Securities") and (ii) on a parity with, the Series D
Preferred Stock, the Series F Preferred Stock and each other series of preferred
stock established by the board of directors of PRIMEDIA, which expressly
provides that such series will rank on a parity with the Preferred Stock as to
dividend rights and rights on liquidation, winding-up and dissolution
(collectively, "Future Parity Securities" and together with the Series D
Preferred Stock and the Series F Preferred Stock, the "Parity Securities") and
(iii) junior to each other class of capital stock or series of preferred stock
established by the board of directors which expressly provides that it ranks
senior to the Preferred Stock. The Certificates of Designations for the
Preferred Stock provide that, without the affirmative vote or consent of at
least a majority of the then outstanding shares of Preferred Stock, voting
together with the holders of any other then outstanding shares of Parity
Securities entitled to vote thereon,
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the Company will not issue any other series of preferred stock the terms of
which specifically provide that such series will rank senior to the Series D
Preferred Stock, the Series F Preferred Stock and the Preferred Stock as to
dividend rights and rights on liquidation, winding-up and dissolution
(collectively referred to as "Senior Securities"), subject to certain
exceptions. See "--Limitation on Issuance of Senior Preferred Stock." The
Preferred Stock will be subject to the future issuance of Junior Securities and
Parity Securities. 2,000,000 shares of the Series D Preferred Stock
($200,000,000 aggregate liquidation preference) were issued and outstanding and
1,250,000 shares of the Series E Preferred Stock ($125,000,000 aggregate
liquidation preference) were issued and outstanding. See "Description of Capital
Stock of the Company."
DIVIDENDS
Holders of Preferred Stock will be entitled to receive, when, as and if
declared by the board of directors of PRIMEDIA, out of funds legally available
therefor, dividends in cash on the Preferred Stock, at an annual amount equal to
$8.625 per share. Dividends on the Old Preferred Stock have accrued and are
cumulative from the original date of issuance thereof to the date on which
shares of Old Preferred Stock are surrendered and shall be paid on the first
dividend payment date after the New Preferred Stock is exchanged for the Old
Preferred Stock. Dividends on the New Preferred Stock will accrue and be
cumulative from the date the New Preferred Stock is exchanged for the Old
Preferred Stock. Dividends on the Preferred Stock are payable quarterly in
arrears on January 1, April 1, July 1 and October 1 of each year, commencing on
July 1, 1998. Dividends, whether or not declared, will cumulate without interest
until declared and paid.
No full dividends may be declared or paid or funds set apart for the payment
of dividends on any Parity Securities for any period unless full cumulative
dividends shall have been paid or set apart for such payment on the Preferred
Stock. If full dividends are not so paid, the Preferred Stock shall share
dividends pro rata with the Parity Securities. No dividends may be paid or set
apart for such payment on Junior Securities (except dividends on Junior
Securities in additional shares of Junior Securities) and no Junior Securities
may be repurchased, redeemed or otherwise retired nor may funds be set apart for
payment with respect thereto, if full dividends have not been paid on the
Preferred Stock. Accumulated unpaid dividends will not bear interest.
OPTIONAL REDEMPTION
The Preferred Stock is not redeemable at PRIMEDIA's option before April 1,
2003. Thereafter, the Preferred Stock may be redeemed (subject to contractual
and other restrictions with respect thereto and to the legal availability of
funds therefor), in whole or in part, at the option of PRIMEDIA, at the
redemption prices per share set forth below plus accrued and unpaid dividends to
the applicable redemption date (including an amount equal to a prorated dividend
from the last payment date to the redemption date), if redeemed during the
twelve-month period beginning April 1 of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
PRICE PER
YEAR SHARE
- ---------------------------------------------------------- --------------
<S> <C>
2003...................................................... $ 104.313
2004...................................................... 102.875
2005...................................................... 101.438
2006 and thereafter....................................... 100.000
</TABLE>
In addition, up to $125.0 million of the aggregate liquidation preference of
the Preferred Stock may be redeemed at the option of PRIMEDIA at any time prior
to April 1, 2001 at a price per share of $108.625, plus accrued and unpaid
dividends to the redemption date, out of the net proceeds of one or more Public
Equity Offerings; PROVIDED such redemption occurs within 180 days of such Public
Equity Offering.
In the event of partial redemptions of Preferred Stock, the shares to be
redeemed will be determined pro rata, except that PRIMEDIA may redeem such
shares held by any holders of fewer than 100 shares (or
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shares held by holders who would hold less than 100 shares as a result of such
redemption), as may be determined by PRIMEDIA. The Credit Facilities and the
Senior Note Indentures restrict the ability of PRIMEDIA to redeem the Preferred
Stock. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Financing Arrangements."
MANDATORY REDEMPTION
On April 1, 2010, PRIMEDIA will be required to redeem (subject to
contractual and other restrictions with respect thereto and to the legal
availability of funds therefor) all outstanding shares of Preferred Stock at a
price equal to the liquidation preference thereof plus all accumulated dividends
to the date of redemption.
PROCEDURE FOR REDEMPTION
On and after a redemption date, unless PRIMEDIA defaults in the payment of
the redemption price, dividends will cease to accrue on shares of Preferred
Stock called for redemption and all rights of holders of such shares will
terminate except for the right to receive the redemption price. PRIMEDIA will
send a written notice of redemption by first class mail to each holder of record
of shares of Preferred Stock, not fewer than 30 days nor more than 60 days prior
to the date fixed for such redemption. Shares of Preferred Stock issued and
reacquired will, upon compliance with the applicable requirements of Delaware
law, have the status of authorized but unissued shares of preferred stock of
PRIMEDIA undesignated as to series and may with any and all other authorized but
unissued shares of preferred stock of PRIMEDIA be designated or redesignated and
issued or reissued, as the case may be, as part of any series of preferred stock
of PRIMEDIA, except that such shares may not be reissued or sold as shares of
Preferred Stock.
EXCHANGE
PRIMEDIA may, at its option, on any scheduled dividend payment date,
exchange the Preferred Stock, in whole but not in part, for the 8 5/8%
Subordinated Debentures. See "--The 8 5/8% Subordinated Debentures" below for
the terms of the 8 5/8% Subordinated Debentures. Holders of Preferred Stock so
exchanged will be entitled to receive the principal amount of 8 5/8%
Subordinated Debentures equal to $100.00 for each $100.00 of liquidation
preference of Preferred Stock held by such holders at the time of exchange plus
an amount per share in cash equal to all accrued but unpaid dividends thereon to
the date of exchange (including an amount equal to a prorated dividend from the
last dividend payment date to the exchange date). The 8 5/8% Subordinated
Debentures will be issuable only in denominations of $1,000 and integral
multiples thereof. An amount in cash may be paid to holders for any principal
amount otherwise issuable which is less than $1,000. Following such exchange,
all dividends on the Preferred Stock will cease to accrue, the rights of the
holders of Preferred Stock as stockholders of PRIMEDIA shall cease and the
person or persons entitled to receive the 8 5/8% Subordinated Debentures
issuable upon exchange shall be treated as the registered holder or holders of
such 8 5/8% Subordinated Debentures. Notice of exchange will be mailed at least
30 days but not more than 60 days prior to the date of exchange to each holder
of Preferred Stock. See "--The 8 5/8% Subordinated Debentures" below.
In addition, under applicable provisions of the federal bankruptcy law or
comparable provisions of state fraudulent transfer law, if at the time of
PRIMEDIA's payment of dividends on, redemption of or exchange of 8 5/8%
Subordinated Debentures for, the Preferred Stock (i) PRIMEDIA is insolvent or
rendered insolvent by reason thereof, (ii) PRIMEDIA is engaged in a business or
transaction for which the Company's remaining assets constitute unreasonably
small capital or (iii) PRIMEDIA intends to incur or believes that it would incur
debts beyond its ability to pay such debts as they mature, then the relevant
distribution to holders of Preferred Stock could be voided in whole or in part
as a fraudulent conveyance and such holders could be required to return the same
or equivalent amounts to or for the benefit of existing or future creditors of
PRIMEDIA. The measure of insolvency for purposes of the foregoing will vary
depending on the law of the jurisdiction which is being applied. Generally
PRIMEDIA would be
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considered insolvent if the sum of its debts, including contingent liabilities,
were greater than the fair saleable value of its assets at a fair valuation or
if the present fair saleable value of its assets were less than the amount that
would be required to pay its probable liability on its existing debts, including
contingent liabilities, as they become absolute and mature.
The Credit Facilities and the Senior Note Indentures restrict PRIMEDIA's
ability to exchange the Preferred Stock for the 8 5/8% Subordinated Debentures.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
PRIMEDIA, holders of Preferred Stock will be entitled to be paid out of the
assets of PRIMEDIA available for distribution $100.00 per share, plus any
accrued and unpaid dividends thereon to the date fixed for liquidation,
dissolution or winding-up (including an amount equal to a prorated dividend from
the last dividend payment date to the date fixed for liquidation, dissolution or
winding-up), before any distribution is made on any Junior Securities,
including, without limitation, Common Stock. If upon any voluntary or
involuntary liquidation, dissolution or winding-up of PRIMEDIA, the amounts
payable with respect to the Preferred Stock and all other Parity Securities are
not paid in full, the holders of the Preferred Stock and the Parity Securities
will share equally and ratably in any distribution of assets of PRIMEDIA in
proportion to the full liquidation preference to which each is entitled. After
payment of the full amount of the liquidation preferences to which they are
entitled, the holders of shares of Preferred Stock will not be entitled to any
further participation in any distribution of assets of PRIMEDIA. However,
neither the sale, conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all of the property
or assets of PRIMEDIA nor the consolidation or merger of PRIMEDIA with one or
more corporations shall be deemed to be a liquidation, dissolution or winding-up
of PRIMEDIA.
The Certificates of Designations for the Preferred Stock do not contain any
provision requiring funds to be set aside to protect the liquidation preference
of the Preferred Stock, although such liquidation preference will be
substantially in excess of the par value of such shares of Preferred Stock. In
addition, PRIMEDIA is not aware of any provision of Delaware law or any
controlling decision of the courts of the State of Delaware (the state of
incorporation of the Company) that requires a restriction upon the surplus of
PRIMEDIA solely because the liquidation preference of the Preferred Stock will
exceed its par value. Consequently, there will be no restriction upon the
surplus of PRIMEDIA solely because the liquidation preference of the Preferred
Stock will exceed the par value and there will be no remedies available to
holders of the Preferred Stock before or after the payment of any dividend,
other than in connection with the liquidation of PRIMEDIA, solely by reason of
the fact that such dividend would reduce the surplus of PRIMEDIA to an amount
less than the difference between the liquidation preference and the Preferred
Stock and its par value.
VOTING RIGHTS
Holders of the Preferred Stock have no voting rights, except as provided by
law or as set forth in the Certificates of Designations for the Preferred Stock.
The Certificates of Designations provide that in the event that dividends on the
Preferred Stock are in arrears and unpaid for six consecutive quarterly periods,
the Board of Directors of PRIMEDIA will be increased by two directors and the
holders of the majority of the Preferred Stock, voting together as a class, will
be entitled to elect two directors of the expanded Board of Directors. Such
voting rights will continue until such time as all dividends in arrears on the
Preferred Stock are paid in full.
Under Delaware law, holders of the Preferred Stock will be entitled to vote
as a class upon a proposed amendment to the certificate of incorporation,
whether or not entitled to vote thereon by the certificate of incorporation, if
the amendment would increase or decrease the aggregate number of authorized
shares of
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such class, increase or decrease the par value of the shares of such class, or
alter or change the powers, preferences, or special rights of the shares of such
class so as to affect them adversely.
LIMITATION ON ISSUANCE OF SENIOR PREFERRED STOCK
The Certificates of Designations for the Preferred Stock provide that,
without the affirmative vote or consent of the holders of at least a majority of
the then outstanding shares of Preferred Stock, voting together with the holders
of any other then outstanding shares of Parity Securities entitled to vote
thereon, the Company will not issue any Senior Security; PROVIDED that the
Company does not need the approval of such holders to issue shares of Senior
Securities the proceeds of which are used to redeem or repurchase all shares of
the then outstanding Preferred Stock and any other Parity Securities entitled to
vote thereon.
MERGER, CONSOLIDATION AND SALE OF ASSETS
Unless the requisite holders of any Senior Security or any indebtedness of
the Company have consented or granted a waiver with respect to such merger,
consolidation or transfer of all or substantially all of the Company's assets,
PRIMEDIA may not merge or consolidate with or into or transfer all or
substantially all of its assets (as an entirety in one transaction or a series
of related transactions), to any person without the consent of the holders of a
majority of the issued and outstanding shares of Preferred Stock, Series D
Preferred Stock and Series F Preferred Stock, together with any outstanding
shares of Future Parity Securities entitled to vote thereon, voting as one
class, unless PRIMEDIA shall be the continuing person, or the person (if other
than the Company) formed by such consolidation or into which PRIMEDIA is merged
or to which the properties and assets of PRIMEDIA are transferred shall be a
corporation organized and existing under the laws of the United States or any
State thereof or the District of Columbia and the Preferred Stock shall be
converted into or exchanged for and shall become shares of such successor or
resulting company, having in respect of such successor or resulting company
substantially the same powers, preferences and relative participating, optional
or other special rights, and the qualifications, limitations or restrictions
thereon, that the Preferred Stock had immediately prior to such transaction. If
any fee is paid to any holder of Senior Securities or indebtedness in connection
with obtaining the foregoing consent or waiver, PRIMEDIA shall pay to the
holders of the Preferred Stock a fee equal to the aggregate liquidation
preference thereof times a fraction, the numerator of which shall be the fee
paid to such holders of Senior Securities and indebtedness and the denominator
of which shall be the aggregate liquidation preference and aggregate principal
amount of all Senior Securities and indebtedness, respectively, with respect to
which such fee was paid. If the above-described payment in cash (or any portion
thereof) would violate any agreement to which the Company is a party or any
terms of any security of the Company then outstanding, then such payment or
portion thereof may be made in additional shares of Preferred Stock, and if
making such payment in additional shares of Preferred Stock would constitute
such a violation, then such payment or portion thereof may be postponed until
the terms of such agreement or security would permit such payment in cash or
Preferred Stock.
The description above includes a phrase relating to the merger,
consolidation or transfer of "all or substantially all" of the assets of the
Company. Although there is a developing body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law.
TRANSFER AGENT AND REGISTRAR
The Bank of New York is the transfer agent and registrar for the Preferred
Stock.
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THE 8 5/8% SUBORDINATED DEBENTURES
GENERAL
The 8 5/8% Subordinated Debentures will, if and when issued, be issued under
the 8 5/8% Debenture Indenture, to be dated as of the date of first issuance
(the "Exchange Date") of the 8 5/8% Subordinated Debentures, between PRIMEDIA
and The Bank of New York (the "Subordinated Debenture Trustee"). The terms of
the 8 5/8% Subordinated Debentures include those stated in the 8 5/8% Debenture
Indenture and those made part of the 8 5/8% Debenture Indenture by reference to
the Trust Indenture Act. The 8 5/8% Subordinated Debentures are subject to all
such terms, and holders of the 8 5/8% Subordinated Debentures are referred to
the 8 5/8% Debenture Indenture and the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act") for a statement thereof. Set forth herein is a
summary of the material terms of the 8 5/8% Subordinated Debentures. Such
summary does not purport to be complete and is qualified in its entirety by
reference to the provisions of the 8 5/8% Debenture Indenture, a copy of the
proposed form of which is filed as an exhibit to the Registration Statement of
which this Prospectus is a part. The definitions of certain terms used in the
following summary are set forth below under "--Certain Definitions." Other
capitalized terms used in this summary but not defined in this Prospectus shall
have the meanings given to them in the 8 5/8% Debenture Indenture.
The 8 5/8% Subordinated Debentures will be issued in registered form,
without coupons, only in principal amounts of $1,000 and integral multiples
thereof. The 8 5/8% Subordinated Debentures will represent general unsecured
obligations of PRIMEDIA, and holders of the 8 5/8% Subordinated Debentures will
rank junior in right of payment to holders of Senior Indebtedness. The 8 5/8%
Subordinated Debentures are limited in aggregate principal amount to
$250,000,000.
Each 8 5/8% Subordinated Debenture will mature on April 1, 2010 and will
bear interest from the date of issuance at the rate of 8 5/8% per annum, payable
quarterly on January 1, April 1, July 1 and October 1 commencing with the first
of such dates to occur after the Exchange Date.
Interest on the 8 5/8% Subordinated Debentures will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the original date of issuance. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months. The 8 5/8% Subordinated
Debentures will be payable both as to principal and interest at the office or
agency of PRIMEDIA maintained for such purpose within or without the City of New
York, or, at the option of PRIMEDIA, payment of interest may be made by check
mailed to the holders of the 8 5/8% Subordinated Debentures at their respective
addresses set forth in the register of holders of the 8 5/8% Subordinated
Debentures. Until otherwise designated by PRIMEDIA, the office maintained by
PRIMEDIA for such purpose shall be the office of the Subordinated Debenture
Trustee.
RANKING
The right to payment of principal and interest on the 8 5/8% Subordinated
Debentures will be subordinated to the prior payment in full of all "Senior
Indebtedness." "Senior Indebtedness" is defined as all present or future
Indebtedness, including all Indebtedness incurred under the Credit Facilities
and the Senior Note Indentures, created, assumed, incurred or guaranteed by
PRIMEDIA (and all renewals, extensions and refundings thereof), unless by its
terms such Indebtedness is not senior to the 8 5/8% Subordinated Debentures.
Senior Indebtedness does not include any Indebtedness of PRIMEDIA to any of its
subsidiaries or trade indebtedness.
Substantially all of the operations of PRIMEDIA are conducted through its
subsidiaries. Claims of creditors of such subsidiaries, including trade
creditors and creditors holding guarantees issued by such subsidiaries, will
have priority with respect to the assets and earnings of such subsidiaries over
the claims of
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creditors of PRIMEDIA, including holders of the 8 5/8% Subordinated Debentures,
even though such obligations do not constitute Senior Indebtedness.
The amount of pro forma senior indebtedness (including indebtedness and
other current and non-current liabilities of PRIMEDIA's subsidiaries) as of
December 31, 1997 was approximately $1,908.7 million. None of such indebtedness
is secured. See "Risk Factors--Subordination of Preferred Stock and 8 5/8%
Subordinated Debentures; Holding Company Structure."
The 8 5/8% Debenture Indenture provides that no payment of principal of or
interest on the 8 5/8% Subordinated Debentures, whether pursuant to the terms of
the 8 5/8% Subordinated Debentures or otherwise, may be made (i) if a default in
payment of any Senior Indebtedness occurs and has not been cured or waived, (ii)
for a period of 180 days upon the occurrence of a default (other than a payment
default) in respect of Senior Indebtedness and for successive periods of 180
days if the default is continuing at the end of such 180 day period or another
default (other than a payment default) in respect of Senior Indebtedness has
occurred or (iii) upon the maturity of any Senior Indebtedness, prior to the
payment of all Obligations with respect to Senior Indebtedness that is then due
and payable. In addition, upon the acceleration of the 8 5/8% Subordinated
Debentures prior to their stated maturity, holders of the Senior Indebtedness
will receive payment in full before any payment will be made to holders of the
8 5/8% Subordinated Debentures. By reason of such subordination, in the event of
insolvency, holders of the Senior Indebtedness will receive payment in full
prior to any payment being made to holders of 8 5/8% Subordinated Debentures.
OPTIONAL REDEMPTION
The 8 5/8% Subordinated Debentures are not redeemable at PRIMEDIA's option
before April 1, 2003. Thereafter, the 8 5/8% Subordinated Debentures will be
subject to redemption at the option of PRIMEDIA, in whole or in part, upon not
less than 30 nor more than 60 days' notice, at the redemption prices (expressed
as percentages of the principal amount) set forth below plus accrued and unpaid
interest thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning April 1 of the years indicated below.
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------------------------------------------------------------- -----------
<S> <C>
2003.......................................................... 104.313%
2004.......................................................... 102.875
2005.......................................................... 101.438
2006 and thereafter........................................... 100.000
</TABLE>
In addition, at any time prior to April 1, 2001, up to $125.0 million of the
8 5/8% Subordinated Debentures may be redeemed at a redemption price of 108.625%
of the principal amount thereof, plus accrued and unpaid interest, out of the
net proceeds of one or more Public Equity Offerings, provided such redemption
occurs within 180 days of such Public Equity Offering.
The Credit Facilities and the Senior Note Indentures restrict the redemption
or prepayment of the 8 5/8% Subordinated Debentures.
CHANGE OF CONTROL
HOLDERS' RIGHT TO REQUIRE REPURCHASE UPON CHANGE OF CONTROL. Upon the
occurrence of a Change of Control, subject to the two last sentences of this
paragraph, each holder shall have the right to require the repurchase of such
holder's 8 5/8% Subordinated Debentures pursuant to the offer described below
(the "Change of Control Offer") at a purchase price equal to 101% of the
aggregate principal amount of such 8 5/8% Subordinated Debentures plus accrued
and unpaid interest, if any, to the date of purchase (the "Change of Control
Payment"). If there is a Change of Control under the 8 5/8% Debenture Indenture
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there will also be a Change of Control under the Class D Debenture Indenture,
the Class F Debenture Indenture and the Senior Note Indentures and, upon the
earlier of 30 days from the Change of Control and the date payment is required
for any tendered Senior Notes, Class D Subordinated Debentures, Class F
Subordinated Debentures or 8 5/8% Subordinated Debentures, indebtedness under
the Credit Facilities will be accelerated. Within the later of 40 days following
any Change of Control and the date that the conditions set forth in the
penultimate sentence are satisfied, PRIMEDIA shall mail a notice to each holder
stating: (1) that the Change of Control Offer is being made pursuant to the
"Change of Control" covenant of the 8 5/8% Debenture Indenture and that all
8 5/8% Subordinated Debentures tendered will be accepted for payment; (2) the
purchase price and the purchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed) (the "Change of Control
Payment Date"); (3) that any 8 5/8% Subordinated Debentures not tendered will
continue to accrue interest; (4) that, unless PRIMEDIA defaults in the payment
of the Change of Control Payment, all 8 5/8% Subordinated Debentures accepted
for payment pursuant to the Change of Control Offer shall cease to accrue
interest after the Change of Control Payment Date; (5) that holders electing to
have any 8 5/8% Subordinated Debentures purchased pursuant to a Change of
Control Offer will be required to surrender the 8 5/8% Subordinated Debentures,
with the form entitled "Option of Holder to Elect Purchase" on the reverse of
the 8 5/8% Subordinated Debenture completed, to the Paying Agent (as defined in
the 8 5/8% Debenture Indenture) at the address specified in the notice prior to
the close of business on the Business Day preceding the Change of Control
Payment Date; (6) that holders will be entitled to withdraw their election if
the Paying Agent receives, not later than the close of business on the third
Business Day preceding the Change of Control Payment Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the holder, the
principal amount of the 8 5/8% Subordinated Debentures delivered for purchase,
and a statement that such holder is withdrawing his election to have such 8 5/8%
Subordinated Debentures purchased; and (7) that holders whose 8 5/8%
Subordinated Debentures are being purchased only in part may be issued new
8 5/8% Subordinated Debentures equal in principal amount to the unpurchased
portion of the 8 5/8% Subordinated Debentures surrendered; PROVIDED that each
8 5/8% Subordinated Debenture purchased and each such new 8 5/8% Subordinated
Debenture issued by PRIMEDIA will be in a principal amount of $1,000 or integral
multiples thereof. Notwithstanding the occurrence of a Change of Control,
PRIMEDIA shall not be required to repurchase the 8 5/8% Subordinated Debentures
unless it shall have either repaid all outstanding Senior Indebtedness or
obtained the requisite consents, if any, under all agreements governing all such
outstanding Senior Indebtedness, to permit the repurchase of the 8 5/8%
Subordinated Debentures. If any fee is paid to the holders of Senior
Indebtedness in connection with obtaining their consent to the repurchase of the
8 5/8% Subordinated Debentures, PRIMEDIA shall pay the holders of the 8 5/8%
Subordinated Debentures a fee equal to the principal amount of the 8 5/8%
Subordinated Debentures times a fraction the numerator of which shall be the
aggregate fee paid to such holders of Senior Indebtedness and the denominator of
which shall be the aggregate of all Senior Indebtedness with respect to which
such fee was paid.
On the Change of Control Payment Date, PRIMEDIA will, to the extent lawful,
(1) accept for payment 8 5/8% Subordinated Debentures or portions thereof
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all 8 5/8%
Subordinated Debentures or portions thereof so tendered and (3) deliver or cause
to be delivered to the Subordinated Debenture Trustee, 8 5/8% Subordinated
Debentures so accepted together with an officers' certificate stating the 8 5/8%
Subordinated Debentures or portions thereof tendered to PRIMEDIA. The Paying
Agent shall promptly mail to each holder of 8 5/8% Subordinated Debentures so
accepted, payment in an amount equal to the purchase price for such 8 5/8%
Subordinated Debentures, and the Subordinated Debenture Trustee shall promptly
authenticate and mail to such holder a new 8 5/8% Subordinated Debenture equal
in principal amount to any unpurchased portion of the 8 5/8% Subordinated
Debentures surrendered; PROVIDED that each such new 8 5/8% Subordinated
Debenture shall be in a principal amount of $1,000 or integral multiples
thereof. PRIMEDIA will publicly announce the results of the Change of Control
Offer on or as soon as practicable after the Change of Control Payment Date.
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OPTIONAL REDEMPTION UPON CHANGE OF CONTROL. In addition to the rights set
forth under "Optional Redemption," the 8 5/8% Subordinated Debentures will be
redeemable, at the option of PRIMEDIA, in whole or in part at any time within
160 days after a Change of Control upon not less than 30 nor more than 60 days'
prior notice to each holder of 8 5/8% Subordinated Debentures to be redeemed, at
a redemption price equal to the sum of (i) the then outstanding principal amount
thereof plus (ii) accrued and unpaid interest, if any, to the redemption date
plus (iii) the Applicable Change of Control Premium.
"Applicable Change of Control Premium" with respect to a 8 5/8% Subordinated
Debenture is defined as the greater of (i) 1.0% of the then outstanding
principal amount of such 8 5/8% Subordinated Debenture and (ii) the excess of
(A) the present value of the required interest and principal payments due on
such 8 5/8% Subordinated Debenture, computed using a discount rate equal to the
Treasury Rate plus 75 basis points, over (B) the then outstanding principal
amount of such 8 5/8% Subordinated Debenture.
SELECTION AND NOTICE
If less than all of the 8 5/8% Subordinated Debentures are to be redeemed at
any time, selection of the 8 5/8% Subordinated Debentures for redemption will be
made by the Subordinated Debenture Trustee in compliance with the requirements
of the principal national securities exchange, if any, on which the 8 5/8%
Subordinated Debentures are listed or, if the 8 5/8% Subordinated Debentures are
not listed on a national securities exchange, on a pro rata basis, by lot or by
such method as the Subordinated Debenture Trustee shall deem fair and
appropriate; PROVIDED that no 8 5/8% Subordinated Debentures of $1,000 or less
shall be redeemed in part. Notice of redemption shall be mailed by first class
mail at least 30 but not more than 60 days before the redemption date to each
holder of 8 5/8% Subordinated Debentures to be redeemed at its registered
address. If any 8 5/8% Subordinated Debenture is to be redeemed in part only,
the notice of redemption that relates to such 8 5/8% Subordinated Debenture
shall state the portion of the principal amount thereof to be redeemed. A new
8 5/8% Subordinated Debenture in principal amount equal to the unredeemed
portion thereof will be issued in the name of the holder thereof upon
cancellation of the original 8 5/8% Subordinated Debenture. On and after the
redemption date, interest ceases to accrue on 8 5/8% Subordinated Debentures or
portions of them called for redemption.
CERTAIN COVENANTS
LIMITATION ON RESTRICTED PAYMENTS. PRIMEDIA will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, (i) declare or
pay any dividend or make any distribution on account of PRIMEDIA's or any of its
Restricted Subsidiaries' Capital Stock or other Equity Interests (other than (A)
dividends or distributions payable in Equity Interests of PRIMEDIA or such
Restricted Subsidiary or (B) dividends or distributions payable to PRIMEDIA or
any of its Restricted Subsidiaries) or (ii) purchase, redeem or otherwise
acquire or retire for value any Equity Interests of PRIMEDIA or any Restricted
Subsidiary (other than any such Equity Interests owned by PRIMEDIA or any of its
Restricted Subsidiaries) (the foregoing actions set forth in clauses (i) and
(ii) being referred to as "Restricted Payments"), if, at the time of such
Restricted Payment, a default or event of default under the 8 5/8% Debenture
Indenture shall have occurred and be continuing or will occur as a consequence
thereof.
"Restricted Subsidiary" for purposes of the 8 5/8% Debenture Indenture,
means a Subsidiary of PRIMEDIA which at the time of determination is not an
Unrestricted Subsidiary. The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary.
"Unrestricted Subsidiary" for purposes of the 8 5/8% Debenture Indenture,
means (i) any Subsidiary of PRIMEDIA which at the time of determination is an
Unrestricted Subsidiary (as designated by the Board of Directors, as provided
below) and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of
Directors may designate any Subsidiary of PRIMEDIA (including any newly acquired
or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such
Subsidiary owns any Capital Stock of, or owns, or
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holds any Lien on, any property of, any other Subsidiary of PRIMEDIA which is
not a Subsidiary of the Subsidiary to be so designated; PROVIDED that the
Subsidiary to be so designated has not at the time of designation, and does not
thereafter, create, incur, issue, assume, guarantee or otherwise become directly
or indirectly liable with respect to any Indebtedness pursuant to which the
lender has recourse to any of the assets of PRIMEDIA or any of its Restricted
Subsidiaries. The Board of Directors may designate any Unrestricted Subsidiary
to be a Restricted Subsidiary.
TRANSACTIONS WITH AFFILIATES. Neither PRIMEDIA nor any of its Restricted
Subsidiaries will make any loan, advance, guarantee or capital contribution to,
or for the benefit of, or sell, lease, transfer or otherwise dispose of any of
its properties or assets to, or for the benefit of, or purchase or lease any
property or assets from, or enter into or amend any contract, agreement or
understanding with, or for the benefit of, (i) any person (or any Affiliate of
such person) holding 10% or more of any class of Capital Stock of PRIMEDIA or
any of its Restricted Subsidiaries or (ii) any Affiliate of PRIMEDIA or any of
its Restricted Subsidiaries (each an "Affiliate Transaction"), involving
aggregate payments of consideration in excess of $5.0 million, unless (a) such
Affiliate Transaction is on terms that are not materially less favorable to the
Company or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (b) the Company delivers to the Trustee
with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $10.0 million, a
resolution adopted by the majority of the Board of Directors approving such
Affiliate Transaction and set forth in an Officers' Certificate certifying that
such Affiliate Transaction complies with clause (a) above.
The foregoing restriction shall not apply to (i) the payment of an annual
fee to KKR for the rendering of management consulting and financial services to
PRIMEDIA and its Restricted Subsidiaries in an aggregate amount which is
reasonable in relation thereto, (ii) the payment of transaction fees to KKR in
amounts which are in accordance with past practices for the rendering of
financial advice and services in connection with acquisitions, dispositions and
financings by PRIMEDIA and its Subsidiaries, (iii) the payment of reasonable and
customary fees paid to, and indemnity provided on behalf of, officers,
directors, employees or consultants of PRIMEDIA or any Restricted Subsidiary,
(iv) loans to officers, directors and employees of PRIMEDIA and its Subsidiaries
for business or personal purposes and other loans and advances to such officers,
directors and employees for travel, entertainment, moving and other relocation
expenses made in the ordinary course of business of PRIMEDIA and its
Subsidiaries, (v) any Restricted Payments not prohibited by the RESTRICTED
PAYMENTS covenant in the Senior Note Indentures, the Series D Debenture
Indenture or the Series F Debenture Indenture, or any Investment not prohibited
by the INVESTMENTS IN UNRESTRICTED SUBSIDIARIES covenant in the Senior Note
Indentures, (vi) transactions between or among any of PRIMEDIA and its
Restricted Subsidiaries or (vii) allocation of corporate overhead to
Unrestricted Subsidiaries on a basis no less favorable to PRIMEDIA than such
allocations to Restricted Subsidiaries.
MERGER, CONSOLIDATION, OR SALE OF ASSETS. PRIMEDIA may not consolidate with,
merge with or into, or transfer all or substantially all of its assets (as an
entirety or substantially as an entirety in one transaction or a series of
related transactions) to any person or permit any person to merge with or into
it unless: (i) PRIMEDIA shall be the continuing person, or the person (if other
than PRIMEDIA) formed by such consolidation or into which PRIMEDIA is merged or
to which the properties and assets of PRIMEDIA are transferred shall be a
corporation organized and existing under the laws of the United States or any
State thereof or the District of Columbia and shall expressly assume, by a
supplemental indenture, executed and delivered to the Subordinated Debenture
Trustee, in form satisfactory to the Subordinated Debenture Trustee, all of the
obligations of PRIMEDIA under the 8 5/8% Subordinated Debentures and the 8 5/8%
Debenture Indenture and (ii) immediately after giving effect to such
transaction, no Default and no Event of Default under the 8 5/8% Debenture
Indenture shall have occurred and be continuing.
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EVENTS OF DEFAULT AND REMEDIES THEREOF
The 8 5/8% Debenture Indenture will provide that each of the following will
constitute an "Event of Default" with respect to the 8 5/8% Subordinated
Debentures: (i) the failure to make any payment of interest on any of the 8 5/8%
Subordinated Debentures when the same becomes due and payable and the
continuance of any such failure for 30 days and for five days after written
notice of default is given to PRIMEDIA by the holders of at least 51% in
principal amount of the 8 5/8% Subordinated Debentures following the expiration
of such 30-day period, (ii) the failure to make any payment of principal or
premium on any of the 8 5/8% Subordinated Debentures when the same shall become
due and payable, whether at maturity, upon acceleration, redemption or
otherwise, and such Default continues for a period of ten days, (iii) the
failure by PRIMEDIA to comply with any of its other agreements in the 8 5/8%
Debenture Indenture or the 8 5/8% Subordinated Debentures and such Default
continues for 60 days after receipt of a written notice from the Subordinated
Debenture Trustee or holders of at least 51% of the principal amount of the
8 5/8% Subordinated Debentures outstanding, specifying such Default and
requiring that it be remedied, (iv) the occurrence of an event of default with
respect to any Indebtedness for borrowed money of PRIMEDIA or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by PRIMEDIA or
any of its Restricted Subsidiaries) having an outstanding principal amount of
$22.5 million or more individually or $45 million or more in the aggregate which
has caused the acceleration of such Indebtedness and such Indebtedness has not
been discharged or such acceleration has not been rescinded within 60 days after
such acceleration, and (v) certain events of bankruptcy, insolvency or
reorganization. The term "Default" means any event, act or condition that is, or
after notice or the passage of time or both would be, an Event of Default.
If a Default or an Event of Default occurs and is continuing and if it is
known to the Subordinated Debenture Trustee, the Subordinated Debenture Trustee
shall mail to each holder of the 8 5/8% Subordinated Debentures notice of the
Default or Event of Default within 90 days after it occurs or, if later, within
10 days after such Default or Event of Default becomes known to the Subordinated
Debenture Trustee, unless such Default or Event of Default has been cured.
Except in the case of a Default or Event of Default in the payment of principal
of, premium, if any, or interest on any 8 5/8% Subordinated Debenture or that
results from a failure to comply with the CHANGE OF CONTROL covenant, the
Subordinated Debenture Trustee may withhold the notice if and so long as a
committee of its trust officers in good faith determines that withholding the
notice is in the interest of the holders of the 8 5/8% Subordinated Debentures.
If an Event of Default (other than an Event of Default with respect to
PRIMEDIA resulting from bankruptcy, insolvency or reorganization) occurs and is
continuing, the Subordinated Debenture Trustee or the holders of at least 51% in
principal amount of the 8 5/8% Subordinated Debentures then outstanding, by
written notice to PRIMEDIA and to the agents under the Credit Facilities, the
trustees under the Senior Note Indentures and the Exchange Debenture Indenture
(and to the Subordinated Debenture Trustee if such notice is given by the
holders of 8 5/8% Subordinated Debentures) may, and the Subordinated Debenture
Trustee at the request of such holders of 8 5/8% Subordinated Debentures shall,
declare all unpaid principal of, premium, if any, and accrued interest on the
8 5/8% Subordinated Debentures to be due and payable upon the first to occur of
an acceleration under any of the Credit Facilities, or the Senior Notes or 15
business days after the receipt by PRIMEDIA, such agent and such trustees of
such written notice to the extent that the Event of Default is continuing. If an
Event of Default resulting from certain events of bankruptcy, insolvency or
reorganization occurs with respect to PRIMEDIA, all unpaid principal of,
premium, if any, and accrued interest on the 8 5/8% Subordinated Debentures then
outstanding shall IPSO FACTO become and be immediately due and payable without
any declaration, notice or other act on the part of the Subordinated Debenture
Trustee or any holder. The holders of at least 51% in principal amount of the
8 5/8% Subordinated Debentures by written notice to the Subordinated Debenture
Trustee may rescind an acceleration and its consequences upon conditions
provided in the 8 5/8% Debenture Indenture. Subject to certain restrictions set
forth in the 8 5/8% Debenture Indenture, the holders of at least 51% in
principal amount of the outstanding 8 5/8% Subordinated Debentures by notice to
the Subordinated Debenture
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Trustee may waive an existing Default or Event of Default and its consequences
(including waivers obtained in connection with a tender offer or exchange offer
for 8 5/8% Subordinated Debentures), except a continuing Default or Event of
Default in the payment of principal of, premium, if any, or interest on, such
8 5/8% Subordinated Debentures (including, without limitation, pursuant to any
mandatory or optional redemption obligation under the 8 5/8% Debenture
Indenture) or a continuing Default or Event of Default that resulted from the
failure to comply with the CHANGE OF CONTROL covenant. When a Default or Event
of Default is waived, it is cured and ceases. A holder of 8 5/8% Subordinated
Debentures may not pursue any remedy with respect to the 8 5/8% Debenture
Indenture or the 8 5/8% Subordinated Debentures unless: (1) the holder gives to
the Subordinated Debenture Trustee written notice of a continuing Event of
Default; (2) the holders of at least 51% in principal amount of such 8 5/8%
Subordinated Debentures outstanding make a written request to the Subordinated
Debenture Trustee to pursue the remedy; (3) such holder or holders offer to the
Subordinated Debenture Trustee indemnity satisfactory to the Subordinated
Debenture Trustee against any loss, liability or expense; (4) the Subordinated
Debenture Trustee does not comply with the request within 30 days after receipt
of the request and the offer of indemnity; and (5) during such 30-day period the
holders of at least 51% in principal amount of the outstanding 8 5/8%
Subordinated Debentures do not give the Subordinated Debenture Trustee a
direction which is inconsistent with the request.
PRIMEDIA is required to deliver to the Subordinated Debenture Trustee
annually a statement regarding compliance with the 8 5/8% Debenture Indenture
and PRIMEDIA is required upon becoming aware of any Default or Event of Default
to deliver a statement to the Subordinated Debenture Trustee specifying such
Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND SHAREHOLDERS
No director, officer, employee, incorporator or shareholder of PRIMEDIA, as
such, shall have any liability for any obligations of PRIMEDIA under the 8 5/8%
Subordinated Debentures or the 8 5/8% Debenture Indenture or for any claim based
on, in respect of, or by reason of, such obligations of their creations. Each
holder of the 8 5/8% Subordinated Debentures by accepting a 8 5/8% Subordinated
Debenture waives and releases all such liability. The waiver and release are
part of the consideration for issuance of the 8 5/8% Subordinated Debentures.
Such waiver may not be effective to waive liabilities under the federal
securities laws and it is the view of the Commission that such a waiver is
against public policy.
DEFEASANCE AND DISCHARGE OF THE 8 5/8% DEBENTURE INDENTURE AND THE 8 5/8%
SUBORDINATED DEBENTURES
If the Company irrevocably deposits, or causes to be deposited, in trust
with the Subordinated Debenture Trustee or the Paying Agent, at any time prior
to the stated maturity of the 8 5/8% Subordinated Debentures or the date of
redemption of all the outstanding 8 5/8% Subordinated Debentures, as trust funds
in trust, money or direct noncallable obligations of or guaranteed by the United
States of America sufficient (without reinvestment thereof) to pay timely and
discharge the entire principal of the then outstanding 8 5/8% Subordinated
Debentures and all interest due thereon to maturity or redemption, and if such
deposit does not violate the subordination provisions of the 8 5/8% Debenture
Indenture, the 8 5/8% Debenture Indenture shall cease to be of further effect as
to all outstanding 8 5/8% Subordinated Debentures (except, among other things,
as to (i) remaining rights of registration of transfer, substitution and
exchange of 8 5/8% Subordinated Debentures, (ii) rights of holders to receive
payment of principal of and interest on the 8 5/8% Subordinated Debentures, and
(iii) the rights, obligations and immunities of the Subordinated Debenture
Trustee).
The Credit Facilities and the Senior Note Indentures restrict PRIMEDIA from
defeasing the 8 5/8% Subordinated Debentures.
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TRANSFER AND EXCHANGE
A holder may transfer or exchange 8 5/8% Subordinated Debentures in
accordance with the 8 5/8% Debenture Indenture. The Registrar and the
Subordinated Debenture Trustee may require a holder, among other things, to
furnish appropriate endorsements and transfer documents, and the Company may
require a holder to pay any taxes and fees required by law or permitted by the
8 5/8% Debenture Indenture. PRIMEDIA is not required to transfer or exchange any
8 5/8% Subordinated Debentures selected for redemption. Also, PRIMEDIA is not
required to transfer or exchange any 8 5/8% Subordinated Debentures for a period
of 15 days before a selection of 8 5/8% Subordinated Debentures to be redeemed.
The registered holder of a 8 5/8% Subordinated Debenture will be treated as
its owner for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next succeeding paragraph, the 8 5/8% Debenture
Indenture or the 8 5/8% Subordinated Debentures may be amended or supplemented
with the written consent of the holders of at least 51% in principal amount of
the 8 5/8% Subordinated Debentures then outstanding (including consents obtained
in connection with a tender offer or exchange offer for 8 5/8% Subordinated
Debentures), and any existing default under or compliance with any provision of
the 8 5/8% Debenture Indenture or the 8 5/8% Subordinated Debentures may be
waived with the consent of the holders of 51% in principal amount of the then
outstanding 8 5/8% Subordinated Debentures (including waivers obtained in
connection with a tender offer or exchange offer for 8 5/8% Subordinated
Debentures).
Without the consent of each holder affected, an amendment or waiver may not
(with respect to any 8 5/8% Subordinated Debentures held by a non-consenting
holder of 8 5/8% Subordinated Debentures) (i) reduce the principal amount of
8 5/8% Subordinated Debentures whose holders must consent to an amendment,
supplement or waiver, (ii) reduce the principal of or change the fixed maturity
of any 8 5/8% Subordinated Debenture or alter the provisions with respect to the
redemption price in connection with repurchases of 8 5/8% Subordinated
Debentures upon a Change of Control or otherwise, (iii) reduce the rate of or
change the time for payments of interest on any 8 5/8% Subordinated Debenture,
(iv) waive a Default or Event of Default in the payment of the principal of, or
premium, if any, or interest on 8 5/8% Subordinated Debentures or that resulted
from a failure to comply with the CHANGE OF CONTROL covenant (except a
rescission of acceleration of the 8 5/8% Subordinated Debentures by the holders
of at least 51% in aggregate principal amount of the 8 5/8% Subordinated
Debentures), (v) make any 8 5/8% Subordinated Debenture payable in money other
than that stated in the 8 5/8% Debenture Indenture, (vi) make any change in the
subordination provisions of the 8 5/8% Debenture Indenture that adversely
affects the rights of any 8 5/8% Subordinated Debenture holder, (vii) make any
change in the provisions of the 8 5/8% Debenture Indenture relating to waivers
of past defaults or the rights of holders of 8 5/8% Subordinated Debentures to
receive payments of principal of or interest on the 8 5/8% Subordinated
Debentures, (viii) waive a redemption payment with respect to any 8 5/8%
Subordinated Debenture or (ix) make any change in the foregoing.
Notwithstanding the foregoing, without the consent of any holder of the
8 5/8% Subordinated Debentures, PRIMEDIA and the Subordinated Debenture Trustee
may amend or supplement the 8 5/8% Debenture Indenture or 8 5/8% Subordinated
Debentures to cure any ambiguity, defect or inconsistency, to provide for
uncertificated 8 5/8% Subordinated Debentures in addition to or in place of
certificated 8 5/8% Subordinated Debentures, to provide for the assumption of
PRIMEDIA's obligations to holders of the 8 5/8% Subordinated Debentures in the
case of a merger or consolidation, to make any change that would provide any
additional rights or benefits to the holders of the 8 5/8% Subordinated
Debentures or that does not adversely affect the legal rights under the 8 5/8%
Debenture Indenture of any such holder, or to comply with requirements of the
Commission in order to effect or maintain the qualification of the 8 5/8%
Debenture Indenture under the Trust Indenture Act.
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CONCERNING THE SUBORDINATED DEBENTURE TRUSTEE
The 8 5/8% Debenture Indenture contains certain limitations on the rights of
the Subordinated Debenture Trustee, should it become a creditor of PRIMEDIA, to
obtain payment of claims in certain cases, or to realize on certain property
received in respect of any such claim as security or otherwise. The Subordinated
Debenture Trustee will be permitted to engage in other transactions; however, if
it acquires any conflicting interest it must eliminate such conflict within
ninety days, apply to the Commission for permission to continue or resign.
The holders of a majority in principal amount of the then outstanding 8 5/8%
Subordinated Debentures will have the right to direct the time, method and place
of conducting any proceeding for exercising any remedy available to the
Subordinated Debenture Trustee, subject to certain exceptions. The 8 5/8%
Debenture Indenture provides that in case an Event of Default shall occur (which
shall not be cured), the Subordinated Debenture Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Subordinated Debenture
Trustee will be under no obligation to exercise any of its rights or powers
under the 8 5/8% Debenture Indenture at the request of any of the holders of the
8 5/8% Subordinated Debentures, unless they shall have offered to the
Subordinated Debenture Trustee security and indemnity satisfactory to it against
any loss, liability or expense.
The Bank of New York is the trustee under the indenture relating to the
8 1/2% Senior Notes, the Notes, the Class D Debenture Indenture, and the Class F
Debenture Indenture and a lender and an agent under the Credit Facilities.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the 8 5/8% Debenture
Indenture. Reference is made to the 8 5/8% Debenture Indenture for a full
disclosure of all such terms, as well as any other capitalized terms used herein
for which no definition is provided.
"Affiliate" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. A person shall be deemed to "control"
(including the correlative meanings, the terms "controlling," "controlled by,"
and "under common control with") another person if the controlling person
possesses, directly or indirectly, the power to direct or cause the direction of
the management or policies of the controlled person, whether through ownership
of voting securities, by agreement or otherwise.
"Average Life" means, as of the date of determination, with respect to any
debt security, the quotient obtained by dividing (i) the sum of the products of
the numbers of years from the date of determination to the dates of each
successive scheduled principal payment (assuming the exercise by the obligor of
such debt security of all unconditional (other than as to the giving of notice)
extension options of each such scheduled payment date) of such debt security
multiplied by the amount of such principal payment by (ii) the sum of all such
principal payments.
"Average Life to Redemption" means, as of the date of determination, with
respect to any preferred security, the number of years (including any portion
thereof) remaining to the mandatory redemption date thereof.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease which
would at such time be so required to be capitalized on the balance sheet in
accordance with GAAP.
"Capital Stock" means any and all shares, interests, participations, rights
or other equivalents (however designated) of corporate stock.
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"Change of Control" means such time as (i) a "person" or "group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), other than KKR and
its Affiliates, becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act) of more than (A) 35 percent (35%) of the total voting power of
the then outstanding voting stock of PRIMEDIA and (B) the total voting power of
the then outstanding voting stock of PRIMEDIA beneficially owned by KKR and its
Affiliates or (ii) during any period of two consecutive calendar years,
individuals who at the beginning of such period constituted PRIMEDIA's Board of
Directors (together with any new directors whose election by PRIMEDIA's Board of
Directors or whose nomination for election by PRIMEDIA's shareholders was
approved by a vote of at least two-thirds of the Directors then still in office
who either were Directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the directors then in office.
"Currency Agreement" means the obligations of any person pursuant to any
foreign exchange contract, currency swap agreement or other similar agreement or
arrangement designed to protect such person or any of its subsidiaries against
fluctuations in currency values.
"Equity Interests" means Capital Stock, warrants, options or other rights to
acquire Capital Stock (but excluding any debt security which is convertible
into, or exchangeable for, Capital Stock).
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession,
which are applicable to the circumstances as of the date of the 8 5/8% Debenture
Indenture.
"Indebtedness" of any person is defined as any indebtedness, contingent or
otherwise, in respect of borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such person or only to a portion
thereof), or evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement obligations with respect thereto) or
representing the balance deferred and unpaid of the purchase price of any
property (including pursuant to financing leases), if and to the extent any of
the foregoing indebtedness would appear as a liability upon a balance sheet of
such person prepared in accordance with GAAP (except that any such balance that
constitutes a trade payable and/or an accrued liability arising in the ordinary
course of business shall not be considered Indebtedness), and shall also
include, to the extent not otherwise included, any Capital Lease Obligations,
the maximum fixed repurchase price of any Redeemable Stock, indebtedness secured
by a Lien to which the property or assets owned or held by such person is
subject, whether or not the obligations secured thereby shall have been assumed,
guarantees of items that would be included within this definition to the extent
of such guarantees (exclusive of whether such items would appear upon such
balance sheet), and net liabilities in respect of Currency Agreements and
Interest Rate Agreements. For purposes of the preceding sentence, the maximum
fixed repurchase price of any Redeemable Stock which does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Redeemable Stock as if such Redeemable Stock were repurchased on any date on
which Indebtedness shall be required to be determined pursuant to the 8 5/8%
Debenture Indenture, provided that if such Redeemable Stock is not then
permitted to be repurchased, the repurchase price shall be the book value of
such Redeemable Stock. The amount of Indebtedness of any person at any date
shall be without duplication (i) the outstanding balance at such date of all
unconditional obligations as described above and the maximum liability of any
such contingent obligations at such date and (ii) in the case of Indebtedness of
others secured by a Lien to which the property or assets owned or held by such
person is subject, the lesser of the fair market value at such date of any asset
subject to a Lien securing the Indebtedness of others and the amount of the
Indebtedness secured. For the purpose of determining the aggregate Indebtedness
of PRIMEDIA and its Restricted Subsidiaries, such Indebtedness shall exclude the
Indebtedness of any Unrestricted Subsidiary of PRIMEDIA or any Unrestricted
Subsidiary of a Restricted Subsidiary.
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"Interest Rate Agreements" means the obligations of any person pursuant to
any interest rate swap agreement, interest rate collar agreement or other
similar agreement or arrangement designed to protect such person or any of its
subsidiaries against fluctuations in interest rates.
"Lien" means any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind, whether or not filed, recorded or otherwise perfected
under applicable law (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to
sell or give any security interest in and any filing or other agreement to give
any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction).
"Public Equity Offering" means an underwritten public offering of primary
shares of PRIMEDIA's Common Stock (or any other class of common stock
hereinafter duly authorized by PRIMEDIA) pursuant to a registration statement
(other than a registration statement on form S-8 or S-4 or successor forms)
filed with the Commission in accordance with the Securities Act.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Subsidiary" means any corporation, association or other business entity of
which more than 50% of the total voting power of shares of Capital Stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by any person or one or more of the other
Subsidiaries of that person or a combination thereof.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the 8 5/8%
Debenture Indenture without charge by writing to: PRIMEDIA Inc., 745 Fifth
Avenue, New York, NY 10151, Attention: Warren Bimblick, Vice President, Investor
Relations.
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DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
GENERAL
The Certificate of Incorporation of PRIMEDIA authorizes 250 million shares
of Common Stock, and 50 million shares of preferred stock, par value $0.01 per
share. The Board of Directors of PRIMEDIA, in its sole discretion, may issue
Common Stock from the authorized and unissued shares of Common Stock and may
designate and issue one or more series of preferred stock from the authorized
and unissued shares of preferred stock. Subject to limitations imposed by law or
the Certificate of Incorporation, the Board of Directors is empowered to
determine the designation of and the number of shares constituting a series of
preferred stock; the dividend rate for the series; the terms and conditions of
any voting, conversion and exchange rights for the series; the amounts payable
on the series upon redemption or PRIMEDIA's liquidation, dissolution or
winding-up; the provisions of any sinking fund for the redemption or purchase of
shares of any series; and the preferences and relative rights among the series
of preferred stock. Pursuant to the Certificate of Designations for the Series D
Preferred Stock, two million shares of Series D Preferred Stock, liquidation
preference $100 per share, have been authorized for issuance, all of which were
issued and outstanding at December 31, 1997. Pursuant to the Certificate of
Designations for the Series E Preferred Stock, 1.25 million shares of Series E
Preferred Stock, liquidation preference $100 per share, have been authorized for
issuance, all of which were issued and outstanding at December 31, 1997. All of
such shares of Series E Preferred Stock were exchanged for shares of Series F
Preferred Stock in connection with the Series E Exchange Offer.
THE COMMON STOCK
As of March 31, 1998, 145,999,630 shares of Common Stock were issued and
outstanding, and 12,683,075 shares were issuable upon exercise of outstanding
options, 8,993,875 of which were exercisable as of December 31, 1997 (which
options, if exercised in full, would generate aggregate proceeds to the Company
of $51,994,133).
Each share of Common Stock is entitled to one vote at all meetings of
stockholders of PRIMEDIA for the election of directors and all other matters
submitted to stockholder vote. The Common Stock does not have cumulative voting
rights. Accordingly, the holders of a majority of the outstanding shares of
Common Stock can elect all the directors if they choose to do so. Dividends may
be paid to the holders of Common Stock when, as and if declared by the Board of
Directors of PRIMEDIA out of funds legally available therefor. The Common Stock
has no preemptive or similar rights. Holders of Common Stock are not liable to
further call or assessment. Upon the liquidation, dissolution or winding up of
the affairs of PRIMEDIA, any assets remaining after provision for payment of
creditors and holders of preferred stock would be distributed PRO RATA among
holders of Common Stock. PRIMEDIA does not anticipate declaring and paying cash
dividends on the Common Stock at any time in the foreseeable future. The
decision whether to apply legally available funds to the payment of dividends on
the Common Stock will be made by the Board of Directors from time to time in the
exercise of its prudent business judgment, taking into account, among other
things, the Company's results of operations and financial condition, any then
existing or proposed commitments for the use by the Company of available funds,
and PRIMEDIA's obligations with respect to any then outstanding class or series
of its preferred stock. In addition, PRIMEDIA is restricted by the terms of the
Credit Facilities and public debt instruments from paying cash dividends on its
capital stock, and may in the future enter into loan or other agreements or
issue debt securities or preferred stock that restrict the payment of cash
dividends on PRIMEDIA's capital stock.
The Certificate of Incorporation of the Company provides that, except as
provided by the DGCL, directors of the Company shall not be personally liable to
the Company or its stockholders for monetary damages for breach of fiduciary
duties as a director. That provision does not exonerate the directors from
liability under federal securities laws, and has no effect on any non-monetary
remedies that may be available to the Company or its stockholders. The By-Laws
of the Company provide for indemnification of the officers and directors of the
Company to the full extent permitted by applicable law.
103
<PAGE>
The Company's By-Laws provide for additional notice requirements for
stockholder nominations and proposals at annual or special meetings of the
Company. At annual meetings, stockholders will be entitled to submit nominations
for directors or other proposals only upon written notice to the Company not
less than 60 days, nor more than 90 days, prior to the annual meeting.
SECTION 203 OF THE DELAWARE LAW
Generally, Section 203 of the DGCL prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date of the transaction in
which the person became an interested stockholder, unless (i) prior to the date
of the business combination, the transaction is approved by the board of
directors of the corporation, (ii) upon consummation of the transaction which
resulted in the stockholder becoming an interested stockholder, the interested
stockholder owns at least 85% of the outstanding voting stock, or (iii) on or
after such date the business combination is approved by the board and by the
affirmative vote of at least 66 2/3% of the outstanding voting stock which is
not owned by the interested stockholder. A "business combination" includes
mergers, asset sales, and other transactions resulting in a financial benefit to
the stockholder. An "interested stockholder" is a person who, together with
affiliates and associates, owns (or within three years, did own) 15% or more of
the corporation's voting stock.
THE SERIES D PREFERRED STOCK
The holders of Series D Preferred Stock have no preemptive rights or
cumulative voting rights and are not subject to future assessments by PRIMEDIA.
All outstanding shares of Series D Preferred Stock are fully paid and
nonassessable. The Series D Preferred Stock has an aggregate liquidation
preference of $200,000,000.
RANK. The Series D Preferred Stock, with respect to dividend rights and
rights on liquidation, winding up and dissolution, ranks PARI PASSU with the
Series F Preferred Stock and the Preferred Stock and senior to the Common Stock.
The Company intends to amend the Certificate of Designations relating to the
Series D Preferred Stock to provide that, without the affirmative vote of at
least a majority of the then outstanding shares of Series D Preferred Stock,
voting together with the holders of any other then outstanding shares of Parity
Securities entitled to vote thereon, the Company will not issue any other Senior
Securities; PROVIDED that the Company does not need the approval of such holders
to issue shares of Senior Securities the proceeds of which are used to redeem or
repurchase all shares of the then outstanding Series D Preferred Stock and any
other Parity Securities entitled to vote thereon.
DIVIDENDS. The holders of the shares of Series D Preferred Stock are
entitled to receive, when, as and if declared by the Board of Directors, out of
funds legally available therefor, cash dividends at an annual rate equal to 10%.
Such dividends are payable quarterly in arrears on each February 1, May 1,
August 1 and November 1. Dividends on shares of the Series D Preferred Stock
accrue and are cumulative from the date of issuance of such shares. As of the
date of this Prospectus, all such dividends have been paid.
OPTIONAL REDEMPTION. PRIMEDIA may, at its option, redeem at any time on or
after February 1, 2001, from any source of funds legally available therefor, in
whole or in part, any or all of the shares of Series D Preferred Stock at
redemption prices declining ratably from 105.0% of liquidation value for the
twelve months commencing February 1, 2001 to 100.0% on and after February 1,
2006, plus in each case an amount in cash equal to all accumulated and unpaid
dividends per share (including an amount equal to a prorated dividend from the
last dividend payment date to the redemption date). The Credit Facilities and
the Senior Note Indentures restrict the ability to redeem the Series D Preferred
Stock.
In addition, up to $100,000,000 of the Series D Preferred Stock may be
redeemed at any time on or before February 1, 1999 at a price of 110.0%, plus
accrued and unpaid dividends out of the net proceeds of
104
<PAGE>
one or more public equity offerings of Common Stock, provided such redemption
occurs within 180 days of such equity public offering.
MANDATORY REDEMPTION. The Series D Preferred Stock is subject to mandatory
redemption (subject to contractual and other restrictions with respect thereto
and to the legal availability of funds therefor) on February 1, 2008 at a price
equal to the liquidation preference thereof plus all accumulated dividends to
the date of redemption.
VOTING RIGHTS. Holders of the Series D Preferred Stock have no voting
rights with respect to general corporate matters except as provided by law or as
set forth in the Certificate of Designations for the Series D Preferred Stock.
Such Certificate of Designations provides that in the event that dividends on
the Series D Preferred Stock are in arrears and unpaid for six consecutive
quarterly periods, the Board of Directors of PRIMEDIA will be increased by two
directors and the holders of the majority of the Series D Preferred Stock,
voting together as a class, will be entitled to elect two directors of the
expanded board of directors. Such voting rights will continue until such time as
all dividends in arrears on the Series D Preferred Stock are paid in full.
Unless the requisite holders of any senior security or any indebtedness of
PRIMEDIA have consented to or granted a waiver with respect thereto, PRIMEDIA
may not merge or consolidate with or into or transfer all or substantially all
of its assets (as an entirety in one transaction or a series of related
transactions), to any person without the consent of the holders of a majority of
the issued and outstanding shares of Series D Preferred Stock, Series F
Preferred Stock and Preferred Stock (together with any outstanding shares of
Future Parity Securities entitled to vote thereon), voting together as one
class, unless (i) PRIMEDIA shall be the continuing person, or the person (if
other than PRIMEDIA) formed by such consolidation or into which PRIMEDIA is
merged or to which the properties and assets of PRIMEDIA are transferred shall
be a corporation organized and existing under the laws of the United States or
any State thereof or the District of Columbia and the Series D Preferred Stock
shall be converted into or exchanged for and shall become shares of such
successor or resulting company, having in respect of such successor or resulting
company substantially the same powers, preferences and relative participating,
optional or other special rights, and the qualifications, limitations or
restrictions thereon, that the Series D Preferred Stock had immediately prior to
such transaction and (ii) immediately after giving effect to such transaction on
a pro forma basis, the Consolidated Net Worth of the surviving entity is at
least equal to the lesser of (a) the Consolidated Net Worth of PRIMEDIA (as
defined in its Certificate of Incorporation) immediately prior to such
transaction and (b) the Consolidated Net Worth of the Company on January 24,
1996.
Under Delaware law, holders of preferred stock are entitled to vote as a
class upon a proposed amendment, whether or not entitled to vote thereon by the
certificate of incorporation, if, among other matters, the amendment would
increase or decrease the aggregate number of authorized shares of such class,
increase or decrease the par value of the shares of such class, or alter or
change the powers, preferences, or special rights of the shares of such class so
as to affect them adversely.
EXCHANGE. PRIMEDIA may, at its option, out of any source of funds legally
available therefor, on any scheduled dividend payment date, issue Class D
Subordinated Debentures in exchange for the Series F Preferred Stock, in whole
but not in part. Holders of Series D Preferred Stock so exchanged will be
entitled to receive the principal amount of Class D Subordinated Debentures
equal to $100 for each $100 of liquidation preference of Series D Preferred
Stock held by such holders at the time of exchange plus an amount per share in
cash equal to all accrued but unpaid dividends thereon to the date of exchange
(including an amount equal to a pro rated dividend from the last dividend
payment date to the exchange date). The Credit Facilities and the indenture
relating to the 10 1/4% Senior Notes restrict the ability of PRIMEDIA to
exchange the Series D Preferred Stock for Class D Subordinated Debentures.
105
<PAGE>
THE SERIES F PREFERRED STOCK
The Series E Exchange Offer was consummated on February 17, 1998, pursuant
to which all shares of Series E Preferred Stock were exchanged for shares of
Series F Preferred Stock. The terms of the Series F Preferred Stock are the same
as the terms of the Series E Preferred Stock, except that the Series F Preferred
Stock has been registered under the Securities Act.
The holders of Series F Preferred Stock have no preemptive rights or
cumulative voting rights and are not subject to future assessments by PRIMEDIA.
All outstanding shares of Series F Preferred Stock are fully paid and
nonassessable. The Series F Preferred Stock has an aggregate liquidation
preference of $125,000,000.
RANK. The Series F Preferred Stock, with respect to dividend rights and
rights on liquidation, winding up and dissolution, ranks PARI PASSU with the
Series D Preferred Stock and the Preferred Stock and senior to the Common Stock.
The Certificate of Designations relating to the Series F Preferred Stock
provides that, without the affirmative vote of at least a majority of the then
outstanding shares of Series F Preferred Stock, voting together with the holders
of any other then outstanding shares of Parity Securities entitled to vote
thereon, the Company will not issue any other Senior Securities; PROVIDED that
the Company does not need the approval of such holders to issue shares of Senior
Securities the proceeds of which are used to redeem or repurchase all shares of
the then outstanding Series F Preferred Stock and any other Parity Securities
entitled to vote thereon.
DIVIDENDS. The holders of the shares of Series F Preferred Stock are
entitled to receive, when, as and if declared by the Board of Directors, out of
funds legally available therefor, cash dividends at an annual rate equal to
9.20%. Such dividends are payable quarterly in arrears on each February 1, May
1, August 1 and November 1. Dividends on shares of the Series F Preferred Stock
accrue and are cumulative from the date of issuance of such shares. As of the
date of this Prospectus, all such dividends have been paid.
OPTIONAL REDEMPTION. PRIMEDIA may, at its option, redeem at any time on or
after November 1, 2002, from any source of funds legally available therefor, in
whole or in part, any or all of the shares of Series F Preferred Stock at
redemption prices declining ratably from 104.60% of liquidation value for the
twelve months commencing November 1, 2002 to 100.0% on and after November 1,
2004, plus in each case an amount in cash equal to all accumulated and unpaid
dividends per share (including an amount equal to a prorated dividend from the
last dividend payment date to the redemption date). The Credit Facilities and
the Senior Note Indentures restrict the ability to redeem the Series F Preferred
Stock.
In addition, up to $60,000,000 of the Series F Preferred Stock may be
redeemed at any time on or before November 1, 2000 at a price of 109.0%, plus
accrued and unpaid dividends out of the net proceeds of one or more public
equity offerings of Common Stock, provided such redemption occurs within 180
days of such equity public offering.
MANDATORY REDEMPTION. The Series F Preferred Stock is subject to mandatory
redemption (subject to contractual and other restrictions with respect thereto
and to the legal availability of funds therefor) on November 1, 2009 at a price
equal to the liquidation preference thereof plus all accumulated dividends to
the date of redemption.
VOTING RIGHTS. Holders of the Series F Preferred Stock have no voting
rights with respect to general corporate matters except as provided by law or as
set forth in the Certificate of Designations for the Series F Preferred Stock.
Such Certificate of Designations provides that in the event that dividends on
the Series F Preferred Stock are in arrears and unpaid for six consecutive
quarterly periods, the Board of Directors of PRIMEDIA will be increased by two
directors and the holders of the majority of the Series F Preferred Stock,
voting together as a class, will be entitled to elect two directors of the
expanded board of directors. Such voting rights will continue until such time as
all dividends in arrears on the Series F Preferred Stock are paid in full.
106
<PAGE>
Unless the requisite holders of any senior security or any indebtedness of
PRIMEDIA have consented to or granted a waiver with respect thereto, PRIMEDIA
may not merge or consolidate with or into or transfer all or substantially all
of its assets (as an entirety in one transaction or a series of related
transactions), to any person without the consent of the holders of a majority of
the issued and outstanding shares of Series D Preferred Stock, Series F
Preferred Stock and Preferred Stock (together with any outstanding shares of
Future Parity Securities entitled to vote thereon), voting together as one
class, unless (i) PRIMEDIA shall be the continuing person, or the person (if
other than PRIMEDIA) formed by such consolidation or into which PRIMEDIA is
merged or to which the properties and assets of PRIMEDIA are transferred shall
be a corporation organized and existing under the laws of the United States or
any State thereof or the District of Columbia and the Series F Preferred Stock
shall be converted into or exchanged for and shall become shares of such
successor or resulting company, having in respect of such successor or resulting
company substantially the same powers, preferences and relative participating,
optional or other special rights, and the qualifications, limitations or
restrictions thereon, that the Series F Preferred Stock had immediately prior to
such transaction and (ii) immediately after giving effect to such transaction on
a pro forma basis, the Consolidated Net Worth of the surviving entity is at
least equal to the lesser of (a) the Consolidated Net Worth of PRIMEDIA (as
defined in its Certificate of Incorporation) immediately prior to such
transaction and (b) the Consolidated Net Worth of the Company on September 26,
1997.
Under Delaware law, holders of preferred stock are entitled to vote as a
class upon a proposed amendment, whether or not entitled to vote thereon by the
certificate of incorporation, if, among other matters, the amendment would
increase or decrease the aggregate number of authorized shares of such class,
increase or decrease the par value of the shares of such class, or alter or
change the powers, preferences, or special rights of the shares of such class so
as to affect them adversely.
EXCHANGE. PRIMEDIA may, at its option, out of any source of funds legally
available therefor, on any scheduled dividend payment date, issue Class F
Subordinated Debentures in exchange for the Series F Preferred Stock, in whole
but not in part. Holders of Series F Preferred Stock so exchanged will be
entitled to receive the principal amount of Class F Subordinated Debentures
equal to $100 for each $100 of liquidation preference of Series F Preferred
Stock held by such holders at the time of exchange plus an amount per share in
cash equal to all accrued but unpaid dividends thereon to the date of exchange
(including an amount equal to a pro rated dividend from the last dividend
payment date to the exchange date). The Credit Facilities and the Senior Notes
Indentures restrict the ability of PRIMEDIA to exchange the Series F Preferred
Stock for Class F Subordinated Debentures.
107
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of March 31, 1998 by (i) each beneficial owner
of more than five percent of the Company's outstanding Common Stock, (ii) each
of the Company's directors, (iii) certain of the Company's executive officers
named in the table under "Management" and (iv) all directors and executive
officers of the Company as a group.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
BENEFICIALLY
NAME OWNED(1) PERCENTAGE
- --------------------------------------------------------------------------------------- ------------- -------------
<S> <C> <C>
KKR Associates(3)
9 West 57th Street
New York, New York 10019............................................................. 123,552,932 84.6%
William F. Reilly(2)(4)................................................................ 4,659,253 3.5
Charles G. McCurdy(2)(5)............................................................... 2,394,612 1.8
Beverly C. Chell(2).................................................................... 2,044,357 1.6
Jack L. Farnsworth(2).................................................................. 359,900 *
Henry R. Kravis(3)..................................................................... -- --
Meyer Feldberg......................................................................... 11,250 *
Perry Golkin(3)........................................................................ 3,000 *
George R. Roberts(3)................................................................... -- --
Michael T. Tokarz(3)................................................................... 5,000 *
All Directors and executive officers as a group (13 persons)........................... 9,859,842 7.2
</TABLE>
- ------------------------
(1) For purposes of this table, a person or group of persons is deemed to have
"beneficial ownership" of any shares as of a given date which such person
has the right to acquire within 60 days after such date. For purposes of
computing the percentage of outstanding shares held by each person or group
of persons named above on a given date, any security which such person or
persons has the right to acquire within 60 days after such date is deemed to
be outstanding, but is not deemed to be outstanding for the purpose of
computing the percentage of ownership of any other person.
(2) Of the shares shown as owned, 3,110,560, 1,977,798, 1,635,484 and 286,400
for Messrs. Reilly and McCurdy, Ms. Chell, and Mr. Farnsworth, respectively,
consist of options which were either exercisable on March 31, 1998 or become
exercisable within 60 days thereafter.
(3) Shares of Common Stock shown as owned by KKR Associates are owned of record
by MA Associates, L.P., FP Associates, L.P., Magazine Associates, L.P.,
Publishing Associates, L.P., Channel One Associates, L.P. and KKR Partners
II, L.P., of which KKR Associates is the sole general partner and as to
which it possesses sole voting and investment power. Messrs. Kravis,
Roberts, Tokarz and Golkin (directors of PRIMEDIA) and Robert I. MacDonnell,
Paul E. Raether, Michael W. Michelson, James H. Greene, Jr., Edward A.
Gilhuly, Clifton S. Robbins and Scott M. Stuart, as the general partners of
KKR Associates, may be deemed to share beneficial ownership of the shares
shown as beneficially owned by KKR Associates. Such persons disclaim
beneficial ownership of such shares.
(4) Disclaims beneficial ownership of 200,000 of such shares.
(5) Disclaims beneficial ownership of 160,000 of such shares.
* Less than one percent.
108
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The discussion below is based upon the provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), and the regulations, rulings and judicial
decisions thereunder as of the date hereof, and such authorities may be
repealed, revoted or modified so as to result in federal income tax consequences
different from these discussed below.
The exchange of Old Notes or Old Preferred Stock for New Notes or New
Preferred Stock will not constitute a taxable transaction to Holders for federal
income tax purposes. Consequently, no gain or loss will be recognized by Holders
upon receipt of the New Notes or New Preferred Stock, the holding period of the
New Notes or New Preferred Stock will include the holding period of the Old
Notes or Old Preferred Stock and the basis of the New Notes or New Preferred
Stock will be the same as the basis of the Old Notes or Old Preferred Stock
immediately before the exchange.
IN ANY EVENT, PERSONS CONSIDERING THE EXCHANGE OF OLD NOTES OR OLD PREFERRED
STOCK FOR NEW NOTES OR NEW PREFERRED STOCK SHOULD CONSULT THEIR OWN TAX ADVISORS
CONCERNING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES IN LIGHT OF THEIR
PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY
OTHER TAXING JURISDICTION.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes or New Preferred Stock for its
own account pursuant to the Exchange Offers must acknowledge that it will
deliver a prospectus in connection with any resale of such New Notes or New
Preferred Stock. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of New Notes
or New Preferred Stock received in exchange for Old Notes or Old Preferred Stock
where such Old Notes or Old Preferred Stock were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that for a period of 90 days after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale.
The Company will not receive any proceeds from any sale of New Notes or New
Preferred Stock by broker-dealers. New Notes or New Preferred Stock received by
broker-dealers for their own account pursuant to the Exchange Offers may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the New Notes or New
Preferred Stock or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such prevailing market
prices or negotiated prices. Any such resale may be made directly to purchasers
or to or through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer and/or purchasers of any
such New Notes or New Preferred Stock. Any broker-dealer that resells New Notes
or New Preferred Stock that were received by it for its own account pursuant to
the Exchange Offers and any broker or dealer that participates in a distribution
of such New Notes or New Preferred Stock may be deemed to be an "underwriter"
within the meaning of the Securities Act and any profit on any such resale of
New Notes or New Preferred Stock and any commissions or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 90 days after the Expiration Date the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in the Letter
of Transmittal. The Company has agreed to pay all expenses incident to the
Exchange Offers and will indemnify the holders of the Notes or the Preferred
Stock (including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
109
<PAGE>
LEGAL MATTERS
The legality under state law of the New Notes, the New Preferred Stock and
the New Subordinated Debentures and certain tax matters will be passed upon for
the Company by Simpson Thacher & Bartlett, New York, New York.
EXPERTS
The consolidated financial statements of PRIMEDIA Inc. and subsidiaries as
of December 31, 1997 and 1996 and for each of the three years in the period
ended December 31, 1997 included in this Prospectus and the related financial
statement schedules included elsewhere in the registration statement have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports appearing herein and elsewhere in the registration statement, and are
included in reliance upon the reports of such firm given upon their authority as
experts in accounting and auditing.
110
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The unaudited pro forma statement of consolidated operations for the year
ended December 31, 1997 gives effect to the following transactions and events as
if they had occurred on January 1, 1997: (i) the Series E Offering and the
Senior Preferred Stock Redemption, (ii) the Offerings and the Series B Preferred
Stock Redemption and (iii) the KKR Fund Investment. The adjustments to reflect
the Series E Offering, the Senior Preferred Stock Redemption, the Offerings, the
Series B Preferred Stock Redemption and the KKR Fund Investment are hereinafter
referred to as the "Pro Forma Adjustments." The unaudited pro forma consolidated
balance sheet at December 31, 1997 gives effect to the Offerings, the Series B
Preferred Stock Redemption and the KKR Fund Investment as if they had occurred
on December 31, 1997.
The Company believes the accounting used for the Pro Forma Adjustments
provides a reasonable basis on which to present the pro forma consolidated
financial data. The pro forma consolidated balance sheet and statement of
consolidated operations are unaudited and were derived by adjusting the
historical consolidated financial statements of the Company. THE UNAUDITED PRO
FORMA CONSOLIDATED STATEMENTS ARE PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND
SHOULD NOT BE CONSTRUED TO BE INDICATIVE OF THE COMPANY'S CONSOLIDATED FINANCIAL
POSITION OR CONSOLIDATED RESULTS OF OPERATIONS HAD THE TRANSACTIONS BEEN
CONSUMMATED ON THE DATES ASSUMED AND DO NOT PROJECT THE COMPANY'S CONSOLIDATED
FINANCIAL POSITION OR CONSOLIDATED RESULTS OF OPERATIONS FOR ANY FUTURE DATE OR
PERIOD.
The unaudited pro forma consolidated financial statements and accompanying
notes should be read in conjunction with the historical consolidated financial
statements of the Company and the notes thereto included elsewhere in this
Prospectus.
P-1
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA STATEMENT OF CONSOLIDATED OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS CONSOLIDATED
------------ ----------- --------------
<S> <C> <C> <C>
Sales, net:
Specialty Magazines............................................. $ 754,410 $ $ 754,410
Education....................................................... 379,552 379,552
Information..................................................... 353,633 353,633
------------ --------------
Total sales, net.................................................. 1,487,595 1,487,595
Operating costs and expenses:
Cost of goods sold.............................................. 341,879 341,879
Marketing and selling........................................... 271,351 271,351
Distribution, circulation and fulfillment....................... 262,151 262,151
Editorial....................................................... 120,952 120,952
Other general expenses.......................................... 163,705 163,705
Corporate administrative expenses............................... 25,545 25,545
Depreciation and amortization of prepublication costs, property
and equipment................................................. 37,334 37,334
Provision for loss on the sales of businesses and other, net.... 138,640 138,640
Amortization of intangible assets, excess of purchase price over
net assets acquired and other................................. 146,831 146,831
------------ --------------
Operating loss.................................................... (20,793) (20,793)
Other income (expense):
Interest expense................................................ (136,625) 17,858(1) (118,767)
Amortization of deferred financing costs........................ (3,071) (578)(1) (3,649)
Other, net...................................................... 1,365 1,365
------------ ----------- --------------
Income (loss) before income tax benefit and extraordinary
charge(3)....................................................... (159,124) 17,280 (141,844)
Income tax benefit--carryback claim............................... 1,685 1,685
------------ ----------- --------------
Income (loss) before extraordinary charge......................... (157,439) 17,280 (140,159)
Extraordinary charge--extinguishment of debt...................... (15,401) 15,401(5) --
------------ ----------- --------------
Net income (loss)................................................. (172,840) 32,681 (140,159)
Preferred stock dividends:
Cash............................................................ (45,305) (7,822)(1) (53,127)
Non-cash dividends in kind...................................... (4,451) 4,451(1) --
Senior Preferred Stock redemption premium....................... (5,800) 5,800(1) --
Dividend accrual................................................ (9,517) 3,053(1) (6,464)
------------ ----------- --------------
Income (loss) applicable to common shareholders................... $ (237,913) $ 38,163 $ (199,750)
------------ ----------- --------------
------------ ----------- --------------
Pro forma basic and diluted loss applicable to common shareholders
per common share(4) $ (1.37)
--------------
--------------
Pro forma basic and diluted common shares outstanding(4).......... 145,971,567
--------------
--------------
Pro forma deficiency of earnings to fixed charges(3).............. $ (141,844)
--------------
--------------
Pro forma deficiency of earnings to fixed charges and preferred
stock dividends(3).............................................. $ (201,435)
--------------
--------------
</TABLE>
See notes to unaudited pro forma consolidated financial data.
P-2
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AT DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
------------ ------------- ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 22,978 $ $ 22,978
Accounts receivable, net......................................... 199,289 199,289
Inventories, net................................................. 27,597 27,597
Net assets held for sale......................................... 38,665 38,665
Prepaid expenses and other....................................... 33,971 33,971
------------ ------------
Total current assets........................................... 322,500 322,500
Property and equipment, net........................................ 116,361 116,361
Other intangible assets, net....................................... 660,268 660,268
Excess of purchase price over net assets acquired, net............. 1,111,785 1,111,785
Deferred income tax asset, net..................................... 176,200 176,200
Other non-current assets........................................... 98,876 5,775(2) 104,651
------------ ------------- ------------
$ 2,485,990 $ 5,775 $ 2,491,765
------------ ------------- ------------
------------ ------------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable................................................. $ 95,546 $ $ 95,546
Accrued interest payable......................................... 13,622 13,622
Accrued expenses and other....................................... 204,770 (3,053)(2) 201,717
Deferred revenues................................................ 140,474 140,474
Current maturities of long-term debt............................. 14,333 14,333
------------ ------------- ------------
Total current liabilities...................................... 468,745 (3,053) 465,692
------------ ------------- ------------
Long-term debt..................................................... 1,656,541 (261,802)(2) 1,394,739
------------ ------------- ------------
Other non-current liabilities...................................... 48,271 48,271
------------ ------------
Exchangeable preferred stock....................................... 470,280 84,094(2) 554,374
------------ ------------- ------------
Common stock subject to redemption................................. 4,376 4,376
------------ ------------
Shareholders' equity (deficiency):
Common stock..................................................... 1,298 167(2) 1,465
Additional paid-in capital....................................... 780,191 195,510(2) 975,701
Accumulated deficit.............................................. (929,011) (9,141)(2) (938,152)
Cumulative foreign currency translation adjustments.............. (1,543) (1,543)
Common stock in treasury, at cost................................ (13,158) (13,158)
------------ ------------- ------------
Total shareholders' equity (deficiency)........................ (162,223) 186,536 24,313
------------ ------------- ------------
$ 2,485,990 $ 5,775 $ 2,491,765
------------ ------------- ------------
------------ ------------- ------------
</TABLE>
See notes to unaudited pro forma consolidated financial data.
P-3
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
(1) The adjustment to interest expense reflects the net reduction in long-term
debt as a result of the reduced level of borrowings under the Credit
Facilities from the application of the net proceeds aggregating $524,934
from: (i) the proceeds of the Series E Offering; (ii) proceeds of the
Offerings and the KKR Fund Investment; and (iii) payments for the Series B
Preferred Stock Redemption and the Senior Preferred Stock Redemption. The
adjustment to interest expense reflects a weighted average interest rate of
7.11%. The adjustment to interest expense also reflects additional interest
expense associated with the issuance of the Old Notes under the Offerings.
The adjustment to amortization of deferred financing costs reflects the
additional deferred financing costs associated with the Old Notes. The
adjustments to dividends reflect the elimination of dividends associated
with the Senior and Series B Preferred Stock Redemptions and the new
dividends associated with the Old Preferred Stock Offering.
(2) The adjustment to other non-current assets reflects additional deferred
financing costs associated with the issuance of the Old Notes. The
adjustment to accrued expenses represents the reduction of accrued dividends
on the Series B Preferred Stock. The net reduction in long-term debt
represents the reduction in borrowings under the Credit Facilities from the
application of the net proceeds of the Offerings, KKR Fund Investment and
Series B Preferred Stock Redemption offset by the issuance of the Old Notes
under the Offerings. The net reduction in long-term debt associated with the
Series E Offering and the Senior Preferred Stock Redemption is already
reflected in the historical December 31, 1997 balance sheet since both
transactions occurred in 1997. Amounts repaid under the Credit Facilities
may be reborrowed for general corporate purposes, including acquisitions.
The net increase to exchangeable preferred stock represents the Old
Preferred Stock Offering net of the Series B Preferred Stock Redemption. The
increase in total shareholders' equity reflects the KKR Fund Investment net
of issuance costs, offset by the difference between the carrying value and
redemption value of the Series B Preferred Stock and the payment of a
premium on the redemption of the Series B Preferred Stock.
(3) Income (loss) before income taxes and extraordinary charge includes non-cash
charges for depreciation and amortization of property and equipment,
prepublication costs, intangible assets, excess of purchase price over net
assets acquired and deferred financing costs, provision for loss on the
sales of businesses and non-cash interest expense on an acquisition
obligation, distribution advance and other current liability. These pro
forma non-cash charges totaled $327,941 for the year ended December 31,
1997. Adjusted to eliminate such pro forma non-cash charges, earnings would
have exceeded fixed charges and fixed charges plus cash preferred stock
dividends by $186,097 and $126,506 for the year ended December 31, 1997,
respectively.
(4) Pro forma basic and diluted loss applicable to common shareholders per
common share for the year ended December 31, 1997 was computed using the
weighted average number of common shares outstanding during the period
increased by the shares related to the KKR Fund Investment.
(5) Reflects the elimination of the extraordinary charge.
P-4
<PAGE>
PRIMEDIA INC.
AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND
1995
Report of Independent Auditors--Deloitte & Touche LLP................................ F-2
Statements of Consolidated Operations for the Years Ended
December 31, 1997, 1996 and 1995................................................... F-3
Consolidated Balance Sheets as of December 31, 1997 and 1996......................... F-4
Statements of Consolidated Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995................................................... F-5
Statements of Shareholders' Equity (Deficiency) for the Years Ended
December 31, 1997, 1996 and 1995................................................... F-6
Notes to Consolidated Financial Statements for the Years Ended
December 31, 1997, 1996 and 1995................................................... F-8
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors of
PRIMEDIA Inc.
New York, New York:
We have audited the accompanying consolidated balance sheets of PRIMEDIA
Inc. and subsidiaries as of December 31, 1997 and 1996, and the related
statements of consolidated operations, shareholders' equity (deficiency), and
consolidated cash flows for each of the three years in the period ended December
31, 1997. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated 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, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company and subsidiaries at
December 31, 1997 and 1996, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1997 in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
January 27, 1998
(April 23, 1998 as to Note 25)
F-2
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
NOTES 1997 1996 1995
----- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Sales, net:
Specialty Magazines............................................. $ 754,410 $ 684,341 $ 452,373
Education....................................................... 379,552 376,217 330,414
Information..................................................... 353,633 313,891 263,542
----------- ----------- ----------
Total sales, net.................................................. 1,487,595 1,374,449 1,046,329
Operating costs and expenses:
Cost of goods sold.............................................. 341,879 337,065 251,347
Marketing and selling........................................... 271,351 249,301 177,167
Distribution, circulation and fulfillment....................... 262,151 230,533 188,147
Editorial....................................................... 120,952 104,484 73,703
Other general expenses.......................................... 163,705 154,966 122,816
Corporate administrative expenses............................... 25,545 21,497 17,034
Depreciation and amortization of prepublication costs, property
and equipment................................................. 9, 11 37,334 38,233 25,761
Provision for loss on the sales of businesses and other, net.... 4 138,640 -- 35,447
Restructuring and other costs................................... 5 -- -- 14,667
Amortization of intangible assets, excess of purchase price over
net assets acquired and other................................. 6, 10 146,831 152,469 166,515
----------- ----------- ----------
Operating income (loss)........................................... (20,793) 85,901 (26,275)
Other income (expense):
Interest expense................................................ (136,625) (124,601) (105,837)
Amortization of deferred financing and organizational costs..... 11 (3,071) (3,662) (3,135)
Other, net...................................................... 4 1,365 6,659 212
----------- ----------- ----------
Loss before income tax benefit and extraordinary charge........... (159,124) (35,703) (135,035)
Income tax benefit................................................ 14 1,685 53,300 59,600
----------- ----------- ----------
Income (loss) before extraordinary charge......................... (157,439) 17,597 (75,435)
Extraordinary charge--extinguishment of debt...................... (15,401) (9,553) --
----------- ----------- ----------
Net income (loss)................................................. (172,840) 8,044 (75,435)
Preferred stock dividends:
Cash............................................................ (45,305) (26,944) (11,500)
Non-cash dividends in kind...................................... (4,451) (16,582) (17,478)
Senior Preferred Stock redemption premium....................... 15 (5,800) -- --
Dividend accrual................................................ 15 (9,517) -- --
----------- ----------- ----------
Loss applicable to common shareholders............................ $ (237,913) $ (35,482) $ (104,413)
----------- ----------- ----------
----------- ----------- ----------
Basic and diluted loss applicable to common shareholders per
common share: 17
Loss before extraordinary charge................................ $ (1.72) $ (.20) $ (.92)
Extraordinary charge............................................ (.12) (.07) --
----------- ----------- ----------
Net loss........................................................ $ (1.84) $ (.27) $ (.92)
----------- ----------- ----------
----------- ----------- ----------
Basic and diluted common shares outstanding....................... 17 129,304,900 128,781,518 113,218,711
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
NOTES 1997 1996
------------ ------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................. $ 22,978 $ 36,655
Accounts receivable, net.............................................. 7 199,289 233,603
Inventories, net...................................................... 8 27,597 52,743
Net assets held for sale.............................................. 4 38,665 18,684
Prepaid expenses and other............................................ 33,971 34,834
------------ ------------
Total current assets.............................................. 322,500 376,519
Property and equipment, net............................................. 9 116,361 122,823
Other intangible assets, net............................................ 10 660,268 781,316
Excess of purchase price over net assets acquired, net.................. 10 1,111,785 971,665
Deferred income tax asset, net.......................................... 14 176,200 176,200
Other non-current assets................................................ 11 98,876 123,692
------------ ------------
$ 2,485,990 $ 2,552,215
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable...................................................... $ 95,546 $ 107,258
Accrued interest payable.............................................. 13,622 22,150
Accrued expenses and other............................................ 12 204,770 140,959
Deferred revenues..................................................... 140,474 144,857
Current maturities of long-term debt.................................. 13 14,333 6,000
------------ ------------
Total current liabilities......................................... 468,745 421,224
------------ ------------
Long-term debt.......................................................... 13, 25 1,656,541 1,565,686
------------ ------------
Other non-current liabilities........................................... 48,271 35,062
------------ ------------
Commitments and contingencies 21
Exchangeable preferred stock (aggregated liquidation and redemption
values of $482,604 and $453,153 at December 31, 1997 and 1996,
respectively)......................................................... 15 470,280 442,729
------------ ------------
Common stock subject to redemption ($.01 par value, 402,650 shares and
643,310 shares outstanding at December 31, 1997 and 1996,
respectively)......................................................... 16 4,376 5,957
------------ ------------
Shareholders' equity (deficiency):
Common stock ($.01 par value, 250,000,000 shares authorized;
129,797,078 shares and 128,349,045 shares issued at December 31,
1997 and 1996, respectively)........................................ 16 1,298 1,283
Additional paid-in capital............................................ 16 780,191 772,642
Accumulated deficit................................................... 18 (929,011) (691,098)
Cumulative foreign currency translation adjustments................... (1,543) (1,270)
Common stock in treasury, at cost (1,048,600 shares at December 31,
1997)............................................................... 16 (13,158) --
------------ ------------
Total shareholders' equity (deficiency)........................... (162,223) 81,557
------------ ------------
$ 2,485,990 $ 2,552,215
------------ ------------
------------ ------------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
<S> <C> <C> <C>
1997 1996 1995
---------- ---------- ---------
<CAPTION>
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)........................................................... $ (172,840) $ 8,044 $ (75,435)
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation, amortization and other...................................... 187,236 194,364 195,411
Provision for loss on the sales of businesses and other, net.............. 138,640 -- 35,447
Accretion of discount on acquisition obligation, distribution advance and
other................................................................... 7,343 6,398 8,147
Extraordinary charge - extinquishment of debt............................. 15,401 9,553 --
Non-cash income tax benefit............................................... -- (53,300) (59,600)
Other, net................................................................ (1,090) (6,213) (122)
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable, net.................................................. 7,885 (24,692) (2,525)
Inventories, net.......................................................... 8,738 24,531 (23,630)
Prepaid expenses and other................................................ (10,433) (598) (13,127)
Increase (decrease) in:
Accounts payable.......................................................... (7,366) 5,807 6,742
Accrued interest payable.................................................. (8,528) 12,824 1,131
Accrued expenses and other................................................ (16,864) (12,674) (26,857)
Deferred revenues......................................................... (17,377) (11,201) 16,971
Other non-current liabilities............................................. (5,385) (2,651) 1,509
---------- ---------- ---------
Net cash provided by operating activities................................. 125,360 150,192 64,062
---------- ---------- ---------
INVESTING ACTIVITIES:
Additions to property, equipment and other, net............................. (31,108) (28,790) (23,414)
Proceeds from sales of businesses........................................... 171,575 8,071 58,656
Payments for businesses acquired............................................ (326,192) (700,990) (353,954)
---------- ---------- ---------
Net cash used in investing activities..................................... (185,725) (721,709) (318,712)
---------- ---------- ---------
FINANCING ACTIVITIES:
Borrowings under credit agreements.......................................... 1,028,049 1,683,787 622,459
Repayments of borrowings under credit agreements............................ (694,950) (1,384,800) (522,500)
Proceeds from issuance of 8 1/2% Senior Notes, net of discount.............. -- 298,734 --
Payments of acquisition obligation.......................................... (6,000) (6,000) (6,000)
Payments of floating rate indebtedness...................................... -- (150,000) --
Proceeds from issuance of common stock, net of redemptions.................. 7,843 3,498 187,520
Proceeds from issuance of KKR Preferred Stock............................... -- -- 50,000
Proceeds from issuance of Series C (exchanged into Series D) Preferred
Stock, net of issuance costs.............................................. -- 193,451 --
Proceeds from issuance of Series E (exchanged into Series F) Preferred
Stock, net of issuance costs.............................................. 120,434 -- --
Redemption of KKR Preferred Stock........................................... -- -- (52,691)
Redemption of Senior Preferred Stock........................................ (105,800) -- --
Redemptions and purchases of 10 5/8% Senior Notes........................... (242,787) (17,655) --
Purchases of common stock for the treasury.................................. (13,158) -- --
Dividends paid to preferred stock shareholders.............................. (45,305) (26,944) (11,500)
Deferred financing costs paid............................................... (1,372) (13,132) (3,204)
Other....................................................................... (266) 7 (440)
---------- ---------- ---------
Net cash provided by financing activities................................. 46,688 580,946 263,644
---------- ---------- ---------
Increase (decrease) in cash and cash equivalents.............................. (13,677) 9,429 8,994
Cash and cash equivalents, beginning of year.................................. 36,655 27,226 18,232
---------- ---------- ---------
Cash and cash equivalents, end of year........................................ $ 22,978 $ 36,655 $ 27,226
---------- ---------- ---------
---------- ---------- ---------
SUPPLEMENTAL INFORMATION:
Businesses acquired:
Fair value of assets acquired............................................. $ 406,382 $ 779,192 $ 429,810
Liabilities assumed....................................................... 80,190 78,202 75,856
---------- ---------- ---------
Cash paid for businesses acquired......................................... $ 326,192 $ 700,990 $ 353,954
---------- ---------- ---------
---------- ---------- ---------
Interest paid............................................................... $ 142,421 $ 111,752 $ 102,040
---------- ---------- ---------
---------- ---------- ---------
Non-cash investing and financing activities:
Assets acquired under capital lease obligations........................... $ 15,760 $ -- $ 11,738
---------- ---------- ---------
---------- ---------- ---------
Preferred stock dividends in kind......................................... $ 4,451 $ 16,582 $ 17,478
---------- ---------- ---------
---------- ---------- ---------
Accretion in carrying value of preferred stock............................ $ 2,666 $ 1,090 $ 590
---------- ---------- ---------
---------- ---------- ---------
Accretion (reduction) in carrying value of common stock subject to
redemption.............................................................. $ 755 $ (885) $ 9,927
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Balance at January 1, 1995.....................................................
Issuances of common stock, net of issuance costs...............................
Expiration of redemption feature on common stock subject to redemption.........
$11.625 Series B Exchangeable Preferred Stock--dividends in kind...............
$2.875 Senior Exchangeable Preferred Stock--cash dividends.....................
KKR Preferred Stock--dividends in kind.........................................
Accretion of differences between carrying value and redemption value of:
$2.875 Senior Exchangeable Preferred Stock.................................
$11.625 Series B Exchangeable Preferred Stock..............................
Common stock subject to redemption.........................................
Cumulative foreign currency translation adjustments............................
Net loss.......................................................................
Balance at December 31, 1995...................................................
Issuances of common stock, net of issuance costs...............................
Expiration of redemption feature on common stock subject to redemption.........
$11.625 Series B Exchangeable Preferred Stock--dividends in kind...............
$2.875 Senior Exchangeable Preferred Stock--cash dividends.....................
$10.00 Series D Exchangeable Preferred Stock--cash dividends...................
Reduction (accretion) of differences between carrying value and redemption
value of:
$2.875 Senior Exchangeable Preferred Stock.................................
$11.625 Series B Exchangeable Preferred Stock..............................
$10.00 Series D Exchangeable Preferred Stock...............................
Common stock subject to redemption.........................................
Cumulative foreign currency translation adjustments............................
Net income.....................................................................
Balance at December 31, 1996...................................................
Issuances of common stock, net of issuance costs...............................
Purchases of treasury stock....................................................
Expiration of redemption feature on common stock subject to redemption.........
$11.625 Series B Exchangeable Preferred Stock--dividends in kind...............
$11.625 Series B Exchangeable Preferred Stock--dividends.......................
$2.875 Senior Exchangeable Preferred Stock--dividends..........................
$10.00 Series D Exchangeable Preferred Stock--dividends........................
$9.20 Series E Exchangeable Preferred Stock--dividends.........................
$2.875 Senior Exchangeable Preferred Stock Redemption Premium..................
Accretion of differences between carrying value and redemption value of:
$2.875 Senior Exchangeable Preferred Stock.................................
$11.625 Series B Exchangeable Preferred Stock..............................
$10.00 Series D Exchangeable Preferred Stock...............................
$9.20 Series E Exchangeable Preferred Stock................................
Common stock subject to redemption.........................................
Cumulative foreign currency translation adjustments............................
Net loss.......................................................................
Balance at December 31, 1997...................................................
See notes to consolidated financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN COMMON STOCK
COMMON STOCK ADDITIONAL CURRENCY IN TREASURY
- --------------------------- PAID-IN ACCUMULATED TRANSLATION --------------------
SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENTS SHARES AMOUNT TOTAL
- -------------- ----------- ----------- ------------ ------------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
105,337,809 $ 1,053 $ 572,940 $ (551,203) $ (1,324) -- $ -- $ 21,466
20,435,782 204 184,964 185,168
147,630 2 807 809
(14,787) (14,787)
(11,500) (11,500)
(2,691) (2,691)
(273) (273)
(317) (317)
(9,927) (9,927)
49 49
(75,435) (75,435)
- -------------- ----------- ----------- ------------ ------------- --------- --------- ---------
125,921,221 1,259 748,194 (655,616) (1,275) -- -- 92,562
681,890 7 3,440 3,447
1,745,934 17 21,213 21,230
(16,582) (16,582)
(11,500) (11,500)
(15,444) (15,444)
(273) (273)
(317) (317)
(500) (500)
885 885
5 5
8,044 8,044
- -------------- ----------- ----------- ------------ ------------- --------- --------- ---------
128,349,045 1,283 772,642 (691,098) (1,270) -- -- 81,557
1,209,693 12 8,404 8,416
1,048,600 (13,158) (13,158)
238,340 3 2,566 2,569
(4,451) (4,451)
(16,794) (16,794)
(11,564) (11,564)
(23,333) (23,333)
(3,131) (3,131)
(5,800) (5,800)
(1,734) (1,734)
(317) (317)
(546) (546)
(69) (69)
(755) (755)
(273) (273)
(172,840) (172,840)
- -------------- ----------- ----------- ------------ ------------- --------- --------- ---------
129,797,078 $ 1,298 $ 780,191 $ (929,011) $ (1,543) 1,048,600 $ (13,158) $(162,223)
- -------------- ----------- ----------- ------------ ------------- --------- --------- ---------
- -------------- ----------- ----------- ------------ ------------- --------- --------- ---------
</TABLE>
F-7
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. DESCRIPTION OF BUSINESS
PRIMEDIA Inc. (which together with its subsidiaries is herein referred to as
either "PRIMEDIA" or the "Company" unless the context implies otherwise) is the
authoritative source for specialized information to targeted markets. The
Company's three business segments are specialty magazines, education and
information. The specialty magazines segment has in prior years been referred to
as the specialty media segment, but the Company believes that the term specialty
magazines is more reflective of the focus of the segment. The specialty
magazines segment includes PRIMEDIA Consumer Magazines, PRIMEDIA Special
Interest Publications (formerly PJS Publications, Inc.), McMullen Argus and the
majority of Intertec. The specialty magazines segment is concentrated primarily
on specialty consumer magazines, and technical and trade magazines. The
education segment includes CHANNEL ONE, Films for the Humanities and Sciences,
PRIMEDIA Workplace Learning (formerly Westcott Communications) and WEEKLY
READER. This segment specializes in providing educational materials to the
classroom learning and workplace learning markets. The information segment
includes PRIMEDIA Reference, PRIMEDIA Information, Haas, BACON'S, NELSON, a
portion of Intertec and THE DAILY RACING FORM. The information segment produces
consumer and business information products in a variety of formats for decision
makers in business, professional and special interest consumer markets. The
information is compiled and sold as guides, reference works, newspapers,
CD-ROMs, almanacs, directories and via the Internet.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION. The consolidated financial statements include the
accounts of PRIMEDIA and its subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the amounts of
assets, liabilities, revenues and expenses reported in the consolidated
financial statements.
Significant accounting estimates used include estimates for sales returns
and allowances and estimates for the realization of deferred tax assets.
Management has exercised reasonableness in deriving these estimates. However,
actual results may differ from these estimates.
Certain reclassifications have been made to the prior year consolidated
financial statements to conform with the presentation used in the current
period.
In 1997, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share" which became effective for the Company's
consolidated financial statements beginning in the fourth quarter of 1997. SFAS
No. 128 eliminates the disclosure of primary earnings per share which includes
the dilutive effect of stock options, warrants and other convertible securities
("Common Stock Equivalents") and instead requires reporting of "basic" earnings
per share, which excludes Common Stock Equivalents. Additionally, SFAS No. 128
changes the methodology and criteria for calculating and reporting fully diluted
earnings per share. The adoption of this new accounting standard did not have a
material effect on the reported loss per share of the Company. SFAS No. 128 also
required previously reported loss per share to be restated (see Note 17).
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income" and SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information," which become effective for the
Company's 1998 consolidated financial statements. SFAS No. 130 requires the
disclosure of comprehensive income, defined as the change in equity of a
business enterprise
F-8
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
during a period from transactions and other events and circumstances from
non-owner sources, in the Company's consolidated financial statements. SFAS No.
131 requires that a public business enterprise report certain financial and
descriptive information about its reportable operating segments. In the opinion
of the Company's management, it is not anticipated that the adoption of these
new accounting standards will have a material effect on the consolidated
financial statements of the Company.
In February 1998, the Financial Accounting Standards Board issued SFAS No.
132, "Employers' Disclosures about Pensions and Other Postretirement Benefits,"
which becomes effective for the Company's 1998 consolidated financial
statements. SFAS No. 132 standardizes the disclosure requirements for pensions
and other postretirement benefits to the extent practicable, requires additional
information on changes in the benefit obligations and fair values of plan assets
that will facilitate financial analysis, and eliminates certain previously
required disclosures. In the opinion of the Company's management, it is not
anticipated that the adoption of this new accounting standard will have a
material effect on the consolidated financial statements of the Company.
CASH AND CASH EQUIVALENTS. Management considers all highly liquid
instruments purchased with an original maturity of 90 days or less to be cash
equivalents.
INVENTORIES. Inventories, including paper, purchased manuscripts,
photographs and art, are valued at the lower of cost or market principally on a
first-in, first-out ("FIFO") basis and include the value of inventory for which
a provision for estimated sales returns has been made.
PROPERTY AND EQUIPMENT. Property and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation of property and
equipment, and the amortization of leasehold improvements are provided at rates
based on the estimated useful lives or lease terms, if shorter, using primarily
the straight-line method. Improvements are capitalized while maintenance and
repairs are expensed as incurred.
EDITORIAL AND PRODUCT DEVELOPMENT COSTS. Editorial costs and product
development costs are generally expensed as incurred. Product development costs
include the cost of artwork, graphics, prepress, plates and photography for new
products.
ADVERTISING AND SUBSCRIPTION ACQUISITION COSTS. Advertising and
subscription acquisition costs are expensed the first time the advertising takes
place, except for direct-response advertising, the primary purpose of which is
to elicit sales from customers who can be shown to have responded specifically
to the advertising and that results in probable future economic benefits.
Direct-response advertising consists of product promotional mailings,
catalogues, telemarketing and subscription promotions. These direct-response
advertising costs are capitalized as assets and amortized over the estimated
period of future benefit using a ratio of current period revenues to total
current and estimated future period revenues. The amortization periods range
from 6 months to 2 years subsequent to the promotional event. Amortization of
direct-response advertising costs is included in marketing and circulation
expenses on the accompanying statements of consolidated operations. Advertising
expense was $122,365, $121,158 and $88,176 during the years ended December 31,
1997, 1996 and 1995, respectively (see Note 11).
DEFERRED FINANCING COSTS. Deferred financing costs are being amortized by
the straight-line method over the terms of the related indebtedness.
F-9
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEFERRED WIRING AND INSTALLATION COSTS. Wiring and installation costs
incurred by CHANNEL ONE and PRIMEDIA Workplace Learning have been capitalized
and are being amortized by the straight-line method over the related estimated
useful lives which range from five to 15 years.
$2.875 SENIOR EXCHANGEABLE PREFERRED STOCK ("SENIOR PREFERRED STOCK"),
$11.625 SERIES B EXCHANGEABLE PREFERRED STOCK ("SERIES B PREFERRED STOCK"),
$10.00 SERIES D EXCHANGEABLE PREFERRED STOCK ("SERIES D PREFERRED STOCK") and
the $9.20 SERIES E EXCHANGEABLE PREFERRED STOCK ("SERIES E PREFERRED
STOCK"). The Senior Preferred Stock, Series B Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock are stated at fair value on the
date of issuance less issuance costs. The difference between their carrying
values and their redemption values is being amortized (using the interest
method) by periodic charges to additional paid-in capital.
COMMON STOCK SUBJECT TO REDEMPTION. The common stock subject to redemption
is stated at redemption value which at December 31, 1997 and 1996, is equal to
quoted market value. The difference between the carrying value of such stock and
its redemption value is being amortized by periodic charges to additional
paid-in capital.
COMPUTER SOFTWARE. Computer software costs are expensed as incurred, except
for certain costs incurred in connection with computer software to be sold,
leased or otherwise marketed. These costs, limited to production costs
subsequent to establishing technological feasibility, are reported as other non-
current assets and amortized over the estimated period of future benefit using
the straight-line method.
INTEREST RATE SWAP AGREEMENTS. The Company's interest rate swap agreements
are designated and effective as modifications to existing debt obligations to
reduce the impact of changes in the interest rates on its floating rate
borrowings and, accordingly, are accounted for using the settlement method of
accounting. The differentials to be paid or received under the interest rate
swap agreements are accrued as interest rates change and are recognized as
adjustments to interest expense. The Company considers swap terms including the
reference rate, payment and maturity dates and the notional amount in
determining if an interest rate swap agreement is effective at modifying an
existing debt obligation. If the criteria for designation are no longer met or
the underlying instrument matures or is extinguished, the Company will account
for outstanding swap agreements at fair market value and any resulting gain or
loss will be recognized as other income or expense. Any gains or losses upon
early termination of the agreements will be deferred and amortized over the
shorter of the remaining life of the hedged existing debt obligation or the
original life of the interest rate swap agreement.
PURCHASE ACCOUNTING. With respect to the acquisitions, the total purchase
price has been allocated to the tangible and intangible assets and liabilities
based on their respective fair values.
EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED AND INTANGIBLE
ASSETS. Intangible assets are being amortized using both accelerated and
straight-line methods over periods ranging from 1/4 of 1 year to 40 years. The
excess of purchase price over net assets acquired is being amortized on a
straight-line basis over 40 years. The recoverability of the carrying values of
the excess of the purchase price over the net assets acquired and intangible
assets is evaluated quarterly to determine if an impairment in value has
occurred. An impairment in value will be considered to have occurred when it is
determined that the undiscounted future operating cash flows generated by the
acquired businesses are not sufficient to recover the carrying values of such
intangible assets. If it has been determined that an impairment in value has
occurred, the
F-10
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
excess of the purchase price over the net assets acquired and intangible assets
would be written down to an amount which will be equivalent to the present value
of the future operating cash flows to be generated by the acquired businesses.
REVENUE RECOGNITION. Advertising revenues for all consumer magazines are
recognized as income at the on-sale date, net of provisions for estimated
rebates, adjustments and discounts. Other advertising revenues are generally
recognized based on the publications' cover dates. Newsstand sales are
recognized as income at the on-sale date for all publications, net of provisions
for estimated returns. Subscriptions are recorded as deferred revenue when
received and recognized as income over the term of the subscription. PRIMEDIA
Workplace Learning subscription and broadcast fees for satellite and videotape
network services are recognized in the month services are rendered. Sales of
books and other items are recognized as revenue principally upon shipment, net
of an allowance for returns which is provided based on sales. Distribution costs
charged to customers are recognized as revenue when the related product is
shipped. CHANNEL ONE advertising revenue, net of commissions, is recognized as
advertisements are aired on the program. Certain advertisers are guaranteed a
minimum number of viewers per advertisement shown; the revenue recognized is
based on the actual viewers delivered not to exceed the original contract value.
FOREIGN CURRENCY. Gains and losses on foreign currency transactions, which
are not significant, have been included in other, net on the accompanying
statements of consolidated operations. The effects of translation of foreign
currency financial statements into U.S. dollars are included in the cumulative
foreign currency translation adjustments account in shareholders' equity
(deficiency).
3. ACQUISITIONS
The Company acquired certain net assets or stock of:
1995--a publisher of 13 specialty consumer magazine titles serving the
sewing, crafts, woodworking and shooting sports areas; a publisher of 11 trade
magazines in the mining, printing and packaging industries, a specialty consumer
magazine, 15 truck and automobile price guides and three marketing and sales
oriented magazines; an information provider for the public relations industry; a
publisher of 21 specialty consumer magazines serving the automobile, truck,
motorcycle and watercraft areas; a publisher of specialty consumer magazines
serving the automotive area; and a publisher of trade magazines and directories
and an operator of trade shows. In addition to the aforementioned, the Company
completed several other smaller acquisitions during 1995.
1996--Cahners Consumer Magazines ("Cahners"), a publisher of specialty
consumer magazines including AMERICAN BABY, MODERN BRIDE, SAIL and POWER &
MOTORYACHT, along with 20 related properties and PRIMEDIA Workplace Learning,
which utilizes various multi-media technologies to provide workplace training,
news, and information to professionals and students in the corporate and
professional, automotive, banking, government and public service, education,
healthcare, and interactive distance training markets. In addition to the
aforementioned, the Company completed several other smaller acquisitions during
1996.
The foregoing acquisitions, except Cahners and PRIMEDIA Workplace Learning,
if they had occurred on January 1 of the year prior to acquisition, would not
have had a material impact on the results of operations. The following unaudited
pro forma information presents the results of operations of the
F-11
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
3. ACQUISITIONS (CONTINUED)
Company as if the acquisitions of Cahners and PRIMEDIA Workplace Learning had
taken place on January 1, 1995:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
<S> <C> <C>
1996 1995
------------ ------------
Sales, net........................................................ $ 1,413,930 $ 1,238,254
Operating income (loss)........................................... 82,100 (12,563)
Income (loss) before extraordinary charge......................... 1,314 (106,012)
Loss applicable to common shareholders before extraordinary
charge.......................................................... (42,212) (134,990)
Basic and diluted loss applicable to common shareholders per
common share before extraordinary charge........................ (.33) (1.19)
</TABLE>
1997--a provider of interactive, computer-based testing and training
products; a leading electronic automotive cost guide; a publisher of automotive
enthusiast magazines including LOW RIDER, ARTE, LOW RIDER BICYCLE and LOW RIDER
JAPAN; the publisher of REGISTERED REPRESENTATIVE, a trade magazine edited for
and circulated to the retail securities industry in the United States; a
publisher of specialty magazines targeting the professional recording, sound and
music production industry; and the leading provider of highly specialized
training and certification software products for the insurance industry. In
addition to the aforementioned, the Company completed several other smaller
acquisitions during 1997. The 1997 acquisitions, if they had occurred on January
1 of the year prior to acquisition, would not have had a material impact on the
results of operations.
The acquisitions have been accounted for by the purchase method. The
preliminary purchase cost allocations for the above-mentioned current year's
acquisitions are subject to adjustment when additional information concerning
asset and liability valuations are obtained. The final asset and liability fair
values may differ from those set forth on the accompanying consolidated balance
sheet at December 31, 1997; however, the changes are not expected to have a
material effect on the consolidated financial position of the Company. The
consolidated financial statements include the operating results of these
acquisitions subsequent to their respective dates of acquisition.
4. DIVESTITURES
In 1995, the Company sold certain technical and trade magazines, PREMIERE
magazine and Newfield. In connection with these sales, the Company has received
aggregate cash proceeds of $58,656 in 1995 and $1,000 in 1997 and has recorded
amounts due from buyer of approximately $4,000 and $5,000 on the accompanying
consolidated balance sheets at December 31, 1997 and 1996, respectively. In
connection with these sales, the Company recorded a net aggregate provision for
loss on the sales of businesses of $35,447 for the year ended December 31, 1995.
During the second quarter of 1996, the Company completed the sale of certain
technical and trade magazines, which were acquired in 1995 and upon acquisition
were designated to be sold. The differences between the proceeds received and
the carrying values of the assets sold were treated as adjustments to the excess
of purchase price over net assets acquired related to the retained businesses.
In addition, during the second quarter of 1996, the Company sold a monthly
tabloid targeted to electronic design engineers for consideration of a motion
picture and television production magazine and cash proceeds. During the
F-12
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
4. DIVESTITURES (CONTINUED)
fourth quarter of 1996, the Company completed the sale of the Kits and Leaflets
Division of PRIMEDIA Special Interest Publications and certain specialty
consumer magazines. In connection with these sales, the Company received
aggregate cash proceeds of $8,071 and recorded a net gain on sale of businesses
of approximately $5,800.
During September 1996, the Company decided to divest Katharine Gibbs and
recorded its net assets at net realizable value as net assets held for sale on
the accompanying consolidated balance sheet at December 31, 1996.
On March 11, 1997, the Company announced its intention to divest the
following four non-core business units: THE DAILY RACING FORM, Newbridge
Communications, Inc. (excluding Films for the Humanities and Sciences), NEW
WOMAN magazine, and Krames Communications Incorporated ("Krames"). Subsequently,
the Company decided to sell STAGEBILL and Intertec Mailing Services. These
planned divestitures combined with Katharine Gibbs are collectively referred to
as the Non-Core Businesses ("Non-Core Businesses") and are part of the Company's
plan to focus on six key growth vehicles in markets that have dynamic growth
opportunities.
During the second quarter of 1997, the Company completed the sale of
Katharine Gibbs. During the third quarter of 1997, the Company recorded a
provision aggregating $138,640 for the reduction of the carrying values of
Newbridge Communications, Inc. (excluding Films for the Humanities and
Sciences), THE DAILY RACING FORM, STAGEBILL, Krames, NEW WOMAN magazine and
Intertec Mailing Services to the estimated realizable value of the net assets of
such businesses. During the third quarter, the Company also completed the sales
of Krames, NEW WOMAN magazine and Intertec Mailing Services. During the fourth
quarter, the Company completed the sales of Newbridge Book Clubs, Newbridge
Educational Publishing and STAGEBILL. In connection with these sales, the
Company received aggregate proceeds of $171,575 net of direct selling expenses.
The remaining planned divestiture of THE DAILY RACING FORM is expected to be
completed during 1998. Its net assets have been recorded at net realizable value
as net assets held for sale on the accompanying consolidated balance sheet at
December 31, 1997.
The operating results of the Non-Core Businesses are included on the
accompanying statements of consolidated operations for the years ended December
31, 1997, 1996 and 1995. Total sales for the Non-Core Businesses were $247,351,
$307,149 and $307,121 for the years ended December 31, 1997, 1996 and 1995,
respectively. Excluding the 1997 provision for loss on the sales of businesses
and other, net, operating income (loss) for the Non-Core Businesses was $7,243,
$(694) and $(17,429) for the years ended December 31, 1997, 1996 and 1995,
respectively.
5. RESTRUCTURING AND OTHER COSTS
In the second quarter of 1995, the Company recorded charges of $14,667
related to a corporate restructuring effort at Newbridge Communications, Inc.
("Newbridge"), its professional book club business, and the completion of a
manufacturing outsourcing effort at THE DAILY RACING FORM. Included in the
restructuring charge of $7,272 were employee separation costs of $1,287,
litigation matters of $3,349, a write-down of inventory and other assets of
$2,086 related to the exit of a product line at Newbridge and costs associated
with the termination of a real estate lease which is no longer needed in the
operations of THE DAILY RACING FORM of $550. Included in the other costs of
$7,395 were costs incurred and associated
F-13
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
5. RESTRUCTURING AND OTHER COSTS (CONTINUED)
with the correction of customer and accounting systems and write-down of certain
assets. During early 1995, the Company experienced certain operational problems
at Newbridge relating to periodic mailings which described its then current
product offerings. These operational problems resulted in higher than normal
levels of bad debts and returns. In addition, Newbridge implemented a new
customer information processing system which inadvertently suppressed a number
of customer and product offering mailings resulting in lower than anticipated
demand for certain products and a corresponding increase in obsolete inventory.
Subsequently, the operational and new system problems were corrected. As a
result of these operational problems, provisions for inventory obsolescence of
approximately $2,500 and for bad debts of approximately $3,500 were recorded,
along with expenses associated with the outside consultants and systems
corrections of approximately $1,400. Approximately $700, $1,200 and $4,100 of
the restructuring and other charges were paid in cash in 1997, 1996 and 1995,
respectively. At December 31, 1997, $700 of these charges is included in accrued
liabilities.
6. ADJUSTMENTS TO THE CARRYING VALUES OF LONG-LIVED ASSETS
In accordance with its accounting policy, during 1995, the Company recorded
aggregate write-downs of $17,958 and $5,786 to the carrying values of the
identifiable intangible assets and goodwill of PRIMEDIA Reference and a product
line of Newbridge, respectively. These adjustments are included in amortization
of intangible assets, excess of purchase price over net assets acquired and
other on the accompanying statement of consolidated operations for the year
ended December 31, 1995 and affect the operating results of the information and
education segments.
7. ACCOUNTS RECEIVABLE, NET
Accounts receivable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
<S> <C> <C>
1997 1996
---------- ----------
Accounts receivable................................................... $ 236,819 $ 273,119
Less: Allowance for doubtful accounts................................. 10,521 15,418
Allowance for returns and rebates................................ 27,009 24,098
---------- ----------
$ 199,289 $ 233,603
---------- ----------
---------- ----------
</TABLE>
8. INVENTORIES, NET
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1997 1996
--------- ---------
Finished goods.......................................................... $ 12,271 $ 41,497
Work in process......................................................... 3,314 2,111
Raw materials........................................................... 14,494 17,838
--------- ---------
30,079 61,446
Less: Allowance for obsolescence........................................ 2,482 8,703
--------- ---------
$ 27,597 $ 52,743
--------- ---------
--------- ---------
</TABLE>
F-14
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
9. PROPERTY AND EQUIPMENT, NET
Property and equipment, including that held under capital leases, consist of
the following:
<TABLE>
<CAPTION>
DECEMBER 31,
RANGE OF LIVES ----------------------
(YEARS) 1997 1996
--------------- ---------- ----------
<S> <C> <C> <C>
Land.................................................. -- $ 4,986 $ 2,022
Buildings and improvements............................ 1-40 33,808 24,219
Furniture and fixtures................................ 4-10 28,135 26,027
Machinery and equipment............................... 2-10 81,226 94,091
School equipment...................................... 5-10 58,665 55,860
Other................................................. 2-7 2,992 2,401
---------- ----------
209,812 204,620
Less: Accumulated depreciation and amortization....... 93,451 81,797
---------- ----------
$ 116,361 $ 122,823
---------- ----------
---------- ----------
</TABLE>
Included in property and equipment are assets which were acquired under
capital leases in the amount of $27,498 and $11,738 with accumulated
amortization of $3,043 and $1,739 at December 31, 1997 and 1996, respectively
(see Note 21).
10. INTANGIBLE ASSETS AND EXCESS OF PURCHASE PRICE OVER NET ASSETS ACQUIRED, NET
Other intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
RANGE OF LIVES --------------------------
(YEARS) 1997 1996
--------------- ------------ ------------
<S> <C> <C> <C>
Trademarks........................................ 40 $ 342,645 $ 448,490
Membership, subscriber and customer lists......... 2-20 456,716 504,951
Non-compete agreements............................ 1-10 194,116 227,312
Trademark license agreements...................... 2-15 2,909 17,500
Copyrights........................................ 12-20 25,715 47,849
Video library..................................... 1-7 14,837 14,837
Databases......................................... 4-12 10,577 121,377
Advertiser lists.................................. .25-15 223,443 133,850
Distribution agreements........................... 1-7 11,525 15,336
Other............................................. 1.5-15 19,647 63,875
------------ ------------
1,302,130 1,595,377
Less: Accumulated amortization.................... 641,862 814,061
------------ ------------
$ 660,268 $ 781,316
------------ ------------
------------ ------------
</TABLE>
The excess of the purchase price over the fair value of the net assets
acquired is net of accumulated amortization of $94,735 and $82,763 at December
31, 1997 and 1996, respectively.
F-15
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
11. OTHER NON-CURRENT ASSETS
Other non-current assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
<S> <C> <C>
1997 1996
---------- ----------
<CAPTION>
<S> <C> <C>
Deferred financing costs, net......................................... $ 15,276 $ 22,814
Deferred wiring and installation costs, net........................... 54,387 58,086
Direct-response advertising costs, net................................ 16,520 28,452
Prepublication and programming costs, net............................. 4,526 6,506
Other................................................................. 8,167 7,834
---------- ----------
$ 98,876 $ 123,692
---------- ----------
---------- ----------
</TABLE>
The deferred financing costs are net of accumulated amortization of $5,093
and $9,794 at December 31, 1997 and 1996, respectively. The deferred wiring and
installation costs are net of accumulated amortization of $18,718 and $12,850 at
December 31, 1997 and 1996, respectively. Direct-response advertising costs are
net of accumulated amortization of $53,840 and $70,661 at December 31, 1997 and
1996, respectively. Prepublication and programming costs are net of accumulated
amortization of $6,843 and $7,968 at December 31, 1997 and 1996, respectively.
12. ACCRUED EXPENSES AND OTHER
Accrued expenses and other current liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
<S> <C> <C>
1997 1996
---------- ----------
<CAPTION>
<S> <C> <C>
Payroll, commissions and related employee benefits.................... $ 53,494 $ 40,553
Systems costs......................................................... 2,066 2,991
Rent and lease liabilities............................................ 27,247 13,502
Retail display costs and allowances................................... 10,407 8,263
Promotion costs....................................................... 2,739 2,663
Royalties............................................................. 8,367 8,362
Circulation costs..................................................... 6,037 5,420
Professional fees..................................................... 12,319 4,408
Taxes................................................................. 18,528 17,162
Customer advances..................................................... 946 2,482
Deferred purchase price............................................... 16,204 8,231
Other................................................................. 46,416 26,922
---------- ----------
$ 204,770 $ 140,959
---------- ----------
---------- ----------
</TABLE>
F-16
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
13. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
<S> <C> <C>
1997 1996
------------ ------------
Borrowings under Bank Credit Facilities........................... $ 1,218,101 $ 884,992
10 5/8% Senior Notes Due 2002..................................... -- 233,250
10 1/4% Senior Notes Due 2004..................................... 100,000 100,000
8 1/2% Senior Notes Due 2006..................................... 298,902 298,811
------------ ------------
1,617,003 1,517,053
Acquisition obligation payable.................................... 53,871 54,633
------------ ------------
1,670,874 1,571,686
Less: Current maturities of long-term debt........................ 14,333 6,000
------------ ------------
$ 1,656,541 $ 1,565,686
------------ ------------
------------ ------------
</TABLE>
On May 31, 1996, the Company replaced its existing credit facilities under
the Revolving Credit Agreement, BONY Term Loan and the Chase Term Loan through
which the Company could borrow $970,000 in the aggregate with new credit
facilities with The Chase Manhattan Bank, the Bank of New York, Bankers Trust
Company and the Bank of Nova Scotia as agents (the "Credit Facilities"). The
Company used approximately $910,000 of the borrowings under the Credit
Facilities to repay borrowings under the previously existing credit facilities
and to pay certain related fees and expenses.
The Credit Facilities are comprised of a $750,000 Tranche A Revolving Loan
Commitment ("Tranche A Loan Commitment"), a $250,000 Term Loan ("Term Loan") and
an additional $250,000 Revolving Loan Commitment ("Revolver/Term Loan"). In
addition, the Company has the right to solicit commitments of up to $250,000
under the Tranche B Revolving Loan Facility ("Tranche B Facility"). In May 1997,
the Company solicited commitments of $150,000 ("Tranche B Loan Commitment")
under the Tranche B Facility. The Tranche A Loan Commitment may be utilized
through the incurrence of Tranche A revolving credit loans, swingline loans
which may not exceed $40,000 in total, Canadian dollar loans which may not
exceed the Canadian dollar equivalent of $40,000 in total or the issuance of
letters of credit which may not exceed $40,000. The Tranche B Facility may be
utilized through the incurrence of Tranche B revolving credit loans. The
borrowings under the Credit Facilities may be used for general corporate and
working capital purposes as well as to finance certain future acquisitions.
F-17
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
13. LONG-TERM DEBT (CONTINUED)
The commitments under the Tranche A Loan Commitment and the Tranche B Loan
Commitment are subject to mandatory reductions semi-annually on June 30 and
December 31 with the first reduction on June 30, 1999 and the final reduction on
June 30, 2004. The mandatory reductions for the Tranche A Loan Commitment are as
follows:
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31,
------------
<S> <C>
1999............................................................................ $ 75,000
2000............................................................................ 150,000
2001............................................................................ 150,000
2002............................................................................ 150,000
2003............................................................................ 150,000
2004............................................................................ 75,000
------------
$ 750,000
------------
------------
</TABLE>
The mandatory reductions for the Tranche B Loan Commitment are as follows:
<TABLE>
<CAPTION>
YEARS ENDING
DECEMBER 31,
------------
<S> <C>
1999............................................................................ $ 15,000
2000............................................................................ 30,000
2001............................................................................ 30,000
2002............................................................................ 30,000
2003............................................................................ 30,000
2004............................................................................ 15,000
------------
$ 150,000
------------
------------
</TABLE>
The mandatory reductions for the Tranche B Loan Commitment are based on
defined percentages of the total Tranche B Loan Commitment. To the extent that
the total revolving credit loans outstanding exceed the reduced commitment
amount, these loans must be paid down to an amount equal to or less than the
reduced commitment amount. However, if the total revolving credit loans
outstanding do not exceed the reduced commitment amount, then there is no
requirement to pay down any of the revolving credit loans.
The principal amounts of the Term Loan and the Revolver/Term Loan will each
be repaid semi-annually on June 30 and December 31 of each year, with an initial
payment of $25,000 on June 30, 2000, installments of $25,000 on each payment
date thereafter through December 31, 2003 and a final payment of $50,000 on June
30, 2004.
On April 21, 1997, the Company entered into a new 364-day credit facility
with The Chase Manhattan Bank, the Bank of New York, Bankers Trust Company and
the Bank of Nova Scotia as agents (the "New Credit Facility") which expires
April 20, 1998. Under the terms of the New Credit Facility, the Company has
commitments of $150,000 which can be borrowed in the form of revolving loans to
be used for general, corporate and working capital purposes as well as to
finance certain future acquisitions.
F-18
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
13. LONG-TERM DEBT (CONTINUED)
At December 31, 1997, the Company has commitments of $1,550,000 and can
borrow up to $1,650,000 in the aggregate under the Credit Facilities and the New
Credit Facility (collectively referred to as the "Bank Credit Facilities").
As of December 31, 1997, the borrowings under the Bank Credit Facilities
consist of the $568,101 under the Tranche A Loan Commitment, $250,000 under the
Revolver/Term Loan, $150,000 under the Tranche B Loan Commitment and $250,000
under the Term Loan.
The amounts borrowed pursuant to the Bank Credit Facilities bear interest,
at the Company's option as follows: (i) the higher of (a) the Federal Funds
Effective Rate as published by the Federal Reserve Bank of New York plus 1/2 of
1% and (b) the prime commercial lending rate announced by the Agent from time to
time (in each case, the "Base Rate"); plus, in each case, an applicable margin
of up to 1/8 of 1% as specified in the Bank Credit Facilities or (ii) the
Eurodollar Rate plus an applicable margin ranging from 1/2 of 1% to 1 1/2% as
specified in the Bank Credit Facilities. All swingline loans bear interest at
the Base Rate plus the applicable margin of up to 1/8 of 1% as specified in the
Bank Credit Facilities. During 1997, the weighted average interest rate on the
Bank Credit Facilities was 7.11%. During 1996, the weighted average interest
rates on the Revolving Credit Agreement, BONY Term Loan, Chase Term Loan and
Bank Credit Facilities were 7.04%, 7.50%, 6.94% and 7.07%, respectively.
Interest rates on the borrowings under the Bank Credit Facilities outstanding at
December 31, 1997 ranged from 7.04% to 8.50%. Interest rates on the borrowings
under the Bank Credit Facilities outstanding at December 31, 1996 ranged from
7.00% to 7.13%.
Under the Credit Facilities, the Company has agreed to pay commitment fees
equal to 3/8 of 1% per annum on the daily average aggregate unutilized
commitment under the Tranche A Loan Commitment and the Tranche B Loan
Commitment. The Company has also agreed to pay certain fees with respect to the
issuance of letters of credit and an annual administration fee. Under the New
Credit Facility, the Company has agreed to pay commitment fees equal to 1/8 of
1% per annum on the daily average aggregate unutilized revolving loan
commitment.
10 5/8% SENIOR NOTES. During November and December 1996, the Company
purchased $16,750 of the 10 5/8% Senior Notes at a premium of 105.4% plus
accrued interest from various brokers on the open market. In January 1997, the
Company purchased, in aggregate, $20,850 of the 10 5/8% Senior Notes at a
weighted average price of 105%, plus accrued and unpaid interest from various
brokers on the open market. On May 1, 1997, the Company redeemed the $212,400
remaining principal amount of the 10 5/8% Senior Notes at 104% plus accrued and
unpaid interest. The aggregate premium paid and the write-off of related
deferred financing costs are classified as an extraordinary charge and are
recorded at an aggregate value of $15,401 on the accompanying statement of
consolidated operations for the year ended December 31, 1997.
10 1/4% SENIOR NOTES. Interest is payable semi-annually in June and
December at an annual rate of 10 1/4%. The 10 1/4% Senior Notes mature on June
1, 2004, with no sinking fund requirements. The 10 1/4% Senior Notes may not be
redeemed prior to June 1, 1999 other than in connection with a change of
control. Beginning in 1999 and thereafter, the 10 1/4% Senior Notes are
redeemable at prices ranging from 104.95% with annual reductions to 100% in 2002
plus accrued and unpaid interest.
F-19
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
13. LONG-TERM DEBT (CONTINUED)
8 1/2% SENIOR NOTES. On January 24, 1996, the Company completed a private
offering of $300,000 of 8 1/2% Senior Notes. The 8 1/2% Senior Notes were issued
at 99.578% with related issuance costs of approximately $7,000. On August 21,
1996, the Company exchanged its 8 1/2% Senior Notes ("Old Notes") for a new
series of $300,000 8 1/2% Senior Notes Due 2006 ("New Notes"). The New Notes
have been registered under the Securities Act of 1933. The New Notes mature on
February 1, 2006, with no sinking fund requirements. Interest on the New Notes
is payable semi-annually in February and August at the annual rate of 8 1/2%.
The New Notes may not be redeemed prior to February 1, 2001 other than in
connection with a change of control. Beginning in 2001 and thereafter, the New
Notes are redeemable in whole or in part, at the option of the Company, at
prices ranging from 104.25% with annual reductions to 100% in 2003 plus accrued
and unpaid interest. Net proceeds from the Old Notes of approximately $293,000
were primarily used to pay down borrowings under the Revolving Credit Agreement.
The 10 1/4% Senior Notes and 8 1/2% Senior Notes (together referred to as
the "Senior Notes"), and the Bank Credit Facilities, all rank senior in right of
payment to all subordinated indebtedness of PRIMEDIA Inc. (a holding company).
The above indebtedness, among other things, limits the ability of the
Company to change the nature of its businesses, incur indebtedness, create
liens, sell assets, engage in mergers, consolidations or transactions with
affiliates, make investments in or loans to certain subsidiaries, issue
guarantees and make certain restricted payments including dividend payments on
its common stock. Under the Company's most restrictive debt covenants, the
Company must maintain a minimum interest coverage ratio of 1.8 to 1 and a
minimum fixed charge coverage ratio of 1.05 to 1. The Company's maximum
allowable leverage ratio is 6.0 to 1. The Company believes it is in compliance
with the financial and operating covenants of its principal financing
arrangements. Borrowings under the above indebtedness are guaranteed by each of
the domestic wholly-owned subsidiaries of the Company. Such guarantees are full,
unconditional and joint and several. The separate financial statements of the
domestic subsidiaries are not presented because the Company believes the
separate financial statements would not be material to the shareholders and
potential investors. The Company's foreign subsidiaries are not guarantors of
the above indebtedness. The total assets, revenues, income or equity of such
foreign subsidiaries, both individually and on a combined basis, are
inconsequential in relation to the total assets, revenues, income or equity of
the Company.
ACQUISITION OBLIGATION. In connection with the acquisition of certain of
the Company's specialty consumer magazine operations and THE DAILY RACING FORM,
an obligation was recorded equivalent to the present value of the principal and
interest payments of the notes payable in the amount of $53,871 at December 31,
1997 and $54,633 at December 31, 1996. The interest rate used in calculating the
present value was 13%, which represents management's estimate of the prevailing
market rate of interest for such obligation at the time of the acquisition.
Principal and interest amounts aggregating $63,500 will be repaid from June 1998
through June 2001.
INTEREST RATE SWAP AGREEMENTS. In May 1995, the Company entered into two,
three-year interest rate swap agreements with an aggregate notional amount of
$200,000. Under the outstanding swap agreements, the Company receives a floating
rate of interest based on three-month LIBOR, which resets quarterly, and pays a
fixed rate of interest which increases each year during the terms of the
respective agreements. The weighted average variable rate and weighted average
fixed rate were 5.7% and 6.5%, respectively, in 1997, 5.5% and 6.2%,
respectively, in 1996 and 6.0% and 6.1%, respectively, in 1995. Also, in May
1995, the
F-20
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
13. LONG-TERM DEBT (CONTINUED)
Company entered into a three-year interest rate cap agreement. As a result of
this transaction, the Company currently has the right to receive payments based
on a notional principal amount of $100,000 to the extent that three-month LIBOR
exceeds 7.75% in year one, 8.75% in year two and 9.75% in year three of the
agreement. Any interest differential received is recognized as an adjustment to
interest expense. The interest rate cap fee is recognized as an adjustment to
interest expense over the life of the interest rate cap agreement.
In the fourth quarter of 1996, the Company entered into six, one-year
interest rate swap agreements with an aggregate notional amount of $600,000.
Under these swap agreements, the Company received a floating rate of interest
based on three-month LIBOR, which resets quarterly, and paid a fixed rate of
interest, each quarter, for the term of the agreements. The weighted average
variable rate and weighted average fixed rate were 5.7% and 5.8%, respectively,
in 1997 and 5.5% and 5.8%, respectively, in 1996. These interest rate swap
agreements expired during the fourth quarter of 1997.
In July 1997, the Company entered into four, three-year and two, four-year
interest rate swap agreements, with an aggregate notional amount of $600,000.
Under these new swap agreements, which commence on January 2, 1998, the Company
will receive a floating rate of interest based on three-month LIBOR, which
resets quarterly, and the Company will pay a fixed rate of interest, each
quarter, for the terms of the respective agreements.
The net interest differential, related to the interest rate swap agreements
and the interest rate cap agreement, charged to interest expense in 1997, 1996
and 1995 was $2,048, $1,943 and $539, respectively. The Company is exposed to
credit risk in the event of nonperformance by counterparties to its interest
rate swap and cap agreements. Credit risk is limited by entering into such
agreements with primary dealers only; therefore, the Company does not anticipate
that nonperformance by counterparties will occur. Notwithstanding this, the
Company's treasury department monitors counterparty credit ratings at least
quarterly through reviewing independent credit agency reports. Both current and
potential exposure are evaluated, as necessary, by obtaining replacement cost
information from alternative dealers. Potential loss to the Company from credit
risk on these agreements is limited to amounts receivable, if any. The Company
enters into these agreements solely to hedge its interest rate risk.
F-21
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
14. INCOME TAXES
At December 31, 1997, the Company had aggregate net operating loss
carryforwards for Federal and state income tax purposes ("NOLs") of
approximately $749,000 which will be available to reduce future taxable income.
The utilization of such NOLs is subject to certain limitations under Federal
income tax laws. In certain instances, such NOLs may only be used to reduce
future taxable income of the respective company which generated the NOL. The
NOLs are scheduled to expire in the following years:
<TABLE>
<S> <C>
2003.............................................................. $ 24,900
2004.............................................................. 60,300
2005.............................................................. 121,800
2006.............................................................. 93,400
2007.............................................................. 82,700
2008.............................................................. 83,700
2009.............................................................. 68,900
2010.............................................................. 156,100
2011.............................................................. 26,100
2012.............................................................. 31,100
---------
$ 749,000
---------
---------
</TABLE>
Deferred income taxes reflect the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes, and (b)
operating loss carryforwards. The tax effects of significant items comprising
the Company's net deferred income tax assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------------
<S> <C> <C> <C>
FEDERAL STATE TOTAL
---------- --------- ----------
DEFERRED INCOME TAX ASSETS:
Difference between book and tax basis of inventory............................. $ 2,187 $ 641 $ 2,828
Difference between book and tax basis of accrued expenses and other............ 16,075 4,709 20,784
Reserves not currently deductible.............................................. 2,615 766 3,381
Difference between book and tax basis of other intangible assets............... 80,945 23,714 104,659
Operating loss carryforwards................................................... 215,832 44,065 259,897
---------- --------- ----------
Total.......................................................................... 317,654 73,895 391,549
---------- --------- ----------
DEFERRED INCOME TAX LIABILITIES:
Difference between book and tax basis of other intangible assets............... 39,283 11,508 50,791
Difference between book and tax basis of property and equipment................ 16,405 4,806 21,211
Other.......................................................................... 19,424 5,691 25,115
---------- --------- ----------
Total.......................................................................... 75,112 22,005 97,117
---------- --------- ----------
Net deferred income tax assets................................................. 242,542 51,890 294,432
Less: Valuation allowances..................................................... 85,500 32,732 118,232
---------- --------- ----------
Net............................................................................ $ 157,042 $ 19,158 $ 176,200
---------- --------- ----------
---------- --------- ----------
</TABLE>
F-22
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
14. INCOME TAXES (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------------
<S> <C> <C> <C>
FEDERAL STATE TOTAL
---------- --------- ----------
DEFERRED INCOME TAX ASSETS:
Difference between book and tax basis of inventory............................. $ 3,550 $ 1,041 $ 4,591
Difference between book and tax basis of accrued expenses and other............ 18,583 5,444 24,027
Reserves not currently deductible.............................................. 2,277 667 2,944
Difference between book and tax basis of other intangible assets............... 31,043 9,094 40,137
Operating loss carryforwards................................................... 192,267 56,326 248,593
---------- --------- ----------
Total.......................................................................... 247,720 72,572 320,292
---------- --------- ----------
DEFERRED INCOME TAX LIABILITIES:
Difference between book and tax basis of other intangible assets............... 32,612 9,554 42,166
Difference between book and tax basis of property and equipment................ 11,382 3,335 14,717
Other.......................................................................... 9,757 2,858 12,615
---------- --------- ----------
Total.......................................................................... 53,751 15,747 69,498
---------- --------- ----------
Net deferred income tax assets................................................. 193,969 56,825 250,794
Less: Valuation allowances..................................................... 36,927 37,667 74,594
---------- --------- ----------
Net............................................................................ $ 157,042 $ 19,158 $ 176,200
---------- --------- ----------
---------- --------- ----------
</TABLE>
At December 31, 1997, 1996 and 1995, management of the Company reviewed
recent operating results and projected future operating results. At the end of
each of the respective years, management determined that a portion of the net
deferred income tax assets would likely be realized. The amount of the net
deferred income tax assets was not adjusted in 1997. In 1996, the Company
reduced the valuation allowances by $62,400 and recorded an income tax benefit
of $53,300 ($47,500 and $5,800 related to Federal and state income tax benefits,
respectively) and a reduction of the excess of purchase price over net assets
acquired of $9,100; and in 1995, the Company reduced the valuation allowances by
$67,700 and recorded an income tax benefit of $59,600 ($53,100 and $6,500
related to Federal and state income tax benefits, respectively) and a reduction
of the excess of purchase price over net assets acquired of $8,100. The amount
of the net deferred tax asset considered realizable, however, could be reduced
in the near term if estimates of future taxable income during the carryforward
period are reduced. After the reduction in the valuation allowances discussed
above, there was a net increase in the valuation allowance of $43,638 during
1997 and net decreases in the valuation allowances of $59,420 and $1,404 during
1996 and 1995, respectively.
A portion of the valuation allowances in the amount of approximately $39,000
at December 31, 1997 relates to net deferred tax assets which were recorded in
accounting for the acquisitions of various entities. The recognition of such
amount in future years will be allocated to reduce the excess of the purchase
price over the net assets acquired and other non-current intangible assets.
F-23
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
15. EXCHANGEABLE PREFERRED STOCK
Exchangeable Preferred Stock consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1996
---------- ----------
<S> <C> <C>
$2.875 Senior Exchangeable Preferred Stock................................................ $ -- $ 98,266
$11.625 Series B Exchangeable Preferred Stock............................................. 155,281 150,513
$10.00 Series D Exchangeable Preferred Stock.............................................. 194,495 193,950
$9.20 Series E Exchangeable Preferred Stock............................................... 120,504 --
---------- ----------
$ 470,280 $ 442,729
---------- ----------
---------- ----------
</TABLE>
$2.875 SENIOR EXCHANGEABLE PREFERRED STOCK
The Company authorized 4,000,000 shares of $.01 par value Senior Preferred
Stock, all of which was issued and outstanding at December 31, 1996. The
liquidation and redemption value at December 31, 1996 was $100,000. Annual
dividends of $2.875 per share on the Senior Preferred Stock were cumulative and
payable quarterly. In November 1997, the Company redeemed all 4,000,000
outstanding shares of the Senior Preferred Stock for $105,864, which includes a
redemption premium of $5,800, plus accrued and unpaid dividends of $64.
$11.625 SERIES B EXCHANGEABLE PREFERRED STOCK
The Company authorized 2,000,000 shares of $.01 par value Series B Preferred
Stock, 1,576,036 shares and 1,531,526 shares of which were issued and
outstanding at December 31, 1997 and 1996, respectively. The liquidation and
redemption value at December 31, 1997 and 1996 was $157,604 and $153,153,
respectively. Annual dividends of $11.625 per share on the Series B Preferred
Stock are cumulative and payable quarterly in cash or by issuing additional
shares of the Series B Preferred Stock. Commencing in the second quarter of
1997, the Company elected to satisfy its Series B Preferred Stock dividend
requirements in cash. On or after February 1, 1998, the Series B Preferred Stock
may be redeemed in whole or in part, at the option of the Company, at specified
redemption prices plus accrued and unpaid dividends. The Company is required to
redeem the Series B Preferred Stock on May 1, 2005 at a redemption price equal
to the liquidation preference of $100 per share, plus accrued and unpaid
dividends. The Series B Preferred Stock is exchangeable at the option of the
Company on or after an initial public offering of the Company's common stock for
its 11 5/8% Class B Subordinated Exchange Debentures due 2005 provided no shares
of the Senior Preferred Stock are then outstanding. Such debentures are
subordinate to all existing and future liabilities and obligations of the
Company and its subsidiaries. The Series B Preferred Stock is recorded on the
accompanying consolidated balance sheets at the aggregate redemption value (net
of issuance costs) of $155,281 and $150,513 at December 31, 1997 and 1996,
respectively (see Note 25).
$10.00 SERIES D EXCHANGEABLE PREFERRED STOCK
On January 24, 1996, the Company completed a private offering of 2,000,000
shares of $.01 par value, $10.00 Series C Exchangeable Preferred Stock ("Series
C Preferred Stock") at $100 per share. Annual dividends of $10.00 per share on
the Series C Preferred Stock were cumulative and payable quarterly, in cash,
commencing May 1, 1996. On August 21, 1996, the Company exchanged the Series C
Preferred Stock
F-24
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
15. EXCHANGEABLE PREFERRED STOCK (CONTINUED)
for 2,000,000 shares of $.01 par value, Series D Preferred Stock. Dividend
payment terms of the Series D Preferred Stock are the same as the terms of the
Series C Preferred Stock. The Series D Preferred Stock has been registered under
the Securities Act of 1933. The liquidation and redemption value at December 31,
1997 and 1996 was $200,000. On and after February 1, 2001, the Series D
Preferred Stock may be redeemed in whole or in part, at the option of the
Company, at specified redemption prices plus accrued and unpaid dividends. The
Company is required to redeem the Series D Preferred Stock on February 1, 2008
at a redemption price equal to the liquidation preference of $100 per share,
plus accrued and unpaid dividends. The Series D Preferred Stock is exchangeable
in whole but not in part, at the option of the Company, on any scheduled
dividend payment date into 10% Class D Subordinated Exchange Debentures due 2008
provided that no shares of the Senior Preferred Stock are outstanding on the
date of exchange. Net proceeds from the Series C Preferred Stock offering of
approximately $193,000 were primarily used to pay down borrowings under the
Revolving Credit Agreement. The Series D Preferred Stock is recorded on the
accompanying consolidated balance sheets at the aggregate redemption value (net
of issuance costs) of $194,495 and $193,950 at December 31, 1997 and 1996,
respectively.
$9.20 SERIES E EXCHANGEABLE PREFERRED STOCK
On September 26, 1997, the Company completed a private offering of 1,250,000
shares of $9.20 Series E Preferred Stock at $100 per share, all of which are
issued and outstanding at December 31, 1997. The liquidation and redemption
value at December 31, 1997 was $125,000. Annual dividends of $9.20 per share on
the Series E Preferred Stock are cumulative and payable quarterly, in cash,
commencing February 1, 1998. Prior to November 1, 2002, the Series E Preferred
Stock may be redeemed in whole or in part, at the option of the Company, at a
redemption price equal to the sum of the aggregate liquidation preference plus
accrued and unpaid dividends to the redemption date and the applicable
make-whole premium as defined in the private offering prospectus. On or after
November 1, 2002, the Series E Preferred Stock may be redeemed in whole or in
part, at the option of the Company, at specified redemption prices plus accrued
and unpaid dividends. The Company is required to redeem the Series E Preferred
Stock on November 1, 2009 at a redemption price equal to the liquidation
preference of $100 per share, plus accrued and unpaid dividends. The Series E
Preferred Stock is exchangeable, in whole but not in part, at the option of the
Company, on any scheduled dividend payment date into 9.20% Class E Subordinated
Debentures. The Series E Preferred Stock is recorded on the accompanying
consolidated balance sheet at the aggregate redemption value (net of unamortized
issuance costs) of $120,504 at December 31, 1997. Net proceeds from this private
offering were used to pay down borrowings under the Bank Credit Facilities (see
Note 25).
In 1997, the Company recorded a preferred stock dividend accrual in the
amount of $9,517. Of the total dividend accrual recorded in 1997, the amounts
that relate to prior periods were not material.
16. COMMON STOCK
In October 1995, the Company increased the authorized number of shares of
common stock by 50,000,000 shares to 250,000,000 shares. During November 1995,
the Company completed a public offering of 17,250,000 shares of common stock at
a price of $10.00 per share. Proceeds from this initial public offering, net of
commissions and other related expenses of approximately $9,500, were
approximately
F-25
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
16. COMMON STOCK (CONTINUED)
$163,000. The Company used the net proceeds from this initial public offering to
repay borrowings outstanding under its Revolving Credit Agreement.
SHARE REPURCHASE PROGRAM. On September 9, 1997, the Company announced that
its board of directors had authorized a program for the Company to repurchase up
to $15,000 of its outstanding common stock from time to time in the open market
and through privately negotiated transactions. During the year ended December
31, 1997, the Company repurchased 1,048,600 shares of common stock for $13,158
at a weighted average price of $12.52.
STOCK PURCHASE AND OPTION PLAN. The PRIMEDIA Stock Purchase and Option Plan
(the "Plan") authorizes sales of shares of common stock and grants of incentive
awards in the forms of, among other things, stock options to key employees and
other persons with a unique relationship with the Company. The stock options are
granted with exercise prices at quoted market value at time of issuance. For the
purpose of determining fair value prior to November 1995, it was recognized that
the Company's common stock was not readily saleable to third parties at that
time, and therefore, was valued at a discount to a publicly-traded common stock.
The common stock issued prior to November 1995 and redeemed is included in the
table of the activity of the common stock subject to redemption.
COMMON STOCK SUBJECT TO REDEMPTION. Under the following circumstances,
employees who purchased shares prior to the Company's initial public offering of
common stock have the right to resell their shares of common stock to the
Company: termination of employment in connection with the sale of the business
for which they work, death, disability or retirement after age 65. The resale
feature expires five years after the effective purchase date of the common
stock. Since inception of the Company, none of the employees has exercised such
resale feature as a result of such sale, death, disability or retirement and the
likelihood of significant resales because the stock is freely tradeable on the
public market is considered by management to be remote.
The following summarizes the activity of the common stock subject to
redemption:
<TABLE>
<CAPTION>
SHARES AMOUNT
--------- ---------
<S> <C> <C>
Balance at January 1, 1995.................................................................. 2,152,180 $ 17,217
Acquisitions of common stock held by management............................................. (57,031) (430)
Issuances of common stock................................................................... 458,994 3,274
Expiration of redemption feature............................................................ (147,630) (809)
Accretion in carrying value................................................................. -- 9,927
--------- ---------
Balance at December 31, 1995................................................................ 2,406,513 29,179
Acquisitions of common stock held by management............................................. (17,269) (148)
Expiration of redemption feature............................................................ (1,745,934) (21,230)
Reduction in carrying value................................................................. -- (885)
--------- ---------
Balance at December 31, 1996................................................................ 643,310 6,916
Acquisitions of common stock held by management............................................. (2,320) (19)
Expiration of redemption feature............................................................ (238,340) (2,569)
Accretion in carrying value................................................................. -- 755
--------- ---------
Balance at December 31, 1997................................................................ 402,650 $ 5,083
--------- ---------
--------- ---------
</TABLE>
The redemption values of the common stock subject to redemption of $5,083
and $6,916 at December 31, 1997 and 1996, respectively, were based on a
repurchase price of $12.625 per share and $10.75 per
F-26
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
16. COMMON STOCK (CONTINUED)
share which are the quoted market values at December 31, 1997 and 1996,
respectively. Common stock subject to redemption is recorded on the accompanying
consolidated balance sheets net of the amounts of notes receivable from
employees (related to common stock issuances) outstanding of $707 and $959 at
December 31, 1997 and 1996, respectively.
ACCOUNTING FOR EMPLOYEE STOCK BASED COMPENSATION. The Plan has authorized
grants of up to 25,000,000 shares of the Company's common stock or options to
management personnel. The options are exercisable at the rate of 20% per year
over a five-year period commencing on the effective date of the grant; however,
some optionees have received credit for periods of employment with the Company
and its predecessors and subsidiaries prior to the date the options were
granted. All options granted pursuant to the Plan will expire no later than ten
years from the date the option was granted.
A summary of the status of the Company's stock option plan as of December
31, 1997, 1996 and 1995, and changes during the years ending on those dates is
presented below:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------- ------------------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE EXERCISE EXERCISE
OPTIONS PRICE PRICE OPTIONS PRICE PRICE OPTIONS PRICE
--------- ------------- ----------- --------- ------------- ----------- --------- -------------
Outstanding--
beginning of
year........... 13,211,212 $5.00-$11.94 $ 6.69 12,326,087 $5.00-$ 8.00 $ 5.98 9,610,447 $5.00-$8.00
Granted........ 135,800 1$0.88-$12.00 $ 11.27 1,830,400 1$0.00-$11.94 $ 11.12 3,139,325 $8.00
Exercised...... (1,209,693) $5.00-$11.81 $ 6.96 (681,890) $5.00-$ 8.00 $ 5.36 (193,401) $5.00-$8.00
Forfeited...... (574,389) $5.00-$11.81 $ 9.22 (263,385) $5.00-$ 8.00 $ 7.69 (230,284) $5.00-$8.00
--------- --------- ---------
Outstanding--end
of the year.... 11,562,930 $5.00-$12.00 $ 6.58 13,211,212 $5.00-$11.94 $ 6.69 12,326,087 $5.00-$8.00
--------- --------- ---------
--------- --------- ---------
Exercisable--end
of the year.... 8,953,280 $5.00-$11.94 $ 5.73 8,707,528 $5.00-$ 8.00 $ 5.38 7,269,817 $5.00-$8.00
--------- --------- ---------
--------- --------- ---------
<CAPTION>
<S> <C>
WEIGHTED
AVERAGE
EXERCISE
PRICE
-----------
Outstanding--
beginning of
year........... $ 5.31
Granted........ $ 8.00
Exercised...... $ 5.19
Forfeited...... $ 6.28
Outstanding--end
of the year.... $ 5.98
Exercisable--end
of the year.... $ 5.18
</TABLE>
The weighted-average fair value per option for options granted in 1997, 1996
and 1995 was $4.45, $4.13 and $3.06, respectively.
The following table summarizes information about stock options outstanding
at December 31, 1997:
<TABLE>
<CAPTION>
NUMBER WEIGHTED WEIGHTED
RANGE OF OUTSTANDING AVERAGE REMAINING AVERAGE
EXERCISE PRICES AT 12/31/97 CONTRACTUAL LIFE EXERCISE PRICE
- --------------- ----------- ----------------------- ---------------
<S> <C> <C> <C>
$5.00-$5.44 7,104,260 4 $ 5.00
$7.00 125,400 6 $ 7.00
$8.00 2,711,210 8 $ 8.00
$10.00-$12.00 1,622,060 9 $ 11.12
-----------
11,562,930 6 $ 6.58
-----------
-----------
</TABLE>
SFAS No. 123 provides for a fair-value based method of accounting for
employee options and measures compensation expense using an option valuation
model that takes into account, as of the grant date, the exercise price and
expected life of the option, the current price of the underlying stock and its
F-27
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
16. COMMON STOCK (CONTINUED)
expected volatility, expected dividends on the stock, and the risk-free interest
rate for the expected term of the option. The Company has elected to continue
accounting for employee stock-based compensation under Accounting Principles
Board Opinion ("APB") No. 25 and related interpretations. Under APB No. 25,
because the exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense is recognized.
Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of SFAS No.
123. The fair value of these options was estimated at the date of grant using
the Black-Scholes option pricing model for options granted in 1997, 1996 and
1995. The following weighted-average assumptions were used for 1997, 1996 and
1995, respectively: risk-free interest rates of 6.65%, 6.36% and 6.34%; dividend
yields of 0.0%, 0.0% and 0.0%; volatility factors of the expected market price
of the Company's common stock of 27.70%, 20.83% and 22.59%; and a
weighted-average expected life of the option of six years. The estimated fair
value of options granted during 1997, 1996 and 1995 was $604, $7,560 and $9,592,
respectively.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the option's vesting period. The Company's
pro forma information is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Pro forma net income (loss)....................................................... $(176,351) $ 5,738 $ (76,388)
Pro forma loss applicable to common shareholders.................................. $(241,424) $ (37,788) $(105,366)
Pro forma basic and diluted loss per common share................................. $ (1.87) $ (.29) $ (.93)
</TABLE>
The Company had reserved approximately 12,000,000 shares of the Company's
common stock or options for future grants in connection with the Plan at
December 31, 1997.
17. LOSS PER SHARE
Loss per share has been determined based on income (loss) before
extraordinary charge after preferred stock dividends, divided by the weighted
average number of common shares outstanding for all periods presented.
Options to purchase 11,562,930, 13,211,212, 12,326,087 shares of common
stock were outstanding at December 31, 1997, 1996 and 1995, respectively, but
were not included in the computation of diluted loss per share because the
effect of their inclusion would be antidilutive.
F-28
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
18. ACCUMULATED DEFICIT
The accumulated deficit of $929,011 at December 31, 1997 includes non-cash
expenses related to the accumulated amortization of intangible assets, the
excess of the purchase price over the net assets acquired and deferred financing
costs, the write-offs of the unamortized balance of deferred financing costs
associated with all previous financings, the restructuring and other costs and
the net provision on sales of businesses in the aggregate amount of
approximately $1,219,300 which is net of the non-cash income tax benefits
aggregating $155,000 through December 31, 1997.
19. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts and the estimated fair values of the Company's
financial instruments for which it is practicable to estimate fair value are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------
<S> <C> <C> <C> <C>
1997 1996
---------------------- ----------------------
<CAPTION>
CARRYING CARRYING
VALUE FAIR VALUE VALUE FAIR VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
10 5/8% Senior Notes............................................. $ -- $ -- $ 233,250 $ 260,950
10 1/4% Senior Notes............................................. 100,000 108,000 100,000 105,400
8 1/2% Senior Notes.............................................. 298,902 307,470 298,811 291,750
Acquisition Obligation........................................... 53,871 55,329 54,633 55,339
Senior Preferred Stock........................................... -- -- 98,266 107,500
Series B Preferred Stock......................................... 155,281 169,818 150,513 154,684
Series D Preferred Stock......................................... 194,495 210,500 193,950 196,000
Series E Preferred Stock......................................... 120,504 125,000 -- --
Interest Rate Swap Agreements.................................... 485 410 982 3,531
Purchased Interest Rate Cap Agreement............................ (43) -- (159) (2)
</TABLE>
The bracketed amounts above represent assets.
The fair values of the senior notes and preferred stocks were determined
based on the quoted market prices and the fair value of the acquisition
obligation was estimated using discounted cash flow analysis, based on current
incremental borrowing rates for similar types of borrowing arrangements. The
fair value of the interest rate swap agreements was determined using discounted
cash flow models.
For instruments including cash and cash equivalents, accounts receivable and
accounts payable, the carrying amount approximates fair value because of the
short maturity of these instruments. The fair value of floating-rate long-term
debt approximates carrying value because these instruments re-price frequently
at current market prices.
20. RETIREMENT PLANS
Substantially all of the Company's employees are eligible to participate in
defined contribution plans. The expense recognized for all of these plans was
approximately $6,300 in 1997, $5,400 in 1996 and $5,200 in 1995.
F-29
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
20. RETIREMENT PLANS (CONTINUED)
In addition, the employees at PRIMEDIA Magazines and the non-union employees
at THE DAILY RACING FORM are eligible to participate in a non-contributory
defined benefit pension plan ("Pension Plan"). The benefits to be paid under the
Pension Plan are based on years of service and compensation amounts for the
highest consecutive five years of service in the most current ten years. The
Pension Plan is funded by means of contributions by the Company to the plan's
trust. The pension funding policy is consistent with the funding requirements of
U.S. Federal and other governmental laws and regulations. Plan assets consist
primarily of fixed income, equity and other short-term investments. The
components of the net periodic pension cost of the Pension Plan for the years
ended December 31, 1997, 1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Service cost........................................................................ $ 1,387 $ 1,203 $ 755
Interest cost....................................................................... 1,073 769 581
Actual investment gain on plan assets............................................... (1,763) (610) (812)
Net amortization and deferral....................................................... 945 462 774
--------- --------- ---------
Net periodic pension cost........................................................... $ 1,642 $ 1,824 $ 1,298
--------- --------- ---------
--------- --------- ---------
</TABLE>
The following is a reconciliation of the funded status of the Pension Plan:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1997 1996
---------- ----------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested.............................................................. $ (10,737) $ (6,342)
Non-vested.......................................................... (851) (617)
---------- ----------
Accumulated benefit obligation........................................ (11,588) (6,959)
Additional liability based on projected compensation levels........... (6,448) (5,118)
---------- ----------
Projected benefit obligation.......................................... (18,036) (12,077)
Plan assets at fair value............................................. 13,391 5,473
---------- ----------
Projected benefit obligation in excess of plan assets................. (4,645) (6,604)
Unrecognized net loss (gain).......................................... (1,440) 172
Obligation recorded at acquisition date............................... 2,587 2,861
---------- ----------
Accrued pension cost.................................................. $ (3,498) $ (3,571)
---------- ----------
---------- ----------
</TABLE>
The obligation recorded at the acquisition date of PRIMEDIA Magazines and
THE DAILY RACING FORM is the excess of the projected benefit obligation over the
plan assets at the date of acquisition which is included in other non-current
liabilities. The weighted average discount rates used in determining the
actuarial present value of the projected benefit obligation were 7.0% and 7.5%
for 1997 and 1996, respectively. The weighted average rate of compensation
increases used was 4.0% for 1997 and 1996. The weighted average expected
long-term rate of return on plan assets was 8.5% for 1997 and 1996 (see Note
25).
F-30
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
21. COMMITMENTS AND CONTINGENCIES
COMMITMENTS. Total rent expense under operating leases was $36,844, $31,561
and $24,409 for the years ended December 31, 1997, 1996 and 1995, respectively.
Certain leases are subject to escalation clauses and certain leases contain
renewal options. Minimum rental commitments under noncancelable operating leases
are approximately as follows:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
-------------------------
<S> <C>
1998............................................................... $ 26,868
1999............................................................... 22,759
2000............................................................... 20,218
2001............................................................... 15,365
2002............................................................... 12,504
Thereafter......................................................... 38,579
--------
$ 136,293
--------
--------
</TABLE>
Future minimum lease payments under capital leases (see Note 9) are
approximately as follows:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
-------------------------
<S> <C>
1998............................................................... $ 3,102
1999............................................................... 3,663
2000............................................................... 3,663
2001............................................................... 3,663
2002............................................................... 3,663
Thereafter......................................................... 23,379
-------
41,133
Less: amount representing interest................................. 15,760
-------
Present value of net minimum lease payments........................ 25,373
Less: current portion.............................................. 1,373
-------
Long-term obligations (included in other non-current
liabilities)..................................................... $ 24,000
-------
-------
</TABLE>
CONTINGENCIES. The Company is involved in ordinary and routine litigation
incidental to its business. In the opinion of management, there is no pending
legal proceeding that would have a material adverse affect on the consolidated
financial statements of the Company.
At December 31, 1997, the Company had letters of credit outstanding of
approximately $3,100.
F-31
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
22. RELATED PARTY TRANSACTIONS
During each of the years ended December 31, 1997, 1996 and 1995, the Company
paid $1,000 in administrative and other fees to Kohlberg Kravis Roberts & Co.
("KKR"), an affiliated party. The Company paid an aggregate of $180, in
directors' fees to certain partners of KKR during the years ended December 31,
1997, 1996 and 1995.
On March 1, 1995, 3,125,000 shares of common stock were issued to a
partnership affiliated with KKR at $8.00 per share which was the fair value per
share at such date. On March 1, 1995, pursuant to the related certificate of
designations, 2,500 shares of Series C Preferred Stock ("KKR Preferred Stock")
were authorized for issuance and 1,000 shares were issued to partnerships
affiliated with KKR at $50,000 per share, which was the liquidation value per
share at such date. The proceeds from both issuances were used to pay down the
borrowings under the Revolving Credit Agreement. On August 3, 1995, the Company
redeemed all 1,054 shares then outstanding (which included dividends accrued
through redemption date) of the KKR Preferred Stock at $50,000 per share for a
total of $52,691. This transaction was financed with borrowings under the
Revolving Credit Agreement (see Notes 13 and 25).
23. UNAUDITED QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1997:
Sales, net...................................... $352,291 $368,762 $368,944 $397,598 $1,487,595
Operating income (loss)......................... 20,478 39,518 (112,326) 31,537 (20,793)
Income (loss) before extraordinary charge....... (12,546) 3,700 (147,674) (919) (157,439)
Extraordinary charge--extinguishment of debt.... (1,554) (13,847) -- -- (15,401)
Net loss........................................ (14,100) (10,147) (147,674) (919) (172,840)
Loss applicable to common shareholders.......... (26,426) (22,602) (160,130) (28,755) (237,913)
Basic and diluted loss applicable to common
shareholders per common share:
Loss before extraordinary charge.............. $(.19) $(.07) $(1.24) $(.22) $(1.72)
Net loss...................................... $(.20) $(.18) $(1.24) $(.22) $(1.84)
Basic and diluted common shares outstanding..... 129,114,344 129,289,307 129,411,579 129,404,368 129,304,900
</TABLE>
F-32
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
23. UNAUDITED QUARTERLY FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1996:
Sales, net...................................... $314,953 $335,680 $344,418 $379,398 $1,374,449
Operating income................................ 6,985 23,280 18,519 37,117 85,901
Income (loss) before extraordinary charge....... (20,740) (7,066) (11,895) 57,298 17,597
Extraordinary charge--extinguishment of debt.... -- (7,572) -- (1,981) (9,553)
Net income (loss)............................... (20,740) (14,638) (11,895) 55,317 8,044
Income (loss) applicable to common
shareholders.................................. (27,584) (27,041) (23,973) 43,116 (35,482)
Basic income (loss) applicable to common
shareholders per common share:
Income (loss) before extraordinary charge..... $(.21) $(.15) $(.19) $.35 $(.20)
Net income (loss)............................. $(.21) $(.21) $(.19) $.33 $(.27)
Diluted income (loss) applicable to common
shareholders per common share:
Income (loss) before extraordinary charge..... $(.21) $(.15) $(.19) $.34 $(.20)
Net income (loss)............................. $(.21) $(.21) $(.19) $.32 $(.27)
Basic common shares outstanding................. 128,502,847 128,787,528 128,874,002 128,961,695 128,781,518
Diluted common shares outstanding 128,502,847 128,787,528 128,874,002 133,866,122 128,781,518
</TABLE>
The sum of the above quarterly per share amounts may not equal reported
year-to-date per share amounts due to rounding.
During the first quarter of 1997, the Company purchased, in aggregate
$20,850 of the 10 5/8% Senior Notes from various brokers on the open market. The
premium paid on the purchase and the write-off of the related deferred financing
fees totaled $1,554. In the second quarter, the Company redeemed the remaining
principal of the 10 5/8% Senior Notes. The aggregate premium paid and the
write-off of the related deferred financing fees totaled $13,847. During the
third quarter of 1997, the Company recorded a provision for loss on the sales of
businesses and other in the amount of $138,640.
As a result of previous bank refinancings, the Company wrote off $7,572 of
unamortized deferred financings costs in the second quarter of 1996 and $1,981
of unamortized deferred financing costs in the fourth quarter of 1996. In
addition, in the fourth quarter of 1996, the Company recognized an income tax
benefit of $53,300.
F-33
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
24. BUSINESS SEGMENT INFORMATION
The Company's operations have been classified into three business segments:
specialty magazines, education and information (see Note 1). Summarized
financial information by business segment as of December 31, 1997, 1996 and 1995
and for each of the years then ended is set forth below:
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
SALES, NET:
Specialty Magazines............................... $ 754,410 $ 684,341 $ 452,373
Education......................................... 379,552 376,217 330,414
Information....................................... 353,633 313,891 263,542
------------ ------------ ------------
Total............................................. $ 1,487,595 $ 1,374,449 $ 1,046,329
------------ ------------ ------------
------------ ------------ ------------
OPERATING INCOME (LOSS):
Specialty Magazines............................... $ 71,580 $ 59,693 $ 32,169
Education......................................... 12,089 15,011 (32,024)
Information....................................... (78,818) 33,473 (8,683)
Corporate......................................... (25,644) (22,276) (17,737)
------------ ------------ ------------
Total............................................. $ (20,793) $ 85,901 $ (26,275)
------------ ------------ ------------
------------ ------------ ------------
TOTAL ASSETS:
Specialty Magazines............................... $ 972,550 $ 908,374 $ 723,711
Education......................................... 911,299 939,947 547,587
Information....................................... 435,153 531,771 499,418
Corporate......................................... 166,988 172,123 110,700
------------ ------------ ------------
Total............................................. $ 2,485,990 $ 2,552,215 $ 1,881,416
------------ ------------ ------------
------------ ------------ ------------
DEPRECIATION, AMORTIZATION AND OTHER CHARGES:
Specialty Magazines............................... $ 86,364 $ 76,281 $ 58,100
Education......................................... 68,275 64,228 107,284
Information....................................... 171,138 53,091 79,435
Corporate......................................... 99 764 706
------------ ------------ ------------
Total............................................. $ 325,876 $ 194,364 $ 245,525
------------ ------------ ------------
------------ ------------ ------------
CAPITAL EXPENDITURES, NET:
Specialty Magazines............................... $ 9,353 $ 8,252 $ 5,724
Education......................................... 16,258 14,460 10,750
Information....................................... 3,757 4,343 4,516
Corporate......................................... 1,740 1,735 2,424
------------ ------------ ------------
Total............................................. $ 31,108 $ 28,790 $ 23,414
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
- ------------------------
There were no significant intersegment sales or transfers during 1997, 1996
and 1995. Operating income (loss) by business segment excludes interest income
and interest expense. Corporate assets consist
F-34
<PAGE>
PRIMEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
24. BUSINESS SEGMENT INFORMATION (CONTINUED)
primarily of cash, receivables, property and equipment and the net deferred
income tax asset. Depreciation, amortization and other charges includes the
amortization of deferred financing and organizational costs, the net provision
for loss on sales of businesses of $138,640 and $35,447 in 1997 and 1995,
respectively, and provision for restructuring and other costs of $14,667 in
1995.
25. SUBSEQUENT EVENTS
In January 1998, the Company elected to terminate its defined benefit
pension plan (see Note 20) effective March 31, 1998. In connection with this
termination, the Company froze benefit accruals effective December 31, 1997. In
the opinion of the Company's management, the plan benefits payable on the
termination are adequately accrued for and will not have a material impact on
the Company's consolidated financial statements. Active plan participants will
be eligible to participate in the Company's defined contribution plans.
On February 17, 1998, the Company exchanged the 1,250,000 shares of its
Series E Preferred Stock for 1,250,000 shares of $9.20 Series F Exchangeable
Preferred Stock ("Series F Preferred Stock"). The terms of the Series F
Preferred Stock are the same as the Series E Preferred Stock except that the
Series F Preferred Stock has been registered under the Securities Act of 1933.
On February 17, 1998, the Company completed a private offering of 2,500,000
shares of $8.625 Series G Exchangeable Preferred Stock for $250,000 and $250,000
principal amount of 7 5/8% Senior Notes Due 2008. The net proceeds of these
offerings were used to redeem all of the Company's outstanding Series B
Preferred Stock at $105.80 per share plus accrued and unpaid dividends to the
redemption date and to reduce outstanding borrowings under the Bank Credit
Facilities, which amounts may be reborrowed for general corporate purposes
including acquisitions.
On March 18, 1998, KKR 1996 Fund L.P., a Delaware limited partnership
affiliated with KKR (the "KKR Fund"), purchased 16,666,667 shares of newly
issued common stock from the Company for $200,000 (the "KKR Fund Investment").
The net proceeds from the KKR Fund Investment were used to repay borrowings
outstanding under the Bank Credit Facilities, which amounts may be reborrowed
for general corporate purposes including acquisitions.
On March 19, 1998, the Company completed the acquisition of the stock of
Cowles Enthusiast Media and Cowles Business Media from McClatchy Newspapers,
Inc. ("McClatchy") for approximately $200,000 (the "Cowles Acquisition"). With
the Cowles Acquisition, the Company added 25 enthusiast titles to its specialty
consumer magazines group, and 11 technical and trade magazines and 15 trade
shows to its technical and trade magazines group.
For the period from January 1, 1998 through April 16, 1998, in addition to
the Cowles Acquisition, the Company had completed four product-line acquisitions
in the specialty magazines and information segments. The aggregate purchase
price for such acquisitions was approximately $12,000.
On April 20, 1998, the New Credit Facility expired. As a result, the Company
has total commitments of $1,400,000 and can borrow up to $1,500,000 in the
aggregate under its Credit Facilities.
On April 23, 1998, the Company entered into a definitive stock purchase
agreement to sell Nelson Information, Inc., a leading information provider in
the financial services industry, to Thomson Information Services Inc.
F-35
<PAGE>
THE BANK OF NEW YORK
NOTE EXCHANGE OFFER
<TABLE>
<S> <C> <C>
BY MAIL: FACSIMILE TRANSMISSIONS: BY HAND OR OVERNIGHT DELIVERY:
The Bank of New York (Eligible Institutions Only) The Bank of New York
101 Barclay Street, 7E (212) 815-6339 101 Barclay Street
New York, New York 10286 CONFIRM BY TELEPHONE: Corporate Trust Services Window
Attn: Reorganization Section, (212) 815-4146 Ground Level
7E: Vincent Jhingor FOR INFORMATION CALL: New York, New York 10286
(Registered or Certified Mail (212) 815-4146 Attn: Reorganization Section,
Recommended) 7E: Vincent Jhingor
</TABLE>
PREFERRED STOCK EXCHANGE OFFER
<TABLE>
<S> <C> <C>
BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER:
Tender & Exchange (For Eligible Institutions Only) Tender & Exchange
Department (212) 815-6213 Department
P.O. Box 11248 101 Barclay Street
Church Street Station CONFIRM FACSIMILE BY TELEPHONE: Receive and Deliver Window
New York, NY 10286-1248 (For Confirmation Only) New York, NY 10286
(800) 507-9357
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY PRIMEDIA. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF PRIMEDIA SINCE THE DATE AS OF WHICH
INFORMATION IS GIVEN IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information.......................... 2
Incorporation of Certain Documents by
Reference.................................... 2
Summary........................................ 3
Glossary of Certain Defined Terms.............. 19
Risk Factors................................... 22
Use of Proceeds................................ 26
Capitalization................................. 27
Selected Financial Information................. 28
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 30
Business....................................... 43
Management..................................... 51
The Exchange Offers............................ 53
Description of Notes........................... 62
Description of Preferred Stock and 8 5/8%
Subordinated Debentures...................... 87
Description of Capital Stock of the Company.... 103
Security Ownership of Certain Beneficial Owners
and Management............................... 108
Certain Federal Income Tax Considerations...... 109
Plan of Distribution........................... 109
Legal Matters.................................. 110
Experts........................................ 110
Unaudited Pro Forma Consolidated Financial
Data......................................... P-1
Index to Financial Statements.................. F-1
</TABLE>
[LOGO]
---------
PROSPECTUS
MAY , 1998
---------
OFFER TO EXCHANGE
$1,000 IN PRINCIPAL AMOUNT OF ITS 7 5/8% SENIOR NOTES DUE 2008 FOR EACH $1,000
IN PRINCIPAL AMOUNT OF ITS OUTSTANDING 7 5/8% SENIOR NOTES DUE 2008
OFFER TO EXCHANGE
ITS $8.625 SERIES H EXCHANGEABLE PREFERRED STOCK REDEEMABLE 2010 (LIQUIDATION
PREFERENCE $100 PER SHARE) (EXCHANGEABLE AT THE OPTION OF PRIMEDIA) FOR UP TO
2,500,000 SHARES OF ITS $8.625 SERIES G EXCHANGEABLE PREFERRED STOCK REDEEMABLE
2010 (LIQUIDATION PREFERENCE $100 PER SHARE) (EXCHANGEABLE AT THE OPTION OF
PRIMEDIA)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
PRIMEDIA is a Delaware Corporation. Reference is made to Section 102(b)(7)
of the Delaware General Corporation Law (the "DGCL"), which enables a
corporation in its original certificate of incorporation or an amendment thereto
to eliminate or limit the personal liability of a director for violations of the
director's fiduciary duty, except (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) pursuant to Section 174 of the DGCL (providing for liability of
directors for unlawful payment of dividends or unlawful stock purchase or
redemptions) or (iv) for any transaction from which a director derived an
improper personal benefit.
Reference also is made to Section 145 of the DGCL, which provides that a
corporation may indemnify any persons, including officers and directors, who
are, or are threatened to be made, parties to any threatened, pending or
completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person was an officer, director,
employee or agent of such corporation or is or was serving at the request of
such corporation as a director, officer, employee or agent of another
corporation or enterprise. The indemnity may include expenses (including
attorney's fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, provided such officer, director, employee or agent acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
corporation's best interest and, for criminal proceedings, had no reasonable
cause to believe that his conduct was unlawful. A Delaware corporation may
indemnify officers and directors in an action by or in the right of the
corporation under the same conditions, except that no indemnification is
permitted without judicial approval if the officer or director is adjudged to be
liable to the corporation. Where an officer or director is successful on the
merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses that such officer or
director actually and reasonably incurred.
Article 8 of the Certificate of Incorporation of PRIMEDIA provides that
except as provided under the DGCL, directors of PRIMEDIA shall not be personally
liable to the corporation or its stockholders for monetary damages for breach of
fiduciary duties as a director. Article 4 of the By-laws of PRIMEDIA provides
for indemnification of the officers and directors of PRIMEDIA to the full extent
permitted by applicable law and provides for the advancement of expenses.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
See Exhibit Index.
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
PRIMEDIA Inc. and Subsidiaries
For the Year Ended December 31, 1997................................................. S-1
For the Year Ended December 31, 1996................................................. S-2
For the Year Ended December 31, 1995................................................. S-3
Independent Auditors' Report on Schedules -- Deloitte & Touche LLP..................... S-4
</TABLE>
All Schedules, except those set forth above have been omitted since the
information required to be submitted has been included in the Consolidated
Financial Statements or Notes thereto or has been omitted as not applicable or
not required.
II-1
<PAGE>
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales of the
registered securities are being made, a post-effective amendment to this
registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in the volume of securities offered (if the total dollar
value of securities offered would not exceed that which was registered)
and any deviation from the low and high and of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change in such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that
is incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
the initial BONA FIDE offering thereof.
(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions
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 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, the
registrant will, unless in the opinion of its 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 Act and will be governed by the final
adjudication of such issue.
(6) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11, or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(7) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrants have
duly caused this Form S-4 Registration Statement to be signed on their behalf by
the undersigned, thereunto duly authorized, in the City of New York, State of
New York, on May 5, 1998.
<TABLE>
<S> <C> <C>
PRIMEDIA INC.
By: /S/ BEVERLY C. CHELL
-----------------------------------------
(Beverly C. Chell)
VICE CHAIRMAN AND SECRETARY
</TABLE>
<TABLE>
<S> <C>
THE APARTMENT GUIDE OF NASHVILLE, INC. INTERTEC PRESENTATIONS, INC.
ARGUS PUBLISHERS CORPORATION INTERTEC PUBLISHING CORPORATION
AMERICAN HEAT VIDEO PRODUCTIONS, INC. K-III HPC, INC.
ASTN, INC. K-III PRIME CORPORATION
A WEP COMPANY KITPLANES ACQUISITION COMPANY
BACON'S INFORMATION, INC. LAW ENFORCEMENT TELEVISION NETWORK, INC.
BANKERS CONSULTING COMPANY LIFETIME LEARNING SYSTEMS, INC.
BOWHUNTER MAGAZINE, INC. LITTLE ROCK APARTMENT GUIDE, INC.
CANOE & KAYAK, INC. LOCKERT JACKSON & ASSOCIATES, INC.
CARDINAL BUSINESS MEDIA, INC. LOW RIDER PUBLISHING GROUP, INC.
CARDINAL BUSINESS MEDIA HOLDINGS, INC. MCMULLEN ARGUS PUBLISHING, INC.
CHANNEL ONE COMMUNICATIONS CORP. MEMPHIS APARTMENT GUIDE, INC.
CLIMBING, INC. MUSICAL AMERICA PUBLISHING, INC.
COVER CONCEPTS MARKETING SERVICES, LLC NELSON INFORMATION, INC.
COWLES BUSINESS MEDIA, INC. PICTORIAL, INC.
COWLES ENTHUSIAST MEDIA, INC. PLAZA COMMUNICATIONS, INC.
COWLES HISTORY GROUP, INC. PRIMEDIA HOLDINGS III INC.
CSK PUBLISHING COMPANY INCORPORATED PRIMEDIA INFORMATION INC.
CUMBERLAND PUBLISHING, INC. PRIMEDIA MAGAZINES INC.
DRF FINANCE, INC. PRIMEDIA MAGAZINES FINANCE INC.
DAILY RACING FORM, INC. PRIMEDIA REFERENCE INC.
DATA BOOK, INC. PRIMEDIA SPECIAL INTEREST PUBLICATIONS INC.
THE ELECTRONICS SOURCE BOOK, INC. PRIMEDIA WORKPLACE LEARNING, INC.
EXCELLENCE IN TRAINING CORPORATION QWIZ, INC.
FILMS FOR THE HUMANITIES & SCIENCES, INC. R.E.R. PUBLISHING CORPORATION
FUNK & WAGNALLS YEARBOOK CORP. RETAILVISION, INC.
GARETH STEVENS, INC. SIMBA INFORMATION, INC.
GO LO ENTERTAINMENT, INC. SOUTHWEST ART, INC.
GUINN COMMUNICATIONS, INC. STRAIGHT DOWN, INC.
HAAS PUBLISHING COMPANIES, INC. SYMBOL OF EXCELLENCE PUBLISHERS, INC.
HEALTH & SCIENCES NETWORK, INC. TEL-A-TRAIN, INC.
HORSE & RIDER, INC. THE VIRTUAL FLYSHOP, INC.
INTERMODAL PUBLISHING COMPANY, LTD. TI-IN ACQUISITION CORPORATION
IDTN LEASING CORPORATION VEGETARIAN TIMES, INC.
INDUSTRIAL TRAINING SYSTEMS CORPORATION WEEKLY READER CORPORATION
INTELLICHOICE, INC. WESTCOTT COMMUNICATIONS MICHIGAN, INC.
INTERTEC MARKET REPORTS, INC. WESTCOTT ECI, INC.
WESTERN EMPIRE PUBLICATIONS, INC.
</TABLE>
<TABLE>
<S> <C> <C>
By: /s/ BEVERLY C. CHELL
-----------------------------------------
(Beverley C. Chell)
SECRETARY
</TABLE>
II-3
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Beverly C. Chell and Charles G. McCurdy, and each
of them, as his or her true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him or her and in his or her name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or either of them, or their or his or her
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Form S-4
Registration Statement has been signed below by the following persons in the
capacities indicated on May 5, 1998.
NAME TITLE
- ------------------------------ --------------------------
/S/ WILLIAM F. REILLY
- ------------------------------ Principal Executive
(William F. Reilly) Officer and Director
/S/ CHARLES G. MCCURDY
- ------------------------------ Principal Financial
(Charles G. McCurdy) Officer and Director
/S/ BEVERLY C. CHELL
- ------------------------------ Director
(Beverly C. Chell)
/S/ CURTIS A. THOMPSON
- ------------------------------ Principal Accounting
(Curtis A. Thompson) Officer
/S/ MEYER FELDBERG
- ------------------------------ Director
(Meyer Feldberg)
- ------------------------------ Director
(Henry R. Kravis)
- ------------------------------ Director
(George R. Roberts)
- ------------------------------ Director
(Michael T. Tokarz)
/S/ PERRY GOLKIN
- ------------------------------ Director
(Perry Golkin)
II-4
<PAGE>
SCHEDULE II
PRIMEDIA INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- -------------------------------------------- ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Accounts receivable
Allowance for doubtful accounts........... $ 15,418 $ 20,904 $ 850(1) $ (21,982)(3) $ 10,521
$ 1,732(2)
$ (6,401 (4)
Allowance for sales returns and rebates... $ 24,098 $ 83,438 $ (3,378 (4) $ (77,149)(3) $ 27,009
Inventory
Allowance for obsolescence................ $ 8,703 $ 5,674 $ 218(2) $ (4,837)(3) $ 2,482
$ (7,276 (4)
Accumulated amortization
Goodwill.................................. $ 82,763 $ 29,024 $ (17,026 (4) $ (26)(3) $ 94,735
Other intangibles......................... $ 814,061 $ 110,799 $ (282,911 (4) $ (87)(3) $ 641,862
Deferred financing costs.................. $ 9,794 $ 3,071 $ -- $ (7,772)(3) $ 5,093
Deferred wiring and installation costs.... $ 12,850 $ 7,008 $ (7 (4) $ (1,133)(3) $ 18,718
Prepublication and programming costs...... $ 7,968 $ 4,491 $ (3,489 (4) $ (2,127)(3) $ 6,843
Direct-response advertising costs......... $ 70,661 $ 42,659 $ (49,320 (4) $ (10,160)(3) $ 53,840
</TABLE>
- ------------------------
Notes:
(1) Increases in related valuation account result from acquisitions.
(2) Increases in related valuation account result from the recovery of amounts
previously written off.
(3) Deductions from related valuation account result from write-offs and actual
returns.
(4) Deductions from related valuation account result from reclassifications and
write-offs related to net assets held for sale.
S-1
<PAGE>
SCHEDULE II
PRIMEDIA INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER END OF
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ---------------------------------------- ------------ ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Accounts receivable
Allowance for doubtful accounts....... $ 14,364 $ 21,438l $ 62(1) $ (21,069 (3) $ 15,418
m $ 970(2)
n $ (347)(4)
Allowance for sales return and
rebates............................. $ 23,015 $ 79,819 $ -- $ (78,736 (3) $ 24,098
Inventory
Allowance for obsolescence............ $ 7,129 $ 4,423 $ 279(2) $ (3,128 (3) $ 8,703
Accumulated amortization
Goodwill.............................. $ 66,889 $ 23,576 $ (640)(4) $ (7,062 (3) $ 82,763
Other intangibles..................... $ 695,504 $ 122,140 $ (2,932)(4) $ (651 (3) $ 814,061
Deferred financing costs.............. $ 8,139 $ 3,662 -- $ (2,007 (3) $ 9,794
Deferred wiring and installation
costs............................... $ 7,163 $ 6,753 -- $ (1,066 (3) $ 12,850
Prepublication and programming
costs............................... $ 4,121 $ 5,963 -- $ (2,116 (3) $ 7,968
Direct-response advertising costs..... $ 29,569 $ 41,481 -- $ (389 (3) $ 70,661
</TABLE>
- ------------------------
Notes:
(1) Increases in related valuation account result from acquisitions.
(2) Increases in related valuation account result from the recovery of amounts
previously written off.
(3) Deductions from related valuation account result from write-offs and actual
returns.
(4) Deductions from related valuation account result from reclassifications and
write-offs related to net assets held for sale.
S-2
<PAGE>
SCHEDULE II
PRIMEDIA INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT
BEGINNING CHARGED TO CHARGED TO BALANCE AT
OF COSTS AND OTHER END OF
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ------------------------------------------ ----------- ----------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Accounts receivable $ 1,195(1) $ (20,526)(3) $ 14,364
Allowance for doubtful accounts......... $ 13,482 $ 19,276T $ 937(2)
Allowance for sales returns and $ 663(2) $ (82,072)(3) $ 23,015
rebates............................... $ 23,543 $ 80,859T 22(2)
Inventory
$ 622(1) $ (1,463)(3) $ 7,129
Allowance for obsolescence.............. $ 5,138 $ 2,662T $ 170(2)
Accumulated amortization
Goodwill................................ $ 29,312 $ 37,572 $ 5(2) -- $ 66,889
Other intangibles....................... $ 573,230 $ 122,609 -- $ (335)(3) $ 695,504
Deferred financing costs................ $ 5,004 $ 3,135 -- -- $ 8,139
Deferred wiring and installation
costs................................. $ 1,413 $ 6,334 -- $ (584)(3) $ 7,163
Prepublication and programming costs.... $ 6,732 $ 1,954 -- $ (4,565)(3) $ 4,121
Direct-response advertising costs......... $ 3,126 $ 28,774 -- $ (2,331)(3) $ 29,569
</TABLE>
- ------------------------
Notes:
(1) Increases in related valuation account result from acquisitions.
(2) Increases in related valuation account result from the recovery of amounts
previously written off.
(3) Deductions from related valuation account result from write-offs and actual
returns.
S-3
<PAGE>
INDEPENDENT AUDITORS' REPORT ON SCHEDULES
To the Shareholders and Board of Directors of
PRIMEDIA Inc.
New York, New York:
We have audited the consolidated balance sheets of PRIMEDIA Inc. and
subsidiaries as of December 31, 1997 and 1996, and the related statements of
consolidated operations, shareholders' equity (deficiency) and consolidated cash
flows for each of the three years in the period ended December 31, 1997, and
have issued our report thereon dated January 27, 1998 (April 23, 1998 as to Note
25) (included elsewhere in this Registration Statement). Our audits also
included the financial statement schedules of PRIMEDIA Inc. and subsidiaries,
listed in Item 21. These financial statement schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion based on
our audits. In our opinion, such financial statement schedules, when considered
in relation to the basic financial statements taken as a whole, present fairly
in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
New York, New York
January 27, 1998 (April 23, 1998 as to Note 25)
S-4
<PAGE>
SCHEDULE I: GUARANTORS
THE APARTMENT GUIDE OF NASHVILLE, INC.
ARGUS PUBLISHERS CORPORATION
AMERICAN HEAT VIDEO PRODUCTIONS, INC.
ASTN, INC.
A WEP COMPANY
BACON'S INFORMATION, INC.
BANKERS CONSULTING COMPANY
BOWHUNTER MAGAZINE, INC.
CANOE & KAYAK, INC.
CARDINAL BUSINESS MEDIA, INC.
CARDINAL BUSINESS MEDIA HOLDINGS, INC.
CHANNEL ONE COMMUNICATIONS CORP.
CLIMBING, INC.
COVER CONCEPTS MARKETING SERVICES, LLC
COWLES BUSINESS MEDIA, INC.
COWLES ENTHUSIAST MEDIA, INC.
COWLES HISTORY GROUP, INC.
CSK PUBLISHING COMPANY INCORPORATED
CUMBERLAND PUBLISHING, INC.
DRF FINANCE, INC.
DAILY RACING FORM, INC.
DATA BOOK, INC.
THE ELECTRONICS SOURCE BOOK, INC.
EXCELLENCE IN TRAINING CORPORATION
FILMS FOR THE HUMANITIES & SCIENCES, INC.
FUNK & WAGNALLS YEARBOOK CORP.
GARETH STEVENS, INC.
GO LO ENTERTAINMENT, INC.
GUINN COMMUNICATIONS, INC.
HAAS PUBLISHING COMPANIES, INC.
HEALTH & SCIENCES NETWORK, INC.
HORSE & RIDER, INC.
INTERMODAL PUBLISHING COMPANY, LTD.
IDTN LEASING CORPORATION
INDUSTRIAL TRAINING SYSTEMS CORPORATION
INTELLICHOICE, INC.
INTERTEC MARKET REPORTS, INC.
INTERTEC PRESENTATIONS, INC.
INTERTEC PUBLISHING CORPORATION
K-III HPC, INC.
K-III PRIME CORPORATION
KITPLANES ACQUISITION COMPANY
LAW ENFORCEMENT TELEVISION NETWORK, INC.
LIFETIME LEARNING SYSTEMS, INC.
LITTLE ROCK APARTMENT GUIDE, INC.
LOCKERT JACKSON & ASSOCIATES, INC.
LOW RIDER PUBLISHING GROUP, INC.
MCMULLEN ARGUS PUBLISHING, INC.
MEMPHIS APARTMENT GUIDE, INC.
MUSICAL AMERICA PUBLISHING, INC.
NELSON INFORMATION, INC.
PICTORIAL, INC.
<PAGE>
PLAZA COMMUNICATIONS, INC.
PRIMEDIA HOLDINGS III INC.
PRIMEDIA INFORMATION INC.
PRIMEDIA MAGAZINES INC.
PRIMEDIA MAGAZINES FINANCE INC.
PRIMEDIA REFERENCE INC.
PRIMEDIA SPECIAL INTEREST PUBLICATIONS INC.
PRIMEDIA WORKPLACE LEARNING, INC.
QWIZ, INC.
R.E.R. PUBLISHING CORPORATION
RETAILVISION, INC.
SIMBA INFORMATION, INC.
SOUTHWEST ART, INC.
STRAIGHT DOWN, INC.
SYMBOL OF EXCELLENCE PUBLISHERS, INC.
TEL-A-TRAIN, INC.
THE VIRTUAL FLYSHOP, INC.
TI-IN ACQUISITION CORPORATION
VEGETARIAN TIMES, INC.
WEEKLY READER CORPORATION
WESTCOTT COMMUNICATIONS MICHIGAN, INC.
WESTCOTT ECI, INC.
WESTERN EMPIRE PUBLICATIONS, INC.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT
- ---------- ---------------------------------------------------------------------------------------------------
<C> <C> <S>
4.1 -- Note Indenture (including form of note and form of guarantee).
4.2 -- Form of 8 5/8% Subordinated Debenture Indenture (including form of note).
4.3 -- Form of Certificate of Designations for the New Preferred Stock.
5 -- Opinion of Simpson Thacher & Bartlett regarding the legality of the securities being registered.
12 -- Statement regarding computation of ratio of earnings to fixed charges.
23.1 -- Consent of Deloitte & Touche LLP.
23.2 -- Consent of Simpson Thacher & Bartlett (included in their opinion filed as Exhibit 5).
24 -- Powers of Attorney (included on signature pages hereto).
25.1 -- Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939, of the
Bank of New York, as Trustee for the Notes.
25.2 -- Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939, of The
Bank of New York, as Trustee for the 8 5/8% Subordinated Debentures.
99.1(a) -- Form of Letter of Transmittal and related documents to be used in connection with the Note Exchange
Offer.
99.1(b) -- Form of Letter of Transmittal and related documents to be used in connection with the Preferred
Stock Exchange Offer.
99.2(a) -- Form of Notice of Guaranteed Delivery to be used in connection with the Note Exchange Offer.
99.2(b) -- Form of Notice of Guaranteed Delivery to be used in connection with the Preferred Stock Exchange
Offer.
99.3(a) -- Form of Exchange Agent Agreement between The Bank of New York and PRIMEDIA to be used in connection
with the Note Exchange Offer.
99.3(b) -- Form of Exchange Agent Agreement between the Bank of New York and PRIMEDIA to be used in connection
with the Preferred Stock Exchange Offer.
99.4 -- Registration Rights Agreement dated as of February 17, 1998, among PRIMEDIA, the subsidiaries
listed therein and the Initial Purchasers.
</TABLE>
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
EXHIBIT 4.1
PRIMEDIA INC.
and the Guarantors listed herein
7-5/8% Senior Notes due 2008
Series A and Series B
-------------
INDENTURE
Dated as of February 17, 1998
-------------
THE BANK OF NEW YORK
Trustee
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01 Definitions........................................... 1
Section 1.02 Other Definitions..................................... 16
Section 1.03 Incorporation by Reference of Trust Indenture Act..... 16
Section 1.04 Rules of Construction................................. 17
ARTICLE 2
THE SECURITIES
Section 2.01 Form and Dating....................................... 17
Section 2.02. Execution and Authentication......................... 18
Section 2.03. Registrar and Paying Agent........................... 18
Section 2.04. Paying Agent to Hold Money in Trust.................. 18
Section 2.05. Holder Lists........................................ 19
Section 2.06. Transfer and Exchange................................ 19
Section 2.07. Replacement Notes.................................... 30
Section 2.08. Outstanding Notes.................................... 30
Section 2.09. Treasury Notes....................................... 31
Section 2.10. Temporary Notes....................................... 31
Section 2.11. Cancellation.......................................... 31
Section 2.12. Defaulted Interest.................................... 31
Section 2.13 CUSIP Numbers......................................... 32
ARTICLE 3
OPTIONAL REDEMPTION AND
OPTIONAL REDEMPTION UPON CHANGE OF CONTROL
Section 3.01 Notices to Trustee.................................... 32
Section 3.02 Selection of Securities to Be Redeemed................ 32
Section 3.03 Notices to Holders.................................... 33
Section 3.04 Effect of Notice of Redemption......................... 33
Section 3.05 Deposit of Redemption Price or Purchase Price.......... 34
Section 3.06 Securities Redeemed in Part........................... 34
Section 3.07 Optional Redemption................................... 34
Section 3.08 Optional Redemption Upon Change of Control............ 35
Section 3.09 Sinking Fund...........................................35
ARTICLE 4
COVENANTS
Section 4.01 Payment of Securities................................. 35
Section 4.02 Maintenance of Office or Agency....................... 35
i
<PAGE>
PAGE
Section 4.03 SEC Reports; Financial Statements..................... 36
Section 4.04 Compliance Certificate................................ 36
Section 4.05 Compliance With Laws, Taxes........................... 37
Section 4.06 Stay, Extension and Usury Laws........................ 37
Section 4.07 Limitations on Restricted Payments.................... 38
Section 4.08 Dividends and Payment Restrictions Affecting
Restricted Subsidiaries.............................. 41
Section 4.09 Incurrence of Indebtedness............................ 41
Section 4.10 Change of Control..................................... 44
Section 4.11 Limitations on Asset Sales............................ 45
Section 4.12 Transactions With Affiliates.......................... 46
Section 4.13 Limitations on Liens.................................. 47
Section 4.14 Investments in Unrestricted Subsidiaries.............. 47
Section 4.15 Payments for Consent.................................. 48
Section 4.16 Corporate Existence................................... 49
Section 4.17 Subsidiary Ownership.................................. 49
Section 4.18 Rule 144A Information Requirement..................... 49
ARTICLE 5
SUCCESSORS
Section 5.01 Merger, Consolidation, or Sale of Assets.............. 49
Section 5.02 Successor Corporation Substituted..................... 50
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01 Events of Default..................................... 50
Section 6.02 Acceleration ......................................... 52
Section 6.03 Other Remedies........................................ 53
Section 6.04 Waiver of Past Defaults............................... 53
Section 6.05 Control by Majority................................... 53
Section 6.06 Limitations on Suits.................................. 53
Section 6.07 Rights of Holders to Receive Payment.................. 54
Section 6.08 Collection Suit by Trustee............................ 54
Section 6.09 Trustee May File Proofs of Claim...................... 54
Section 6.10 Priorities............................................ 55
Section 6.11 Undertaking for Costs................................. 55
ARTICLE 7
TRUSTEE
Section 7.01 Duties of Trustee..................................... 55
Section 7.02 Rights of Trustee..................................... 56
Section 7.03 Individual Rights of Trustee.......................... 57
Section 7.04 Trustee's Disclaimer.................................. 57
Section 7.05 Notice of Defaults.................................... 57
Section 7.06 Reports by Trustee to Holders......................... 57
Section 7.07 Compensation and Indemnity............................ 58
Section 7.08 Replacement of Trustee................................ 58
Section 7.09 Successor Trustee by Merger, etc...................... 59
ii
<PAGE>
PAGE
Section 7.10 Eligibility; Disqualification......................... 59
Section 7.11 Preferential Collection of Claims Against Company..... 59
ARTICLE 8
DISCHARGE OF INDENTURE
Section 8.01 Termination of Company's and Guarantors' Obligations.. 60
Section 8.02 Application of Trust Money............................ 61
Section 8.03 Repayment to Company.................................. 61
Section 8.04 Reinstatement......................................... 61
ARTICLE 9
AMENDMENTS
Section 9.01 Without Consent of Holders............................ 62
Section 9.02 With Consent of Holders............................... 62
Section 9.03 Compliance with Trust Indenture Act................... 63
Section 9.04 Revocation and Effect of Consents..................... 63
Section 9.05 Notation on or Exchange of Securities................. 64
Section 9.06 Trustee to Sign Amendments, etc....................... 64
ARTICLE 10
GUARANTEE
Section 10.01 Subsidiary Guarantee................................. 65
Section 10.02 Execution and Delivery of Guarantee.................. 66
Section 10.03 Guarantors May Consolidate, etc., on Certain Terms... 66
Section 10.04 Releases Following Sale of Assets.................... 67
Section 10.05 "Trustee" to Include Paying Agent.................... 67
Section 10.06 Additional Subsidiary Guarantees..................... 68
ARTICLE 11
MISCELLANEOUS
Section 11.01 Trust Indenture Act Controls......................... 68
Section 11.02 Notices............................................... 68
Section 11.03 Communication by Holders with Other Holders.......... 69
Section 11.04 Certificate and Opinion as to Conditions Precedent... 69
Section 11.05 Statements Required in Certificate or Opinion........ 69
Section 11.06 Rules by Trustee and Agents.......................... 70
Section 11.07 Legal Holidays....................................... 70
Section 11.08 No Recourse Against Others........................... 70
Section 11.09 Governing Law........................................ 70
Section 11.10 No Adverse Interpretation of Other Agreements........ 70
Section 11.11 Successors........................................... 71
Section 11.12 Severability......................................... 71
Section 11.13 Counterpart Originals................................ 71
Section 11.14 Trustee as Paying Agent and Registrar................ 71
Section 11.15 Table of Contents, Headings, etc..................... 71
Section 11.16 Bank of New York Not Acting in Individual Capacity... 71
iii
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PAGE
SIGNATURES ..................................................67, 68, 69
iv
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PAGE
EXHIBIT A FORM OF SECURITY
EXHIBIT A-1 FORM OF GUARANTEE
EXHIBIT B FROM OF CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
REGISTRATION OF TRANSFER OF SECURITIES
EXHIBIT C FORM OF CERTIFICATE OF EXCHANGE
EXHIBIT D FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED
INVESTOR
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INDENTURE, dated as of February 17, 1998, among PRIMEDIA Inc., a
Delaware corporation (the "COMPANY"), the corporations listed on Schedule I
hereto (each a "Guarantor" and collectively, the "GUARANTORS") and The Bank of
New York, a New York banking corporation, as Trustee.
Each party agrees as follows for the benefit of the other parties and
for the equal and ratable benefit of the Holders (as defined below) of 7-5/8%
Senior Notes due 2008 (the "SERIES A NOTES") and the 7-5/8% Senior Notes due
2008 to be issued in exchange for the Series A Notes (the "Series B Notes" and,
together with the Series A Notes, the "SECURITIES" or the "NOTES") issued by the
Company (as defined below):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01 DEFINITIONS
"144A GLOBAL NOTE" means a global note in the form of Exhibit A hereto
bearing the Global Note Legend and the Private Placement Legend and deposited
with or on behalf of, and registered in the name of, the Depositary or its
nominee that will be issued in a denomination equal to the outstanding principal
amount of the Notes sold in reliance on Rule 144A.
"ADJUSTED CONSOLIDATED NET INCOME" means, with respect to any Person
for any period, (i) the Consolidated Net Income of such Person for such period,
plus (ii) in the case of the Company and its Restricted Subsidiaries, all cash
received during such period by the Company or any Restricted Subsidiary from its
Unrestricted Subsidiaries from the payment of dividends or distributions
(including tax sharing payments and loans or advances which are junior in right
of payment to the Securities and have a longer Average Life than the
Securities), but only to the extent such cash payments are not otherwise
included in "Adjusted Consolidated Net Income." Each item of Adjusted
Consolidated Net Income will be determined in conformity with GAAP, except that,
for purposes of the application of Accounting Principles Board Opinions Nos. 16
and 17, such Person may select any amortization practice allowable by GAAP up to
40 years, notwithstanding the use of a different amortization in such Person's
consolidated financial statements. Any designation of a Subsidiary of the
Company as a Restricted Subsidiary or Unrestricted Subsidiary at or prior to the
time of the calculation of Adjusted Consolidated Net Income of a Subsidiary will
be treated as if it had occurred at the beginning of the applicable period.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. A Person shall be deemed to "control"
(including the correlative meanings, the terms "controlling," "controlled by,"
and "under common control with") another Person if the controlling Person
possesses, directly or indirectly the power to direct or cause the direction of
the management or policies, of the controlled person, whether through ownership
of voting securities, by agreement or otherwise.
"AGENT" means any Registrar or Paying Agent.
"APPLICABLE PREMIUM" with respect to any Security being redeemed
pursuant to Section 3.08 shall equal the greater of (i) 1.0% of the then
outstanding principal amount of such Security and (ii) the excess of (A) the
present value of the required interest and principal payments due on such
Security,
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computed using a discount rate equal to the Treasury Rate plus the
Applicable Spread, over (B) the then outstanding principal amount of such
Security.
"APPLICABLE PROCEDURES" means, with respect to any transfer or exchange
of or for beneficial interests in any Global Note, the rules and procedures of
the Depositary, Euroclear and Cedel that apply to such transfer or exchange.
"APPLICABLE SPREAD" means one half of one percent.
"ASSET SALE" means, with respect to any Person, the sale, lease,
conveyance, disposition or other transfer by the referent Person of any of its
assets (including by way of a sale-and-leaseback and including the sale or other
transfer of any of the Capital Stock of any Subsidiary of the referent Person);
PROVIDED, that notwithstanding the foregoing, the term "Asset Sale" shall not
include the sale, lease, conveyance, disposition or other transfer of (i) with
respect to an Unrestricted Subsidiary, (A) any assets not constituting all or
substantially all of the assets of any Net Cash Flow Unrestricted Subsidiary and
(B) any Capital Stock or any assets of any Restricted Payment Unrestricted
Subsidiary, (ii) all or substantially all of the assets of the Company, as
permitted pursuant to Section 5.01 hereof, (iii) any assets between the Company,
any Restricted Subsidiary or any Unrestricted Subsidiary, (iv) any sale,
conveyance, disposition or other transfer of (A) cash and cash equivalents, (B)
inventory in the ordinary course of business and (C) any other tangible or
intangible asset, in each case in the ordinary course of business, of the
Company or its Restricted Subsidiaries, or (v) the sale or discount, in each
case without recourse, of accounts receivable arising in the ordinary course of
business, but only in connection with the compromise or collection thereof.
"AVERAGE LIFE" means, as of the date of determination, with respect to
any debt security, the quotient obtained by dividing (i) the sum of the products
of the numbers of years from the date of determination to the dates of each
successive scheduled principal payment (assuming the exercise by the obligor of
such debt security of all unconditional (other than as to the giving of notice)
extension options of each such scheduled payment date) of such debt security
multiplied by the amount of such principal payment by (ii) the sum of all such
principal payments.
"BANK CREDIT FACILITY" means the $1.5 billion credit facilities with
The Chase Manhattan Bank, The Bank of New York, Bankers Trust Company and The
Bank of Nova Scotia, as agent.
"BANKRUPTCY LAW" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or any
authorized committee of the Board of Directors of the Company.
"BUSINESS DAY" means any day other than a Legal Holiday.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease which
would at such time be so required to be capitalized on the balance sheet in
accordance with GAAP.
"CAPITAL STOCK" means any and all shares, interests, participations,
rights or other equivalents (however designated) of corporate stock.
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"CEDEL" means Cedel Bank, SA.
"CHANGE OF CONTROL" means such time as (i) a "person" or "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), other
than KKR and its Affiliates, becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act) of more than (A) 35 percent (35%) of the total
voting power of the then outstanding voting stock of the Company and (B) the
total voting power of the then outstanding voting stock of the Company
beneficially owned by KKR and its Affiliates or (ii) during any period of two
consecutive calendar years, individuals who at the beginning of such period
constituted the Company's Board of Directors (together with any new directors
whose election by the Company's Board of Directors or whose nomination for
election by the Company's shareholders was approved by a vote of at least
two-thirds of the Directors then still in office who either were Directors at
the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
directors then in office.
"CLASS D SUBORDINATED DEBENTURES" means the 10% Class D Subordinated
Exchange Debentures due 2008 of the Company issuable in exchange for the Series
D Preferred Stock.
"CLASS E SUBORDINATED DEBENTURES" means the 9.20% Class E Subordinated
Exchange Debentures due 2009 of the Company issuable in exchange for the Series
E Preferred Stock.
"CLASS F SUBORDINATED DEBENTURES" means the 9.20% Class F Subordinated
Exchange Debentures due 2009 of the Company issuable in exchange for the Series
F Preferred Stock.
"CLASS G SUBORDINATED DEBENTURES" means the 8-5/8% Class G Subordinated
Exchange Debentures due 2010 of the Company issuable in exchange for the Series
G Preferred Stock.
"CLASS H SUBORDINATED DEBENTURES" means the 8-5/8% Class G Subordinated
Exchange Debentures due 2010 of the Company issuable in exchange for the Series
H Preferred Stock.
"CLASS D SUBORDINATED DEBENTURE INDENTURE" means the indenture between
the Company and the Subordinated Debenture Trustee referred to therein pursuant
to which the Class D Subordinated Debentures will be issued.
"CLASS E SUBORDINATED DEBENTURE INDENTURE" means the indenture between
the Company and the Subordinated Debenture Trustee referred to therein pursuant
to which the Class E Subordinated Debentures will be issued.
"CLASS F SUBORDINATED DEBENTURE INDENTURE" means the indenture between
the Company and the Subordinated Debenture Trustee referred to therein pursuant
to which the Class F Subordinated Debentures will be issued.
"CLASS G SUBORDINATED DEBENTURE INDENTURE" means the indenture between
the Company and the Subordinated Debenture Trustee referred to therein pursuant
to which the Class G Subordinated Debentures will be issued.
"CLASS H SUBORDINATED DEBENTURE INDENTURE" means the indenture between
the Company and the Subordinated Debenture Trustee referred to therein pursuant
to which the Class H Subordinated Debentures will be issued.
3
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"COMMON STOCK" means the common stock, par value $0.01 per share, of
the Company.
"COMPANY" means (i) PRIMEDIA Inc., a Delaware corporation, and (ii) any
successor of PRIMEDIA Inc. pursuant to Article 5 hereof.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any
period, the Adjusted Consolidated Net Income of such Person for such period PLUS
(a) (i) with respect to any Restricted Subsidiary other than a Partially Owned
Restricted Subsidiary, provision for taxes based on income or profits to the
extent such provision for taxes was included in computing Adjusted Consolidated
Net Income and (ii) with respect to any Partially Owned Restricted Subsidiary,
the Pro Rata Portion of any provision for taxes based on income or profits to
the extent such provision for taxes was included in computing Adjusted
Consolidated Net Income, PLUS (b) (i) with respect to any Restricted Subsidiary
other than a Partially Owned Restricted Subsidiary, consolidated Interest
Expense, whether paid or accrued, to the extent such expense was deducted in
computing Adjusted Consolidated Net Income (including amortization of original
issue discount and non-cash interest payments), and (ii) with respect to any
Partially Owned Restricted Subsidiary, the Pro Rata Portion of consolidated
Interest Expense, whether paid or accrued, to the extent such expense was
deducted in computing Adjusted Consolidated Net Income (including amortization
of original issue discount and non-cash interest payments), plus (c) (i) with
respect to any Restricted Subsidiary other than a Partially Owned Restricted
Subsidiary, depreciation, amortization and other non-cash charges to the extent
such depreciation, amortization and other non-cash charges were deducted in
computing Adjusted Consolidated Net Income (including amortization of goodwill
and other intangibles) and (ii) with respect to any Partially Owned Restricted
Subsidiary, the Pro Rata Portion of depreciation, amortization and other
non-cash charges to the extent such depreciation, amortization and other
non-cash charges were deducted in computing Adjusted Consolidated Net Income
(including amortization of goodwill and other intangibles); PROVIDED, with
respect to the calculation of a Person's Debt to Consolidated Cash Flow Ratio,
that if, during such period, (a) such Person or any of its Subsidiaries shall
have made any Asset Sales (other than, in the case of the Company and its
Restricted Subsidiaries, sales of the Capital Stock of or any assets of
Unrestricted Subsidiaries which constitute Asset Sales), Consolidated Cash Flow
of such Person for such period shall be reduced by an amount equal to the
Consolidated Cash Flow (if positive), to the extent such Consolidated Cash Flow
was included in computing Consolidated Cash Flow, directly attributable to the
assets or Capital Stock which are the subject of such Asset Sales for such
period or increased by an amount equal to the Consolidated Cash Flow (if
negative), to the extent such Consolidated Cash Flow was included in computing
Consolidated Cash Flow, directly attributable thereto for such period and (b)
such Person or any of its Subsidiaries (other than, in the case of the Company
and its Restricted Subsidiaries, Unrestricted Subsidiaries) has made any
acquisition of assets or Capital Stock (occurring by merger or otherwise),
including without limitation, any acquisition of assets or Capital Stock
occurring in connection with a transaction causing a calculation to be made
hereunder, Consolidated Cash Flow of such person shall be calculated
(notwithstanding clause (a) of the definition of Consolidated Net Income) as if
such acquisition of assets or Capital Stock (including the incurrence of any
Indebtedness in connection with any such acquisition and the application of the
proceeds thereof) took place on the first day of such period. Consolidated Cash
Flow of such Person shall be determined for any period without regard to changes
in Working Capital of such Person and its Subsidiaries during such period.
"CONSOLIDATED FIXED CHARGES" means, with respect to any Person for any
period, the (a) consolidated Interest Expense, whether paid or accrued, to the
extent such expense was deducted in computing Adjusted Consolidated Net Income
(including amortization of original issue discount and non-cash interest
payments) and (b) the amount of all cash dividend payments on all series of
preferred stock other than cash dividends on preferred stock of Unrestricted
Subsidiaries and cash dividends paid to such
4
<PAGE>
Person or its Subsidiaries; PROVIDED that with respect to Partially Owned
Restricted Subsidiaries, only the Pro Rata Portion of any amounts covered by
clauses (a) and (b) above shall be included in calculating Consolidated Fixed
Charges; PROVIDED FURTHER that if, during such period, (i) such Person or any of
its Subsidiaries shall have made any Asset Sales (other than in the case of the
Company and its Restricted Subsidiaries, sales of the Capital Stock of or any
assets of Unrestricted Subsidiaries which constitute asset sales), Consolidated
Fixed Charges of such Person for such period shall be reduced by an amount equal
to the Consolidated Fixed Charges directly attributable to the assets which are
the subject of such Asset Sales for such period and (ii) such Person or any of
its Subsidiaries (other than in the case of the Company and its Restricted
Subsidiaries, Unrestricted Subsidiaries) has made any acquisition of assets or
Capital Stock (occurring by merger or otherwise), including, without limitation,
any acquisition of assets or Capital Stock occurring in connection with the
transaction causing a calculation to be made hereunder, Consolidated Fixed
Charges of such Person shall be calculated as if such acquisition of assets or
Capital Stock (including the incurrence of any Indebtedness in connection with
any such acquisition and the application of the proceeds thereof) took place on
the first day of such period.
"CONSOLIDATED NET CASH FLOW" means, with respect to any Person for any
period, the aggregate Consolidated Cash Flow of such Person for such period,
MINUS (a) capital expenditures of such Person and its Subsidiaries (and in the
case of the Company and its Restricted Subsidiaries, excluding Unrestricted
Subsidiaries and, in the case of Partially Owned Restricted Subsidiaries,
including only the Pro Rata Portion thereof), MINUS (b) the aggregate amount of
all cash dividends paid by such Person and its Subsidiaries (and in the case of
the Company and its Restricted Subsidiaries, excluding Unrestricted Subsidiaries
and, in the case of Partially Owned Restricted Subsidiaries, including only the
Pro Rata Portion thereof) to holders of its Capital Stock other than to such
Person or its Subsidiaries, MINUS (c) the aggregate amount of all taxes based on
income or profits paid by such Person and its Subsidiaries (and in the case of
the Company and its Restricted Subsidiaries, excluding Unrestricted Subsidiaries
and, in the case of Partially Owned Restricted Subsidiaries, including only the
Pro Rata Portion thereof) other than to such Person or its Subsidiaries, MINUS
(d) cash Interest Expense of such Person and its Subsidiaries (and in the case
of the Company and its Restricted Subsidiaries, excluding Unrestricted
Subsidiaries and, in the case of Partially Owned Restricted Subsidiaries,
including only the Pro Rata Portion thereof), MINUS (e) repayments of principal
of Indebtedness by such Person and its Subsidiaries (and in the case of the
Company and its Restricted Subsidiaries, excluding Unrestricted Subsidiaries
and, in the case of Partially Owned Restricted Subsidiaries, including only the
Pro Rata Portion thereof), MINUS (f) any increases in Working Capital of such
Person and its Subsidiaries (and in the case of the Company and its Restricted
Subsidiaries, excluding Unrestricted Subsidiaries and, in the case of Partially
Owned Restricted Subsidiaries, including only the Pro Rata Portion thereof), and
PLUS (g) any decreases in Working Capital of such Person and its Subsidiaries
(and in the case of the Company and its Restricted Subsidiaries, excluding
Unrestricted Subsidiaries and, in the case of Partially Owned Restricted
Subsidiaries, including only the Pro Rata Portion thereof), in each case, for
such period and determined in accordance with GAAP; PROVIDED that in calculating
the amount referred to in clause (f) or (g) above, as the case may be, for any
period during which the Company or any of its Restricted Subsidiaries has
consummated an Asset Sale (other than, the case of the Company and its
Restricted Subsidiaries, sales of Capital Stock of, cash or any assets of
Unrestricted Subsidiaries which constitute Asset Sales), the portion of the
change in Working Capital for such period attributable to the entity or business
sold or purchased shall be based (x) in the case of such an Asset Sale, on the
change in Working Capital attributable to the entity or business sold from the
first day of such period to the date of the consummation of such sale and (y) in
the case of an acquisition, on the change in Working Capital attributable to the
entity or business acquired from the date of consummation of such acquisition to
the last day of such period.
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"CONSOLIDATED NET INCOME" means, with respect to any Person for any
period, the aggregate net income (or loss) of such Person and its Subsidiaries
(and in the case of the Company and its Restricted Subsidiaries, excluding
Unrestricted Subsidiaries and, with respect to any Partially Owned Restricted
Subsidiary, including only the Pro Rata Portion of the net income (or loss) of
such Partially Owned Restricted Subsidiary as of any date of determination of
Consolidated Net Income for the Company and its Restricted Subsidiaries) for
such period, on a consolidated basis, determined in accordance with GAAP,
provided that (i) the net income (or loss) of any Person which is not a
Subsidiary or is accounted for by the equity method of accounting shall be
included only to the extent of the amount of cash dividends or distributions
(including tax sharing payments and loans or advances which are junior in right
of payment to the Securities and have a longer Average Life than the Securities)
paid to the referent Person or a Subsidiary of the referent Person, (ii) except
to the extent includable pursuant to the foregoing clause (i), the income (or
loss) of any Person accrued prior to the date it becomes a Subsidiary of such
Person or is merged into or consolidated with such Person or any of its
Subsidiaries or that Person's assets are acquired by such Person or any of its
Subsidiaries shall be excluded, (iii) any gains or losses attributable to Asset
Sales net of related tax costs or tax benefits, as the case may be, shall be
excluded and (iv) the net income of any Unrestricted Subsidiary (and, solely for
purposes of Section 4.07 hereof, the net income of any Partially Owned
Restricted Subsidiary) shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by that Unrestricted Subsidiary
(or, solely for the purposes of Section 4.07 hereof, any Partially Owned
Restricted Subsidiary) of that net income is not at the date of determination
permitted without any prior governmental approval (that has not been obtained)
or, directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary or its stockholders that, in each such
case, has not been legally waived or otherwise satisfied.
"CONSOLIDATED NET WORTH" means, for purposes of this Indenture, at any
date of determination, the sum of the Capital Stock and additional paid-in
capital plus retained earnings (or minus accumulated deficit) of the referent
Person and its Subsidiaries on a consolidated basis, less amounts attributable
to Redeemable Stock, each item to be determined in conformity with GAAP
(excluding the effects of foreign currency exchange adjustments under Financial
Accounting Standards Board Statement of Financial Accounting Standards No. 52),
except that all effects of the application of Accounting Principles Board
Opinions Nos. 16 and 17 and related interpretations shall be disregarded.
"CORPORATE TRUST OFFICE" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be administered,
which office at the date of execution of this Indenture is located at 101
Barclay Street, New York, New York 10286, Attention: Corporate Trust and Agency
Group.
"CREDIT FACILITIES" means, collectively, the Bank Credit Facility and
the New Credit Facility, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, in each
case as amended, modified, renewed, refunded or refinanced from time to time, as
permitted in clause (i) of the second paragraph of Section 4.09 hereof.
"CURRENCY AGREEMENT" means the obligations of any Person pursuant to
any foreign exchange contract, currency swap agreement or other similar
agreement or arrangement designed to protect such Person or any of its
subsidiaries against fluctuations in currency values.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
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"DEBT TO CONSOLIDATED CASH FLOW RATIO" means the ratio of all
Indebtedness of the Company and its Restricted Subsidiaries to Consolidated Cash
Flow.
"DEFAULT" means any event, act or condition that is, or after notice or
the passage of time or both would be, an Event of Default.
"DEFINITIVE NOTE" means a certificated Note registered in the name of
the Holder thereof and issued in accordance with Section 2.06 hereof, in the
form of Exhibit A hereto except that such Note shall not bear the Global Note
Legend and shall not have the "Schedule of Exchanges of Interests in the Global
Note" attached thereto.
"DEPOSITARY" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof as
the Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"EQUITY INTERESTS" means Capital Stock, warrants, options or other
rights to acquire Capital Stock (but excluding any debt security which is
convertible into, or exchangeable for, Capital Stock).
"EUROCLEAR" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE OFFER" means the offer which may be made by the Company
pursuant to the Registration Rights Agreement to exchange Series A Notes for the
Series B Notes.
"EXCHANGE OFFER REGISTRATION STATEMENT" has the meaning set forth in
the Registration Rights Agreement.
"EXISTING INDEBTEDNESS" means Indebtedness of the Company and its
Subsidiaries (other than the Credit Facilities and the Outstanding Notes) in
existence on the date of this Indenture, until such amounts are repaid.
"FIXED CHARGE COVERAGE RATIO" means the ratio of Consolidated Cash Flow
to Consolidated Fixed Charges.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession,
which are applicable to the circumstances as of the date of this Indenture.
"GLOBAL NOTES" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"GLOBAL NOTE LEGEND" means the legend set forth in Section 2.06(g)(ii),
which is required to be placed on all Global Notes issued under this Indenture.
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"GUARANTEE" means, individually and collectively, the guarantees given
by the Guarantors pursuant to Article 10 hereof, including a notation in the
Securities substantially in the form attached hereto as Exhibit A-1.
"GUARANTEE DATE" means the date upon which a Guarantor executes a
Guarantee.
"GUARANTOR" means each domestic Restricted Subsidiary of the Company
(or successor of such Restricted Subsidiary) which executes a Guarantee.
"HOLDER" means a Person in whose name a Security is registered.
"IAI GLOBAL NOTE" means the global Note in the form of Exhibit A hereto
bearing the Global Note Legend and the Private Placement Legend and deposited
with or on behalf of and registered in the name of the Depositary or its nominee
that will be issued in a denomination equal to the outstanding principal amount
of the Notes sold to Institutional Accredited Investors.
"INDEBTEDNESS" of any Person means any indebtedness, contingent or
otherwise, in respect of borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof), or evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement obligations with respect thereto) or
representing the balance deferred and unpaid of the purchase price of any
property (including pursuant to financing leases), if and to the extent any of
the foregoing indebtedness would appear as a liability upon a balance sheet of
such Person prepared in accordance with GAAP (except that any such balance that
constitutes a trade payable and/or an accrued liability arising in the ordinary
course of business shall not be considered Indebtedness), and shall also
include, to the extent not otherwise included, any Capital Lease Obligations,
the maximum fixed repurchase price of any Redeemable Stock, indebtedness secured
by a Lien to which the property or assets owned or held by such Person is
subject, whether or not the obligations secured thereby shall have been assumed,
guarantees of items that would be included within this definition to the extent
of such guarantees (exclusive of whether such items would appear upon such
balance sheet), and net liabilities in respect of Currency Agreements and
Interest Rate Agreements. For purposes of the preceding sentence, the maximum
fixed repurchase price of any Redeemable Stock which does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Redeemable Stock as if such Redeemable Stock were repurchased on any date on
which Indebtedness shall be required to be determined pursuant to this
Indenture, provided that if such Redeemable Stock is not then permitted to be
repurchased, the repurchase price shall be the book value of such Redeemable
Stock. The amount of Indebtedness of any Person at any date shall be without
duplication (i) the outstanding balance at such date of all unconditional
obligations as described above and the maximum liability of any such contingent
obligations at such date and (ii) in the case of Indebtedness of others secured
by a Lien to which the property or assets owned or held by such Person is
subject, the lesser of the fair market value at such date of any asset subject
to a Lien securing the Indebtedness of others and the amount of the Indebtedness
secured. For the purpose of determining the aggregate Indebtedness of the
Company and its Restricted Subsidiaries, such Indebtedness shall exclude (a) the
Indebtedness of any Unrestricted Subsidiary of the Company or any Unrestricted
Subsidiary of a Restricted Subsidiary and (b) with respect to any Partially
Owned Restricted Subsidiary, the Pro Rata Portion of any Indebtedness of any
Partially Owned Restricted Subsidiary of the Company or any Partially Owned
Restricted Subsidiary of a Restricted Subsidiary pursuant to which the lender
thereunder does not have recourse to any of the assets of the Company or any of
its Restricted Subsidiaries.
"INDENTURE" means this Indenture as amended from time to time.
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"INDIRECT PARTICIPANT" means a Person who holds a beneficial interest
in a Global Note through a Participant.
"INITIAL PURCHASER" means Salomon Brothers Inc or Morgan Stanley & Co.
Incorporated.
"INSTITUTIONAL ACCREDITED INVESTOR" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not also QIBs.
"INTEREST EXPENSE" means, with respect to any Person, for any period,
the aggregate amount of interest in respect of Indebtedness (including all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing and the net cost (benefit)
associated with Interest Rate Agreements, and excluding amortization of deferred
finance fees and interest recorded as accretion in the carrying value of
liabilities (other than Indebtedness) recorded at a discounted value) and all
but the principal component of rentals in respect of Capital Lease Obligations,
paid, accrued or scheduled to be paid or accrued by such Person during such
period.
"INTEREST PAYMENT DATE" has the meaning assigned to such term in the
Securities.
"INTEREST RATE AGREEMENTS" means the obligations of any Person pursuant
to any interest rate swap agreement, interest rate collar agreement or other
similar agreement or arrangement designed to protect such Person or any of its
subsidiaries against fluctuations in interest rates.
"INVESTMENT" means any direct or indirect advance, loan (other than
advances to customers in the ordinary course of business, which are recorded as
accounts receivable on the balance sheet of any Person or its Subsidiaries) or
other extension of credit or capital contribution to (by means of any transfer
of cash or other property to others or any payment for property or services for
the account or use of others), or any purchase or acquisition of Capital Stock,
bonds, notes, debentures or other securities issued by any other Person. For the
purposes of Sections 4.07 and 4.14 hereof, (i) "Investment" shall include and be
valued at the fair market value of the net assets of any Restricted Subsidiary
at the time that such Restricted Subsidiary is designated an Unrestricted
Subsidiary and shall exclude the fair market value of the net assets of any
Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is
designated a Restricted Subsidiary and (ii) any property transferred to or from
an Unrestricted Subsidiary shall be valued at fair market value at the time of
such transfer, in each case as determined by the Board of Directors of the
Company in good faith.
"KKR" means Kohlberg Kravis Roberts & Co., L.P.
"LETTER OF TRANSMITTAL" means the letter of transmittal to be prepared
by the Company and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"LIEN" means any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind, whether or not filed, recorded or otherwise perfected
under applicable law (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to
sell or give any security interest in and any filing or other agreement to give
any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction).
"LIQUIDATED DAMAGES" means, with respect to any Securities, all unpaid
liquidated damages owing by the Company pursuant to Section 5 of the
Registration Rights Agreement for such Securities.
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"NET CASH FLOW UNRESTRICTED SUBSIDIARY" means an Unrestricted
Subsidiary which is not a Restricted Payment Unrestricted Subsidiary.
"NET PROCEEDS" means, with respect to any Asset Sale, the aggregate
cash proceeds (including any cash received by way of deferred payment pursuant
to a note receivable issued in connection with such Asset Sale, other than the
portion of such deferred payment constituting interest, and including any
amounts received as disbursement or withdrawals from any escrow or similar
account established in connection with any such Asset Sale, but, in either such
case, only as and when so received) received by the Company or any of its
Subsidiaries in respect of such Asset Sale, net of (i) the cash expenses of such
sale (including, without limitation, the payment of principal, premium, if any,
and interest on Indebtedness required to be paid as a result of such Asset Sale
(other than the Securities and amounts repaid pursuant to the Credit Facilities)
and legal, accounting and investment banking fees and sales commissions), (ii)
taxes paid or payable as a result thereof, (iii) any portion of cash proceeds
which the Company determines in good faith should be reserved for post-closing
adjustments, it being understood and agreed that on the day that all such
post-closing adjustments have been determined, the amount (if any) by which the
reserved amount in respect of such Asset Sale exceeds the actual post-closing
adjustments payable by the Company or any of its Subsidiaries shall constitute
Net Proceeds on such date and (iv) any relocation expenses and pension,
severance and shutdown costs incurred as a result thereof.
"NEW CREDIT FACILITY" means the $150 million credit facility with The
Chase Manhattan Bank, The Bank of New York, Bankers Trust Company and The Bank
of Nova Scotia, as agents.
"NON-U.S. PERSON" means a Person who is not a U.S. Person.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OFFICERS" means the President, the Treasurer, any Assistant Treasurer,
Controller, Secretary or any Vice President of the Company or any Guarantor, as
applicable.
"OFFICERS' CERTIFICATE" means a certificate signed by two Officers, one
of whom must be the Company's chief executive officer, chief financial officer
or controller financial accounting.
"OPINION OF COUNSEL" means a written opinion prepared in accordance
with Section 11.05 hereof and acceptable in form and substance to the Trustee,
from legal counsel who is acceptable to the Trustee. The counsel may be an
employee of or counsel to the Company or any Guarantor, if applicable, or the
Trustee.
"OPINION OF COUNSEL" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
11.05 hereof. The counsel may be an employee of or counsel to the Company, any
Subsidiary of the Company or the Trustee.
"OUTSTANDING NOTES" means the 10 1/4% Senior Notes due 2004 and the 8
1/2% Senior NOTES due 2006, as each may be amended, supplemented or otherwise
modified from time to time.
"OUTSTANDING NOTE INDENTURES" means the Indenture, dated as of May 31,
1994, among the Company, the guarantors listed therein and Bankers Trust
Company, as trustee, relating to the 10 1/4% Senior Notes due 2004, and the
Indenture, dated as of January 24, 1996, among the Company, the
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guarantors listed therein and The Bank of New York, as trustee, relating to the
8 1/2% Senior Notes due 2006, as each may be amended, supplemented or otherwise
modifiED from time to time.
"PARTIALLY OWNED RESTRICTED SUBSIDIARY" means any Restricted Subsidiary
other than a wholly-owned Restricted Subsidiary.
"PARTICIPANT" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
"PARTICIPATING BROKER-DEALER" has the meaning set forth in the
Registration Rights Agreement.
"PERMITTED LIENS" means (i) Liens for taxes, assessments, governmental
charges or claims which are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted and for which a reserve
or other appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made; (ii) statutory Liens of landlords and carriers',
warehousemen's, mechanics', suppliers', materialmen's, repairmen's, or other
like Liens arising in the ordinary course of business and with respect to
amounts not yet delinquent or being contested in good faith by appropriate
proceedings, if a reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP shall have been made therefor; (iii) Liens
incurred or deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security; (iv) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal bonds,
government contracts, performance and return-of-money bonds and other
obligations of a like nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money); (v) easements,
rights-of-way, restrictions, minor defects or irregularities in title and other
similar charges or encumbrances not interfering in any material respect with the
business of the Company or any of its Subsidiaries incurred in the ordinary
course of business; (vi) Liens (including extensions and renewals thereof) upon
real or tangible personal property acquired after the date of this Indenture,
PROVIDED that (a) any such Lien is created solely for the purpose of securing
Indebtedness representing, or incurred to finance, refinance or refund, the cost
(including the cost of construction) of the item of property subject thereto,
(b) the principal amount of the Indebtedness secured by such Lien does not
exceed 100% of such cost, (c) such Lien does not extend to or cover any other
property other than such item of property and any improvements on such item and
(d) the incurrence of such Indebtedness is permitted by Section 4.09 hereof;
(vii) Liens securing reimbursement obligations with respect to letters of credit
which encumber documents and other property relating to such letters of credit
and the products and proceeds thereof; (viii) Liens in favor of customs and
revenue authorities arising as a matter of law to secure payment of customs
duties in connection with the importation of goods; (ix) judgment and attachment
Liens not giving rise to an Event of Default; (x) leases or subleases granted to
others not interfering in any material respect with the business of the Company
or any of its Subsidiaries; (xi) Liens encumbering customary initial deposits
and margin deposits, and other Liens incurred in the ordinary course of business
and which are within the general parameters customary in the industry, in each
case securing Indebtedness under Interest Rate Agreements and Currency
Agreements; (xii) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual or warranty requirements of the Company
or its Subsidiaries; (xiii) Liens arising out of consignment or similar
arrangements for the sale of goods entered into by the Company or any of its
Subsidiaries in the ordinary course of business of the Company and its
Subsidiaries; (xiv) any interest or title of a lessor in the property subject to
any Capital Lease Obligation or operating lease; (xv) Liens arising from filing
Uniform Commercial Code financing statements regarding leases; (xvi) Liens
permitted by the Credit Facilities as in effect on the date of this Indenture;
(xvii) Liens securing Indebtedness described in
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clause (xii) of the second paragraph of Section 4.09 hereof; (xviii) Liens
between the Company and any Restricted Subsidiary or between Restricted
Subsidiaries; (xix) Liens securing letters of credit in an amount not to exceed
$75 million in the aggregate at any one time; (xx) Liens in an amount not to
exceed $50 million in the aggregate at any one time and (xxi) Liens incurred by
Partially Owned Restricted Subsidiaries which do not exceed 10% of Total Assets
in the aggregate at any one time.
"PERSON" means any individual, corporation, partnership, joint venture,
incorporated or unincorporated association, joint-stock company, trust,
unincorporated organization or government or other agency or political
subdivision thereof or other entity of any kind.
"PRO RATA PORTION" means, with respect to any Partially Owned
Restricted Subsidiary, the percentage of such Partially Owned Restricted
Subsidiary's outstanding Equity Interests beneficially owned by the Company and
its Restricted Subsidiaries.
"PRIVATE PLACEMENT LEGEND" means the legend set forth in Section
2.06(g)(i) to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"REDEEMABLE STOCK" means any Equity Interest which, by its terms (or by
the terms of any security into which it is convertible or for which it is
exchangeable before the stated maturity of the Securities), or upon the
happening of any event, matures or is mandatorily redeemable, in whole or in
part, prior to the stated maturity of the Securities, or is, by its terms or
upon the happening of any event, redeemable at the option of the holder thereof,
in whole or in part, at any time prior to the stated maturity of the Securities
except for Equity Interests of the Company issued to present and former members
of management of the Company and its Subsidiaries pursuant to subscription and
option agreements in effect on the date hereof and common stock and options of
the Company issued to future members of management of the Company and its
Subsidiaries pursuant to subscription agreements executed subsequent to the date
hereof containing provisions for the repurchase of such common stock and options
upon death, disability or termination of employment of such persons which are
substantially identical to those contained in the subscription agreements in
effect on the date hereof; provided that for purposes of Section 4.07 hereof and
that for purposes of the definition of Indebtedness, Redeemable Stock does not
include the Series B Preferred Stock, the Series D Preferred Stock, the Series E
Preferred Stock, the Series F Preferred Stock and the Series G Preferred Stock.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
dated February 17, 1998, between the Initial Purchasers, the Company and the
subsidiaries of the Company listed on the signature page thereto, as such
agreement may be amended, modified or supplemented from time to time.
"REGULATION S" means Regulation S promulgated under the Securities Act.
"REGULATION S GLOBAL NOTE" means a global Note bearing the Private
Placement Legend and deposited with or on behalf of the Depositary and
registered in the name of the Depositary or its nominee, issued in a
denomination equal to the outstanding principal amount of the Notes initially
sold in reliance on Rule 903 of Regulation S.
"RESPONSIBLE OFFICER" means, when used with respect to the Trustee, any
officer within the Corporate Trust and Agency Group (or any successor group
thereto) of the Trustee, including any Vice President, Assistant Vice President,
Secretary, Assistant Secretary or any other officer of the Trustee
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customarily performing functions similar to those performed by any of the above
designated officers and, with respect to a particular matter, any other officer
to whom such matter is referred because of such officer's knowledge and
familiarity with the particular subject.
"RESTRICTED DEFINITIVE NOTE" means a Definitive Note bearing the
Private Placement Legend.
"RESTRICTED GLOBAL NOTE" means a Global Note bearing the Private
Placement Legend.
"RESTRICTED PAYMENT UNRESTRICTED SUBSIDIARY" means an Unrestricted
Subsidiary which was capitalized exclusively with a permitted Restricted Payment
or the proceeds from the issuance of an Equity Interest by the Company or with
the proceeds of the sale of stock or substantially all of the assets of any
other Unrestricted Subsidiary which was capitalized with such funds to the
extent that a liquidating dividend is paid to the Company or any Restricted
Subsidiary from the proceeds of such sale.
"RESTRICTED PERIOD" means the 40-day restricted period as defined in
Regulation S.
"RESTRICTED SUBSIDIARY" means, for the purposes of this Indenture, a
Subsidiary of the Company which at the time of determination is not an
Unrestricted Subsidiary. The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; PROVIDED that immediately after giving
effect to such designation, the Company could incur at least $1.00 of additional
Indebtedness pursuant to the first paragraph of Section 4.09 hereof, on a pro
forma basis taking into account such designation.
"RULE 144" means Rule 144 promulgated under the Securities Act.
"RULE 144A" means Rule 144A promulgated under the Securities Act.
"RULE 903" means Rule 903 promulgated under the Securities Act.
"RULE 904" means Rule 904 promulgated the Securities Act.
"SEC" means the Securities and Exchange Commission.
"SECURITIES" means the Securities described above issued under this
Indenture.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SERIES D PREFERRED STOCK" means the Company's $10.00 Series D
Exchangeable Preferred Stock Redeemable 2008, par value $.01 per share.
"SERIES E PREFERRED STOCK" means the Company's $9.20 Series E
Exchangeable Preferred Stock Redeemable 2009, par value $.01 per share.
"SERIES F PREFERRED STOCK" means the Company's $9.20 Series F
Exchangeable Preferred Stock Redeemable 2009, issuable in exchange for the
Series E Preferred Stock and containing terms identical to the Series E
Preferred Stock.
"SERIES G PREFERRED STOCK" means the Company's $8.625 Series G
Exchangeable Preferred Stock Redeemable 2010, par value $.01 per share.
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"SERIES H PREFERRED STOCK" means the Company's $8.625 Series H
Exchangeable Preferred Stock Redeemable 2010 issuable in exchange for the Series
G Preferred Stock and containing terms identical to the Series G Preferred
Stock.
"SHELF REGISTRATION STATEMENT" means the Shelf Registration Statement
as defined in the Registration Rights Agreement.
"SUBORDINATED DEBENTURES" means the Company's 10% Class D Subordinated
Exchange Debentures due 2008, the 9.20% Class E Subordinated Exchange Debentures
due 2009, the 9.20% Class F Subordinated Exchange Debentures due 2009, the
8-5/8% Class G Subordinated Exchange Debentures due 2010, and the 8-5/8% Class H
Subordinated Exchange Debentures due 2010.
"SUBSIDIARY" of any Person means any corporation, association or other
business entity of which more than 50% of the total voting power of shares of
Capital Stock entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by such Person or one or more of
the other Subsidiaries of such Person or a combination thereof.
"TIA" means the Trust Indenture Act of 1939, as amended (15 U.S.C.
ss.ss. 77aaa-77bbbb).
"TOTAL ASSETS" means the total consolidated assets of the Company and
its Restricted Subsidiaries.
"TRANSFER RESTRICTED SECURITIES" means Securities that bear or are
required to bear the legend set forth in Section 2.06(b) hereof.
"TRANSFERS" means (i) any payment of interest on Indebtedness,
dividends or repayments of loans or advances and (ii) any other transfers of
assets, in each case from an Unrestricted Subsidiary to the Company or any of
its Restricted Subsidiaries.
"TREASURY RATE" means, for the purposes of this Indenture, the yield to
maturity at the time of computation of United States Treasury securities with a
constant maturity (as compiled by and published in the most recent Federal
Reserve Statistical Release H.15 (519) which has become publicly available at
least two Business Days prior to the date fixed for prepayment (or, if such
Statistical Release is no longer published, any publicly available source of
similar market data)) most nearly equal to the then remaining Average Life of
the Securities; PROVIDED that if the Average Life of the Securities is not equal
to the constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given, except that if the Average Life of the Securities is less than one year,
the weekly average yield on actually traded United States Treasury securities
adjusted to a constant maturity of one year shall be used.
"TRUSTEE" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"UNRESTRICTED DEFINITIVE NOTE" means one or more Definitive Notes that
do not bear and are not required to bear the Private Placement Legend.
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"UNRESTRICTED GLOBAL NOTE" means a permanent global Note in the form of
Exhibit A attached hereto that bears the Global Note Legend and that has the
"Schedule of Exchanges of Interests in the Global Note" attached thereto, and
that is deposited with or on behalf of and registered in the name of the
Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"UNRESTRICTED SUBSIDIARY" means, for the purposes of this Indenture,
(i) any Subsidiary of the Company which at the time of determination is an
Unrestricted Subsidiary (as designated by the Board of Directors, as provided
below) and (ii) any subsidiary of an Unrestricted Subsidiary. The Board of
Directors may designate any Subsidiary of the Company (including any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless
such Subsidiary owns any Capital Stock of, or owns, or holds any Lien on, any
property of, any other Subsidiary of the Company which is not a Subsidiary of
the Subsidiary to be so designated; PROVIDED that (a) the Company certifies that
such designation complies with Section 4.07 and 4.14 hereof, and (b) the
Subsidiary to be so designated has not at the time of designation, and does not
thereafter, create, incur, issue, assume, guarantee or otherwise become directly
or indirectly liable with respect to any Indebtedness pursuant to which the
lender has recourse to any of the assets of the Company or any of its Restricted
Subsidiaries. The Board of Directors may designate any Unrestricted Subsidiary
to be a Restricted Subsidiary; PROVIDED that immediately after giving effect to
such designation, the Company could incur at least $1.00 of additional
Indebtedness pursuant to the first paragraph of Section 4.09 hereof, on a PRO
FORMA basis taking into account such designation.
"U.S. GOVERNMENT OBLIGATIONS" means direct noncallable obligations of
or guaranteed by the United States of America.
"U.S. PERSON" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"WORKING CAPITAL" means, with respect to any Person for any period, the
current assets of such Person and its Subsidiaries (and in the case of the
Company and its Restricted Subsidiaries, excluding Unrestricted Subsidiaries
and, in the case of Partially Owned Restricted Subsidiaries, including only the
Pro Rata Portion thereof) on a consolidated basis, after excluding therefrom
cash and cash equivalents and deferred income taxes, less the current
liabilities of such person and its Subsidiaries (and in the case of the Company
and its Restricted Subsidiaries, excluding Unrestricted Subsidiaries and, in the
case of Partially Owned Restricted Subsidiaries, including only the Pro Rata
Portion thereof) on a consolidated basis, after excluding therefrom, in each
case to the extent otherwise included therein, all short-term Indebtedness for
borrowed money, the current portion of any long-term Indebtedness, liabilities
arising from the honoring by a bank or other financial institution of a check,
draft or similar instrument inadvertently (except in the case of daylight
overdrafts, which will not be, and will not be deemed to be, inadvertent) drawn
against insufficient funds in the ordinary course of business, PROVIDED that
such liabilities are extinguished within three business days of this incurrence,
and deferred income taxes of such Person and its Subsidiaries (and in the case
of the Company and its Restricted Subsidiaries, excluding Unrestricted
Subsidiaries and, in the case of Partially Owned Restricted Subsidiaries,
including only the Pro Rata Portion thereof).
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SECTION 1.02 OTHER DEFINITIONS
<TABLE>
<CAPTION>
DEFINED IN
TERM SECTION
<S> <C>
"Affiliate Transaction"....................................................... 4.12
"Change of Control Offer"..................................................... 4.10
"Change of Control Payment"................................................... 4.10
"Change of Control Payment Date".............................................. 4.10(2)
"Event of Default"............................................................ 6.01
"Legal Holiday"............................................................... 11.07
"Paying Agent"................................................................ 2.03
"Registrar"................................................................... 2.03
"Refinancing Indebtedness".................................................... 4.09
"Restricted Payments"......................................................... 4.07
"Retired Capital Stock"....................................................... 4.07
"Refunding Capital Stock"..................................................... 4.07
"Successor"................................................................... 5.01(i)
</TABLE>
SECTION 1.03 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"INDENTURE SECURITIES" means the Securities and the Guarantees.
"INDENTURE SECURITY HOLDER" means a Holder;
"INDENTURE TO BE QUALIFIED" means this Indenture;
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee;
"OBLIGOR" on the Securities means the Company, any other obligor upon
the Securities or any successor obligor upon the Securities or any Guarantor.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
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SECTION 1.04 RULES OF CONSTRUCTION
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural include
the singular; and
(5) provisions apply to successive events and transactions.
ARTICLE 2
THE SECURITIES
SECTION 2.01 FORM AND DATING
(a) GENERAL. The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes shall
be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture and the Company, the
Guarantors and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby. However,
to the extent any provision of any Note conflicts with the express provisions of
this Indenture, the provisions of this Indenture shall govern and be
controlling.
(b) GLOBAL NOTES. Notes issued in global form shall be substantially in
the form of Exhibit A attached hereto (including the Global Note Legend thereon
and the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Notes issued in definitive form shall be substantially in the form of
Exhibit A attached hereto (but without the Global Note Legend thereon and
without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee or the Note
Custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06 hereof.
(c) EUROCLEAR AND CEDEL PROCEDURES APPLICABLE. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to
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transfers of beneficial interests in the Regulation S Global Notes that are held
by Participants through Euroclear or Cedel Bank.
SECTION 2.02. EXECUTION AND AUTHENTICATION
One Officer shall sign the Notes for the Company by manual or facsimile
signature. The Company's seal may be reproduced on the Notes and may be in
facsimile form.
If an Officer whose signature is on a Note no longer holds that office
at the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature shall be conclusive evidence that the Note has
been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers (an "Authentication Order"), authenticate Notes for original issue.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or an
Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("REGISTRAR") and an
office or agency where Notes may be presented for payment ("PAYING AGENT"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall notify
the Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of
its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar and
Paying Agent and to act as Note Custodian with respect to the Global Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the Notes, and
will notify the Trustee of any default by the Company in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) shall have no
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<PAGE>
further liability for the money. If the Company or a Subsidiary acts as Paying
Agent, it shall segregate and hold in a separate trust fund for the benefit of
the Holders all money held by it as Paying Agent. Upon any bankruptcy or
reorganization proceedings relating to the Company, the Trustee shall serve as
Paying Agent for the Notes.
SECTION 2.05. HOLDER LISTS
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is
not the Registrar, the Company shalL furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Company shall otherwise comply with TIA ss. 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE
(a) TRANSFER AND EXCHANGE OF GLOBAL NOTES. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the
Depositary, by a nominee of the Depositary to the Depositary or to
another nominee of the Depositary, or by the Depositary or any such
nominee to a successor Depositary or a nominee of such successor
Depositary. All Global Notes will be exchanged by the Company for
Definitive Notes if (i) the Company delivers to the Trustee notice from
the Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered under
the Exchange Act and, in either case, a successor Depositary is not
appointed by the Company within 90 days after the date of such notice
from the Depositary or (ii) the Company in its sole discretion
determines that the Global Notes (in whole but not in part) should be
exchanged for Definitive Notes and delivers a written notice to such
effect to the Trustee. Upon the occurrence of either of the preceding
events in (i) or (ii) above, Definitive Notes shall be issued in such
names as the Depositary shall instruct the Trustee. Global Notes also
may be exchanged or replaced, in whole or in part, as provided in
Sections 2.07 and 2.11 hereof. Every Security authenticated and
delivered in exchange for, or in lieu of, a Global Note or any portion
thereof, pursuant to Section 2.07 or 2.11 hereof, shall be
authenticated and delivered in the form of, and shall be, a Global
Note. A Global Note may not be exchanged for another Security other
than as provided in this Section 2.06(a), however, beneficial interests
in a Global Note may be transferred and exchanged as provided in
Section 2.06(b), (c) or (f) hereof.
(b) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN THE GLOBAL NOTES.
The transfer and exchange of beneficial interests in the Global Notes
shall be effected through the Depositary, in accordance with the
provisions of this Indenture and the Applicable Procedures. Beneficial
interests in the Restricted Global Notes shall be subject to
restrictions on transfer comparable to those set forth herein to the
extent required by the Securities Act. Transfers of beneficial
interests in the Global Notes also shall require compliance with either
subparagraph (i) or (ii) below, as applicable, as well as one or more
of the other following subparagraphs as applicable:
(i) TRANSFER OF BENEFICIAL INTERESTS IN THE SAME GLOBAL NOTE.
Beneficial interests in any Restricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in
the same Restricted Global Note in accordance with the transfer
restrictions set forth in the Private Placement Legend; PROVIDED, that
prior to the expiration of the Restricted Period transfers of beneficial
interests in the Regulation S Global Note may not be made to a U.S. Person
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or for the account or benefit of a U.S. Person (other than an Initial
Purchaser). Beneficial interests in any Unrestricted Global Note may be
transferred only to Persons who take delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note. No written orders or
instructions shall be required to be delivered to the Registrar to effect
the transfers described in this Section 2.06(b)(i).
(ii)ALL OTHER TRANSFERS AND EXCHANGES OF BENEFICIAL INTERESTS IN GLOBAL
NOTES. In connection with all transfers and exchanges of beneficial
interests (other than a transfer of a beneficial interest in a Global Note
to a Person who takes delivery thereof in the form of a beneficial interest
in the same Global Note), the transferor of such beneficial interest must
deliver to the Registrar either (A) (1) a written order from a Participant
or an Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to credit or cause to be
credited a beneficial interest in another Global Note in an amount equal to
the beneficial interest to be transferred or exchanged and (2) instructions
given in accordance with the Applicable Procedures containing information
regarding the Participant account to be credited with such increase or (B)
(1) a written order from a Participant or an Indirect Participant given to
the Depositary in accordance with the Applicable Procedures directing the
Depositary to cause to be issued a Definitive Note in an amount equal to
the beneficial interest to be transferred or exchanged and (2) instructions
given by the Depositary to the Registrar containing information regarding
the Person in whose name such Definitive Note shall be registered to effect
the transfer or exchange referred to in (1) above; PROVIDED, that in no
event shall Definitive Notes be issued upon the transfer or exchange of
beneficial interests in the Regulation S Global Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar of
any certificates required pursuant to Rule 903 under the Securities Act.
Upon an Exchange Offer by the Company in accordance with Section 2.06(f)
hereof, the requirements of this Section 2.06(b)(ii) shall be deemed to
have been satisfied upon receipt by the Registrar of the instructions
contained in the Letter of Transmittal delivered by the Holder of such
beneficial interests in the Restricted Global Notes. Upon satisfaction of
all of the requirements for transfer or exchange of beneficial interests in
Global Notes contained in this Indenture, the Securities and otherwise
applicable under the Securities Act, the Trustee shall adjust the principal
amount of the relevant Global Note(s) pursuant to Section 2.06(h) hereof.
(iii) TRANSFER OF BENEFICIAL INTERESTS TO ANOTHER RESTRICTED GLOBAL
NOTE. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of clause (ii) above and the Registrar
receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications in item (1) thereof; and
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Global Note, then the
transferor must deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (2) thereof;
(C) if the transferee will take delivery in the form of a
beneficial interest in the IAI Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications and certificates and Opinion of Counsel required by item
(3) thereof, if applicable, and the tansferee must deliver a
certificate in the form of Exhibit D hereto.
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(iv)TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN A RESTRICTED
GLOBAL NOTE FOR BENEFICIAL INTERESTS IN THE UNRESTRICTED GLOBAL NOTE. A
beneficial interest in any Restricted Global Note may be exchanged by any
holder thereof for a beneficial interest in an Unrestricted Global Note or
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note if the exchange or
transfer complies with the requirements of clause (ii) above and:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the
holder of the beneficial interest to be transferred, in the case of an
exchange, or the transferee, in the case of a transfer, is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Securities or (3) a Person who is an affiliate (as defined in Rule 144)
of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
beneficial interest in an Unrestricted Global Note, a certificate from
such holder in the form of Exhibit C hereto, including the
certifications in item (1)(a) thereof;
(2) if the holder of such beneficial interest in a Restricted
Global Note proposes to transfer such beneficial interest to a Person
who shall take delivery thereof in the form of a beneficial interest in
an Unrestricted Global Note, a certificate from such holder in the form
of Exhibit B hereto, including the certifications in item (4) thereof;
and
(3) in each such case set forth in this subparagraph (D), an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are not required in order to
maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or
(D) above at a time when an Unrestricted Global Note has not yet been
issued, the Company shall issue and, upon receipt of an authentication
order in accordance with Section 2.02 hereof, the Trustee shall
authenticate one or more Unrestricted Global Notes in an aggregate
principal amount equal to the principal amount of beneficial interests
transferred pursuant to subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the
form of, a beneficial interest in a Restricted Global Note.
(c) TRANSFER OR EXCHANGE OF BENEFICIAL INTERESTS FOR DEFINITIVE NOTES.
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(i) BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES TO RESTRICTED
DEFINITIVE Notes. If any holder of a beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a Definitive
Note or to transfer such beneficial interest to a Person who takes delivery
thereof in the form of a Definitive Note, then, upon receipt by the
Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
Definitive Note, a certificate from such holder in the form of Exhibit
C hereto, including the certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications
in item (1) thereof;
(C) if such beneficial interest is being transferred to a Non-U.S.
Person in an offshore transaction in accordance with Rule 903 or Rule
904 under the Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred pursuant to an
exemption from the registration requirements of the Securities Act in
accordance with Rule 144 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in
item (3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those listed
in subparagraphs (B) through (D) above, a certificate to the effect set
forth in Exhibit B hereto, including the certifications, certificates
and Opinion of Counsel required by item (3) thereof, if applicable, and
a certificate in the form of Exhibit D hereto;
(F) if such beneficial interest is being transferred to the Company
or any of its Subsidiaries, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(b) thereof;
or
(G) if such beneficial interest is being transferred pursuant to an
effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof,
and the Company shall execute and the Trustee shall authenticate and make
available for delivery to the Person designated in the instructions a
Definitive Note in the appropriate principal amount. Any Definitive Note
issued in exchange for a beneficial interest in a Restricted Global Note
pursuant to this Section 2.06(c) shall be registered in such name or names
and in such authorized denomination or denominations as the holder of such
beneficial interest shall instruct the Registrar through instructions from
the Depositary and the Participant or Indirect Participant. The Trustee
shall make available for delivery such Definitive Notes to the Persons in
whose names such Notes are so registered. Any Definitive Note issued in
exchange for a beneficial interest in a Restricted Global Note pursuant to
this Section 2.06(c)(i) shall bear the Private Placement Legend and shall
be subject to all restrictions on transfer contained therein.
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(ii)BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES TO UNRESTRICTED
DEFINITIVE NOTES. A holder of a beneficial interest in a Restricted Global
Note may exchange such beneficial interest for an Unrestricted Definitive
Note or may transfer such beneficial interest to a Person who takes
delivery thereof in the form of an Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the
holder of such beneficial interest, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a Person
who is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
Definitive Note that does not bear the Private Placement Legend, a
certificate from such holder in the form of Exhibit C hereto, including
the certifications in item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a Restricted
Global Note proposes to transfer such beneficial interest to a Person
who shall take delivery thereof in the form of a Definitive Note that
does not bear the Private Placement Legend, a certificate from such
holder in the form of Exhibit B hereto, including the certifications in
item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
(iii) BENEFICIAL INTERESTS IN UNRESTRICTED GLOBAL NOTES TO UNRESTRICTED
DEFINITIVE NOTES. If any holder of a beneficial interest in an Unrestricted
Global Note proposes to exchange such beneficial interest for a Definitive
Note or to transfer such beneficial interest to a Person who takes delivery
thereof in the form of a Definitive Note, then, upon satisfaction of the
conditions set forth in Section 2.06(b)(ii) hereof, the Trustee shall cause
the aggregate principal amount of the applicable Global Note to be reduced
accordingly pursuant to Section 2.06(h) hereof, and the Company shall
execute and the Trustee shall authenticate and make available for delivery
to the Person designated in the instructions a Definitive Note in the
appropriate principal amount. Any Definitive Note issued in exchange for a
beneficial interest pursuant to this Section 2.06(c)(iii) shall be
registered in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall instruct the
Registrar through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall make available for delivery such
Definitive Notes to the Persons in whose names such Notes are so
registered. Any Definitive Note issued in exchange for a beneficial
interest pursuant to this section 2.06(c)(iii) shall not bear the Private
Placement Legend.
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A beneficial interest in an Unrestricted Global Note cannot be exchanged
for a Definitive Note bearing the Private Placement Legend or transferred
to a Person who takes delivery thereof in the form of a Definitive Note
bearing the Private Placement Legend.
(d) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR BENEFICIAL INTERESTS.
(i) RESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN RESTRICTED
GLOBAL Notes. If any Holder of a Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global Note or
to transfer such Definitive Notes to a Person who takes delivery thereof in
the form of a beneficial interest in a Restricted Global Note, then, upon
receipt by the Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global
Note, a certificate from such Holder in the form of Exhibit C hereto,
including the certifications in item (2)(b) thereof;
(B) if such Definitive Note is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications
in item (1) thereof;
(C) if such Definitive Note is being transferred to a Non-U.S.
Person in an offshore transaction in accordance with Rule 903 or Rule
904 under the Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (2) thereof;
(D) if such Definitive Note is being transferred pursuant to an
exemption from the registration requirements of the Securities Act in
accordance with Rule 144 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in
item (3)(a) thereof;
(E) if such Definitive Note is being transferred to the Company or
any of its Subsidiaries, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(b) thereof;
(F) if such Definitive Note is being transferred pursuant to an
effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof; or
(G) if such Definitive Note is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3) thereof, and a
certificate in the form of Exhibit D hereto,
the Trustee shall cancel the Definitive Note, increase or cause to be
increased the aggregate principal amount of, in the case of clause (A)
above, the appropriate Restricted Global Note, in the case of clause (B)
above, the 144A Global Note, in the case of clause (C) above, the
Regulation S Global Note and in the case of clause (G) above, the IAI
Global Note.
(ii)RESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN UNRESTRICTED
GLOBAL NOTES. A Holder of a Restricted Definitive Note may exchange such
Note for a beneficial interest in an Unrestricted
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Global Note or transfer such Restricted Definitive Note to a Person who
takes delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the
Holder, in the case of an exchange, or the transferee, in the case of a
transfer, is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an affiliate
(as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to
exchange such Notes for a beneficial interest in the Unrestricted
Global Note, a certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (1)(c) thereof;
(2) if the Holder of such Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof in the
form of a beneficial interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit B hereto, including
the certifications in item (4) thereof; and
(3) in each such case set forth in this subparagraph (D), an
Opinion of Counsel in form reasonably acceptable to the Company to the
effect that such exchange or transfer is in compliance with the
Securities Act, that the restrictions on transfer contained herein and
in the Private Placement Legend are not required in order to maintain
compliance with the Securities Act, and such Definitive Notes are being
exchanged or transferred in compliance with any applicable blue sky
securities laws of any State of the United States.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
(iii) UNRESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN
UNRESTRICTED GLOBAL NOTES. A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Definitive Notes to a Person who takes delivery thereof in
the form of a beneficial interest in an Unrestricted Global Note at any
time. Upon receipt of a request for such an exchange or transfer, the
Trustee shall cancel the applicable Unrestricted Definitive Note and
increase or cause to be increased the aggregate principal amount of one of
the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a beneficial
interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above
at a time when an Unrestricted Global Note has not yet been issued, the Company
shall issue and, upon receipt of an authentication order in accordance with
Section 2.02 hereof, the Trustee shall authenticate one or more Unrestricted
Global Notes in an
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aggregate principal amount equal to the principal amount of beneficial interests
transferred pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above.
(e) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR DEFINITIVE NOTES.
Upon request by a Holder of Definitive Notes and such Holder's compliance with
the provisions of this Section 2.06(e), the Registrar shall register the
transfer or exchange of Definitive Notes. Prior to such registration of transfer
or exchange, the requesting Holder shall present or surrender to the Registrar
the Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by his attorney, duly authorized in writing. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, pursuant to the provisions of this Section 2.06(e).
(i) RESTRICTED DEFINITIVE NOTES TO RESTRICTED DEFINITIVE NOTES.
Restricted Definitive Notes may be transferred to and registered in the
name of Persons who take delivery thereof if the Registrar receives the
following:
(A) if the transfer will be made pursuant to Rule 144A under the
Securities Act, then the transferor must deliver a certificate in the
form of Exhibit B hereto, including the certifications in item (1)
thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule 904,
then the transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (2) thereof;
(C) if the transfer will be made pursuant to an exemption from the
registration requirements of the Securities Act to an Institutional
Accredited Investor, then the transferor must deliver a certificate in
the form of Exhibit B hereto, including the certifications and
certificates and Opinion of Counsel required by item (3) thereof, if
applicable, and the transferee must deliver a certificate in the form
of Exhibit D hereto; and
(D) if the transfer will be made pursuant to any other exemption
from the registration requirements of the Securities Act, then the
transferor must deliver (x) a certificate in the form of Exhibit B
hereto, including the certifications, certificates and Opinion of
Counsel required by item (3) thereof, if applicable.
(ii)RESTRICTED DEFINITIVE NOTES TO UNRESTRICTED DEFINITIVE NOTES. Any
Restricted Definitive Note may be exchanged by the Holder thereof for an
Unrestricted Definitive Note or transferred to a Person or Persons who take
delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the
Holder, in the case of an exchange, or the transferee, in the case of a
transfer, is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an affiliate
(as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
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(C) any such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes proposes
to exchange such Notes for an Unrestricted Definitive Note, a
certificate from such Holder in the form of Exhibit C hereto, including
the certifications in item (1)(a) thereof;
(2) if the Holder of such Restricted Definitive Notes proposes
to transfer such Notes to a Person who shall take delivery thereof in
the form of an Unrestricted Definitive Note, a certificate from such
Holder in the form of Exhibit B hereto, including the certifications in
item (4) thereof; and
(3) in each such case set forth in this subparagraph (D), an
Opinion of Counsel in form reasonably acceptable to the Company to the
effect that such exchange or transfer is in compliance with the
Securities Act, that the restrictions on transfer contained herein and
in the Private Placement Legend are not required in order to maintain
compliance with the Securities Act, and such Restricted Definitive Note
is being exchanged or transferred in compliance with any applicable
blue sky securities laws of any State of the United States.
(iii) A Holder of Unrestricted Definitive Notes may transfer such Notes
to a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note. Upon receipt of a request for such a transfer, the
Registrar shall register the Unrestricted Definitive Notes pursuant to the
instructions from the Holder thereof. Unrestricted Definitive Notes cannot
be exchanged for or transferred to Persons who take delivery thereof in the
form of a Restricted Definitive Note.
(f) EXCHANGE OFFER. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Company shall issue and,
upon receipt of an authentication order in accordance with Section 2.02, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by persons that
are not (x) broker-dealers, (y) Persons participating in the distribution of the
Exchange Notes or (z) Persons who are affiliates (as defined in Rule 144) of the
Company and accepted for exchange in the Exchange Offer and (ii) Definitive
Notes in an aggregate principal amount equal to the principal amount of the
Restricted Definitive Notes accepted for exchange in the Exchange Offer.
Concurrent with the issuance of such Notes, the Trustee shall cause the
aggregate principal amount of the applicable Restricted Global Notes to be
reduced accordingly, and the Company shall execute and the Trustee shall
authenticate and make available for delivery to the Persons designated by the
Holders of Definitive Notes so accepted Definitive Notes in the appropriate
principal amount.
(g) LEGENDS. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) PRIVATE PLACEMENT LEGEND.
(A) Except as permitted by subparagraph (b) below, each Global Note
and each Definitive Note (and all Notes issued in exchange therefor or
substitution thereof) shall bear the legend in substantially the
following form:
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"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
THE SECURITIES ACT PROVIDED BY RULE 144A OR REGULATION S THEREUNDER. THE
HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (1)(a) INSIDE THE UNITED STATES TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A
FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER
THE SECURITIES ACT, (d) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" AS
DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF THE SECURITIES ACT (AN
"INSTITUTIONAL ACCREDITED INVESTOR") THAT, PRIOR TO SUCH TRANSFER,
FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS
AND AGREEMENTS (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF
SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF SECURITIES
LESS THAN $100,000, AN OPINION OF COUNSEL THAT SUCH TRANSFER IS IN
COMPLIANCE WITH THE SECURITIES ACT OR (e) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE
COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH
CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL,
AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF
THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE."
(B) Notwithstanding the foregoing, any Global Note or Definitive
Note issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii),
(d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and
all Notes issued in exchange therefor or substitution thereof) shall
not bear the Private Placement Legend.
(ii)GLOBAL NOTE LEGEND. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS
MAY BE REQUIRED PURSUANT TO SECTION
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2.06 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT
NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL
NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION
2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A
SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY."
(h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL NOTES. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
cancelled in whole and not in part, each such Global Note shall be returned to
or retained and cancelled by the Trustee in accordance with Section 2.11 hereof.
At any time prior to such cancellation, if any beneficial interest in a Global
Note is exchanged for or transferred to a Person who will take delivery thereof
in the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note shall be
reduced accordingly and an endorsement shall be made on such Global Note, by the
Trustee or by the Depositary at the direction of the Trustee, to reflect such
reduction; and if the beneficial interest is being exchanged for or transferred
to a Person who will take delivery thereof in the form of a beneficial interest
in another Global Note, such other Global Note shall be increased accordingly
and an endorsement shall be made on such Global Note, by the Trustee or by the
Depositary at the direction of the Trustee, to reflect such increase.
(I) GENERAL PROVISIONS RELATING TO TRANSFERS AND EXCHANGES.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Trustee shall authenticate Global Notes and
Definitive Notes upon the Company's order or at the Registrar's request.
(ii)No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Definitive Note for any
registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes
or similar governmental charge payable upon exchange or transfer pursuant
to Sections 2.10, 3.06, 4.08, and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer of
or exchange any Security selected for redemption in whole or in part,
except the unredeemed portion of any Security being redeemed in part.
(iv)All Global Notes and Definitive Notes issued upon any registration
of transfer or exchange of Global Notes or Definitive Notes shall be the
valid obligations of the Company, evidencing the same debt, and entitled to
the same benefits under this Indenture, as the Global Notes or Definitive
Notes surrendered upon such registration of transfer or exchange.
(v) The Company shall not be required (A) to issue, to register the
transfer of or to exchange Securities during a period beginning at the
opening of business 15 days before the day of mailing of a notice of
redemption under Section 3.02 hereof and ending at the close of business on
the day of selection, (B) to register the transfer of or to exchange any
Security so selected for redemption in whole or in part, except the
unredeemed portion of any Security being redeemed in part or (C) to
register the transfer of or to exchange a Security between a record date
and the next succeeding Interest Payment Date.
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(vi)Prior to due presentment for the registration of a transfer of any
Security, the Trustee, any Agent and the Company may deem and treat the
Person in whose name any Security is registered as the absolute owner of
such Security for the purpose of receiving payment of principal of and
interest on such Securities and for all other purposes, and none of the
Trustee, any Agent or the Company shall be affected by notice to the
contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive Notes
in accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 2.06 to
effect a transfer or exchange may be submitted by facsimile.
SECTION 2.07. REPLACEMENT NOTES
If any mutilated Note is surrendered to the Trustee or the Company and
the Trustee receives evidence to its satisfaction of the destruction, loss or
theft of any Note, the Company shall issue and the Trustee, upon receipt of an
Authentication Order, shall authenticate a replacement Note if the Trustee's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Company to protect the Company, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Company may charge for its expenses in replacing a Note.
Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note
does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Note; however, Notes held by the Company or a Subsidiary of
the Company shall not be deemed to be outstanding for purposes of Section
3.07(b) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
SECTION 2.09. TREASURY NOTES
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or by any Person directly or indirectly
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controlling or controlled by or under direct or indirect common control with the
Company, shall be considered as though not outstanding, except that for the
purposes of determining whether the Trustee shall be protected in relying on any
such direction, waiver or consent, only Notes that the Trustee knows are so
owned shall be so disregarded.
SECTION 2.10. TEMPORARY NOTES
Until certificates representing Notes are ready for delivery, the
Company may prepare and the Trustee, upon receipt of an Authentication Order,
shall authenticate temporary Notes. Temporary Notes shall be substantially in
the form of certificated Notes but may have variations that the Company
considers appropriate for temporary Notes and as shall be reasonably acceptable
to the Trustee. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
SECTION 2.11. CANCELLATION
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation. The Company may not
issue new Notes to replace Notes that it has paid or that have been delivered to
the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST
If the Company defaults in a payment of interest on the Notes, it shall
pay the defaulted interest in any lawful manner plus, to the extent lawful,
interest payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, in each case at the rate provided in the Notes
and in Section 4.01 hereof. The Company shall notify the Trustee in writing of
the amount of defaulted interest proposed to be paid on each Note and the date
of the proposed payment. The Company shall fix or cause to be fixed each such
special record date and payment date, PROVIDED that no such special record date
shall be less than 10 days prior to the related payment date for such defaulted
interest. At least 15 days before the special record date, the Company (or, upon
the written request of the Company, the Trustee in the name and at the expense
of the Company) shall mail or cause to be mailed to Holders a notice that states
the special record date, the related payment date and the amount of such
interest to be paid.
SECTION 2.13 CUSIP NUMBERS
The Company in issuing the Notes may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; PROVIDED that any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Notes or as contained in any notice of redemption and
that reliance may be placed only on the other identification numbers printed on
the Notes, and any such redemption shall not be affected by any defect in or
omission of such numbers. The Company will promptly notify the Trustee of any
change in the "CUSIP" numbers.
ARTICLE 3
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OPTIONAL REDEMPTION AND
OPTIONAL REDEMPTION UPON CHANGE OF CONTROL
SECTION 3.01 NOTICES TO TRUSTEE
(a) If the Company elects to redeem Securities pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 45 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth that such redemption shall occur pursuant to
Section 3.07 hereof and setting forth the redemption date, the principal amount
of Securities to be redeemed and the redemption price.
(b) If the Company elects to redeem Securities pursuant to the
provisions of Section 3.08 hereof, it shall furnish to the Trustee, at least 45
days but not more than 60 days before the redemption date, an Officers'
Certificate setting forth that a Change of Control has occurred and the date of
such Change of Control and that such redemption shall occur pursuant to Section
3.08 hereof, and further setting forth the principal amount of Securities to be
redeemed, the redemption price of such Securities and the intended redemption
date.
SECTION 3.02 SELECTION OF SECURITIES TO BE REDEEMED
If less than all of the Securities are to be redeemed at any time,
selection of the Securities for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the Securities are listed, or, if the Securities are not listed
on a national securities exchange, on a PRO RATA basis, by lot or by such method
as the Trustee shall deem fair and appropriate; provided that no Security in
denominations of $1,000 or less shall be redeemed in part. The Trustee may
select for redemption any portion (equal to $1,000 or any integral multiple
thereof) of the principal of Securities that have denominations larger than
$1,000. Except as provided in the preceding sentence, provisions of this
Indenture that apply to Securities called for redemption also apply to portions
of Securities called for redemption.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Security selected for
partial redemption, the principal amount thereof to be redeemed. The particular
Securities to be redeemed shall be selected, unless otherwise provided herein,
not less than 30 nor more than 60 days prior to the redemption date by the
Trustee from the outstanding Securities not previously called for redemption.
SECTION 3.03 NOTICES TO HOLDERS
(a) If the Company elects to redeem Securities pursuant to either of
Section 3.07 or 3.08 hereof, notice of redemption shall be mailed by first class
mail at least 30 days but not more than 60 days before the redemption date to
each Holder of Securities to be redeemed at its registered address.
The notice shall identify the Securities to be redeemed (including
CUSIP number) and shall state:
(1) the redemption date;
(2) the redemption price;
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(3) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that,
after the redemption date, upon surrender of such Security, a
new Security or Securities in principal amount equal to the
unredeemed portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Securities called for redemption must be surrendered to
the Paying Agent at the address specified in such notice to
collect the redemption price;
(6) that interest on Securities or portions of them called for
redemption ceases to accrue on and after the redemption date;
(7) the paragraph of the Securities pursuant to which the
Securities are being redeemed; and
(8) the aggregate principal amount of Securities that are being
redeemed.
(b) At the Company's timely request, the Trustee shall give the notice
required in Section 3.03(a) hereof above in the Company's name and at its
expense and setting forth the information to be stated in such notice as
provided in Section 3.03(a) hereof.
SECTION 3.04 EFFECT OF NOTICE OF REDEMPTION
Once notice of redemption is mailed (after the Trustee has received the
notice provided for in Section 3.01 hereof), Securities called for redemption
become due and payable on the redemption date at the redemption price and shall
cease to bear interest from and after the redemption date (unless the Company
shall fail to make payment of the redemption price or accrued interest on the
redemption date). Upon surrender to the Paying Agent, such Securities shall be
paid at the redemption price, plus premium and Liquidated Damages, if any, plus
accrued interest, if any, to the redemption date, but interest installments
whose maturity is on the redemption date and Liquidated Damages which become
payable on the redemption date will be payable to the Holder of record at the
close of business on the relevant record dates referred to in the Securities.
ECTION 3.05 DEPOSIT OF REDEMPTION PRICE OR PURCHASE PRICE
Prior to 10:00 a.m. on the redemption date, the Company shall deposit
with the Trustee or with the Paying Agent money (in same-day funds) sufficient
to pay the redemption price of, premium and Liquidated Damages, if any, and
accrued interest on, all Securities to be redeemed on that date other than
Securities or portions thereof called for redemption on that date which
previously have been delivered by the Company to the Trustee for cancellation.
The Trustee or the Paying Agent shall return to the Company any such money not
required for that purpose.
If the Company complies with the preceding paragraph, interest on the
Securities or portions thereof to be redeemed, whether or not such Securities
are presented for payment, will cease to accrue on the applicable redemption
date. If any Security called for redemption shall not be so paid upon surrender
for redemption because of the failure of the Company to comply with the
preceding paragraph, then interest will be paid on the unpaid principal from the
redemption date until such principal is paid and on
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any interest not paid on such unpaid principal, in each case, at the rate
provided in the Securities and in Section 4.01 hereof.
SECTION 3.06 SECURITIES REDEEMED IN PART
Upon surrender of a Security that is redeemed in part, the Company
shall issue and the Trustee, upon the written order of the Company, shall
authenticate for the Holder at the expense of the Company a new Security equal
in principal amount to the unredeemed portion of the Security surrendered.
SECTION 3.07 OPTIONAL REDEMPTION
The Company may redeem all or any of the Securities, in whole or in
part, at any time on or after April 1, 2003 at the redemption prices (expressed
as percentages of the principal amount) set forth in the immediately succeeding
paragraph, plus accrued and unpaid interest thereon to the applicable redemption
date.
The redemption price as a percentage of the principal amount shall be
as follows, if the Securities are redeemed during the twelve-month period
beginning April 1 of the year indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2003..................................................... 103.813%
2004..................................................... 102.542%
2005..................................................... 101.271%
2006 and thereafter...................................... 100.000%
</TABLE>
Notwithstanding the foregoing, upon the occurrence at any time of a
Change in Control, the Securities will be redeemable, at the option of the
Company, in whole or in part, pursuant to the provisions of Section 3.08 hereof.
Any redemption pursuant to this Section 3.07 shall be made, to the
extent applicable, pursuant to the provisions of Sections 3.01 through 3.06
hereof.
SECTION 3.08 OPTIONAL REDEMPTION UPON CHANGE OF CONTROL
In addition to any redemption pursuant to Section 3.07 hereof, the
Securities will be redeemable, at the option of the Holders, in whole or in
part, at any time within 160 days after a Change of Control upon not less than
30 nor more than 60 days' prior notice to the Company of Securities to be
redeemed, at a redemption price equal to the sum of (i) the then outstanding
principal amount of the Securities being redeemed plus Liquidated Damages for
such Securities, if any, plus (ii) accrued and unpaid interest, if any, to the
redemption date plus (iii) the Applicable Premium.
Any redemption pursuant to this Section 3.08 shall be made, to the
extent applicable, pursuant to the provisions of Sections 3.01 through 3.06
hereof.
SECTION 3.09 SINKING FUND
The Securities will not be entitled to any sinking fund payments.
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ARTICLE 4
COVENANTS
SECTION 4.01 PAYMENT OF SECURITIES
The Company shall pay the principal of and interest on the Securities
on the dates and in the manner provided in the Securities, and shall pay
Liquidated Damages, if any, on the dates and in the manner provided in the
Registration Rights Agreement. Principal and interest shall be considered paid
on the date due if the Paying Agent, other than the Company or a Subsidiary of
the Company, holds on that date money deposited by the Company in available
funds and designated for and sufficient to pay all principal and interest then
due.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
at the same rate per annum on the Securities to the extent lawful; it shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest (without regard to any
applicable grace period) at the same rate to the extent lawful.
SECTION 4.02 MAINTENANCE OF OFFICE OR AGENCY
The Company shall maintain, in the Borough of Manhattan, The City of
New York, an office or agency (which may be an office of the Trustee or the
Registrar) where Securities may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Securities and this Indenture may be served. The Company shall give prompt
written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the Corporate Trust Office of the Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
PROVIDED, HOWEVER, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York for such purposes. The Company shall
give prompt written notice to the Trustee of any such designation or rescission
and of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the Trustee
as one such office or agency of the Company in accordance with Section 2.03
hereof.
SECTION 4.03 SEC REPORTS; FINANCIAL STATEMENTS
(a) The Company and the Guarantors shall file with the Trustee, within
15 days after it files the same with the SEC, copies of the annual reports and
the information, documents and other reports (or copies of such portions of any
of the foregoing as the SEC may by rules and regulations prescribe) that the
Company and/or the Guarantors are required to file with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act. If the Company is not subject to the
requirements of such Section 13 or 15(d), the Company shall file with the
Trustee, within 15 days after it would have been required to file the same with
the SEC, financial statements, including any notes thereto (and with respect to
annual reports, an auditors' report by a firm of established national
reputation), and a "Management's Discussion and
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Analysis of Financial Condition and Results of Operations," both comparable to
that which the Company would have been required to include in such annual
reports, information, documents or other reports if the Company had been subject
to the requirements of such Section 13 or 15(d). Any Guarantor not required to
file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act shall not
be required to file such reports with the SEC or Trustee. The Company and the
Guarantors shall also comply with the other provisions of TIA ss.314(a).
(b) If the Company is required to furnish annual or quarterly reports
to its stockholders pursuant to the Exchange Act, the Company shall cause any
annual report furnished to its stockholders generally and any quarterly or other
financial reports furnished by it to its stockholders generally to be filed with
the Trustee and mailed to the Holders at their addresses appearing in the
register of Securities maintained by the Registrar. If the Company is not
required to furnish annual or quarterly reports to its stockholders pursuant to
the Exchange Act, so long as at least 5% of the original principal amount of the
Securities remain outstanding, the Company shall cause its financial statements
referred to in Section 4.03(a) hereof, including any notes thereto (and with
respect to annual reports, an auditors' report by a firm of established national
reputation), and a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" to be so mailed to the Holders within 90 days after
the end of each of the Company's fiscal years and within 60 days after the end
of each of the Company's first three fiscal quarters. The Company will cause to
be disclosed in a statement accompanying any annual report or comparable
information as of the date of the most recent financial statements in each such
report or comparable information the amount available for payments pursuant to
Section 4.07 hereof. As of the date hereof, the Company's fiscal year ends on
December 31. Any Guarantor not required to file with the SEC pursuant to Section
13 or 15(d) of the Exchange Act shall not be required to file such reports with
the SEC or Trustee.
SECTION 4.04 COMPLIANCE CERTIFICATE
(a) The Company shall deliver to the Trustee, within 120 days after the
end of each fiscal year of the Company, an Officers' Certificate stating that a
review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture, and further
stating, as to each such Officer signing such certificate, that to the best of
his knowledge the Company has kept, observed, performed and fulfilled each and
every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions hereof
(or, if a Default or Event of Default shall have occurred, describing all such
Defaults or Events of Default of which he may have knowledge and what action the
Company is taking or proposes to take with respect thereto) and that to the best
of his knowledge no event has occurred and remains in existence by reason of
which payments on account of the principal of or interest, if any, on the
Securities are prohibited or, if such event has occurred, a description of the
event and what action the Company is taking or proposes to take with respect
thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03 hereof shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Articles 4 or 5 of this Indenture or, if any such violation
has occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
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(c) The Company shall, so long as any of the Securities are
outstanding, (i) deliver to the Trustee, forthwith upon any Officer becoming
aware of any Default or Event of Default under this Indenture, an Officers'
Certificate specifying such Default or Event of Default and what action the
Company is taking or proposes to take with respect thereto and (ii) promptly
notify the Trustee of any Change of Control.
SECTION 4.05 COMPLIANCE WITH LAWS, TAXES
The Company shall, and shall cause each of its Subsidiaries to, comply
with all statutes, laws, ordinances, or government rules and regulations to
which it is subject, noncompliance with which would materially adversely affect
the business, earnings, properties, assets or condition, financial or otherwise,
of the Company and its Subsidiaries taken as a whole.
The Company shall, and shall cause each of its Subsidiaries to, pay
prior to delinquency all taxes, assessments, and governmental levies except as
contested in good faith and by appropriate proceedings.
SECTION 4.06 STAY, EXTENSION AND USURY LAWS
The Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the Company's
obligation to pay the Securities; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
insofar as such law applies to the Securities, and covenants that it shall not,
by resort to any such law, hinder, delay or impede the execution of any power
herein granted to the Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.
SECTION 4.07 LIMITATIONS ON RESTRICTED PAYMENTS
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, (i) declare or pay any dividend or make
any distribution on account of the Company's or any of its Restricted
Subsidiaries' Capital Stock or other Equity Interests (other than (A) dividends
or distributions payable in Equity Interests (other than Redeemable Stock) of
the Company or such Restricted Subsidiary or (B) dividends or distributions
payable to the Company or any of its Restricted Subsidiaries), (ii) (A)
voluntarily purchase, redeem or otherwise acquire or retire for value any
preferred stock of the Company or any of its Restricted Subsidiaries, which by
its terms, is exchangeable for any Indebtedness that is pari passu with or
subordinated in right of payment to the Securities or (B) purchase, redeem or
otherwise acquire or retire for value any Equity Interests (other than
Exchangeable Preferred Stock) of the Company or any of its Restricted
Subsidiaries (other than any such Equity Interests purchased from the Company or
any of its Restricted Subsidiaries), (iii) voluntarily purchase, repay, redeem,
defease (including, but not limited to, covenant or legal defeasance) or
otherwise acquire or retire for value any Indebtedness (other than (A) the
Securities, (B) Indebtedness under the Credit Facilities, (C) Indebtedness
permitted under clause (v) or (vi) of the second paragraph of Section 4.09
hereof, and any extension, refinancing, renewal, replacement, substitution or
refunding thereof permitted under clause (vii) of the second paragraph of
Section 4.09 hereof or (D) Indebtedness between and among the Company and its
Restricted Subsidiaries) that is PARI PASSU with or subordinated in right of
payment to the Securities (other than in connection with the refunding or
refinancing of such Indebtedness) or (iv) make Investments in
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Restricted Payment Unrestricted Subsidiaries (the foregoing actions set forth in
clauses (i) through (iv) being referred to as "Restricted Payments"), if, at the
time of such Restricted Payment:
(a) a Default or Event of Default shall have occurred and be continuing
or shall occur as a consequence thereof; or
(b) the Company could not incur at least $1.00 of additional
Indebtedness pursuant to the first paragraph of Section 4.09 hereof
(without giving effect to clauses (i) through (xv) of the second paragraph
thereof), which calculation shall be made on a PRO FORMA basis deducting
from Adjusted Consolidated Net Income the amount of any Investment the
Company has made in an Unrestricted Subsidiary during the relevant period
and any Investment the Company intends to make in an Unrestricted
Subsidiary, to the extent that such Investment is made with amounts
included in Adjusted Consolidated Net Income as a result of Transfers
described in clause (c)(x) of this Section 4.07 or clause (c)(y) of Section
4.14 hereof; or
(c) such Restricted Payment, together with the aggregate of all other
Restricted Payments made after May 13, 1992 exceeds the sum of the
following: (w) 50% of the amount of the Adjusted Consolidated Net Income
(other than amounts included in the next succeeding clause (c)(x)) of the
Company for the period (taken as one accounting period) from the beginning
of the first quarter commencing immediately after May 13, 1992 through the
end of the Company's fiscal quarter ending immediately prior to the time of
such Restricted Payment (or, if Adjusted Consolidated Net Income for such
period is a deficit, 100% of such deficit); PLUS (x) 100% of the amount of
all Transfers from a Restricted Payment Unrestricted Subsidiary up to the
aggregate amount of the Investment (after taking into account all prior
Transfers from such Restricted Payment Unrestricted Subsidiary) in such
Restricted Payment Unrestricted Subsidiary (valued in each case as provided
in the definition of "Investment"); PLUS (y) in the event of a designation
of a Restricted Payment Unrestricted Subsidiary as a Restricted Subsidiary,
100% of an amount equal to the greater of (A) the fair market value of such
Subsidiary as determined by the Board of Directors in good faith (or, if
such fair market value may exceed $25.0 million, as determined in writing
by an independent investment banking firm of nationally recognized
standing) at the time of the redesignation of such Restricted Payment
Unrestricted Subsidiary as a Restricted Subsidiary and (B) the Consolidated
Net Cash Flow generated by such Subsidiary for the period (taken as one
accounting period) from the beginning of its first fiscal quarter
commencing immediately after the date of its designation as a Restricted
Payment Unrestricted Subsidiary through such Subsidiary's fiscal quarter
ending immediately prior to its designation as a Restricted Subsidiary (or
if such Consolidated Net Cash Flow for such period is a deficit, 100% of
such deficit); PLUS (z) 100% of the aggregate net cash proceeds received by
the Company from (i) the issuance or sale of Equity Interests of the
Company (other than such Equity Interests issued or sold to a Restricted
Subsidiary of the Company and other than Redeemable Stock) or (ii) the sale
of the stock of an Unrestricted Subsidiary or the sale of all or
substantially all of the assets of an Unrestricted Subsidiary to the extent
that a liquidating dividend is paid to the Company or any Restricted
Subsidiary from the proceeds of such sale;
PROVIDED, HOWEVER, that for purposes of making Investments in Unrestricted
Subsidiaries, if the amount determined in accordance with clauses (w) or (y)
above is a deficit, such deficit shall be excluded from the computation of this
clause (c); and PROVIDED, FURTHER, that all such amounts applied pursuant to
this clause (c) shall not be available for application under clause (c) of
Section 4.14 hereof.
The foregoing provisions shall not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the
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provisions of this Indenture; (ii) (A) the retirement of any shares of the
Company's Capital Stock (the "Retired Capital Stock") either (1) in exchange for
or (2) out of the net proceeds of the substantially concurrent sale (other than
to a Restricted Subsidiary of the Company) of other shares of the Company's
Capital Stock (the "Refunding Capital Stock") other than any Redeemable Stock,
and (B) if immediately prior to such retirement of such Retired Capital Stock
the declaration and payment of dividends thereon was permitted under either
clause (iii) or (vii) of this paragraph, the declaration and payment of
dividends on the Refunding Capital Stock in an aggregate amount per year no
greater than the aggregate amount of dividends per year that was declarable and
payable on such Retired Capital Stock immediately prior to such retirement;
(iii) the declaration and payment of dividends to the holders of the Series D
Preferred Stock, Series E Preferred Stock, Series F Preferred Stock and the
Series G Preferred Stock; (iv) the repurchase, redemption or other acquisition
or retirement for value of any Equity Interests of the Company issued to present
and former members of management of the Company and its Subsidiaries pursuant to
subscription and option agreements in effect on the date hereof and Equity
Interests of the Company issued to future members of management pursuant to
subscription agreements executed subsequent to the date hereof, containing
provisions for the repurchase of such Equity Interests upon death, disability or
termination of employment of such persons which are substantially identical to
those contained in the subscription agreements in effect on the date hereof; (v)
the declaration and payment of dividends on the Company's Common Stock of up to
$25.0 million per annum plus 6% per annum of the net proceeds received at any
time by the Company from (a) the issue or sale of Common Stock or (b) (1) the
issuance of securities convertible into Common Stock (other than any such
convertible securities issued to (A) members of the Company's management or its
Board of Directors and (B) any Subsidiary of the Company) and (2) the conversion
of such convertible securities into Common Stock, in both cases at the time of
such conversion into Common Stock; (vi) the repurchase, redemption or other
acquisition or retirement for value of Indebtedness of the Company which is
subordinated in right of payment to the Securities either (A) in exchange for or
(B) with the proceeds of the issuance of, Equity Interests (other than
Redeemable Stock) of the Company; (vii) the declaration and payment of dividends
to holders of any class or series of the Company's preferred stock issued after
the date hereof (including, without limitation, the declaration and payment of
dividends on Refunding Capital Stock in excess of the dividends declarable and
payable thereon pursuant to clause (ii) of this paragraph), PROVIDED that at the
time of such issuance the Company's Fixed Charge Coverage Ratio, after giving
effect to such issuance, would be greater than 1.25 to 1; (viii) the redemption,
repurchase or other acquisition or retirement for value of any Indebtedness of
the Company which is subordinated in right of payment to the Securities (A) with
the proceeds of, or in exchange for, Indebtedness incurred pursuant to clause
(vii) of the second paragraph of Section 4.09 hereof or (B) if, after giving
effect to such redemption, repurchase or retirement, the Company could incur at
least $1.00 of Indebtedness under the first paragraph of Section 4.09 hereof
(without giving effect to clauses (i) through (xv) of the second paragraph
thereof); (ix) the retirement of the Series B Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock, Series F Preferred Stock and Series G
Preferred Stock in exchange for the issuance of the Class B Subordinated
Debentures, Class D Subordinated Debentures, Class E Subordinated Debentures,
Class F Subordinated Debentures and Class G Subordinated Debentures,
respectively, pursuant to the respective certificates of designations relating
thereto, (x) the purchase of Class B Subordinated Debentures, Class D
Subordinated Debentures, Class E Subordinated Debentures, Class F Subordinated
Debentures and Class G Subordinated Debentures in accordance with the Change of
Control covenants in the Class B Debenture Indenture, the Class D Debenture
Indenture, the Class E Debenture Indenture, the Class F Debenture and the Class
G Debenture Indenture, respectively; (xi) Investments in Unrestricted
Subsidiaries having an aggregate fair market value, when taken together with all
other Investments made pursuant to this clause (xi) that are at that time
outstanding, not to exceed $50.0 million at the time of such Investment (with
the fair market value of each Investment being measured at the time made and
without giving effect to subsequent changes in value); (xii) the repurchase,
retirement or other acquisition for value of Equity Interests of the Company
which are not held
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by KKR or any of its Affiliates; PROVIDED, that (A) the aggregate Restricted
Payments made under this clause (xii) shall not exceed $75 million and (B)
immediately after giving effect to each Restricted Payment made pursuant to this
clause (xii) on a pro forma basis, the Company could incur at least $1.00 of
additional Indebtedness pursuant to the first paragraph of Section 4.09 hereof
and (xiii) other Restricted Payments in an aggregate amount not to exceed $25
million; PROVIDED that in determining the aggregate amount expended for
Restricted Payments in accordance with paragraph (c) above, (1) no amounts
expended under clauses (ii)(A)(1), (vi)(A), (viii) and (ix) of this paragraph
will be included, (2) 100% of the amounts expended under clauses (ii)(A)(2),
(iv), (v), (vi)(B), (vii), (x), (xi), (xii) and (xiii) of this paragraph will be
included, (3) 50% of the amounts expended under clause (iii) of this paragraph
will be included, (4) amounts expended under clause (ii)(B) of this paragraph
will be included to the extent previously included for the Retired Capital Stock
and (5) 100% of the amounts expended under clause (i) to the extent not included
under subclauses (1) through (4) of this proviso will be included. For the
purposes of determining compliance with this Section 4.07, in the event that a
Restricted Payment meets the criteria of more than one of the categories of
permitted Restricted Payments described in clauses (i) through (xiii) above or
is entitled to be incurred pursuant to the first paragraph of this Section 4.07
(including clauses (a), (b) and (c) thereof), the Company shall, in its sole
discretion, classify such Restricted Payment in any manner that complies with
the covenants described above and such Restricted Payment will be treated as
having been made pursuant to only one of such clauses or pursuant to the first
paragraph of this Section 4.07.
Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officer's Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 4.07 were computed, which calculations may
be based on the Company's latest available internal financial statements.
SECTION 4.08 DIVIDENDS AND PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (i) pay dividends or make any other distributions on
its Capital Stock, or any other interest or participation in, or measured by,
its profits, owned by the Company or any of its Restricted Subsidiaries, or pay
any Indebtedness owed to the Company or any of its Restricted Subsidiaries, (ii)
make loans or advances to the Company or any of its Restricted Subsidiaries or
(iii) transfer any of its properties or assets to the Company or any of its
Restricted Subsidiaries, except for such encumbrances or restrictions existing
under or by reason of: (A) the terms (as in effect on the date hereof) of the
Existing Indebtedness, (B) the terms (as in effect on the date hereof) of the
Credit Facilities and the Outstanding Notes and Outstanding Note Indentures, (C)
the terms of Indebtedness of the Company incurred in accordance with Section
4.09 hereof; PROVIDED that such terms of any such Indebtedness constitute no
greater encumbrance or restriction on the ability of any Restricted Subsidiary
to pay dividends or make distributions, make loans or advances or transfer
properties or assets than is permitted by this Section 4.08, (D) the terms of
this Indenture and the Securities, (E) applicable law, (F) customary
non-assignment provisions entered into in the ordinary course of business and
consistent with past practices, (G) the terms of purchase money obligations for
property acquired in the ordinary course of business, but only to the extent
that such purchase money obligations restrict or prohibit the transfer of the
property so acquired, (H) the terms of the Class B Subordinated Debentures, the
Class B Debenture Indenture, the Class D Subordinated Debentures, the Class D
Debenture Indenture, the Class E Subordinated Debentures, the Class E Debenture
Indenture, the Class F Subordinated Debentures, the Class F Debenture Indenture,
the Class G Subordinated Debentures and the Class G Debenture Indenture,
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(I) any encumbrance or restriction with respect to a Subsidiary of the Company
that is not a Subsidiary of the Company on the date of this Indenture, which
encumbrance or restriction is in existence at the time such Person becomes a
Subsidiary of the Company or is created on the date it becomes a Subsidiary of
the Company, (J) any encumbrance or restriction with respect to a Subsidiary of
the Company imposed pursuant to an agreement which has been entered into for the
sale or disposition of all or substantially all the Capital Stock or assets of
such Subsidiary, (K) customary provisions in joint venture agreements and other
similar agreements entered into in the ordinary course of business, (L)
customary provisions contained in leases and other agreements entered into in
the ordinary course of business, (M) the terms of any Indebtedness for borrowed
money of any Partially Owned Restricted Subsidiary or (N) any encumbrance or
restriction existing under any agreement which refinances or replaces the
agreements described in clauses (A), (B), (D), (H), (K), (L) and (M), PROVIDED
that the terms and conditions of any such encumbrances or restrictions contained
in any such agreement constitute no greater encumbrance or restriction on the
ability of any Restricted Subsidiary to pay dividends or make distributions,
make loans or advances or transfer properties or assets than those under or
pursuant to the agreement evidencing the Indebtedness or obligations refinanced.
Nothing contained in this Section 4.08 shall prevent the Company or a Restricted
Subsidiary from entering into any agreement permitting or providing for the
incurrence of Liens otherwise permitted by Section 4.13 hereof.
SECTION 4.09 INCURRENCE OF INDEBTEDNESS
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable with respect to any
Indebtedness unless the Company's Debt to Consolidated Cash Flow Ratio for its
four full fiscal quarters ending immediately prior to the date such additional
Indebtedness is created, incurred, issued, assumed or guaranteed would have been
no greater than 6 to 1, and such Indebtedness is not senior in right of payment
to the Securities; PROVIDED that such calculation shall give effect to (A) the
incurrence of any Indebtedness (after giving effect to the application of the
proceeds thereof) in connection with the simultaneous acquisition of any person,
business, property or assets and (B) the Consolidated Cash Flow generated by
such acquired person, business, property or assets, giving effect in each case
to such incurrence of Indebtedness, application of proceeds and Consolidated
Cash Flow as if such acquisition had occurred at the beginning of such four
quarter period. For purposes of the foregoing provision, cash flow generated by
any acquired person, business, property or asset shall be determined on the same
basis as the definition of Consolidated Cash Flow and shall be based on the
actual earnings before interest, taxes, depreciation and amortization of such
acquired person, business, property or asset during the immediately preceding
four full fiscal quarters PLUS (y) (i) the savings in cost of goods sold that
would have resulted during that period from the effect of using the Company's
actual costs for comparable goods and services during that period and (ii) other
savings in cost of goods sold or eliminations of selling, general and
administrative expenses as determined by the Company in good faith in its
consideration of such acquisitions and consistent with the Company's experiences
in acquisitions of similar businesses MINUS (z) the incremental expenses that
would be included in cost of goods sold and selling, general and administrative
expenses that would have been incurred by the Company in the operation of such
acquired person, business, property or assets during such period.
The foregoing limitations shall not apply to the incurrence of (i)
Indebtedness pursuant to the Credit Facilities (provided that the principal
amount of such Indebtedness shall not exceed $1.65 billion, less the amount of
all repayments made in respect of term loans and of all permanent commitment
reductions with respect to revolving loans (except to the extent, and only to
the extent, that any required repayments of principal in connection with such
commitment reduction are not made) made under the Credit Facilities (excluding
such repayments and commitment reductions which occur substantially
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contemporaneously with a refinancing or a refunding thereof)), PLUS any amounts
then available under clause (vi) of this paragraph; (ii) Existing Indebtedness;
(iii) Indebtedness represented by the Outstanding Notes; (iv) Indebtedness
represented by the Class B Subordinated Debentures issued in exchange for all of
the outstanding Series B Preferred Stock, the Class D Subordinated Debentures
issued in exchange for all the outstanding Series D Preferred Stock, the Class E
Subordinated Debentures issued in exchange for all the outstanding Series E
Preferred Stock, the Class F Subordinated Debentures issued in exchange for all
the outstanding Series F Preferred Stock and the Class G Subordinated Debentures
issued in exchange for all the outstanding Series G Preferred Stock; (v) Capital
Lease Obligations in an aggregate principal amount which, when aggregated with
the principal amount of all other Capital Lease Obligations then outstanding and
incurred pursuant to this clause (v) and including all Refinancing Indebtedness
(as defined below) incurred to refund, refinance or replace any other
Indebtedness incurred pursuant to this clause (v), does not exceed 5% of Total
Assets; (vi) Indebtedness in an aggregate principal amount equal to the greater
of (A) $225 million in the aggregate at any one time outstanding for the Company
and its Restricted Subsidiaries or (B) Indebtedness created, incurred, issued,
assumed or guaranteed (x) by the Company at any one time outstanding not in
excess of 7% of the Consolidated Net Worth of the Company at the time of such
creation, incurrence, issuance, assumption or guarantee or (y) by any Restricted
Subsidiary of the Company at any one time outstanding not in excess of 7% of the
Consolidated Net Worth of such Restricted Subsidiary at the time of such
creation, incurrence, issuance, assumption or guarantee; (vii) Indebtedness
created, incurred, issued, assumed or guaranteed in exchange for or the proceeds
of which are used to extend, refinance, renew, replace, substitute or refund
Indebtedness referred to in clauses (i) through (vi) above, including additional
Indebtedness incurred to pay premiums and fees in connection therewith (the
"Refinancing Indebtedness"); PROVIDED, that (A) the principal amount of such
Refinancing Indebtedness shall not exceed the principal amount of Indebtedness
(including unused commitments and additional Indebtedness incurred to pay
premiums and fees in connection therewith) so extended, refinanced, renewed,
replaced, substituted or refunded PLUS any amounts then available under clause
(vi) of this paragraph, (B) in the case of Refinancing Indebtedness for
Indebtedness permitted under clauses (ii) and (iv) of this paragraph, the
Refinancing Indebtedness permitted under clauses (ii) and (iv) of this paragraph
shall have an Average Life equal to or greater than the Average Life of the
Indebtedness being extended, refinanced, renewed, replaced, substituted or
refunded and (C) the Refinancing Indebtedness for Indebtedness permitted under
clauses (ii) and (iv) of this paragraph shall rank, in right of payment, no more
senior than such Indebtedness being extended, refinanced, renewed, replaced,
substituted or refunded and the Refinancing Indebtedness for Indebtedness
permitted under clauses (i), (iii), (v) and (vi) of this paragraph shall rank,
in right of payment, PARI PASSU with or junior to the Securities; (viii)
intercompany Indebtedness incurred in connection with Investments in
Unrestricted Subsidiaries; PROVIDED that such Investments are permitted by
Section 4.07 or Section 4.14 hereof; (ix) Indebtedness under Currency Agreements
and Interest Rate Agreements, PROVIDED that in the case of Currency Agreements
which relate to other Indebtedness, such Currency Agreements do not increase the
Indebtedness of the Company outstanding other than as a result of fluctuations
in foreign currency exchange rates; (x) Indebtedness arising from agreements
providing for indemnification, adjustment of purchase price or similar
obligations, or from guarantees or letters of credit, surety bonds or
performance bonds securing any obligations of the Company or any Restricted
Subsidiary of the Company pursuant to such agreements, incurred or assumed by
the acquired Subsidiary in connection with the acquisition or disposition of any
business, assets or Restricted Subsidiary of the Company, other than guarantees
or similar credit support by the Company of Indebtedness incurred by any Person
acquiring all or any portion of such business, assets or Restricted Subsidiary
for the purpose of financing such acquisition; PROVIDED that the maximum
aggregate liability in respect of all such Indebtedness in the nature of such
guarantees shall at no time exceed the gross proceeds actually received from the
sale of such business, assets or Restricted Subsidiary; (xi) Indebtedness
arising from the honoring by a bank or other financial institution of a check,
draft or similar instrument inadvertently (except in the case of daylight
overdrafts, which will
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not be, and will not be deemed to be, inadvertent) drawn against insufficient
funds in the ordinary course of business, PROVIDED that such Indebtedness is
extinguished within three Business Days of its incurrence; (xii) Indebtedness of
an entity at the time it is acquired as a Restricted Subsidiary, PROVIDED that
such Indebtedness was not incurred or assumed by such entity in connection with
or in anticipation of such acquisition; (xiii) Indebtedness between the Company
and any Restricted Subsidiary; (xiv) Non-Compete Notes, not to exceed $50.0
million in aggregate principal amount less the amount of all principal
repayments made in respect thereof; and (xv) the Company's Obligations arising
from the repurchase, redemption or other acquisitions of Capital Stock from
management investors to the extent permitted by Section 4.07 hereof. For the
purposes of determining the aggregate Indebtedness of any referent Person,
Indebtedness shall not include guarantees by any other Person of such
Indebtedness. For the purposes of determining compliance with this Section 4.09,
in the event that an item of Indebtedness meets the criteria of more than one of
the categories of permitted Indebtedness described in clauses (i) through (xv)
of this Section 4.09 or is entitled to be incurred pursuant to the first
paragraph of this Section 4.09, the Company shall, in its sole discretion,
classify such item of Indebtedness in any manner that complies with the
covenants described above and such item of Indebtedness will be treated as
having been incurred pursuant to only one of such clauses or pursuant to the
first paragraph of this Section 4.09. Accrual of interest, the accretion of
accreted value and the payment of interest in the form of additional
Indebtedness will not be deemed to be an incurrence of Indebtedness for purposes
of this Section 4.09.
SECTION 4.10 CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder shall have the
right to require the repurchase of such Holder's Securities pursuant to the
offer described below (the "Change of Control Offer") at a purchase price equal
to 101% of the aggregate principal amount of such Securities plus accrued and
unpaid interest, if any, to the date of purchase (the "Change of Control
Payment"). Within 40 days following any Change of Control, the Company shall
mail a notice to each Holder stating:
(1) that the Change of Control Offer is being made pursuant to this
Section 4.10 and that all Securities tendered will be accepted for payment;
(2) the purchase price and the purchase date, which shall be no earlier
than 30 days nor later than 40 days from the date such notice is mailed
(the "Change of Control Payment Date");
(3) that any Security not tendered will continue to accrue interest;
(4) that, unless the Company defaults in the payment of the Change of
Control Payment, all Securities accepted for payment pursuant to the Change
of Control Offer shall cease to accrue interest after the Change of Control
Payment Date;
(5) that Holders electing to have any Securities purchased pursuant to
a Change of Control Offer will be required to surrender the Securities,
with the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Security completed, to the Paying Agent at the address specified in
the notice prior to the close of business on the Business Day preceding the
Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day preceding the Change of Control Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
Holder, the principal
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amount of the Securities delivered for purchase, and a statement that such
Holder is withdrawing his election to have such Securities purchased; and
(7) that Holders whose Securities are being purchased only in part will
be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered; PROVIDED that each Holder shall
tender Securities, and each Security purchased and each such new Security
issued by the Company shall be in a principal amount of $1,000 or integral
multiples thereof.
The Change of Control Offer shall be deemed to have commenced upon
mailing of notice described in this paragraph and shall terminate 20 Business
Days after its commencement, unless a longer offering period is required by law.
If the Change of Control Payment Date is on the related interest payment date,
any accrued interest will be paid to the person in whose name a Security is
registered at the close of business on such record date, and no additional
interest will be payable to Holders who tender Securities pursuant to the Change
of Control Offer.
On the Change of Control Payment Date, the Company shall, to the extent
lawful, (1) accept for payment Securities or portions thereof tendered pursuant
to the Change of Control Offer, (2) deposit with the Paying Agent an amount
equal to the Change of Control Payment in respect of all Securities or portions
thereof so tendered and (3) deliver or cause to be delivered to the Trustee, the
Securities so accepted together with an Officers' Certificate stating the
Securities or portions thereof were tendered to the Company. The Paying Agent
shall promptly mail to each Holder of Securities so accepted, payment in an
amount equal to the purchase price for such Securities, and the Trustee shall
promptly authenticate and mail to such Holder a new Security equal in principal
amount to any unpurchased portion of the Securities surrendered; PROVIDED that
each such new Security shall be in a principal amount of $1,000 or integral
multiples thereof. The Company will publicly announce the results of the Change
of Control Offer on or as soon as practicable after the Change of Control
Payment Date.
SECTION 4.11 LIMITATIONS ON ASSET SALES
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, consummate an Asset Sale (including the
sale of any of the stock of any Subsidiary) unless at least 100% of the Net
Proceeds from such Asset Sale (or, in the case of a Partially Owned Restricted
Subsidiary, the Company's Pro Rata Portion thereof, after repayment by such
Partially Owned Restricted Subsidiary of its Indebtedness) are applied first to
repay Obligations or reduce commitments under the Credit Facilities in
accordance with the terms thereof, second to offer to redeem at par the
Outstanding Notes and third to offer to redeem at par the Securities. The
foregoing application of Net Proceeds from Asset Sales is not required in the
case of (i) sales or dispositions generating cash proceeds of less than, with
respect to the Company, its Restricted Subsidiaries, $2.5 million and (ii) sales
and dispositions as to which the Company delivers a reinvestment notice and the
proceeds are so reinvested in one or more communications, publishing,
information, education or media assets or businesses within twelve months of the
date the relevant Asset Sale is consummated. Notwithstanding the foregoing
provisions of this Section 4.11, neither the Company nor its Subsidiaries shall
be required to apply the Net Proceeds from any Asset Sale (i) to the extent that
the aggregate Net Proceeds from such Asset Sale, together with the Net Proceeds,
if any, of any other Asset Sale which have not been previously applied, are less
than $25 million or (ii) to the extent that, and for so long as, such Net
Proceeds cannot be so applied as a result of an encumbrance or restriction
permitted pursuant to Section 4.13 hereof.
(b) At least 15 days prior to the Company's mailing of a notice of a
Net Proceeds Offer, the Company shall notify the Trustee of the Company's
obligation to make such Net Proceeds Offer. Notice
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of a Net Proceeds Offer shall be mailed by the Company not less than 30 Business
Days nor more than 40 days before the Net Proceeds Payment Date to the Holders
of the Securities at their last registered addresses with a copy to the Trustee
and the Paying Agent. The Net Proceeds Offer shall remain open from the time of
mailing until the close of business on the Business Day prior to the Net
Proceeds Payment Date. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Securities pursuant to the Net
Proceeds Offer. The notice, which shall govern the terms of the Net Proceeds
Offer, shall state:
(1) that the Net Proceeds Offer is being made pursuant to this
Section 4.11 and that the Securities will be accepted for payment on a
PRO RATA basis (rounded down to the nearest $1,000), if necessary;
(2) the Purchase Price and the Net Proceeds Payment Date;
(3) that any Security not tendered or accepted for payment will
continue to accrue interest;
(4) that any Security accepted for payment pursuant to the Net
Proceeds Offer shall cease to accrue interest after the Net Proceeds
Payment Date;
(5) that each Holder of a Security electing to have such Security
purchased pursuant to a Net Proceeds Offer will be required to
surrender the Security, with the form entitled "Option of Holder to
Elect Purchase" on the reverse of the Security completed, to the
Trustee at the address specified in the notice prior to the close of
business on the Business Day prior to the Net Proceeds Payment Date;
(6) that Holders will be entitled to withdraw their election if the
Trustee receives, not later than the close of business on the fifth
Business Day next preceding the Net Proceeds Payment Date, facsimile
transmission or letter setting forth the name of the Holder, the
principal amount of Securities the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such
Securities purchased; and
(7) that Holders whose Securities are purchased only in part will
be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered.
The Trustee shall notify the Company at the opening of business on the
Net Proceeds Payment Date as to the principal amount of each of the Securities
or portions thereof which have been surrendered to the Trustee in connection
with the Net Proceeds Offer. On the Net Proceeds Payment Date, the Company shall
(i) accept for payment on a PRO RATA basis (if necessary) Securities or portions
thereof tendered pursuant to the Net Proceeds Offer, (ii) deposit with the
Paying Agent money sufficient to pay the purchase price of all Securities or
portions thereof so accepted and (iii) deliver or cause to be delivered to the
Trustee all Securities so accepted together with an Officers' Certificate
stating the Securities or portions thereof accepted for payment by the Company
and any other information that the Trustee may reasonably request in order to
make the payments required to be made on the Net Proceeds Payment Date. The
Paying Agent shall promptly mail to Holders of Securities so accepted, payment
in an amount equal to the Purchase Price, and the Trustee shall promptly
authenticate and mail to such Holders a new Security equal in principal amount
to any unpurchased portion of the Security surrendered. Any Securities not so
accepted shall be promptly mailed by the Trustee to the Holder thereof. The
Company will publicly announce the results of the Net Proceeds Offer on or as
soon as practicable after the Net Proceeds Payment Date. For purposes of this
Section 4.11, the Trustee shall act as the Paying Agent.
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SECTION 4.12 TRANSACTIONS WITH AFFILIATES
Neither the Company nor any of its Restricted Subsidiaries shall make
any loan, advance, guarantee or capital contribution to, or for the benefit of,
or sell, lease, transfer or otherwise dispose of any of its properties or assets
to, or for the benefit of, or purchase or lease any property or assets from, or
enter into or amend any contract, agreement or understanding with, or for the
benefit of, (i) any Person (or any Affiliate of such Person) holding 10% or more
of any class of Capital Stock of the Company or any of its Restricted
Subsidiaries or (ii) any Affiliate of the Company or any of its Restricted
Subsidiaries (each an "Affiliate Transaction") involving aggregate payments or
consideration in excess of $5.0 million, unless (a) such Affiliate Transaction
is on terms that are not materially less favorable to the Company or the
relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Restricted Subsidiary with an
unrelated Person and (b) the Company delivers to the Trustee with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $10.0 million, a resolution adopted by the
majority of the Board of Directors approving such Affiliate Transaction and set
forth in an Officers' Certificate certifying that such Affiliate Transaction
complies with clause (a) of this Section 4.12.
The foregoing restriction shall not apply to (i) the payment of an annual
fee to KKR for the rendering of management consulting and financial services to
the Company and its Restricted Subsidiaries in an aggregate amount which is
reasonable in relation thereto, (ii) the payment of transaction fees to KKR in
amounts which are in accordance with past practices for the rendering of
financial advice and services in connection with acquisitions, dispositions and
financings by the Company and its Subsidiaries, (iii) loans to officers,
directors and employees of the Company and its Subsidiaries for business or
personal purposes and other loans and advances to such officers, directors and
employees for travel, entertainment, moving and other relocation expenses made
in the ordinary course of business of the Company and its Subsidiaries, (iv) any
Restricted Payments not prohibited by Section 4.07 hereof, covenant or any
Investment not prohibited by Section 4.14 hereof, (v) transactions between or
among any of the Company and its Restricted Subsidiaries, (vi) allocation of
corporate overhead to Unrestricted Subsidiaries on a basis not materially less
favorable to the Company than such allocations to Restricted Subsidiaries or
(vii) the payment of reasonable and customary fees paid to, and indemnity
provided on behalf of, officers, directors, employees or consultants of the
Company or any Restricted Subsidiary.
SECTION 4.13 LIMITATIONS ON LIENS
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien (other than Permitted Liens) on any of its assets or any income
or profits therefrom or assign or convey any right to receive income therefrom
unless the Securities are equally and ratably secured.
SECTION 4.14 INVESTMENTS IN UNRESTRICTED SUBSIDIARIES
The Company shall not, and shall not permit any Restricted Subsidiary
to, directly or indirectly, make any Investment in any Unrestricted Subsidiary,
if at the time of such Investment:
(a) a Default or Event of Default shall have occurred and be continuing
or shall occur as a consequence thereof; or
(b) immediately before such Investment, the Company would not be
permitted to incur at least $1.00 of Indebtedness pursuant to the first
paragraph of Section 4.09 hereof (without giving effect
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to clauses (i) through (xv) of the second paragraph thereof), which
calculation shall be made on a PRO FORMA basis deducting from Adjusted
Consolidated Net Income the amount of any Investment the Company has made
in an Unrestricted Subsidiary during the relevant period and any Investment
the Company intends to make in an Unrestricted Subsidiary, to the extent
that such Investment is made with amounts included in Adjusted Consolidated
Net Income as a result of Transfers described in clause (c)(x) of Section
4.07 hereof or clause (c)(y) of this Section 4.14; or
(c) such Investment, together with the aggregate of all other
Investments in Unrestricted Subsidiaries made after May 13, 1992, exceeds
(w) the aggregate Consolidated Net Cash Flow of the Company for the period
(taken as one accounting period) from the beginning of the first quarter
immediately after May 13, 1992 to the end of the Company's most recently
ended fiscal quarter at the time of such Investment; PLUS (x) 100% of the
aggregate net cash proceeds received by the Company from (i) the issue or
sale of Equity Interests of the Company (other than such Equity Interests
issued or sold to a Restricted Subsidiary of the Company and other than
Redeemable Stock) or (ii) the sale of the stock of an Unrestricted
Subsidiary or the sale of all or substantially all of the assets of an
Unrestricted Subsidiary to the extent that a liquidating dividend is paid
to the Company or any Restricted Subsidiary from the proceeds of such sale;
PLUS (y) 100% of the amount of all Transfers from a Net Cash Flow
Unrestricted Subsidiary up to the aggregate Investment (after taking into
account all prior Transfers from such Net Cash Flow Unrestricted
Subsidiary) in such Net Cash Flow Unrestricted Subsidiary resulting from
such payments or transfers of assets (valued in each case as provided in
the definition of "Investment"); PLUS (z) in the event of a designation of
a Net Cash Flow Unrestricted Subsidiary as a Restricted Subsidiary, 100% of
an amount equal to the greater of (A) the fair market value of such
Subsidiary as determined by the Board of Directors in good faith (or, if
such fair market value may exceed $25.0 million, as determined in writing
by an independent investment banking firm of nationally recognized
standing) at the time of the redesignation of such Net Cash Flow
Unrestricted Subsidiary as a Restricted Subsidiary and (B) the Consolidated
Net Cash Flow generated by such Subsidiary for the period (taken as one
accounting period) from the beginning of its first fiscal quarter
commencing immediately after the date of its designation as Net Cash Flow
an Unrestricted Subsidiary through such Subsidiary's fiscal quarter ending
immediately prior to its designation as a Restricted Subsidiary (or if such
Consolidated Net Cash Flow for such period is a deficit, 100% of such
deficit);
PROVIDED, that all such amounts applied pursuant to this clause (c) shall not be
available for application under clause (c) of Section 4.07 hereof.
The foregoing limitations shall not apply to an Investment to the
extent that it is (i) to capitalize a Restricted Payment Unrestricted Subsidiary
permitted pursuant to Section 4.07 hereof; (ii) funded by the issuance of Equity
Interests of the Company to the extent net proceeds are not used to fund an
optional redemption of Notes and (iii) Investments in Unrestricted Subsidiaries
having an aggregate fair market value, when taken together with all other
Investments made pursuant to this clause (iii) that are at that time
outstanding, not to exceed $50.0 million at the time of such Investment (with
the fair market value of each Investment being measured at the time made and
without giving effect to subsequent changes in value). For the purposes of
determining compliance with this Section 4.14, in the event that the making of
an Investment in an Unrestricted Subsidiary meets the criteria of more than one
of the categories of permitted Investments in Unrestricted Subsidiaries
described in clauses (i) through (iii) above or is entitled to be incurred
pursuant to the first paragraph of this Section 4.14 (including clauses (a), (b)
and (c) thereof), the Company shall, in its sole discretion, classify such
Investment in an Unrestricted Subsidiary in any manner that complies with this
Section 4.14 and Investment in an Unrestricted Subsidiary will be
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treated as having been made pursuant to only one of such clauses or pursuant to
the first paragraph of this Section 4.14.
All Net Cash Flow Unrestricted Subsidiaries of the Company shall at all
times remain wholly-owned, directly or indirectly, by the Company or a
wholly-owned Restricted Subsidiary of the Company.
Not later than the date of making any Investment described above, the
Company shall deliver to the Trustee an Officer's Certificate stating that such
Investment is permitted (including, without limitation, whether such Investment
is capitalizing a Net Cash Flow Unrestricted Subsidiary or a Restricted Payment
Unrestricted Subsidiary) and setting forth the basis upon which the calculations
required by this Section 4.14 were computed, which calculations may be based on
the Company's latest available internal financial statements.
SECTION 4.15 PAYMENTS FOR CONSENT
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any Holder of any Securities for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of this Indenture or the Securities unless such consideration is offered to be
paid or agreed to be paid to all Holders of the Securities which so consent,
waive or agree to amend in the time frame set forth in solicitation documents
relating to such consent, waiver or agreement.
SECTION 4.16 CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect its corporate
existence and the corporate, partnership or other existence of each Restricted
Subsidiary in accordance with the respective organizational documents of each
Restricted Subsidiary and the rights (charter and statutory), licenses and
franchises of the Company and its Restricted Subsidiaries; PROVIDED that the
Company shall not be required to preserve any such right, license or franchise,
or the corporate, partnership or other existence of any Restricted Subsidiary,
if the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and its
Restricted Subsidiaries taken as a whole and that the loss thereof is not
adverse in any material respect to the Holders.
SECTION 4.17 SUBSIDIARY OWNERSHIP.
All Restricted Subsidiaries and all Net Cash Flow Unrestricted
Subsidiaries shall at all times remain wholly-owned, directly or indirectly, by
the Company or a Restricted Subsidiary except if sold, leased, conveyed,
disposed of or transferred in accordance with Section 4.11 hereof.
.ECTION 4.18 RULE 144A INFORMATION REQUIREMENT
The Company will furnish to the Holders or beneficial holders of the
Securities and prospective purchasers of the Securities designated by the
holders of Transfer Restricted Securities, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act
until such time as the Company consummates the Exchange Offer or has registered
the Securities for resale under the Securities Act.
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ARTICLE 5
SUCCESSORS
SECTION 5.01 MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Company may not consolidate with, merge with or into, or transfer
all or substantially all of its assets (as an entirety or substantially as an
entirety in one transaction or a series of related transactions), to any Person
(except a wholly-owned Restricted Subsidiary, PROVIDED that in connection with
any merger of the Company with a Restricted Subsidiary of the Company, no
consideration (other than common stock in the surviving corporation or the
Company) shall be issued or distributed to the shareholders of the Company) or
permit any person to merge with or into it unless:
(i) the Company shall be the continuing Person, or the Person (if other
than the Company) formed by such consolidation or into which the Company is
merged or to which the properties and assets of the Company are transferred
(collectively, the "Successor") shall be a corporation organized and existing
under the laws of the United States or any State thereof or the District of
Columbia and shall expressly assume, by a supplemental indenture, executed and
delivered to the Trustee, in form satisfactory to the Trustee, all of the
obligations of the Company under the Securities and this Indenture;
(ii) immediately after giving effect to such transaction on a pro forma
basis, (a) no Default and no Event of Default under this Indenture shall have
occurred and be continuing and (b) the Company could incur at least $1.00 of
additional Indebtedness pursuant to the first paragraph of Section 4.09 hereof;
and
(iii) immediately after giving effect to such transaction on a PRO
FORMA basis, the Fixed Charge Coverage Ratio of the surviving entity is at least
1:1; PROVIDED that if the Fixed Charge Coverage Ratio of the Company before
giving effect to such transaction is within the range set forth in column (A)
below, then the PRO FORMA Fixed Charge Coverage Ratio of the surviving entity
shall be at least equal to the lesser of (x) the ratio determined by multiplying
the percentage set forth in Column B by the Fixed Charge Coverage Ratio of the
Company prior to such transaction, and (y) the ratio set forth in Column C
below:
<TABLE>
<CAPTION>
(A) (B) (C)
<S> <C> <C>
1.11:1 to 1.99:1.................................. 90% 1.5:1
2.00:1 to 2.99:1.................................. 80% 2.1:1
3.00:1 to 3.99:1.................................. 70% 2.4:1
4.00:1 or more.................................... 60% 2.5:1
</TABLE>
and PROVIDED, FURTHER, that if the pro forma fixed Charge Coverage Ratio of the
surviving entity is 3:1 or more, the calculation in the preceding provision
shall be inapplicable and such transaction shall be deemed to have complied with
the requirements of clause (iv) of this Section 5.01.
SECTION 5.02 SUCCESSOR CORPORATION SUBSTITUTED
Upon any consolidation or merger, or any sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company or
any assignment of its obligations under this Indenture or the Securities in
accordance with Section 5.01 hereof, the Successor formed by such consolidation
or into or with which the Company is merged or to which such sale, lease,
conveyance or other disposition or assignment is made shall succeed to, and be
substituted for, and may exercise every right and power
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of, the Company under this Indenture with the same effect as if such Successor
has been named as the Company herein and the predecessor Company, in the case of
a sale, lease, conveyance or other disposition or assignment, shall be released
from all obligations under this Indenture and the Securities.
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01 EVENTS OF DEFAULT
Each of the following constitutes an "EVENT OF DEFAULT":
(1) the Company fails to make any payment of interest on any Security
when the same shall become due and payable and the Default continues for a
period of 30 days;
(2) the Company fails to make any payment of the principal or premium
of any Security when the same shall become due and payable at maturity, or
upon acceleration, redemption or otherwise;
(3) the Company fails to comply with any of its other agreements or
covenants in, or provisions of, the Securities or this Indenture and such
failure continues for the period and after the notice specified below;
(4) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Restricted Subsidiaries) whether such Indebtedness or guarantee is
now existing or thereafter created in the future, if either (A) such
default is the failure to pay the final scheduled principal installment in
an amount of at least $10 million in respect of any such Indebtedness on
the stated maturity date thereof (after giving effect to any extension of
such maturity date by the holder of such Indebtedness and after the
expiration of any grace period in respect of such final scheduled principal
installment contained in the instrument under which such Indebtedness is
outstanding) or (B) as a result of such default the maturity of such
Indebtedness has been accelerated prior to its express maturity and the
principal amount of such Indebtedness, together with the principal amount
of any other such Indebtedness the maturity of which has been accelerated,
aggregates $20 million or more; PROVIDED that an Event of Default shall not
be deemed to occur with respect to any accelerated Indebtedness which is
repaid or prepaid within 20 days after such declaration;
(5) a final judgment that exceeds $15 million individually, or final
judgments that exceed $25 million in the aggregate, for the payment of
money are entered by a court or courts of competent jurisdiction against
the Company, or any of its Restricted Subsidiaries and such judgment or
judgments shall not be discharged, satisfied, stayed, annulled or rescinded
within 60 days of being entered;
(6) the Company or any of the Restricted Subsidiaries pursuant to or
within the meaning of any Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against it in an
involuntary case,
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(c) consents to the appointment of a Custodian of it or for all or
substantially all of its property, or
(d) makes a general assignment for the benefit of its creditors;
or
(7) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(a) is for relief against the Company, or any of its Restricted
Subsidiaries as debtor in an involuntary case,
(b) appoints a Custodian of the Company, or any of its Restricted
Subsidiaries or a Custodian for all or substantially all of
the property of the Company, or any of its Restricted
Subsidiaries, or
(c) orders the liquidation of the Company, or any of its
Restricted Subsidiaries,
and the order or decree remains unstayed and in effect for 60 days.
(8) except as permitted by this Indenture and the Securities, the
Guarantees shall be held in any judicial proceeding to be unenforceable or
invalid or shall cease for any reason to be in full force and effect with
respect to any Guarantor or any Guarantor shall deny or disaffirm its
obligations under its Guarantee.
The Company is required, pursuant to Section 4.04(a) hereof, to deliver
to the Trustee annually a statement regarding compliance with this Indenture,
and the Company is required, pursuant to Section 4.04(c) hereof, upon becoming
aware of any Default or Event of Default to deliver a statement to the Trustee
specifying such Default or Event of Default. The Trustee shall not be deemed to
know of a Default unless a Responsible Officer has actual knowledge of such
Default or receives written notice of such Default with specific reference to
such Default.
In the case of any Event of Default pursuant to the provisions of this
Section 6.01 occurring by reason of any willful action (or inaction) taken (or
not taken) by or on behalf of the Company with the intention of avoiding payment
of the premium, if any, which the Company would have had to pay if the Company
then had elected to redeem the Securities pursuant to Section 3.07 hereof, an
equivalent premium shall also become and be immediately due and payable to the
extent permitted by law, anything in this Indenture or in the Securities
contained to the contrary notwithstanding.
A Default under clause (3) is not an Event of Default until the Trustee
notifies the Company, or the Holders of at least 30% in principal amount of the
then outstanding Securities notify the Company and the Trustee, in writing, of
the Default and the Company does not cure the Default within 30 days after
receipt of the notice. The notice must specify the Default, demand that it be
remedied and state that the notice is a "Notice of Default."
SECTION 6.02 ACCELERATION
If an Event of Default (other than an Event of Default with respect to
the Company specified in clauses (6) or (7) of Section 6.01 hereof) occurs and
is continuing, the Trustee by written notice to the Company, or the Holders of
at least 30% in principal amount of the then outstanding Securities by written
notice to the Company and the Trustee, may and the Trustee at the request of
such Holders shall, declare
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all unpaid principal of, premium and Liquidated Damages, if any, and accrued
interest on the Securities to be due and payable immediately. Upon such
declaration of acceleration such principal of, premium and Liquidated Damages,
if any, and accrued interest, due and payable on the Securities, as determined
in the next succeeding paragraph, shall be due and payable immediately. If an
Event of Default with respect to the Company specified in clause (6) or (7) of
Section 6.01 hereof occurs, all unpaid principal of, premium and Liquidated
Damages, if any, and accrued interest on the Securities then outstanding shall
IPSO FACTO become and be immediately due and payable without any declaration,
notice or other act on the part of the Trustee or any Holder. The Holders of at
least 51% in aggregate principal amount of the then outstanding Securities by
written notice to the Trustee may rescind an acceleration and its consequences
if the rescission would not conflict with any judgment or decree and if all
existing Events of Default (except nonpayment of principal, premium and
Liquidated Damages, if any, or interest on the Securities that has become due
solely as a result of such acceleration) have been cured or waived.
In the event that the maturity of the Securities is accelerated
pursuant to this Section 6.02, 100% of the principal amount thereof and premium
or Liquidated Damages, if any, plus accrued interest to the date of payment
shall become due and payable.
SECTION 6.03 OTHER REMEDIES
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal, premium and Liquidated
Damages, if any, or interest then due on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. All remedies are cumulative
to the extent permitted by law.
SECTION 6.04 WAIVER OF PAST DEFAULTS
The Holders of at least 51% in principal amount of the then outstanding
Securities by notice to the Trustee may waive an existing Default or Event of
Default and its consequences (including waivers obtained in connection with a
tender offer or exchange offer for Securities), except a continuing Default or
Event of Default (i) in the payment of the principal of, premium or Liquidated
Damages, if any, or interest on any Security (including, without limitation,
pursuant to any mandatory or optional redemption obligation hereunder) or (ii)
that resulted from the failure to comply with Section 4.10 or 4.11 hereof. Upon
any such waiver, such Default shall cease to exist, and any Event of Default
arising therefrom shall be deemed to have been cured for every purpose of this
Indenture; but no such waiver shall extend to any subsequent or other Default or
impair any right consequent thereon.
SECTION 6.05 CONTROL BY MAJORITY
The Holders of a majority in principal amount of the then outstanding
Securities may direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture, that the Trustee determines may be unduly
prejudicial to the rights of other Holders, or that may involve the Trustee in
personal liability.
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SECTION 6.06 LIMITATIONS ON SUITS
A Holder may not pursue a remedy with respect to this Indenture, the
Securities or any Guarantee unless:
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) the Holders of at least 25% in principal amount of the then
outstanding Securities make a written request to the Trustee to pursue
the remedy;
(3) such Holder or Holders offer to the Trustee indemnity satisfactory
to the Trustee against any loss, liability or expense (including, without
limitation, fees and expenses of counsel);
(4) the Trustee does not comply with the request within 30 days after
receipt of the request and the offer of indemnity; and
(5) during such 30-day period the Holders of a majority in principal
amount of the then outstanding Securities do not give the Trustee a
direction which is inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another Holder or
to obtain a preference or priority over another Holder.
SECTION 6.07 RIGHTS OF HOLDERS TO RECEIVE PAYMENT
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Security to receive payment of principal of, premium and Liquidated
Damages, if any, and interest on the Security, on or after the respective due
dates expressed in the Security, or to bring suit for the enforcement of any
such payment on or after such respective dates, shall not be impaired or
affected without the consent of the Holder.
SECTION 6.08 COLLECTION SUIT BY TRUSTEE
If an Event of Default specified in Section 6.01(1) or (2) or (3) (with
respect to the Company's obligations under Section 4.10 or 4.11 hereof) hereof
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Company or any Guarantor
for the amount of principal, premium, if any, and interest remaining unpaid on
the Securities, determined in accordance with Section 6.02 hereof and interest
on overdue principal, premium and Liquidated Damages, if any, and, to the extent
lawful, interest, and such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09 TRUSTEE MAY FILE PROOFS OF CLAIM
The Trustee is authorized to file such proofs of claim and other papers
or documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relative to the Company, its
creditors or its property and shall be entitled and empowered to collect,
receive and distribute any money or other property payable or deliverable on any
such claims and any Custodian in any such judicial proceeding is hereby
authorized
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<PAGE>
by each Holder to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due to it for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under Section 7.07 hereof. To the extent that
the payment of any such compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof out of the estate in any such proceeding, shall be denied
for any reason, payment of the same shall be secured by a Lien on, and shall be
paid out of, any and all distributions, dividends, money, securities and other
properties which the Holders of the Securities may be entitled to receive in
such proceeding whether in liquidation or under any plan of reorganization or
arrangement or otherwise. Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Securities or the rights of any Holder thereof, or to authorize
the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10 PRIORITIES
If the Trustee collects any money pursuant to this Article 6, it shall
pay out the money in the following order:
FIRST: to the Trustee for amounts due under Section 7.07 hereof;
SECOND: to Holders for amounts due and unpaid on the Securities for
principal, premium and Liquidated Damages, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due
and payable on the Securities for principal, premium, if any, and interest,
respectively; and
THIRD: to the Company.
The Trustee may fix a record date and payment date for any payment to
Holders pursuant to this Article 6.
SECTION 6.11 UNDERTAKING FOR COSTS
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Securities.
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ARTICLE 7
TRUSTEE
SECTION 7.01 DUTIES OF TRUSTEE
(1) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in such exercise, as a prudent person
would exercise or use under the circumstances in the conduct of such person's
own affairs.
(2) Except during the continuance of an Event of Default:
(a) the Trustee need perform only those duties that are
specifically set forth in this Indenture and no others, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(b) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee pursuant to and conforming to the
requirements of this Indenture. However, the Trustee shall examine the
certificates and opinions to determine whether or not, on their face,
they appear to conform to the requirements of this Indenture.
(3) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(a) this paragraph does not limit the effect of paragraph (2) of
this Section 7.01;
(b) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer or other officer, unless it is
proved that the Trustee was negligent in ascertaining the pertinent
facts; and
(c) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Sections 6.02 or 6.05 hereof.
(4) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(1), (2), (3) and (5) of this Section 7.01.
(5) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or incur any liability. The Trustee is not obligated to
perform any duty or exercise any right or power under this Indenture at the
request of the Holders of the Securities unless it receives an offer from such
Holders of security and indemnity satisfactory to it against any loss, liability
or expense (including, without limitation, fees of counsel).
(6) The Trustee shall not be liable for interest on any money received
by it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
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SECTION 7.02 RIGHTS OF TRUSTEE
(1) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
(2) Before the Trustee acts or refrains from acting, it may require
receipt of an Officers' Certificate or an Opinion of Counsel or both. The
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on such Officers' Certificate or Opinion of Counsel. The
Trustee may consult with counsel of its selection and the advice of such counsel
(to be promptly confirmed in writing) or any Opinion of Counsel shall be full
and complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder and in reliance thereon.
(3) The Trustee may act through agents, attorneys, custodians and
nominees and shall not be responsible for the misconduct or negligence of any
such agent, attorney, custodian or nominee appointed with due care.
(4) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers conferred upon it by this Indenture.
(5) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company or any Guarantor shall be
sufficient if signed by an Officer of the Company or such Guarantor.
SECTION 7.03 INDIVIDUAL RIGHTS OF TRUSTEE
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or any of
its Affiliates with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights.
However, the Trustee is subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04 TRUSTEE'S DISCLAIMER
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities or any money paid to the Company or upon
the Company's direction under any provision hereof, it shall not be responsible
for the use or application of any money received by any Paying Agent other than
the Trustee and it shall not be responsible for any statement or recital herein
or any statement in the Securities other than its certificate of authentication.
SECTION 7.05 NOTICE OF DEFAULTS
If a Default or Event of Default occurs and is continuing and if it is
actually known to a Responsible Officer of the Trustee, the Trustee shall mail
to each Holder a notice of the Default or Event of Default within 90 days after
it occurs or, if later, within ten days after such Default or Event of Default
becomes so known to the Trustee unless such Default or Event of Default has been
cured. Except in the case of a Default or Event of Default in payment of
principal of, premium and Liquidated Damages, if any, or interest on any
Security or that resulted from a failure to comply with Section 4.10 or 4.11
hereof,
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the Trustee may withhold the notice if and so long as a committee of its
Responsible Officers determines in good faith that withholding the notice is in
the interests of the Holders.
SECTION 7.06 REPORTS BY TRUSTEE TO HOLDERS
Within 60 days after each June 1 beginning with June 1, 1998, the
Trustee shall mail to Holders a brief report dated as of such reporting date
that complies with TIA ss. 313(a) (but if no event described in TIA ss. 313(a)
has occurred within the twelve monTHS preceding the reporting date, no report
need be transmitted). The Trustee also shall comply with TIA ss. 313(b). The
Trustee also shall transmit by mail all reports as required by TIA ss. 313(c).
A copy of each report at the time of its mailing to Holders shall be
filed with the SEC and each stock exchange on which the Securities are listed.
The Company shall notify the Trustee when the Securities are listed on any stock
exchange.
SECTION 7.07 COMPENSATION AND INDEMNITY
The Company shall pay to the Trustee from time to time such
compensation for its acceptance of this Indenture and services hereunder as the
parties shall agree from time to time. The Trustee's compensation shall not be
limited by any law relating to compensation of a trustee of an express trust.
The Company shall reimburse the Trustee promptly upon request for all reasonable
disbursements, advances and expenses incurred by it. Such expenses shall include
the reasonable compensation, disbursements and expenses of the Trustee's agents
and counsel.
The Company shall indemnify and hold harmless the Trustee and its
directors, officers, employees and agents against any loss, liability or expense
(including without limitation fees and expenses of counsel) incurred by it
arising out of or in connection with the acceptance or administration of its
duties under this Indenture including, without limitation, costs and expenses of
defending itself against any claim or liability in connection with the exercise
or performance of its powers and duties hereunder, except as set forth in the
next paragraph. The Trustee shall notify the Company promptly of any claim for
which it may seek indemnity. The Company shall defend the claim and the Trustee
shall cooperate in the defense. The Trustee may have separate counsel and the
Company shall pay the reasonable fees and expenses of such counsel. The Company
need not pay for any settlement made without its consent, which consent shall
not be unreasonably withheld.
The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Trustee through negligence or bad faith.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a Lien prior to the Securities on all money or property held
or collected by the Trustee, except that held in trust to pay principal of,
premium and Liquidated Damages, if any, and interest on particular Securities.
Such Lien shall survive the satisfaction and discharge of the Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(6) or (7) hereof occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
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SECTION 7.08 REPLACEMENT OF TRUSTEE
The Trustee may resign and be discharged from the trust hereby created
by so notifying the Company. The Holders of a majority in principal amount of
the then outstanding Securities may remove the Trustee by so notifying the
Trustee and the Company.
The Company may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10 hereof;
(2) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy
Law;
(3) a Custodian or public officer takes charge of the Trustee or its
property; or
(4) the Trustee becomes incapable of acting.
The foregoing notwithstanding, a resignation or removal of the Trustee and
appointment of a successor Trustee shall become effective only upon the
successor Trustee's acceptance of appointment as provided in this Section 7.08,
and thereafter the Trustee shall have no liability for any acts or omissions of
any successor Trustee.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the then outstanding Securities
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10 hereof, any Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to the Holders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the Lien
provided for in Section 7.07 hereof. Notwithstanding replacement of the Trustee
pursuant to this Section 7.08, the Company's obligations under Section 7.07
hereof shall continue for the benefit of the retiring Trustee.
SECTION 7.09 SUCCESSOR TRUSTEE BY MERGER, ETC
Subject to Section 7.10 hereof, if the Trustee consolidates, merges or
converts into, or transfers all or substantially all of its corporate trust
business to, another corporation or national banking association, the successor
entity without any further act shall be the successor Trustee. In case any
Securities have been authenticated, but not delivered, by the Trustee then in
office, any successor by merger, conversion or consolidation of such
authenticating trustee may adopt such authentication and deliver the Securities
so authenticated with the same effect as if such successor trustee had itself
authenticated such Securities.
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SECTION 7.10 ELIGIBILITY; DISQUALIFICATION
There shall at all times be a Trustee hereunder which shall be a
corporation organized and doing business under the laws of the United States of
America, any state thereof or the District of Columbia authorized under such
laws to exercise corporate trust powers, shall be subject to supervision or
examination by Federal or state (or the District of Columbia) authority and
shall have a combined capital and surplus of at least $50 million as set forth
in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA ss. 310(a)(1). The Trustee is subject to TIA ss. 310(b).
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY
The Trustee is subject to TIA ss. 311(a), excluding any creditor
relationship listeD in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.01 TERMINATION OF COMPANY'S AND GUARANTORS' OBLIGATIONS
This Indenture shall cease to be of further effect (except that the
Company's obligations under Section 7.07 hereof and the Trustee's and Paying
Agent's obligations under Section 8.03 hereof shall survive) when all
outstanding Securities theretofore authenticated and issued have been delivered
(other than destroyed, lost or stolen Securities that have been replaced or
paid) to the Trustee for cancellation and the Company has paid all sums payable
hereunder. In addition, the Company may terminate all of its obligations under
this Indenture if:
(1) the Company irrevocably deposits, or causes to be deposited, in
trust with the Trustee or the Paying Agent, or, at the option of the
Trustee, with a trustee satisfactory to the Trustee and the Company under
the terms of an irrevocable trust agreement in form and substance
satisfactory to the Trustee, money or U.S. Government Obligations in an
amount sufficient (without reinvestment thereof) to pay principal and
interest on the Securities to maturity or redemption, as the case may be,
as such amounts become due, and to pay all other sums payable by it
hereunder; PROVIDED that (i) the trustee of the irrevocable trust shall
have been irrevocably instructed to pay such money or the proceeds of such
U.S. Government Obligations to the Trustee and (ii) the Trustee shall have
been irrevocably instructed to apply such money or the proceeds of such
U.S. Government Obligations to the payment of said principal, premium and
Liquidated Damages, if any, and interest with respect to the Securities;
(2) the Company delivers to the Trustee an Officers' Certificate
stating that all conditions precedent to satisfaction and discharge of this
Indenture have been complied with, and an Opinion of Counsel to the same
effect;
(3) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit; and
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(4) the Company shall have delivered to the Trustee an Opinion of
Counsel from nationally recognized counsel acceptable to the Trustee or a
tax ruling from the Internal Revenue Service to the effect that the Holders
of the Securities will not recognize income, gain or loss for Federal
income tax purposes as a result of the Company's exercise of its option
under this Section 8.01 and will be subject to Federal income tax on the
same amount and in the same manner and at the same times as would have been
the case if such option had not been exercised.
In such event, this Indenture shall cease to be of further effect (except as
provided in the next succeeding paragraph), and the Trustee, on demand of the
Company, shall execute proper instruments acknowledging confirmation of and
discharge under this Indenture.
However, the Company's and the Guarantors' obligations in Sections
2.03, 2.04, 2.05, 2.06, 2.07, 4.01, 4.06, 7.07, 7.08 and 8.04 hereof and the
Company's, the Guarantors', the Trustee's and Paying Agent's obligations in
Section 8.03 hereof, and the Trustee's rights under Article 7 hereof, shall
survive until the Securities are no longer outstanding. Thereafter, only the
Company's obligations in Section 7.07 hereof and the Trustee's and Paying
Agent's obligations in Section 8.03 hereof shall survive.
After such irrevocable deposit made pursuant to this Section 8.01 and
satisfaction of the other conditions set forth herein, the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations under
this Indenture except for those surviving obligations specified above.
In order to have money available on a payment date to pay principal or
interest on the Securities, the U.S. Government Obligations shall be payable as
to principal or interest on or before such payment date in such amounts as will
provide the necessary money. U.S. Government Obligations shall not be callable
at the issuer's option.
SECTION 8.02 APPLICATION OF TRUST MONEY
The Trustee or a trustee satisfactory to the Trustee and the Company
shall hold in trust money or U.S. Government Obligations deposited with it
pursuant to Section 8.01 hereof. It shall apply the deposited money and the
money from U.S. Government Obligations through the Paying Agent and in
accordance with this Indenture to the payment of principal of and interest on
the Securities.
SECTION 8.03 REPAYMENT TO COMPANY
The Trustee and the Paying Agent shall promptly pay to the Company upon
written request any excess money or securities held by them at any time,
PROVIDED that nothing remains owed to the Trustee pursuant to this Indenture.
The Trustee and the Paying Agent shall pay to the Company upon written
request any money held by them for the payment of principal or interest that
remains unclaimed for two years after the date upon which such payment shall
have become due; PROVIDED that the Company shall have either caused notice of
such payment to be mailed to each Holder entitled thereto no less than 30 days
prior to such repayment or within such period shall have published such notice
in a financial newspaper of widespread circulation published in The City of New
York. After payment to the Company, Holders entitled to the money must look to
the Company for payment as general creditors unless an applicable abandoned
property law designates another Person, and all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
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SECTION 8.04 REINSTATEMENT
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 8.01 hereof by reason of any
legal proceeding or by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, the Company's obligations under this Indenture and the Securities
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.01 hereof until such time as the Trustee or Paying Agent is permitted
to apply all such money or U.S. Government Obligations in accordance with
Section 8.01 hereof; PROVIDED, that if the Company has made any payment of
interest on or principal of any Securities because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the money or U.S. Government
Obligations held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENTS
SECTION 9.01 WITHOUT CONSENT OF HOLDERS
The Company and the Trustee may amend this Indenture, the Securities or
the Guarantee or waive any provision hereof or thereof without the consent of
any Holder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Securities in addition to or in place
of certificated Securities;
(3) to comply with Section 5.01 hereof;
(4) to make any change that would provide any additional rights or
benefits to the Holders or that does not adversely affect the
rights hereunder of any Holder; or
(5) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
Upon the request of the Company, accompanied by a resolution of the
Board of Directors authorizing the execution of any such supplemental indenture,
and upon receipt by the Trustee of the documents described in Section 9.06
hereof, the Trustee shall join with the Company in the execution of any
supplemental indenture authorized or permitted by the terms of this Indenture
and make any further appropriate agreements and stipulations that may be therein
contained, but the Trustee shall not be obligated to enter into any supplemental
indenture that, in its reasonable discretion, affects its own rights, duties or
immunities under this Indenture or otherwise. After an amendment or waiver under
this Section 9.01 becomes effective, the Company shall mail to the Holders of
each Security affected thereby a notice briefly describing the amendment or
waiver. Any failure of the Company to mail such notice, or any defect therein,
shall not, however, in any way impair or affect the validity of any such
supplemental indenture.
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SECTION 9.02 WITH CONSENT OF HOLDERS
Except as provided below in this Section 9.02, this Indenture, the
Securities or the Guarantee may be amended or supplemented, with the written
consent of the Holders of at least 51% in principal amount of the then
outstanding Securities (including consents obtained in connection with a tender
offer or exchange offer for Securities).
Upon the request of the Company, accompanied by a resolution of the
Board of Directors authorizing the execution of any such supplemental indenture,
and upon the filing with the Trustee of evidence of the consent of the Holders
as aforesaid, and upon receipt by the Trustee of the documents described in
Section 9.06 hereof, the Trustee shall join with the Company in the execution of
such supplemental indenture unless, in the Trustee's reasonable discretion, such
supplemental indenture affects the Trustee's own rights, duties or immunities
under this Indenture or otherwise, in which case the Trustee may in its
discretion, but shall not be obligated to, enter into such supplemental
indenture.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment or waiver,
but it shall be sufficient if such consent approves the substance thereof.
The Holders of at least 51% in principal amount of the Securities then
outstanding may waive compliance in a particular instance by the Company with
any provision of this Indenture or the Securities (including waivers obtained in
connection with a tender offer for Securities) or any existing default. However,
without the consent of each Holder affected, an amendment or waiver under this
Section may not (with respect to any Securities held by a non-consenting
Holder):
(1) reduce the principal amount of Securities whose Holders must
consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any
Security or alter the provisions with respect to the redemption or
purchase price in connection with repurchases under Sections 3.07,
3.08, 4.10 or 4.11 hereof;
(3) reduce the rate of or change the time for payment of interest on
any Security;
(4) waive a Default or Event of Default in the payment of principal of
or premium and Liquidated Damages, if any, or interest on the
Securities or that resulted from a failure to comply with Sections
4.10 or 4.11 hereof (except a rescission of acceleration of the
Securities by the Holders of at least 51% in aggregate principal
amount of the Securities as provided in Section 6.02 hereof);
(5) make any Securities payable in money other than that stated in the
Securities;
(6) make any change in Section 6.04 or 6.07 hereof or in this sentence
of this Section 9.02; or
(7) waive a redemption payment with respect to any Security.
The right of any Holder to participate in any consent required or
sought pursuant to any provision of this Indenture (and the obligation of the
Company to obtain any such consent otherwise required from such Holder) may be
subject to the requirement that such Holder shall have been the Holder
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of record of any Securities with respect to which such consent is required or
sought as of a date identified by the Trustee in a notice furnished to Holders
in accordance with the terms of this Indenture.
SECTION 9.03 COMPLIANCE WITH TRUST INDENTURE ACT
Every amendment to this Indenture or the Securities shall comply in
form and substance with the TIA as then in effect.
SECTION 9.04 REVOCATION AND EFFECT OF CONSENTS
Until an amendment (which includes any supplement) or waiver becomes
effective, a consent to it by a Holder of a Security is a continuing consent by
the Holder and every subsequent Holder of a Security or portion of a Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent is not made on any Security. However, any such Holder or
subsequent Holder may revoke the consent as to his or her Security or portion of
a Security if the Trustee receives written notice of revocation before the date
the amendment or waiver becomes effective. An amendment or waiver becomes
effective in accordance with its terms and thereafter binds every Holder.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment or
waiver. If the Company elects to fix a record date for such purpose, the record
date shall be fixed at (i) the later of 30 days prior to the first solicitation
of such consent or the date of the most recent list of Holders furnished to the
Trustee prior to such solicitation pursuant to Section 2.05 hereof, or (ii) such
other date as the Company shall designate. If a record date is fixed, then
notwithstanding the provisions of the immediately preceding paragraph, those
Persons who were Holders at such record date (or their duly designated proxies),
and only those Persons, shall be entitled to consent to such amendment or waiver
or to revoke any consent previously given, whether or not such Persons continue
to be Holders after such record date. No consent shall be valid or effective for
more than 90 days after such record date unless consents from Holders of the
principal amount of Securities required hereunder for such amendment or waiver
to be effective shall have also been given and not revoked within such 90-day
period.
After an amendment or waiver becomes effective it shall bind every
Holder, unless it is of the type described in any of clauses (1) through (7) of
Section 9.02 hereof. In such case, the amendment or waiver shall bind each
Holder of a Security who has consented to it and every subsequent Holder of a
Security that evidences the same debt as the consenting Holder's Security.
SECTION 9.05 NOTATION ON OR EXCHANGE OF SECURITIES
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the Trustee.
The Trustee may place an appropriate notation about the changed terms and return
it to the Holder and the Trustee may place an appropriate notation on any
Security thereafter authenticated. Alternatively, if the Company or Trustee so
determines, the Company in exchange for all Securities shall issue and the
Trustee shall authenticate new Securities that reflect the changed terms.
SECTION 9.06 TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amendment or supplemental indenture
authorized pursuant to this Article 9 if the amendment does not, in the
Trustee's reasonable discretion, adversely affect the rights,
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duties, liabilities or immunities of the Trustee. If it does, the Trustee may,
but need not, sign it. In signing or refusing to sign such amendment or
supplemental indenture, the Trustee shall be entitled to receive and, subject to
Section 7.01 hereof, shall be fully protected in relying upon, an Officers'
Certificate and an Opinion of Counsel as conclusive evidence that such amendment
or supplemental indenture is authorized or permitted by this Indenture, that it
is not inconsistent herewith, and that it will be valid and binding upon the
Company in accordance with its terms.
ARTICLE 10
GUARANTEE
SECTION 10.01 SUBSIDIARY GUARANTEE
Each of the Guarantors hereby, jointly and severally, fully and
unconditionally guarantees to each Holder of a Security authenticated and
delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of this Indenture, the
Securities or the obligations of the Company hereunder or thereunder, that: (a)
the principal of, and premium and Liquidated Damages, if any, and interest on
the Securities will be promptly paid in full when due, whether at maturity, by
acceleration, redemption or otherwise, and interest on the overdue principal of,
premium and Liquidated Damages, if any, and interest on the Securities, if any,
if lawful, and all other obligations of the Company to the Holders or the
Trustee hereunder or thereunder will be promptly paid in full or performed, all
in accordance with the terms hereof and thereof; and (b) in case of any
extension of time of payment or renewal of any Securities or any of such other
obligations, the same will be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise; PROVIDED, HOWEVER, that the maximum
liability of a Guarantor pursuant to this Guarantee shall in no event exceed the
Maximum Guaranteed Amount (as defined below). Failing payment when due of any
amount so guaranteed or any performance so guaranteed for whatever reason, the
Guarantors will be jointly and severally obligated to pay the same immediately.
The Guarantors hereby agree that their obligations hereunder shall be absolute
and unconditional, irrespective of the validity, regularity or enforceability of
the Securities or this Indenture, the absence of any action to enforce the same,
any waiver or consent by any Holder of the Securities with respect to any
provisions hereof or thereof, the recovery of any judgment against the Company,
any action to enforce the same or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a guarantor other than
the defense that payment has been made or that the other relevant obligations
have been paid or performed. Each Guarantor hereby waives diligence,
presentment, demand of payment, claim of fraud, filing of claims with a court in
the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands whatsoever
and covenant that this Guarantee will not be discharged except by complete
performance of the obligations contained in the Securities and this Indenture.
If any Holder or the Trustee is required by any court or otherwise to return to
the Company or Guarantors, or any Custodian, trustee, liquidator or other
similar official acting in relation to either the Company or Guarantors, any
amount paid by either to the Trustee or such Holder, this Guarantee, to the
extent theretofore discharged, shall be reinstated in full force and effect.
Each Guarantor agrees that it shall not be entitled to any right of subrogation
in relation to the Holders in respect of any obligations guaranteed hereby until
payment in full of all obligations guaranteed hereby. Each Guarantor further
agrees that, as between the Guarantors, on the one hand, and the Holders and the
Trustee, on the other hand, (x) the maturity of the obligations guaranteed
hereby may be accelerated as provided in Article 6 for the purposes of this
Guarantee, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations guaranteed hereby, and (y) in
the event of any declaration of acceleration of such obligations as provided in
Article 6, such obligations
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(whether or not due and payable) shall forthwith become due and payable by the
Guarantors for the purpose of this Guarantee. The Guarantors shall have the
right to seek contribution from any non-paying Guarantor so long as the exercise
of such right does not impair the rights of the Holders under the Guarantee.
The "Maximum Guaranteed Amount" means, with respect to any Guarantor,
the amount which allows the Guarantee to be enforceable to the fullest extent
permitted by law, limited only to the extent necessary for the Guarantee to not
constitute a fraudulent conveyance.
The "Adjusted Net Worth" of a Guarantor as of the Guarantee Date shall
mean the excess of (a) the amount of the fair saleable value of the assets of
such Guarantor as of such date determined in accordance with applicable federal
and state laws governing determinations of the insolvency of debtors over (b)
the amount of all liabilities of such Guarantor, contingent or otherwise, as of
the Guarantee Date, determined on the basis provided in clause (a) above
(excluding all liabilities under this Guarantee).
Each Guarantor shall be subrogated to all rights of each Holder of any
Securities against the Company in respect of any amounts paid to the Holders by
such Guarantor pursuant to the provisions of this Guarantee; PROVIDED that the
Guarantors shall not be entitled to enforce, or to receive, any payments arising
out of or based upon, such right of subrogation until the principal of, premium
and Liquidated Damages, if any, and interest on all the Securities shall have
been paid in full and nothing remains owed to the Trustee pursuant to this
Indenture.
The Guarantee set forth in this Section 10.01 shall not be valid or
become obligatory for any purpose with respect to a Security until the
certificate of authentication on such Security shall have been signed by or on
behalf of the Trustee.
No Unrestricted Subsidiary or Partially Owned Restricted Subsidiary
shall become a guarantor of any Indebtedness of the Company or any Restricted
Subsidiaries unless such Unrestricted Subsidiary or Partially Owned Restricted
Subsidiary becomes a guarantor of the Notes.
SECTION 10.02 EXECUTION AND DELIVERY OF GUARANTEE
To evidence its Guarantee set forth in Section 10.01 hereof, each
Guarantor hereby agrees that a notation of such Guarantee substantially in the
form of Exhibit A-1 shall be endorsed by an officer of such Guarantor on each
Security authenticated and delivered by the Trustee and that this Indenture
shall be executed on behalf of such Guarantor by its President or one of its
Vice Chairmen or Vice Presidents.
Each Guarantor hereby agrees that its Guarantee set forth in Section
10.01 shall remain in full force and effect notwithstanding any failure to
endorse on each Security a notation of such Guarantee.
If an officer or Officer whose signature is on this Indenture of on the
Guarantee no longer holds that office at the time the Trustee authenticates the
Security on which a Guarantee is endorsed, the Guarantee shall be valid, binding
and enforceable nevertheless.
The delivery of any Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Guarantee set forth in
this Indenture on behalf of the Guarantors.
SECTION 10.03 GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS
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(a) Except as set forth in Articles 4 and 5 hereof, nothing contained
in this Indenture or in any of the Securities shall prevent any consolidation or
merger of a Guarantor with or into the Company or another Guarantor or shall
prevent any sale or conveyance of the property of a Guarantor as an entirety or
substantially as an entirety, to the Company or another Guarantor. Upon any such
consolidation, merger, sale or conveyance, the Guarantee given by such Guarantor
shall no longer have any force or effect.
(b) Except as set forth in Articles 4 and 5 hereof, nothing contained
in this Indenture or in any of the Securities shall prevent any consolidation or
merger of a Guarantor with or into a corporation or corporations other than the
Company or another Guarantor (whether or not affiliated with the Guarantor), or
successive consolidations or mergers in which a Guarantor or its successor or
successors shall be a party or parties, or shall prevent any sale or conveyance
of the property of a Guarantor as an entirety or substantially as an entirety,
to a corporation other than the Company or another Guarantor (whether or not
affiliated with the Guarantor) authorized to acquire and operate the same;
PROVIDED that each such Guarantor is sold or disposed of for fair market value,
evidenced by a resolution of the Board of Directors set forth in an Officer's
Certificate delivered to the Trustee; and PROVIDED, FURTHER, that the foregoing
proviso shall not apply to the sale or disposition of a Guarantor in a
foreclosure proceeding to the extent that such proviso would be inconsistent
with the Uniform Commercial Code. Upon any such consolidation, merger, sale or
conveyance, the Guarantee given by such Guarantor shall no longer have any force
or effect.
SECTION 10.04 RELEASES FOLLOWING SALE OF ASSETS
Concurrently with any sale of assets (including, if applicable, all of
the capital stock of any Guarantor), any Liens in favor of the Trustee in the
assets sold thereby shall be released; PROVIDED that any such assets are sold or
disposed of for fair market value, evidenced by a resolution of the Board of
Directors set forth in an Officer's Certificate delivered to the Trustee and,
PROVIDED, FURTHER, that, the foregoing proviso shall not apply to the sale or
disposition of a Guarantor in a foreclosure proceeding to the extent that such
proviso would be inconsistent with the Uniform Commercial Code. If the assets
sold in such sale or other disposition include all or substantially all of the
assets of any Guarantor or all of the capital stock of any Guarantor, then such
Guarantor (in the event of a sale or other disposition of all of the capital
stock of such Guarantor) or the corporation acquiring the property and such
Guarantor (in the event of a sale or other disposition of all or substantially
all of the assets of a Guarantor) shall automatically be released and relieved
of its obligations under this Article 10, PROVIDED that any such sale or
disposition of all or substantially all of the assets of a Guarantor is sold or
disposed of for fair market value, evidenced by a resolution of the Board of
Directors set forth in an Officer's Certificate delivered to the Trustee and,
PROVIDED, FURTHER, that the foregoing proviso shall not apply to the sale or
disposition of a Guarantor in a foreclosure proceeding to the extent that such
proviso would be inconsistent with the Uniform Commercial Code. Upon delivery by
the Company to the Trustee of an Officers' Certificate and an Opinion of Counsel
to the effect that such sale or other disposition was made by the Company in
accordance with the provisions of this Indenture, the Trustee shall execute any
documents reasonably required in order to evidence the release of any Guarantor
from its obligations under its Guarantee. Any Guarantor not released from its
obligations under its Guarantee shall remain liable for the full amount of
principal of and interest on the Securities and for the other obligations of any
Guarantor under the Indenture as provided in this Article 10.
66
<PAGE>
SECTION 10.05 "TRUSTEE" TO INCLUDE PAYING AGENT
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article 10 shall in such case (unless the context shall
otherwise require) be construed as extending to and including such Paying Agent
within its meaning as fully and for all intents and purposes as if such Paying
Agent were named in this Article 10 in place of the Trustee.
67
<PAGE>
SECTION 10.06 ADDITIONAL SUBSIDIARY GUARANTEES
The Company shall (a) cause each Subsidiary which, after the date of
this Indenture (if not then a Guarantor), becomes a Restricted Subsidiary to
execute a Guarantee of the Obligations of the Company hereunder in the form set
forth in this Article 10 hereof and Exhibit A-1 hereto, PROVIDED that no
Subsidiary organized outside of the United States of America and no Unrestricted
Subsidiary shall be required to be a Guarantor, and (b) deliver to the Trustee
an Opinion of Counsel, in form reasonably satisfactory to the Trustee, that such
Subsidiary Guarantee is a valid, binding and enforceable obligation of such
Restricted Subsidiary, subject to customary exceptions for bankruptcy,
fraudulent conveyance and equitable principles and the implied covenant of good
faith and fair dealing.
ARTICLE 11
MISCELLANEOUS
SECTION 11.01 TRUST INDENTURE ACT CONTROLS
If any provision of this Indenture limits, qualifies or conflicts with
another provision which is required to be included herein by any of Sections 310
to 317 inclusive of the TIA, such required provisions shall control.
SECTION 11.02 NOTICES
Any notice or communication by the Company, the Guarantors or the
Trustee to the other is duly given if in writing and delivered in person or
mailed by first-class mail (registered or certified, return receipt requested),
telex, telecopier or overnight air courier guaranteeing next day delivery, to
the other's address:
If to the Company or the Guarantors:
PRIMEDIA, INC.
745 Fifth Avenue
New York, New York 10151
Attention: General Counsel
Telecopier No.: (212) 745-0199
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Gary I. Horowitz, Esq.
Telecopier No.: (212) 455-2502
If to the Trustee:
The Bank of New York
101 Barclay Street -- 21W
New York, New York 10286
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<PAGE>
Attention: Corporate Trust Administration
Telecopier No.: (212) 815-5915/5917
The Company, the Guarantors or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications shall be deemed to have been duly given:
at the time delivered by hand, if personally delivered; five Business Days after
being deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; when receipt acknowledged, if telecopied; and the next Business Day
after timely delivery to the courier, if sent by overnight air courier
guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first-class
mail, certified or registered, return receipt requested, to the Holder's address
shown on the register kept by the Registrar. Failure to mail a notice or
communication to a Holder or any defect in it shall not affect its sufficiency
with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
SECTION 11.03 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS
Holders may communicate pursuant to TIA ss. 312(b) with other Holders
with respect tO their rights under this Indenture or the Securities. The
Company, the Guarantors, the Trustee, the Registrar and anyone else shall have
the protection of TIA ss. 312(c).
SECTION 11.04 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT
Upon any request or application by the Company and/or any Guarantors to
the Trustee to take any action under this Indenture, the Company and/or such
Guarantor as the case may be shall furnish to the Trustee:
(1) an Officers' Certificate (which shall include the statements set
forth in Section 11.05 hereof) stating that, in the opinion of the signers,
all conditions precedent and covenants, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel (which shall include the statements set forth
in Section 11.05 hereof) stating that, in the opinion of such counsel, all
such conditions precedent and covenants have been complied with.
SECTION 11.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA ss. 314(a)(4)) shall include:
69
<PAGE>
(1) a statement that the Person making such certificate or opinion has
read and understands such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with; PROVIDED that with
respect to matters of fact Opinions of Counsel may rely on an Officers'
Certificate or certificates of public officials.
SECTION 11.06 RULES BY TRUSTEE AND AGENTS
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 11.07 LEGAL HOLIDAYS
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions in The City of New York or at a place of payment are authorized or
obligated by law, regulation or executive order to remain closed. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period.
SECTION 11.08 NO RECOURSE AGAINST OTHERS
No director, officer, employee, incorporator or shareholder of the
Company, as such, shall have any liability for any obligations of the Company
under the Securities, this Indenture or the Guarantees or for any claim based
on, in respect of, or by reason of, such obligations or their creation. Each
Holder of the Securities by accepting the Securities waives and releases all
such liability. The waiver and release are part of the consideration for
issuance of the Securities.
SECTION 11.09 GOVERNING LAW
This Indenture, the Securities and the Guarantee shall be governed by
and construed in accordance with the laws of the State of New York, without
regard to principles of conflicts of law.
SECTION 11.10 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or a Subsidiary. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
70
<PAGE>
SECTION 11.11 SUCCESSORS
All agreements of the Company in this Indenture and the Securities
shall bind its successor. All agreements of the Trustee in this Indenture shall
bind its successor.
SECTION 11.12 SEVERABILITY
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 11.13 COUNTERPART ORIGINALS
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 11.14 TRUSTEE AS PAYING AGENT AND REGISTRAR
The Company initially appoints the Trustee as Paying Agent and
Registrar. The provisions regarding the indemnification of the Trustee set forth
in Section 7.07 shall also apply to the Trustee in its capacity as Paying Agent
and Registrar hereunder.
SECTION 11.15 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
SECTION 11.16 BANK OF NEW YORK NOT ACTING IN INDIVIDUAL CAPACITY
Notwithstanding anything to the contrary contained herein, this
Indenture has been accepted by The Bank of New York not in its individual
capacity but solely as Trustee and in no event shall The Bank of New York have
any liability for the representations, warranties, covenants, agreements or
other obligations of the Company herein or in any of the certificates, notices
or agreements delivered by the Company pursuant hereto, as to all of which
recourse shall be had solely to the assets of the Company, and under no
circumstances shall The Bank of New York be personally liable for the payment of
any indebtedness or expenses of the Company.
SECTION 11.17 ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED SECURITIES
In addition to the rights provided to Holders of Securities under the
Indenture, Holders of Transfer Restricted Securities shall have all the rights
set forth in the Registration Rights Agreement.
[Signatures on Following Pages]
71
<PAGE>
SIGNATURES
PRIMEDIA INC.
Dated as of February 17, 1998 By: /s/ BEVERLY C. CHELL
-------------------------------
Name: Beverly C. Chell
Title:
THE APARTMENT GUIDE OF NASHVILLE, INC.
ARGUS PUBLISHERS CORPORATION
AMERICAN HEAT VIDEO PRODUCTIONS, INC.
ASTN, INC.
A WEP COMPANY
BACON'S INFORMATION, INC.
BANKERS CONSULTING COMPANY
CARDINAL BUSINESS MEDIA, INC.
CARDINAL BUSINESS MEDIA HOLDINGS, INC.
CHANNEL ONE COMMUNICATIONS CORPORATION
COVER CONCEPTS MARKETING SERVICES, LLC
CSK PUBLISHING COMPANY INCORPORATED
DAILY RACING FORM, INC.
DATA BOOK, INC.
DRF FINANCE, INC.
THE ELECTRONICS SOURCE BOOK, INC.
EXCELLENCE IN TRAINING CORPORATION
FUNK & WAGNALLS YEARBOOK CORPORATION
GARETH STEVENS, INC.
GO LO ENTERTAINMENT, INC.
GUINN COMMUNICATIONS, INC.
HAAS PUBLISHING COMPANIES, INC.
HEALTH & SCIENCES NETWORK, INC.
IDTN LEASING CORPORATION
INDUSTRIAL TRAINING SYSTEMS CORPORATION
INTELLICHOICE, INC.
INTERMODAL PUBLISHING COMPANY, LTD.
INTERTEC MARKET REPORTS, INC.
INTERTEC PRESENTATIONS, INC.
INTERTEC PUBLISHING CORPORATION
K-III HPC, INC.
K-III PRIME CORPORATION
LAW ENFORCEMENT TELEVISION NETWORK, INC.
LAW ENFORCEMENT TELEVISION NETWORK, INC.
LIFETIME LEARNING SYSTEMS, INC.
LITTLE ROCK APARTMENT GUIDE, INC.
LOCKERT JACKSON & ASSOCIATES, INC.
MCMULLEN ARGUS PUBLISHING, INC.
MEMPHIS APARTMENT GUIDE, INC.
MUSICAL AMERICA PUBLISHING, INC.
NELSON INFORMATION, INC.
NEWBRIDGE COMMUNICATIONS, INC.
PARK AVENUE PUBLISHING, INC.
<PAGE>
PICTORIAL, INC.
PLAZA COMMUNICATIONS, INC.
PRIMEDIA HOLDINGS III INC.
PRIMEDIA INFORMATION INC.
PRIMEDIA MAGAZINES INC.
PRIMEDIA MAGAZINES FINANCE INC.
PRIMEDIA REFERENCE INC.
PRIMEDIA SPECIAL INTEREST PUBLICATIONS
INC.
QWIZ, INC.
R.E.R. PUBLISHING CORPORATION
STRAIGHT DOWN, INC.
SYMBOL OF EXCELLENCE PUBLISHERS, INC.
TEL-A-TRAIN, INC.
TI-IN ACQUISITION CORPORATION
WEEKLY READER CORPORATION
WESTCOTT COMMUNICATIONS, INC.
WESTCOTT COMMUNICATIONS MICHIGAN, INC.
WESTCOTT ECI, INC.
WESTERN EMPIRE PUBLICATIONS, INC.
Dated as of February 17, 1998 By: /s/ BEVERLY C. CHELL
---------------------------------
Name: Beverly C. Chell
Title:
<PAGE>
THE BANK OF NEW YORK,
as Trustee
Dated as of February 17, 1998 By: /s/ THE BANK OF NEW YORK
---------------------------------
Vice President
<PAGE>
EXHIBIT A
7-5/8% SENIOR NOTES DUE 2008
No. _________________ CUSIP _________________
$----------------------
PRIMEDIA INC., a Delaware corporation (herein called the "COMPANY"), for value
received hereby promises to pay to
- ---------------------------------------------------------
or registered assigns,
the principal sum of _________________________________________________________
on April 1, 2008.
INTEREST PAYMENT DATES: April 1 and October 1
RECORD DATES: March 15 and September 15
Reference is hereby made to the further provisions of this Senior Note due 2008
set forth on the reverse side hereof and such further provisions shall for all
purposes have the same effect as if set forth on the front side hereof.
IN WITNESS WHEREOF, the Company has caused this certificate to be signed
manually or by facsimile.
DATED: February 17, 1998
CERTIFICATE OF AUTHENTICATION:
This is one of the Securities referred to in the within mentioned Indenture.
THE BANK OF NEW YORK, PRIMEDIA INC.
as Trustee
By: By:
---------------------------- ---------------------------
Authorized Signatory Name:
Title:
<PAGE>
7-5/8% SENIOR NOTES DUE 2008
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE,
(III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A OR
REGULATION S THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY
AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) INSIDE THE UNITED
STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES
ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, (d) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(A)(1), (2),
(3) OR (7) OF THE SECURITIES ACT (AN "INSTITUTIONAL ACCREDITED
INVESTOR") THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS (THE FORM OF
WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN
RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF SECURITIES LESS THAN
$100,000, AN OPINION OF COUNSEL THAT SUCH TRANSFER IS IN COMPLIANCE WITH
THE SECURITIES ACT OR (e) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR
(3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE,
IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET
FORTH IN (A) ABOVE."
Capitalized terms used herein have the meaning assigned to them in
the Indenture unless otherwise indicated.
A-2
<PAGE>
1. INTEREST; LIQUIDATED DAMAGES. The Company promises to pay interes
on the principal amount of this Security at 7-5/8% per annum from
the date of issuance until maturity and shall pay the Liquidated Damages
payable pursuant to Section 5 of the Registration Rights Agreement. The
Company will pay interest and Liquidated Damages, if any, semi-annually
on April 1 and October 1 of each year, or if any such day is not a
Business Day, on the next succeeding Business Day (each an "Interest
Payment Date"). Interest on the Securities will accrue from the most
recent date on which interest has been paid or, if no interest has been
paid, from the date of issuance; PROVIDED that if there is no existing
Default in the payment of interest, and if this Security is
authenticated between a record date referred to on the face hereof and
the next succeeding Interest Payment Date, interest shall accrue from
such next succeeding Interest Payment Date; PROVIDED, FURTHER, that the
first Interest Payment Date shall be October 1, 1998. The Company shall
pay interest (including post-petition interest in any proceeding under
any Bankruptcy Law) on overdue principal and premium, if any, from time
to time on demand at the same rate per annum on the Securities to the
extent lawful; it shall pay interest (including post-petition interest
in any proceeding under any Bankruptcy Law) on overdue installments of
interest (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the
Securities (except defaulted interest) and premium and Liquidated
Damages, if any, to the Persons who are registered Holders of Securities
at the close of business on the March 15 or September 15 next preceding
the Interest Payment Date, even if such Securities are cancelled after
such record date and on or before such Interest Payment Date. The
Securities will be payable as to principal, premium, interest and
Liquidated Damages at the office or agency of the Company maintained for
such purpose within or without the City and State of New York, or, at
the option of the Company, payment of interest, premium and Liquidated
Damages may be made by check mailed to the Holders of the Securities at
their addresses set forth in the register of Holders of Securities.
3. PAYING AGENT AND REGISTRAR. Initially, The Bank of New York, the
Trustee under the Indenture, will act as Paying Agent and Registrar. The
Company may change any Paying Agent, Registrar or co-registrar without
notice to any Holder. The Company or any of its Subsidiaries may act in
any such capacity.
4. INDENTURE. The Company issued the Securities under an Indenture
dated as of February 17, 1998 (the "Indenture") among the Company, the
Guarantors and the Trustee. The terms of the Securities include those
stated in the Indenture and those made part of the Indenture by
reference to the TIA (15 U.S. Code ss.ss. 77aaa-77bbbb). The Securities
are subject to all such terms, and Holders are referred to the Indenture
and such Act for a statement of such terms. The Securities are senior
obligations of the Company initially limited to $250.0 million in
aggregate principal amount, plus premiums and Liquidated Damages, if
any, plus amounts, if any, sufficient to pay interest on outstanding
Securities as set forth in Paragraph 2 hereof. Additional Notes may be
issued from time to time subject to Section 4.09 of the Indenture. The
Notes and any additional Notes subsequently issued would be treated as a
single class for all purposes under the Indenture, including, without
limitation, waivers, amendments, redemptions and offers to purchase.
A-3
<PAGE>
5. OPTIONAL REDEMPTION.
The Company may redeem all or any of the Securities, in whole or in
part, at any time on or after April 1, 2003 at the redemption prices
(expressed as percentages of the principal amount) set forth in the
immediately succeeding paragraph, plus accrued and unpaid interest
thereon to the applicable redemption date.
The redemption price as a percentage of the principal amount shall
be as follows, if the Securities are redeemed during the twelve-month
period beginning April 1 of the year indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2003..................................................... 103.813%
2004..................................................... 102.542%
2005..................................................... 101.271%
2006 and thereafter...................................... 100.000%
</TABLE>
Notwithstanding the foregoing, upon the occurrence at any time of a
Change of Control, the Securities will be redeemable, at the option of
the Company, in whole or in part, pursuant to the provisions of Section
3.08 of the Indenture.
6. MANDATORY OFFERS TO REPURCHASE; ASSET SALES.
(a) Upon the occurrence of a Change of Control, the Company will be
required to offer (a "Change of Control Offer") to purchase all
outstanding Securities at a purchase price equal to 101% of the
aggregate principal amount of such Securities, plus premium, Liquidated
damages and accrued and unpaid interest, if any, to the date of purchase
(the "Change of Control Payment"). The Change of Control Offer shall
remain open for a period of 20 Business Days after its commencement
unless a longer offering period is required by law. No earlier than 30
days nor later than 40 days after the notice of the Change of Control
Offer has been mailed (the "Change of Control Payment Date"), the
Company shall deposit, to the extent lawful, with the Paying Agent an
amount equal to the Change of Control Payment in respect of all
Securities or portions thereof tendered by Holders. The Paying Agent
shall promptly mail or deliver payment for all Securities tendered in
the Change of Control Offer.
A Holder of Securities may tender all or any portion of his
Securities at his discretion by completing the form entitled "OPTION OF
HOLDER TO ELECT PURCHASE" appearing on this Security. Any portion of
Securities tendered must be in integral multiples of $1,000.
(b) The Company is required to apply 100% of the Net Proceeds of
any Asset Sale (including the sale of stock of any Subsidiary) first to
repay Obligations or reduce commitments under the Credit Facilities,
second to offer to redeem at par the Outstanding Notes and third to
offer to redeem at par the Securities.
7. NOTICE OF REDEMPTION. Notice of any redemption pursuant to
Section 3.07 or 3.08 of the Indenture will be mailed by first class mail
at least 30 days but not more than
A-4
<PAGE>
60 days before the redemption date to each Holder whose Securities are
to be redeemed at its registered address. Securities in denominations
larger than $1,000 may be redeemed in part but only in whole multiples
of $1,000, unless all of the Securities held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on
Securities or portions thereof called for redemption.
8. DENOMINATIONS, TRANSFER, EXCHANGE. The Securities are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Securities may be registered and
Securities may be exchanged as provided in the Indenture. The Registrar
and the Trustee may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted
by the Indenture. The Company need not exchange or register the transfer
of any Security or portion of a Security selected for redemption, except
the unredeemed portion of any Security being redeemed in part. Also, it
need not exchange or register the transfer of any Securities for a
period of 15 days before the mailing of a Notice of Redemption and
ending on the date of such mailing or during the period between a record
date and the corresponding Interest Payment Date.
9. PERSONS DEEMED OWNERS. The registered Holder of a Security may
be treated as its owner for all purposes.
10. AMENDMENTS AND WAIVERS. Subject to certain exceptions, the
Indenture, the Securities or the Guarantee may be amended or
supplemented and any existing Default under, or compliance with any
provision of, the Indenture may be waived with the consent of the
Holders of at least 51% in principal amount of the Securities then
outstanding (including consents obtained in connection with a tender
offer or exchange offer for Securities). Without the consent of any
Holder, the Company and the Trustee may amend or supplement the
Indenture or the Securities to cure any ambiguity, defect or
inconsistency; to provide for uncertificated Securities in addition to
or in place of certificated Securities; to comply with Section 5.01 of
the Indenture; to make any change that would provide any additional
rights or benefits to the Holders of the Securities or that does not
adversely affect the legal rights under the Indenture of any such
Holder; or to comply with requirements of the SEC in order to effect or
maintain the qualification of the Indenture under the TIA.
Without the consent of each Holder affected, an amendment or waiver
may not (with respect to any Securities held by a non-consenting Holder
of Securities) (i) reduce the principal amount of Securities whose
Holders must consent to an amendment, supplement or waiver, (ii) reduce
the principal of or change the fixed maturity of any Security or alter
the provisions with respect to the redemption or purchase price in
connection with repurchases under Sections 3.07, 3.08, 4.10 or 4.11 of
the Indenture, (iii) reduce the rate of or change the time for payment
of interest on any Security, (iv) waive a Default or Event of Default in
the payment of principal of or premium or Liquidated Damages, if any, or
interest on the Securities or that resulted from a failure to comply
with Sections 4.10 or 4.11 of the Indenture (except a rescission of
acceleration of the Securities by the Holders of at least 51% in
aggregate principal amount of the Securities as provided in Section 6.02
of the Indenture), (v) make any Securities payable in money other than
that stated in the Securities, (vi) make any change in Section 6.04
A-5
<PAGE>
or 6.07 of the Indenture or this sentence, and or (vii) waive a
redemption payment with respect to any Security.
The right of any Holder to participate in any consent required or
sought pursuant to any provision of the Indenture or this Security (and
the obligation of the Company to obtain any such consent otherwise
required from such Holder) may be subject to the requirement that such
Holder shall have been the Holder of record of any Securities with
respect to which such consent is required or sought as of a date
identified by the Trustee in a notice furnished to Holders in accordance
with the terms of the Indenture.
11. DEFAULTS AND REMEDIES. Events of Default include: default in
payment of interest or Liquidated Damages on the Securities for 30 days;
default in payment of the principal or premium of any Security at
maturity, or upon acceleration, redemption or otherwise; failure by the
Company for 30 days after written notice to it from the Trustee, or
after written notice to it and the Trustee from Holders of at least 30%
in principal amount of the then outstanding Securities, to comply with
any of its other agreements in the Indenture or the Securities; certain
defaults under other Indebtedness; certain final judgments that remain
undischarged for 60 days after being entered; certain events of
bankruptcy or insolvency; and, except as permitted by the Indenture and
the Securities, the Guarantees are held in any judicial proceeding to be
unenforceable or invalid or otherwise cease for any reason to be in full
force and effect with respect to any Guarantor or any Guarantor denies
or disaffirms its obligations under its Guarantee. If an Event of
Default occurs and is continuing, the Trustee or the Holders of at least
30% in principal amount of the then outstanding Securities may declare
all the Securities to be immediately due and payable for an amount equal
to 100% of the principal amount of the Securities plus premium and
Liquidated Damages, if any, and accrued interest to the date of payment,
except that in the case of an Event of Default arising from certain
events of bankruptcy or insolvency, all outstanding Securities become
due and payable immediately without further action or notice. Holders
may not enforce the Indenture or the Securities except as provided in
the Indenture. The Trustee may require indemnity satisfactory to it
before it enforces the Indenture or the Securities. Subject to certain
limitations, Holders of a majority in principal amount of the then
outstanding Securities may direct the Trustee in its exercise of any
trust or power. The Trustee may withhold from Holders notice of any
continuing Default or Event of Default (except a Default or an Event of
Default in payment of principal, premium or Liquidated Damages, if any,
or interest or that resulted from a failure to comply with Section 4.10
or 4.11 of the Indenture) if and so long as a committee of its
Responsible Officers determines in good faith that withholding notice is
in their interests. The Company must furnish an annual compliance
certificate to the Trustee.
12. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual
or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise
deal with the Company or its Affiliates, as if it were not Trustee.
13. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator or shareholder of the Company, as such, shall have any
liability for any obligations of the Company under the Securities, this
Indenture or the Guarantees or for any claim based on, in respect of, or
by reason of, such obligations or their creation. Each Holder of the
A-6
<PAGE>
Securities by accepting the Securities waives and releases all such
liability. The waiver and release are part of the consideration for
issuance of the Securities.
14. AUTHENTICATION. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an
authenticating agent.
15. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and
U/G/M/A (= Uniform Gifts to Minors Act).
16. GUARANTORS. Payment of principal, premium and Liquidated
Damages, if any, and interest (including interest on overdue principal
of, premium, if any, and interest, if lawful) is unconditionally
guaranteed by each of the Guarantors.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to:
PRIMEDIA INC.
745 Fifth Avenue
New York, New York 10151
Attention: Treasurer
A-7
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign and
transfer this Security to
_______________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint________________________________________________
to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
_______________________________________________________________________
Date:_________________
Your Signature: ____________________
(Sign exactly as your name appears on
the face of this Security)
Signature Guarantee.*
----------------------------------------
*Signature must be guaranteed by a financial institution that is a
member of the Securities Transfer Agent Medallion Program in accordance
with the Securities Exchange Act of 1934, as amended.
A-8
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section or 4.10 or 4.11 of the Indenture, check the
appropriate box:
/ / Section 4.10 / /Section 4.11
If you want to elect to have only part of the Security purchased by
the Company pursuant to Section 4.10 or 4.11 of the Indenture, state the
amount you elect to have purchased: $___________
Date:__________________ Your Signature:_____________________
(Sign exactly as your name appears on
the Security)
Signature Guarantee.*
-------------------------------
*Signature must be guaranteed by a financial institution that is a
member of the Securities Transfer Agent Medallion Program in accordance
with the Securities Exchange Act of 1934, as amended.
A-9
<PAGE>
SCHEDULE OF EXCHANGES FOR GLOBAL NOTES
<TABLE>
AMOUNT OF PRINCIPAL AMOUNT OF THIS
AMOUNT OF DECREASE IN INCREASE IN GLOBAL NOTE SIGNATURE OF
DATE OF PRINCIPAL AMOUNT OF PRINCIPAL AMOUNT OF FOLLOWING SUCH DECREASE AUTHORIZED
EXCHANGE THIS GLOBAL NOTE THIS GLOBAL NOTE (OR INCREASE) SIGNATORY
------------- ------------------- ------------------ -------------------- ------------------
<S> <C> <C> <C> <C>
</TABLE>
A-10
<PAGE>
EXHIBIT A-1
[FORM OF NOTATION ON NOTE RELATING TO GUARANTEE]
GUARANTEE
Each of the corporations listed below (hereinafter referred to as the
"Guarantors", which term includes any successor or additional Guarantor under
the Indenture (the "Indenture") referred to in the Security upon which this
notation is endorsed) (i) has jointly and severally, unconditionally guaranteed
that (a) the principal of, and premium, if any, and interest on the Securities
will be promptly paid in full when due, whether at maturity, by acceleration,
redemption or otherwise, and interest on the overdue principal of, premium, if
any, and interest on the Securities, if any, if lawful, and all other
obligations of the Company to the Holders or the Trustee will be promptly paid
in full or performed, all in accordance with the terms hereof and as set forth
in the Indenture; and (b) in case of any extension of time of payment or renewal
of any Securities or any of such other obligations, the same will be promptly
paid in full when due or performed in accordance with the terms of the extension
or renewal, whether at stated maturity, by acceleration, or otherwise; PROVIDED,
HOWEVER, that the maximum liability of a Guarantor pursuant to this Guarantee
shall in no event exceed the Maximum Guaranteed Amount (as defined below).
Capitalized terms used herein have the meanings assigned to them in the
Indenture unless otherwise indicated.
The "Maximum Guaranteed Amount" means, with respect to any Guarantor,
the amount which allows this Guarantee to be enforceable to the fullest extent
permitted by law, limited only to the extent necessary for this Guarantee to not
constitute a fraudulent conveyance.
The Adjusted Net Worth of a Guarantor as of the Guarantee Date shall
mean the excess of (a) the amount of the fair saleable value of the assets of
such Guarantor as of such date determined in accordance with applicable federal
and state laws governing determinations of the insolvency of debtors over (b)
the amount of all liabilities of such Guarantor, contingent or otherwise, as of
the Guarantee Date, determined on the basis provided in clause (a) above
(excluding all liabilities under this Guarantee).
No stockholder, officer, director, employer or incorporator, past,
present or future, of the Guarantors, as such, shall have any personal liability
under this Guarantee by reason of his or its status as such stockholder,
officer, director, employer or incorporator.
This Guarantee shall be binding upon each Guarantor and its successors
and assigns and shall inure to the benefit of the successors and assigns of the
Trustee and the Holders and, in the event of any transfer or assignment of
rights by any Holder or the Trustee, the rights and privileges herein conferred
upon that party shall automatically extend to and be vested in such transferee
or assignee, all subject to the terms and conditions hereof.
This Guarantee shall not be valid or obligatory for any purpose with
respect to a Security until the certificate of authentication on the Security
upon which this Guarantee is noted shall have been executed by or on behalf of
the Trustee under the Indenture by the manual signature of one of its authorized
signatories.
THE APARTMENT GUIDE OF NASHVILLE, INC.
ARGUS PUBLISHERS CORPORATION
AMERICAN HEAT VIDEO PRODUCTIONS, INC.
A-1-1
<PAGE>
ASTN, INC.
A WEP COMPANY
BACON'S INFORMATION, INC.
BANKERS CONSULTING COMPANY
CARDINAL BUSINESS MEDIA, INC.
CARDINAL BUSINESS MEDIA HOLDINGS, INC.
CHANNEL ONE COMMUNICATIONS CORPORATION
COVER CONCEPTS MARKETING SERVICES, LLC
CSK PUBLISHING COMPANY INCORPORATED
DAILY RACING FORM, INC.
DATA BOOK, INC.
DRF FINANCE, INC.
THE ELECTRONICS SOURCE BOOK, INC.
EXCELLENCE IN TRAINING CORPORATION
FUNK & WAGNALLS YEARBOOK CORPORATION
GARETH STEVENS, INC.
GO LO ENTERTAINMENT, INC.
GUINN COMMUNICATIONS, INC.
HAAS PUBLISHING COMPANIES, INC.
HEALTH & SCIENCES NETWORK, INC.
IDTN LEASING CORPORATION
INDUSTRIAL TRAINING SYSTEMS CORPORATION
INTELLICHOICE, INC.
INTERMODAL PUBLISHING COMPANY, LTD.
INTERTEC MARKET REPORTS, INC.
INTERTEC PRESENTATIONS, INC.
INTERTEC PUBLISHING CORPORATION
K-III HPC, INC.
K-III PRIME CORPORATION
LAW ENFORCEMENT TELEVISION NETWORK, INC.
LIFETIME LEARNING SYSTEMS, INC.
LITTLE ROCK APARTMENT GUIDE, INC.
LOCKERT JACKSON & ASSOCIATES, INC.
MCMULLEN ARGUS PUBLISHING, INC.
MEMPHIS APARTMENT GUIDE, INC.
MUSICAL AMERICA PUBLISHING, INC.
NELSON INFORMATION, INC.
NEWBRIDGE COMMUNICATIONS, INC.
PARK AVENUE PUBLISHING, INC.
PICTORIAL, INC.
PLAZA COMMUNICATIONS, INC.
PRIMEDIA HOLDINGS III INC.
PRIMEDIA INFORMATION INC.
PRIMEDIA MAGAZINES INC.
PRIMEDIA MAGAZINES FINANCE INC.
PRIMEDIA REFERENCE INC.
PRIMEDIA SPECIAL INTEREST PUBLICATIONS INC.
QWIZ, INC.
A-1-2
<PAGE>
R.E.R. PUBLISHING CORPORATION
STRAIGHT DOWN, INC.
SYMBOL OF EXCELLENCE PUBLISHERS, INC.
TEL-A-TRAIN, INC.
TI-IN ACQUISITION CORPORATION
WEEKLY READER CORPORATION
WESTCOTT COMMUNICATIONS, INC.
WESTCOTT COMMUNICATIONS MICHIGAN, INC.
WESTCOTT ECI, INC.
WESTERN EMPIRE PUBLICATIONS, INC.
Name:
Title:
A-1-3
<PAGE>
SCHEDULE I
THE APARTMENT GUIDE OF NASHVILLE, INC.
ARGUS PUBLISHERS CORPORATION
AMERICAN HEAT VIDEO PRODUCTIONS, INC.
ASTN, INC.
A WEP COMPANY
BACON'S INFORMATION, INC.
BANKERS CONSULTING COMPANY
CARDINAL BUSINESS MEDIA, INC.
CARDINAL BUSINESS MEDIA HOLDINGS, INC.
CHANNEL ONE COMMUNICATIONS CORPORATION
COVER CONCEPTS MARKETING SERVICES, LLC
CSK PUBLISHING COMPANY INCORPORATED
DAILY RACING FORM, INC.
DATA BOOK, INC.
DRF FINANCE, INC.
THE ELECTRONICS SOURCE BOOK, INC.
EXCELLENCE IN TRAINING CORPORATION
FUNK & WAGNALLS YEARBOOK CORPORATION
GARETH STEVENS, INC.
GO LO ENTERTAINMENT, INC.
GUINN COMMUNICATIONS, INC.
HAAS PUBLISHING COMPANIES, INC.
HEALTH & SCIENCES NETWORK, INC.
IDTN LEASING CORPORATION
INDUSTRIAL TRAINING SYSTEMS CORPORATION
INTELLICHOICE, INC.
INTERMODAL PUBLISHING COMPANY, LTD.
INTERTEC MARKET REPORTS, INC.
INTERTEC PRESENTATIONS, INC.
INTERTEC PUBLISHING CORPORATION
K-III HPC, INC.
K-III PRIME CORPORATION
LAW ENFORCEMENT TELEVISION NETWORK, INC.
LIFETIME LEARNING SYSTEMS, INC.
LITTLE ROCK APARTMENT GUIDE, INC.
LOCKERT JACKSON & ASSOCIATES, INC.
MCMULLEN ARGUS PUBLISHING, INC.
MEMPHIS APARTMENT GUIDE, INC.
MUSICAL AMERICA PUBLISHING, INC.
NELSON INFORMATION, INC.
NEWBRIDGE COMMUNICATIONS, INC.
PARK AVENUE PUBLISHING, INC.
PICTORIAL, INC.
PLAZA COMMUNICATIONS, INC.
PRIMEDIA HOLDINGS III INC.
PRIMEDIA INFORMATION INC.
PRIMEDIA MAGAZINES INC.
PRIMEDIA MAGAZINES FINANCE INC.
PRIMEDIA REFERENCE INC.
<PAGE>
PRIMEDIA SPECIAL INTEREST PUBLICATIONS INC.
QWIZ, INC.
R.E.R. PUBLISHING CORPORATION
STRAIGHT DOWN, INC.
SYMBOL OF EXCELLENCE PUBLISHERS, INC.
TEL-A-TRAIN, INC.
TI-IN ACQUISITION CORPORATION
WEEKLY READER CORPORATION
WESTCOTT COMMUNICATIONS, INC.
WESTCOTT COMMUNICATIONS MICHIGAN, INC.
WESTCOTT ECI, INC.
WESTERN EMPIRE PUBLICATIONS, INC.
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
PRIMEDIA Inc.
745 Fifth Avenue
New York, New York 10151
The Bank of New York
101 Barclay Street
New York, New York 10286
Re: 7-5/8% SENIOR NOTES DUE 2008
Reference is hereby made to the Indenture, dated as of February 17,
1998 (the "INDENTURE"), between PRIMEDIA Inc., as issuer (the "COMPANY"), and
The Bank of New York, as trustee. Capitalized terms used but not defined herein
shall have the meanings given to them in the Indenture.
______________, (the "TRANSFEROR") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the "TRANSFER"),
to __________ (the "Transferee"), as further specified in Annex A hereto. In
connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. |_| CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "SECURITIES ACT"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
2. |_| CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
REGULATION S GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO REGULATION S. The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and, accordingly, the Transferor hereby further
certifies that (i) the Transfer is not being made to a person in the United
States and (x) at the time the buy order was originated, the Transferee was
outside the United States or such Transferor and any Person acting on its behalf
reasonably believed and believes that the Transferee was outside the United
States or (y) the transaction was executed in, on or through the facilities of a
designated offshore securities market and neither such Transferor nor any Person
acting on its behalf knows that the transaction was prearranged with a buyer in
the United States, (ii) no directed selling efforts have been made in
B-1
<PAGE>
contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S
under the Securities Act and, (iii) the transaction is not part of a plan or
scheme to evade the registration requirements of the Securities Act and (iv) if
the proposed transfer is being made prior to the expiration of the Restricted
Period, the transfer is not being made to a U.S. Person or for the account or
benefit of a U.S. Person (other than an Initial Purchaser). Upon consummation of
the proposed transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will be subject to the
restrictions on Transfer enumerated in the Private Placement Legend printed on
the Regulation S Global Note, the Temporary Regulation S Global Note and/or the
Definitive Note and in the Indenture and the Securities Act.
3. |_| CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN A DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE SECURITIES ACT
OTHER THAN RULE 144A OR REGULATION S. The Transfer is being effected in
compliance with the transfer restrictions applicable to beneficial interests in
Restricted Global Notes and Restricted Definitive Notes and pursuant to and in
accordance with the Securities Act and any applicable blue sky securities laws
of any state of the United States, and accordingly the Transferor hereby further
certifies that (check one):
(a) |_| such Transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act;
or
(b) |_| such Transfer is being effected to the Company or a subsidiary
thereof;
or
(c) |_| such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
(d) |_| such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor
hereby further certifies that the Transfer complies with the transfer
restrictions applicable to Restricted Definitive Notes and the requirements of
the exemption claimed, which certification is supported by (1) a certificate
executed by the Transferee in the form of Exhibit D to the Indenture and (2) if
such Transfer is in respect of a principal amount of Notes at the time of
transfer of less than $100,000, an Opinion of Counsel provided by the Transferor
or the Transferee (a copy of which the Transferor has attached to this
certification), to the effect that such Transfer is in compliance with the
Securities Act. Upon consummation of the proposed transfer in accordance with
the terms of the Indenture, the transferred Definitive Note will be subject to
the restrictions on transfer enumerated in the Private Placement Legend printed
on Definitive Notes and in the Indenture and the Securities Act.
4. |_| CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN
UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE.
(a) |_| CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the Indenture
and any applicable blue sky securities laws of any state of the
B-2
<PAGE>
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will no longer be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted
Global Notes, on Restricted Definitive Notes and in the Indenture.
(b) |_| CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer
is being effected pursuant to and in accordance with Rule 903 or Rule 904 under
the Securities Act and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any state of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will no longer be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted
Global Notes, on Restricted Definitive Notes and in the Indenture.
(c) |_| CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will not be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes or Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
___________________________
[Insert Name of Transferor]
By:
------------------------
Name:
Title:
Dated: ____________, ___
B-3
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) |_| a beneficial interest in the:
(i) |_| 144A Global Note (CUSIP ), or
(ii) |_| Regulation S Global Note (CUSIP ), or
(iii) |_| IAI Global Note (CUSIP_____), or
(b) |_| a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) |_| a beneficial interest in the:
(i) |_| 144A Global Note (CUSIP ), or
(ii) |_| Regulation S Global Note (CUSIP ), or
(iii) |_| Unrestricted Global Note (CUSIP ); or
(b) |_| a Restricted Definitive Note; or
(c) |_| an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
PRIMEDIA Inc.
745 Fifth Avenue
New York, New York 10151
The Bank of New York
101 Barclay Street
New York, New York 10286
Re: 7-5/8% SENIOR NOTES 2008
(CUSIP )
Reference is hereby made to the Indenture, dated as of February
17, 1998 (the "INDENTURE"), between PRIMEDIA Inc., as issuer (the "COMPANY"),
and The Bank of New York, as trustee. Capitalized terms used but not defined
herein shall have the meanings given to them in the Indenture.
____________, (the "OWNER") owns and proposes to exchange the
Note[s] or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "EXCHANGE"). In connection with
the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN AN UNRESTRICTED GLOBAL NOTE
(a) |_| CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection
with the Exchange of the Owner's beneficial interest in a Restricted Global Note
for a beneficial interest in an Unrestricted Global Note in an equal principal
amount, the Owner hereby certifies (i) the beneficial interest is being acquired
for the Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the Global
Notes and pursuant to and in accordance with the United States Securities Act of
1933, as amended (the "SECURITIES ACT"), (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the beneficial
interest in an Unrestricted Global Note is being acquired in compliance with any
applicable blue sky securities laws of any state of the United States.
(b) |_| CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for an Unrestricted
Definitive Note, the Owner hereby certifies (i) the Definitive Note is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the Securities
Act, (iii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act and (iv) the Definitive Note is being acquired in compliance
with any applicable blue sky securities laws of any state of the United States.
C-1
<PAGE>
(c) |_| CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) |_| CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN RESTRICTED GLOBAL NOTES
(a) |_| CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for a Restricted
Definitive Note with an equal principal amount, the Owner hereby certifies that
the Restricted Definitive Note is being acquired for the Owner's own account
without transfer. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the Restricted Definitive Note issued will continue
to be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Definitive Note and in the Indenture
and the Securities Act.
(b) |_| CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange
of the Owner's Restricted Definitive Note for a beneficial interest in the
[CHECK ONE] |_| 144A Global Note, |_| Regulation S Global Note or |_| IAI Global
Note with an equal principal amount, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer and (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Restricted Global Notes and pursuant to
and in accordance with the Securities Act, and in compliance with any applicable
blue sky securities laws of any state of the United States. Upon consummation of
the proposed Exchange in accordance with the terms of the Indenture, the
beneficial interest issued will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the relevant Restricted
Global Note and in the Indenture and the Securities Act.
C-2
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
-----------------------------
[Insert Name of Owner]
By:
-------------------------
Name:
Title:
Dated: _____________,____
C-3
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
PRIMEDIA Inc.
745 Fifth Avenue
New York, New York 10151
he Bank of New York
101 Barclay Street
New York, New York 10286
Re: 7-5/8% SENIOR NOTES DUE 2008
Reference is hereby made to the Indenture, dated as of February 17, 1998
(the "Indenture"), between PRIMEDIA Inc., as issuer (the "COMPANY"), and The
Bank of New York, as trustee. Capitalized terms used but not defined herein
shall have the meanings given to them in the Indenture.
In connection with our proposed purchase of $____________ aggregate
principal amount of:
(a) |_| a beneficial interest in a Global Note, or
(b) |_| a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or any interest
therein is subject to certain restrictions and conditions set forth in the
Indenture and the undersigned agrees to be bound by, and not to resell, pledge
or otherwise transfer the Notes or any interest therein except in compliance
with, such restrictions and conditions and the United States Securities Act of
1933, as amended (the "SECURITIES ACT").
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes and any interest therein
may not be offered or sold except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are acting
as hereinafter stated, that if we should sell the Notes or any interest therein,
we will do so only (A) to the Company or any subsidiary thereof, (B) in
accordance with Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined therein), (C) to an institutional "accredited investor" (as
defined below) that, prior to such transfer, furnishes (or has furnished on its
behalf by a U.S. broker-dealer) to you and to the Company a signed letter
substantially in the form of this letter and, if such transfer is in respect of
a principal amount of Notes, at the time of transfer of less than $100,000, an
Opinion of Counsel in form reasonably acceptable to the Company to the effect
that such transfer is in compliance with the Securities Act, (D) outside the
United States in accordance with Rule 904 of Regulation S under the Securities
Act, (E) pursuant to the provisions of Rule 144 under the Securities Act or (F)
pursuant to an effective registration statement under the Securities Act, and we
further agree to provide to any person purchasing the Definitive Note or
beneficial interest in a Global Note from us in a transaction meeting the
D-1
<PAGE>
requirements of clauses (A) through (E) of this paragraph a notice advising such
purchaser that resales thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Notes or beneficial
interest therein, we will be required to furnish to you and the Company such
certifications, legal opinions and other information as you and the Company may
reasonably require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will bear a
legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or its investment.
5. We are acquiring the Notes or beneficial interest therein purchased by
us for our own account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we exercise sole
investment discretion and we are acquiring the Notes for investment purposes and
not with a view to, or for offer or sale in connection with, any distribution in
violation of the Securities Act or other applicable securities law.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
______________________________-
[Insert Name of Accredited Investor]
By:
-------------------------------
Name:
Title:
Dated:__________________,____
D-2
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
EXHIBIT 4.2
PRIMEDIA INC.
$
8-5/8% Subordinated Exchange Debentures due 2010
Class G and Class H
-------------
INDENTURE
Dated as of _______ __, ____
-------------
THE BANK OF NEW YORK
Subordinated Debenture Trustee
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01 Definitions................................................. 1
Section 1.02 Other Definitions........................................... 9
Section 1.03 Incorporation by Reference of Trust Indenture Act........... 9
Section 1.04 Rules of Construction....................................... 10
ARTICLE 2
THE SECURITIES
Section 2.01 Form and Dating............................................. 10
Section 2.02 Execution and Authentication................................ 11
Section 2.03 Registrar and Paying Agent.................................. 12
Section 2.04 Paying Agent to Hold Money in Trust......................... 12
Section 2.05 Holder Lists................................................ 12
Section 2.06 Transfer and Exchange....................................... 13
Section 2.07 Replacement Securities...................................... 24
Section 2.08 Outstanding Securities...................................... 25
Section 2.09 Treasury Securities......................................... 25
Section 2.10 Temporary Securities........................................ 25
Section 2.11 Cancellation................................................ 26
Section 2.12 Defaulted Interest.......................................... 26
Section 2.13 CUSIP Numbers............................................... 26
ARTICLE 3
OPTIONAL REDEMPTION, OPTIONAL REDEMPTION UPON CHANGE OF
CONTROL AND OPTIONAL REDEMPTION UPON A PUBLIC EQUITY OFFERING
Section 3.01 Notices to Subordinated Debenture Trustee................... 26
Section 3.02 Selection of Securities to Be Redeemed...................... 27
Section 3.03 Notices to Holders.......................................... 27
Section 3.04 Effect of Notice of Redemption.............................. 28
Section 3.05 Deposit of Redemption Price or Purchase Price............... 28
Section 3.06 Securities Redeemed in Part................................. 29
Section 3.07 Optional Redemption......................................... 29
Section 3.08 Optional Redemption Upon Change of Control.................. 30
ARTICLE 4
COVENANTS
Section 4.01 Payment of Securities....................................... 30
Section 4.02 Maintenance of Office or Agency............................. 30
Section 4.03 SEC Reports; Financial Statements........................... 31
Section 4.04 Compliance Certificate...................................... 31
Section 4.05 Compliance With Laws, Taxes................................. 32
Section 4.06 Stay, Extension and Usury Laws.............................. 33
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<PAGE>
Section 4.07 Limitations on Restricted Payments.......................... 33
Section 4.08 Change of Control........................................... 33
Section 4.09 Transactions With Affiliates................................ 35
Section 4.10 Corporate Existence......................................... 35
Section 4.11 Rule 144A Information Requirement........................... 36
ARTICLE 5
SUCCESSORS
Section 5.01 Merger, Consolidation, or Sale of Assets.................... 36
Section 5.02 Successor Corporation Substituted........................... 36
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01 Events of Default........................................... 37
Section 6.02 Acceleration ............................................... 38
Section 6.03 Other Remedies............................................... 39
Section 6.04 Waiver of Past Defaults..................................... 39
Section 6.05 Control by Majority......................................... 40
Section 6.06 Limitations on Suits........................................ 40
Section 6.07 Rights of Holders to Receive Payment........................ 40
Section 6.08 Collection Suit by Subordinated Debenture Trustee........... 41
Section 6.09 Subordinated Debenture Trustee May File Proofs of Claim..... 41
Section 6.10 Priorities.................................................. 41
Section 6.11 Undertaking for Costs....................................... 42
ARTICLE 7
SUBORDINATED DEBENTURE TRUSTEE
Section 7.01 Duties of Subordinated Debenture Trustee.................... 42
Section 7.02 Rights of Subordinated Debenture Trustee.................... 43
Section 7.03 Individual Rights of Subordinated Debenture Trustee......... 44
Section 7.04 Subordinated Debenture Trustee's Disclaimer................. 44
Section 7.05 Notice of Defaults.......................................... 44
Section 7.06 Reports by Subordinated Debenture Trustee to Holders........ 44
Section 7.07 Compensation and Indemnity.................................. 45
Section 7.08 Replacement of Subordinated Debenture Trustee............... 46
Section 7.09 Successor Subordinated Debenture Trustee by Merger, etc..... 47
Section 7.10 Eligibility; Disqualification............................... 47
Section 7.11 Preferential Collection of Claims Against Company........... 47
ARTICLE 8
DISCHARGE OF INDENTURE
Section 8.01 Termination of Company's Obligations........................ 47
Section 8.02 Application of Trust Money.................................. 49
Section 8.03 Repayment to Company........................................ 49
ii
<PAGE>
Section 8.04 Reinstatement............................................... 49
ARTICLE 9
AMENDMENTS
Section 9.01 Without Consent of Holders.................................. 50
Section 9.02 With Consent of Holders..................................... 50
Section 9.03 Compliance with Trust Indenture Act......................... 52
Section 9.04 Revocation and Effect of Consents........................... 52
Section 9.05 Notation on or Exchange of Securities....................... 52
Section 9.06 Subordinated Debenture Trustee to Sign Amendments, etc...... 53
ARTICLE 10
SUBORDINATION
Section 10.01 Agreement to Subordinate................................... 53
Section 10.02 Certain Definitions........................................ 53
Section 10.03 Liquidation; Dissolution; Bankruptcy....................... 54
Section 10.04 Default on Senior Debt..................................... 54
Section 10.05 Acceleration of Securities................................. 54
Section 10.06 When Distribution Must Be Paid Over........................ 54
Section 10.07 Notice by Company.......................................... 55
Section 10.08 Subrogation................................................ 55
Section 10.09 Relative Rights............................................ 56
Section 10.10 Subordination May Not Be Impaired by Company............... 56
Section 10.11 Distribution or Notice to Representative................... 56
Section 10.12 Rights of Subordinated Debenture Trustee and Paying Agent.. 56
Section 10.13 Authorization to Effect Subordination...................... 57
ARTICLE 11
MISCELLANEOUS
Section 11.01 Trust Indenture Act Controls............................... 57
Section 11.02 Notices.................................................... 57
Section 11.03 Communication by Holders with Other Holders................ 59
Section 11.04 Certificate and Opinion as to Conditions Precedent......... 59
Section 11.05 Statements Required in Certificate or Opinion.............. 59
Section 11.06 Rules by Subordinated Debenture Trustee and Agents......... 60
Section 11.07 Legal Holidays............................................. 60
Section 11.08 No Recourse Against Others................................. 60
Section 11.09 Governing Law.............................................. 60
Section 11.10 No Adverse Interpretation of Other Agreements.............. 60
Section 11.11 Successors................................................. 60
Section 11.12 Severability............................................... 61
Section 11.13 Counterpart Originals...................................... 61
Section 11.14 Subordinated Debenture Trustee as Paying Agent and
Registrar................................................. 61
Section 11.15 Table of Contents, Headings, etc........................... 61
Section 11.16 The Bank of New York Not Acting in Individual Capacity..... 61
iii
<PAGE>
Section 11.17 Additional Rights of Holders of Transfer Restricted
Securities................................................ 61
SIGNATURES ............................................................... 47
Exhibit A Form of Security
Exhibit B Certificate to be Delivered Upon Exchange or Registration of
Transfer of Securities
Exhibit C Form of Certificate of Exchange
Exhibit D Form of Certificate from Acquiring Institutional Accredited
Investor
iv
<PAGE>
INDENTURE, dated as of _______ __, ____, between PRIMEDIA Inc. (the
"COMPANY"), a Delaware corporation, and The Bank of New York, a New York banking
corporation, (the SUBORDINATED DEBENTURE TRUSTEE).
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders (as defined below) of 8-5/8%
Class G Subordinated Exchange Debentures due 2010 and 8-5/8% Class H
Subordinated Debentures due 2010 (collectively, the "SECURITIES" or the "NOTES")
issued by the Company (as defined below):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.01 DEFINITIONS
"144A GLOBAL NOTE" means the global note in the form of Exhibit A
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with and registered in the name of the Depositary or its nominee that
will be issued in a denomination equal to the outstanding principal amount of
the Securities sold in reliance on Rule 144A.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. A Person shall be deemed to "control"
(including the correlative meanings, the terms "controlling," "controlled by,"
and "under common control with") another Person if the controlling Person
possesses, directly or indirectly, the power to direct or cause the direction of
the management or policies, of the controlled person, whether through ownership
of voting securities, by agreement or otherwise.
"AGENT" means any Registrar or Paying Agent.
"APPLICABLE CHANGE OF CONTROL PREMIUM" with respect to any Security is
defined as the greater of (i) 1.0% of the then outstanding principal amount
thereof and (ii) the excess of (A) the present value of the required interest
and principal payments due thereon, computed using a discount rate equal to the
Treasury Rate plus 75 basis points, over (B) the then outstanding principal
amount of thereof.
"APPLICABLE PROCEDURES" means, with respect to any transfer or exchange
of or for beneficial interests in any Global Note, the rules and procedures of
the Depositary, Euroclear and Cedel that apply to such transfer or exchange.
"AVERAGE LIFE" means, as of the date of determination, with respect to
any debt security, the quotient obtained by dividing (i) the sum of the products
of the numbers of years from the date of determination to the dates of each
successive scheduled principal payment (assuming the exercise by the obligor of
such debt security of all unconditional (other than as to the giving of notice)
extension options of each such scheduled payment date) of such debt security
multiplied by the amount of such principal payment by (ii) the sum of all such
principal payments.
<PAGE>
"AVERAGE LIFE TO REDEMPTION" means, as of the date of determination,
with respect to any preferred security, the number of years (including any
portion thereof) remaining to the mandatory redemption date thereof.
"BANK CREDIT FACILITY" means the $1.5 billion credit facilities with
The Chase Manhattan Bank, The Bank of New York, Bankers Trust Company and The
Bank of Nova Scotia, as agents.
"BANKRUPTCY LAW" means Title 11 of the U.S. Code or any similar federal
or state law for the relief of debtors.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or any
authorized committee of the Board of Directors of the Company.
"BUSINESS DAY" means any day other than a Legal Holiday (as defined
below).
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease which
would at such time be required to be capitalized on the balance sheet in
accordance with GAAP.
"CAPITAL STOCK" means any and all shares, interests, participations,
rights or other equivalents (however designated) of corporate stock.
"CEDEL" means Cedel Bank, societe anonyme.
"CHANGE OF CONTROL" means such time as (i) a "person" or "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), other
than KKR and its Affiliates, becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act) of more than (A) 35 percent (35%) of the total
voting power of the then outstanding voting stock of the Company and (B) the
total voting power of the then outstanding voting stock of the Company
beneficially owned by KKR and its Affiliates or (ii) during any period of two
consecutive calendar years, individuals who at the beginning of such period
constituted the Company's Board of Directors (together with any new directors
whose election by the Company's Board of Directors or whose nomination for
election by the Company's shareholders was approved by a vote of at least
two-thirds of the Directors then still in office who either were Directors at
the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
directors then in office.
"CLASS D SUBORDINATED EXCHANGE DEBENTURES" means the 10% Class D
Subordinated Exchange Debentures due 2008 issuable upon exchange of the Series D
Preferred Stock.
"CLASS E SUBORDINATED EXCHANGE DEBENTURES" means the 9.20% Class E
Subordinated Exchange Debentures due 2009 issuable upon exchange of the Series E
Preferred Stock.
"CLASS F SUBORDINATED EXCHANGE DEBENTURES" means the 9.20% Class F
Subordinated Exchange Debentures due 2009 issuable upon exchange of the Series F
Preferred Stock.
2
<PAGE>
"CLASS G SUBORDINATED EXCHANGE DEBENTURES" means the 8-5/8% Class G
Subordinated Exchange Debentures due 2010 described above and issued under this
Indenture.
"CLASS H SUBORDINATED EXCHANGE DEBENTURES" means the 8-5/8% Class H
Subordinated Exchange Debentures due 2010 that may be issued in the Exchange
Offer.
"COMMON STOCK" means the common stock, par value $.01 per share, of the
Company.
"COMPANY" means (i) PRIMEDIA Inc., a Delaware corporation and (ii) any
successor of PRIMEDIA Inc. pursuant to Article 5 hereof.
"CORPORATE TRUST OFFICE OF THE SUBORDINATED DEBENTURE TRUSTEE" shall be
at either the address of the Subordinated Debenture Trustee specified in Section
11.02 or such other address as the Subordinated Debenture Trustee may give
notice to the Company.
"CREDIT FACILITIES" means, collectively, the Bank Credit Facility and
the New Credit Facility, including any related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith, in each
case as amended, modified, renewed, refunded or refinanced from time to time.
"CURRENCY AGREEMENT" means the obligations of any Person pursuant to
any foreign exchange contract, currency swap agreement or other similar
agreement or arrangement designed to protect such Person or any of its
subsidiaries against fluctuations in currency values.
"CUSTODIAN" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
"DEFINITIVE NOTE" means a certificated Note registered in the name of
the Holder thereof and issued in accordance with Section 2.06 hereof, in the
form of Exhibit A hereto except that such Note shall not bear the Global Note
Legend and shall not have the "Schedule of Exchanges of Interests in the Global
Note" attached thereto.
"DEFAULT" means any event, act or condition that is, or after notice or
the passage of time or both would be, an Event of Default.
"DEPOSITARY" means, with respect to the Securities issuable or issued
in whole or in part in global form, the Person specified in Section 2.03 hereof
as the Depositary with respect to the Securities, and any and all successors
thereto appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"EQUITY INTERESTS" means Capital Stock, warrants, options or other
rights to acquire Capital Stock (but excluding any debt security which is
convertible into, or exchangeable for, Capital Stock).
"EUROCLEAR" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
3
<PAGE>
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE OFFER" means the offer which may be made by the Company
pursuant to the Registration Rights Agreement to exchange Class H Subordinated
Exchange Debentures for then outstanding Class G Subordinated Exchange
Debentures.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession,
which are applicable to the circumstances as of the date of this Indenture.
"GLOBAL NOTES" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"GLOBAL NOTE LEGEND" means the legend set forth in Section 2.06(g)(ii),
which is required to be placed on all Global Notes issued under this Indenture.
"HOLDER" means a Person in whose name a Security is registered.
"IAI GLOBAL NOTE" means the global Note in the form of Exhibit A hereto
bearing the Global Note Legend and the Private Placement Legend and deposited
with or on behalf of and registered in the name of the Depositary or its nominee
that will be issued in a denomination equal to the outstanding principal amount
of the Notes sold to Institutional Accredited Investors.
"INDEBTEDNESS" of any Person means any indebtedness, contingent or
otherwise, in respect of borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof), or evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement obligations with respect thereto) or
representing the balance deferred and unpaid of the purchase price of any
property (including pursuant to financing leases), if and to the extent any of
the foregoing indebtedness would appear as a liability upon a balance sheet of
such Person prepared in accordance with GAAP (except that any such balance that
constitutes a trade payable and/or an accrued liability arising in the ordinary
course of business shall not be considered Indebtedness), and shall also
include, to the extent not otherwise included, any Capital Lease Obligations,
the maximum fixed repurchase price of any Redeemable Stock, indebtedness secured
by a Lien to which the property or assets owned or held by such Person is
subject, whether or not the obligations secured thereby shall have been assumed,
guarantees of items that would be included within this definition to the extent
of such guarantees (exclusive of whether such items would appear upon such
balance sheet), and net liabilities in respect of Currency Agreements and
Interest Rate Agreements. For purposes of the preceding sentence, the maximum
fixed repurchase price of any Redeemable Stock which does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Redeemable Stock as if such Redeemable Stock were repurchased on any date on
which Indebtedness shall be required to be determined pursuant to this
Indenture, provided that if such Redeemable Stock is not then permitted to be
repurchased, the repurchase price shall be the book value of such Redeemable
Stock. The amount of Indebtedness of any Person at
4
<PAGE>
any date shall be without duplication (i) the outstanding balance at such date
of all unconditional obligations as described above and the maximum liability of
any such contingent obligations at such date and (ii) in the case of
Indebtedness of others secured by a Lien to which the property or assets owned
or held by such Person is subject, the lesser of the fair market value at such
date of any asset subject to a Lien securing the Indebtedness of others and the
amount of Indebtedness secured. For the purpose of determining the aggregate
Indebtedness of the Company and its Restricted Subsidiaries, such Indebtedness
shall exclude the Indebtedness of any Unrestricted Subsidiary of the Company or
any Unrestricted Subsidiary of a Restricted Subsidiary.
"INDENTURE" means this Indenture as amended from time to time.
"INDIRECT PARTICIPANT" means a Person who holds a beneficial interest
in a Global Note through a Participant.
"INITIAL PURCHASERS" means Salomon Brothers Inc and Morgan Stanley &
Co. Incorporated.
"INSTITUTIONAL ACCREDITED INVESTOR" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act.
"INTEREST PAYMENT DATE" has the meaning assigned to such term in the
Security.
"INTEREST RATE AGREEMENTS" means the obligations of any Person pursuant
to any interest rate swap agreement, interest rate collar agreement or other
similar agreement or arrangement designed to protect such Person or any of its
subsidiaries against fluctuations in interest rates.
"KKR" means Kohlberg Kravis Roberts & Co., L.P.
"LIEN" means any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind, whether or not filed, recorded or otherwise perfected
under applicable law (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to
sell or give any security interest in and any filing or other agreement to give
any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction).
"LETTER OF TRANSMITTAL" means the letter of transmittal to be prepared
by the Company and sent to all Holders of the Securities for use by such Holders
in connection with the Exchange Offer.
"LIQUIDATED DAMAGES" means all unpaid liquidated damages owing by the
Company pursuant to Section 5 of the Registration Rights Agreement.
"NEW CREDIT FACILITY" means the $150 million credit facility with The
Chase Manhattan Bank, The Bank of New York, Bankers Trust Company and The Bank
of Nova Scotia, as agents.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
5
<PAGE>
"OFFICERS" means the President, the Treasurer, any Assistant Treasurer,
Controller, Secretary or any Vice President of the Company, as applicable.
"OFFICERS' CERTIFICATE" means a certificate signed by two Officers, one
of whom must be the Company's principal executive officer, principal financial
officer or principal accounting officer.
"OPINION OF COUNSEL" means a written opinion prepared in accordance
with Section 11.05 hereof, from legal counsel who is acceptable to the
Subordinated Debenture Trustee. The counsel may be an employee of or counsel to
the Company, if applicable, or the Subordinated Debenture Trustee.
"PARTICIPANT" means, with respect to DTC, Euroclear or Cedel, a Person
who has an account with DTC, Euroclear or Cedel, respectively (and, with respect
to DTC, shall include Euroclear and Cedel).
"PERSON" means any individual, corporation, partnership, joint venture,
incorporated or unincorporated association, joint-stock company, trust,
unincorporated organization or government or other agency or political
subdivision thereof or other entity of any kind.
"PRIVATE PLACEMENT LEGEND" means the legend set forth in Section
2.06(g)(i) to be placed on all Securities issued under this Indenture except
where otherwise permitted by the provisions of this Indenture.
"PUBLIC EQUITY OFFERING" means an underwritten public offering of
primary shares of the Company's common stock (or any other class of common stock
hereinafter duly authorized by the Company) pursuant to a registration statement
(other than a registration statement on form S-8 or S-4 or successor forms)
filed with the SEC in accordance with the Securities Act.
"REDEEMABLE STOCK" means any Equity Interest issued after February __,
1998 which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable before the stated maturity of the
Securities), or upon the happening of any event, matures or is mandatorily
redeemable, in whole or in part, prior to the stated maturity of the Securities,
or is, by its terms or upon the happening of any event, redeemable at the option
of the holder thereof, in whole or in part, at any time prior to the stated
maturity of the Securities.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
dated February 17, 1998, between the Initial Purchasers, the Company and the
Guarantors, as such agreement may be amended, modified or supplemented from time
to time.
"REGULATION S" means Regulation S promulgated under the Securities Act.
"REGULATION S GLOBAL NOTE" means a Global Note bearing the Global Note
Legend and the Private Placement Legend and deposited with or on behalf of and
registered in the name of the Depositary or its nominee, issued in a
denomination equal to the outstanding principal amount of the Securities
initially sold in reliance on Rule 903 of Regulation S.
"RESTRICTED DEFINITIVE NOTE" means a Definitive Note bearing the
Private Placement Legend.
6
<PAGE>
"RESTRICTED GLOBAL NOTE" means a Global Note bearing the Private
Placement Legend.
"RESTRICTED PERIOD" means the 40-day restricted period as defined in
Regulation S.
"RESTRICTED SUBSIDIARY" means, for the purposes of this Indenture, a
Subsidiary of the Company which at the time of determination is not an
Unrestricted Subsidiary. The Board of Directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary.
"SEC" means the Securities and Exchange Commission.
"SECURITIES" means the Securities described above issued under this
Indenture.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"7-5/8% SENIOR NOTES" means the 7-5/8% Senior Notes due 2008 of the
Company issued under the 7-5/8% Senior Indenture.
"7-5/8% SENIOR NOTE INDENTURE" means that certain indenture, dated
February 17, 1998, among the Company, the corporations listed on Schedule I
thereto and The Bank of New York, as Trustee, as amended from time to time.
"8 1/2% SENIOR NOTES" means the 8 1/2% Senior Notes due 2006 of the
Company issued under the 8 1/2% Senior Note Indenture.
"8 1/2% SENIOR NOTE INDENTURE" means that certain indenture, dated as
of January 24, 1996, among the Company, the corporations listed on Schedule I
thereto and The Bank of New York, as Trustee, as amended or modified from time
to time.
"10 1/4% SENIOR NOTES" means the 10 1/4% Senior Notes due 2004 of the
Company issued under the 10 1/4% Senior Note Indenture.
"10 1/4% SENIOR NOTE INDENTURE" means that certain indenture, dated as
of May 31, 1994, among the Company, the corporations listed on Schedule I
thereto and Bankers Trust Company, as Trustee, as amended or modified from time
to time.
"SENIOR NOTES" means the 8 1/2% Senior Notes, the 10 1/4% Senior Notes
and the 7-5/8% Senior Notes.
"SENIOR NOTE INDENTURES" means the 8 1/2% Senior Note Indenture, the 10
1/4% Senior Note Indenture and the 7-5/8% Senior Note Indenture.
"SERIES D PREFERRED STOCK" means the Company's $10.00 Series D
Exchangeable Preferred Stock Redeemable 2008, par value $.01 per share.
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"SERIES E PREFERRED STOCK" means the Company's $9.20 Series E
Exchangeable Preferred Stock Redeemable 2009, par value $.01 per share.
"SERIES F PREFERRED STOCK" means the Company's $9.20 Series F
Exchangeable Preferred Stock Redeemable 2009, issuable in exchange for the
Series E Preferred Stock and containing terms identical to the Series E
Preferred Stock.
"SERIES G PREFERRED STOCK" means the Company's $8.625 Series G
Exchangeable Preferred Stock Redeemable 2010, par value $.01 per share.
"SERIES H PREFERRED STOCK" means the Company's $8.625 Series H
Exchangeable Preferred Stock Redeemable 2010 issuable in exchange for the Series
G Preferred Stock and containing terms identical to the Series G Preferred
Stock.
"SUBORDINATED DEBENTURE TRUSTEE" means the party named as such above
until a successor replaces it in accordance with the applicable provisions of
this Indenture and thereafter means the successor serving hereunder.
"SUBSIDIARY" means any corporation, association or other business
entity of which more than 50% of the total voting power of shares of Capital
Stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more of the other
Subsidiaries of that Person or a combination thereof.
"TIA" means the Trust Indenture Act of 1939, as amended (15 U.S.C.
ss.ss. 77aaa-77bbbb).
"TRANSFER RESTRICTED SECURITIES" means Securities that bear or are
required to bear the legend set forth in Section 2.06(b) hereof.
"TREASURY RATE," for the purposes of this Indenture, is defined as the
yield to maturity at the time of computation of United States Treasury
securities with a constant maturity (as compiled by and published in the most
recent Federal Reserve Statistical Release H.15 (519) which has become publicly
available at least two Business Days prior to the date fixed for prepayment (or,
if such Statistical Release is no longer published, any publicly available
source of similar market data)) most nearly equal to the then remaining Average
Life of the Securities; PROVIDED that if the Average Life of the Securities is
not equal to the constant maturity of a United States Treasury security for
which a weekly average yield is given, the Treasury Rate shall be obtained by
linear interpolation (calculated to the nearest one-twelfth of a year) from the
weekly average yields of United States Treasury securities for which such yields
are given.
"TRUST OFFICER" means any officer or assistant officer of the
Subordinated Debenture Trustee assigned by the Subordinated Debenture Trustee to
administer this Indenture.
"UNRESTRICTED GLOBAL NOTE" means a permanent Global Note in the form of
Exhibit A attached hereto that bears the Global Note Legend and that has the
"Schedule of Exchanges of Interests in the
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Global Note" attached thereto, and that is deposited with or on behalf of and
registered in the name of the Depositary, representing a series of Securities
that do not bear the Private Placement Legend.
"UNRESTRICTED DEFINITIVE NOTE" means one or more Definitive Notes that
do not bear and are not required to bear the Private Placement Legend.
"UNRESTRICTED SUBSIDIARY" means, for the purposes of this Indenture,
(i) any Subsidiary of the Company which at the time of determination is an
Unrestricted Subsidiary (as designated by the Board of Directors, as provided
below) and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board of
Directors may designate any Subsidiary of the Company (including any newly
acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless
such Subsidiary owns any Capital Stock of, or owns, or holds any Lien on, any
property of, any other Subsidiary of the Company which is not a Subsidiary of
the Subsidiary to be so designated; PROVIDED that the Subsidiary to be so
designated has not at the time of designation, and does not thereafter, create,
incur, issue, assume, guarantee or otherwise become directly or indirectly
liable with respect to any Indebtedness pursuant to which the lender has
recourse to any of the assets of the Company or any of its Restricted
Subsidiaries. The Board of Directors may designate any Unrestricted Subsidiary
to be a Restricted Subsidiary.
"U.S. GOVERNMENT OBLIGATIONS" means direct noncallable obligations of
or guaranteed by the United States of America.
SECTION 1.02 OTHER DEFINITIONS
<TABLE>
<CAPTION>
DEFINED IN
TERM SECTION
<S> <C>
"Affiliate Transaction"....................................................... 4.09
"Change of Control Offer"..................................................... 4.08
"Change of Control Payment"................................................... 4.08
"Change of Control Payment Date".............................................. 4.08
"Legal Holiday"............................................................... 11.07
"Paying Agent"................................................................ 2.03
"Registrar"................................................................... 2.03
"Representative".............................................................. 10.02
"Restricted Payments"......................................................... 4.07
"Senior Debt"................................................................. 10.02
"Successor"................................................................... 5.01
</TABLE>
SECTION 1.03 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"INDENTURE SECURITIES" means the Security;
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"INDENTURE SECURITY HOLDER" means a Holder;
"INDENTURE TO BE QUALIFIED" means this Indenture;
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Subordinated
Debenture Trustee;
"OBLIGOR" on the Security means the Company, any other obligor upon the
Security or any successor obligor upon the Security.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
SECTION 1.04 RULES OF CONSTRUCTION
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural include
the singular; and
(5) provisions apply to successive events and transactions.
ARTICLE 2
THE SECURITIES
SECTION 2.01 FORM AND DATING
(a) GENERAL. The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes shall
be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture and the Company and the
Subordinated Debenture Trustee, by their execution and delivery of this
Indenture, expressly agree to such terms and provisions and to be bound thereby.
However, to the extent any provision of any Note conflicts with the express
provisions of this Indenture, the provisions of this Indenture shall govern and
be controlling.
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(b) GLOBAL NOTES. Notes issued in global form shall be substantially in
the form of Exhibit A attached hereto (including the Global Note Legend thereon
and the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Notes issued in definitive form shall be substantially in the form of
Exhibit A attached hereto (but without the Global Note Legend thereon and
without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee or the Note
Custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06 hereof.
(c) EUROCLEAR AND CEDEL PROCEDURES APPLICABLE. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation S Global Notes that are held by
Participants through Euroclear or Cedel Bank.
SECTION 2.02 EXECUTION AND AUTHENTICATION
One Officer shall sign the Notes for the Company by manual or facsimile
signature. The Company's seal may be reproduced on the Notes and may be in
facsimile form.
If an Officer whose signature is on a Note no longer holds that office
at the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature
of the Subordinated Debenture Trustee. The signature shall be conclusive
evidence that the Note has been authenticated under this Indenture.
The Subordinated Debenture Trustee shall, upon a written order of the
Company signed by two Officers (an "Authentication Order"), authenticate Notes
for original issue up to the aggregate principal amount stated in paragraph 4 of
the Notes. The aggregate principal amount of Notes outstanding at any time may
not exceed such amount except as provided in Section 2.07 hereof.
The Subordinated Debenture Trustee may appoint an authenticating agent
acceptable to the Company to authenticate Notes. An authenticating agent may
authenticate Notes whenever the Subordinated Debenture Trustee may do so. Each
reference in this Indenture to authentication by the Subordinated Debenture
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with Holders or an Affiliate of the Company.
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SECTION 2.03 REGISTRAR AND PAYING AGENT
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("REGISTRAR") and an
office or agency where Notes may be presented for payment ("PAYING AGENT"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall notify
the Subordinated Debenture Trustee in writing of the name and address of any
Agent not a party to this Indenture. If the Company fails to appoint or maintain
another entity as Registrar or Paying Agent, the Trustee shall act as such. The
Company or any of its Subsidiaries may act as Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Notes.
The Company initially appoints the Subordinated Debenture Trustee to
act as the Registrar and Paying Agent and to act as Note Custodian with respect
to the Global Notes.
SECTION 2.04 PAYING AGENT TO HOLD MONEY IN TRUST
The Company shall require each Paying Agent other than the Subordinated
Debenture Trustee to agree in writing that the Paying Agent will hold in trust
for the benefit of Holders or the Subordinated Debenture Trustee all money held
by the Paying Agent for the payment of principal, premium or Liquidated Damages,
if any, or interest on the Notes, and will notify the Subordinated Debenture
Trustee of any default by the Company in making any such payment. While any such
default continues, the Subordinated Debenture Trustee may require a Paying Agent
to pay all money held by it to the Subordinated Debenture Trustee. The Company
at any time may require a Paying Agent to pay all money held by it to the
Subordinated Debenture Trustee. Upon payment over to the Subordinated Debenture
Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have
no further liability for the money. If the Company or a Subsidiary acts as
Paying Agent, it shall segregate and hold in a separate trust fund for the
benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy
or reorganization proceedings relating to the Company, the Subordinated
Debenture Trustee shall serve as Paying Agent for the Notes.
SECTION 2.05 HOLDER LISTS
The Subordinated Debenture Trustee shall preserve in as current a form
as is reasonably practicable the most recent list available to it of the names
and addresses of Holders and shall otherwise comply with TIA ss. 312(a). If the
Subordinated Debenture Trustee is not the Registrar, the Company shall furnish
to the Subordinated Debenture Trustee at least seven Business Days before each
Interest Payment Date and, at such other times as the Subordinated Debenture
Trustee may request in writing, a list in such form and as of such date as the
Subordinated Debenture Trustee may reasonably require of the names and addresses
of Holders, and the Company shall otherwise comply with TIA ss. 312(a).
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<PAGE>
SECTION 2.06 TRANSFER AND EXCHANGE
(a) TRANSFER AND EXCHANGE OF GLOBAL NOTES. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the
Depositary, by a nominee of the Depositary to the Depositary or to
another nominee of the Depositary, or by the Depositary or any such
nominee to a successor Depositary or a nominee of such successor
Depositary. All Global Notes will be exchanged by the Company for
Definitive Notes if (i) the Company delivers to the Subordinated
Debenture Trustee notice from the Depositary that it is unwilling or
unable to continue to act as Depositary or that it is no longer a
clearing agency registered under the Exchange Act and, in either case,
a successor Depositary is not appointed by the Company within 90 days
after the date of such notice from the Depositary or (ii) the Company
in its sole discretion determines that the Global Notes (in whole but
not in part) should be exchanged for Definitive Notes and delivers a
written notice to such effect to the Subordinated Debenture Trustee.
Upon the occurrence of either of the preceding events in (i) or (ii)
above, Definitive Notes shall be issued in such names as the Depositary
shall instruct the Subordinated Debenture Trustee. Global Notes also
may be exchanged or replaced, in whole or in part, as provided in
Sections 2.07 and 2.11 hereof. Every Security authenticated and
delivered in exchange for, or in lieu of, a Global Note or any portion
thereof, pursuant to Section 2.07 or 2.11 hereof, shall be
authenticated and delivered in the form of, and shall be, a Global
Note. A Global Note may not be exchanged for another Security other
than as provided in this Section 2.06(a), however, beneficial interests
in a Global Note may be transferred and exchanged as provided in
Section 2.06(b), (c) or (f) hereof.
(b) TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN THE GLOBAL NOTES.
The transfer and exchange of beneficial interests in the Global Notes
shall be effected through the Depositary, in accordance with the
provisions of this Indenture and the Applicable Procedures. Beneficial
interests in the Restricted Global Notes shall be subject to
restrictions on transfer comparable to those set forth herein to the
extent required by the Securities Act. Transfers of beneficial
interests in the Global Notes also shall require compliance with either
subparagraph (i) or (ii) below, as applicable, as well as one or more
of the other following subparagraphs as applicable:
(i) TRANSFER OF BENEFICIAL INTERESTS IN THE SAME GLOBAL NOTE.
Beneficial interests in any Restricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in
the same Restricted Global Note in accordance with the transfer
restrictions set forth in the Private Placement Legend; PROVIDED, that
prior to the expiration of the Restricted Period transfers of beneficial
interests in the Regulation S Global Note may not be made to a U.S. Person
or for the account or benefit of a U.S. Person (other than an Initial
Purchaser). Beneficial interests in any Unrestricted Global Note may be
transferred only to Persons who take delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note. No written orders or
instructions shall be required to be delivered to the Registrar to effect
the transfers described in this Section 2.06(b)(i).
(ii)ALL OTHER TRANSFERS AND EXCHANGES OF BENEFICIAL INTERESTS IN GLOBAL
NOTES. In connection with all transfers and exchanges of beneficial
interests (other than a transfer of a beneficial interest in a Global Note
to a Person who takes delivery thereof in the form of a beneficial interest
in the same Global Note), the transferor of such beneficial interest must
deliver to the Registrar either (A)
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<PAGE>
(1) a written order from a Participant or an Indirect Participant given to
the Depositary in accordance with the Applicable Procedures directing the
Depositary to credit or cause to be credited a beneficial interest in
another Global Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given in accordance with the
Applicable Procedures containing information regarding the Participant
account to be credited with such increase or (B) (1) a written order from a
Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to cause
to be issued a Definitive Note in an amount equal to the beneficial
interest to be transferred or exchanged and (2) instructions given by the
Depositary to the Registrar containing information regarding the Person in
whose name such Definitive Note shall be registered to effect the transfer
or exchange referred to in (1) above; PROVIDED, that in no event shall
Definitive Notes be issued upon the transfer or exchange of beneficial
interests in the Regulation S Global Note prior to (x) the expiration of
the Restricted Period and (y) the receipt by the Registrar of any
certificates required pursuant to Rule 903 under the Securities Act. Upon
an Exchange Offer by the Company in accordance with Section 2.06(f) hereof,
the requirements of this Section 2.06(b)(ii) shall be deemed to have been
satisfied upon receipt by the Registrar of the instructions contained in
the Letter of Transmittal delivered by the Holder of such beneficial
interests in the Restricted Global Notes. Upon satisfaction of all of the
requirements for transfer or exchange of beneficial interests in Global
Notes contained in this Indenture, the Securities and otherwise applicable
under the Securities Act, the Subordinated Debenture Trustee shall adjust
the principal amount of the relevant Global Note(s) pursuant to Section
2.06(h) hereof.
(iii) TRANSFER OF BENEFICIAL INTERESTS TO ANOTHER RESTRICTED GLOBAL
NOTE. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of clause (ii) above and the Registrar
receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications in item (1) thereof;
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Global Note, then the
transferor must deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (2) thereof; and
(C) if the transferee will take delivery in the form of a
beneficial interest in the IAI Global Note, then (x) the transferor
must deliver a certificate in the form of Exhibit B hereto, including
the certifications and certificates and Opinion of Counsel required by
item (3) thereof, if applicable, and (y) the transferee must deliver a
certificate in the form of Exhibit D hereto.
(iv)TRANSFER AND EXCHANGE OF BENEFICIAL INTERESTS IN A RESTRICTED
GLOBAL NOTE FOR BENEFICIAL INTERESTS IN THE UNRESTRICTED GLOBAL NOTE. A
beneficial interest in any Restricted Global Note may be exchanged by any
holder thereof for a beneficial interest in an Unrestricted Global Note or
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note if the exchange or
transfer complies with the requirements of clause (ii) above and:
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(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the
holder of the beneficial interest to be transferred, in the case of an
exchange, or the transferee, in the case of a transfer, is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Class H Subordinated Indentures or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
beneficial interest in an Unrestricted Global Note, a certificate from
such holder in the form of Exhibit C hereto, including the
certifications in item (1)(a) thereof;
(2) if the holder of such beneficial interest in a Restricted
Global Note proposes to transfer such beneficial interest to a Person
who shall take delivery thereof in the form of a beneficial interest in
an Unrestricted Global Note, a certificate from such holder in the form
of Exhibit B hereto, including the certifications in item (4) thereof;
and
(3) in each such case set forth in this subparagraph (D), an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are not required in order to
maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or
(D) above at a time when an Unrestricted Global Note has not yet been
issued, the Company shall issue and, upon receipt of an authentication
order in accordance with Section 2.02 hereof, the Subordinated Debenture
Trustee shall authenticate one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of beneficial
interests transferred pursuant to subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the
form of, a beneficial interest in a Restricted Global Note.
(c) TRANSFER OR EXCHANGE OF BENEFICIAL INTERESTS FOR DEFINITIVE NOTES.
(i) BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES TO RESTRICTED
DEFINITIVE Notes. If any holder of a beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a Definitive
Note or to transfer such beneficial interest to a Person who takes delivery
thereof in the form of a Definitive Note, then, upon receipt by the
Registrar of the following documentation:
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(A) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
Definitive Note, a certificate from such holder in the form of Exhibit
C hereto, including the certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications
in item (1) thereof;
(C) if such beneficial interest is being transferred to a Non-U.S.
Person in an offshore transaction in accordance with Rule 903 or Rule
904 under the Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred pursuant to an
exemption from the registration requirements of the Securities Act in
accordance with Rule 144 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in
item (3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those listed
in subparagraphs (B) through (D) above, a certificate to the effect set
forth in Exhibit B hereto, including the certifications, certificates
and Opinion of Counsel required by item (3) thereof, if applicable, and
a certificate in the form of Exhibit D hereto;
(F) if such beneficial interest is being transferred to the Company
or any of its Subsidiaries, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(b) thereof;
or
(G) if such beneficial interest is being transferred pursuant to an
effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Subordinated Debenture Trustee shall cause the aggregate principal
amount of the applicable Global Note to be reduced accordingly pursuant to
Section 2.06(h) hereof, and the Company shall execute and the Subordinated
Debenture Trustee shall authenticate and make available for delivery to the
Person designated in the instructions a Definitive Note in the appropriate
principal amount. Any Definitive Note issued in exchange for a beneficial
interest in a Restricted Global Note pursuant to this Section 2.06(c) shall
be registered in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall instruct the
Registrar through instructions from the Depositary and the Participant or
Indirect Participant. The Subordinated Debenture Trustee shall make
available for delivery such Definitive Notes to the Persons in whose names
such Notes are so registered. Any Definitive Note issued in exchange for a
beneficial interest in a Restricted Global Note pursuant to this Section
2.06(c)(i) shall bear the Private Placement Legend and shall be subject to
all restrictions on transfer contained therein.
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(ii) BENEFICIAL INTERESTS IN RESTRICTED GLOBAL NOTES TO UNRESTRICTED
DEFINITIVE NOTES. A holder of a beneficial interest in a Restricted Global
Note may exchange such beneficial interest for an Unrestricted Definitive
Note or may transfer such beneficial interest to a Person who takes
delivery thereof in the form of an Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the
holder of such beneficial interest, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a Person
who is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
Definitive Note that does not bear the Private Placement Legend, a
certificate from such holder in the form of Exhibit C hereto, including
the certifications in item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a Restricted
Global Note proposes to transfer such beneficial interest to a Person
who shall take delivery thereof in the form of a Definitive Note that
does not bear the Private Placement Legend, a certificate from such
holder in the form of Exhibit B hereto, including the certifications in
item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
(iii) BENEFICIAL INTERESTS IN UNRESTRICTED GLOBAL NOTES TO UNRESTRICTED
DEFINITIVE NOTES. If any holder of a beneficial interest in an Unrestricted
Global Note proposes to exchange such beneficial interest for a Definitive
Note or to transfer such beneficial interest to a Person who takes delivery
thereof in the form of a Definitive Note, then, upon satisfaction of the
conditions set forth in Section 2.06(b)(ii) hereof, the Subordinated
Debenture Trustee shall cause the aggregate principal amount of the
applicable Global Note to be reduced accordingly pursuant to Section
2.06(h) hereof, and the Company shall execute and the Subordinated
Debenture Trustee shall authenticate and make available for delivery to the
Person designated in the instructions a Definitive Note in the appropriate
principal amount. Any Definitive Note issued in exchange for a beneficial
interest pursuant to this Section 2.06(c)(iii) shall be registered in such
name or names and in such authorized denomination or
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denominations as the holder of such beneficial interest shall instruct the
Registrar through instructions from the Depositary and the Participant or
Indirect Participant. The Subordinated Debenture Trustee shall make
available for delivery such Definitive Notes to the Persons in whose names
such Notes are so registered. Any Definitive Note issued in exchange for a
beneficial interest pursuant to this section 2.06(c)(iii) shall not bear
the Private Placement Legend. A beneficial interest in an Unrestricted
Global Note cannot be exchanged for a Definitive Note bearing the Private
Placement Legend or transferred to a Person who takes delivery thereof in
the form of a Definitive Note bearing the Private Placement Legend.
(d) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR BENEFICIAL INTERESTS.
(i) RESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN RESTRICTED
GLOBAL Notes. If any Holder of a Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global Note or
to transfer such Definitive Notes to a Person who takes delivery thereof in
the form of a beneficial interest in a Restricted Global Note, then, upon
receipt by the Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note proposes to
exchange such Note for a beneficial interest in a Restricted Global
Note, a certificate from such Holder in the form of Exhibit C hereto,
including the certifications in item (2)(b) thereof;
(B) if such Definitive Note is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications
in item (1) thereof;
(C) if such Definitive Note is being transferred to a Non-U.S.
Person in an offshore transaction in accordance with Rule 903 or Rule
904 under the Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (2) thereof;
(D) if such Definitive Note is being transferred pursuant to an
exemption from the registration requirements of the Securities Act in
accordance with Rule 144 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in
item (3)(a) thereof;
(E) if such Definitive Note is being transferred to the Company or
any of its Subsidiaries, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(b) thereof;
(F) if such Definitive Note is being transferred pursuant to an
effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof; or
(G) if such Definitive Note is being transferred to an
Institutional Accredited Investor pursuant to an exemption from the
registration requirements of the Securities Act, a certificate in the
Form of Exhibit D hereto,
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the Subordinated Debenture Trustee shall cancel the Definitive Note,
increase or cause to be increased the aggregate principal amount of, in the
case of clause (A) above, the appropriate Restricted Global Note, in the
case of clause (B) above, the 144A Global Note, in the case of clause (C)
above, the Regulation S Global Note and, in the case of clause (G)
above,the IAI Global Note.
(ii) RESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN
UNRESTRICTED GLOBAL NOTES. A Holder of a Restricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Restricted Definitive Note to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global Note
only if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the
Holder, in the case of an exchange, or the transferee, in the case of a
transfer, is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an affiliate
(as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to
exchange such Notes for a beneficial interest in the Unrestricted
Global Note, a certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (1)(c) thereof;
(2) if the Holder of such Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof in the
form of a beneficial interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit B hereto, including
the certifications in item (4) thereof; and
(3) in each such case set forth in this subparagraph (D), an
Opinion of Counsel in form reasonably acceptable to the Company to the
effect that such exchange or transfer is in compliance with the
Securities Act, that the restrictions on transfer contained herein and
in the Private Placement Legend are not required in order to maintain
compliance with the Securities Act, and such Definitive Notes are being
exchanged or transferred in compliance with any applicable blue sky
securities laws of any State of the United States.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Subordinated Debenture Trustee shall cancel the
Definitive Notes and increase or cause to be increased the aggregate
principal amount of the Unrestricted Global Note.
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(iii) UNRESTRICTED DEFINITIVE NOTES TO BENEFICIAL INTERESTS IN
UNRESTRICTED GLOBAL NOTES. A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global Note
or transfer such Definitive Notes to a Person who takes delivery thereof in
the form of a beneficial interest in an Unrestricted Global Note at any
time. Upon receipt of a request for such an exchange or transfer, the
Subordinated Debenture Trustee shall cancel the applicable Unrestricted
Definitive Note and increase or cause to be increased the aggregate
principal amount of one of the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a beneficial
interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or (iii) above
at a time when an Unrestricted Global Note has not yet been issued, the Company
shall issue and, upon receipt of an authentication order in accordance with
Section 2.02 hereof, the Subordinated Debenture Trustee shall authenticate one
or more Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of beneficial interests transferred pursuant to subparagraphs
(ii)(B), (ii)(D) or (iii) above.
(e) TRANSFER AND EXCHANGE OF DEFINITIVE NOTES FOR DEFINITIVE NOTES.
Upon request by a Holder of Definitive Notes and such Holder's compliance with
the provisions of this Section 2.06(e), the Registrar shall register the
transfer or exchange of Definitive Notes. Prior to such registration of transfer
or exchange, the requesting Holder shall present or surrender to the Registrar
the Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by his attorney, duly authorized in writing. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, pursuant to the provisions of this Section 2.06(e).
(i) RESTRICTED DEFINITIVE NOTES TO RESTRICTED DEFINITIVE NOTES.
Restricted Definitive Notes may be transferred to and registered in the
name of Persons who take delivery thereof if the Registrar receives the
following:
(A) if the transfer will be made pursuant to Rule 144A under the
Securities Act, then the transferor must deliver a certificate in the
form of Exhibit B hereto, including the certifications in item (1)
thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule 904,
then the transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (2) thereof; and
(C) if the transfer will be made pursuant to any other exemption
from the registration requirements of the Securities Act, then the
transferor must deliver (x) a certificate in the form of Exhibit B
hereto, including the certifications, certificates and Opinion of
Counsel required by item (3) thereof, if applicable.
(ii) RESTRICTED DEFINITIVE NOTES TO UNRESTRICTED DEFINITIVE NOTES. Any
Restricted Definitive Note may be exchanged by the Holder thereof for an
Unrestricted Definitive Note or transferred to a Person or Persons who take
delivery thereof in the form of an Unrestricted Definitive Note if:
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(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Registration Rights Agreement and the
Holder, in the case of an exchange, or the transferee, in the case of a
transfer, is not (1) a broker-dealer, (2) a Person participating in the
distribution of the Exchange Notes or (3) a Person who is an affiliate
(as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes proposes
to exchange such Notes for an Unrestricted Definitive Note, a
certificate from such Holder in the form of Exhibit C hereto, including
the certifications in item (1)(a) thereof;
(2) if the Holder of such Restricted Definitive Notes proposes
to transfer such Notes to a Person who shall take delivery thereof in
the form of an Unrestricted Definitive Note, a certificate from such
Holder in the form of Exhibit B hereto, including the certifications in
item (4) thereof; and
(3) in each such case set forth in this subparagraph (D), an
Opinion of Counsel in form reasonably acceptable to the Company to the
effect that such exchange or transfer is in compliance with the
Securities Act, that the restrictions on transfer contained herein and
in the Private Placement Legend are not required in order to maintain
compliance with the Securities Act, and such Restricted Definitive Note
is being exchanged or transferred in compliance with any applicable
blue sky securities laws of any State of the United States.
(iii) A Holder of Unrestricted Definitive Notes may transfer such Notes
to a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note. Upon receipt of a request for such a transfer, the
Registrar shall register the Unrestricted Definitive Notes pursuant to the
instructions from the Holder thereof. Unrestricted Definitive Notes cannot
be exchanged for or transferred to Persons who take delivery thereof in the
form of a Restricted Definitive Note.
(f) EXCHANGE OFFER. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Company shall issue and,
upon receipt of an authentication order in accordance with Section 2.02, the
Subordinated Debenture Trustee shall authenticate (i) one or more Unrestricted
Global Notes in an aggregate principal amount equal to the principal amount of
the beneficial interests in the Restricted Global Notes tendered for acceptance
by persons that are not (x) broker-dealers, (y) Persons participating in the
distribution of the Exchange Notes or (z) Persons who are affiliates (as defined
in Rule 144) of the Company and accepted for exchange in the Exchange Offer and
(ii) Definitive Notes in an aggregate principal amount equal to the principal
amount of the Restricted Definitive Notes accepted for exchange in the Exchange
Offer. Concurrent with the issuance of such Notes, the
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Subordinated Debenture Trustee shall cause the aggregate principal amount of the
applicable Restricted Global Notes to be reduced accordingly, and the Company
shall execute and the Subordinated Debenture Trustee shall authenticate and make
available for delivery to the Persons designated by the Holders of Definitive
Notes so accepted Definitive Notes in the appropriate principal amount.
(g) LEGENDS. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) PRIVATE PLACEMENT LEGEND.
(A) Except as permitted by subparagraph (b) below, each Global Note
and each Definitive Note (and all Notes issued in exchange therefor or
substitution thereof) shall bear the legend in substantially the
following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
THE SECURITIES ACT PROVIDED BY RULE 144A OR REGULATION S THEREUNDER. THE
HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (1)(a) INSIDE THE UNITED STATES TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A
FOREIGN PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER
THE SECURITIES ACT, (d) TO AN INSTITUTIONAL "ACCREDITED INVESTOR" AS
DEFINED IN RULE 501(A)(1), (2), (3) OR (7) OF THE SECURITIES ACT (AN
"INSTITUTIONAL ACCREDITED INVESTOR") THAT, PRIOR TO SUCH TRANSFER,
FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS
AND AGREEMENTS (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF
SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF SECURITIES
LESS THAN $100,000, AN OPINION OF COUNSEL THAT SUCH TRANSFER IS IN
COMPLIANCE WITH THE SECURITIES ACT OR (e) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE
COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH
CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL,
AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF
THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE."
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(B) Notwithstanding the foregoing, any Global Note or Definitive
Note issued pursuant to subparagraphs (b)(iv), (c)(ii), (c)(iii),
(d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06 (and
all Notes issued in exchange therefor or substitution thereof) shall
not bear the Private Placement Legend.
(ii)GLOBAL NOTE LEGEND. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE SUBORDINATED DEBENTURE TRUSTEE MAY MAKE
SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.06 OF THE
INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART
PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE
DELIVERED TO THE SUBORDINATED DEBENTURE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE
TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE
COMPANY."
(h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL NOTES. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
cancelled in whole and not in part, each such Global Note shall be returned to
or retained and cancelled by the Subordinated Debenture Trustee in accordance
with Section 2.11 hereof. At any time prior to such cancellation, if any
beneficial interest in a Global Note is exchanged for or transferred to a Person
who will take delivery thereof in the form of a beneficial interest in another
Global Note or for Definitive Notes, the principal amount of Notes represented
by such Global Note shall be reduced accordingly and an endorsement shall be
made on such Global Note, by the Subordinated Debenture Trustee or by the
Depositary at the direction of the Subordinated Debenture Trustee, to reflect
such reduction; and if the beneficial interest is being exchanged for or
transferred to a Person who will take delivery thereof in the form of a
beneficial interest in another Global Note, such other Global Note shall be
increased accordingly and an endorsement shall be made on such Global Note, by
the Subordinated Debenture Trustee or by the Depositary at the direction of the
Subordinated Debenture Trustee, to reflect such increase.
(I) GENERAL PROVISIONS RELATING TO TRANSFERS AND EXCHANGES.
(i) To permit registrations of transfers and exchanges, the Company
shall execute and the Subordinated Debenture Trustee shall authenticate
Global Notes and Definitive Notes upon the Company's order or at the
Registrar's request.
(ii)No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Definitive Note for any
registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes
or similar governmental charge payable upon exchange or transfer pursuant
to Sections 2.10, 3.06, 4.08, and 9.05 hereof).
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(iii) The Registrar shall not be required to register the transfer of
or exchange any Security selected for redemption in whole or in part,
except the unredeemed portion of any Security being redeemed in part.
(iv)All Global Notes and Definitive Notes issued upon any registration
of transfer or exchange of Global Notes or Definitive Notes shall be the
valid obligations of the Company, evidencing the same debt, and entitled to
the same benefits under this Indenture, as the Global Notes or Definitive
Notes surrendered upon such registration of transfer or exchange.
(v) The Company shall not be required (A) to issue, to register the
transfer of or to exchange Securities during a period beginning at the
opening of business 15 days before the day of mailing of a notice of
redemption under Section 3.02 hereof and ending at the close of business on
the day of mailing, (B) to register the transfer of or to exchange any
Security so selected for redemption in whole or in part, except the
unredeemed portion of any Security being redeemed in part or (C) to
register the transfer of or to exchange a Security between a record date
and the next succeeding Interest Payment Date.
(vi)Prior to due presentment for the registration of a transfer of any
Security, the Subordinated Debenture Trustee, any Agent and the Company may
deem and treat the Person in whose name any Security is registered as the
absolute owner of such Security for the purpose of receiving payment of
principal of and interest on such Securities and for all other purposes,
and none of the Subordinated Debenture Trustee, any Agent or the Company
shall be affected by notice to the contrary.
(vii) The Subordinated Debenture Trustee shall authenticate Global
Notes and Definitive Notes in accordance with the provisions of Section
2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 2.06 to
effect a transfer or exchange may be submitted by facsimile.
SECTION 2.07 REPLACEMENT SECURITIES
If any mutilated Security is surrendered to the Subordinated Debenture
Trustee, or the Company and the Subordinated Debenture Trustee receive evidence
to their satisfaction of the destruction, loss or theft of any Security, the
Company shall issue and the Subordinated Debenture Trustee, upon the written
order of the Company signed by an Officer, shall authenticate a replacement
Security if the Subordinated Debenture Trustee's requirements are met. An
indemnity bond must be supplied by the Holder that is sufficient in the judgment
of the Subordinated Debenture Trustee and the Company to protect the Company,
the Subordinated Debenture Trustee, any Agent or any authenticating agent from
any loss which any of them may suffer if a Security is replaced. The Company may
charge for its expenses in replacing a Security.
Every replacement Security is an additional obligation of the Company
and shall be entitled to all benefits of this Indenture equally and
proportionately with all other Securities duly issued hereunder.
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SECTION 2.08 OUTSTANDING SECURITIES
The Securities outstanding at any time are all the Securities
authenticated by the Subordinated Debenture Trustee except for those cancelled
by it, those delivered to it for cancellation and those described in this
Section as not outstanding.
If a Security is replaced pursuant to Section 2.07 hereof, it ceases to
be outstanding unless the Subordinated Debenture Trustee receives proof
satisfactory to it that the replaced Security is held by a BONA FIDE purchaser.
If the principal amount of any Security is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Securities payable on that date, then on and after that date
such Securities shall be deemed to be no longer outstanding and shall cease to
accrue interest.
Except as set forth in Section 2.09 hereof, a Security does not cease
to be outstanding because the Company or an Affiliate holds the Security.
SECTION 2.09 TREASURY SECURITIES
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, waiver or consent, Securities owned
by the Company, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company, shall
be considered as though not outstanding, except that for the purposes of
determining whether the Subordinated Debenture Trustee shall be protected in
relying on any such direction, waiver or consent, only Securities which a Trust
Officer of the Subordinated Debenture Trustee knows are so owned shall be so
disregarded.
SECTION 2.10 TEMPORARY SECURITIES
Until definitive Securities are ready for delivery, the Company may
prepare and the Subordinated Debenture Trustee shall authenticate temporary
securities upon a written order of the Company signed by an Officer and
delivered or caused to be delivered to a Trust Officer. Temporary Securities
shall be substantially in the form of definitive Securities but may have
variations that the Company considers appropriate for temporary Securities.
Without unreasonable delay, the Company shall prepare and the Subordinated
Debenture Trustee shall authenticate definitive Securities in exchange for
temporary Securities.
Holders of temporary Securities shall be entitled to all benefits of
this Indenture.
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SECTION 2.11 CANCELLATION
The Company at any time may deliver Securities to the Subordinated
Debenture Trustee for cancellation. The Registrar and Paying Agent shall forward
to the Subordinated Debenture Trustee any Securities surrendered to them for
registration of transfer, exchange or payment. The Subordinated Debenture
Trustee and no one else shall cancel all Securities surrendered for registration
of transfer, exchange, payment, replacement or cancellation. The Company may not
issue new Securities to replace Securities that it has paid or that have been
delivered to the Subordinated Debenture Trustee for cancellation.
SECTION 2.12 DEFAULTED INTEREST
If the Company defaults in a payment of interest on the Securities, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Securities and in Section 4.01 hereof. The Company shall, with the
consent of the Subordinated Debenture Trustee, fix each such special record date
and payment date. At least 15 days before the record date, the Company (or the
Subordinated Debenture Trustee, in the name of and at the expense of the
Company) shall mail to Holders a notice that states the special record date, the
related payment date and the amount of such interest to be paid.
SECTION 2.13 CUSIP NUMBERS
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Subordinated Debenture Trustee shall use
"CUSIP" numbers in notices of redemption as a convenience to Holders; PROVIDED
that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as contained
in any notice of redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers. The Company will
promptly notify the Subordinated Debenture Trustee of any change in the "CUSIP"
numbers.
ARTICLE 3
OPTIONAL REDEMPTION, OPTIONAL REDEMPTION UPON CHANGE OF
CONTROL AND OPTIONAL REDEMPTION UPON A PUBLIC EQUITY OFFERING
SECTION 3.01 NOTICES TO SUBORDINATED DEBENTURE TRUSTEE
(a) If the Company elects to redeem Securities pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the
Subordinated Debenture Trustee, at least 45 days but not more than 60
days before a redemption date, an Officers' Certificate stating that
such redemption shall occur pursuant to Section 3.07 hereof and stating
the redemption date, the principal amount of Securities to be redeemed
and the redemption price.
(b) If the Company elects to redeem Securities pursuant to the
provisions of Section 3.08 hereof, it shall furnish to the Subordinated
Debenture Trustee, at least 45 days but not more than
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60 days before the redemption date, an Officers' Certificate stating
that a Change of Control has occurred, the date of such Change of
Control and that such redemption shall occur pursuant to Section 3.08
hereof, and further stating the principal amount of Securities to be
redeemed, the redemption price of such Securities and the intended
redemption date.
SECTION 3.02 SELECTION OF SECURITIES TO BE REDEEMED
If less than all of the Securities are to be redeemed at any time,
selection of the Securities for redemption will be made by the Subordinated
Debenture Trustee in compliance with the requirements of the principal national
securities exchange, if any, on which the Securities are listed, or, if the
Securities are not listed on a national securities exchange, on a PRO RATA
basis, by lot or by such method as the Subordinated Debenture Trustee shall deem
fair and appropriate; PROVIDED that no Securities of $1,000 or less shall be
redeemed in part. The Subordinated Debenture Trustee may select for redemption
any portion (equal to $1,000 or any integral multiple thereof) of the principal
of Securities that have denominations larger than $1,000. Except as provided in
the preceding sentence, provisions of this Indenture that apply to Securities
called for redemption also apply to portions of Securities called for
redemption.
The Subordinated Debenture Trustee shall promptly notify the Company in
writing of the Securities selected for redemption and, in the case of any
Security selected for partial redemption, the principal amount thereof to be
redeemed. The particular Securities to be redeemed shall be selected, unless
otherwise provided herein, not less than 30 nor more than 60 days prior to the
redemption date by the Subordinated Debenture Trustee from the outstanding
Securities not previously called for redemption.
SECTION 3.03 NOTICES TO HOLDERS
(a) If the Company elects to redeem Securities pursuant to either
Section 3.07 or 3.08 hereof, notice of redemption shall be mailed by
first class mail at least 30 days but not more than 60 days before the
redemption date to each Holder of Securities that are to be redeemed at
its registered address.
The notice shall identify the Securities to be redeemed (including
CUSIP number) and shall state:
(1) the redemption date;
(2) the redemption price;
(3) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after
the redemption date, upon surrender of such Security, a new
Security or Securities in principal amount equal to the unredeemed
portion will be issued;
(4) the name and address of the Paying Agent;
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(5) that Securities called for redemption must be surrendered to
the Paying Agent at the address specified in such notice to collect
the redemption price;
(6) that interest on Securities or portions of them called for
redemption ceases to accrue on and after the redemption date;
(7) the paragraph of the Securities pursuant to which the
Securities are being redeemed; and
(8) the aggregate principal amount of Securities that are being
redeemed.
(b) At the Company's request, the Subordinated Debenture Trustee shall
give the notice required in Section 3.03(a) hereof in the Company's
name and at its expense and setting forth the information to be stated
in such notice as provided in Section 3.03(a) hereof.
SECTION 3.04 EFFECT OF NOTICE OF REDEMPTION
Once notice of redemption is mailed (after the Subordinated Debenture
Trustee has received the notice provided for in Section 3.01 hereof), Securities
called for redemption become due and payable on the redemption date at the
redemption price and shall cease to bear interest from and after the redemption
date (unless the Company shall fail to make payment of the redemption price or
accrued interest on the redemption date). Upon surrender to the Paying Agent,
such Securities shall be paid at the redemption price, plus premium and
Liquidated Damages, if any, plus accrued interest, if any, to the redemption
date, but interest installments whose maturity is on the redemption date and
Liquidated Damages which become payable on the redemption date will be payable
to the Holder of record at the close of business on the relevant record dates
referred to in the Securities.
ECTION 3.05 DEPOSIT OF REDEMPTION PRICE OR PURCHASE PRICE
One Business Day prior to the redemption date, the Company shall
deposit with the Subordinated Debenture Trustee or with the Paying Agent money
(in same-day funds) sufficient to pay the redemption price of, premium and
Liquidated Damages, if any, and accrued interest on, all Securities to be
redeemed on that date other than Securities or portions thereof called for
redemption on that date which previously have been delivered by the Company to
the Subordinated Debenture Trustee for cancellation. The Subordinated Debenture
Trustee or the Paying Agent shall return to the Company any such money not
required for that purpose.
If the Company complies with the preceding paragraph, interest on the
Securities or portions thereof to be redeemed, whether or not such Securities
are presented for payment, will cease to accrue on the applicable redemption
date. If any Security called for redemption shall not be so paid upon surrender
for redemption because of the failure of the Company to comply with the
preceding paragraph, then interest will be paid on the unpaid principal from the
redemption date until such principal is paid and on any interest not paid on
such unpaid principal, in each case, at the rate provided in the Securities and
in Section 4.01 hereof.
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SECTION 3.06 SECURITIES REDEEMED IN PART
Upon surrender of a Security that is redeemed in part, the Company
shall issue and the Subordinated Debenture Trustee shall authenticate for the
Holder at the expense of the Company a new Security equal in principal amount to
the unredeemed portion of the Security surrendered.
SECTION 3.07 OPTIONAL REDEMPTION
Except as otherwise provided herein, prior to April 1, 2003, the
Company may not redeem the Securities, in whole or in part. At any time on or
after April 1, 2003, the Company may redeem all or any of the Securities, in
whole or in part, at a redemption price equal to a percentage of the principal
amount thereof, as set forth in the immediately succeeding paragraph, plus
Liquidated Damages, if any, plus accrued and unpaid interest to the redemption
date.
The redemption price as a percentage of the principal amount shall be
as follows, if the Securities are redeemed during the 12 month period beginning
April 1 of the following years:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2003 ........................................... 104.313%
2004 ........................................... 102.875%
2005 ........................................... 101.438%
2006 and thereafter............................. 100.000%
</TABLE>
Notwithstanding the foregoing,
(1) at any time prior to April 1, 2001, the Company may redeem up to
$125.0 million of the Securities at a redemption price of 108.625% of the
principal amount thereof, plus accrued and unpaid interest to the redemption
date, out of the net proceeds of one or more Public Equity Offerings, PROVIDED
that any such redemption shall occur within 180 days of such Public Equity
Offering; and
(2) upon the occurrence at any time of a Change in Control, the
Securities will be redeemable, at the option of the Company, in whole or in
part, pursuant to the provisions of Section 3.08 hereof.
Any redemption pursuant to this Section 3.07 shall be made, to the
extent applicable, pursuant to the provisions of Sections 3.01 through 3.06
hereof.
SECTION 3.08 OPTIONAL REDEMPTION UPON CHANGE OF CONTROL
In addition to any redemption pursuant to Section 3.07 hereof, the
Securities will be redeemable, at the option of the Holders, in whole or in
part, at any time within 160 days after a Change of Control at a redemption
price equal to the sum of (i) the then outstanding principal amount thereof plus
(ii) accrued and unpaid interest, if any, to the redemption date plus (iii) the
Applicable Change of Control Premium.
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ARTICLE 4
COVENANTS
SECTION 4.01 PAYMENT OF SECURITIES
The Company shall pay the principal of and interest on the Securities
on the dates and in the manner provided in the Securities, and shall pay
Liquidated Damages, if any, on the dates and in the manner provided in the
Registration Rights Agreement. Principal and interest shall be considered paid
on the date due if the Paying Agent, other than the Company or a Subsidiary of
the Company, holds on that date money deposited by the Company in available
funds and designated for and sufficient to pay all principal and interest then
due.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
at the same rate per annum on the Securities to the extent lawful; it shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest (without regard to any
applicable grace period) at the same rate to the extent lawful.
SECTION 4.02 MAINTENANCE OF OFFICE OR AGENCY
The Company shall maintain, in the Borough of Manhattan, The City of
New York, an office or agency (which may be an office of the Subordinated
Debenture Trustee or the Registrar) where Securities may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company in respect of the Securities and this Indenture may be served. The
Company shall give prompt written notice to the Subordinated Debenture Trustee
of the location, and any change in the location, of such office or agency. If at
any time the Company shall fail to maintain any such required office or agency
or shall fail to furnish the Subordinated Debenture Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office of the Subordinated Debenture Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
PROVIDED, HOWEVER, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, The City of New York for such purposes. The Company shall
give prompt written notice to the Subordinated Debenture Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.
The Company hereby designates the Corporate Trust Office of the
Subordinated Debenture Trustee as one such office or agency of the Company in
accordance with Section 2.03 hereof.
SECTION 4.03 SEC REPORTS; FINANCIAL STATEMENTS
(a) The Company shall file with the Subordinated Debenture Trustee,
within 15 days after it files the same with the SEC, copies of the
annual reports and the information, documents and
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other reports (or copies of such portions of any of the foregoing as
the SEC may by rules and regulations prescribe) that the Company is
required to file with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act. If the Company is not subject to the requirements of such
Section 13 or 15(d), the Company shall file with the Subordinated
Debenture Trustee, within 15 days after it would have been required to
file the same with the SEC, financial statements, including any notes
thereto (and with respect to annual reports, an auditors' report by a
firm of established national reputation), and a "Management's
Discussion and Analysis of Financial Condition and Results of
Operations," both comparable to that which the Company would have been
required to include in such annual reports, information, documents or
other reports if the Company had been subject to the requirements of
such Section 13 or 15(d). The Company shall also comply with the other
provisions of TIA ss.314(a).
(b) If the Company is required to furnish annual or quarterly reports
to its stockholders pursuant to the Exchange Act, the Company shall
cause any annual report furnished to its stockholders generally and any
quarterly or other financial reports furnished by it to its
stockholders generally to be filed with the Subordinated Debenture
Trustee and mailed to the Holders at their addresses appearing in the
register of Securities maintained by the Registrar. If the Company is
not required to furnish annual or quarterly reports to its stockholders
pursuant to the Exchange Act, so long as at least 5% of the original
principal amount of the Securities remain outstanding, the Company
shall cause its financial statements referred to in Section 4.03(a)
hereof, including any notes thereto (and with respect to annual
reports, an auditors' report by a firm of established national
reputation), and a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" to be so mailed to the Holders
within 90 days after the end of each of the Company's fiscal years and
within 60 days after the end of each of the Company's first three
fiscal quarters. As of the date hereof, the Company's fiscal year ends
on December 31.
Delivery of such reports, information and documents to the Subordinated
Debenture Trustee is for informational purposes only and the
Subordinated Debenture Trustee's receipt of such shall not constitute
constructive notice of any information contained therein or
determinable from information contained therein, including the
Company's compliance with any of its covenants hereunder (as to which
the Subordinated Debenture Trustee is entitled to rely exclusively on
Officers' Certificates).
SECTION 4.04 COMPLIANCE CERTIFICATE
(a) The Company shall deliver to the Subordinated Debenture Trustee,
within 120 days after the end of each fiscal year of the Company, an
Officers' Certificate stating that a review of the activities of the
Company and its Subsidiaries during the preceding fiscal year has been
made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and
fulfilled its obligations under this Indenture, and further stating, as
to each such Officer signing such certificate, that to the best of his
knowledge the Company has kept, observed, performed and fulfilled each
and every covenant contained in this Indenture and is not in default in
the performance or observance of any of the terms, provisions and
conditions hereof (or, if a Default or Event of Default shall have
occurred, describing all such Defaults or Events of Default of which he
may have knowledge and what action the
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Company is taking or proposes to take with respect thereto) and that to
the best of his knowledge no event has occurred and remains in
existence by reason of which payments on account of the principal of or
interest, if any, on the Securities are prohibited or, if such event
has occurred, a description of the event and what action the Company is
taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end
financial statements delivered pursuant to Section 4.03 hereof shall be
accompanied by a written statement of the Company's independent public
accountants (who shall be a firm of established national reputation)
that in making the examination necessary for certification of such
financial statements nothing has come to their attention that would
lead them to believe that the Company has violated any provisions of
Articles 4 or 5 of this Indenture or, if any such violation has
occurred, specifying the nature and period of existence thereof, it
being understood that such accountants shall not be liable directly or
indirectly to any Person for any failure to obtain knowledge of any
such violation.
(c) The Company shall, so long as any of the Securities are
outstanding, (i) deliver to the Subordinated Debenture Trustee,
forthwith upon any Officer becoming aware of any Default or Event of
Default under this Indenture, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or
proposes to take with respect thereto and (ii) promptly notify the
Subordinated Debenture Trustee of any Change of Control.
SECTION 4.05 COMPLIANCE WITH LAWS, TAXES
The Company shall, and shall cause each of its Subsidiaries to, comply
with all statutes, laws, ordinances, or government rules and regulations to
which it is subject, noncompliance with which would materially adversely affect
the business, earnings, properties, assets or condition, financial or otherwise,
of the Company and its Subsidiaries taken as a whole.
The Company shall, and shall cause each of its Subsidiaries to, pay
prior to delinquency all taxes, assessments, and governmental levies except as
contested in good faith and by appropriate proceedings.
SECTION 4.06 STAY, EXTENSION AND USURY LAWS
The Company covenants (to the extent that it may lawfully do so) that
it shall not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the Company's
obligation to pay the Securities; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
insofar as such law applies to the Securities, and covenants that it shall not,
by resort to any such law, hinder, delay or impede the execution of any power
herein granted to the Subordinated Debenture Trustee, but will suffer and permit
the execution of every such power as though no such law has been enacted.
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SECTION 4.07 LIMITATIONS ON RESTRICTED PAYMENTS
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, (i) declare or pay any dividend or make
any distribution on account of the Company's or any of its Restricted
Subsidiaries' Capital Stock or other Equity Interests (other than (A) dividends
or distributions payable in Equity Interests of the Company or such Restricted
Subsidiary or (B) dividends or distributions payable to the Company or any of
its Restricted Subsidiaries) or (ii) purchase, redeem or otherwise acquire or
retire for value any Equity Interests of the Company or any Restricted
Subsidiary (other than any such Equity Interests owned by the Company or any of
its Restricted Subsidiaries) (the foregoing actions set forth in clauses (i) and
(ii) being referred to as "Restricted Payments"), if, at the time of such
Restricted Payment, a Default or Event of Default under the Securities shall
have occurred and be continuing or shall occur as a consequence thereof.
SECTION 4.08 CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder shall have the
right to require the repurchase of such Holder's Securities pursuant to the
offer described below (the "Change of Control Offer") at a purchase price equal
to 101% of the aggregate principal amount of such Securities plus accrued and
unpaid interest, if any, to the date of purchase (the "Change of Control
Payment"). Prior to the mailing of the notice to holders provided for in the
paragraph below, the Company hereby covenants (i) (A) to repay in full all
Obligations under the Credit Facilities or to offer to repay in full all such
Obligations and to repay the Obligations of each lender who has accepted such
offer or (B) to obtain the requisite consent under the Credit Facilities to
permit the repurchase of Securities pursuant to the Change of Control Offer;
(ii) (A) to commence an offer (the "Exchange Debenture Offer") to repurchase all
and to purchase (upon termination of the Exchange Debenture Offer) all Exchange
Debentures tendered pursuant to such offer or (B) to obtain the requisite
consent under the Exchange Debenture Indenture to permit the repurchase of
Securities pursuant to the Change of Control Offer and (iii) with respect to all
other Senior Debt (as defined below) to (A) repay such Senior Debt to the extent
required by the terms thereof to permit repurchase of the Securities pursuant to
the Change of Control Offer or (B) to obtain the requisite consents, if any,
under all agreements governing all such Senior Debt to permit the repurchase of
Securities pursuant to the Change of Control Offer. In no event shall the
Company be required to offer to repurchase or repurchase the Securities unless
it shall have either repaid the outstanding Senior Debt to the extent required
by the terms thereof or obtained the requisite consents thereunder, if any, to
permit the repurchase of the Securities pursuant to the Change of Control Offer.
Within the later of (a) 40 days following any Change of Control and (b)
the date that the foregoing conditions are satisfied, the Company shall mail a
notice to each Holder stating:
(1) that the Change of Control Offer is being made pursuant to this
Section 4.08 and that all Securities tendered will be accepted for
payment;
(2) the purchase price and the purchase date (which shall be no earlier
than 30 days nor later than 40 days from the date such notice is
mailed)(the "Change of Control Payment Date");
(3) that any Security not tendered will continue to accrue interest;
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(4) that, unless the Company defaults in the payment of the Change of
Control Payment, all Securities accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the Change
of Control Payment Date;
(5) that Holders electing to have any of their Securities purchased
pursuant to a Change of Control Offer will be required to surrender the
Securities, with the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Security completed, to the Paying Agent at the
address specified in the notice prior to the close of business on the
Business Day preceding the Change of Control Payment Date;
(6) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the
third Business Day preceding the Change of Control Payment Date,
facsimile transmission or letter setting forth the name of the Holder,
the principal amount of the Securities delivered for purchase, and a
statement that such Holder is withdrawing his election to have such
Securities purchased; and
(7) that Holders whose Securities are being purchased only in part will
be issued new Securities equal in principal amount to the unpurchased
portion of the Securities surrendered; PROVIDED that each Security
purchased and each such new Security issued by the Company shall be in
a principal amount of $1,000 or integral multiples thereof.
The Change of Control Offer shall be deemed to have commenced upon
mailing of the notice described in this paragraph and shall terminate 20
Business Days after its commencement, unless a longer offering period is
required by law. If the Change of Control Payment Date is on the related
interest payment date, any accrued interest will be paid to the person in whose
name a Security is registered at the close of business on such record date, and
no additional interest will be payable to Holders who tender Securities pursuant
to the Change of Control Offer.
On the Change of Control Payment Date, the Company shall, to the extent
lawful, (1) accept for payment Securities or portions thereof tendered pursuant
to the Change of Control Offer, (2) deposit with the Paying Agent an amount
equal to the Change of Control Payment in respect of all Securities or portions
thereof so tendered and (3) deliver or cause to be delivered to the Subordinated
Debenture Trustee, the Securities so accepted together with an Officers'
Certificate stating the Securities or portions thereof tendered to the Company.
The Paying Agent shall promptly mail to each holder of Securities so accepted,
payment in an amount equal to the purchase price for such Securities, and the
Subordinated Debenture Trustee shall promptly authenticate and make available
for delivery to such holder a new Security equal in principal amount to any
unpurchased portion of the Securities surrendered; PROVIDED that each such new
Security shall be in a principal amount of $1,000 or integral multiples thereof.
The Company will publicly announce the results of the Change of Control Offer on
or as soon as practicable after the Change of Control Payment Date.
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SECTION 4.09 TRANSACTIONS WITH AFFILIATES
Neither the Company nor any of its Restricted Subsidiaries shall make
any loan, advance, guarantee or capital contribution to, or for the benefit of,
or sell, lease, transfer or otherwise dispose of any of its properties or assets
to, or for the benefit of, or purchase or lease any property or assets from, or
enter into or amend any contract, agreement or understanding with, or for the
benefit of, (i) any Person (or any Affiliate of such Person) holding 10% or more
of any class of Capital Stock of the Company or any of its Restricted
Subsidiaries or (ii) any Affiliate of the Company or any of its Restricted
Subsidiaries (each an "Affiliate Transaction"), involving aggregate payments of
consideration in excess of $5.0 million, unless (a) such Affiliate Transaction
is on terms that are not materially less favorable to the Company or the
relevant Restricted Subsidiary than those that would have been obtained in a
comparable transaction by the Company or such Restricted Subsidiary with an
unrelated Person and (b) the Company delivers to the Trustee with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $10.0 million, a resolution adopted by the
majority of the Board of Directors approving such Affiliate Transaction and set
forth in an Officers' Certificate certifying that such Affiliate Transaction
complies with clause (a) above; and PROVIDED, FURTHER, that, the foregoing
restriction shall not apply to (i) the payment of an annual fee to KKR for the
rendering of management consulting and financial services to the Company and its
Restricted Subsidiaries in an aggregate amount which is reasonable in relation
thereto, (ii) the payment of transaction fees to KKR in amounts which are in
accordance with past practices for the rendering of financial advice and
services in connection with acquisitions, dispositions and financings by the
Company and its Subsidiaries, (iii) the payment of reasonable and customary fees
paid to, and indemnity provided on behalf of, officers, directors, employees or
consultants of the Company or any Restricted Subsidiary, (iv) loans to officers,
directors and employees of the Company and its Subsidiaries for business or
personal purposes and other loans and advances to such officers, directors and
employees for travel, entertainment, moving and other relocation expenses made
in the ordinary course of business of the Company and its Subsidiaries, (v) any
Restricted Payments (as defined in the referent indenture) not prohibited by the
RESTRICTED PAYMENTS covenant in the Senior Note Indentures, the Exchange
Debenture Indenture, the Class B Debenture Indenture, the Class D Debenture
Indenture, Class E Debenture Indenture of the Class F Debenture Indenture or any
Investment (as defined in the referent indenture) not prohibited by the
INVESTMENTS IN UNRESTRICTED SUBSIDIARIES covenant in the Senior Note Indentures,
(vi) transactions between or among any of the Company and its Restricted
Subsidiaries or (vii) allocation of corporate overhead to Unrestricted
Subsidiaries on a basis no less favorable to the Company than such allocations
to Restricted Subsidiaries.
SECTION 4.10 CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect its corporate
existence and the corporate, partnership or other existence of each Restricted
Subsidiary in accordance with the respective organizational documents of each
Restricted Subsidiary and the rights (charter and statutory), licenses and
franchises of the Company and its Restricted Subsidiaries; PROVIDED that the
Company shall not be required to preserve any such right, license or franchise,
or the corporate, partnership or other existence of any Restricted Subsidiary,
if the Board of Directors shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and its
Restricted Subsidiaries taken as a whole and that the loss thereof is not
adverse in any material respect to the Holders.
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SECTION 4.11 RULE 144A INFORMATION REQUIREMENT
The Company will furnish to the Holders or beneficial holders of the
Securities and prospective purchasers of the Securities designated by the
holders of Transfer Restricted Securities, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act
until such time as the Company consummates the Exchange Offer or has registered
the Securities for resale under the Securities Act.
ARTICLE 5
SUCCESSORS
SECTION 5.01 MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Company may not consolidate with, merge with or into, or transfer
all or substantially all of its assets (as an entirety or substantially as an
entirety in one transaction or a series of related transactions) to any Person
or permit any Person to merge with or into it unless:
(1) the Company shall be the continuing Person, or the Person (if other
than the Company) formed by such consolidation or into which the
Company is merged or to which the properties and assets of the Company
are transferred (collectively the "Successor") shall be a corporation
organized and existing under the laws of the United States or any State
thereof or the District of Columbia and shall expressly assume, by a
supplemental indenture, executed and delivered to the Subordinated
Debenture Trustee, in form satisfactory to the Subordinated Debenture
Trustee, all the obligations of the Company under the Securities and
this Indenture; and
(2) immediately after giving effect to such transaction, no Default and
no Event of Default under this Indenture shall have occurred and be
continuing.
SECTION 5.02 SUCCESSOR CORPORATION SUBSTITUTED
Upon any consolidation or merger, or any sale, lease, conveyance or
other disposition of all or substantially all of the assets of the Company or
any assignment of its obligations under this Indenture or the Securities in
accordance with Section 5.01 hereof, the successor formed by such consolidation
or into or with which the Company is merged or to which such sale, lease,
conveyance or other disposition or assignment is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such Successor has been named as the
Company herein and the predecessor Company, in the case of a sale, lease,
conveyance or other disposition or assignment, shall be released from all
obligations under this Indenture and the Securities.
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ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01 EVENTS OF DEFAULT
An "EVENT OF DEFAULT" occurs if:
(1) the Company fails to make any payment of interest or Liquidated
Damages on any Security when the same shall become due and payable and
such default continues for a period of 30 days and for five days after
written notice of such default is given to the Company by the Holders
of at least 51% in principal amount of the Securities following the
expiration of such 30-day period;
(2) the Company fails to make any payment of the principal of or
premium on any Security when the same shall become due and payable,
whether at maturity or upon acceleration, redemption or otherwise, and
such default continues for a period of ten days;
(3) the Company fails to comply with any of its other agreements or
covenants in, or provisions of, the Securities or this Indenture and
such failure continues for the period and after the notice specified
below;
(4) an event of default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of
its Restricted Subsidiaries (or the payment of which is guaranteed by
the Company or any of its Restricted Subsidiaries) whether such
Indebtedness or guarantee is now existing or thereafter created in the
future, if as a result of such event of default the maturity of such
Indebtedness has been accelerated prior to its express maturity and the
principal amount of such Indebtedness is $22.5 million or more or the
principal amount of such Indebtedness, together with the principal
amount of any other such Indebtedness the maturity of which as been
accelerated, aggregates $45 million or more, PROVIDED that an Event of
Default shall not be deemed to occur with respect to any accelerated
Indebtedness which is repaid or prepaid, or the acceleration of which
is rescinded, within 60 days after such declaration;
(5) the Company, or any of the Restricted Subsidiaries pursuant to or
within the meaning of any Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against it in an
involuntary case,
(c) consents to the appointment of a Custodian of it or for all or
substantially all of its property, or
(d) makes a general assignment for the benefit of its creditors;
or
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(6) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(a) is for relief against the Company, or any of its Restricted
Subsidiaries as debtor in an involuntary case,
(b) appoints a Custodian of the Company, or any of its Restricted
Subsidiaries or a Custodian for all or substantially all of the
property of the Company, or any of its Restricted Subsidiaries,
or
(c) orders the liquidation of the Company, or any of its Restricted
Subsidiaries, and the order or decree remains unstayed and in
effect for 60 days.
The Company is required pursuant to Section 4.04(a) hereof to deliver
to the Subordinated Debenture Trustee annually a statement regarding compliance
with the provisions of this Indenture, and the Company is required pursuant to
Section 4.04(c) hereof upon becoming aware of any Default or Event of Default to
deliver a statement to the Subordinated Debenture Trustee specifying such
Default or Event of Default. The Subordinated Debenture Trustee shall not be
deemed to know of a Default unless a Trust Officer has actual knowledge of such
Default or receives written notice of such Default with specific reference to
such Default.
In the case of any Event of Default pursuant to the provisions of this
Section 6.01 occurring by reason of any willful action (or inaction) taken (or
not taken) by or on behalf of the Company with the intention of avoiding payment
of the premium, if any, which the Company would have had to pay if the Company
then had elected to redeem the Securities pursuant to Section 3.07 hereof, an
equivalent premium shall also become and be immediately due and payable to the
extent permitted by law, anything contained in this Indenture or in the
Securities to the contrary notwithstanding.
A Default under clause (3) is not an Event of Default until the
Subordinated Debenture Trustee notifies the Company, or the Holders of at least
51% in principal amount of the then outstanding Securities notify the Company
and the Subordinated Debenture Trustee in writing, of the Default and the
Company does not cure the Default within 60 days after receipt of the notice.
The notice must specify the Default, demand that it be remedied and state that
the notice is a "Notice of Default."
SECTION 6.02 ACCELERATION
If an Event of Default (other than an Event of Default with respect to
the Company specified in clauses (5) and (6) of Section 6.01 hereof) occurs and
is continuing, the Subordinated Debenture Trustee or the Holders of at least 51%
in principal amount of the then outstanding Securities, by written notice to the
Company and to the agents under the Credit Facilities, the trustees under the
Senior Note Indentures and the Exchange Debenture Indenture (and to the
Subordinated Debenture Trustee if such notice is given by the Holders) may, and
the Subordinated Debenture Trustee at the request of such Holders shall, declare
all unpaid principal of, premium and Liquidated Damages, if any, and accrued
interest on the Securities to be due and payable upon the first to occur of an
acceleration under any of the Credit Facilities, any of the Senior Notes or
Exchange Debentures or 15 Business Days after receipt by the Company, such agent
and such trustees of such written notice to the extent that the Event of Default
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is continuing. If an Event of Default with respect to the Company specified in
clause (5) or (6) of Section 6.01 hereof occurs, all unpaid principal of,
premium and Liquidated Damages, if any, and accrued interest on the Securities
then outstanding shall IPSO FACTO become and be immediately due and payable
without any declaration, notice or other act on the part of the Subordinated
Debenture Trustee or any Holder. The Holders of at least 51% in aggregate
principal amount of the then outstanding Securities by written notice to the
Subordinated Debenture Trustee may rescind an acceleration and its consequences
if the rescission would not conflict with any judgment or decree and if all
existing Events of Default (except nonpayment of principal, premium and
Liquidated Damages, if any, or interest on the Securities that has become due
solely as a result of such acceleration) have been cured or waived.
In the event that the maturity of the Securities is accelerated
pursuant to this Section 6.02, 100% of the principal amount thereof and premium
and Liquidated Damages, if any, and accrued interest to the date of payment
shall become due and payable.
SECTION 6.03 OTHER REMEDIES
If an Event of Default occurs and is continuing, the Subordinated
Debenture Trustee may pursue any available remedy to collect the payment of
principal, premium and Liquidated Damages, if any, or interest then due on the
Securities or to enforce the performance of any provision of the Securities or
this Indenture.
The Subordinated Debenture Trustee may maintain a proceeding even if it
does not possess any of the Securities or does not produce any of them in the
proceeding. A delay or omission by the Subordinated Debenture Trustee or any
Holder in exercising any right or remedy accruing upon an Event of Default shall
not impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. All remedies are cumulative to the extent permitted by law.
SECTION 6.04 WAIVER OF PAST DEFAULTS
The Holders of at least 51% in principal amount of the then outstanding
Securities by notice to the Subordinated Debenture Trustee may waive an existing
Default or Event of Default and its consequences (including waivers obtained in
connection with a tender offer or exchange offer for Securities), except a
continuing Default or Event of Default in the payment of the principal of,
premium or Liquidated Damages, if any, or interest on, such Security (including,
without limitation, pursuant to any mandatory or optional redemption obligation
hereunder) or that resulted from the failure to comply with Section 4.08 hereof.
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
SECTION 6.05 CONTROL BY MAJORITY
The Holders of at least 51% in principal amount of the then outstanding
Securities may direct the time, method and place of conducting any proceeding
for any remedy available to the Subordinated Debenture Trustee or exercising any
trust or power conferred on it. However, the Subordinated Debenture
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Trustee may refuse to follow any direction that conflicts with law or this
Indenture, that the Subordinated Debenture Trustee determines may be unduly
prejudicial to the rights of other Holders, or that may involve the Subordinated
Debenture Trustee in personal liability.
SECTION 6.06 LIMITATIONS ON SUITS
A Holder may not pursue a remedy with respect to this Indenture or the
Securities unless:
(1) the Holder gives to the Subordinated Debenture Trustee written
notice of a continuing Event of Default;
(2) the Holders of at least 51% in principal amount of the then
outstanding Securities make a written request to the Subordinated Debenture
Trustee to pursue the remedy;
(3) such Holder or Holders offer to the Subordinated Debenture Trustee
indemnity satisfactory to the Subordinated Debenture Trustee against any
loss, liability or expense (including, without limitation, fees and
expenses of counsel);
(4) the Subordinated Debenture Trustee does not comply with the request
within 30 days after receipt of the request and the offer of indemnity; and
(5) during such 30-day period the Holders of at least 51% in principal
amount of the then outstanding Securities do not give the Subordinated
Debenture Trustee a direction which is inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over another Holder.
SECTION 6.07 RIGHTS OF HOLDERS TO RECEIVE PAYMENT
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Security to receive payment of principal of, premium and Liquidated
Damages, if any, and interest on the Security, on or after the respective due
dates expressed in the Security or the Registration Rights Agreement, as the
case may be, or to bring suit for the enforcement of any such payment on or
after such respective dates, shall not be impaired or affected without the
consent of the Holder.
SECTION 6.08 COLLECTION SUIT BY SUBORDINATED DEBENTURE TRUSTEE
If an Event of Default specified in Section 6.01(1), (2) or (3) (with
respect to the Company's obligations under Section 4.08 hereof) hereof occurs
and is continuing, the Subordinated Debenture Trustee is authorized to recover
judgment in its own name and as trustee of an express trust against the Company
for the amount of principal, premium and Liquidated Damages, if any, and
interest remaining unpaid on the Securities, determined in accordance with
Section 6.02 hereof and interest on overdue principal, premium, if any, and, to
the extent lawful, interest, and such further amount as shall be
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sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the
Subordinated Debenture Trustee, its agents and counsel.
SECTION 6.09 SUBORDINATED DEBENTURE TRUSTEE MAY FILE PROOFS OF CLAIM
The Subordinated Debenture Trustee is authorized to file such proofs of
claim and other papers or documents as may be necessary or advisable in order to
have the claims of the Subordinated Debenture Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Subordinated Debenture Trustee, its agents and counsel) and the Holders allowed
in any judicial proceedings relative to the Company, its creditors or its
property and shall be entitled and empowered to collect, receive and distribute
any money or other property payable or deliverable on any such claims and any
Custodian in any such judicial proceeding is hereby authorized by each Holder to
make such payments to the Subordinated Debenture Trustee, and in the event that
the Subordinated Debenture Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Subordinated Debenture Trustee any amount
due to it for the reasonable compensation, expenses, disbursements and advances
of the Subordinated Debenture Trustee, its agents and counsel, and any other
amounts due the Subordinated Debenture Trustee under Section 7.07 hereof. To the
extent that the payment of any such compensation, expenses, disbursements and
advances of the Subordinated Debenture Trustee, its agents and counsel, and any
other amounts due the Subordinated Debenture Trustee under Section 7.07 hereof
out of the estate in any such proceeding, shall be denied for any reason,
payment of the same shall be secured by a Lien on, and shall be paid out of, any
and all distributions, dividends, money, securities and other properties which
the Holders of the Securities may be entitled to receive in such proceeding
whether in liquidation or under any plan of reorganization or arrangement or
otherwise. Nothing herein contained shall be deemed to authorize the
Subordinated Debenture Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof, or to
authorize the Subordinated Debenture Trustee to vote in respect of the claim of
any Holder in any such proceeding.
SECTION 6.10 PRIORITIES
If the Subordinated Debenture Trustee collects any money pursuant to
this Article 6, it shall pay out the money in the following order:
FIRST: to the Subordinated Debenture Trustee for amounts due under
Section 7.07 hereof;
SECOND: subject to Article 10 hereof, to Holders for amounts due and
unpaid on the Securities for principal, premium and Liquidated Damages,
if any, and interest, ratably, without preference or priority of any
kind, according to the amounts due and payable on the Securities for
principal, premium and Liquidated Damages, if any, and interest,
respectively; and
THIRD: to the Company.
The Subordinated Debenture Trustee may fix a record date and payment
date for any payment to Holders pursuant to this Article 6.
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SECTION 6.11 UNDERTAKING FOR COSTS
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Subordinated Debenture Trustee for any
action taken or omitted by it as a Subordinated Debenture Trustee, a court in
its discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees and expenses,
against any party litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. This Section 6.11
does not apply to a suit by the Subordinated Debenture Trustee, a suit by a
Holder pursuant to Section 6.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Securities.
ARTICLE 7
SUBORDINATED DEBENTURE TRUSTEE
SECTION 7.01 DUTIES OF SUBORDINATED DEBENTURE TRUSTEE
(1) If an Event of Default has occurred and is continuing, the
Subordinated Debenture Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and use the same degree of care
and skill in such exercise, as a prudent man would exercise or use
under the circumstances in the conduct of his own affairs.
(2) Except during the continuance of an Event of Default:
(a) the Subordinated Debenture Trustee need perform only those
duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into
this Indenture against the Subordinated Debenture Trustee; and
(b) in the absence of bad faith on its part, the Subordinated
Debenture Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein,
upon certificates or opinions furnished to the Subordinated
Debenture Trustee and conforming to the requirements of this
Indenture. However, in the case of any such certificates or
opinions which by any provision hereof are specifically required to
be furnished to the Subordinated Debenture Trustee, the
Subordinated Debenture Trustee shall be under a duty to examine the
same to determine whether or not they conform to the requirements
of this Indenture (but need not confirm or investigate the accuracy
of mathematical calculations or other facts stated therein).
(3) The Subordinated Debenture Trustee may not be relieved from
liability for its own negligent action, its own negligent failure to
act, or its own willful misconduct, except that:
(a) this paragraph does not limit the effect of paragraph (2) of
this Section 7.01;
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(b) the Subordinated Debenture Trustee shall not be liable for any
error of judgment made in good faith by a Trust Officer, unless it
is proved that the Subordinated Debenture Trustee was negligent in
ascertaining the pertinent facts; and
(c) the Subordinated Debenture Trustee shall not be liable with
respect to any action it takes or omits to take in good faith in
accordance with a direction received by it pursuant to Section 6.05
hereof.
(4) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Subordinated Debenture
Trustee is subject to paragraphs (1), (2) and (3) of this Section 7.01.
(5) No provision of this Indenture shall require the Subordinated
Debenture Trustee to expend or risk its own funds or incur any
liability. The Subordinated Debenture Trustee is not obligated to
perform any duty or exercise any right or power under this Indenture at
the request of the Holders of the Securities unless it receives an
offer from such Holders of security and indemnity satisfactory to it
against any loss, liability or expense (including, without limitation,
fees of counsel).
(6) The Subordinated Debenture Trustee shall not be liable for interest
on any money received by it except as the Subordinated Debenture
Trustee may agree in writing with the Company. Money held in trust by
the Subordinated Debenture Trustee need not be segregated from other
funds except to the extent required by law.
SECTION 7.02 RIGHTS OF SUBORDINATED DEBENTURE TRUSTEE
(1) The Subordinated Debenture Trustee may rely on any document
believed by it to be genuine and to have been signed or presented by
the proper Person. The Subordinated Debenture Trustee need not
investigate any fact or matter stated in the document.
(2) Before the Subordinated Debenture Trustee acts or refrains from
acting, it may require an Officers' Certificate or an Opinion of
Counsel or both. The Subordinated Debenture Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Subordinated
Debenture Trustee may consult with counsel of its selection and the
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder and in reliance thereon.
(3) The Subordinated Debenture Trustee may act through agents and shall
not be responsible for the misconduct or negligence of any agent,
attorney, custodian or nominee appointed with due care.
(4) The Subordinated Debenture Trustee shall not be liable for any
action it takes or omits to take in good faith which it believes to be
authorized or within its rights or powers conferred upon it by this
Indenture.
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(5) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be
sufficient if signed by an Officer of the Company.
SECTION 7.03 INDIVIDUAL RIGHTS OF SUBORDINATED DEBENTURE TRUSTEE
The Subordinated Debenture Trustee in its individual or any other
capacity may become the owner or pledgee of Securities and may otherwise deal
with the Company or any of its Affiliates with the same rights it would have if
it were not Subordinated Debenture Trustee. Any Agent may do the same with like
rights. However, the Subordinated Debenture Trustee is subject to Sections 7.10
and 7.11 hereof.
SECTION 7.04 SUBORDINATED DEBENTURE TRUSTEE'S DISCLAIMER
The Subordinated Debenture Trustee makes no representation as to the
validity or adequacy of this Indenture or the Securities; it shall not be
accountable for the Company's use of the proceeds from the Securities or any
money paid to the Company or upon the Company's direction under any provision
hereof; it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Subordinated Debenture Trustee; and
it shall not be responsible for any statement or recital herein or any statement
in the Securities other than its certificate of authentication.
SECTION 7.05 NOTICE OF DEFAULTS
If a Default or Event of Default occurs and is continuing and if it is
actually known to a Trust Officer of the Subordinated Debenture Trustee, the
Subordinated Debenture Trustee shall mail to each Holder a notice of the Default
or Event of Default within 90 days after it occurs, or if later, within 10 days
after such Default or Event of Default becomes known to the Subordinated
Debenture Trustee unless such Default or Event of Default has been cured. Except
in the case of a Default or Event of Default in payment of principal of, premium
and Liquidated Damages, if any, or interest on any Security or that resulted
from a failure to comply with Section 4.08 hereof, the Subordinated Debenture
Trustee may withhold the notice if and so long as a committee of its Trust
Officers determines in good faith that withholding the notice is in the
interests of Holders.
SECTION 7.06 REPORTS BY SUBORDINATED DEBENTURE TRUSTEE TO HOLDERS
Within 60 days after each June 1 beginning with the first June 1 to
occur after the date of this Indenture, the Subordinated Debenture Trustee shall
mail to Holders a brief report dated as of such reporting date that complies
with TIA ss. 313(a) (but if no event described in TIA ss. 313(a) has occurred
within the twelve months preceding the reporting date, no report need be
transmitted). The Subordinated Debenture Trustee also shall comply with TIA ss.
313(b). The Subordinated Debenture Trustee shall also transmit by mail all
reports as required by TIA ss. 313(c).
A copy of each report at the time of its mailing to Holders shall be
filed with the SEC and each stock exchange on which the Securities are listed.
The Company shall promptly notify the Subordinated Debenture Trustee when the
Securities are listed on any stock exchange and when such Securities become
delisted on any such exchange.
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SECTION 7.07 COMPENSATION AND INDEMNITY
The Company shall pay to the Subordinated Debenture Trustee from time
to time such compensation as shall be agreed in writing between the Company and
the Subordinated Debenture Trustee for its acceptance of this Indenture and
services hereunder. The Subordinated Debenture Trustee's compensation shall not
be limited by any law relating to compensation of a trustee of an express trust.
The Company shall reimburse the Subordinated Debenture Trustee upon request for
all reasonable disbursements, advances and expenses incurred by it. Such
expenses shall include the reasonable compensation, disbursements and expenses
of the Subordinated Debenture Trustee's agents and counsel.
The Company shall indemnify and hold harmless each of the Subordinated
Debenture Trustee and any predecessor Subordinated Debenture Trustee and its
directors, officers, employees and agents against any and all loss, liability,
damage, claim or expense (including, without limitation, fees and expenses of
counsel) incurred by it arising out of or in connection with the acceptance or
administration of its duties under this Indenture including, without limitation,
costs and expenses of defending itself against any claim or liability in
connection with the exercise or performance of its powers and duties hereunder,
except as set forth in the next paragraph. The Subordinated Debenture Trustee
shall notify the Company promptly of any claim for which it may seek indemnity.
The Company shall defend the claim and the Subordinated Debenture Trustee shall
cooperate in the defense. The Subordinated Debenture Trustee may have separate
counsel and the Company shall pay the reasonable fees and expenses of such
counsel. The Company need not pay for any settlement made without its consent,
which consent shall not be unreasonably withheld.
The Company need not reimburse any expense or indemnify against any
loss or liability incurred by the Subordinated Debenture Trustee through its
negligence or bad faith.
To secure the Company's payment obligations in this Section 7.07, the
Subordinated Debenture Trustee shall have a Lien prior to the Securities on all
money or property held or collected by the Subordinated Debenture Trustee,
except that held in trust to pay principal, premium and Liquidated Damages, if
any, and interest on particular Securities. Such Lien shall survive the
satisfaction and discharge of the Indenture.
When the Subordinated Debenture Trustee incurs expenses or renders
services after an Event of Default specified in Section 6.01(5) or (6) hereof
occurs, the expenses and the compensation for the services are intended to
constitute expenses of administration under any Bankruptcy Law.
The provisions of this Section shall survive the termination of this
Indenture.
SECTION 7.08 REPLACEMENT OF SUBORDINATED DEBENTURE TRUSTEE
The Subordinated Debenture Trustee may resign and be discharged from
the trust hereby created by so notifying the Company. The Holders of a majority
in principal amount of the then outstanding Securities may remove the
Subordinated Debenture Trustee by so notifying the Subordinated Debenture
Trustee and the Company. The Company may remove the Subordinated Debenture
Trustee if:
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(1) the Subordinated Debenture Trustee fails to comply with Section
7.10 hereof;
(2) the Subordinated Debenture Trustee is adjudged a bankrupt or an
insolvent or an order for relief is entered with respect to the
Subordinated Debenture Trustee under any Bankruptcy Law;
(3) a Custodian or public officer takes charge of the Subordinated
Debenture Trustee or its property; or
(4) the Subordinated Debenture Trustee becomes incapable of acting.
Notwithstanding the foregoing, a resignation or removal of the
Subordinated Debenture Trustee and appointment of a successor Subordinated
Debenture Trustee shall become effective only upon the successor Subordinated
Debenture Trustee's acceptance of appointment as provided in this Section 7.08,
and thereafter the Subordinated Debenture Trustee shall have no liability for
any acts or omission of any successor Trustee.
If the Subordinated Debenture Trustee resigns or is removed or if a
vacancy exists in the office of Subordinated Debenture Trustee for any reason,
the Company shall promptly appoint a successor Subordinated Debenture Trustee.
If a successor Subordinated Debenture Trustee does not take office
within 30 days after the retiring Subordinated Debenture Trustee resigns or is
removed, the retiring Subordinated Debenture Trustee, the Company or the Holders
of at least 10% in principal amount of the then outstanding Securities may
petition, at the expense of the Company, any court of competent jurisdiction for
the appointment of a successor Subordinated Debenture Trustee.
If the Subordinated Debenture Trustee fails to comply with Section 7.10
hereof, any Holder may petition any court of competent jurisdiction for the
removal of the Subordinated Debenture Trustee and the appointment of a successor
Subordinated Debenture Trustee.
A successor Subordinated Debenture Trustee shall deliver a written
acceptance of its appointment to the retiring Subordinated Debenture Trustee and
to the Company. Thereupon the resignation or removal of the retiring
Subordinated Debenture Trustee shall become effective, and the successor
Subordinated Debenture Trustee shall have all the rights, powers and duties of
the Subordinated Debenture Trustee under this Indenture. The successor
Subordinated Debenture Trustee shall mail a notice of its succession to Holders.
The retiring Subordinated Debenture Trustee shall promptly transfer all property
held by it as Subordinated Debenture Trustee to the successor Subordinated
Debenture Trustee, subject to the Lien provided for in Section 7.07 hereof.
Notwithstanding replacement of the Subordinated Debenture Trustee pursuant to
this Section 7.08, the Company's obligations under Section 7.07 hereof shall
continue for the benefit of the retiring Subordinated Debenture Trustee.
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SECTION 7.09 SUCCESSOR SUBORDINATED DEBENTURE TRUSTEE BY MERGER, ETC
Subject to Section 7.10 hereof, if the Subordinated Debenture Trustee
consolidates, merges or converts into, or transfers all or substantially all of
its corporate trust business to, another corporation or national banking
association, the successor entity without any further act shall be the successor
Subordinated Debenture Trustee. In case any Securities have been authenticated,
but not delivered, by the Subordinated Debenture Trustee then in office, any
succession by merger, conversion or consolidation of such authenticating trustee
may adopt such authentication and deliver the Securities so authenticated with
the same effect as if such successor trustee had itself authenticated such
Securities.
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION
There shall at all times be a Subordinated Debenture Trustee hereunder
which shall be a corporation organized and doing business under the laws of the
United States of America, any state thereof or the District of Columbia
authorized under such laws to exercise corporate trust power, shall be subject
to supervision or examination by federal or state (or the District of Columbia)
authority and shall have a combined capital and surplus of at least $50 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Subordinated Debenture Trustee who
satisfies the requirements of TIA ss. 310(a)(1). The Subordinated Debenture
Trustee is subject to TIA ss. 310(b).
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY
The Subordinated Debenture Trustee is subject to TIA ss. 311(a),
excluding therefrom any creditor relationship listed in TIA ss. 311(b). A
Subordinated Debenture Trustee who has resigned or been removed shall be subject
to TIA ss. 311(a) to the extent indicated therein.
ARTICLE 8
DISCHARGE OF INDENTURE
SECTION 8.01 TERMINATION OF COMPANY'S OBLIGATIONS
This Indenture shall cease to be of further effect (except that the
Company's obligations under Section 7.07 hereof and the Subordinated Debenture
Trustee's and Paying Agent's obligations under Section 8.03 hereof shall
survive) when all outstanding Securities theretofore authenticated and issued
have been delivered (other than destroyed, lost or stolen Securities that have
been replaced or paid) to the Subordinated Debenture Trustee for cancellation
and the Company has paid all sums payable hereunder. In addition, the Company
may terminate all of its obligations under this Indenture if:
(1) the Company irrevocably deposits, or causes to be deposited, in
trust with the Subordinated Debenture Trustee or the Paying Agent or,
at the option of the Subordinated Debenture Trustee, with a trustee
satisfactory to the Subordinated Debenture Trustee and the Company
under the
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terms of an irrevocable trust agreement in form and substance
satisfactory to the Subordinated Debenture Trustee, money or U.S.
Government Obligations in an amount sufficient (without reinvestment
thereof) to pay principal, premium and Liquidated Damages, if any, and
interest on the Securities to maturity or redemption, as the case may
be, as such amounts become due, and to pay all other sums payable by it
hereunder, and such deposit, when made, does not violate the provisions
of Article 10 hereof; PROVIDED that (i) the trustee of the irrevocable
trust shall have been irrevocably instructed to pay such money or the
proceeds of such U.S. Government Obligations to the Subordinated
Debenture Trustee and (ii) the Subordinated Debenture Trustee shall
have been irrevocably instructed to apply such money or the proceeds of
such U.S. Government Obligations to the payment of said principal,
premium and Liquidated Damages, if any, and interest on the Securities;
(2) the Company delivers to the Subordinated Debenture Trustee an
Officers' Certificate stating that all conditions precedent to
satisfaction and discharge of this Indenture have been complied with,
and delivers an Opinion of Counsel to the same effect;
(3) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit; and
(4) the Company shall have delivered to the Subordinated Debenture
Trustee an Opinion of Counsel from nationally recognized counsel
acceptable to the Subordinated Debenture Trustee or a tax ruling from
the Internal Revenue Service to the effect that the Holders of the
Securities will not recognize income, gain or loss for federal income
tax purposes as a result of the Company's exercise of its option under
this Section 8.01 and will be subject to federal income tax on the same
amount and in the same manner and at the same times as would have been
the case if such option had not been exercised.
In such event, this Indenture shall cease to be of further effect,
except that the Company's obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07,
4.01, 4.06, 7.07, 7.08 and 8.04 hereof and the Company's, the Subordinated
Debenture Trustee's and the Paying Agent's obligations in Section 8.03, and the
Subordinated Debenture Trustee's rights under Article 7 hereof, shall survive
until the Securities are no longer outstanding. Thereafter, only the Company's
obligations in Section 7.07 hereof and the Subordinated Debenture Trustee's and
the Paying Agent's obligations in Section 8.03 hereof shall survive.
After such irrevocable deposit made pursuant to this Section 8.01 and
satisfaction of the other conditions set forth herein, the Subordinated
Debenture Trustee upon request shall acknowledge in writing the discharge of the
Company's obligations under this Indenture except for those surviving
obligations specified above.
In order to have money available on a payment date to pay principal or
interest on the Securities, the U.S. Government Obligations shall be payable as
to principal or interest on or before such payment date in such amounts as will
provide the necessary money. U.S. Government Obligations shall not be callable
at the issuer's option.
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SECTION 8.02 APPLICATION OF TRUST MONEY
The Subordinated Debenture Trustee or a trustee satisfactory to the
Subordinated Debenture Trustee and the Company shall hold in trust money or U.S.
Government Obligations deposited with it pursuant to Section 8.01 hereof. It
shall apply the deposited money and the money from U.S. Government Obligations
through the Paying Agent and in accordance with this Indenture to the payment of
principal of and interest on the Securities.
The Company shall pay and indemnify the Subordinated Debenture Trustee
against any tax, fee or other charge imposed on or assessed against the U.S.
Government Obligations deposited pursuant to Section 8.01 or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the Securities.
SECTION 8.03 REPAYMENT TO COMPANY
The Subordinated Debenture Trustee and the Paying Agent shall promptly
pay to the Company upon written request any excess money or securities held by
them at any time.
The Subordinated Debenture Trustee and the Paying Agent shall pay to
the Company upon written request any money held by them for the payment of
principal or interest that remains unclaimed for two years after the date upon
which such payment shall have become due; PROVIDED that the Company shall have
either caused notice of such payment to be mailed to each Holder entitled
thereto no less than 30 days prior to such repayment or within such period shall
have published such notice in a financial newspaper of widespread circulation
published in The City of New York. After payment to the Company, Holders
entitled to the money must look to the Company for payment as general creditors
unless an applicable abandoned property law designates another Person, and all
liability of the Subordinated Debenture Trustee and such Paying Agent with
respect to such money shall cease.
SECTION 8.04 REINSTATEMENT
If the Subordinated Debenture Trustee or Paying Agent is unable to
apply any money or U.S. Government Obligations in accordance with Section 8.01
hereof by reason of any legal proceeding or by reason of any order or judgment
of any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, the Company's obligations under this Indenture and
the Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 8.01 hereof until such time as the Subordinated Debenture
Trustee or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with Section 8.01 hereof; PROVIDED that if the Company
has made any payment of interest on or principal of any Securities because of
the reinstatement of its obligations, the Company shall be subrogated to the
rights of the Holders of such Securities to receive such payment from the money
or U.S. Government Obligations held by the Subordinated Debenture Trustee or
Paying Agent.
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ARTICLE 9
AMENDMENTS
SECTION 9.01 WITHOUT CONSENT OF HOLDERS
Without the consent of any Holder of Securities the Company and the
Subordinated Debenture Trustee may amend or supplement this Indenture or the
Securities:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Securities in addition to or in place
of certificated Securities;
(3) to comply with Section 5.01 hereof;
(4) to make any change that would provide any additional rights or
benefits to the Holders or that does not adversely affect the rights
hereunder of any Holder; or
(5) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
Upon the request of the Company, accompanied by a resolution of the
Board of Directors authorizing the execution of any such supplemental indenture,
and upon receipt by the Subordinated Debenture Trustee of the documents
described in Section 9.06 hereof, the Subordinated Debenture Trustee shall join
with the Company in the execution of any supplemental indenture authorized or
permitted by the terms of this Indenture and make any further appropriate
agreements and stipulations that may be therein contained, but the Subordinated
Debenture Trustee shall not be obligated to enter into any supplemental
indenture that affects its own rights, duties or immunities under this Indenture
or otherwise. After an amendment or waiver under this Section 9.01 becomes
effective, the Company shall mail to the Holders of each Security affected
thereby a notice briefly describing the amendment or waiver. Any failure of the
Company to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such supplemental indenture.
SECTION 9.02 WITH CONSENT OF HOLDERS
Except as provided below in this Section 9.02, this Indenture or the
Securities may be amended or supplemented with the written consent (including
consents obtained in connection with a tender offer or exchange offer for
Securities) of the Holders of at least 51% in principal amount of the then
outstanding Securities.
Upon the request of the Company, accompanied by a resolution of the
Board of Directors authorizing the execution of any such supplemental indenture,
and upon the filing with the Subordinated Debenture Trustee of evidence of the
consent of the Holders as aforesaid, and upon receipt by the Subordinated
Debenture Trustee of the documents described in Section 9.06 hereof, the
Subordinated Debenture Trustee shall join with the Company in the execution of
such supplemental indenture unless such supplemental indenture affects the
Subordinated Debenture Trustee's own rights, duties or immunities
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under this Indenture or otherwise, in which case the Subordinated Debenture
Trustee may in its discretion, but shall not be obligated to, enter into such
supplemental indenture.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment or waiver,
but it shall be sufficient if such consent approves the substance thereof.
The Holders of 51% in principal amount of the Securities then
outstanding may waive compliance in a particular instance by the Company with
any provision of this Indenture or the Securities (including waivers obtained in
connection with a tender offer or an exchange offer for Securities) or any
existing default. However, without the consent of each Holder affected, an
amendment or waiver under this Section may not (with respect to any Securities
held by a non-consenting Holder):
(1) reduce the principal amount of Securities whose Holders must
consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any
Security or alter the provisions with respect to the redemption price
in connection with repurchases under Sections 3.07, 3.08 or 4.08
hereof;
(3) reduce the rate of or change the time for payment of interest on
any Security;
(4) waive a Default or Event of Default in the payment of the principal
of, or premium or Liquidated Damages, if any, or interest on Securities
or that resulted from a failure to comply with Section 4.08 hereof
(except a rescission of acceleration of the Securities as provided in
Section 6.02 hereof);
(5) make any Security payable in money other than that stated in the
Security;
(6) make any change in Article 10 hereof that adversely affects the
rights of any Holder;
(7) make any change in Section 6.04 or 6.07 hereof or in this sentence
of this Section 9.02;
(8) waive a redemption payment with respect to any Security; or
(9) make a change in any of the foregoing.
The right of any Holder to participate in any consent required or
sought pursuant to any provision of this Indenture (and the obligation of the
Company to obtain any such consent otherwise required from such Holder) may be
subject to the requirement that such Holder shall have been the Holder of record
of any Securities with respect to which such consent is required or sought as of
a date identified by the Subordinated Debenture Trustee in a notice furnished to
Holders in accordance with the terms of this Indenture.
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SECTION 9.03 COMPLIANCE WITH TRUST INDENTURE ACT
Every amendment to this Indenture or the Securities shall comply in
form and substance with the TIA as then in effect.
SECTION 9.04 REVOCATION AND EFFECT OF CONSENTS
Until an amendment (which includes any supplement) or waiver becomes
effective, a consent to it by a Holder of a Security is a continuing consent by
the Holder and every subsequent Holder of a Security or portion of a Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent is not made on any Security. However, any such Holder or
subsequent Holder may revoke the consent as to his or her Security or portion of
a Security if the Subordinated Debenture Trustee receives written notice of
revocation before the date the amendment or waiver becomes effective. An
amendment or waiver becomes effective in accordance with its terms and
thereafter binds every Holder.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment or
waiver. If a record date is fixed, then notwithstanding the provisions of the
immediately preceding paragraph, those Persons who were Holders at such record
date (or their duly designated proxies), and only those Persons, shall be
entitled to consent to such amendment or waiver or to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
record date. No consent shall be valid or effective for more than 90 days after
such record date unless consents from Holders of the principal amount of
Securities required hereunder for such amendment or waiver to be effective shall
have also been given and not revoked within such 90-day period.
After an amendment or waiver becomes effective it shall bind every
Holder, unless it is of the type described in any of clauses (1) through (8) of
Section 9.02 hereof. In such case, the amendment or waiver shall bind each
Holder of a Security who has consented to it and every subsequent Holder of a
Security that evidences the same debt as the consenting Holder's Security.
SECTION 9.05 NOTATION ON OR EXCHANGE OF SECURITIES
If an amendment, supplement or waiver changes the terms of a Security,
the Subordinated Debenture Trustee may require the Holder of the Security to
deliver it to the Subordinated Debenture Trustee. The Subordinated Debenture
Trustee may place an appropriate notation about the changed terms and return it
to the Holder and the Subordinated Debenture Trustee may place an appropriate
notation on any Security thereafter authenticated. Alternatively, if the Company
or Subordinated Debenture Trustee so determines, the Company in exchange for all
Securities shall issue and the Subordinated Debenture Trustee shall authenticate
new Securities that reflect the changed terms.
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SECTION 9.06 SUBORDINATED DEBENTURE TRUSTEE TO SIGN AMENDMENTS, ETC.
The Subordinated Debenture Trustee shall sign any amendment or
supplemental indenture authorized pursuant to this Article 9 if the amendment
does not adversely affect the rights, duties, liabilities or immunities of the
Subordinated Debenture Trustee. If it does, the Subordinated Debenture Trustee
may, but need not, sign it. In signing or refusing to sign such amendment or
supplemental indenture, the Subordinated Debenture Trustee shall be entitled to
receive and, subject to Section 7.01 hereof, shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel as conclusive evidence
that such amendment or supplemental indenture is authorized or permitted by this
Indenture, that it is not inconsistent herewith, and that it will be valid and
binding upon the Company in accordance with its terms.
ARTICLE 10
SUBORDINATION
SECTION 10.01 AGREEMENT TO SUBORDINATE
The Company agrees, and each Holder by accepting a Security agrees,
that the indebtedness evidenced by the Security is subordinated in right of
payment, to the extent and in the manner provided in this Article 10, to the
prior payment in full of all "Senior Debt" (as defined below) and that the
subordination is for the benefit of the holders of Senior Debt. The Indebtedness
evidenced by the Security shall be PARI PASSU with the Series D Subordinated
Debentures and the Series E Subordinated Debentures.
SECTION 10.02 CERTAIN DEFINITIONS
"Representative" means (i) with respect to the Credit Facilities, the
Agents (as defined therein) and (ii) with respect to any other Senior Debt, the
indenture trustee or other trustee, agent or representative for such Senior
Debt.
"Senior Debt" means all present and future Indebtedness, including all
Indebtedness incurred under the Credit Facilities and the Senior Note
Indentures, created, assumed, incurred or guaranteed by the Company (and all
renewals, extensions and refundings thereof), unless by its terms such
Indebtedness is not senior to the Class G Subordinated Debentures. Senior Debt
does not include any Indebtedness of the Company to any of its subsidiaries or
trade indebtedness.
A distribution may consist of cash, securities or other property, by
set-off or otherwise.
For the purposes of this Article 10, Obligations with respect to Senior
Debt shall not be deemed to have been paid in full unless the holders thereof
shall have received payment in full in cash.
SECTION 10.03 LIQUIDATION; DISSOLUTION; BANKRUPTCY
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company
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or its property or in an assignment for the benefit of creditors or any
marshalling of the assets and liabilities of the Company:
(1) holders of Senior Debt shall be entitled to receive payment in full
of all Obligations with respect to the Senior Debt (including interest
after the commencement of any such proceeding at the rate specified in
the applicable Senior Debt whether or not such interest is an allowed
claim enforceable against the Company in any such bankruptcy,
reorganization, insolvency, receivership or similar proceeding) before
Holders shall be entitled to receive any payment of any Obligations
with respect to the Securities; and
(2) until all Obligations with respect to Senior Debt (as provided in
subsection (1) of this Section 10.03) are paid in full, any
distribution to which Holders would be entitled but for this Article 10
shall be made to holders of Senior Debt, as their interests may appear.
SECTION 10.04 DEFAULT ON SENIOR DEBT
No direct or indirect payment or distribution by or on behalf of the
Company of principal of, premium, if any, or interest on the Securities, whether
pursuant to the terms of the Securities or otherwise, may be made (i) if a
default of any Obligations to the holders of Senior Debt occurs and has not been
cured or waived, (ii) for a period of 180 days upon the occurrence of a default
(other than a payment default) in respect of Senior Debt and for successive
periods of 180 days if the default is continuing at the end of such 180 day
period or another default (other than a payment default) in respect of Senior
Debt has occurred or (iii) upon the maturity of any Senior Debt, prior to the
payment of all Obligations with respect to Senior Debt that is then due and
payable. In addition, upon the acceleration of the Securities prior to their
stated maturity, holders of the Senior Debt shall receive payment in full before
any payment shall be made to Holders of the Securities.
SECTION 10.05 ACCELERATION OF SECURITIES
If payment of the Securities is accelerated because of an Event of
Default, the Company shall promptly notify the Representatives of Senior Debt of
the acceleration.
SECTION 10.06 WHEN DISTRIBUTION MUST BE PAID OVER
In the event that the Subordinated Debenture Trustee or any Holder
receives any payment of any Obligations (other than, in the case of the
Subordinated Debenture Trustee, fees, expenses and all other amounts payable
pursuant to Section 7.07 hereof) with respect to the Securities at a time when
such payment is prohibited by Section 10.04 hereof, then and in such event (but
with respect to the Subordinated Debenture Trustee, subject to the provisions of
Section 10.12 hereof) such payment shall be held by the Subordinated Debenture
Trustee or such Holder, in trust for the benefit of, and shall be paid forthwith
over and delivered, upon written request, to, the holders of Senior Debt as
their interests may appear or their Representative under the indenture or other
agreement (if any) pursuant to which Senior Debt may have been issued, as their
respective interests may appear, for application to the payment of all
Obligations due to the holders of Senior Debt remaining unpaid to the extent
necessary to pay such
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Obligations in full in accordance with their terms, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Debt.
If a distribution is made to the Subordinated Debenture Trustee or any
Holder (other than, in the case of the Subordinated Debenture Trustee, fees,
expenses and all other amounts payable pursuant to Section 7.07 hereof) that
because of this Article 10 should not have been made to it, the Subordinated
Debenture Trustee (subject to the provision of Section 10.12 hereof) or such
Holder who receives the distribution shall hold it in trust for the benefit of,
and, upon written request, pay it over to, the holders of Senior Debt as their
interests may appear, or their Representative under the indenture or other
agreement (if any) pursuant to which Senior Debt may have been issued, as their
respective interests may appear, for application to the payment of all
Obligations due to the holders of Senior Debt remaining unpaid to the extent
necessary to pay such Obligations in full in accordance with their terms, after
giving effect to any concurrent payment or distribution to or for the holders of
Senior Debt.
With respect to the holders of Senior Debt, the Subordinated Debenture
Trustee undertakes to perform only such obligations on the part of the
Subordinated Debenture Trustee as are specifically set forth in this Article 10,
and no implied covenants or obligations with respect to the holders of Senior
Debt shall be read into this Indenture against the Subordinated Debenture
Trustee. The Subordinated Debenture Trustee shall not be deemed to owe any
fiduciary duty to the holders of Senior Debt, and shall not be liable to any
such holders if the Subordinated Debenture Trustee shall pay over or distribute
to or on behalf of Holders or the Company or any other Person money or assets to
which any holders of Senior Debt shall be entitled by virtue of this Article 10,
unless such payment or distribution is made as a result of the willful
misconduct or gross negligence of the Subordinated Debenture Trustee.
SECTION 10.07 NOTICE BY COMPANY
The Company shall promptly notify the Subordinated Debenture Trustee
and the Paying Agent of any facts known to the Company that would cause a
payment of any Obligations with respect to the Securities to violate this
Article 10, but failure to give such notice shall not affect the subordination
of the Securities to the Senior Debt provided in this Article 10.
SECTION 10.08 SUBROGATION
After all Obligations with respect to all Senior Debt are paid in full
and until the Securities are paid in full, Holders shall be subrogated (equally
and ratably with all other Indebtedness ranking PARI PASSU with the Securities)
to the rights of holders of Senior Debt to receive distributions applicable to
Senior Debt to the extent that distributions otherwise payable to the Holders
have been applied to the payment of Senior Debt. A distribution made under this
Article 10 to holders of Senior Debt which otherwise would have been made to
Holders is not, as between the Company and Holders, a payment by the Company on
the Securities.
SECTION 10.09 RELATIVE RIGHTS
This Article 10 defines the relative rights of Holders and holders of
Senior Debt. Nothing in this Indenture shall:
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(1) impair, as between the Company and the Holders, the obligation of
the Company, which is absolute and unconditional, to pay principal of,
premium and Liquidated Damages, if any, and interest on the Securities
in accordance with their terms;
(2) affect the relative rights of the Holders and creditors of the
Company other than their rights in relation to holders of Senior Debt;
or
(3) prevent the Subordinated Debenture Trustee or any Holder from
exercising its available remedies upon a Default or Event of Default,
subject to the rights of holders and owners of Senior Debt to receive
distributions and payments otherwise payable to Holders.
If the Company fails because of this Article 10 to pay principal of,
premium or Liquidated Damages, if any, or interest on a Security on the due
date, the failure is still a Default or Event of Default.
SECTION 10.10 SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY
No right of any holder of Senior Debt to enforce the subordination of
the indebtedness evidenced by the Securities shall be impaired by any act or
failure to act by the Company or by its failure to comply with this Indenture.
SECTION 10.11 DISTRIBUTION OR NOTICE TO REPRESENTATIVE
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Company referred to
in this Article 10, the Subordinated Debenture Trustee and the Holders shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction or upon any certificate of such Representative or of the
liquidating trustee or agent or other Person making any distribution to the
Subordinated Debenture Trustee or to the Holders for the purpose of ascertaining
the Persons entitled to participate in such distribution, the holders of the
Senior Debt and other Indebtedness of the Company, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article 10.
SECTION 10.12 RIGHTS OF SUBORDINATED DEBENTURE TRUSTEE AND PAYING AGENT
Notwithstanding the provisions of this Article 10 or any other
provisions of this Indenture, the Subordinated Debenture Trustee shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of any payment or distribution by the Subordinated Debenture Trustee, or
the taking of any action by the Subordinated Debenture Trustee, and the
Subordinated Debenture Trustee and the Paying Agent may continue to make
payments on the Securities unless it shall have received at its Corporate Trust
Office at least three Business Days prior to the date of such payment written
notice of facts that would cause the payment of any Obligations with respect to
the Securities to violate this Article 10. Only the Company, a Representative of
Senior Debt or a holder of an issue of Senior Debt that has no Representative
may give the notice. Nothing in this Article 10 shall impair the claims of, or
payments to, the Subordinated Debenture Trustee under or pursuant to Section
7.07 hereof. Except as set
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forth in the immediately preceding sentence, nothing in this Section 10.12 shall
limit the rights of holders of Senior Debt to recover payments as contemplated
by Section 10.06 hereof.
The Subordinated Debenture Trustee in its individual or any other
capacity may hold Senior Debt with the same rights it would have if it were not
Subordinated Debenture Trustee. Any Agent may do the same with like rights.
SECTION 10.13 AUTHORIZATION TO EFFECT SUBORDINATION
Each Holder of a Security by its acceptance thereof authorizes and
directs the Subordinated Debenture Trustee on its behalf to take such action as
may be necessary or appropriate to effectuate the subordination as provided in
this Article 10 and appoints the Subordinated Debenture Trustee his
attorney-in-fact for any and all such purposes.
ARTICLE 11
MISCELLANEOUS
SECTION 11.01 TRUST INDENTURE ACT CONTROLS
If any provision of this Indenture limits, qualifies or conflicts with
another provision which is required to be included herein by any of Sections 310
to 317 inclusive of the TIA, such required provisions shall control.
SECTION 11.02 NOTICES
Any notice or communication to the Company, the Subordinated Debenture
Trustee, or the agents under the Credit Facilities, is duly given if in writing
and delivered in person or mailed by first-class mail (registered or certified,
return receipt requested), telecopier or overnight air courier guaranteeing next
day delivery, to the other's address:
If to the Company:
PRIMEDIA Inc.
745 Fifth Avenue
New York, New York 10151
Attention: General Counsel
Telecopier No.: (212) 745-0199
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With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Gary I. Horowitz, Esq.
Telecopier No.: (212) 455-2502
If to the Subordinated Debenture Trustee:
The Bank of New York
101 Barclay Street -- 21W
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Telecopier No.: (212) 815-5915/5917
If to the agents under the Credit Facilities:
The Chase Manhattan Bank, N.A.
1 Chase Manhattan Plaza
New York, New York 10081
Attention: William K. Luby
Telecopier No.: (212) 552-1159
The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: James Dimino
Telecopier No.: (212) 815-4038
The Company, the Subordinated Debenture Trustee and the agents under
the Credit Facilities Outstanding Note Trustee by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications shall be deemed to have been duly given:
at the time delivered by hand, if personally delivered; five Business Days after
being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
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Any notice or communication to a Holder shall be mailed by first-class
mail, to the Holder's address shown on the register kept by the Registrar.
Failure to mail a notice or communication to a Holder or any defect in it shall
not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Subordinated Debenture Trustee and each Agent at the same
time.
SECTION 11.03 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS
Holders may communicate pursuant to TIA ss. 312(b) with other Holders
with respect to their rights under this Indenture or the Securities. The
Company, the Subordinated Debenture Trustee, the Registrar and anyone else shall
have the protection of TIA ss. 312(c).
SECTION 11.04 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT
Upon any request or application by the Company to the Subordinated
Debenture Trustee to take any action under this Indenture, the Company shall
furnish to the Subordinated Debenture Trustee:
(1) an Officers' Certificate (which shall include the statements set
forth in Section 11.05 hereof) stating that, in the opinion of the
signers, all conditions precedent and covenants, if any, provided for
in this Indenture relating to the proposed action have been complied
with; and
(2) an Opinion of Counsel (which shall include the statements set forth
in Section 11.05 hereof) stating that, in the opinion of such counsel,
all such conditions precedent and covenants have been complied with.
SECTION 11.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA ss. 314(a)(4)) shall include:
(1) a statement that the Person making such certificate or opinion has
read and understands such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
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(4) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been complied with; PROVIDED that with
respect to matters of fact Opinions of Counsel may rely on an Officers'
Certificate or certificates of public officials.
SECTION 11.06 RULES BY SUBORDINATED DEBENTURE TRUSTEE AND AGENTS
The Subordinated Debenture Trustee may make reasonable rules for action
by or at a meeting of Holders. The Registrar or Paying Agent may make reasonable
rules and set reasonable requirements for its functions.
SECTION 11.07 LEGAL HOLIDAYS
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions in The City of New York or at a place of payment are authorized or
obligated by law, regulation or executive order to remain closed. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period.
SECTION 11.08 NO RECOURSE AGAINST OTHERS
No director, officer, employee, incorporator or shareholder of the
Company, as such, shall have any liability for any obligations of the Company
under the Securities or this Indenture or for any claim based on, in respect of,
or by reason of, such obligations of their creation. Each Holder of the
Securities by accepting a Security waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the Security.
SECTION 11.09 GOVERNING LAW
This Indenture and the Securities shall be governed by and construed in
accordance with the laws of the State of New York, without regard to principles
of conflicts of law.
SECTION 11.10 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or a Subsidiary. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
SECTION 11.11 SUCCESSORS
All agreements of the Company in this Indenture and the Securities
shall bind its successor. All agreements of the Subordinated Debenture Trustee
in this Indenture shall bind its successor.
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SECTION 11.12 SEVERABILITY
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 11.13 COUNTERPART ORIGINALS
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 11.14 SUBORDINATED DEBENTURE TRUSTEE AS PAYING AGENT AND REGISTRAR
The Company initially appoints the Subordinated Debenture Trustee as
Paying Agent and Registrar.
SECTION 11.15 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
SECTION 11.16 THE BANK OF NEW YORK NOT ACTING IN INDIVIDUAL CAPACITY
Notwithstanding anything to the contrary contained herein, this
Indenture has been accepted by The Bank of New York not in its individual
capacity but solely as Trustee and in no event shall The Bank of New York have
any liability for the representations, warranties, covenants, agreements or
other obligations of the Company herein or in any of the certificates, notices
or agreements delivered by the Company pursuant hereto, as to all of which
recourse shall be had solely to the assets of the Company, and under no
circumstances shall The Bank of New York be personally liable for the payment of
any indebtedness or expenses of the Company. SECTION 11.17 ADDITIONAL RIGHTS OF
HOLDERS OF TRANSFER RESTRICTED SECURITIES
In addition to the rights provided to Holders of Securities under the
Indenture, Holders of Transfer Restricted Securities shall have all the rights
set forth in the Registration Rights Agreement.
[Signatures on Next Page]
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SIGNATURES
PRIMEDIA INC.
Dated as of , By: ___________________________
Name:
Title:
THE BANK OF NEW YORK,
as Subordinated Debenture
Trustee
Dated as of , By:____________________________
Name:
Title:
<PAGE>
EXHIBIT A
(Face of Note)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CUSIP/CINS ____________
8-5/8% [Series G] [Series H] Subordinated Exchange Debentures due 2010
No. ___ $__________
PRIMEDIA INC.
promises to pay to _________________________________________________
or registered assigns,
the principal sum of ________________________________________________
Dollars on __________ __, 2010.
INTEREST PAYMENT DATES: January 1, April 1, July 1 and October 1
RECORD DATES: December 15, March 15, June 15 and September 15
PRIMEDIA INC.
By: _____________________________
Name:
Title:
Dated: _______________,
This is one of the Global
Notes referred to in the
within-mentioned Indenture:
THE BANK OF NEW YORK,
as Subordinated Debenture Trustee
By: __________________________________
Authorized Signatory
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
A-1
<PAGE>
(Back of Note)
8-5/8% [Series G] [Series H] Subordinated Exchange Debentures due 2010
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE SUBORDINATED DEBENTURE TRUSTEE MAY MAKE SUCH NOTATIONS
HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS
GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION
2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE
SUBORDINATED DEBENTURE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE
INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY
WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY.
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND THE SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A OR
REGULATION S THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY
AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) INSIDE THE UNITED
STATES TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES
ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, (d) TO AN
INSTITUTIONAL "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(A)(1), (2),
(3) OR (7) OF THE SECURITIES ACT (AN "INSTITUTIONAL ACCREDITED
INVESTOR") THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED
LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS (THE FORM OF
WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH TRANSFER IS IN
RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF SECURITIES LESS THAN
$100,000, AN OPINION OF COUNSEL THAT SUCH TRANSFER IS IN COMPLIANCE WITH
THE SECURITIES ACT OR (e) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR
(3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE,
IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE
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<PAGE>
HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE."
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. INTEREST. PRIMEDIA, Inc., a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Note at 8_% per annum
from ________________, until maturity and shall pay the Liquidated Damages, if
any, payable pursuant to Section 5 of the Registration Rights Agreement referred
to below. The Company will pay interest and Liquidated Damages, if any, on
January 1, April 1, July 1 and October 1 of each year, or if any such day is not
a Business Day, on the next succeeding Business Day (each, an "Interest Payment
Date"). Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
issuance; provided, that if there is no existing Default in the payment of
interest, and if this Note is authenticated between a record date referred to on
the face hereof and the next succeeding Interest Payment Date, interest shall
accrue from such next succeeding Interest Payment Date; PROVIDED, FURTHER, that
the first Interest Payment Date shall be _____________. The Company shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at the rate per annum on the Notes then in effect; it shall pay interest
(including post-petition interest in any proceeding under any Bankruptcy Law) on
overdue installments of interest and Liquidated Damages, if any (without regard
to any applicable grace periods) from time to time on demand at the same rate to
the extent lawful. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes (except
defaulted interest) and Liquidated Damages, if any, to the Persons who are
registered Holders of Notes at the close of business on December 15, March 15,
June 15 and September 15 next preceding the Interest Payment Date, even if such
Notes are cancelled after such record date and on or before such Interest
Payment Date, except as provided in Section 2.12 of the Indenture with respect
to defaulted interest. The Notes will be payable as to principal, premium and
Liquidated Damages, if any, and interest at the office or agency of the Company
maintained for such purpose within or without the City and State of New York,
or, at the option of the Company, payment of interest and Liquidated Damages, if
any, may be made by check mailed to the Holders at their addresses set forth in
the register of Holders, and provided that payment by wire transfer of
immediately available funds will be required with respect to principal of and
interest, premium and Liquidated Damages, if any, on all Global Notes and all
other Notes the Holders of which shall have provided wire transfer instructions
to the Company or the Paying Agent. Such payment shall be in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, The Bank of New York, the
Subordinated Debenture Trustee under the Indenture, will act as Paying Agent and
Registrar. The Company may change any Paying Agent or Registrar without notice
to any Holder. The Company or any of its Subsidiaries may act in any such
capacity.
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<PAGE>
4. INDENTURE. The Company issued the Notes under an Indenture dated as of
____________, ("Indenture") between the Company and the Subordinated Debenture
Trustee. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The Notes are subject to all such
terms, and Holders are referred to the Indenture and such Act for a statement of
such terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the Indenture shall govern and be
controlling. The Notes are obligations of the Company limited to $250.0 million
in aggregate principal amount, plus amounts, if any, issued to pay Liquidated
Damages on outstanding Notes as set forth in Paragraph 2 hereof.
5. SUBORDINATION. The Company's payment of the principal of, premium and
Liquidated Damages, if any, and interest on the Notes is subordinated to the
prior payment in full of the Company's Senior Debt. Each Holder of Notes by his
acceptance hereof covenants and agrees that all payments of the principal of,
premium and Liquidated Damages, if any, and interest on the Notes by the Company
shall be subordinated in accordance with the provisions of Article 10 of the
Indenture, and each Holder accepts and agrees to be bound by such provisions.
6. OPTIONAL REDEMPTION. On and after April 1, 2003 and on and after a
Change of Control of the Company, the Notes will be subject to redemption at the
option of the Company, in whole or in part, upon not less than 30 nor more than
60 days' notice, at the redemption prices (expressed as percentages of the
principal amount) set forth below plus accrued and unpaid interest thereon to
the applicable redemption date, if redeemed during the twelve-month period
beginning April 1 of the years indicated below.
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2003 ............................................ 104.313%
2004 ............................................ 102.875%
2005 ............................................ 101.438%
2006 and thereafter.............................. 100.000%
</TABLE>
Notwithstanding the foregoing,
(1) at any time prior to April 1, 2001, the Company may redeem up to
$125.0 million of the Securities at a redemption price of 108.625% of the
principal amount thereof, plus accrued and unpaid interest to the redemption
date, out of the net proceeds of one or more Public Equity Offerings, PROVIDED
that any such redemption shall occur within 180 days of such Public Equity
Offering; and
(2) upon the occurrence at any time of a Change in Control, the
Securities will be redeemable, at the option of the Company, in whole or in
part, pursuant to the provisions of Section 3.08 hereof.
Any redemption pursuant to this Section 3.07 shall be made, to the
extent applicable, pursuant to the provisions of Sections 3.01 through 3.06
hereof.
7. MANDATORY OFFERS TO REPURCHASE; MANDATORY REDEMPTION. Subject to
repayment of all then outstanding Senior Debt (to the extent required by the
terms thereof) or receipt by the Company of
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all consents with respect thereto required to permit such an offer, following
the occurrence of any Change of Control, the Company will be required to offer
(a "Change of Control Offer") to purchase all outstanding Notes at a purchase
price equal to 101% of the aggregate principal amount of such Notes, plus
Liquidated Damages and accrued and unpaid interest, if any, to the date of
purchase (the "Change of Control Payment"), in each case in accordance with and
to the extent provided in the Indenture. The Change of Control Offer shall
remain open for a period of 20 Business Days after its commencement unless a
longer offering period is required by law. No earlier than 30 days nor later
than 40 days after the notice of the Change of Control Offer has been mailed
(the "Change of Control Payment Date"), the Company shall deposit, to the extent
lawful, with the Paying Agent an amount equal to the Change of Control Payment
in respect of all Notes or portions thereof tendered by Holders. The Paying
Agent shall promptly mail or deliver payment for all Notes tendered in the
Change of Control Offer.
A Holder of Notes may tender or refrain from tendering all or any portion
of his Notes at his discretion by completing the form entitled "OPTION OF HOLDER
TO ELECT PURCHASE" appearing on this Note. Any portion of Notes tendered must be
in integral multiples of $1,000.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed by first class
mail at least 30 days but not more than 60 days before the redemption date to
each Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in integral
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes or
portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Subordinated Debenture Trustee may require
a Holder, among other things, to furnish appropriate endorsements and transfer
documents and the Company may require a Holder to pay any taxes and fees
required by law or permitted by the Indenture. The Company need not exchange or
register the transfer of any Note or portion of a Note selected for redemption,
except for the unredeemed portion of any Note being redeemed in part. Also, it
need not exchange or register the transfer of any Notes for a period of 15 days
before the mailing of a notice of redemption or during the period between a
record date and the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated
as its owner for all purposes.
11. AMENDMENTS AND WAIVERS. Subject to certain exceptions, the Indenture or
the Notes may be amended or supplemented and any existing Default under, or
compliance with any provision of, the Indenture may be waived with the written
consent of the Holders of at least 51% in principal amount of the Notes then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for Notes). Without the consent of any Holder, the Company and
the Subordinated Debenture Trustee may amend or supplement the Indenture or the
Notes to cure any ambiguity, defect or inconsistency; to provide for
uncertificated Notes in addition to or in place of certificated Notes; to comply
with Section 5.01 of the Indenture; to make any change that would provide any
additional rights or benefits to the Holders or that does not adversely affect
the rights under the Indenture of any Holder; or
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<PAGE>
to comply with requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the TIA.
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver; (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption or purchase price in
connection with repurchases under Sections 3.07, 3.08 or 4.08 of the Indenture;
(iii) reduce the rate of or change the time for payment of interest on any Note;
(iv) waive a Default or Event of Default in the payment of the principal of,
premium or Liquidated Damages, if any, or interest on Notes or that resulted
from a failure to comply with Section 4.08 of the Indenture, (except a
rescission of acceleration of the Notes by Holders of at least 51% in aggregate
principal amount of the Notes); (v) make any Note payable in money other than
that stated in the Note; (vi) make any change in Article 10 of the Indenture
that adversely affects the rights of any Holder; (vii) make any change in
Section 6.04 or 6.07 of the Indenture or the last sentence of the fourth
paragraph of Section 9.02 of the Indenture; (viii) waive a redemption payment
with respect to any Note; or (ix) make any change in the foregoing.
The right of any Holder to participate in any consent required or sought
pursuant to any provision of the Indenture (and the obligation of the Company to
obtain any such consent otherwise required from such Holder) may be subject to
the requirement that such Holder shall have been the Holder of record of any
Notes with respect to which such consent is required or sought as of a date
identified by the Subordinated Debenture Trustee in a notice furnished to
Holders in accordance with the terms of this Indenture.
12. DEFAULTS AND REMEDIES. Events of Default include: default in payment of
interest or Liquidated Damages on any Note for 30 days and for five (5) days
after written notice of such default is given to the Company by the Holders of
at least 51% in principal amount of any Note following the expiration of such
30-day period; default in payment of the principal or premium of the Notes at
maturity or upon acceleration, redemption or otherwise, and such default
continues for a period of 10 days; failure by the Company for 60 days after
written notice to it from the Subordinated Debenture Trustee, or after written
notice to it and the Subordinated Debenture Trustee from Holders of at least 51%
in principal amount of the then outstanding Notes, to comply with any of its
other agreements in the Indenture or the Notes; certain defaults under other
Indebtedness; and certain events of bankruptcy or insolvency. If an Event of
Default occurs and is continuing, the Subordinated Debenture Trustee or the
Holders of at least 51% in principal amount of the then outstanding Notes by
written notice to the Company, to the agent under the Credit Facilities, the
trustees under the Senior Notes and the Exchange Debenture Trustee (and to the
Subordinated Debenture Trustee if such notice is given by the Holders) may, and
the Subordinated Debenture Trustee at the request of the Holders shall, declare
all of the Notes to be immediately due and payable for an amount equal to 100%
of the principal amount of the Notes plus premium and Liquidated Damages, if
any, and accrued interest to the date of payment upon the first to occur of an
acceleration under the Credit Facilities, the Senior Notes or the Exchange
Debentures or 15 Business Days after receipt by the Company, such agent and such
trustees of such written notice to the extent such Event of Default is
continuing, except that in the case of an Event of Default arising from certain
events of bankruptcy or insolvency, all outstanding Notes shall become due and
payable immediately without further action or notice. Holders may not enforce
the Indenture or the Notes except as provided in the Indenture. The
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<PAGE>
Subordinated Debenture Trustee may require indemnity satisfactory to it before
it enforces the Indenture or the Notes. Subject to certain limitations, Holders
of a majority in principal amount of the then outstanding Notes may direct the
Subordinated Debenture Trustee in its exercise of any trust or power. The
Subordinated Debenture Trustee may withhold from Holders notice of any
continuing Default or Event of Default (except a Default or Event of Default in
payment of principal, premium or Liquidated Damages, if any, or interest or that
resulted from a failure to comply with Section 4.08 of the Indenture) if and so
long as a committee of its Trust Officers determines in good faith that
withholding notice is in their interests. The Company must furnish an annual
compliance certificate to the Subordinated Debenture Trustee.
13. SUBORDINATED DEBENTURE TRUSTEE DEALINGS WITH COMPANY. The
Subordinated Debenture Trustee, in its individual or any other capacity, may
make loans to, accept deposits from, and perform services for the Company or its
Affiliates, and may otherwise deal with the Company or its Affiliates, as if it
were not Subordinated Debenture Trustee.
14. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator or shareholder of the Company, as such, shall have any liability
for any obligations of the Company under the Notes or the Indenture or for any
claim based on, in respect of, or by reason of, such obligations of their
creation. Each Holder of the Notes by accepting a Note waives and releases all
such liability. The waiver and release are part of the consideration for
issuance of the Notes.
15. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Subordinated Debenture Trustee or an authenticating
agent.
16. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF TRANSFER RESTRICTED NOTES. In
addition to the rights provided to Holders of Notes under the Indenture, Holders
of Transfer Restricted Notes shall have all the rights set forth in the
Registration Rights Agreement.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
PRIMEDIA, INC.
745 Fifth Avenue
New York, New York 10151
Attention: Treasurer
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<PAGE>
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
_______________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
_______________________________________________________________________________
Date: ___________________
Your Signature:_________________________
(Sign exactly as your name appears on the
face of this Note)
Signature Guarantee.*
- -------------------------------------
*Signature must be guaranteed by a financial institution that is a member of the
Securities Transfer Agent Medallion program in accordance with the Securities
Exchange Act of 1934, as amended.
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<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.08 of the Indenture, check the box below:
/ / Section 4.08
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.08 of the Indenture, state the amount you elect to
have purchased: $-----------
Date: ____________________ Your Signature: _________________________
(Sign exactly as your name
appears on the Note)
Tax Identification No.: _________________
Signature Guarantee.*
- ---------------------------
*Signature must be guaranteed by a financial institution that is a member of the
Securities Transfer Agent Medallion program in accordance with the Securities
Exchange Act of 1934, as amended.
A-9
<PAGE>
SCHEDULE OF EXCHANGES FOR DEFINITIVE DEBENTURES
The following exchanges of a part of this Global Note for Definitive
Notes have been made:
<TABLE>
PRINCIPAL AMOUNT OF SIGNATURE OF
AMOUNT OF DECREASE IN AMOUNT OF INCREASE THIS GLOBAL NOTE AUTHORIZED SIGNATORY
PRINCIPAL AMOUNT OF IN PRINCIPAL AMOUNT OF FOLLOWING SUCH DECREASE OF TRUSTEE CUSTODIAN
DATE OF EXCHANGE THIS GLOBAL NOTE THIS GLOBAL NOTE (OR INCREASE) NOTE
<S> <C> <C> <C> <C>
</TABLE>
A-10
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
PRIMEDIA Inc.
745 Fifth Avenue
New York, New York 10151
The Bank of New York
101 Barclay Street
New York, New York 10286
Re: 8-5/8% SUBORDINATED EXCHANGE DEBENTURES DUE 2010
Reference is hereby made to the Indenture, dated as of
___________________ (the "INDENTURE"), between PRIMEDIA Inc., as issuer (the
"COMPANY"), and The Bank of New York, as trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
______________, (the "TRANSFEROR") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the "TRANSFER"),
to __________ (the "Transferee"), as further specified in Annex A hereto. In
connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. |_| CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer is
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "SECURITIES ACT"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
2. |_| CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN THE
REGULATION S GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO REGULATION S. The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and, accordingly, the Transferor hereby further
certifies that (i) the Transfer is not being made to a person in the United
States and (x) at the time the buy order was originated, the Transferee was
outside the United States or such Transferor and any
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<PAGE>
Person acting on its behalf reasonably believed and believes that the Transferee
was outside the United States or (y) the transaction was executed in, on or
through the facilities of a designated offshore securities market and neither
such Transferor nor any Person acting on its behalf knows that the transaction
was prearranged with a buyer in the United States, (ii) no directed selling
efforts have been made in contravention of the requirements of Rule 903(b) or
Rule 904(b) of Regulation S under the Securities Act and, (iii) the transaction
is not part of a plan or scheme to evade the registration requirements of the
Securities Act and (iv) if the proposed transfer is being made prior to the
expiration of the Restricted Period, the transfer is not being made to a U.S.
Person or for the account or benefit of a U.S. Person (other than an Initial
Purchaser). Upon consummation of the proposed transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on Transfer enumerated in the Private
Placement Legend printed on the Regulation S Global Note, the Temporary
Regulation S Global Note and/or the Definitive Note and in the Indenture and the
Securities Act.
3. |_| CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN A DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE SECURITIES ACT
OTHER THAN RULE 144A OR REGULATION S. The Transfer is being effected in
compliance with the transfer restrictions applicable to beneficial interests in
Restricted Global Notes and Restricted Definitive Notes and pursuant to and in
accordance with the Securities Act and any applicable blue sky securities laws
of any state of the United States, and accordingly the Transferor hereby further
certifies that (check one):
(a) |_| such Transfer is being effected pursuant to and in accordance with
Rule 144 under the Securities Act;
or
(b) |_| such Transfer is being effected to the Company or a subsidiary
thereof;
or
(c) |_| such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
(d) |_| such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration requirements of the
Securities Act other than Rule 144A, Rule 144 or Rule 904, and the Transferor
hereby further certifies that the Transfer complies with the transfer
restrictions applicable to Restricted Definitive Notes and the requirements of
the exemption claimed, which certification is supported by (1) a certificate
executed by the Transferee in the form of Exhibit D to the Indenture and (2) if
such Transfer is in respect of a principal amount of Notes at the time of
transfer of less than $100,000, an Opinion of Counsel provided by the Transferor
or the Transferee (a copy of which the Transferor has attached to this
certification), to the effect that such Transfer is in compliance with the
Securities Act. Upon consummation of the proposed transfer in accordance with
the terms of the Indenture, the transferred Definitive Note will be subject to
the restrictions on transfer enumerated in the Private Placement Legend printed
on Definitive Notes and in the Indenture and the Securities Act.
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<PAGE>
4. |_| CHECK IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL INTEREST IN AN
UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE.
(a) |_| CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the Indenture
and any applicable blue sky securities laws of any state of the United States
and (ii) the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note will no longer be subject to the restrictions on transfer enumerated in the
Private Placement Legend printed on the Restricted Global Notes, on Restricted
Definitive Notes and in the Indenture.
(b) |_| CHECK IF TRANSFER IS PURSUANT TO REGULATION S. (i) The Transfer is
being effected pursuant to and in accordance with Rule 903 or Rule 904 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.
(c) |_| CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION. (i) The Transfer
is being effected pursuant to and in compliance with an exemption from the
registration requirements of the Securities Act other than Rule 144, Rule 903 or
Rule 904 and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any State of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will not be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the Restricted Global Notes or
Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
---------------------------
[Insert Name of Transferor]
By:
------------------------
Name:
Title:
Dated: ___________________, _____
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<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) |_| a beneficial interest in the:
(i) |_| 144A Global Note (CUSIP ), or
(ii)|_| Regulation S Global Note (CUSIP ), or
(iii) |_| IAI Global Note (CUSIP_____), or
(b) |_| a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) |_| a beneficial interest in the:
(i) |_| 144A Global Note (CUSIP ), or
(ii)|_| Regulation S Global Note (CUSIP ), or
(iii) |_| Unrestricted Global Note (CUSIP ); or
(b) |_| a Restricted Definitive Note; or
(c) |_| an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-4
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
PRIMEDIA Inc.
745 Fifth Avenue
New York, New York 10151
The Bank of New York
101 Barclay Street
New York, New York 10286
Re: 8-5/8% SUBORDINATED EXCHANGE DEBENTURES DUE 2010
(CUSIP )
Reference is hereby made to the Indenture, dated as of
______________________ (the "INDENTURE"), between PRIMEDIA Inc., as issuer (the
"COMPANY"), and The Bank of New York, as trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
________________, (the "OWNER") owns and proposes to exchange the
Note[s] or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "EXCHANGE"). In connection with
the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN AN UNRESTRICTED GLOBAL NOTE
(a) |_| CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection
with the Exchange of the Owner's beneficial interest in a Restricted Global Note
for a beneficial interest in an Unrestricted Global Note in an equal principal
amount, the Owner hereby certifies (i) the beneficial interest is being acquired
for the Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the Global
Notes and pursuant to and in accordance with the United States Securities Act of
1933, as amended (the "SECURITIES ACT"), (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the beneficial
interest in an Unrestricted Global Note is being acquired in compliance with any
applicable blue sky securities laws of any state of the United States.
(b) |_| CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for an Unrestricted
Definitive Note, the Owner hereby certifies (i) the Definitive Note is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the Securities
Act, (iii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act and (iv) the Definitive Note is being acquired in compliance
with any applicable blue sky securities laws of any state of the United States.
C-1
<PAGE>
(c) |_| CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) |_| CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN RESTRICTED GLOBAL NOTES
(a) |_| CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN A RESTRICTED
GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for a Restricted
Definitive Note with an equal principal amount, the Owner hereby certifies that
the Restricted Definitive Note is being acquired for the Owner's own account
without transfer. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the Restricted Definitive Note issued will continue
to be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Definitive Note and in the Indenture
and the Securities Act.
(b) |_| CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE NOTE TO
BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the Exchange
of the Owner's Restricted Definitive Note for a beneficial interest in the
[CHECK ONE] |_| 144A Global Note, |_| Regulation S Global Note with an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer and (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, and in compliance with any applicable blue sky securities
laws of any state of the United States. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the beneficial interest
issued will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the relevant Restricted Global Note and in the
Indenture and the Securities Act.
C-2
<PAGE>
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company.
-------------------------------
[Insert Name of Owner]
By: ___________________________
Name:
Title:
Dated:________________,____
C-3
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
PRIMEDIA Inc.
745 Fifth Avenue
New York, New York 10151
The Bank of New York
101 Barclay Street
New York, New York 10286
Re: 8-5/8% SUBORDINATED EXCHANGE DEBENTURES DUE 2010
Reference is hereby made to the Indenture, dated as of
___________________ (the "INDENTURE"), between PRIMEDIA Inc., as issuer (the
"COMPANY"), and The Bank of New York, as trustee. Capitalized terms used but not
defined herein shall have the meanings given to them in the Indenture.
In connection with our proposed purchase of $____________
aggregate principal amount of:
(a) |_| a beneficial interest in a Global Note, or
(b) |_| a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or any
interest therein is subject to certain restrictions and conditions set forth in
the Indenture and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Notes or any interest therein except in
compliance with, such restrictions and conditions and the United States
Securities Act of 1933, as amended (the "SECURITIES ACT").
2. We understand that the offer and sale of the Notes have not
been registered under the Securities Act, and that the Notes and any interest
therein may not be offered or sold except as permitted in the following
sentence. We agree, on our own behalf and on behalf of any accounts for which we
are acting as hereinafter stated, that if we should sell the Notes or any
interest therein, we will do so only (A) to the Company or any subsidiary
thereof, (B) in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined therein), (C) to an institutional
"accredited investor" (as defined below) that, prior to such transfer, furnishes
(or has furnished on its behalf by a U.S. broker-dealer) to you and to the
Company a signed letter substantially in the form of this letter and, if such
transfer is in respect of a principal amount of Notes, at the time of transfer
of less than $100,000, an Opinion of Counsel in form reasonably acceptable to
the Company to the effect that such transfer is in compliance with the
Securities Act, (D) outside the United States in accordance with Rule 904 of
Regulation S under the Securities Act, (E) pursuant to the provisions of Rule
144 under the Securities Act or (F) pursuant to an effective registration
statement under the Securities Act, and we further agree to
D-1
<PAGE>
provide to any person purchasing the Definitive Note or beneficial interest in a
Global Note from us in a transaction meeting the requirements of clauses (A)
through (E) of this paragraph a notice advising such purchaser that resales
thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Notes or
beneficial interest therein, we will be required to furnish to you and the
Company such certifications, legal opinions and other information as you and the
Company may reasonably require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Notes purchased by us
will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Notes, and
we and any accounts for which we are acting are each able to bear the economic
risk of our or its investment.
5. We are acquiring the Notes or beneficial interest therein
purchased by us for our own account or for one or more accounts (each of which
is an institutional "accredited investor") as to each of which we exercise sole
investment discretion and we are acquiring the Notes for investment purposes and
not with a view to, or for offer or sale in connection with, any distribution in
violation of the Securities Act or other applicable securities law.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby.
------------------------------------
[Insert Name of Accredited Investor]
By: ____________________________
Name:
Title:
Dated:_________________,_____
D-2
<PAGE>
EXHIBIT 4.3
PRIMEDIA INC.
CERTIFICATE OF DESIGNATIONS
_______________
Pursuant to Section 151
of the General Corporation Law of the State of Delaware
_______________
PRIMEDIA Inc. (the "Company"), a corporation organized and existing
under the General Corporation Law of the State of Delaware, does hereby certify
that pursuant to the provisions of Section 151 of the General Corporation Law of
the State of Delaware, the Board of Directors of the Company (the "Board of
Directors"), adopted the following resolution on ______________ __, 1998, which
resolution remains in full force and effect as of the date hereof:
WHEREAS, the Board of Directors, is authorized, within the limitations
and restrictions stated in the Certificate of Incorporation, to fix by
resolution or resolutions the designation of each series of preferred stock and
the powers, designations, preferences and relative participating, optional or
other rights, if any, or the qualifications, limitations or restrictions
thereof, including, without limiting the generality of the foregoing, such
provisions as may be desired concerning voting, redemption, dividends,
dissolution or the distribution of assets, conversion or exchange, and such
other subjects or matters as may be fixed by resolution or resolutions of the
Board of Directors under the General Corporation Law of Delaware;
WHEREAS, it is the desire of the Board of Directors, pursuant to its
authority as aforesaid, to fix the terms of the Preferred Stock (as
defined) and the number of shares constituting such Preferred Stock;
NOW, THEREFORE, BE IT RESOLVED, that the Preferred Stock shall have
the following terms and provisions:
1. DESIGNATION. The series of preferred stock authorized hereunder
shall be designated as the "Series H Exchangeable Preferred Stock" (the
"Preferred Stock"). The number of shares constituting such series shall be
2,500,000. The par value of the Preferred Stock shall be $.01 per share. The
number of shares of Preferred Stock may be increased (but not above the total
number of authorized and undesignated shares of preferred stock) or decreased
(but not below the number of shares of Preferred Stock then outstanding) by a
resolution of the Board of Directors filed with the Delaware Secretary of State.
2. RANK. The Preferred Stock shall, with respect to dividend rights
on liquidation, winding-up and dissolution, rank
<PAGE>
senior to all classes of common stock of the Company (including, without
limitation, the Common Stock), and each other class of capital stock or
series of preferred stock hereafter created which does not expressly provide
that it ranks senior to or on parity with the Preferred Stock as to dividend
rights and rights on liquidation, winding-up and dissolution. The Preferred
Stock shall, with respect to dividend rights and rights on liquidation,
winding-up and dissolution, rank on a parity with the Series D Preferred
Stock, the Series F Preferred Stock, the Series G Preferred Stock and each
other series of preferred stock hereafter created which expressly provides
that it ranks on a parity with the Preferred Stock as to dividend rights and
rights on liquidation, winding-up and dissolution (collectively, "Future
Parity Securities"). The Preferred Stock shall, with respect to dividend
rights and rights on liquidation, winding-up and dissolution, rank junior to
each class of capital stock or series of preferred stock hereafter created
which expressly provides that it ranks senior to the Preferred Stock as to
dividend rights and rights on liquidation, winding-up and dissolution. (All
equity securities of the Company to which the Preferred Stock ranks senior,
including, without limitation, the Common Stock, are collectively referred to
herein as the "Junior Securities", all equity securities of the Company with
which the Preferred Stock ranks on a parity, including Future Parity
Securities, are collectively referred to herein as the "Parity Securities",
and all equity securities of the Company to which the Preferred Stock ranks
junior are collectively referred to herein as the "Senior Securities".)
3. DIVIDENDS. (a) The holders of the outstanding shares of Preferred
Stock shall be entitled to receive, when, as and if declared by the Board of
Directors, out of funds legally available for the payment of dividends, cash
dividends at an annual amount equal to $8.625 per share. Dividends on each
share of Preferred Stock shall accrue and be payable in cash quarterly in
arrears on each Dividend Payment Date, commencing on the first such date to
occur after the Original Issue Date, in preference to dividends on the Junior
Securities. Each such dividend shall be payable to holders of record as they
appear on the stock books of the Company on such record dates, not less than ten
(10) nor more than sixty (60) days preceding the Dividend Payment Date, as shall
be fixed by the Board of Directors. Accrued and unpaid dividends shall not bear
interest. Dividends shall cease to accrue in respect of the Preferred Stock on
the Exchange Date or Redemption Date.
(b) All dividends paid with respect to shares of the Preferred Stock
pursuant to Section 3(a) shall be paid pro rata to the holders entitled thereto.
(c) Dividends shall accrue and be cumulative from the Original Issue
Date.
(d) Each fractional share of Preferred Stock outstanding shall be
entitled to a ratably proportionate amount of all dividends accruing with
respect to each outstanding share of Preferred Stock pursuant to Section 3(a),
and all such dividends with respect to such outstanding fractional shares
<PAGE>
3
shall be cumulative and shall accrue (whether or not declared), and shall be
payable in the same manner and at such times as provided for in Section 3(a)
with respect to dividends on each outstanding share of Preferred Stock. Each
fractional share of Preferred Stock outstanding shall also be entitled to a
ratably proportionate amount of any other distributions made with respect to
each outstanding share of Preferred Stock, and all such distributions shall be
payable in the same manner and at the same time as distributions on each
outstanding share of Preferred Stock.
(e) Nothing herein contained shall in any way or under any
circumstances be construed or deemed to require the Board of Directors to
declare, or the Company to pay or set apart for payment, any dividends on shares
of the Preferred Stock at any time.
(f) No full dividends shall be declared by the Board of Directors or
paid or funds set apart for payment by the Company on any Parity Securities for
any period unless full cumulative dividends have been or contemporaneously are
declared and paid, or declared and a sum set apart sufficient for such payment,
on the Preferred Stock for all Dividend Periods terminating on or prior to the
date of payment of such full dividends on such Parity Securities. If any
dividends are not paid in full, as aforesaid, upon the shares of the Preferred
Stock and any other Parity Securities, all dividends declared upon shares of the
Preferred Stock and any other Parity Securities shall be declared pro rata so
that the amount of dividends declared per share on the Preferred Stock and such
Parity Securities shall in all cases bear to each other the same ratio that
accrued dividends per share on the Preferred Stock and such Parity Securities
bear to each other. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on the Preferred Stock or
any other Parity Securities which may be in arrears.
(g)i) Holders of shares of the Preferred Stock shall be entitled to
receive the dividends provided for in Section 3(a) hereof in preference to and
in priority over any dividends upon any of the Junior Securities.
ii) So long as any shares of the Preferred Stock are outstanding, the
Company shall not declare, pay or set apart for payment any dividend on any of
the Junior Securities or make any payment on account of, or set apart for
payment money for a sinking or other similar fund for, the purchase, redemption
or other retirement of, any of the Junior Securities or any warrants, rights,
calls or options exercisable for or convertible into any of the Junior
Securities, or make any distribution in respect thereof, either directly or
indirectly, and whether in cash, obligations or shares of the Company or other
property (other than distributions or dividends in Junior Securities to the
holders of Junior Securities), and shall not permit any
<PAGE>
4
corporation or other entity directly or indirectly controlled by the Company to
purchase or redeem any of the Junior Securities or any warrants, rights, calls
or options exercisable for or convertible into any of the Junior Securities
UNLESS, prior to or concurrently with such declaration, payment, setting apart
for payment, purchase, redemption or distribution, as the case may be, all
accrued and unpaid dividends on shares of the Preferred Stock not paid on the
dates provided for in Section 3(a) hereof (including accrued dividends not paid
by reason of the terms and conditions of Section 3(e) or Section 3(f) hereof)
shall have been or be paid.
(h) Subject to the foregoing provisions of this Section 3, the Board
of Directors may declare and the Company may pay or set apart for payment
dividends and other distributions on any of the Junior Securities or Parity
Securities, and may purchase or otherwise redeem any of the Junior Securities or
Parity Securities or any warrants, rights or options exercisable for or
convertible into any of the Junior Securities or Parity Securities, and the
holders of the shares of the Preferred Stock shall not be entitled to share
therein.
(i) Dividends payable on the Preferred Stock for any period less than
a year shall be computed on the basis of a 360-day year of twelve 30-day months
and the actual number of days elapsed in the period for which payable.
4. LIQUIDATION PREFERENCE. (a) In the event of any voluntary or
involuntary liquidation, dissolution or winding-up of the affairs of the
Company, the holders of shares of Preferred Stock then outstanding shall be
entitled to be paid out of the assets of the Company available for distribution
to its stockholders, whether such assets are capital, surplus or earnings, an
amount in cash equal to $100.00 for each share outstanding, plus an amount in
cash equal to accrued but unpaid dividends thereon to the date fixed for
liquidation, dissolution or winding-up (including an amount equal to a prorated
dividend from the last Dividend Payment Date to the date fixed for liquidation,
dissolution or winding-up) before any payment shall be made or any assets
distributed to the holders of any of the Junior Securities. Except as provided
in the preceding sentence, holders of Preferred Stock shall not be entitled to
any distribution in the event of liquidation, dissolution or winding-up of the
affairs of the Company. If the assets of the Company are not sufficient to pay
in full the liquidation payments payable to the holders of outstanding shares of
the Preferred Stock and all Parity Securities, then the holders of all such
shares shall share ratably in such distribution of assets in accordance with the
amounts which would be payable on such distribution if the amounts to which the
holders of outstanding shares of Preferred Stock and the holders of outstanding
shares of all Parity Securities are entitled were paid in full.
<PAGE>
5
(b) For the purposes of this Section 4, neither the sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of the
Company nor the consolidation or merger of the Company with or into one or more
corporations shall be deemed to be a liquidation, dissolution or winding-up of
the affairs of the Company.
5. REDEMPTION.
(a) OPTIONAL REDEMPTION.i) At any time on or after April 1, 2003,
the Preferred Stock may be redeemed, in whole or in part, by the Company, at the
option of the Board of Directors, from any source of funds legally available
therefor, in the manner provided in Section 5(c) hereof, at the redemption
prices per share set forth below plus an amount in cash equal to all accumulated
and unpaid dividends per share (including an amount equal to a prorated dividend
from the last Dividend Payment Date to the Redemption Date), without interest
(the "Optional Redemption Price"), if redeemed during the twelve-month period of
the years indicated below:
YEAR OPTIONAL REDEMPTION PRICE
---- -------------------------
2003......................... $ 104.313
2004......................... $ 102.875
2005......................... $ 101.438
2006 and thereafter.......... $ 100.000
ii) At the option of the Board of Directors, the Company may, at any
time prior to April 1, 2001, redeem up to $125.0 million of the aggregate
liquidation preference of the shares of Preferred Stock then issued and
outstanding with the net proceeds of a Public Equity Offering at a redemption
price per share equal to $108.625 plus an amount in cash equal to all
accumulated but unpaid dividends per share (including any amount equal to a
prorated dividend from the last Dividend Payment Date to the Redemption Date),
without interest (the "Public Offering Redemption Price") in the manner set
forth in Section 5(c) hereof. Any such redemption pursuant to this Section
5(a)(iii) shall be effected by the Company within 180 days after the
consummation of such Public Equity Offering.
iii) In the event of a redemption pursuant to Section 5(a)(i) or
5(a)(ii) hereof of only a portion of the then outstanding shares of Preferred
Stock redeemable thereunder, the Company shall effect such redemption pro rata
according to the number of shares held by each Holder of such Preferred Stock,
except that the Company may redeem such shares held by Holders of fewer than 100
shares (or shares held by Holders who would hold less than 100 shares as a
result of such redemption), as may be determined by the Company.
<PAGE>
6
(b) MANDATORY REDEMPTION. The Company shall redeem, from any source
of funds legally available therefor, in the manner provided in Section 5(c)
hereof, all issued and outstanding shares of Preferred Stock on April 1, 2010,
at a redemption price equal to $100.00 per share, plus an amount in cash equal
to all accumulated and unpaid dividends per share (including any amount equal to
a prorated dividend from the last Dividend Payment Date to the Redemption Date)
(the "Mandatory Redemption Price").
(c) PROCEDURE FOR REDEMPTION. i) At least thirty (30) days and not
more than sixty (60) days prior to the date fixed for any redemption of the
Preferred Stock, written notice (the "Redemption Notice") shall be given by
first class mail, postage prepaid, to each Holder of record on the record date
fixed for such redemption of the Preferred Stock at such Holder's address as the
same appears on the stock register of the Company, PROVIDED, HOWEVER, that no
failure to give such notice nor any deficiency therein shall affect the validity
of the procedure for the redemption of any shares of Preferred Stock to be
redeemed except as to the Holder or Holders to whom the Company has failed to
give said notice or except as to the Holder or Holders whose notice was
defective. The Redemption Notice shall state:
a) whether the redemption is pursuant to Section 5(a)(i) or 5(a)(ii)
or 5(b) hereof;
b) the Optional Redemption Price, Public Offering Redemption Price or
Mandatory Redemption Price, as the case may be;
c) whether all or less than all the outstanding shares of the
Preferred Stock redeemable thereunder are to be redeemed and the total
number of shares of such Preferred Stock being redeemed;
d) the number of shares of Preferred Stock held by the Holder that the
Company intends to redeem;
e) the date fixed for redemption;
f) that the Holder is to surrender to the Company, at the place or
places where certificates for shares of Preferred Stock are to be
surrendered for redemption, in the manner and at the price designated, the
certificate or certificates representing the shares of Preferred Stock to
be redeemed; and
g) that dividends on the shares of the Preferred Stock to be redeemed
shall cease to accrue on such Redemption Date unless the Company defaults
in the payment of the Optional Redemption Price, Public Offering Redemption
Price or Mandatory Redemption Price, as the case may be.
<PAGE>
7
ii) On or before the date fixed for redemption, each holder of
Preferred Stock shall surrender the certificate or certificates representing
such shares of Preferred Stock to the Company, in the manner and at the place
designated in the Redemption Notice, and on the Redemption Date the full
Optional Redemption Price, Public Offering Redemption Price or Mandatory
Redemption Price, as the case may be, for such shares shall be payable in cash
to the Person whose name appears on such certificate or certificates as the
owner thereof, and each surrendered certificate shall be canceled and retired.
In the event that less than all of the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares.
iii) Unless the Company defaults in the payment in full of the
Optional Redemption Price, Public Offering Redemption Price or Mandatory
Redemption Price, as the case may be, dividends on the Preferred Stock called
for redemption shall cease to accumulate on the Redemption Date, and the holders
of such redeemed shares shall cease to have any further rights with respect
thereto on the Redemption Date, other than the right to receive the Optional
Redemption Price, Public Offering Redemption Price or Mandatory Redemption
Price, as the case may be, without interest.
6. VOTING RIGHTS. (a) The holders of Preferred Stock, except as
otherwise required under Delaware law and as set forth in paragraphs (b) and (c)
below, shall not be entitled or permitted to vote on any matter required or
permitted to be voted upon by the stockholders of the Company.
(b) The Company may not merge or consolidate with or into or transfer
all or substantially all of its assets (as an entirety in one transaction or a
series of related transactions), to any Person without the affirmative vote or
consent of the Holders of a majority of the issued and outstanding shares of
Preferred Stock, Series D Preferred Stock, Series F Preferred Stock, Series G
Preferred Stock and any outstanding Future Parity Securities entitled to vote
thereon, voting together as one class, unless (i) the Company shall be the
surviving or continuing Person, or the Person (if other than the Company) formed
by such consolidation or into which the Company is merged or to which the
properties and assets of the Company are transferred shall be a corporation
organized and existing under the laws of the United States or any State thereof
or the District of Columbia and the Preferred Stock shall be converted into or
exchanged for and shall become shares of such successor or resulting company,
having in respect of such successor or resulting company substantially the same
powers, preferences and relative participating, optional or other special
rights, and the qualifications, limitations or restrictions thereon, that the
Preferred Stock had immediately prior to such transaction and or (ii) the
requisite holders of any Senior Security or any indebtedness of the Company have
consented or granted a waiver
<PAGE>
8
with respect to such merger, consolidation or transfer of all or substantially
all of the Company's assets. If any fee is paid to any holder of Senior
Securities or indebtedness in connection with obtaining the foregoing consent or
waiver, the Company shall pay to the Holders of the Preferred Stock an amount in
cash equal to, in the aggregate, the Consent Payment Amount. If payment of the
Consent Payment Amount (or any portion thereof) in cash would violate any
agreement to which the Company is a party or any terms of any debt or equity
security of the Company then outstanding, then such payment or portion thereof
may be made in additional shares of Preferred Stock. If making such payment in
additional shares of Preferred Stock would constitute such a violation, then
such payment (or portion thereof) may be postponed until the terms of such
agreement or debt or equity security would permit payment of the unpaid portion
of the Consent Payment Amount in cash or Preferred Stock. The Consent Payment
Amount shall be payable pro rata to all Holders of record of Preferred Stock as
of the date of the announcement of the proposed merger, consolidation or
transfer of all or substantially all assets.
(c) In the event that the Company shall fail to declare or pay
dividends on the Preferred Stock as set forth in Section 3(a) hereof for six
consecutive Dividend Periods, then the number of directors constituting the
Board of Directors shall be increased by two to permit the Holders of the
Preferred Stock and Series G Preferred Stock (if any), voting together as a
class, to elect two members of the Board of Directors of the Company. Holders
of a majority of the issued and outstanding shares of Preferred Stock and Series
G Preferred Stock (if any), voting together as a class, shall thereupon have the
exclusive right to elect two of the members of the Board of Directors
immediately upon such failure to declare and pay dividends and at every
subsequent meeting at which the terms of office of the directors so elected by
the Holders of the Preferred Stock and Series G Preferred Stock expire.
(d) The right of the Holders of Preferred Stock and Series G Preferred
Stock (if any), voting together as a class, to elect members of the Board of
Directors as aforesaid shall continue until such time as all accumulated
dividends that are in arrears on the Preferred Stock and Series G Preferred
Stock are paid in full, at which time the special right of the Holders of
Preferred Stock and Series G Preferred Stock to vote as a class for the election
of directors and the term of office of the directors elected by the Holders of
the Preferred Stock and Series G Preferred Stock shall terminate. At any time
after voting power to elect directors shall have become vested and be continuing
in the Holders of Preferred Stock and Series G Preferred Stock pursuant to this
Section 6(d), or if vacancies shall exist in the offices of directors elected by
the Holders of Preferred Stock and Series G Preferred Stock (if any), a proper
officer of the Company may, and upon the written request of the Holders of
record of at least twenty percent (20%) of the
<PAGE>
9
aggregate number of shares of Preferred Stock and Series G Preferred Stock then
outstanding addressed to the Secretary of the Company shall, call a special
meeting of the Holders of Preferred Stock and Series G Preferred Stock, for the
purpose of electing directors. Any such meeting shall be held at the earliest
practicable date at the place for the holding of the annual meetings of
stockholders. If such meeting shall not be called by the proper officer of the
Company within twenty (20) days after personal service of said written request
upon the Secretary of the Company, or within twenty (20) days after mailing the
same within the United States by certified mail, addressed to the Secretary of
the Company at its principal executive offices, then the Holders of record of at
least twenty percent (20%) of the aggregate number of outstanding shares of
Preferred Stock and Series G Preferred Stock may designate in writing one of
their number to call such meeting at the expense of the Company, and such
meeting may be called by the Person so designated upon the notice required for
the annual meetings of stockholders of the Company and shall be held at the
place for holding the annual meetings of stockholders. Any Holder of Preferred
Stock or Series G Preferred Stock so designated shall have access to the lists
of stockholders to be called pursuant to the provisions hereof.
(e) At any meeting held for the purpose of electing directors at which
the Holders of Preferred Stock or Series G Preferred Stock shall have the right,
voting together as a class, to elect directors as aforesaid, the presence in
person or by proxy of the Holders of at least a majority of the aggregate number
of outstanding shares of Preferred Stock and Series G Preferred Stock, if any,
shall be required to constitute a quorum of such Preferred Stock and Series G
Preferred Stock.
(f) Any vacancy occurring in the office of a director elected by the
Holders of Preferred Stock and Series G Preferred Stock, voting together as a
class, may be filled by the remaining directors elected by the Holders of
Preferred Stock and Series G Preferred Stock unless and until such vacancy shall
be filled by the Holders of Preferred Stock and Series G Preferred Stock.
(g) In any case in which the Holders of Preferred Stock shall be
entitled to vote pursuant to this Section 6 or pursuant to Delaware law, each
Holder of Preferred Stock shall be entitled to one vote for each share of
Preferred Stock held.
7. EXCHANGE.
(a) REQUIREMENTS. The Preferred Stock may be exchanged, in whole but
not in part, on any Dividend Payment Date, for the Company's 8 5/8% Class G
Subordinated Exchange Debentures due 2010 (the "Exchange Debentures") to be
substantially in the form of Exhibit A to the form of Indenture relating thereto
presented to the Special Committee (the "Indenture"). The exchange rate shall
be $100.00 principal
<PAGE>
10
amount of the Exchange Debentures for each $100.00 of liquidation preference of
Preferred Stock. An amount in cash equal to accrued but unpaid dividends
(including any amount equal to a prorated dividend from the last Dividend
Payment Date to the Exchange Date) shall be paid upon exchange.
(b) PROCEDURE FOR EXCHANGE. (i) At least thirty (30) days and not
more than sixty (60) days prior to the date fixed for exchange, written notice
(the "Exchange Notice") shall be given by first-class mail, postage prepaid, to
each Holder of record on the record date fixed for such exchange of the
Preferred Stock at such Holder's address as the same appears on the stock
register of the Company, PROVIDED, HOWEVER, that no failure to give such notice
nor any deficiency therein shall affect the validity of the procedure for the
exchange of any shares of Preferred Stock to be exchanged except as to the
Holder or Holders to whom the Company has failed to give said notice or except
as to the Holder or Holders whose notice was defective. The Exchange Notice
shall state:
(A) the date fixed for exchange;
(B) whether all or less than all the outstanding shares of the
Preferred Stock exchangeable thereunder are to be exchanged and the total
number of shares of such Preferred Stock being exchanged
(C) the number of shares of Preferred Stock held by the Holder that
the Company intends to exchange
(D) that the Holder is to surrender to the Company, at the place or
places where certificates for shares of Preferred Stock are to be
surrendered for exchange, in the manner designated, the certificate or
certificates representing the shares of Preferred Stock to be exchanged;
(E) that dividends on the shares of Preferred Stock to be exchanged
shall cease to accrue on such Exchange Date whether or not certificates for
shares of Preferred Stock are surrendered for exchange on such Exchange
Date; and
(F) that interest on the Exchange Notes shall accrue from the Exchange
Date whether or not certificates for shares of Preferred Stock are
surrendered for exchange on such Exchange Date.
(ii) On or before the date fixed for exchange, each Holder of
Preferred Stock shall surrender the certificate or certificates representing
such shares of Preferred Stock, in the manner and at the place designated in the
Exchange Notice. The Company shall cause the Exchange Notes to be executed on
the Exchange Date and, upon surrender in accordance with the Exchange Notice of
the certificates for any shares of Preferred Stock so exchanged (properly
endorsed or assigned for transfer, if the
<PAGE>
11
notice shall so state), such shares shall be exchanged by the Company into
Exchange Notes as aforesaid. The Company shall pay interest on the Exchange
Notes at the rate and on the dates specified therein from the Exchange Date.
(iii) If notice has been mailed as aforesaid, and if before the
Exchange Date specified in such notice (x) the Indenture shall have been duly
executed and delivered by the Company and the trustee thereunder and (y) all
Exchange Notes necessary for such exchange shall have been duly executed by the
Company and delivered to the trustee under the Indenture with irrevocable
instructions to authenticate the Exchange Notes necessary for such exchange,
then the rights of the Holders of Preferred Stock so exchanged as stockholders
of the Company shall cease (except the right to receive Exchange Notes and an
amount in cash equal to the amount of accrued and unpaid dividends to the
Exchange Date), and the Person or Persons entitled to receive the Exchange Notes
issuable upon exchange shall be treated for all purposes as the registered
Holder or Holders of such Exchange Notes as of the date of exchange.
(c) NO EXCHANGE IN CERTAIN CASES. Notwithstanding the foregoing
provisions of this Section 7, the Company shall not be entitled to exchange the
Preferred Stock for Exchange Notes if (i) such exchange, or any term or
provision of the Indenture or the Exchange Notes, or the performance of the
Company's obligations under the Indenture or the Exchange Notes shall violate or
conflict with any applicable law or agreement or instrument then binding on the
Company, or (ii) at the time of such exchange, it would be rendered insolvent or
its capital would be impaired by such exchange.
8. CONVERSION OR EXCHANGE. Except as provided in Section 7, the
Holders of shares of Preferred Stock shall not have any rights herein to convert
such shares into or exchange such shares for shares of any other class or
classes or of any other series of any class or classes of Capital Stock of the
Company.
9. LIMITATION ON ISSUANCE OF SENIOR PREFERRED STOCK. Without the
affirmative vote or consent of the Holders of at least a majority of the then
outstanding shares of Preferred Stock and Series G Preferred Stock, voting
together with the holders of any other then outstanding shares of Parity
Securities entitled to vote thereon, the Company will not issue any other Senior
Securities; PROVIDED that no approval of such Holders shall be required in
connection with the issuance of Senior Securities the proceeds of which are used
to redeem or repurchase all shares of the then outstanding Preferred Stock and
Series G Preferred Stock and any other Parity Securities entitled to vote
thereon.
10. PREEMPTIVE RIGHTS. No shares of Preferred Stock shall have any
rights of preemption whatsoever as to any
<PAGE>
12
securities of the Company, or any warrants, rights or options issued or granted
with respect thereto by the Company at any time, regardless of how such
securities or such warrants, rights or options may be denominated, issued or
granted.
11. REISSUANCE OF PREFERRED STOCK. Shares of Preferred Stock that
have been issued and reacquired in any manner, including shares purchased or
redeemed or exchanged, shall (upon compliance with any applicable provisions of
the laws of the State of Delaware) have the status of authorized and unissued
shares of preferred stock undesignated as to series and may be redesignated and
reissued as part of any series of preferred stock.
12. BUSINESS DAY. If any payment, redemption or exchange shall be
required by the terms hereof to be made on a day that is not a Business Day,
such payment, redemption or exchange shall be made on the immediately succeeding
Business Day.
13. DEFINITIONS. As used herein, the following terms shall have the
following meanings (with terms defined in the singular having comparable
meanings when used in the plural and vice versa), unless the context otherwise
requires:
"AVERAGE LIFE TO REDEMPTION" shall mean, as of the date of
determination, with respect to any preferred security, the number of years
(including any portion thereof) remaining to the mandatory redemption date
thereof.
"BUSINESS DAY" shall mean a day other than a Saturday, Sunday,
national or New York State holiday or other day on which commercial banks
in New York City are authorized or required by law to close.
"CAPITAL STOCK" shall mean any and all shares, interests,
participation, rights or other equivalents (however designated) of
corporate stock.
"COMMON STOCK" shall mean the Common Stock, $.01 par value, of the
Company and any other class of common stock issued by the Company from time
to time.
"COMPANY" shall mean PRIMEDIA Inc.
"CONSENT PAYMENT AMOUNT" shall mean the product of (a) the aggregate
liquidation preference of all issued and outstanding shares of Preferred
Stock and (b) the sum of all Fee Amounts for all classes or series of
Senior Securities or indebtedness with respect to which a fee was paid in
connection with any consent or waiver referred to in Section 6(b) hereof.
<PAGE>
13
"DIVIDEND PAYMENT DATE" shall mean January 1, April 1, July 1 and
October 1 of each year.
"DIVIDEND PERIOD" shall mean the Initial Dividend Period and,
thereafter each Quarterly Dividend Period.
"EXCHANGE DATE" shall mean the date on which the shares of Preferred
Stock are exchanged for the Exchange Notes by the Company.
"EXCHANGE NOTES" shall have the meaning ascribed to them in Section
7(a) hereof.
"EXCHANGE NOTICE" shall have the meaning ascribed to it in Section
7(b) hereof.
"FEE AMOUNT" shall mean, with respect to any series or class of Senior
Securities or indebtedness, a fraction, the numerator of which is the
aggregate fee paid to such class or series and the denominator of which is
(i) in the case of each class or series of Senior Securities, the aggregate
liquidation preference of the outstanding shares of such class or series of
Senior Securities and (ii) in the case of each class or series of
indebtedness, the aggregate outstanding principal amount of such
indebtedness.
"FUTURE PARITY SECURITIES" shall have the meaning ascribed to them in
Section 2 hereof.
"HOLDER" shall mean a holder of shares of Preferred Stock.
"INDENTURE" shall have the meaning ascribed to it in Section 7(a)
hereof.
"INITIAL DIVIDEND PERIOD" shall mean the dividend period commencing on
the Original Issue Date and ending on the first Dividend Payment Date to
occur thereafter.
"JUNIOR SECURITIES" shall have the meaning ascribed to them in Section
2 hereof.
"MANDATORY REDEMPTION PRICE" shall have the meaning ascribed to it in
Section 5(b) hereof.
"OPTIONAL REDEMPTION PRICE" shall have the meaning ascribed to it in
Section 5(a)(i) hereof.
"ORIGINAL ISSUE DATE" shall mean the date upon which the Preferred
Stock was originally issued by the Company.
"PARITY SECURITIES" shall have the meaning ascribed to them in Section
2 hereof.
<PAGE>
14
"PERSON" shall mean any individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint
venture, governmental authority or other entity of whatever nature.
"PREFERRED STOCK" shall mean the Series H Preferred Stock, par value
$.01 per share, liquidation preference $100.00 per share, of the Company.
"PUBLIC EQUITY OFFERING" shall mean an underwritten public offering of
primary shares of the Company's Common Stock (or any other class of common
stock hereinafter duly authorized by the Company) pursuant to a
registration statement (other than a registration on Form S-8 or S-4 or
successor forms) filed with the Securities and Exchange Commission in
accordance with the Securities Act of 1933, as amended.
"PUBLIC OFFERING REDEMPTION PRICE" shall have the meaning ascribed to
it in Section 5(a)(ii) hereof
"QUARTERLY DIVIDEND PERIOD" shall mean the quarterly period commencing
on each January 1, April 1, July 1 and October 1 and ending on each
Dividend Payment Date, respectively.
"REDEEMABLE STOCK" shall mean Capital Stock that is redeemable prior
to the scheduled final redemption of the Preferred Stock.
"REDEMPTION DATE," with respect to any shares of Preferred Stock,
shall mean the date on which such shares of Preferred Stock are redeemed by
the Company.
"REDEMPTION NOTICE" shall have the meaning ascribed to it in Section
5(b) hereof.
"SENIOR SECURITIES" shall have the meaning ascribed to them in Section
2 hereof.
"SERIES D PREFERRED STOCK" shall mean the $10.00 Series D Exchangeable
Preferred Stock, par value, $.01 per share, liquidation preference $100.00
per share, of the Company.
"SERIES F PREFERRED STOCK" shall mean the $9.20 Series F Exchangeable
Preferred Stock, par value, $.01 per share, liquidation preference $100.00
per share, of the Company.
<PAGE>
15
"SERIES G PREFERRED STOCK" shall mean the $8.625 Series G Exchangeable
Preferred Stock, par value, $.01 per share, liquidation preference $100.00 per
share, of the Company.
"SUBSIDIARY" means any corporation, association or other business
entity of which more than 50% of the total voting power of shares of
Capital Stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by any
person or one or more of the other Subsidiaries of that person or a
combination thereof.
"TREASURY RATE" shall have the meaning ascribed to it in Section 5(a)
hereof.
<PAGE>
16
IN WITNESS WHEREOF, PRIMEDIA Inc. has caused this certificate to be
executed by Beverly C. Chell, as Vice Chairman, General Counsel and Secretary,
and attested by Ann M. Riposanu, as Assistant Secretary, this ___ day of
___________, 1998.
PRIMEDIA INC.
By:___________________________
Title: Vice Chairman,
General Counsel
and Secretary,
Attest:
_________________________
Assistant Secretary
<PAGE>
EXHIBIT 5
May 4, 1998
PRIMEDIA Inc.
745 Fifth Avenue
New York, NY 10151
Dear Sirs:
We have acted as counsel to PRIMEDIA Inc., a Delaware corporation (the
"Company"), in connection with the preparation and filing by the Company with
the Securities and Exchange Commission of a Registration Statement on Form S-4
filed on the date hereof (as amended, the "Registration Statement") under the
Securities Act of 1933, as amended, with respect to (i) up to $250,000,000 in
aggregate principal amount of 7 5/8% Senior Notes due 2008 of the Company (the
"Notes") to be issued in exchange for the $250,000,000 aggregate principal
amount of the Company's outstanding 7 5/8% Senior Notes due 2008 (the "Old
Notes"), and the unconditional guarantees of such Notes (the "Guarantees") by
the subsidiaries of the Company listed on Schedule I hereto (the "Guarantors"),
(ii) up to 2,500,000 shares of $8.625 Series H Exchangeable Preferred Stock, par
value $.01 per share and liquidation value $100 per share, of the Company (the
"Preferred Stock") to be issued in exchange for the Company's $8.625 Series G
Exchangeable Preferred Stock (the "Old Preferred Stock"), and (iii) up to
$250,000,000 in aggregate principal amount of the Company's 8 5/8% Class H
Subordinated Debentures due 2010 (the "Subordinated Debentures") issuable, at
the Company's option, in exchange for the Preferred Stock, all as described in
the Registration Statement.
The Notes will be issued under the Indenture dated as of February 17, 1998
(the "Note Indenture") among the Company, the Guarantors and The Bank of New
York, as Trustee (the "Note Trustee"), which has been filed as an exhibit to the
Registration Statement. The Preferred Stock will be issued pursuant to the
provisions of the Certificate of Incorporation of the Company, as amended, and
the certificate of designations for the Preferred Stock (the "Certificate of
Designations"), a form of which has been filed as an exhibit to the Registration
Statement. The Subordinated Debentures, if and when issued, will be issued under
an indenture (the "Subordinated Debenture Indenture") to be entered into between
the Company and The Bank of New York, as trustee (the "Subordinated Debenture
Trustee"), a form of which has been filed as an exhibit to the Registration
Statement.
We have reviewed the corporate action of the Company and the Guarantors in
connection with the proposed issuance and exchange of the Notes for the Old
Notes (including the Guarantees thereof) and the Preferred Stock for the Old
Preferred Stock and have examined, and have relied as to matters of fact upon,
originals or copies, certified or otherwise identified to our satisfaction, of
such corporate records, agreements, documents and other instruments and such
certificates or comparable documents of public officials and of officers and
representatives of the Company and the Guarantors, and have made such other and
further investigations, as we have deemed relevant and necessary as a basis for
the opinions hereinafter set forth.
In such examination, we have assumed the genuineness of all signatures, the
legal capacity of natural persons, the authenticity of all documents submitted
to us as originals, the conformity to original documents of all documents
submitted to us as certified or photostatic copies, and the authenticity of the
originals of such latter documents.
Based upon the foregoing, and subject to the qualifications and limitations
stated herein, we are of the opinion that:
1. The Notes have been duly authorized by the Company and, upon due
issuance and execution thereof by the Company, due authentication thereof by
the Note Trustee and delivery of the Notes in exchange for the Old Notes in
accordance with the terms of the prospectus included in the Registration
Statement (the "Prospectus"), will constitute valid and legally binding
obligations of the Company, enforceable against the Company in accordance
with their terms and entitled to the benefits of the Indenture.
<PAGE>
2. The Guarantees have been duly authorized by each Guarantor
incorporated in the State of New York or the State of Delaware (each a "New
York/Delaware Guarantor") and, assuming (i) due issuance and execution of
the Guarantees by each New York/Delaware Guarantor, (ii) due authorization,
issuance and execution of the Guarantees by each Guarantor other than the
New York/Delaware Guarantors, (iii) due issuance and execution of the Notes
by the Company, (iv) due authentication of the Notes by the Note Trustee and
(v) delivery of the Notes in exchange for the Old Notes in accordance with
the terms of the Prospectus, will constitute valid and legally binding
obligations of each Guarantor, enforceable against each Guarantor in
accordance with their terms and entitled to the benefits of the Indenture.
3. The Preferred Stock has been duly authorized and, when the
Certificate of Designations is filed with the Secretary of State of the
State of Delaware in accordance with Section 103 of the Delaware General
Corporation Law, and upon delivery of the Preferred Stock in exchange for
the Old Preferred Stock in accordance with the terms of the Prospectus, will
be validly issued, fully paid and nonassessable.
4. The Subordinated Debentures have been duly authorized and, upon due
execution and delivery of the Subordinated Debenture Indenture by the
Company and the Subordinated Debenture Trustee and due issuance and
execution of the Subordinated Debentures by the Company, due authentication
of the Subordinated Debentures by the Subordinated Debenture Trustee and
delivery of the Subordinated Debentures against receipt of shares of
Preferred Stock surrendered in exchange therefor in accordance with the
terms of the Subordinated Debenture Indenture and the Certificate of
Designations, will constitute valid and legally binding obligations of the
Company enforceable against the Company in accordance with their terms and
entitled to the benefits of the Subordinated Debenture Indenture.
Our opinions set forth in paragraphs 1, 2 and 4 above are subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
We are members of the Bar of the State of New York, and we do not express
any opinion herein concerning any law other than the law of the State of New
York and the Delaware General Corporation Law.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Prospectus.
This opinion letter is rendered to you in connection with the above
described transactions. This opinion letter may not be relied upon by you for
any other purpose, or relied upon by, or furnished to, any other person, firm or
corporation without our prior written consent.
Very truly yours,
/s/SIMPSON THACHER & BARTLETT
SIMPSON THACHER & BARTLETT
<PAGE>
EXHIBIT 12
PAGE 1 OF 2
PRIMEDIA INC. AND SUBSIDIARIES
DEFICIENCY OF EARNINGS TO FIXED CHARGES AND
DEFICIENCY OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------
1997 1997 1996 1995 1994 1993
PRO FORMA ACTUAL ACTUAL ACTUAL ACTUAL ACTUAL
----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Earnings before fixed charges:
Net income (loss)............................... $(140,159) $(172,840) $ 8,044 $ (75,435) $ (41,403) $ (86,496)
Income tax benefit.............................. (1,685) (1,685) (53,300) (59,600) (42,100) --
Extraordinary charge............................ -- 15,401 9,553 -- 11,874 --
----------- --------- --------- --------- --------- ---------
Loss from continuing operations before income tax
benefit and extraordinary charge................ (141,844) (159,124) (35,703) (135,035) (71,629) (86,496)
Interest expense and amortization of deferred
financing and organizational costs.............. 122,416 139,696 128,263 108,972 81,431 77,856
Interest portion of rental expenses............... 12,281 12,281 10,510 8,129 7,991 5,838
----------- --------- --------- --------- --------- ---------
Earnings (loss) before fixed charges.............. (7,147) (7,147) 103,070 (17,934) 17,793 (2,802)
----------- --------- --------- --------- --------- ---------
Fixed charges:
Interest expense and amortization of deferred
financing and organizational costs............ 122,416 139,696 128,263 108,972 81,431 77,856
Interest portion of rental expenses............. 12,281 12,281 10,510 8,129 7,991 5,838
----------- --------- --------- --------- --------- ---------
Total fixed charges......................... 134,697 151,977 138,773 117,101 89,422 83,694
Deficiency of earnings to fixed charges........... (141,844) (159,124) (35,703) (135,035) (71,629) (86,496)
Preferred stock dividends......................... (59,591) (65,073) (43,526) (28,978) (25,959) (22,290)
----------- --------- --------- --------- --------- ---------
Deficiency of earnings to fixed charges and
preferred stock dividends....................... $(201,435) $(224,197) $ (79,229) $(164,013) $ (97,588) $(108,786)
----------- --------- --------- --------- --------- ---------
----------- --------- --------- --------- --------- ---------
</TABLE>
<PAGE>
EXHIBIT 12
PAGE 2 OF 2
PRIMEDIA INC. AND SUBSIDIARIES
RATIO OF EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION, AMORTIZATION AND
PROVISION FOR ONE-TIME CHARGES TO INTEREST EXPENSE AND RATIO OF EARNINGS BEFORE
INTEREST, TAXES, DEPRECIATION, AMORTIZATION AND PROVISION FOR ONE-TIME CHARGES
TO INTEREST EXPENSE AND DIVIDENDS ON PREFERRED STOCK
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------
1997 1997 1996 1995
PRO FORMA ACTUAL ACTUAL ACTUAL
----------- --------- --------- ---------
<S> <C> <C> <C> <C>
Earnings before interest, taxes, depreciation, amortization and
provision for one-time charges....................................... $ 302,012 $ 302,012 $ 276,603 $ 216,115
----------- --------- --------- ---------
----------- --------- --------- ---------
Interest expense....................................................... $ 118,767 $ 136,625 $ 124,601 $ 105,837
----------- --------- --------- ---------
----------- --------- --------- ---------
Ratio of earnings before interest, taxes, depreciation, amortization
and provision for one-time charges to interest expense............... 2.5x 2.2x 2.2x 2.0x
----------- --------- --------- ---------
----------- --------- --------- ---------
Earnings before interest, taxes, depreciation, amortization and
provision for one-time charges....................................... $ 302,012 $ 302,012 $ 276,603 $ 216,115
----------- --------- --------- ---------
----------- --------- --------- ---------
Interest expense....................................................... 118,767 136,625 124,601 105,837
Dividends on preferred stock........................................... 59,591 65,073 43,526 28,978
----------- --------- --------- ---------
Interest expense plus dividends on preferred stock..................... $ 178,358 $ 201,698 $ 168,127 $ 134,815
----------- --------- --------- ---------
----------- --------- --------- ---------
Ratio of earnings before interest, taxes, depreciation, amortization
and provision for one-time charges to interest expense and dividends
on preferred stock................................................... 1.7x 1.5x 1.6x 1.6x
----------- --------- --------- ---------
----------- --------- --------- ---------
</TABLE>
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
PRIMEDIA Inc.:
We consent to the use in this Registration Statement of PRIMEDIA Inc. on
Form S-4 of our report dated January 27, 1998 (April 23, 1998 as to Note 25),
appearing in the Prospectus, which is part of this Registration Statement, and
of our report dated January 27, 1998 (April 23, 1998 as to Note 25) relating to
the financial statement schedules appearing elsewhere in this Registration
Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
DELOITTE & TOUCHE LLP
New York, New York
May 5, 1998
<PAGE>
Exhibit 25.1
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT
TO RULE 901(d) OF REGULATION S-T
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
-----------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
-----------------
PRIMEDIA INC.
(FORMERLY KNOWN AS K-III COMMUNICATIONS CORPORATION)
(Exact name of obligor as specified in its charter)
Delaware 13-3647573
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
745 Fifth Avenue New York, New York 10151
(Address of principal executive offices) (Zip code)
<PAGE>
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EXCELLENCE IN TRAINING CORPORATION
FILMS FOR THE HUMANITIES & SCIENCES, INC.
FUNK & WAGNALLS YEARBOOK CORP.
GARETH STEVENS, INC.
GO LO ENTERTAINMENT, INC.
GUINN COMMUNICATIONS, INC.
HAAS PUBLISHING COMPANIES, INC.
HEALTH & SCIENCES NETWORK, INC.
HORSE & RIDER, INC.
INTERMODAL PUBLISHING COMPANY, LTD.
IDTN LEASING CORPORATION
INDUSTRIAL TRAINING SYSTEMS CORPORATION
INTELLICHOICE, INC.
INTERTEC MARKET REPORTS, INC.
INTERTEC PRESENTATIONS, INC.
INTERTEC PUBLISHING CORPORATION
K-III HPC, INC.
K-III PRIME CORPORATION
KITPLANES ACQUISITION COMPANY
LAW ENFORCEMENT TELEVISION NETWORK, INC.
LIFETIME LEARNING SYSTEMS, INC.
LITTLE ROCK APARTMENT GUIDE, INC.
LOCKERT JACKSON & ASSOCIATES, INC.
LOW RIDER PUBLISHING GROUP, INC.
MCMULLEN ARGUS PUBLISHING, INC.
-2-
<PAGE>
MEMPHIS APARTMENT GUIDE, INC.
MUSICAL AMERICA PUBLISHING, INC.
NELSON INFORMATION, INC.
PICTORIAL, INC.
PLAZA COMMUNICATIONS, INC.
PRIMEDIA HOLDINGS III INC.
PRIMEDIA INFORMATION INC.
PRIMEDIA MAGAZINES INC.
PRIMEDIA MAGAZINES FINANCE INC.
PRIMEDIA REFERENCE INC.
PRIMEDIA SPECIAL INTEREST PUBLICATIONS INC.
PRIMEDIA WORKPLACE LEARNING, INC.
QWIZ, INC.
R.E.R. PUBLISHING CORPORATION
RETAILVISION, INC.
SIMBA INFORMATION, INC.
SOUTHWEST ART, INC.
STRAIGHT DOWN, INC.
SYMBOL OF EXCELLENCE PUBLISHERS, INC.
TEL-A-TRAIN, INC.
THE VIRTUAL FLYSHOP, INC.
T1-IN ACQUISITION CORPORATION
VEGETARIAN TIMES, INC.
WEEKLY READER CORPORATION
WESTCOTT COMMUNICATIONS MICHIGAN, INC.
WESTCOTT ECI, INC.
WESTERN EMPIRE PUBLICATIONS, INC.
-----------------
7-5/8% Senior Notes due 2008
(Title of the indenture securities)
================================================================================
-3-
<PAGE>
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
-4-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
-5-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 30th day of April, 1998.
THE BANK OF NEW YORK
By: /s/ MARY JANE MORRISSEY
-------------------------------
Name: MARY JANE MORRISSEY
Title: VICE PRESIDENT
-6-
<PAGE>
EXHIBIT 7
- --------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1997, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
in Thousands
<S> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin................... $ 5,742,986
Interest-bearing balances............................................ 1,342,769
Securities:
Held-to-maturity securities.......................................... 1,099,736
Available-for-sale securities........................................ 3,882,686
Federal funds sold and Securities purchased under agreements to resell.. 2,568,530
Loans and lease financing receivables:
Loans and leases, net of unearned income....... 35,019,608
LESS: Allowance for loan and lease losses......... 627,350
LESS: Allocated transfer risk reserve................... 0
Loans and leases, net of unearned income, allowance, and reserve..... 34,392,258
Assets held in trading accounts......................................... 2,521,451
Premises and fixed assets (including capitalized leases)................ 659,209
Other real estate owned................................................. 11,992
Investments in unconsolidated subsidiaries and associated companies..... 226,263
Customers liability to this bank on acceptances outstanding............. 1,187,449
Intangible assets....................................................... 781,684
Other assets............................................................ 1,736,574
-----------
Total assets............................................................ $56,153,587
-----------
-----------
LIABILITIES
Deposits:
In domestic offices.................................................. $27,031,362
Noninterest-bearing........................... 11,899,507
Interest-bearing............................... 15,131,855
In foreign offices, Edge and Agreement subsidiaries and IBFs......... 13,794,449
Noninterest-bearing............................... 590,999
Interest-bearing............................... 13,203,450
Federal funds purchased and Securities sold under agreements
to repurchase........................................................ 2,338,881
Demand notes issued to the U.S. Treasury................................ 173,851
Trading liabilities..................................................... 1,695,216
Other borrowed money:
With remaining maturity of one year or less.......................... 1,905,330
With remaining maturity of more than one year through three years.... 0
With remaining maturity of more than three years..................... 25,664
Bank's liability on acceptances executed and outstanding................ 1,195,923
Subordinated notes and debentures....................................... 1,012,940
Other liabilities....................................................... 2,018,960
-----------
Total liabilities....................................................... 51,192,576
-----------
EQUITY CAPITAL
Common stock............................................................ 1,135,284
Surplus................................................................. 731,319
Undivided profits and capital reserves.................................. 3,093,726
Net unrealized holding gains (losses) on
available-for-sale securities........................................ 36,866
Cumulative foreign currency translation adjustments..................... (36,184)
-----------
Total equity capital.................................................... 4,961,011
-----------
Total liabilities and equity capital.................................... $56,153,587
-----------
-----------
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the above-
named bank do hereby declare that this Report of Condition has been prepared
in conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true
and correct.
Thomas A. Renyi )
Alan R. Griffith ) Directors
J. Carter Bacot )
- --------------------------------------------------------------------------------
<PAGE>
Exhibit 25.2
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT
TO RULE 901(d) OF REGULATION S-T
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
-----------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
-----------------
PRIMEDIA INC.
(FORMERLY KNOWN AS K-III COMMUNICATIONS CORPORATION)
(Exact name of obligor as specified in its charter)
Delaware 13-3647573
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
745 Fifth Avenue New York, New York 10151
(Address of principal executive offices) (Zip code)
<PAGE>
ADDITIONAL REGISTRANTS
THE APARTMENT GUIDE OF NASHVILLE, INC.
ARGUS PUBLISHERS CORPORATION
AMERICAN HEAT VIDEO PRODUCTIONS, INC.
ASTN, INC.
A WEP COMPANY
BACON'S INFORMATION, INC.
BANKERS CONSULTING COMPANY
BOWHUNTER MAGAZINE, INC.
CANOE & KAYAK, INC.
CARDINAL BUSINESS MEDIA, INC.
CARDINAL BUSINESS MEDIA HOLDINGS, INC.
CHANNEL ONE COMMUNICATIONS CORP.
CLIMBING, INC.
COVER CONCEPTS MARKETING SERVICES, LLC
COWLES BUSINESS MEDIA, INC.
COWLES ENTHUSIAST MEDIA, INC.
COWLES HISTORY GROUP, INC.
CSK PUBLISHING COMPANY INCORPORATED
CUMBERLAND PUBLISHING, INC.
DRF FINANCE, INC.
DAILY RACING FORM, INC.
DATA BOOK, INC.
THE ELECTRONICS SOURCE BOOK, INC.
EXCELLENCE IN TRAINING CORPORATION
FILMS FOR THE HUMANITIES & SCIENCES, INC.
FUNK & WAGNALLS YEARBOOK CORP.
GARETH STEVENS, INC.
GO LO ENTERTAINMENT, INC.
GUINN COMMUNICATIONS, INC.
HAAS PUBLISHING COMPANIES, INC.
HEALTH & SCIENCES NETWORK, INC.
HORSE & RIDER, INC.
INTERMODAL PUBLISHING COMPANY, LTD.
IDTN LEASING CORPORATION
INDUSTRIAL TRAINING SYSTEMS CORPORATION
INTELLICHOICE, INC.
INTERTEC MARKET REPORTS, INC.
INTERTEC PRESENTATIONS, INC.
INTERTEC PUBLISHING CORPORATION
K-III HPC, INC.
K-III PRIME CORPORATION
KITPLANES ACQUISITION COMPANY
LAW ENFORCEMENT TELEVISION NETWORK, INC.
LIFETIME LEARNING SYSTEMS, INC.
LITTLE ROCK APARTMENT GUIDE, INC.
LOCKERT JACKSON & ASSOCIATES, INC.
LOW RIDER PUBLISHING GROUP, INC.
MCMULLEN ARGUS PUBLISHING, INC.
-2-
<PAGE>
MEMPHIS APARTMENT GUIDE, INC.
MUSICAL AMERICA PUBLISHING, INC.
NELSON INFORMATION, INC.
PICTORIAL, INC.
PLAZA COMMUNICATIONS, INC.
PRIMEDIA HOLDINGS III INC.
PRIMEDIA INFORMATION INC.
PRIMEDIA MAGAZINES INC.
PRIMEDIA MAGAZINES FINANCE INC.
PRIMEDIA REFERENCE INC.
PRIMEDIA SPECIAL INTEREST PUBLICATIONS INC.
PRIMEDIA WORKPLACE LEARNING, INC.
QWIZ, INC.
R.E.R. PUBLISHING CORPORATION
RETAILVISION, INC.
SIMBA INFORMATION, INC.
SOUTHWEST ART, INC.
STRAIGHT DOWN, INC.
SYMBOL OF EXCELLENCE PUBLISHERS, INC.
TEL-A-TRAIN, INC.
THE VIRTUAL FLYSHOP, INC.
T1-IN ACQUISITION CORPORATION
VEGETARIAN TIMES, INC.
WEEKLY READER CORPORATION
WESTCOTT COMMUNICATIONS MICHIGAN, INC.
WESTCOTT ECI, INC.
WESTERN EMPIRE PUBLICATIONS, INC.
-----------------
8-5/8% Class H Subordinated Exchange Debentures due 2010
(Title of the indenture securities)
================================================================================
-3-
<PAGE>
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York, New York
N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
-4-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
-5-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 30th day of April, 1998.
THE BANK OF NEW YORK
By: /s/ MARY JANE MORRISSEY
-------------------------------
Name: MARY JANE MORRISSEY
Title: VICE PRESIDENT
-6-
<PAGE>
Exhibit 25.1
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED PURSUANT
TO RULE 901(d) OF REGULATION S-T
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
-----------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
-----------------
PRIMEDIA INC.
(FORMERLY KNOWN AS K-III COMMUNICATIONS CORPORATION)
(Exact name of obligor as specified in its charter)
Delaware 13-3647573
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
745 Fifth Avenue New York, New York 10151
(Address of principal executive offices) (Zip code)
<PAGE>
ADDITIONAL REGISTRANTS
THE APARTMENT GUIDE OF NASHVILLE, INC.
ARGUS PUBLISHERS CORPORATION
AMERICAN HEAT VIDEO PRODUCTIONS, INC.
ASTN, INC.
A WEP COMPANY
BACON'S INFORMATION, INC.
BANKERS CONSULTING COMPANY
BOWHUNTER MAGAZINE, INC.
CANOE & KAYAK, INC.
CARDINAL BUSINESS MEDIA, INC.
CARDINAL BUSINESS MEDIA HOLDINGS, INC.
CHANNEL ONE COMMUNICATIONS CORP.
CLIMBING, INC.
COVER CONCEPTS MARKETING SERVICES, LLC
COWLES BUSINESS MEDIA, INC.
COWLES ENTHUSIAST MEDIA, INC.
COWLES HISTORY GROUP, INC.
CSK PUBLISHING COMPANY INCORPORATED
CUMBERLAND PUBLISHING, INC.
DRF FINANCE, INC.
DAILY RACING FORM, INC.
DATA BOOK, INC.
THE ELECTRONICS SOURCE BOOK, INC.
EXCELLENCE IN TRAINING CORPORATION
FILMS FOR THE HUMANITIES & SCIENCES, INC.
FUNK & WAGNALLS YEARBOOK CORP.
GARETH STEVENS, INC.
GO LO ENTERTAINMENT, INC.
GUINN COMMUNICATIONS, INC.
HAAS PUBLISHING COMPANIES, INC.
HEALTH & SCIENCES NETWORK, INC.
HORSE & RIDER, INC.
INTERMODAL PUBLISHING COMPANY, LTD.
IDTN LEASING CORPORATION
INDUSTRIAL TRAINING SYSTEMS CORPORATION
INTELLICHOICE, INC.
INTERTEC MARKET REPORTS, INC.
INTERTEC PRESENTATIONS, INC.
INTERTEC PUBLISHING CORPORATION
K-III HPC, INC.
K-III PRIME CORPORATION
KITPLANES ACQUISITION COMPANY
LAW ENFORCEMENT TELEVISION NETWORK, INC.
LIFETIME LEARNING SYSTEMS, INC.
LITTLE ROCK APARTMENT GUIDE, INC.
LOCKERT JACKSON & ASSOCIATES, INC.
LOW RIDER PUBLISHING GROUP, INC.
MCMULLEN ARGUS PUBLISHING, INC.
-2-
<PAGE>
MEMPHIS APARTMENT GUIDE, INC.
MUSICAL AMERICA PUBLISHING, INC.
NELSON INFORMATION, INC.
PICTORIAL, INC.
PLAZA COMMUNICATIONS, INC.
PRIMEDIA HOLDINGS III INC.
PRIMEDIA INFORMATION INC.
PRIMEDIA MAGAZINES INC.
PRIMEDIA MAGAZINES FINANCE INC.
PRIMEDIA REFERENCE INC.
PRIMEDIA SPECIAL INTEREST PUBLICATIONS INC.
PRIMEDIA WORKPLACE LEARNING, INC.
QWIZ, INC.
R.E.R. PUBLISHING CORPORATION
RETAILVISION, INC.
SIMBA INFORMATION, INC.
SOUTHWEST ART, INC.
STRAIGHT DOWN, INC.
SYMBOL OF EXCELLENCE PUBLISHERS, INC.
TEL-A-TRAIN, INC.
THE VIRTUAL FLYSHOP, INC.
T1-IN ACQUISITION CORPORATION
VEGETARIAN TIMES, INC.
WEEKLY READER CORPORATION
WESTCOTT COMMUNICATIONS MICHIGAN, INC.
WESTCOTT ECI, INC.
WESTERN EMPIRE PUBLICATIONS, INC.
-----------------
7-5/8% Senior Notes due 2008
(Title of the indenture securities)
================================================================================
-3-
<PAGE>
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y.
12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
-4-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
-5-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 30th day of April, 1998.
THE BANK OF NEW YORK
By: /s/ MARY JANE MORRISSEY
-------------------------------
Name: MARY JANE MORRISSEY
Title: VICE PRESIDENT
-6-
<PAGE>
EXHIBIT 7
- --------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1997, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
in Thousands
<S> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin................... $ 5,742,986
Interest-bearing balances............................................ 1,342,769
Securities:
Held-to-maturity securities.......................................... 1,099,736
Available-for-sale securities........................................ 3,882,686
Federal funds sold and Securities purchased under agreements to resell.. 2,568,530
Loans and lease financing receivables:
Loans and leases, net of unearned income....... 35,019,608
LESS: Allowance for loan and lease losses......... 627,350
LESS: Allocated transfer risk reserve................... 0
Loans and leases, net of unearned income, allowance, and reserve..... 34,392,258
Assets held in trading accounts......................................... 2,521,451
Premises and fixed assets (including capitalized leases)................ 659,209
Other real estate owned................................................. 11,992
Investments in unconsolidated subsidiaries and associated companies..... 226,263
Customers liability to this bank on acceptances outstanding............. 1,187,449
Intangible assets....................................................... 781,684
Other assets............................................................ 1,736,574
-----------
Total assets............................................................ $56,153,587
-----------
-----------
LIABILITIES
Deposits:
In domestic offices.................................................. $27,031,362
Noninterest-bearing........................... 11,899,507
Interest-bearing............................... 15,131,855
In foreign offices, Edge and Agreement subsidiaries and IBFs......... 13,794,449
Noninterest-bearing............................... 590,999
Interest-bearing............................... 13,203,450
Federal funds purchased and Securities sold under agreements
to repurchase........................................................ 2,338,881
Demand notes issued to the U.S. Treasury................................ 173,851
Trading liabilities..................................................... 1,695,216
Other borrowed money:
With remaining maturity of one year or less.......................... 1,905,330
With remaining maturity of more than one year through three years.... 0
With remaining maturity of more than three years..................... 25,664
Bank's liability on acceptances executed and outstanding................ 1,195,923
Subordinated notes and debentures....................................... 1,012,940
Other liabilities....................................................... 2,018,960
-----------
Total liabilities....................................................... 51,192,576
-----------
EQUITY CAPITAL
Common stock............................................................ 1,135,284
Surplus................................................................. 731,319
Undivided profits and capital reserves.................................. 3,093,726
Net unrealized holding gains (losses) on
available-for-sale securities........................................ 36,866
Cumulative foreign currency translation adjustments..................... (36,184)
-----------
Total equity capital.................................................... 4,961,011
-----------
Total liabilities and equity capital.................................... $56,153,587
-----------
-----------
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the above-
named bank do hereby declare that this Report of Condition has been prepared
in conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true
and correct.
Thomas A. Renyi )
Alan R. Griffith ) Directors
J. Carter Bacot )
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT (a)(ii)
EXHIBIT 99.1(A)
LETTER OF TRANSMITTAL
THE NOTE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON , 1998 (AS SUCH DATE AND TIME MAY BE EXTENDED
BY THE COMPANY IN ITS SOLE DISCRETION, THE "EXPIRATION DATE").
PRIMEDIA INC.
(FORMERLY KNOWN AS K-III COMMUNICATIONS CORPORATION)
7 5/8% SENIOR NOTES DUE 2008
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
IF YOU DESIRE TO ACCEPT THE PREFERRED STOCK EXCHANGE OFFER, THIS LETTER OF
TRANSMITTAL SHOULD BE COMPLETED, SIGNED, AND SUBMITTED TO THE BANK OF NEW YORK,
EXCHANGE AGENT:
<TABLE>
<S> <C> <C>
BY MAIL: FACSIMILE TRANSMISSIONS: BY HAND OR OVERNIGHT DELIVERY:
The Bank of New York (Eligible Institutions Only) The Bank of New York
101 Barclay Street, 7E (212) 815-6339 101 Barclay Street
New York, New York 10286 CONFIRM BY TELEPHONE: Corporate Trust Services Window
Attn: Reorganization Section, (212) 815-4146 Ground Level
7E: Vincent Jhingor FOR INFORMATION CALL: New York, New York 10286
(Registered or Certified Mail (212) 815-4146 Attn: Reorganization Section,
Recommended) 7E: Vincent Jhingor
</TABLE>
Delivery of this Letter of Transmittal to an address other than as set forth
above or transmission of instructions via a facsimile number other than that set
forth above will not constitute a valid delivery.
The undersigned hereby acknowledges receipt of the Prospectus dated
(the "PROSPECTUS") of PRIMEDIA Inc. (formerly known as K-III
Communications Corporation), a Delaware corporation ("PRIMEDIA " or the
"COMPANY"), and this Letter of Transmittal (the "LETTER OF TRANSMITTAL "), that
together constitute the Company's offer (the "NOTE EXCHANGE OFFER ") to exchange
$1,000 in principal amount of a new series of its 7 5/8% Senior Notes due 2008
(the "NEW NOTES") for each $1,000 in principal amount of its outstanding 7 5/8%
Senior Notes due 2008 (the "OLD NOTES"). The New Notes and the Old Notes are
collectively referred to as the "NOTES". Capitalized terms used but not defined
herein have the meanings ascribed to them in the Prospectus.
THE REGISTRATION STATEMENT ON FORM S-4 (FILE NO. 333- ) OF WHICH THE
PROSPECTUS IS A PART WAS DECLARED EFFECTIVE BY THE SECURITIES AND EXCHANGE
COMMISSION ON , 1998.
The undersigned hereby tenders the principal amount of Old Notes described
in Box 1 below (the "TENDERED NOTES") pursuant to the terms and conditions
described in the Prospectus and this Letter of Transmittal. The undersigned is
the registered owner of all the Tendered Notes and the undersigned represents
that it has received from each beneficial owner of Tendered Notes ("BENEFICIAL
OWNERS") a duly completed and executed form of "Instruction to Registered Holder
from Beneficial Owner" accompanying this Letter of Transmittal, instructing the
undersigned to take the action described in this Letter of Transmittal.
Subject to, and effective upon, the acceptance for exchange of the Tendered
Notes, the undersigned hereby exchanges, assigns, and transfers to, or upon the
order of, the Company, all right, title, and interest in, to, and under the
Tendered Notes.
Please issue the New Notes exchanged for Tendered Notes in the name(s) of
the undersigned. Similarly, unless otherwise indicated under "SPECIAL DELIVERY
INSTRUCTIONS" below (Box 3), please send or cause to be sent the certificate(s)
for New Notes (and accompanying documents, as appropriate) to the undersigned at
the address shown below in Box 1.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the true and lawful agent and attorney in fact of the undersigned with
respect to the Tendered Notes, with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest), to
(i) deliver the Tendered Notes to the Company or cause ownership of the Tendered
Notes to be transferred to, or upon the order of, the Company, on the books of
the registrar for the Old Notes or on the account books maintained by a
book-entry transfer facility and deliver all accompanying evidences of transfer
and authenticity to, or upon the order of, the Company upon receipt by the
Exchange Agent, as the undersigned's agent, of the New Notes to which the
undersigned is entitled upon the acceptance by the Company of the Tendered Notes
pursuant to the Note Exchange Offer, and (ii) receive all benefits and otherwise
exercise all rights of beneficial ownership of the Tendered Notes, all in
accordance with the terms of the Note Exchange Offer.
The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offers--Procedures for
Tendering" in the Prospectus and in the instructions hereto will constitute a
binding agreement between the undersigned and the Company upon the terms and
subject to the conditions of the Note Exchange Offer, subject only to withdrawal
of such tenders on the terms set forth in the Prospectus under the caption "The
Exchange Offers--Withdrawal of Tenders." All authority herein conferred or
agreed to be conferred shall survive the death or incapacity of the undersigned
and any Beneficial Owner(s), and every obligation of the undersigned or any
Beneficial Owners hereunder shall be binding upon the heirs, representatives,
successors, and assigns of the undersigned and such Beneficial Owner(s).
<PAGE>
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, exchange, assign, and transfer the Tendered Notes
and that the Company will acquire good and unencumbered title thereto, free and
clear of all liens, restrictions, charges, encumbrances, and adverse claims when
the Tendered Notes are acquired by the Company as contemplated herein. The
undersigned and each Beneficial Owner will, upon request, execute and deliver
any additional documents reasonably requested by the Company as necessary or
desirable to complete and give effect to the transactions contemplated hereby.
The undersigned hereby represents and warrants that the information set
forth in Box 2 is true and correct.
By accepting the Note Exchange Offer, the undersigned hereby represents and
warrants that (i) the New Notes to be acquired by the undersigned and any
Beneficial Owner(s) in connection with the Note Exchange Offer are being
acquired by the undersigned and any Beneficial Owner(s) in the ordinary course
of business of the undersigned and any Beneficial Owner(s), (ii) the undersigned
and each Beneficial Owner are not participating, do not intend to participate,
and have no arrangement or understanding with any person to participate, in the
distribution of the New Notes, (iii) the undersigned and each Beneficial Owner
acknowledge and agree that any person participating in the Note Exchange Offer
for the purpose of distributing the New Notes must comply with the registration
and prospectus delivery requirements of the Securities Act of 1933, as amended
(together with the rules and regulations promulgated thereunder, the "SECURITIES
ACT"), in connection with a secondary resale transaction of the New Notes
acquired by such person and cannot rely on the position of the Staff of the
Securities and Exchange Commission (the "COMMISSION") set forth in the no-action
letters that are discussed in the section of the Prospectus entitled "The
Exchange Offers-- Resales of the New Notes and the New Preferred Stock."
The undersigned and each Beneficial Owner understands that any secondary
resale transaction described in clause (iii) above should be covered by an
effective registration statement containing the selling securityholder
information required by Item 507 of Regulation S-K of the Commission. Except as
otherwise disclosed to the Company in writing, the undersigned hereby represents
and warrants that neither it nor any Beneficial Owner(s) is an "affiliate," as
defined under Rule 405 of the Securities Act, of the Company except as otherwise
disclosed to the Company in writing.
If the undersigned is a broker-dealer that will receive New Notes for its
own account in exchange for Old Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus in connection with any resale of such New Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
<PAGE>
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOXES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
BOX 1
DESCRIPTION OF OLD NOTES TENDERED
(ATTACH ADDITIONAL SIGNED PAGES, IF NECESSARY)
<CAPTION>
NAME(S) AND ADDRESS(ES) OF
REGISTERED OLD NOTES
HOLDERS(S), CERTIFICATE AGGREGATE AGGREGATE
EXACTLY AS NAME(S) APPEAR(S) NUMBER(S) PRINCIPAL PRINCIPAL
ON OLD NOTES CERTIFICATE(S) OF AMOUNT OF NOTES AMOUNT OF NOTES
(PLEASE FILL IN, IF BLANK) OLD NOTES* BY CERTIFICATE(S) TENDERED**
<S> <C> <C> <C>
TOTAL
</TABLE>
* Need not be completed by book-entry holders.
** Unless otherwise indicated in this column, the number of shares
represented by all Old Notes Certificates identified in this Box 1 or
delivered to the Exchange Agent herewith shall be deemed tendered. See
Instruction 4.
BOX 2
BENEFICIAL OWNER(S)
STATE OF PRINCIPAL RESIDENCE OF
EACH BENEFICIAL OWNER OF
AGGREGATE PRINCIPAL AMOUNT OF
TENDERED NOTES
TENDERED NOTES
HELD FOR ACCOUNT OF BENEFICIAL
OWNER
This Letter of Transmittal is to be used either if Old Notes are to be
forwarded herewith or if delivery of Old Notes is to be made by book-entry
transfer to an account maintained by the Exchange Agent at The Depository Trust
Company, pursuant to the procedures set forth in "The Exchange
Offers--Procedures for Tendering" in the Prospectus. Delivery of documents to
the book-entry transfer facility does not constitute delivery to the Exchange
Agent.
Holders whose Old Notes are not immediately available or who cannot deliver
their Old Notes and all other documents required hereby to the Exchange Agent on
or prior to the Expiration Date must tender their Old Notes according to the
guaranteed delivery procedure set forth in the Prospectus under the caption "The
Exchange Offers-- Guaranteed Delivery Procedures."
/ /CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE
TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution _______________________________________________
/ / The Depository Trust Company
Account Number _____________________________________________________________
Transaction Code Number ____________________________________________________
<PAGE>
BOX 3
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
To be completed ONLY if the New Notes exchanged for Old Notes and untendered
Old Notes are to be sent to someone other than the undersigned, or to the
undersigned at an address other than that shown above.
Mail New Notes and any untendered Old Notes to:
Name(s):
______________________________________________________________________________
(please print)
Address:
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
(include Zip Code)
Tax Identification or Social Security No.:
BOX 4
USE OF GUARANTEED DELIVERY
/ / CHECK HERE ONLY IF OLD NOTES ARE BEING TENDERED BY MEANS OF A NOTICE OF
GUARANTEED DELIVERY.
See Instruction 2. If this box is checked, please provide the following
information:
Name(s) of Registered Holder(s): _____________________________________________
______________________________________________________________________________
Date of Execution of Notice of Guaranteed Delivery: __________________________
Name of Institution which Guaranteed Delivery: _______________________________
If Delivered by Book-Entry Transfer:
Account Number: ______________________________________________________________
<PAGE>
BOX 5
TENDERING HOLDER SIGNATURE
(SEE INSTRUCTIONS 1 AND 5)
IN ADDITION, COMPLETE SUBSTITUTE FORM W-9
X _______________________________________________________________________
Signature Guarantee
(If required by
Instruction 5)
X _______________________________________________________________________
(Signature of Registered
Holder(s)
Authorized Signature
or Authorized Signatory)
X ____________________
Note: The above lines must be signed by the registered
Name: ________________
holder(s) of Old Notes as their name(s) appear(s) on
(please print)
the Old Notes or by person(s) authorized to become
Title: _______________
registered holder(s) (which must be transmitted with this Letter of
Transmittal). If signature is by a trustee,
Name of Firm: _________
executor, administrator, guardian, attorney-in-fact,
(Must
be an
Eligible
Institution
officer, or other person acting in a fiduciary or as defined in
Instruction
2)
representative capacity, such person must set forth his
Address: _____________
or her full title below.
See Instruction 5.
_____________
Name(s): ______________________________________________________________
_______________________________________________________________
______________________________________________________________
(incude Zip
Code)
Capacity: _____________________________________________________________
Area Code and Telephone
Number:
_____________________________________________________________
___________
Street Address: _______________________________________________________
Dated: _______________
________________________________________________________________
________________________________________________________________
(include Zip Code)
Area Code and Telephone Number:
___________________________________
Tax Identification or Social Security Number:
____________________________________
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: __________________________________________________________________________
Address: _______________________________________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, and has no arrangement
or understanding with any person to engage in, a distribution of New Notes. If
the undersigned is a broker-dealer that will receive New Notes for its own
account in exchange for Old Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus in connection with any resale of such New Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
<PAGE>
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS
OF THE NOTE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD NOTES. The Tendered
Notes or confirmation of any book-entry transfer, as well as a properly
completed and duly executed copy of this Letter of Transmittal, a Substitute
Form W-9 (or facsimile thereof) and any other documents required by this Letter
of Transmittal must be received by the Exchange Agent at its address set forth
herein prior to the Expiration Date. The method of delivery of certificates for
Old Notes and all other required documents is at the election and risk of the
tendering holder and delivery will be deemed made only when actually received by
the Exchange Agent. If delivery is by mail, registered mail with return receipt
requested, properly insured, is recommended. Instead of delivery by mail, it is
recommended that the holder use an overnight or hand delivery service. In all
cases, sufficient time should be allowed to assure timely delivery. Neither
PRIMEDIA nor the registrar is under any obligation to notify any tendering
holder of the Company's acceptance of Tendered Notes prior to the Expiration
Date.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Old
Notes but whose Old Notes are not immediately available and who cannot deliver
Old Notes, Letter of Transmittal and any other documents required by the Letter
of Transmittal to the Exchange Agent prior to the Expiration Date or comply with
book-entry transfer procedures on a timely basis must tender their Old Notes
according to the guaranteed delivery procedures set forth below, including
completion of Box 4. Pursuant to such procedures: (i) such tender must be made
by or through a firm which is a member of a registered national securities
exchange or if the National Association of Securities Dealers, Inc., or is a
commercial bank or trust company having an office or correspondent in the United
States, or is otherwise an "eligible guarantor institution" within the meaning
of Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (an
"ELIGIBLE INSTITUTION") and the Notice of Guaranteed Delivery must be signed by
the holder; (ii) prior to the Expiration Date, the Exchange Agent must have
received from the holder and the Eligible Institution a properly completed and
duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail, or
hand delivery setting forth the name and address of the holder, the certificate
number or numbers of the Tendered Notes, and the principal amount of Tendered
Notes, stating that the tender is being made thereby and guaranteeing that,
within three business days after the Expiration Date, the Letter of Transmittal
(or facsimile thereof), together with the Tendered Notes (or a confirmation of
any book-entry transfer of the Old Notes into the Exchange Agent's account at a
book-entry transfer facility) and any other required documents will be deposited
by the Eligible Institution with the Exchange Agent; and (iii) such properly
completed and executed documents required by this Letter of Transmittal and the
Tendered Shares (or a confirmation of any book-entry transfer of the Old Notes
into the Exchange Agent's account at a book-entry transfer facility) in proper
form for transfer must be received by the Exchange Agent within three business
days after the Expiration Date. Any holder who wishes to tender Old Notes
pursuant to the guaranteed delivery procedures described above must ensure that
the Exchange Agent receives the Notice of Guaranteed Delivery relating to such
Old Notes prior to the Expiration Date. Failure to complete the guaranteed
delivery procedures outlined above will not, of itself, affect the validity or
effect a revocation of any Letter of Transmittal form properly completed and
executed by an Eligible Holder who attempted to use the guaranteed delivery
process.
3. BENEFICIAL OWNER INSTRUCTIONS TO REGISTERED HOLDERS. Only a holder in
whose name the Old Notes are registered on the books of the registrar (or the
legal representative or attorney-in-fact of such registered holder) may execute
and deliver this Letter of Transmittal. Any Beneficial Owner of Old Notes who is
not the registered holder must arrange promptly with the registered holder to
execute and deliver this Letter of Transmittal on his or her behalf through the
execution and delivery to the registered holder of the Instructions to
Registered Holder from Beneficial Owner form accompanying this Letter of
Transmittal.
4. PARTIAL TENDERS. If less than the entire number of Old Notes is
tendered, the tendering holder should fill in the aggregate principal amount of
Notes tendered in the column labeled "Aggregate Principal Amount of Notes
Tendered" of the box entitled "Description of Old Notes Tendered" (Box 1) above.
The entire aggregate principal amount of Old Notes delivered to the Exchange
Agent will be deemed to have been tendered unless otherwise indicated. If the
entire aggregate principal amount of all Old Notes is not tendered, Old Notes
for the aggregate principal amount of Old Notes not tendered and New Notes
exchanged for Old Notes tendered will be sent to the holder at his or her
registered address, unless a different address is provided in the appropriate
box on this Letter of Transmittal, as soon as practicable following the
Expiration Date.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the
registered holder(s) of the Tendered Notes, the signature must correspond with
the name(s) as written on the face of the Tendered Notes without alteration,
enlargement, or any change whatsoever.
If any of the Tendered Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any Tendered
Notes are held in different names on several Old Notes, it will be necessary to
complete, sign, and submit as many separate copies of the Letter of Transmittal
documents as there are names in which Tendered Notes are held.
<PAGE>
If this Letter of Transmittal is signed by the registered holder(s) (which
term, for the purposes described herein, shall include the book-entry transfer
facility whose name appears on a security listing as the owner of the Old Notes)
of Tendered Notes tendered and New Notes are to be issued (or any untendered Old
Notes are to be reissued) to the registered holder(s), the registered holder(s)
need not and should not endorse any Tendered Notes nor provide a separate bond
power. In any other case, such registered holder(s) must either properly endorse
the Old Notes tendered or transmit a properly completed separate bond power with
this Letter of Transmittal, with the signature(s) on the endorsement or bond
power guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
Registered Holder(s) of any Old Notes, the Tendered Notes must be endorsed or
accompanied by appropriate bond powers, in each case, signed as the name of the
registered holder(s) appears on the Old Notes, with the signature on the
endorsement or bond power guaranteed by an Eligible Institution.
If this Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations, or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and, unless waived by the Company,
evidence satisfactory to the Company of their authority to so act must be
submitted with this Letter of Transmittal.
Endorsements on Old Notes or signatures on bond powers required by this
Instruction 5 must be guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution unless the Tendered Notes are tendered (i) by a Registered Holder
who has not completed the box set forth herein entitled "Special Delivery
Instructions" (Box 3) or (ii) by an Eligible Institution.
6. SPECIAL DELIVERY INSTRUCTIONS. Tendering Eligible Holders should
indicate, in the applicable box (Box 3), the name and address to which the New
Notes and/or substitute Old Notes for Old Notes not tendered or not accepted for
exchange are to be sent, if different from the name and address of the person
signing this Letter of Transmittal.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the sale and transfer of Old Notes to it or its order pursuant to
the Note Exchange Offer. If, however, a transfer tax is imposed for any reason
other than the transfer and sale of Old Notes to the Company or its order
pursuant to the Note Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or on any other person) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption from taxes therefrom is not submitted with this Letter of
Transmittal, the amount of transfer taxes will be billed directly to such
tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
8. SUBSTITUTE FORM W-9. Federal income tax law requires that a holder of
any Old Notes which are accepted for exchange must provide the Company (as
payor) with its correct taxpayer identification number ("TIN"), which, in the
case of a holder who is an individual, is his or her social security number, and
with certain other information, on Substitute Form W-9 (which is provided
herein), and to certify that the holder (or other payee) is not subject to
backup withholding. Failure to provide the information on the Substitute Form
W-9 may subject the holder to a $50 penalty imposed by the Internal Revenue
Service (the "IRS") and 31% federal income tax backup withholding on payments
made in connection with the Note Exchange Offer. (If withholding results in an
over-payment of taxes, a refund may be obtained from the IRS.) Certain holders
(including, among others, all corporations and certain foreign individuals) are
not subject to these backup withholding and reporting requirements. Exempt
holders should indicate their exempt status on Substitute Form W-9. In order for
a foreign individual to qualify as an exempt recipient, the holder must submit a
Form W-8, signed under penalties of perjury, attesting to that individual's
exempt status. A Form W-8 can be obtained from the Company. See the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of failure
to report all interest or dividends or (ii) the Internal Revenue Service has
notified the holder that such holder is no longer subject to backup withholding.
If the Old Notes are registered in more than one name or are not in the name of
the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for information on which TIN to
report.
PRIMEDIA reserves the right in its sole discretion to take whatever steps
are necessary to comply with the Company's obligation regarding backup
withholding.
<PAGE>
9. VALIDITY OF TENDERS. All questions as to the validity, form,
eligibility (including time of receipt), and acceptance of Tendered Notes will
be determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the right to reject any and all Old
Notes not validly tendered or any Old Notes the Company's acceptance of which
would, in the opinion of counsel for the Company, be unlawful. The Company also
reserves the right to waive any conditions of the Note Exchange Offer or
defects, irregularities or conditions of tender as to particular Old Notes. The
interpretation of the terms and conditions of the Note Exchange Offer (including
this Letter of Transmittal and the instructions hereto) by the Company shall be
final and binding on all parties. Unless waived, any defects or irregularities
in connection with tenders of Old Notes must be cured within such time as the
Company shall determine. The Company will use reasonable efforts to give
notification of defects or irregularities with respect to tenders of Old Notes,
but shall not incur any liability for failure to give such notification.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to
amend, waive, or modify specified conditions in the Note Exchange Offer in the
case of any Tendered Notes.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of Old Notes or transmittal of this Letter of Transmittal will
be accepted.
12. MUTILATED, LOST, STOLEN, OR DESTROYED OLD NOTES. Any tendering holder
whose Old Notes have been mutilated, lost, stolen, or destroyed should contact
the Exchange Agent at the address indicated above for further instruction.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Note Exchange Offer.
14. ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF NEW NOTES; RETURN OF OLD
NOTES. Subject to the terms and conditions of the Note Exchange Offer, the
Company will accept for exchange all validly tendered Old Notes as soon as
practicable after the Expiration Date and will issue New Notes therefor as soon
as practicable thereafter. For purposes of the Note Exchange Offer, the Company
shall be deemed to have accepted tendered Old Notes when, as and if the Company
has given written or oral notice thereof to the Exchange Agent. If any Tendered
Notes are not exchanged pursuant to the Note Exchange Offer for any reason, such
unexchanged Old Notes will be returned, without expense, to the undersigned at
the address shown below or at a different address as may be indicated herein
under "Special Delivery Instructions."
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offers--Withdrawal of Tenders."
<PAGE>
<TABLE>
<S> <C> <C>
PAYOR'S NAME: PRIMEDIA
SUBSTITUTE Name (if joint names, list first and circle the name of the person
or entity whose number you enter in Part I below. See instructions
if your name has changed.)
Address
FORM W-9
City, state and ZIP Code
Department of the Treasury
List account number(s) here (optional)
Internal Revenue Service Part 1 - PLEASE PROVIDE YOUR TAXPAYER Social Security
IDENTIFICATON NUMBER ("TIN") IN THE BOX AT number or TIN
RIGHT AND CERTIFY BY SIGNING AND DATING BELOW
Part 2 - Check the box if you are NOT subject to backup withholding
under the provisions of section 3408(a)(1)(C) of the Internal
Revenue Code
because (1) you have not been notified that you are subject to
backup
withholding as a result of failure to report all interest or
dividends or
(2) the Internal Revenue Service has notified you that you are no
longer
subject to backup withholding. / /
Payor's Request for TIN CERTIFICATION - UNDER THE PENALTIES OF PERJURY, Part 3 -
I CERTIFY THAT THE INFORMATION PROVIDED ON THIS
FORM IS TRUE, CORRECT AND COMPLETE AWAITING TIN
Signature Date / /
</TABLE>
Note: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE NOTE EXCHANGE OFFER.
PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE>
EXHIBIT (a)(iii)
INSTRUCTION TO REGISTERED HOLDER
FROM BENEFICIAL OWNER
OF
PRIMEDIA INC.
(FORMERLY KNOWN AS K-III COMMUNICATIONS CORPORATION)
7 5/8% SENIOR NOTES INC. 2008
The undersigned hereby acknowledges receipt of the Prospectus
dated , 1998 (the "PROSPECTUS") of PRIMEDIA Inc. (formerly known
as K-III Communications Corporation), a Delaware corporation (THE "COMPANY"),
and the accompanying Letter of Transmittal (the "LETTER OF TRANSMITTAL"), that
together constitute the Company's offer (the "NOTE EXCHANGE OFFER"). Capitalized
terms used but not defined herein have the meanings ascribed to them in the
Prospectus.
This will instruct you, the registered holder, as to the action to be taken
by you relating to the Note Exchange Offer with respect to the 7 5/8% Senior
Notes due 2008 (the "OLD NOTES") held by you for the account of the undersigned.
The principal amount of Old Notes held by you for the account of the
undersigned is (FILL IN PRINCIPAL AMOUNT OF NOTES):
$_________ principal amount of Old Notes.
With respect to the Note Exchange Offer, the undersigned hereby instructs
you (CHECK APPROPRIATE BOX):
/ / To TENDER the following Old Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF OLD NOTES TO BE TENDERED, IF
ANY):
_________ Old Notes.
/ / NOT to TENDER any Old Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Old Notes held by you for the
account of the undersigned, it is understood that you are authorized (a) to
make, on behalf of the undersigned (and the undersigned, by its signature below,
hereby makes to you), the representation and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
Beneficial Owner (as defined in the Letter of Transmittal), including but not
limited to the representations that (i) the undersigned's principal residence is
in the state of (FILL IN STATE) _____________________ , (ii) the undersigned is
acquiring the New Notes in the ordinary course of business of the undersigned,
(iii) the undersigned is not participating, does not intend to participate, and
has no arrangement or understanding with any person to participate, in the
distribution of the New Notes, (iv) the undersigned acknowledges that any person
participating in the Note Exchange Offer for the purpose of distributing the New
Notes must comply with the registration and prospectus delivery requirements of
the Securities Act of 1933, as amended (the "SECURITIES ACT"), in connection
with a secondary resale transaction of the New Notes acquired by such person and
cannot rely on the position of the Staff of the Securities and Exchange
Commission set forth in the no-action letters that are discussed in the section
of the Prospectus entitled "The Exchange Offers--Resales of the New Notes and
the New Preferred Stock", (v) the undersigned understands that a secondary
resale transaction described in (iv) above should be covered by an effective
registration statement containing the selling security holder information
required by Item 507 of Regulation S-K of the Commission and (vi) the
undersigned is not an "affiliate," as defined under Rule 405 of the Securities
Act, of the Company except as otherwise disclosed to the Company in writing; (b)
to agree, on behalf of the undersigned, as set forth in the Letter of
Transmittal; and (c) to take such other action as necessary under the Prospectus
or the Letter of Transmittal to effect the valid tender of such Old Notes.
SIGN HERE
Name of Beneficial Owner(s): ___________________________________________________
Signature(s): __________________________________________________________________
Name(s) (PLEASE PRINT): ________________________________________________________
Address: _______________________________________________________________________
_______________________________________________________________________
Telephone Number: ______________________________________________________________
Taxpayer Identification or Social Security Number: _____________________________
Date: __________________________________________________________________________
<PAGE>
EXHIBIT (a)(ii)
EX. 99.1(B)
LETTER OF TRANSMITTAL
THE PREFERRED STOCK EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON , 1998 (AS SUCH DATE AND TIME MAY BE
EXTENDED BY THE COMPANY IN ITS SOLE DISCRETION, THE "EXPIRATION DATE").
PRIMEDIA INC.
(FORMERLY KNOWN AS K-III COMMUNICATIONS CORPORATION)
$8.625 SERIES G EXCHANGEABLE PREFERRED STOCK
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
IF YOU DESIRE TO ACCEPT THE PREFERRED STOCK EXCHANGE OFFER, THIS LETTER OF
TRANSMITTAL SHOULD BE COMPLETED, SIGNED, AND SUBMITTED TO THE BANK OF NEW YORK,
EXCHANGE AGENT:
<TABLE>
<S> <C> <C>
BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER:
Tender & Exchange Department (For Eligible Institutions Only) Tender & Exchange Department
P.O. Box 11248 (212) 815-6213 101 Barclay Street
Church Street Station CONFIRM FACSIMILE BY TELEPHONE: Receive and Deliver Window
New York, NY 10286-1248 (For Confirmation Only) New York, NY 10286
(800) 507-9357
</TABLE>
Delivery of this Letter of Transmittal to an address other than as set forth
above or transmission of instructions via a facsimile number other than that set
forth above will not constitute a valid delivery.
The undersigned hereby acknowledges receipt of the Prospectus dated
, 1998 (the "PROSPECTUS") of PRIMEDIA Inc. (formerly known as K-III
Communications Corporation), a Delaware corporation ("PRIMEDIA " or the
"COMPANY"), and this Letter of Transmittal (the "LETTER OF TRANSMITTAL "), that
together constitute the Company's offer (the "PREFERRED STOCK EXCHANGE OFFER ")
to exchange one share (or fraction thereof) of its $8.625 Series H Exchangeable
Preferred Stock (the "NEW PREFERRED STOCK") for each share (or fraction thereof)
of its outstanding $8.625 Series G Exchangeable Preferred Stock (the "OLD
PREFERRED STOCK"). The New Preferred Stock and the Old Preferred Stock are
collectively referred to as the "PREFERRED STOCK". Capitalized terms used but
not defined herein have the meanings ascribed to them in the Prospectus.
THE REGISTRATION STATEMENT ON FORM S-4 (FILE NO. 333- ) OF WHICH THE
PROSPECTUS IS A PART WAS DECLARED EFFECTIVE BY THE SECURITIES AND EXCHANGE
COMMISSION ON , 1998.
The undersigned hereby tenders the shares of Old Preferred Stock described
in Box 1 below (the "TENDERED SHARES") pursuant to the terms and conditions
described in the Prospectus and this Letter of Transmittal. The undersigned is
the registered owner of all the Tendered Shares and the undersigned represents
that it has received from each beneficial owner of Tendered Shares ("BENEFICIAL
OWNERS") a duly completed and executed form of "Instruction to Registered Holder
from Beneficial Owner" accompanying this Letter of Transmittal, instructing the
undersigned to take the action described in this Letter of Transmittal.
Subject to, and effective upon, the acceptance for exchange of the Tendered
Shares, the undersigned hereby exchanges, assigns, and transfers to, or upon the
order of, the Company, all right, title, and interest in, to, and under the
Tendered Shares.
Please issue the shares of New Preferred Stock exchanged for Tendered Shares
in the name(s) of the undersigned. Similarly, unless otherwise indicated under
"SPECIAL DELIVERY INSTRUCTIONS" below (Box 3), please send or cause to be sent
the certificate(s) for shares of New Preferred Stock (and accompanying
documents, as appropriate) to the undersigned at the address shown below in Box
1.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the true and lawful agent and attorney in fact of the undersigned with
respect to the Tendered Shares, with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest), to
(i) deliver the Tendered Shares to the Company or cause ownership of the
Tendered Shares to be transferred to, or upon the order of, the Company, on the
books of the registrar for the Old Preferred Stock or on the account books
maintained by a book-entry transfer facility and deliver all accompanying
evidences of transfer and authenticity to, or upon the order of, the Company
upon receipt by the Exchange Agent, as the undersigned's agent, of the shares of
New Preferred Stock to which the undersigned is entitled upon the acceptance by
the Company of the Tendered Shares pursuant to the Preferred Stock Exchange
Offer, and (ii) receive all benefits and otherwise exercise all rights of
beneficial ownership of the Tendered Shares, all in accordance with the terms of
the Preferred Stock Exchange Offer.
The undersigned understands that tenders of shares of Old Preferred Stock
pursuant to the procedures described under the caption "The Exchange
Offers--Procedures for Tendering" in the Prospectus and in the instructions
hereto will constitute a binding agreement between the undersigned and the
Company upon the terms and subject to the conditions of the Preferred Stock
Exchange Offer, subject only to withdrawal of such tenders on the terms set
forth in the Prospectus under the caption "The Exchange Offers--Withdrawal of
Tenders." All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the undersigned and any Beneficial Owner(s), and
every obligation of the undersigned or any Beneficial Owners hereunder shall be
binding upon the heirs, representatives, successors, and assigns of the
undersigned and such Beneficial Owner(s).
<PAGE>
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, exchange, assign, and transfer the Tendered
Shares and that the Company will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges, encumbrances, and adverse
claims when the Tendered Shares are acquired by the Company as contemplated
herein. The undersigned and each Beneficial Owner will, upon request, execute
and deliver any additional documents reasonably requested by the Company as
necessary or desirable to complete and give effect to the transactions
contemplated hereby.
The undersigned hereby represents and warrants that the information set
forth in Box 2 is true and correct.
By accepting the Preferred Stock Exchange Offer, the undersigned hereby
represents and warrants that (i) the shares of New Preferred Stock to be
acquired by the undersigned and any Beneficial Owner(s) in connection with the
Preferred Stock Exchange Offer are being acquired by the undersigned and any
Beneficial Owner(s) in the ordinary course of business of the undersigned and
any Beneficial Owner(s), (ii) the undersigned and each Beneficial Owner are not
participating, do not intend to participate, and have no arrangement or
understanding with any person to participate, in the distribution of the New
Preferred Stock, (iii) the undersigned and each Beneficial Owner acknowledge and
agree that any person participating in the Preferred Stock Exchange Offer for
the purpose of distributing the New Preferred Stock must comply with the
registration and prospectus delivery requirements of the
Securities Act of 1933, as amended (together with the rules and regulations
promulgated thereunder, the "SECURITIES ACT"), in connection with a secondary
resale transaction of the shares of New Preferred Stock acquired by such person
and cannot rely on the position of the Staff of the Securities and Exchange
Commission (the "COMMISSION") set forth in the no-action letters that are
discussed in the section of the Prospectus entitled "The Exchange
Offers--Resales of the New Notes and the New Preferred Stock."
The undersigned and each Beneficial Owner understands that any secondary
resale transaction described in clause (iii) above should be covered by an
effective registration statement containing the selling securityholder
information required by Item 507 of Regulation S-K of the Commission. Except as
otherwise disclosed to the Company in writing, the undersigned hereby represents
and warrants that neither it nor any Beneficial Owner(s) is an "affiliate," as
defined under Rule 405 of the Securities Act, of the Company except as otherwise
disclosed to the Company in writing.
If the undersigned is a broker-dealer that will receive New Preferred Stock
for its own account in exchange for Old Preferred Stock that were acquired as a
result of market-making activities or other trading activities, it acknowledges
that it will deliver a prospectus in connection with any resale of such New
Preferred Stock; however, by so acknowledging and by delivering a prospectus,
the undersigned will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
<PAGE>
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOXES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
BOX 1
DESCRIPTION OF OLD PREFERRED STOCK TENDERED
(ATTACH ADDITIONAL SIGNED PAGES, IF NECESSARY)
<CAPTION>
NAME(S) AND ADDRESS(ES) OF
REGISTERED OLD PREFERRED STOCK
HOLDERS(S), CERTIFICATE
EXACTLY AS NAME(S) APPEAR(S) NUMBER(S) AGGREGATE
ON OLD PREFERRED STOCK OF SHARES OF NUMBER OF SHARES AGGREGATE
CERTIFICATE(S) OLD PREFERRED REPRESENTED NUMBER OF SHARES
(PLEASE FILL IN, IF BLANK) STOCK* BY CERTIFICATE(S) TENDERED**
<S> <C> <C> <C>
TOTAL
</TABLE>
* Need not be completed by book-entry holders.
** Unless otherwise indicated in this column, the number of shares
represented by all Old Preferred Stock Certificates identified in this
Box 1 or delivered to the Exchange Agent herewith shall be deemed
tendered. See Instruction 4.
BOX 2
BENEFICIAL OWNER(S)
STATE OF PRINCIPAL RESIDENCE OF
EACH BENEFICIAL OWNER OF
NUMBER OF TENDERED SHARES
TENDERED SHARES
HELD FOR ACCOUNT OF BENEFICIAL
OWNER
This Letter of Transmittal is to be used either if shares of Old Preferred
Stock are to be forwarded herewith or if delivery of Old Preferred Stock is to
be made by book-entry transfer to an account maintained by the Exchange Agent at
The Depository Trust Company, pursuant to the procedures set forth in "The
Exchange Offers--Procedures for Tendering" in the Prospectus. Delivery of
documents to the book-entry transfer facility does not constitute delivery to
the Exchange Agent.
Holders whose shares of Old Preferred Stock are not immediately available or
who cannot deliver their shares of Old Preferred Stock and all other documents
required hereby to the Exchange Agent on or prior to the Expiration Date must
tender their shares of Old Preferred Stock according to the guaranteed delivery
procedure set forth in the Prospectus under the caption "The Exchange
Offers--Guaranteed Delivery Procedures."
/ /CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE
TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution _______________________________________________
/ / The Depository Trust Company
Account Number _____________________________________________________________
Transaction Code Number ____________________________________________________
<PAGE>
BOX 3
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5, 6 AND 7)
To be completed ONLY if the shares of New Preferred Stock exchanged for shares
of Old Preferred Stock and untendered shares of Old Preferred Stock are to be
sent to someone other than the undersigned, or to the undersigned at an
address other than that shown above.
Mail shares of New Preferred Stock and any untendered shares of Old Preferred
Stock to:
Name(s):
______________________________________________________________________________
(please print)
Address:
______________________________________________________________________________
______________________________________________________________________________
______________________________________________________________________________
(include Zip Code)
Tax Identification or Social Security No.:
BOX 4
USE OF GUARANTEED DELIVERY
/ / CHECK HERE ONLY IF SHARES OF OLD PREFERRED STOCK ARE BEING
TENDERED BY MEANS OF A NOTICE OF GUARANTEED DELIVERY.
See Instruction 2. If this box is checked, please provide the following
information:
Name(s) of Registered Holder(s): _____________________________________________
______________________________________________________________________________
Date of Execution of Notice of Guaranteed Delivery: __________________________
Name of Institution which Guaranteed Delivery: _______________________________
If Delivered by Book-Entry Transfer:
Account Number: ______________________________________________________________
<PAGE>
BOX 5
TENDERING HOLDER SIGNATURE
(SEE INSTRUCTIONS 1 AND 5)
IN ADDITION, COMPLETE SUBSTITUTE FORM W-9
X _______________________________________________________________________
Signature Guarantee
(If required by
Instruction 5)
X _______________________________________________________________________
(Signature of Registered
Holder(s)
Authorized Signature
or Authorized Signatory)
X ____________________
Note: The above lines must be signed by the registered
Name: ________________
holder(s) of Old Preferred Stock as their name(s)
(please print)
appear(s) on the shares of Old Preferred Stock or by
Title: _______________
person(s) authorized to become registered holder(s) (which must be
transmitted with this Letter of
Name of Firm: _________
Transmittal). If signature is by a trustee, executor,
(Must
be an
Eligible
Institution
administrator, guardian, attorney-in-fact, officer, or as defined in
Instruction
2)
other person acting in a fiduciary or representative
Address: _____________
capacity, such person must set forth his or her full title below.
_____________
See Instruction 5.
_____________
Name(s): ______________________________________________________________
(incude Zip
Code)
______________________________________________________________
Area Code and Telephone
Number:
Capacity: _____________________________________________________________
___________
_____________________________________________________________
Dated: _______________
Street Address: _______________________________________________________
________________________________________________________________
________________________________________________________________
(include Zip Code)
Area Code and Telephone Number:
___________________________________
Tax Identification or Social Security Number:
____________________________________
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name: __________________________________________________________________________
Address: _______________________________________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, and has no arrangement
or understanding with any person to engage in, a distribution of New Preferred
Stock. If the undersigned is a broker-dealer that will receive New Preferred
Stock for its own account in exchange for Old Preferred Stock that was acquired
as a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such New Preferred Stock; however, by so acknowledging and by delivering a
prospectus, the undersigned will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
<PAGE>
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS
OF THE PREFERRED STOCK EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD PREFERRED STOCK. The
Tendered Shares or confirmation of any book-entry transfer, as well as a
properly completed and duly executed copy of this Letter of Transmittal, a
Substitute Form W-9 (or facsimile thereof) and any other documents required by
this Letter of Transmittal must be received by the Exchange Agent at its address
set forth herein prior to the Expiration Date. The method of delivery of
certificates for Old Preferred Stock and all other required documents is at the
election and risk of the tendering holder and delivery will be deemed made only
when actually received by the Exchange Agent. If delivery is by mail, registered
mail with return receipt requested, properly insured, is recommended. Instead of
delivery by mail, it is recommended that the holder use an overnight or hand
delivery service. In all cases, sufficient time should be allowed to assure
timely delivery. Neither PRIMEDIA nor the registrar is under any obligation to
notify any tendering holder of the Company's acceptance of Tendered Shares prior
to the Expiration Date.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their shares
of Old Preferred Stock but whose shares of Old Preferred Stock are not
immediately available and who cannot deliver their shares of Old Preferred
Stock, Letter of Transmittal and any other documents required by the Letter of
Transmittal to the Exchange Agent prior to the Expiration Date or comply with
book-entry transfer procedures on a timely basis must tender their shares of Old
Preferred Stock according to the guaranteed delivery procedures set forth below,
including completion of Box 4. Pursuant to such procedures: (i) such tender must
be made by or through a firm which is a member of a registered national
securities exchange or if the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended (an "ELIGIBLE INSTITUTION") and the Notice of Guaranteed Delivery must
be signed by the holder; (ii) prior to the Expiration Date, the Exchange Agent
must have received from the holder and the Eligible Institution a properly
completed and duly executed Notice of Guaranteed Delivery (by facsimile
transmission, mail, or hand delivery setting forth the name and address of the
holder, the certificate number or numbers of the Tendered Shares, and the
principal amount of Tendered Shares, stating that the tender is being made
thereby and guaranteeing that, within three business days after the Expiration
Date, the Letter of Transmittal (or facsimile thereof), together with the
Tendered Shares (or a confirmation of any book-entry transfer of the Old
Preferred Stock into the Exchange Agent's account at a book-entry transfer
facility) and any other required documents will be deposited by the Eligible
Institution with the Exchange Agent; and (iii) such properly completed and
executed documents required by this Letter of Transmittal and the Tendered
Shares (or a confirmation of any book-entry transfer of the Old Preferred Stock
into the Exchange Agent's account at a book-entry transfer facility) in proper
form for transfer must be received by the Exchange Agent within three business
days after the Expiration Date. Any holder who wishes to tender shares of Old
Preferred Stock pursuant to the guaranteed delivery procedures described above
must ensure that the Exchange Agent receives the Notice of Guaranteed Delivery
relating to such shares of Old Preferred Stock prior to the Expiration Date.
Failure to complete the guaranteed delivery procedures outlined above will not,
of itself, affect the validity or effect a revocation of any Letter of
Transmittal form properly completed and executed by an Eligible Holder who
attempted to use the guaranteed delivery process.
3. BENEFICIAL OWNER INSTRUCTIONS TO REGISTERED HOLDERS. Only a holder in
whose name the shares of Old Preferred Stock are registered on the books of the
registrar (or the legal representative or attorney-in-fact of such registered
holder) may execute and deliver this Letter of Transmittal. Any Beneficial Owner
of shares of Old Preferred Stock who is not the registered holder must arrange
promptly with the registered holder to execute and deliver this Letter of
Transmittal on his or her behalf through the execution and delivery to the
registered holder of the Instructions to Registered Holder from Beneficial Owner
form accompanying this Letter of Transmittal.
4. PARTIAL TENDERS. If less than the entire number of shares of Old
Preferred Stock is tendered, the tendering holder should fill in the number of
shares tendered in the column labeled "Aggregate Number of Shares Tendered" of
the box entitled "Description of Old Preferred Stock Tendered" (Box 1) above.
The entire number of shares of Old Preferred Stock delivered to the Exchange
Agent will be deemed to have been tendered unless otherwise indicated. If the
entire number of shares of all Old Preferred Stock is not tendered, shares of
Old Preferred Stock for the number of shares of Old Preferred Stock not tendered
and shares of New Preferred Stock exchanged for any shares of Old Preferred
Stock tendered will be sent to the holder at his or her registered address,
unless a different address is provided in the appropriate box on this Letter of
Transmittal, as soon as practicable following the Expiration Date.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the
registered holder(s) of the Tendered Shares, the signature must correspond with
the name(s) as written on the face of the Tendered Shares without alteration,
enlargement, or any change whatsoever.
If any of the Tendered Shares are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any Tendered
Shares are held in different names on several shares of Old Preferred Stock, it
will be necessary to complete, sign, and submit as many separate copies of the
Letter of Transmittal documents as there are names in which Tendered Shares are
held.
<PAGE>
If this Letter of Transmittal is signed by the registered holder(s) (which
term, for the purposes described herein, shall include the book-entry transfer
facility whose name appears on a security listing as the owner of the Old
Preferred Stock) of Tendered Shares tendered and shares of New Preferred Stock
are to be issued (or any untendered shares of Old Preferred Stock are to be
reissued) to the registered holder(s), the registered holder(s) need not and
should not endorse any Tendered Shares nor provide a separate bond power. In any
other case, such registered holder(s) must either properly endorse the shares of
Old Preferred Stock tendered or transmit a properly completed separate stock
power with this Letter of Transmittal, with the signature(s) on the endorsement
or stock power guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
Registered Holder(s) of any shares of Old Preferred Stock, the Tendered Shares
must be endorsed or accompanied by appropriate stock powers, in each case,
signed as the name of the registered holder(s) appears on the shares of Old
Preferred Stock, with the signature on the endorsement or stock power guaranteed
by an Eligible Institution.
If this Letter of Transmittal or any shares of Old Preferred Stock or stock
powers are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations, or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing and,
unless waived by the Company, evidence satisfactory to the Company of their
authority to so act must be submitted with this Letter of Transmittal.
Endorsements on shares of Old Preferred Stock or signatures on stock powers
required by this Instruction 5 must be guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution unless the Tendered Shares are tendered (i) by a Registered Holder
who has not completed the box set forth herein entitled "Special Delivery
Instructions" (Box 3) or (ii) by an Eligible Institution.
6. SPECIAL DELIVERY INSTRUCTIONS. Tendering Eligible Holders should
indicate, in the applicable box (Box 3), the name and address to which the
shares of New Preferred Stock and/or substitute shares of Old Preferred Stock
for shares not tendered or not accepted for exchange are to be sent, if
different from the name and address of the person signing this Letter of
Transmittal.
7. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the sale and transfer of Old Preferred Stock to it or its order
pursuant to the Preferred Stock Exchange Offer. If, however, a transfer tax is
imposed for any reason other than the transfer and sale of Old Preferred Stock
to the Company or its order pursuant to the Preferred Stock Exchange Offer, then
the amount of any such transfer taxes (whether imposed on the registered holder
or on any other person) will be payable by the tendering holder. If satisfactory
evidence of payment of such taxes or exemption from taxes therefrom is not
submitted with this Letter of Transmittal, the amount of transfer taxes will be
billed directly to such tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the shares of Old Preferred Stock listed in
this Letter of Transmittal.
8. SUBSTITUTE FORM W-9. Federal income tax law requires that a holder of
any shares of Old Preferred Stock which are accepted for exchange must provide
the Company (as payor) with its correct taxpayer identification number ("TIN"),
which, in the case of a holder who is an individual, is his or her social
security number, and with certain other information, on Substitute Form W-9
(which is provided herein), and to certify that the holder (or other payee) is
not subject to backup withholding. Failure to provide the information on the
Substitute Form W-9 may subject the holder to a $50 penalty imposed by the
Internal Revenue Service (the "IRS") and 31% federal income tax backup
withholding on payments made in connection with the Preferred Stock Exchange
Offer. (If withholding results in an over-payment of taxes, a refund may be
obtained from the IRS.) Certain holders (including, among others, all
corporations and certain foreign individuals) are not subject to these backup
withholding and reporting requirements. Exempt holders should indicate their
exempt status on Substitute Form W-9. In order for a foreign individual to
qualify as an exempt recipient, the holder must submit a Form W-8, signed under
penalties of perjury, attesting to that individual's exempt status. A Form W-8
can be obtained from the Company. See the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for additional
instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of failure
to report all interest or dividends or (ii) the Internal Revenue Service has
notified the holder that such holder is no longer subject to backup withholding.
If the shares of Old Preferred Stock are registered in more than one name or are
not in the name of the actual owner, consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
information on which TIN to report.
PRIMEDIA reserves the right in its sole discretion to take whatever steps
are necessary to comply with the Company's obligation regarding backup
withholding.
<PAGE>
9. VALIDITY OF TENDERS. All questions as to the validity, form,
eligibility (including time of receipt), and acceptance of Tendered Shares will
be determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the right to reject any and all shares
of Old Preferred Stock not validly tendered or any shares of Old Preferred Stock
the Company's acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the right to waive any
conditions of the Preferred Stock Exchange Offer or defects, irregularities or
conditions of tender as to particular shares of Old Preferred Stock. The
interpretation of the terms and conditions of the Preferred Stock Exchange Offer
(including this Letter of Transmittal and the instructions hereto) by the
Company shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of shares of Old Preferred Stock must
be cured within such time as the Company shall determine. The Company will use
reasonable efforts to give notification of defects or irregularities with
respect to tenders of shares of Old Preferred Stock, but shall not incur any
liability for failure to give such notification.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to
amend, waive, or modify specified conditions in the Preferred Stock Exchange
Offer in the case of any Tendered Shares.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of shares of Old Preferred Stock or transmittal of this Letter
of Transmittal will be accepted.
12. MUTILATED, LOST, STOLEN, OR DESTROYED SHARES OF OLD PREFERRED
STOCK. Any tendering holder whose shares of Old Preferred Stock have been
mutilated, lost, stolen, or destroyed should contact the Exchange Agent at the
address indicated above for further instruction.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Preferred Stock Exchange Offer.
14. ACCEPTANCE OF TENDERED SHARES AND ISSUANCE OF SHARES OF NEW PREFERRED
STOCK; RETURN SHARES OF OLD PREFERRED STOCK. Subject to the terms and
conditions of the Exchange Offer, the Company will accept for exchange all
validly tendered shares of Old Preferred Stock as soon as practicable after the
Expiration Date and will issue shares of New Preferred Stock therefor as soon as
practicable thereafter. For purposes of the Preferred Stock Exchange Offer, the
Company shall be deemed to have accepted tendered shares of Old Preferred Stock
when, as and if the Company has given written or oral notice thereof to the
Exchange Agent. If any Tendered Shares are not exchanged pursuant to the
Preferred Stock Exchange Offer for any reason, such unexchanged shares of Old
Preferred Stock will be returned, without expense, to the undersigned at the
address shown below or at a different address as may be indicated herein under
"Special Delivery Instructions."
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the limited
withdrawal rights set forth in the Prospectus under the caption "The Exchange
Offers--Withdrawal of Tenders."
<PAGE>
<TABLE>
<S> <C> <C>
PAYOR'S NAME: PRIMEDIA
SUBSTITUTE Name (if joint names, list first and circle the name of the person
or entity whose number you enter in Part I below. See instructions
if your name has changed.)
Address
FORM W-9
City, state and ZIP Code
Department of the Treasury
List account number(s) here (optional)
Internal Revenue Service Part 1 - PLEASE PROVIDE YOUR TAXPAYER Social Security
IDENTIFICATON NUMBER ("TIN") IN THE BOX AT number or TIN
RIGHT AND CERTIFY BY SIGNING AND DATING BELOW
Part 2 - Check the box if you are NOT subject to backup withholding
under the provisions of section 3408(a)(1)(C) of the Internal
Revenue Code
because (1) you have not been notified that you are subject to
backup
withholding as a result of failure to report all interest or
dividends or
(2) the Internal Revenue Service has notified you that you are no
longer
subject to backup withholding. / /
Payor's Request for TIN CERTIFICATION - UNDER THE PENALTIES OF PERJURY, Part 3 -
I CERTIFY THAT THE INFORMATION PROVIDED ON THIS
FORM IS TRUE, CORRECT AND COMPLETE AWAITING TIN
Signature Date / /
</TABLE>
Note: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE PREFERRED STOCK
EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
<PAGE>
EXHIBIT (a)(iii)
INSTRUCTION TO REGISTERED HOLDER
FROM BENEFICIAL OWNER
OF
PRIMEDIA INC.
(FORMERLY KNOWN AS K-III COMMUNICATIONS CORPORATION)
$8.625 SERIES G EXCHANGEABLE PREFERRED STOCK
The undersigned hereby acknowledges receipt of the Prospectus dated
, 1998 (the "PROSPECTUS") of PRIMEDIA Inc. (formerly known as K-III
Communications Corporation), a Delaware corporation (THE "COMPANY"), and the
accompanying Letter of Transmittal (the "LETTER OF TRANSMITTAL"), that together
constitute the Company's offer (the "PREFERRED STOCK EXCHANGE OFFER").
Capitalized terms used but not defined herein have the meanings ascribed to them
in the Prospectus.
This will instruct you, the registered holder, as to the action to be taken
by you relating to the Preferred Stock Exchange Offer with respect to the $8.625
Series G Exchangeable Preferred Stock (the "OLD PREFERRED STOCK") held by you
for the account of the undersigned.
The number of shares of the Old Preferred Stock held by you for the account
of the undersigned is (FILL IN NUMBER OF SHARES):
_________ shares of Old Preferred Stock.
With respect to the Preferred Stock Exchange Offer, the undersigned hereby
instructs you (CHECK APPROPRIATE BOX):
/ / To TENDER the following shares of Old Preferred Stock held by you for
the account of the undersigned (INSERT NUMBER OF SHARES OF OLD PREFERRED
STOCK TO BE TENDERED, IF ANY):
_________ shares of Old Preferred Stock.
/ / NOT to TENDER any shares of Old Preferred Stock held by you for the
account of the undersigned.
If the undersigned instructs you to tender the shares of Old Preferred Stock
held by you for the account of the undersigned, it is understood that you are
authorized (a) to make, on behalf of the undersigned (and the undersigned, by
its signature below, hereby makes to you), the representation and warranties
contained in the Letter of Transmittal that are to be made with respect to the
undersigned as a Beneficial Owner (as defined in the Letter of Transmittal),
including but not limited to the representations that (i) the undersigned's
principal residence is in the state of (FILL IN STATE) _____________________ ,
(ii) the undersigned is acquiring the shares of New Preferred Stock in the
ordinary course of business of the undersigned, (iii) the undersigned is not
participating, does not intend to participate, and has no arrangement or
understanding with any person to participate, in the distribution of the New
Preferred Stock, (iv) the undersigned acknowledges that any person participating
in the Preferred Stock Exchange Offer for the purpose of distributing the New
Preferred Stock must comply with the registration and prospectus delivery
requirements of the Securities Act of 1933, as amended (the "SECURITIES ACT"),
in connection with a secondary resale transaction of the New Preferred Stock
acquired by such person and cannot rely on the position of the Staff of the
Securities and Exchange Commission set forth in the no-action letters that are
discussed in the section of the Prospectus entitled "The Exchange
Offers--Resales of the New Notes and the New Preferred Stock", (v) the
undersigned understands that a secondary resale transaction described in (iv)
above should be covered by an effective registration statement containing the
selling security holder information required by Item 507 of Regulation S-K of
the Commission and (vi) the undersigned is not an "affiliate," as defined under
Rule 405 of the Securities Act, of the Company except as otherwise disclosed to
the Company in writing; (b) to agree, on behalf of the undersigned, as set forth
in the Letter of Transmittal; and (c) to take such other action as necessary
under the Prospectus or the Letter of Transmittal to effect the valid tender of
such shares of Old Preferred Stock.
SIGN HERE
Name of Beneficial Owner(s): ___________________________________________________
Signature(s): __________________________________________________________________
Name(s) (PLEASE PRINT): ________________________________________________________
Address: _______________________________________________________________________
_______________________________________________________________________
Telephone Number: ______________________________________________________________
Taxpayer Identification or Social Security Number: _____________________________
Date: __________________________________________________________________________
<PAGE>
EXHIBIT 99.2(A)
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
PRIMEDIA INC.
(FORMERLY KNOWN AS K-III COMMUNICATIONS CORPORATION)
7 5/8% SENIOR NOTES DUE 2008
This form must be used by a holder of the 7 5/8% Senior Notes due 2008 (the
"OLD NOTES") of PRIMEDIA Inc. (formerly known as K-III Communications
Corporation) ("PRIMEDIA") who wishes to tender Old Notes to the Exchange Agent
pursuant to the guaranteed delivery procedures described in "The Exchange
Offers--Guaranteed Delivery Procedures" of the Prospectus dated , 1998
(the "PROSPECTUS") and in Instruction 2 to the Letter of Transmittal. Any holder
who wishes to tender Old Notes pursuant to such guaranteed delivery procedures
must ensure that the Exchange Agent receives this Notice of Guaranteed Delivery
prior to the Expiration Date of the Note Exchange Offer. Capitalized terms not
defined herein have the meanings ascribed to them in the Prospectus or the
Letter of Transmittal.
To: The Bank of New York, Exchange Agent
<TABLE>
<S> <C> <C>
BY MAIL: FACSIMILE TRANSMISSIONS: BY HAND OR OVERNIGHT DELIVERY:
The Bank of New York (Eligible Institutions Only) The Bank of New York
101 Barclay Street, 7E (212) 815-6339 101 Barclay Street
New York, New York 10286 CONFIRM BY TELEPHONE: Corporate Trust Services Window
Attn: Reorganization Section, (212) 815-4146 Ground Level
7E: Vincent Jhingor FOR INFORMATION CALL: New York, New York 10286
(Registered or Certified Mail (212) 815-4146 Attn: Reorganization Section,
Recommended) 7E: Vincent Jhingor
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to PRIMEDIA, upon the terms and subject to
the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Old Notes specified below pursuant to the guaranteed delivery procedures set
forth in the Prospectus and in Instruction 2 of the Letter of Transmittal. The
undersigned hereby tenders the principal amount of Old Notes listed below:
<TABLE>
<CAPTION>
CERTIFICATE NUMBER(S) (IF KNOWN) PRINCIPAL AMOUNT PRINCIPAL AMOUNT
OF OLD NOTES REPRESENTED TENDERED
<S> <C> <C>
</TABLE>
/ / The Depositary Trust Company
(check if Old Notes will be tendered by book-entry transfer)
Account Number: ________________________________________________________________
SIGN HERE
Name of Holder: ________________________________________________________________
Signature(s): __________________________________________________________________
Name(s) (PLEASE PRINT): ________________________________________________________
Address: _______________________________________________________________________
_______________________________________________________________________
Telephone Number: ______________________________________________________________
Date: __________________________________________________________________________
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended, guarantees deposit with the Exchange Agent of the Letter of Transmittal
(or facsimile thereof), together with the Old Notes tendered hereby in proper
form for transfer and any other required documents, all by 5:00 p.m., New York
City time, on the third business day following the Expiration Date.
SIGN HERE
Name of firm: __________________
Authorized Signature: __________
Name (PLEASE PRINT): ___________
Address: _______________________
_______________________
_______________________
Telephone Number: ______________
Date: __________________________
DO NOT SEND NOTES WITH THIS FORM. ACTUAL SURRENDER OF NOTES MUST BE MADE
PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL.
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly completed
and duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by the
Exchange Agent at its address set forth herein prior to the Expiration Date. The
method of delivery of this Notice of Guaranteed Delivery and any other required
documents to the Exchange Agent is at the election and risk of the holder, and
the delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. Instead of delivery by mail, it is recommended
that the holder use an overnight or hand delivery service. In all cases
sufficient time should be allowed to assure timely delivery. For a description
of the guaranteed delivery procedure, see Instruction 2 of the Letter of
Transmittal.
2. SIGNATURES ON THIS NOTICE OF GUARANTEED DELIVERY. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Old Notes
referred to herein, the signature must correspond with the name(s) written on
the face of the Old Notes without alteration, enlargement, or any change
whatsoever.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Old Notes listed, this Notice of Guaranteed Delivery
must be accompanied by appropriate bond powers, signed as the name of the
registered holder(s) appears on the Old Notes.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing.
3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Note Exchange Offer.
<PAGE>
EXHIBIT (a)(iv)
EXHIBIT 99.2(B)
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
PRIMEDIA INC.
(FORMERLY KNOWN AS K-III COMMUNICATIONS CORPORATION)
$8.625 SERIES G EXCHANGEABLE PREFERRED STOCK
This form must be used by a holder of the $8.625 Series G Exchangeable
Preferred Stock (the "OLD PREFERRED STOCK") of PRIMEDIA Inc. (formerly known as
K-III Communications Corporation) ("PRIMEDIA") who wishes to tender shares of
Old Preferred Stock to the Exchange Agent pursuant to the guaranteed delivery
procedures described in "The Exchange Offers--Guaranteed Delivery Procedures" of
the Prospectus dated , 1998 (the "PROSPECTUS") and in Instruction 2 to the
Letter of Transmittal. Any holder who wishes to tender shares of Old Preferred
Stock pursuant to such guaranteed delivery procedures must ensure that the
Exchange Agent receives this Notice of Guaranteed Delivery prior to the
Expiration Date of the Preferred Stock Exchange Offer. Capitalized terms not
defined herein have the meanings ascribed to them in the Prospectus or the
Letter of Transmittal.
To: The Bank of New York, Exchange Agent
<TABLE>
<S> <C> <C>
BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT
Tender & Exchange (For Eligible Institutions COURIER:
Department Only) Tender & Exchange
P.O. Box 11248 (212) 815-6213 Department
Church Street Station CONFIRM FACSIMILE BY 101 Barclay Street
New York, NY 10286-1248 TELEPHONE: Receive and Deliver Window
(For Confirmation Only) New York, NY 10286
(800) 507-9357
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to PRIMEDIA, upon the terms and subject to
the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the number of shares of
Old Preferred Stock specified below pursuant to the guaranteed delivery
procedures set forth in the Prospectus and in Instruction 2 of the Letter of
Transmittal. The undersigned hereby tenders the shares of Old Preferred Stock
listed below:
<TABLE>
<CAPTION>
CERTIFICATE NUMBER(S) (IF KNOWN) NUMBER OF SHARES NUMBER OF SHARES
OF SHARES OF OLD PREFERRED STOCK REPRESENTED TENDERED
<S> <C> <C>
</TABLE>
/ / The Depositary Trust Company
(check if Old Preferred Stock will be tendered by book-entry transfer)
Account Number: ________________________________________________________________
SIGN HERE
Name of Holder: ________________________________________________________________
Signature(s): __________________________________________________________________
Name(s) (PLEASE PRINT): ________________________________________________________
Address: _______________________________________________________________________
_______________________________________________________________________
Telephone Number: ______________________________________________________________
Date: __________________________________________________________________________
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended, guarantees deposit with the Exchange Agent of the Letter of Transmittal
(or facsimile thereof), together with the shares of Old Preferred Stock tendered
hereby in proper form for transfer and any other required documents, all by 5:00
p.m., New York City time, on the third business day following the Expiration
Date.
SIGN HERE
Name of firm: __________________
Authorized Signature: __________
Name (PLEASE PRINT): ___________
Address: _______________________
_______________________
_______________________
Telephone Number: ______________
Date: __________________________
DO NOT SEND SHARES WITH THIS FORM. ACTUAL SURRENDER OF SHARES MUST BE MADE
PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL.
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly completed
and duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by the
Exchange Agent at its address set forth herein prior to the Expiration Date. The
method of delivery of this Notice of Guaranteed Delivery and any other required
documents to the Exchange Agent is at the election and risk of the holder, and
the delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. Instead of delivery by mail, it is recommended
that the holder use an overnight or hand delivery service. In all cases
sufficient time should be allowed to assure timely delivery. For a description
of the guaranteed delivery procedure, see Instruction 2 of the Letter of
Transmittal.
2. SIGNATURES ON THIS NOTICE OF GUARANTEED DELIVERY. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Old Preferred
Stock referred to herein, the signature must correspond with the name(s) written
on the face of the shares of Old Preferred Stock without alteration,
enlargement, or any change whatsoever.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any shares of Old Preferred Stock listed, this Notice of
Guaranteed Delivery must be accompanied by appropriate bond powers, signed as
the name of the registered holder(s) appears on the shares of Old Preferred
Stock.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing.
3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Preferred Stock Exchange Offer.
<PAGE>
EXHIBIT 99.3(a)
FORM OF EXCHANGE AGENCY AGREEMENT
The Bank of New York
101 Barclay Street-12W
New York, New York 10286
Attention: Corporate Trust Administration
Dear Sirs:
PRIMEDIA Inc. (the "Company"), a Delaware corporation, proposes to
offer to exchange (the "Note Exchange Offer") its 7 5/8% Senior Notes due 2008
(the "New Notes"), which have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), for its outstanding 7 5/8% Senior Notes due
2008 (the "Old Notes").
The Note Exchange Offer will commence on , 1998 and will
expire at 12:00 a.m., New York City time, on , 1998, unless the
Company extends the offer by notice to you.
1. APPOINTMENT AS EXCHANGE AGENT. Subject to your acceptance
hereof, the Company appoints you as the Exchange Agent for the purposes and
upon the terms and conditions set forth herein. In this connection, the
Company has enclosed the Exchange Documents (as defined below) and certified
copies of resolutions of the Company's Board of Directors approving the Note
Exchange Offer and authorizing the officers of the Company to enter into this
Agreement and to carry out the transactions contemplated by the Note Exchange
Offer.
2. COMPENSATION. The Company hereby agrees to pay you a fee for
your services hereunder as previously agreed to with you.
3. RECEIPT OF TENDERS. You shall receive all tenders of the Old
Notes and determine whether each such tender has been made in accordance with
the procedures set forth in the Prospectus relating to the Note Exchange
Offer dated , 1998 (the "Prospectus") and the Letter of Transmittal
described therein (the "Letter of Transmittal"), subject to the right of the
Company to determine the validity of any tender, as described in the
Prospectus.
<PAGE>
2
You shall segregate all tenders which are in accordance with the
procedures set forth in the Prospectus and the Letter of Transmittal from those
which are not ("Defective Deposits"). Upon consultation with the Company or its
representatives, you shall use your best efforts to cause holders who effected
any Defective Deposit to cure such Defective Deposit.
You will hold all items which are deposited for tender with you
after 12:00 a.m., New York City time, on the date the Note Exchange Offer
expires pending further instructions from an officer of the Company.
4. EXCHANGE DOCUMENTS. At the request of the Company you shall
furnish copies of any or all of the Prospectus, the Letter of Transmittal and
the Notice of Guaranteed Delivery (collectively, the "Exchange Documents")
promptly to any person designated in such request. All mailings under this
Section shall be by first class mail, postage prepaid, unless otherwise
specified in such request. The Company will furnish you with such additional
copies of the Exchange Documents as you may request to fulfill your obligations
under this Section.
5. NOTIFICATION OF CHANGES IN THE NOTE EXCHANGE OFFER. At the
request of the Company, you shall notify tendering holders of the Old Notes
in the event of any rescission or modification of the Note Exchange Offer.
In the event of any such rescission, you will return all tendered Old Notes
to the persons entitled thereto, at the request of the Company.
6. DELIVERY OF NEW NOTES. As soon as practicable after , 1998
and after each period of extension of the Note Exchange Offer, you shall
complete and countersign the certificates for New Notes to which holders who
have tendered their New Notes are entitled, and deliver the New Notes in the
manner requested in the Letter of Transmittal relating to a valid tender, but
only upon receipt by you of oral or written notice from Ann M. Riposanu of
the Company of acceptance by the Company of such Old Notes for exchange. The
New Notes shall be registered as set forth in the Letter of Transmittal and
delivered to the address specified in each such Letter of Transmittal.
You shall have no obligation to deliver any certificates for New
Notes unless the Company has ordered you as Trustee for the New Notes, to
authenticate such New Notes and you have received New Notes certificates
sufficient to make deliveries thereof.
7. RETURN OF OLD NOTES. Subject to Section 3, you shall return,
in accordance with the Letter of Transmittal, any Old Notes not validly
tendered.
<PAGE>
3
8. LIMITED LIABILITY OF EXCHANGE AGENT. As Exchange Agent you:
(a) shall have no duties or obligations other than those specifically
set forth herein;
(b) will not be required to and will make no representations and have
no responsibilities as to the validity, sufficiency, value or genuineness
of (i) any Old Notes, any Exchange Documents deposited with you,
or any New Notes delivered by you pursuant to the Note Exchange Offer
or (ii) any signatures or endorsements, other than your own;
(c) shall not be obligated to take any action hereunder that might in
your judgment involve any expense or liability unless you have been
furnished with reasonable indemnity;
(d) shall not be liable for any action taken or omitted by you, or
any action suffered by you to be taken or omitted, without negligence,
misconduct or bad faith on your part, in connection with this Agreement or
your compliance with the instructions set forth herein or with any written
or oral instructions delivered to you pursuant hereto, and may rely on, and
shall be protected in acting on, any certificate, instrument, opinion,
notice, letter, telegram or other document, or any security, delivered to
you and reasonably believed by you to be genuine and to have been signed by
a proper party or parties;
(e) may rely on, and shall be protected in acting on, the written or
oral instructions, with respect to any matter relating to your duties as
Exchange Agent, of any officer of the Company; and
(f) may consult counsel satisfactory to you (including counsel for
the Company) and the advice of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by you hereunder in good faith and in accordance with such advice
of such counsel.
9. INDEMNIFICATION OF EXCHANGE AGENT. The Company agrees to
reimburse you for, to indemnify you against and hold you harmless from all
liability, cost or expense (including reasonable counsel fees and expenses) that
may be paid, incurred or suffered by you or to which you may become subject
without
<PAGE>
4
negligence, wilful misconduct or bad faith on your part, arising out of or in
connection with this Agreement.
10. NOTICES. Except as otherwise expressly provided herein, all
notices and other communications hereunder shall be in writing, shall be
delivered by hand or first class mail, postage prepaid, shall be deemed given
when received and shall be sent to the addresses listed below or to such other
addresses as the addressee shall designate from time to time by notice:
Company: PRIMEDIA Inc.
745 Fifth Avenue
New York, New York 10151
Attention: Ann M. Riposanu
Exchange The Bank of New York
Agent: 101 Barclay Street-12W
New York, New York 10286
Attention: Corporate Trust Administration
11. AMENDMENT, MODIFICATION. This Agreement may not be modified,
amended or supplemented without an express written agreement executed by the
parties hereto.
12. GOVERNING LAW; BENEFIT OF AGREEMENT. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York. This Agreement shall inure solely to the benefit of, and the obligations
created hereby shall be binding upon, the successors of the parties hereto. No
other person shall acquire or have any rights under or by virtue of this
Agreement.
If the foregoing is in accordance with your understanding, would you
please indicate your agreement by signing and returning the enclosed copy of
this letter to the Company.
Very truly yours,
PRIMEDIA Inc.
By______________________________
Title:
Agreed to this ____ day of
, 1998
THE BANK OF NEW YORK
By__________________________
Title:
<PAGE>
EXHIBIT 99.3(b)
FORM OF EXCHANGE AGENCY AGREEMENT
The Bank of New York
101 Barclay Street-12W
New York, New York 10286
Attention: Corporate Trust Administration
Dear Sirs:
PRIMEDIA Inc. (the "Company"), a Delaware corporation, proposes to
offer to exchange (the "Preferred Stock Exchange Offer") one share of its
$8.625 Series H Exchangeable Preferred Stock, par value $.01 per share,
liquidation preference $100.00 per share (the "New Preferred Stock"), which
will have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), for each outstanding share of its $8.625 Series G
Exchangeable Preferred Stock, par value $.01 per share, liquidation
preference $100.00 per share (the "Old Preferred Stock") of which 2,500,000
shares are outstanding.
The Preferred Stock Exchange Offer will commence on , 1998
and will expire at 12:00 a.m., New York City time, on , 1998, unless
the Company extends the offer by notice to you.
1. APPOINTMENT AS EXCHANGE AGENT. Subject to your acceptance
hereof, the Company appoints you as the Exchange Agent for the purposes and
upon the terms and conditions set forth herein. In this connection, the
Company has enclosed the Exchange Documents (as defined below) and certified
copies of resolutions of the Company's Board of Directors approving the
Preferred Stock Exchange Offer and authorizing the officers of the Company to
enter into this Agreement and to carry out the transactions contemplated by
the Preferred Stock Exchange Offer.
2. COMPENSATION. The Company hereby agrees to pay you a fee for
your services hereunder as previously agreed to with you.
3. RECEIPT OF TENDERS. You shall receive all tenders of the Old
Preferred Stock and determine whether each such tender has been made in
accordance with the procedures set forth in the Prospectus relating to the
Preferred Stock Exchange Offer dated , 1998 (the "Prospectus") and
the Letter of Transmittal described therein (the "Letter of Transmittal"),
subject to the right of the Company to determine the validity of any tender,
as described in the Prospectus.
<PAGE>
2
You shall segregate all tenders which are in accordance with the
procedures set forth in the Prospectus and the Letter of Transmittal from those
which are not ("Defective Deposits"). Upon consultation with the Company or its
representatives, you shall use your best efforts to cause holders who effected
any Defective Deposit to cure such Defective Deposit.
You will hold all items which are deposited for tender with you
after 12:00 a.m., New York City time, on the date the Preferred Stock
Exchange Offer expires pending further instructions from an officer of the
Company.
4. EXCHANGE DOCUMENTS. At the request of the Company you shall
furnish copies of any or all of the Prospectus, the Letter of Transmittal and
the Notice of Guaranteed Delivery (collectively, the "Exchange Documents")
promptly to any person designated in such request. All mailings under this
Section shall be by first class mail, postage prepaid, unless otherwise
specified in such request. The Company will furnish you with such additional
copies of the Exchange Documents as you may request to fulfill your obligations
under this Section.
5. NOTIFICATION OF CHANGES IN THE PREFERRED STOCK EXCHANGE OFFER.
At the request of the Company, you shall notify tendering holders of the Old
Preferred Stock in the event of any rescission or modification of the
Preferred Stock Exchange Offer. In the event of any such rescission, you
will return all tendered Old Preferred Stock to the persons entitled thereto,
at the request of the Company.
6. DELIVERY OF NEW PREFERRED STOCK. As soon as practicable after
, 1998 and after each period of extension of the Preferred Stock
Exchange Offer, you shall complete and countersign the certificates for New
Preferred Stock to which holders who have tendered their New Preferred Stock
are entitled, and deliver the New Preferred Stock in the manner requested in
the Letter of Transmittal relating to a valid tender, but only upon receipt
by you of oral or written notice from Ann M. Riposanu of the Company of
acceptance by the Company of such Old Preferred Stock for exchange. The New
Preferred Stock shall be registered as set forth in the Letter of Transmittal
and delivered to the address specified in each such Letter of Transmittal.
You shall have no obligation to deliver any certificates for New
Preferred Stock unless the Company has ordered you as Registrar and Transfer
Agent for the New Preferred Stock, to countersign such New Preferred Stock
certificates and you have received New Preferred Stock certificates sufficient
to make deliveries thereof.
7. RETURN OF OLD PREFERRED STOCK. Subject to Section 3, you shall
return, in accordance with the Letter of Transmittal, any Old Preferred Stock
not validly tendered.
<PAGE>
3
8. LIMITED LIABILITY OF EXCHANGE AGENT. As Exchange Agent you:
(a) shall have no duties or obligations other than those specifically
set forth herein;
(b) will not be required to and will make no representations and have
no responsibilities as to the validity, sufficiency, value or genuineness
of (i) any Old Preferred Stock, any Exchange Documents deposited with you,
or any New Preferred Stock delivered by you pursuant to the Preferred
Stock Exchange Offer or (ii) any signatures or endorsements, other than
your own;
(c) shall not be obligated to take any action hereunder that might in
your judgment involve any expense or liability unless you have been
furnished with reasonable indemnity;
(d) shall not be liable for any action taken or omitted by you, or
any action suffered by you to be taken or omitted, without negligence,
misconduct or bad faith on your part, in connection with this Agreement or
your compliance with the instructions set forth herein or with any written
or oral instructions delivered to you pursuant hereto, and may rely on, and
shall be protected in acting on, any certificate, instrument, opinion,
notice, letter, telegram or other document, or any security, delivered to
you and reasonably believed by you to be genuine and to have been signed by
a proper party or parties;
(e) may rely on, and shall be protected in acting on, the written or
oral instructions, with respect to any matter relating to your duties as
Exchange Agent, of any officer of the Company; and
(f) may consult counsel satisfactory to you (including counsel for
the Company) and the advice of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by you hereunder in good faith and in accordance with such advice
of such counsel.
9. INDEMNIFICATION OF EXCHANGE AGENT. The Company agrees to
reimburse you for, to indemnify you against and hold you harmless from all
liability, cost or expense (including reasonable counsel fees and expenses) that
may be paid, incurred or suffered by you or to which you may become subject
without
<PAGE>
4
negligence, wilful misconduct or bad faith on your part, arising out of or in
connection with this Agreement.
10. NOTICES. Except as otherwise expressly provided herein, all
notices and other communications hereunder shall be in writing, shall be
delivered by hand or first class mail, postage prepaid, shall be deemed given
when received and shall be sent to the addresses listed below or to such other
addresses as the addressee shall designate from time to time by notice:
Company: PRIMEDIA Inc.
745 Fifth Avenue
New York, New York 10151
Attention: Ann M. Riposanu
Exchange The Bank of New York
Agent: 101 Barclay Street-12W
New York, New York 10286
Attention: Corporate Trust Administration
11. AMENDMENT, MODIFICATION. This Agreement may not be modified,
amended or supplemented without an express written agreement executed by the
parties hereto.
12. GOVERNING LAW; BENEFIT OF AGREEMENT. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York. This Agreement shall inure solely to the benefit of, and the obligations
created hereby shall be binding upon, the successors of the parties hereto. No
other person shall acquire or have any rights under or by virtue of this
Agreement.
If the foregoing is in accordance with your understanding, would you
please indicate your agreement by signing and returning the enclosed copy of
this letter to the Company.
Very truly yours,
PRIMEDIA Inc.
By______________________________
Title:
Agreed to this ____ day of
, 1998
THE BANK OF NEW YORK
By__________________________
Title:
<PAGE>
EXHIBIT 99.4
- -------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of February 17, 1998
by and among
PRIMEDIA INC.
The Guarantors listed herein
and
SALOMON BROTHERS INC
MORGAN STANLEY & CO. INCORPORATED
- -------------------------------------------------------------------------------
<PAGE>
This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of February 17, 1998, by and between PRIMEDIA Inc., a Delaware
corporation (the "Company"), each of the Guarantors (as defined in the Purchase
Agreement referred to below) and Salomon Brothers Inc and Morgan Stanley & Co.
Incorporated, (collectively, the "INITIAL PURCHASERS"), who have purchased (i)
$250,000,000 principal amount of the Company's 7 5/8% Senior Notes due 2008 (the
"SERIES A SENIOR NOTES") and (ii) 2,500,000 shares of the Company's $8.625
Series G Exchangeable Preferred Stock Redeemable 2010 (the "SERIES G PREFERRED
STOCK") pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated
February 11, 1998 (the "PURCHASE AGREEMENT"), by and between the Company and the
Initial Purchasers. In order to induce the Initial Purchasers to purchase the
Series A Senior Notes and the Series G Preferred Stock, the Company has agreed
to provide the registration rights set forth in this Agreement. The execution
and delivery of this Agreement is a condition to the obligations of the Initial
Purchasers set forth in Section 4 of the Purchase Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall
have the following meanings:
ACT: The Securities Act of 1933, as amended.
ADVICE: As defined in Section 6(b) hereof.
APPLICABLE EFFECTIVENESS PERCENT: As defined in Section 5
hereof.
BUSINESS DAY: Each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in The Borough of
Manhattan, The City of New York, New York are authorized or obligated by law or
executive order to close.
CLASS G SUBORDINATED DEBENTURES: The 8 5/8% Class G Subordinated
Exchange Debentures due 2010 of the Company issuable in exchange for the Series
G Preferred Stock.
CLASS H SUBORDINATED DEBENTURES: The 8 5/8% Class H Subordinated
Exchange Debentures due 2010 of the Company issuable in exchange for the Series
H Preferred Stock or, in connection with a Registered Exchange Offer for the
Class G Subordinated Debentures and containing terms identical to the Class G
Subordinated Debentures (except that if issued in connection with a Registered
Exchange Offer, interest thereon shall accrue from the Exchange Offer
Consummation Date and except that such securities shall bear no legend and shall
be free from restrictions on transfer).
CLOSING DATE: The date on which the Series A Senior Notes and the
Series G Preferred Stock are first sold by the Initial Purchasers pursuant to
the Offer.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: A Registered Exchange Offer shall be deemed
"Consummated" for purposes of this Agreement upon the occurrence of (i) the
filing and effectiveness under the Act of a Registration
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Statement relating to the Series B Senior Notes and Series H Preferred Stock or
Class H Subordinated Debentures, as applicable, to be issued in the Registered
Exchange Offer, (ii) the maintenance of such Registration Statement continuously
effective for a period of not less than the minimum period required under
applicable federal and state securities laws (provided that in no event shall
such Registered Exchange Offer remain open and the Registration Statement
relating thereto remain continuously effective, in each case, for less than 20
business days), and (iii) the delivery by the Company to either (A) the
registrar under the Senior Note Indenture of Series B Senior Notes in the same
aggregate principal amount of Series A Senior Notes that were tendered by
Holders thereof pursuant to the Registered Exchange Offer, (B) the transfer
agent for the Series H Preferred Stock the same number of shares of Series H
Preferred Stock as the number of shares of Series G Preferred Stock tendered by
holders thereof pursuant to the Registered Exchange Offer, or (C) the registrar
under the Subordinated Debenture Indenture of Class H Subordinated Debentures in
the same aggregate principal amount as the aggregate principal amount of Class G
Subordinated Debentures tendered by Holders thereof pursuant to the Registered
Exchange Offer.
DIVIDEND PAYMENT DATE: As defined in the Certificate of
Designations relating to the Series G Preferred Stock.
EFFECTIVENESS TARGET DATE: As defined in Section 5 hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXCHANGE OFFER CONSUMMATION DATE: The date on which the
Registered Exchange Offer is Consummated.
EXCHANGE OFFER EFFECTIVE DATE: The date on which the Registration
Statement relating to the Registered Exchange Offer becomes effective.
EXCHANGE OFFER REGISTRATION STATEMENT: As defined in Section 3
hereof.
HOLDER: As defined in Section 2(b) hereof.
INDEMNIFIED PARTY: As defined in Section 8 hereof.
INTEREST PAYMENT DATE: As defined in the Senior Note Indenture,
for the Senior Notes, and the Subordinated Debenture Indenture, for the
Subordinated Debentures.
NASD: National Association of Securities Dealers, Inc.
OFFER: The transactions in which the Initial Purchasers propose
to sell the Series A Senior Notes and the Series G Preferred Stock to certain
"qualified institutional buyers" (as such term is defined in Rule 144A under the
Act) and in "off shore transactions" (as such term is defined in Regulation S
under the Act) pursuant to the Offering Memorandum.
OFFERING MEMORANDUM: The offering memorandum, dated February 11,
1998 and all amendments and supplements thereto, relating to the Senior Notes
and the Preferred Stock prepared by the Company pursuant to the Purchase
Agreement.
PAYMENT DATE: Each Dividend Payment Date and each Interest
Payment Date.
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<PAGE>
PERSON: An individual, partnership, joint venture, corporation,
trust, estate or unincorporated organization, or a government or agency or
political subdivision thereof.
PREFERRED STOCK: The Series G Preferred Stock and the Series H
Preferred Stock.
PROSPECTUS: The prospectus included in a Registration Statement,
as amended or supplemented by any prospectus supplement and by all other
amendments thereto, including post-effective amendments, and all material, if
any, incorporated by reference into such Prospectus.
RECORD HOLDER: (i) With respect to any Interest Payment Date
relating to Senior Notes, each person who is a Holder of Senior Notes on the
record date with respect to the Interest Payment Date on which such Interest
Payment Date relating to the Senior Notes shall occur; (ii) with respect to any
Payment Date occurring prior to the date on which the Series G Preferred Stock
is exchanged for Class G Subordinated Debentures, each Person who was a Holder
of Series G Preferred Stock on the record date with respect to the Dividend
Payment Date on which such Payment Date shall occur, or, if no record date was
set with respect to such Dividend Payment Date, the date 15 days prior to such
Dividend Payment Date; and (iii) with respect to any Payment Date occurring
after the date on which the Series G Preferred Stock is exchanged for Class G
Subordinated Debentures, each Person who was a Holder of Class G Subordinated
Debentures on the record date with respect to the Interest Payment Date on which
such Payment Date shall occur.
REGISTERED EXCHANGE OFFER: The registration by the Company under
the Act of the Series B Senior Notes or the Series H Preferred Stock or, if the
Series G Preferred Stock has been exchanged for Class G Subordinated Debentures,
Class H Subordinated Debentures pursuant to a Registration Statement pursuant to
which the Company offers the holders of all outstanding Transfer Restricted
Securities the opportunity to exchange all such outstanding Transfer Restricted
Securities held by such Holder for Series B Senior Notes, Series H Preferred
Stock or Class H Subordinated Debentures, as applicable, in an aggregate number
of shares or principal amount, as applicable, equal to the aggregate number of
shares or principal amount, as applicable, of the Transfer Restricted Securities
tendered in such exchange offer by such Holders.
REGISTRATION STATEMENT: Any registration statement of the Company
relating to (a) an offering of Series B Senior Notes, Series H Preferred Stock
or, if the Series G Preferred Stock has been exchanged for Class G Subordinated
Debentures, Class H Subordinated Debentures, pursuant to a Registered Exchange
Offer or (b) the registration for resale of Transfer Restricted Securities
pursuant to the Shelf Registration Statement, which is filed pursuant to the
provisions of this Agreement, including the Prospectus included therein, all
amendments and supplements thereto (including post-effective amendments) and all
exhibits and material incorporated by reference therein.
SENIOR NOTES: The Series A Senior Notes and the Series B Senior
Notes.
SENIOR NOTE INDENTURE: The Indenture between the Company and the
Trustee pursuant to which the Senior Notes are to be issued.
SERIES H PREFERRED STOCK: The $8.625 Series H Exchangeable
Preferred Stock Redeemable 2010 of the Company, issuable in connection with the
Registered Exchange Offer and containing terms identical to the Series G
Preferred Stock (except that dividends thereon will accrue from the Exchange
offer Consummation Date and except that such securities shall bear no legend and
shall be free from restrictions or transfer).
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<PAGE>
SERIES B SENIOR NOTES: The Company's 7_% Senior Notes due 2008 to
be issued pursuant to the Senior Note Indenture in the Registered Exchange
offer.
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
SUBORDINATED DEBENTURES: The Class G Subordinated Debentures and
the Class H Subordinated Debentures.
SUBORDINATED DEBENTURE INDENTURE: The Indenture between the
Company and the Subordinated Debenture Trustee pursuant to which the
Subordinated Debentures are issued.
SUBORDINATED DEBENTURE TRUSTEE: The trustee under the
Subordinated Debenture Indenture.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb) as in effect on the date of the Indenture.
TRANSFER RESTRICTED SECURITIES: Each Senior Note, each share of
Series G Preferred Stock and, if the Company has elected to exchange such Series
G Preferred Stock, each Class G Subordinated Debenture issued in exchange
therefor, until the earlier to occur of (a) the Exchange Offer Consummation
Date, (b) the date on which such Senior Notes, Preferred Stock or Subordinated
Debentures, as applicable, have been effectively registered under the Act and
disposed of in accordance with a Registration Statement and (c) the date on
which such Senior Notes, Preferred Stock or Subordinated Debentures, as
applicable, are distributed to the public pursuant to Rule 144 under the Act.
TRUSTEE: The trustee under the Senior Note Indenture.
UNDERWRITER(S): The underwriter(s) participating in any
Underwritten Offering referred to in Section 6(b)(xii) and party to the
underwriting agreement referred to in such
section.
UNDERWRITTEN REGISTRATION OR UNDERWRITTEN OFFERING: A
registration in which securities of the Company are sold to an Underwriter for
reoffering to the public.
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) TRANSFER RESTRICTED SECURITIES. The securities entitled to
the benefits of this Agreement are the Transfer Restricted Securities.
(b) HOLDERS OF TRANSFER RESTRICTED SECURITIES. A Person is deemed
to be a holder of Transfer Restricted Securities (each, a "HOLDER") whenever
such Person is the registered owner of Transfer Restricted Securities.
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<PAGE>
SECTION 3. REGISTERED EXCHANGE OFFER
(a) If, in the reasonable opinion of the Company after
consultation with counsel, (i) the Registered Exchange Offer shall then be
permissible under applicable law and (ii) a Registration Statement (the
"EXCHANGE OFFER REGISTRATION Statement") with respect to the Series B Senior
Notes, Series H Preferred Stock or Class H Subordinated Debentures, as
applicable, and the Registered Exchange Offer reasonably can be filed after the
initial sale of Senior Notes and Preferred Stock pursuant hereto, the Company
shall (a) cause to be filed with the Commission after the Closing Date a
Registration Statement under the Act relating to the Series B Senior Notes,
Series H Preferred Stock or Class H Subordinated Debentures, as applicable, and
the Registered Exchange Offer, (b) use its reasonable best efforts to cause such
Exchange Offer Registration Statement to become effective at the earliest
possible time thereafter, (c) in connection with the foregoing, (1) file all
pre-effective amendments to such Exchange Offer Registration Statement as may be
necessary in order to cause such Exchange Offer Registration Statement to become
effective, (2) if applicable, a post-effective amendment to such Exchange Offer
Registration Statement pursuant to Rule 430A under the Act, and (3) use its
reasonable best efforts to cause all necessary filings in connection with the
registration and qualification of the Series B Senior Notes, Series H Preferred
Stock or Class H Subordinated Debentures, as applicable, to be registered under
the Blue Sky laws of such jurisdictions as are necessary to permit Consummation
of the Registered Exchange Offer, and (d) upon the effectiveness of such
Exchange Offer Registration Statement, commence the Registered Exchange Offer.
The Registered Exchange Offer shall be on the appropriate form permitting
registration of the Series B Senior Notes, Series H Preferred Stock or Class H
Subordinated Debentures, as applicable, to be offered in exchange for the
Transfer Restricted Securities.
(b) The Company shall cause the Exchange Offer Registration
Statement to be continuously effective for a period of not less than the minimum
period required under applicable federal and state securities laws to Consummate
the Registered Exchange Offer; PROVIDED, HOWEVER, that in no event shall such
period be less than 20 Business Days. The Company shall cause the Registered
Exchange Offer to comply with all applicable federal and state securities laws.
No securities other than the Series B Senior Notes, Series H Preferred Stock or
Class H Subordinated Debentures, as applicable, shall be included in the
Registration Statement relating to the Registered Exchange Offer. The Company
shall use its reasonable best efforts to cause the Registered Exchange Offer to
be Consummated on the earliest practicable date after the Exchange Offer
Effective Date.
SECTION 4. SHELF REGISTRATION
(a) SHELF REGISTRATION. If the Company is not required to file a
Registration Statement with respect to the Registered Exchange Offer pursuant to
Section 3(a) hereof, then pursuant to Rule 415 under the Act, the Company shall
file a "shelf" registration statement (the "SHELF REGISTRATION STATEMENT")
relating to all then outstanding Transfer Restricted Securities, the holders of
which shall have provided the information required pursuant to Section 6(a)(i)
and (ii) hereof within the time specified in such section, and shall use its
reasonable best efforts to cause such Shelf Registration Statement to become
effective as promptly as practicable thereafter. Subject to the proviso
contained in Section 6(b)(x), the Company shall use its reasonable best efforts
to keep such Shelf Registration Statement continuously effective and to prevent
the happening of any event described in Section 6(b)(iv)(D) hereof for a period
of two years following the date on which such Shelf Registration Statement
becomes effective under the Act (as may be extended pursuant to Section 6
hereof) or shorter period terminating when all Transfer Restricted Securities
either (i) have been sold pursuant to the Shelf Registration Statement or (ii)
have
5
<PAGE>
ceased to be Transfer Restricted Securities pursuant to clause (c) of the
definition of Transfer Restricted Securities.
Subject to the proviso contained in Section 6(b)(x), upon the
occurrence of any event that would cause the Shelf Registration Statement (i) to
contain a material misstatement or omission or (ii) not to be effective and
usable for resale of Transfer Restricted Securities during the period that such
Shelf Registration Statement is required to be effective and usable, the Company
shall promptly file an amendment to the Shelf Registration Statement, in the
case of clause (i), correcting any such misstatement or omission, and in the
case of clauses (i) and (ii), use its reasonable best efforts to cause such
amendment to be declared effective and such Shelf Registration Statement to
become usable as soon as practicable thereafter.
(b) RESTRICTIONS ON SALE OF CERTAIN SECURITIES BY OTHERS. The
Company agrees to use reasonable best efforts to cause each holder of its
privately placed debt securities (if the Holders effect an Underwritten Offer
with respect to the Senior Notes or Subordinated Debentures) or preferred stock
(if the Holders effect an Underwritten Offer with respect to the Preferred
Stock), and its securities convertible into or exchangeable or exercisable for
any such debt security or preferred stock, as applicable, purchased from the
Company at any time on or after the date of this Agreement to agree not to
effect any public sale or distribution of any such securities during the 10 day
period prior to and during the 60-day period beginning on the closing date of
each Underwritten Offer made pursuant to the Shelf Registration Statement,
including a sale pursuant to Rule 144 under the Act (except as part of such
Underwritten Registration).
SECTION 5. LIQUIDATED DAMAGES
If written notice that the applicable Registration Statement has
been declared effective shall not have been given on or before 180 days
following the Closing Date (the "EFFECTIVENESS TARGET DATE"), then, commencing
on the first Payment Date following the 181st day after the Closing Date and on
each Payment Date thereafter until the applicable Registration Statement has
been declared effective, the Company shall pay to each Record Holder an amount,
as liquidated damages, equal to the product of (i) the aggregate principal
amount of all Senior Notes held by such Holder or the aggregate liquidation
preference of all shares of Preferred Stock (or, if the Preferred Stock has been
exchanged for Subordinated Debentures, the aggregate principal amount of all
such Subordinated Debentures) constituting Transfer Restricted Securities and
(ii) the "APPLICABLE EFFECTIVENESS PERCENT," which shall accrue from and after
the 181st day after the Closing Date. For purposes hereof, the "Applicable
Effectiveness Percent" shall be one-half of one percent (0.50%) per annum for
each of the days immediately succeeding the 181st day following the Closing Date
until the applicable Registration Statement has been declared effective.
SECTION 6. REGISTRATION PROCEDURES
(a) In connection with the Registered Exchange Offer (if required
to be made pursuant to Section 3(a) hereof):
(i) As a condition to its participation in the Registered
Exchange Offer pursuant to the terms of this Agreement, each Holder of
Transfer Restricted Securities shall be required to furnish, upon the
request of the Company, within 15 Business Days thereafter, such
information regarding such Holder and such Holder's intentions in
connection with the Series B
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<PAGE>
Senior Notes, Series H Preferred Stock or Class H Subordinated
Debentures, as applicable, to be received in the Registered Exchange
Offer as the Company may from time to time reasonably request in
writing. Each such Holder shall be required to furnish to the Company
all information required to be disclosed in order to make the
information previously furnished to the Company by such Holder not
materially misleading;
(ii) As a condition to its participation in the Registered
Exchange Offer pursuant to the terms of this Agreement, each Holder of
Transfer Restricted Securities shall be required to furnish, upon the
request of the Company, prior to the Consummation thereof, a written
representation to the Company that it is not engaged in, and does not
intend to engage in, a distribution of the Series B Senior Notes, Series
H Preferred Stock or Class H Subordinated Debentures, as applicable, to
be received in the Registered Exchange Offer and that it is acquiring
the Series B Senior Notes, Series H Preferred Stock or Class H
Subordinated Debentures, as applicable, in its ordinary course of
business and shall otherwise cooperate in the Company's preparations for
the Registered Exchange Offer. Each Holder shall acknowledge that any
such Holder using the Registered Exchange Offer to participate in a
distribution of the securities to be acquired in the Registered Exchange
Offer (x) could not rely on the position of the Commission enunciated in
EXXON CAPITAL HOLDINGS CORPORATION (available April 13, 1989) or similar
no-action letters (including any no-action letter obtained pursuant to
paragraph (i) above in connection with the Registered Exchange Offer),
(y) must comply with registration and prospectus delivery requirements
of the Act in connection with a secondary resale transaction and (z)
that such a secondary resale transaction should be covered by an
effective registration statement containing the selling security holder
information required by Item 507 of Regulation S-K; and
(iii) If the Registered Exchange Offer relates to the Senior
Notes or the Subordinated Debentures, the Company shall cause the Senior
Note Indenture or Subordinated Debenture Indenture, as the case may be,
to be qualified under the TIA not later than the effective date of the
first Registration Statement relating to the Registered Exchange Offer;
and, in connection therewith, will cooperate with the Trustee or the
Subordinated Debenture Trustee, as the case may be, and the holders of
the Series A Senior Notes and Class G Subordinated Debentures to effect
such changes to the Senior Note Indenture or the Subordinated Debenture
Indenture, as the case may be, as may be required for such indenture to
be so qualified in accordance with the terms of the TIA; and will
execute, and use its reasonable best efforts to cause such trustee to
execute, all documents as may be required to effect such changes and all
other forms and documents required to be filed with the Commission to
enable such indenture to be so qualified in a timely manner.
(b) In connection with the Shelf Registration Statement, the
Company will use its reasonable best efforts to effect such registration, to
permit the sale of the Transfer Restricted Securities being sold in accordance
with the intended method or methods of distribution thereof and, pursuant
thereto, the Company will as expeditiously as possible:
(i) prepare and file with the Commission, as soon as
practicable, a Registration Statement relating to the registration on
any appropriate form under the Act, cooperate and assist in any filings
required to be made with the NASD and use its reasonable best efforts to
cause such Shelf Registration Statement to become effective and approved
by such governmental agencies or authorities as may be necessary to
enable the selling Holders to consummate the disposition of such
Transfer Restricted Securities; PROVIDED that before filing a Shelf
Registration Statement or any Prospectus, or any amendments or
supplements thereto,
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<PAGE>
including documents incorporated by reference after the initial filing
of the Shelf Registration Statement, the Company will furnish to the
Holders and the underwriter(s), if any, copies of all such documents
proposed to be filed prior to the filing thereof and shall make the
Company's representative available for discussion of such documents;
(ii) prepare and file with the Commission such amendments
and post-effective amendments to the Shelf Registration Statement as may
be necessary to keep the Shelf Registration Statement effective for the
applicable period set forth in Section 3 hereof, or such shorter period
which will terminate when all Transfer Restricted Securities covered by
such Shelf Registration Statement have been sold; cause the Prospectus
to be supplemented by any required Prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 under the Act, and to
comply fully with the applicable provisions of Rules 424 and 430A under
the Act in a timely manner; and comply with the provisions of the Act
with respect to the disposition of all securities covered by such Shelf
Registration Statement during the applicable period in accordance with
the intended method or methods of distribution by the sellers thereof
set forth in such Shelf Registration Statement or supplement to the
Prospectus;
(iii) if requested by the Holders of Transfer Restricted
Securities being sold in an Underwritten Offering conducted pursuant to
an Underwriting Agreement referred to in Section 6(b)(xii) or the
Underwriter(s) thereof, promptly incorporate in a Prospectus supplement
or post-effective amendment such information as such Underwriter(s) and
the Holders of Transfer Restricted Securities being sold agree should be
included therein relating to the plan of distribution of the Transfer
Restricted Securities, including, without limitation, information with
respect to the principal amount of Senior Notes, the number of shares of
Preferred Stock and principal amount of Subordinated Debentures being
sold to such Underwriter(s), the purchase price being paid therefor and
with respect to any other terms of the offering of the Transfer
Restricted Securities to be sold in such offering; and make all required
filings of such Prospectus supplement or post-effective amendment as
soon as practicable after the Company is notified of the matters to be
incorporated in such Prospectus supplement or post-effective amendment;
(iv) advise the Underwriter(s), if any, and selling Holders
promptly and, if requested by such Persons, to confirm such advice in
writing, (A) when the Shelf Registration Statement or any post-effective
amendment thereto, has become effective, (B) of any request by the
Commission for amendments to the Registration Statement or amendments or
supplements to the Prospectus or for additional information relating
thereto, (C) if at any time the representations and warranties of the
Company contemplated by paragraph (xii)(A) below cease to be true and
correct, (D) of the existence of any fact and the happening of any event
that makes any statement of a material fact made in the Registration
Statement, the Prospectus, any amendment or supplement thereto, or any
document incorporated by reference therein untrue, or that requires the
making of any additions to or changes in the Registration Statement or
the Prospectus in order to make the statements therein not misleading
and (E) of the receipt by the Company of any stop order from the
Commission suspending the effectiveness of the Registration Statement,
and any order issued by any state securities commission or other
regulatory authority suspending the qualification or exemption from
qualification of such Transfer Restricted Securities under state
securities or blue sky laws. If at any time the Company shall receive
any such stop order suspending the effectiveness of the Registration
Statement, or any such order from a state securities commission or other
regulatory authority, the Company shall use its reasonable best efforts
to obtain the withdrawal or lifting of such order at the earliest
possible time;
8
<PAGE>
(v) promptly prior to the filing of any document that is to
be incorporated by reference into the Shelf Registration Statement or
the Prospectus (after initial filing of the Shelf Registration
Statement), provide copies of such document to the selling Holders and
to the managing Underwriter(s), if any, and make the Company's
representative(s) available for discussion of such document;
(vi) furnish to each selling Holder and each of the
Underwriter(s), if any, without charge, at least one signed copy of the
Registration Statement, as first filed with the Commission, and of each
amendment thereto, including all documents incorporated by reference
therein and all exhibits (including exhibits incorporated therein by
reference);
(vii) deliver to each selling Holder and each of the
Underwriter(s), if any, without charge, as many copies of the Prospectus
(including each preliminary prospectus) and any amendment or supplement
thereto as such Persons may reasonably request; the Company consents to
the use of the Prospectus and any amendment or supplement thereto by
each of the selling Holders and each of the Underwriter(s), if any, in
connection with the offering and the sale of the Transfer Restricted
Securities covered by the Prospectus or any amendment or supplement
thereto;
(viii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders, the Underwriter(s), if
any, and their respective counsel in connection with the registration
and qualification of the Transfer Restricted Securities under the
securities or Blue Sky laws of such jurisdictions as the selling Holders
or Underwriter(s) may request and do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions
of the Transfer Restricted Securities covered by the Shelf Registration
Statement; PROVIDED, HOWEVER, that the Company shall not be required to
register or qualify as a foreign corporation where it is not then so
qualified or to take any action that would subject it to the service of
process in suits or to taxation, other than as to matters and
transactions relating to the Shelf Registration Statement, in any
jurisdiction where it is not now so subject;
(ix) cooperate with the selling Holders and the
Underwriter(s), if any, to facilitate the timely preparation and
delivery of certificates representing Transfer Restricted Securities to
be sold and not bearing any restrictive legends; and enable such
Transfer Restricted Securities to be in such denominations and
registered in such names as the Holders or the Underwriter(s), if any,
may request at least two Business Days prior to any sale of Transfer
Restricted Securities made by such Underwriter(s);
(x) if any fact or event contemplated by Section
6(b)(iv)(D) above shall exist or have occurred, prepare a supplement or
post-effective amendment to the Registration Statement or related
Prospectus or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities, the Prospectus, as amended
or supplemented, will not contain an untrue statement of a material fact
or omit to state any material fact necessary to make the statements
therein not misleading; PROVIDED, that the Company shall not be required
to comply with this Section 6(b)(x) if, and only for so long as: (i) the
Company shall be engaged in a transaction; (ii) (A) such transaction is
required to be disclosed in the Registration Statement, the related
Prospectus, or any amendment or supplement thereto, or the failure by
the Company to disclose such transaction in the Registration Statement
or related Prospectus, or any amendment or supplement thereto, as then
amended or supplemented, would cause such Registration Statement,
Prospectus or amendment or supplement thereto, to contain an untrue
statement of a material fact or omit to state a material
9
<PAGE>
fact necessary in order to make the statements therein not misleading,
in the light of the circumstances under which they were made; (B)
information regarding the existence of such transaction has not then
been publicly disclosed by or on behalf of the Company; and (C) the
Company determines, in its reasonable judgment, that disclosure of such
transaction would have a material adverse effect (1) on the business,
condition (financial or other), results of operations or properties of
the Company and its subsidiaries, taken as a whole, or (2) on the
consummation of such transaction and (iii) the Company notifies the
Holders promptly after making the determination set forth in clause
(ii);
(xi) provide a CUSIP number for all Transfer Restricted
Securities not later than the effective date of Exchange Offer
Registration Statement or the Shelf Registration Statement;
(xii) enter into such customary agreements (including an
underwriting agreement in form reasonably satisfactory to the Company)
and take all such other actions in connection therewith as may be
requested by the Holders of a majority of the outstanding shares (or
principal amount, as the case may be) of the Transfer Restricted
Securities or the managing Underwriter(s) in order to expedite or
facilitate the disposition of the Transfer Restricted Securities
pursuant to the Shelf Registration and, in connection with any such
underwriting agreement entered into by the Company, (A) make such
representations and warranties to the Holders and the Underwriter(s), in
form, substance and scope as are customarily made by issuers to
Underwriters in primary underwritten offerings and covering matters
including, but not limited to, those set forth in the Purchase
Agreement; (B) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance) shall
be reasonably satisfactory to the Underwriter(s) and the Holders of the
Transfer Restricted Securities being sold) addressed to each selling
Holder and the Underwriter(s) covering the matters customarily covered
in opinions requested in underwritten offerings and such other matters
as may be reasonably requested by such Holders and Underwriters; (C)
obtain "cold comfort" letters and updates thereof from the Company's
independent certified public accountants addressed to the Underwriters
and use its reasonable best efforts to obtain such "cold comfort"
letters addressed to the Holders of Transfer Restricted Securities, such
letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters by Underwriters in
connection with primary underwritten offerings; (D) set forth in full or
incorporate by reference in the underwriting agreement the
indemnification provisions and procedures of Section 8 hereof with
respect to all parties to be indemnified pursuant to said Section; and
(E) deliver such documents and certificates as may be reasonably
requested by the Holders of the Transfer Restricted Securities being
sold or the underwriter(s) of such Underwritten Offering to evidence
compliance with clause (A) above and with any customary conditions
contained in the underwriting agreement or other agreement entered into
by the Company pursuant to this clause (xii). The above shall be done at
each closing under such underwriting or similar agreement, as and to the
extent required thereunder. Notwithstanding the foregoing, in no event
shall any Holder be entitled to participate in an Underwritten
Registration unless Holders of Senior Notes the principal amount of
which equals or exceeds $50 million or Holders of Preferred Stock the
aggregate liquidation preference of which equals or exceeds $25 million
(or, if the Preferred Stock has been exchanged for Subordinated
Debentures, the principal amount of which equals or exceeds $25 million)
shall first notify the Company of their intent to retain an Underwriter
for such purpose pursuant to Section 11 hereof;
10
<PAGE>
(xiii) make available at reasonable times for inspection by
the Holders of the Transfer Restricted Securities, any Underwriter
participating in an Underwritten Offering pursuant to such Shelf
Registration Statement and any attorney or accountant retained by such
selling Holders or any of the Underwriters (collectively, the
"INSPECTORS"), all financial and other records, pertinent corporate
documents and properties of the Company as shall be requested by any
such Inspector in connection with such Shelf Registration Statement
subsequent to the filing thereof and prior to its effectiveness;
PROVIDED, HOWEVER, that any Records which the Company determines, in
good faith, to be confidential and which it notifies the Inspectors in
writing are confidential shall not be disclosed to any Inspector unless
(i) such Inspector signs a confidentiality agreement reasonably
satisfactory to the Company or (ii) the release of such Records is
ordered pursuant to a subpoena or other court order or is otherwise
required by law. Each Holder agrees that it will, promptly after
learning that disclosure of such Records is sought by a court having
jurisdiction, give notice to the Company and allow the Company to
undertake appropriate action to prevent disclosure of such Records (it
being understood, however, that, in no event, shall any Holder be
required to violate any such subpoena, court order or applicable law as
a result of the Company's actions to prevent such disclosure);
(xiv) otherwise use its reasonable best efforts to comply
with all applicable rules and regulations of the Commission and make
generally available to its security holders as soon as practicable a
consolidated earnings statement (which need not be audited) for the
twelve-month period (A) commencing at the end of any fiscal quarter in
which Transfer Restricted Securities are sold to the Underwriters in a
firm or best efforts Underwritten Offering or (B) if not sold to the
Underwriters in such an offering, beginning with the first month of the
Company's first fiscal quarter commencing after the effective date of
the Shelf Registration Statement; and
(xv) cause the Senior Note Indenture or the Subordinated
Debenture Indenture, as the case may be, to be qualified under the TIA,
and, in connection therewith, cooperate with the applicable trustee and
the Holders to effect such changes to such indenture as may be required
for such indentures to be so qualified in accordance with the terms of
the TIA; and execute and use its reasonable best efforts to cause such
trustee to execute, all documents as may be required to effect such
changes and all other forms and documents required to be filed with the
Commission to enable such indenture to be so qualified in a timely
manner.
Each Holder as to which any Shelf Registration Statement is being
effected shall furnish promptly to the Company all information required to be
disclosed in order to make the information previously furnished to the Company
by such Holder not materially misleading.
Upon receipt of any notice from the Company of the existence of
any fact of the kind described in Section 6(b)(iv)(D) hereof, each Holder will
forthwith discontinue disposition of Transfer Restricted Securities until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 6(b)(x) hereof, or until it is advised in writing (the
"ADVICE") by the Company that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings which are incorporated
by reference in the Prospectus. If so directed by the Company, each Holder will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Transfer Restricted Securities current at the time of receipt of
such notice. In the event the Company shall give any such notice, the time
period regarding the effectiveness of the Registration Statement set forth in
Section 4(a) hereof shall be extended by the number of days during the period
from and including the date of the giving of such Advice to and
11
<PAGE>
including the date when each selling Holder covered by such Registration
Statement shall have received the copies of the supplemented or amended
Prospectus contemplated by Section 6(b)(x) hereof.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or
compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without limitation
all: (i) registration and filing fees and expenses (including filings made with
the NASD (including, if applicable, the fees and expenses of any "qualified
independent underwriter" and its counsel, as may be required by the rules and
regulations of the NASD)); (ii) fees and expenses of compliance with federal
securities and state Blue Sky or securities laws; (iii) expenses of printing
(including printing certificates for the Senior Notes, Preferred Stock,
Subordinated Debentures and Prospectuses), messenger and delivery services and
telephone; (iv) reasonable fees and disbursements of counsel for the Company and
the Holders of the Transfer Restricted Securities; (v) all application and
filing fees in connection with listing the Senior Notes, Preferred Stock and the
Subordinated Debentures on a national securities exchange or automated quotation
system pursuant to the requirements hereof; and (vi) reasonable fees and
disbursements of independent certified public accountants of the Company
(including the expenses of any special audit and "cold comfort" letters required
by or incident to such performance).
The Company will, in any event, bear its internal expenses
(including, without limitation, all salaries and expense of its officers and
employees performing legal or accounting duties), the expenses of any annual
audit, rating agency fees and the fees and expenses of any Person, including
special experts, retained by the Company.
(b) In connection with the Shelf Registration Statement, the
Company will reimburse the Holders of Transfer Restricted Securities being
tendered or registered for the reasonable fees and disbursements of Latham &
Watkins, as counsel to such Holders. Notwithstanding the provisions of this
Section 7, each Holder shall pay all registration expenses to the extent
required by applicable law.
SECTION 8. INDEMNIFICATION
(a) Each of the Company and the Guarantors jointly and severally
agrees to indemnify and hold harmless each Holder of Transfer Restricted
Securities and each person, if any, who controls such Holder within the meaning
of either Section 15 of the Securities Act or Section 20 of the Exchange Act, or
is under common control with or is controlled by such Holder from and against
any and all losses, claims, damages and liabilities (including, without
limitation, any legal or other expenses reasonably incurred by any Holder of
Transfer Restricted Securities or any such controlling person or person who is
under common control with, or is controlled by such Holder, in connection with
defending or investigating any such action or claim) caused by any untrue
statement or alleged untrue statement of a material fact contained in either
Memorandum (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto), or caused by any omission or alleged
omission to state therein a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except (i) insofar as such losses, claims, damages or liabilities
are caused by any such untrue statement or omission or alleged untrue statement
or omission based upon information relating to any Holder of Transfer Restricted
Securities furnished to the Company in writing by such Holder expressly for use
therein and (ii) that the foregoing indemnity with respect to any untrue
statement contained in or omission from a Memorandum shall not inure to the
benefit of any Holder of Transfer
12
<PAGE>
Restricted Securities (or any person controlling under common control with, or
controlled by, such Holder) from whom the person asserting any such loss, claim,
damage or liability purchased any of the Securities which are the subject
thereof if such person was not sent or given a copy of the Memorandum (or the
Memorandum as amended or supplemented) at or prior to the written confirmation
of the sale of such Securities to such person and the untrue statement contained
in or omission from such Memorandum was contained in the Memorandum (or the
Memorandum as amended or supplemented).
(b) Each Holder of Transfer Restricted Securities agrees,
severally and not jointly, to indemnify and hold harmless each of the Company
and the Guarantors, its directors, its officers and each person, if any, who
controls the Company within the meaning of either Section 15 of the Securities
Act or Section 20 of the Exchange Act to the same extent as the foregoing
indemnity from the Company and the Guarantors to such Holder, but only with
reference to information relating to such Holder furnished to the Company in
writing by such Holder expressly for use in either Memorandum or any amendments
or supplements thereto.
(c) In case any proceeding (including without limitation any
governmental investigation) shall be instituted involving any person in respect
of which indemnity may be sought pursuant to either paragraph (a) or (b) above,
such person (the "INDEMNIFIED PARTY") shall promptly notify the person against
whom such indemnity may be sought (the "INDEMNIFYING PARTY") in writing and the
Indemnifying Party, upon request of the Indemnified Party, shall retain counsel
reasonably satisfactory to the Indemnified Party to represent the Indemnified
Party and any others the Indemnifying Party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any Indemnified Party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such Indemnified Party unless (i) the Indemnifying Party and the Indemnified
Party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the Indemnifying Party and the Indemnified Party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the Indemnifying Party
shall not, in respect of the legal expenses of any Indemnified Party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all such indemnified parties and that all such fees
and expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by Salomon Brothers Inc., in the case of parties
indemnified pursuant to paragraph (a) above and by the Company in the case of
parties indemnified pursuant to paragraph (b) above. The Indemnifying Party
shall not be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the Indemnifying Party agrees to indemnify the
Indemnified Party from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the immediately preceding sentence, if
at any time an Indemnified Party shall have requested an Indemnifying Party to
reimburse the Indemnified Party for fees and expenses of counsel as contemplated
by the second and third sentences of this paragraph, the Indemnifying Party
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more than 60
days after receipt by such Indemnifying Party of the aforesaid request and (ii)
such Indemnifying Party shall not have reimbursed the Indemnified Party in
accordance with such request prior to the date of such settlement. No
Indemnifying Party shall, without the prior written consent of the Indemnified
Party, effect any settlement of any pending or threatened proceeding in respect
of which any Indemnified Party is or could have been a party and indemnity could
have been sought hereunder by such Indemnified Party, unless such settlement
includes an unconditional release of such Indemnified Party from all liability
on claims that are the subject matter of such proceeding.
13
<PAGE>
(d) To the extent the indemnification provided for in paragraph
(a) or (b) of this Section 8 is unavailable to an Indemnified Party or
insufficient in respect of any losses, claims, damages or liabilities referred
to therein, then each Indemnifying Party under such paragraph, in lieu of
indemnifying such Indemnified Party thereunder, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company and the Guarantors, on the one hand,
and the Holders of Transfer Restricted Securities on the other hand, from the
offering of the Securities or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (i) above but
also the relative fault of the Company and the Guarantors, on the one hand, and
of the Holders of Transfer Restricted Securities, on the other hand, in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of the Company and the Guarantors, on the one
hand, and the Holders of Transfer Restricted Securities on the other hand, shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or by the Holders
of Transfer Restricted Securities and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
(e) The Company, the Guarantors and the Holders of Transfer
Restricted Securities agree that it would not be just or equitable if
contribution pursuant to this Section 8 were determined by PRO RATA allocation
or by any other method of allocation that does not take account of the equitable
considerations referred to in paragraph (d) above. The amount paid or payable by
an Indemnified Party as a result of the losses, claims, damages and liabilities
referred to in paragraph (d) above shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such Indemnified Party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 8, no Holder of
Transfer Restricted Securities shall be required to contribute any amount in
excess of the amount by which the total price at which the Securities resold by
it in the initial placement of such Securities were offered to investors exceeds
the amount of any damages that such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The remedies
provided for in this Section 8 are not exclusive and shall not limit any rights
or remedies which may otherwise be available to any Indemnified Party at law or
in equity.
(f) The indemnity and contribution provisions contained in this
Section 8 and the representations and warranties of the Company and the
Guarantors contained in this Agreement shall remain operative and in full force
and effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Holder of Transfer Restricted
Securities or any person controlling any Holder of Transfer Restricted
Securities or by or on behalf of the Company, its officers or directors or any
person controlling the Company and (iii) acceptance of and payment for any of
the Securities. The remedies provided for in this Section 8 are not exclusive
and shall not limit any rights or remedies that may otherwise be available to
any Indemnified Party at law or equity.
14
<PAGE>
SECTION 9. RULE 144A
The Company hereby agrees with each Holder, for so long as any of
the Senior Notes, Preferred Stock or Subordinated Debentures remain outstanding
and during any period in which the Company is not subject to Section 13 or 15(d)
of the Exchange Act, to make available to any Initial Purchaser or beneficial
owner of such Transfer Restricted Securities in connection with any sale thereof
and any prospective purchaser of such Transfer Restricted Securities from such
Initial Purchaser or beneficial owner, the information required by Rule
144A(d)(4) under the Act.
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration
hereunder unless such Holder (a) agrees to sell such Holder's Transfer
Restricted Securities on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes the related underwriting agreement and all
questionnaires, powers of attorney, indemnities, and other documents required
under the terms of such underwriting arrangements.
SECTION 11. SELECTION OF UNDERWRITERS
Subject to Section 6(b)(xii) hereof, the Holders of Transfer
Restricted Securities covered by the Shelf Registration Statement who desire to
do so may sell such Transfer Restricted Securities in an Underwritten Offering.
The Underwriter(s) that will administer said offerings will be selected by the
Holders of a majority of the outstanding shares or the aggregate principal
amount, as applicable, of the Transfer Restricted Securities included in such
Underwritten Offering.
SECTION 12. MISCELLANEOUS
(a) REMEDIES. Each Holder, in addition to being entitled to
exercise all rights provided herein, in the Senior Note Indenture, in the
Subordinated Debenture Indenture, if applicable, in the Purchase Agreement and
granted by law, including recovery of damages, will be entitled to specific
performance of its rights under this Agreement. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Agreement and hereby agrees to waive the
defense in any action for specific performance that a remedy at law would be
adequate.
(b) NO INCONSISTENT AGREEMENTS. The Company will not on or after
the date of this Agreement enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof. The rights granted
to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Company's securities
under any agreements of the Company in effect on the date hereof.
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement may
not be amended, modified or supplemented, and waivers or consents to or
departures from the provisions hereof may not be given unless the Company has
obtained the written consent of Holders of a majority of, in the case of Senior
Notes, the outstanding aggregate principal amount, Preferred Stock, the
outstanding shares
15
<PAGE>
and, in the case of Subordinated Debentures, the then outstanding aggregate
principal amount, in each case, that are Transfer Restricted Securities.
(d) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the
records of the Registrar for the Senior Notes, transfer agent for the
Preferred Stock or the Registrar for the Subordinated Debentures, as
applicable, with a copy to the transfer agent or the Registrar; and
(ii) if to the Company, to PRIMEDIA Inc., 745 Fifth
Avenue, New York, New York, 10151, Attention: Beverly Chell, with a copy
to Simpson Thacher & Bartlett at 425 Lexington Avenue, New York, New
York, 10017, Attention: Gary I. Horowitz.
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt acknowledged, if telecopied; and on
the next Business Day, if timely delivered to an air courier guaranteeing
overnight delivery.
From and after the date on which the Preferred Stock is exchanged
for Subordinated Debentures, copies of all such notices, demands or other
communications shall be concurrently delivered by the Person giving the same to
the trustee under the Subordinated Debenture Indenture at the address specified
therein.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment hereof, subsequent Holders of Transfer Restricted Securities;
PROVIDED, that this Agreement shall not inure to the benefit of or be binding
upon a successor or assign of a Holder unless and to the extent such successor
or assign acquired Transfer Restricted Securities from such Holder.
(f) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) HEADINGS. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE CONFLICT OF LAW RULES THEREOF.
(i) SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(j) ENTIRE AGREEMENT. This Agreement together with the other
Operative Documents (as defined in the Purchase Agreement) is intended by the
parties as a final expression of their agreement
16
<PAGE>
and intended to be a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter contained
herein. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein with respect to the registration
rights granted by the Company with respect to the Transfer Restricted
Securities. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
17
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
PRIMEDIA INC.
By: /s/ BEVERLY C. CHELL
-------------------------------
Name: Beverly C. Chell
Title:
THE APARTMENT GUIDE OF NASHVILLE, INC.
ARGUS PUBLISHERS CORPORATION
AMERICAN HEAT VIDEO PRODUCTIONS, INC.
ASTN, INC.
A WEP COMPANY
BACON'S INFORMATION, INC.
BANKERS CONSULTING COMPANY
CARDINAL BUSINESS MEDIA, INC.
CARDINAL BUSINESS MEDIA HOLDINGS, INC.
CHANNEL ONE COMMUNICATIONS CORPORATION
COVER CONCEPTS MARKETING SERVICES, LLC
CSK PUBLISHING COMPANY INCORPORATED
DAILY RACING FORM, INC.
DATA BOOK, INC.
DRF FINANCE, INC.
THE ELECTRONICS SOURCE BOOK, INC.
EXCELLENCE IN TRAINING CORPORATION
FUNK & WAGNALLS YEARBOOK CORPORATION
GARETH STEVENS, INC.
GO LO ENTERTAINMENT, INC.
GUINN COMMUNICATIONS, INC.
HAAS PUBLISHING COMPANIES, INC.
HEALTH & SCIENCES NETWORK, INC.
IDTN LEASING CORPORATION
INDUSTRIAL TRAINING SYSTEMS CORPORATION
INTELLICHOICE, INC.
INTERMODAL PUBLISHING COMPANY, LTD.
INTERTEC MARKET REPORTS, INC.
INTERTEC PRESENTATIONS, INC.
INTERTEC PUBLISHING CORPORATION
K-III HPC, INC.
K-III PRIME CORPORATION
LAW ENFORCEMENT TELEVISION NETWORK, INC.
(TEXAS)
LIFETIME LEARNING SYSTEMS, INC.
LITTLE ROCK APARTMENT GUIDE, INC.
LOCKERT JACKSON & ASSOCIATES, INC.
MCMULLEN ARGUS PUBLISHING, INC.
MEMPHIS APARTMENT GUIDE, INC.
MUSICAL AMERICA PUBLISHING, INC.
<PAGE>
NELSON INFORMATION, INC.
NEWBRIDGE COMMUNICATIONS, INC.
PARK AVENUE PUBLISHING, INC.
PICTORIAL, INC.
PLAZA COMMUNICATIONS, INC.
PRIMEDIA HOLDINGS III INC.
PRIMEDIA INFORMATION INC.
PRIMEDIA MAGAZINES INC.
PRIMEDIA MAGAZINES FINANCE INC.
PRIMEDIA REFERENCE INC.
PRIMEDIA SPECIAL INTEREST PUBLICATIONS INC.
QWIZ, INC.
R.E.R. PUBLISHING CORPORATION
STRAIGHT DOWN, INC.
SYMBOL OF EXCELLENCE PUBLISHERS, INC.
TEL-A-TRAIN, INC.
TI-IN ACQUISITION CORPORATION
WEEKLY READER CORPORATION
WESTCOTT COMMUNICATIONS, INC.
WESTCOTT COMMUNICATIONS MICHIGAN, INC.
WESTCOTT ECI, INC.
WESTERN EMPIRE PUBLICATIONS, INC.
AS GUARANTORS
By: /s/ BEVERLY C. CHELL
------------------------------------
Name: Beverly C. Chell
Title:
<PAGE>
CONFIRMED AND ACCEPTED,
as of the date first above written:
SALOMON BROTHERS INC
By: /s/ CHRIS CLIPPER
-------------------------------
Name: Chris Clipper
Title:
<PAGE>
CONFIRMED AND ACCEPTED,
as of the date first above written:
MORGAN STANLEY & CO. INCORPORATED
By: /s/ FRANCIS P. BARKER
-------------------------------
Name: Francis P. Barker
Title:
