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Pursuant to Rule 424(b)(3)
Registration # 333-67804
PROSPECTUS
[LOGO]
OFFER TO EXCHANGE $500,000,000 8 7/8% SENIOR NOTES DUE 2011
FOR
$500,000,000 8 7/8% SENIOR NOTES DUE 2011,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
UNCONDITIONALLY GUARANTEED ON A SENIOR BASIS BY ALL OUR DOMESTIC WHOLLY-OWNED
RESTRICTED SUBSIDIARIES, OTHER THAN SECURITIZATION SUBSIDIARIES
THE EXCHANGE OFFER
- We will exchange all old notes that are validly tendered and not validly
withdrawn for an equal principal amount of new notes that are freely
tradeable, except in limited circumstances described below.
- You may withdraw tenders of old notes at any time before the expiration of the
exchange offer.
- The exchange offer expires at 5:00 p.m., New York City time, on October 16,
2001, unless extended. We do not currently intend to extend the expiration
date.
- The exchange of old notes for new notes in the exchange offer will not be a
taxable event for U.S. federal income tax purposes.
- We will not receive any proceeds from the exchange offer.
THE NEW NOTES
- The new notes are being offered in order to satisfy certain of our obligations
under the registration rights agreement entered into in connection with the
placement of the old notes.
- The terms of the new notes to be issued in the exchange offer are
substantially identical to the old notes, except that the new notes will be
freely tradeable, except in limited circumstances described below.
RESALES OF NEW NOTES
- The new notes may be sold in the over-the-counter market, in negotiated
transactions or through a combination of those methods.
If you are a broker-dealer and you receive new notes for your own account,
you must acknowledge that you will deliver a prospectus in connection with any
resale of the new notes. By making that acknowledgment, you will not be deemed
to admit that you are an underwriter under the Securities Act of 1933.
Broker-dealers may use this prospectus in connection with any resale of new
notes received in exchange for old notes where the old notes were acquired by
the broker-dealer as a result of market-making activities or trading activities.
We will make this prospectus available to any broker-dealer for use in any such
resale for a period of up to 180 days from the date on which the exchange offer
is consummated, subject to limited exceptions. A broker-dealer may not
participate in the exchange offer with respect to old notes acquired other than
as a result of market-making activities or trading activities. See "Plan of
Distribution."
If you are an affiliate of ours or are engaged in, or intend to engage in,
or have an agreement or understanding to participate in, a distribution of the
new notes, you cannot rely on the applicable interpretations of the Securities
and Exchange Commission and you must comply with the registration requirements
of the Securities Act in connection with any resale transaction.
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 13 OF THIS
PROSPECTUS
BEFORE PARTICIPATING IN THE EXCHANGE OFFER.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS SEPTEMBER 14, 2001.
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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. WE ARE NOT
MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS
PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THIS
PROSPECTUS.
TABLE OF CONTENTS
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PAGE
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Where You Can Find More Information......................... ii
Incorporation of Certain Documents by Reference............. ii
Summary..................................................... 1
Risk Factors................................................ 13
Forward-Looking Statements.................................. 21
Use of Proceeds............................................. 21
The Exchange Offer.......................................... 22
Description of Other Indebtedness and Preferred Stock....... 32
Description of New Notes.................................... 36
Certain United States Federal Income Tax Consequences....... 75
Plan of Distribution........................................ 79
Legal Matters............................................... 80
Experts..................................................... 80
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WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934, as amended, and file reports, proxy and information statements and
other information with the Securities and Exchange Commission which we refer to
as the "Commission" or the "SEC". Those reports, proxy and information
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington D.C. 20549 and at the Commission's Regional
Offices located at Seven World Trade Center, 13th Floor, New York, New York
10048 and at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of those materials also can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington D.C.
20549, at prescribed rates. The Commission also maintains a web site at
http://www.sec.gov, which contains reports, proxy statements and other
information regarding registrants that file electronically with the Commission.
In addition, reports, proxy statements and other information concerning us may
be inspected at the offices of the New York Stock Exchange, 20 Broad Street, New
York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
We incorporate by reference into this prospectus the following documents
filed with the Commission:
(a) our annual report on Form 10-K for the fiscal year ended December 31,
2000;
(b) our quarterly reports on Form 10-Q for the quarters ended March 31, 2001
and June 30, 2001;
(c) our current reports on Form 8-K or Form 8-K/A dated March 1, 2001,
July 6, 2001, July 26, 2001, August 1, 2001, August 16, 2001, August 24,
2001 and August 31, 2001; and
(d) About.com, Inc.'s consolidated financial statements and accompanying
notes as of and for the year ended December 31, 2000 and our unaudited
pro forma consolidated financial statements and accompanying notes giving
effect to the About.com merger included in our current report on
Form 8-K/A dated April 26, 2001.
All documents that we file with the Commission under Section 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this prospectus will 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 those documents.
You may obtain copies of those documents from us, free of cost, by
contacting us at the following address or telephone number:
Corporate Secretary
PRIMEDIA Inc.
745 Fifth Avenue
New York, New York 10151
(212) 745-0100
Information that we file later with the Commission and that is incorporated
by reference in this prospectus will automatically update and supersede
information contained in this prospectus. You will be deemed to have notice of
all information incorporated by reference in this prospectus as if that
information was included in this prospectus.
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SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND THE CONSOLIDATED FINANCIAL STATEMENTS AND ACCOMPANYING NOTES
INCORPORATED BY REFERENCE IN THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE
INDICATES, THE TERM "WE" OR "PRIMEDIA" MEANS THE COMBINED BUSINESS OPERATIONS OF
PRIMEDIA INC. AND ITS SUBSIDIARIES. YOU SHOULD CAREFULLY CONSIDER THE RISKS
INCLUDED UNDER THE CAPTION "RISK FACTORS." MARKET SHARE DATA CONTAINED IN THIS
PROSPECTUS ARE BASED UPON A PRODUCT'S SHARE OF ADVERTISING OR CIRCULATION,
DEPENDING ON THE PRODUCT, AS COMPARED TO ITS DIRECT COMPETITION.
OUR COMPANY
PRIMEDIA is the new tradition in media, combining traditional and new media.
We are a targeted media company with leading positions in consumer and
business-to-business markets. Our properties, which are delivered to over
200 million users, utilize the full media arsenal to deliver content via print
(magazines and directories), video (digital broadband, satellite and cable),
live events (trade and consumer shows) and the Internet. As of December 31,
2000, approximately 78% of our traditional media products ranked first or second
in advertising pages, advertising revenue, circulation or other competitive
metrics in their respective markets. We believe that in 2000 we sold the most
advertising pages of any magazine publisher in the United States and ranked
third in terms of revenue derived from sales of magazine copies at the newsstand
in the United States. Our Internet businesses rank seventh in unique visitors in
the United States as measured by MEDIA METRIX for June 2001.
In 2000, we had net sales of approximately $1.7 billion and EBITDA of
approximately $256.7 million. For the six months ended June 30, 2001, we had net
sales of approximately $872.3 million and EBITDA of approximately
$86.2 million. In 2000, our net loss was approximately $346.8 million, and for
the six months ended June 30, 2001, our net loss was approximately
$225.5 million.
OUR GROWTH STRATEGY
We believe that as technology has created a flood of information, it has
shifted the role of the media from making information broadly available across
all audiences to sifting out and qualifying information for the benefit of
specific audiences. As a result, we have organized our business into two
operating segments: consumer and business-to-business. Our consumer segment is
the largest publisher of specialty magazines and apartment rental guides and one
of the largest producers and distributors of special interest videos in the
United States. Through the About.com merger, we acquired a network of
highly-targeted, topic-specific web sites and the leading producer of original
content on the Internet. Our business-to-business segment is a leading publisher
of business-to-business magazines, books, directories and databases, addressing
the specialized information needs of professionals.
Our growth strategy is to deliver information over multiple traditional and
new media platforms to highly specific niches in both the consumer and
business-to-business markets, thereby attracting both dedicated users of
information and the advertisers determined to reach them. We expect to derive
our revenue principally from lead generation advertising as well as from
subscriptions to our products and brand awareness advertising. Lead generation
advertising is advertising focused on triggering a purchase decision by the
reader or viewer. We believe lead generation advertising is less susceptible to
general economic conditions than general brand awareness advertising.
In 2000, we embarked on an initiative to integrate our operating units. One
aspect of the integration was to improve productivity through cost reduction as
we entered into a strategic sourcing initiative to leverage our purchasing power
across all spending for certain manufacturing and non-manufacturing commodities.
Significant cost savings were achieved through consolidating the procurement of
goods and services, such as paper and printing, and centralizing support
services, such as accounting and payroll. During 2000, the strategic sourcing
initiative generated approximately $10.5 million in savings. With the About.com
merger, we will continue our integration and sourcing efforts and expect to
reduce Internet development costs.
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After the About.com merger, we formed the PRIMEDIA Integrated Sales and
Marketing Group to sell integrated marketing packages across all our traditional
and new media vehicles. We also formed the PRIMEDIA Internet Resource and
Technology Group to centralize and standardize our technology.
RECENT DEVELOPMENTS
EMAP USA
On August 24, 2001, we acquired all of the outstanding capital stock of
EMAP, Inc. (formerly known as Petersen Publishing) from an affiliate of
EMAP plc. In this prospectus, we refer to EMAP, Inc. as EMAP USA. EMAP USA has
more than 60 consumer titles reaching over 75 million enthusiasts through a
combination of magazines, network and cable television shows, web sites and live
consumer events. The acquisition did not include the United States edition of
FOR HIM MAGAZINE published by EMAP USA.
The total consideration we paid for the acquisition of EMAP USA was
$505 million in cash and a warrant to acquire 2,000,000 shares of our common
stock. We have partially financed the acquisition of EMAP USA by (1) issuing
$125 million of Series J convertible exchangeable preferred stock at a price per
share equal to $125 to KKR 1996 Fund L.P., an affiliate of Kohlberg Kravis
Roberts & Co. L.P. or KKR, and (2) drawing upon our revolving credit facility in
an amount of approximately $255 million. In addition, KKR 1996 Fund purchased
from us $125 million of (a) our common stock and (b) our Series K convertible
preferred stock at a price per share equal to $4.70. The Series K convertible
preferred stock is non-voting but otherwise the economic equivalent of our
common stock. The shares of Series K convertible preferred stock will be
automatically converted into an equal number of shares of our common stock upon
receipt of approval under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, for KKR 1996 Fund to acquire additional shares of our common
stock and 20 days after we send out an information statement describing the
financing pursuant to the Commission's proxy rules.
Dividends on the Series J convertible exchangeable preferred stock accrue at
an annual rate of 12.5% and are payable quarterly in kind. The Series J
convertible exchangeable preferred stock is perpetual and ranks pari passu with
our existing series of outstanding preferred stock. We have the option to redeem
any or all of the shares of Series J convertible exchangeable preferred stock at
any time for cash at 100% of the liquidation preference of each share being
redeemed. The Series J convertible exchangeable preferred stock may be converted
into shares of our common stock at any time after the first anniversary of the
issue date at a conversion price of $7 per share, subject to adjustments. On any
dividend payment date, we have the option to exchange the Series J convertible
exchangeable preferred stock into our subordinated debt. Our ability to redeem
or exchange the Series J convertible exchangeable preferred stock into debt is
subject to the approval of a majority of our independent directors.
In connection with the equity financing by KKR 1996 Fund, we paid KKR 1996
Fund a commitment fee consisting of warrants to purchase 1.25 million shares of
our common stock and granted to KKR as a funding fee for the securities
additional warrants to purchase 2.62 million shares of our common stock. The
warrants will be exercisable at any time after the first anniversary of the
grant date at an exercise price of $7 per share, subject to adjustments. The
warrants constituting the commitment fee and the funding fee vest on the grant
date. If the Series J convertible exchangeable preferred stock is outstanding
for three, six, nine or 12 months from the date of issuance, KKR 1996 Fund will
receive additional warrants that vest on the grant date to purchase 250,000,
1 million, 1.25 million and 1.5 million shares of our common stock,
respectively.
NEW CREDIT AGREEMENT
On June 20, 2001, we entered into a new credit agreement with commitments of
$1 billion, of which $558 million was outstanding as of June 30, 2001. The debt
under the credit agreement (as well as certain of our other equally and ratably
secured indebtedness) is secured by a pledge of the stock of PRIMEDIA
Companies Inc., an intermediate holding company that we own directly.
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The following chart summarizes the businesses of our two segments:
PRIMEDIA
CONSUMER SEGMENT
CONSUMER MAGAZINES AND INTERNET GROUP
- Over 100 titles
(including Seventeen, New York, American Baby, Modern Bride, Automobile, Fly
Fisherman, Equus, Popular Hot Rodding, McCalls Quilting, Crafts Magazines)
- Seventeen.com, Americanbaby.com
- Over 60 EMAP USA titles (including Motor Trend, Hot Rod, Teen and
Stereophile)
CONSUMER GUIDES
- 76 local apartment guides
- 16 new home guides
- 6 travel information guides
- Apartmentguide.com
CONSUMER INTERNET
- About.com (including over 700 niche sites)
CONSUMER VIDEO
- Channel One
- Films for the Humanities and Sciences
- PRIMEDIA Digital Video
BUSINESS-TO-BUSINESS SEGMENT
BUSINESS-TO-BUSINESS MAGAZINES AND MEDIA GROUP
- 82 trade publications
(including Telephony, Wireless Review, Electrical Construction and
Maintenance, Broadcast Engineering, Soybean Digest, Beef, American Trucker)
- Trade Shows
(25 trade shows, including Telecom Business, Waste Age, Lighting Dimensions
International)
INFORMATION
- Over 500 books, directories and databases
(including Machinery Information Division, Federal Sources, Media Central)
- Trade Shows
PRIMEDIA WORKPLACE LEARNING
- Accreditation-oriented
- Vocational trining in 7 fields
(including automotive, law, healthcare and government)
- Trade Shows
We were incorporated on November 22, 1991 in the State of Delaware. Our
principal executive offices are located at 745 Fifth Avenue, New York, New York,
10151; telephone number (212) 745-0100. Our domain name is "primedia.com." Our
common stock is publicly traded on the New York Stock Exchange under the symbol
"PRM." The information on our web site is not part of this prospectus.
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SUMMARY OF TERMS OF THE EXCHANGE OFFER
On May 8, 2001, we completed the private offering of the old notes. On that
date, we and our domestic wholly-owned restricted subsidiaries, other than
securitization subsidiaries, which we refer to as the guarantors, entered into a
registration rights agreement with the initial purchasers in the private
offering in which we and the guarantors agreed to deliver to you this prospectus
as part of the exchange offer and we agreed to complete the exchange offer
within 230 days after the date of original issuance of the old notes. You are
entitled to exchange in the exchange offer your old notes for new notes which
are identical in all material respects to the old notes except:
- the new notes have been registered under the Securities Act of 1933;
and
- the liquidated damages which would be payable on the old notes in
specified circumstances are no longer applicable.
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The Exchange Offer................... We are offering to exchange up to $500,000,000 aggregate
principal amount of old notes for up to $500,000,000
aggregate principal amount of new notes. Old notes may be
exchanged only in integral multiples of $1,000.
Resale............................... Based on an interpretation by the staff of the SEC set forth
in no-action letters issued to third parties, including
Exxon Capital Holdings Corporation and Morgan Stanley & Co.
Incorporated, we believe that the new notes issued in the
exchange offer in exchange for old notes may be offered for
resale, resold and otherwise transferred by you without
compliance with the registration and prospectus delivery
provisions of the Securities Act, so long as you:
- are not an affiliate of ours within the meaning of
Rule 405 under the Securities Act; and
- are acquiring the new notes in the ordinary course of your
business and have not engaged in, do not intend to engage
in, and have no arrangement or understanding with any
person to participate in, a distribution of the new notes.
Each participating broker-dealer that receives new notes for
its own account in the exchange offer in exchange for old
notes that were acquired as a result of market-making or
other trading activity must acknowledge that it will deliver
a prospectus in connection with any resale of the new notes.
See "Plan of Distribution."
Any holder of old notes who:
- is an affiliate of ours within the meaning of Rule 405
under the Securities Act;
- does not acquire new notes in the ordinary course of its
business; or
- tenders in the exchange offer with the intention to
participate, or for the purpose of participating, in a
distribution of new notes
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cannot rely on the position of the staff of the SEC
enunciated in EXXON CAPITAL HOLDINGS CORPORATION, MORGAN
STANLEY & CO. INCORPORATED or similar no-action letters and,
in the absence of an exemption from the registration and
prospectus delivery requirements of the Securities Act, must
comply with those requirements in connection with the resale
of the new notes.
Expiration Date; Withdrawal of
Tender............................... The exchange offer will expire at 5:00 p.m., New York City
time, on October 16, 2001, or on a later date and time if we
decide to extend the exchange offer. We refer to the date on
which the exchange offer will expire as the expiration date.
We do not currently intend to extend the expiration date. A
tender of old notes in the exchange offer may be withdrawn
at any time before the expiration date. Any old notes not
accepted for exchange for any reason will be returned
without expense to the tendering holder promptly after the
expiration or termination of the exchange offer.
Material Conditions to the Exchange
Offer................................ The exchange offer is subject to customary conditions, which
we may waive. Please read the section captioned "The
Exchange Offer--Material Conditions to the Exchange Offer"
of this prospectus for more information regarding the
conditions to the exchange offer.
Procedures for Tendering Outstanding
Notes................................ If you wish to accept the exchange offer, you must:
- complete, sign and date the accompanying letter of
transmittal, or a facsimile of the letter of transmittal
according to the instructions contained in this prospectus
and the letter of transmittal;
- mail or otherwise deliver the letter of transmittal, or a
facsimile of the letter of transmittal, together with the
old notes and any other required documents, to the
exchange agent at the address indicated on the cover
page of the letter of transmittal; or
- if you hold old notes through The Depository Trust
Company, or DTC, and wish to participate in the exchange
offer, you must comply with the Automated Tender Offer
Program procedures of DTC, by which you will agree to be
bound by the letter of transmittal.
By signing, or agreeing to be bound by the letter of
transmittal, you will represent to us that, among other
things:
- any new notes that you receive will be acquired in the
ordinary course of your business;
- you have no arrangement or understanding with any person
or entity to participate in a distribution of the new
notes;
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- if you are a broker-dealer that will receive new notes for
your own account in exchange for old notes that were
acquired as a result of market-making activities, that you
will deliver a prospectus, as required by law, in
connection with any resale of those new notes; and
- you are not an affiliate, as defined in Rule 405 of the
Securities Act, of ours or, if you are an affiliate, you
will comply with any applicable registration and
prospectus delivery requirements of the Securities Act.
Special Procedures for Beneficial
Owners............................... If you are a beneficial owner of old notes which are
registered in the name of a broker, dealer, commercial bank,
trust company or other nominee and you wish to tender your
old notes in the exchange offer, you should contact that
registered holder promptly and instruct the registered
holder to tender on your behalf. If you wish to tender on
your own behalf, you must, prior to completing and executing
the letter of transmittal and delivering your old notes,
either make appropriate arrangements to register ownership
of the old notes in your name or obtain a properly completed
bond power from the registered holder. The transfer of
registered ownership may take considerable time and may not
be able to be completed before the expiration date.
Guaranteed Delivery
Procedures........................... If you wish to tender your old notes and your old notes are
not immediately available or you cannot deliver your old
notes, the letter of transmittal or any other documents
required by the letter of transmittal or to comply with the
applicable procedures under DTC's Automated Tender Offer
Program before the expiration date, you must tender your old
notes according to the guaranteed delivery procedures set
forth in this prospectus under "The Exchange
Offer--Guaranteed Delivery Procedures."
Effect on Holders of
Outstanding Notes.................... Once we complete the exchange of all validly tendered old
notes pursuant to the terms of the exchange offer, we will
have fulfilled a covenant contained in the registration
rights agreement and, accordingly, there will be no
liquidated damages paid on the old notes under the
circumstances described in the registration rights
agreement. If you are a holder of old notes and you do not
tender your old notes in the exchange offer, you will
continue to hold the old notes and you will be entitled to
all the rights and limitations applicable to the old notes
in the indenture, except for any rights under the
registration rights agreement that by their terms terminate
upon the completion of the exchange offer.
We expect that the exchange of new notes for old notes will
have a material adverse effect on the trading market for old
notes.
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Consequences of Failure to
Exchange............................. All untendered old notes will continue to be subject to the
restrictions on transfer provided for in the old notes and
in the indenture. In general, the old notes may not be
offered or sold, unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction
not subject to, the Securities Act and applicable state
securities laws. Other than in connection with the exchange
offer, we do not currently anticipate that we will register
the old notes under the Securities Act.
Material Income Tax Considerations... The exchange of old notes for new notes in the exchange
offer will not be a taxable event for United States federal
income tax purposes. See "Certain United States Federal
Income Tax Consequences."
Use of Proceeds...................... We will not receive any cash proceeds from the issuance of
new notes in connection with the exchange offer.
Exchange Agent....................... The Bank of New York is the exchange agent for the exchange
offer. The address and telephone number of the exchange
agent are provided in the section captioned "The Exchange
Offer--Exchange Agent" of this prospectus.
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SUMMARY OF TERMS OF THE NEW NOTES
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Maturity............................. May 15, 2011.
Interest Payment Dates............... May 15 and November 15 of each year, commencing
November 15, 2001.
Optional Redemption.................. At any time on or after May 15, 2006, we may redeem all or a
part of the new notes at the redemption price specified in
this prospectus under "Description of Notes--Optional
Redemption."
At any time before May 15, 2004, we may redeem up to 35% of
the new notes with the net proceeds of certain equity
offerings at a redemption price of 108.875%, as long as at
least 65% of the aggregate principal amount of the new notes
remains outstanding after the redemption. See "Description
of Notes--Optional Redemption."
In addition, we may redeem all or a part of the new notes if
we become subject to a change of control at any time, at the
redemption price described under "Description of
Notes--Change of Control--Optional Redemption Upon Change of
Control."
Change of Control.................... If we become subject to a change of control, we will be
required to make an offer to purchase any new notes that we
do not redeem as provided under "Optional Redemption" above,
at a purchase price of 101% of the principal amount of those
new notes, plus accrued and unpaid interest to the date of
purchase.
Guarantees........................... The new notes will be fully and unconditionally guaranteed,
on a senior basis, jointly and severally, by each of our
wholly-owned domestic restricted subsidiaries, other than
securitization subsidiaries.
Ranking.............................. The new notes will be senior obligations secured as
described below and will rank PARI PASSU in right of payment
to all our existing and future senior indebtedness and
senior to any future subordinated indebtedness of ours.
The guarantees of the new notes will rank PARI PASSU in
right of payment with all existing and future senior
indebtedness of our subsidiary guarantors, including those
subsidiaries' guarantees of our obligations under our bank
credit facilities and our other outstanding senior notes.
As of June 30, 2001, we had approximately $1,698.9 million
of senior indebtedness consisting of $558.0 million of
borrowings under our bank credit facilities, $100.0 million
of our 10 1/4% senior notes due 2004, $299.3 million of our
8 1/2% senior notes due 2006, $248.9 million of our 7 5/8%
senior notes due 2008 and $492.7 million of the old notes,
all of which was guaranteed on a senior basis by our
subsidiaries guaranteeing the new notes. All of our senior
indebtedness, including the new notes, is secured by a
pledge of the stock of PRIMEDIA Companies Inc., an
intermediate holding company we own directly. PRIMEDIA
Companies Inc. owns all of our operating subsidiaries.
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As of June 30, 2001, there was $420.4 million available for
borrowing under our bank credit facilities. As a result of
the concurrent transactions, we expect to draw upon our
revolving credit facility in an amount of $270 million.
As of June 30, 2001, we had no subordinated indebtedness
outstanding. Subject to the financial covenants in our bank
credit facilities, we have the option at any time to
exchange our outstanding series of preferred stock into
subordinated indebtedness in an aggregate principal amount
of $562.1 million.
Restrictive Covenants................ We will issue the new notes under an indenture containing
covenants for your benefit. These covenants restrict our
ability and the ability of our subsidiaries, with
exceptions, to:
- incur additional debt;
- create or permit to exist certain liens;
- pay dividends on or repurchase or retire capital stock;
- make investments in certain subsidiaries;
- sell assets or equity interests in subsidiaries;
- enter into transactions with affiliates; and
- consolidate, merge or transfer all or substantially all of
our assets.
These covenants are subject to a number of important
exceptions and qualifications.
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SELECTED CONSOLIDATED FINANCIAL INFORMATION
The selected consolidated operating and balance sheet data are derived in
part from our audited consolidated financial statements contained in our annual
reports on Form 10-K for each of the years in the five-year period ended
December 31, 2000 and from our unaudited condensed consolidated financial
statements contained in our quarterly report on Form 10-Q for the quarter ended
June 30, 2001. The historical data are only a summary and should be read in
conjunction with the historical consolidated financial statements and related
notes contained in the Form 10-K for the year ended December 31, 2000 and the
Form 10-Q for the quarter ended June 30, 2001, which have been incorporated by
reference in this prospectus. In the opinion of management, the unaudited
condensed consolidated financial statements have been prepared on the same basis
as the audited consolidated financial statements and include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position and results of operations for such
periods. The results of operations as of and for the six months ended June 30,
2001 are not necessarily indicative of our results for any other interim period
or for the full year.
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<Caption>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------------------------ ---------------------------
1996 1997 1998 1999 2000 2000 2001
------------ ------------ ------------ ------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
OPERATING DATA:
Sales, net.............. $1,374,449 $1,487,595 $1,573,573 $1,716,102 $1,690,952 $829,977 $872,284
Depreciation of property
and equipment......... 38,233 37,334 42,214 47,653 52,920 26,906 30,845
Amortization of
intangible assets,
excess of purchase
price over net assets
acquired and other.... 152,469 146,831 176,755 176,361 128,355 66,422 117,738
Other (income)
charges(1)............ -- 138,640 (7,216) 62,208 41,570 12,780 29,030
Operating income
(loss)(2)............. 85,901 (20,793) 118,157 54,332 33,834 22,190 (91,436)
Provision for the
impairment of
investments(3)........ -- -- -- -- 188,526 -- 30,807
Interest expense........ 124,601 136,625 144,442 164,909 143,988 75,319 66,854
Income tax benefit
(expense)(4).......... 53,300 1,685 -- (6,500) (41,200) -- --
Income (loss) before
extraordinary
charge................ 17,597 (157,439) (37,736) (120,113) (346,826) (46,499) (225,488)
Extraordinary charge--
extinguishment of
debt(5)............... 9,553 15,401 -- -- -- -- --
Net income (loss)(2).... 8,044 (172,840) (37,736) (120,113) (346,826) (46,499) (225,488)
Preferred stock
dividends and related
accretion(6).......... 43,526 65,073 63,285 53,062 53,063 26,531 27,347
Loss applicable to
common shareholders... 35,482 237,913 101,021 173,175 399,889 73,030 252,835
Basic and diluted loss
applicable to common
shareholders per
common share:
Loss before
extraordinary
charge.............. $0.20 $1.72 $0.71 $1.19 $2.48 $0.47 $1.28
Net loss.............. $0.27 $1.84 $0.71 $1.19 $2.48 $0.47 $1.28
Basic and diluted common
shares outstanding.... 128,781,518 129,304,900 142,529,024 145,418,441 161,104,053 155,145,878 198,271,477
</Table>
10
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<Table>
<Caption>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------------------------ ---------------------------
1996 1997 1998 1999 2000 2000 2001
------------ ------------ ------------ ------------ ------------ ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
OTHER DATA:
EBITDA(7)............... $276,603 $302,012 $329,910 $340,554 $256,679 $128,298 $86,177
Additions to property,
equipment and other,
net................... 28,790 31,108 55,238 69,488 77,579 35,442 26,114
Net cash provided by
(used in) operating
activities............ 150,192 125,360 140,804 107,298 52,546 (22,277) (139,757)
Net cash provided by
(used in) investing
activities............ (721,709) (185,725) (609,621) 186,081 (54,644) 35,436 57,206
Net cash provided by
(used in) financing
activities............ 580,946 46,688 470,377 (289,256) (2,873) (10,592) 72,161
Deficiency of earnings
to fixed
charges(8)(9)......... 35,703 159,124 37,736 113,613 295,489 45,775 196,183
Deficiency of earnings
to fixed charges and
preferred stock
dividends and related
accretion(8)(9)....... 79,229 224,197 101,021 166,675 348,552 72,306 223,530
BALANCE SHEET DATA:
Cash and cash
equivalents........... $36,655 $22,978 $24,538 $28,661 $23,690 $31,228 $13,300
Working capital(10)..... (44,705) (146,245) (234,045) (200,458) (346,447) (128,685) (142,946)
Total assets............ 2,552,215 2,485,990 3,041,074 2,714,552 2,677,479 2,660,970 3,060,323
Long-term debt(11)...... 1,577,469 1,682,224 1,956,997 1,732,896 1,503,188 1,557,435 1,720,207
Exchangeable preferred
stock................. 442,729 470,280 557,841 559,689 561,324 560,508 562,141
Total shareholders'
equity (deficiency)... 81,557 (162,223) (83,703) (144,238) (236,026) (32,338) 149,716
</Table>
------------------------------
(1) Represents non-cash compensation and non-recurring charges of $35,210 for
the year ended December 31, 2000 and $24,544 and $12,727 for the six months
ended June 30, 2000 and 2001, respectively, a provision for severance,
closures and integration costs of $22,000 and $20,798 for the years ended
December 31, 1999 and 2000, respectively, and $16,718 and $12,502 for the
six months ended June 30, 2000 and 2001, respectively, other integration
costs related to the About.com merger and other company-wide integration
efforts of $4,304 for the six months ended June 30, 2001, (gain) loss on the
sales of businesses and other, net of $138,640, $(7,216), $(235,580) and
$(14,438) for the years ended December 31, 1997, 1998, 1999 and 2000,
respectively, and $(28,482) and $(503) for the six months ended June 30,
2000 and 2001, respectively, and a provision for the impairment of
long-lived assets of $275,788 for the year ended December 31, 1999.
(2) The adoption of a change in method of accounting for internal use software
costs effective January 1, 1998 resulted in an increase in operating income
and an equal decrease in net loss of approximately $12,450, $9,000 and
$12,500 for the years ended December 31, 1998, 1999 and 2000, respectively.
(3) Represents a provision for the impairment of our investment in CMGI, Inc. of
approximately $155,500, a provision for the impairment of our investment in
Liberty Digital, Inc. of approximately $21,900 and a provision for the
impairment of various PRIMEDIA Ventures' investments of approximately
$11,200 for the year ended December 31, 2000 and a provision for the
impairment of various of our investments of approximately $30,800 for the
six months ended June 30, 2001.
(4) At December 31, 1997, 1998 and 1999, our 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
would likely be realized and accordingly, we recorded an income tax benefit
of $53,300 in 1996. For the year ended December 31, 1997, we recorded an
income tax carryback claim of $1,685. In 1999, we recorded income tax
expense of $6,500 related to a provision for current state and local taxes
incurred as a result of the gain on the sale of the supplemental education
group. During 2000, we increased our valuation allowance due to historical
operating losses and the impairment of investments, resulting in a provision
for income taxes of $41,200. At December 31, 2000, we
11
<Page>
had aggregate net operating and capital loss carryforwards of approximately
$1,028,000 which will be available to reduce future taxable income.
(5) Represents the write-off of unamortized deferred financing costs and the
premiums paid on the redemptions of the 10 5/8% senior notes.
(6) Includes the premiums paid on the redemptions of our $11.625 Series B
exchangeable preferred stock and our $2.875 senior exchangeable preferred
stock in 1998 and 1997, respectively. In 1997, we 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.
(7) Represents earnings before interest, taxes, depreciation, amortization and
other (income) charges including non-cash compensation and non-recurring
charges of $35,210 for the year ended December 31, 2000 and $24,544 and
$12,727 for the six months ended June 30, 2000 and 2001, respectively, a
provision for severance, closures and integration costs of $22,000 and
$20,798 for the years ended December 31, 1999 and 2000, respectively, and
$16,718 and $12,502 for the six months ended June 30, 2000 and 2001,
respectively, other integration costs related to the About.com merger and
other company-wide integration efforts of $4,304 for the six months ended
June 30, 2001, (gain) loss on the sales of businesses and other, net of
$138,640, $(7,216), $(235,580) and $(14,438) for the years ended
December 31, 1997, 1998, 1999 and 2000, respectively, and $(28,482) and
$(503) for the six months ended June 30, 2000 and 2001, respectively, and a
provision for the impairment of long-lived assets of $275,788 for the year
ended December 31, 1999.
EBITDA is not intended to represent cash flow from operating activities and
should not be considered as an alternative to net income (loss) (as
determined in conformity with generally accepted accounting principles) as
an indicator of our operating performance or to cash flows as a measure of
liquidity. We believe 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 in this
prospectus to permit a more complete comparative analysis of our operating
performance relative to other companies in our industry. EBITDA should not
be considered in isolation or as a substitute for other measures of
financial performance or liquidity. The primary difference between EBITDA
and cash flows provided by operating activities relates to changes in
working capital requirements and payments made for interest and income
taxes. Additionally, EBITDA is not available for our discretionary use as
there are legal requirements to pay preferred stock dividends and repay
debt, among other payments. EBITDA as presented may not be comparable to
similarly titled measures reported by other companies, since not all
companies necessarily calculate EBITDA in identical manners, and therefore,
is not necessarily an accurate measure of comparison between companies.
(8) For purposes of determining the deficiency of earnings to fixed charges and
preferred stock dividends and related accretion, "earnings" consist of loss
before income taxes, fixed charges and equity in losses of investees, and
"fixed charges" consist of interest on all indebtedness, amortization of
deferred financing costs and that portion of rental expenses that management
believes to be representative of interest and "preferred stock dividends and
related accretion" consist of dividends on our preferred stock, the
accretion of our preferred stock and premiums paid on the redemption of our
$11.625 Series B exchangeable preferred stock in 1998.
(9) Loss before income taxes includes non-cash and non-recurring charges for
depreciation and amortization of property and equipment, other intangible
assets, excess of purchase price over net assets acquired and deferred
financing costs, gain (loss) on the sales of businesses and other, net,
provision for severance, closures and integration costs, non-cash
compensation and non-recurring charges, provision for the impairment of
long-lived assets, provision for the impairment of investments, write-off of
deferred financing costs and non-cash interest expense on an acquisition
obligation, distribution advance and other current liabilities. These
charges totaled $198,895, $333,219, $224,063, $294,982 and $419,144 for the
years ended December 31, 1996, 1997, 1998, 1999 and 2000, respectively and
$109,999 and $218,055 for the six months ended June 30, 2000 and 2001,
respectively. Adjusted to eliminate those charges, earnings would have
exceeded fixed charges and fixed charges plus cash preferred stock dividends
and related accretion by $163,192 and $136,248, $174,095 and $113,473,
$186,327 and $123,042, $181,369 and $128,307 and $123,655 and $70,592 for
the years ended December 31, 1996, 1997, 1998, 1999 and 2000, respectively,
and by $64,224 and $37,693 for the six months ended June 30, 2000. Adjusted
to eliminate those charges for the six months ended June 30, 2001, earnings
would have exceeded fixed charges by $21,872 but, earnings would have been
insufficient to cover fixed charges plus preferred stock dividends and
related accretion by $5,475.
(10) Includes current maturities of long-term debt and net assets held for sale,
where applicable. Consolidated working capital reflects certain industry
working capital practices and accounting principles, including the expensing
of certain editorial and product development costs when incurred and the
recording of deferred revenue from subscriptions 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.
(11) Excludes current maturities of long-term debt.
12
<Page>
RISK FACTORS
RISK FACTORS RELATING TO OUR BUSINESS
WE MAY NOT BE ABLE TO ACHIEVE THE EXPECTED RESULTS FROM ACQUISITIONS AND
INVESTMENTS.
We may not be able to continue to integrate the business of About.com or
integrate the business of EMAP USA into our existing businesses without
encountering difficulties. In addition, we may make acquisitions and investments
in the future. The integration of About.com, EMAP USA and other businesses we
may acquire is and will be a complex, time consuming and expensive process
involving a number of issues, including:
- difficulty integrating acquired technologies, operations and personnel
with our existing businesses;
- diversion of management attention in connection with both negotiating the
acquisitions and integrating the assets;
- strain on managerial and operational resources as management tries to
oversee larger operations;
- exposure to unforeseen liabilities of acquired companies;
- potential issuance of securities in connection with a future acquisition
with rights that are superior to the rights of holders of our currently
outstanding securities; and
- the requirement to record potentially significant additional future
operating costs for the amortization of certain intangible assets.
Our future operating results will depend to a significant degree on our
ability to address these issues. In addition, we have invested and may invest in
the future in some early-stage companies with limited operating histories and
limited or no revenues. We may not be able to successfully develop these young
companies and, in some cases, we may not own enough equity in them to control
their development.
GENERAL ECONOMIC TRENDS MAY REDUCE OUR ADVERTISING REVENUES.
Our advertising revenues are subject to the risks arising from adverse
changes in domestic and global economic conditions. A decline in the level of
business activity of our advertisers has had and could continue to have an
adverse effect on our revenues and profit margins. Because of the recent
economic slowdown in the United States, many advertisers, particularly
business-to-business advertisers, are reducing advertising expenditures. If the
current economic slowdown continues or worsens, our results of operations may be
adversely affected.
WE HAVE SUBSTANTIAL INDEBTEDNESS AND OTHER MONETARY OBLIGATIONS, WHICH
CONSUME A SUBSTANTIAL PORTION OF THE CASH FLOW THAT WE GENERATE.
We have substantial indebtedness and expect to incur additional indebtedness
under our bank credit facilities or otherwise. As of June 30, 2001, we had
approximately $1,728.3 million of outstanding indebtedness and $562.1 million of
outstanding preferred stock. In addition, as a result of our acquisition of EMAP
USA, we drew upon our revolving credit facility in an amount of $255 million. A
substantial portion of our cash flow is dedicated to the payment of principal
and interest on indebtedness and to the payment of dividends on our preferred
stock, which reduces funds available for capital expenditures and business
opportunities and may limit our ability to respond to adverse developments in
our business or in the economy. For the year ended December 31, 2000, we paid
$117.7 million of principal and $141.9 million of interest, and for the six
months ended June 30, 2001, we paid $59.8 million of interest. In addition, for
the year ended December 31, 2000, we made cash
13
<Page>
dividend payments of $53.1 million on our outstanding preferred stock, and for
the six months ended June 30, 2001, we made cash dividend payments of
$26.5 million on our outstanding preferred stock. As a result of our recent
transactions in connection with the financing of our acquisition of EMAP USA, we
expect our annual interest payments to increase by approximately $15 million.
As of June 30, 2001, borrowings under our bank credit facilities were
approximately $558 million. In addition, to partially finance our acquisition of
EMAP USA, we borrowed an additional $255 million under our revolving credit
facility. These 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 our bank credit facilities would increase our interest
payment obligations and could have an adverse effect on us. The weighted average
interest rate on our bank credit facilities was 6.46% at June 30, 2001.
Our ability to make payments with respect to our indebtedness will depend on
our future operating performance, which will be affected by prevailing economic
conditions and financial, business, competitive and other factors. We will not
be able to control many of these factors, such as the economic conditions in the
markets in which we operate and initiatives taken by our competitors.
Based on the outstanding principal amount of our debt under our bank credit
facilities and outstanding senior notes as of June 30, 2001, we will be required
to repay $127.4 million of indebtedness on or prior to December 31, 2004, and we
will have to repay substantial additional indebtedness and redeem a significant
amount of preferred stock thereafter. We may not be able to repay that debt or
redeem the preferred stock from available cash sources and may not be able to
refinance that debt or preferred stock on commercially reasonable terms, if at
all. If we are unable to repay, redeem or refinance these amounts on or prior to
their due dates, we may need to sell assets or take other actions that could be
detrimental to the holders of our common stock. In that event, we may not be
able to generate sufficient cash from asset sales to satisfy our cash needs. If
we are unable to repay, redeem or refinance our indebtedness and preferred stock
on or prior to their due dates, we will be in default and all of our
indebtedness could be accelerated.
OUR DEBT INSTRUMENTS LIMIT OUR BUSINESS FLEXIBILITY BY IMPOSING OPERATING AND
FINANCIAL RESTRICTIONS ON OUR OPERATIONS.
The agreements governing our indebtedness impose specific operating and
financial restrictions on us. These restrictions prohibit or limit us from,
among other things:
- changing the nature of our business;
- incurring additional indebtedness;
- creating liens on our assets;
- selling assets;
- engaging in mergers, consolidations or transactions with our affiliates;
- making investments in or loans to specific subsidiaries;
- making guarantees or specific restricted payments; and
- declaring or making dividend payments on our common or preferred stock.
As of June 30, 2001, under our most restrictive debt covenants, we must
maintain a minimum interest coverage ratio of 1.80 to 1 and a minimum fixed
charge coverage ratio of 1.05 to 1. Our maximum allowable debt leverage ratio is
6.0 to 1. The minimum interest coverage ratio and maximum debt coverage ratio we
must maintain become more restrictive over time. The maximum leverage ratio
decreases to 5.75 to 1, 5.5 to 1, 5.0 to 1 and 4.5 to 1, respectively, on
July 1, 2003, January 1, 2004, January 1, 2005 and January 1, 2006. The minimum
interest coverage ratio increases to 2.0 to 1, 2.25 to
14
<Page>
1 and 2.5 to 1, respectively, on July 1, 2003, January 1, 2004 and January 1,
2005. For the twelve months ended June 30, 2001, our interest coverage ratio,
fixed charge coverage ratio and debt leverage ratio were 2.34 to 1, 1.28 to 1
and 5.43 to 1, respectively. These restrictions, in combination with our
leveraged nature, could limit our ability to effect future acquisitions or
financings or otherwise restrict corporate activities.
Our failure to comply with the terms and covenants in our indebtedness could
lead to a default under the terms of those documents, which would entitle the
lenders to accelerate the indebtedness and declare all amounts owed due and
payable. Moreover, the instruments governing almost all of our indebtedness,
including the notes, contain cross-default provisions so that a default under
any of our indebtedness may result in a default under our other indebtedness. If
a cross-default occurs, the maturity of almost all of our indebtedness could be
accelerated and become immediately due and payable. We may not be able to comply
with these restrictions in the future, or in order to comply with these
restrictions we may have to forgo opportunities that might otherwise be
beneficial to us.
OUR EARNINGS HAVE BEEN INSUFFICIENT TO PAY OUR FIXED CHARGES AND PREFERRED
STOCK DIVIDENDS.
Our earnings were inadequate to cover fixed charges and fixed charges plus
preferred stock dividends and related accretion by $295.5 million and
$348.6 million, respectively, for the year ended December 31, 2000 and by
$196.2 million and $223.5 million, respectively, for the six months ended
June 30, 2001. Earnings consist of loss before income taxes, fixed charges and
equity in losses of investees, and fixed charges consist of interest on all
indebtedness, amortization of deferred financing costs and that portion of
rental expenses that management believes to be representative of interest.
Although our earnings were affected by substantial non-cash and non-recurring
charges (including depreciation and amortization of property and equipment,
other intangible assets, excess of purchase price over net assets acquired and
deferred financing costs, write-off of deferred financing costs, gain on the
sales of businesses and other, net, provision for severance, closures and
integration costs, non-cash compensation and non-recurring charges, provision
for the impairment of investments and non-cash interest expense on an
acquisition obligation and other current liabilities of approximately
$419.1 million for the year ended December 31, 2000 and $218.1 million for the
six months ended June 30, 2001), we cannot assure you that our cash flow will be
sufficient in future periods to permit us to make our required payments on our
indebtedness and preferred stock.
KOHLBERG KRAVIS ROBERTS & CO. L.P., OR KKR, HAS CONTROL OF OUR COMMON STOCK
AND HAS THE POWER TO ELECT ALL THE MEMBERS OF OUR BOARD OF DIRECTORS AND TO
APPROVE ANY ACTION REQUIRING STOCKHOLDER APPROVAL.
As of July 31, 2001, approximately 59.5% of the shares of our common stock
were held by investment partnerships, of which KKR Associates, L.P., a New York
limited partnership, and KKR GP 1996 LLC, a Delaware limited liability company,
each an affiliate of KKR, are the general partners. KKR Associates and KKR GP
1996 have sole voting and investment power with respect to those shares. In
addition, on August 24, 2001, we issued (1) 10,800,000 shares of our common
stock to KKR 1996 Fund, an affiliate of KKR, (2) 15,795,745 shares of our
Series K convertible preferred stock which will automatically convert into
15,795,745 shares of common stock to KKR 1996 Fund upon receipt of approval
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, for
KKR 1996 Fund to acquire additional shares of common stock and 20 days after we
send out an information statement pursuant to Regulation 14C of the Exchange Act
to our stockholders and (3) 1,000,000 shares of our Series J convertible
exchangeable preferred stock to KKR 1996 Fund at $125 per share with an
aggregate liquidation preference of $125 million and convertible into shares of
our common stock at any time after the first anniversary of the issue date at a
conversion price per share of $125 million divided by $7 per share. We also
granted warrants which are not exercisable until after the first anniversary of
the grant date to KKR or one of its affiliates to purchase up to
3,870,000 shares of our common stock and additional warrants to purchase up to
4,000,000 shares of our common stock
15
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depending on the date on which shares of our Series J convertible exchangeable
preferred stock are still outstanding. As a result of their majority ownership,
our stockholders that are affiliated with KKR and their respective general
partners and members, four of whom are also our directors, control us and have
the power to elect all of our directors and approve any action requiring
stockholder approval, including adopting amendments to our certificate of
incorporation and approving mergers or sales of all or substantially all of our
assets. Our stockholders that are affiliated with KKR will also be able to
prevent change of control events or cause a change of control at any time. The
interest of our KKR affiliated stockholders and their affiliates may conflict
with the interest of holders of our debt securities, including the new notes.
INCREASES IN PAPER AND POSTAGE COSTS MAY HAVE AN ADVERSE IMPACT ON OUR FUTURE
FINANCIAL RESULTS.
The price of paper is a significant expense relating to our print products
and direct mail solicitations. Paper price increases may have an adverse effect
on our future results. Postage for product distribution and direct mail
solicitations is also a significant expense. We use the U.S. Postal Service for
distribution of many of our products and marketing materials. Postage costs
increased in January 2001 and can be expected to increase in the future. We may
not be able to pass these cost increases through to our customers.
WE DEPEND ON SOME IMPORTANT EMPLOYEES, AND THE LOSS OF ANY OF THOSE EMPLOYEES
MAY HARM OUR BUSINESS.
Our performance is substantially dependent on the performance of our
executive officers and other key employees. In addition, our success is
dependent on our ability to attract, train, retain and motivate high quality
personnel, especially for our management team. Competition for those employees
is intense. The loss of the services of any of our executive officers or key
employees may harm our business.
OUR TRADITIONAL BUSINESS IS SUBJECT TO COMPETITION FROM THE RAPIDLY
INCREASING AND COMPETITIVE MARKET FOR NEW MEDIA PRODUCTS AND SERVICES.
We derive a substantial portion of our revenues from our traditional
businesses. The increased availability of information on the Internet subjects
our traditional business to additional competition, which may adversely affect
our future operating results. Our strategies for obtaining sustained revenue
growth and profitability in the market for new media products and services may
not be sufficient to compensate for any losses of revenue in our traditional
businesses resulting from competition with new media.
Numerous well-established companies and smaller entrepreneurial companies
are focusing significant resources on developing and marketing products and
services that will compete with our products and services. Competition in the
market for Internet products and services may intensify in the future. In
addition, our current and potential competitors may have greater financial,
technical, operational and marketing resources. Competitive pressures may also
force prices for Internet goods and services down and those price reductions may
adversely affect us.
IF THE UNITED STATES OR OTHER GOVERNMENTS REGULATE THE INTERNET MORE CLOSELY,
OUR NEW MEDIA BUSINESSES MAY BE HARMED.
Any new law or regulation pertaining to the Internet or the application or
interpretation of existing laws could decrease the demand for our Internet
businesses, increase the cost of doing business of About.com and our other new
media businesses or otherwise have a material adverse effect on our business,
results of operations and financial condition. There are and will be an
increasing number of laws and regulations pertaining to the Internet. These laws
or regulations may relate to liability for information retrieved from or
transmitted over the Internet, online content regulation, user privacy,
16
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taxation and the quality of products and services. In addition, the
applicability to the Internet of existing laws governing intellectual property
ownership and infringement, copyright, trademark, trade secret, obscenity,
libel, employment, personal privacy and other issues is uncertain and
developing.
IN ORDER FOR OUR NEW MEDIA BUSINESSES TO SUCCEED, WE MUST RESPOND TO THE
RAPID CHANGES IN TECHNOLOGY.
The markets for Internet products and services are characterized by:
- rapidly changing technology;
- evolving industry standards;
- frequent new product and service introductions; and
- changing customer demands.
The success of our new media businesses will depend on our ability to adapt
to this rapidly evolving marketplace. We may not be able to adequately adapt its
products and services or to acquire new products and services that can compete
successfully. In addition, we may not be able to establish and maintain
effective distribution channels.
THE SUCCESS OF OUR NEW MEDIA BUSINESSES DEPENDS ON USE OF THE INTERNET BY
BUSINESSES AND INDIVIDUALS.
The success of our new media businesses depends on use of the Internet for
advertising, marketing, providing services and conducting business. Our new
media businesses may suffer if commercial use of the Internet fails to grow in
the future. Commercial use of the Internet is currently at an early stage of
development and the future of the Internet is not clear. Internet usage may be
inhibited for any of the following reasons:
- the Internet infrastructure may not be able to support the demands placed
on it, and its performance and reliability may decline as usage grows;
- security and authentication concerns with respect to the transmission over
the Internet of confidential information, such as credit card numbers, and
attempts by unauthorized computer users, so-called hackers, to penetrate
online security systems; and
- privacy concerns, including those related to the ability of web sites to
gather user information without the user's knowledge or consent.
In addition, it is not clear how effective advertising on the Internet is in
generating business as compared to more traditional types of advertising such as
print, television and radio. The adoption of Internet advertising, particularly
by those entities that have historically relied upon traditional media for
advertising, requires the acceptance of a new way of conducting business,
exchanging information and advertising products and services. Advertisers that
have traditionally relied upon other advertising media may be reluctant to
advertise on the Internet. These businesses may find Internet advertising to be
less effective than traditional advertising media for promoting their products
and services.
WE FACE SPECIFIC SECURITY RISKS REGARDING THE TRANSMISSION OF CONFIDENTIAL
INFORMATION.
Consumer concerns about the security of transmissions of confidential
information over public telecommunications facilities is a significant barrier
to electronic commerce and communications. Many factors may cause compromises or
breaches of our security systems or other Internet sites used to protect
proprietary information, including advances in computer and software
functionality or new discoveries in the field of cryptography. A compromise of
security on the Internet would have a negative effect on the use of the Internet
for commerce and communications and negatively impact our businesses. Security
breaches of our activities or the activities of our customers and sponsors
involving the storage and transmission of proprietary information, such as
credit card numbers, may expose us to
17
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a risk of loss or litigation and possible liability. Our security measures
designed to prevent security breaches and insurance programs we obtain to
address the potential losses or liabilities may not be sufficient to cover any
such losses or liabilities.
WE MAY HAVE LIABILITY FOR INFORMATION RETRIEVED FROM THE INTERNET.
Because materials may be downloaded from the Internet and subsequently
distributed to others, we may be subject to claims for defamation, negligence,
copyright or trademark infringement, personal injury or other theories based on
the nature, content, publication and distribution of those materials.
WE MAY NOT BE ABLE TO PROTECT OUR INTELLECTUAL PROPERTY, AND WE MAY BE LIABLE
FOR INFRINGING THE INTELLECTUAL PROPERTY OF OTHERS.
Third parties may infringe or misappropriate our and our subsidiaries'
patents, trademarks or other intellectual property, which could have a material
adverse effect on our business, results of operations or financial condition.
While we and our subsidiaries enter into confidentiality agreements with our
material employees, guides, consultants and strategic partners, and generally
control access to and distribution of our proprietary information, the steps we
and our subsidiaries have taken to protect our intellectual property may not
prevent misappropriation. In addition, we and our subsidiaries do not know
whether we will be able to defend our proprietary rights since the validity,
enforceability and scope of protection of proprietary rights in Internet-related
industries is still evolving.
Third parties may assert infringement claims against us or our subsidiaries.
From time to time in the ordinary course of business we and our subsidiaries
have been, and we expect to continue to be, subject to claims of alleged
infringement of the trademarks and other intellectual property rights of third
parties. These claims and any resultant litigation, should it occur, could
subject us and our subsidiaries to significant liability for damages. In
addition, even if we and our subsidiaries prevail, litigation could be
time-consuming and expensive to defend and could result in the diversion of our
time and attention. Any claims from third parties may also result in limitations
on our and our subsidiaries' ability to use the intellectual property subject to
these claims unless we are able to enter into agreements with the third parties
making these claims.
RISK FACTORS RELATING TO THE EXCHANGE OFFER
IF YOU FAIL TO TENDER YOUR OLD NOTES IN THE EXCHANGE OFFER, THEN THE
LIQUIDITY OF THE MARKET FOR YOUR NOTES MAY BE SUBSTANTIALLY LIMITED.
We expect that a substantial portion of the old notes will be tendered and
accepted in the exchange offer and exchanged for new notes. When the exchange
offer is completed, the amount of old notes will be reduced by the amount of new
notes that we will issue. Accordingly, we expect that the liquidity of the
market for the old notes after the exchange offer is completed will be
substantially limited.
IF YOU FAIL TO EXCHANGE YOUR OLD NOTES IN THE EXCHANGE OFFER, YOUR OLD NOTES
WILL CONTINUE TO BE SUBJECT TO TRANSFER RESTRICTIONS.
If you do not exchange your old notes for new notes in the exchange offer
your old notes will continue to be subject to the transfer restrictions outlined
in the offering memorandum distributed in connection with the offering of the
old notes. In general, the old notes may not be offered or sold unless they are
registered or exempt from registration under the Securities Act and applicable
state securities laws. Except as required by the registration rights agreements,
we do not intend to register resales of the old notes under the Securities Act.
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RISK FACTORS RELATING TO THE NEW NOTES
WE ARE A HOLDING COMPANY AND OUR ABILITY TO MEET INTEREST AND PRINCIPAL
PAYMENTS DEPENDS UPON DISTRIBUTIONS FROM OUR SUBSIDIARIES.
We are a holding company and conduct all of our operations through our
subsidiaries and currently have no significant operating assets other than our
investments in our operating subsidiaries. As a result, we must rely on
dividends and other advances and transfers of funds from our subsidiaries to
meet our debt service and other obligations. The ability of our subsidiaries to
pay dividends or make other advances and transfers of funds will depend on their
respective operating results and may be restricted by, among other things, the
laws of their jurisdiction of organization which limit the amount of funds
available for the payment of dividends and agreements of those subsidiaries.
Although the indenture will limit the ability of most of those subsidiaries to
enter into consensual restrictions on their ability to pay dividends or make
other advances and transfers of funds to us, those limitations are subject to a
number of significant qualifications and exceptions. Although most of our
subsidiaries will guarantee the new notes, some will not, and in any event these
guarantees may not be enforceable. See "--A court may be able to void the
guarantees of the new notes and require holders of the new notes to return
payments received from our subsidiaries."
NOT ALL OF OUR SUBSIDIARIES GUARANTEE OUR OBLIGATIONS UNDER THE NEW NOTES,
AND THE ASSETS OF THE NON-GUARANTOR SUBSIDIARIES MAY NOT BE AVAILABLE TO
MAKE PAYMENTS ON THE NEW NOTES.
Our present and future foreign subsidiaries and our partially owned domestic
subsidiaries will not be guarantors of the new notes. Our present and future
wholly-owned domestic subsidiaries will guarantee the new notes, except domestic
subsidiaries that engage only in the business of financing accounts receivable
or that may be designated as unrestricted with respect to the indenture.
Payments on the new notes are only required to be made by us and the subsidiary
guarantors. As a result, no payments are required to be made from assets of
subsidiaries that do not guarantee the new notes, unless those assets are
transferred by dividend or otherwise to us or a subsidiary guarantor.
In the event of a bankruptcy, liquidation or reorganization of any of the
non-guarantor subsidiaries, holders of their indebtedness, including their trade
creditors, would generally be entitled to payment of their claims from the
assets of those subsidiaries before any assets are made available for
distribution to us. As a result, the new notes are effectively subordinated to
the indebtedness of the non-guarantor subsidiaries.
For the year ended December 31, 2000 and for the six months ended June 30,
2001, our non-guarantor subsidiaries had net sales of $62.0 million and
$63.2 million, respectively. The non-guarantor subsidiaries historically have
had negative EBITDA but could turn profitable in the future.
WE MAY NOT BE PERMITTED OR HAVE THE ABILITY TO PURCHASE THE NEW NOTES UPON A
CHANGE OF CONTROL AS REQUIRED BY THE INDENTURE.
Our ability to repurchase new notes in connection with a change of control
may be limited by a number of factors. The occurrence of certain events that
constitute a change of control would constitute a default under our bank credit
facilities and would require us to make an offer to purchase our other
outstanding notes. In that event, we must repay our borrowings under our bank
credit facilities and repurchase any new notes and any of our other outstanding
notes that are tendered for repurchase. We may also incur future indebtedness
that may require us to offer to repurchase that indebtedness upon a change of
control. We may not have sufficient funds to repay or repurchase all that
indebtedness. Our failure to repay outstanding indebtedness under our bank
credit facilities, make a change of control offer when required or to purchase
tendered notes when tendered would constitute
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an event of default under the indenture related to the new notes and the
indentures governing our other outstanding notes.
In addition, certain events that may constitute a change of control under
our bank credit facilities and cause us to be required to repay our borrowings
under the bank credit facilities may not constitute a change of control under
the indenture related to the new notes. In that case, we may not have sufficient
funds to repurchase that indebtedness, which would cause us to be in default
under the bank credit facilities, the new notes and all our outstanding notes.
Our and our subsidiaries' future indebtedness may also contain prohibitions of
certain events that would constitute a change of control or require indebtedness
to be repurchased upon a change of control.
A COURT MAY BE ABLE TO VOID THE GUARANTEES OF THE NEW NOTES AND REQUIRE
HOLDERS OF THE NEW NOTES TO RETURN PAYMENTS RECEIVED FROM OUR SUBSIDIARIES.
Under federal bankruptcy law and comparable provisions of state fraudulent
transfer laws, a guarantee could be voided, or claims in respect of a guarantee
could be subordinated to all other debts of the guarantor if, among other
things, the subsidiary guarantor, at the time that the subsidiary guarantor
issued the guarantee:
- issued the guarantee to delay, hinder or defraud present or future
creditors; or
- received less than reasonably equivalent value or fair consideration for
issuing the guarantee and at the time it issued the guarantee:
- was insolvent or rendered insolvent by reason of issuing the guarantee
and the application of the proceeds of the guarantee;
- was engaged or about to engage in a business or transaction for which
the guarantor's remaining unencumbered assets constituted unreasonably
small capital to carry on its business;
- intended to incur, or believed that it would incur, debts beyond its
ability to pay the debts as they mature; or
- it was a defendant in an action for money damages, or had a judgment
for money damages docketed against it if, in either case, after final
judgment, the judgment is unsatisfied.
In addition, any payment by the guarantor under its guarantee could be
voided and required to be returned to the guarantor or to a fund for the benefit
of the creditors of the guarantor or the guarantee could be subordinated to
other debt of the subsidiary guarantor.
The measures of insolvency for purposes of fraudulent transfer laws vary
depending upon the law applied in any proceeding to determine whether a
fraudulent transfer has occurred. Generally, however, a person would be
considered insolvent if, at the time it incurred the debt:
- the present fair saleable value of its assets was 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; or
- it could not pay its debts as they become due.
We cannot be sure as to the standard that a court would use to determine
whether or not the guarantor subsidiaries were solvent at the relevant time, or,
regardless of the standard that the court uses, that the issuance of the
guarantee of the notes would not be voided or the guarantee of the notes would
not be subordinated to that subsidiary guarantor's other debt.
If such a case were to occur, any guarantee of the new notes incurred by one
of the subsidiary guarantors could also be subject to the claim that, since the
guarantee was incurred for our benefit, and
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only indirectly for the benefit of the subsidiary guarantor, the obligations of
the applicable guarantor were incurred for less than fair consideration. A court
could therefore void the obligations under the guarantees or subordinate the
guarantees to the applicable guarantor's other debt or take action detrimental
to holders of the notes.
FORWARD-LOOKING STATEMENTS
This prospectus contains or incorporates by reference forward-looking
statements under the captions "Summary--Our Growth Strategy," "Risk Factors" and
elsewhere. In some cases these statements are identified by our use of
forward-looking words or phrases such as "believe," "expect," "anticipate,"
"intend," "estimate," "continue," "may increase," "may fluctuate" and similar
expressions or by our use of future or conditional verbs such as "will,"
"should," "would" and "could." Forward-looking statements may also use different
words and phrases. We have based the forward-looking statements on our current
assumptions, expectations and projections about future events. Although the
expectations reflected in these forward-looking statements represent
management's best judgment at the time they were made, we can give no assurance
that these expectations will prove to be correct.
These forward-looking statements involve risks and uncertainties, including:
- risks relating to our ability to successfully integrate our businesses
following the merger with About.com, our acquisition of EMAP USA and our
continuing strategy of expanding our business through acquisitions of and
investments in businesses, technologies, products and services from other
businesses;
- the U.S. economy and its impact on advertising revenues; and
- other risks and uncertainties, including those listed under the caption
"Risk Factors."
For more information see "Risk Factors." We caution prospective purchasers
not to place undue reliance on these forward-looking statements.
USE OF PROCEEDS
There will be no cash proceeds to us from the exchange offer.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
We have entered into a registration rights agreement with the initial
purchasers of the old notes in which we and our subsidiaries agreed, under some
circumstances, to file a registration statement relating to an offer to exchange
the old notes for new notes. We and some of our subsidiaries also agreed to use
our reasonable best efforts to cause the offer to be consummated within 230 days
following the original issue of the old notes. The new notes will have terms
substantially identical to the old notes, except that the new notes will not
contain terms with respect to transfer restrictions, registration rights and
liquidated damages for failure to observe some obligations in the registration
rights agreement. The old notes were issued on May 8, 2001.
Under the circumstances set forth below, we will use our reasonable best
efforts to cause the SEC to declare effective a shelf registration statement
with respect to the resale of the old notes and keep the statement effective for
up to two years after the effective date of the shelf registration statement.
These circumstances include if:
(a) we are not required to file the exchange offer registration
statement or permitted to consummate the exchange offer because
the exchange offer is not permitted by applicable law or SEC
policy; or
(b) any holder of old notes notifies us prior to the 20th day
following consummation of the exchange offer that:
(1) it is prohibited by law or SEC policy from participating in
the exchange offer; or
(2) it may not resell the new notes acquired by it in the
exchange offer to the public without delivering a prospectus
and the prospectus contained in the exchange offer
registration statement is not available for such resales; or
(3) it is a broker-dealer and owns old notes acquired directly
from us or an affiliate of ours.
If we fail to comply with some obligations under the registration rights
agreement, we will be required to pay liquidated damages to each holder of old
notes. See "Description of New Notes--Exchange Offer; Registration Rights."
Each holder of old notes that wishes to exchange old notes for transferable
new notes in the exchange offer will be required to make the following
representations:
- any new notes will be acquired in the ordinary course of its business;
- the holder has no arrangement with any person to participate in the
distribution of the new notes;
- the holder is not an "affiliate," as defined in Rule 405 of the Securities
Act, of ours or if it is an affiliate, that it will comply with applicable
registration and prospectus delivery requirements of the Securities Act;
- if the holder is not a broker-dealer, that it is not engaged in, and does
not intend to engage in, the distribution of the new notes; and
- if the holder is a broker-dealer, that it 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 and that it will be
required to acknowledge that it will deliver a prospectus in connection
with any resale of the new notes. See "Plan of Distribution."
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RESALE OF EXCHANGE NOTES
Based on interpretations of the SEC staff outlined in no action letters
issued to unrelated third parties, we believe that new notes issued under the
exchange offer in exchange for old notes may be offered for resale, resold and
otherwise transferred by any new note holder without compliance with the
registration and prospectus delivery provisions of the Securities Act, if:
- the holder is not an "affiliate" of ours within the meaning of Rule 405
under the Securities Act;
- the new notes are acquired in the ordinary course of the holder's
business; and
- the holder does not intend to participate in the distribution of the new
notes.
Any holder who tenders in the exchange offer with the intention of
participating in any manner in a distribution of the new notes:
- cannot rely on the position of the staff of the SEC enunciated in EXXON
CAPITAL HOLDINGS CORPORATION or similar interpretive letters; and
- must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale transaction.
This prospectus may be used for an offer to resell, for the resale or for
other retransfer of new notes only as specifically set forth in this prospectus.
With regard to broker-dealers, only broker-dealers that acquired the old notes
as a result of market-making activities or other trading activities may
participate in the exchange offer. Each broker-dealer that receives new notes
for its own account in exchange for old notes, where the old notes were acquired
by the 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 the new notes. Please read the section captioned "Plan of
Distribution" for more details regarding the transfer of new notes.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions included in this prospectus and
in the accompanying letter of transmittal, we will accept for exchange any old
notes properly tendered and not withdrawn prior to the expiration date. We will
issue $1,000 principal amount of new notes in exchange for each $1,000 principal
amount of old notes surrendered under the exchange offer. Old notes may be
tendered only in integral multiples of $1,000.
The form and terms of the new notes will be substantially identical to the
form and terms of the old notes except the new notes will be registered under
the Securities Act, will not bear legends restricting their transfer and will
not provide for any liquidated damages upon our failure to fulfill our
obligations under the registration rights agreement to file, and cause to be
effective, a registration statement. The new notes will evidence the same debt
as old notes. The new notes will be issued under and entitled to the benefits of
the same indenture that authorized the issuance of the old notes.
The exchange offer is not conditioned upon any minimum aggregate principal
amount of old notes being tendered for exchange.
As of the date of this prospectus, $500.0 million aggregate principal amount
of the old notes are outstanding. This prospectus and a letter of transmittal
are being sent to all registered holders of old notes. There will be no fixed
record date for determining registered holders of old notes entitled to
participate in the exchange offer.
We intend to conduct the exchange offer in accordance with the provisions of
the registration rights agreement, the applicable requirements of the Securities
Act and the Exchange Act and the rules and regulations of the SEC. Old notes
that are not tendered for exchange in the exchange offer
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will remain outstanding and continue to accrue interest and will be entitled to
the rights and benefits the holders have under the indenture relating to the old
notes, except for any rights under the registration rights agreement that by
their terms terminate upon the consummation of the exchange offer.
We will be deemed to have accepted for exchange properly tendered old notes
when we have given oral or written notice of the acceptance to the exchange
agent. The exchange agent will act as agent for the tendering holders for the
purposes of receiving the new notes from us and delivering new notes to the
holders. Under the terms of the registration rights agreement, we reserve the
right to amend or terminate the exchange offer, and not to accept for exchange
any old notes not previously accepted for exchange, upon the occurrence of any
of the conditions specified below under the caption "--Material Conditions to
the Exchange Offer."
Holders who tender old notes in the exchange offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the letter
of transmittal, transfer taxes with respect to the exchange of old notes. We
will pay all charges and expenses, other than certain applicable taxes described
below, in connection with the exchange offer. It is important that you read the
section labeled "--Fees and Expenses" below for more details regarding fees and
expenses incurred in the exchange offer.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The exchange offer will expire at 5:00 p.m., New York City time on
October 16, 2001, unless in our sole discretion we extend it.
In order to extend the exchange offer, we will notify the exchange agent
orally or in writing of any extension. We will notify the registered holders of
old notes of the extension no later than 9:00 a.m., New York City time, on the
business day after the previously scheduled expiration date.
We reserve the right, in our sole discretion:
- to delay accepting for exchange any old notes;
- to extend the exchange offer or to terminate the exchange offer and to
refuse to accept old notes not previously accepted if any of the
conditions set forth below under "--Material Conditions to the Exchange
Offer" have not been satisfied, by giving oral or written notice of such
delay, extension or termination to the exchange agent; or
- under the terms of the registration rights agreement, to amend the terms
of the exchange offer in any manner.
Any delay in acceptance, extension, termination, or amendment will be
followed as promptly as practicable by oral or written notice to the registered
holders of old notes. If we amend the exchange offer in a manner that we
determine constitutes a material change, we will promptly disclose the amendment
in a manner reasonably calculated to inform the holder of old notes of the
amendment.
Without limiting the manner in which we may choose to make public
announcements of any delay in acceptance, extension, termination or amendment of
the exchange offer, we will have no obligation to publish, advertise, or
otherwise communicate any public announcement, other than by making a timely
release to a financial news service.
MATERIAL CONDITIONS TO THE EXCHANGE OFFER
Despite any other term of the exchange offer, we will not be required to
accept for exchange, or exchange any new notes for, any old notes, and we may
terminate the exchange offer as provided in this prospectus before accepting any
old notes for exchange if in our reasonable judgment:
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- the new notes to be received will not be tradable by the holder, without
restriction under the Securities Act, the Exchange Act and without
material restrictions under the blue sky or securities laws of
substantially all of the states of the United States;
- the exchange offer, or the making of any exchange by a holder of old
notes, would violate applicable law or any applicable interpretation of
the staff of the SEC; or
- any action or proceeding has been instituted or threatened in any court or
by or before any governmental agency with respect to the exchange offer
that, in our judgment, would reasonably be expected to impair our ability
to proceed with the exchange offer.
In addition, we will not be obligated to accept for exchange the old notes
of any holder that has not made to us:
- the representations described under "Purpose and Effect of the Exchange
Offer," "--Procedures for Tendering" and "Plan of Distribution"; and
- other representations as may be reasonably necessary under applicable SEC
rules, regulations or interpretations to make available to it an
appropriate form for registration of the new notes under the Securities
Act.
We expressly reserve the right, at any time or at various times, to extend
the period of time during which the exchange offer is open. Consequently, we may
delay acceptance of any old notes by giving oral or written notice of the
extension to their holders. During any extensions, all old notes previously
tendered will remain subject to the exchange offer, and we may accept them for
exchange. We will return any old notes that we do not accept for exchange for
any reason without expense to their tendering holder as promptly as practicable
after the expiration or termination of the exchange offer.
We expressly reserve the right to amend or terminate the exchange offer, and
to reject for exchange any old notes not previously accepted for exchange, upon
the occurrence of any of the conditions of the exchange offer specified above.
We will give oral or written notice of any extension, amendment, non-acceptance,
or termination to the holders of the old notes as promptly as practicable.
Those conditions are for our sole benefit and we may assert them regardless
of the circumstances that may give rise to them or waive them in whole or in
part at any or at various times in our sole discretion. If we fail at any time
to exercise any of these rights, this failure will not constitute a waiver of
this right. Each right will be deemed an ongoing right that we may assert at any
time or at various times.
In addition, we will not accept for exchange any old notes tendered, and
will not issue new notes in exchange for any old notes, if at the time any stop
order will be threatened or in effect with respect to the registration statement
of which this prospectus constitutes a part or the qualification of the
indenture under the Trust Indenture Act.
PROCEDURES FOR TENDERING
Only a holder of old notes may tender the old notes in the exchange offer.
To tender in the exchange offer, a holder must:
- complete, sign and date the accompanying letter of transmittal, or a
facsimile of the letter of transmittal; have the signature on the letter
of transmittal guaranteed if the letter of transmittal so requires; and
mail or deliver the letter of transmittal or facsimile to the exchange
agent prior to the expiration date; or
- comply with the DTC's Automated Tender Offer Program procedures described
below.
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In addition, either:
- the exchange agent must receive the old notes along with the accompanying
letter of transmittal; or
- the exchange agent must receive, prior to the expiration date, a timely
confirmation of book-entry transfer of the old notes into the exchange
agent's account at the DTC according to the procedures for book-entry
transfer described below or a properly transmitted agent's message; or
- the holder must comply with the guaranteed delivery procedures described
below.
To be tendered effectively, the exchange agent must receive any physical
delivery of a letter of transmittal and other required documents at the address
set forth below under "--Exchange Agent" prior to the expiration date.
The tender by a holder of old notes that is not withdrawn prior to the
expiration date will constitute an agreement between the holder of old notes and
us in accordance with the terms and subject to the conditions set forth in this
prospectus and in the accompanying letter of transmittal.
The method of delivery of old notes, the letter of transmittal and all other
required documents to the exchange agent is at the holder's election and risk.
Rather than mail these items, we recommend that holders use an overnight or hand
delivery service. In all cases, holders should allow sufficient time to assure
delivery to the exchange agent before the expiration date. Holders should not
send the letter of transmittal or old notes to us. Holders may request their
respective brokers, dealers, commercial banks, trust companies or other nominees
to effect the above transactions for them.
Any beneficial owner whose old notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
should contact the registered holder promptly and instruct it to tender on the
owners' behalf. If the beneficial owner wishes to tender on its own behalf, it
must, prior to completing and executing the accompanying letter of transmittal
and delivering its old notes either:
- make appropriate arrangements to register ownership of the old notes in
such owner's name; or
- obtain a properly completed bond power from the registered holder of old
notes.
The transfer of registered ownership may take considerable time and may not
be completed prior to the expiration date.
Signatures on a letter of transmittal or a notice of withdrawal described
below must be guaranteed by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the United
States or another "eligible institution" within the meaning of Rule 17Ad-15
under the Exchange Act, unless the old notes are tendered:
- by a registered holder who has not completed the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on the
accompanying letter of transmittal; or
- for the account of an eligible institution.
If the accompanying letter of transmittal is signed by a person other than
the registered holder of any old notes listed on the old notes, the old notes
must be endorsed or accompanied by a properly completed bond power. The bond
power must be signed by the registered holder as the registered holder's name
appears on the old notes and an eligible institution must guarantee the
signature on the bond power.
If the accompanying 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, these persons should so indicate when signing. Unless waived by us,
they should also submit evidence satisfactory to us of their authority to
deliver the accompanying letter of transmittal.
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The exchange agent and the DTC have confirmed that any financial institution
that is a participant in the DTC's system may use the DTC's Automated Tender
Offer program to tender. Participants in the program may, instead of physically
completing and signing the accompanying letter of transmittal and delivering it
to the exchange agent, transmit their acceptance of the exchange offer
electronically. They may do so by causing the DTC to transfer the old notes to
the exchange agent in accordance with its procedures for transfer. The DTC will
then send an agent's message to the exchange agent. The term "agent's message"
means a message transmitted by the DTC, received by the exchange agent and
forming part of the book-entry confirmation, to the effect that:
- the DTC has received an express acknowledgment from a participant in its
Automated Tender Offer Program that is tendering old notes that are the
subject of the book-entry confirmation;
- the participant has received and agrees to be bound by the terms of the
accompanying letter of transmittal, or, in the case of an agent's message
relating to guaranteed delivery, that the participant has received and
agrees to be bound by the applicable notice of guaranteed delivery; and
- the agreement may be enforced against that participant.
We will determine in our sole discretion all outstanding questions as to the
validity, form, eligibility, including time or receipt, acceptance of tendered
old notes and withdrawal of tendered old notes. Our determination will be final
and binding. We reserve the absolute right to reject any old notes not properly
tendered or any old notes the acceptance of which would, in the opinion of our
counsel, be unlawful. We also reserve the right to waive any defects,
irregularities or conditions of tender as to particular old notes. Our
interpretation of the terms and conditions of the exchange offer, including the
instructions in the accompanying letter of transmittal, will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of old notes must be cured within the time as we will
determine. Although we intend to notify holders of defects or irregularities
with respect to tenders of old notes, neither we, the exchange agent nor any
other person will incur any liability for failure to give any notification.
Tenders of old notes will not be deemed made until any defects or irregularities
have been cured or waived. Any old notes received by the exchange agent that are
not properly tendered and as to which the defects or irregularities have not
been cured or waived will be returned to the exchange agent without cost to the
tendering holder, unless otherwise provided in the letter of transmittal, as
soon as practicable following the expiration date.
In all cases, we will issue new notes for old notes that we have accepted
for exchange under the exchange offer only after the exchange agent timely
receives:
- old notes or a timely book-entry confirmation of the old notes into the
exchange agent's account at the DTC; and
- a properly completed and duly executed letter of transmittal and all other
required documents or a properly transmitted agent's message.
By signing the accompanying letter of transmittal or authorizing the
transmission of the agent's message, each tendering holder of old notes will
represent or be deemed to have represented to us that, among other things:
- any new notes that the holder receives will be acquired in the ordinary
course of its business;
- the holder has no arrangement or understanding with any person or entity
to participate in the distribution of the new notes;
- if the holder is not a broker-dealer, that is not engaged in and does not
intend to engage in the distribution of the new notes;
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- if the holder 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, that it will deliver a prospectus, as required
by law, in connection with any resale of any new notes; and
- the holder is not an "affiliate," as defined in Rule 405 of the Securities
Act, of ours or, if the holder is an affiliate, it will comply with any
applicable registration and prospectus delivery requirements of the
Securities Act.
BOOK-ENTRY TRANSFER
The exchange agent will make a request to establish an account with respect
to the old notes at the DTC for purposes of the exchange offer promptly after
the date of this prospectus. Any financial institution participating in the
DTC's system may make book-entry delivery of old notes by causing the DTC to
transfer the old notes into the exchange agent's account at the DTC in
accordance with the DTC's procedures for transfer. Holders of old notes who are
unable to deliver confirmation of the book-entry tender of their old notes into
the exchange agent's account at the DTC or all other documents required by the
letter of transmittal to the exchange agent on or prior to the expiration date
must tender their old notes according to the guaranteed delivery procedures
described below.
GUARANTEED DELIVERY PROCEDURES
Holders wishing to tender their old notes but whose old notes are not
immediately available or who cannot deliver their old notes, the accompanying
letter of transmittal or any other required documents to the exchange agent or
comply with the applicable procedures under the DTC's Automated Tender Offer
Program prior to the expiration date may tender if:
- the tender is made through an eligible institution;
- prior to the expiration date, the exchange agent receives from the
eligible institution either a properly completed and duly executed notice
of guaranteed delivery, by facsimile transmission, mail or hand delivery,
or a properly transmitted agent's message and notice of guaranteed
delivery:
- setting forth the name and address of the holder, the registered
number(s) of the old notes and the principal amount of old notes
tendered;
- stating that the tender is being made thereby; and
- guaranteeing that, within three New York Stock Exchange trading days
after the expiration date, the accompanying letter of transmittal, or
facsimile of the letter of transmittal, together with the old notes or
a book-entry confirmation, and any other documents required by the
accompanying letter of transmittal will be deposited by the eligible
institution with the exchange agent; and
- the exchange agent receives the properly completed and executed letter of
transmittal, or facsimile of the executed letter of transmittal, as well
as all tendered old notes in proper form for transfer or a book-entry
confirmation, and all other documents required by the accompanying letter
of transmittal, within three New York Stock Exchange trading 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 according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, holders of old notes may
withdraw their tenders at any time prior to the expiration date.
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For a withdrawal to the effective:
- the exchange agent must receive a written notice of withdrawal, which
notice may be by telegram, telex, facsimile transmission or letter of
withdrawal at one of the addresses set forth below under "--Exchange
Agent"; or
- holders must comply with the appropriate procedures of the DTC's Automated
Tender Offer Program system.
Any notice of withdrawal must:
- specify the name of the person who tendered the old notes to be withdrawn;
- identify the old notes to be withdrawn, including the principal amount of
the old notes; and
- where certificates for old notes have been transmitted, specify the name
in which the old notes were registered, if different from that of the
withdrawing holder.
If certificates for old notes have been delivered or otherwise identified to
the exchange agent, then, prior to the release of the certificates, the
withdrawing holder must also submit:
- the serial numbers of the particular certificates to be withdrawn; and
- a signed notice of withdrawal with signatures guaranteed by an eligible
institution unless the holder is an eligible institution.
If old notes have been tendered pursuant to the procedure for book-entry
transfer described above, any notice of withdrawal must specify the name and
number of the account at the DTC to be credited with the withdrawn old notes and
otherwise comply with the procedures of that facility. We will determine all
questions as to the validity, form and eligibility, including time of receipt,
of the notices, and our determination will be final and binding on all parties.
We will deem any old notes so withdrawn not to have validly tendered for
exchange for purposes of the exchange offer. Any old notes that have been
tendered for exchange but that are not exchanged for any reason will be returned
to their holder without cost to the holder, or, in the case of old notes
tendered by book-entry transfer into the exchange agent's account at the DTC
according to the procedures described above, the old notes will be credited to
an account maintained with the DTC for old notes, as soon as practicable after
withdrawal, rejection of tender or termination of the exchange offer. Properly
withdrawn, old notes may be retendered by following one of the procedures
described under "--Procedures for Tendering" above at any time on or prior to
the expiration date.
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EXCHANGE AGENT
The Bank of New York has been appointed as exchange agent for the exchange
offer. You should direct questions and requests for assistance, requests for
additional copies of this prospectus or of the letter of transmittal and
requests for the notice of guaranteed delivery to the exchange agent as follows:
<Table>
FOR DELIVERY BY REGISTERED OR CERTIFIED MAIL: BY HAND OR OVERNIGHT COURIER:
The Bank of New York
The Bank of New York Reorganization Department
Reorganization Department 101 Barclay Street
101 Barclay Street Corporate Trust Services
Floor 7E Ground Level
New York, New York 10286 New York, New York 10286
Attention: Diane Amoroso Attention: Diane Amoroso
BY FACSIMILE TRANSMISSION:
(for eligible institutions only):
212-815-6339
Confirm facsimile by telephone only:
212-815-3738
</Table>
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY OF THE LETTER OF TRANSMITTAL.
FEES AND EXPENSES
We will bear the expenses of soliciting tenders. The principal solicitation
is being made by mail; however, we may make additional solicitations by
telephone or in person by our officers and regular employees and those of our
affiliates.
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to broker-dealers or others soliciting
acceptance of the exchange offer. We will, however, pay the exchange agent
reasonable and customary fees for its services and reimburse it for its related
reasonable out-of-pocket expenses.
We will pay the cash expenses to be incurred in connection with the exchange
offer. The expenses are estimated in the aggregate to be approximately $500,000.
They include:
- SEC registration fees;
- fees and expenses of the exchange agent and trustee;
- accounting and legal fees and printing costs; and
- related fees and expenses.
TRANSFER TAXES
We will pay all transfer taxes, if any, applicable to the exchange of old
notes under the exchange offer. The tendering holder, however, will be required
to pay any transfer taxes, whether imposed on the registered holder or any other
person, if:
- certificates representing old notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the
name of, any person other than the registered holder of old notes
tendered;
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- tendered old notes are registered in the name of any person other than the
person signing the letter of transmittal; or
- a transfer tax is imposed for any reason other than the exchange of old
notes under the exchange offer.
If satisfactory evidence of payment of the taxes is not submitted with the
letter of transmittal, the amount of the transfer taxes will be billed to that
tendering holder.
Holders who tender their old notes for exchange will not be required to pay
any transfer taxes. However, holders who instruct us to register new notes in
the name of, or request that old notes not tendered or not accepted in the
exchange offer be returned to, a person other than the registered tendering
holder will be required to pay any applicable transfer tax.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of old notes who do not exchange their old notes for new notes under
the exchange offer will remain subject to the restrictions on transfer of the
old notes:
- as set forth in the legend printed on the old notes as a consequence of
the issuance of the old notes under the exemption from, or in transactions
not subject to, the registration requirements of the Securities Act and
applicable state securities laws; and
- otherwise as set forth in the prospectus distributed in connection with
the private offering of the old notes.
In general, you may not offer or sell the old notes unless they are
registered under the Securities Act, or if the offer or sale is exempt from
registration under the Securities Act and applicable state securities laws.
Except as required by the registration rights agreement, we do not intend to
register resales of the old notes under the Securities Act. Based on
interpretations of the SEC staff, new notes issued under the exchange offer may
be offered for resale, resold or otherwise transferred by their holders (other
than any holder that is our "affiliate" 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 the holders acquired the new
notes in the ordinary course of the holders' business and the holders have no
arrangement or understanding with respect to the distribution of the new notes
to be acquired in the exchange offer. Any holder who tenders in the exchange
offer for the purpose of participating in a distribution of the new notes:
- cannot rely on the applicable interpretations of the SEC; and
- must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with a secondary resale transaction.
ACCOUNTING TREATMENT
We will record the new notes in our accounting records at the same carrying
value as the old notes, which is the aggregate principal amount net of issuance
discount, as reflected in our accounting records on the date of exchange.
Accordingly, we will not recognize any gain or loss for accounting purposes in
connection with the exchange offer. The expenses of the exchange offer will be
deferred and amortized over the term of the related notes.
OTHER
Participation in the exchange offer is voluntary, and you should carefully
consider whether to accept. You are urged to consult your financial and tax
advisors in making your own decision on what action to take.
We may in the future seek to acquire untendered old notes in open market or
privately negotiated transactions, through subsequent exchange offers or
otherwise. We have no present plans to acquire any old notes that are not
tendered in the exchange offer or to file a registration statement to permit
resales of any untendered old notes.
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DESCRIPTION OF INDEBTEDNESS AND PREFERRED STOCK
BANK CREDIT FACILITIES
On June 20, 2001, we completed a refinancing of our existing bank credit
facilities pursuant to new bank credit facilities with The Chase Manhattan Bank,
Bank of America, N.A, The Bank of New York and The Bank of Nova Scotia, as
agents. Borrowings under the bank credit facilities are guaranteed by each of
our wholly owned domestic restricted subsidiaries. The guarantees are full,
unconditional and joint and several. Certain of our subsidiaries, which
primarily represent Internet assets and businesses, including About.com, as well
as our foreign and securitization subsidiaries, are not guarantors of the bank
credit facilities.
The borrowings under the bank credit facilities may be used for general
corporate and working capital purposes as well as to finance certain future
acquisitions. The bank credit facilities consist of the following:
- a $475.0 million revolving loan facility, of which $33.0 million was
outstanding at June 30, 2001;
- a term loan A, of which $100.0 million was outstanding at June 30, 2001;
and
- a term loan B, of which $425.0 million was outstanding at June 30, 2001.
As of June 30, 2001, we had $558.0 million borrowings outstanding,
$22.0 million letters of credit outstanding and unused bank commitments of
approximately $420.4 million under our bank credit facilities. In addition, we
have drawn on our revolving loan facility in an amount of $255 million to
partially finance our acquisition of EMAP USA.
With the exception of the term loan B, the amounts borrowed bear interest,
at our option, at either the higher of the base rate plus an applicable margin
ranging from 0.125% to 1.50% or the Eurodollar Rate plus an applicable margin
ranging from 1.125% to 2.50%. Additionally, until we issue financial statements
for the period ending December 31, 2001, the applicable margin for the amounts
borrowed will be a minimum of 0.75% for the base rate option and 1.75% for the
Eurodollar rate option. The term loan B bears interest at the base rate plus
1.75% or LIBOR plus 2.75%. At June 30, 2001, the weighted average variable
interest rate on all outstanding borrowings under the bank credit facilities was
6.46%.
Under the bank credit facilities, we have agreed to pay commitment fees at a
per annum rate of either 0.375% or 0.50%, depending on our debt to EBITDA ratio
as defined in our new credit agreement, on the daily average aggregate
unutilized commitment under the revolving loan commitment. We also have agreed
to pay certain fees with respect to the issuance of letters of credit and an
annual administration fee.
The commitments under the revolving loan commitment are subject to mandatory
reductions semiannually on June 30 and December 31 commencing December 31, 2004
with the final reduction on June 30, 2008. The aggregate mandatory reductions of
the revolving loan commitments under the bank credit facility are
$23.75 million in 2004, $47.5 million in 2005, $71.25 million in 2006,
$142.5 million in 2007 and a final reduction of $190.0 million in 2008. 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. Aggregate term loan
payments under the bank credit facility are $2.125 million in 2001,
$4.25 million in 2002 and 2003, $16.75 million in 2004, $29.25 million in 2005,
2006 and 2007, $16.75 million in 2008 and $393.125 million in 2009.
The bank credit facilities, among other things, limit our ability to change
the nature of our businesses, incur indebtedness, create liens, sell assets,
engage in mergers, consolidations or transactions
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with affiliates, make investments in or loans to certain subsidiaries, issue
guarantees and make certain restricted payments including dividend payments on
our common stock in excess of $75.0 million in any given year. Under our most
restrictive debt covenants, we must maintain a minimum interest coverage ratio
of 1.80 to 1 and a minimum fixed charge coverage ratio of 1.05 to 1. Our maximum
allowable debt leverage ratio is 6.0 to 1. The maximum leverage ratio decreases
to 5.75 to 1, 5.5 to 1, 5.0 to 1 and 4.5 to 1, respectively, on July 1, 2003,
January 1, 2004, January 1, 2005 and January 1, 2006. The minimum interest
coverage ratio increases to 2.0 to 1, 2.25 to 1 and 2.5 to 1, respectively, on
July 1, 2003, January 1, 2004 and January 1, 2005.
The bank credit facilities required us to create a new intermediate holding
company to own, directly or indirectly, our restricted subsidiaries. We pledged
the stock of this new intermediate holding company to secure our obligations
under the bank credit facilities and our outstanding notes.
As a result of the refinancing of our existing bank credit facilities, we
wrote-off the remaining balance of deferred financing costs originally recorded.
10 1/4% SENIOR NOTES DUE 2004
The 10 1/4% senior notes are our senior obligations in an aggregate
principal amount of $100 million. They mature on June 1, 2004, with no sinking
fund requirements, and have interest payable semiannually in June and December
at an annual rate of 10 1/4%. The 10 1/4% senior notes are fully,
unconditionally and jointly and severally guaranteed by each of our domestic
restricted subsidiaries. They are currently redeemable at 101.65% with annual
reductions to 100% in 2002 plus accrued and unpaid interest.
If we become subject to a change of control, each holder of the notes will
have the right to require us to purchase any or all of the notes at a purchase
price equal to 101% of the aggregate principal amount of the notes plus accrued
and unpaid interest, if any, to the date of purchase.
8 1/2% SENIOR NOTES DUE 2006
The 8 1/2% senior notes are our senior obligations in an aggregate principal
amount of $300 million. They mature on February 1, 2006, with no sinking fund
requirements, and have interest payable semiannually in February and August at
an annual rate of 8 1/2%. The 8 1/2% senior notes are fully, unconditionally and
jointly and severally guaranteed by each of our domestic restricted
subsidiaries. Beginning in 2001 and thereafter, the 8 1/2% senior notes are
redeemable in whole or in part, at our option, at prices ranging from 104.25%
with annual reductions to 100% in 2003 plus accrued and unpaid interest.
If we become subject to a change of control, each holder of the notes will
have the right to require us to purchase any or all of the note at a purchase
price equal to 101% of the aggregate principal amount of the notes plus accrued
and unpaid interest, if any, to the date of purchase.
7 5/8% SENIOR NOTES DUE 2008
The 7 5/8% senior notes are our senior obligations in an aggregate principal
amount of $250 million. They mature on April 1, 2008, with no sinking fund
requirement, and interest is payable semiannually in April and October at the
annual rate of 7 5/8% commencing October 1, 1998. They are fully,
unconditionally and jointly and severally guaranteed by each of our domestic
restricted subsidiaries. The 7 5/8% senior notes may not be redeemed prior to
April 1, 2003 other than in connection with a change of control. Beginning on
April 1, 2003 and thereafter, the 7 5/8% senior notes are redeemable in whole or
in part, at our option, at prices ranging from 103.813% with annual reductions
to 100% in 2006 plus accrued and unpaid interest.
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If we become subject to a change of control, each holder of the notes will
have the right to require us to purchase any or all of the note at a purchase
price equal to 101% of the aggregate principal amount of the notes plus accrued
and unpaid interest, if any, to the date of purchase.
$10.00 SERIES D EXCHANGEABLE PREFERRED STOCK
In 1996, we completed an offering of 2,000,000 shares of $0.01 par value,
Series D preferred stock at $100 per share. Annual dividends of $10 per share on
the Series D preferred stock are cumulative and payable quarterly in cash. The
liquidation and redemption value is $200 million. On or after February 1, 2001,
the Series D preferred stock may be redeemed in whole or in part, at our option,
at specified redemption prices plus accrued and unpaid dividends. We are
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 our option, on any scheduled dividend payment date,
into 10% Class D subordinated exchange debentures due 2008.
If we become subject to a change of control, each holder of a 10% Class D
subordinated exchange debenture will have the right to require us to purchase
any or all of the 10% Class D subordinated exchange debentures of that holder at
a purchase price equal to 101% of the aggregate principal amount of the
debentures plus accrued and unpaid interest, if any, to the date of purchase.
This right is subject to the repayment of obligations under our bank credit
facility, all our outstanding senior notes and the commencement of an offer to
purchase and the purchase of all exchange debentures
$9.20 SERIES F EXCHANGEABLE PREFERRED STOCK
1,250,000 shares of $9.20 Series F exchangeable preferred stock, $0.01 par
value, offered at $100 per share, are outstanding. Annual dividends of $9.20 per
share on the Series F exchangeable preferred stock were cumulative and payable
quarterly in cash. We are required to redeem the Series F exchangeable preferred
stock on November 1, 2009 at a redemption price equal to the liquidation
preference of $100 per share, plus accrued and unpaid dividends. Series F
exchangeable preferred stock is exchangeable into 9.20% Class F subordinated
exchange debentures due 2009, in whole but not in part, at our option on any
scheduled dividend payment date. As of December 31, 2000, the liquidation and
redemption value of the Series F exchangeable preferred stock was $125 million.
If we become subject to a change of control, each holder of a 9.20% Class F
subordinated exchange debenture will have the right to require us to purchase
any or all of the 9.20% Class F subordinated exchange debentures of that holder
at a purchase price equal to 101% of the aggregate principal amount of the
debentures plus accrued and unpaid interest, if any, to the date of purchase.
This right is subject to the repayment of obligations under our bank credit
facility, all our outstanding senior notes and the commencement of an offer to
purchase and the purchase of all exchange debentures.
$8.625 SERIES H EXCHANGEABLE PREFERRED STOCK
2,500,000 shares of $8.625 Series H exchangeable preferred stock, par value
$0.01, offered at $99.40 per share, are outstanding. Annual dividends of $8.625
per share on the Series H exchangeable preferred stock are cumulative and
payable quarterly in cash. On or after April 1, 2003, the Series H exchangeable
preferred stock may be redeemed in whole or in part, at our option, at prices
ranging from 104.313% with annual reductions to 100% in 2006, plus accrued and
unpaid dividends. We are required to redeem the Series H exchangeable preferred
stock on April 1, 2010 at a redemption price equal to the liquidation preference
of $100 per share, plus accrued and unpaid dividends. The liquidation and
redemption value of the Series H exchangeable preferred stock is $250 million.
The
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Series H exchangeable preferred stock is exchangeable, in whole but not in part,
at our option, on any scheduled dividend payment date into 8.625% Class H
subordinated exchange debentures due 2010.
If we become subject to a change of control, each holder of an 8.625%
Class H subordinated exchange debenture will have the right to require us to
purchase any or all of the 8.625% Class H subordinated exchange debentures of
that holder at a purchase price equal to 101% of the aggregate principal amount
of the debentures plus accrued and unpaid interest, if any, to the date of
purchase. This right is subject to the repayment of obligations under our bank
credit facility, all our outstanding senior notes and the commencement of an
offer to purchase and the purchase of all exchange debentures.
SERIES J CONVERTIBLE EXCHANGEABLE PREFERRED STOCK
Our Series J convertible exchangeable preferred stock is non-voting. Our
Series J convertible exchangeable preferred stock is perpetual and ranks pari
passu with our existing series of outstanding preferred stock. In the event of a
liquidation, the holders of shares of the Series J convertible exchangeable
preferred stock are entitled to be paid out of our assets available for
distribution to our stockholders, an amount in cash equal to $125 for each share
outstanding, plus an amount in cash equal to accrued but unpaid dividends.
Dividends on the Series J convertible exchangeable preferred stock accrue at an
annual rate of 12.5% and are payable quarterly in kind. We have the option to
redeem any or all of the shares of Series J convertible exchangeable preferred
stock at any time for cash at 100% of the liquidation preference of each share
being redeemed. The Series J convertible exchangeable preferred stock may be
converted into shares of our common stock at any time after the first
anniversary of the issue date at a conversion price of $125 million divided by
$7 per share, subject to adjustments. On any dividend payment date, we have the
option to exchange the Series J convertible exchangeable preferred stock into
12.5% Class J subordinated notes at an exchange rate of $1,000,000 principal
amount of the Class J subordinated notes for each $1,000,000 of liquidation
preference of Series J convertible exchangeable preferred stock. Our ability to
redeem or exchange the Series J convertible exchangeable preferred stock into
debt is subject to the approval of a majority of our independent directors.
SERIES K CONVERTIBLE PREFERRED STOCK
Our Series K convertible preferred stock is non-voting but otherwise the
economic equivalent of our common stock. It ranks pari passu with our common
stock. In the event of a liquidation, the holders of shares of the Series K
convertible preferred stock are entitled to receive any assets of ours as such
holders would have received had their shares of Series K convertible preferred
stock already been converted into shares of our common stock. The holders of the
Series K convertible preferred stock participate ratably with the holders of
common stock as if the shares of Series K convertible preferred stock had been
converted into common stock in all dividends, when and if paid on the common
stock. There is no option to repurchase or redeem the Series K convertible
preferred stock as the shares of Series K convertible preferred stock will be
automatically converted into an equal number of shares of common stock upon
receipt of approval under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, for KKR 1996 Fund to acquire additional common stock and 20
days after we send out an information statement pursuant to the Commission's
proxy rules.
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DESCRIPTION OF NEW NOTES
THE FOLLOWING IS A SUMMARY DESCRIPTION OF THE NEW NOTES, WHICH WE REFER TO
IN THIS SECTION AS THE NOTES.
GENERAL
PRIMEDIA will issue the notes under an indenture (the "Indenture") among
PRIMEDIA, the Guarantors and The Bank of New York, as trustee (the "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.
The notes are subject to all those terms, and holders of the notes are referred
to the Indenture and the Trust Indenture Act for a statement of those terms. You
can find the definitions of certain terms used in the following description
under "--Certain Definitions."
The notes:
- are general obligations of PRIMEDIA;
- rank PARI PASSU in right of payment with all existing and future senior
indebtedness of PRIMEDIA, including PRIMEDIA's obligations under the
Credit Facilities and the Outstanding Notes;
- are senior in right of payment to any future subordinated indebtedness of
PRIMEDIA;
- are fully and unconditionally guaranteed on a senior basis by each
domestic, wholly-owned Restricted Subsidiary of PRIMEDIA, other than any
Securitization Subsidiary; and
- are secured, together with all of PRIMEDIA's other senior indebtedness by
a pledge of the stock of PRIMEDIA Companies Inc., an intermediate holding
company owned directly by PRIMEDIA. PRIMEDIA Companies Inc. owns all of
PRIMEDIA's operating subsidiaries.
As of June 30, 2001, PRIMEDIA had approximately $1,698.9 million of senior
indebtedness, consisting of $558.0 million of borrowings under the Credit
Facilities, $100.0 million of PRIMEDIA's 10 1/4% senior notes due 2004,
$299.3 million of PRIMEDIA's 8 1/2% senior notes due 2006, $248.9 million in
aggregate principal amount of PRIMEDIA's 7 5/8% senior notes due 2008 and
$492.7 million of the old notes. In addition, as a result of the concurrent
transactions, PRIMEDIA expects to draw upon its revolving credit facility in an
amount of $270 million. The notes will rank PARI PASSU in right of payment with
all this indebtedness. As of June 30, 2001, PRIMEDIA had no subordinated
indebtedness outstanding. Subject to the financial covenants in the Credit
Facilities, PRIMEDIA has the option at any time to exchange its outstanding
series of preferred stock into subordinated indebtedness in an aggregate
principal amount of $562.1 million.
The Guarantors have guaranteed PRIMEDIA's obligations under the Credit
Facilities and the Outstanding Notes. As of June 30, 2001, the Guarantors had on
a combined basis approximately $28.9 million of additional senior indebtedness,
all of which is secured by a pledge of the stock of PRIMEDIA Companies Inc. The
guarantees under the notes will rank PARI PASSU in right of payment with all of
the guarantees under the Credit Facilities and the Outstanding Notes.
PRINCIPAL, MATURITY, AND INTEREST
The notes initially are limited in aggregate principal amount to
$500.0 million and will mature on May 15, 2011. The notes will be issued in
registered form, without coupons, in denominations of $1,000 and integral
multiples of $1,000. Additional notes may be issued from time to time after this
offering, subject to the provisions of the Indenture described below under the
caption "--Certain Covenants--Incurrence of Indebtedness." The new notes offered
under this prospectus, the old 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. Unless the context otherwise requires, for all purposes of the
Indenture and this "Description of New
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Notes," references to the notes include any additional notes actually issued.
Interest on the notes will accrue at the rate of 8 7/8% per annum and will be
payable semiannually on May 15 and November 15, commencing on November 15, 2001,
to holders of record on the immediately preceding May 1 and November 1.
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 original date
of issuance. Interest will be computed on the basis of a 360-day year consisting
of twelve 30-day months.
We may be obligated to pay liquidated damages with respect to the old notes
in certain circumstances under the Registration Rights Agreement. See
"--Registration Rights; Liquidated Damages."
The notes will be payable both as to principal and interest at the office or
agency of PRIMEDIA maintained for that 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 that purpose.
OPTIONAL REDEMPTION
At any time before May 15, 2004, PRIMEDIA may on any one or more occasions
redeem up to 35% of the aggregate principal amount of notes (which includes
additional notes, if any) originally issued under the Indenture at a redemption
price of 108.875% of the principal amount of those notes, plus accrued and
unpaid interest to the redemption date, with the net cash proceeds of one or
more Equity Offerings; PROVIDED that:
(1) at least 65% of the aggregate principal amount of notes (which includes
additional notes, if any) originally issued remains outstanding
immediately after the occurrence of each of those redemptions (excluding
notes held by PRIMEDIA and its Subsidiaries); and
(2) any redemption must occur within 60 days of the date of closing of that
Equity Offering.
Except as provided in the preceding paragraph and other than in connection
with a Change of Control, as described below, PRIMEDIA may not redeem the notes
before May 15, 2006. On or after May 15, 2006, PRIMEDIA may, at its option,
redeem the notes, 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 on the notes
being redeemed to the applicable redemption date, if redeemed during the
12-month period beginning May 15 of the years indicated below:
<Table>
<Caption>
YEAR PERCENTAGE
---- ----------
2006........................................................ 104.438%
2007........................................................ 102.958%
2008........................................................ 101.479%
2009 and thereafter......................................... 100.000%
</Table>
If the optional redemption date is on or after an interest record date and
on or before the related interest payment date, the accrued and unpaid interest,
if any, will be paid to the person or entity in whose name the note is
registered at the close of business on that record date, and no additional
interest will be payable to holders whose notes will be subject to redemption by
PRIMEDIA.
The Credit Facilities restrict the optional redemption or the prepayment of
the notes, and the indentures governing the Outstanding Notes make that
redemption or prepayment a Restricted Payment (as defined in the indentures
governing the Outstanding Notes).
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SINKING FUND
There will be no sinking fund payments for the notes.
CHANGE OF CONTROL
HOLDERS' RIGHT TO REQUIRE REPURCHASE UPON CHANGE OF CONTROL
If a Change of Control occurs, each holder will have the right to require
PRIMEDIA to repurchase all or any part (equal to $1,000 or any integral multiple
of $1,000) of that 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 described in the next subsection
would in all cases be equal to or greater than this repurchase price. 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. 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 PRIMEDIA's board of directors.
Within 40 days following any Change of Control, PRIMEDIA will 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 will be no earlier than
30 days nor later than 60 days from the date that notice is mailed (the
"Change of Control Payment Date");
(3) that any notes not tendered will continue to accrue interest;
(4) that, unless PRIMEDIA defaults in the payment of the Change of Control
Payment, all notes accepted for payment pursuant to the Change of Control
Offer will 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 each note
completed, to the paying agent at the address specified in the notice
before 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 that holder is withdrawing his election to have those
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.
On the Change of Control Payment Date, PRIMEDIA will, to the extent lawful:
(1) accept for payment notes or portions of notes 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 notes or portions of notes so tendered; and
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(3) deliver or cause to be delivered to the Trustee the notes so accepted
together with an officers' certificate stating the notes or portions of
notes that were tendered to PRIMEDIA.
The paying agent will promptly mail to each holder of notes so accepted
payment in an amount equal to the purchase price for those notes, and the
Trustee will promptly authenticate and mail to that holder a note equal in
principal amount to any unpurchased portion of the notes surrendered; PROVIDED
that each of those notes will be in a principal amount of $1,000 or integral
multiples of $1,000.
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 Facilities will automatically accelerate upon
the earlier of (i) 30 days from the Change of Control and the Change of Control
Payment Date. If PRIMEDIA has insufficient funds with which to repay the
indebtedness under the Credit Facilities and to repurchase the notes and any
other senior indebtedness that is required to be repurchased upon a Change of
Control, including the Outstanding Notes, the holders of notes will have a claim
on the funds of PRIMEDIA equal to that of the lenders under the Credit
Facilities and of the holders of any such other senior indebtedness, including
the holders of the Outstanding Notes.
The provisions described above that require PRIMEDIA to make a Change of
Control Offer following a Change of Control will be applicable whether or not
any other provisions of the Indenture are applicable to that Change of Control.
Except as described above with respect to a Change of Control, the Indenture
does not contain provisions that permit the holders of the notes to require that
PRIMEDIA repurchase or redeem the notes in the event of a takeover,
recapitalization or similar transaction.
PRIMEDIA will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements included
in the Indenture applicable to a Change of Control Offer made by PRIMEDIA and
purchases all notes validly tendered and not withdrawn under that Change of
Control Offer.
OPTIONAL REDEMPTION UPON CHANGE OF CONTROL
In addition to the rights set forth under "Optional Redemption," PRIMEDIA
may, at its option, redeem the notes, 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 of the notes being
redeemed 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 will be calculated with
respect to the date of redemption and will equal the greater of (i) 1.0% of the
then outstanding principal amount of the notes and (ii) the excess of (A) the
present value of the required interest and principal payments due on the notes,
computed using a discount rate equal to the Treasury Rate plus the Applicable
Spread, over (B) the then outstanding principal amount of the notes.
"Applicable Spread," for purposes of the Indenture, is defined as one half
of one percent.
"Treasury Rate," for purposes of the 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 that
Statistical Release is no longer published, any publicly available source of
similar market data)) most nearly equal
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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
will 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 those 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 will 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 those tenders before the Change of Control Payment
Date so as to participate in the optional redemption. However, PRIMEDIA would
have no obligation to announce an optional Change of Control redemption before
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 promulgated under that act to
the extent those 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, the Trustee
will select notes for redemption as follows:
(1) if the notes are listed, in compliance with the requirements of the
principal national securities exchange on which the notes are listed; or
(2) if the notes are not so listed, on a pro rata basis, by lot or by such
method as the Trustee will deem fair and appropriate.
No notes of $1,000 or less will be redeemed in part. Notice of redemption
will 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 that note will state the portion of the principal amount of that note
to be redeemed. A note in principal amount equal to the unredeemed portion of
that note will be issued in the name of the holder of that note upon
cancellation of the original notes. 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 that
Restricted Subsidiary, (B) dividends or distributions payable to
PRIMEDIA or any of its Restricted Subsidiaries or (C) dividends or
distributions by a Partially Owned Restricted Subsidiary so long as, in
the case of any dividend or distribution payable on or in respect of any
class or series of securities issued by that Partially Owned Restricted
Subsidiary, PRIMEDIA or a Restricted Subsidiary of PRIMEDIA receives at
least its pro rata share of
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that dividend or distribution in accordance with its Equity Interests in
that class or series of securities;
(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 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 otherwise acquire or
retire for value any Indebtedness that is subordinated in right of
payment to the notes (other than in connection with the refunding or
refinancing of that Indebtedness), except a payment of interest or
principal at the stated maturity of that Indebtedness or in
anticipation of satisfying a sinking fund obligation, principal
installment or final maturity, in each case due within one year of that
payment, and other than Indebtedness between and among PRIMEDIA and its
Restricted Subsidiaries; 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 that 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
under the first paragraph of the INCURRENCE OF INDEBTEDNESS covenant
(without giving effect to clauses (i) through (xvi) of the second
paragraph of that covenant), which calculation will 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
that 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) that 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 that Restricted Payment (or, if
Adjusted Consolidated Net Income for that period is a deficit,
100% of that 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
that Restricted Payment Unrestricted Subsidiary) in that
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 that
Subsidiary as determined by the board of directors of PRIMEDIA in
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good faith (or, if that 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 that Restricted Payment Unrestricted
Subsidiary as a Restricted Subsidiary and (B) the Consolidated
Net Cash Flow generated by that 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 that
Subsidiary's fiscal quarter ending immediately prior to its
designation as a Restricted Subsidiary (or if that Consolidated
Net Cash Flow for that period is a deficit, 100% of that
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 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 that 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, that deficit will be excluded from
the computation of this clause (c); PROVIDED, FURTHER, that all those
amounts applied under this clause (c) will not be available for
application under clause (c) of the INVESTMENTS IN UNRESTRICTED
SUBSIDIARIES covenant. As of June 30, 2001, the amount available for
Restricted Payments under clause (c) was approximately $702.2 million.
The foregoing provisions will not prohibit:
(i) the payment of any dividend within 60 days after the date of declaration
of that dividend, if at that date of declaration the payment would have
complied with the provisions of the 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 the retirement of Retired
Capital Stock the declaration and payment of dividends on the Retired
Capital Stock 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 the Retired Capital Stock immediately prior to the retirement;
(iii) the declaration and payment of dividends to the holders of Series D
Preferred Stock, Series F Preferred Stock and Series H 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 under
subscription and option agreements in effect on the date of the
Indenture or under any stock option plan of About.com, Inc. existing on
the date of the Indenture and Equity Interests of PRIMEDIA issued to
future members of management under subscription agreements executed
after the date of the Indenture, containing provisions for the
repurchase of those Equity Interests upon death, disability or
termination of employment of those persons which are substantially
identical to those contained in the subscription agreements in effect
on the date of the Indenture;
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(v) the declaration and payment of dividends on PRIMEDIA's 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 its
common stock or (b)(1) the issuance of securities convertible into its
common stock (other than any such convertible securities issued to
(A) members of PRIMEDIA's management or its board of directors and
(B) any Subsidiary of PRIMEDIA) and (2) the conversion of those
convertible securities into PRIMEDIA's common stock, in both cases at
the time of the conversion into common stock;
(vi) the repurchase, redemption or other acquisition or retirement for value
of Indebtedness of PRIMEDIA or any Guarantor 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
Indenture (including, without limitation, the declaration and payment
of dividends on Refunding Capital Stock in excess of the dividends
declarable and payable on Refunding Capital Stock under clause (ii) of
this paragraph); PROVIDED that at the time of the issuance PRIMEDIA's
Fixed Charge Coverage Ratio, after giving effect to the 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 or any Guarantor 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 that 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 (xvi) of the second paragraph of that
covenant);
(ix) the retirement of the Series D Preferred Stock, Series F Preferred
Stock and Series H Preferred Stock in exchange for the issuance of the
Class D Subordinated Debentures, Class F Subordinated Debentures and
Class H Subordinated Debentures, respectively, under the respective
certificates of designations relating to those series of preferred
stock;
(x) the purchase of Class D Subordinated Debentures, Class F Subordinated
Debentures and Class H Subordinated Debentures in accordance with the
CHANGE OF CONTROL covenants in the Class D Debenture Indenture, Class F
Debenture Indenture and Class H Debenture Indenture, respectively;
(xi) Investments in Unrestricted Subsidiaries having an aggregate fair
market value, when taken together with all other Investments made under
this clause (xi) that are at that time outstanding, not to exceed
$50.0 million at the time of that 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 PRIMEDIA which are not held by KKR or any of its
Affiliates; PROVIDED, that (A) the aggregate Restricted Payments made
under this clause (xii) in any calendar year will not exceed
$75.0 million and (B) immediately after giving effect to each
Restricted Payment made under this clause (xii) on a pro forma basis,
PRIMEDIA could incur at least $1.00 of additional Indebtedness under
the first paragraph of the INCURRENCE OF INDEBTEDNESS covenant (without
giving effect to clauses (i) through (xvi) of the second paragraph of
that covenant);
(xiii) other Restricted Payments in an aggregate amount not to exceed
$50.0 million; and
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(xiv) any Investment made in a Securitization Subsidiary in connection with a
Qualified Securitization Transaction, which Investment consists of the
transfer of Receivables and Other Assets.
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), (ix) and
(xiv) 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 (xiv) above or
is entitled to be incurred under the first paragraph of this covenant (including
clauses (a), (b) and (c) of this covenant), PRIMEDIA will, in its sole
discretion, classify that Restricted Payment in any manner that complies with
the covenants described above and that Restricted Payment will be treated as
having been made under only one of those clauses or under the first paragraph of
this covenant.
Not later than the date of making any Restricted Payment, PRIMEDIA will
deliver to the Trustee an officer's certificate stating that the 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 PRIMEDIA'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 that 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 that Investment, PRIMEDIA would not be permitted to
incur at least $1.00 of Indebtedness under the first paragraph of the
INCURRENCE OF INDEBTEDNESS covenant (without giving effect to clauses
(i) through (xvi) of the second paragraph of that covenant), which
calculation will 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 that 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) that 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 that Investment; PLUS
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(x) 100% of the aggregate net cash proceeds received by PRIMEDIA from
(i) the issue or sale of Equity Interests of PRIMEDIA (other than
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 that 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 that Net Cash Flow Unrestricted Subsidiary)
in that Net Cash Flow Unrestricted Subsidiary resulting from those
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 that Subsidiary as determined
by the board of directors of PRIMEDIA in good faith (or, if the 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 that Net Cash Flow
Unrestricted Subsidiary as a Restricted Subsidiary and (B) the
Consolidated Net Cash Flow generated by that 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 that
Subsidiary's fiscal quarter ending immediately prior to its
designation as a Restricted Subsidiary (or if the Consolidated Net
Cash Flow for that period is a deficit, 100% of that deficit);
PROVIDED that all those amounts applied under this clause (c) will not be
available for application under clause (c) of the RESTRICTED PAYMENTS covenant.
As of June 30, 2001, the amount available for Investments under clause (c) was
approximately $1.1 billion.
The foregoing limitations will not apply to:
(i) an Investment to the extent that it is to capitalize a Restricted
Payment Unrestricted Subsidiary permitted under the LIMITATIONS ON
RESTRICTED PAYMENTS covenant;
(ii) an Investment to the extent that it is funded by the issuance of Equity
Interests of PRIMEDIA to the extent net proceeds are not used to fund
an optional redemption of notes;
(iii) any Investment made in a Securitization Subsidiary in connection with a
Qualified Securitization Transaction, which Investment consists of the
transfer of Receivables and Other Assets; and
(iv) Investments in Unrestricted Subsidiaries having an aggregate fair
market value, when taken together with all other Investments made under
this clause (iv) that are at that time outstanding, not to exceed
$50.0 million at the time of that 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 (iv) above or is
entitled to be incurred under the first paragraph of this covenant (including
clauses (a), (b) and (c) of the first paragraph of this covenant), PRIMEDIA
will, in its sole discretion, classify that Investment in an Unrestricted
Subsidiary in any manner that complies with the covenants described above and
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Investment in an Unrestricted Subsidiary will be treated as having been made
under only one of those clauses or under the first paragraph of this covenant.
Each Net Cash Flow Unrestricted Subsidiary of PRIMEDIA will at all times
remain (1) wholly owned, directly or indirectly, by PRIMEDIA or a wholly owned
Restricted Subsidiary of PRIMEDIA or (2) a Subsidiary of PRIMEDIA so long as
there is no encumbrance or restriction on the ability of that Subsidiary to pay
dividends or make any other distributions on its Capital Stock, or pay any
Indebtedness or other obligations, to PRIMEDIA or any Restricted Subsidiary of
PRIMEDIA.
Not later than the date of making any Investment described above, PRIMEDIA
will deliver to the Trustee an officer's certificate stating that the Investment
is permitted (including, without limitation, whether the 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 PRIMEDIA'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.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing by reason of:
(A) the terms, as in effect on the date of the Indenture, of the Existing
Indebtedness;
(B) the terms, as in effect on the date of the Indenture, of the Bank Credit
Facilities and the Outstanding Notes and the indentures governing the
Outstanding Notes;
(C) the terms of Indebtedness of PRIMEDIA incurred in accordance with the
INCURRENCE OF INDEBTEDNESS covenant; PROVIDED that the terms of the
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 covenant;
(D) the terms of the 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 those 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, the Class F Subordinated Debentures, the Class F Debenture
Indenture, the Class H Subordinated Debentures and the Class H Debenture
Indenture;
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(I) any encumbrance or restriction with respect to a Subsidiary of PRIMEDIA
that is not a Subsidiary of PRIMEDIA on the date of the Indenture, which
encumbrance or restriction is in existence at the time that 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 under an agreement which has been entered into for the sale or
disposition of all or substantially all the Capital Stock or assets of
that 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;
(N) in the case of clause (iii) of the first paragraph of this covenant, any
encumbrance or restriction contained in mortgages, pledges or other
security agreements permitted under the Indenture securing Indebtedness
of PRIMEDIA or a Restricted Subsidiary of PRIMEDIA to the extent that
encumbrance or restriction restricts the transfer of the property subject
to those mortgages, pledges or other security agreements;
(O) any contractual requirements incurred with respect to Qualified
Securitization Transactions relating exclusively to a Securitization
Subsidiary that, in the good faith determination of the board of
directors of PRIMEDIA, are customary in Qualified Securitization
Transactions; or
(P) 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 of
those encumbrances or restrictions contained in any of those agreements
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 will 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 that additional Indebtedness is
created, incurred, issued, assumed or guaranteed would have been no greater than
6.0 to 1, and that Indebtedness is not senior in right of payment to the notes;
PROVIDED that the calculation will give effect to (A) the incurrence of any
Indebtedness (after giving effect to the application of the proceeds of that
Indebtedness) in connection with the simultaneous acquisition of any person,
business, property or assets and (B) the Consolidated Cash Flow generated by
that acquired person, business, property or assets, giving effect in each case
to the incurrence of Indebtedness, application of proceeds and Consolidated Cash
Flow as if that acquisition had occurred at the beginning of that four quarter
period.
For purposes of the previous paragraph, cash flow generated by any acquired
person, business, property or asset will be determined on the same basis as the
definition of Consolidated Cash Flow and
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will be based on the actual earnings before interest, taxes, depreciation and
amortization of that 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 PRIMEDIA'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 those acquisitions and consistent with PRIMEDIA'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 PRIMEDIA in the
operation of that acquired person, business, property or assets during that
period.
The foregoing limitations will not apply to the incurrence of:
(i) Indebtedness under the Credit Facilities (PROVIDED that the principal
amount of that Indebtedness will not exceed $1.3 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 that commitment reduction are not made)
made under the Credit Facilities (excluding those 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 and the notes (but
not any additional notes);
(iv) Indebtedness represented by 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 Class H Subordinated
Debentures issued in exchange for all the outstanding Series H
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 under
this clause (v), does not exceed 5% of Total Assets;
(vi) Indebtedness in an aggregate principal amount equal to the greater of
(A) $225.0 million in the aggregate at any one time outstanding for
PRIMEDIA and its Restricted Subsidiaries and (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 the 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
that Restricted Subsidiary at the time of the 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 with that additional
Indebtedness (the "Refinancing Indebtedness"); PROVIDED, that (A) the
principal amount of that Refinancing Indebtedness will not exceed the
principal amount of Indebtedness (including unused commitments and
additional Indebtedness incurred to pay premiums and fees in connection
with that Indebtedness) so extended, refinanced, renewed, replaced,
substituted or refunded
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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
will 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
will rank, in right of payment, no more senior than that 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 will 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 those 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, those 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 under
those 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 that business, those assets or that
Restricted Subsidiary for the purpose of financing that acquisition;
PROVIDED that the maximum aggregate liability in respect of all that
Indebtedness in the nature of those guarantees will at no time exceed
the gross proceeds actually received from the sale of that business,
those assets or that 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 that 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 that Indebtedness was not incurred or assumed
by that entity in connection with or in anticipation of that
acquisition;
(xiii) Indebtedness between PRIMEDIA and any Restricted Subsidiary; PROVIDED
that any subsequent transfer of any Capital Stock which results in any
Restricted Subsidiary ceasing to be a Restricted Subsidiary or any
subsequent transfer of such Indebtedness (other than to PRIMEDIA or
another Restricted Subsidiary) shall be deemed in each case to
constitute the incurrence of such Indebtedness by the obligor thereon;
(xiv) Non-Compete Notes, not to exceed $50.0 million in aggregate principal
amount less the amount of all principal repayments made in respect of
those notes;
(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; and
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(xvi) Indebtedness incurred by a Securitization Subsidiary in connection with
a Qualified Securitization Transaction that is Non-Recourse
Indebtedness with respect to PRIMEDIA and its Restricted Subsidiaries
(except for Standard Securitization Undertakings); PROVIDED that in the
event such Securitization Subsidiary ceases to qualify as a
Securitization Subsidiary or such Indebtedness ceases to constitute
such Non-Recourse Indebtedness, such Indebtedness will be deemed, in
each case, to be incurred at such time.
For the purposes of determining the aggregate Indebtedness of any referent
person, Indebtedness will not include guarantees by any other person of that
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
(xvi) above or is entitled to be incurred under the first paragraph of this
covenant, (A) PRIMEDIA will, in its sole discretion, classify that item of
Indebtedness in any manner that complies with the covenants described above;
PROVIDED that any Indebtedness classified as incurred pursuant to clause (vi)
above may later be reclassified as having been incurred pursuant to the first
paragraph of this covenant to the extent such reclassified Indebtedness could be
incurred pursuant to the first paragraph at the time of such reclassification;
and (B) that item of Indebtedness will be treated as having been incurred
pursuant to only one of those clauses or pursuant to the first paragraph of this
covenant except as otherwise set forth in the proviso to clause (A) above.
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 from
any of its assets or assign or convey any right to receive income from any of
its assets unless the notes are equally and ratably secured with the
Indebtedness secured by that Lien for so long as that Indebtedness is so
secured. Upon the release and discharge of the initial Lien, any Lien created in
favor of the notes as a result of the initial Lien will be automatically
released.
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
that Asset Sale (or, in the case of a Partially Owned Restricted Subsidiary,
PRIMEDIA's Pro Rata Portion of the Net Proceeds, after repayment by that
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 of the Credit Facilities 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 12 months of the date the relevant Asset Sale is
consummated.
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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 that 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, those Net Proceeds cannot be so
applied as a result of an encumbrance or restriction permitted under
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 (each, an "Affiliate
Transaction") with, or for the benefit of:
(i) any person (or any Affiliate of that 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,
in each case involving aggregate payments or consideration in excess of
$5.0 million, unless:
(a) that Affiliate Transaction is on terms that are not materially less
favorable to PRIMEDIA or the relevant Restricted Subsidiary than
those that would have been obtained in a comparable transaction by
PRIMEDIA or that Restricted Subsidiary with an unrelated Person; and
(b) PRIMEDIA 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 of PRIMEDIA
approving that Affiliate Transaction and set forth in an officers'
certificate certifying that that Affiliate Transaction complies with
clause (a) above.
The foregoing restrictions will 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 to
those services;
(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 those 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;
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(vi) allocation of corporate overhead to Unrestricted Subsidiaries on a
basis not materially less favorable to PRIMEDIA than those allocations
to Restricted Subsidiaries;
(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; or
(viii) sales or other transfers or dispositions of Receivables and Other
Assets transferred to a Securitization Subsidiary in a Qualified
Securitization Transaction.
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) will be issued or
distributed to the shareholders of PRIMEDIA) or permit any person to merge with
or into it unless:
(i) PRIMEDIA will be the continuing person, or the person (if other than
PRIMEDIA) formed by that consolidation or into which PRIMEDIA is merged
or to which the properties and assets of PRIMEDIA are transferred will
be a corporation organized and existing under the laws of the United
States or any State of the United States or the District of Columbia and
will 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 Indenture; and
(ii) immediately after giving effect to that transaction on a pro forma
basis (a) no Default and no Event of Default under the Indenture will
have occurred and be continuing and (b) PRIMEDIA could incur at least
$1.00 of additional Indebtedness under the first paragraph of the
INCURRENCE OF INDEBTEDNESS covenant (without giving effect to
clause (i) through (xvi) of the second paragraph of that covenant) or
the Debt to Consolidated Cash Flow Ratio equals or is less than the
Debt to Consolidated Cash Flow Ratio immediately prior to that
transaction.
PAYMENTS FOR CONSENT
Neither PRIMEDIA nor any of its Subsidiaries will, directly or indirectly,
pay or cause to be paid any consideration, whether by way of interest, fee or
otherwise, to any holder of any notes for or as an inducement to any consent,
waiver or amendment of any of the terms or provisions of the Indenture or the
notes, unless that 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 that consent, waiver or
agreement.
GUARANTEES
GUARANTEES. The new notes will be fully and unconditionally guaranteed on a
senior basis, jointly and severally, by each Guarantor. 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 that 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 will become a guarantor of any Indebtedness of PRIMEDIA or any
Restricted Subsidiaries unless that Unrestricted Subsidiary becomes a guarantor
of the notes. In addition, no Securitization Subsidiary will become a guarantor
of the notes.
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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 Indenture, that Guarantor will be released
from its obligations under its Guarantee if that 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; PROVIDED that the foregoing proviso will not apply to the sale or
disposition of a Guarantor in a foreclosure proceeding to the extent that that
proviso would be inconsistent with the requirements of the Uniform Commercial
Code.
EVENTS OF DEFAULT AND REMEDIES
The 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 that 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
Indenture or the notes and that 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 that 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 that Indebtedness or guarantee
is now existing or thereafter created in the future, if either:
(A) that 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 of that Indebtedness
(after giving effect to any extension of the maturity date by the
holder of that Indebtedness and after the expiration of any grace
period in respect of the final scheduled principal installment
contained in the instrument under which that Indebtedness is
outstanding); or
(B) as a result of that default the maturity of that Indebtedness has
been accelerated prior to its express maturity and the principal
amount of that 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 will not be deemed to occur with respect to any
accelerated indebtedness which is repaid or prepaid within 20 days
after that declaration;
(v) failure by PRIMEDIA or any of its Significant 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 Significant Subsidiaries; and
(vii) except as permitted by the 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.
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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 will 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 the Default or Event of Default becomes known to the
Trustee, unless the 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 notes or that results from a failure to comply with
the CHANGE OF CONTROL covenant, the Trustee may withhold the notice if and so
long 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 the Trustee at the request of those
holders will, 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, the principal, premium, if any, and accrued
interest will 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 Indenture. Subject to certain restrictions set forth
in the 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 Indenture). 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 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 the notes outstanding
make a written request to the Trustee to pursue the remedy;
(3) the 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 that 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 Indenture, and PRIMEDIA is required upon becoming
aware of any Default or Event of Default to deliver a statement to the Trustee
specifying that Default or Event of Default.
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NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND SHAREHOLDERS
No director, officer, employee, incorporator or shareholder of PRIMEDIA, as
such, will have any liability for any obligations of PRIMEDIA under the notes,
the Indenture, the Guarantees or the Registration Rights Agreement or for any
claim based on, in respect of, or by reason of, those 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. That 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.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
PRIMEDIA may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding notes ("Legal
Defeasance"), except for:
(1) the rights of holders of outstanding notes to receive payments in
respect of the principal of, premium, if any, and interest on the notes
when those payments are due from the trust referred to below;
(2) PRIMEDIA's obligations with respect to the notes concerning issuing
temporary notes, registration of notes, mutilated, destroyed, lost or
stolen notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the Trustee, and
PRIMEDIA's obligations in connection with those rights, powers, trusts,
duties and immunities; and
(4) the Legal Defeasance provisions of the Indenture.
In addition, PRIMEDIA may, at its option and at any time, elect to have the
obligations of PRIMEDIA released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with those covenants will not constitute a Default or Event of Default
with respect to the notes. In the event Covenant Defeasance occurs, certain
events (not including non-payment or bankruptcy, receivership, rehabilitation
and insolvency events) described under "Events of Default" will no longer
constitute an Event of Default with respect to the notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) PRIMEDIA must irrevocably deposit or cause to be deposited with the
Trustee or the paying agent, in trust, money or direct noncallable
obligations of or guaranteed by the United States of America in an amount
sufficient, without reinvestment, to pay the principal of and interest on
the outstanding notes on the stated maturity or on the applicable
redemption date, as the case may be;
(2) in the case of Legal Defeasance, PRIMEDIA will 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 outstanding notes will not
recognize income, gain or loss for federal income tax purposes as a
result of the Legal Defeasance and will be subject to federal income tax
on the same amount, in the same manner and at the same times as would
have been the case if the Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, PRIMEDIA will have delivered to the
Trustee an opinion of counsel from nationally recognized counsel
acceptable to the Trustee confirming that the holders of the outstanding
notes will not recognize income, gain or loss for federal income tax
purposes as a result of the Covenant Defeasance and will be subject to
federal
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income tax on the same amount, in the same manner and at the same times
as would have been the case if the Covenant Defeasance had not occurred;
(4) no Default or Event of Default will have occurred and be continuing (A)
on the date of the deposit or (B) insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the period
ending on the 91st day after the date of the deposit; and
(5) PRIMEDIA must deliver to the Trustee an officer's certificate and an
opinion of counsel, each stating that all conditions precedent provided
for relating to the Legal Defeasance or the Covenant Defeasance have been
complied with.
TRANSFER AND EXCHANGE
A holder may transfer or exchange notes in accordance with the 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
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 Indenture, the
Guarantees or the notes may be amended or supplemented with the consent of the
holders of at least a majority in principal amount of the notes then outstanding
(including consents obtained in connection with a tender offer or exchange offer
for notes), and any existing default or compliance with any provision of the
Indenture or the notes may be waived with the consent of the holders of a
majority in principal amount of the then outstanding 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 notes 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
notes;
(iv) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the notes (except a rescission of
acceleration of the notes by the holders of at least a majority in
aggregate principal amount of the notes);
(v) make any notes payable in money other than that stated in the notes;
(vi) make any change in the provisions of the 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.
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Notwithstanding the foregoing, without the consent of any holder of the
notes, PRIMEDIA and the Trustee may amend or supplement the Indenture or the
notes to:
(1) cure any ambiguity, defect or inconsistency;
(2) provide for uncertificated notes in addition to or in place of
certificated notes;
(3) provide for the assumption of PRIMEDIA's obligations to holders of the
notes in the case of a merger or consolidation;
(4) 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 Indenture of any such holder; or
(5) comply with requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture
Act.
CONCERNING THE TRUSTEE
The 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 other
transactions; however, if it acquires any conflicting interest it must eliminate
that conflict within 90 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 Indenture provides that in case an Event of Default
occurs (which is not 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 those provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any of the holders of the notes, unless they offer to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
EXCHANGE OFFER, REGISTRATION RIGHTS
On May 8, 2001, PRIMEDIA, the Guarantors and the initial purchasers entered
into the Registration Rights Agreement. Under the Registration Rights Agreement,
PRIMEDIA agreed, for the benefit of the holders of the Transfer Restricted
Securities, that PRIMEDIA will, at its cost, (1) cause to be filed, on or before
120 days after the Closing Date, the Exchange Offer Registration Statement with
the SEC under the Securities Act concerning the Exchange Offer, and (2) (a) use
its reasonable best efforts to cause the Exchange Offer Registration Statement
to be declared effective by the SEC on or before 200 days after the closing Date
and (b) cause the Exchange Offer to remain open for the minimum period required
by applicable federal and state securities laws, PROVIDED, HOWEVER, that in no
event will that period be less than 20 business days. For each Transfer
Restricted Security surrendered to PRIMEDIA and accepted for exchange in the
exchange offer, the holder of that Transfer Restricted Security will receive a
new note having a principal amount equal to that of the surrendered Transfer
Restricted Security.
Based upon no-action letters issued by the staff of the SEC to third
parties, PRIMEDIA believes that the new notes issued in the exchange offer in
exchange for Transfer Restricted Securities would in general be freely
transferable after the exchange offer without further registration under the
Securities Act if the holder of the new notes represents (1) that it is not an
"affiliate" as defined in Rule 405 under the Securities Act, of PRIMEDIA,
(2) that it is acquiring the new notes in the ordinary course of its business
and (3) that it has no arrangement or understanding with any person to
participate in
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the distribution, within the meaning of the Securities Act, of the new notes,
PROVIDED that, in the case of broker-dealers, a prospectus meeting the
requirements of the Securities Act be delivered as required. However, the SEC
has not considered the exchange offer in the context of a no-action letter and
there can be no assurance that the staff of the SEC would make a similar
determination with respect to the exchange offer as in those other
circumstances. Holders of Transfer Restricted Securities wishing to accept the
exchange offer must represent to PRIMEDIA that those conditions have been met.
Each broker-dealer that receives new notes for its own account in the exchange
offer, where it acquired the new notes exchanged for the new notes for its own
account as a result of market-making or other trading activities, must
acknowledge that it will deliver a prospectus in connection with the resale of
the new notes. The letter of transmittal states 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.
A holder of Transfer Restricted Securities other than certain specified
holders, who wishes to exchange those Transfer Restricted Securities for new
notes in the exchange offer will be required to represent that any new notes to
be received by it will be acquired in the ordinary course of its business, and
that at the time of the commencement of the exchange offer it has no arrangement
or understanding with any person to participate in the distribution, within the
meaning of the Securities Act, of the new notes and that it is not an
"affiliate" of PRIMEDIA, as defined in Rule 405 under the Securities Act, or if
it is an affiliate, that it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable.
If the exchange offer is not permitted by applicable law or SEC policy or
(2) if any Holder of Transfer Restricted Securities will notify PRIMEDIA within
20 business days following the consummation of the exchange offer that (a) the
holder was prohibited by law or SEC policy from participating in the exchange
offer or (b) the holder may not resell the new notes acquired by it in the
exchange offer to the public without delivering a prospectus and the Prospectus
contained in the Exchange Offer Registration Statement is not appropriate or
available for the resales by the holders or (c) the holder is a broker-dealer
and holds old notes acquired directly from the Company or any of its affiliates,
then PRIMEDIA will, at its cost, (A) cause to be filed a shelf registration
statement (the "Shelf Registration Statement") covering resales of the Transfer
Restricted Securities, (B) use its reasonable best efforts to cause the shelf
Registration Statement to be declared effective under the Securities Act and
(C) use its reasonable best efforts to keep the Shelf Registration Statement
effective until two years after its effective date or any shorter period ending
when all resales of Transfer Restricted Securities covered by the Shelf
Registration Statement have been made. A holder selling those Transfer
Restricted Securities under the Shelf Registration Statement generally would be
required to be named as a selling security holder in the related prospectus and
to deliver a prospectus to purchasers, will be subject to certain of the civil
liability provisions under the Securities Act in connection with those sales and
will be bound by the provisions of the Registration Rights Agreement which are
applicable to that holder, including certain indemnification obligations.
If
(a) PRIMEDIA fails to file any of the registration statements
required by the Registration Rights Agreement on or before the
date specified for such filing;
(b) any of such registration statements is not declared effective by
the Commission on or prior to the date specified for such
effectiveness (the "Effectiveness Target Date");
(c) PRIMEDIA fails to consummate the exchange offer within 30 days
of the Effectiveness Target Date with respect to the Exchange
Offer Registration Statement; or
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(d) the Shelf Registration Statement or the Exchange Offer
Registration Statement is declared effective but thereafter
ceases to be effective or usable in connection with resales of
Transfer Restricted Securities during the periods specified in
the Registration Rights Agreement
(each such event referred to in clauses (a) through (d) above a "Registration
Default"), then PRIMEDIA will pay liquidated damages to each holder of Transfer
Restricted Securities ("Liquidated Damages"). Liquidated Damages will accrue,
with respect to the first 90-day period (or portion thereof) immediately
following the occurrence of the first Registration Default, at a rate of 0.25%
per annum of the aggregate principal amount of the outstanding notes on the date
of such Registration Default, payable in cash semiannually in arrears on each
interest payment date, commencing on the date of such Registration Default. The
rate of the Liquidated Damages will increase by an additional 0.25% per annum at
the beginning of each subsequent 90-day period (or portion thereof) until all
Registration Defaults have been cured, up to a maximum rate of Liquidated
Damages for all Registration Defaults of 0.50% per annum.
The Registration Rights Agreement will provide that the Liquidated Damages
specified above will be the exclusive remedy available to holders of Transfer
Restricted Securities for any failure by PRIMEDIA to comply with the
registration requirements of the Registration Rights Agreement.
The summary in this prospectus of certain provisions of the Registration
Rights Agreement does not purport to be complete and is subject to, and is
qualified in its entirety by, all of the provisions of the Registration Rights
Agreement.
BOOK-ENTRY; DELIVERY AND FORM
The notes will initially be represented in the form of one or more global
notes in definitive, fully-registered book-entry form, without interest coupons
that will be deposited with or on behalf of The Depository Trust Company, or
DTC, and registered in the name of DTC or its participants.
Except as set forth below, the global notes may be transferred, in whole and
not in part, solely to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the global notes may not be exchanged for notes
in physical, certificated form except in the limited circumstances described
below.
DEPOSITORY PROCEDURES
The following description of the operations and procedures of the DTC are
provided solely as a matter of convenience. These operations and procedures are
solely within the control of the respective settlement systems and are subject
to changes by them. PRIMEDIA takes no responsibility for these operations and
procedures and urges investors to contact the system or their participants
directly to discuss these matters.
The DTC has advised PRIMEDIA that the DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between Participants through electronic
book-entry changes in accounts of its Participants. The Participants include
securities brokers and dealers (including the initial purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities, such as banks, brokers,
dealers and trust companies, that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly (collectively,
the "Indirect Participants"). Persons who are not Participants may beneficially
own securities held by or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interests in, and transfers of ownership
interests in, each security held by or on behalf of DTC are recorded on the
records of the Participants and Indirect Participants.
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The DTC has also advised PRIMEDIA that, pursuant to procedures established
by it:
(1) upon deposit of the Global Notes, the DTC will credit the accounts of
Participants designated by the initial purchasers with portions of the
principal amount of the Global Notes; and
(2) ownership of these interests in the Global Notes will be shown on, and
the transfer of ownership of these interests will be effected only
through, records maintained by the DTC (with respect to the Participants)
or by the Participants and the Indirect Participants (with respect to
other owners of beneficial interest in the Global Notes).
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Note to those persons will be limited
to that extent. Because the DTC can act only on behalf of Participants, which in
turn act on behalf of Indirect Participants, the ability of a person having
beneficial interests in a Global Note to pledge those interests to persons that
do not participate in the DTC system, or otherwise take actions in respect of
those interests, may be affected by the lack of a physical certificate
evidencing those interests.
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTES WILL NOT
HAVE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL DELIVERY OF
NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE REGISTERED OWNERS OR
HOLDERS OF THE GLOBAL NOTES UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of, and interest and premium and
liquidated damages, if any, on a Global Note registered in the name of the DTC
or its nominee will be payable to the DTC in its capacity as the registered
holder under the indenture. Under the terms of the indenture, PRIMEDIA and the
trustee will treat the persons in whose names the notes, including the Global
Notes, are registered as the owners of the notes for the purpose of receiving
payments and for all other purposes. Consequently, neither PRIMEDIA, the trustee
nor any agent of PRIMEDIA or the trustee has or will have any responsibility or
liability for:
(1) any aspect of the DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of
beneficial ownership interest in the Global Notes or for maintaining,
supervising or reviewing any of the DTC's records or any Participant's or
Indirect Participant's records relating to the beneficial ownership
interests in the Global Notes; or
(3) any other matter relating to the actions and practices of the DTC or any
of its Participants or Indirect Participants.
The DTC has advised PRIMEDIA that its current practice, upon receipt of any
payment in respect of securities, such as the notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date unless the DTC has reason to believe it will not
receive payment on that payment date. Each relevant Participant is credited with
an amount proportionate to its beneficial ownership of an interest in the
principal amount of the relevant security as shown on the records of the DTC.
Payments by the Participants and the Indirect Participants to the beneficial
owners of notes will be governed by standing instructions and customary
practices and will be the responsibility of the Participants or the Indirect
Participants and will not be the responsibility of the DTC, the trustee or
PRIMEDIA. Neither PRIMEDIA nor the trustee will be liable for any delay by the
DTC or any of its Participants in identifying the beneficial owners of the
notes, and PRIMEDIA and the trustee may conclusively rely on and will be
protected in relying on instructions from the DTC or its nominee for all
purposes.
Transfers between Participants in the DTC will be effected in accordance
with the DTC's procedures, and will be settled in same-day funds.
The DTC has advised PRIMEDIA that it will take any action permitted to be
taken by a holder of notes only at the direction of one or more Participants to
whose account the DTC has credited the
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interests in the Global Notes and only in respect of such portion of the
aggregate principal amount of the notes as to which the Participant or
Participants has or have given that direction. However, if there is an Event of
Default under the notes, the DTC reserves the right to exchange the Global Notes
for legended notes in certificated form and to distribute those notes to its
Participants.
Although the DTC has agreed to the foregoing procedures to facilitate
transfers of interests in the Global Notes among participants in the DTC, they
are under no obligation to perform or to continue to perform such procedures,
and may discontinue such procedures at any time. Neither PRIMEDIA nor the
trustee nor any of their respective agents will have any responsibility for the
performance by the DTC or their respective participants or indirect participants
of their respective obligations under the rules and procedures governing their
operations.
EXCHANGE OF GLOBAL NOTES FOR CERTIFICATED NOTES
A Global Note is exchangeable for definitive notes in registered
certificated form ("Certificated Notes") if:
(1) the DTC (a) notifies PRIMEDIA that it is unwilling or unable to continue
as depositary for the Global Notes and PRIMEDIA fails to appoint a
successor depositary or (b) has ceased to be a clearing agency registered
under the Exchange Act;
(2) PRIMEDIA, at its option, notifies the trustee in writing that it elects
to cause the issuance of the Certificated Notes; or
(3) there has occurred and is continuing a Default or Event of Default with
respect to the notes.
In addition, beneficial interests in a Global Note may be exchanged for
Certificated Notes upon prior written notice given to the trustee by or on
behalf of the DTC in accordance with the indenture. In all cases, Certificated
Notes delivered in exchange for any Global Note or beneficial interests in
Global Notes will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the depositary (in accordance with
its customary procedures).
SAME-DAY SETTLEMENT AND PAYMENT
PRIMEDIA will make payments in respect of the notes represented by the
Global Notes (including principal, premium, if any, interest and liquidated
damages, if any) by wire transfer of immediately available funds to the accounts
specified by the Global Note Holder. PRIMEDIA will make all payments of
principal, interest and premium and liquidated damages, if any, with respect to
Certificated Notes by wire transfer of immediately available funds to the
accounts specified by the holders of the Certificated Notes or, if no such
account is specified, by mailing a check to each such holder's registered
address.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all those terms, as well as
any other capitalized terms used in this prospectus 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."
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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 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) (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;
(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; or
(vi) Receivables and Other Assets pursuant to a Qualified Securitization
Transaction.
"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 Facilities" means (1) the Credit Agreement, dated as of
March 11, 1999, among PRIMEDIA, the lending institutions listed therein, The
Bank of New York and Bankers Trust Company, as Co-Syndication Agents, The Bank
of Nova Scotia, as Documentation Agent, and The
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Chase Manhattan Bank, as Administrative Agent and (2) the Credit Agreement,
dated as of May 24, 1996, among PRIMEDIA, the lending institutions listed
therein, The Bank of New York and Bankers Trust Company, as Co-Syndication
Agents, The Bank of Nova Scotia, as Documentation Agent, and The Chase Manhattan
Bank, as Administrative Agent.
"Business Day" means any day other than 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.
"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.
"Class D Debenture Indenture" means the indenture governing the Class D
Subordinated Debentures.
"Class D Subordinated Debentures" means the 10% Class D Subordinated
Exchange Debentures due 2008 of PRIMEDIA issuable in exchange for the Series D
Preferred Stock.
"Class F Debenture Indenture" means the indenture governing the Class F
Subordinated Debentures.
"Class F Subordinated Debentures" means the 9.20% Class F Subordinated
Exchange Debentures due 2009 of PRIMEDIA issuable in exchange for the Series F
Preferred Stock.
"Class H Debenture Indenture" means the indenture governing the Class H
Subordinated Debentures.
"Class H Subordinated Debentures" means the 8 5/8% Class H Subordinated
Exchange Debentures due 2010 of PRIMEDIA issuable in exchange for the Series H
Preferred Stock.
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"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 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 (i) 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
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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
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
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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.
In addition, "Consolidated Net Income" will not include, without limitation:
(A) any non-capitalized transaction costs and expenses incurred in
connection with financings, investments or acquisitions, including, but
not limited to, financing and refinancing fees;
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(B) any extraordinary or nonrecurring charges relating to any premium or
penalty paid, write-off of deferred financing costs or other financial
recapitalization charges in connection with the redemption or retirement
of any Indebtedness prior to its stated maturity; and
(C) any non-recurring charges arising out of the restructuring or
consolidation of the operations of any persons or business either alone
or together with PRIMEDIA or any Restricted Subsidiary of PRIMEDIA,
incurred within 18 months following the acquisition of those persons or
businesses by PRIMEDIA or any Restricted Subsidiary of PRIMEDIA.
"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 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, with respect to PRIMEDIA or any of its Restricted
Subsidiaries, one or more debt facilities (including, without limitation, the
Bank Credit Facilities) or commercial paper facilities with banks or other
institutional lenders providing for revolving credit loans, term loans or
letters of credit, in each case, as amended, restated, modified, renewed,
refunded, replaced or refinanced in whole or in part 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.
"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).
"Equity Offering" means any public or private offering of Equity Interests
(other than Redeemable Stock) of PRIMEDIA.
"Existing Indebtedness" means Indebtedness of PRIMEDIA and its Subsidiaries
(other than the Bank Credit Facilities and the Outstanding Notes) in existence
on the date of the 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 Indenture.
"Guarantor" means each domestic Restricted Subsidiary of PRIMEDIA, other
than any Securitization Subsidiary, which is wholly owned, directly or
indirectly, by PRIMEDIA.
"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
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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 paragraph, 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 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:
(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.
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"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 or lease in the nature thereof).
"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
Outstanding Notes and the 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 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.
"Non-Compete Notes" means the promissory notes issued by PRIMEDIA pursuant
to the Non-Competition Agreement, dated as of June 17, 1991, among PRIMEDIA
Holdings, Inc., News America Holdings Incorporated and the other parties thereto
in an aggregate principal amount not to exceed $50.0 million, as such notes may
be amended, supplemented or otherwise modified from time to time in accordance
with the terms thereof.
"Non-Recourse Indebtedness" means Indebtedness (i) as to which neither
PRIMEDIA nor any Restricted Subsidiary (other than a Securitization Subsidiary)
(a) provides credit support of any kind (including any undertaking, agreement or
instrument that would constitute Indebtedness), (b) is directly
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or indirectly liable (as a guarantor or otherwise) or (c) constitutes the
lender, (ii) as to which no default (including any rights that the holders
thereof may have to take enforcement action against an Unrestricted Subsidiary)
would permit (upon notice, lapse of time or both) any holder of any other
Indebtedness of PRIMEDIA or any Restricted Subsidiary (other than a
Securitization Subsidiary) to declare a default on such other Indebtedness or
cause the payment thereof to be accelerated or payable prior to its stated
maturity and (iii) as to which the lenders have been notified in writing they
will not have recourse to the shares or assets of PRIMEDIA or any Restricted
Subsidiary (other than a Securitization Subsidiary).
"Obligations" means any principal, interest, penalties, fee,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Outstanding Notes" means the 10 1/4% Senior Notes due 2004, the 8 1/2%
Senior Notes due 2006 and the 7 5/8% Senior Notes due 2008 of PRIMEDIA, 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.
"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 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;
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(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 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 million in the aggregate at any one
time;
(xxi) Liens incurred by Partially Owned Restricted Subsidiaries which do not
exceed 10% of Total Assets in the aggregate at any one time; and
(xxii) Liens on assets of a Securitization Subsidiary arising in connection
with a Qualified Securitization Transaction.
"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.
"Qualified Securitization Transaction" means any transaction or series of
transactions that may be entered into by PRIMEDIA or any Restricted Subsidiary
pursuant to which PRIMEDIA or any Restricted Subsidiary may sell, convey or
otherwise transfer to (a) a Securitization Subsidiary (in the case of a transfer
by PRIMEDIA or of any Restricted Subsidiary) and (b) any other person (in the
case of a transfer by a Securitization Subsidiary), or may grant a security
interest in, Receivables and Other Assets.
"Receivables and Other Assets" means, with respect to any person, all of the
following property and interests in property of such person, whether now
existing or existing in the future or hereafter acquired or arising:
(1) accounts;
(2) accounts receivable or other similar rights to future payments in
respect of assets sold or to be sold, rights granted or to be granted or
services rendered or to be rendered, including, without
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limitation, all rights to payment created by or arising from sales of
goods, lease of goods or the rendition of services no matter how
evidenced, whether or not earned by performance;
(3) all unpaid seller's or lessor's rights, including, without limitation,
recession, replevin, reclamation and stoppage in transit, relating to any
of the foregoing or arising therefrom;
(4) all rights to any goods or merchandise represented by any of the
foregoing, including, without limitation, returned or repossessed goods;
(5) all reserves and credit balances with respect to any such accounts
receivable or account debtors;
(6) all letters of credit, security or guarantees of any of the foregoing;
(7) all insurance policies or reports relating to any of the foregoing;
(8) all collection or deposit accounts relating to any of the foregoing;
(9) all proceeds of any of the foregoing; and
(10) all books and records relating to any of the foregoing.
"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 Indenture or under any stock option plan of
About.com, Inc. existing on the date of the 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 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 Indenture; PROVIDED that for purposes of
the "LIMITATION OF RESTRICTED PAYMENTS" covenant and for purposes of the
definition of Indebtedness, Redeemable Stock does not include the Series D
Preferred Stock, the Series F Preferred Stock or the Series H Preferred Stock.
"Registration Rights Agreement" means (a) the registration rights agreement,
dated May 8, 2001, among PRIMEDIA, the Guarantors and Salomon Smith Barney Inc.,
J.P. Morgan Securities Inc. and Banc of America Securities LLC, as
representatives of the initial purchasers, and
(b) with respect to each issuance of additional notes issued in a transaction
exempt from the registration requirements of the Securities Act, the
registration rights agreement, if any, among PRIMEDIA and the persons purchasing
such additional notes under the related purchase agreement.
"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.
"Securitization Subsidiary" means any person to which PRIMEDIA or any
Restricted Subsidiary of PRIMEDIA transfers Receivables and Other Assets that
engages in no activities other than in
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connection with financing of Receivables and Other Assets and that is designated
by the board of directors as a Securitization Subsidiary and
(A) no portion of the Indebtedness or any other Obligations (contingent or
otherwise) of which
(i) is guaranteed by PRIMEDIA or any Restricted Subsidiary (excluding
guarantees of Obligations (other than the principal of, and interest
on, Indebtedness) pursuant to Standard Securitization Undertakings);
(ii) is recourse to or obligates PRIMEDIA or any Restricted Subsidiary
(other than such Securitization Subsidiary) in any way other than
pursuant to Standard Securitization Undertakings;
(iii) subjects any property or asset of PRIMEDIA or any Restricted
Subsidiary (other than such Securitization Subsidiary), directly or
indirectly, contingently or otherwise, to the satisfaction thereof,
other than pursuant to Standard Securitization Undertakings;
(B) with which neither PRIMEDIA nor any Restricted Subsidiary (other than
such Securitization Subsidiary) has any material contract, agreement,
arrangement or understanding other than on terms no less favorable to
PRIMEDIA or such Restricted Subsidiary than those that might be obtained
at the time from persons that are not Affiliates of PRIMEDIA, other than
fees payable in the ordinary course of business in connection with
servicing Receivables and Other Assets of such entity; and
(C) to which neither PRIMEDIA nor any Restricted Subsidiary (other than such
Securitization Subsidiary) has any obligation to maintain or preserve
such entity's financial condition or cause such entity to achieve certain
levels of operating results.
Any designation of a Securitization Subsidiary will be evidenced to the
Trustee by filing with the Trustee a certified copy of the resolution of the
board of directors of PRIMEDIA giving effect to the designation and an officers'
certificate certifying that the designation complied with the preceding
conditions and was permitted by the Indenture.
"Series D Preferred Stock" means PRIMEDIA's $10.00 Series D Exchangeable
Preferred Stock Redeemable 2008, par value $0.01 per share.
"Series F Preferred Stock" means PRIMEDIA'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 H Preferred Stock" means PRIMEDIA'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.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Securities Act, as such Regulation is in effect on the date of
the Indenture.
"Standard Securitization Undertakings" means representations, warranties,
covenants and indemnities entered into by PRIMEDIA or any Restricted Subsidiary
that are reasonably customary in a Qualified Securitization Transaction.
"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.
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"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) each of the following Subsidiaries of the Company, unless and until such
Subsidiary ceases to be a Subsidiary of the Company or is designated as
a Restricted Subsidiary pursuant to the terms of the Indenture:
PRIMEDIANet Inc.; PRIMEDIA Ventures, Inc.; PRIMEDIA Teenclick Corp.;
PRIMEDIA Digital Video Holdings LLC; About.com, Inc.; HPC Interactive,
LLC; Media Central Acquisition, LLC; Kagan World Media Limited; Kagan
Asia Media, Ltd.; In New York LLC; and PRIMEDIA International, Inc.;
(ii) any other 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
(iii) any subsidiary of an Unrestricted Subsidiary.
The board of directors of PRIMEDIA 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 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
(without giving effect to clauses (i) through (xvi) of the second paragraph of
that 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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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain U.S. federal income tax consequences
of the acquisition, ownership and disposition of new notes as of the date of
this prospectus. Except where noted, this summary deals only with new notes that
are acquired in connection with this exchange offer and held as capital assets
and does not deal with taxpayers subject to special treatment under the U.S.
federal income tax laws, including if you are one of the following:
- a dealer in securities or currencies;
- a financial institution;
- an insurance company;
- a tax exempt organization;
- a person holding the new notes as part of a hedging, integrated or
conversion transaction, a constructive sale or straddle;
- a trader in securities that has elected the mark-to-market method of
accounting for your securities;
- a person liable for alternative minimum tax; or
- a U.S. person whose "functional currency" is not the U.S. dollar.
If a partnership holds the new notes, the tax treatment of a partner will
generally depend upon the status of the partner and the activities of the
partnership. If you are a partner of a partnership holding the new notes, you
should consult your own tax advisors.
The discussion below is based upon the provisions of the Internal Revenue
Code of 1986, as amended, and regulations, rulings and judicial decisions as of
the date of this prospectus. Those authorities may be changed, perhaps
retroactively, so as to result in U.S. federal income tax consequences different
from those discussed below.
IF YOU ARE CONSIDERING THE ACQUISITION OF NEW NOTES, YOU SHOULD CONSULT YOUR
OWN TAX ADVISORS CONCERNING THE FEDERAL INCOME TAX CONSEQUENCES TO YOU AND ANY
CONSEQUENCES ARISING UNDER THE LAWS OF ANY FOREIGN, STATE, LOCAL OR OTHER TAXING
JURISDICTION.
CONSEQUENCES OF THE EXCHANGE
The exchange of the old notes for the new notes in the exchange offer (see
"The Exchange Offer") will not constitute a taxable event to you. As a result:
- you will not realize any gain or loss upon receipt of a new note;
- the holding period of the new note will include the holding period of the
old note exchanged for the new note; and
- the adjusted basis of the new note will be the same as the adjusted tax
basis of the old note exchanged for the new note immediately before the
exchange.
CONSEQUENCES TO U.S. HOLDERS
The following is a summary of certain U.S. federal tax consequences that
will apply to you if you are a U.S. holder of new notes.
The material consequences to "non-U.S. holders" of new notes, who are
beneficial owners of exchange notes and who are not U.S. holders, are described
below under "Consequences to Non-U.S. Holders".
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"U.S. holder" means a beneficial owner of a new note that is:
- a citizen or resident of the United States;
- a corporation or partnership created or organized in or under the laws of
the United States or any political subdivision of the U.S.;
- an estate the income of which is subject to U.S. federal income taxation
regardless of its source; or
- a trust that (1) is subject to the primary supervision of a court within
the United States and the control of one or more U.S. persons or (2) has a
valid election in effect under applicable U.S. Treasury regulations to be
treated as a U.S. person.
PAYMENTS OF INTEREST
Except as set forth below, interest on a new note will generally be taxable
to you as ordinary income from domestic sources at the time it is paid or
accrued in accordance with your method of accounting for tax purposes.
AMORTIZABLE BOND PREMIUM
If you purchased an old note for an amount in excess of the sum of all
amounts payable on the old note after the purchase date other than stated
interest, you will be considered to have purchased the note at a "premium." You
generally may elect to amortize the premium over the remaining term (or an
applicable call date as discussed below) of the new note on a constant yield
method as an offset to interest when includible in income under your regular
method of accounting. The new notes are subject to a call provision at the
option of PRIMEDIA at various times, as described in this prospectus under
"Description of New Notes--Optional Redemption." You will calculate the amount
of amortizable bond premium based on the amount payable at the applicable call
date, but only if use of the call date (in lieu of the stated maturity date)
results in a smaller amortizable bond premium for the period ending on the call
date. If you do not elect to amortize bond premium, that premium will decrease
the gain or increase the loss you would otherwise recognize on disposition of
the new note. Your election to amortize premium on a constant yield method will
also apply to all debt obligations held or subsequently acquired by you on or
after the first day of the first taxable year to which the election applies. You
may not revoke the election without the consent of the Internal Revenue Service.
You should consult your own tax advisor before making this election.
CALCULATION OF AMORTIZABLE BOND PREMIUM IS COMPLICATED, AND WE URGE YOU TO
CONSULT YOUR OWN TAX ADVISOR CONCERNING THE APPLICATION OF THESE RULES AS THEY
APPLY TO YOU.
MARKET DISCOUNT
If you purchased an old note for an amount that is less than its stated
redemption price at maturity, the amount will be treated as "market discount"
for United States federal income tax purposes, unless that difference is less
than a specified de minimis amount. Under the market discount rules, you will be
required to treat any payment, other than stated interest, on, or any gain on
the sale, exchange, retirement or other disposition of, a new note as ordinary
income to the extent of the market discount that you have not previously
included in income and are treated as having accrued on the new note at the time
of its payment or disposition. In addition, you may be required to defer, until
the maturity of the new note or its earlier disposition in a taxable
transaction, the deduction of all or a portion of the interest expense on any
indebtedness attributable to the new note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the new note, unless you
elect to accrue on a constant yield interest
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method. You may elect to include market discount in income currently as it
accrues, on either a ratable or constant yield interest method, in which case
the rule described above regarding deferral of interest deductions will not
apply. Your election to include market discount in income currently, once made,
applies to all market discount obligations acquired by you on or after the first
taxable year to which your election applies and may not be revoked without the
consent of the Internal Revenue Service. You should consult your own tax advisor
before making this election.
SALE, EXCHANGE AND RETIREMENT OF NOTES
When you sell, exchange or retire a new note, you will recognize gain or
loss equal to the difference between the amount you receive (less an amount
equal to any accrued interest you have not previously included in income, which
will be taxable as interest income) and your adjusted basis in the new note.
Except as described above with respect to market discount, your gain or loss
realized on the sale, exchange or retirement of a new note will generally be
treated as capital gain or loss, and will be long-term capital gain or loss if
at the time of the sale, exchange or retirement of a new note, you have held the
new note for more than one year. Long-term capital gains of individuals are
eligible for reduced rates of taxation. The deductability of capital losses is
subject to limitations.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to certain
payments of principal, interest and premium paid on new notes and to the
proceeds of sale of a new notes made to you, unless you are an exempt recipient,
like a corporation. A backup withholding tax will apply to those payments if you
fail to provide a taxpayer identification number, a certification of exempt
status, or fail to report in full dividend and interest income.
CONSEQUENCES TO NON-U.S. HOLDERS
The following is a summary of certain U.S. federal income tax consequences
that will apply to you if you are a non-U.S. holder of new notes. This summary
does not represent a detailed description of the federal income tax consequences
to you in light of your particular circumstances. In addition, it does not deal
with non-U.S. holders that are subject to special treatment under the U.S.
federal income tax laws (including if you are a controlled foreign corporation,
passive foreign investment company, foreign personal holding company, a
corporation that accumulates earnings to avoid federal income tax, or in certain
circumstances, a United States expatriate).
U.S. FEDERAL WITHHOLDING TAX
The 30% U.S. federal withholding tax will not apply to any payment of
principal or interest on the new notes provided that:
- you do not actually, or constructively, own 10% or more of the total
combined voting power of all classes of our voting stock within the
meaning of the Internal Revenue Code and applicable U.S. Treasury
regulations;
- you are not a controlled foreign corporation that is related to us through
stock ownership;
- you are not a bank whose receipt of interest on the exchange notes is
described in section 881(c)(3)(A) of the Internal Revenue Code; and
- (a) you provide your name and address on an Internal Revenue Service Form
W-BEN (or other applicable form), and certify, under penalties of perjury,
that you are not a U.S. person or (b) you hold the exchange notes through
certain foreign intermediaries and you satisfy the certification
requirements of applicable U.S. Treasury regulations. Special
certification rules apply to certain non-U.S. holders that are entities
rather than individuals.
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If you cannot satisfy the requirements described above, payments of interest
made to you will be subject to the 30% U.S. federal withholding tax, unless you
provide us with a properly executed (1) Internal Revenue Service Form W-8BEN (or
other applicable form) claiming an exemption from, or reduction in, withholding
under the benefit of an applicable tax treaty; or (2) Internal Revenue Service
Form W-8ECI (or successor form) stating that interest paid on a new note is not
subject to withholding because it is effectively connected with your conduct of
a trade or business in the United States, as described below under "U.S. Federal
Income Tax".
The 30% U.S. federal withholding tax will not generally apply to any gain
that you realize on the sale, exchange, retirement or other disposition of the
new notes.
U.S. FEDERAL ESTATE TAX
Your estate will not be subject to U.S. federal estate tax on new notes
beneficially owned by you at the time of your death, provided that you are not a
U.S. citizen or resident (as specifically defined for U.S. federal estate tax
purposes) and (1) you do not own 10% or more of the total combined voting power
of all classes of our voting stock (within the meaning of the Internal Revenue
Code and the U.S. Treasury regulations) and (2) interest on the new note would
not have been, if received at the time of your death, effectively connected with
the conduct by you of a trade or business in the United States.
U.S. FEDERAL INCOME TAX
If you are engaged in a trade or business in the United States and interest
on the new notes is effectively connected with the conduct of that trade or
business, you will be subject to U.S. Federal income tax on that interest on a
net income basis in the same manner as if you were a U.S. person as defined
under the Internal Revenue Code, although that interest income will be exempt
from the 30% U.S. federal withholding tax. In addition, if you are a foreign
corporation, you may be subject to a branch profits tax equal to 30% (or lower
applicable treaty rate) of your earnings and profits for the taxable year,
subject to certain adjustments.
Any gain realized on the disposition of a new note generally will not be
subject to U.S. federal income tax unless:
- the gain is effectively connected with the conduct by you of a trade or
business in the United States, or
- you are an individual who is present in the United States for 183 days or
more in the taxable year of that disposition, and other conditions are
met.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, you will not be subject to backup withholding and information
reporting with respect to payments that we make to you provided that we do not
have actual knowledge that you are a U.S. person and we have received from you
the statement described above under "Consequences to Non-U.S. Holders--U.S.
Federal Withholding Tax."
In addition, you will not be subject to backup withholding or information
reporting with respect to the proceeds of the sale of a new note within the
United States or conducted through U.S.-related financial intermediaries, if the
payor receives the statement described above and does not have actual knowledge
that you are a U.S. person, as defined under the Internal Revenue Code, or you
otherwise establish an exemption.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives new notes for its own account pursuant to
the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of the new notes. This prospectus, as it may be
amended or supplemented, may be used by a broker-dealer in connection with
resales of new notes received in exchange for old notes only where the old notes
were acquired as a result of market-making activities or other trading
activities. We have agreed that we will make this prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any
resale for a period of 180 days from the date on which the exchange offer is
consummated, or any shorter period as will terminate when all old notes acquired
by broker-dealers for their own accounts as a result of market-making activities
or other trading activities have been exchanged for new notes and the new notes
have been resold by the broker-dealers.
We will not receive any proceeds from any sale of new notes by
broker-dealers. New notes received by broker-dealers for their own account
pursuant to the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the new notes or a combination of these methods of
resale, at market prices prevailing at the time of resale, at prices related to
the prevailing market prices or negotiated prices. Any 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 broker-dealer or
the purchasers of any new notes. Any broker-dealer that resells new notes that
were received by it for its own account pursuant to the exchange offer and any
broker or dealer that participates in a distribution of the new notes may be
deemed to be an "underwriter" within the meaning of the Securities Act and any
profit on any resale of new notes and any commissions or concessions received by
these 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 180 days from the date on which the exchange offer is
consummated, or a shorter period as will terminate when all old notes acquired
by broker-dealers for their own accounts as a result of market-making activities
or other trading activities have been exchanged for new notes and the new notes
have been resold by the broker-dealers, we will promptly send additional copies
of this prospectus and any amendment or supplement to this prospectus to any
broker-dealer that requests the documents in the letter of transmittal. We have
agreed to pay all expenses incident to the exchange offer, including the
expenses of one counsel for the holders of the old notes, other than commissions
or concessions of any brokers or dealers and the fees of any counsel or other
advisors or experts retained by the holders of old notes, except as expressly
set forth in the registration rights agreement, and will indemnify the holders
of old notes, including any broker-dealers, against certain liabilities,
including liabilities under the Securities Act.
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LEGAL MATTERS
Certain legal matters with respect to the new notes and the guarantees are
being passed upon on our behalf by Simpson Thacher & Bartlett, New York, New
York.
EXPERTS
The financial statements and the related financial statement schedule
incorporated in this prospectus by reference from PRIMEDIA's Annual Report on
Form 10-K for the year ended December 31, 2000 have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their reports, which are
incorporated herein by reference, and have been so incorporated in reliance upon
the reports of such firm given upon their authority as experts in accounting and
auditing.
The consolidated financial statements of About.com as of December 31, 2000
and for the year then ended, incorporated by reference in this prospectus from
PRIMEDIA's current report on Form 8-K/A dated April 26, 2001, have been audited
by Ernst & Young LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
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$500,000,000
[LOGO]
OFFER TO EXCHANGE ALL OUTSTANDING $500,000,000 8 7/8% SENIOR NOTES DUE 2011
FOR
$500,000,000 8 7/8% SENIOR NOTES DUE 2011,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
UNCONDITIONALLY GUARANTEED ON A SENIOR BASIS BY ALL OUR DOMESTIC WHOLLY-OWNED
RESTRICTED SUBSIDIARIES, OTHER THAN SECURITIZATION SUBSIDIARIES
-----------------
P R O S P E C T U S
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