EXHIBIT 1.1
EXECUTION VERSION
$175,000,000
NETWORK COMMUNICATIONS, INC.
10 3/4% SENIOR NOTES DUE 2013
PURCHASE AGREEMENT
November 22, 2005
CREDIT SUISSE FIRST BOSTON LLC,
TD SECURITIES (USA) LLC,
c/o Credit Suisse First Boston LLC
Eleven Madison Avenue,
New York, N.Y. 10010-3629
Dear Sirs:
1. Introductory. Network Communications, Inc., a Georgia corporation (the
"COMPANY"), proposes, subject to the terms and conditions stated herein, to
issue and sell to the several initial purchasers named in Schedule A hereto (the
"INITIAL PURCHASERS") U.S.$175,000,000 principal amount of its 10 3/4% Senior
Notes due 2013 ("OFFERED SECURITIES") to be issued under an indenture dated as
of November 30, 2005 (the "INDENTURE"), between the Company and Xxxxx Fargo
Bank, N.A., as trustee (the "TRUSTEE"). The United States Securities Act of 1933
is herein referred to as the "SECURITIES ACT."
The holders of the Offered Securities will be entitled to the benefits of a
Registration Rights Agreement, dated as of the Closing Date (as defined below),
among the Company and the Initial Purchasers (the "Registration Rights
Agreement"), pursuant to which the Company agrees to file a registration
statement with the Securities Exchange Commission (the "Commission") registering
the resale of the Offered Securities under the Securities Act.
The Company hereby agrees with the several Initial Purchasers as follows:
2. Representations and Warranties of the Company. The Company represents
and warrants to, agrees with, the several Initial Purchasers that:
(a) A preliminary offering circular and an offering circular relating
to the Offered Securities to be offered by the Initial Purchasers have been
prepared by the Company. Such preliminary offering circular (the
"PRELIMINARY OFFERING CIRCULAR") and offering circular (the "OFFERING
CIRCULAR"), as supplemented as of the date of this Agreement, are
hereinafter collectively referred to as the "OFFERING DOCUMENT". The
Offering Document does not and will not include any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading. The preceding sentence does not apply to
statements in or omissions from the Offering Document based upon written
information furnished to the Company by any Initial Purchaser through
Credit Suisse First Boston LLC ("CSFB") specifically for use therein, it
being understood and agreed that the only such information is that
described as such in Section 7(b) hereof.
(b) The Company has been duly incorporated and is an existing
corporation in good standing under the laws of the State of Georgia, with
power and authority (corporate and other) to
own its properties and conduct its business as described in the Offering
Document; and the Company is duly qualified to do business as a foreign
corporation in good standing in all other jurisdictions in which its
ownership or lease of property or the conduct of its business requires such
qualification, except where the failure to so qualify would not have a
Material Adverse Effect (as defined below).
(c) Each subsidiary of the Company has been duly incorporated and is
an existing corporation in good standing under the laws of the jurisdiction
of its incorporation, with power and authority (corporate and other) to own
its properties and conduct its business as described in the Offering
Document; and each subsidiary of the Company is duly qualified to do
business as a foreign corporation in good standing in all other
jurisdictions in which its ownership or lease of property or the conduct of
its business requires such qualification (except where the failure to so
qualify would not have a Material Adverse Effect); all of the issued and
outstanding capital stock of each subsidiary of the Company has been duly
authorized and validly issued and is fully paid and nonassessable; and the
capital stock of each subsidiary owned by the Company, directly or through
subsidiaries, is owned free from liens, encumbrances and defects.
(d) The Indenture has been duly authorized; the Offered Securities
have been duly authorized; and when the Offered Securities are delivered by
the Company and paid for pursuant to this Agreement on the Closing Date,
the Indenture will have been duly executed and delivered by the Company,
such Offered Securities will have been duly executed, authenticated, issued
and delivered and will conform to the description thereof contained in the
Offering Document and the Indenture and such Offered Securities will
constitute valid and legally binding obligations of the Company,
enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
(e) No consent, approval, authorization, or order of, or filing with,
any governmental agency or body or any court is required for the
consummation of the transactions contemplated by this Agreement and the
Registration Rights Agreement in connection with the issuance and sale of
the Offered Securities except for the order of the Commission declaring the
Exchange Offer Registration Statement or the Shelf Registration Statement
(each as defined in the Registration Rights Agreement) effective.
(f) The execution, delivery and performance of the Indenture, this
Agreement and the Registration Rights Agreement, and the issuance and sale
of the Offered Securities and compliance with the terms and provisions
thereof will not result in a breach or violation of any of the terms and
provisions of, or constitute a default under (i) any statute, any rule,
regulation or order of any governmental agency or body or any court,
domestic or foreign, having jurisdiction over the Company or any subsidiary
of the Company or any of their properties, (ii) any agreement or instrument
to which the Company or any such subsidiary is a party or by which the
Company or any such subsidiary is bound or to which any of the properties
of the Company or any such subsidiary is subject, or (iii) the charter or
by-laws of the Company or any such subsidiary, and the Company has full
power and authority to authorize, issue and sell the Offered Securities as
contemplated by this Agreement, except, in the case of clauses (ii) and
(iii), any breach, violation or default that would not, individually or in
the aggregate, have a Material Adverse Effect
(g) This Agreement and the Registration Rights Agreement have been
duly authorized, executed and delivered by the Company. When the
Registration Rights Agreement has been duly executed and delivered, the
Registration Rights Agreement will be a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general
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applicability relating to or affecting creditors' rights and to general
equity principles. On the Closing Date, the Registration Rights Agreement
will conform as to legal matters to the description thereof in the Offering
Circular.
(h) Except as disclosed in the Offering Document, the Company and its
subsidiaries have good and marketable title to all real properties and all
other properties and assets owned by them, in each case free from liens,
encumbrances and defects that would materially affect the value thereof or
materially interfere with the use made or to be made thereof by them; and
except as disclosed in the Offering Document, the Company and its
subsidiaries hold any leased real or personal property under valid and
enforceable leases with no exceptions that would materially interfere with
the use made or to be made thereof by them.
(i) The Company and its subsidiaries possess adequate certificates,
authorities or permits issued by appropriate governmental agencies or
bodies necessary to conduct the business now operated by them and have not
received any notice of proceedings relating to the revocation or
modification of any such certificate, authority or permit that, if
determined adversely to the Company or any of its subsidiaries, would
individually or in the aggregate have a material adverse effect on the
condition (financial or other), business, properties or results of
operations of the Company and its subsidiaries taken as a whole ("MATERIAL
ADVERSE EFFECT").
(j) No labor dispute with the employees of the Company or any
subsidiary exists or, to the knowledge of the Company, is imminent that
would individually or in the aggregate have a Material Adverse Effect.
(k) The Company and its subsidiaries own, possess or can acquire on
reasonable terms, adequate trademarks, trade names and other rights to
inventions, know-how, patents, copyrights, confidential information and
other intellectual property (collectively, "INTELLECTUAL PROPERTY RIGHTS")
necessary to conduct the business now operated by them, or presently
employed by them, and have not received any notice of infringement of or
conflict with asserted rights of others with respect to any intellectual
property rights that, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a Material
Adverse Effect.
(l) Except as disclosed in the Offering Document, neither the Company
nor any of its subsidiaries is in violation of any statute, rule,
regulation, decision or order of any governmental agency or body or any
court, domestic or foreign, relating to the use, disposal or release of
hazardous or toxic substances or relating to the protection or restoration
of the environment or human exposure to hazardous or toxic substances
(collectively, "ENVIRONMENTAL LAWS"), owns or operates any real property
contaminated with any substance that is subject to any environmental laws,
is liable for any off-site disposal or contamination pursuant to any
environmental laws, or is subject to any claim relating to any
environmental laws, which violation, contamination, liability or claim
would individually or in the aggregate have a Material Adverse Effect; and
the Company is not aware of any pending investigation which might lead to
such a claim.
(m) Except as disclosed in the Offering Document, there are no pending
actions, suits or proceedings against or affecting the Company, any of its
subsidiaries or any of their respective properties that, if determined
adversely to the Company or any of its subsidiaries, would individually or
in the aggregate have a Material Adverse Effect, or would materially and
adversely affect the ability of the Company to perform its obligations
under the Indenture, this Agreement or the Registration Rights Agreement,
or which are otherwise material in the context of the sale of the Offered
Securities; and no such actions, suits or proceedings are threatened or, to
the Company's knowledge, contemplated.
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(n) The financial statements included in the Offering Document present
fairly in all material respects the financial position of the Company and
its consolidated subsidiaries as of the dates shown and their results of
operations and cash flows for the periods shown, and such financial
statements have been prepared in conformity with the generally accepted
accounting principles in the United States applied on a consistent basis;
and the assumptions used in preparing the pro forma financial statements
included in the Offering Document provide a reasonable basis for presenting
the significant effects directly attributable to the transactions or events
described therein, the related pro forma adjustments give appropriate
effect to those assumptions, and the pro forma columns therein reflect the
proper application of those adjustments to the corresponding historical
financial statement amounts.
(o) Except as disclosed in the Offering Document, since the date of
the latest audited financial statements included in the Offering Document
there has been no material adverse change, nor any development or event
involving a prospective material adverse change, in the condition
(financial or other), business, properties or results of operations of the
Company and its subsidiaries taken as a whole, and, except as disclosed in
or contemplated by the Offering Document, there has been no dividend or
distribution of any kind declared, paid or made by the Company on any class
of its capital stock.
(p) The Company is not an open-end investment company, unit investment
trust or face-amount certificate company that is or is required to be
registered under Section 8 of the United States Investment Company Act of
1940 (the "INVESTMENT COMPANY ACT"); and the Company is not and, after
giving effect to the offering and sale of the Offered Securities and the
application of the proceeds thereof as described in the Offering Document,
will not be an "investment company" as defined in the Investment Company
Act.
(q) No securities of the same class (within the meaning of Rule
144A(d)(3) under the Securities Act) as the Offered Securities are listed
on any national securities exchange registered under Section 6 of the
Exchange Act or quoted in a U.S. automated inter-dealer quotation system.
(r) The offer and sale of the Offered Securities in the manner
contemplated by this Agreement will be exempt from the registration
requirements of the Securities Act by reason of Section 4(2) thereof and
Regulation S thereunder; and it is not necessary to qualify an indenture in
respect of the Offered Securities under the United States Trust Indenture
Act of 1939, as amended (the "TRUST INDENTURE ACT"). No registration under
the Securities Act of the Offered Securities is required for the sale of
the Offered Securities and such guarantees to the Initial Purchasers as
contemplated hereby or for exempt resales assuming the accuracy of the
Initial Purchaser's representations set forth in Section 4 hereof.
(s) Neither the Company, nor any of its affiliates, nor any person
acting on its or their behalf (i) has, within the six-month period prior to
the date hereof, offered or sold in the United States or to any U.S. person
(as such terms are defined in Regulation S under the Securities Act) the
Offered Securities or any security of the same class or series as the
Offered Securities or (ii) has offered or will offer or sell the Offered
Securities (A) in the United States by means of any form of general
solicitation or general advertising within the meaning of Rule 502(c) under
the Securities Act or (B) with respect to any such securities sold in
reliance on Rule 903 of Regulation S ("REGULATION S") under the Securities
Act, by means of any directed selling efforts within the meaning of Rule
902(c) of Regulation S. The Company, its affiliates and any person acting
on its or their behalf have complied and will comply with the offering
restrictions requirement of Regulation S. The Company has not entered and
will not enter into any contractual arrangement with respect to the
distribution of the Offered Securities except for this Agreement.
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(t) The entities listed on Schedule B hereto are the only
subsidiaries, direct or indirect, of the Company.
(u) On the Closing Date, the Indenture will conform in all material
respects to the requirements of the Trust Indenture Act, and the rules and
regulations of the Commission applicable to an indenture which is qualified
thereunder.
(v) On the Closing Date, the Exchange Securities (as defined in the
Registration Rights Agreement) will have been duly authorized by the
Company; and when the Exchange Securities are issued, executed and
authenticated in accordance with the terms of the Exchange Offer (as
defined in the Registration Rights Agreement) and the Indenture, the
Exchange Securities will be entitled to the benefits of the Indenture and
will be the valid and legally binding obligations of the Company,
enforceable in accordance with their terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar
laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
(w) The Registration Rights Agreement has been duly authorized by the
Company and, on the Closing Date, will have been duly executed and
delivered by the Company.
(x) Neither the Company nor any of its subsidiaries is in violation of
its respective charter or by-laws or in default in the performance of any
obligation, agreement, covenant or condition contained in any indenture,
loan agreement, mortgage, lease or other agreement or instrument that is
material to the Company and its subsidiaries, taken as a whole, to which
the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries or their respective property is bound.
(y) Except as disclosed in the Offering Document, there are no
contracts, agreements or understandings between the Company and any person
granting such person the right to require the Company to file a
registration statement under the Securities Act with respect to any
securities of the Company or to require the Company to include such
securities with the Securities registered pursuant to any Registration
Statement.
(z) Neither the Company nor any of its subsidiaries nor any agent
thereof acting on the behalf of them has taken, and none of them will take,
any action that might cause this Agreement or the issuance or sale of the
Offered Securities to violate Regulation T, Regulation U or Regulation X of
the Board of Governors of the Federal Reserve System.
(aa) No "nationally recognized statistical rating organization" as
such term is defined for purposes of Rule 436(g)(2) under the Securities
Act (i) has imposed (or has informed the Company that it is considering
imposing) any condition (financial or otherwise) on the Company's retaining
any rating assigned to the Company, any securities of the Company or (ii)
has indicated to the Company that it is considering (a) the downgrading,
suspension, or withdrawal of, or any review for a possible change that does
not indicate the direction of the possible change in, any rating so
assigned or (b) any change in the outlook for any rating of the Company or
any securities of the Company.
(bb) No form of general solicitation or general advertising (as
defined in Regulation D under the Securities Act) was used by the Company
or any of its respective representatives (other than the Initial
Purchasers, as to whom the Company make no representation) in connection
with the offer and sale of the Offered Securities contemplated hereby,
including, but not limited to, articles, notices or other communications
published in any newspaper, magazine, or similar medium or broadcast over
television or radio, or any seminar or meeting whose attendees have
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been invited by any general solicitation or general advertising. No
securities of the same class as the Offered Securities have been issued and
sold by the Company within the six-month period immediately prior to the
date hereof.
(cc) None of the Company nor any of its affiliates or any person
acting on its or their behalf (other than the Initial Purchasers, as to
whom the Company make no representation) has engaged or will engage in any
directed selling efforts within the meaning of Regulation S with respect to
the Offered Securities.
(dd) The Offered Securities offered and sold in reliance on Regulation
S have been and will be offered and sold only in offshore transactions.
(ee) The sale of the Offered Securities pursuant to Regulation S is
not part of a plan or scheme to evade the registration provisions of the
Securities Act.
3. Purchase, Sale and Delivery of Offered Securities. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the Initial
Purchasers, and the Initial Purchasers agree, severally and not jointly, to
purchase from the Company, at a purchase price of 95.941% of the principal
amount thereof plus accrued interest from November 30, 2005 to the Closing Date
(as hereinafter defined), the respective principal amounts of Securities set
forth opposite the names of the several Initial Purchasers in Schedule A hereto.
The Company will deliver against payment of the purchase price the Offered
Securities in the form of one or more permanent global Securities in definitive
form (the "GLOBAL SECURITIES") deposited with the Trustee as custodian for The
Depository Trust Company ("DTC") and registered in the name of Cede & Co., as
nominee for DTC. Interests in any permanent global Securities will be held only
in book-entry form through DTC, except in the limited circumstances described in
the Offering Document. Payment for the Offered Securities shall be made by the
Initial Purchasers in Federal (same day) funds by official check or checks or
wire transfer to an account at a bank acceptable to CSFB drawn to the order of
the Company at the office of Cravath, Swaine & Xxxxx LLP, Worldwide Plaza, 000
Xxxxxx Xxxxxx, Xxx Xxxx, X.X. 00000 at 9:00 A.M. (New York time), on November
30, 2005, or at such other time not later than seven full business days
thereafter as CSFB and the Company determine, such time being herein referred to
as the "CLOSING DATE", against delivery to the Trustee as custodian for DTC of
the Global Securities representing all of the Offered Securities. The Global
Securities will be made available for checking at the above office of Cravath,
Swaine & Xxxxx LLP at least 24 hours prior to the Closing Date.
4. Representations by Initial Purchasers; Resale by Initial Purchasers. (a)
Each Initial Purchaser severally represents and warrants to the Company that it
is an "accredited investor" within the meaning of Regulation D under the
Securities Act.
(b) Each Initial Purchaser severally acknowledges that the Offered
Securities have not been registered under the Securities Act and may not be
offered or sold within the United States or to, or for the account or
benefit of, U.S. persons except in accordance with Regulation S or pursuant
to an exemption from the registration requirements of the Securities Act.
Each Initial Purchaser severally represents and agrees that it has offered
and sold the Offered Securities, and will offer and sell the Offered
Securities (i) as part of its distribution at any time and (ii) otherwise
until 40 days after the later of the commencement of the offering and the
Closing Date, only in accordance with Rule 903 or Rule 144A under the
Securities Act ("RULE 144A"). Accordingly, neither such Initial Purchaser
nor its affiliates, nor any persons acting on its or their behalf, have
engaged or will engage in any directed selling efforts with respect to the
Offered Securities, and such Initial Purchaser, its affiliates and all
persons acting on its or their behalf have complied and will comply with
the offering restrictions requirement of Regulation S. Each Initial
Purchaser
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severally agrees that, at or prior to confirmation of sale of the Offered
Securities, other than a sale pursuant to Rule 144A, such Initial Purchaser
will have sent to each distributor, dealer or person receiving a selling
concession, fee or other remuneration that purchases the Offered Securities
from it during the restricted period a confirmation or notice to
substantially the following effect:
"The Securities covered hereby have not been registered under the U.S.
Securities Act of 1933 (the "Securities Act") and may not be offered
or sold within the United States or to, or for the account or benefit
of, U.S. persons (i) as part of their distribution at any time or (ii)
otherwise until 40 days after the later of the date of the
commencement of the offering and the closing date, except in either
case in accordance with Regulation S (or Rule 144A if available) under
the Securities Act. Terms used above have the meanings given to them
by Regulation S."
Terms used in this subsection (b) have the meanings given to them by
Regulation S.
(c) Each Initial Purchaser severally agrees that it and each of its
affiliates has not entered and will not enter into any contractual
arrangement with respect to the distribution of the Offered Securities
except for any such arrangements with the other Initial Purchasers or
affiliates of the other Initial Purchasers or with the prior written
consent of the Company.
(d) Each Initial Purchaser severally agrees that it and each of its
affiliates will not offer or sell the Offered Securities in the United
States by means of any form of general solicitation or general advertising
within the meaning of Rule 502(c) under the Securities Act, including, but
not limited to (i) any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or
broadcast over television or radio, or (ii) any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising. Each Initial Purchaser severally agrees, with respect to
resales made in reliance on Rule 144A of any of the Offered Securities, to
deliver either with the confirmation of such resale or otherwise prior to
settlement of such resale a notice to the effect that the resale of such
Offered Securities has been made in reliance upon the exemption from the
registration requirements of the Securities Act provided by Rule 144A.
(e) Each of the Initial Purchasers severally represents and agrees
that (i) it has not offered or sold and prior to the expiry of a period of
six months from the closing date, will not offer or sell any Offered
Securities to persons in the United Kingdom except to persons whose
ordinary activities involve them in acquiring, holding, managing or
disposing of investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances which have not resulted and will
not result in an offer to the public in the United Kingdom within the
meaning of the Public Offers of Securities Regulations 1995; (ii) it has
only communicated or caused to be communicated and will only communicate or
cause to be communicated any invitation or inducement to engage in
investment activity (within the meaning of section 21 of the Financial
Services and Markets Act 2000 (the "FSMA")) received by it in connection
with the issue or sale of any Offered Securities in circumstances in which
section 21(1) of the FSMA does not apply to the Issuer; and (iii) it has
complied and will comply with all applicable provisions of the FSMA with
respect to anything done by it in relation to the Offered Securities in,
from or otherwise involving the United Kingdom
5. Certain Agreements of the Company. The Company agrees with the several
Initial Purchasers that:
(a) The Company will advise CSFB promptly of any proposal to amend or
supplement the Offering Document and will not effect such amendment or
supplementation without CSFB's
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consent. If, at any time prior to the completion of the resale of the
Offered Securities by the Initial Purchasers, any event occurs as a result
of which the Offering Document as then amended or supplemented would
include an untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, the
Company promptly will notify the Initial Purchasers of such event and
promptly will prepare, at its own expense, an amendment or supplement which
will correct such statement or omission. Neither CSFB's consent to, nor the
Initial Purchasers' delivery to offerees or investors of, any such
amendment or supplement shall constitute a waiver of any of the conditions
set forth in Section 6.
(b) The Company will furnish to the Initial Purchasers copies of any
preliminary offering circular, the Offering Document and all amendments and
supplements to such documents, in each case as soon as available and in
such quantities as the Initial Purchasers reasonably request. The Company
will promptly furnish or cause to be furnished to the Initial Purchasers
and, upon request of holders and prospective purchasers of the Offered
Securities, to such holders and purchasers, copies of the information
required to be delivered to holders and prospective purchasers of the
Offered Securities pursuant to Rule 144A(d)(4) under the Securities Act (or
any successor provision thereto) in order to permit compliance with Rule
144A in connection with resales by such holders of the Offered Securities.
The Company will pay the expenses of printing and distributing to the
Initial Purchasers all such documents.
(c) The Company will use reasonable best efforts to permit the
qualification of the Offered Securities for sale and the determination of
their eligibility for investment under the laws of such jurisdictions in
the United States and Canada as CSFB designates and to continue such
qualifications in effect so long as required for the resale of the Offered
Securities by the Initial Purchasers, provided that the Company will not be
required to qualify as a foreign corporation or to file a general consent
to service of process in any such state.
(d) During the period of three years hereafter, the Company will
furnish to the Initial Purchasers, as soon as practicable after the end of
each fiscal year, a copy of its annual report to stockholders for such
year; and the Company will furnish to the Initial Purchasers (i) as soon as
available, a copy of each report, notice or communication sent to
securityholders or, if applicable, filed with foreign regulators or
securities exchanges, and (ii) from time to time, such other information
concerning the Company as CSFB may reasonably request.
(e) During the period of two years after the Closing Date, the Company
will, upon request, furnish to the Initial Purchasers and any holder of
Offered Securities a copy of the restrictions on transfer applicable to the
Offered Securities.
(f) During the period of two years after Closing Date, the Company
will not, and will not permit any of its affiliates (as defined in Rule 144
under the Securities Act) to, resell any of the Offered Securities that
have been reacquired by any of them.
(g) During the period of two years after the Closing Date, the Company
will not be or become, an open-end investment company, unit investment
trust or face-amount certificate company that is or is required to be
registered under Section 8 of the Investment Company Act.
(h) The Company will pay all expenses incidental to the performance of
its obligations under this Agreement, the Indenture and the Registration
Rights Agreement, including (i) the fees and expenses of the Trustee and
its professional advisers; (ii) all expenses in connection with the
execution, issue, authentication, packaging and initial delivery of the
Offered Securities and, as applicable, the Exchange Securities (as defined
in the Registration Rights Agreement), the preparation
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and printing of this Agreement, the Registration Rights Agreement, the
Offered Securities, the Indenture, the Offering Document and amendments and
supplements thereto, and any other document relating to the issuance,
offer, sale and delivery of the Offered Securities and as applicable, the
Exchange Securities; (iii) the cost of qualifying the Offered Securities
for trading in The PORTAL (SM) Market ("PORTAL") and any expenses
incidental thereto; (iv) the reasonable cost of any advertising approved by
the Company in connection with the issue of the Offered Securities (v) for
any reasonable expenses (including fees and disbursements of counsel)
incurred in connection with qualification of the Offered Securities or the
Exchange Securities for sale under the laws of such jurisdictions in the
United States and Canada as CSFB designates and the printing of memoranda
relating thereto, (vi) for any fees charged by investment rating agencies
for the rating of the Securities or the Exchange Securities, and (vii) for
reasonable expenses incurred in distributing preliminary offering circulars
and the Offering Document (including any amendments and supplements
thereto) to the Initial Purchasers. The Company will also pay or reimburse
the Initial Purchasers (to the extent incurred by them) for all reasonable
travel expenses of the Initial Purchasers and the Company's officers and
employees and any other expenses of the Initial Purchasers and the Company
in connection with attending or hosting meetings with prospective
purchasers of the Offered Securities from the Initial Purchasers.
(i) In connection with the offering, until CSFB shall have notified
the Company and the other Initial Purchasers of the completion of the
resale of the Offered Securities, neither the Company nor any of its
affiliates has or will, either alone or with one or more other persons, bid
for or purchase for any account in which it or any of its affiliates has a
beneficial interest any Offered Securities or attempt to induce any person
to purchase any Offered Securities; and neither it nor any of its
affiliates will make bids or purchases for the purpose of creating actual,
or apparent, active trading in, or of raising the price of, the Offered
Securities.
(j) For a period of 180 days after the date of the initial offering of
the Offered Securities by the Initial Purchasers, the Company will not
offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, or file with the Commission a registration statement under the
Securities Act relating to, any United States dollar-denominated debt
securities issued or guaranteed by the Company and having a maturity of
more than one year from the date of issue, or publicly disclose the
intention to make any such offer, sale, pledge, disposition or filing,
without the prior written consent of CSFB. The Company will not at any time
offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, any securities under circumstances where such offer, sale,
pledge, contract or disposition would cause the exemption afforded by
Section 4(2) of the Securities Act or the safe harbor of Regulation S
thereunder to cease to be applicable to the offer and sale of the Offered
Securities.
(k) The Company will use reasonable best efforts to permit the Offered
Securities admitted to trading in PORTAL.
6. Conditions of the Obligations of the Initial Purchasers. The obligations
of the several Initial Purchasers to purchase and pay for the Offered Securities
will be subject to the accuracy of me representations and warranties on the part
of the Company herein, to the accuracy of the statements of officers of the
Company made pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder and to the following additional conditions
precedent:
(a) The Initial Purchasers shall have received a letter dated the date
of this Agreement, from PricewaterhouseCoopers LLP in form and substance
reasonably satisfactory to the Initial Purchasers and
PricewaterhouseCoopers LLP concerning the financial information with
respect to the Company set forth in the Offering Document
9
(b) Subsequent to the execution and delivery of this Agreement, there
shall not have occurred (i) any change, or any development or event
involving a prospective change, in the condition (financial or other),
business, properties or results of operations of the Company and its
subsidiaries taken as one enterprise which, in the judgment of CSFB, is
material and adverse and makes it impractical or inadvisable to proceed
with completion of the offering or the sale of and payment for the Offered
Securities; (ii) any downgrading in the rating of any debt securities of
the Company by any "nationally recognized statistical rating organization"
(as defined for purposes of Rule 436(g) under the Securities Act), or any
public announcement that any such organization has under surveillance or
review its rating of any debt securities of the Company (other than an
announcement with positive implications of a possible upgrading, and no
implication of a possible downgrading, of such rating) or any announcement
that the Company has been placed on negative outlook; (iii) any change in
U.S. or international financial, political or economic conditions or
currency exchange rates or exchange controls as would, in the judgment of
CSFB, be likely to prejudice materially the success of the proposed issue,
sale or distribution of the Offered Securities, whether in the primary
market or in respect of dealings in the secondary market, (iv) any material
suspension or material limitation of trading in securities generally on the
New York Stock Exchange, or any setting of minimum prices for trading on
such exchange; (v) or any suspension of trading of any securities of the
Company on any exchange or in the over-the-counter market; (vi) any banking
moratorium declared by U.S. Federal or New York authorities; (vii) any
major disruption of settlements of securities or clearance services in the
United States or (viii) any attack on, outbreak or escalation of
hostilities or act of terrorism involving the United States, any
declaration of war by Congress or any other national or international
calamity or emergency if, in the judgment of CSFB, the effect of any such
attack, outbreak, escalation, act, declaration, calamity or emergency makes
it impractical or inadvisable to proceed with completion of the offering or
sale of and payment for the Offered Securities.
(c) The Initial Purchasers shall have received an opinion, dated the
Closing Date, of Xxxxxxxx & Xxxxx LLP, counsel for the Company, reasonably
acceptable to Cravath, Swaine & Xxxxx LLP and the Initial Purchasers,
substantially in the Form of Exhibit A attached hereto.
(d) The Initial Purchasers shall have received an opinion, dated the
Closing Date, of (i) Xxxxxxx Xxxxxx & Green, P.C., special Georgia counsel
for the Company, substantially in the form of Exhibit X-x hereto and (ii)
Xxxxx Xxxxx, Senior Vice President and General Counsel of the Company,
substantially in the form of Exhibit B-2 hereto.
(e) The Initial Purchasers shall have received from Cravath, Swaine &
Xxxxx LLP, counsel for the Initial Purchasers, such opinion or opinions,
dated the Closing Date, with respect to the incorporation of the Company,
the validity of the Offered Securities, the Offering Circular, the
exemption from registration for the offer and sale of the Offered
Securities by the Company to the several Initial Purchasers and the resales
by the several Initial Purchasers as contemplated hereby and other related
matters as CSFB may require, and the Company shall have furnished to such
counsel such documents as they request for the purpose of enabling them to
pass upon such matters. In rendering such opinion, Cravath, Swaine & Xxxxx
LLP may rely as to the incorporation of the Company and all other matters
governed by Georgia law upon the opinion of Xxxxxxxxxx Xxxxxxxx LLP
referred to above.
(f) (i) The Initial Purchasers shall have received a certificate dated
the Closing Date, of the President or any Vice President and a principal
financial or accounting officer of the Company in which such officers, to
the best of their knowledge after reasonable investigation, shall state
that the representations and warranties of the Company in this Agreement
are true and correct, that the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied hereunder
at or prior to the Closing Date, and that, subsequent to the date of the
most
10
recent financial statements in the Offering Document there has been no
material adverse change, nor any development or event involving a
prospective material adverse change, in the condition (financial or other),
business, properties or results of operations of the Company and its
subsidiaries taken as a whole except as set forth in the Offering Document
or as described in such certificate.
(ii) The Initial Purchasers shall have received a certificate
dated the Closing Date, of the Chief Financial Officer of the Company
substantially in the form of Exhibit C hereto.
(g) The Initial Purchasers shall have received a letter dated the
Closing Date, of PricewaterhouseCoopers LLP which meets the requirements of
subsection (a) of this Section, except that the specified date referred to
in such subsection will be a date not more than three days prior to the
Closing Date for the purposes of this subsection.
The Company will furnish the Initial Purchasers with such conformed copies
of such opinions, certificates, letters and documents as the Initial Purchasers
reasonably request. CSFB may in its sole discretion waive compliance with any
conditions to the obligations of the Initial Purchasers hereunder, whether in
respect of the Closing Date or otherwise.
7. Indemnification and Contribution. (a) The Company will indemnify and
hold harmless each Initial Purchaser, its officers, partners, members, directors
and its affiliates and each person, if any, who controls such Initial Purchaser
within the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act, against any losses, claims, damages or liabilities, joint or
several, to which such Initial Purchaser may become subject, under the
Securities Act or the Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the Offering Document, or any amendment or supplement thereto, or
any related preliminary offering circular or arise out of or are based upon the
omission or alleged omission to state therein a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, including any losses, claims, damages or
liabilities arising out of or based upon the Company's failure to perform its
obligations under Section 5(a) of this Agreement, and will reimburse each
Initial Purchaser for any legal or other expenses reasonably incurred by such
Initial Purchaser in connection with investigating or defending any such loss,
claim, damage, liability or action as such expenses are incurred; provided,
however, that the Company will not be liable in any such case to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement in or omission or alleged omission
from any of such documents in reliance upon and in conformity with written
information furnished to the Company by any Initial Purchaser through CSFB
specifically for use therein, it being understood and agreed that the only such
information consists of the information described as such in subsection (b)
below; and provided, further, that with respect to any untrue statement or
alleged untrue statement in or omission or alleged omission from any preliminary
offering circular, the indemnity agreement contained in this subsection (a)
shall not inure to the benefit of any Initial Purchaser that sold the Offered
Securities concerned to the person asserting any such losses, claims, damages or
liabilities, to the extent that such sale was an initial resale by such Initial
Purchaser and any such loss, claim, damage or liability of such Initial
Purchaser results from the fact that there was not sent or given to such person,
at or prior to the written confirmation of the sale of such Offered Securities
to such person, a copy of the Offering Document if the Company had previously
furnished copies thereof to such Initial Purchaser.
(b) Each Initial Purchaser will severally and not jointly indemnify
and hold harmless each of the Company, its directors and officers and each
person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20(a) of the Exchange Act, against any
losses, claims, damages or liabilities to which the Company may become
subject, under
11
the Securities Act or the Exchange Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Offering Document, or any
amendment or supplement thereto, or any related preliminary offering
circular, or arise out of or are based upon the omission or the alleged
omission to state therein a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by such Initial Purchaser through CSFB
specifically for use therein, and will reimburse any legal or other
expenses reasonably incurred by the Company in connection with
investigating or defending any such loss, claim, damage, liability or
action as such expenses are incurred, it being understood and agreed that
the only such information furnished by any Initial Purchaser consists of
the information in the first sentence of paragraph three, the third
sentence of paragraph eight and paragraphs ten, eleven and twelve of the
Offering Document, in each case, under the caption "Plan of Distribution";
provided, however, that the Initial Purchasers shall not be liable for any
losses, claims, damages or liabilities arising out of or based upon the
Company's failure to perform its obligations under Section 5(a) of this
Agreement.
(c) Promptly after receipt by an indemnified party under this Section
of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party
under subsection (a) or (b) above, notify the indemnifying party of the
commencement thereof; but the failure to notify the indemnifying party
shall not relieve it from any liability that it may have under subsection
(a) or (b) above except to the extent that it has been materially
prejudiced (through the forfeiture of substantive rights or defenses) by
such failure; and provided further that the failure to notify the
indemnifying party shall not relieve it from any liability that it may have
to an indemnified party otherwise than under subsection (a) or (b) above.
In case any such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the
extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party),
and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party under this Section for any legal or
other expenses subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation. It is understood that the indemnifying party shall not, in
respect of the legal expenses of any indemnified party in connection with
any proceeding or related proceedings in the same jurisdiction, be liable
for the reasonable fees and expenses of more than one separate firm of
legal counsel (in addition to any local counsel) for all such indemnified
parties and that all such fees and expenses shall be reimbursed as they are
incurred. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
action in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified
party unless such settlement includes (i) an unconditional release of such
indemnified party from all liability on any claims that are the subject
matter of such action and (ii) does not include a statement as to or an
admission of fault, culpability or failure to act by or on behalf of any
indemnified party.
(d) If the indemnification provided for in this Section is unavailable
or insufficient to hold harmless an indemnified party under subsection (a)
or (b) above, then each indemnifying party shall contribute to the amount
paid or payable by such indemnified party as a result of the losses,
claims, damages or liabilities referred to in subsection (a) or (b) above
(i) in such
12
proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand and the Initial Purchasers on the other from
the offering of the Offered Securities or (ii) if the allocation provided
by clause (i) above is not permitted by applicable law, in such proportion
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company on the one hand
and the Initial Purchasers on the other in connection with the statements
or omissions which resulted in such losses, claims, damages or liabilities
as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the Initial Purchasers
on the other shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the
Company bear to the total discounts, fees and commissions received by the
Initial Purchasers from the Company under this Agreement The relative fault
shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company or the Initial Purchasers and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
untrue statement or omission. The amount paid by an indemnified party as a
result of the losses, claims, damages or liabilities referred to in the
first sentence of this subsection (d) shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any action or claim which is the
subject of this subsection (d). Notwithstanding the provisions of this
subsection (d), no Initial Purchaser shall be required to contribute any
amount in excess of the amount by which the total discounts, fees and
commissions received by such Initial Purchaser exceeds the amount of any
damages which such Initial Purchaser has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. The Initial Purchasers' obligations in this subsection (d) to
contribute are several in proportion to their respective purchase
obligations and not joint.
(e) The obligations of the Company under this Section shall be in
addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who
controls any Initial Purchaser within the meaning of the Securities Act or
the Exchange Act; and the obligations of the Initial Purchasers under this
Section shall be in addition to any liability which the respective Initial
Purchasers may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls the Company within the
meaning of the Securities Act or the Exchange Act.
8. Default of Initial Purchasers. If any Initial Purchaser or Initial
Purchasers default in their obligations to purchase Offered Securities hereunder
and the aggregate principal amount of Offered Securities that such defaulting
Initial Purchaser or Initial Purchasers agreed but failed to purchase does not
exceed 10% of the total principal amount of Offered Securities, CSFB may make
arrangements satisfactory to the Company for the purchase of such Offered
Securities by other persons, including any of the Initial Purchasers, but if no
such arrangements are made by the Closing Date, the non-defaulting Initial
Purchasers shall be obligated severally, in proportion to their respective
commitments hereunder, to purchase the Offered Securities that such defaulting
Initial Purchasers agreed but failed to purchase. If any Initial Purchaser or
Initial Purchasers so default and the aggregate principal amount of Offered
Securities with respect to which such default or defaults occur exceeds 10% of
the total principal amount of Offered Securities and arrangements satisfactory
to CSFB and The Company for the purchase of such Offered Securities by other
persons are not made within 36 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Initial Purchaser
or the Company, except as provided in Section 9. As used in this Agreement, the
term "Initial Purchaser" includes any person substituted for an Initial
Purchaser under this Section. Nothing herein will relieve a defaulting Initial
Purchaser from liability for its default.
13
9. Survival of Certain Representations and Obligations. The respective
indemnities, agreements, representations, warranties and other statements of the
Company or their respective officers and of the several Initial Purchasers set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation, or statement as to the results thereof,
made by or on behalf of any Initial Purchaser, the Company or any of their
respective representatives, officers or directors or any controlling person, and
will survive delivery of and payment for the Offered Securities. If this
Agreement is terminated pursuant to Section 8 or if for any reason the purchase
of the Offered Securities by the Initial Purchasers is not consummated, the
Company shall remain responsible for the expenses to be paid or reimbursed by it
pursuant to Section 5 and the respective obligations of the Company and the
Initial Purchasers pursuant to Section 7 shall remain in effect If the purchase
of the Offered Securities by the Initial Purchasers is not consummated for any
reason other than solely because of the termination of this Agreement pursuant
to Section 8 or the occurrence of any event specified in clause (iii), (iv),
(vi), (vii) or (viii) of Section 6(b), the Company will reimburse the Initial
Purchasers for all out-of-pocket expenses (including fees and disbursements of
counsel) reasonably incurred by them in connection with the offering of the
Offered Securities.
10. Notices. All communications hereunder will be in writing and, if sent
to the Initial Purchasers, will be mailed, delivered or telegraphed and
confirmed to the Initial Purchasers, c/o Credit Suisse First Boston LLC, Eleven
Madison Avenue, New York, N.Y. 10010-3629, Attention: Transactions Advisory
Group, or, if sent to the Company, will be mailed, delivered or telegraphed and
confirmed to it at Network Communications, Inc., 0000 Xxxxxxxx Xxxxxxx,
Xxxxxxxxxxxxx, G.A. 30043, Attention: Xxxxx Xxxxx; provided, however, that any
notice to an Initial Purchaser pursuant to Section 7 will be mailed, delivered
or telegraphed and confirmed to such Initial Purchaser.
11. Successors. This Agreement will inure to the benefit of and be binding
upon the parties hereto and their respective successors and the controlling
persons referred to in Section 7, and no other person will have any right or
obligation hereunder, except that holders of Offered Securities shall be
entitled to enforce the agreements for their benefit contained in the second and
third sentences of Section 5(b) hereof against the Company as if such holders
were parties thereto.
12. Representation of Initial Purchasers. You will act for the several
Initial Purchasers in connection with this purchase, and any action under this
Agreement taken by you by CSFB will be binding upon all the Initial Purchasers.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute one and the same Agreement.
14
14. Absence of Fiduciary Relationship. The Company acknowledges and agrees
that:
(a) The Initial Purchasers have been retained solely to act as initial
purchasers in connection with the sale of the Offered Securities and that
no fiduciary, advisory or agency relationship between the Company and the
Initial Purchasers has been created in respect of any of the transactions
contemplated by this Agreement, irrespective of whether the Initial
Purchasers have advised or are advising the Company on other matters;
(b) The price of the Offered Securities set forth in this Agreement
was established by the Company following discussions and arms-length
negotiations with the Initial Purchasers and the Company is capable of
evaluating and understanding and understands and accepts the terms, risks
and conditions of the transactions contemplated by this Agreement;
(c) It has been advised that the Initial Purchasers and their
affiliates are engaged in a broad range of transactions which may involve
interests that differ from those of the Company and that the Initial
Purchasers have no obligation to disclose such interests and transactions
to the Company by virtue of any fiduciary, advisory or agency relationship;
and
(d) It waives, to the fullest extent permitted by law, any claims it
may have against the Initial Purchasers for breach of fiduciary duty or
alleged breach of fiduciary duty and agrees that the Initial Purchasers
shall have no liability (whether direct or indirect) to the Company in
respect of such a fiduciary duty claim or to any person asserting a
fiduciary duty claim on behalf of or in right of the Company, including
stockholders, employees or creditors of the Company.
15. APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS.
The Company hereby submits to the non-exclusive jurisdiction of the Federal
and state courts in the Borough of Manhattan in The City of New York in any suit
or proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby.
If the foregoing is in accordance with the Initial Purchasers' understanding of
our agreement, kindly sign and return to the Company one of the counterparts
hereof, whereupon it will become a binding agreement between the Company and the
several Initial Purchasers in accordance with its terms.
Very truly yours,
NETWORK COMMUNICATIONS, INC.
By /s/ Xxxxxx Xxxxxx
-------------------------------------
Name: Xxxxxx Xxxxxx
Title: Chief Financial Officer
The foregoing Purchase Agreement is hereby confirmed and accepted as of the date
first above written.
CREDIT SUISSE FIRST BOSTON LLC
TD SECURITIES (USA) LLC
By: CREDIT SUISSE FIRST BOSTON LLC
By /s/ Xxxxxx Xxxxx
----------------------------------
Name: Xxxxxx Xxxxx
Title: Managing Director
16
SCHEDULE A
PRINCIPAL AMOUNT OF
INITIAL PURCHASER OFFERED SECURITIES
----------------- -------------------
Credit Suisse First Boston LLC....... $140,000,000
TID Securities (USA) LLC.............. 35,000,000
------------
TOTAL............................. $175,000,000
============
17
SCHEDULE B
SUBSIDIARIES OF THE COMPANY
Network Publications Canada, Inc.
NCID,LLC
NCID (Austin) LLC
NCID (Seattle), LLC
NCID (Vegas), LLC
NCID (West Palm), LLC
18
EXHIBIT A
FORM OF K&E OPINION
19
K&E DRAFT DATED 11/23/05
November 30, 2005
CREDIT SUISSE FIRST BOSTON LLC,
TD SECURITIES (USA) LLC,
c/o Credit Suisse First Boston LLC
Eleven Madison Avenue,
New York, N.Y. 10010-3629
Ladies and Gentlemen:
We have acted as special legal counsel to Network Communications, Inc., a
Georgia corporation (the "Company"). This letter is being delivered in response
to the requirement in Section 6(c) of the Purchase Agreement, dated November 22,
2005 (the "Purchase Agreement"), among Credit Suisse First Boston LLC and TD
Securities (USA) LLC, (the "Initial Purchasers") and the Company relating to the
sale by the Company of $175,000,000 in aggregate principal amount of the
Company's Senior Notes due 2013 (the "Securities") to be issued under the
Indenture dated as of November 30, 2005 (the "Indenture") between the Company
and Xxxxx Fargo Bank, N.A., as trustee (the "Trustee").
The Purchase Agreement, the Indenture, the Registration Rights Agreement
(as defined below) and the Securities are collectively referred to herein as the
"Transaction Documents." The Senior Notes due 2013 contemplated by the
Registration Rights Agreement to be offered to holders of Securities in exchange
for the Securities are referred to herein as the "Exchange Securities." The
offer to exchange the Securities for the Exchange Securities as contemplated by
the Registration Rights Agreement is referred to herein as the "Exchange Offer."
The agreements listed on Schedule A hereto are collectively referred to herein
as the "Specified Contracts" which term does not include any agreements attached
as exhibits, schedules or attachments to or are otherwise referred to in
agreements listed on Schedule A, but are not directly listed on Schedule A.
In connection with the preparation of this letter, we have among other
things read:
(a) the Offering Circular, dated November 22, 2005, relating to the
offering and sale of the Securities (the "Offering Circular");
(b) an executed copy of the Purchase Agreement;
(c) an executed copy of the Indenture;
(d) an executed copy of the Registration Rights Agreement, dated as of
November 30, 2005 between the Company and the Initial Purchasers (the
Registration Rights Agreement");
(e) a specimen certificate of the Securities;
(f) a copy of the resolutions adopted by the Board of Directors of the
Company dated November 22, 2005;
(g) copies of all certificates and other documents delivered in connection
with the sale of the Securities on the date hereof and the
consummation of the other transactions contemplated by the Purchase
Agreement;
(h) copies of the Specified Contracts; and
(i) such other records, certificates and documents as we have deemed
necessary or appropriate in order to deliver the opinions set forth
herein.
Subject to the assumptions, qualifications, exclusions and other
limitations which are identified in this letter, we advise you that:
1. Assuming the due authorization, execution and delivery thereof by the
Company and the Initial Purchasers, the Registration Rights Agreement is a
valid and binding obligation of the Company, enforceable in accordance with
its terms.
2. Assuming the due authorization, execution and delivery thereof by the
Company and the Trustee, the Indenture is a valid and binding obligation of
the Company, enforceable in accordance with its terms.
3. Assuming that the Company's Board of Directors has adopted by requisite
vote the resolutions necessary to authorize the Company's execution,
delivery and performance of the Transaction Documents to which the Company
is a party, when the Securities are paid for by the Initial Purchasers in
accordance with the terms of the Purchase Agreement (assuming the due
authentication and delivery of the Securities by the Trustee in accordance
with the Indenture), the Securities will constitute valid and binding
obligations of the Company, enforceable against the Company in accordance
with their terms and entitled to the benefits of the Indenture.
4. Assuming that the Company's Board of Directors has adopted by requisite
vote the resolutions necessary to authorize the Exchange Securities, when
the Exchange Securities have been duly executed and delivered by the
Company in accordance with the terms of the Registration Rights Agreement,
the Exchange Offer and the Indenture (assuming the
due authentication and delivery of the Exchange Securities by the Trustee
in accordance with the Indenture), the Exchange Securities will constitute
the valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms and entitled to the benefits of the
Indenture.
5. The Securities and the Indenture conform in all material respects to the
descriptions thereof contained in the Offering Circular under the heading
"Description of Notes."
6. The statements in the Offering Circular under the heading "Certain Material
United States Federal Income Tax Considerations" to the extent that such
information summarizes laws, governmental rules or regulations, fairly
summarizes in all material respects, such laws, rules and regulations.
7. No consent, approval, authorization or order of, or filing with, any court
or governmental authority is required for the issuance and sale by the
Company of the Securities to the Initial Purchasers or the consummation by
the Company of the other transactions contemplated by the Transaction
Documents, except (i) such as may be required under the securities or blue
sky laws of the various states (and the rules and regulations thereunder),
as to which we express no opinion in this paragraph and (ii) solely with
respect to the issuance of the Exchange Securities, such as may be required
under the Securities Act of 1933, as amended (the "Securities Act"), the
Exchange Act of 1934, as amended (the "Exchange Act"), the Trust Indenture
Act of 1939, as amended (the "TIA"), as to which we express no opinion in
this paragraph.
8. The execution, delivery and performance by the Company of the Transaction
Documents to which it is a party and the consummation of the transactions
contemplated thereby (including, without limitation, the issuance and sale
of the Securities to the Initial Purchasers) do not conflict with or
constitute or result in a breach or default under (or an event which with
notice or the passage of time or both would constitute a default under) or
violation of (a) any Applicable Law (as defined below) or (b) the terms and
provisions of any Specified Contract (provided that we express no opinion
with respect to any financial test or the triggering of a cross-default
provision in any Specified Contract as a result of a default caused under
any other contract), except for, [(i)] in the case of clause (b) above, any
such conflict, breach, violation, default or event which would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the general affairs, management, business, condition
(financial or other), properties, prospects or results of operations of the
Company, taken as a whole [and (ii) any such conflict, breach, violation or
default which has been waived pursuant to the Waiver dated as of November
30, 2005, among Gallarus Media Holdings, Inc. and Citicorp Mezzanine III,
LP].
9. Neither the Company nor any of its subsidiaries is, nor will the Company or
any of its subsidiaries be, immediately after the sale of the Securities to
the Initial Purchasers and application of the net proceeds therefrom as
described in the Offering Circular under the caption "Use of Proceeds," an
"investment company" as such term is defined in the Investment Company Act
of 1940, as amended.
10. Assuming (i) the accuracy of the representations and warranties of the
Company and you set forth in the Purchase Agreement, (ii) the due
performance of the Company and you of the covenants and agreements set
forth in the Purchase Agreement, (iii) your compliance with the offering
and transfer procedures and restrictions described in the Offering
Circular, and (iv) the accuracy of the representations and warranties made
to you in accordance with the Purchase Agreement and the Offering Circular
by the purchasers to whom you initially resell the Securities, the offer,
sale and delivery of the Securities to you in the manner contemplated by
the Purchase Agreement and the Offering Circular and the initial resale of
the Securities by you in the manner contemplated by the Purchase Agreement
and Offering Circular do not require registration under the Securities Act,
and prior to the commencement of the Exchange Offer or the filing of a
shelf registration statement as contemplated by the Registration Rights
Agreement, the Indenture is not required to be qualified under the TIA, it
being understood that we do not express any opinion as to any subsequent
resale of any Security.
11. We have no knowledge of any legal or governmental proceeding that is
pending or threatened against the Company or any of its subsidiaries that
has caused us to conclude that such proceeding would be required to be
described by Item 103 of Regulation S-K under the Securities Act if the
issuance of the Securities were being registered under the Securities Act
but is not so described in the Offering Circular.
12. To our knowledge, after due inquiry, [except as disclosed in the Offering
Circular,] there are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the
Company to include any securities with the Exchange Securities registered
pursuant to a registration statement.
13. The Indenture conforms in all material respects to the requirements of the
Trust Indenture Act, as amended, and the rules and regulations of the
Commission applicable to an indenture which is qualified thereunder.
*********
The purpose of our professional engagement was not to establish factual
matters, and preparation of the Offering Circular involved many determinations
of a wholly or partially nonlegal character. We make no representation that we
have independently verified the
accuracy, completeness or fairness of the Offering Circular or that the actions
taken in connection with the preparation of the Offering Circular (including the
actions described in the next paragraph) were sufficient to cause the Offering
Circular to be accurate, complete or fair. We are not passing upon and do not
assume any responsibility for the accuracy, completeness or fairness of the
Offering Circular except to the extent otherwise explicitly indicated in
numbered paragraphs 5 and 6 above.
We can, however, confirm that we have participated in conferences with
representatives of the Company, representatives of the Initial Purchasers,
counsel for the Initial Purchasers and representatives of the independent
accountants for the Company during which disclosures in the Offering Circular
and related matters were discussed. In addition, we have reviewed certain
corporate records furnished to us by the Company.
Based upon our participation in the conferences and our document review
identified in the preceding paragraph, our understanding of applicable law and
the experience we have gained in our practice thereunder and relying as to
matters of fact upon the opinions and statements of officers of the Company, we
can, however, advise you that nothing has come to our attention that has caused
us to conclude that the Offering Circular, at the date it bears or on the date
of this letter, contained or contains an untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
*********
Except for the activities described in the immediately preceding section of
this letter, we have not undertaken any investigation to determine the facts
upon which the advice in this letter is based.
We have assumed for purposes of this letter: each document we have reviewed
for purposes of this letter is accurate and complete, each such document that is
an original is authentic, each such document that is a copy conforms to an
authentic original, and all signatures on each such document are genuine; that
the parties thereto, had the power, corporate or other, to enter into and
perform all obligations thereunder; that each such document was duly authorized
by all requisite action, corporate or other, and that such documents were duly
executed and delivered by each party thereto; that the Transaction Documents and
every other agreement we have examined for purposes of this letter constitutes a
valid and binding obligation of each party (other than the Company) to that
document and that each such party has satisfied all legal requirements that are
applicable to such party to the extent necessary to entitle such party to
enforce such agreement; that each party to any document is in good standing and
duly incorporated or organized under the laws of the state of its incorporation;
and that you have acted
in good faith and without notice of any fact which has caused you to reach any
conclusion contrary to any of the advice provided in this letter.
In preparing this letter we have relied without independent verification
upon: (i) information contained in certificates obtained from governmental
authorities; (ii) factual information represented to be true in the Purchase
Agreement and other documents specifically identified at the beginning of this
letter as having been read by us; (iii) factual information provided to us by
the Company or its representatives; and (iv) factual information we have
obtained from such other sources as we have deemed reasonable. We have assumed
that there has been no relevant change or development between the dates as of
which the information cited in the preceding sentence was given and the date of
this letter and that the information upon which we have relied is accurate and
does not omit disclosures necessary to prevent such information from being
misleading.
We confirm that we do not have actual knowledge that has caused us to
conclude that our reliance and assumptions cited in the two immediately
preceding paragraphs and the next paragraph are unwarranted. Whenever this
letter provides advice about (or based upon) our knowledge of any particular
information or about any information which has or has not come to our attention
such advice is based entirely on the actual knowledge at the time this letter is
delivered on the date it bears by the lawyers with Xxxxxxxx & Xxxxx LLP at that
time who spent time representing the Company in connection with the transactions
contemplated by the Offering Circular after consultation with other lawyers in
our firm who spent time representing the Company on other matters. Each opinion
(an "enforceability opinion") in this letter that any particular contract is a
valid and binding obligation or is enforceable in accordance with its terms is
subject to: (i) the effect of bankruptcy, insolvency, fraudulent conveyance and
other similar laws and judicially developed doctrines in this area such as
substantive consolidation and equitable subordination; (ii) the effect of
general principles of equity; and (iii) other commonly recognized statutory and
judicial constraints on enforceability including statutes of limitations. In
addition, we do not express any opinion as to the enforceability of any rights
to contribution or indemnification which may be violative of public policy
underlying any law, rule or regulation (including federal or state securities
law, rule or regulation). "General principles of equity" include but are not
limited to: principles limiting the availability of specific performance and
injunctive relief; principles which limit the availability of a remedy under
certain circumstances where another remedy has been elected; principles
requiring reasonableness, good faith and fair dealing in the performance and
enforcement of an agreement by the party seeking enforcement; principles which
may permit a party to cure a material failure to perform its obligations; and
principles affording equitable defenses such as waiver, laches and estoppel. It
is possible that terms in a particular contract covered by our enforceability
opinion may not prove enforceable for reasons other than those explicitly cited
in this letter should an actual enforcement action be brought, but (subject to
all the exceptions, qualifications, exclusions and other limitations contained
in this letter) such unenforceability would not in our opinion prevent the party
entitled
to enforce that contract from realizing the principal benefits purported to be
provided to that party by the terms in that contract which are covered by our
enforceability opinion.
Except to the extent otherwise explicitly indicated in numbered paragraphs
7 and 8 above, we have also assumed that the execution and delivery by the
Company of the Transaction Documents and the consummation of the transactions
contemplated thereby do not and will not violate, conflict with or constitute a
default under (i) any agreement or instrument to which the Company or its
properties are subject (other than the Specified Contracts), (ii) any law, rule
or regulation to which any Company is subject (except that we do not make the
assumption set forth in this clause (ii) with respect to Applicable Laws (as
defined below)), (iii) any judicial or regulatory order or decree of any
governmental authority or (iv) any consent, approval license, authorization or
validation of, or filing, recording or registration with any governmental
authority.
Our advice on every legal issue addressed in this letter is based
exclusively on the internal law of the State of New York, the General
Corporation Law of the State of Delaware, or the federal laws of the United
States to the extent specifically referred to herein (the "Applicable Laws"),
and represents our opinion as to how that issue would be resolved were it to be
considered by the highest court in the jurisdiction which enacted such law. We
express no opinion as to what law might be applied by any other courts to
resolve any issue addressed by our opinion and we express no opinion as to
whether any relevant difference exists between the laws upon which our opinions
are based and any other laws which may actually be applied to resolve issues
which may arise under the Transaction Documents. The manner in which any
particular issue would be treated in any actual court case would depend in part
on facts and circumstances particular to the case and would also depend on how
the court involved chose to exercise the wide discretionary authority generally
available to it. This letter is not intended to guarantee the outcome of any
legal dispute which may arise in the future.
None of the opinions or other advice contained in this letter considers or
covers: (i) any state securities (or "blue sky") laws or regulations, (ii) any
financial statements or supporting schedules (or any notes to any such
statements or schedules) or other financial information set forth in (or omitted
from) the Offering Circular or (iii) any rules and regulations of the National
Association of Securities Dealers, Inc. This letter does not cover any other
laws, statutes, governmental rules or regulations or decisions which in our
experience are not usually considered for or covered by opinions like those
contained in this letter or are not generally applicable to transactions of the
kind covered by the Purchase, Agreement.
This letter speaks as of the time of its delivery on the date it bears.
We do not assume any obligation to provide you with any subsequent opinion or
advice by reason of any fact about which we did not have knowledge at that time,
by reason of any change subsequent to that time in any law covered by any of our
opinions, or for any other reason.
You may rely upon this letter only for the purpose served by the provision
in the Purchase Agreement cited in the initial paragraph of this letter in
response to which it has been delivered. Without our written consent: (i) no
person (including any person that acquires securities from you) other than you
may rely on this letter for any purpose; (ii) this letter may not be cited or
quoted in any financial statement, prospectus, private placement memorandum or
other similar document; (iii) this letter may not be cited or quoted in any
other document or communication which might encourage reliance upon this letter
by any person or for any purpose excluded by the restrictions in this paragraph;
and (iv) copies of this letter may not be furnished to anyone for purposes of
encouraging such reliance; provided that the Trustee may rely, subject to all
assumptions and qualifications in this letter, on numbered paragraphs 1 through
4 and paragraphs 7, 8 and 10 as if it were an addressee of this letter.
Sincerely,
Xxxxxxxx & Xxxxx LLP
Schedule A
Specified Contracts
SCHEDULE A
AGREEMENT
1. [Securities Purchase and Holders Agreement, dated January 7, 2005, by and
among GMH Holding Company, Citigroup Venture Capital Equity Partners, L.P,
CVC Executive Fund LLC, CVC/SSB Employee Fund, L.P., Court Square Capital
Limited, the CVC Co-Investors identified therein and the Management
Investors identified therein.
2. Joinder to Securities Purchase and Holders Agreement, dated March 31, 2005,
between GMH Holding Company and Citicorp Mezzanine III, L.P.
3. Registration Rights Agreement, dated January 7, 2005, by and among GMH
Holding Company, Citigroup Venture Capital Equity Partners, L.P., CVC
Executive Fund LLC, CVC/SSB Employee Fund, L.P., Court Square Capital
Limited, the CVC Co-Investors identified therein and the Management
Investors identified therein.
4. Warrant Agreement, dated January 7, 2005, between Court Square Capital
Limited and GMH Holding Company.
5. Stock Purchase Warrant, dated January 7, 2005, between GMH Holding Company
and Court Square Capital Limited.
6. Note and Warrant Assignment Agreement, dated March 31, 2005, between Court
Square Capital Limited and Citicorp Mezzanine III, L.P.
7. Note Assignment Agreement, dated March 31, 2005, between Court Square
Capital Limited and CVC Capital Funding, Inc.
8. Stock Purchase Warrant, dated January 7, 2005, between GMH Holding Company
and Citicorp Mezzanine III, L.P.
9. Securities Exchange Agreement, dated December 23, 2004, by and GMH Holding
Company, Inc. and the Management Investors named therein.
1
10. Senior Subordinated Credit Agreement, dated January 7, 2005, by and among
Gallarus Media Holdings, Inc., as Borrower, and Court Square Capital
Limited, as Lender and the Guarantors signatory thereto.
11. First Amendment to Senior Subordinated Credit Agreement, dated May 2, 2005,
by and among Gallarus Media Holdings, Inc. and Citicorp Mezzanine III, L.P.
12. Employment Agreement by and between GMH Holding Company and Xxx XxXxxxxx,
dated December 23, 2004.
13. Employment Agreement by and between GMH Holding Company and Xxxxxx Xxxxxx,
dated December 23, 2004.
14. Securities Purchase Agreement, between GMH Holding Company and Xxxx Xxxxx,
dated August 10, 2005.
15. Joinder to the Securities Purchase and Holders Agreement and Registration
Rights Agreement, between GMH Holding Company and Xxxx Xxxxx, dated August
10, 2005.
16. Advisory Agreement, dated December 12, 2004, between GMH Holding Company,
GMH Acquisition Corp. and CVC Management LLC.
17. Senior Subordinated Credit Agreement, dated January 7, 2005, by and among
Network Communications, Inc., as Borrower, Court Square Capital Limited, as
Lender, and the Guarantors signatory thereto.
18. First Amendment to Senior Subordinated Credit Agreement, dated May 2, 2005,
by and among Gallarus Media Holdings, Inc., Network Communications, Inc.,
the other parties signatory thereto, as Guarantors, and CVC Capital
Funding, Inc.
19. Loan Agreement, dated as of June 24, 2004, among Network Communications,
Inc., as Borrower, Gallarus Media Holdings, Inc., as Parent, the Financial
Institutions whose names appear as Lenders on the signature pages thereof,
and Toronto Dominion (Texas), Inc., as Administrative Agent for the
Lenders, with TD Securities (USA) Inc., as Lead Arranger and Book Runner
and National City Bank, as Syndication Agent
20. Amended and Restated Loan Agreement, dated February 11, 2005, among
2
Network Communications, Inc., as Borrower, Gallarus Media Holdings, Inc.,
as Parent, General Electric Capital Corporation, National City Bank and
Toronto Dominion (Texas), LLC, as Lenders, Toronto Dominion (Texas), LLC,
as Administrative Agent for the Lenders, with TD Securities (USA) LLC, as
Lead Arranger and Book Runner.
21. Incremental Facility Note, dated May 2, 2005, by Network Communications,
Inc., as Borrower, and Toronto Dominion (Texas), LLC, as Lender.
22. Notice of Designation of Unrestricted Subsidiary from Network
Communications, Inc. to Toronto Dominion (Texas), LLC, dated March 29,
2005.
23. Subsidiary Security Agreement, between NCID (Vegas), LLC and Toronto
Dominion (Texas), LLC, dated March 28, 2005.
24. Subsidiary Pledge Agreement, dated March 28, 2005, by and among NCID
(Vegas), LLC and Toronto Dominion (Texas), LLC.
25. Copyright Security Agreement, dated March 28, 2005, by and among NCID
(Vegas), LLC and Toronto Dominion (Texas), LLC.
26. Patent Security Agreement, dated March 28, 2005, by and among NCID (Vegas),
LLC and Toronto Dominion (Texas), LLC.
27. Trademark Security Agreement, dated March 28, 2005, by and among NCID
(Vegas), LLC and Toronto Dominion (Texas), LLC.
28. Subsidiary Guaranty, dated March 28, 2005, by and among NCID (Vegas), LLC
and Toronto Dominion (Texas), LLC.
29. Subsidiary Loan Certificate of NCID (Vegas), LLC, dated March 29, 2005.
30. Subsidiary Security Agreement, between NCID (Austin), LLC and Toronto
Dominion (Texas), LLC, dated March 28, 2005.
31. Subsidiary Pledge Agreement, dated March 28, 2005, by and among NCID
3
(Austin), LLC and Toronto Dominion (Texas), LLC.
32. Copyright Security Agreement, dated March 28, 2005, by and among NCID
(Austin), LLC and Toronto Dominion (Texas), LLC.
33. Patent Security Agreement, dated March 28, 2005, by and among NCID
(Austin), LLC and Toronto Dominion (Texas), LLC.
34. Trademark Security Agreement, dated March 28, 2005, by and among NCID
(Austin), LLC and Toronto Dominion (Texas), LLC.
35. Subsidiary Guaranty, dated March 28, 2005, by and among NCID (Austin), LLC
and Toronto Dominion (Texas), LLC.
36. Subsidiary Loan Certificate of NCID (Austin), LLC, dated March 29, 2005.
37. Subsidiary Security Agreement, between NCID (Seattle), LLC and Toronto
Dominion (Texas), LLC, dated March 28, 2005.
38. Subsidiary Pledge Agreement, dated March 28, 2005, by and among NCID
(Seattle), LLC and Toronto Dominion (Texas), LLC.
39. Copyright Security Agreement, dated March 28, 2005, by and among NCID
(Seattle), LLC and Toronto Dominion (Texas), LLC.
40. Patent Security Agreement, dated March 28, 2005, by and among NCID
(Seattle), LLC and Toronto Dominion (Texas), LLC.
41. Trademark Security Agreement, dated March 28, 2005, by and among NCID
(Seattle), LLC and Toronto Dominion (Texas), LLC.
42. Subsidiary Guaranty, dated March 28, 2005, by and among NCID (Seattle), LLC
and Toronto Dominion (Texas), LLC.
43. Subsidiary Loan Certificate of NCID (Seattle), LLC, dated March 29, 2005.
4
44. Subsidiary Security Agreement, between NCID (West Palm), LLC and Toronto
Dominion (Texas), LLC, dated March 28, 2005.
45. Subsidiary Pledge Agreement, dated March 28, 2005, by and among NCID (West
Palm), LLC and Toronto Dominion (Texas), LLC.
46. Copyright Security Agreement, dated March 28, 2005, by and among NCID (West
Palm), LLC and Toronto Dominion (Texas), LLC,
47. Patent Security Agreement, dated March 28, 2005, by and among NCID (West
Palm), LLC and Toronto Dominion (Texas), LLC.
48. Trademark Security Agreement, dated March 28, 2005, by and among NCID (West
Palm), LLC and Toronto Dominion (Texas), LLC.
49. Subsidiary Guaranty, dated March 28, 2005, by and among NCID (West Palm),
LLC and Toronto Dominion (Texas), LLC.
50. Subsidiary Loan Certificate of NCID (West Palm), LLC, dated March 29,
2005.]
5
EXHIBIT X-x
FORM OF XXXXXXX XXXXXX & GREEN, P.C. OPINION
XXXXXXX XXXXXX & GREEN, P.C.
ATTORNEYS AT LAW
000 XXXX XXXXX XXXXX XXXX, XXXXX 0000
XXXXXXX, XXXXXXX 00000-0000
000.000.0000
FAX: 000.000.0000
XXXXXX.XXX
XXXXXXX XXXXXXX XXXXXXX, XX., ESQ.
TEL: 404 923.9047
FAX: 404 923.9947
XXXXXXXX@XXXXXX.XXX
November 30, 2005
Credit Suisse First Boston LLC,
TD Securities (USA) LLC,
c/o Credit Suisse First Boston LLC
Eleven Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Ladies and Gentlemen:
We have acted in a limited capacity as special counsel in Georgia
to Network Communications, Inc., a Georgia corporation (the
"Company"), in connection with the Transaction Documents referred to
below. Please be advised that we act as Georgia counsel to the Company
only on select matters and do not act as general counsel to the
Company or Gallarus Media Holdings, Inc. ("Holdings").
This letter is being delivered in response to the requirement in
Section 6(d)(ii) of the Purchase Agreement dated as of November 22,
2005 (the "Purchase Agreement"), between Credit Suisse First Boston
LLC ("CSFB"), as representative of the Initial Purchasers (as defined
in the Purchase Agreement), and the Company relating to the sale by
the Company of $175,000,000 in aggregate principal amount of the
Company's Senior Notes due 2013 (the "Securities") to be issued under
the Indenture dated as of November 30, 2005 (the "Indenture") between
the Company and Xxxxx Fargo Bank, N.A., as trustee (the "Trustee").
The Purchase Agreement, the Indenture, the Registration Rights
Agreement (as defined below) and the Securities are collectively
referred to herein as the "Transaction Documents." The Senior Notes
due 2013 contemplated by the Registration Rights Agreement to be
offered to holders of Securities in exchange for the Securities are
referred to herein as the "Exchange Securities".
Credit Suisse First Boston LLC,
TD Securities (USA) LLC,
Credit Suisse First Boston LLC
November 30, 2005
Page 2
In connection with the preparation of this letter, we have, among other
things, read:
(a) the Offering Circular, dated November 22, 2005, relating to the
offering and sale of the Securities (the "Offering Circular");
(b) the Purchase Agreement;
(c) the Indenture;
(d) the Registration Rights Agreement dated as of November 30, 2005
between the Company and CSFB, as representative of the Initial
Purchasers (the "Registration Rights Agreement");
(e) a copy of the resolutions adopted by the Board of Directors of the
Company dated November 23, 2005;
(f) a copy of the agreement identified on Schedule A (the "Specified
Contract");
(g) The Articles of Incorporation of National Real Estate Magazine
Network, Inc., as filed with the Georgia Secretary of State on July
7, 1980;
(h) Articles of Amendment dated March 8, 1982 amending the name of
National Real Estate Magazine Network, Inc. to Network Publications,
Inc.;
(i) Amendment to Articles of Incorporation dated April 3, 1992 amending
Article V of the Articles of Incorporation of Network Publications,
Inc.;
(j) Amendment to Articles of Incorporation dated September 21, 1993
amending Article V of the Articles of Incorporation of Network
Publications, Inc.;
(k) Certificate of Merger of Network Marketing Group, Inc. into Network
Publications, Inc. dated December 28, 1993;
(l) Amendment to Articles of Incorporation dated November 17, 1998
amending the name of Network Publications, Inc. to Network
Communications, Inc.;
(m) Certificate of Merger of Xxxxxx Holdings, Inc. into Network
Communications, Inc. dated June 28, 2002;
Credit Suisse First Boston LLC,
TD Securities (USA) LLC,
Credit Suisse First Boston LLC
November 30, 2005
Page 3
(n) Certificate of Merger of Gallarus Media, Inc. into Network
Communications, Inc. dated June 28, 2002;
(o) Certificate of Merger of Black's Holdings, Inc. into Network
Communications, Inc. dated September 26, 2002;
(p) Certificate of Merger of Black's Guide, Inc. into Network
Communications, Inc. dated January 3, 2003;
(q) Certificate of Merger of NCI Development Corporation into Network
Communications, Inc. dated April 1, 2004;
(r) By-Laws of Company certified as such by the Chief Executive Officer
and Secretary of Company, Xxxxxx XxXxxxxx, by Secretary's Certificate
dated the date hereof; and
(s) Company Unanimous Written Consent of Directors in Lieu of Meeting of
Board of Directors, dated as of the date hereof.
Based upon and subject to the foregoing, we express the following opinions.
1. The Company has been duly incorporated and is an existing corporation
in good standing under the laws of the State of Georgia;
2. The Indenture has been duly authorized, executed and delivered by the
Company; the Securities have been duly authorized, executed,
authenticated, issued and delivered and conform to the description
thereof contained in the Offering Circular;
3. The execution, delivery and performance of the Indenture, the Purchase
Agreement and the Registration Rights Agreement and the issuance and
sale of the Securities and compliance with the terms and provisions
thereof will not result in a breach or violation of any of the terms
and provisions of, or constitute a default under (i) the terms and
provisions of the Specified Contract; except for any such conflict,
breach, violation, default or event which would not, individually or
in the aggregate, reasonably be expected to have a material adverse
effect on the general affairs, management, business, condition
(financial or other), properties, prospects or results of operations
of the Company, taken as a whole or (ii) the charter or by-laws of the
Company, and the Company has full power and authority to authorize,
issue and sell the Securities as contemplated by the Purchase
Agreement;
4. The Purchase Agreement and the Registration Rights Agreement have each
been duly authorized, executed and delivered by the Company;
Credit Suisse First Boston LLC,
TD Securities (USA) LLC,
Credit Suisse First Boston LLC
November 30, 2005
Page 4
5. The Exchange Securities have been duly authorized by the Company; and
6. The Registration Rights Agreement has been duly authorized, executed
and delivered by the Company.
The opinions expressed above are subject to the following additional
assumptions, limitations, qualifications and exclusions.
A. In giving the opinions expressed herein, we have assumed the genuineness
of all signatures, the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents submitted to us
as certified, conformed or photostatic copies, and the authority of each person
or persons who executed any document on behalf of another person (other than the
Company).
B. Except as specifically set forth above, we express no opinion in this
letter with respect to the validity of any of the Transaction Documents or the
schedules thereto and have not been asked to review nor have we seen any of the
Transaction Documents or the schedules thereto other than those specifically
described in subsections (a) through (s) above. We express no opinion whatsoever
with respect to the enforceability by or against any party thereto of any of the
Transaction Documents.
C. Our opinions on every legal issue addressed in this letter above are
based exclusively on the internal laws of the State of Georgia.
This letter speaks as of the time of its delivery on the date it bears. We
do not assume any obligation to provide you with any subsequent opinion or
advice by reason of any fact about which we did not have actual knowledge at
that time, by reason of any change subsequent to that time in any law covered by
any of our opinions, or for any other reason.
Credit Suisse First Boston LLC,
TD Securities (USA) LLC,
Credit Suisse First Boston LLC
November 30, 2005
Page 5
You may rely upon this letter only for the purpose served by the
provision in the Purchase Agreement cited in the initial paragraph of this
letter in response to which it has been delivered. Without my written consent:
(i) no person (including any person that acquires securities from you) other
than you may rely on this letter for any purpose; (ii) this letter may not be
cited or quoted in any financial statement, prospectus, private placement
memorandum or other similar document; (iii) this letter may not be cited or
quoted in any other document or communication which might encourage reliance
upon this letter by any person or for any purpose excluded by the restrictions
in this paragraph; and (iv) copies of this letter may not be furnished to anyone
for purposes of encouraging such reliance; provided that the Trustee may rely,
subject to all assumptions and qualifications in this letter as if it were an
addressee of this letter.
Very truly yours,
XXXXXXX XXXXXX & GREEN, P.C.
Credit Suisse First Boston LLC,
TD Securities (USA) LLC,
Credit Suisse First Boston LLC
November 30, 2005
Page 6
SCHEDULE A
SPECIFIED CONTRACT
- Lease Agreement dated June 28, 2002 between Pace Converting, Inc., a
Georgia corporation, as Landlord and Network Communications, Inc., a
Georgia corporation as Tenant.
EXHIBIT B-2
FORM OF XXXXX XXXXX OPINION
[NCI IN-HOUSE OPINION]
November 30, 2005
CREDIT SUISSE FIRST BOSTON LLC,
TD SECURITIES (USA) LLC,
c/o Credit Suisse First Boston LLC
Eleven Madison Avenue,
New York, N.Y. 10010-3629
Ladies and Gentlemen:
I, Xxxxx Xxxxx, have acted as in-house legal counsel to Network
Communications, Inc., a Georgia corporation (the "Company"). This letter is
being delivered in partial response to the requirement in Section 6(d)(i) of the
Purchase Agreement dated as of November 22, 2005 (the "Purchase Agreement"),
between Credit Suisse First Boston LLC ("CSFB"), as representative of the
Initial Purchasers (as defined in the Purchase Agreement) and the Company
relating to the sale by the Company of $175,000,000 in aggregate principal
amount of the Company's Senior Notes due 2013 (the "Securities") to be issued
under the Indenture dated as of November 30, 2005 (the "Indenture") between the
Company and Xxxxx Fargo Bank, N.A., as trustee (the "Trustee").
The Purchase Agreement, the Indenture, the Registration Rights Agreement
dated as of November 30, 2005 between the Company and CSFB, as representative of
the Initial Purchasers (the "Registration Rights Agreement"), and the Securities
are collectively referred to herein as the "Transaction Documents." The Senior
Notes due 2013 contemplated by the Registration Rights Agreement to be offered
to holders of Securities in exchange for the Securities are referred to herein
as the "Exchange Securities." The offer to exchange the Securities for the
Exchange Securities as contemplated by the Registration Rights Agreement is
referred to herein as the "Exchange Offer."
1. The Company has the corporate power and authority to own and lease its
properties and to conduct its business as described in the Offering
Circular, dated November 22, 2005, relating to the offering and sale of the
Securities (the "Offering Circular") and to enter into and perform its
obligations under the Transaction Documents to which it is a party.
2. Solely based on the review of the certificates of good standing (or similar
document) from each of the applicable states and jurisdictions, the Company
is duly qualified to do business as a foreign corporation in good standing
in all other jurisdictions in which its ownership or lease of property or
the conduct of its business requires such qualification, except for in the
State of Illinois.
3. The execution and delivery by the Company of the Transaction Documents to
which it is a party and the consummation of the transactions contemplated
thereby (including, without limitation, the issuance and sale of the
Securities to the Initial Purchasers) do not conflict with or constitute or
result in a breach or default under (or an event which with notice or the
passage of time or both would constitute a default under) or violation of
(i) any agreement or instrument to which the Company or any such subsidiary
is a party or by which the Company or any such subsidiary is bound or to
which any of the properties of the Company or any such subsidiary is
subject, except for (x) any such conflict, breach, violation, default or
event which would not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the general affairs,
management, business, condition (financial or other), properties, prospects
or results of operations of the Company, taken as a whole and (y) any
Specified Contract as set forth on Schedule A or (ii) any Applicable Law
(as defined below).
4. There are no pending actions, suits or proceedings against or affecting the
Company, any of its subsidiaries or any of their respective properties
that, if determined adversely to the Company or any of its subsidiaries,
would individually or in the aggregate a Material Adverse Effect (as
defined in the Purchase Agreement), or would materially and adversely
affect the ability of the Company to perform its obligations under the
Indenture, the Purchase Agreement or the Registration Rights Agreement, or
which are otherwise material in the context of the sale of the Securities;
and no such actions, suits or proceedings are threatened or, to my
knowledge, contemplated.
5. Except as described in the Offering Circular, there are no contracts,
agreements or understandings between the Company and any person granting
such person the right to require the Company to file a registration
statement under the Securities Act with respect to any securities of the
Company or to require the Company to include such securities with the
Exchange Securities.
My advice on every legal issue addressed in this letter is based
exclusively on the internal law of the State of Georgia or the federal laws of
the United States to the extent specifically referred to herein (the "Applicable
Laws"), and represents my opinion as to how that issue would be resolved were it
to be considered by the highest court in the jurisdiction which enacted such
law.
You may rely upon this letter only for the purpose served by the provision
in the Purchase Agreement cited in the initial paragraph of this letter in
response to which it has been delivered. Without my written consent: (i) no
person (including any person that acquires securities from you) other than you
may rely on this letter for any purpose; (ii) this letter may not be cited or
quoted in any financial statement, prospectus, private placement memorandum or
other similar document; (iii) this letter may not be cited or quoted in any
other document or communication which might encourage reliance upon this letter
by any person or for any purpose excluded by the restrictions in this paragraph;
and (iv) copies of this letter may not be furnished to anyone for purposes of
encouraging such reliance; provided that the Trustee may rely, subject to all
assumptions and qualifications in this letter as if it were an addressee of this
letter.
Sincerely,
Xxxxx Xxxxx, Esq.
2
Schedule A
Specified Contracts
(i) Securities Purchase and Holders Agreement, dated January 7, 2005, by and
among GMH Holding Company, Citigroup Venture Capital Equity Partners, L.P.,
CVC Executive Fund LLC, CVC/SSB Employee Fund, L.P., Court Square Capital
Limited, the CVC Co-Investors identified therein and the Management
Investors identified therein (as may be supplemented, amended or waived
from time to time).
(ii) Joinder to Securities Purchase and Holders Agreement, dated March 31, 2005,
between GMH Holding Company and Citicorp Mezzanine HI, L.P. (as may be
supplemented, amended or waived from time to time)
(iii) Registration Rights Agreement, dated January 7, 2005, by and among GMH
Holding Company, Citigroup Venture Capital Equity Partners, L.P., CVC
Executive Fund LLC, CVC/SSB Employee Fund, L.P., Court Square Capital
Limited, the CVC Co-Investors identified therein and the Management
Investors identified therein (as may be supplemented, amended or waived
from time to time).
(iv) Warrant Agreement, dated January 7, 2005, between Court Square Capital
Limited and GMH Holding Company (as may be supplemented, amended or waived
from time to time).
(v) Stock Purchase Warrant, dated January 7, 2005, between GMH Holding Company
and Court Square Capital Limited (as may be supplemented, amended or waived
from time to time).
(vi) Note and Warrant Assignment Agreement, dated March 31, 2005, between Court
Square Capital Limited and Citicorp Mezzanine III, L.P.
(as may be supplemented, amended or waived from time to time)
(vii) Note Assignment Agreement, dated March 31, 2005, between Court Square
Capital Limited and CVC Capital Funding, Inc. (as may be supplemented,
amended or waived from time to time)
(viii) Stock Purchase Warrant, dated January 7, 2005, between GMH Holding
Company and Citicorp Mezzanine III, L.P. (as may be supplemented, amended
or waived from time to time)
(ix) Securities Exchange Agreement, dated December 23, 2004, by and GMH Holding
Company, Inc. and the Management Investors named therein (as may be
supplemented, amended or waived from time to time).
(x) Senior Subordinated Credit Agreement, dated January 7, 2005, by and among
Gallarus Media Holdings, Inc., as Borrower, and Court Square Capital
Limited, as Lender and the Guarantors signatory thereto (as may be
supplemented, amended or waived from time to time).
(xi) First Amendment to Senior Subordinated Credit Agreement, dated May 2, 2005,
by and among Gallarus Media Holdings, Inc. and Citicorp Mezzanine III, L.P.
(as may be supplemented, amended or waived from time to time)
(xii) Employment Agreement by and between GMH Holding Company and Xxx XxXxxxxx,
dated December 23, 2004 (as may be supplemented, amended or waived from
time to time).
(xiii) Employment Agreement by and between GMH Holding Company and Xxxxxx
Xxxxxx, dated December 23, 2004 (as may be supplemented, amended or waived
from time to time).
(xiv) Securities Purchase Agreement, between GMH Holding Company and Xxxx Xxxxx,
dated August 10, 2005 (as may be supplemented, amended or waived from time
to time).
(xv) Joinder to the Securities Purchase and Holders Agreement and Registration
Rights Agreement, between GMH Holding Company and Xxxx Xxxxx, dated August
10, 2005 (as may be supplemented, amended or waived from time to time).
(xvi) Advisory Agreement, dated December 12, 2004, between GMH Holding Company,
GMH Acquisition Corp. and CVC Management LLC (as may be supplemented,
amended or waived from time to time).
(xvii) Senior Subordinated Credit Agreement, dated January 7, 2005, by and among
Network Communications, Inc., as Borrower, Court Square Capital Limited, as
Lender, and the Guarantors signatory thereto (as maybe supplemented,
amended or waived from time to time).
(xviii) First Amendment to Senior Subordinated Credit Agreement, dated May 2,
2005, by and among Gallarus Media Holdings, Inc., Network Communications,
Inc., the other parties signatory thereto, as Guarantors, and CVC Capital
Funding, Inc. (as may be supplemented, amended or waived from time to time)
(xix) Loan Agreement, dated as of June 24, 2004, among Network Communications,
Inc., as Borrower, Gallarus Media Holdings, Inc., as Parent, the Financial
Institutions whose names appear as Lenders on the signature pages thereof,
and Toronto Dominion (Texas), Inc., as Administrative Agent for the
Lenders, with TD Securities (USA) Inc., as Lead Arranger and Book Runner
and National City Bank, as Syndication Agent.
(xx) Amended and Restated Loan Agreement, dated February 11, 2005, among Network
Communications, Inc., as Borrower, Gallarus Media Holdings, Inc., as
Parent, General Electric Capital Corporation,
National City Bank and Toronto Dominion (Texas), LLC, as Lenders, Toronto
Dominion (Texas), LLC, as Administrative Agent for the Lenders, with TD
Securities (USA) LLC, as Lead Arranger and Book Runner.
(xxi) Incremental Facility Note, dated May 2, 2005, by Network Communications,
Inc., as Borrower, and Toronto Dominion (Texas), LLC, as Lender.
(xxii) Notice of Designation of Unrestricted Subsidiary from Network
Communications, Inc. to Toronto Dominion (Texas), LLC, dated March 29,
2005.
(xxiii) Subsidiary Security Agreement, between NCID (Vegas), LLC and Toronto
Dominion (Texas), LLC, dated March 28, 2005.
(xxiv) Subsidiary Pledge Agreement, dated March 28, 2005, by and among NCID
(Vegas), LLC and Toronto Dominion (Texas), LLC.
(xxv) Copyright Security Agreement, dated March 28, 2005, by and among NCID
(Vegas), LLC and Toronto Dominion (Texas), LLC.
(xxvi) Patent Security Agreement, dated March 28, 2005, by and among NCID
(Vegas), LLC and Toronto Dominion (Texas), LLC.
(xxvii) Trademark Security Agreement, dated March 28, 2005, by and among NCID
(Vegas), LLC and Toronto Dominion (Texas), LLC.
(xxviii) Subsidiary Guaranty, dated March 28, 2005, by and among NCID (Vegas),
LLC and Toronto Dominion (Texas), LLC.
(xxix) Subsidiary Loan Certificate of NCID (Vegas), LLC, dated March 29,
2005.
(xxx) Subsidiary Security Agreement, between NCID (Austin), LLC and Toronto
Dominion (Texas), LLC, dated March 28, 2005.
(xxxi) Subsidiary Pledge Agreement, dated March 28, 2005, by and among NCID
(Austin), LLC and Toronto Dominion (Texas), LLC.
(xxxii) Copyright Security Agreement, dated March 28, 2005, by and among NCID
(Austin), LLC and Toronto Dominion (Texas), LLC.
(xxxiii) Patent Security Agreement, dated March 28, 2005, by and among NCID
(Austin), LLC and Toronto Dominion (Texas), LLC.
(xxxiv) Trademark Security Agreement, dated March 28, 2005, by and among NCID
(Austin), LLC and Toronto Dominion (Texas), LLC.
(xxxv) Subsidiary Guaranty, dated March 28, 2005, by and among NCID (Austin),
LLC and Toronto Dominion (Texas), LLC.
(xxxvi) Subsidiary Loan Certificate of NCID (Austin), LLC, dated March 29, 2005.
(xxxvii) Subsidiary Security Agreement, between NCID (Seattle), LLC and Toronto
Dominion (Texas), LLC, dated March 28, 2005.
(xxxviii) Subsidiary Pledge Agreement, dated March 28, 2005, by and among NCID
(Seattle), LLC and Toronto Dominion (Texas), LLC.
(xxxix) Copyright Security Agreement, dated March 28, 2005, by and among NCID
(Seattle), LLC and Toronto Dominion (Texas), LLC.
(xl) Patent Security Agreement, dated March 28, 2005, by and among NCID
(Seattle), LLC and Toronto Dominion (Texas), LLC.
(xli) Trademark Security Agreement, dated March 28, 2005, by and among NCID
(Seattle), LLC and Toronto Dominion (Texas), LLC.
(xlii) Subsidiary Guaranty, dated March 28, 2005, by and among NCID (Seattle),
LLC and Toronto Dominion (Texas), LLC.
(xliii) Subsidiary Loan Certificate of NCID (Seattle), LLC, dated March 29,
2005.
(xliv) Subsidiary Security Agreement, between NCID (West Palm), LLC and Toronto
Dominion (Texas), LLC, dated March 28, 2005.
(xlv) Subsidiary Pledge Agreement, dated March 28, 2005, by and among NCID (West
Palm), LLC and Toronto Dominion (Texas), LLC.
(xlvi) Copyright Security Agreement, dated March 28, 2005, by and among NCID
(West Palm), LLC and Toronto Dominion (Texas), LLC.
(xlvii) Patent Security Agreement, dated March 28, 2005, by and among NCID (West
Palm), LLC and Toronto Dominion (Texas), LLC.
(xlviii) Trademark Security Agreement, dated March 28, 2005, by and among NCID
(West Palm), LLC and Toronto Dominion (Texas), LLC.
(xlix) Subsidiary Guaranty, dated March 28, 2005, by and among NCID (West Palm),
LLC and Toronto Dominion (Texas), LLC.
(l) Subsidiary Loan Certificate of NCID (West Palm), LLC, dated March
29, 2005.
EXHIBIT C
FORM OF OFFICER'S CERTIFICATE
OFFICER'S CERTIFICATE
OF
NETWORK COMMUNICATIONS, INC.
Pursuant to Section 6(f)(ii) of the Purchase Agreement dated November
22, 2005 (the Purchase Agreement"), among Network Communications, Inc., a
Georgia corporation (the "Company") and Credit Suisse First Boston LLC, as
Representative of the Initial Purchasers listed on Schedule A thereto (the
"Initial Purchasers"), the undersigned, Xxxxxx Xxxxxx, solely in my capacity as
Chief Financial Officer of the Company, and former Chief Financial Officer of
Xxxxxx Holdings, Inc. (a predecessor of the Company), hereby certifies on behalf
of the Company (including the predecessors thereof) that I have reviewed the
Offering Circular dated as of November 22, 2005 prepared in connection with the
offering (the "Offering") of $175,000,000 aggregate principal amount of the
Company's 10 3/4% Senior Notes due 2013 (the "Offering Circular").
In connection with the Offering Circular, I hereby further certify as
follows:
1. I, or persons under my direct supervision, have:
(a) compared each item marked in the excerpt from the Offering
Circular attached as Annex A-l hereto (the "2001 and 2002
Financial Information") to the corresponding amount or percentage
indicated in the consolidated financial statements of the Company
and its subsidiaries as of March 25, 2001 and March 31, 2002 and
for the fiscal years ended March 25, 2001 and March 31, 2002, in
each case audited by Bays & Xxxxxxxxx (the "2001 and 2002
Financial Statements"), and found the 2001 and 2002 Financial
Information to be in agreement with the 2001 and 2002 Financial
Statements;
(b) recomputed the 2001 and 2002 Financial Information based upon
amounts or percentages in the 2001 and 2002 Financial Statements,
as such calculations (if any) are shown in Annex A-2; and
(c) calculated the 2001 and 2002 Financial Information by adjusting
amounts or percentages in the 2001 and 2002 Financial Statements
in accordance with the advice of PricewaterhouseCoopers LLP
("PwC") given in connection with the Offering, as such
adjustments (if any) are shown in Annex A-3.
2. I, or persons under my direct supervision, have:
(a) compared each item marked in the excerpt from the Offering
Circular attached as Annex X-x hereto (the "2003 Financial
Information") to the corresponding amount or percentage indicated
in the unaudited accounting records of the Company for the period
commencing on April 1, 2002 and ending on June 27, 2002 (the
"2003 Unaudited Financial Records"), and found the 2003 Financial
Information to be in agreement with the 2003 Unaudited Financial
Records;
(b) recomputed the 2003 Financial Information based upon amounts or
percentages in the 2003 Unaudited Financial Records, as such
calculations (if any) are shown in Annex B-2; and
(c) calculated the 2003 Financial Information by adjusting amounts or
percentages in the 2003 Financial Statements in accordance with
the advice of PwC given in connection with the Offering, as such
adjustments (if any) are shown in Annex B-3.
3. I, or persons under my direct supervision, have calculated each
item marked in Annex C-1 hereto (the "Annualization Adjustment") by adding
certain savings amounts to amounts or percentages in the unaudited accounting
records of the Company, as such calculations are shown in Annex C-2.
4. No facts have come to my attention that have caused me to believe
that the 2001 and 2002 Financial Information, the 2003 Financial Information and
the Annualization Adjustment (A) was not prepared in accordance with GAAP on a
basis substantially consistent with that of the consolidated financial
statements of the Company and its subsidiaries audited by PwC and included in
the Offering Circular (except for the Annualization Adjustment) or (B) does not
fairly present, in all material respects, the financial condition and results of
operations of the Company and its subsidiaries as of and for the periods
indicated.
IN WITNESS WHEREOF, I have hereunto signed my name.
Dated: November 30, 2005
By:
------------------------------------
Name: Xxxxxx Xxxxxx
Title: Chief Financial Officer
ANNEX A-1
2001 and 2002 Financial Information
ANNEX A-1
$175,000,000
(NETWORK COMMUNICATIONS, INC. LOGO)
10 3/4% Senior NOTES DUE 2013
----------
Network Communications, Inc. is offering $175,000,000 of its 10 3/4% Senior
Notes due 2013. Interest on the notes will be paid on June 1 and December 1 of
each year, commencing on June 1, 2006. The notes will mature on December 1,
2013.
We may redeem some or all of the notes at any time on or after December 1,
2009 at the redemption prices set forth in this offering circular. Prior to
December 1, 2008, we may redeem up to 35% of the aggregate principal amount of
the notes using the net proceeds of certain equity offerings. Prior to December
1, 2009, the notes are redeemable at our option at 100% of the principal amount
plus a make-whole premium. There is no sinking fund for the notes.
The notes will be our unsecured senior obligations and will rank equally in
right of payment with all our existing and future senior indebtedness, including
our indebtedness under our new senior secured credit facilities. The notes will
be guaranteed on an unsecured senior basis by each of our subsequently acquired
or organized domestic restricted subsidiaries.
We have agreed to file an exchange offer registration statement or, under
certain circumstances, a shelf registration statement, pursuant to a
registration rights agreement. In the event that we fail to comply with certain
of our obligations under the registration rights agreement, we will pay
additional interest on the notes.
The notes are eligible for trading in The PORTAL(SM) Market ("PORTAL"), a
subsidiary of The Nasdaq Stock Market, Inc.
INVESTING IN THE NOTES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE
14.
PRICE: 98.691%
plus accrued interest, if any, from November 30, 2005.
Delivery of the notes in book-entry form will be made on or about November
30, 2005.
The notes have not been registered under the Securities Act. The notes may
not be offered or sold within the United States or to U.S. persons except to
qualified institutional buyers in reliance on the exemption from registration
provided by Rule 144A and to certain persons in offshore transactions in
reliance on Regulation S. You are hereby notified that sellers of the notes may
be relying on the exemption from the provisions of Section 5 of the Securities
Act provided by Rule 144A.
Sole Book-Running Manager
CREDIT SUISSE FIRST BOSTON
Co-Manager
TD SECURITIES
The date of this confidential offering circular is November 22, 2005.
COMPETITIVE STRENGTHS
We believe we are distinguished by the following competitive strengths:
Growing Revenue Base and Profitability. We have experienced strong and
recurring revenue growth over the past three years with a compound annual growth
rate ("CAGR") of 18.0% from fiscal 2002 to fiscal 2005 on an adjusted basis. The
majority of this growth has been organic, as revenue from our existing
publications has grown at a CAGR of 12.2% over this time period, with the
remainder generated by various strategic acquisitions. During the same period,
Adjusted EBITDA has grown at a CAGR of 39.2%, with organic growth at a CAGR of
29.5%. This has resulted in margin expansion, as our Adjusted EBITDA margin has
grown from 14.5% in fiscal 2002 to 23.8% in fiscal 2005.
Highly Predictable and Diversified Revenue. Our revenues are highly
diversified across our product offerings, geographic footprint and broad
customer base. Over the last five years, we have reduced our reliance on TREB
and substantially increased the contribution to our revenue by Apartment Finder,
Unique Homes, Mature Living Choices and New Home Finder. In addition, we have
successfully introduced new products and brands such as Black's Guide, Kansas
City Homes & Gardens, Atlanta Homes & Lifestyles and Colorado Homes & Lifestyles
during that time. Our broad geographic coverage is spread across North America
in over 630 markets and no single market accounted for more than 10% of our
fiscal 2005 revenue. Our business is almost exclusively locally driven, thereby
eliminating the risk of customer concentration and economic downturns in any
particular market. In our Direct channel, we have approximately 20,000
advertisers that we directly invoice in each publishing period and no single
advertiser represented more than 0.4% of our fiscal 2005 revenue. In our ID
channel, we have over 25,000 advertisers that our independent distributors
invoice in each publishing period and no single independent distributor
represented more than 1.5% of our fiscal 2005 revenue. Our publications have
proven to be a consistent, highly effective advertising and marketing media for
local residential real estate professionals for many years. Approximately 63% of
our revenue was generated by advertisers under contract. These contracts have
a renewal rate of over 75%. As a result, our 700 market representatives have
developed longstanding relationships with our advertisers.
Established Infrastructure and Significant Economies of Scale. Through
organic growth and strategic acquisitions we have established significant
economies of scale in our proprietary distribution network and proprietary
database of local residential real estate listings, which have become
significant competitive strengths that may deter competitors in our markets. We
distribute more than ten million real estate magazines each month in over 630
markets through our proprietary network of over 320,000 strategically placed,
high-traffic distribution points in North America. We believe that the
replication of our distribution network would be cost-prohibitive and would take
many years to complete. We also maintain a proprietary database of 1.2 million
residential real estate listings and photographs. We believe that, our database
would not only be cost-prohibitive and time-consuming to replicate initially,
but also that establishing an infrastructure for daily maintenance would be
extremely challenging.
Portfolio of Strong, Established Brands. According to Advertising Age, TREB
is the number-one free publication in terms of circulation in North America and
has the sixth largest circulation in the world. According to BPA
International(R), Apartment Finder is the premier digest-size, full-color local
rental community publication in North America. In addition to the over
20-year-old brand strength of both TREB and Apartment Finder, our strategy of
saturating our markets with over eight million TREB magazines and 1.4 million
Apartment Finder magazines each month has created strong brand recognition.
Strong Free Cask Flows and Significant Operating Leverage. We generate
strong free cash flows and require minimal operating capital investment in order
to maintain and significantly increase our revenue and EBITDA. In fiscal 2005?
over 68% of our Adjusted EBITDA was available to us as pre-tax free cash flow.
The predictability and stability of this cash flow has allowed us to
continuously pay down our indebtedness and de-lever significantly over the
years. We have exhibited significant operating leverage as demonstrated by our
strong growth in EBITDA over the past five years.
3
History of Successfully Integrated Acquisitions. Since fiscal 2002, we have
made 14 acquisitions of 41 publications. The successful integration of these
acquisitions into our business has been driven, in part, by our ability to
recognize synergies and reduce duplicative costs. Our Adjusted EBITDA margins
have grown from l4.5% in fiscal 2002 to 25.0% for the trailing twelve months
ended September 11, 2005.
Experienced Management Team. We have an experienced management team that
has demonstrated their ability to improve our competitive position by
successfully executing our business strategy and building a leading market
position. Our senior management has an average of 15 years of industry
experience.
BUSINESS STRATEGY
Increase advertising volume in each local market through enhanced print and
online products and services. We have increased our average number of
advertising pages per publication for our TREB, Apartment Finder, New Home
Finder and Mature Living Choices brands from 51 in fiscal 2002 to 67 in fiscal
2005. The key driver of growth in our existing business is increasing the number
of advertiser pages per book while simultaneously increasing the average revenue
per advertiser page by consistently enhancing the value and offerings we deliver
to the advertiser. We believe that our products offer a compelling return on
investment ("ROI") to our advertisers. We continuously seek to further enhance
the ROI to our advertisers through continued investments in our distribution
network and by further strengthening the branding of our products. In addition,
we are making incremental investments in information technology to better track
lead generation and enhance our customer sales and service.
Expand through targeted product launches in North American markets. We have
successfully implemented a strategic framework for product growth that aims to
maximize revenue and cash flow generation. We believe that there are significant
opportunities to expand into new geographic markets through our ID and Direct
channels. Historically, the ID channel has been the primary growth channel for
TREB, while our Direct channel is the preferred strategy for new market
opportunities which require significant capital investment. During fiscal 2004
to fiscal 2005, we launched publications in 69 new markets through our ID and
Direct channels. To date in fiscal 2006, we have already entered into nine new
markets through our ID and Direct channels and plan to launch publications in 20
additional new markets during the remainder of fiscal 2006.
Continue to provide integrated print and online products to capture
increased online activity. Our website, XxxxxxXxxxxxx.xxx, complements the
strength of our print publications by providing broad distribution of our
database of real estate listings to the millions of consumers searching for
homes online. With over ten million unique visitors viewing 500 million listings
annually, XxxxxxXxxxxxx.xxx is one of the most popular online destinations for
consumers searching for homes and apartments. In addition, we distribute our
content on an exclusive basis to a broad range of websites, including
XxxxXxxxxx.xxx, XxxXxxx.xxx and Xxxxx.xxx. We aim to continuously expand and
develop our web presence to further enhance the strength of our brands and to
further improve the ROI for our advertiser base.
Continue to selectively pursue strategic acquisitions. Our disciplined
acquisition strategy is predominantly focused on sourcing and identifying
potential acquisition targets in local markets where we are already present.
This strategy allows us to build on our economies of scale. We plan to continue
to selectively pursue acquisitions in the future in accordance with this
strategy.
RECENT ACQUISITIONS AND NEW PRODUCTS
We completed the following significant acquisitions during the last two
years:
ATLANTA HOME IMPROVEMENT ACQUISITION
In October 2005, We acquired Atlanta Home Improvement magazine and The
Green Pages directory from Atlanta Home Improvement, Inc. The magazine and
directory provide editorial and advertising
4
FISCAL 2001 FISCAL 2002 FISCAL 2003 FISCAL 2004
------------- ------------- ---------------------------- -------------
PRE-PREDECESSOR PREDECESSOR
------------------------------------------- ----------------------------
PERIOD FROM PERIOD FROM
FISCAL YEAR FISCAL YEAR APRIL 1, 2002 JUNE 28, 2002 FISCAL YEAR
ENDED ENDED TO TO ENDED
MARCH 25, MARCH 31, JUNE 27, MARCH 30, MARCH 28,
2001 2002(1) 2002 2003 2004
------------- ------------- ------------- ------------- -------------
(RESTATED)(2) (RESTATED)(2) (RESTATED)(2) (RESTATED)(2) (RESTATED)(2)
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Revenue....................... $81,509 $87,587 $23,262 $78,467 $118,833
Cost of Sales (exclusive of
production depreciation
and software
amortization expense
shown separately
below).................. 55,490 60,021 15,525 50,698 77,750
Production depreciation and
software amortization
(3)..................... 1,684 1,869 111 4,940 7,093
------- ------- ------- ------- --------
Gross profit............ 24,335 25,697 7,626 22,829 33,990
Selling, general &
administrative expenses.... 16,478 15,622 8,026 13,810 18,345
Amortization of intangible
assets..................... 1,038 665 153 5,241 7,464
------- ------- ------- ------- --------
Operating income
(loss)............... 6,819 9,410 (553) 3,778 8,181
Interest income (expense),
net........................ (199) (88) 6 (4,305) (5,114)
Realized gain (loss)
derivative................. -- -- -- (688) (220)
Misc. other income (expense),
net........................ 279 48 10 (59) 112
(Provision) benefit for income
taxes...................... (2,584) (4,162) 207 373 (1,140)
------- ------- ------- ------- --------
Net income (loss)............. $ 4,315 $ 5,208 $ (330) $ (901) $ 1,819
======= ======= ======= ======= ========
OTHER FINANCIAL DATA:
Ratio of earnings to fixed
charges(4)................. 35.7x 107.4x 118.2x 0.7x 1.6x
PRE-PREDECESSOR PREDECESSOR
---------------------------- ----------------------------
FISCAL YEAR
----------------------------------------------------------
2001 2002 2003 2004
------------- ------------- ------------- -------------
(RESTATED)(2) (RESTATED)(2) (RESTATED)(2) (RESTATED)(2)
(DOLLARS IN THOUSANDS)
BALANCE SHEET BATA (AT END
OF PERIOD):
Cash and cash equivalents .... $ 4,784 $ 9,612 $ 6,705 $ 2,534
Total assets ................. 29,212 38,507 205,214 213,940
Total debt ................... 5,331 4,197 77,825 85,641
Total stockholder's equity ... 17,396 22,343 68,409 70,333
28
We operate a highly efficient manufacturing and shipping network. At our
corporate headquarters and production facility in Lawrenceville, GA, a suburb of
Atlanta, we operate five Zirkon presses that are optimized to produce our
digest-sized four-color publications. In fiscal 2005 we processed more than
364,000 digital images, created more than 375,000 advertising pages and
produced more than ten billion printed pages. Through our fleet of nine trucks,
we delivered more than 130 million books to over 630 markets across the U.S. and
Canada. The benefits of our vertical integration strategy include lower cost of
production, higher quality control and faster time to market than our
competitors. As of September 16, 2005, we had 973 employees, approximately 530
of which were located at our corporate headquarters.
COMPETITIVE STRENGTHS
We believe we are distinguished by the following competitive strengths:
Growing Revenue Base and Profitability. We have experienced strong and
recurring revenue growth over the past three years with a CAGR of 18.0% from
fiscal 2002 to fiscal 2005 on an adjusted basis. The majority of this growth has
been organic, as revenue from our existing publications has grown at a CAGR of
12.2% over this time period, with the remainder generated by various strategic
acquisitions. During the same period, Adjusted EBITDA has grown at a CAGR of
39.2%, with organic growth at a CAGR of 29.5%. This has resulted in margin
expansion, as our Adjusted EBITDA margin has grown from l4.5% in fiscal 2002 to
23.8% in fiscal 2005.
Highly Predictable and Diversified Revenue. Our revenues are highly
diversified across our product offerings, geographic footprint and broad
customer base. Over the last five years, we have reduced our reliance on TREB
and substantially increased the contribution to our revenue by Apartment Finder,
Unique Homes, Mature Living Choices and New Home Finder. In addition, we have
successfully Introduced new products and brands such as Black's Guide, Kansas
City Homes & Gardens, Atlanta Homes & Lifestyles and Colorado Homes & Lifestyles
during that time. Our broad geographic coverage is spread across North America
in over 630 markets and no single market accounted for more than 10% of our
fiscal 2005 revenue. Our business is almost exclusively locally driven, thereby
eliminating the risk of customer concentration and economic downturns in any
particular market. In our Direct channel, we have approximately 20,000
advertisers that we directly invoice in each publishing period and no single
advertiser represented more than 0.4% of our fiscal 2005 revenue. In our ID
channel, we have over 25,000 advertisers that our independent distributors
invoice in each publishing period and no single independent distributor
represented more than 1.5% of our fiscal 2005 revenue. Our publications have
proven to be a consistent, highly effective advertising and marketing media for
local residential real estate professionals for many years. Approximately 63% of
our revenue was generated by advertisers under contract. These contracts have a
renewal rate of over 75%. As a result, our 700 market representatives have
developed longstanding relationships with our advertisers.
Established Infrastructure and Significant Economies of Scale. Through
organic growth and strategic acquisitions we have established significant
economies of scale in our proprietary distribution network and proprietary
database of local residential real estate listings, which have become
significant competitive strengths that may deter competitors in our markets. We
distribute more than ten million real estate magazines each month in over 630
markets through our proprietary network of over 320,000 strategically placed,
high-traffic distribution points in North America. We believe that the
replication of our distribution network would be cost-prohibitive and would take
many years to complete. We also maintain a proprietary database of 1.2 million
residential real estate listings and photographs. We believe that our database
would not only be cost-prohibitive and time-consuming to replicate initially,
but also that establishing an infrastructure for daily maintenance would be
extremely challenging.
Portfolio of Strong, Established Brands. According to Advertising Age, TREB
is the number-one free publication in terms of circulation in North America and
has the sixth largest circulation in the world. According to BPA International
(R), Apartment Finder is the premier digest-size, full-color local rental
community publication in North America. In addition to the over 20-year-old
brand strength of both
50
TREB and Apartment Finder, our strategy of saturating our markets with over
eight million TREB magazines and 1.4 million Apartment Finder magazines each
month has created strong brand recognition.
Strong Free Cash Flows and Significant Operating Leverage. We generate
strong free cash flows and require minimal operating capital investment in order
to maintain and significantly increase our revenue and EBITDA. In fiscal 2005,
over 68% of our Adjusted EBITDA was available to us as pre-tax free cash flow.
The predictability and stability of this cash flow has allowed us to
continuously pay down our indebtedness and de-lever significantly over the
years. We have exhibited significant operating leverage as demonstrated by our
strong growth in EBITDA over the past five years.
History of Successfully Integrated Acquisitions. Since fiscal 2002, we have
made 14 acquisitions of 41 publications. The successful integration of these
acquisitions into our business has been driven, in part, by our ability to
recognize synergies and reduce duplicative costs. Our Adjusted EBITDA margins
have grown from l4.5% in fiscal 2002 to 25.0% for the trailing twelve months
ended September 11, 2005.
Experienced Management Team. We have an experienced management team that
has demonstrated their ability to improve our competitive position by
successfully executing our business strategy and building a leading market
position. Our senior management has an average of 15 years of industry
experience.
BUSINESS STRATEGY
Increase advertising volume in each local market through enhanced print and
online products and services. We have increased our average number of
advertising pages per publication for our TREB, Apartment Finder, New Home
Finder and Mature Living Choices brands from 51 in fiscal 2002 to 67 in fiscal
2005. The key driver of growth in our existing business is increasing the number
of advertiser pages per book while simultaneously increasing the average revenue
per advertiser page by consistently enhancing the value and offerings we deliver
to the advertiser. We believe that our products offer a compelling ROI to our
advertisers. We continuously seek to further enhance the ROI to our advertisers
through continued investments in our distribution network and by further
strengthening the branding of our products. In addition, we are making
incremental investments in information technology to better track lead
generation and enhance our customer sales and service.
Expand through targeted product launches in North American markets. We have
successfully implemented a strategic framework for product growth that aims to
maximize revenue and cash flow generation. We believe that there are significant
opportunities to expand into new geographic markets through our ID and Direct
channels. Historically, the ID channel has been the primary growth channel for
TREB, while our Direct channel is the preferred strategy for new market
opportunities which require significant capital investment. During fiscal 2004
to fiscal 2005, we launched publications in 69 new markets through our ID and
Direct channels. To date in fiscal 2006, we have already entered into nine new
markets through our ID and Direct channels and plan to launch publications in 20
additional new markets during the remainder of fiscal 2006.
Continue to provide integrated print and online products to capture
increased online activity. Our website, XxxxxxXxxxxxx.xxx, complements the
strength of our print publications by providing broad distribution of our
database of real estate listings to the millions of consumers searching for
homes online. With over ten million unique visitors viewing 500 million listings
annually, XxxxxxXxxxxxx.xxx is one of the most popular online destinations for
consumers searching for homes and apartments. In addition, we distribute our
content on an exclusive basis to a broad range of websites, including
XxxxXxxxxx.xxx, XxxXxxx.xxx and Xxxxx.xxx. We aim to continuously expand and
develop our web presence to further enhance the strength of our brands and to
further improve the ROI for our advertiser base.
Continue to selectively pursue strategic acquisitions. Our disciplined
acquisition strategy is predominantly focused on sourcing and identifying
potential acquisition targets in local markets where we are already present.
This strategy allows us to build on our economies of scale. We plan to continue
to selectively pursue acquisitions in the future in accordance with this
strategy.
51
ANNEX A-2
2001 and 2002 Financial Information
Computations
[Schedule of any 2001 and 2002 Financial Information computations to be
provided by K&E/NCI or K&E/NCI to confirm that there were no 2001 and 2002
Financial Information computations]
ANNEX A-3
2001 and 2002 Financial Information
Adjustments
[Schedule of any 2001 and 2002 Financial Information Adjustments
to be Provided by K&E/NCI]
ANNEX X-x
2003 Financial Information
ANNEX B-1
$175,000,000
(NETWORK COMMUNICATIONS, INC. LOGO)
10 3/4% Senior Notes due 2013
----------
Network Communications, Inc. is offering $175,000,000 of its 10 3/4% Senior
Notes due 2013. Interest on the notes will be paid on June 1 and December 1 of
each year, commencing on June 1, 2006. The notes will mature on December 1,
2013.
We may redeem some or all of the notes at any time on or after December 1,
2009 at the redemption prices set forth in this offering circular. Prior to
December 1, 2008, we may redeem up to 35% of the aggregate principal amount of
the notes using the net proceeds of certain equity offerings. Prior to December
1, 2009, the notes are redeemable at our option at 100% of the principal amount
plus a make-whole premium. There is no sinking fund for the notes.
The notes will be our unsecured senior obligations and will rank equally in
right of payment with all our existing and future senior indebtedness, including
our indebtedness under our new senior secured credit facilities. The notes will
be guaranteed on an unsecured senior basis by each of our subsequently acquired
or organized domestic restricted subsidiaries.
We have agreed to file an exchange offer registration statement or, under
certain circumstances, a shelf registration statement, pursuant to a
registration rights agreement. In the event that we fail to comply with certain
of our obligations under the registration rights agreement, we will pay
additional interest on the notes.
The notes are eligible for trading in The PORTAL(SM) Market ("PORTAL"), a
subsidiary of The Nasdaq Stock Market, Inc.
INVESTING IN THE NOTES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 14.
PRICE: 98.691%
plus accrued interest, if any, from November 30, 2005.
Delivery of the notes in book-entry form will be made on or about November
30, 2005.
The notes have not been registered under the Securities Act. The notes may
not be offered or sold within the United States or to U.S. persons, except to
qualified institutional buyers in reliance on the exemption from registration
provided by Rule 144A and to certain persons in offshore transactions in
reliance on Regulation S. You are hereby notified that sellers of the notes may
be relying on the exemption from the provisions of Section 5 of the Securities
Act provided by Rule 144A.
Sole Book-Running Manager
CREDIT SUISSE FIRST BOSTON
Co-Manager
TD SECURITIES
The date of this confidential offering circular is November 22, 2005.
FISCAL 2001 FISCAL 2002 FISCAL 2003 FISCAL 2004
------------- ------------- ----------------------------- -------------
PREDECESSOR
PRE-PREDECESSOR -----------------------------
--------------------------------------------- PERIOD FROM
FISCAL YEAR FISCAL YEAR PERIOD FROM JUNE 28, 2002 FISCAL YEAR
ENDED ENDED APRIL 1, 2002 TO ENDED
MARCH, 25 MARCH 31, TO MARCH 30, MARCH 28,
2001 2002(1) JUNE 27, 2002 2003 2004
------------- ------------- ------------- ------------- -------------
(RESTATED)(2) (RESTATED)(2) (RESTATED)(2) (RESTATED)(2) (RESTATED)(2)
(DOLLARS IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Revenue........................................ $81,509 $87,587 $23,262 $78,467 $118,833
Cost of Sales (exclusive of production
depreciation and software amortization
expense shown separately below).......... 55,490 60,021 15,525 50,698 77,750
Production depreciation and software
amortization(3).......................... 1,684 1,869 111 4,940 7,093
------- ------- ------- ------- --------
Gross profit............................. 24,335 25,697 7,626 22,829 33,990
Selling, general & administrative expenses..... 16,478 15,622 8,026 13,810 18,345
Amortization of intangible assets.............. 1,038 665 153 5,241 7,464
------- ------- ------- ------- --------
Operating income (loss)..................... 6,819 9,410 (553) 3,778 8,181
Interest income (expense), net................. (199) (88) 6 (4,305) (5,114)
Realized gain (loss) derivative................ -- -- -- (668) (220)
Misc. other income (expense), net.............. 279 48 10 (59) 112
(Provision) benefit for income taxes........... (2,584) (4,162) 207 373 (1,140)
------- ------- ------- ------- --------
Net income (loss).............................. $ 4,315 $ 5,208 $ (330) $ (901) $ 1,819
======= ======= ======= ======= ========
OTHER FINANCIAL DATA:
Ratio of earnings to fixed charges(4).......... 35.7x 107.4x 118.2x 0.7x 1.6x
PRE-PREDECESSOR PREDECESSOR
----------------------------- -----------------------------
FISCAL YEAR
-------------------------------------------------------------
2001 2002 2003 2004
------------- ------------- ------------- -------------
(RESTATED)(2) (RESTATED)(2) (RESTATED)(2) (RESTATED)(2)
(DOLLARS IN THOUSANDS)
BALANCE SHEET DATA (AT END OF PERIOD):
Cash and cash equivalents...................................... $ 4,784 $ 9,612 $ 6,705 $ 2,534
Total assets................................................... 29,212 38,507 205,214 213,940
Total debt..................................................... 5,331 4,197 77,825 85,641
Total stockholder's equity..................................... 17,396 22,343 68,409 70,333
28
ANNEX B-2
2003 Financial Information
Computations
[Schedule of any 2003 Financial Information computations to be provided by
K&E/NCI or K&E/NCI to confirm that there were no 2003 Financial Information
computations]
ANNEX B-3
2003 Financial Information
Adjustments
[Schedule of any 2003 Financial Information adjustments
to be provided by K&E/NCI]
ANNEX C-1
Annualization Adjustment
ANNEX C-1
$175,000,000
(NETWORK COMMUNICATIONS, INC LOGO)
10 3/4% Senior Notes due 2013
----------
Network Communications, Inc. is offering $175,000,000 of its 10 3/4% Senior
Notes due 2013. Interest on the notes will be paid on June 1 and December 1 of
each year, commencing on June 1, 2006. The notes will mature on December 1,
2013.
We may redeem some or all of the notes at any time on or after December 1,
2009 at the redemption prices set forth in this offering circular. Prior to
December 1, 2008, we may redeem up to 35% of the aggregate principal amount of
the notes using the net proceeds of certain equity offerings, Prior to December
1, 2009, the notes are redeemable at our option at 100% of the principal amount
plus a make-whole premium. There is no sinking fund for the notes.
The notes will be our unsecured senior obligations and will rank equally in
right of payment with all our existing and future senior indebtedness, including
our indebtedness under our new senior secured credit facilities. The notes will
be guaranteed on an unsecured senior basis by each of our subsequently acquired
or organized domestic restricted subsidiaries.
We have agreed to file an exchange offer registration statement or, under
certain circumstances, a shelf registration statements pursuant to a
registration rights agreement. In the event that we fail to comply with certain
of our obligations under the registration rights agreement, we will pay
additional interest on the notes.
The notes are eligible for trading In The PORTAL(SM) Market ("PORTAL"), a
subsidiary of The Nasdaq Stock Market, Inc.
INVESTING IN THE NOTES INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 14.
PRICE: 98.691 %
plus accrued interest, if any, from November 30, 2005.
Delivery of the notes in book-entry form will be made on or about November
30, 2005,
The notes have not been registered under the Securities Act. The notes may
not be offered or sold within the United States or to U.S. persons, except to
qualified institutional buyers in reliance on the exemption from registration
provided by Rule 144A and to certain persons in offshore transactions in
reliance on Regulation S. You are hereby notified that sellers of the notes may
be relying on the exemption from the provisions of Section 5 of the Securities
Act provided by Rule 144A.
Sole Book-Running Manager
CREDIT SUISSE FIRST BOSTON
Co-Manager
TD SECURITIES
The date of this confidential offering circular is November 22, 2005.
Because of these limitations, EBITDA should not be considered as a measure
of discretionary available to us to invest in the growth of our business.
These limitations are compensated for by relying primarily on GAAP results
and using EBITDA only supplementally. See the consolidated financial
statements and related footnotes located elsewhere in this offering
circular.
The following table sets forth a reconciliation of EBITDA to net earnings
(loss):
FISCAL
2003(1)
(40 WEEKS) FISCAL 2004
-------------- -------------- INTERIM PERIODS PRO FORMA(3)
PREDECESSOR ---------------------------- -------------
------------------------------ FISCAL 2005(2) PREDECESSOR SUCCESSOR SUCCESSOR
PERIOD FROM -------------- SIX PERIODS SIX PERIODS TWELVE MONTHS
JUNE 28, 2002 FISCAL YEAR FISCAL YEAR ENDED ENDED ENDED
TO ENDED ENDED SEPTEMBER 12, SEPTEMBER 11, SEPTEMBER 11,
MARCH 30, 2003 MARCH 28, 2004 MARCH 27, 2005 2004 2005 2005
-------------- -------------- -------------- ------------- ------------- -------------
(RESTATED)(4) (RESTATED)(4) (RESTATED)(4)
(DOLLARS IN THOUSANDS)
Net income (loss) ............ $ (901) $ 1,819 $ 1,214 $ 2,293 $ (858) $(10,702)
Interest expense, net ........ 4,305 5,114 11,963 3,954 8,894 26,419
Provision (benefit) for
income taxes .............. (373) 1,140 1,248 1,574 (856) (6,763)
Depreciation(5) .............. 6,676 9,585 7,138 3,181 5,705 12,362
Amortization of intangible
assets .................... 5,241 7,464 9,407 3,640 6,726 14,573
(Gain) loss on derivative or
sale of assets ............ 688 220 (418) (418) (3) (3)
------- ------- ------- ------- ------- --------
EBITDA ....................... $15,636 $25,342 $30,552 $14,224 $19,563 $ 35,886
======= ======= ======= ======= ======= ========
----------
(7) Adjusted EBITDA is EBITDA, as defined, adjusted to exclude items that are
not considered by management to be indicative of our underlying financial
results. We believe that the inclusion of supplementary adjusted to EBITDA
applied in presenting Adjusted EBITDA is appropriate to provide additional
information to investors about certain significant items. Such
supplementary adjustments to EBITDA many not be in accordance with the
rules adopted by the SEC that apply to registration statements filed under
the Securities Act and periodic reports filed under the Securities Exchange
Act of 1934, as amended, (the "Exchange Act"). Accordingly, we may not
present Adjusted EBITDA in filings made with the SEC. You are therefore
cautioned not to place undue reliance on adjusted EBITDA and financial
ratios based on adjusted EBITDA.
The following table sets forth a reconciliation of Adjusted EBITDA to EBITDA:
FISCAL
2003(1)
(40 WEEKS) FISCAL 2004
-------------- -------------- INTERIM PERIODS
PREDECESSOR ---------------------------- PRO FORMA(3)
------------------------------ PREDECESSOR SUCCESSOR SUCCESSOR
PERIOD FROM FISCAL 2005(2) SIX PERIODS SIX PERIODS TWELVE MONTHS
JUNE 28, 2002 FISCAL YEAR FISCAL YEAR ENDED ENDED ENDED
TO ENDED ENDED SEPTEMBER 12, SEPTEMBER 11, SEPTEMBER 11,
MARCH 30, 2003 MARCH 28, 2004 MARCH 27, 2005 2004 2005 2005
-------------- -------------- -------------- ------------- ------------- -------------
(RESTATED)(4) (RESTATED)(4) (RESTATED)(4)
(DOLLARS IN THOUSANDS)
EBITDA ....................... $15,636 $25,342 $30,552 $14,224 $19,563 $35,886
Adjustment to annualize
results of
acquisition(9) ............ -- 2,463 1,871 993 1,428 3,900
Losses from unrestricted
subsidiaries(10) .......... 239 990 1,731 843 1,612 2,500
------- ------- ------- ------- ------- -------
Adjusted EBITDA .............. $15,875 $28,795 $34,154 $16,060 $22,603 $42,286
======= ======= ======= ======= ======= =======
----------
(8) Adjusted revenue is revenue, as defined, adjusted to exclude items that are
not considered by management to be indicative of our underlying financial
results. We believe that the inclusion of supplementary adjustments to
revenue is appropriate to provide additional information to investors about
certain significant items. Such supplementary adjustments to revenue may
not be in accordance with the rules adopted by the SEC that apply to
registration statements filed under the Securities Act and periodic reports
filed under the Exchange Act. Accordingly, we may not present Adjusted
revenue in filings made with the SEC. You are therefore cautioned not to
place undue reliance on adjusted revenue and financial ratios based on
Adjusted revenue.
12
The following table sets forth a reconciliation of Adjusted revenue to
revenue:
FISCAL
2003(1)
(40 WEEKS) FISCAL 2004
----------- ----------- INTERIM PERIODS
PREDECESSOR FISCAL ---------------------------- PRO FORMA(3)
------------------------ 2005(2) PREDECESSOR SUCCESSOR SUCCESSOR
PERIOD FROM ----------- ------------- ------------- -------------
JUNE 28, FISCAL YEAR FISCAL YEAR SIX PERIODS SIX PERIODS TWELVE MONTHS
2002 TO ENDED ENDED ENDED ENDED ENDED
MARCH 30, MARCH 28, MARCH 27, SEPTEMBER 12, SEPTEMBER 11, SEPTEMBER 11,
2003 2004 2005 2004 2005 2005
----------- ----------- ----------- ------------- ------------- -------------
(RESTATED) (RESTATED) (RESTATED)
(4) (4) (4)
(DOLLARS IN THOUSANDS)
Reported revenue ........ $78,467 $118,833 $139,390 $64,569 $81,816 $156,637
Adjustment to
annualize results
of acquisitions(9) ... -- 4,679 4,660 2,598 3,022 12,368
------- -------- -------- ------- ------- --------
Adjusted revenue ........ $78,467 $123,512 $144,050 $67,167 $84,838 $169,005
======= ======== ======== ======= ======= ========
(9) The adjustments annualize the financial results of acquisitions consummated
during the applicable fiscal period. The adjusted amount reflects
acquisitions as if they had occurred on the first day of that fiscal period
and been operated by us thereafter. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Acquisitions."
(10) Our start-up publications and their associated revenue and operating losses
are included in our unrestricted subsidiaries, NCID (Vegas), LLC, NCID
(Austin), LLC, NCID (West Palm), LLC, NCID (Seattle), LLC and NCID, LLC.
Under our existing senior credit facility, our unrestricted subsidiaries
are redesignated as restricted subsidiaries once they have achieved
operating profitability for two consecutive quarterly reporting periods.
(11) The pro forma balance sheet data has been prepared assuming the closing of
the Refinancing, including payment of related fees and expenses, as if it
had occurred on September 11, 2005.
13
WA area. The second was a TREB territory that included several publications in
the Ohio and Northern Kentucky area.
In fiscal 2005, we repurchased territories back from two of our independent
distributors. The first repurchase was of two TREB publications in the Seattle,
WA area. The second repurchase was of several Apartment Finder publications in
Houston, TX and surrounding markets. We also acquired the assets of an apartment
publication and a new home publication in the Raleigh, NC market.
On January 7, 2005, we were acquired by CVC in a stock transaction.
In May 2005, we purchased the assets of home and design titles in the
Atlanta, Seattle, St. Louis and Colorado markets as well as a title focused on
mountain living. In September 2005, we acquired several resale real estate
publications servicing Knoxville, TN and the surrounding areas. In October 2005,
we made an acquisition of a magazine and a directory focusing on the home design
and home improvement sectors in the Atlanta, GA market.
Certain financial information contained elsewhere in this offering circular
has been adjusted to reflect the annualization of the results of the
acquisitions discussed above. See "Summary Consolidated Financial Information
and Operating Data." The following table reflects adjustments for acquisitions
such that our adjusted financials reflect the acquisitions as if they had
occurred on the first day of the given fiscal year and been operated by us
thereafter. As shown in the footnotes to the table below, we often incur a loss
in the first period following an acquisition because we incur expenses in
connection with the acquisition and operating the acquired publication
throughout the first period, but often do not recognize revenue associated with
the acquisition until the end of the first publication cycle following the
acquisition.
STUB PERIOD
ADJUSTMENT
(IN THOUSANDS)
DATE OF ---------------
BUSINESS ACQUIRED ACQUISITION STUB PERIOD PRIOR TO NCI OWNERSHIP REVENUE EBITDA
----------------- ------------ ---------------------------------------- ------- ------
(UNAUDITED)
FISCAL YEAR 2004
Quest Publications 23-Jul-03(a) March 31, 2003 to September 14, 2003 $ 174 $ 120
Showcase Publishing 14-Jul-03(b) March 31, 2003 to August 17, 2003 967 369
Upstate Publishing 5-Sep-03(c) March 31, 2003 to September 14, 2003 1,091 689
ApartmentLiving Guide 22-Sep-03(d) March 31, 2003 to October 12, 2003 662 366
Xxxxxxx Company 31-Oct-O3(e) March 31, 2003 to November 9, 2003 603 133
English
Communications 6-Jan-04(f) March 31, 2003 to January 4, 2004 185 60
Advanced Media 30-Jan-04(g) March 31, 2003 to January 4, 2004 997 726
------- ------
Total Fiscal Year 2004
Adjustments $ 4,679 $2,463
======= ======
FISCAL YEAR 2005
TREB Incorporated 31-Aug-04(h) March 29, 2004 to September 12, 2004 $ 531 $ 148
RTJW Limited
Partnership 5-Nov-04(i) March 29, 2004 to December 5, 2004 480 148
Lone Wolf Publishing l-Mar-05(j) March 29, 2004 to March 26, 2005 3,649 1,575
------- ------
Total Fiscal Year 2005
Adjustments $ 4,660 $1,871
======= ======
TRAILING TWELVE MONTHS
SEPTEMBER 11, 2005
RTJW Limited
Partnership 5-Nov-04(i) September 13, 2004 to December 5, 2004 160 56
Lone Wolf Publishing 1-Mar-05(j) September 13, 2004 to September 11, 2005 2,099 1,043
Xxxxxxx Publishing 2-May-05(k) September 13, 2004 to September 11, 2005 6,285 1,872
Omni Communications 9-Sep-05(l) September 13, 2004 to September 11, 2005 1,444 381
Atlanta Home
Improvement, Inc. ]4-Oct-05(m) September 13, 2004 to September 11, 2005 2,380 548
------- ------
Total Trailing Twelve Months
Months Adjustments $12,368 $3,900
======= ======
33
STUB PERIOD
ADJUSTMENT
DATE (IN THOUSANDS)
OF ----------------
BUSINESS ACQUIRED ACQUISITION STUB PERIOD PRIOR TO NCI OWNERSHIP REVENUE EBITDA
----------------- ----------- ------------------------------------ ------- ------
(UNAUDITED)
SIX PERIODS ENDED
SEPTEMBER 12, 2004
TREB Incorporated 31-Aug-04(h) March 29, 2004 to September 12, 2004 $ 532 $ 148
RTJW Limited
Partnership 5-Nov-04(i) March 29, 2004 to September 12, 2004 320 92
Lone Wolf Publishing l-Mar-05(j) March 29, 2004 to September 12, 2004 1,746 753
------ ------
Total Six Periods
Ended September 12, 2004
Adjustments $2,598 $ 993
====== ======
SIX PERIODS ENDED
SEPTEMBER 11, 2005
Lone Wolf Publishing 1-Mar-05(j) March 28, 2005 to September 11, 2005 $ 197 $ 222
Xxxxxxx Publishing 2-May-05(k) March 28, 2005 to September 11, 2005 913 741
Omni Communications 9-Sep-05(l) March 28, 2005 to September 11, 2005 722 191
Atlanta Home
Improvement, Inc. 14-Oct-05(m) March 28, 2005 to September 11, 2005 1,190 274
------ ------
Total Six Periods
Ended September 11, 2005
Adjustments $3,022 $1,428
====== ======
----------
Footnotes:
(a) The acquisition closed on July 23, 2003. The transaction was structured as
an issue cut-off. Our first issue was in period 7 (September 15, 2003
through October 12, 2003) of fiscal 2004. We recorded no revenue and an
EBITDA loss of $9,481 prior to period 7 of fiscal 2004. The adjustment for
fiscal 2004 reflects results for the first and second quarters of fiscal
2004.
(b) The acquisition closed on July 14, 2003. The transaction was structured as
an issue cut-off. Our first issue was in period 6 (August 18, 2003 through
September 14, 2003) of fiscal 2004. We recorded no revenue and an EBITDA
loss of $64,038 prior to period 6 of fiscal 2004. The adjustment for fiscal
2004 reflects results for the first quarter and periods 4 and 5 of the
second quarter of fiscal 2004.
(c) The acquisition closed on September 5, 2003, The transaction was structured
as an issue cut-off. We purchased a total of 4 publications. Our first
issues were period 6 (ended September 14, 2003), period 7 (September 15,
2003 through October 12, 2003), and, for two of the publications, period 10
(ended January 4, 2004). For the publications for which period 10 was our
first issue, we recognized no revenue and an EBITDA loss $139,281 prior to
period 10. The adjustment for fiscal 2004 reflects results for the first
quarter for all publications, periods 4 and 5 of the second quarter for one
of the publications, the full second quarter for three of the publications,
and the third quarter for two of the publications.
(d) The acquisition closed on September 22, 2003. The transaction was
structured as an issue cutoff. We purchased a total of 2 publications. Our
first issues were period 8 (ended November 9, 2003) and period 10 (December
8, 2003 through January 4, 2004). For the publication for which period 10
was our first issue, we recognized no revenue and an EBITDA loss of $76,715
prior to period 10. The adjustment for fiscal 2004 reflects results for the
first and second quarter for both publications, period 7 of the third
quarter for the one publication, and the full third quarter for the other
publication.
(e) The acquisition closed on October 31, 2003. The transaction was structured
as an issue cut-off Our first issues were in period 9 (November 10, 2003
through December 7, 2003) of fiscal 2004. We recorded no revenue and an
EBITDA loss of $30,704 prior to period 9 of fiscal
34
2004. The adjustment for fiscal 2004 reflects results for the first
quarter, second quarter, and reporting periods 7 and 8 of the third quarter
of fiscal 2004.
(f) The acquisition closed on January 6, 2004. The transaction was structured
as an issue cutoff. Our first issue was in period 11 (January 5, 2004
through February 1, 2004) of fiscal 2004. We recorded no revenue and no
EBITDA prior to period 11 of fiscal 2004. The adjustment for fiscal 2004
reflects results for the first, second and third quarters, as well as
reporting period 10 of the fourth quarter of fiscal 2004.
(g) The acquisition closed on January 30, 2004. The transaction was structured
as an issue cut-off. Our first issue was in period 11 (January 5, 2004
through February 1, 2004) of fiscal 2004. We recorded no revenue and no
EBITDA prior to period 11 of fiscal 2004. The adjustment for fiscal 2004
reflects results for the first, second and third quarters, as well as
reporting period 10 of the fourth quarter of fiscal 2004.
(h) The acquisition closed on August 31, 2004. The transaction was structured
as an issue cut-off. Our first issue was in period 7 (September 13, 2004
through October 10, 2004) of fiscal 2005. We recorded no revenue and no
EBITDA prior to period 7 of fiscal 2005. The adjustment for fiscal 2005
reflects results for the first and second quarters.
(i) The acquisition closed on November 5, 2004. The transaction was structured
as an issue cut-off. Our first issue was in period 10 (December 6, 2004
through January 2, 2005) of fiscal 2005. We recorded no revenue and no
EBITDA prior to period 10 of fiscal 2005. The adjustment for fiscal 2005
reflects results for the first, second and third quarters. The adjustment
for the trailing twelve months ended September 11, 2005 reflects results
for the third and fourth quarters of fiscal 2005.
(j) The acquisition closed on March 1, 2005, which was the beginning date of
the last period of fiscal 2005. That transaction was structured as an issue
cut-off. Our first issue of the New Homes Ideas publication was in period 1
(March 28, 2005 through April 24, 2005) of fiscal 2006. Our first issue of
the Apartment Book publication was in period 2 (April 25, 2005 through May
22, 2005) of fiscal 2006. As a result, we recorded no revenue and an EBITDA
loss of $66,187 on our financial statements for fiscal 2005. The adjustment
for fiscal 2005 represents a full year of revenue and EBITDA for the
acquisition. The adjustment for the trailing twelve months ended September
11, 2005 reflects results for the third and fourth quarters of fiscal 2005
and for the first and second quarters of fiscal 2006.
(k) The acquisition closed on May 2, 2005. Our first period of revenue and
EBITDA was period 2 (April 25, 2005 through May 22, 2005) of fiscal 2006.
The adjustment for the trailing twelve months ended September 11, 2005
reflects results for the third and fourth quarters of our fiscal 2005 and
for the first and second quarters of fiscal 2006.
(l) The acquisition closed on September 9, 2005, which was in the second
quarter of our fiscal 2006. We recorded no revenue and no EBITDA for this
acquisition in fiscal 2005 or the first quarter of fiscal 2006. The
adjustment for the trailing twelve months ended September 11, 2005 reflects
results for the third and fourth quarters of our fiscal 2005 and the first
and second quarters of our fiscal 2006.
(m) The acquisition closed on October 14, 2005, which was in the third quarter
of our fiscal 2006. We recorded no revenue and no EBITDA for this
acquisition in fiscal 2005 or the first quarter of fiscal 2006. The
adjustment for the trailing twelve months ended September 11, 2005 reflects
results for the third and fourth quarters of our fiscal 2005 and the first
and second quarters of our fiscal 2006.
35
ANNEX C-2
Annualization Adjustment
Calculations
[Schedule of Annualization Adjustment calculations to be provided by K&E/NCI]
