<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 9, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CMP MEDIA INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
DELAWARE 2721 11-2240940
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL) IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
600 COMMUNITY DRIVE
MANHASSET, NEW YORK 11030
(516) 562-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
ROBERT D. MARAFIOTI, ESQ.
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
CMP MEDIA INC.
600 Community Drive
Manhasset, New York 11030
(516) 562-5000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S AGENT FOR SERVICE)
------------------------
PLEASE ADDRESS A COPY OF ALL COMMUNICATIONS TO:
<TABLE>
<S> <C>
LEONARD J. BAXT, ESQ. ALAN H. PALEY, ESQ.
DOW, LOHNES & ALBERTSON, PLLC DEBEVOISE & PLIMPTON
1200 New Hampshire Avenue, N.W. 875 Third Avenue
Washington, D.C. 20036-6802 New York, N.Y. 10022
(202) 776-2000 (212) 909-6000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
=============================================================================================
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES TO BE AGGREGATE AMOUNT OF REGISTRATION
REGISTERED OFFERING PRICE(1)(2) FEE
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Class A Common Stock....................... $115,000,000 $34,849
=============================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933, as amended.
(2) Includes shares subject to the Underwriters' over-allotment options. Also
includes shares that are to be offered outside the United States but that
may be resold from time to time in the United States under circumstances
requiring delivery of a prospectus; such shares are not being registered for
the purpose of sales outside the United States.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE
ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 9, 1997
SHARES
CMP MEDIA INC.
[CMP LOGO] CLASS A COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------------------
Of the shares of Class A Common Stock offered, shares
are being offered hereby in the United States and shares are being offered
in a concurrent international offering outside the United States. The initial
public offering price and the aggregate underwriting discount per share will be
identical for both offerings. See "Underwriting".
Of the shares of Class A Common Stock offered, shares
are being sold by the Company and shares are being sold by the Selling
Stockholders named herein. See "Principal and Selling Stockholders". The Company
will not receive any of the proceeds from the sale of the shares being sold by
the Selling Stockholders.
Each share of Class A Common Stock entitles its holder to one vote, whereas
each share of Class B Common Stock entitles its holder to ten votes. All of the
shares of Class B Common Stock are held by members of the Founding Family (as
defined herein). After consummation of the offerings, members of the Founding
Family will beneficially own shares having approximately % of the outstanding
voting power of the Company's Common Stock.
Prior to the offerings, there has been no public market for the Class A
Common Stock of the Company. It is currently estimated that the initial public
offering price per share will be between $ and $ . For factors
to be considered in determining the initial public offering price, see
"Underwriting".
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR CERTAIN CONSIDERATIONS RELEVANT
TO AN INVESTMENT IN THE CLASS A COMMON STOCK.
Application has been made for quotation of the Class A Common Stock on the
Nasdaq National Market under the symbol "CMPX".
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT(1) COMPANY(2) STOCKHOLDERS
--------------------- --------------------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Per Share..... $ $ $ $
Total(3)...... $ $ $ $
</TABLE>
- ---------------
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
(2) Before deducting estimated expenses of $ payable by the Company.
(3) The Company has granted the U.S. Underwriters an option for 30 days to
purchase up to an additional shares of Class A Common Stock at the
initial public offering price per share, less the underwriting discount,
solely to cover over-allotments. Additionally, the Company has granted the
International Underwriters a similar option with respect to an additional
shares as part of the concurrent international offering. If such
options are exercised in full, the total initial public offering price,
underwriting discount and proceeds to the Company will be $ ,
$ and $ , respectively. See "Underwriting".
------------------------
The shares offered hereby are offered severally by the U.S. Underwriters,
as specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
certificates for the shares will be ready for delivery in New York, New York, on
or about , 1997, against payment therefor in immediately available
funds.
GOLDMAN, SACHS & CO. LAZARD FRERES & CO. LLC
BEAR, STEARNS & CO. INC. FURMAN SELZ
------------------------
The date of this Prospectus is , 1997.
<PAGE> 3
[INSIDE FRONT COVER PAGE]
"CMP" and certain other terms used in this Prospectus are trademarks or
service marks of CMP Media Inc. ("CMP" or the "Company"). Trade names,
trademarks and service marks of other companies appearing in this Prospectus are
the property of their respective holders. This Prospectus does not include the
contents of the Company's Internet sites and references to such Internet sites
are not intended to, and should not be deemed to, incorporate the contents of
such sites into this Prospectus.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements.
------------------------
CERTAIN PERSONS PARTICIPATING IN THE OFFERINGS MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE CLASS A COMMON
STOCK, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN
SUCH SECURITIES AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE
OFFERINGS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the consolidated financial statements and the notes thereto
appearing elsewhere in this Prospectus. Except as otherwise noted, all
information in this Prospectus (i) gives effect to the exchange, to be effected
prior to the consummation of the Offerings, of all outstanding shares of the
Company's Class C Common Stock for shares of the Company's Class A Common Stock
and shares of the Company's Class B Common Stock, (ii) gives effect to the
amendment and restatement of the Company's certificate of incorporation and a
-to-one stock split of the Company's outstanding Common Stock to be
effected through a stock dividend prior to the consummation of the Offerings and
(iii) assumes no exercise of the Underwriters' over-allotment options. See
"Description of Capital Stock" and "Underwriting".
THE COMPANY
CMP is a leading publisher of magazines and newspapers about computers,
electronics, information technology and the Internet (collectively,
"technology"). Each of CMP's publications is designed for a distinct audience
within one of three groups: the builders, the sellers or the users of
technology. In terms of total advertising pages, the Company is one of the
largest technology publishers in the United States, with a 1996 U.S. market
share in excess of 20% according to Inquiry Management Systems ("IMS"), an
independent ad-tracking firm. In 1996, many of CMP's publications were the
leaders in their respective market niches and five of CMP's publications were
among the ten fastest-growing technology publications in the United States, in
terms of advertising pages according to IMS. The Company's revenues have nearly
doubled since 1992, increasing to $418.1 million in 1996 from $218.2 million in
1992. Income from operations increased to $28.8 million in 1996 from $7.4
million in 1992. The Company had adjusted pro forma net income of $18.7 million
in 1996. See "Selected Consolidated Financial Data".
Of the three largest U.S. technology publishers, CMP is the only one which
serves the broad spectrum of builders, sellers and users of technology and which
is therefore able to offer technology advertisers access to customers in all
three groups. The "builders" include manufacturers, engineers, designers and
purchasers of electronic systems and components, including computers,
telecommunications equipment and related products. The "sellers" include
distributors, resellers and retailers of those products. The "users" include the
end-users, in business and at home, of information systems, computer systems,
personal computers, software, the Internet and related products and services.
Most of CMP's magazines and newspapers are controlled-circulation,
business-to-business trade publications which are distributed free of charge to
qualified subscribers and which generate revenues predominantly from the sale of
advertising space. In 1996, advertising revenues from the Company's
controlled-circulation publications accounted for approximately 72% of total
revenues. CMP also publishes paid-circulation magazines that generate revenue
not only from advertising but also from subscriptions and newsstand sales. The
Company has expanded its business internationally by acquiring an advertising
sales representative organization that serves local technology publishers
worldwide, by launching new wholly-owned and joint-venture editions of its U.S.
publications designed for local audiences and by licensing its U.S. publications
to local publishers outside the United States. CMP has also expanded onto the
Internet by making its publications and other information services available
through its World Wide Web sites.
The technology sector of the U.S. publishing industry has experienced
substantial growth as technology has become increasingly integrated into
business and consumer products and the demand for technology information and
analysis has increased. In 1996, the technology sector accounted for
approximately 35% of advertising dollars spent in U.S. business-to-business
publications according to Competitive Media Reporting, a media market-research
service. The total number of advertising pages for technology products in U.S.
technology and business publications was
3
<PAGE> 5
approximately 160,000 in 1996 according to IMS, and the Company estimates that
total 1996 revenues from these advertising pages were between $1.5 billion and
$1.7 billion.
PUBLICATIONS AND SERVICES
CMP serves the builders and sellers of technology through its "OEM" and
"channel" publications, respectively, which include some of the Company's
longest-established publications. The Company serves large business users of
technology (including corporate, government and institutional users) through its
"enterprise computing" publications, and it serves desktop business users and
consumers through its "personal computing" publications, which include the
Company's paid-circulation magazines. CMP's publications and the years in which
they were launched are indicated below.
BUILDERS. CMP publishes two controlled-circulation newspapers that address
distinct audiences within the original equipment manufacturer ("OEM") sector of
the technology industry: Electronic Buyers' News (1971) and Electronic
Engineering Times (1972). Audiences for these publications include OEM
management, engineers, designers and purchasers of electronic systems and
components, including computers, telecommunications equipment, semiconductors,
software, peripherals and related products. According to IMS, CMP held the
largest market share in 1996 in the U.S. OEM publishing sector, accounting for
approximately 41% of the total advertising pages in all U.S. technology
publications serving this group of readers.
SELLERS. CMP publishes three controlled-circulation publications that
address distinct audiences within various technology distribution channels
(collectively, the "channel"): Computer Reseller News (1982), VARBusiness (1987)
and Computer Retail Week (1992). Audiences for these publications include
distributors, value-added resellers ("VARs"), retailers, systems integrators,
dealers, consultants, computer superstores, mass merchandisers, warehouse clubs,
consumer electronics retailers and mail-order sellers. According to IMS, CMP
held the largest market share in 1996 in the U.S. channel publishing sector,
accounting for approximately 76% of the total advertising pages in all U.S.
technology publications serving this group of readers.
USERS. CMP publishes three controlled-circulation publications that
address distinct audiences in business enterprises and other large
organizations: CommunicationsWeek (1984), InformationWeek (1985) and Network
Computing (1990). These audiences include information systems executives,
network communications and departmental applications managers, Internet and
intranet managers, and other purchasers and end-users of computers and
information technology products. According to IMS, CMP held the second largest
market share in 1996 in the U.S. enterprise computing publishing sector,
accounting for approximately 27% of the total advertising pages in all U.S.
technology publications serving this group of readers. CMP also publishes three
paid-circulation magazines that address the needs of personal computer users,
including technology professionals and users in large businesses, technology
users in small and home offices, and individuals: WINDOWS Magazine (1992),
HomePC (1994) and NetGuide Magazine (1994). According to IMS, CMP held the
second largest market share in 1996 in the U.S. personal computing publishing
sector, accounting for approximately 17% of the total advertising pages in all
U.S. technology publications serving this group of readers.
INTERNATIONAL. CMP offers U.S. advertisers access to a global network of
technology publications serving the builders, sellers and users of technology
worldwide. The network includes CMP's own French-language publication,
Informatiques Magazine(1994), published in Paris, and two joint ventures: a
German-language edition of Computer Reseller News (1995) published in Munich and
a U.K. edition of InformationWeek (1997) published in London. The network also
includes over 100 publications for which CMP provides advertising sales
representation services. A number of these publications license the titles,
designs and editorial content of CMP's U.S. publications. M&T International
Media ("M&T International"), acquired by CMP in 1996, represents all of these
publications in the United States. The Company also sells advertising space to
local advertisers through its sales offices in Taiwan, Hong Kong and the U.K.
4
<PAGE> 6
INTERNET SERVICES. With the 1994 launch of TechWeb, CMP became the first
major U.S. technology publisher to make all of its domestic print publications
accessible through a single World Wide Web site. The Company has announced that
in 1997 it will launch CMPnet, a World Wide Web site which will serve as a
single point of access for all of CMP's Internet services.
GROWTH STRATEGY
CMP's objective is to continue to grow in revenues, profitability and
market share as a leading publisher of magazines and newspapers serving the
broad spectrum of builders, sellers and users of technology worldwide. The
Company believes that its ability to achieve its objective will be enhanced by
its strong relationships with advertisers, the broad market coverage of its
publications, its reputation for high-quality editorial content and its
experienced management team. To implement this objective, CMP has adopted the
following strategies, which it may pursue through internal growth, selective
acquisitions, joint ventures and licensing arrangements.
BUILD UPON STRENGTH OF EXISTING PUBLICATIONS. CMP will seek to increase
its overall market share of advertising pages by continuing to improve the
editorial and circulation quality of its publications, thereby providing
advertisers with increasingly effective access to their target audiences. The
Company believes that, by publishing for audiences across the spectrum of
builders, sellers and users of technology, it can offer advertisers a one-stop
purchasing opportunity which capitalizes on their need to reach audiences in
multiple markets. CMP also plans to continue selectively expanding the
circulation of its publications, which it expects will lead to higher net
average rates per page and therefore higher revenues and profits. In addition,
in response to advances in technology and changes in technology markets, CMP
will reposition existing publications from time to time in order to maximize
their market opportunities, accelerate their growth and increase their
profitability.
INTRODUCE NEW PUBLICATIONS FOR EMERGING TARGET AUDIENCES. CMP will
continue monitoring new developments and trends in technology markets to
identify emerging audiences for technology-related information. When the Company
perceives appropriate opportunities, it intends to launch publications with
innovative positions attractive to both advertisers and readers. The Company has
demonstrated an ability to identify new audiences and to reach the market with
publications for such audiences before other major U.S. technology publishers.
CMP believes that being the first-to-market provides a competitive advantage in
establishing market-share leadership.
EXPAND INTERNATIONALLY. CMP believes that the strength of its existing
publications and its network of non-U.S. publications for which it provides
advertising sales representation enable it to take advantage of the growth of
technology markets internationally. The Company plans to expand its
international business primarily by launching local versions of its strongest
publications, either independently or in joint ventures with local publishers,
in those countries that have the largest or fastest-growing technology markets.
CMP also intends to expand its program of licensing its titles, designs and
editorial content to local publishers. In addition, CMP plans to expand M&T
International by increasing the number of publications it represents and opening
additional overseas sales offices.
EXPAND INTERNET SERVICES. The Company intends to continue using the
Internet to complement and extend the reach of its existing print publications
and to develop new online audiences for its advertisers. In addition to
aggregating its Internet services into the single CMPnet site and adding new
content and services, CMP will use a common CMPnet sales force, which CMP
believes will be cost-efficient and effective for its advertisers.
5
<PAGE> 7
OWNERSHIP
The Company was founded by Gerard G. Leeds and Lilo J. Leeds in 1971.
Immediately after the Offerings (as defined herein), Gerard Leeds, Lilo Leeds
and their children (collectively, the "Founding Family"), some of whom will
continue as directors and executive officers of the Company, will beneficially
own shares of Class A Common Stock and Class B Common Stock having
approximately % of the outstanding aggregate voting power of the Company's
Common Stock. See "Risk Factors -- Concentration of Control; Anti-Takeover
Effect of Certain Provisions" and "Description of Capital Stock".
Upon the consummation of the Offerings, certain members of the Founding
Family will make a gift from their personal holdings of approximately
shares of Class A Common Stock to substantially all of the
Company's employees. See "Management -- Employee Share Grants". Following
consummation of the Offerings, the executive officers and other employees of the
Company will collectively own shares representing approximately % of the
Company's Common Stock.
The Company is a Delaware corporation, and its principal executive offices
are located at 600 Community Drive, Manhasset, New York 11030. Its telephone
number is (516) 562-5000.
THE OFFERINGS
<TABLE>
<S> <C>
Class A Common Stock offered:(1)
The Company.............................. shares
The Selling Stockholders.................
------------------------ shares
Total...............................
------------------------ shares
------------------------
Common Stock outstanding after the Offerings:
Class A Common Stock..................... shares (2)
Class B Common Stock.....................
------------------------ shares (3)
Total...............................
------------------------ shares (2)
------------------------
Voting rights................................. The Class A Common Stock and Class B Common
Stock vote as a single class on all matters
requiring the approval of the Company's
stockholders, except as otherwise required
by law, with each share of Class A Common
Stock entitling its holder to one vote and
each share of Class B Common Stock
entitling its holder to ten votes.
Use of proceeds............................... The Company will use the $ net
proceeds it will receive from the Offerings
to repay the outstanding balance under the
Company's revolving credit agreement
($ million as of March 31, 1997)
and to pay $ million of the S
Corporation Distribution (as defined
herein) to the Company's current
stockholders, and the balance will be used
for other general corporate purposes. See
"Use of Proceeds".
Proposed Nasdaq National Market symbol........ CMPX
</TABLE>
6
<PAGE> 8
- ---------------
(1) The offering of shares of Class A Common Stock initially
being offered in the United States (the "U.S. Offering") and the offering of
shares of Class A Common Stock initially being offered
outside the United States (the "International Offering") are collectively
referred to as the "Offerings".
(2) Excludes shares of Class A Common Stock reserved for issuance
and not yet issued under the Company's Stock Incentive Plan and
shares reserved for issuance and not yet issued under the
Company's Employee Stock Purchase Plan. See "Management -- Stock Incentive
Plan" and " -- Employee Stock Purchase Plan". Also excludes
shares of Class A Common Stock issuable upon the exercise of outstanding
options held by certain members of the Company's senior management. See
"Management -- Executive Compensation -- Option/SAR Grants in Last Fiscal
Year".
(3) Shares of Class B Common Stock are convertible at any time into Class A
Common Stock on a one-for-one basis and convert automatically into Class A
Common Stock upon a transfer to anyone other than a member of the Founding
Family or certain permitted transferees. In addition, shares of Common Stock
owned by members of the Founding Family are subject to certain transfer
restrictions. See "Risk Factors -- Concentration of Control; Anti-Takeover
Effect of Certain Provisions", "Certain Relationships and Related
Transactions" and "Principal and Selling Stockholders".
RISK FACTORS
For a discussion of certain considerations relevant to an investment in the
Class A Common Stock, see "Risk Factors".
7
<PAGE> 9
SUMMARY CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth summary consolidated financial and other
data for each of the years in the five-year period ended December 31, 1996 and
for the three months ended March 31, 1996 and 1997 and as of March 31, 1997. The
following information should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's consolidated financial statements and notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------------------------------ --------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues.................................. $218,206 $258,919 $316,800 $382,360 $418,059 $ $
Operating costs and expenses:
Cost of revenues........................ 99,200 110,698 129,250 166,092 172,475
Selling and promotion................... 75,792 83,233 113,870 128,640 138,319
General and administrative.............. 35,788 55,416 57,498 68,013 78,460
-------- -------- -------- -------- -------- -------- --------
Income (loss) from operations............. 7,426 9,572 16,182 19,615 28,805
-------- -------- -------- -------- -------- -------- --------
Gain (loss) on sales of businesses........ 1,475 -- 13,650 (282) 1,434
Other income (expense), net............... 174 923 (863) (2,103) (2,476)
-------- -------- -------- -------- -------- -------- --------
Income (loss) before provision (benefit)
for income taxes........................ 9,075 10,495 28,969 17,230 27,763
Pro forma provision (benefit) for income
taxes (1)............................... 3,902 4,513 12,643 7,694 11,707
-------- -------- -------- -------- -------- -------- --------
Pro forma net income (loss)(1)............ $ 5,173 $ 5,982 $ 16,326 $ 9,536 $ 16,056 $ $
======== ======== ======== ======== ======== ======== ========
Pro forma net income (loss) per
share(2)................................ $ $ $ $ $ $ $
======== ======== ======== ======== ======== ======== ========
Pro forma weighted average shares
outstanding(2)..........................
======== ======== ======== ======== ======== ======== ========
ADJUSTED PRO FORMA DATA(3):
Income (loss) before provision (benefit)
for income taxes........................ $ 32,335 $
Provision (benefit) for income taxes...... 13,636
-------- --------
Net income (loss)......................... $ 18,699 $
======== ========
Net income (loss) per share (4)........... $ $
======== ========
Weighted average shares outstanding(4)....
======== ========
OTHER DATA:
Depreciation and amortization............. $ 3,772 $ 3,539 $ 5,264 $ 6,351 $ 7,321 $ $
Interest (income) expense, net............ 130 (194) (594) 713 457
EBITDA(5)................................. 12,977 13,840 33,639 24,294 35,541
Adjusted income (loss) from
operations(6)........................... 8,754 11,646 18,712 22,065 31,809
Adjusted EBITDA(7)........................ 14,305 15,914 36,169 26,744 38,545
Advertising pages(8)...................... -- -- 35,006 36,912 38,925
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1997
-----------------------
PRO
ACTUAL FORMA(9)
---------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........................ $ $
Total assets...........................
Total long-term debt...................
Total stockholders' equity.............
</TABLE>
8
<PAGE> 10
- ---------------
(1) Pro forma provision (benefit) for income taxes and pro forma net income
(loss) are presented as if the Company were a C corporation for tax purposes
for all periods presented. See Notes 2 and 11 to the consolidated financial
statements included elsewhere in this Prospectus.
(2) Based on the weighted average number of shares of Common Stock, including
Common Stock equivalents outstanding, and includes (i) additional
shares, representing the number of Common Stock options issued during the
twelve-month period prior to the Offerings as if they were outstanding for
all periods presented, and (ii) additional shares, representing the
number of shares of Class A Common Stock to be issued and sold by the
Company in the Offerings, at the initial public offering price of $
per share, the mid-point of the range set forth on the cover page of this
Prospectus, the proceeds from which would be necessary to pay the S
Corporation Distribution, estimated to be approximately $ , and S
corporation distributions of approximately $ made in the twelve
months preceding April 30, 1997 which were in excess of net income for such
twelve-month period. See "Use of Proceeds".
(3) The unaudited Adjusted Pro Forma Data give effect to the following
transactions as if they had occurred as of the beginning of each period
presented: (i) the change in tax status of the Company from an S corporation
to a C corporation, resulting in an effective tax rate of 42.2% for the year
ended December 31, 1996 and % for the three months ended March 31, 1997;
(ii) a reduction in interest expense of $667 for the year ended December 31,
1996 and $ for the three months ended March 31, 1997 attributable to the
Company's long-term debt, which will be repaid out of the net proceeds of
the Offerings; (iii) the elimination of $3,004 for the year ended December
31, 1996 and $ for the three months ended March 31, 1997, in compensation
expense to certain officers of the Company that will no longer be incurred
after the Offerings; and (iv) the elimination of $901 of losses for the year
ended December 31, 1996 and $ of losses for the three months ended
March 31, 1997 attributable to certain equity investments in Internet
services and technology companies, which the Company intends to distribute
to its current stockholders prior to consummation of the Offerings. See "Use
of Proceeds", "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Overview" and "Management -- Executive
Compensation -Summary Compensation Table".
(4) Based on the weighted average number of shares of Common Stock, including
Common Stock equivalents outstanding, and includes (i) additional
shares, representing the number of Common Stock options issued during the
twelve-month period prior to the Offerings as if they were outstanding for
the periods presented, and (ii) additional shares, representing the
number of shares of Class A Common Stock to be issued and sold by the
Company in the Offerings, at the initial public offering price of $
per share, the mid-point of the range set forth on the cover page of this
Prospectus.
(5) EBITDA means income (loss) before provision (benefit) for income taxes plus
depreciation and amortization plus interest (income) expense, net. EBITDA is
not intended to represent cash flows from operations and should not be
considered as an alternative to net income as an indicator of the Company's
operating performance or to cash flows as a measure of liquidity. The
Company believes that EBITDA is a standard measure commonly reported and
widely used by analysts, investors and other interested parties in the
publishing industry. Accordingly, this information has been disclosed herein
to permit a more complete comparative analysis of the Company's performance
relative to other companies in the industry.
(6) Reflects income (loss) from operations adjusted for compensation to certain
officers of the Company that will no longer be incurred after the Offerings
of $1,328, $2,074, $2,530, $2,450 and $3,004 for the years ended December
31, 1992, 1993, 1994, 1995 and 1996, respectively, and $ and $ for the
three months ended March 31, 1996 and 1997, respectively.
(7) Adjusted EBITDA means EBITDA adjusted for compensation to certain officers
of the Company that will no longer be incurred after the Offerings. See Note
(6) above. See "Management -- Executive Compensation -- Summary Compensation
Table". Adjusted EBITDA includes gain (loss) on businesses sold and income
(loss) from operations of businesses sold. Excluding gain (loss) on
businesses sold and the related income (loss) from operations of businesses
sold for all periods presented, adjusted EBITDA would have been $15,136,
$19,618, $25,188, $25,978 and $37,207 for the years ended December 31, 1992,
1993, 1994, 1995 and 1996, respectively, and $ and $ for the three
months ended March 31, 1996 and 1997, respectively.
(8) Advertising pages represents the total number of advertising pages in the
Company's print publications for each period according to IMS. Advertising
pages data are not presented for 1992 and 1993 because independently
compiled advertising pages data are not available for the Company's health
and travel-related publications, which were divested by the Company in July
1992 and January 1994, respectively. Advertising pages (according to IMS)
and revenues for the Company's technology publications were 25,544 and
$199,100 in 1992, respectively, and were 30,371 and $242,583 in 1993,
respectively.
(9) The unaudited pro forma consolidated balance sheet data give effect to (i)
the issuance and sale of shares of Class A Common Stock by the
Company at an assumed offering price of $ per share, the mid-point of
the range set forth on the cover page of this Prospectus, providing assumed
net proceeds to the Company of $ , and utilization of such proceeds
to repay long-term debt outstanding and to pay $ of the S Corporation
Distribution, estimated to be approximately $ in total, as if the
issuance and sale had occurred as of March 31, 1997, and (ii) the Company's
distribution to its current stockholders prior to consummation of the
Offerings of certain equity investments in Internet services and technology
companies, having an aggregate book value of approximately $ as of
March 31, 1997. See "Use of Proceeds" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Overview".
9
<PAGE> 11
RISK FACTORS
In addition to the other information contained in this Prospectus, the
following risk factors should be considered carefully in evaluating the Company
and its business before purchasing the Class A Common Stock offered by this
Prospectus.
DEPENDENCE ON DEMAND FOR ADVERTISING
A substantial majority of the Company's revenues (approximately 88% in
1996) is derived from the sale of advertising space. The Company's print
advertising space is generally not sold pursuant to long-term contracts. In the
event of a future general economic downturn or a recession in the United States,
the Company's advertisers may reduce their advertising budgets. Any material
decline in the demand for advertising by technology product advertisers would
have a material adverse effect on the Company's business, financial condition
and results of operations.
COMPETITION
The Company faces significant competition with respect to its print
publications from a number of technology publishers, some of which have
substantially greater financial resources than the Company, which may enhance
their ability to compete in the technology publishing market. In addition, the
Company faces broad competition for audiences and advertising revenue from other
media companies that produce magazines, newspapers and online content. Overall
competitive factors include product positioning, editorial quality, circulation,
price and customer service. Competition for advertising dollars is primarily
based on advertising rates, the nature and scope of readership, reader response
to advertisers' products and services and the effectiveness of sales teams. If
the Company is unable to compete successfully for advertisers and readers, the
Company's business, financial condition and results of operations could be
adversely affected. See "Business -- Competition".
NEW PRODUCT RISKS
The Company's success has depended largely upon its ability to monitor
rapidly changing technologies and market trends and to adapt its publications
and services to meet the evolving information needs of existing and emerging
target audiences. The Company's future success will depend in part on its
ability to continue offering new publications and services that successfully
gain market acceptance by addressing the needs of specific audience groups
within the Company's target markets. The process of internally researching and
developing, launching, gaining acceptance and establishing profitability for a
new publication or service, or assimilating and marketing an acquired
publication or service, is inherently risky and costly. New publications
typically require several years and significant investment to achieve
profitability. There can be no assurance that the Company's efforts to introduce
new or assimilate acquired publications or services will be successful or
profitable. In addition, the Company has invested in certain Internet services
that are currently generating losses. The Internet is still in the early stages
of development as a commercial medium, and there can be no assurance that these
services will be successful or profitable. Costs related to the development of
new publications and services are expensed as incurred and, accordingly, the
Company's profitability from year to year may be adversely affected by the
number and timing of new product launches. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Overview".
RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION
A component of the Company's growth strategy is further expansion into
international markets. The Company has limited experience in developing
localized versions of its publications and services and in marketing and
distributing them internationally. In addition, there are certain risks inherent
in doing business in international markets, such as the uncertainty of product
acceptance by different cultures, the risks of divergent business expectations
or cultural incompatibility inherent in establishing joint ventures with foreign
partners, difficulties in staffing and managing multinational
10
<PAGE> 12
operations, currency fluctuations, state-imposed restrictions on the
repatriation of funds and potentially adverse tax consequences. There can be no
assurance that one or more of such factors will not have a material adverse
effect on the Company's future international operations and, consequently, on
the Company's results of operations. See "Business -- International".
EFFECT OF INCREASES IN PAPER AND POSTAGE COSTS
Paper for the Company's magazines and newspapers is a significant expense,
accounting for 9.9% of total operating expenses in 1996. Paper prices have been
volatile over the past several years. They began to rise in 1994, rose
significantly in 1995, dropped in 1996 and have decreased slightly in 1997.
Unexpected or significant increases in paper prices may have an adverse effect
on the Company's future results of operations. Postage for newspaper and
magazine distribution is also a significant expense for the Company, which
generally uses regular mail service. Postage costs increase periodically and can
be expected to increase in the future. No assurance can be given that the
Company can recoup paper or postage cost increases by passing them through to
its advertisers and readers and, accordingly, such cost increases could have a
material adverse effect on the Company's results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Production".
HISTORICAL LOSSES IN THE FIRST QUARTER
The Company typically has experienced losses in the first quarter of the
year, primarily due to lower advertising sales during that period. The amount of
such losses varies from year to year because of a variety of factors, primarily
the timing of new product launches. The Company expects to incur a loss before
provision for income taxes in the first quarter of 1997 and may incur first-
quarter losses in subsequent years. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Seasonality".
CONCENTRATION OF CONTROL; ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS
The Company has two classes of authorized voting Common Stock, Class A
Common Stock and Class B Common Stock. The rights of the Class A Common Stock
and the Class B Common Stock are identical, except that holders of the Class A
Common Stock are entitled to one vote per share, holders of the Class B Common
Stock are entitled to ten votes per share, and Class B Common Stock may be
converted into Class A Common Stock on a share-for-share basis. Both classes
will vote together as one class on all matters generally submitted to a vote of
stockholders, including the election of directors.
After consummation of the Offerings, the Founding Family will beneficially
own shares of Class A Common Stock and Class B Common Stock having
approximately % of the aggregate outstanding voting power of the Company's
Common Stock. As a result, these stockholders will have the collective ability
to elect the Company's directors and to determine the outcome of corporate
actions requiring stockholder approval. This concentration of ownership and the
disproportionate voting rights between the Class A Common Stock and the Class B
Common Stock may make the Company a less attractive target for a takeover than
it otherwise might be, or render more difficult or discourage a merger proposal,
a tender offer or a proxy contest. See "Management" and "Principal and Selling
Stockholders".
Pursuant to the Company's revolving credit agreement, certain members of
the Founding Family have entered into a negative pledge agreement under which
they are restricted from transferring shares of their Common Stock. The lenders
under the revolving credit agreement have agreed to amend the negative pledge
agreement in order to permit the Selling Stockholders who are parties to such
agreement to sell the shares of Class A Common Stock being sold by them in the
Offerings and to make certain gifts of Class A Common Stock. In addition, the
Company's revolving credit agreement provides that changes in control of the
Company and transfers of Common Stock made in breach of the negative pledge
agreement will constitute an event of default under the
11
<PAGE> 13
revolving credit agreement, which would permit the lenders to accelerate
outstanding indebtedness thereunder. These provisions may have the effect of
delaying, deterring or preventing a change of control of the Company.
After consummation of the Offerings, the Board of Directors will have the
authority to issue up to shares of Preferred Stock and to determine
the price, rights, preferences, privileges and restrictions, including voting
rights, of those shares without any further vote or action by the stockholders.
The rights of the holders of Class A Common Stock will be subject to, and may be
adversely affected by, the rights of the holders of any Preferred Stock that may
be issued in the future. The issuance of Preferred Stock may have the effect of
delaying, deterring or preventing a change of control of the Company without
further action by the stockholders and may adversely affect the voting and other
rights of the holders of Class A Common Stock. The Company has no present plans
to issue shares of Preferred Stock.
Further, the Company's amended and restated certificate of incorporation
and restated bylaws will limit the ability of stockholders to raise matters at a
meeting of stockholders without giving advance notice, which may have the effect
of deterring hostile takeovers or delaying or preventing changes in control or
management of the Company. Certain aspects of Delaware law applicable to the
Company may also have the effect of discouraging takeover attempts. These
provisions may limit the ability of stockholders to approve transactions that
they may deem to be in their best interests or transactions in which
stockholders might otherwise receive a premium for their shares over the
prevailing market prices. See "Description of Capital Stock".
SHARES ELIGIBLE FOR FUTURE SALE
After consummation of the Offerings, there will be shares of Class A
Common Stock outstanding ( shares assuming the conversion of all outstanding
shares of Class B Common Stock), of which the shares of Class A Common
Stock sold pursuant to the Offerings (together with any shares sold under the
Underwriters' over-allotment options) will be tradeable without restriction by
persons other than "affiliates" of CMP. The remaining shares of Class A Common
Stock (including any Class A Common Stock issued upon conversion of Class B
Common Stock) will be deemed "restricted" securities within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), and, as such, may not
be sold in the absence of registration under the Securities Act or an exemption
therefrom, including the exemptions contained in Rule 144 under the Securities
Act. No prediction can be made as to the effect, if any, that future sales of
shares of Class A Common Stock, or the availability of such shares for future
sales, will have on the market price of the shares of Class A Common Stock
prevailing from time to time. Sales of substantial amounts of Class A Common
Stock, or the perception that such sales could occur, could adversely affect
prevailing market prices for the Class A Common Stock, and such a reduction in
the market price of the Class A Common Stock could impair the ability of the
Company to raise additional capital through future public offerings of its
equity securities.
Certain members of the Founding Family will make a gift from their personal
holdings of an aggregate of approximately shares of Class A Common Stock to
substantially all of the employees of the Company upon the consummation of the
Offerings, which shares will be held in trust for such employees for one year.
See "Management -- Employee Share Grants". Options to purchase shares of
Class A Common Stock have been granted under the Company's Stock Incentive Plan
and additional shares of Class A Common Stock are available for grants
under the Stock Incentive Plan. See "Management -- Stock Incentive Plan". The
Company has also reserved shares of Class A Common Stock for issuance under
the Company's Employee Stock Purchase Plan. See "Management -- Employee Stock
Purchase Plan". In addition, options to purchase shares of Class A Common
Stock are held by certain members of senior management. See
"Management -- Executive Compensation -- Option/SAR Grants in Last Fiscal Year".
The Company intends to file one or more registration statements on Form S-8
under the Securities
12
<PAGE> 14
Act to register shares of Class A Common Stock subject to stock options granted
under the Stock Incentive Plan and the shares available under the Employee Stock
Purchase Plan as well as those shares subject to the options held by certain
members of senior management that will permit resale of such shares, subject to
the Rule 144 volume limitations applicable to affiliates of the Company and any
agreements between option holders and the representatives of the Underwriters.
The Company, its executive officers and directors and the holders of Class
B Common Stock (including the Selling Stockholders) have agreed that, subject to
certain limited exceptions, during the period beginning from the date of this
Prospectus and continuing to and including the date 180 days after the date of
this Prospectus, they will not offer, sell, contract to sell or otherwise
dispose of any securities of the Company (other than pursuant to employee stock
option and stock purchase plans existing, or on the conversion or exchange of
convertible or exchangeable securities outstanding, on the date of this
Prospectus) which are substantially similar to the shares of Class A Common
Stock or which are convertible or exchangeable into securities which are
substantially similar to the shares of Class A Common Stock, without the prior
written consent of Goldman, Sachs & Co. No assurance can be given that a holder
of the Class B Common Stock will not decide, based upon then prevailing market
and other conditions, to convert all or a portion of his or her shares of Class
B Common Stock to shares of Class A Common Stock and to dispose of such shares
pursuant to the provisions of Rule 144 under the Securities Act, subject to the
holding period and volume limitations of Rule 144 and the 180-day lock-up
agreement. In addition, the holders of the shares of Class B Common Stock have
the right to require the Company to register under the Securities Act the shares
of Class A Common Stock into which their shares of Class B Common Stock are
convertible. See "Certain Relationships and Related Transactions", "Principal
and Selling Stockholders", "Shares Eligible for Future Sale" and "Underwriting".
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offerings, there has been no public market for the Company's
Class A Common Stock, and there can be no assurance that an active public market
for the Company's Class A Common Stock will develop or be sustained after the
Offerings. The initial public offering price will be determined by negotiation
between the Company and the representatives of the Underwriters based upon
several factors. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price. The trading price
of the Company's Class A Common Stock could be subject to wide fluctuations in
response to quarterly variations in operating results, announcements of new
publications or technological innovations by the Company or its competitors,
changes in financial estimates by securities analysts, the operating and stock
price performance of other companies that investors may deem comparable to the
Company and other events or factors. Moreover, in some future quarter the
Company's operating results may fall below the expectations of securities
analysts and investors. In such event, the market price of the Company's Class A
Common Stock would likely be materially and adversely affected. In addition, the
stock market in general has experienced extreme volatility that often has been
unrelated to the operating performance of particular companies which are traded
on the market. These broad market and industry fluctuations may adversely affect
the trading price of the Company's Class A Common Stock, regardless of the
Company's operating performance.
IMMEDIATE AND SUBSTANTIAL DILUTION
The initial public offering price of the Class A Common Stock is higher
than the book value per outstanding share of Class A Common Stock. Accordingly,
purchasers in the Offerings will suffer immediate and substantial dilution of
$ in the net tangible book value per share of the Class A Common Stock from
the initial public offering price. Additional dilution will occur upon the
exercise of outstanding options granted by the Company. See "Dilution".
13
<PAGE> 15
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Class A
Common Stock offered by the Company pursuant to the Offerings are estimated to
be $ ($ if the Underwriters' over-allotment options are
exercised in full), assuming an initial public offering price of $ per
share, the mid-point of the range set forth on the cover page of this
Prospectus, and after deducting the estimated underwriting discount and offering
expenses. The Company will not receive any proceeds from the sale of shares of
Class A Common Stock by the Selling Stockholders hereunder. See "Principal and
Selling Stockholders".
The Company will use a portion of the net proceeds from the Offerings to
repay the outstanding balance under its revolving credit agreement. As of March
31, 1997, the outstanding balance under the revolving credit agreement was $
million and the weighted average interest rate was approximately 6%. Borrowings
under the revolving credit agreement have been used to fund working capital
requirements and to pay dividends representing prior earnings to the Company's
current stockholders.
The Company elected to be treated as an S corporation beginning January 1,
1987 and, therefore, the income of the Company is attributable to its current
stockholders for federal and certain state and local tax purposes. Upon
consummation of the Offerings, the Company will terminate its S corporation
election and will become subject to U.S. federal, state and local income taxes
at prevailing corporate rates. In connection with the termination of the
Company's S corporation election, the Company will pay to its current
stockholders a distribution (the "S Corporation Distribution"), which will be
declared, but not paid, prior to the Offerings. The S Corporation Distribution
will be equal to the amount of the Company's earnings which are taxable to its
current stockholders and have not been previously distributed to them. The S
Corporation Distribution will consist of undistributed earnings for the year
ended December 31, 1996 and a proportional share of the Company's entire 1997
earnings (based on the number of days in the period) for the period beginning
January 1, 1997 and ending on the date that the Company's S corporation election
is terminated. The Company currently estimates that the S Corporation
Distribution will be approximately $ million. The actual amount of the S
Corporation Distribution will be based on the date of termination of the
Company's S corporation election and actual 1997 earnings. The Company will use
$ million of the net proceeds of the Offerings to pay a portion of the S
Corporation Distribution upon consummation of the Offerings and, once the actual
S Corporation Distribution is determined, the Company will use cash on hand,
cash flow from operations or borrowings under its revolving credit agreement to
fund the balance of the S Corporation Distribution. Purchasers of shares of
Class A Common Stock in the Offerings will not be entitled to any portion of the
S Corporation Distribution.
The Company plans to use any remaining net proceeds from the Offerings for
other general corporate purposes.
DIVIDEND POLICY
The Company paid cash dividends of $7,825,000 and $38,258,678 to its
stockholders in the years ended December 31, 1995 and 1996, respectively,
primarily to fund taxes owed by the stockholders on the Company's income
attributable to them as stockholders of an S corporation and to distribute
earnings of the Company on which such stockholders had previously paid income
tax. In addition, the Company will make the S Corporation Distribution to its
current stockholders. See "Use of Proceeds".
After consummation of the Offerings and except for payment of the S
Corporation Distribution, the Company intends to retain all available funds for
use in the operation and expansion of its business, and the Company does not
anticipate that any cash dividends will be declared or paid in the foreseeable
future. In addition, the Company's revolving credit agreement restricts the
Company's ability to pay dividends.
14
<PAGE> 16
DILUTION
As of March 31, 1997, the net tangible book value of CMP was $ million,
or $ per share of Common Stock. Net tangible book value per share
represents the Company's total tangible assets less total liabilities divided by
total shares of Common Stock outstanding. After giving effect to (i) the net
proceeds received by the Company from the sale of shares of Class A Common Stock
pursuant to the Offerings at an assumed initial public offering price of
$ per share, the mid-point of the range set forth on the cover page of
this Prospectus, and assuming no exercise of the Underwriters' over-allotment
options and (ii) the payment of the S Corporation Distribution to the Company's
current stockholders, the pro forma net tangible book value of CMP as of March
31, 1997, would have been $ million, or $ per share of Common
Stock. Such amount represents an immediate increase in pro forma net tangible
book value of $ per share of Common Stock to the Company's existing
stockholders and immediate dilution to new investors of $ per share of
Class A Common Stock. The following table illustrates the per share dilution in
pro forma net tangible book value to new investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................ $
Net tangible book value per share as of March 31, 1997.... $
Decrease in net tangible book value per share attributable
to the S Corporation Distribution....................
Increase in net tangible book value per share attributable
to net proceeds of the Offerings.....................
Pro forma net tangible book value per share as of March 31,
1997 after the Offerings............................
---
Dilution per share to new investors........................... $
===
</TABLE>
The following table summarizes, on a pro forma basis as of March 31, 1997,
the number of shares of Common Stock purchased from CMP, the total consideration
paid and the average price per share paid by the Company's existing stockholders
and by new investors purchasing shares of Class A Common Stock in the Offerings
at an assumed initial public offering price of $ per share, the
mid-point of the range set forth on the cover page of this Prospectus, and
assuming no exercise of the Underwriters' overallotment options:
<TABLE>
<CAPTION>
SHARES OF TOTAL
COMMON STOCK CONSIDERATION
PURCHASED (IN THOUSANDS) AVERAGE PRICE
----------------- ----------------- PER SHARE
NUMBER PERCENT AMOUNT PERCENT OF COMMON STOCK
------- -------- ------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Existing stockholders (Class A
Common Stock and Class B
Common Stock)(1)..............
New stockholders (Class A
Common Stock)(1)..............
Total......................
</TABLE>
- ---------------
(1) Excludes (i) shares of Class A Common Stock reserved for
issuance and not yet issued under the Company's Stock Incentive Plan, (ii)
shares of Class A Common Stock reserved for issuance and not
yet issued under the Company's Employee Stock Purchase Plan and (iii)
shares of Class A Common Stock issuable upon exercise of
outstanding stock options held by certain members of the Company's senior
management. See "Management -- Stock Incentive Plan", "-- Employee Stock
Purchase Plan" and "-- Executive Compensation -- Option/SAR Grants in Last
Fiscal Year".
15
<PAGE> 17
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1997 (i) on an actual basis and (ii) on a pro forma basis after giving
effect to (a) an increase in the number of authorized shares of Common Stock,
(b) the sale of shares of Class A Common Stock by the Company
pursuant to the Offerings at an assumed initial public offering price of
$ per share, the mid-point of the range set forth on the cover page of
this Prospectus (less the underwriting discount and estimated offering
expenses), and assuming no exercise of the Underwriters' over-allotment options,
(c) the repayment of $ million of outstanding indebtedness under the
Company's revolving credit agreement with a portion of the net proceeds
therefrom and (d) the termination of the Company's S corporation election and
payment of $ million of the S Corporation Distribution to the Company's
current stockholders, estimated to be approximately $ million in total. See
"Use of Proceeds". This table should be read in conjunction with the Company's
consolidated financial statements and the notes thereto included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1997
------------------------
ACTUAL PRO FORMA
--------- ---------
<S> <C> <C>
Cash and cash equivalents........................................... $ $
======= =======
Long-term debt...................................................... $ $
======= =======
Stockholders' equity:
Class A Common Stock, par value $.01 per share,
shares authorized, shares issued and outstanding,
actual; par value $.01 per share, shares authorized,
shares issued and outstanding, pro forma(1).........
Class B Common Stock, par value $.01 per share,
shares authorized, shares issued and
outstanding, actual; par value $.01 per share,
shares authorized, shares issued and outstanding,
pro forma.....................................................
Additional paid-in capital..........................................
Retained earnings...................................................
Unamortized restricted stock compensation...........................
Other...............................................................
------- -------
Total stockholders' equity................................ $ $
======= =======
</TABLE>
- ---------------
(1) Excludes (i) shares of Class A Common Stock reserved for
issuance and not yet issued under the Company's Stock Incentive Plan, (ii)
shares of Class A Common Stock reserved for issuance and not
yet issued under the Company's Employee Stock Purchase Plan and (iii)
shares of Class A Common Stock issuable upon exercise of
outstanding stock options held by certain members of the Company's senior
management. See "Management -- Stock Incentive Plan", "-- Employee Stock
Purchase Plan" and "-- Executive Compensation -- Option/SAR Grants in Last
Fiscal Year".
16
<PAGE> 18
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth selected consolidated financial and other
data for each of the years in the five-year period ended December 31, 1996 and
as of December 31 for each of such years and for the three months ended March
31, 1996 and 1997 and as of March 31, 1997. The selected consolidated statement
of income data for the years ended December 31, 1994, 1995 and 1996 and the
selected consolidated balance sheet data as of December 31, 1995 and 1996 have
been derived from the consolidated financial statements of the Company audited
by Coopers & Lybrand L.L.P., independent accountants, whose report with respect
thereto is included elsewhere in this Prospectus. The consolidated statement of
income data for the years ended December 31, 1992 and 1993 and consolidated
balance sheet data as of December 31, 1992, 1993 and 1994 have been derived from
the consolidated financial statements of the Company audited by Coopers &
Lybrand L.L.P. and not included herein. The selected consolidated statement of
income data for the three months ended March 31, 1996 and 1997 and the selected
consolidated balance sheet data as of March 31, 1997 have been derived from the
unaudited consolidated financial statements of the Company, which in the opinion
of management include all adjustments (consisting of normal recurring
adjustments) which are necessary to present fairly the results of operations and
financial position of the Company for the periods and at the date presented. The
results of operations for the three months ended March 31, 1997 are not
necessarily indicative of the results to be expected for the full year. The pro
forma consolidated financial data is not necessarily indicative of what the
actual financial position and results of operations of the Company would have
been as of and for the periods indicated, nor does it purport to represent the
Company's future financial position and results of operations. The following
information should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Company's
consolidated financial statements and notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues................................. $218,206 $258,919 $316,800 $382,360 $418,059 $ $
Operating costs and expenses:
Cost of revenues....................... 99,200 110,698 129,250 166,092 172,475
Selling and promotion.................. 75,792 83,233 113,870 128,640 138,319
General and administrative............. 35,788 55,416 57,498 68,013 78,460
-------- -------- -------- -------- -------- ------- -------
Income (loss) from operations............ 7,426 9,572 16,182 19,615 28,805
-------- -------- -------- -------- -------- ------- -------
Gain (loss) on sales of businesses....... 1,475 -- 13,650 (282) 1,434
Other income (expense), net.............. 174 923 (863) (2,103) (2,476)
-------- -------- -------- -------- -------- ------- -------
Income (loss) before provision (benefit)
for income taxes....................... 9,075 10,495 28,969 17,230 27,763
Pro forma provision (benefit) for income
taxes(1)............................... 3,902 4,513 12,643 7,694 11,707
-------- -------- -------- -------- -------- ------- -------
Pro forma net income (loss)(1)........... $ 5,173 $ 5,982 $ 16,326 $ 9,536 $ 16,056 $ $
======== ======== ======== ======== ======== ======= =======
Pro forma net income (loss) per
share(2)............................... $ $ $ $ $ $ $
======== ======== ======== ======== ======== ======= =======
Pro forma weighted average shares
outstanding(2).........................
======== ======== ======== ======== ======== ======= =======
</TABLE>
17
<PAGE> 19
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
------------------------------------------------- -----------------------
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- -------- -------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
ADJUSTED PRO FORMA DATA(3):
Income (loss) before provision (benefit)
for income taxes...................... $ 32,335 $
Provision (benefit) for income taxes.... 13,636
-------- ----------
Net income (loss)....................... $ 18,699 $
======== ==========
Net income (loss) per share(4).......... $ $
======== ==========
Weighted average shares
outstanding(4)........................
======== ==========
OTHER DATA:
Depreciation and amortization........... $ 3,772 $ 3,539 $ 5,264 $ 6,351 $ 7,321 $ $
Interest (income) expense, net.......... 130 (194) (594) 713 457
EBITDA(5)............................... 12,977 13,840 33,639 24,294 35,541
Adjusted income (loss) from
operations(6)......................... 8,754 11,646 18,712 22,065 31,809
Adjusted EBITDA(7)...................... 14,305 15,914 36,169 26,744 38,545
Advertising pages(8).................... -- -- 35,006 36,912 38,925
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, 1997
------------------------------------------------- -----------------------
1992 1993 1994 1995 1996 ACTUAL PRO FORMA(9)
------- ------- ------- -------- -------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital......................... $13,559 $12,415 $ 2,416 $ 23,887 $ 11,865 $ $
Total assets............................ 52,254 65,845 93,668 113,326 123,935
Total long-term debt.................... -- -- -- 12,000 25,000
Total stockholders' equity.............. 22,068 23,473 19,345 27,827 16,713
</TABLE>
- ---------------
(1) Pro forma provision (benefit) for income taxes and pro forma net income
(loss) are presented as if the Company were a C corporation for tax purposes
for all periods presented. See Notes 2 and 11 to the consolidated financial
statements included elsewhere in this Prospectus.
(2) Based on the weighted average number of shares of Common Stock, including
Common Stock and Common Stock equivalents outstanding, and includes (i)
additional shares, representing the number of Common Stock options
issued during the twelve-month period prior to the Offerings as if they were
outstanding for all periods presented, and (ii) additional shares,
representing the number of shares of Class A Common Stock to be issued and
sold by the Company in the Offerings, at the initial public offering price
of $ per share, the mid-point of the range set forth on the cover
page of this Prospectus, the proceeds from which would be necessary to pay
the S Corporation Distribution, estimated to be approximately $ , and S
corporation distributions of approximately $ made in the twelve months
preceding April 30, 1997 which were in excess of net income for such twelve-
month period. See "Use of Proceeds".
(3) The unaudited Adjusted Pro Forma Data give effect to the following
transactions as if they had occurred as of the beginning of each period
presented: (i) the change in tax status of the Company from an S corporation
to a C corporation, resulting in an effective tax rate of 42.2% for the year
ended December 31, 1996 and % for the three months ended March 31, 1997;
(ii) a reduction in interest expense of $667 for the year ended December 31,
1996 and $ for the three months ended March 31, 1997 attributable to the
Company's long-term debt, which will be repaid out of the net proceeds of
the Offerings; (iii) the elimination of $3,004 for the year ended December
31, 1996 and $ for the three months ended March 31, 1997 in compensation
expense to certain officers of the Company that will no longer be incurred
after the Offerings; and (iv) the elimination of $901 of losses for the year
ended December 31, 1996 and $ of losses for the three months ended
March 31, 1997 attributable to certain equity investments in Internet
services and technology companies, which the Company intends to distribute
to its current stockholders prior to consummation of the Offerings. See "Use
of Proceeds", "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Overview" and "Management -- Executive
Compensation -- Summary Compensation Table".
18
<PAGE> 20
(4) Based on the weighted average number of shares of Common Stock, including
Common Stock equivalents outstanding, and includes (i) additional
shares, representing the number of Common Stock options issued during the
twelve-month period prior to the Offerings as if they were outstanding for
all periods presented, and (ii) additional shares, representing the
number of shares of Class A Common Stock to be issued and sold by the
Company in the Offerings, at the initial public offering price of $
per share, the mid-point of the range set forth on the cover page of this
Prospectus.
(5) EBITDA means income (loss) before provision (benefit) for income taxes plus
depreciation and amortization plus interest (income) expense, net. EBITDA is
not intended to represent cash flows from operations and should not be
considered as an alternative to net income as an indicator of the Company's
operating performance or to cash flows as a measure of liquidity. The
Company believes that EBITDA is a standard measure commonly reported and
widely used by analysts, investors and other interested parties in the
publishing industry. Accordingly, this information has been disclosed herein
to permit a more complete comparative analysis of the Company's performance
relative to other companies in the industry.
(6) Reflects income (loss) from operations adjusted for compensation to certain
officers of the Company that will no longer be incurred after the Offerings
of $1,328, $2,074, $2,530, $2,450 and $3,004 for the years ended December
31, 1992, 1993, 1994, 1995 and 1996, respectively, and $ and $
for the three months ended March 31, 1996 and 1997, respectively.
(7) Adjusted EBITDA means EBITDA adjusted for compensation to certain officers
of the Company that will no longer be incurred after the Offerings. See Note
(6) above. See "Management -- Executive Compensation -- Summary Compensation
Table". Adjusted EBITDA includes gain (loss) on businesses sold and income
(loss) from operations of businesses sold. Excluding gain (loss) on
businesses sold and the related income (loss) from operations of businesses
sold for all periods presented, adjusted EBITDA would have been $15,136,
$19,618, $25,188, $25,978 and $37,207 for the years ended December 31, 1992,
1993, 1994, 1995 and 1996, respectively, and $ and $ for the three
months ended March 31, 1996 and 1997, respectively.
(8) Advertising pages represents the total number of advertising pages in the
Company's print publications for each period according to IMS. Advertising
pages data are not presented for 1992 and 1993 because independently
compiled advertising pages data are not available for the Company's health
and travel-related publications, which were divested by the Company in July
1992 and January 1994, respectively. Advertising pages (according to IMS)
and revenues for the Company's technology publications were 25,544 and
$199,100 in 1992, respectively, and were 30,371 and $242,583 in 1993,
respectively.
(9) The unaudited pro forma consolidated balance sheet data give effect to the
(i) issuance and sale of shares of Class A Common Stock by the
Company at an assumed offering price of $ per share, the mid-point
of the range set forth on the cover page of this Prospectus, providing
assumed net proceeds to the Company of $ , and utilization of such
proceeds to repay long-term debt outstanding, and to pay $ of the S
Corporation Distribution, estimated to be approximately $ in total,
as if the issuance and sale had occurred as of March 31, 1997, and (ii) the
Company's distribution to its current stockholders prior to consummation of
the Offerings of certain equity investments in Internet services and
technology companies, having an aggregate book value of approximately
$ as of March 31, 1997. See "Use of Proceeds" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Overview".
19
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
CMP publishes controlled-circulation, business-to-business trade
publications and paid-circulation magazines and also provides Internet services.
A substantial portion of the Company's revenues are derived from the sale of
advertising space in its publications. The Company also earns revenues from paid
subscriptions, newsstand sales, list rentals, reprints and licensing of the
editorial content, designs and titles of its publications. In 1996, advertising
revenues from all of the Company's publications and services accounted for
approximately 88% of total revenues. Advertising revenues from
controlled-circulation publications accounted for approximately 72% of the
Company's total revenues in 1996.
The Company's revenues and profitability are influenced by a number of
external factors, the most significant of which include the pace at which new
technology products are introduced; the extent to which companies selling such
products elect to advertise using print or online media rather than other
advertising media; trends in paper prices and postal rates which, in certain
years, have increased at levels in excess of the rate increases which could
reasonably be passed along to customers; and the level of competition in various
market sectors among the major technology publishers.
As part of its growth strategy, the Company invests in new publications and
services aimed at the builders, sellers and users of technology. New
publications generally require several years and significant investment to
generate positive cash flow from operations, with paid-circulation magazines
requiring a greater length of time and a higher level of investment to reach
profitability than controlled-circulation publications. The development and
launch of new Internet services also requires substantial investment, and the
amount of time required to achieve profitability for new services remains
uncertain as the Internet is still in the early stages of development as a
commercial medium. The Company does not capitalize development costs or start-up
expenses for new publications and services. Costs related to the development of
new publications and services are expensed as incurred. If the Company concludes
that a new publication or service will not achieve certain benchmarks with
regard to revenues, profitability and cash flow within a reasonable period of
time, management will modify or reposition the publication or service,
incorporate it into another publication or service or discontinue it.
Significant publication and service launches in the past three years include
HomePC (1994), NetGuide Magazine(1994), Informatiques Magazine (1994), TechWeb
(1994) and NetGuide (the Internet service formerly known as NetGuide Live)
(1996). While revenues from these publications and services have increased from
1994 to 1996, there have been substantial costs involved in these launches. The
Company expects that some or all of these publications and services will
continue to generate negative cash flow in 1997, and there can be no assurance
that these publications and services will generate positive cash flow in the
future. See "Risk Factors -- New Product Risks".
Prior to consummation of the Offerings, the Company intends to distribute
to its current stockholders certain equity investments in Internet services and
technology companies, having an aggregate book value of approximately $
million as of March 31, 1997. Other income (expense), net for the year ended
December 31, 1996 and the three months ended March 31, 1997 included losses
attributable to these investments of $0.9 million and $ million,
respectively.
CERTAIN COMPENSATION EXPENSES
Upon the consummation of the Offerings, certain members of the Founding
Family will make a gift from their personal holdings of approximately
shares of Class A Common Stock to substantially all of the employees of the
Company. See "Management -- Employee Share Grants". As required by generally
accepted accounting principles, the Company will, at the date of the gift,
20
<PAGE> 22
record a one-time, non-cash compensation charge which will reduce income before
provision for income taxes for 1997 by approximately $3.5 million.
In November 1996, the Co-Chairpersons of the Company, who are principal
stockholders of the Company, sold shares of Class A Common Stock, representing
approximately 7% of the Company's Common Stock outstanding at that time, to
three senior executives for an aggregate purchase price of $1.4 million. See
"Management -- Compensation Committee Interlocks and Insider Participation" and
"Certain Relationships and Related Transactions". At the date of this
transaction, the shares of Class A Common Stock purchased by the senior
executives had an appraised fair market value of $16.8 million and, accordingly,
the Company will recognize a total of $15.4 million in non-cash compensation
expense pro rata over the vesting periods for such shares, which range from
seven to nine years. Related non-cash compensation expense was approximately
$0.2 million in 1996 and will be approximately $1.9 million in 1997.
The Co-Chairpersons of the Company received compensation as executive
officers totaling approximately $3 million in salary and bonuses for the year
ended December 31, 1996. In 1997, each of the Co-Chairpersons will receive
compensation of approximately $15,500 per month through the date of consummation
of the Offerings. After the Offerings, the Co-Chairpersons will no longer
receive compensation as executive officers, but will only receive compensation
for their services as non-employee directors. See "Management -- Director
Compensation" and "-- Executive Compensation -- Summary Compensation Table".
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, items within the
Company's consolidated statements of income as a percentage of revenues for each
period. This table and the subsequent discussion should be read in conjunction
with "Selected Consolidated Financial Data" and the consolidated financial
statements and the notes thereto contained elsewhere in this Prospectus. The
Company typically incurs operating losses in the first quarter of each year. See
"-- Seasonality".
<TABLE>
<CAPTION>
FOR THE
FOR THE YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
-------------------------------- --------------------
1994 1995 1996 1996 1997
------ ------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues................................. 100.0% 100.0% 100.0% % %
Operating costs and expenses:
Cost of revenues.................... 40.8 43.4 41.2
Selling and promotion............... 35.9 33.6 33.1
General and administrative.......... 18.1 17.8 18.8
----- ----- ----- ----- -----
Income (loss) from operations............ 5.2 5.2 6.9
Gain (loss) on sales of businesses....... 4.3 (0.1) 0.3
Other income (expense), net.............. (0.3) (0.6) (0.6)
Income (loss) before pro forma provision
(benefit) for income taxes............. 9.2 4.5 6.6
Pro forma provision (benefit) for income
taxes(1)............................... 4.0 2.0 2.8
----- ----- ----- ----- -----
Pro forma net income (loss)(1)........... 5.2% 2.5% 3.8% % %
===== ===== ===== ===== =====
</TABLE>
- ---------------
(1) Pro forma provision (benefit) for income taxes is presented as if the
Company had changed its tax status from an S corporation to a C corporation
prior to January 1, 1994.
1996 COMPARED WITH 1995
REVENUES. Revenues for 1996 increased $35.7 million, or 9.3%, to $418.1
million compared with $382.4 million for 1995. The improvement was primarily
attributable to increases in advertising
21
<PAGE> 23
yield (advertising revenue per page) and in the number of advertising pages and
the acquisition of M&T International in May 1996, partially offset by the effect
of the sale of CommunicationsWeek International in February 1996. Total
advertising pages increased 5.5% to 38,925 pages, primarily due to advertising
page increases for Computer Reseller News, Electronic Engineering Times, Network
Computing and InformationWeek, partially offset by advertising page decreases
for WINDOWS Magazine and Computer Retail Week. Excluding the effects of the
acquisition of M&T International and the sale of CommunicationsWeek
International, revenues for 1996 increased 11.4% as compared to 1995.
OPERATING COSTS AND EXPENSES. Cost of revenues for 1996 increased $6.4
million, or 3.8%, to $172.5 million compared with $166.1 million for 1995,
primarily as a result of increased paper, editorial, fulfillment and
distribution costs for the Company's print publications, and increased costs
attributable to the Company's Internet services, NetGuide and TechWeb, launched
in August 1996 and November 1994, respectively, partially offset by decreased
production costs for the Company's print publications and the effect of the sale
of CommunicationsWeek International. However, cost of revenues as a percentage
of revenues decreased to 41.2% in 1996 as compared to 43.4% in 1995, primarily
as a result of higher revenues resulting from increased advertising yield and
advertising pages without a corresponding increase in cost of revenues,
partially offset by costs attributable to NetGuide and TechWeb, which currently
have significant costs but do not generate substantial revenues. Cost of
revenues include production, paper, editorial, distribution and fulfillment
costs.
Selling and promotion expenses for 1996 increased by $9.7 million, or 7.5%,
to $138.3 million compared with $128.6 million for 1995. The increase was
primarily attributable to higher commission and sales force costs associated
with increased revenues in 1996 as compared to 1995, increased circulation
efforts in 1996 by NetGuide Magazine and WINDOWS Magazine, expenses associated
with the Company's launch of NetGuide in August 1996 and the effect of the
acquisition of M&T International. Selling and promotion expenses as a percentage
of revenues decreased to 33.1% in 1996 from 33.6% in 1995. This was principally
due to the expense reduction associated with outsourcing the Company's list
rental business, increased revenues for Informatiques Magazine and NetGuide
Magazine without corresponding increases in selling and promotion expenses,
partially offset by higher costs associated with the Company's Internet services
and the inclusion of M&T International, which have higher expense ratios than
the Company's print publications.
General and administrative expenses for 1996 increased $10.5 million, or
15.4%, to $78.5 million compared with $68.0 million for 1995. General and
administrative expenses as a percentage of revenues increased to 18.8% in 1996
from 17.8% in 1995. These increases were principally due to increased staffing
levels in 1996 to support the continuing development of the World Wide Web sites
for each of the Company's publications as well as costs incurred to launch
NetGuide.
GAIN (LOSS) ON SALES OF BUSINESSES. The gain on sales of businesses of
$1.4 million in 1996 was realized primarily from the sale of the Company's
CommunicationsWeek International publication in February 1996. The loss on sales
of businesses of $0.3 million in 1995 consisted primarily of the loss on sale of
the Company's conference business in Japan in September 1995.
OTHER INCOME (EXPENSE), NET. Other expense, net for 1996 was $2.5 million
compared with $2.1 million for 1995, primarily as a result of increased losses
from the Company's equity investments, partially offset by reduced interest
expense due to lower interest rates on the Company's borrowings and lower
foreign exchange losses. The Company's equity investments are primarily in
international publications and start-up Internet services and technology
companies.
PROVISION (BENEFIT) FOR INCOME TAXES. The Company and certain affiliates
elected to be treated as S corporations for U.S. federal income tax purposes,
which requires that the income or loss for federal and certain state and local
tax jurisdictions be recognized by the stockholders. Had the Company and certain
affiliates been C corporations for the years ended December 31, 1996, 1995 and
1994, the effective income tax rate would have been 42.2%, 44.7% and 43.6%,
respectively.
22
<PAGE> 24
1995 COMPARED WITH 1994
REVENUES. Revenues for 1995 increased $65.6 million, or 20.7%, to $382.4
million compared with $316.8 million for 1994. The increase was principally
attributable to increases in advertising yield and in the number of advertising
pages and significant increases in circulation for the Company's personal
computing publications, WINDOWS Magazine, HomePC and NetGuide Magazine. The
increase was partially offset by the loss of advertising revenue due to the
impact of the discontinuance of Open Systems Today, which was merged into
InformationWeek in March 1995. Total advertising pages increased 5.4% to 36,912
pages, primarily due to advertising page increases for HomePC, InformationWeek,
Electronic Engineering Times and NetGuide Magazine, partially offset by
advertising page decreases for Open Systems Today, Computer Reseller News and
CommunicationsWeek.
OPERATING COSTS AND EXPENSES. Cost of revenues for 1995 increased $36.8
million, or 28.5%, to $166.1 million compared with $129.3 million for 1994,
primarily as a result of increases in paper, production, editorial, distribution
and fulfillment costs. Cost of revenues as a percentage of revenues increased to
43.4% in 1995 from 40.8% in 1994 as a result of substantially higher paper costs
and increased postal rates.
Selling and promotion expenses for 1995 increased $14.7 million, or 13.0%,
to $128.6 million compared with $113.9 million for 1994. This increase was
primarily attributable to higher sales force and promotional costs associated
with increased revenues in 1995 as compared to 1994 and increased circulation
efforts in 1995 by the Company's personal computing publications, WINDOWS
Magazine, HomePC and NetGuide Magazine, partially offset by the impact of the
discontinuance of Open Systems Today. However, selling and promotion expenses as
a percentage of revenues decreased to 33.6% in 1995 from 35.9% in 1994. This was
a result of improved operating leverage from increased revenues for WINDOWS
Magazine, HomePC, NetGuide Magazine and Informatiques Magazine without a
corresponding increase in the existing sales and editorial costs of those
magazines.
General and administrative expenses for 1995 increased $10.5 million, or
18.3%, to $68.0 million compared with $57.5 million for 1994. This increase was
principally due to increases in personnel costs. The Company increased staffing
levels in 1995 in connection with the launch of TechWeb and to provide support
for anticipated Company growth in 1996. General and administrative expenses as a
percentage of revenues decreased to 17.8% in 1995 from 18.1% in 1994.
GAIN (LOSS) ON SALES OF BUSINESSES. The loss on sales of business of $0.3
million in 1995 related primarily to the September 1995 sale of the Company's
conference business in Japan. The gain on sale of business of $13.7 million in
1994 was attributable to the sale of the Company's travel publications.
OTHER INCOME (EXPENSE), NET. Other expense, net for 1995 was $2.1 million
compared with $0.9 million for 1994, primarily as a result of increases in
interest expense due to higher levels of debt.
LIQUIDITY AND CAPITAL RESOURCES
The Company has traditionally required relatively low levels of working
capital to operate its business. Working capital was $11.9 million, $23.9
million and $2.4 million at December 31, 1996, 1995 and 1994, respectively.
Working capital as of December 31, 1996, 1995 and 1994, as a percentage of
revenues for the year then ended, was 2.8%, 6.2% and 0.8%, respectively. The
change in working capital and working capital as a percentage of revenues for
1996 as compared to 1995 was primarily attributable to the timing of S
corporation distributions, increases in capital expenditures and investments in
and advances to Internet services and other companies in which CMP has an equity
investment. The change in working capital and working capital as a percentage of
revenues for 1995 as compared to 1994 resulted from the timing of S corporation
distributions
23
<PAGE> 25
and classification of debt as current in 1994 as opposed to non-current in 1995,
as well as decreased capital expenditures. Accounts receivable, net were $65.1
million, $64.2 million and $44.2 million at December 31, 1996, 1995 and 1994,
respectively. Days' sales outstanding ("DSO") were 53.3, 49.1 and 47.4 at
December 31, 1996, 1995 and 1994, respectively. DSO has increased primarily due
to the growth of Informatiques Magazine and the acquisition of M&T
International, both of which have higher DSO than the Company's other
businesses. Paper inventories were $6.1 million, $12.2 million and $4.2 million
at December 31, 1996, 1995 and 1994, respectively.
Cash provided by operating activities was $48.4 million, $7.2 million and
$30.5 million for the years ended December 31, 1996, 1995 and 1994,
respectively. The significant increase from 1995 to 1996 was primarily due to
increased operating income and to changes in working capital items, principally
paper inventories and accounts receivable. The significant decrease from 1994 to
1995 was primarily attributable to changes in working capital items, principally
accounts receivable, paper inventories and accounts payable.
Investing activities used $22.4 million in 1996, which consisted primarily
of $12.7 million in capital expenditures, $2.0 million for the purchase of M&T
International and $10.0 million in investments in and advances to Internet
services and other companies in which CMP has an equity investment, partially
offset by proceeds of $2.2 million from the sale of CommunicationsWeek
International. Investing activities for 1995 used $1.5 million, consisting
primarily of $8.2 million in capital expenditures and $0.3 million in advances
to companies in which CMP has an equity investment, partially offset by proceeds
of $7.1 million from the sale of long-term marketable securities. Investing
activities for 1994 used cash of $6.6 million, reflecting capital expenditures
of $13.7 million, the purchase of $7.1 million in marketable securities, the
purchase of $0.9 million of intangible assets and $0.9 million in advances to
companies in which CMP has an equity investment, offset by proceeds of $14.0
million from the sale of the Company's travel publications and $2.0 million in
proceeds from the sale of long-term marketable securities. The Company expects
capital expenditures in 1997 to continue at least at the pace of 1996 and to
consist primarily of computer equipment for business unit and corporate use.
The Company made cash distributions to its stockholders of $38.3 million,
$7.8 million and $32.1 million for the years ended December 31, 1996, 1995 and
1994, respectively, primarily to fund taxes owed by the stockholders on the
Company's income attributable to them as stockholders of an S corporation and to
distribute earnings of the Company on which such stockholders had previously
paid income tax. The Company's borrowings under its revolving credit agreement
as of March 31, 1997 were $ million and as of December 31, 1996, 1995 and
1994 were $25.0 million, $12.0 million and $11.0 million, respectively.
The Company's revolving credit agreement, as amended, with two financial
institutions provides for borrowings of up to $75 million. Borrowings are
unsecured and bear interest at either (i) LIBOR plus .35% to .825% depending on
outstanding loan balances and the Company's earnings levels, or (ii) the prime
rate. The agreement, as amended, contains certain negative covenants regarding
minimum levels of net worth, fixed coverage and limitations on indebtedness.
Borrowings outstanding at March 31, 1997 are due November 14, 2001. Pursuant to
the Company's revolving credit agreement, certain members of the Founding Family
have entered into a negative pledge agreement under which they are restricted
from transferring shares of their Common Stock. The lenders under the revolving
credit agreement will grant waivers to the Selling Stockholders who are parties
to the negative pledge agreement in order to permit them to sell the shares of
Class A Common Stock being sold in the Offerings. In addition, the Company's
revolving credit agreement provides that changes in control of the Company and
transfers of Common Stock made in breach of the negative pledge agreement will
constitute an event of default under the revolving credit agreement, which would
permit the lenders to accelerate repayment of outstanding indebtedness
thereunder.
In April 1997, the Company guaranteed loans totaling $4.7 million to two of
its senior executives to pay taxes in connection with their purchase of Class A
Common Stock from the Co-Chairpersons.
24
<PAGE> 26
The loans are from one of the financial institutions with which the Company has
its revolving credit agreement. See "Management -- Compensation Committee
Interlocks and Insider Participation".
In connection with the Offerings, the Company will terminate its S
corporation election and make the S Corporation Distribution, estimated to be
approximately $ million. As of March 31, 1997, on a pro forma basis giving
effect to the Offerings and the use of a portion of the proceeds to repay the
outstanding balance under the revolving credit agreement as of such date, and to
pay $ million of the S Corporation Distribution, the Company's cash and cash
equivalents and working capital would have been $ million and $ million,
respectively. See "Use of Proceeds".
The Company's working capital requirements have been met by internally
generated funds and short-term borrowings under its existing revolving credit
facility. Management believes sufficient cash resources will be available to
support its long-term growth strategies through internally generated funds,
existing credit arrangements and the proceeds of the Offerings. However, no
assurance can be given that financing will continue to be available on favorable
terms.
SEASONALITY
The Company has typically incurred losses in the first quarter of each
year, but generally has earned profits in each of the remaining quarters. First
quarter losses have been primarily due to lower than average advertising sales
during the quarter and relatively even distribution of certain costs throughout
the year. First-quarter losses have varied from year-to-year due to a variety of
factors, including the timing of new product launches and price increases from
suppliers.
Fourth-quarter revenues and income from operations of the Company have
traditionally been more favorable than those of the preceding quarters as a
result of a tendency of technology advertisers to place more advertising in the
latter part of the year and the scheduling of major technology industry trade
shows in the fourth quarter. While operating results for any quarter are not
necessarily indicative of results for any future period, the Company expects
that these quarterly trends will continue for the foreseeable future.
INFLATION AND VOLATILITY OF PAPER PRICES
The Company continually reviews the impact of inflation and the volatility
of paper prices. In early 1995, a postal rate increase went into effect, which
was the first such increase since 1991. Paper prices began to rise in 1994, rose
significantly in 1995, dropped in 1996 and have decreased slightly in 1997. The
Company will continue to monitor the impact of inflation and paper prices and
will consider these matters in setting its pricing policies. In addition, the
Company continually reviews its purchasing and manufacturing processes for
opportunities to reduce costs and mitigate the impact of paper and postage
increases. The Company also takes advantage of various postal discounts.
However, unexpected or significant increases in paper prices may have an adverse
affect on the Company's future financial position, results of operations and
cash flows. See "Risk Factors -- Effect of Increases in Paper and Postage
Costs".
FORWARD-LOOKING STATEMENTS
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and other sections of this Prospectus contain forward-looking
statements which are subject to various risks and uncertainties. Actual results
could differ materially from those discussed herein. Important factors that
could cause or contribute to such differences include those discussed under
"Risk Factors" as well as those discussed elsewhere in this Prospectus.
25
<PAGE> 27
NEW ACCOUNTING PRONOUNCEMENTS
In 1996, the Company adopted Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"), which is
effective for fiscal years beginning after December 15, 1995. SFAS No. 123
provides companies with the choice to follow the provisions of SFAS No. 123 in
the determination of stock-based compensation or to continue to follow the
provisions of Accounting Principles Bulletin No. 25, "Accounting for Stock
Issued to Employees" ("APB No. 25"). The Company elected to continue to follow
APB No. 25 and has provided the pro forma disclosures required by SFAS No. 123
in the notes to the consolidated financial statements.
On January 1, 1996, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and For Long-Lived Assets to be Disposed Of" ("SFAS No. 121"),
which is effective for fiscal years beginning after December 15, 1995. Adoption
of SFAS No. 121 had no impact on the Company's financial position, results of
operations or cash flows.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No.
128"), which simplifies existing computational guidelines, revises disclosure
requirements and increases the comparability of earnings-per-share data on an
international basis. SFAS No. 128 is effective for financial statements for
periods ending after December 15, 1997 and requires restatement of all
prior-period earnings-per-share data presented. The Company is currently
evaluating the new statement; however, the impact of adoption of SFAS No. 128 on
the Company's financial statements is not expected to be significant.
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BUSINESS
GENERAL
CMP is a leading publisher of magazines and newspapers about technology.
Each of CMP's publications is designed for a distinct audience within one of
three groups: the builders, the sellers or the users of technology. In terms of
total advertising pages, the Company is one of the largest technology publishers
in the United States, with a 1996 U.S. market share in excess of 20% according
to IMS. In 1996, many of CMP's publications were the leaders in their respective
market niches and five of CMP's publications were among the ten fastest-growing
technology publications in the United States, in terms of advertising pages
according to IMS. The Company's revenues have nearly doubled since 1992,
increasing to $418.1 million in 1996 from $218.2 million in 1992. Income from
operations increased to $28.8 million in 1996 from $7.4 million in 1992. The
Company had adjusted pro forma net income of $18.7 million in 1996. See
"Selected Consolidated Financial Data".
Of the three largest U.S. technology publishers, CMP is the only one which
serves the broad spectrum of builders, sellers and users of technology and which
is therefore able to offer technology advertisers access to customers in all
three groups. The "builders" include manufacturers, engineers, designers and
purchasers of electronic systems and components, including computers,
telecommunications equipment and related products. The "sellers" include
distributors, resellers and retailers of those products. The "users" include the
end-users, in business and at home, of information systems, computer systems,
personal computers, software, the Internet and related products and services.
Most of CMP's magazines and newspapers are controlled-circulation,
business-to-business trade publications which are distributed free of charge to
qualified subscribers and which generate revenues predominantly from the sale of
advertising space. In 1996, advertising revenues from the Company's
controlled-circulation publications accounted for approximately 72% of total
revenues. CMP also publishes paid-circulation magazines that generate revenue
not only from advertising but also from subscriptions and newsstand sales. The
Company has expanded its business internationally by acquiring an advertising
sales representative organization that serves local technology publishers
worldwide, by launching new wholly-owned and joint-venture editions of its U.S.
publications designed for local audiences, and by licensing its U.S.
publications to local publishers outside the United States. CMP has also
expanded onto the Internet by making its publications as well as other
information services available through its World Wide Web sites.
The technology sector of the U.S. publishing industry has experienced
substantial growth as technology has become increasingly integrated into
business and consumer products and the demand for technology information and
analysis has increased. Developments in technology have brought about frequent
and often dramatic changes that have increased the demand for authoritative,
objective and up-to-date information and analysis. In 1996, the technology
sector of the U.S. publishing industry accounted for approximately 35% of
advertising dollars spent in U.S. business-to-business publications according to
Competitive Media Reporting. The total number of advertising pages for
technology products in U.S. technology and business publications was
approximately 160,000 in 1996, according to IMS, and the Company estimates that
total 1996 revenues from these advertising pages were between $1.5 billion and
$1.7 billion.
GROWTH STRATEGY
CMP's objective is to continue to grow in revenues, profitability and
market share as a leading publisher of magazines and newspapers serving the
broad spectrum of builders, sellers and users of technology worldwide. The
Company believes that its ability to achieve its objective will be enhanced by
its strong relationships with advertisers, the broad market coverage of its
publications, its reputation for high-quality editorial content and its
experienced management team. To implement
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this objective, CMP has adopted the following strategies, which it may pursue
through internal growth, selective acquisitions, joint ventures and licensing
arrangements.
BUILD UPON STRENGTH OF EXISTING PUBLICATIONS. CMP will seek to increase
its overall market share of advertising pages by continuing to improve the
editorial and circulation quality of its publications, thereby providing
advertisers with increasingly effective access to their target audiences. The
Company believes that, by publishing for audiences across the spectrum of
builders, sellers and users of technology, it can offer advertisers a one-stop
purchasing opportunity which capitalizes on their need to reach audiences in
multiple markets. CMP also plans to continue selectively expanding the
circulation of its publications, which it expects will lead to higher net
average rates per page and therefore higher revenues and profits. In addition,
in response to advances in technology and changes in technology markets, CMP
will reposition existing publications from time to time in order to maximize
their market opportunities, accelerate their growth and increase their
profitability.
INTRODUCE NEW PUBLICATIONS FOR EMERGING TARGET AUDIENCES. CMP will
continue monitoring new developments and trends in technology markets to
identify emerging audiences for technology-related information. When the Company
perceives appropriate opportunities, it intends to launch publications with
innovative positions attractive to both advertisers and readers. The Company has
demonstrated an ability to identify new audiences and to reach the market with
publications for such audiences before other major U.S. technology publishers.
For example, when network computing became the focus of information technology
managers in large business enterprises, CMP identified them as an emerging
audience and launched Network Computing. Similarly, the Company acquired and
re-launched WINDOWS Magazine to serve the growing audience of users of
Microsoft's Windows operating system. CMP believes that being the
first-to-market provides a competitive advantage in establishing market-share
leadership.
EXPAND INTERNATIONALLY. CMP believes that the strength of its existing
publications and its network of non-U.S. publications for which it provides
advertising sales representation enable it to take advantage of the growth of
technology markets internationally. The Company plans to expand its
international business primarily by launching local versions of its strongest
publications, either independently or in joint ventures with local publishers,
in those countries that have the largest or fastest-growing technology markets.
CMP also intends to expand its program of licensing its titles, designs and
editorial content to local publishers. In addition, CMP plans to expand M&T
International by increasing the number of publications it represents and opening
additional overseas sales offices.
EXPAND INTERNET SERVICES. The Company intends to continue using the
Internet to complement and extend the reach of its existing print publications
and to develop new online audiences for its advertisers. CMP has announced that
in 1997 it will launch CMPnet, a World Wide Web site which will serve as a
single point of access for all of CMP's Internet services. In addition to
aggregating its Internet services into the single CMPnet site and adding new
content and services, CMP will use a common CMPnet sales force, which CMP
believes will be cost-efficient and effective for its advertisers. In addition
to launching its own World Wide Web sites, CMP has made selective investments in
other Internet services and technology which it believes will provide future
opportunities to serve its advertisers.
PUBLICATIONS AND TARGET AUDIENCES
The Company's publications and services are designed to serve the needs of
distinct audiences across the broad spectrum of builders, sellers and users of
technology. CMP serves the builders and sellers of technology through its "OEM"
and "channel" publications, respectively, which include some of the Company's
longest-established publications. The Company serves large business users of
technology (including corporate, government and institutional users) through its
"enterprise computing" publications, and it serves desktop business users and
consumers through its
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"personal computing" publications, which include the Company's paid-circulation
magazines. Supplementing CMP's U.S. publications are its international
publications and its Internet services.
<TABLE>
<CAPTION>
1996
FREQUENCY OF ADVERTISING
PUBLICATION(1) FIRST ISSUE CIRCULATION(2) PUBLICATION PAGES(3)
--------------------------- --------------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Builders Electronic Buyers' News.... May 1971 65,652 Weekly 3,890
Electronic Engineering..... September 1972 156,298 Weekly 6,699
Times
Sellers Computer Reseller News..... June 1982 115,009 Weekly 8,398
VARBusiness................ November 1987 105,040 Bi-weekly 2,775
Computer Retail Week....... September 1992 40,070 Bi-weekly 1,913
Users CommunicationsWeek......... January 1984 190,000 Weekly 3,103
InformationWeek(4)......... January 1985 350,000 Weekly 4,067
Network Computing.......... October 1990 200,000 Bi-weekly 2,499
WINDOWS Magazine*.......... February 1992 758,088 Monthly 2,699
HomePC*.................... May 1994 462,570 Monthly 1,865
NetGuide Magazine*......... November 1994 352,875 Monthly 1,017
International Informatiques Magazine*.... October 1994 52,964 Bi-weekly 773
Computer Reseller.......... March 1995 26,500 Bi-weekly 1,355
News (Germany)
InformationWeek (U.K.)..... March 1997 100,000 Bi-weekly N/A(5)
</TABLE>
- ---------------
(1) All publications are controlled-circulation publications except those
indicated with an asterisk, which are paid-circulation magazines.
Informatiques Magazine also includes some unpaid circulation.
(2) Circulation data are based on December 1996 circulation statements prepared
by BPA International or Audit Bureau of Circulation, which are independent
circulation auditing firms, except circulation data for international
publications which are based on the Company's own data and are as of
December 1996. See "--Circulation".
(3) Advertising page data for U.S. publications are according to IMS;
advertising page data for international publications are based on page
counts conducted by the Company.
(4) This publication was originally launched in 1979 as Information Systems
News, a bi-weekly newspaper.
(5) First issue was published in March 1997.
Most of CMP's magazines and newspapers are controlled-circulation,
business-to-business trade publications which are distributed free of charge to
qualified subscribers and which generate revenues predominantly from the sale of
advertising space. In 1996, advertising revenues from all of CMP's publications
and services accounted for 88% of the Company's total revenues. Advertising
revenues from CMP's controlled-circulation publications accounted for
approximately 72% of the Company's total revenues in 1996.
A controlled-circulation publication is one for which circulation is
limited to a pre-determined number of subscribers who have certified to the
publisher that their job functions include purchasing authority in the
particular market served by the publication. The publisher selects these
subscribers based on defined qualifying characteristics, thereby enabling
advertisers to reach those individuals most likely to be interested in
purchasing the products advertised in the publication. The Company surveys
recipients of its controlled-circulation publications annually to verify their
continued qualification. Because the Company is able to offer its advertisers
access to a highly targeted and valuable subscriber base, it is able to sell
advertising space in its controlled-circulation publications at rates that are
higher than the average rates charged by publications aimed at more general
audiences.
CMP has expanded beyond its core controlled-circulation business in recent
years by launching paid-circulation magazines, by extending its publication
brands internationally and by making all of its U.S. publications and a number
of news and other information services available on the Internet. The Company is
continually monitoring developments and trends in technology markets, and it
expects to continue extending the reach and scope of its existing businesses by
selectively
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launching new print publications and Internet services that are strategically
positioned to serve the changing needs of the builders, sellers and users of
technology. Additionally, all of the Company's publications publish regular
supplements and special issues.
BUILDERS
CMP publishes two controlled-circulation newspapers that address distinct
audiences within the OEM sector of the technology industry. Audiences for these
publications include OEM management engineers, designers and purchasers of
electronic systems and components, including computers, telecommunications
equipment, semiconductors, software, peripherals and related products. According
to IMS, CMP held the largest market share in 1996 in the U.S. OEM publishing
sector, accounting for approximately 41% of the total advertising pages in all
U.S. technology publications serving this group of readers. CMP's publications
targeting the builders of technology are as follows:
Electronic Buyers' News, CMP's first publication, is a weekly newspaper
primarily serving purchasers of electronic systems and components as well as
corporate management at OEMs. It provides information about pricing trends, new
products, supplier reports and industry developments. According to IMS,
Electronic Buyers' News had the second largest market share in 1996 in terms of
advertising pages in the U.S. OEM publishing sector.
Electronic Engineering Times is a weekly newspaper targeting electronic
engineers and technical/corporate management at OEMs in the computer and
electronics industries. It provides business, technology and product news,
market information and industry trends reports for this audience. According to
IMS, Electronic Engineering Times had the largest market share in 1996 in terms
of advertising pages in the U.S. OEM publishing sector.
SELLERS
CMP publishes three controlled-circulation publications that address
distinct audiences within the channel sector of the technology industry.
Audiences for these publications include distributors, VARs, retailers, systems
integrators, dealers, consultants, computer superstores, mass merchandisers,
warehouse clubs, consumer electronics retailers and mail-order sellers.
According to IMS, CMP held the largest market share in 1996 in the U.S. channel
publishing sector, accounting for approximately 76% of the total advertising
pages in all U.S. technology publications serving this group of readers. CMP's
publications targeting sellers of technology are as follows:
Computer Reseller News is a weekly newspaper that provides the value-added
reseller channel (including VARs, systems integrators, dealers, consultants and
distributors) with news, analysis and research about computer-related technology
and product marketing trends. Through its Test Center program, it reviews new
products entering the industry on a weekly basis. Computer Reseller News has won
a number of awards from the Computer Press Association, including "Best Broad
Interest Newspaper" for 1995. According to IMS, Computer Reseller News had the
largest market share in 1996 in terms of advertising pages in the U.S. channel
publishing sector.
VARBusiness is a bi-weekly magazine for the value-added reseller channel,
offering product coverage, analysis of technology trends and practical insight
on managing a reseller business. The magazine provides overviews of the state of
the computer market, with annual features such as the VARBusiness 500, a ranking
by revenues of the most successful VARs and systems integrators in North
America.
Computer Retail Week is a bi-weekly newspaper that delivers news and
analysis concerning product technology and merchandising trends to management
and store-level sales personnel in the retail channel at computer superstores,
mass merchandisers, warehouse clubs and electronics retailers selling directly
to consumers.
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CMP has created a number of innovative marketing services for the channel
market, such as the Channel Advocate Program, which is designed to help vendors
enhance their channel relationships and sales results, and the Xchange
Conference, a program which provides technology vendors with the opportunity to
meet with and demonstrate their new products to resellers and retailers. In late
1996, the Company introduced ChannelWeb, an Internet service which delivers a
customized news feed from CMP's channel publications and provides areas for
vendors and resellers to exchange information, receive channel research and
learn more about industry issues, products and technologies.
USERS
BUSINESS ENTERPRISE USERS. CMP publishes three controlled-circulation
publications that address distinct audiences in business enterprises and other
large organizations. These audiences include information systems executives,
network communications and departmental applications managers, Internet and
intranet managers, and other purchasers and end-users of computers and
information technology products. According to IMS, CMP held the second largest
market share in 1996 in the U.S. enterprise computing publishing sector,
accounting for approximately 27% of the total advertising pages in all U.S.
technology publications serving this group of readers. CMP's publications
targeting business enterprise users of technology are as follows:
CommunicationsWeek is a weekly newspaper for corporate network managers
that focuses on network products, developments and strategies from technological
and business points of view. It is also the flagship publication of the NetWorld
+ Interop conference, the leading conference for networking technology vendors.
InformationWeek is a weekly magazine that provides technology news and
analysis from a business solutions perspective. InformationWeek has the largest
controlled-circulation base of U.S. information systems managers and
technology-related business managers among all enterprise computing
publications. In 1996, according to IMS, InformationWeek had a greater increase
in advertising pages than any of the publications which CMP considers to be
directly competitive. The Company also offers InformationWeek Daily, a daily
e-mail news service for subscribers, and hosts the InformationWeek 500
Conference.
Network Computing is a bi-weekly magazine that provides network managers
with technical, lab-based news and information about network technologies, from
local area networks to large corporate intranet networks. In 1996, according to
IMS, Network Computing had a greater increase in advertising pages than any of
the publications which CMP considers to be directly competitive.
PERSONAL COMPUTER USERS. CMP also publishes three paid-circulation
magazines that address the needs of personal computer users, including
technology professionals in large businesses, technology users in small and home
offices, and individuals. According to IMS, CMP held the second largest market
share in 1996 in the U.S. personal computing publishing sector, accounting for
approximately 17% of the total advertising pages in all U.S. technology
publications serving this group of readers. CMP's publications targeting
personal computer users are as follows:
WINDOWS Magazine is a monthly magazine for purchasers of Windows-related
graphical computing products ranging from hand-held units through desktop PCs
and workstations to enterprise-wide systems. It has grown from 75,000 to more
than 750,000 paid subscribers since it was acquired in 1991 (as WINDOWS and OS/2
Magazine) and relaunched by CMP in 1992.
HomePC is a monthly magazine that focuses on entertainment, education and
personal productivity products and "how-to's" for home computing enthusiasts and
offers a mix of product news, reviews and commentary. It received the Computer
Press Award for "Best Broad Interest Magazine" for 1995.
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NetGuide Magazine is a monthly magazine for business buyers of online
products and services that features information about Internet tools, techniques
for accessing and using online resources, reviews of Internet-related hardware
and software and information to help readers set up and run World Wide Web sites
and other Internet-related businesses.
INTERNATIONAL
CMP offers U.S. advertisers access to a global network of technology
publications serving the builders, sellers and users of technology worldwide.
The Company publishes a magazine in France and produces publications in joint
ventures with local publishers in Germany and the U.K. The Company also licenses
the titles, editorial content and designs of many of its U.S. publications to
foreign publishers. In 1996, the Company acquired M&T International, which is
the exclusive advertising sales representative in the United States and Canada
for more than 100 non-U.S. technology publications.
Informatiques Magazine is a wholly-owned, French-language bi-weekly
magazine published in Paris. It provides information on product developments,
strategies and trends for information system managers and technology-related
business managers at companies in France, Belgium and Switzerland. Since its
launch in 1994, Informatiques Magazine has become the second largest magazine in
the information services category in France in terms of paid subscribers
according to the Office de Justification de la Diffusion ("OJD"), an independent
circulation auditing firm in France.
Computer Reseller News (Germany) is a German-language bi-weekly newspaper
published in Munich by a joint venture between CMP and MagnaMedia Verlag AG.
Launched in 1995, this publication provides news, analysis and product
information for resellers, VARs and OEMs in Germany, Austria and Switzerland.
InformationWeek (United Kingdom) is a bi-weekly magazine published in
London by a joint venture between CMP and EMAP Business Communications Limited.
This publication was launched in March 1997 and targets information technology
decision-makers whose purchasing responsibilities extend across the enterprise.
Editorial content covers all technology areas, with in-depth product reviews.
Licensing Program. Through a selective licensing program, CMP enters into
licensing agreements for CMP's U.S. publications with local publishers in
numerous overseas markets. CMP currently has agreements with 22 foreign
publishers to license CMP editorial content and, in a number of cases, to use
the designs and titles of its U.S. publications. Under these licensing
arrangements, publications with CMP editorial content are distributed in more
than 60 countries. By licensing CMP's U.S. titles, editorial content and designs
to local publishers, CMP achieves further extensions of its publication brands.
Most licensing arrangements also permit CMP to provide advertising
representation services for its licensees.
Advertising Sales Representation. M&T International's network of
publications serves CMP's advertising customers by providing a single source for
the placement of advertisements, billing and market-specific translations and
customization of advertisements. The Company also sells advertising space to
local advertisers through its sales offices in Taiwan, Hong Kong and the U.K.
INTERNET SERVICES
With the 1994 launch of TechWeb (http://www.techweb.com), CMP became the
first major U.S. technology publisher to make all of its domestic print
publications accessible through a single World Wide Web site. TechWeb is one of
the most comprehensive technology sources on the World Wide Web and now
provides, in addition to CMP's publication archives, daily news updates, expert
analysis, product reports and other features for builders, sellers and users of
technology. Since TechWeb's launch, its traffic has grown to an average of two
million page-views per week. In 1996,
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CMP launched NetGuide (http://www.netguide.com), a real-time guide to Internet
events and information that averages more than 1.5 million page views per week,
and First-TV (http://www.first-tv.com), a 24-hour-a-day Internet-only
television/video network.
This year the Company plans to launch CMPnet, a World Wide Web site which
will serve as a single point of access for all of CMP's Internet services. In
addition to aggregating its Internet services into the single CMPnet site and
adding new content and services, CMP will use a common CMPnet sales force, which
CMP believes will be cost-efficient and effective for its advertisers. The
Company is also a joint venture partner in WebConnect, which offers Internet
media placement services.
OTHER CMP MARKETING SERVICES
CMP also generates additional revenues through a variety of marketing
services, including mailing list rentals and research and consulting services.
The Company offers these services to advertisers to help them to reach their
customers through other media.
Mailing List Rentals. CMP uses information from its subscription lists and
other available databases to compile detailed mailing lists for rental by
advertisers. CMP has the ability to customize its mailing list databases in
order to screen for specific business or demographic criteria selected by a list
renter and to match advertiser customer files against CMP's subscriber databases
in order to compile additional data regarding such customers, including job
function, purchase involvement, company size and other useful information. CMP
believes that, because its mailing lists provide such highly targeted data, they
are particularly attractive to its mailing list renters.
Other Marketing Services. CMP also provides its advertisers and marketing
customers with reprint services and event marketing services. CMP sponsors its
own industry forums and roundtables, including the InformationWeek 500
Conference and the Xchange Conference. CMP's Technology Research Center designs,
develops and implements quantitative and qualitative market research projects
relating to technology products and services.
EDITORIAL
CMP believes that its publications have established a reputation among
their readers and within the technology industry for authoritative and reliable
journalism. Each CMP publication has its own dedicated editorial staff,
including editors, researchers, designers and production personnel. To preserve
the editorial integrity of each publication's news reporting and analysis, the
Company seeks to maintain strict separation between the editorial and sales
staffs of each publication. The Company believes that its reputation for
objective, fair and credible editorial content contributes significantly to its
success.
CMP's editorial staffs meet frequently with readers of their particular
publications to understand better the information needs and interests of those
readers and thereby serve them more effectively. The Company devotes
considerable resources to the study of trends in its readership communities and
strives to make its publications the best-read and most widely used among its
target audiences.
The Company also uses high-quality design graphics, illustrations,
photography and other artistic elements to make its publications visually
attractive and accessible to readers. CMP's publications have won numerous
editorial and design awards from publishing and computer press societies.
As of March 31, 1997, CMP employed 418 editorial personnel. Many of the
Company's editors designers, programmers and contributors are recognized as
experts in their field and are regularly contacted by the press to comment on
developments and trends in technology areas.
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ADVERTISING SALES
In 1996, advertising revenues from all of CMP's publications and services
accounted for 88% of the Company's total revenues. Each of the Company's
publications has its own advertising sales team, complemented by a Corporate
Accounts sales team that provides large national advertisers with a single point
of contact for all CMP publications and services. Each CMP publication uses a
separate rate card to sell its advertising space, although advertisers may
qualify for discounts based on spending patterns across multiple CMP
publications. Because CMP is positioned as a single source for advertisers to
reach a broad spectrum of the technology market, CMP enables advertisers to
consolidate their advertising expenditures in a cost-effective manner.
Advertising revenues from CMP's controlled-circulation publications
accounted for approximately 72% of the Company's total revenues in 1996. CMP
markets advertising space in each of its controlled-circulation publications by
assuring advertisers that they will be able to reach a valuable, qualified
audience of technology professionals and managers who are likely to have an
interest in purchasing products or services in the sector of the technology
industry to which the particular publication relates. Because CMP offers its
advertisers access to a highly targeted and valuable subscriber base, it is able
to sell advertising space in its controlled-circulation publications at rates
that are higher than the average rates charged by publications aimed at more
general audiences.
As of March 31, 1997, CMP employed 335 salespeople, sales managers and
sales executives, plus 341 sales support staff and personnel who provide
customer service, research, promotional support and value-added programs for
advertisers. The Company believes it has built one of the most knowledgeable
sales teams in the technology publishing sector.
CIRCULATION
CMP limits its controlled-circulation publications to a pre-determined
number of "qualified recipients". It requires each person seeking to become a
"qualified recipient" for any of its controlled-circulation publications to
submit an annual application form on which the applicant provides information
regarding the primary products or services used at the applicant's business, the
dollar amount of annual purchases of components, equipment and services for
which the applicant has buying authority and the type of purchasing activities
in which the applicant engages. Once CMP accepts an applicant as a qualified
recipient for a controlled-circulation magazine or newspaper, that person is
entitled to receive the particular CMP publication for one year. The recipient
must requalify each year thereafter to continue receiving the publication.
Waiting lists are sometimes maintained by CMP for certain publications. When
recipients leave the industry or lose buying authority, their names are removed
from the subscription list, and eligible new applicants are added from a waiting
list, referral or other source of new applications.
CMP's subscriber information for each of its controlled-circulation
publications and for NetGuide Magazine is audited each year by BPA International
("BPA"), a nationally recognized auditor of periodical subscription lists
specializing in controlled-circulation publications. BPA's audits verify that
CMP's subscription information accurately identifies the number and job
characteristics of qualified recipients and that the qualified recipients are in
fact eligible to subscribe to the relevant publication under CMP's standards
established for that publication. The Audit Bureau of Circulation, another
nationally recognized auditor of periodical subscription lists, audits WINDOWS
Magazine and HomePC.
Subscriptions for CMP's paid-circulation publications are generated through
a mix of direct mail marketing, online promotion, insert cards in the Company's
magazines and advertising. Another source of subscriptions is the magazines'
content areas on the Internet.
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PRODUCTION AND DISTRIBUTION
CMP's publications and other printed materials are printed and bound by
independent printers. The Company believes that outside printing services are
readily available at competitive prices, and its publications are printed by
several different printers.
The principal raw material used in the Company's print publications is
paper. CMP is party to a number of long-term paper supply contracts under which
it purchases the bulk of the paper used by its printers to produce the Company's
publications. The Company believes that the existing arrangements providing for
the supply of paper are adequate and that, in any event, alternative sources are
available. Paper costs represent a significant expense for the Company,
accounting for approximately 9.9% of the Company's total operating costs and
expenses in 1996. Paper prices are affected by a variety of factors, including
demand, capacity, pulp supply and general economic conditions. Paper prices have
been volatile over the past several years. The Company's costs for paper,
relative to revenues, can vary from year-to-year due to increased paper demands
associated with the launch of new publications. See "Risk Factors -- Effect of
Increases in Paper and Postage Costs".
The Company uses third-party distributors to distribute the United States
and international editions of certain of its publications. The United States
editions of the Company's paid-circulation publications are distributed
nationally primarily by Murdoch Magazine Distributions, Inc., International
Periodical Distributors and Ingram Periodicals, Inc. to retailers, smaller
stores, and computer stores, and internationally by Worldwide Media Service,
Inc.
Many of the Company's publications are delivered to the United States
Postal Service directly by the printer. Postage costs also represent a
significant expense for the Company, accounting for approximately 5.7% of the
Company's total operating costs and expenses in 1996. In an attempt to contain
postal costs, the Company takes advantage of various postal discounts as well as
alternative delivery services.
PROMOTION AND MARKETING
The Company uses advertising, publicity, trade show presentations and
promotions to increase brand awareness for its publications and services and to
position its brands, as well as to generate subscriptions and increase online
traffic. The Company's marketing of its Internet services has been focused to
date on advertising in print publications and online venues. The Company plans
to increase total marketing expenditures for its Internet services in order to
increase traffic and build brand awareness.
COMPETITION
The Company faces significant competition with respect to its print
publications from a number of technology publishers, some of which have
substantially greater financial resources that may give them a competitive
advantage. In addition, the Company faces broad competition for audiences and
advertising revenue from other media companies that produce magazines,
newspapers and online content. Overall competitive factors include product
positioning, editorial quality, circulation, price and customer service.
Competition for advertising dollars is primarily based on advertising rates, the
nature and scope of readership, reader response to advertisers' products and
services, and effectiveness of sales teams.
There are several other technology publishing companies, including
Ziff-Davis Inc. ("Ziff-Davis"), International Data Group ("IDG") and Cahners
Publishing Company, which compete intensively with the Company in certain
sectors of the technology publishing market targeted by the Company's
publications. The Company estimates that there are more than 350 technology
magazines in the United States, most of which are published by smaller
publishers. Although in terms of advertising pages the Company's publications
are market share leaders in the OEM and
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<PAGE> 37
channel sectors of the technology publishing market, other publishers are the
market share leaders in the enterprise computing and personal computing sectors
of the market.
An increasing number of companies, some with significantly greater
resources than the Company, are developing online content and services for
delivery on the World Wide Web, and competing for audiences and the advertising
dollars that are currently being devoted to the Internet. The Company's World
Wide Web sites compete with other technology-related online content sites such
as c/net and ZDnet.
TRADEMARKS AND INTELLECTUAL PROPERTY RIGHTS
The Company regards its copyrights, trademarks, trade secrets and similar
intellectual property as critical to its success and relies upon copyright,
trademark and trade secrets laws, as well as confidentiality agreements with its
employees and others, to protect its rights. The Company pursues the
registration of its material trademarks in the United States and, depending upon
use, in certain other countries. Effective copyright, trademark and trade secret
protection may not be available in every country in which the Company's
publications and services are available.
From time to time, the Company may be subject to legal proceedings and
claims in the ordinary course of its business, including claims of alleged
infringement by the Company and its licensees of trademarks and other
intellectual property rights of third parties. The Company does not believe
there are any legal proceedings or claims that will have, individually or in the
aggregate, a material adverse effect on the Company's business, financial
condition or results of operations.
FACILITIES
CMP's world headquarters are located in Manhasset, New York, and the
Company has editorial, production and sales offices in many other cities in the
United States and around the world, including: Atlanta; Chicago; Dallas; Irvine,
California; Jericho, New York; Los Angeles; New York City; St. Paul; San
Francisco; San Mateo, California; Waltham, Massachusetts; Washington, D.C.; Hong
Kong; London; Munich; Paris; Taipei; and Tokyo.
The Company owns no material real estate and leases all of its offices from
third parties. The Founding Family has a 15% minority interest in the entity
from which the Company leases its Manhasset, New York offices. See "Certain
Relationships and Related Transactions". The Company believes that its
properties, taken as a whole, are in good operating condition and are suitable
and adequate for the Company's current business operations, and that suitable
additional or alternative space, including space available under lease options,
will be available at commercially reasonable terms for future expansion.
EMPLOYEES
As of March 31, 1997, the Company had a total of 1,605 employees. Of these
employees, 418 were engaged in editorial, 676 were engaged in sales, marketing
and related support activities, 36 were engaged in circulation, 62 were engaged
in production, 102 were engaged in information technology support and 311 were
engaged in general corporate, finance and administrative activities. None of the
Company's employees is represented by a labor union. The Company considers its
relationships with its employees to be excellent.
CMP and many of its employees actively participate in and contribute to
social programs in the communities where the Company operates. The CMP
Foundation is a non-profit organization created by the Company to direct
donations on behalf of the Company to worthy causes, most of which are
recommended by CMP's employee community action committee after considering
recommendations from employees and requests from outside groups. CMP's founders
also launched a non-profit organization, Institute for Community Development,
Inc., in 1989 to provide
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<PAGE> 38
intensive academic and social support programs for underperforming students in
low-income communities. See "Certain Relationships and Related Transactions".
The Company firmly believes that its social commitment and involvement are
important to building strong relationships among the Company, its employees and
the communities in which its employees live and work.
LITIGATION
There are no legal proceedings to which the Company is a party, other than
ordinary routine litigation incidental to the business of the Company which is
not otherwise material to the business or financial condition of the Company.
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<PAGE> 39
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------- --- --------------------------------------------------
<S> <C> <C>
Michael S. Leeds.................. 44 President, Chief Executive Officer and a Director
Kenneth D. Cron................... 40 Executive Vice President and President of
Publishing
Daniel H. Leeds................... 41 Executive Vice President, President of
International and a Director
Joseph E. Sichler................. 56 Vice President and Chief Financial Officer
Robert D. Marafioti............... 49 Vice President, Secretary and General Counsel
Pearl Turner...................... 57 Vice President
Tina Sanacore..................... 36 Treasurer
Barbara Kerbel.................... 50 Vice President of Corporate Communications
Grace Monahan..................... 41 Vice President and Chief Information Officer
Gerard G. Leeds................... 74 Co-Chairperson of the Board of Directors
Lilo J. Leeds..................... 69 Co-Chairperson of the Board of Directors
Richard A. Leeds.................. 43 Director
</TABLE>
OTHER KEY EMPLOYEES
Set forth below are certain key employees of CMP:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------- --- --------------------------------------------------
<S> <C> <C>
E. Drake Lundell, Jr. ............ 55 Senior Vice President, Personal Computing
Publications
Jeffrey L. Strief................. 41 Senior Vice President, Enterprise Computing
Publications
Rebecca S. Barna.................. 47 Vice President, Internet Media
Girish Mhatre..................... 47 Vice President, OEM Publications
John Russell...................... 37 Vice President, Channel Publications
</TABLE>
Gerard G. Leeds and Lilo J. Leeds are husband and wife. Michael S. Leeds,
Daniel H. Leeds and Richard A. Leeds are children of Gerard and Lilo Leeds.
Michael S. Leeds is President and Chief Executive Officer ("CEO") of the
Company and a member of the Board of Directors. Mr. Leeds joined CMP in 1984
when he launched CMP's travel group of publications with Business Travel News.
In 1985 he was promoted to Vice President and group publisher of CMP's travel
publications. He was responsible for the Company's entry into international
publishing in 1986, and he was named President and CEO of the Company in 1988.
Before joining CMP, Mr. Leeds was a publisher at Harcourt Brace Jovanovich and
prior to that, he served for five years as a marketing director and in sales at
Ziff-Davis.
Kenneth D. Cron is an Executive Vice President of the Company and the
President of Publishing. Mr. Cron joined CMP in 1978 as a salesperson for
Electronic Engineering Times. In 1983, he was named publisher of Computer
Reseller News, and in 1987 he was promoted to Vice President and group publisher
of the Company's OEM publications. In 1989, he also assumed group publisher
responsibilities for the channel publications. In 1992, Mr. Cron was appointed
Executive Vice President, Technology Publishing Division, and in 1994 he was
promoted to President of Publishing, in which role he now oversees CMP's
publishing activities. Prior to joining CMP, Mr. Cron was employed by IBM.
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<PAGE> 40
Daniel H. Leeds is an Executive Vice President of the Company and the
President of International, as well as a member of the Board of Directors. Since
joining CMP in 1985, Mr. Leeds directed CMP's printing business, its entry into
electronic publishing and its international operations. Mr. Leeds was appointed
President of International in 1992, in which capacity he directs CMP's non-U.S.
businesses, including its worldwide sales network, its non-U.S. publications and
Internet services, and its international licensing program. Prior to joining
CMP, he was a publisher at Harcourt Brace Jovanovich and earlier worked at
Digital Equipment Corporation and Schlumberger Ltd.
Joseph E. Sichler is a Vice President and the Chief Financial Officer of
the Company. Mr. Sichler joined CMP in 1992. From 1988 to 1992, he was Executive
Vice President and Chief Financial Officer of Devon Group Inc., a publishing,
printing and graphic arts company in Stamford, Connecticut. From 1982 to 1988,
he was Senior Vice President and Chief Financial Officer of Ensign Bickford, a
specialty chemicals company in Simsbury, Connecticut. From 1976 to 1982, Mr.
Sichler served with Heublein Inc. in Farmington, Connecticut, as Vice President
of Planning and Development.
Robert D. Marafioti is a Vice President and the Company's Secretary and
General Counsel. Mr. Marafioti joined CMP as its General Counsel in 1988. He was
previously Senior Vice President and Assistant General Counsel of JWT Group,
Inc., the parent company of J. Walter Thompson Company, Hill & Knowlton, Simmons
Market Research Bureau and other communications businesses.
Pearl Turner is a Vice President. Ms. Turner also serves as treasurer of
the CMP Foundation and as an advisor to the Company's employee action committee.
See "Business--Employees". Ms. Turner joined CMP in 1973 and became Assistant
Treasurer in 1980. She was promoted to Vice President and Treasurer in 1983.
Tina Sanacore was recently promoted from Assistant Treasurer to Treasurer
of the Company. Prior to assuming her first treasury post in 1996, Ms. Sanacore
was the business manager/assistant to the President of Publishing, and before
that held various financial and business management positions with CMP. Ms.
Sanacore joined CMP in 1985 as a staff accountant in the financial planning
department.
Barbara Kerbel is Vice President of Corporate Communications. Ms. Kerbel
joined CMP in 1981 as a copy editor and then worked on the launch of
CommunicationsWeek as senior editor. She then left CMP for a five-year hiatus
with Impressions-ABA Industries, Inc., a marketing communications firm. Ms.
Kerbel returned to CMP in 1989 as marketing director for CommunicationsWeek. She
was appointed director of Corporate Communications in 1993, and she was promoted
to her current position in 1995.
Grace Monahan is a Vice President and the Company's Chief Information
Officer ("CIO"). An 18-year veteran of the Company, she was appointed as CIO in
early 1996, from her previous position as Executive Vice President of
Operations. Ms. Monahan joined CMP in 1978 as a reader service analyst. In 1981,
she was named circulation director, and in 1988, she was promoted to Vice
President of Operations.
Gerard G. Leeds is Co-Chairperson of the Board of Directors and co-founded
the Company with his wife, Lilo Leeds, in 1971. Prior to founding CMP, Mr. Leeds
founded and was CEO of several electronics companies.
Lilo J. Leeds is Co-Chairperson of the Board of Directors and co-founded
the Company with her husband, Gerard Leeds, in 1971. Prior to becoming
Co-Chairperson, Lilo Leeds served as Senior Vice President of the Company and as
an officer and director of several electronics companies.
Richard A. Leeds is a member of the Board of Directors. Mr. Leeds is the
President of Computer Products Introductions Corp., a company that specializes
in developing and implementing
39
<PAGE> 41
marketing campaigns for new software products. Mr. Leeds founded Computer
Products Introductions Corp. in 1986.
E. Drake Lundell, Jr. is a Senior Vice President and the group publisher of
the Company's personal computing publications. After joining CMP in 1984, Mr.
Lundell founded CMP's InformationWeek in 1985 and was its publisher until 1990.
He was named publisher of WINDOWS Magazine in 1991, and he assumed his current
position in 1994. Before joining CMP, he was editor of Computerworld and
subsequently helped launch PCWeek, serving as its first associate publisher and
editor-in-chief. Mr. Lundell's group sold PC Week to Ziff-Davis in 1983.
Jeffrey L. Strief is a Senior Vice President and the group publisher of the
Company's enterprise computing publications. Mr. Strief joined CMP in 1985 as a
district sales manager for Computer Reseller News and became its publisher in
1988. He assumed group publisher responsibilities for the Company's channel
publications in January 1992 and for the OEM publications in June 1992. He moved
to his current position in 1994.
Rebecca S. Barna is a Vice President and group publisher of Internet Media
products. Ms. Barna was appointed to her current position in January 1997 with
responsibility for the Company's Internet services and related investments.
Prior to her promotion, Ms. Barna was the publishing director of the Company's
enterprise computing publications. In her eight-year career with CMP, she has
also served as editor-in-chief, publisher and publishing director of
InformationWeek. Before joining CMP, Ms. Barna held numerous editorial and
management positions, including editor of Datamation Magazine.
Girish Mhatre is a Vice President and group publisher of the Company's OEM
publications. Mr. Mhatre joined CMP in 1978 as a semiconductor reporter for
Electronic Engineering Times. In 1982, he was named editor-in-chief of
Electronic Engineering Times and in 1988 became its publisher. Mr. Mhatre was
appointed to his present position in 1994. Prior to joining CMP, he spent six
years as an electronics design engineer.
John Russell is a Vice President and the group publisher of the Company's
channel publications. He was promoted to his current position in 1994 from his
previous position as publishing director of the channel publications. Mr.
Russell has been in the computer industry and reseller channel for 15 years. He
first joined the Company in 1983 as an editor of Computer Reseller News, where
he served as editor-in-chief from 1987 until being named publisher in 1992.
BOARD OF DIRECTORS
The Company anticipates that the size of the CMP Board of Directors will be
increased to seven directors, and that two additional directors who are not
affiliates or present or former employees of the Company will be elected to the
Board (the "Independent Directors"). Each member of the Board of Directors holds
office until the next annual meeting of stockholders and until his or her
successor has been duly elected and qualified.
DIRECTOR COMPENSATION
All directors are reimbursed for expenses incurred in connection with
attendance at meetings of the Company's Board of Directors. Each non-employee
director currently receives an annual retainer of $10,000 for serving as a
member of the Board of Directors and a fee of $2,500 for each meeting of the
Board attended by such director. Following consummation of the Offerings, each
non-employee director will receive an annual retainer of $20,000 for serving as
a member of the Board, a fee of $2,500 for each meeting of the Board of
Directors attended by such director and a fee of $1,000 for each meeting of a
committee of the Board held on a date not coinciding with a meeting of the
Board. If a non-employee director beneficially owns less than 1% of the
Company's outstanding Common Stock, such director's annual retainer will be paid
50% in cash and 50% in the form of options to purchase Class A Common Stock.
Each non-employee director will have the right
40
<PAGE> 42
to waive the payment of all or any portion of the annual cash retainer in
exchange for options to purchase Class A Common Stock. Following initial
election and qualification to the Board of Directors, each non-employee director
who is not a member of the Founding Family will receive a grant of shares of
Class A Common Stock with a fair market value of $10,000, which may be
restricted shares. Directors who are also employees of the Company receive no
compensation for their service as directors of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Gerard Leeds, Lilo Leeds, Michael Leeds and Richard Leeds currently serve
on the Compensation Committee of the Board of Directors. Lilo Leeds, Michael
Leeds and Daniel Leeds currently serve on the Stock Plan Committee of the Board
of Directors. The Company anticipates that the Independent Directors will also
serve on the Compensation Committee and on the Stock Plan Committee. Michael
Leeds is President and CEO of the Company and Daniel Leeds is President of
International. Gerard and Lilo Leeds are Co-Chairpersons of the Board of
Directors.
On November 27, 1996, pursuant to Share Purchase Agreements, Gerard Leeds
and Lilo Leeds sold an aggregate of shares of Class A Common Stock to
Michael Leeds and Daniel Leeds. Michael Leeds purchased shares for an
aggregate purchase price of $594,000, and Daniel Leeds purchased shares
for an aggregate purchase price of $396,000. The purchase price for the Class A
Common Stock was determined by reference to an independent appraisal of the
market value of a minority interest in the Company as of June 30, 1991. In
connection with the purchase of Class A Common Stock, Michael Leeds and Daniel
Leeds each entered into a Stockholders' Agreement (collectively, the "Executive
Stockholders' Agreements") with the Company, Gerard Leeds and Lilo Leeds. The
Executive Stockholders' Agreements prohibit the disclosure or use of the
Company's proprietary or confidential information and restrict certain
competitive practices for two years following termination of employment with the
Company, or so long as the individual owns shares acquired under the respective
Share Purchase Agreements. The Executive Stockholders' Agreements also restrict
the amount and timing of any sales of the shares of Class A Common Stock. In
addition the Company granted Michael Leeds and Daniel Leeds options to purchase
and shares of Class A Common Stock, respectively, and each of them
entered into an employment agreement with the Company. See "--Option/SAR Grants
in Last Fiscal Year" and "--Employment Agreements".
The Company has guaranteed a loan to Michael Leeds of $3,000,000 and a loan
to Daniel Leeds of $1,700,000. The proceeds of both loans were used to pay taxes
in connection with their purchase of Class A Common Stock from Gerard Leeds and
Lilo Leeds. The loan to Michael Leeds is due and payable in full on November 14,
2001, but the Company has agreed to extend the guarantee until December 31,
2005. The loan to Daniel Leeds is due and payable in full on November 14, 2001,
but the Company has agreed to extend the guarantee until December 31, 2007.
For a discussion of certain other transactions and relationships involving
members of the Compensation Committee and the Stock Plan Committee who are also
members of the Founding Family, see "Certain Relationships and Related
Transactions".
41
<PAGE> 43
EXECUTIVE COMPENSATION
The following table shows compensation paid to, deferred or accrued for the
benefit of the Company's President and Chief Executive Officer and each of the
four remaining most highly compensated executive officers (the "Named Executive
Officers") for all services rendered to CMP during the fiscal year ended
December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
1996 ANNUAL COMPENSATION ---------------------
--------------------------------- RESTRICTED ALL OTHER
OTHER STOCK OPTIONS/ COMPENSA-
NAME AND PRINCIPAL POSITION SALARY BONUS ANNUAL (1) AWARDS (2) SARS (#) TION (3)
- --------------------------- -------- ---------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Michael S. Leeds........... $600,000 $1,908,062 -- $6,606,000 $13,236
President and CEO
Kenneth D. Cron............ 500,000 1,727,316 -- 4,404,000 17,888
President of Publishing
Daniel H. Leeds............ 400,000 506,814 $86,000 4,404,000 12,461
President of
International
Gerard G. Leeds(4)......... 185,000 1,317,000 -- -- -- 231
Co-Chairperson of the
Board of Directors
Lilo J. Leeds(4)........... 185,000 1,317,000 -- -- -- 231
Co-Chairperson of the
Board of Directors
</TABLE>
- ---------------
(1) The amount shown for Daniel Leeds, who is based in Europe, reflects a cost
of living allowance of $80,000 and a car allowance of $6,000. The Company
has not included in the Summary Compensation Table the value of incidental
personal perquisites furnished by the Company to the other Named Executive
Officers, since such value did not exceed the lesser of $50,000 or 10% of
the total of annual salary and bonus reported for such Named Executive
Officers.
(2) The amounts shown in the Summary Compensation Table represent the fair
market value of the restricted stock on the date of purchase, less the
amount paid by each Named Executive Officer for the shares. All shares of
restricted stock are shares of Class A Common Stock, and holders of
restricted stock are entitled to dividends, if any, paid on the Class A
Common Stock. As of December 31, 1996, Michael Leeds held a total of
shares of restricted stock with an appraised aggregate fair market
value of $7,200,000; Kenneth Cron held a total of shares of
restricted stock with an appraised aggregate fair market value of
$4,800,000; and Daniel Leeds held a total of shares of restricted
stock with an appraised aggregate fair market value of $4,800,000. Fair
market value was determined by an independent appraisal conducted by Furman
Selz LLC, one of the Underwriters of the Offerings. Following consummation
of the Offerings, sales of restricted stock by Michael Leeds, Daniel Leeds
and Kenneth Cron will be subject to the Executive Stockholders' Agreements.
See "--Compensation Committee Interlocks and Insider Participation" and
"Certain Relationships and Related Transactions".
(3) Amounts reported under "All Other Compensation" for each Named Executive
Officer include $231 for life insurance premiums paid by the Company for the
benefit of each Named Executive Officer under the Company's group life
insurance benefit plan, and the balance represents contributions made by the
Company on behalf of each Named Executive Officer under the Company's Profit
Sharing and Retirement Savings Plan.
(4) Following consummation of the Offerings, Gerard and Lilo Leeds will no
longer receive a salary or bonus from the Company and will only receive fees
for their services as non-employee directors of the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--1996 Compared with 1995" and "--Director Compensation".
42
<PAGE> 44
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth information for certain Named Executive
Officers with respect to grants of options to purchase Class A Common Stock of
the Company made during the fiscal year ended December 31, 1996. No grants of
SARs were made during the last fiscal year.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------------------------
PERCENT OF
TOTAL
OPTIONS/SARS
NUMBER OF GRANTED TO EXERCISE GRANT DATE
OPTIONS/SARS EMPLOYEES IN PRICE PER EXPIRATION PRESENT
NAME GRANTED(1) FISCAL YEAR SHARE(2) DATE(3) VALUE(4)
- ------------------ ------------ ------------ --------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Michael S. Leeds 28% 12/31/2008 $446,374
Kenneth D. Cron 36 12/31/2010 763,757
Daniel H. Leeds 36 12/31/2010 763,757
</TABLE>
- ---------------
(1) The options issued to Michael Leeds vest on December 31, 2003, and the
options issued to Kenneth Cron and Daniel Leeds vest on December 31, 2005.
The grant date for these options was November 27, 1996. These options are
subject to accelerated vesting if the Company meets certain performance
targets.
(2) The exercise price was set at the fair market value of the shares of
underlying Class A Common Stock on the date of grant. Fair market value was
determined by an independent appraisal conducted by Furman Selz LLC, one of
the Underwriters of the Offerings.
(3) The options expire five years after vesting. The expiration dates in the
table represent the latest date on which the options will expire.
(4) The present value of the options granted was estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions:
dividend yield of 5%, volatility of 0%, risk free interest rates of 6.02%
for options vesting in seven years and 6.22% for options vesting in nine
years and an expected life of seven to nine years.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table sets forth information for certain Named Executive
Officers with respect to options to purchase Class A Common Stock of the Company
and SARs held as of December 31, 1996. No options or SARs were exercised in the
last fiscal year.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
IN-THE-MONEY
NUMBER OF UNEXERCISED OPTIONS/ OPTIONS/SARS AT
SARS AT FISCAL YEAR-END (#) FISCAL YEAR-END ($)(1)
---------------------------------- ----------------------------------
NAME EXERCISABLE(2) UNEXERCISABLE EXERCISABLE(2) UNEXERCISABLE
- ----------------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Michael S. Leeds $264,000 $ 1,502,374
Kenneth D. Cron 264,000 1,819,757
Daniel H. Leeds 264,000 1,819,757
</TABLE>
- ---------------
(1) The options held by Michael Leeds, Daniel Leeds and Kenneth Cron were
granted as of November 27, 1996, and the exercise price was set at the fair
market value on the date of grant. Fair market value was determined by an
independent appraisal conducted by Furman Selz LLC, one of the Underwriters
of the Offerings.
(2) A maximum of 20% of the SARs held by any Named Executive Officer may be
exercised in any one fiscal year. Therefore, 20% of each Named Executive
Officer's SARs are listed in the table under "Exercisable" and the remaining
80% are listed under "Unexercisable".
STOCK INCENTIVE PLAN
The Company established the CMP Media Inc. 1996 Stock Option Plan (the
"Option Plan") effective December 2, 1996. Prior to consummation of the
Offerings, the Option Plan will be amended, restated and renamed the CMP Media
Inc. Stock Incentive Plan (the "Stock Plan"). The
43
<PAGE> 45
Option Plan provides for the issuance of non-qualified stock options to key
employees of the Company. Under the Option Plan, a maximum of shares
of Class A Common Stock are available for issuance as of December 31, 1996. The
Company intends to register the shares reserved under the Option Plan with the
Securities and Exchange Commission (the "SEC"). The Option Plan provides for
adjustments in the number of shares available for grant as options and in the
exercise price of such shares in the event of a stock split, stock dividend,
combination of shares, transfer of assets, merger, reorganization, spin-off,
spin-out or other similar change, exchange, reclassification of or any other
event affecting the Class A Common Stock at the discretion of the Stock Plan
Committee which administers the Option Plan.
The Stock Plan Committee will be composed of not less than three members,
two of whom must be disinterested members of the Company's Board of Directors,
who shall not be eligible to be granted options under the Option Plan while
serving as members of the Stock Plan Committee. The Stock Plan Committee
currently consists of Lilo Leeds, Michael Leeds and Daniel Leeds.
The Stock Plan Committee has the discretion to determine which eligible
individuals will receive options, the number of shares to be covered by the
options, the exercise and expiration dates of the options, the exercise price
and the terms and conditions of the options. The individuals eligible for awards
are key employees of the CMP Group (as defined in the Option Plan), excluding
Michael Leeds, Daniel Leeds and Kenneth Cron. In no event may an option be
granted under the Option Plan after December 31, 2005. No individual may receive
options for more than shares in any single taxable year of the
Company, unless the Stock Plan Committee expressly determines that an option
shall not be designed to comply with the safe-harbor performance-based exception
from the tax deductibility limitations of Section 162(m) of the Internal Revenue
Code. The exercise price of any option shall be determined by the Stock Plan
Committee, but may not be less than 75% of the fair market value of the stock on
the grant date, or, if greater, the par value of the stock. Options awarded
under the Option Plan generally are not assignable or transferable except by
will or by the laws of descent and distribution. The specific terms of any
option awarded under the Option Plan will be reflected in a stock option
agreement executed by the Company and the optionee. The Stock Plan Committee may
permit the exercise price to be paid (i) in cash or its equivalent; (ii) through
delivery of other shares of Class A Common Stock, which shall be valued at their
fair market value (provided that, if such shares were acquired by the optionee
pursuant to the Option Plan, such shares have been owned by the optionee for at
least six months prior to their transfer and delivery to the Company); (iii) by
any other method authorized by the Stock Plan Committee; or (iv) by any
combination of the foregoing methods of payment.
Once vested, an option may remain exercisable until the earliest of: (i)
the expiration date designated by the Stock Plan Committee, (ii) if the
optionee's employment ceases by reason of his or her death or Disability (as
defined in the Option Plan), two years after such termination of employment, or
(iii) if the optionee's employment ceases by reason of his or her Dismissal
Without Cause (as defined in the Option Plan), six months after the date of
termination of employment. If the optionee's employment ceases by reason of his
or her Retirement (as defined in the Option Plan), his or her options shall
remain exercisable and, to the extent not already vested, shall continue to vest
until the earlier of the expiration date or three years after the date of
termination of employment, unless otherwise determined by the Stock Plan
Committee. In any event, an option shall expire no later than the tenth
anniversary of the date it is granted.
Unless otherwise determined by the Stock Plan Committee, if an optionee's
employment with the Company terminates for any reason other than death,
Disability, Dismissal Without Cause or Retirement (as defined in the Option
Plan), all rights of the Optionee in any option, to the extent they have not
already expired or been exercised, shall terminate and be extinguished
immediately upon termination of employment. Notwithstanding the above, if an
optionee engages in competition (as defined in the applicable stock option
agreement) with the CMP Group, whether during or after his or her employment,
all rights of the optionee in any option, to the extent such rights have not
already expired or been exercised, shall terminate and be extinguished
immediately upon com-
44
<PAGE> 46
mencement of such competition. In the event the optionee exercises an option at
a time when, without the Company's knowledge or consent, he or she has already
engaged in competition with the Company, the Company may rescind and void such
exercise and optionee shall return upon demand by the Company such stock
certificate(s) representing the shares issued to him or her upon the exercise of
the option and still owned by the optionee.
If the optionee's employment terminates due to Dismissal Without Cause or
resignation for Good Reason (as defined in the Option Plan) within three years
after a Change in Control, then all of his or her options shall immediately vest
and shall remain fully exercisable until their respective expiration dates as
set forth in the applicable stock option agreements.
In the event that the Company redeems any shares of Class B Common Stock
owned by any member of the Founding Family pursuant to the 1991 Shareholders'
Agreement, the Company shall adjust the number of unissued shares of Class A
Common Stock subject to outstanding options under the Option Plan and shall
redeem any issued shares to the extent necessary to ensure that each optionee's
percentage interest in the Company remains the same as such interest would have
been but for such redemption of the Class B Common Stock.
The Option Plan may be amended, modified, suspended or terminated by the
Board of Directors of the Company in whole or in part at any time; provided that
(i) no such amendment, modification, suspension or termination of the Option
Plan may materially and adversely affect the rights of or obligations to any
optionee without such optionee's consent, and (ii) no amendment which renders
the grant or exercise of an option nonexempt under Rule 16b-3 of Section 16(b)
of the Securities Exchange Act of 1934 (the "Exchange Act") shall be made or be
effective.
The grant of an option under the Option Plan will not have any immediate
effect on the federal income tax liability of the Company or the optionee. If
the Stock Plan Committee grants an option to an optionee, then the optionee will
recognize ordinary income at the time he or she exercises the option equal to
the difference between the fair market value of the Class A Common Stock at that
time and the exercise price paid by the optionee, and the Company will receive a
deduction for the same amount.
In January 1997, the Stock Plan Committee approved the grant of and the
Company issued options to purchase an aggregate of shares of Class A
Common Stock under the Option Plan to eleven key employees. The exercise price
for these options was set at the fair market value of the Class A Common Stock
on the date of grant, as determined by an independent appraisal conducted by
Furman Selz LLC, and the options generally vest 15% each year from 1998 through
2001 and 20% each year in 2002 and 2003.
The Stock Plan will include substantially all of the provisions of the
Option Plan, as described above, and will also permit the award of additional
forms of equity-based incentive compensation, including incentive stock options,
stock appreciation rights, stock bonuses, restricted stock awards, performance
units and phantom stock as well as awards consisting of combinations of such
incentives.
The Stock Plan will permit the grant of Incentive Stock Options ("ISO's")
within the meaning of Section 422 of the Internal Revenue Code. ISO's issued
under the Stock Plan will be subject to the restrictions applicable to stock
options issued under the Option Plan, as set forth above, except as follows: (i)
the exercise price under any ISO shall be no less than the fair market value of
the stock as of the grant date (or, in the case of an individual owning stock
possessing 10 percent or more of the combined voting power of all classes of
stock, the exercise price shall be no less than 110 percent of the fair market
value as of the grant date); (ii) the aggregate fair market value (determined as
of the grant date) of stock for which any individual may be granted an ISO which
is exercisable for the first time in any calendar year may not exceed $100,000;
(iii) no ISO will be exercisable after the expiration of 10 years from the date
the option is granted (or, in the case of an individual owning stock possessing
10 percent or more of the combined voting power of all classes
45
<PAGE> 47
of stock, the options shall not be exercisable for more than five years after
the grant date); and (iv) each ISO shall cease to be exercisable no later than
three months following an optionee's termination of employment (or, in the case
of a termination by reason of Disability (as defined in the Stock Plan), each
ISO shall cease to be exercisable no later than one year following such
termination).
The Stock Plan Committee may grant stock appreciation rights as an
alternative to or supplement to a related stock option. A stock appreciation
right will entitle its holder to be paid an amount equal to the fair market
value of the Class A Common Stock subject to the stock appreciation right on the
date of exercise of the stock appreciation right less the exercise price of the
related stock option, or such other price as the Stock Plan Committee may
determine for such stock appreciation right.
The Stock Plan Committee may grant awards of stock as restricted stock,
bonus stock or deferred stock. Shares of Class A Common Stock covered by a
restricted stock award will be issued to the recipient at the time the award is
granted but will be subject to forfeiture in the event continued employment
and/or other conditions established by the Stock Plan Committee at the time the
award is granted are not satisfied. A stock bonus award or a deferred stock
award will provide for the future payment of cash or the issuance of shares of
Class A Common Stock to the recipient if continued employment and other
performance objectives established by the Stock Plan Committee at the time of
grant are attained. The performance objectives that must be attained to receive
any award subject to performance criteria will be designated by the Stock Plan
Committee and may be based on pre-established amounts of, among other things,
annual net income, operating income, cash flow, return on assets, return on
equity, return on capital or total stockholder return.
The Stock Plan Committee may award dividend equivalents, independently or
in conjunction with restricted stock, stock bonus or deferred stock awards,
which entitle the holder to the payment of amounts equal to the value of
dividends that may be paid with respect to shares of Class A Common Stock in the
future. Such dividend equivalents shall be paid or distributed when accrued or
shall be deemed to have been reinvested in additional shares or awards, or
otherwise reinvested.
Stock bonus awards, restricted stock awards and performance awards may, in
the discretion of the Stock Plan Committee, be settled in cash, on each date on
which shares of Class A Common Stock covered by the awards would otherwise have
been delivered or become unrestricted, in an amount equal to the fair market
value of such shares on such date.
The Stock Plan Committee has the discretion to provide, in an award under
the Stock Plan, that in the event of a change in control (as defined in the
Stock Plan): (i) the performance criteria of all performance awards and
performance-based restricted stock will be deemed fully achieved and all such
awards will become fully earned and vested; (ii) all options will become fully
exercisable and vested; and/or (iii) the restrictions, deferral limitations and
forfeiture conditions applicable to any other awards granted under the Stock
Plan will lapse and such awards will become fully vested.
There is no current intention to issue stock appreciation rights,
performance awards, restricted stock awards, deferred stock awards, stock bonus
awards or dividend equivalents under the Stock Plan.
EMPLOYEE STOCK PURCHASE PLAN
Prior to consummation of the Offerings, CMP intends to adopt the CMP Media
Inc. Employee Stock Purchase Plan (the "Purchase Plan"). The Purchase Plan will
be administered by the Stock Plan Committee. Each eligible employee will be
given an option to purchase up to a number of shares of Class A Common Stock
equal to 10% of his or her base annual compensation as in effect on the date of
the award, divided by the purchase price per share under the option. The Board
of Directors has authorized the issuance under the Purchase Plan of
shares of Class A Common Stock. CMP intends to register the shares reserved
under the Purchase Plan with the SEC.
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<PAGE> 48
CMP intends to issue options under the Purchase Plan as of , and to
issue options thereafter at such time as the Stock Plan Committee may determine
in its sole discretion.
Options granted under the Purchase Plan will be exercised six months after
the grant date. In no case may an employee receive an option which would permit
him or her to purchase more than $10,000 of shares, valued as of the grant date,
for each calendar year in which the option is outstanding. Eligible employees
are those individuals employed by CMP or any of its subsidiaries for at least
three months as of the grant date, other than certain part-time employees,
temporary employees or any employee who, immediately after the grant date, would
own more than 5% of the total combined voting power or value of all classes of
stock of CMP. The price of the shares purchased by employees under the Purchase
Plan will be determined at the discretion of the Stock Plan Committee, but will
not be less than 85% of the fair market value of the Class A Common Stock on the
grant date or 85% of the fair market value of the Class A Common Stock on the
exercise date. Employees electing to participate must authorize CMP to withhold
from their pay each payroll period during the six months succeeding the grant
date, an amount to be applied toward the purchase of shares.
Generally, the employee does not recognize taxable income, and CMP is not
entitled to an income tax deduction, on the grant or exercise of an option under
the Purchase Plan. If the employee does not sell the shares acquired upon
exercise of his or her option until at least one year after the date he or she
exercised the option and at least two years after the date the option was
granted to him or her, then the discount between the fair market value of the
shares on the date of grant and the exercise price will be recognized as
ordinary income and the appreciation over the fair market value as of the date
of grant will be treated as a capital gain. In such case, CMP will be entitled
to an income tax deduction corresponding to the amount of ordinary income
recognized by the employee. If the employee sells the shares acquired upon the
exercise of his or her option at any time within one year after the date of
exercise of the option, or two years after the date the option was granted, then
the employee will recognize ordinary income in an amount equal to the excess, if
any, of the lesser of the sale price or the fair market value on the date of
exercise, over the exercise price of the option. In the event of such a
"disqualifying" disposition, CMP will generally be entitled to a deduction in an
amount equal to the amount of ordinary income recognized by the employee.
The Purchase Plan may be amended, suspended or terminated by the Board of
Directors at any time, provided no such amendment, suspension or termination of
the Purchase Plan may adversely affect accrued rights of or obligations to the
participants without such participants' consent, and any such amendment,
suspension or termination will be subject to the approval of CMP stockholders to
the extent required by any federal or state law or regulation of any stock
exchange.
1988 EQUITY APPRECIATION PLAN
The Company established the CMP Publications, Inc. 1988 Equity Appreciation
Plan (the "EAP") effective January 1, 1988. The EAP provides for the issuance of
incentive deferred compensation to key employees and directors of the Company in
the form of Share Appreciation Rights ("SARs"). Each SAR represents an interest
in the appreciation of an Appreciation Plan Share, the value of which is
determined by a formula which considers pre-tax earnings and annual net sales of
the Company and its affiliates (an "EAP Share"). Thus, the SARs increase in
value as the Company's sales and profits increase.
The value of a SAR depends upon the appreciation in the value of the EAP
Share on the December 31 immediately preceding the date of redemption, less the
value of the EAP Share on the date of grant. As of December 31, 1987, the base
value of each EAP Share was deemed to be $3.80. No later than April 1 of each
year, a participant may elect to redeem a portion of his or her SARs. Normally,
payment of 50% of the value of the SARs redeemed each year shall be made by June
30 of that year, and the remainder shall be paid by December 15 of such year.
The Board of Directors of the Company has the discretion to delay (but by no
more than five years) up to two-thirds of the redemption payments of SARs, in
the event that such payments for the calendar year would exceed
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<PAGE> 49
20% of pre-tax profits of the Company for the preceding year, or under
extraordinary circumstances for a reason deemed appropriate by the Board of
Directors. All payments made under the EAP are in the form of cash.
The Board of Directors of the Company determines which key employees and
directors shall be granted SARs under the EAP. The maximum number of SARs which
all of the participants may receive in total under the EAP are limited to
2,000,000. SARs have been awarded to ten key employees of the Company, two of
whom are also directors of the Company. No SARs have been awarded to directors
for their service as directors of the Company, and the Board of Directors has
determined that no more SARs will be awarded under the EAP. The SARs normally
are subject to a nine-year redemption schedule beginning, at the election of the
participant, as early as June 30, 1993, and ending on June 30, 2002, unless the
Board of Directors provides an extension. Under the redemption schedule, a
participant must have redeemed at least 20% of his or her SARs as of June 30,
1998, 40% as of June 30, 1999; 60% as of June 30, 2000, 80% as of June 30, 2001
and 100% as of June 30, 2002; provided, however, that no more than 20% of a
participant's SARs may be redeemed in any one year. The Board of Directors has
the discretion to accelerate the payment of any or all redemptions and payments.
In the event a participant terminates employment with the Company for any
reason other than Termination for Cause (as defined in the EAP) or death, the
participant shall remain eligible to redeem equal percentages of his or her
remaining SARs in five annual installments commencing on the June 30 immediately
following the termination. In the event that a participant terminates employment
with the Company due to the participant's death, all of the employee's remaining
SARs shall be redeemed immediately at their value as of the December 31
immediately preceding the participant's death, and paid in ten semi-annual
installments commencing on the June 30 immediately following the participant's
death. In the event a participant is terminated for Cause or Competes (as such
terms are defined in the EAP) with the Company, he or she shall forfeit all SARs
which are not yet paid.
PROFIT SHARING & RETIREMENT SAVINGS PLAN
CMP established a defined contribution plan, now called the CMP Media Inc.
Profit Sharing & Retirement Savings Plan (the "Savings Plan"), effective October
1, 1977. The Savings Plan includes a qualified cash or deferred arrangement
under Section 401(k) of the Internal Revenue Code. Employees of CMP are eligible
to participate in the profit sharing portion of the Savings Plan as of the
January 1 following their attainment of age 20 1/2, subject to certain
exceptions. Employees of CMP who have attained age 20 1/2 are eligible to
participate in the cash or deferred arrangement portion of the Savings Plan as
of the first day of the quarter following three months of service, subject to
certain exceptions. Subject to limitations imposed by law, an employee
participating in the cash or deferred arrangement portion of the Savings Plan
may elect to defer and have contributed to the Savings Plan an amount up to 15%
of such employee's eligible compensation, on a pre-tax basis. The Savings Plan,
as amended, provides for a matching contribution to be made by CMP. For each
employee deferral, CMP will contribute an amount equal to 50% of the deferral,
but in no event more than 3% of the employee's eligible compensation. Matching
contributions are allocated only to those employees qualified to receive profit
sharing contributions and actively employed on the first and last business days
of the calendar year, subject to certain exceptions. In addition, under the
profit sharing component of the Savings Plan, CMP contributes an amount equal to
a percentage of each eligible employee's compensation; the percentage is based
on the employee's years of employment with CMP and eligible compensation,
subject to a minimum annual contribution of $1,000 for every eligible
participant. Profit sharing contributions are allocated only to those employees
who both are employed on the first and last business days of the calendar year
and have completed at least 1,000 hours of service during such calendar year,
subject to certain exceptions. Both matching contributions and profit sharing
contributions are subject to a seven-year vesting schedule that provides for 20%
vesting after completion of three years of service with an additional
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<PAGE> 50
20% vested for each additional year of service, so that an employee's account is
100% vested after seven years of service.
PENSION PLAN
CMP established a defined benefit pension plan, now called the CMP Media
Inc. Pension Plan (the "Pension Plan"), effective January 1, 1980. The Pension
Plan was frozen as of December 31, 1992, so no additional benefits accrue under
the Pension Plan. Prior to December 31, 1992, employees of CMP who completed one
year of service and attained age 21 were eligible to participate in the Pension
Plan, subject to certain exceptions. The benefit provided under the plan is
payable monthly for the life of the participant. The amount of the benefit is
equal to 17% of the eligible employee's average monthly compensation, subject to
a reduction for those employees with less than 15 years of service, with CMP, as
determined on December 31, 1992. Benefits under the Pension Plan are subject to
a vesting schedule that provides for 20% vesting after completion of three years
of service, with an additional 20% vested for each additional year of service
and with 100% vesting after seven years of service. The Named Executive Officers
who are participants in the plan are Michael Leeds, Daniel Leeds and Kenneth
Cron, and the frozen monthly benefit payable for the life of each such Named
Executive Officer is approximately $728, $530 and $1,002, respectively.
EMPLOYMENT AGREEMENTS
Michael Leeds, Daniel Leeds and Kenneth Cron each have an employment
agreement with the Company. Each employment agreement is terminable at the will
of either party, provided that the employee gives ninety days notice of any
voluntary resignation or ten business days notice of a Resignation for Good
Reason, or the Company gives ten business days notice of a Dismissal for Cause
(as defined in the respective employment agreements). Each agreement provides
that the employee shall be entitled to an annual base salary, the benefits
provided to employees generally and an annual incentive bonus determined by the
Compensation Committee of the Board of Directors.
Each agreement prohibits the disclosure or use of any of the Company's
confidential or proprietary information. The agreements with Michael Leeds and
Daniel Leeds provide that the employee will not compete with the Company for up
to three years following termination of employment as long as the Company
continues to pay cash compensation as determined under the respective
agreements; provided, however, that such payments will be made only if
employment with the Company terminates by reason of Dismissal Without Cause or
Resignation For Good Reason (as defined in the respective employment agreements)
and not by reason of voluntary resignation or Dismissal For Cause (as defined in
the respective employment agreements) and only until the employee attains the
age of sixty-five. The agreements with Michael Leeds and Daniel Leeds also
provide that, upon termination of employment by reason of retirement at or after
attainment of age 65, the Company has the right to require, at its option,
continued compliance with the non-compete covenants for a period of up to two
additional years as long as the Company continues to pay an amount equal to that
determined under the agreements. The agreement with Mr. Cron provides that he
will not compete with the Company for up to five years following termination of
employment as long as the Company pays him cash compensation as determined under
his employment agreement. The agreement with Mr. Cron also provides that, upon
termination of employment by reason of retirement at or after attaining age 65,
the Company has the right to require, at its option, continued compliance with
the non-compete covenants for a period of up to five additional years as long as
the Company continues to pay cash compensation determined under his employment
agreement.
EMPLOYEE SHARE GRANTS
Upon the consummation of the Offerings, certain members of the Founding
Family will make a gift from their personal holdings to each employee of the
Company who is employed both on
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<PAGE> 51
May 9, 1997 and on the date of consummation of the Offerings shares of
Class A Common Stock plus shares for each full year of service
rendered by such employee. These shares of Class A Common Stock will be held in
trust for the benefit of such employees for one year. An aggregate of
approximately shares of Class A Common Stock will be given to
employees pursuant to this arrangement.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Gerard and Lilo Leeds founded the Institute for Community Development (the
"Institute") in 1989, and they currently serve as co-chairpersons of its board
of directors. The Institute is a non-profit organization dedicated to providing
quality education for underperforming students in low-income communities. The
Institute's principal programs, STAR (Success Through Academic Readiness) in
high schools and COMET (Children of Many Educational Talents) in middle schools,
assist children considered most at risk through academic support, counseling and
personal development programs. The Company supports the Institute by providing
it with office space and services without charge at its corporate headquarters
in Manhasset, New York, and at its New York City office. The Company incurred
expenses of approximately $441,000, $489,000 and $544,000 in 1994, 1995 and
1996, respectively, on behalf of the Institute. The Company intends to continue
to support the Institute, and expenses incurred by the Company on behalf of the
Institute in 1997 are anticipated to be approximately $643,000. CMP's Board of
Directors has adopted a resolution to the effect that aggregate annual
contributions by the Company, whether in cash or in kind, to public or private
charities or foundations (including, without limitation, the Institute) will not
exceed 3% of the Company's consolidated income before provision for income taxes
for the preceding fiscal year.
Gerard and Lilo Leeds founded the Margaret and Richard Lipmanson Foundation
(the "Lipmanson Foundation") and the Caroline and Sigmund Schott Foundation (the
"Schott Foundation", and together with the Lipmanson Foundation, the
"Foundations"), and Gerard and Lilo Leeds are officers and directors of both the
Lipmanson Foundation and the Schott Foundation. Prior to the consummation of the
Offerings, Gerard and Lilo Leeds will donate shares of Class A
Common Stock to the Lipmanson Foundation and shares of Class A
Common Stock to the Schott Foundation, and the Foundations will sell all such
shares in the Offerings. See "Principal and Selling Stockholders". The
Foundations will use the proceeds from the sale of shares of Class A Common
Stock in the Offerings primarily to support quality public education and child
care in low-income communities.
The Founding Family has a 15% ownership interest in the facility which the
Company leases as its principal offices. The existing lease expires in November
1999. Annual rental expense under this lease is approximately $4,500,000.
Michael Leeds is a member of the board of directors and treasurer of BPA
International, a not-for-profit membership association. Mr. Leeds' membership on
the BPA board of directors expires in May 1997. The Company paid BPA
approximately $255,000, $215,000 and $157,000 in 1994, 1995 and 1996,
respectively, for circulation auditing and other services.
The Company and the members of the Founding Family have entered into a
Stockholders' Agreement (the "1997 Stockholders' Agreement") which, in part,
governs the voting of shares of Common Stock held by members of the Founding
Family, provides registration rights in certain circumstances and restricts the
sale of Common Stock held by members of the Founding Family following
consummation of the Offerings. With respect to voting for directors of the
Company, the 1997 Stockholders' Agreement provides that the members of the
Founding Family will vote to elect Gerard and Lilo Leeds (for so long as they
may choose to serve as directors) as well as any Sibling Stockholder (as defined
in the 1997 Stockholders' Agreement) who is a full-time executive officer of the
Company (a "Sibling Officer") as directors of the Company. The 1997
Stockholders' Agreement also provides that the members of the Founding Family
will vote to elect one Sibling Stockholder who is not a full-time executive
officer of the Company as a director of the Company for a one-year
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term, subject to certain conditions, with the eldest non-executive Sibling
Stockholder serving first and the others following in descending order of age,
and that this process will be repeated in future years such that one Sibling
Stockholder who is not a full-time executive officer shall be entitled to serve
on the Board of Directors of the Company at all times. With respect to voting on
matters submitted to stockholders for a vote as long as either Gerard or Lilo
Leeds is alive, the members of the Founding Family will vote in accordance with
the position taken on such matters by the holders of 70% or more of the combined
voting power of the Class A Common Stock and Class B Common Stock held by
members of the Founding Family (the "Combined Voting Power"). If Gerard and Lilo
Leeds are not living or after March 1, 2002, whichever first occurs, and a
majority of the Sibling Officers support the matter, the members of the Founding
Family will vote in accordance with the position taken by Sibling Stockholders
holding 55% or more of the Combined Voting Power, determined without regard to
the Common Stock then held, if any, by Gerard and Lilo Leeds. If Gerard and Lilo
Leeds are not living or after March 1, 2002, whichever first occurs, and less
than a majority of the Sibling Officers support the matter, the members of the
Founding Family will vote in accordance with the position taken by Sibling
Stockholders holding 65% or more of the Combined Voting Power, determined
without regard to the Common Stock then held, if any, by Gerard and Lilo Leeds.
The 1997 Stockholders' Agreement provides that beginning in 1998 any member
of the Founding Family may request that the Company register shares of Class A
Common Stock held by such member under the Securities Act, subject to certain
conditions. Other members of the Founding Family have the right to participate,
subject to certain exceptions, in any registration requested by another member
of the Founding Family. The Company will pay all expenses related to three such
registrations under the 1997 Stockholders' Agreement. In addition, if the
Company proposes to register additional shares of Common Stock under the
Securities Act for a public offering for cash, (other than in the Offerings,
with respect to an employee benefit plan or in connection with a transaction
governed by Rule 145 of the Securities Act) any member of the Founding Family
may request that shares of Common Stock held by such member be included in such
registration, subject to certain conditions and exceptions, and the Company will
pay all expenses related to any such registration. Other than sales of Common
Stock by means of an effective registration statement or an exemption from
registration provided by Rule 144 of the Securities Act, no member of the
Founding Family will be permitted to sell, transfer or dispose of any shares of
Common Stock in a private transaction to a Third Party (as defined in the 1997
Stockholders' Agreement) without the approval of all Sibling Officers; provided,
however, that if members of the Founding Family holding 80% or more of the
Combined Voting Power approve a sale, transfer or disposition to a Third Party,
then members of the Founding Family who did not approve of such Third Party
transaction may elect to purchase the shares being offered to such Third Party
at the same price and subject to the same terms and conditions offered to the
Third Party. After February 28, 2002 or prior thereto if Gerard and Lilo Leeds
are not living, a sale, transfer or disposition to a Third Party may be approved
by the affirmative vote of Sibling Stockholders holding 65% or more of the
Combined Voting Power, determined without regard to the Common Stock, if any,
then held by Gerard and Lilo Leeds and, if so approved, members of the Founding
Family who did not approve of such Third Party transaction may elect to purchase
the shares being offered to such Third Party at the same price and subject to
the same terms and conditions offered to the Third Party.
The Company has a note receivable from Kenneth Cron, the principal amount
of which was $770,000 as of December 31, 1996. This note, which bears interest
at a rate which approximates LIBOR, provides for quarterly interest payments and
annual principal payments through its repayment in 2023.
On November 27, 1996, pursuant to a Share Purchase Agreement, Gerard Leeds
and Lilo Leeds sold shares of Class A Common Stock to Kenneth Cron for an
aggregate purchase price of $396,000. The purchase price for the Class A Common
Stock was determined by reference to an
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independent appraisal of the market value of a minority interest in the Company
as of June 30, 1991. In connection with the purchase of Class A Common Stock,
Mr. Cron entered into an Executive Stockholders' Agreement substantially similar
to those entered into by Michael Leeds and Daniel Leeds, except that the
restrictions on certain competitive practices continue for five years following
termination of Mr. Cron's employment with the Company. See
"Management -- Compensation Committee Interlocks and Insider Participation". In
addition, the Company has granted Mr. Cron options to purchase shares of Class
A Common Stock, and Mr. Cron has entered into an employment agreement with the
Company. See "-- Option/SAR Grants in Last Fiscal Year" and "-- Employment
Agreements".
For a discussion of certain other relationships and transactions involving
certain directors and executive officers who are members of the Compensation
Committee or the Stock Option Committee of the Board of Directors see
"Management -- Compensation Committee Interlocks and Insider Participation".
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<PAGE> 54
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of March 31, 1997, and as adjusted to
reflect the sale of shares of Class A Common Stock by CMP and
shares of Class A Common Stock by the Selling Stockholders in the
Offerings, by (i) each person known by CMP to be the beneficial owner of more
than 5% of any class of the Company's voting Common Stock, (ii) the Named
Executive Officers, (iii) all of the Company's directors and executive officers
as a group and (v) each Selling Stockholder. The Company will not receive any of
the proceeds from the sale of the shares of Class A Common Stock being sold by
the Selling Stockholders. Unless otherwise noted, each holder has sole voting
and investment power with respect to all shares of stock listed as owned by such
person.
<TABLE>
<CAPTION>
CLASS A COMMON STOCK
------------------------------------------ PERCENT OF VOTE
CLASS B OF ALL CLASSES OF
BEFORE AFTER COMMON COMMON STOCK(2)
OFFERINGS SHARES OFFERINGS STOCK ----------------------
NAME OF BENEFICIAL -------------- BEING -------------- -------------- BEFORE AFTER
OWNER(1) NUMBER % OFFERED NUMBER % NUMBER % OFFERINGS OFFERINGS
- ------------------------- ------ ---- ------- ------ ---- ------ ---- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gerard G. Leeds (3)......
Lilo J. Leeds (3)........
Michael S. Leeds(4)...... --
Daniel H. Leeds(5)....... --
Richard A. Leeds......... --
Greg Jobin-Leeds(6)...... --
Jennifer Leeds........... --
Kenneth D. Cron(7)....... --
The Lipmanson
Foundation(3)..........
The Schott
Foundation(3)..........
All Directors and
executive officers as a
group (12 persons).....
</TABLE>
- ---------------
(1) Gerard G. Leeds and Lilo J. Leeds are husband and wife. Michael S. Leeds,
Daniel H. Leeds, Richard A. Leeds, Greg Jobin-Leeds and Jennifer Leeds are
the children of Gerard and Lilo Leeds. The address for each beneficial
owner, other than the Foundations, is c/o CMP Media Inc., 600 Community
Drive, Manhasset, New York 11030.
(2) Holders of Class A Common Stock are entitled to one vote per share, and
holders of Class B Common Stock are entitled to ten votes per share. Holders
of both classes of Common Stock will vote together as a single class on all
matters presented for a vote of stockholders, except as otherwise required
by law. See "Description of Capital Stock -- Common Stock -- Voting Rights".
(3) shares of Class A Common Stock and shares of Class B
Common Stock are held by Gerard Leeds, and shares of Class A
Common Stock and shares of Class B Common Stock are held by Lilo
Leeds, which gives effect to their conversion of an aggregate of
shares of Class B Common Stock into an equal number of shares of
Class A Common Stock. As husband and wife, Gerard and Lilo Leeds are deemed
to be the beneficial owner of shares held by the other spouse and,
therefore, the combined beneficial ownership is shown in the table. Gerard
and Lilo each disclaim beneficial ownership of the shares held by the other.
Gerard and Lilo Leeds plan to use a substantial portion of the
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<PAGE> 55
proceeds from their sale of Class A Common Stock in the Offerings to fund
certain non-profit organizations and programs. Prior to the consummation of
the Offerings, each of Gerard and Lilo Leeds will donate a total of
shares of Class A Common Stock to the Foundations, which shares
are being sold by the Foundations in the Offerings. In addition, upon the
consummation of the Offerings, Gerard and Lilo Leeds will give approximately
shares of Class A Common Stock to the Company's employees and
approximately shares of Class A Common Stock to certain other
individuals.
(4) Includes shares of Class A Common Stock and shares of
Class B Common Stock held in a trust by Michael Leeds as trustee for certain
members of his family, and excludes shares of Class A Common Stock
issuable upon the exercise of options that are not exercisable within 60
days.
(5) Includes shares of Class A Common Stock and shares of
Class B Common Stock held in a trust by Daniel Leeds as trustee for certain
members of his family, and excludes shares of Class A Common Stock
issuable upon the exercise of options that are not exercisable within 60
days.
(6) Includes shares of Class B Common Stock held in trust by Greg
Jobin-Leeds as trustee for certain members of his family.
(7) Includes shares of Class A Common Stock held in a trust by Kenneth
Cron as trustee for certain members of his family, and excludes
shares of Class A Common Stock issuable upon the exercise of options that
are not exercisable within 60 days.
54
<PAGE> 56
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company was founded in 1971 as CMP Publications, Inc., a New York
corporation. On May 24, 1996, a new corporation, CMP Media Inc., was
incorporated in Delaware. On May 31, 1996, CMP Publications, Inc. was merged
with and into CMP Media Inc. so that, effective as of such merger, CMP Media
Inc. possessed all the rights and became subject to all the liabilities of CMP
Publications, Inc.
The Company has the authority to issue shares of common stock,
par value $.01 per share, of which shares are designated Class A
Common Stock (the "Class A Common Stock"), shares are designated
Class B Common Stock (the "Class B Common Stock"), and shares are
designated Class C Common Stock (the "Class C Common Stock"). Prior to the
consummation of the Offerings, all holders of Class C Common Stock will exchange
all the outstanding shares of Class C Common Stock for shares of either Class A
Common Stock or Class B Common Stock, and following the Offerings, the Company
will no longer have the authority to issue any additional shares of Class C
Common Stock. The Class A Common Stock, the Class B Common Stock and the Class C
Common Stock collectively are sometimes referred to as the "Common Stock". The
Company will also be authorized to issue shares of Preferred Stock,
par value $.01 per share (the "Preferred Stock").
COMMON STOCK
Except as otherwise set forth below or as otherwise required by law, the
rights and privileges of each class of the Common Stock are identical in all
respects, including the right to participate ratably in dividends and
liquidation distributions and the right of the members of a class of Common
Stock to participate ratably in offers by the Company to repurchase shares of
Common Stock that are directed to all of the holders of any other class of the
Common Stock. No shares of any class of Common Stock may be subdivided,
consolidated, reclassified or otherwise changed unless concurrently the shares
of the other classes of Common Stock are subdivided, consolidated, reclassified
or otherwise changed in the same proportion and the same manner. No class of
Common Stock has preemptive rights.
VOTING RIGHTS
Each outstanding share of Class A Common Stock is entitled to vote on each
matter on which the stockholders of the Company are entitled to vote, and each
holder of Class A Common Stock is entitled to one vote for each share of such
stock held by such holder. Each outstanding share of Class B Common Stock is
entitled to vote on each matter on which the stockholders of the Company are
entitled to vote, and each holder of Class B Common Stock is entitled to ten
votes for each share of such stock held by such holder. The holders of the
Common Stock entitled to vote on any matter vote together as a single class on
all such matters. The stockholders of the Company are not entitled to cumulate
their votes in any election of the directors of the Company.
DIVIDENDS
The Board of Directors of the Company may cause dividends to be paid to
holders of shares of Common Stock out of funds legally available for the payment
of dividends; however, the Company does not anticipate paying dividends in the
foreseeable future. See "Dividend Policy". Any dividend or distribution on the
Common Stock shall be payable on shares of Class A Common Stock and Class B
Common Stock share and share alike; provided that in the case of dividends
payable in shares of Class A Common Stock or Class B Common Stock of the
Company, or options, warrants or rights to acquire shares of such Common Stock
or securities convertible into or exchangeable for shares of such Common Stock,
the shares, options, warrants, rights or securities so payable shall
55
<PAGE> 57
be payable in shares of, or options, warrants or rights to acquire or securities
convertible into or exchangeable for, Common Stock of the same class upon which
the dividend or distribution is being paid.
LIQUIDATION RIGHTS
In the event of any dissolution, liquidation or winding up of the affairs
of the Company, whether voluntary or involuntary, after payment or provision for
payment of the debts and other liabilities of the Company, the remaining assets
and funds of the Company, if any, shall be divided among and paid ratably to the
holders of Class A Common Stock and the holders of Class B Common Stock. A
merger or consolidation of the Company with or into any other corporation or a
sale or conveyance of all or any part of the assets of the Company (which shall
not in fact result in the liquidation of the Company and the distribution of
assets to stockholders) shall not be deemed to be a voluntary or involuntary
liquidation or dissolution or winding up of the Company.
CONVERSION RIGHTS
Each and every share of Class B Common Stock is convertible into Class A
Common Stock at any time at the option of the holder. Such conversion shall be
on a share-for-share basis, one share of Class A Common Stock for each share of
Class B Common Stock so converted. Shares of Class A Common Stock are not
convertible.
Each share of Class B Common Stock shall convert automatically into one
fully paid and non-assessable share of Class A Common Stock upon its sale,
assignment, gift or other transfer to a party or entity other than a Permitted
Transferee. A "Permitted Transferee" of a holder of Class B Common Stock (a
"Class B Stockholder") shall be (i) any member of the Founding Family; (ii) any
trust established and maintained principally for the benefit of one or more
members of the Founding Family and where one or more members of the Founding
Family has a general or special testamentary power of appointment or general or
special non-testamentary power of appointment limited to any Permitted
Transferee or Permitted Transferees thereof; or (iii) any corporation,
partnership or other business entity where (A) the majority of the board of
directors or other managing body are comprised of the members of the Founding
Family or (B) all the beneficial ownership, or ownership of equity securities of
such business entity representing voting control over such entity, is held by
members of the Founding Family and/or any Permitted Transferee or Permitted
Transferees thereof; provided, however, that if the Class B Stockholder who made
such transfer, and all Permitted Transferees thereof, cease, for whatever
reason, to hold all of the beneficial ownership, or ownership of equity
securities representing voting control, of such corporation, partnership or
other business entity, then any and all shares of Class B Common Stock owned by
such corporation, partnership or other business entity shall be converted
automatically, without further action by or on behalf of any person, into shares
of Class A Common Stock and such corporation, partnership or other business
entity shall no longer be a Class B Stockholder.
Any Class B Stockholder may pledge shares of Class B Common Stock owned by
such person to a pledgee pursuant to a bona fide pledge of such shares as
collateral security for indebtedness due to the pledgee, provided that such
shares may not be transferred to or registered in the name of the pledgee unless
such pledgee is a Permitted Transferee. In the event of foreclosure or other
similar action by the pledgee (other than a pledgee who is a Permitted
Transferee), such pledged shares of Class B Common Stock shall be converted
automatically, without further action by or on behalf of any person, into shares
of Class A Common Stock upon such foreclosure; provided, however, that if within
ten business days after such foreclosure or similar event such converted shares
are returned to the pledgor or transferred to a Permitted Transferee of the
pledgor, such shares shall be converted automatically, without any act or deed
on the part of the Company or any other person, into the same number of shares
of Class B Common Stock. The foregoing automatic conversion provisions shall not
be applicable to any transfer of shares of Class B Common Stock by operation of
law upon incompetence, death, dissolution or bankruptcy of any Class B
Stockholder to
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<PAGE> 58
an executor, guardian or trustee, respectively, of such Class B Stockholder but
only if the beneficial ownership of such shares continues to be held by one or
more Permitted Transferee.
Prior to February 28, 1997, no shares of Class C Common Stock were issued
or outstanding. On February 28, 1997, the Company paid a stock dividend of nine
shares of Class C Common Stock on each outstanding share of Class A Common Stock
and Class B Common Stock. Prior to consummation of the Offerings, shares of
Class C Common Stock issued as a stock dividend will be exchanged for an equal
number of shares of the same class of Common Stock with respect to which such
dividend was paid. As a result, the shares of Class C Common Stock
will be exchanged for shares of Class A Common Stock and
shares of Class B Common Stock. All information set forth in this
Prospectus gives effect to the exchange of such Class C Common Stock, except for
certain historical information presented in the consolidated financial
statements and the notes thereto. No additional shares of Class C Common Stock
will be outstanding, authorized or issued after consummation of the Offerings.
MERGERS AND CONSOLIDATIONS
In the event of a merger, consolidation or other business combination of
the Company with or into another entity (whether or not the Company is the
surviving entity), or in the event of the dissolution of the Company, provision
shall be made so that the holders of each class of Common Stock will be entitled
to receive the same amount and form of consideration per share as the per share
consideration, if any, received by holders of the other classes of Common Stock
in such merger, consolidation, combination or dissolution; provided, however,
that in connection with any such merger, consolidation or business combination
in which shares of capital stock are distributed, such shares may differ as to
voting rights to the extent and only to the extent that the voting rights of the
Class A Common Stock and Class B Common Stock differ as currently provided; and
provided further, however, that if such shares differ as to voting rights, the
shares having superior voting rights shall be subject to conversion provisions
that are no more or less favorable to the holders of such shares than those
provided with respect to the Class B Common Stock.
PREFERRED STOCK
The Company's amended and restated certificate of incorporation will
authorize the Board of Directors, without any further action by the
stockholders, to issue the Preferred Stock in one or more series, to establish
from time to time the number of shares to be included in each series and to fix
the designations, powers, preferences and rights of the shares of each series
and the qualifications, limitations or restrictions thereof. Although the
ability of the Board of Directors to designate and issue shares of the Preferred
Stock provides desirable flexibility, including the ability to engage in future
public offerings to raise additional capital, the issuance of shares of the
Preferred Stock may have adverse effects on the holders of Common Stock,
including restrictions on dividends on the Common Stock if dividends on shares
of the Preferred Stock have not been paid; dilution of voting power of the
Common Stock to the extent the shares of the Preferred Stock have voting rights;
or deferral of participation in the Company's assets upon liquidation until
satisfaction of any liquidation preference granted to holders of shares of the
Preferred Stock. In addition, issuance of shares of the Preferred Stock could
make it more difficult for a third party to acquire a majority of the
outstanding voting stock and accordingly may be used as an "anti-takeover"
device. The Board of Directors, however, currently does not contemplate the
issuance of any shares of the Preferred Stock.
CERTAIN ANTI-TAKEOVER PROVISIONS
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law (the "Anti-Takeover Law") regulating corporate
takeovers. The Anti-Takeover Law prevents certain Delaware corporations,
including those whose securities are listed on the Nasdaq National Market, from
engaging, under certain circumstances, in a "business combination" not approved
in
57
<PAGE> 59
advance by the corporation's board of directors (which includes a merger or sale
of more than 10% of the corporation's assets) with any "interested stockholder"
(a stockholder who owns 15% or more of the corporation's outstanding voting
stock) for three years following the date that such stockholder became an
"interested stockholder". The effect of the Anti-Takeover Law on the Company is
to discourage takeover attempts, including attempts that might result in a
premium over the market price of the Class A Common Stock. A Delaware
corporation may "opt out" of the Anti-Takeover Law with an express provision in
its original certificate of incorporation or an express provision in its
certificate of incorporation or bylaws resulting from a stockholders' amendment
approved by at least a majority of the outstanding voting shares. The Company
has not "opted out" of the provisions of the Anti-Takeover Law.
Under the Company's amended and restated certificate of incorporation,
special meetings of stockholders may be called by the Company's Board of
Directors or the Chief Executive Officer. Except as otherwise required by law,
stockholders, in their capacity as such, will not be entitled to request or call
a special meeting of stockholders. In addition, stockholders of the Company will
be required to provide advance notice of nominations of directors to be made at,
and of business proposed to be brought before, a meeting of stockholders. The
failure to deliver proper notice within the periods specified in the Company's
restated by-laws will result in the denial to the stockholder of the right to
make such nominations or propose such action at the meeting.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Company's Class A Common Stock is
American Stock Transfer & Trust Company.
58
<PAGE> 60
SHARES ELIGIBLE FOR FUTURE SALE
Upon the completion of the Offerings, CMP will have shares of
Class A Common Stock outstanding (assuming no exercise of the Underwriters'
over-allotment options and assuming further that, prior to such time, there is
no conversion of Class B Common Stock into shares of Class A Common Stock) and
shares of Class B Common Stock outstanding (assuming that no shares of
Class B Common Stock are converted into Class A Common Stock prior to the
Offerings). All of the shares of Class A Common Stock sold in the Offerings
(together with any shares sold under the Underwriters' over-allotment options)
will be freely transferable and tradeable without restriction or further
registration under the Securities Act, except for any shares purchased by an
"affiliate," as defined below, of CMP, which will be subject to the resale
limitations of Rule 144 adopted under the Securities Act. The shares of Class A
Common Stock and Class B Common Stock held by CMP's existing stockholders are
"restricted" securities within the meaning of Rule 144 and may only be sold in
the public market pursuant to an effective registration statement under the
Securities Act or pursuant to an applicable exemption from registration,
including Rule 144.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are required to be aggregated) who has been deemed to have
beneficially owned shares of an issuer for at least one year, including an
"affiliate," is entitled to sell, within any three-month period, a number of
shares that does not exceed the greater of 1% of the then outstanding number of
shares of such class or the average trading volume in composite trading in all
national securities exchanges during the four calendar weeks preceding the
filing of the required notice of such sale, provided that such issuer has been a
reporting Company for at least 90 days. A person (or persons whose shares are
required to be aggregated) who is not deemed an affiliate of an issuer and who
has beneficially owned shares for at least two years is entitled to sell such
shares under Rule 144 without regard to the volume limitations described above.
Affiliates continue to be subject to such limitations. As defined in Rule 144,
an "affiliate" of an issuer is a person that directly or indirectly, through one
or more intermediaries, controls or is controlled by, or is under common control
with, such issuer.
The Company, its executive officers and directors and the holders of Class
B Common Stock (including the Selling Stockholders) have agreed that, subject to
certain exceptions, during the period beginning from the date of this Prospectus
and continuing to and including the date 180 days after the date of this
Prospectus, they will not offer, sell, contract to sell or otherwise dispose of
any securities of the Company (other than pursuant to employee stock option and
stock purchase plans existing, or on the conversion or exchange of convertible
or exchangeable securities outstanding, on the date of this Prospectus) which
are substantially similar to the shares of Class A Common Stock or which are
convertible or exchangeable into securities which are substantially similar to
the shares of Class A Common Stock, without the prior written consent of
Goldman, Sachs & Co.
Certain members of the Founding Family will make a gift from their personal
holdings of an aggregate of approximately shares of Class A Common Stock to
substantially all of the employees of the Company upon the consummation of the
Offerings, which shares will be held in trust for such employees for one year.
See "Management -- Employee Share Grants". Options to purchase shares of
Class A Common Stock have been granted under the Company's Stock Incentive Plan
and additional shares of Class A Common Stock have been reserved and are
available for grants under the Stock Incentive Plan. See "Management -- Stock
Incentive Plan". The Company has also reserved shares of Class A Common
Stock for issuance under the Company's Employee Stock Purchase Plan. See
"Management -- Employee Stock Purchase Plan". In addition, options to purchase
shares of Class A Common Stock are held by certain members of senior
management. See "Management -- Executive Compensation -- Option/SAR Grants in
Last Fiscal Year". The Company intends to file one or more registration
statements on Form S-8 under the Securities Act to register shares of Class A
Common Stock subject to stock options granted under the Stock Incentive Plan and
the shares available under the Employee Stock Purchase Plan as well as those
shares subject to the options held by certain members of senior
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<PAGE> 61
management that will permit resale of such shares, subject to the Rule 144
volume limitations applicable to affiliates of the Company and any agreements
between option holders and the representatives of the Underwriters.
The shares of the Company's Class B Common Stock are convertible into
shares of Class A Common Stock and, following the conversion of such shares and
expiration of the 180 day lock-up agreement with the Underwriters, of the
aggregate shares of Class A Common Stock owned by the Class B Stockholders upon
conversion of their shares of Class B Common Stock would be eligible for sale
pursuant to the provisions of Rule 144 under the Securities Act. In addition,
the holders of the shares of Class B Common Stock have the right to require the
Company to register under the Securities Act the shares of Class A Common Stock
into which their shares of Class B Common Stock are convertible. See "Certain
Relationships and Related Transactions". No assurances can be given that a Class
B Stockholder will not decide, based upon then prevailing market and other
conditions, to convert his or her Class B Common Stock to Class A Common Stock
and to dispose of all or a portion of the Class A Common Stock held by such
person. Also, following expiration of the 180 day lock-up agreement with the
Underwriters, of the aggregate shares of Class A Common Stock issued
and outstanding prior to the Offerings would be eligible for sale pursuant to
the provisions of Rule 144.
Prior to the Offerings, there has been no established market for the Class
A Common Stock, and no predictions can be made about the effect, if any, that
market sales of shares of Class A Common Stock or the availability of such
shares for sale will have on the market price prevailing from time to time.
Nevertheless, sales of substantial amounts of Class A Common Stock in the public
market may have an adverse impact on the market for the shares of Class A Common
Stock offered hereby.
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LEGAL MATTERS
The validity of the shares of Class A Common Stock offered hereby will be
passed upon for the Company by Dow, Lohnes & Albertson, PLLC, Washington, D.C.,
and for the Underwriters by Debevoise & Plimpton.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1994, 1995 and 1996 and for the three-year period ended December 31, 1996
appearing in this Prospectus and in the Registration Statement have been audited
by Coopers & Lybrand L.L.P., independent auditors, as set forth in their report
thereon appearing elsewhere herein and are included in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
CHANGE IN ACCOUNTANTS
Effective September 11, 1996, Coopers & Lybrand L.L.P. was engaged as the
Company's independent accountants. Prior to September 11, 1996, Miller, Ellin &
Company had been the Company's independent accountants. The decision to change
independent accountants was approved by the Company's Board of Directors. There
were no disagreements with Miller, Ellin & Company regarding any matters with
respect to accounting principles or practices, financial statement disclosure or
audit scope or procedure, which disagreements, if not resolved to the
satisfaction of the former accountants, would have caused Miller, Ellin &
Company to make reference to the subject matter of the disagreement in
connection with its report. The former accountants' reports for the fiscal years
ended December 31, 1994 and 1995 are not a part of the financial statements of
the Company included in this Prospectus or the related financial statement
schedules included elsewhere in the Registration Statement. Such reports did not
contain an adverse opinion or disclaimer of opinion or qualifications or
modifications as to uncertainty, audit scope or accounting principles. Prior to
September 11, 1996, the Company had not consulted with Coopers & Lybrand L.L.P.
on any items which involved the Company's accounting principles or the form of
audit opinion to be issued on the Company's financial statements.
ADDITIONAL INFORMATION
The Company has filed with the SEC a Registration Statement, of which this
Prospectus constitutes a part, under the Securities Act with respect to the
shares of Class A Common Stock offered hereby. This Prospectus omits certain
information contained in the Registration Statement, and reference is made to
the Registration Statement and the exhibits and schedules thereto for further
information with respect to the Company and the Class A Common Stock offered
hereby. Statements contained herein concerning the provisions of any documents
are not necessarily complete, and in each instance reference is made to the copy
of such document filed as an exhibit to the Registration Statement. Each such
statement is qualified in its entirety by such reference. The Registration
Statement, including exhibits and schedules filed therewith, may be inspected
without charge at the public reference facilities maintained by the SEC at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
regional offices of the SEC located at Room 1228, 75 Park Place, New York, New
York 10007 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials may be obtained from the
Public Reference Section of the SEC, Room 1024, Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and its public reference facilities in New
York, New York and Chicago, Illinois, at prescribed rates. The SEC also
maintains a World Wide Web site at http://www.sec.gov which contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the SEC.
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CMP MEDIA INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants on Consolidated Financial Statements............... F-2
Consolidated Statements of Income for the years ended December 31, 1994, 1995 and
1996 and the three months ended March 31, 1996 and 1997 (unaudited)................ F-3
Consolidated Balance Sheets as of December 31, 1995, 1996 and March 31, 1997
(unaudited)........................................................................ F-4
Consolidated Statements of Stockholders' Equity for the years ended December 31,
1994, 1995 and 1996 and the three months ended March 31, 1997 (unaudited).......... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 1994, 1995 and
1996 and the three months ended March 31, 1996 and 1997 (unaudited)................ F-6
Notes to Consolidated Financial Statements........................................... F-7
</TABLE>
F-1
<PAGE> 64
After the approval by the Board of Directors of the exchange of Class C
Common Stock, the common stock split and the change in par value discussed in
Notes 1 and 9 to the consolidated financial statements of CMP Media Inc. and
subsidiaries, we expect to be in a position to render the following audit
report.
COOPERS & LYBRAND L.L.P.
New York, New York
February 28, 1997.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
CMP Media Inc.:
We have audited the accompanying consolidated balance sheets of CMP Media
Inc. and subsidiaries as of December 31, 1995 and 1996 and the related
consolidated statements of income, stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1996. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CMP Media
Inc. and subsidiaries as of December 31, 1995 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
New York, New York
February 28, 1997, except Notes 1 and 9
as to which the date is .
F-2
<PAGE> 65
CMP MEDIA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE THREE
FOR THE YEAR ENDED DECEMBER MONTHS
31, ENDED MARCH 31,
------------------------------ ------------------
1994 1995 1996 1996 1997
-------- -------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues................................. $316,800 $382,360 $418,059 $ $
Operating costs and expenses:
Cost of revenues....................... 129,250 166,092 172,475
Selling and promotion.................. 113,870 128,640 138,319
General and administrative............. 57,498 68,013 78,460
-------- -------- -------- ------- --------
Income (loss) from operations............ 16,182 19,615 28,805
-------- -------- -------- ------- --------
Gain (loss) on sales of businesses....... 13,650 (282) 1,434
Other income (expense), net.............. (863) (2,103) (2,476)
-------- -------- -------- ------- --------
Income (loss) before provision (benefit)
for income taxes....................... 28,969 17,230 27,763
Provision (benefit) for income taxes..... 1,230 595 904
-------- -------- -------- ------- --------
Net income (loss)........................ $ 27,739 $ 16,635 $ 26,859 $ $
======== ======== ======== ======= ========
Pro Forma Data (unaudited):
Historical income (loss) before
provision (benefit) for income
taxes............................... $ 28,969 $ 17,230 $ 27,763 $ $
Pro forma provision (benefit) for
income taxes........................ 12,643 7,694 11,707
-------- -------- -------- ------- --------
Pro forma net income (loss)............ $ 16,326 $ 9,536 $ 16,056 $ $
======== ======== ======== ======= ========
Pro forma net income (loss) per share.. $ $ $
======== ======== ======== ======= ========
Pro forma weighted average number of
shares of common stock and common
stock equivalents...................
======== ======== ======== ======= ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE> 66
CMP MEDIA INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- MARCH 31,
1995 1996 1997
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 6,091 $ 6,721 $
Accounts receivable, less allowance for doubtful
accounts of $2,945, $3,189 and $ as of December
31, 1995, 1996 and March 31, 1997, respectively.... 64,154 65,145
Inventories........................................... 12,244 6,091
Deferred subscription acquisition costs............... -- --
Prepaid expenses and other current assets............. 7,057 6,431
-------- -------- --------
Total current assets............................... 89,546 84,388
-------- -------- --------
Property and equipment, net............................. 20,834 26,461
Investment in and advances to unconsolidated
affiliates............................................ -- 8,197
Intangible assets....................................... 1,307 3,382
Other assets............................................ 1,639 1,507
-------- -------- --------
$113,326 $123,935 $
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................................... $ 26,042 $ 27,146 $
Accrued expenses and other current liabilities........ 28,254 33,995
Deferred revenue...................................... 11,363 11,382
-------- -------- --------
Total current liabilities.......................... 65,659 72,523
-------- -------- --------
Long-term debt.......................................... 12,000 25,000
Deferred compensation................................... 5,169 6,730
Other liabilities....................................... 2,671 2,969
-------- -------- --------
Total liabilities............................. 85,499 107,222
-------- -------- --------
Commitments and contingencies (Note 14)
Stockholders' equity:
Class A Common Stock, par value $.10 per share,
1,000,000 shares authorized, 52,796 shares issued
and outstanding at December 31, 1995 and 3,696
shares issued and outstanding at December 31, 1996
and March 31, 1997................................. 5 --
Class B Common Stock, par value $.10 per share,
1,000,000 shares authorized, 49,100 shares issued
and outstanding at December 31, 1996 and March 31,
1997............................................... -- 5
Class C Common Stock, par value $.10 per share,
1,000,000 shares authorized, 475,164 shares issued
and outstanding at December 31, 1995, 1996 and
March 31, 1997..................................... 48 48
Additional paid-in capital............................ 2,366 17,843
Retained earnings..................................... 25,859 14,459
Unamortized restricted stock compensation............. -- (15,174)
Other................................................. (451) (468)
-------- -------- --------
Total stockholders' equity.................... 27,827 16,713
-------- -------- --------
$113,326 $123,935 $
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE> 67
CMP MEDIA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (NOTES 1 AND 9)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK
-------------------------------------
UNAMORTIZED
SHARES ADDITIONAL RESTRICTED
---------------------------- PAID-IN RETAINED STOCK STOCKHOLDERS'
CLASS A CLASS B CLASS C AMOUNT CAPITAL EARNINGS COMPENSATION OTHER EQUITY
-------- ------- ------- ------ ---------- -------- ------------ ----- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance as of January 1,
1994..................... 52,796 475,164 $ 53 $ 2,046 $ 21,374 $ 23,473
Net income............... 27,739 27,739
Distributions to S
corporation
stockholders for taxes
and other.............. (32,064) (32,064)
Contributed capital...... 250 250
Decrease in market value
of marketable
securities............. $ (53) (53)
------- ------ ------- --- ------- -------- ------- ----- --------
Balance as of December 31,
1994..................... 52,796 -- 475,164 53 2,296 17,049 -- (53) 19,345
======= ====== ======= === ======= ======== ======= ===== ========
Net income............... 16,635 16,635
Distributions to S
corporation
stockholders for taxes
and other.............. (7,825) (7,825)
Contributed capital...... 70 70
Minimum pension liability
adjustment............. (451) (451)
Adjustment to unrealized
loss on decline in
market value of
securities............. 53 53
------- ------ ------- --- ------- -------- ------- ----- --------
Balance as of December 31,
1995..................... 52,796 -- 475,164 53 2,366 25,859 -- (451) 27,827
======= ====== ======= === ======= ======== ======= ===== ========
Net income............... 26,859 26,859
Distributions to S
corporation
stockholders for taxes
and other.............. (38,259) (38,259)
Conversion of Class A
Common Stock to Class B
Common Stock........... (52,796) 52,796
Conversion of Class B
Common Stock to Class A
Common Stock........... 3,696 (3,696)
Sale of restricted
stock.................. 15,414 $(15,414) --
Amortization of
restricted stock
compensation........... 240 240
Contributed capital...... 63 63
Minimum pension liability
adjustment............. (17) (17)
------- ------ ------- --- ------- -------- ------- ----- --------
Balance as of December 31,
1996..................... 3,696 49,100 475,164 53 17,843 14,459 (15,174) (468) 16,713
======= ====== ======= === ======= ======== ======= ===== ========
Net income (unaudited)...
Distributions to S
corporation
stockholders for taxes
and other
(unaudited)............
Amortization of
restricted stock
compensation
(unaudited)............
Contributed capital
(unaudited)............
------- ------ ------- --- ------- -------- ------- ----- --------
Balance as of March 31,
1997 (unaudited)......... $ $ $ $ $ $
======= ====== ======= === ======= ======== ======= ===== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statement.
F-5
<PAGE> 68
CMP MEDIA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
FOR THE YEAR ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------------- ---------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................................ $ 27,739 $ 16,635 $ 26,859 $ $
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation and amortization of property and equipment........ 4,685 6,068 6,952
Write-off of property and equipment............................ 1,792 1,622 872
Amortization of intangible assets.............................. 579 283 369
Provision for doubtful accounts................................ 2,767 2,150 2,216
Compensation expense under incentive plans..................... 583 1,595 2,192
(Gain) loss on sales of businesses............................. (13,650) 282 (1,434)
Losses from unconsolidated affiliates.......................... 925 743 1,330
Deferred income taxes.......................................... 7 (134) 207
Gain on sale of marketable securities.......................... 44
Cash effects of changes in assets and liabilities, net of the
effects of businesses acquired and sold:
(Increase) decrease in accounts receivable................... (12,327) (22,105) (2,807)
(Increase) decrease in inventories........................... (1,420) (8,088) 6,153
Increase in deferred subscription acquisition costs..........
(Increase) decrease in prepaid expenses and other current
assets..................................................... (1,840) 1,142 419
Decrease (increase) in other assets.......................... 516 (181) 132
Increase (decrease) in accounts payable...................... 11,916 (1,474) 1,104
Increase (decrease) in accrued expenses and other current
liabilities................................................ 4,817 6,724 4,294
Increase in deferred revenue................................. 2,786 2,144 19
Increase (decrease) in other liabilities..................... 581 (202) (520)
-------- -------- -------- -------- --------
Net cash provided by (used in) operating activities........ 30,456 7,248 48,357
-------- -------- -------- -------- --------
Cash flows from investing activities:
Purchase of property and equipment............................... (13,674) (8,224) (12,728)
Purchase of intangible assets.................................... (935) (102) (219)
Investment in and advances to unconsolidated affiliates.......... (906) (339) (9,950)
Purchase of business............................................. (2,000)
Purchase of marketable securities................................ (7,122)
Proceeds from sale of marketable securities...................... 2,000 7,080
Proceeds from sales of businesses................................ 14,000 126 2,489
-------- -------- -------- -------- --------
Net cash used in investing activities...................... (6,637) (1,459) (22,408)
-------- -------- -------- -------- --------
Cash flows from financing activities:
Borrowings under revolving credit agreement...................... 11,000 74,550 43,050
Repayment of borrowings.......................................... (73,550) (30,050)
Distributions paid to S corporation stockholders for taxes and
other.......................................................... (32,064) (7,825) (38,259)
Contributed capital.............................................. 250 70 63
Increase in book overdraft.......................................
Other financing activities....................................... (123)
-------- -------- -------- -------- --------
Net cash provided by (used in) financing activities........ (20,814) (6,755) (25,319)
-------- -------- -------- -------- --------
Net change in cash and cash equivalents............................ 3,005 (966) 630
Cash and cash equivalents at beginning of period................... 4,052 7,057 6,091
-------- -------- -------- -------- --------
Cash and cash equivalents at end of period......................... $ 7,057 $ 6,091 $ 6,721 $ $
======== ======== ======== ======== ========
Supplemental disclosure of cash flow information:
Interest paid.................................................... $ -- $ 840 $ 724 $ $
======== ======== ======== ======== ========
Income taxes paid................................................ $ 875 $ 734 $ 781 $ $
======== ======== ======== ======== ========
Supplemental disclosure of business acquired:
Fair value of assets acquired.................................... $ 2,275
Liabilities assumed.............................................. (275)
--------
Cash paid........................................................ $ 2,000
========
Non-cash transactions:
On November 27, 1996, three senior executives acquired shares of
the Company's Class A Common Stock from the Company's principal
stockholders, resulting in a $15,414 credit to Additional
paid-in capital and a $15,414 debit to Unamortized restricted
stock compensation, both components of Stockholders' equity.
See Note 10 to the Consolidated Financial Statements.
</TABLE>
The accompanying notes are a integral part of the consolidated financial
statements.
F-6
<PAGE> 69
CMP MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
1. BASIS OF PRESENTATION:
CMP Media Inc. and subsidiaries (the "Company") operate in one business
segment by publishing magazines and newspapers and providing Internet services
for the manufacturers, engineers, designers and purchasers of electronic systems
and components, including computers, telecommunications equipment and related
products, distributors, resellers and retailers of those products and the
end-users, in business and at home, of information systems, computer systems,
personal computers, software, the Internet and related products and services. In
addition, the Company licenses the titles, editorial content and designs of many
of its publications to publishers outside the United States and represents
foreign technology publishers in the sale of advertising space to U.S.
technology advertisers.
The accompanying financial statements include the accounts of CMP Media
Inc. ("Media"), CMP International Corp. ("International"), CMP Communications
Corp. ("Communications"), CMP Media Partnership (the "Partnership"), CMP France
S.N.C. ("S.N.C."), Englewood Enterprises Corp. ("Enterprises"), and CMP Japan
K.K. ("K.K."), which are all related through common ownership.
Through a series of transactions which occurred from October 21, 1996
through February 3, 1997, Media became the parent company of International,
S.N.C. and Enterprises as follows:
- On October 21, 1996, Media and Communications merged, and the outstanding
shares in Communications were subsequently cancelled (the "Merger"). As a
result of the Merger, the Partnership (which owned S.N.C.) between Media
and Communications ceased to exist;
- In December 1996, K.K. was liquidated by its stockholders;
- On February 3, 1997, the stockholders of International and Enterprises
contributed all of the shares of capital stock of those corporations to
Media as capital, and International and Enterprises became wholly-owned
subsidiaries of Media. On April 21, 1997, Enterprises was merged with
Media.
As all of the entities were under common control, the most meaningful
presentation of the financial statements is the retroactive consolidation of
Media and its subsidiaries for all periods presented.
On February 3, 1997, the Company declared a stock dividend of nine shares
of its non-voting Class C Common Stock for each share of Class A Common Stock
and Class B Common Stock outstanding. The stock dividend, which was paid on
February 28, 1997, has been given retroactive treatment for all periods
presented. Prior to the consummation of the initial public offering, the
stockholders of the Company will exchange each of their shares of Class C Common
Stock for one share of the class of Common Stock upon which the dividend was
paid. See Note 9.
Prior to the consummation of the initial public offering, the Company will
declare a -for-one stock split, in the form of a stock dividend, of all
classes of its common stock and amend and restate its certificate of
incorporation to, among other things, change the par value of all classes of its
common stock from $0.10 per share to $0.01 per share. See Note 9.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. Principles of Consolidation
The consolidated financial statements include the accounts of Media and its
subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation.
F-7
<PAGE> 70
CMP MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: -- CONTINUED
Investments in companies in which ownership interests range from 20 to 50
percent and the Company has the ability to exercise significant influence over
the operating and financial policies of such companies are accounted for under
the equity method. Other investments are accounted for under the cost method.
b. Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The
Company's most significant estimates are related to provisions for estimated
returns, rebates, discounts and adjustments and allowances for doubtful
accounts.
c. Revenue Recognition
Advertising revenues from the Company's controlled-circulation trade
newspapers and magazines are recognized based on the publications' cover dates
net of provisions for estimated rebates, adjustments and discounts. Advertising
revenues from the Company's paid-subscription and newsstand-circulation consumer
magazines are recognized at the on-sale date, net of provisions for estimated
rebates, adjustments and discounts. Revenues from newsstand sales are recognized
at the on-sale date for all publications, net of provisions for estimated
returns. Revenues from subscription sales are recognized over the terms of the
subscription on a straight-line basis. Licensing revenues are recognized on a
straight-line basis over the term of the license agreement.
d. Operating Costs and Expenses
Cost of revenues include editorial, production, paper, distribution and
fulfillment costs. Selling and promotion costs include subscription acquisition
costs. Such costs are expensed as incurred. For interim financial reporting
purposes, subscription acquisition costs are deferred and allocated among
interim periods based upon the benefit received.
e. Marketable Securities
On January 1, 1994, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." There was no cumulative effect upon adoption. In
computing realized gain or loss on sale, the cost of marketable securities has
been determined based upon specific identification. Unrealized gains and losses
on marketable securities available for sale are included as a separate component
of stockholders' equity.
f. Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents.
F-8
<PAGE> 71
CMP MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: -- CONTINUED
g. Concentration of Credit Risk
The Company places its temporary cash investments with high credit quality
financial institutions. At times, such investments may be in excess of federally
insured limits. The Company has not experienced losses in such accounts.
The Company provides publishing, marketing and information services to its
customers who represent a variety of technology companies in the United States
and other countries. The Company extends credit to its customers and
historically has not experienced significant losses relating to receivables from
individual customers or groups of customers.
h. Inventories
Inventories, which consist primarily of paper used in the production of the
Company's publications, are stated at the lower of cost or market. Cost is
determined on a first-in, first-out basis.
i. Property and Equipment
Property and equipment is recorded at cost. Depreciation is computed
principally using the straight-line method over estimated useful lives which
range from three to seven years. Maintenance and repairs are charged to expense
as incurred; renewals and improvements which extend the life of the asset are
capitalized. Gains or losses on the disposition of property and equipment are
reflected in results of operations. Leasehold improvements are amortized over
the shorter of the lease term or the remaining useful life of the related
assets.
j. Intangible Assets
Intangible assets consist of goodwill, trademarks, subscriber lists and
covenants not to compete. Intangible assets are amortized on a straight-line
basis over periods ranging from three to fifteen years.
At each balance sheet date, management assesses whether there has been a
permanent impairment in the value of intangible assets. If the carrying value of
the assets exceeds the estimated undiscounted future cash flows from operating
activities of the related businesses, a permanent impairment is deemed to have
occurred. In this event, the assets are written down to fair value.
k. Long-Lived Assets
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of" ("SFAS No. 121"),
which is effective for fiscal years beginning after December 15, 1995. SFAS No.
121 specifies the recognition and measurement criteria for such impairments.
Adoption of SFAS No. 121 on January 1, 1996 had no impact on the Company's
financial position, results of operations or cash flows.
l. Income Taxes
The Company and certain affiliates elected to be treated as S corporations
for U.S. federal income tax purposes, which requires that the income or loss for
federal and certain state and local
F-9
<PAGE> 72
CMP MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: -- CONTINUED
tax jurisdictions be recognized by the stockholders. The other affiliates are
partnerships whereby income or loss is included in a partner's tax return based
upon its respective ownership percentage. Accordingly, the provision for income
taxes includes state, local and foreign income taxes.
In connection with the proposed sale of its Class A Common Stock in an
initial public offering, the Company will terminate its S corporation election
and make a final S corporation distribution to its stockholders, which is
estimated to be approximately $ . As a result of terminating its S
corporation election and converting to a C corporation, the Company will be
subject to U.S. federal and all applicable state and local taxes. The unaudited
pro forma provision for income taxes, unaudited pro forma net income and
unaudited pro forma net income per share are presented as if the Company had
terminated its S corporation election prior to January 1, 1994.
Deferred income taxes are recognized for the tax consequences in future
years of differences between the tax bases of assets and liabilities and their
financial reporting amounts at each year-end on the basis of enacted laws and
statutory tax rates applicable to the period in which the differences are
expected to affect taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to the amounts expected to be realized.
m. Pro Forma Net Income (Loss) Per Share and Weighted Average Common Shares
Outstanding (Unaudited)
Pro forma net income (loss) per share-primary is computed using the
weighted average number of shares of common stock and common stock equivalents
outstanding (using the Treasury Stock Method). Common stock options issued
during the twelve-month period prior to the Company's initial public offering
have been included in the calculation as if they were outstanding for all
periods using the Treasury Stock Method and an assumed initial public offering
price of $ per share. In addition, the calculation includes shares of
common stock representing the number of shares, based upon an assumed initial
public offering price of $ per share, the proceeds from which would be
necessary to pay the final S corporation distribution referenced in Note 2(l)
above and S corporation distributions of approximately $ made in the
twelve months preceding April 30, 1997 which were in excess of net income for
such twelve-month period. Net income (loss) per share-fully diluted is not
presented as it is equivalent to net income (loss) per share-primary.
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No.
128"), which simplifies existing computational guidelines, revises disclosure
requirements and increases the comparability of earnings-per-share-data on an
international basis. SFAS No. 128 is effective for financial statements for
periods ending after December 15, 1997 and requires restatement of all
prior-period earnings-per-share data presented. The Company is currently
evaluating the new statement; however, the impact of adoption of SFAS No. 128 on
the Company's financial statements is not expected to be significant.
n. Unaudited Interim Financial Statements
The consolidated financial statements as of March 31, 1997 and for the
three months ended March 31, 1996 and 1997 are unaudited but have been prepared
in accordance with generally accepted accounting principles for interim
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presenta-
F-10
<PAGE> 73
CMP MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: -- CONTINUED
tion have been included. The results of operations of any interim period are not
necessarily indicative of the results of operations for the full year.
3. PROPERTY AND EQUIPMENT:
Property and equipment at December 31, 1995 and 1996 consisted of the
following:
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Production, editorial and circulation equipment........ $ 6,029 $ 9,739
Office equipment....................................... 17,566 20,077
Furniture and fixtures................................. 2,513 2,054
Leasehold improvements................................. 9,573 10,485
------- -------
35,681 42,355
Less: accumulated depreciation and amortization........ 14,847 15,894
------- -------
Property and equipment, net.......................... $20,834 $26,461
======= =======
</TABLE>
4. INTANGIBLE ASSETS:
Intangible assets at December 31, 1995 and 1996 consisted of the following:
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Goodwill................................................. $ 498 $2,673
Trademark................................................ 817 817
Subscriber lists......................................... -- 220
Covenants not to compete................................. 986 150
------ ------
2,301 3,860
Less: accumulated amortization........................... 994 478
------ ------
Intangible assets, net................................. $1,307 $3,382
====== ======
</TABLE>
In May 1996, the Company acquired a business which represents non-U.S.
technology publishers in the sale of advertising space to U.S. technology
advertisers for $2,275 in cash and assumed liabilities. The acquisition has been
accounted for by the purchase method of accounting. The results of operations of
the business acquired have been included in the Company's Consolidated Statement
of Income from the date of acquisition. In connection with this acquisition, the
Company recorded $2,175 of goodwill which is being amortized over fifteen years.
Pro forma data have been omitted as the impact is not material to the Company's
results of operations for 1995 and 1996.
5. INVESTMENT IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES:
In 1996, the Company made equity investments totaling $5,748 in three
companies, and an investment accounted for under the cost method of $3,000 in
another company. These companies are engaged in the Internet services and
technology industries. The excess of the Company's investments over equity in
net assets acquired amounted to $2,534 at December 31, 1996, net of accumulated
amortization of $504. This excess is being amortized on a straight-line basis
over three
F-11
<PAGE> 74
CMP MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
5. INVESTMENT IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES: -- CONTINUED
years. In addition, during 1996, the Company made advances of $1,177 to its two
publishing joint venture investments.
Losses from unconsolidated affiliates were $925, $743, and $1,330 for 1994,
1995 and 1996, respectively, and have been included in other income (expense),
net, in the Company's Consolidated Statements of Income.
6. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES:
Accrued expenses and other current liabilities at December 31, 1995 and
1996 consisted of the following:
<TABLE>
<CAPTION>
1995 1996
------- -------
<S> <C> <C>
Salaries, commissions, vacation and employee
benefits............................................. $14,701 $17,330
Profit sharing contributions........................... 3,102 4,141
Volume discounts....................................... 4,244 3,025
Other.................................................. 6,207 9,499
------- -------
$28,254 $33,995
======= =======
</TABLE>
7. REVOLVING CREDIT AGREEMENT:
On November 14, 1996, the Company modified an existing revolving credit
agreement with two financial institutions to provide for borrowings of up to
$75,000. Borrowings bear interest at either LIBOR plus .35% to .825%, depending
on outstanding loan balances and Company earnings levels, or the prime rate, at
the Company's option. The agreement contains certain negative covenants
regarding minimum levels of net worth, fixed coverage and limitations on
indebtedness. Borrowings under the agreement were $12,000 and $25,000 as of
December 31, 1995 and 1996, respectively. The agreement expires November 14,
2001. The weighted average interest rates for borrowings under the agreement
were 7.26% and 6.11% for the years ended December 31, 1995 and 1996,
respectively. Interest expense was approximately $0, $852 and $667 for the years
ended December 31, 1994, 1995 and 1996, respectively and is included in other
income (expense), net, in the Company's Consolidated Statements of Income.
8. GAIN (LOSS) ON SALES OF BUSINESSES:
Gain (loss) on sales of businesses for the years ended December 31, 1994,
1995 and 1996 consisted primarily of the following:
In January 1994, the Company sold its travel-related publications for
$14,000. The sale resulted in a gain of $13,650. Excluding this gain, the
operations of these publications had no impact on revenues or income before
provision for income taxes for 1994.
In September 1995, the Company sold its Japanese conference business for
approximately $125. The sale resulted in a loss of approximately $407. The
Company's results of operations for 1994 and 1995 include revenues and (loss)
before provision for income taxes of approximately $481 and $(1,032), and $1,331
and $(77), respectively, from this business.
In March 1996, the Company sold its publication, CommunicationsWeek
International, for $2,198. The sale resulted in a gain of $1,216. The Company's
results of operations for 1994, 1995 and 1996
F-12
<PAGE> 75
CMP MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
8. GAIN (LOSS) ON SALES OF BUSINESSES: -- CONTINUED
included revenues and income (loss) before provision for income taxes of
approximately $4,794 and $(1,488), $11,042 and $1,370 and $175 and $(107),
respectively, from this publication.
9. STOCKHOLDERS' EQUITY:
The Company has the authority to issue three million shares of common
stock, par value $.10 per share, of which one million shares each are designated
Class A Common Stock, Class B Common Stock and Class C Common Stock.
Holders of Class A Common Stock and Class B Common Stock vote together as a
single class as follows: holders of Class A Common Stock are entitled to one
vote for each share of such stock held and holders of Class B Common Stock are
entitled to ten votes for each share of such stock held. Class C Common Stock is
non-voting. Dividends may be paid out of legally available funds if declared by
the Board of Directors and are payable equally to each class of Common Stock.
Each share of Class B Common Stock is convertible, at the option of the holder,
into Class A Common Stock, on a share-for-share basis.
In May 1996, the 52,796 outstanding shares of Class A Common Stock were
converted by the Company into an equal number of shares of Class B Common Stock.
In November 1996, 3,696 outstanding shares of Class B Common Stock were
converted into an equal number of shares of Class A Common Stock.
On January 31, 1997, a distribution of approximately $800 was declared
payable in June 1997 to all stockholders of International. See Note 1.
On February 3, 1997, the Company declared a stock dividend of nine shares
of Class C Common Stock for each share of Class A and Class B Common Stock
outstanding. This dividend, which was paid on February 28, 1997, resulted in the
issuance of 475,164 shares of Class C Common Stock and has been given
retroactive treatment in the consolidated financial statements for all periods
presented. Prior to the consummation of the initial public offering, the
stockholders of the Company will exchange each of their shares of Class C Common
Stock for one share of the class of Common Stock upon which the dividend was
paid. As a result, 475,164 shares of Class C Common Stock will be exchanged for
33,264 shares of Class A Common Stock and 441,900 shares of Class B Common
Stock, and there will be no Class C Common Stock issued or outstanding.
In connection with the Company's expected change in tax status from an S
corporation to a C corporation, the Company will make a final S corporation
distribution to its stockholders, which is estimated to be approximately
$ . See Note 2 (l). As of March 31, 1997, on a pro forma basis giving
effect to the payment of this distribution, Stockholders' equity would be
$( ).
Prior to the consummation of the initial public offering, the Company will
declare a -for-one stock split, in the form of a stock dividend, of all
classes of its common stock and amend and restate its certificate of
incorporation to, among other things, change the par value of all classes of its
common stock from $0.10 per share to $0.01 per share.
F-13
<PAGE> 76
CMP MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
10. INCENTIVE AWARDS:
a. Equity Appreciation Plan
In 1988, the Company established an equity appreciation plan (the "Equity
Appreciation Plan") for certain key employees and directors which provides for
incentive deferred compensation in the form of Share Appreciation Rights
("SARs") pursuant to formulas contained in the Equity Appreciation Plan. All
SARs are granted at the discretion of the Company's Board of Directors. The SARs
normally are subject to a nine-year redemption schedule beginning, at the
election of the participant, as early as June 30, 1993, and ending on June 30,
2002, unless the Board of Directors provides an extension. Under the redemption
schedule, a participant must have redeemed at least 20% of his or her SARs as of
June 30, 1998, 40% as of June 30, 1999, 60% as of June 30, 2000, 80% of as June
30, 2001 and 100% as of June 30, 2002; provided, however, that no more than 20%
of a participant's SARs may be redeemed in any one year. The Board of Directors
has the discretion to accelerate the payment of any or all redemptions and
payments. Pursuant to the Equity Appreciation Plan, approximately $583, $1,595
and $1,952 were charged to operations in 1994, 1995 and 1996, respectively. As
of December 31, 1994, 1995 and 1996, $4,866, $6,461 and $8,414, respectively,
has been accrued for payment under the Equity Appreciation Plan. Cumulative
payments made under the Equity Appreciation Plan approximated $70 as of December
31, 1996.
b. Executive Stock Purchase and Option Agreements
On November 27, 1996, three senior executives acquired 3,696 shares of the
Company's outstanding Class A Common Stock (increased by 33,264 shares of Class
C Common Stock pursuant to the Company's nine-for-one stock dividend described
in Notes 1 and 9) from principal stockholders of the Company for $1,386 in cash.
At the date of purchase, the aggregate market value of the shares was $16,800.
The Company will recognize $15,414 in non-cash compensation expense pro rata
over the vesting periods ranging from seven to nine years. Compensation expense
for 1996 was $240.
On November 27, 1996, the Company granted the same three senior executives
stock options to purchase 7,392 shares of Class A Common Stock (increased by
66,528 shares of Class A Common Stock in connection with the Company's
nine-for-one stock dividend) pursuant to certain stock option agreements between
these executives and the Company. The option price per share of Class A Common
Stock of $4,545 ($454 per share adjusted for the nine-for-one stock dividend)
was equal to the market value per share on the date of grant. Subject to
acceleration based on certain performance criteria, options with respect to
2,112 shares and 5,280 shares of Class A Common Stock vest (increased by 19,008
and 47,520 shares of Class A Common Stock, respectively, in connection with the
Company's nine-for-one stock dividend) on December 31, 2003 and 2005,
respectively. Options expire no later than December 31, 2010.
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees", and related interpretations in accounting for
its incentive plans. Accordingly, no compensation expense has been recognized
for the Company's incentive plans other than for the restricted stock purchased
and formula-based awards. The fair value of the options granted was estimated as
$1,974 on the date of grant using the Black-Scholes option-pricing model with
the following assumptions: dividend yield of 5%, volatility of 0%, risk-free
interest rates of 6.02% for options vesting in seven years and 6.22% for options
vesting in nine years and an expected life of seven to nine years. Had
compensation cost for the Company's stock option awards been determined based
upon the fair value at the grant date consistent with the methodology prescribed
under Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Com-
F-14
<PAGE> 77
CMP MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
10. INCENTIVE AWARDS: -- CONTINUED
pensation," the Company's unaudited pro forma net income and unaudited pro forma
earnings per share for the year ended December 31, 1996 would have been reduced
by approximately $1,910, or $ per share.
c. Employee Stock Option Plan
In December 1996, the Company adopted its 1996 Stock Option Plan (the
"Option Plan"). The Option Plan provides for the issuance of options for the
purchase of 3,168 shares of the Company's Class A Common Stock (increased by
28,512 shares of Class A Common Stock in connection with the Company's
nine-for-one stock dividend). The exercise period for options granted under the
Option Plan is ten years from the date of grant.
Under the Option Plan, in January 1997, the Company granted certain key
employees options to purchase 1,174 shares of Class A Common Stock at an option
price of $4,545 per share (increased by 10,566 shares of Class A Common Stock in
connection with the Company's nine-for-one stock dividend, resulting in an
adjusted price per share of $454 per share). The option price per share was
equal to market value per share at date of grant. The options become exercisable
at varying dates from July 1998 through January 2003.
11. INCOME TAXES:
Income before provision for income taxes for the years ended December 31,
1994, 1995 and 1996 is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Domestic............................................ $37,526 $25,374 $32,388
Foreign............................................. (8,557) (8,144) (4,625)
------- ------- -------
$28,969 $17,230 $27,763
======= ======= =======
</TABLE>
Foreign income before provision for income taxes includes foreign source
losses from entities characterized as a partnership for U.S. state and local
income tax purposes. Accordingly, these losses provided U.S. state and local
income tax benefit.
The provision (benefit) for historical income taxes for the years ended
December 31, 1994, 1995 and 1996 is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------ ----- ----
<S> <C> <C> <C>
State and local income taxes:
Current................................................ $1,057 $ 482 $446
Deferred............................................... 7 (134) 207
------ ----- ----
1,064 348 653
Foreign income taxes..................................... 166 247 251
------ ----- ----
$1,230 $ 595 $904
====== ===== ====
</TABLE>
F-15
<PAGE> 78
CMP MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
11. INCOME TAXES: -- CONTINUED
A reconciliation of the U.S. federal statutory rate to the historical
effective income tax rates of the Company for the years ended December 31, 1994,
1995 and 1996 is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
U.S. federal statutory rate................................ 35.0% 35.0% 35.0%
Benefit of S corporation status............................ (35.0) (35.0) (35.0)
State and local income taxes............................... 3.7 2.0 2.4
Foreign income taxes....................................... 0.6 1.5 0.9
----- ----- -----
4.3% 3.5% 3.3%
===== ===== =====
</TABLE>
The components of the net deferred income tax asset as of December 31, 1995
and 1996 are as follows:
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Accounts receivable................................................ $ 85 $102
Accruals for operating expenses.................................... 575 344
Property, equipment and leasehold improvements..................... (72) (62)
Other.............................................................. 4 34
Valuation allowance................................................ -- (33)
---- ----
$592 $385
==== ====
</TABLE>
The provision for pro forma income taxes (unaudited) for the years ended
December 31, 1994, 1995 and 1996 as if the Company had terminated its S
corporation election prior to January 1, 1994 is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
U.S. federal income taxes:
Current........................................... $10,812 $ 7,401 $ 6,853
Deferred.......................................... (934) (1,504) 2,223
State and local income taxes:
Current........................................... 2,842 1,933 1,796
Deferred.......................................... (244) (383) 584
Foreign income taxes................................ 167 247 251
------- ------- -------
$12,643 $ 7,694 $11,707
======= ======= =======
</TABLE>
F-16
<PAGE> 79
CMP MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
11. INCOME TAXES: -- CONTINUED
A reconciliation of the U.S. federal statutory rate to the pro forma
effective income tax rates (unaudited) of the Company for the years ended
December 31, 1994, 1995 and 1996 is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
U.S. federal statutory rate................................... 35.0% 35.0% 35.0%
State and local income taxes.................................. 5.8 5.8 5.4
Foreign income taxes.......................................... 0.6 1.5 0.9
Operating expenses disallowed for tax purposes................ 1.3 1.8 1.2
Operating losses (income) with no income tax
benefit (expense)........................................... 1.2 1.3 (1.9)
Other......................................................... (0.3) (0.7) (0.1)
Valuation allowance........................................... -- -- 1.7
---- ---- ----
43.6% 44.7% 42.2%
==== ==== ====
</TABLE>
The components of the pro forma deferred income tax asset (unaudited) as of
December 31, 1995 and 1996 are as follows:
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Accounts receivable.............................................. $1,069 $1,362
Accruals for operating expenses.................................. 7,786 4,596
Property, equipment and leasehold improvements................... (971) (830)
Other............................................................ 56 445
Valuation allowance.............................................. -- (440)
------ ------
$7,940 $5,133
====== ======
</TABLE>
12. EMPLOYEE BENEFIT PLANS:
a. Defined Benefit Pension Plan
As of December 31, 1992, substantially all employees of the Company were
covered under a noncontributory defined benefit pension plan (the "Pension
Plan"). The Company reports pension expense in accordance with Statement of
Financial Accounting Standards No. 87, "Employers' Accounting for Pensions"
("SFAS No. 87"), and Statement of Financial Accounting Standards No. 88,
"Employers' Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits." The Company has funded the Pension
Plan in accordance with the Employee Retirement Income Security Act of 1974. The
Pension Plan's assets consist primarily of time deposits, money market funds,
guaranteed income annuity contracts, pooled income funds, and equity securities.
As of January 1, 1993, the Pension Plan was amended and frozen so that
employees will earn no further benefits for future services. Future service will
continue to be the basis for vesting of non-vested benefits existing at December
31, 1992 and the Pension Plan will continue to hold assets and pay benefits.
This amendment was treated as a curtailment for the year ended December 31,
1992.
F-17
<PAGE> 80
CMP MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
12. EMPLOYEE BENEFIT PLANS -- (CONTINUED)
The following table sets forth the Pension Plan's funded status and amounts
recognized at December 31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Actuarial present value of benefit obligation:
Accumulated benefit obligation, including vested benefits of
$1,944 in 1995 and $2,087 in 1996.............................. $2,039 $2,117
====== ======
Projected benefit obligation for service rendered to date........ $2,039 $2,117
Pension Plan assets at fair value................................ 1,707 1,786
------ ------
Fund status...................................................... (332) (331)
Unrecognized transition amount being recognized over 15 years.... (648) (563)
Unrecognized net loss............................................ 1,099 1,031
Adjustment to recognize minimum liability........................ (451) (468)
------ ------
Accrued pension cost................................... $ (332) $ (331)
====== ======
</TABLE>
As required by SFAS No. 87, pension cost was computed using the projected
unit credit actuarial cost method (previously the entry age normal actuarial
cost method had been used). Net periodic pension cost includes the following
components for the years ended December 31, 1994, 1995 and 1996:
<TABLE>
<CAPTION>
1994 1995 1996
----- ---- -----
<S> <C> <C> <C>
Interest cost............................................. $ 211 $141 $ 143
Return on assets.......................................... (119) (90) (109)
Net amortization and deferral............................. (136) (51) (5)
----- ---- -----
Net periodic pension (income) expense........... $ (44) $ -- $ 29
===== ==== =====
</TABLE>
For the years ended December 31, 1994, 1995 and 1996, the actuarial present
value of the projected benefit obligation was computed using an average discount
rate of 7.25%, 7% and 7%, respectively. The rate of increase in future
compensation levels no longer applies since the Pension Plan was frozen as of
January 1, 1993. The expected long-term rate of return on plan assets was 6.5%,
5% and 5% in 1994, 1995 and 1996, respectively.
In accordance with the provisions of SFAS No. 87, the Company recorded a
minimum pension liability representing the excess of the accumulated benefit
obligation over the fair value of plan assets and accrued pension liabilities.
Because the liability recognized exceeds the amount of unrecognized prior
service cost, the liability as of December 31, 1995 and 1996 is reported as a
separate reduction of stockholders' equity.
b. Profit Sharing Plan:
Substantially all employees of the Company are covered by a profit sharing
plan (the "Profit Sharing Plan"). The Profit Sharing Plan provides that
employees may make annual pre-tax contributions of up to 15% of their eligible
compensation pursuant to Section 401(k) of the Internal Revenue Code. Through
December 31, 1996, the Company contributed an amount equal to 25% of each
employee's contribution up to 1.5% of the employee's eligible compensation. As
of January 1, 1997, the Company will contribute an amount equal to 50% of each
employee's contribution up to
F-18
<PAGE> 81
CMP MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
12. EMPLOYEE BENEFIT PLANS -- (CONTINUED)
3% of the employee's eligible compensation. The Company's contributions were
$557, $630 and $882 for the years ended December 31, 1994, 1995 and 1996,
respectively. The Company at its discretion has made additional annual
contributions as defined in the Profit Sharing Plan. The provision for these
contributions amounted to $2,154, $3,118 and $4,283 in 1994, 1995 and 1996,
respectively.
13. RELATED PARTY TRANSACTIONS:
Certain stockholders of the Company have a 15% ownership interest in the
facility which the Company leases as its principal offices. The existing lease
expires in November 1999. Total rental expense with respect to this lease was
approximately $4,500 for each of the years ended December 31, 1994, 1995 and
1996. See Note 14. The Company has a note receivable from one of its executive
officers, the unpaid principal amount of which was $780 and $770 as of December
31, 1995 and 1996, respectively. This note, which bears interest at a rate which
approximates LIBOR, provides for quarterly interest payments and annual
principal payments of $10 per year through 2003, $20 per year through 2013 and
$50 per year through 2023. In addition, in April 1997, the Company guaranteed
loans to two of its senior executives totaling $4,700. The loans are from one of
the financial institutions with which the Company has its revolving credit
agreement. These loans will be payable in November 2001 and are guaranteed
through such date. The Company is obligated to extend the guarantees for $3,000
and $1,700 through December 31, 2005 and December 31, 2007, respectively, at the
request of the senior executives. The Company incurred expenses of approximately
$441, $489 and $544 for the years ended December 31, 1994, 1995 and 1996,
respectively, on behalf of a not-for-profit organization managed by the
Co-Chairpersons of the Company.
14. COMMITMENTS AND CONTINGENCIES:
The Company leases its office facilities and certain office equipment under
non-cancellable operating leases expiring in various years through 2005. Future
minimum lease payments as of December 31, 1996 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
----------------------------------------------------------
<S> <C>
1997...................................................... $10,593
1998...................................................... 10,656
1999...................................................... 9,743
2000...................................................... 5,535
2001...................................................... 5,264
Thereafter................................................ 14,190
-------
$55,981
=======
</TABLE>
Certain of the above leases are subject to escalation clauses for taxes and
other expenses. Rent expense amounted to $7,547, $9,098 and $9,851 in 1994, 1995
and 1996, respectively.
The Company has employment agreements with three senior executives. The
agreements provide minimum terms for base compensation and fringe benefits. The
agreements also contain confidentiality and non-competition clauses ranging from
three to five years as well as termination provisions. The Company is accruing
the probable amount of expected termination costs over the
F-19
<PAGE> 82
CMP MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
14. COMMITMENTS AND CONTINGENCIES: -- CONTINUED
expected service period. The maximum contingent liability under such agreements
at December 31, 1996 was approximately $17,000.
In the normal course of business, the Company is sometimes named as a
defendant in litigation. In the opinion of management, based upon the advice of
counsel, any uninsured liability which may result from the resolution of any
present litigation or asserted claim will not have a material effect on the
Company's financial position, results of operations or cash flows.
15. FAIR VALUE OF FINANCIAL INSTRUMENTS:
Cash and cash equivalents, marketable securities, short-term receivables
and trade payables and accrued expenses are carried at amounts approximating
fair value. Based on the interest rates currently available to the Company for
similar borrowings, long-term debt is also carried at amounts approximating fair
value.
16. QUARTERLY FINANCIAL DATA (UNAUDITED):
<TABLE>
<CAPTION>
1995 MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, TOTAL
- ------------------------------------- --------- -------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Revenues............................. $77,958 $ 93,319 $95,192 $115,891 $382,360
Operating costs and expenses......... 81,729 91,033 89,579 100,404 362,745
------- ------- ------- -------- --------
Income (loss) from operations........ (3,771) 2,286 5,613 15,487 19,615
Gain (loss) on sales of
businesses(1)...................... 126 (408) (282)
Other income (expense), net.......... (338) (125) 138 (1,778) (2,103)
------- ------- ------- -------- --------
Income (loss) before provision
(benefit) for income taxes......... (4,109) 2,287 5,343 13,709 17,230
Provision (benefit) for income
taxes.............................. (142) 79 185 473 595
------- ------- ------- -------- --------
Net income (loss).................... $(3,967) $ 2,208 $ 5,158 $ 13,236 $ 16,635
======= ======= ======= ======== ========
Historical income (loss) before
provision (benefit) for
income taxes....................... $(4,109) $ 2,287 $ 5,343 $ 13,709 $ 17,230
Pro forma provision (benefit) for
income taxes(2).................... (1,835) 1,021 2,386 6,122 7,694
------- ------- ------- -------- --------
Pro forma net income (loss).......... $(2,274) $ 1,266 $ 2,957 $ 7,587 $ 9,536
======= ======= ======= ======== ========
Pro forma net income (loss) per
share(3)...........................
======= ======= ======= ======== ========
Pro forma weighted average shares
outstanding........................
======= ======= ======= ======== ========
</TABLE>
F-20
<PAGE> 83
CMP MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
16. QUARTERLY FINANCIAL DATA (UNAUDITED): -- (CONTINUED)
<TABLE>
<CAPTION>
1996 MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, TOTAL
- ------------------------------------ --------- -------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C>
Revenues............................ $84,910 $107,674 $ 110,578 $114,897 $418,059
Operating costs and expenses........ 87,304 98,450 101,498 102,002 389,254
------- ------- ------- -------- --------
Income (loss) from operations....... (2,394) 9,224 9,080 12,895 28,805
Gain (loss) on sales of
businesses(1)..................... 1,216 72 146 1,434
Other income (expense), net......... 376 (95) (655) (2,102) (2,476)
------- ------- ------- -------- --------
Income (loss) before provision
(benefit) for income taxes........ (802) 9,201 8,571 10,793 27,763
Provision (benefit) for income
taxes............................. (26) 300 279 351 904
------- ------- ------- -------- --------
Net income (loss)................... $ (776) $ 8,901 $ 8,292 $ 10,442 $ 26,859
======= ======= ======= ======== ========
Historical income (loss) before
provision (benefit) for income
taxes............................. $ (802) $ 9,201 $ 8,571 $ 10,793 $ 27,763
Pro forma provision (benefit) for
income taxes(2)................... (338) 3,880 3,614 4,551 11,707
------- ------- ------- -------- --------
Pro forma net income (loss)......... $ (464) $ 5,321 $ 4,957 $ 6,242 $ 16,056
======= ======= ======= ======== ========
Pro forma net income (loss) per
share(3)..........................
======= ======= ======= ======== ========
Pro forma weighted average shares
outstanding.......................
======= ======= ======= ======== ========
</TABLE>
- ---------------
(1) See Note 8 -- Gain (Loss) on Sales of Businesses
(2) See Note 11 -- Income Taxes
(3) See Note 2(m) -- Pro Forma Net Income (Loss) Per Share and Weighted Average
Common Shares Outstanding (Unaudited)
F-21
<PAGE> 84
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company and the Selling Stockholders have agreed to sell to each of the U.S.
Underwriters named below, and each of such Underwriters, for whom Goldman, Sachs
& Co., Lazard Freres & Co. LLC, Bear, Stearns & Co. Inc. and Furman Selz LLC are
acting as representatives, has severally agreed to purchase from the Company and
the Selling Stockholders, the respective number of shares of Class A Common
Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
CLASS A
UNDERWRITER COMMON STOCK
--------------------------------------------------------------------- -------------
<S> <C>
Goldman, Sachs & Co..................................................
Lazard Freres & Co. LLC..............................................
Bear, Stearns & Co. Inc..............................................
Furman Selz LLC......................................................
---
Total...........................................................
===
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.
The U.S. Underwriters propose to offer the shares of Class A Common Stock
in part directly to the public at the initial public offering price set forth on
the cover page of this Prospectus and in part to certain securities dealers at
such price less a concession of $ per share. The U.S. Underwriters may
allow, and such dealers may reallow, a concession not in excess of $
per share to certain brokers and dealers. After the shares of Class A Common
Stock are released for sale to the public, the offering price and other selling
terms may from time to time be varied by the representatives.
The Company and the Selling Stockholders have entered into an underwriting
agreement (the "International Underwriting Agreement") with the underwriters of
the International Offering (the "International Underwriters") providing for the
concurrent offer and sale of shares of Class A Common Stock in an
international offering outside the United States. The offering price and
aggregate underwriting discounts and commissions per share for the two offerings
are identical. The closing of the U.S. Offering made hereby is a condition to
the closing of the International Offering, and vice versa. The representatives
of the International Underwriters are Goldman Sachs International, Lazard
Capital Markets, Bear, Stearns International Limited and Furman Selz LLC.
Pursuant to an agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of the
U.S. Underwriters named herein has agreed that, as a part of the distribution of
the shares offered hereby and subject to certain exceptions, it will offer, sell
or deliver the shares of Class A Common Stock, directly or indirectly, only in
the United States of America (including the States and the District of
Columbia), its territories, its possessions and other areas subject to its
jurisdiction (the "United States") and to U.S. persons, which term shall mean,
for purposes of this paragraph: (a) any individual who is a resident of the
United States or (b) any corporation, partnership or other entity organized in
or under the laws of the United States or any political subdivision thereof and
whose office most directly involved with the purchase is located in the United
States. Each of the International Underwriters has agreed pursuant to the
Agreement Between that, as a part of the distribution of the shares offered as a
part of the International Offering, and subject to certain exceptions, it will
(i) not, directly or indirectly, offer, sell or deliver shares of Class A Common
Stock (a) in the United States or to any U.S. persons or (b) to any person who
it believes intends to reoffer, resell or deliver
U-1
<PAGE> 85
the shares in the United States or to any U.S. persons, and (ii) cause any
dealer to whom it may sell such shares at any concession to agree to observe a
similar restriction.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Class A Common Stock as may be mutually agreed. The price of any shares so sold
shall be the initial public offering price, less an amount not greater than the
selling concession.
The Company has granted the U.S. Underwriters an option exercisable for 30
days after the date of this Prospectus to purchase up to an aggregate of
additional shares of Class A Common Stock, solely to cover over-allotments, if
any. If the U.S. Underwriters exercise their over-allotment option, the U.S.
Underwriters have severally agreed, subject to certain conditions, to purchase
approximately the same percentage thereof that the number of shares to be
purchased by each of them, as shown in the foregoing table, bears to the
shares of Class A Common Stock offered. The Company has granted the
International Underwriters a similar option to purchase up to an aggregate of
additional shares of Class A Common Stock.
The Company, its executive officers and directors and the holders of Class
B Common Stock (including the Selling Stockholders), who will hold in the
aggregate shares of Class A Common Stock and shares of Class B Common
Stock following the Offerings, have agreed that, subject to certain limited
exceptions, during the period beginning from the date of this Prospectus and
continuing to and including the date 180 days after the date of the Prospectus,
they will not offer, sell, contract to sell or otherwise dispose of any
securities of the Company (other than pursuant to employee stock option or stock
purchase plans existing, or on the conversion or exchange of convertible or
exchangeable securities outstanding, on the date of this Prospectus) which are
substantially similar to the shares of Class A Common Stock or which are
convertible or exchangeable into securities which are substantially similar to
the shares of Class A Common Stock, without the prior written consent of
Goldman, Sachs & Co.
The representatives of the Underwriters have informed the Company that they
do not expect sales to accounts over which the Underwriters exercise
discretionary authority to exceed 5% of the total number of shares of Class A
Common Stock offered by them.
Prior to the Offerings, there has been no public market for the Class A
Common Stock. The initial public offering price will be negotiated between the
Company, the Selling Stockholders and the representatives of the U.S.
Underwriters and the International Underwriters. Among the factors to be
considered in determining the initial public offering price of the Class A
Common Stock, in addition to prevailing market conditions, will be the Company's
historical performance, estimates of the business potential and earnings
prospects of the Company, an assessment of the Company's management and the
consideration of the above factors in relation to market valuation of companies
in related businesses.
Application has been made for quotation of the Class A Common Stock on the
Nasdaq National Market under the symbol "CMPX".
In connection with the Offerings, the Underwriters may purchase and sell
shares of Class A Common Stock in the open market. These transactions may
include over-allotment and stabilizing transactions and purchases to cover
syndicate short positions created in connection with the Offerings. Stabilizing
transactions consist of certain bids or purchases for the purpose of preventing
or retarding a decline in the market price of the Class A Common Stock, and
syndicate short positions involve the sale by the Underwriters of a greater
number of shares of Class A Common Stock than they are required to purchase from
the Company and the Selling Stockholders in the Offerings. The Underwriters also
may impose a penalty bid, whereby selling concessions allowed to syndicate
members or other broker-dealers in respect of the shares sold in the Offerings
may be reclaimed by the syndicate if such shares of Class A Common Stock are
repurchased by the syndicate in stabilizing or covering transactions. These
activities may stabilize, maintain or other-
U-2
<PAGE> 86
wise affect the market price of the Class A Common Stock, which may be higher
than the price that might otherwise prevail in the open market; and these
activities, if commenced, may be discontinued at any time. These transactions
may be effected in the Nasdaq National Market, in the over-the-counter market or
otherwise.
The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act of 1933.
This Prospectus may be used by underwriters and dealers in connection with
offers and sales of Class A Common Stock, including shares of Class A Common
Stock initially sold in the International Offering, to persons located in the
United States.
Furman Selz LLC has performed certain valuation and appraisal services for
the Company.
U-3
<PAGE> 87
=========================================================
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus and, if given or
made, such information or representations must not be relied upon as having been
authorized. This Prospectus does not constitute an offer to sell or the
solicitation of an offer to buy any securities other than the securities to
which it relates or an offer to sell or the solicitation of an offer to buy such
securities in any circumstances in which such offer or solicitation is unlawful.
Neither the delivery of this Prospectus nor any sale made hereunder shall, under
any circumstances, create any implication that there has been no change in the
affairs of the Company since the date hereof or that the information contained
herein is correct as of any time subsequent to its date.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary...................... 3
Risk Factors............................ 10
Use of Proceeds......................... 14
Dividend Policy......................... 14
Dilution................................ 15
Capitalization.......................... 16
Selected Financial Data................. 17
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 20
Business................................ 27
Management.............................. 38
Certain Relationships and Related
Transactions.......................... 50
Principal and Selling Stockholders...... 53
Description of Capital Stock............ 55
Shares Eligible for Future Sale......... 59
Legal Matters........................... 61
Experts................................. 61
Change in Accountants................... 61
Additional Information.................. 61
Index to Financial Statements........... F-1
Underwriting............................ U-1
</TABLE>
Through and including , 1997 (the 25th day after the date of this
Prospectus), all dealers effecting transactions in the Class A Common Stock,
whether or not participating in this distribution, may be required to deliver a
Prospectus. This is in addition to the obligation of dealers to deliver a
Prospectus when acting as Underwriters and with respect to their unsold
allotments or subscriptions.
=========================================================
=========================================================
Shares
CMP Media Inc.
Class A Common Stock
(par value $.01 per share)
[CMP LOGO]
Goldman, Sachs & Co.
Lazard Freres & Co. LLC
Bear, Stearns & Co. Inc.
Furman Selz
Representatives of the Underwriters
=========================================================
<PAGE> 88
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses in connection with the
sale of the shares of Class A Common Stock being registered, other than the
underwriting discounts and commissions. All amounts shown are estimates except
for the Securities and Exchange Commission registration fee and the NASD filing
fee. All of these fees are being paid by the Company.
<TABLE>
<S> <C>
Registration Fee.................................................. $ 34,849
NASD Filing Fee................................................... 12,000
Nasdaq National Market Application Fee............................ 5,000
Blue Sky Fees and Expenses........................................ *
Printing and Engraving Fees....................................... *
Legal Fees and Expenses........................................... *
Accounting Fees and Expenses...................................... *
Transfer Agent and Registration Fees.............................. *
Miscellaneous..................................................... *
--------
Total................................................... $ *
========
</TABLE>
- ---------------
* To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 102(b)(7) of the General Corporation Law of the State of Delaware
(the "DGCL"), provides that a corporation (in its original certificate of
incorporation or an amendment thereto) may eliminate or limit the personal
liability of a director (or certain persons who, pursuant to the provisions of
the certificate of incorporation, exercise or perform duties conferred or
imposed upon directors by the DGCL) to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, provided that such
provisions shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL
(providing for liability of directors for unlawful payment of dividends or
unlawful stock purchases or redemptions) or (iv) for any transaction from which
the director derived an improper personal benefit. Section 7.5 of the
Certificate of Incorporation of CMP Media Inc., as amended (the "Certificate of
Incorporation"), limits the liability of directors thereof to the extent
permitted by Section 102(b)(7) of the DGCL.
Under Section 145 of the DGCL, in general, a corporation may indemnify its
directors, officers, employees or agents against expenses (including attorney's
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by them in connection with any action, suit or proceeding brought by
third parties to which they may be made parties by reason of their being or
having been directors, officers, employees or agents and shall so indemnify such
persons if they acted in good faith and in a manner they reasonably believed to
be in or not opposed to the best interests of the corporation and, with respect
to any criminal action or proceeding, had no reasonable cause to believe their
conduct was unlawful. Section 7.4 of the Certificate of Incorporation gives CMP
the power to indemnify its officers, directors, employees and agents to the full
extent permitted by Delaware law.
Under the Underwriting Agreement, the Underwriters are obligated, under
certain circumstances, to indemnify directors and officers of the Registrant
against certain liabilities, including liabilities under the Securities Act of
1933, as amended (the "Securities Act"). Reference is made to the form of
Underwriting Agreement filed as Exhibit 1 hereto.
II-1
<PAGE> 89
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
None.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
(a) Exhibit Exhibit List
- --------------- ------------------------------------------------------------------------------
<S> <C>
1 -- Form of Underwriting Agreement (U.S. Version)
3.1 -- Certificate of Incorporation of CMP Media Inc., as amended.
3.2 -- By-laws of CMP Media Inc.
*3.3 -- Form of Amended and Restated Certificate of Incorporation of CMP Media Inc.
*3.4 -- Form of Restated Bylaws of CMP Media Inc.
4.1 -- Reference is made to Exhibits 3.1 and 3.2
*4.2 -- Specimen Class A Common Stock certificate
*4.3 -- Stockholders' Agreement, dated as of February 3, 1997
*5 -- Opinion of Dow, Lohnes & Albertson, PLLC (including consent)
10.1 -- Employment Agreement with Michael S. Leeds
10.2 -- Share Purchase Agreement, dated November 27, 1996, among Gerard G. Leeds, Lilo
J. Leeds, CMP Media Inc. and Michael S. Leeds
10.3 -- Stockholders' Agreement, dated November 27, 1996, among CMP Media Inc., Gerard
G. Leeds, Lilo J. Leeds and Michael S. Leeds
10.4 -- Option Agreement, dated November 27, 1996, between CMP Media Inc. and Michael
S. Leeds
10.5 -- Employment Agreement with Daniel H. Leeds
10.6 -- Share Purchase Agreement, dated November 27, 1996, among Gerard G. Leeds, Lilo
J. Leeds, CMP Media Inc. and Daniel H. Leeds
10.7 -- Stockholders' Agreement, dated November 27, 1996, among CMP Media Inc., Gerard
G. Leeds, Lilo J. Leeds and Daniel H. Leeds
10.8 -- Option Agreement, dated November 27, 1996, between CMP Media Inc. and Daniel
H. Leeds
10.9 -- Employment Agreement with Kenneth D. Cron
10.10 -- Share Purchase Agreement, dated November 27, 1996, among Gerard G. Leeds, Lilo
J. Leeds, CMP Media Inc. and Kenneth D. Cron
10.11 -- Stockholders' Agreement, dated November 27, 1996, among CMP Media Inc., Gerard
G. Leeds, Lilo J. Leeds and Kenneth D. Cron
10.12 -- Option Agreement, dated November 27, 1996, between CMP Media Inc. and Kenneth
D. Cron
10.13 -- CMP Media Inc. 1996 Stock Option Plan
10.14 -- CMP Media Inc. Pension Plan
10.15 -- CMP Publications, Inc. Profit Sharing and Retirement Savings Plan and Trust
10.16 -- CMP Publications, Inc. 1988 Equity Appreciation Plan
*10.17 -- CMP Media Inc. Employee Stock Purchase Plan
10.18 -- Credit Agreement by and among CMP Publications, Inc., Shawmut Bank Connecticut
and The Chase Manhattan Bank, dated July 15, 1993
10.19 -- Fifth Amendment to the Credit Agreement by and among CMP Media Inc., Fleet
National Bank and The Chase Manhattan Bank, dated November 14, 1996
10.20 -- Sixth Amendment to the Credit Agreement by and among CMP Media Inc., Fleet
National Bank and The Chase Manhattan Bank, dated April 15, 1997
*10.21 -- CMP Media Inc. Directors' Stock Compensation Plan
</TABLE>
II-2
<PAGE> 90
<TABLE>
<CAPTION>
(a) Exhibit Exhibit List
- --------------- ------------------------------------------------------------------------------
<S> <C>
*10.22 -- CMP Media Inc. Stock Incentive Plan
*11 -- Statement re computation of per share earnings
16 -- Letter from Miller, Ellin & Company
21 -- Subsidiaries of CMP Media Inc.
23.1 -- Consent of Coopers & Lybrand L.L.P.
*23.2 -- Consent of Dow, Lohnes & Albertson, PLLC (contained in their opinion filed as
Exhibit 5)
24 -- Power of Attorney (included on page II-4)
27 -- Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment.
(b) Financial Statement Schedules
All other schedules are omitted because they are not required, they are not
applicable or the required information is already included in the Registrant's
consolidated financial statements or the notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 14 above or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
1. For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as a part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed part of this registration
statement as of the time it was declared effective.
2. For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at such time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 91
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, CMP
MEDIA INC. HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN MANHASSET, NEW YORK, ON
MAY 9, 1997.
CMP MEDIA INC.
By: /s/ MICHAEL S. LEEDS
----------------------------------
(MICHAEL S. LEEDS,
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND A DIRECTOR)
POWER OF ATTORNEY
CMP MEDIA INC., A DELAWARE CORPORATION, AND EACH PERSON WHOSE SIGNATURE
APPEARS BELOW, CONSTITUTES AND APPOINTS MICHAEL S. LEEDS AND ROBERT D.
MARAFIOTI, AND ANY OF THEM, WITH FULL POWER TO ACT WITHOUT THE OTHERS, SUCH
PERSON'S TRUE AND LAWFUL ATTORNEYS-IN-FACT, WITH FULL POWER OF SUBSTITUTION AND
RESUBSTITUTION, FOR HIM OR HER AND IN HIS OR HER NAME, PLACE AND STEAD, IN ANY
AND ALL CAPACITIES, TO SIGN THIS REGISTRATION STATEMENT, AND ANY AND ALL
AMENDMENTS THERETO (INCLUDING, WITHOUT LIMITATION, POST-EFFECTIVE AMENDMENTS AND
ANY SUBSEQUENT REGISTRATION STATEMENTS FILED PURSUANT TO RULE 462(B) UNDER THE
SECURITIES ACT OF 1933, AS AMENDED), AND OTHER DOCUMENTS IN CONNECTION
THEREWITH, WITH THE SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID
ATTORNEYS-IN-FACT, AND EACH OF THEM, FULL POWER AND AUTHORITY TO DO AND PERFORM
EACH AND EVERY ACT AND THING NECESSARY OR DESIRABLE TO BE DONE IN AND ABOUT THE
PREMISES, AS FULLY TO ALL INTENTS AND PURPOSES AS HE OR SHE MIGHT OR COULD DO IN
PERSON, THEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT, OR ANY
OF THEM, OR THEIR OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE TO
BE DONE BY VIRTUE HEREOF.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON
BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ---------------------------------- -------------
<C> <S> <C>
/s/ MICHAEL S. LEEDS President, Chief Executive Officer
- ------------------------------------------ and a Director (Principal
(MICHAEL S. LEEDS) Executive Officer) May 9, 1997
/s/ DANIEL H. LEEDS Executive Vice President,
- ------------------------------------------ President of International and a
(DANIEL H. LEEDS) Director May 9, 1997
/s/ KENNETH D. CRON Executive Vice President,
- ------------------------------------------ President of Publishing May 9, 1997
(KENNETH D. CRON)
/s/ JOSEPH E. SICHLER Vice President and Chief Financial
- ------------------------------------------ Officer (Principal Financial
(JOSEPH E. SICHLER) Officer and Principal Accounting
Officer) May 9, 1997
/s/ GERARD G. LEEDS Director, Co-Chairperson of Board
- ------------------------------------------ of Directors May 9, 1997
(GERARD G. LEEDS)
/s/ LILO J. LEEDS Director, Co-Chairperson of Board
- ------------------------------------------ of Directors May 9, 1997
(LILO J. LEEDS)
/s/ RICHARD A. LEEDS Director May 9, 1997
- ------------------------------------------
(RICHARD A. LEEDS)
</TABLE>
II-4
<PAGE> 92
After the approval by the Board of Directors of the exchange of the Class C
Common Stock, the common stock split and the change in par value discussed in
Notes 1 and 9 to the consolidated financial statements of CMP Media Inc. and
subsidiaries, we expect to be in a position to render the following audit
report.
COOPERS & LYBRAND L.L.P.
New York, New York
February 28, 1997.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of CMP Media Inc.:
In connection with our audits of the consolidated financial statements of
CMP Media Inc. and subsidiaries as of December 31, 1995 and 1996, and for each
of the three years in the period ended December 31, 1996, which financial
statements are included in the Prospectus, we have also audited the financial
statement schedule listed in Item 16 herein.
In our opinion, the financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information required to be included therein.
New York, New York
February 28, 1997, except Notes 1 and 9
as to which the date is .
S-1
<PAGE> 93
SCHEDULE II
CMP MEDIA INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
AS OF DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO
BEGINNING OF COSTS AND BALANCE AT END
DESCRIPTION PERIOD EXPENSES WRITE-OFFS OF PERIOD
- ---------------------------------------- ------------ ---------- ---------- --------------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts at
December 31, 1994..................... $2,091 2,767 (2,152) $2,706
====== ===== ====== ======
Allowance for Doubtful Accounts at
December 31, 1995..................... $2,706 2,150 (1,911) $2,945
====== ===== ====== ======
Allowance for Doubtful Accounts at
December 31, 1996..................... $2,945 1,817 (1,573) $3,189
====== ===== ====== ======
</TABLE>
S-2
<PAGE> 94
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
- ------ ---------------------------------------------------------------------- ------------
<C> <S> <C> <C>
1 -- Form of Underwriting Agreement (U.S. Version).........................
3.1 -- Certificate of Incorporation of CMP Media Inc., as amended............
3.2 -- By-laws of CMP Media Inc. ............................................
*3.3 -- Form of Amended and Restated Certificate of Incorporation of CMP Media
Inc. .................................................................
*3.4 -- Form of Restated Bylaws of CMP Media Inc. ............................
4.1 -- Reference is made to Exhibits 3.1 and 3.2.............................
*4.2 -- Specimen Class A Common Stock certificate.............................
*4.3 -- Stockholders' Agreement, dated as of February 3, 1997.................
*5 -- Opinion of Dow, Lohnes & Albertson, PLLC (including consent)..........
10.1 -- Employment Agreement with Michael S. Leeds............................
10.2 -- Share Purchase Agreement, dated November 27, 1996, among Gerard G.
Leeds, Lilo J. Leeds, CMP Media Inc. and Michael S. Leeds.............
10.3 -- Stockholders' Agreement, dated November 27, 1996, among CMP Media
Inc., Gerard G. Leeds, Lilo J. Leeds and Michael S. Leeds.............
10.4 -- Option Agreement, dated November 27, 1996, between CMP Media Inc. and
Michael S. Leeds......................................................
10.5 -- Employment Agreement with Daniel H. Leeds.............................
10.6 -- Share Purchase Agreement, dated November 27, 1996, among Gerard G.
Leeds, Lilo J. Leeds, CMP Media Inc. and Daniel H. Leeds..............
10.7 -- Stockholders' Agreement, dated November 27, 1996, among CMP Media
Inc., Gerard G. Leeds, Lilo J. Leeds and Daniel H. Leeds..............
10.8 -- Option Agreement, dated November 27, 1996, between CMP Media Inc. and
Daniel H. Leeds.......................................................
10.9 -- Employment Agreement with Kenneth D. Cron.............................
10.10 -- Share Purchase Agreement, dated November 27, 1996, among Gerard G.
Leeds, Lilo J. Leeds, CMP Media Inc. and Kenneth D. Cron..............
10.11 -- Stockholders' Agreement, dated November 27, 1996, among CMP Media
Inc., Gerard G. Leeds, Lilo J. Leeds and Kenneth D. Cron..............
10.12 -- Option Agreement, dated November 27, 1996, between CMP Media Inc. and
Kenneth D. Cron.......................................................
10.13 -- CMP Media Inc. 1996 Stock Option Plan.................................
10.14 -- CMP Media Inc. Pension Plan...........................................
10.15 -- CMP Publications Inc. Profit Sharing and Retirement Savings Plan and
Trust.................................................................
10.16 -- CMP Publications, Inc. 1988 Equity Appreciation Plan..................
*10.17 -- CMP Media Inc. Employee Stock Purchase Plan...........................
10.18 -- Credit Agreement by and among CMP Publications, Inc., Shawmut Bank
Connecticut and The Chase Manhattan Bank, dated July 15, 1993.........
</TABLE>
<PAGE> 95
<TABLE>
<CAPTION>
Sequentially
Exhibit Numbered
Number Description Page
- ------ ---------------------------------------------------------------------- ------------
<C> <S> <C> <C>
10.19 -- Fifth Amendment to the Credit Agreement by and among CMP Media Inc.,
Fleet National Bank and The Chase Manhattan Bank, dated November 14,
1996..................................................................
10.20 -- Sixth Amendment to the Credit Agreement by and among CMP Media Inc.,
Fleet National Bank and The Chase Manhattan Bank, dated April 15,
1997..................................................................
*10.21 -- CMP Media Inc. Directors' Stock Compensation Plan.....................
*10.22 -- CMP Media Inc. Stock Incentive Plan...................................
*11 -- Statement re computation of per share earnings........................
16 -- Letter from Miller, Ellin & Company...................................
21 -- Subsidiaries of CMP Media Inc.........................................
23.1 -- Consent of Coopers & Lybrand L.L.P....................................
*23.2 -- Consent of Dow, Lohnes & Albertson, PLLC (contained in their opinion
filed as Exhibit 5)...................................................
24 -- Power of Attorney (included on page II-4).............................
27 -- Financial Data Schedule...............................................
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
Exhibit 1
Draft-May 8, 1997
CMP MEDIA INC.
CLASS A COMMON STOCK
(PAR VALUE $.01 PER SHARE)
--------------------------------------------------------------
UNDERWRITING AGREEMENT
(U.S. VERSION)
, 1997
Goldman, Sachs & Co.,
Lazard Freres & Co. LLC,
Bear, Stearns & Co. Inc.
Furman Selz LLC,
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.,
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
CMP Media Inc., a Delaware corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of
shares and, at the election of the Underwriters, up to
additional shares of Class A Common Stock (par value $ .01 per share)
("Stock") of the Company and the stockholders of the Company named in Schedule
II hereto (the "Selling Stockholders") propose, subject to the terms and
conditions stated herein, to sell to the Underwriters an aggregate of
shares of Stock. The aggregate of shares to be sold by the Company
and the Selling Stockholders is herein called the "Firm Shares" and the
aggregate of additional shares to be sold by the Company is herein called the
"Optional Shares". The Firm Shares and the Optional Shares that the
Underwriters elect to purchase pursuant to Section 2 hereof are herein
collectively called the "Shares".
<PAGE> 2
It is understood and agreed to by all parties that the Company and the
Selling Stockholders are concurrently entering into an agreement (the
"International Underwriting Agreement") providing for the sale by the Company
and the Selling Stockholders of up to a total of _______shares of Stock (the
"International Shares"), including the overallotment option thereunder, through
arrangements with certain underwriters outside the United States (the
"International Underwriters"), for whom Goldman Sachs International, Lazard
Capital Markets, Bear, Stearns International Limited and Furman Selz LLC are
acting as lead managers. Anything herein or therein to the contrary
notwithstanding, the respective closings under this Agreement and the
International Underwriting Agreement are hereby expressly made conditional on
one another. The Underwriters hereunder and the International Underwriters are
simultaneously entering into an Agreement between U.S. and International
Underwriting Syndicates (the "Agreement between Syndicates") which provides,
among other things, for the transfer of shares of Stock between the two
syndicates. Two forms of prospectus are to be used in connection with the
offering and sale of shares of Stock contemplated by the foregoing, one relating
to the Shares hereunder and the other relating to the International Shares. The
latter form of prospectus will be identical to the former except for the front,
inside front and back cover pages, the "Certain United States Tax Consequences
to Non-United States Holders" section (which is included in the international
prospectus only) and the "Underwriting" section. Except as used in Sections 2,
3, 4, 9 and 11 herein, and except as the context may otherwise require,
references hereinafter to the Shares shall include all the shares of Stock which
may be sold pursuant to either this Agreement or the International Underwriting
Agreement, and references herein to any prospectus whether in preliminary or
final form, and whether as amended or supplemented, shall include both the U.S.
and the international versions thereof.
1. (a) The Company represents and warrants to, and agrees with, each of
the Underwriters that:
(i) A registration statement on Form S-1 (File No. 333- ) (the
"Initial Registration Statement") in respect of the Shares has been
filed with the Securities and Exchange Commission (the "Commission");
the Initial Registration Statement and any post-effective amendment
thereto, each in the form heretofore delivered to you, and, excluding
exhibits thereto, to you for each of the other Underwriters, have been
declared effective by the Commission in such form; other than a
registration statement, if any, increasing the size of the offering (a
"Rule 462(b) Registration Statement"), pursuant to Rule 462(b) under
the Securities Act of 1933, as amended (the "Act"), which became or
will become effective upon filing with the Commission, no other
document with respect to the Initial Registration Statement (including
any pre-effective amendment) or the Rule 462(b)
2
<PAGE> 3
Registration Statement has heretofore been filed with the Commission;
no stop order suspending the effectiveness of the Initial Registration
Statement, any post-effective amendment thereto or the Rule 462(b)
Registration Statement, if any, has been issued and no proceeding for
that purpose has been initiated or threatened by the Commission (any
preliminary prospectus included in the Initial Registration Statement
or filed with the Commission pursuant to Rule 424(a) of the rules and
regulations of the Commission under the Act, is hereinafter called a
"Preliminary Prospectus"; the various parts of the Initial Registration
Statement and the Rule 462(b) Registration Statement, if any, including
all exhibits thereto and including the information contained in the
form of final prospectus filed with the Commission pursuant to Rule
424(b) under the Act in accordance with Section 5(a) hereof and deemed
by virtue of Rule 430A under the Act to be part of the Initial
Registration Statement at the time it was declared effective, each as
amended at the time such part of the Initial Registration Statement
became effective or such part of the Rule 462(b) Registration
Statement, if any, became or hereafter becomes effective, are
hereinafter collectively called the "Registration Statement"; and such
final prospectus, in the form first filed pursuant to Rule 424(b) under
the Act, is hereinafter called the "Prospectus"); and, if the Company
has filed a Rule 462(b) Registration Statement with the Commission
prior to the execution of this Agreement, the Company has either paid
to the Commission the filing fee for the Rule 462(b) Registration
Statement or given irrevocable instructions for the payment of such fee
pursuant to Rule 111(b) under the Act;
(ii) No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission, and each
Preliminary Prospectus, at the time of filing thereof, conformed in all
material respects to the requirements of the Act and the rules and
regulations of the Commission thereunder, and did not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to the Company
by an Underwriter through Goldman, Sachs & Co. expressly for use
therein;
(iii) The Registration Statement conforms, and the Prospectus
and any further amendments or supplements to the Registration Statement
or the Prospectus will conform, in all material respects to the
requirements of the Act and the rules and regulations of the Commission
thereunder; the Registration Statement and any further amendments
thereto do not and will not, as of the applicable effective date
3
<PAGE> 4
of the Registration Statement and any amendment thereto, contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; the Prospectus and any further amendments or
supplements thereto do not and will not, as of the applicable filing
date of the Prospectus and any amendment or supplement thereto, contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in
reliance upon and in conformity with information furnished in writing
to the Company by an Underwriter through Goldman, Sachs & Co. expressly
for use therein;
(iv) Neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial statements
included in the Prospectus any loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered
by insurance, or from any labor dispute or court or governmental
action, order or decree, which loss or interference has had a material
adverse effect or would reasonably be expected to have a material
adverse effect on the general affairs, financial position,
stockholders' equity or consolidated results of operations of the
Company and its subsidiaries taken as a whole (a "Material Adverse
Effect"), otherwise than as set forth or contemplated in the
Prospectus; and, since the respective dates as of which information is
given in the Registration Statement and the Prospectus, there has not
been any change in the capital stock or long-term debt of the Company
or any of its subsidiaries or any material adverse change, or any
development involving a prospective material adverse change, in or
affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries taken as a whole, in each case, otherwise than as set
forth or contemplated in the Prospectus;
(v) The Company and its subsidiaries have good title in fee
simple to all real property and good title to all personal property
owned by them, in each case free and clear of all liens, encumbrances
and defects except such as are described in the Prospectus or as,
individually or in the aggregate, do not and would not reasonably be
expected to have a Material Adverse Effect; any real property and
buildings held under lease by the Company and its subsidiaries are held
by them under valid, subsisting and enforceable leases with such
exceptions as, individually or in the aggregate, do not and would not
reasonably be expected to have a Material Adverse Effect; and the
Company and its subsidiaries are in
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<PAGE> 5
compliance with all applicable zoning laws and regulations with such
exceptions as, individually or in the aggregate, do not or would not
reasonably be expected to have a Material Adverse Effect;
(vi) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with corporate power and authority to own its properties
and conduct its business as described in the Prospectus, and has been
duly qualified as a foreign corporation for the transaction of business
and is in good standing under the laws of each other jurisdiction in
which it owns or leases properties or conducts any business so as to
require such qualification, except where the failure to be so qualified
in any such jurisdiction would not reasonably be expected to have a
Material Adverse Effect; and each subsidiary of the Company has been
duly incorporated or organized and is validly existing as a corporation
or partnership in good standing under the laws of its jurisdiction of
incorporation or organization, in each case, as the case may be;
(vii) The Company has an authorized capitalization as set
forth in the Prospectus, and all of the issued shares of capital stock
of the Company have been duly and validly authorized and issued, are
fully paid and non-assessable and conform in all material respects to
the description thereof contained in the Prospectus; and all of the
issued shares of capital stock of each subsidiary of the Company have
been duly and validly authorized and issued, are fully paid and
non-assessable and are owned directly or indirectly by the Company,
free and clear of all liens, encumbrances, equities or claims;
(viii) The unissued Shares to be issued and sold by the
Company to the Underwriters hereunder and under the International
Underwriting Agreement have been duly and validly authorized and, when
issued and delivered against payment therefor as provided herein, will
be duly and validly issued and fully paid and non-assessable and will
conform in all material respects to the description of the Stock
contained in the Prospectus;
(ix) The issue and sale of the Shares to be sold by the
Company hereunder and under the International Underwriting Agreement
and the compliance by the Company with all of the provisions of this
Agreement and the International Underwriting Agreement and the
consummation of the transactions herein and therein contemplated and of
the stock split of the Company's outstanding shares of Stock and Class
B Common Stock, as described in the Prospectus (the "Stock Split"), the
exchange of the Company's outstanding shares of Class C Common
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<PAGE> 6
Stock for shares of Stock and Class B Common Stock, as the case may be,
and related amendments to the Company's Certificate of Incorporation,
as described in the Prospectus (the "Class C Exchange"), the
termination of the Company's S Corporation (as defined herein) election
and the S Corporation Distribution (as defined in the Prospectus), will
not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which the Company or any of its subsidiaries is a party
or by which the Company or any of its subsidiaries is bound or to which
any of the property or assets of the Company or any of its subsidiaries
is subject, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or By-laws of the
Company or any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or any
of its subsidiaries or any of their properties except, in each case
(other than with respect to the Certificate of Incorporation or By-laws
of the Company), for such conflicts, breaches, violations or defaults
that would not, individually or in the aggregate, (x) reasonably be
expected to have a Material Adverse Effect or (y) impair the Company's
ability to perform its obligations hereunder or under the International
Underwriting Agreement; and no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental
agency or body is required for the issue and sale of the Shares or the
consummation by the Company of the transactions contemplated by this
Agreement and the International Underwriting Agreement (including, but
not limited to, the Stock Split, the Class C Exchange, the termination
of the Company's S Corporation election and the S Corporation
Distribution), except the registration under the Act of the Shares, the
registration under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") of the Stock and such consents, approvals,
authorizations, registrations or qualifications as may be required
under foreign or state securities or Blue Sky laws in connection with
the purchase and distribution of the Shares by the Underwriters and the
International Underwriters;
(xi) Neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation or By-laws or in default
in the performance or observance of any obligation, agreement, covenant
or condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which it is a
party or by which it or any of its properties may be bound, except
(other than with respect to the Certificate of Incorporation or By-laws
of the Company) for such defaults that would not, individually or in
the aggregate, (x) reasonably be expected to have a Material Adverse
Effect or (y)
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<PAGE> 7
impair the Company's ability to perform its obligations hereunder or
under the International Underwriting Agreement;
(xii) The consolidated financial statements included in the
Registration Statement and the Prospectus, together with the related
schedules and notes, present fairly the financial position of the
Company and its subsidiaries on a consolidated basis as of the dates
indicated and the statement of operations, stockholders' equity and
cash flows of the Company and its subsidiaries on a consolidated basis
for the periods specified. Such financial statements have been prepared
in conformity with generally accepted accounting principles applied on
a consistent basis throughout the periods involved. The financial
statement schedules included in the Registration Statement present
fairly the information required to be stated therein. The summary and
selected financial data included in the Prospectus present fairly the
information shown therein and have been compiled on a basis consistent
in all material respects with that of the audited financial statements
included in the Registration Statement. The pro forma financial
information and the related notes thereto included in the Registration
Statement and the Prospectus present fairly the information shown
therein, have been prepared in accordance with the Commission's rules
and regulations with respect to pro forma financial statements and have
been compiled on the pro forma bases described therein, and the
assumptions used in the preparation thereof were reasonable at the time
made and the adjustments used therein give appropriate effect to the
transactions and circumstances referred to therein;
(xiii) The Company and its subsidiaries own, or possess all
necessary licenses or other rights to use, all patents, trademarks,
service marks, trade names, copyrights, technology, know-how and trade
secrets necessary to conduct their businesses as presently conducted or
proposed to be conducted by them as described in the Prospectus in all
material respects, and neither the Company nor any of its subsidiaries
has received any notice of or is otherwise aware of any infringement
upon or conflict with any asserted rights of others with respect to any
patents, trademarks, service marks, trade names, copyrights,
technology, know-how or trade secrets, except for such infringements or
conflicts that, individually or in the aggregate, do not or would not
reasonably be expected to have a Material Adverse Effect; and, to the
best of the Company's knowledge, the discoveries, inventions, products
or processes of the Company and its subsidiaries do not infringe upon
or conflict with any right or patent of any third party, or any
discovery, invention, product or process which is the subject of a
patent application filed by any third party, except for such
infringements or conflicts that, individually or in the
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<PAGE> 8
aggregate, do not or would not reasonably be expected to have a
Material Adverse Effect;
(xiv) The Company and its subsidiaries have obtained all
permits, consents and authorizations required to be obtained by them
under applicable federal, state, local and foreign laws or regulations
in order to conduct their businesses as described in the Prospectus,
including, but not limited to, those under laws or regulations relating
to the protection of the environment or concerning the handling,
storage, disposal or discharge of toxic materials (collectively,
"Environmental Laws"), and any such permits, consents and
authorizations remain in full force and effect, except where the
failure (a) to possess any such permit, consent or authorization or (b)
of any such permit, consent or authorization to remain in full force
and effect, as the case may be, would not reasonably be expected to
have a Material Adverse Effect. The Company and its subsidiaries are in
compliance with Environmental Laws, except where the failure to so
comply would not reasonably be expected to have a Material Adverse
Effect, and there is no pending or, to the Company's knowledge,
threatened, action or proceeding against the Company or any of its
subsidiaries alleging violations of Environmental Laws, except for any
such action or proceeding that, if determined adversely to the Company
or any of its subsidiaries, would not reasonably be expected to have a
Material Adverse Effect;
(xv) There are no holders of securities (debt or equity) of
the Company or any of its subsidiaries or holders of rights (including,
without limitation, preemptive rights), warrants or options to obtain
securities of the Company or any of its subsidiaries who have the right
to request the Company or any of its subsidiaries to register
securities held by them under the Act, except as disclosed in the
Prospectus;
(xvi) The statements set forth in the Prospectus under the
caption "Description of Capital Stock", insofar as they purport to
constitute a summary of the terms of the Stock and other classes of
capital stock, and under the captions "Certain United States Tax
Consequences to Non-United States Holders," and "Certain Relationships
and Related Transactions," insofar as they purport to describe the
provisions of the laws, documents and transactions referred to therein,
are accurate and complete in all material respects;
(xvii) Other than as set forth in the Prospectus, there are no
legal or governmental proceedings pending to which the Company or any
of its subsidiaries is a party or of which any property of the Company
or any of its subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries,
8
<PAGE> 9
would, individually or in the aggregate, reasonably be expected to have
a material adverse effect on the current or future consolidated
financial position, stockholders' equity or results of operations of
the Company and its subsidiaries taken as a whole, in each case; and,
to the best of the Company's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or threatened by
others;
(xviii) The Company is not and, after giving effect to the
offering and sale of the Shares, will not be an "investment company" or
an entity "controlled" by a company required to register as an
"investment company", as such terms are defined in the Investment
Company Act of 1940, as amended (the "Investment Company Act");
(xix) Coopers & Lybrand L.L.P., who have certified certain
financial statements of the Company and its subsidiaries, are
independent public accountants as required by the Act and the rules and
regulations of the Commission thereunder;
(xx) The Company and its subsidiaries carry or are entitled to
the benefits of insurance covering such risks and in such amounts as
are prudent and customary in the businesses in which they are engaged;
and neither the Company nor any of its subsidiaries has any reason to
believe that they will not be able to renew their existing insurance
coverage as and when such coverage expires or to obtain similar
coverage as may be necessary to continue their businesses at a cost
that would not reasonably be expected to have a Material Adverse
Effect;
(xxi) No labor dispute with the employees of the Company or
any of its subsidiaries exists or, to the knowledge of the Company, is
imminent, that would reasonably be expected to have a Material Adverse
Effect;
(xxii) The Company's predecessor, CMP Publications, Inc.,
elected to be treated as an S corporation ("S Corporation") under
Section 1362(a) of the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code"), effective January 1, 1987, and was an S
Corporation at all times since such effective date through the date of
its merger with the Company; the Company has been an S Corporation at
all times; and except as disclosed or contemplated in the Prospectus,
no taxes have been or will be imposed on the Company in connection with
the termination of the Company's S Corporation election or the S
Corporation Distribution; and
(xxiii) Each of the Stock Split, the Class C Exchange, the
termination of the Company's S Corporation election and the S
Corporation Distribution has been
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<PAGE> 10
duly and validly authorized by the Company, and each of the Stock Split
and the Class C Exchange has occurred.
(b) Each of the Selling Stockholders severally and not jointly
represents and warrants to, and agrees with, each of the Underwriters and the
Company that:
(i) All consents, approvals, authorizations and orders
necessary for the execution and delivery by such Selling Stockholder of
this Agreement, the International Underwriting Agreement, the Power of
Attorney and the Custody Agreement hereinafter referred to, and for the
sale and delivery of the Shares to be sold by such Selling Stockholder
hereunder and under the International Underwriting Agreement, have been
obtained, except for the registration under the Act of the Shares, the
registration under the Exchange Act of the Stock and such consents,
approvals, authorizations, registrations or qualifications as may be
required under foreign or state securities or Blue Sky laws in
connection with the purchase and distribution of the Shares by the
Underwriters and the International Underwriters, in each case as to
which such Selling Stockholder makes no representation or warranty; and
such Selling Stockholder has full right, power and authority to enter
into this Agreement, the International Underwriting Agreement, the
Power of Attorney and the Custody Agreement and to sell, assign,
transfer and deliver the Shares to be sold by such Selling Stockholder
hereunder and under the International Underwriting Agreement;
(ii) The sale of the Shares to be sold by such Selling
Stockholder hereunder and under the International Underwriting
Agreement and the compliance by such Selling Stockholder with all of
the provisions of this Agreement, the International Underwriting
Agreement, the Power of Attorney and the Custody Agreement and the
consummation of the transactions herein and therein contemplated will
not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any statute,
indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument to which such Selling Stockholder is a party or by which
such Selling Stockholder is bound, or to which any of the property or
assets of such Selling Stockholder is subject, nor will such action
result in any violation of the provisions of the constituent documents
of such Selling Stockholder if such Selling Stockholder is other than
an individual or any statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over such
Selling Stockholder or the property of such Selling Stockholder,
except, in each case (other than with respect to the constituent
documents of such Selling Stockholder, if applicable), for (x) such
conflicts, breaches, violations or defaults that, individually or in
the aggregate, would not
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<PAGE> 11
impair such Selling Stockholder's ability to perform its obligations
hereunder or under the International Underwriting Agreement, or (y) the
registration under the Act of the Shares, the registration under the
Exchange Act of the Stock and foreign or state securities or Blue Sky
laws (as to which such Selling Stockholder makes no representation or
warranty);
(iii) Such Selling Stockholder has, and immediately prior to
the First Time of Delivery (as defined in Section 4 hereof) such
Selling Stockholder will have, good and valid title to the Shares to be
sold by such Selling Stockholder hereunder and under the International
Underwriting Agreement, free and clear of all liens, encumbrances,
equities or claims; and, upon delivery of such Shares and payment
therefor pursuant hereto and thereto, good and valid title to such
Shares, free and clear of all liens, encumbrances, equities or claims,
will pass to the several Underwriters or the International
Underwriters, as the case may be (assuming that the Underwriters and
the International Underwriters are without notice of any adverse claim,
as defined in Uniform Commercial Code as adopted in the State of New
York (the "Code"), and are otherwise bona fide purchasers for the
purposes of the Code and that such Underwriters' and International
Underwriters' rights are not limited by subsection (4) of Section 8-302
of the Code);
(iv) During the period beginning from the date hereof and
continuing to and including the date 180 days after the date of the
Prospectus, such Selling Stockholder shall not offer, sell, contract to
sell or otherwise dispose of, except as provided hereunder or under the
International Underwriting Agreement, any securities of the Company
that are substantially similar to the Shares, including but not limited
to any securities that are convertible into or exchangeable for, or
that represent the right to receive, Stock or any such substantially
similar securities (other than (x) pursuant to employee stock option
and stock purchase plans existing on, or upon the conversion or
exchange of convertible or exchangeable securities outstanding as of,
the date of this Agreement or as provided in the Prospectus or (y) bona
fide gifts or sales or other dispositions of shares of any class of the
Company's common stock, in each case that are made exclusively between
or among the Selling Stockholders, members of their families, trusts
established for their benefit or their respective affiliates, provided
that in the case of the foregoing clause (y) it shall be a condition to
any such transfer that the transferee execute an agreement to the
effect set forth in this Section 1(b)(iv) in form and substance
reasonably satisfactory to Goldman, Sachs & Co.), without your prior
written consent;
(v) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action which is designed to or which has
constituted or which might
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<PAGE> 12
reasonably be expected to cause or result in stabilization or
manipulation of the price of any security of the Company to facilitate
the sale or resale of the Shares;
(vi) To the extent that any statements or omissions made in
the Registration Statement, any Preliminary Prospectus, the Prospectus
or any amendment or supplement thereto are made in reliance upon and in
conformity with written information furnished to the Company by such
Selling Stockholder expressly for use therein, such Preliminary
Prospectus and the Registration Statement did, and the Prospectus and
any further amendments or supplements to the Registration Statement and
the Prospectus, when they become effective or are filed with the
Commission, as the case may be, will, conform in all material respects
to the requirements of the Act and the rules and regulations of the
Commission thereunder and will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;
(vii) In order to document the Underwriters' compliance with
the reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 with respect to the transactions herein
contemplated, such Selling Stockholder will deliver to you prior to or
at the First Time of Delivery (as hereinafter defined) a properly
completed and executed United States Treasury Department Form W-9 (or
other applicable form or statement specified by Treasury Department
regulations in lieu thereof);
(viii) Certificates in negotiable form representing all of the
Shares to be sold by such Selling Stockholder hereunder and under the
International Underwriting Agreement have been placed in custody under
a Custody Agreement, in the form heretofore furnished to you (the
"Custody Agreement"), duly executed and delivered by such Selling
Stockholder to American Stock Transfer and Trust Company, as custodian
(the "Custodian"), and such Selling Stockholder has duly executed and
delivered a Power of Attorney, in the form heretofore furnished to you
(the "Power of Attorney"), appointing the persons indicated in Schedule
II hereto, and each of them, as such Selling Stockholder's
attorneys-in-fact (the "Attorneys-in-Fact") with authority to execute
and deliver this Agreement and the International Underwriting Agreement
on behalf of such Selling Stockholder, to determine the purchase price
to be paid by the Underwriters and the International Underwriters to
the Selling Stockholders as provided in Section 2 hereof, to authorize
the delivery of the Shares to be sold by such Selling Stockholder
hereunder and otherwise to act on behalf of such Selling Stockholder in
connection with the transactions contemplated by this
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<PAGE> 13
Agreement, the International Underwriting Agreement and the Custody
Agreement; and
(ix) The Shares represented by the certificates held in
custody for such Selling Stockholder under the Custody Agreement are
subject to the interests of the Underwriters hereunder and the
International Underwriters under the International Underwriting
Agreement; the arrangements made by such Selling Stockholder for such
custody, and the appointment by such Selling Stockholder of the
Attorneys-in-Fact by the Power of Attorney, are to that extent
irrevocable; the obligations of the Selling Stockholders hereunder
shall not be terminated by operation of law, whether by the death or
incapacity of any individual Selling Stockholder or, in the case of an
estate or trust, by the death or incapacity of any executor or trustee
or the termination of such estate or trust, or in the case of a
partnership or corporation, by the dissolution of such partnership or
corporation, or by the occurrence of any other event; if any individual
Selling Stockholder or any such executor or trustee should die or
become incapacitated, or if any such estate or trust should be
terminated, or if any such partnership or corporation should be
dissolved, or if any other such event should occur, before the delivery
of the Shares hereunder, certificates representing the Shares shall be
delivered by or on behalf of such Selling Stockholder in accordance
with the terms and conditions of this Agreement, of the International
Underwriting Agreement and of the Custody Agreement; and actions taken
by the Attorneys-in-Fact pursuant to the Power of Attorney shall be as
valid as if such death, incapacity, termination, dissolution or other
event had not occurred, regardless of whether or not the Custodian, the
Attorneys-in-Fact, or any of them, shall have received notice of such
death, incapacity, termination, dissolution or other event.
2. Subject to the terms and conditions herein set forth, (a) the
Company and each of the Selling Stockholders agree, severally and not jointly,
to sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company and each of the Selling
Stockholders, at a purchase price per share of $ , the number of Firm
Shares (to be adjusted by you so as to eliminate fractional shares) determined
by multiplying the aggregate number of Firm Shares to be sold by the Company and
each of the Selling Stockholders as set forth opposite their respective names in
Schedule II hereto by a fraction, the numerator of which is the aggregate number
of Firm Shares to be purchased by such Underwriter as set forth opposite the
name of such Underwriter in Schedule I hereto and the denominator of which is
the aggregate number of Firm Shares to be purchased by all of the Underwriters
from the Company and all of the Selling Stockholders hereunder and (b) in the
event and to the extent that the Underwriters shall exercise the election to
purchase Optional Shares as provided below, the Company agrees to sell to each
of the Underwriters, and each of the Underwriters agrees, severally and
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<PAGE> 14
not jointly, to purchase from the Company, at the purchase price per share set
forth in clause (a) of this Section 2, that portion of the number of Optional
Shares as to which such election shall have been exercised (to be adjusted by
you so as to eliminate fractional shares) determined by multiplying such number
of Optional Shares by a fraction the numerator of which is the maximum number of
Optional Shares which such Underwriter is entitled to purchase as set forth
opposite the name of such Underwriter in Schedule I hereto and the denominator
of which is the maximum number of Optional Shares that all of the Underwriters
are entitled to purchase hereunder.
The Company hereby grants to the Underwriters the right to purchase at
their election up to Optional Shares, at the purchase price per share
set forth in the paragraph above, for the sole purpose of covering
overallotments in the sale of the Firm Shares. Any such election to purchase
Optional Shares may be exercised only by written notice from you to the Company,
given within a period of 30 calendar days after the date of this Agreement and
setting forth the aggregate number of Optional Shares to be purchased and the
date on which such Optional Shares are to be delivered, as determined by you but
in no event earlier than the First Time of Delivery (as defined in Section 4
hereof) or, unless you and the Company otherwise agree in writing, earlier than
two or later than ten business days after the date of such notice.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Company and the Selling Stockholders shall be delivered by or on
behalf of the Company and the Selling Stockholders to Goldman, Sachs & Co. for
the account of such Underwriter, against payment by or on behalf of such
Underwriter of the purchase price therefor by wire transfer, payable to the
order of the Company and each of the Selling Stockholders, as their interests
may appear, in Federal (same day) funds. The Company will cause the certificates
representing the Shares to be made available for checking and packaging at least
twenty-four hours prior to the Time of Delivery (as defined below) with respect
thereto at the office of Goldman, Sachs & Co., 85 Broad Street, New York, New
York 10004 (the "Designated Office"). The time and date of such delivery and
payment shall be, with respect to the Firm Shares, 9:30 a.m., New York City
time, on , 1997 or such other time and date as Goldman, Sachs & Co.
and the Company may agree upon in writing, and, with respect to the Optional
Shares, 9:30 a.m., New York City time, on the date specified by Goldman, Sachs &
Co. in the written notice given by Goldman, Sachs & Co. (as provided herein) of
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<PAGE> 15
the Underwriters' election to purchase such Optional Shares, or such other time
and date as Goldman, Sachs & Co. and the Company may agree upon in writing (as
provided herein). Such time and date for delivery of the Firm Shares is herein
called the "First Time of Delivery", such time and date for delivery of the
Optional Shares, if not the First Time of Delivery, is herein called the "Second
Time of Delivery", and each such time and date for delivery is herein called a
"Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by
or on behalf of the parties hereto pursuant to Section 7 hereof, including the
cross-receipt for the Shares and any additional documents requested by the
Underwriters pursuant to Section 7(k) hereof, will be delivered at the offices
of Debevoise & Plimpton, 875 Third Avenue, New York, New York 10022 (the
"Closing Location"), and the Shares will be delivered at the Designated Office,
all at each Time of Delivery. A meeting will be held at the Closing Location at
2:00 p.m., New York City time, on the New York Business Day next preceding each
Time of Delivery, at which meeting the final drafts of the documents to be
delivered pursuant to the preceding sentence will be available for review by the
parties hereto. For the purposes of this Section 4, "New York Business Day"
shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a
day on which banking institutions in New York are generally authorized or
obligated by law or executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to
file such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier time
as may be required by Rule 430A(a)(3) under the Act; to make no further
amendment or any supplement to the Registration Statement or Prospectus which
shall be disapproved by you promptly after reasonable notice thereof; to advise
you, promptly after it receives notice thereof, of the time when any amendment
to the Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed and to
furnish you copies thereof; to advise you, promptly after it receives notice
thereof, of the issuance by the Commission of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or Prospectus, of
the suspension of the qualification of the Shares for offering or sale in any
jurisdiction, of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or supplementing
of the Registration Statement or Prospectus or for additional information; and,
in the event of the issuance of any stop order or of any order preventing or
suspending the use of any Preliminary Prospectus or Prospectus or suspending any
such qualification, promptly to use its best efforts to obtain the withdrawal of
such order;
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(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with such
laws so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution of
the Shares, provided that in connection therewith the Company shall not be
required to qualify as a foreign corporation or a dealer in securities or to
file a general consent to service of process in any jurisdiction or to subject
itself to taxation in respect of doing business in any jurisdiction in which the
Shares have been so qualified;
(c) Prior to 10:00 a.m., New York City time, on the New York
Business Day next succeeding the date of this Agreement and from time to time,
to furnish the Underwriters with copies of the Prospectus in New York City in
such quantities as you may reasonably request, and, if the delivery of a
prospectus is required at any time prior to the expiration of nine months after
the time of issue of the Prospectus in connection with the offering or sale of
the Shares and if at such time any events shall have occurred as a result of
which the Prospectus 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 when such Prospectus is delivered, not misleading, or, if
for any other reason it shall be necessary during such period to amend or
supplement the Prospectus in order to comply with the Act, to notify you and
upon your request to prepare and furnish without charge to each Underwriter and
to any dealer in securities as many copies as you may from time to time
reasonably request of an amended Prospectus or a supplement to the Prospectus
which will correct such statement or omission or effect such compliance, and in
case any Underwriter is required to deliver a prospectus in connection with
sales of any of the Shares at any time nine months or more after the time of
issue of the Prospectus, upon your request but at the expense of such
Underwriter, to prepare and deliver to such Underwriter as many copies as you
may request of an amended or supplemented Prospectus complying with Section
10(a)(3) of the Act and, in each case, to file such amended or supplemented
Prospectus with the Commission in accordance with Rule 424(b) under the Act;
(d) To make generally available to its security holders as
soon as practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c) under
the Act), an earnings statement of the Company and its subsidiaries (which need
not be audited) complying with Section 11(a) of the Act and the rules and
regulations of the Commission thereunder (including, at the option of the
Company, Rule 158);
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(e) During the period beginning from the date hereof and
continuing to and including the date 180 days after the date of the Prospectus,
not to offer, sell, contract to sell or otherwise dispose of, except as provided
hereunder and under the International Underwriting Agreement, any securities of
the Company that are substantially similar to the Shares, including but not
limited to any securities that are convertible into or exchangeable for, or that
represent the right to receive, Stock or any such substantially similar
securities (other than (i) pursuant to employee stock option and stock purchase
plans or any non-employee director stock plan existing on, or upon the
conversion or exchange of convertible or exchangeable securities outstanding as
of, the date of this Agreement or (ii) as consideration for any acquisition by
the Company of another person provided that all recipients of securities of the
Company issued pursuant to such an acquisition execute an agreement to the
effect set forth in this Section 5(e) in form and substance reasonably
satisfactory to Goldman, Sachs & Co.), without your prior written consent;
(f) To furnish to its stockholders as soon as practicable
after the end of each fiscal year an annual report (including a balance sheet
and statements of income, stockholders' equity and cash flows of the Company and
its consolidated subsidiaries certified by independent public accountants);
(g) During a period of five years from the effective date of
the Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to deliver to
you (i) as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission or any national securities
exchange on which any class of securities of the Company is listed; and (ii)
such additional information concerning the business and financial condition of
the Company as you may from time to time reasonably request (such financial
statements to be on a consolidated basis to the extent the accounts of the
Company and its subsidiaries are consolidated in reports furnished to its
stockholders generally or to the Commission);
(h) To use the net proceeds received by it from the sale of
the Shares pursuant to this Agreement and the International Underwriting
Agreement in the manner specified in the Prospectus under the caption "Use of
Proceeds";
(i) To use its best efforts to list for quotation the Shares
on NASDAQ;
(j) To file with the Commission such reports on Form SR as may
be required by Rule 463 under the Act; and
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(k) If the Company elects to rely upon Rule 462(b) and the
Rule 462(b) Registration Statement has not become effective upon filing with the
Commission prior to the execution of this Agreement, the Company shall file the
Rule 462(b) Registration Statement with the Commission in compliance with Rule
462(b) by 10:00 P.M., Washington, D.C. time, on the date of this Agreement, and
the Company shall at the time of filing either pay to the Commission the filing
fee for the Rule 462(b) Registration Statement or give irrevocable instructions
for the payment of such fee pursuant to Rule 111(b) under the Act.
6. The Company covenants and agrees with the several Underwriters that
the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act and all other
expenses in connection with the preparation, printing and filing of the Initial
Registration Statement, any Preliminary Prospectus, any Rule 462(b) Registration
Statement and the Prospectus and amendments and supplements thereto and the
mailing and delivering of copies thereof to the Underwriters and dealers; (ii)
the cost of printing or producing any Agreement among Underwriters, this
Agreement, the International Underwriting Agreement, the Agreement between
Syndicates, the Selling Agreements, the Blue Sky Memorandum, closing documents
(including any compilations thereof) and any other documents in connection with
the offering, purchase, sale and delivery of the Shares; (iii) all expenses in
connection with the qualification of the Shares for offering and sale under
state securities laws as provided in Section 5(b) hereof, including the
reasonable fees and disbursements of counsel for the Underwriters in connection
with such qualification and in connection with the Blue Sky survey; (iv) all
fees and expenses in connection with listing the Shares on NASDAQ; (v) the
filing fees incident to, and the reasonable fees and disbursements of counsel
for the Underwriters in connection with, securing any required review by the
National Association of Securities Dealers, Inc. of the terms of the sale of the
Shares; (vi) the cost of preparing stock certificates; (vii) the cost and
charges of any transfer agent or registrar; and (viii) all other costs and
expenses incident to the performance of its obligations hereunder which are not
otherwise specifically provided for in this Section. Each Selling Stockholder
covenants and agrees with the several Underwriters that such Selling Stockholder
will pay or cause to be paid all costs and expenses incident to the performance
of such Selling Stockholder's obligations hereunder which are not otherwise
specifically provided for in this Section, including (i) any fees and expenses
of counsel for such Selling Stockholder, (ii) such Selling Stockholder's pro
rata share of the fees and expenses of the Attorneys-in-Fact and the Custodian
and (iii) all expenses and taxes (subject to the following sentence) incident to
the sale and delivery of the Shares to be sold by such Selling Stockholder to
the Underwriters hereunder and under the International Underwriting Agreement.
In connection with Clause (iii) of the preceding sentence, Goldman, Sachs & Co.
agrees to pay New York State stock transfer taxes relating to the sale and
delivery of the
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Shares, and the Selling Stockholder agrees to reimburse Goldman, Sachs & Co. for
associated carrying costs if Goldman, Sachs & Co. has duly filed an application
for rebate of such tax payment and such tax payment is not rebated on the day of
payment and for any portion of such tax payment not rebated. It is understood,
however, that except as provided in this Section, and Sections 8 and 11 hereof,
the Underwriters will pay all of their own costs and expenses, including the
fees of their counsel, stock transfer taxes on resale of any of the Shares by
them, and any advertising expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Shares to
be delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company and of the Selling Stockholders herein are, at and as of such Time
of Delivery, true and correct, the condition that the Company and the Selling
Stockholders shall have performed all of its and their obligations hereunder
theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed
for such filing by the rules and regulations under the Act and in
accordance with Section 5(a) hereof; if the Company has elected to rely
upon Rule 462(b) and the Rule 462(b) Registration Statement has not
become effective upon filing with the Commission prior to the execution
of this Agreement, the Rule 462(b) Registration Statement shall have
become effective by 10:00 P.M., Washington, D.C. time, on the date of
this Agreement; no stop order suspending the effectiveness of the
Registration Statement or any part thereof shall have been issued and
no proceeding for that purpose shall have been initiated or threatened
by the Commission; and all requests for additional information on the
part of the Commission shall have been complied with to your reasonable
satisfaction;
(b) Debevoise & Plimpton, counsel for the Underwriters, shall
have furnished to you such opinion or opinions (a draft of such opinion
is attached as Annex II(a) hereto), dated such Time of Delivery, with
respect to the matters covered in paragraphs (i), (ii), (iii), (v) and
(vii) of subsection (c) below as well as such other related matters as
you may reasonably request, and such counsel shall have received such
papers and information as they may reasonably request to enable them to
pass upon such matters;
(c) Dow, Lohnes & Albertson, PLLC, counsel for the Company,
shall have furnished to you their written opinion (a draft of such
opinion is attached as Annex II(b) hereto), dated such Time of
Delivery, in form and substance reasonably satisfactory to you, to the
effect that:
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(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with corporate power and authority to own its properties
and conduct its business as described in the Prospectus;
(ii) The Company has an authorized capitalization as set forth
in the Prospectus, and all of the issued shares of capital stock of the
Company (including the Shares being delivered at such Time of Delivery)
have been duly and validly authorized and issued and are fully paid and
non-assessable and conform in all material respects to the description
thereof contained in the Prospectus;
(iii) This Agreement and the International Underwriting
Agreement have been duly authorized, executed and delivered by the
Company;
(iv) No consent, approval, authorization, order, registration
or qualification of or with any State of New York, Delaware or United
States Federal court or governmental agency or body is required for the
issuance and sale of the Shares or the consummation by the Company of
the transactions contemplated by this Agreement and the International
Underwriting Agreement and of the Stock Split, the Class C Exchange,
the termination of the Company's S Corporation election and the S
Corporation Distribution, except the registration under the Act of the
Shares, the registration under the Exchange Act of the Stock and such
consents, approvals, authorizations, registrations or qualifications as
may be required under foreign or state securities or Blue Sky laws in
connection with the purchase and distribution of the Shares by the
Underwriters and the International Underwriters (as to which counsel
need express no opinion);
(v) The statements set forth in the Prospectus under the
caption "Description of Capital Stock", insofar as they purport to
constitute a summary of the terms of the Stock, and under the caption
"Certain United States Tax Consequences to Non-United States Holders,"
insofar as they purport to summarize certain Federal tax laws of the
United States, are accurate and complete in all material respects;
(vi) The Company is not an "investment company" or an entity
"controlled" by a company required to register as an "investment
company", as such terms are defined in the Investment Company Act; and
(vii) Although they do not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement
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<PAGE> 21
or the Prospectus, except for those referred to in the opinion in
subsection (v) of this Section 7(c), in the course of the preparation
of the Registration Statement and the Prospectus by the Company, such
counsel participated in conferences with representatives of the
Company, the independent public accountants of the Company and the
representatives of the Underwriters (the "Representatives") and their
counsel, at which conferences the contents of the Registration
Statement and the Prospectus and related matters were discussed, and
without any independent investigation, check or verification of facts
for the purpose of rendering such opinion, on the basis of such
counsel's examination of the Registration Statement and the Prospectus
and such counsel's participation in the above mentioned conferences, no
facts have come to the attention of such counsel that would lead such
counsel to believe that, as of its effective date, the Registration
Statement or any further amendment thereto made by the Company prior to
such Time of Delivery (other than the financial statements, related
schedules and other financial data therein, as to which such counsel
need express no opinion) contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading; or that, as
of its date, the Prospectus or any further amendment or supplement
thereto made by the Company prior to such Time of Delivery (other than
the financial statements, related schedules and other financial data
therein, as to which such counsel need express no opinion) contained an
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; or that, as
of such Time of Delivery, either the Registration Statement or the
Prospectus or any further amendment or supplement thereto made by the
Company prior to such Time of Delivery (other than the financial
statements, related schedules and other financial data therein, as to
which such counsel need express no opinion) contains an untrue
statement of a material fact or omits to state a material fact
necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; or that, as
of the effective date of the Registration Statement, the date of the
Prospectus or such Time of Delivery, either the Registration Statement
or the Prospectus or any further amendment or supplement thereto made
by the Company prior to such Time of Delivery (other than the financial
statements, related schedules and other financial data therein, as to
which such counsel need express no opinion) did not or does not, as the
case may be, comply as to form in all material respects with the
requirements of the Act and the rules and regulations thereunder; or
that any amendment to the Registration Statement is required to be
filed or any contract or other document of a character required to be
filed as an exhibit to the Registration Statement or required to be
described in the Registration Statement or the Prospectus is not filed
or described as required.
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<PAGE> 22
In rendering such opinions, such counsel may state that they express no
opinion as to the laws of jurisdictions other than the law of the State of New
York, the Federal law of the United States and the General Corporation Law of
the State of Delaware, and may state that, insofar as such opinions involve
factual matters, they have relied, to the extent they deem proper, upon
certificates of officers of the Company and its subsidiaries and certificates of
public officials, provided that such counsel shall provide copies of such
certificates to you and shall state that they believe that both you and they are
justified in relying upon such certificates;
(d) Robert D. Marafioti, General Counsel for the Company,
shall have furnished to you his written opinion (a draft of such opinion is
attached as Annex II(c) hereto), dated such Time of Delivery, in form and
substance reasonably satisfactory to you, to the effect that:
(i) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or leases
properties or conducts any business so as to require such
qualification, except where the failure to be so qualified in any such
jurisdiction would not reasonably be expected to have a Material
Adverse Effect (such counsel being entitled to rely in respect of the
opinion in this clause upon opinions of local counsel and in respect of
matters of fact upon certificates of officers of the Company, provided
that such counsel shall state that he believes that both you and he are
justified in relying upon such opinions and certificates);
(ii) Each subsidiary of the Company has been duly incorporated
or organized and is validly existing as a corporation or partnership in
good standing under the laws of its jurisdiction of incorporation or
organization, in each case, as the case may be; and all of the issued
shares of capital stock of each such subsidiary have been duly and
validly authorized and issued, are fully paid and non-assessable, and
are owned directly or indirectly by the Company, free and clear of all
liens, encumbrances, equities or claims (such counsel being entitled to
rely in respect of the opinion in this clause upon opinions of local
counsel and in respect of matters of fact upon certificates of public
officials and officers of the Company or its subsidiaries, provided
that such counsel shall state that they believe that both you and they
are justified in relying upon such opinions and certificates);
(iii) To the best of such counsel's knowledge and other than
as set forth in the Prospectus, there are no legal or governmental
proceedings pending to which the Company or any of its subsidiaries is
a party or of which any property of the
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<PAGE> 23
Company or any of its subsidiaries is the subject which, if determined
adversely to the Company or any of its subsidiaries, would,
individually or in the aggregate, reasonably be expected to have a
material adverse effect on the current or future consolidated financial
position, stockholders' equity or results of operations of the Company
and its subsidiaries taken as a whole, in each case; and, to the best
of such counsel's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others;
(iv) The issuance and sale of the Shares being delivered at
such Time of Delivery to be sold by the Company and the compliance by
the Company with all of the provisions of this Agreement and the
International Underwriting Agreement and the consummation of the
transactions herein and therein contemplated and of the Stock Split,
the Class C Exchange, the termination of the Company's S Corporation
election and the S Corporation Distribution, will not conflict with or
result in a breach or violation of any of the terms or provisions of,
or constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument known to such counsel
to which the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is
subject, nor will such action result in any violation of the provisions
of the Certificate of Incorporation or By-laws of the Company or any
statute or any order, rule or regulation known to such counsel of any
court or governmental agency or body having jurisdiction over the
Company or any of its subsidiaries or any of their properties, except,
in each case (other than with respect to the Certificate of
Incorporation or By-laws of the Company), for such conflicts, breaches,
violations or defaults that would not, individually or in the
aggregate, (x) reasonably be expected to have a Material Adverse Effect
or (y) impair the Company's ability to perform its obligations
hereunder or under the International Underwriting Agreement;
(v) Neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation or By-laws or in default
in the performance or observance of any obligation, agreement, covenant
or condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease or other agreement or instrument to which it is a
party or by which it or any of its properties may be bound, except
(other than with respect to the Certificate of Incorporation or By-laws
of the Company) for such defaults that would not, individually or in
the aggregate, (x) reasonably be expected to have a Material Adverse
Effect or (y) impair the Company's ability to perform its obligations
hereunder or under the International Underwriting Agreement;
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<PAGE> 24
(vi) Each of the Stock Split, the Class C Exchange, the
termination of the Company's S Corporation election and the S
Corporation Distribution has been duly and validly authorized by the
Company, and each of the Stock Split and the Class C Exchange has
occurred; and
(vii) Although such counsel does not assume any responsibility
for the accuracy, completeness or fairness of the statements contained
in the Registration Statement or the Prospectus, in the course of the
preparation of the Registration Statement and the Prospectus by the
Company, such counsel participated in conferences with representatives
of the Company, the independent public accountants of the Company and
the Representatives and their counsel, at which conferences the
contents of the Registration Statement and the Prospectus and related
matters were discussed, and without any independent investigation,
check or verification of facts for the purpose of rendering such
opinion, on the basis of such counsel's examination of the Registration
Statement and the Prospectus and such counsel's participation in the
above mentioned conferences, no facts have come to the attention of
such counsel that would lead him to believe that, as of its effective
date, the Registration Statement or any further amendment thereto made
by the Company prior to such Time of Delivery (other than the financial
statements, related schedules and other financial data therein, as to
which such counsel need express no opinion) contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading or that, as of its date, the Prospectus or any
further amendment or supplement thereto made by the Company prior to
such Time of Delivery (other than the financial statements, related
schedules and other financial data therein, as to which such counsel
need express no opinion) contained an untrue statement of a material
fact or omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading or that, as of such Time of Delivery, either
the Registration Statement or the Prospectus or any further amendment
or supplement thereto made by the Company prior to such Time of
Delivery (other than the financial statements, related schedules and
other financial data therein, as to which such counsel need express no
opinion) contains an untrue statement of a material fact or omits to
state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
In rendering such opinions, such counsel may rely, as to all matters
governed by the laws of jurisdictions other than the law of the State of New
York, the Federal law of the United States and the General Corporation Law of
the State of Delaware, upon the opinions of counsel reasonably satisfactory to
the Representatives, and may state that, insofar as such
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<PAGE> 25
opinions involve factual matters, he has relied, to the extent he deems proper,
upon certificates of officers of the Company and its subsidiaries and
certificates of public officials, provided that such counsel shall provide
copies of such opinions and certificates to you and shall state that he believes
that both you and he are justified in relying upon such opinions and
certificates;
(e) Counsel for the Selling Stockholders, as indicated in
Schedule II hereto, shall have furnished to you their written opinion (a draft
of such opinion is attached as Annex II(d) hereto) with respect to each of the
Selling Stockholders, dated such Time of Delivery, in form and substance
reasonably satisfactory to you, to the effect that:
(i) A Power of Attorney and a Custody Agreement have been duly
executed and delivered by such Selling Stockholder and constitute valid
and binding agreements of such Selling Stockholder in accordance with
their terms;
(ii) This Agreement and the International Underwriting
Agreement have been duly executed and delivered by or on behalf of such
Selling Stockholder; and the sale of the Shares to be sold by such
Selling Stockholder hereunder and thereunder and the compliance by such
Selling Stockholder with all of the provisions of this Agreement and
the International Underwriting Agreement, the Power of Attorney and the
Custody Agreement and the consummation by such Selling Stockholder of
the transactions herein and therein contemplated in connection with the
Shares to be sold by such Selling Stockholder hereunder and thereunder
will not conflict with or result in a breach or violation of any terms
or provisions of, or constitute a default under, any statute,
indenture, mortgage, deed of trust, loan agreement or other agreement
or instrument known to such counsel to which such Selling Stockholder
is a party or by which such Selling Stockholder is bound, or to which
any of the property or assets of such Selling Stockholder is subject,
nor will such action result in any violation of the provisions of the
constituent documents of such Selling Stockholder if such Selling
Stockholder is other than an individual or any order, rule or
regulation known to such counsel of any court or governmental agency or
body having jurisdiction over such Selling Stockholder or the property
of such Selling Stockholder, except, in each case (other than with
respect to the constituent documents of such Selling Stockholder, if
applicable), for (x) such conflicts, breaches, violations or defaults
that, individually or in the aggregate, would not impair such Selling
Stockholder's ability to perform its obligations hereunder or under the
International Underwriting Agreement, or (y) the registration under the
Act of the Shares, the registration under the Exchange Act of the Stock
and foreign or state securities or Blue Sky laws (as to which such
counsel need express no opinion);
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(iii) No consent, approval, authorization or order of any
State of New York, Delaware or United States Federal court or
governmental agency or body is required for the consummation by such
Selling Stockholder of the transactions contemplated by this Agreement
and the International Underwriting Agreement in connection with the
Shares to be sold by such Selling Stockholder hereunder or thereunder,
except such as have been obtained under the Act and such as may be
required under foreign or state securities or Blue Sky laws in
connection with the purchase and distribution of such Shares by the
Underwriters or the International Underwriters (as to which such
counsel need express no opinion);
(iv) Immediately prior to such Time of Delivery such Selling
Stockholder was the sole registered owner of the Shares to be sold by
such Selling Stockholder; and such Selling Stockholder has full right,
power and authority to sell, assign, transfer and deliver the Shares to
be sold by such Selling Stockholder under this Agreement and the
International Underwriting Agreement; and
(v) Upon delivery of and payment for the Shares to be sold by
such Selling Stockholder as contemplated by this Agreement and the
International Underwriting Agreement, at the First Time of Delivery,
the Underwriters and the International Underwriters will have acquired
good and valid title to such Shares, free and clear of all liens,
encumbrances, equities or claims (assuming that the Underwriters and
the International Underwriters are without notice of any adverse claim,
as defined in the Code, and are otherwise bona fide purchasers for the
purposes of the Code and that such Underwriters' and International
Underwriters' rights are not limited by subsection (4) of Section 8-302
of the Code).
In rendering such opinions, such counsel may state that they
express no opinion as to the laws of jurisdictions other than the law of the
State of New York, the Federal law of the United States and the General
Corporation Law of the State of Delaware, and may state that, insofar as such
opinions involve factual matters, they have relied, to the extent they deem
proper, upon certificates of such Selling Stockholders and certificates of
public officials, provided that such counsel shall provide copies of such
certificates to you and shall state that they believe that both you and they are
justified in relying upon such certificates;
(f) On the date of the Prospectus at a time prior to the
execution of this Agreement, at 9:30 a.m., New York City time, on the effective
date of any post-effective amendment to the Registration Statement filed
subsequent to the date of this Agreement and also at each Time of Delivery,
Coopers & Lybrand L.L.P. shall have furnished to you a letter or letters, dated
the respective dates of delivery thereof, in form and substance
26
<PAGE> 27
satisfactory to you, to the effect set forth in Annex I hereto (the executed
copy of the letter delivered prior to the execution of this Agreement is
attached as Annex I(a) hereto and a draft of the form of letter to be delivered
on the effective date of any post-effective amendment to the Registration
Statement and as of each Time of Delivery is attached as Annex I(b) hereto);
(g) (i) Neither the Company nor any of its subsidiaries shall
have sustained since the date of the latest audited financial statements
included in the Prospectus any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or from
any labor dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus, and (ii) since the
respective dates as of which information is given in the Prospectus there shall
not have been any change in the capital stock or long term debt of the Company
or any of its subsidiaries or any change, or any development involving a
prospective change, in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the Company and its
subsidiaries taken as a whole, in each case, otherwise than as set forth or
contemplated in the Prospectus, the effect of which, in any such case described
in Clause (i) or (ii), is in the judgment of the Representatives so material and
adverse as to make it impracticable or inadvisable to proceed with the public
offering or the delivery of the Shares being delivered at such Time of Delivery
on the terms and in the manner contemplated in the Prospectus;
(h) On or after the date hereof (i) no downgrading shall have
occurred in the rating accorded the Company's debt securities or preferred stock
by any "nationally recognized statistical rating organization", as that term is
defined by the Commission for purposes of Rule 436(g)(2) under the Act, and (ii)
no such organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its rating of any
of the Company's debt securities or preferred stock;
(i) On or after the date hereof there shall not have occurred
any of the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange or on NASDAQ; (ii) a
suspension or material limitation in trading in the Company's securities on
NASDAQ; (iii) a general moratorium on commercial banking activities declared by
either Federal or New York State authorities; or (iv) the outbreak or escalation
of hostilities involving the United States or the declaration by the United
States of a national emergency or war, if the effect of any such event specified
in this Clause (iv) in the judgment of the Representatives makes it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Shares being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus;
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(j) The Shares to be sold by the Company and the Selling
Stockholders at such Time of Delivery shall have been duly listed for quotation
on NASDAQ;
(k) The Company shall have obtained and delivered to the
Underwriters executed copies of an agreement from each of the persons listed on
Schedule III hereto to the effect set forth in Subsection 1(b)(iv) hereof in
form and substance reasonably satisfactory to you;
(l) The Company and the Selling Stockholders shall have
furnished or caused to be furnished to you at such Time of Delivery certificates
of officers of the Company and of the Selling Stockholders, respectively,
satisfactory to you as to the accuracy of the representations and warranties of
the Company and the Selling Stockholders, respectively, herein at and as of such
Time of Delivery, as to the performance by the Company and the Selling
Stockholders of all of their respective obligations hereunder to be performed at
or prior to such Time of Delivery, and as to such other matters as you may
reasonably request, and the Company shall have furnished or caused to be
furnished certificates as to the matters set forth in subsections (a) and (g) of
this Section, and as to such other matters as you may reasonably request; and
(m) The Company shall have complied with the provisions of
Section 5(c) hereof with respect to the furnishing of prospectuses on the New
York Business Day next succeeding the date of this Agreement.
8. (a) The Company and each of Gerard G. Leeds and Liselotte Leeds (the
"Founding Selling Stockholders"), jointly and severally, will indemnify and hold
harmless each Underwriter against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Prospectus, the
Registration Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse each Underwriter for
any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that the Company and the Founding
Selling Stockholders shall 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 or omission or alleged omission made in
any Preliminary Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity with written
information furnished to the
28
<PAGE> 29
Company by any Underwriter through Goldman, Sachs & Co. expressly for use
therein; provided further that the liability of a Founding Selling Stockholder
pursuant to this subsection (a) shall not exceed the product of the number of
Shares sold by such Selling Stockholder and the initial public offering price of
the Shares (after deducting underwriting discounts and commissions) as set forth
in the Prospectus.
(b) Each of the Margaret and Richard Lipmanson Foundation and the
Caroline and Sigmund Schott Foundation (the "Foundation Selling Stockholders")
will indemnify and hold harmless each Underwriter against any losses, claims,
damages or liabilities, joint or several, to which such Underwriter may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein 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 any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by such Foundation Selling Stockholder expressly for
use therein; and will reimburse each Underwriter for any legal or other expenses
reasonably incurred by such Underwriter in connection with investigating or
defending any such action or claim as such expenses are incurred; provided,
however, that such Foundation Selling Stockholder shall 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 or
omission or alleged omission made in any Preliminary Prospectus, the
Registration Statement or the Prospectus or any such amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by any Underwriter through Goldman, Sachs & Co. expressly for use
therein; provided further that the liability of a Foundation Selling Stockholder
pursuant to this subsection (b) shall not exceed the product of the number of
Shares sold by such Foundation Selling Stockholder and the initial public
offering price of the Shares (after deducting underwriting discounts and
commissions) as set forth in the Prospectus.
(c) Each Underwriter will indemnify and hold harmless the
Company and each Selling Stockholder against any losses, claims, damages or
liabilities to which the Company or such Selling Stockholder may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, the Registration Statement or the Prospectus, or
29
<PAGE> 30
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein 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 any
Preliminary Prospectus, the Registration Statement or the Prospectus or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through Goldman, Sachs
& Co. expressly for use therein; and will reimburse the Company and each Selling
Stockholder for any legal or other expenses reasonably incurred by the Company
or such Selling Stockholder in connection with investigating or defending any
such action or claim as such expenses are incurred.
(d) Promptly after receipt by an indemnified party under
subsection (a), (b) or (c) above of notice of the commencement of any action,
such indemnified party shall, if a claim in respect thereof is to be made
against an indemnifying party under such subsection, notify the indemnifying
party in writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party (which
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 shall not be liable to such indemnified party under such
subsection for any legal expenses of other counsel or any other expenses, in
each case subsequently incurred by such indemnified party, in connection with
the defense thereof other than reasonable costs of investigation. No
indemnifying party shall, without the written consent of the indemnified party,
effect the settlement or compromise of, or consent to the entry of any judgment
with respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any indemnified party.
(e) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a), (b) or (c) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred
30
<PAGE> 31
to therein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative benefits received by the Company and the Selling
Stockholders on the one hand and the Underwriters on the other from the offering
of the Shares. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law or if the indemnified party failed
to give the notice required under subsection (d) above, then each indemnifying
party shall contribute to such amount paid or payable by such indemnified party
in such proportion as is appropriate to reflect not only such relative benefits
but also the relative fault of the Company and the Selling Stockholders on the
one hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Stockholders on the one hand and the Underwriters on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering of the
Shares purchased under this Agreement (before deducting expenses but after
deducting underwriting discounts and commissions) received by the Company and
the Selling Stockholders bear to the total underwriting discounts and
commissions received by the Underwriters with respect to the Shares purchased
under this Agreement, in each case as set forth in the table on the cover page
of the Prospectus. 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 Selling Stockholders on the one hand
or the Underwriters on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. The Company, each of the Selling Stockholders and the Underwriters
agree that it would not be just and equitable if contributions pursuant to this
subsection (e) were determined by pro rata allocation (even if the Underwriters
were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to above in this subsection (e). The amount paid or payable by an indemnified
party as a result of the losses, claims, damages or liabilities (or actions in
respect thereof) referred to above in this subsection (e) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (e), no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission, and no Selling Stockholder shall be
required to contribute any amount in excess of the product of the number of
Shares sold by such Selling Stockholder and the initial public offering price
31
<PAGE> 32
of the Shares (after deducting underwriting discounts and commissions) as set
forth in the Prospectus. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (e) to
contribute are several in proportion to their respective underwriting
obligations and not joint. Each Selling Stockholder's obligations in this
subsection (e) to contribute are several and not joint.
(f) The obligations of the Company and the Selling
Stockholders under this Section 8 shall be in addition to any liability which
the Company and the respective Selling Stockholders may otherwise have and shall
extend, upon the same terms and conditions, to each person, if any, who controls
any Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company (including any
person who, with his or her consent, is named in the Registration Statement as
about to become a director of the Company) and to each person, if any, who
controls the Company or any Selling Stockholder within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Shares on the terms contained herein. If within thirty-six hours
after such default by any Underwriter you do not arrange for the purchase of
such Shares, then the Company and the Selling Stockholders shall be entitled to
a further period of thirty-six hours within which to procure another party or
other parties reasonably satisfactory to you to purchase such Shares on such
terms. In the event that, within the respective prescribed periods, you notify
the Company and the Selling Stockholders that you have so arranged for the
purchase of such Shares, or the Company and the Selling Stockholders notify you
that they have so arranged for the purchase of such Shares, you or the Company
and the Selling Stockholders shall have the right to postpone such Time of
Delivery for a period of not more than seven days, in order to effect whatever
changes may thereby be made necessary in the Registration Statement or the
Prospectus, or in any other documents or arrangements, and the Company agrees to
file promptly any amendments to the Registration Statement or the Prospectus
which in your opinion may thereby be made necessary. The term "Underwriter" as
used in this Agreement shall include any person substituted under this Section
with like effect as if such person had originally been a party to this Agreement
with respect to such Shares.
(b) If, after giving effect to any arrangements for the
purchase of the Shares of a defaulting Underwriter or Underwriters by you and
the Company and the Selling
32
<PAGE> 33
Stockholders as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased does not exceed one-eleventh of the aggregate
number of all of the Shares to be purchased at such Time of Delivery, then the
Company and the Selling Stockholders shall have the right to require each
non-defaulting Underwriter to purchase the number of Shares which such
Underwriter agreed to purchase hereunder at such Time of Delivery and, in
addition, to require each non-defaulting Underwriter to purchase its pro rata
share (based on the number of Shares which such Underwriter agreed to purchase
hereunder) of the Shares of such defaulting Underwriter or Underwriters for
which such arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the
purchase of the Shares of a defaulting Underwriter or Underwriters by you and
the Company and the Selling Stockholders as provided in subsection (a) above,
the aggregate number of such Shares which remains unpurchased exceeds
one-eleventh of the aggregate number of all of the Shares to be purchased at
such Time of Delivery, or if the Company and the Selling Stockholders shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Shares of a defaulting Underwriter or Underwriters,
then this Agreement (or, with respect to the Second Time of Delivery, the
obligations of the Underwriters to purchase and of the Company and the Selling
Stockholders to sell the Optional Shares) shall thereupon terminate, without
liability on the part of any non-defaulting Underwriter or the Company or the
Selling Stockholders, except for the expenses to be borne by the Company and the
Selling Stockholders and the Underwriters as provided in Section 6 hereof and
the indemnity and contribution agreements in Section 8 hereof; but nothing
herein shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company, the Selling Stockholders and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company, or any of the Selling Stockholders, or any officer
or director or controlling person of the Company, or any controlling person of
any Selling Stockholder, and shall survive delivery of and payment for the
Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
neither the Company nor the Selling Stockholders shall then be under any
liability to any Underwriter except as provided in Sections 6 and 8 hereof; but,
if for any other reason any Shares are not delivered by or on behalf of the
Company and the Selling Stockholders as provided herein, the Company will
reimburse the Underwriters through you for all
33
<PAGE> 34
reasonable out-of-pocket expenses approved in writing by you, including fees and
disbursements of counsel, reasonably incurred by the Underwriters in making
preparations for the purchase, sale and delivery of the Shares not so delivered,
but the Company and the Selling Stockholders shall then be under no further
liability to any Underwriter in respect of the Shares not so delivered except as
provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
Representatives; and in all dealings with any Selling Stockholder hereunder, you
and the Company shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of such Selling Stockholder made or given by any
or all of the Attorneys-in-Fact for such Selling Stockholder.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail or
facsimile transmission to you as the Representatives in care of Goldman, Sachs &
Co., 85 Broad Street, New York, New York 10004, Attention: Registration
Department; if to any Selling Stockholder shall be delivered or sent by mail or
facsimile transmission to such Selling Stockholder at its address set forth in
Schedule II hereto; and if to the Company shall be delivered or sent by mail or
facsimile transmission to the address of the Company set forth in the
Registration Statement, Attention: Secretary; provided, however, that any notice
to an Underwriter pursuant to Section 8 (d) hereof shall be delivered or sent by
mail or facsimile transmission to such Underwriter at its address set forth in
its Underwriters' Questionnaire or telex constituting such Questionnaire, which
address will be supplied to the Company or the Selling Stockholders by you upon
request. Any such statements, requests, notices or agreements shall take effect
upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Underwriters, the Company and the Selling Stockholders and, to
the extent provided in Sections 8 and 10 hereof, the officers and directors of
the Company and each person who controls the Company, any Selling Stockholder or
any Underwriter, and their respective heirs, executors, administrators,
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No purchaser of any of the Shares from any
Underwriter shall be deemed a successor or assign by reason merely of such
purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
34
<PAGE> 35
15. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
16. This Agreement may be executed by any one or more of the parties
hereto 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
instrument.
If the foregoing is in accordance with your understanding, please sign
and return to us eight counterparts hereof, and upon the acceptance hereof by
you, on behalf of each of the Underwriters, this letter and such acceptance
hereof shall constitute a binding agreement among each of the Underwriters, the
Company and each of the Selling Stockholders. It is understood that your
acceptance of this letter on behalf of each of the Underwriters is pursuant to
the authority set forth in a form of Agreement among Underwriters (U.S.
Version), the form of which shall be submitted to the Company and the Selling
Stockholders for examination upon request, but without warranty on your part as
to the authority of the signers thereof.
Any person executing and delivering this Agreement as Attorney-in-Fact
for a Selling Stockholder represents by so doing that he has been duly appointed
as Attorney-in-Fact by such Selling Stockholder pursuant to a validly existing
and binding Power of Attorney which authorizes such Attorney-in-
35
<PAGE> 36
Fact to take such action.
Very truly yours,
CMP Media Inc.
By:_____________________________________
Name:
Title:
Gerard G. Leeds
Liselotte J. Leeds
Margaret and Richard Lipmanson Foundation
Caroline and Sigmund Schott Foundation
By:_____________________________________
Name:
Title:
As Attorney-in-Fact acting
on behalf of each of the
Selling Stockholders named
in Schedule II to this
Agreement.
Accepted as of the date hereof
Goldman, Sachs & Co.
Lazard Freres & Co. LLC
Bear, Stearns & Co. Inc.
Furman Selz LLC
By:__________________________________
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
36
<PAGE> 37
SCHEDULE I
<TABLE>
<CAPTION>
TOTAL NUMBER NUMBER OF OPTIONAL
OF SHARES TO BE
FIRM SHARES PURCHASED IF
TO BE MAXIMUM OPTION
UNDERWRITER PURCHASED EXERCISED
<S> <C> <C>
Goldman, Sachs & Co....................................................
Lazard Freres & Co. LLC
Bear, Stearns & Co. Inc.
Furman Selz LLC........................................................
[Names of other Underwriters].......................................... ______________ ______________
Total ============== ==============
</TABLE>
37
<PAGE> 38
SCHEDULE II
<TABLE>
<CAPTION>
NUMBER OF OPTIONAL
TOTAL NUMBER SHARES TO BE
OF SOLD IF
FIRM SHARES MAXIMUM OPTION
TO BE SOLD EXERCISED
<S> <C> <C>
The Company............................................................
The Selling Stockholders (a):
Gerard G. Leeds ................................................ 0
Lisolette J. Leeds.............................................. 0
Margaret and Richard Lipmanson Foundation....................... 0
Caroline and Sigmund Schott Foundation.......................... 0
_____________ ________________
Total ============= ================
</TABLE>
(a) Each Selling Stockholder is represented by [Name and Address of
Counsel] and has appointed [Names of Attorneys-in-Fact (not less than two)], and
each of them, as the Attorneys-in-Fact for such Selling Stockholder. The address
of each person set forth in the above table is c/o CMP Media Inc., 600 Community
Drive, Manhasset, New York 11030, attention: Secretary.
38
<PAGE> 39
SCHEDULE III
[persons subject to lock-up]
39
<PAGE> 40
ANNEX I
Pursuant to Section 7(f) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of the
Act and the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any
supplementary financial information and schedules (and, if applicable,
financial forecasts and/or pro forma financial information) examined by
them and included in the Prospectus or the Registration Statement
comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations thereunder; and, if applicable, they have made a review in
accordance with standards established by the American Institute of
Certified Public Accountants of the unaudited consolidated interim
financial statements, selected financial data, pro forma financial
information, financial forecasts and/or condensed financial statements
derived from audited financial statements of the Company for the
periods specified in such letter, as indicated in their reports
thereon, copies of which have been separately furnished to the
representatives of the Underwriters (the "Representatives");
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants
of the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus as indicated in their reports thereon copies
of which have been separately furnished to the Representatives; and on
the basis of specified procedures including inquiries of officials of
the Company who have responsibility for financial and accounting
matters regarding whether the unaudited condensed consolidated
financial statements referred to in paragraph (vi)(A)(i) below comply
as to form in all material respects with the applicable accounting
requirements of the Act and the related published rules and
regulations, nothing came to their attention that caused them to
believe that the unaudited condensed consolidated financial statements
do not comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published rules and
regulations;
<PAGE> 41
(iv) The unaudited selected financial information with respect
to the consolidated results of operations and financial position of the
Company for the five most recent fiscal years included in the
Prospectus agrees with the corresponding amounts (after restatements
where applicable) in the audited consolidated financial statements for
such five fiscal years;
(v) They have compared the information in the Prospectus under
selected captions with the disclosure requirements of Regulation S-K
and on the basis of limited procedures specified in such letter nothing
came to their attention as a result of the foregoing procedures that
caused them to believe that this information does not conform in all
material respects with the disclosure requirements of Items 301, 302,
402 and 503(d), respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available
interim financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its subsidiaries
since the date of the latest audited financial statements included in
the Prospectus, inquiries of officials of the Company and its
subsidiaries responsible for financial and accounting matters and such
other inquiries and procedures as may be specified in such letter,
nothing came to their attention that caused them to believe that:
(A) (i) the unaudited consolidated statements of
income, consolidated balance sheets and consolidated
statements of cash flows included in the Prospectus do not
comply as to form in all material respects with the applicable
accounting requirements of the Act and the related published
rules and regulations, or (ii) any material modifications
should be made to the unaudited condensed consolidated
statements of income, consolidated balance sheets and
consolidated statements of cash flows included in the
Prospectus for them to be in conformity with generally
accepted accounting principles;
(B) any other unaudited income statement data and
balance sheet items included in the Prospectus do not agree
with the corresponding items in the unaudited consolidated
financial statements from which such data and items were
derived, and any such unaudited data and items were not
determined on a basis substantially consistent with the basis
for the corresponding amounts in the audited consolidated
financial statements included in the Prospectus;
2
<PAGE> 42
(C) the unaudited financial statements which were not
included in the Prospectus but from which were derived any
unaudited condensed financial statements referred to in Clause
(A) and any unaudited income statement data and balance sheet
items included in the Prospectus and referred to in Clause (B)
were not determined on a basis substantially consistent with
the basis for the audited consolidated financial statements
included in the Prospectus;
(D) any unaudited pro forma consolidated condensed
financial statements included in the Prospectus do not comply
as to form in all material respects with the applicable
accounting requirements of the Act and the published rules and
regulations thereunder or the pro forma adjustments have not
been properly applied to the historical amounts in the
compilation of those statements;
(E) as of a specified date not more than five days
prior to the date of such letter, there have been any changes
in the consolidated capital stock (other than issuances of
capital stock upon exercise of options and stock appreciation
rights, upon earn-outs of performance shares and upon
conversions of convertible securities, in each case which were
outstanding on the date of the latest financial statements
included in the Prospectus) or any increase in the
consolidated long-term debt of the Company and its
subsidiaries, or any decreases in consolidated net current
assets or stockholders' equity or other items specified by the
Representatives, or any increases in any items specified by
the Representatives, in each case as compared with amounts
shown in the latest balance sheet included in the Prospectus,
except in each case for changes, increases or decreases which
the Prospectus discloses have occurred or may occur or which
are described in such letter; and
(F) for the period from the date of the latest
financial statements included in the Prospectus to the
specified date referred to in Clause (E) there were any
decreases in consolidated net revenues or operating profit or
the total or per share amounts of consolidated net income or
other items specified by the Representatives, or any increases
in any items specified by the Representatives, in each case as
compared with the comparable period of the preceding year and
with any other period of corresponding length specified by the
Representatives, except in each case for decreases or
increases which the Prospectus discloses have occurred or may
occur or which are described in such letter; and
3
<PAGE> 43
(vii) In addition to the examination referred to in their
report(s) included in the Prospectus and the limited procedures,
inspection of minute books, inquiries and other procedures referred to
in paragraphs (iii) and (vi) above, they have carried out certain
specified procedures, not constituting an examination in accordance
with generally accepted auditing standards, with respect to certain
amounts, percentages and financial information specified by the
Representatives, which are derived from the general accounting records
of the Company and its subsidiaries, which appear in the Prospectus, or
in Part II of, or in exhibits and schedules to, the Registration
Statement specified by the Representatives, and have compared certain
of such amounts, percentages and financial information with the
accounting records of the Company and its subsidiaries and have found
them to be in agreement.
4
<PAGE> 44
ANNEX I(a)
[executed comfort letter of Coopers & Lybrand L.L.P.]
<PAGE> 45
ANNEX I(b)
[form of bring-down comfort letter of Coopers & Lybrand L.L.P.]
<PAGE> 46
ANNEX II (a)
[form of opinion of Debevoise & Plimpton]
<PAGE> 47
ANNEX II (b)
[form of opinion of Dow, Lohnes & Albertson, PLLC]
<PAGE> 48
ANNEX II (c)
[form of opinion of General Counsel of the Company]
<PAGE> 49
ANNEX II (d)
[form of opinion of counsel for the Selling Stockholders]
<PAGE> 1
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
CMP MEDIA INC.
ARTICLE ONE
NAME
The name of the corporation is CMP Media Inc. The corporation
is referred to herein as the "Corporation."
ARTICLE TWO
REGISTERED OFFICE
The address of the Corporation's registered office in the
State of Delaware is 1013 Center Road in the City of Wilmington, County of New
Castle, Delaware 19805. The name of its registered agent at such address is The
Prentice-Hall Corporation System, Inc.
ARTICLE THREE
PURPOSE
The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
ARTICLE FOUR
CAPITAL STRUCTURE
The aggregate number of shares of capital stock which the
Corporation shall have the authority to issue is 300,000 shares, which shall be
classified into three classes of capital stock, as follows:
100,000 shares of Class A Common Stock, par value $0.10 per
share (the "Class A Common Stock");
100,000 shares of Class B Common Stock, par value $0.10 per
shares (the "Class B Common Stock"); and
- 1 -
<PAGE> 2
100,000 shares of Class C Common Stock, par value $0.10 per
shares (the "Class C Common Stock").
The Class A Common Stock, the Class B Common Stock, and the
Class C Common Stock collectively are sometimes referred to as the "Common
Stock."
ARTICLE FIVE
COMMON STOCK
5.1 Identical Rights. Except as otherwise set forth in this
ARTICLE FIVE or as otherwise required by law, the rights and privileges of each
class of the Common Stock shall be identical in all respects, including without
limitation the right to participate ratably in dividends and liquidation
distributions and the right of the members of a class of Common Stock to
participate ratably in offers by the Corporation to repurchase shares of Common
Stock that are directed to all of the holders of any other class of the Common
Stock.
5.2 Voting Rights
(a) Class A. Common Stock. Except as otherwise required by
law, each outstanding share of Class A Common Stock shall be entitled to vote on
each matter on which the stockholders of the Corporation shall be entitled to
vote, and each holder of Class A Common Stock shall be entitled to one (1) vote
for each share of such stock held by such holder.
(b) Class B. Common Stock. Except as otherwise required by
law, each outstanding share of Class B Common Stock shall be entitled to vote on
each matter on which the stockholders of the Corporation shall be entitled to
vote, and each holder of Class A Common Stock shall be entitled to ten (10) vote
for each share of such stock held by such holder.
(c) Class C. Common Stock. Except as otherwise required by
law, each outstanding share of Class C Common Stock shall be entitled to vote on
each matter on which the stockholders of the Corporation shall be entitled to
vote, and each holder of Class C Common Stock shall be included in determining
the number of shares voting or entitled to vote on any such matter.
(d) All Classes to Vote As A Single Class. Except as otherwise
required by law, the holders of the Common Stock entitled to vote on any matters
shall vote together as a single class on all such matters. The stockholders of
the Corporation shall not be entitled to circulate their votes in any election
of the directors of the Corporation.
5.3 Dividends. The Board of Directors of the Corporation may
cause dividends to paid to holders of shares of Common Stock out of funds
legally available for the
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<PAGE> 3
payment of dividends. Any dividends or distribution on the Common Stock shall be
payable on shares of Class A Common Stock, Class B Common Stock and Class C
Common Stock share and share alike; provided that in the case of dividends
payable in shares of Common Stock of the Corporation, or options, warrants or
rights to acquire shares of such Common Stock or securities convertible into or
exchangeable for shares of such Common Stock, the shares, options, warrants,
rights or securities so payable shall be payable in shares of, or options,
warrants or rights to acquire or securities convertible into or exchangeable
for, Common Stock of the same class upon which the dividend or distribution is
being paid.
5.4 Liquidation Rights. In the event of any dissolution,
liquidation or winding up of the affairs of the Corporation, whether voluntary
or involuntary, after payment or provision for payments of the debts and other
liabilities of the Corporation, the remaining assets and funds of the
Corporation, if any, shall be divided among and paid ratably to the holder of
Class A Common Stock, the holders of Class B Common Stock and the holders of
Class C Common Stock share and share alike. A merger or consolidation of the
Corporation with or into any other corporation or a sale or conveyance of all or
part of the assets of the Corporation (which shall not fact result in the
liquidation of the Corporation and the distribution of assets to stockholders)
shall not be deemed to be a voluntary or involuntary liquidation or dissolution
or winding up of the Corporation within the meaning of this Section 5.4.
5.5 Preemptive Rights. No stockholder of the Corporation
shall, by reason of holding any equity or voting shares of any class of Common
Stock, have any preemptive or preferential right to purchase or subscribe to any
shares of any class of Common Stock, now or hereafter to be authorized, or any
shares or other securities convertible into or carrying rights or options to
purchase any shares of any class of Common Stock, now or hereafter to be
authorized, whether or not the issuance of any such shares or other securities
would adversely affect the dividend or voting rights of such stockholder, other
than such rights, if any, as the Board of Directors of the Corporation in its
discretion may fix; and the Board of Directors may issue shares of any class of
Common Stock or other securities convertible into or carrying rights or options
to purchase any shares of any class of the Corporation, without offering any
such shares or securities, either in whole or in part, to the existing
stockholders of any class of Common Stock.
5.6 Conversion Rights.
(a) Voluntary Conversion. Each and every shares of Class B
Common Stock is convertible into Class A Common Stock at any time at the option
of the holder thereof. Such conversion shall be a share-for-share basis, one
share of Class A Common Stock for each share of Class B Common Stock so
converted.
(b) Automatic Conversion. Each share of Class B Common Stock
shall convert automatically into one fully paid and non-assessable share of
Class A Common stock
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<PAGE> 4
upon its sale, assignment, gift or other transfer to a party or entitle other
than a Permitted Transferee. For purposes of this Section 5.6(b), a "Permitted
Transferee" of a holder a Class B Common Stock (a "Class B Stockholder") shall
be (i) any of Gerard G. Leeds, Liselotte J. Leeds and any lineal descendant
(including any adopted child) thereof (each a "Leeds Family Member" and
collectively the "Leeds Family Members"); (ii) any trust established and
maintained principally for the benefit of one or more Leeds Family Members and
where one or more Leeds Family Members has a general or special testamentary
power of appointment or general or special non-testamentary power of appointment
limited to any Permitted Transferee or Permitted Transferees thereof; or (iii)
any corporation, partnership or other business entity where (A) the majority of
the board of directors of other managing body are comprised of Leeds Family
Members and/or any Permitted Transferee or Permitted Transferees, or (B) all the
beneficial ownership, or ownership of equity securities of such business entity
representing voting control over such entity, is held by Leeds Family Members
and/or any Permitted Transferee or Permitted Transferees thereof; provided,
however, that if the Class B Stockholder who made such transfer, and all
Permitted Transferees thereof, cease, for whatever reason, to hold all of the
beneficial ownership, or ownership of equity securities representing voting
control, of such corporation, partnership or other business entity, then any and
all shares of Class B Common Stock owned by such corporation, partnership or
other business entity shall be converted automatically, without further action
by or on behalf of any person, into shares of Class A Common Stock as provided
by Section 5.6(b) above and such corporation, partnership or other business
entity shall no longer be a Class B Stockholder.
Notwithstanding anything to the contrary set forth herein, any
Class B Stockholder may pledge his shares of Class B Common Stock to a pledgee
pursuant to a bona fide pledge of such shares as collateral security for
indebtedness due to the pledgee, provided that such shares may not be
transferred to or registered in the name of the pledgee unless such pledgee is a
Permitted Transferee. In the even to foreclosure or other similar action by the
pledgee (other than a pledgee who is a Permitted Transferee), such pledged
shares of Class B Common Stock shall be converted automatically, without further
action by or on behalf of any person, into shares of Class A Common Stock, as
provide in this Section 5.6(b) upon such foreclosure; provided, however, that if
within ten business days after such foreclosure or similar event such converted
shares are returned to the pledgor or transferred to a Permitted Transferee of
the pledgor, such shares shall be converted automatically, without any act or
deed on the part of the Corporation or any other person, into the same number of
shares of Class B Common Stock.
Notwithstanding anything to the contrary set forth herein, the
foregoing automatic conversion provisions of this Section 5.6(b) shall not be
applicable to any transfer of shares of Class B Common Stock by operation of law
upon incompetence, death, dissolution or bankruptcy of any Class B Stockholder
to an executor, guardian or trustee, respectively, of such Class B Stockholder
as long as the beneficial ownership of such shares continues to be held by one
or more Leeds Family Members or Permitted Transferees thereof.
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<PAGE> 5
(c) Conversion Procedure
(1) Each conversion of shares of Class B Common Stock
into shares of Class A Common Stock shall be effected by the surrender of the
certificate of certifies representing the shares to be converted (hereinafter
called the "Converting Shares") at the principal office of the Corporation (or
such other office or agency of the Corporation as the Corporation may designate
by written notice to the holders of Common Stock) at any time during its usual
business hours, together with written notice by the holder of such Converting
Shares, stating that such holder desires to converted the Converting Shares, or
a stated number of the shares of Class B Common Stock represented by such
certificates, into an equal number of shares of Class A Common Stock
(hereinafter called the "Converted Shares"). Such notice shall also state the
name or names (with addresses) and denominations in which the certificate or
certificates for Converted Shares are to be issued and shall include
instructions for the delivery thereof. Promptly after such surrender and the
receipt of such written notice, the Corporation will issue ad deliver in
accordance with the surrendering holder's instructions the certificate or
certificates evidencing the Converted Shares issuable upon such conversion, and
the Corporation will deliver to the converting holder a certificate (which may
contain such legends as appropriate) representing any shares of Class B Common
Stock which were represented by the certificate or certificates that were
delivered to the Corporation in connection with such conversion, but which were
not converted.
(2) In the event of the automatic conversion of
shares of Class B Common Stock into shares of Class A Common Stock, the holder
of such shares shall surrender the certificate or certificates representing the
Converting Shares in accordance with, and the parties to the transfer and the
Corporation shall otherwise comply with, the procedures set forth in Section
5.6(c)(1) hereof; provided, however, that, notwithstanding that any certificate
for Converting Shares shall not have been surrendered for cancellation, all such
Converting Shares shall no longer be deemed outstanding on and after the
effective date of conversion as set forth in Section 5.6(a) or 5.6(b), as the
case may be, and all rights with respect to such Converting Shares shall
forthwith on the effective date of such transfer cease and terminate, except
only the right of the holder or holders thereof to receive the same number of
shares of Converted Shares on the conversion thereof.
(3) Upon the issuance of shares in accordance with
this Section 5.6(c), such shares shall be deemed to be duly authorized, validly
issued, fully paid and nonassessable.
(d) Reservation. The Corporation hereby reserves and shall at
all times reserve and keep available, out of its authorized an unissued shares
of Class A Common Stock, for the purpose of effecting conversions, such number
of duly authorized shares of Class A Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of Class B Common
Stock. The Corporation covenants that all the shares of Class A Common Stock so
issuable shall, when so issued, be duly and validly issued, fully paid and
non-
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<PAGE> 6
assessable, and free from liens and charges with respect to the issue. The
Corporation will take all such action as may be necessary to assure that all
such shares of Class A Common Stock may be so issued without violation of any
applicable law or regulation. The Corporation will not take any action that
results in any adjustment of the conversion ratio if the total number of shares
of Class A Common Stock issued and issuable after such action upon conversion of
the shares of Class B Common Stock would exceed the total number of shares of
Class A Common Stock then authorized by the Corporation's Certificate of
Incorporation, as the same may have been amended or restated.
(e) No Dividends. If a share of Class B Common Stock shall be
converted subsequent to the record date for the payment of a dividend or other
distribution on Class B Common Stock but prior to such payment, the registered
holder of such share at the close of business on such record date shall be
entitled to receive the dividend or other distribution payable on such share on
the date set for payment of such dividend or other distribution notwithstanding
the conversion thereof hereunder or the Corporation's default in payment of the
dividend due on such date.
5.7 Change in Class. No shares of any class of Common Stock
may be subdivided, consolidated, reclassified or otherwise changed unless
concurrently the shares of the other classes of Common Stock are subdivided,
consolidated, reclassified or otherwise changed in the same proportion and the
same manner.
5.8 Mergers and Consolidations. In the event of a merger,
consolidation or other business combination of the Corporation with or into
another entity (whether or not the Corporation is the surviving entity), or in
the event of the dissolution of the Corporation, provision shall be made so that
the holders of each class of Common Stock will be entitled to receive the same
amount and form of consideration per shares as the per share consideration, if
any, received by holders of the other classes of Common Stock in such merger,
consolidation, combination or dissolution; provided, however, that in connection
with any such merger, consolidation or business combination in which shares of
capital stock are distributed, such shares may differ as to voting rights to the
extent and only tot he extent that the voting rights of the Class A Common
Stock, Class B Common Stock and Class C Common Stock differ as provided herein;
and provided further, however, that if such shares differ as to voting rights,
the shares having superior voting rights shall be subject to conversion
provisions that are no more or less favorable to the holders of such shares than
those provided in ARTICLE FIVE hereof with respect to the Class B Common Stock.
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<PAGE> 7
ARTICLE SIX
PERPETUAL EXISTENCE
The Corporation shall have perpetual existence.
ARTICLE SEVEN
BOARD OF DIRECTORS
7.1 In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors of the Corporation is expressly
authorized to adopt, amend or repeal-by-laws of the Corporation, but the
stockholders may adopt additional by-laws and may amend or repeal any by-law
whether adopted by them or otherwise.
7.2 Elections of directors need not be by written ballot
except and to the extent provided in the by-laws of the Corporation.
7.3 Any director or the entire Board of Directors may be
removed, with or without cause, by the vote of the holders of shares of capital
stock then entitled to cast a majority of the votes with respect to the election
of directors.
7.4 The Corporation shall have the power to indemnity its
officers, directors, employees and agents, and such other persons as may be
designated by the Board of Directors of the Corporation or as may be provided in
its by-laws, to the full extent permitted by the laws of the State of Delaware.
The directors and officers of the Corporation shall be entitled to such rights
of indemnification and advancement of expenses, including attorneys' fees, in
the defense of any action or proceeding or threatened action or proceeding in
which a director or officer is or may be made a party as the Board of Directors
may by resolutions prescribe.
7.5 A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director; provided, however, that the foregoing shall not
eliminate or limit the liability of a director (a) for any breach of the
director's duty of loyalty the Corporation or its stockholders, (b) for any act
or omission not in good faith or which involves intentional misconduct or a
knowing violation of law, (c) under Section 174 of the General Corporation Law
of the State of Delaware, or (d) for any transaction from which the director
derived an improper personal benefit. Any repeal or modification of this Article
SEVEN by the stockholders of the Corporation existing at the time of such repeal
or modification with respect to acts or omissions occurring prior to such repeal
or modification.
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<PAGE> 8
ARTICLE EIGHT
AMENDMENTS
The Corporation reserves the right at any time and from time
tot time to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation (including provisions as may hereafter be added or
inserted in this Certificate of Incorporation as authorized by the laws of the
State of Delaware) in the manner now or hereafter prescribed by law; and all
rights, preferences and privileges of whatsoever nature conferred upon
stockholders, directors or any other persons whomsoever by and pursuant to this
Certificate or Incorporation in its present form or as hereafter amended are
granted subject to the right reserved in this Article EIGHT.
ARTICLE NINE
CONSTRUCTION OF TERMS
The objects, purposes and powers specified in any clause or
paragraph of this Certificate of Incorporation shall be in no way limited or
restricted by reference to or inference from the terms of any other clause or
paragraph of this Certificate of Incorporation. The objects, purposes and powers
in each of the clauses and paragraphs of this Certificate of Incorporation shall
be regarded as independent objects, purposes and powers. The objects, purposes
and powers specified in this Certificate of Incorporation are in furtherance and
not in limitation of the objects, purposes and powers conferred by statute.
IN WITNESS WHEREOF, this Certificate of Incorporation, having
been duly adopted in accordance with Section 102 of the Delaware General
Corporation Law, has been signed under the seal of this Corporation as for this
24th day of May, 1996.
INCORPORATOR;
By: /s/ ROBERT D. MARAFIOTI
------------------------
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<PAGE> 9
Certificate of Merger
MERGING
CMP PUBLICATIONS, INC.
INTO
CMP MEDIA INC.
Pursuant to Section 251(f) and 252 of the Delaware General Corporation
Law, the undersigned do hereby certify as follows:
FIRST: The name and state of incorporation of each of the constituent
corporations is:
Name Type of Entity State of Domicil
CMP Media Inc. Corporation Delaware
CMP Publications, Inc. Corporation New York
SECOND: the Agreement and plan of Merger attached hereto as Exhibit A
has been approved, adopted, certified, executed and acknowledged by each of the
constituent corporations in accordance with Sections 251(f) and 52 of the
Delaware General Corporation Law and Section 907 of the New York Business
Corporation Law.
a. The Agreement and Plan of Merger was duly adopted and
approved by the Board of Directors of CMP Media Inc. on May 29, 1996.
b. There are no shares of capital stock of CMP Media Inc.
issued and outstanding.
c. The Agreement and Plan of Merger was duly adopted and
approved by the Board of Directors of CMP Publications, Inc. on May 10, 1996.
Unanimous written consent of the stockholders of CMP Publications, Inc. was also
given on May 10, 1996.
d. The authorized capital stock of CMP Publications, Inc.
consists of 200,000 shares of common stock at a par value of $.10 each, 100,000
shares of which are shares of Class A Stock and 100,000 of which are shares of
Class B Stock. The issued and outstanding capital stock of CMP Publications Inc.
entitled to vote consists of 52,118 shares of Class A Stock. The holder of all
52, 118 shares of capital stock of CMP Publications, Inc. that were entitled to
vote approved the Agreement and Plan of Merger.
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<PAGE> 10
THIRD: The surviving corporation is CMP Media Inc. (the "Surviving
Corporation").
FOURTH: The Certificate of Incorporation and the Bylaws of the
Surviving Corporation shall be in the form of the existing Certificate of
Incorporation and Bylaws of CMP Media Inc. No amendments or changes are being
made to the Certificate of Incorporation of the Surviving Corporation.
FIFTH: The executed original of the Agreement and Plan of Merger is on
file at the principal place of business of the Surviving Corporation at 600
Community Drive, Manhasset, NY 11030
SIXTH: A copy of the Agreement and Plan of Merger will be furnished by
the Surviving Corporation, on request and without cost, to any stockholder of
any constituent corporation.
SEVENTH: The merger shall be effective as of May 31, 1996.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Ownership and Merger as of the 29th day of May, 1996.
CMP MEDIA INC. CMP PUBLICATIONS, INC.
By: /s/ DANIEL H. LEEDS By: /s/ DANIEL H. LEEDS
------------------- -------------------
Daniel H. Leeds Daniel H. Leeds
Vice President Vice President
By: /s/ ROBERT D. MARAFIOTI By: /s/ ROBERT D. MARAFIOTI
----------------------- -----------------------
Robert D. Marafioti Robert D. Marafioti
Assistant Secretary Assistant Secretary
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<PAGE> 11
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
MERGING
CMP PUBLICATIONS, INC.
WITH AND INTO
CMP MEDIA INC.
AGREEMENT AND PLAN OF MERGER, dated as of May 29, 1996, by and among
CMP Publications, Inc., a New York corporation, and CMP Media, Inc., a Delaware
corporation. Pursuant to Section 907 of the New York Business Corporation Law
and Sections 251(f) and 252 of the Delaware General Corporation Law, the parties
agree that CMP Publications, Inc. shall merge with and into CMP Media Inc. (the
"Merger") according to the terms set forth below:
FIRST: The name of the disappearing corporation is CMP Publications, Inc. (the
"Disappearing Corporation"). It shall be merged with and into CMP Media
Inc., with CMP Media Inc. being the surviving corporation ("Surviving
Corporation").
SECOND: There are no shares of capital stock of CMP Media INC. issued and
outstanding. There are 52,118 shares of common stock of CMP
Publications, Inc. issued and outstanding of record.
THIRD: The Merger shall be effective as of the close of business of May 31,
1996 (the "Effective Time"). Upon the Merger, the corporate existence
of CMP Media INC., with all its purposes, powers and objects, shall
continue unaffected and unimpaired by the Merger, and the corporate
identity and existence of CMP Publications, INC., with all its
purposes, powers and objects shall be merged with and into CMP Media,
and CMP Media Inc., as the corporation surviving the Merger, shall be
fully vested therewith. The separate existence and corporate
organization of CMP Publications, Inc. shall cease as of the Effective
Time.
FOURTH: As of the Effective Time, the issued and outstanding shares of the
capital stock of CMP Media Inc. and CMP Publications, Inc. shall become
and be converted into shares of stock of the Surviving Corporation or
be canceled as follows: the 52,118 shares of CMP Publications, Inc.
Class A Common Stock which are outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action by
the holder thereof, be and become 52,118 shares of Class B Common
Stock of the Surviving Corporation. At and after the Effective Time,
the Surviving Corporation shall possess all the rights, privileges,
immunities, powers, and purposes, of each of CMP Media Inc. and CMP
Publications, Inc.; all the property, real and personal, shall vest in
the Surviving Corporation without further act or deed; and the
Surviving Corporation shall
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<PAGE> 12
assume and be liable for all the liabilities, obligations and penalties
of CMP Media Inc. and CMP Publications, Inc.
FIFTH: As of the Effective Time, the Certificate of Incorporation and the
Bylaws of the Surviving Corporation shall be the Certificate of
Incorporation and the Bylaws of CMP Media Inc.
IN WITNESS WHEREOF, each of the parties has caused this Agreement and
Plan of Merger to be executed on its behalf by its duly authorized officers, as
of the day and year first written above.
CMP MEDIA INC.
By: /s/ MICHAEL S. LEEDS
-----------------------
Michael S. Leeds
President
By: /s/ ROBERT D. MARAFIOTI
-----------------------
Robert D. Marafioti
Assistant Secretary
CMP PUBLICATIONS, INC.
By: /s/ MICHAEL S. LEEDS
-----------------------
Michael S. Leeds
President
By: /s/ ROBERT D. MARAFIOTI
-----------------------
Robert D. Marafioti
Assistant Secretary
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<PAGE> 13
CERTIFICATION OF ASSISTANT SECRETARY
OF
CMP MEDIA INC.
Pursuant to Section 228, 251(f) and 252 of the Delaware General
Corporation Law, the undersigned, Robert D. Marafioti, Assistant Secretary of
CMP MEDIA INC., a corporation organized and existing under the laws of the State
of Delaware, does hereby certify as follows:
FIRST: The Agreement and Plan of Merger to which this certificate is attached
was duly adopted and approved by the Board of Directors of said CMP
MEDIA INC. by written consent dated May 29, 1996.
SECOND: There were no shares of capital stock of CMP MEDIA INC. issued and
outstanding prior to the adoption of the resolutions approving the
Agreement and Plan of Merger by the Board of Directors of said CMP
MEDIA INC.
IN WITNESS WHEREOF, the undersigned has executed this Certification of
Assistant Secretary as of the 29th day of May, 1996.
CMP MEDIA INC.
By: /s/ ROBERT D. MARAFIOTI
-----------------------
Robert D. Marafioti
Assistant Secretary
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<PAGE> 14
Certificate of Merger
RELATING TO THE MERGER OF
CMP COMMUNICATIONS CORP.
INTO
CMP MEDIA INC.
Pursuant to Section 251(c) of the General Corporation Law of State of
Delaware, the undersigned do hereby certify as follows:
FIRST: The name and state of incorporation of each of the constituent
corporations is:
NAME TYPE OF ENTITY STATE OF DOMICIL
CMP Media Inc. Corporation Delaware
CMP Communications Corp. Corporation New York
SECOND: the Agreement and plan of Merger merging CMP Communications
Corp with and into CMP Media Inc. has been approved, adopted, certified,
executed and acknowledged by each of the constituent corporations in accordance
with Sections 251(c) of the General Corporation Law of the State of Delaware.
THIRD: The surviving corporation is CMP Media Inc. (the "Surviving
Corporation").
FOURTH: The Certificate of Incorporation and the Bylaws of the
Surviving Corporation shall be in the form of the existing Certificate of
Incorporation and Bylaws of CMP Media Inc. No amendments or changes are being
made to the Certificate of Incorporation of the Surviving Corporation.
FIFTH: The executed original of the Agreement and Plan of Merger is on
file at the principal place of business of the Surviving Corporation at 600
Community Drive, Manhasset, NY 11030
SIXTH: A copy of the Agreement and Plan of Merger will be furnished by
the Surviving Corporation, on request and without cost, to any stockholder of
any constituent corporation.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Ownership and Merger as of the 21st day of October, 1996.
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<PAGE> 15
CMP MEDIA INC.
By: /s/ DANIEL H. LEEDS
------------------------
Daniel H. Leeds
Vice President
By: /s/ ROBERT D. MARAFIOTI
------------------------
Robert D. Marafioti
Assistant Secretary
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<PAGE> 16
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CMP MEDIA INC.
Pursuant to Section 242 of the Delaware General Corporation Law, CMP Media
Inc.,, a corporation organized and existing under and by virtue of the laws of
the State of Delaware (the "Company"), does hereby certify as follows:
1. The Board of Directors of the Company, by unanimous written consent
pursuant to Section 14(f) of the Delaware Corporation Law, duly adopted
resolutions proposing and declaring advisable an amendment to the Certificate of
Incorporation of the Company to increase the authorized number of shares of
Common Stock of the Company and directing that said amendment by submitted to
the stockholders of the Company for consideration and approval thereof. The
resolutions setting forth the proposed amendment are as follows:
RESOLVED, that in order to effectuate an increase in the authorized
number of shares of Common Stock of the Company, the Certificate of
Incorporation of the Company be amended by striking out Article Four
thereof and substituting in lieu of such Article Four the following new
Article:
ARTICLE FOUR
CAPITAL STRUCTURE
The aggregate number of shares of capital stock which the
Corporation shall have the authority to issue is 3,000,000 shares,
which shall be classified into three classes of common stock as
follows:
1,000,000 shares of Class A Common Stock, par value $0.10 per
share (the "Class A Common Stock");
1,000,000 shares of Class B Common Stock, par value $0.10 per
share (the "Class B Common Stock"); and
1,000,000 shares of Class C Common Stock, par value $0.10 per
share (the "Class C Common Stock").
The Class A Common Stock, the Class B Common Stock, and the
Class C Common Stock collectively are sometimes referred to as the
"Common Stock."
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<PAGE> 17
2. Thereafter, all the stockholders of the Company waived all notice of
the time, place and purposes of a meeting of the stockholders o the Company and
gave their unanimous written consent to said amendment in accordance with the
provisions of Section 228 of the Delaware General Corporation Law, and such
unanimous written consent was filed with the Secretary of the Company.
3. The amendment of the Certificate of Incorporation herein certified
has been duly adopted in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware.
4. The aforesaid amendment to the Company's Certificate of
Incorporation shall be effective as of the effective date of the filing of this
Certificate of Amendment of the Certificate of Incorporation with the Secretary
of State of the State of Delaware.
5. The capital of the Company will not be reduced under or by reason of
said amendment.
IN WITNESS WHEREOF, CMP Media Inc. has caused this Certificate to be
executed by Michael S. Leeds, its President, as of the 31st day of January,
1997.
By: /s/ MICHAEL S. LEEDS
--------------------
Michael S. Leeds
President
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<PAGE> 18
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CMP MEDIA INC.
Pursuant to Section 242 of the Delaware General Corporation Law, CMP
Media Inc., a corporation organized and existing by virtue of the laws of the
State of Delaware (the "Corporation"), does hereby certify as follows:
1. The Board of Directors and the stockholders of the Corporation, duly
adopted resolutions proposing and declaring advisable an amendment to the
Corporation's Certificate of Incorporation (set forth in paragraph 2 below) to
provide for the conversion of shares of the Corporation's Class C Common Stock
into shares of other classes of the Corporation's Common Stock under certain
circumstances.
2. The Corporation's Certificate of Incorporation is hereby amended by
striking out Article Five thereof in its entirety and by substituting in lieu of
such Article Five the following new Article:
5.1 Identical Rights. Except as otherwise set forth in this
ARTICLE FIVE or as otherwise required by law, the rights and privileges
of each class of the Common Stock shall be identical in all respects,
including without limitation the right to participate ratably in
dividends and liquidation distributions and the right of the members of
a class of Common Stock to participate ratably in offers by the
Corporation to repurchase shares of Common Stock that are directed to
all of the holders of any other class of the Common Stock.
5.2 Voting Rights
(a) Class A. Common Stock. Except as otherwise required by
law, each outstanding share of Class A Common Stock shall be entitled
to vote on each matter on which the stockholders of the Corporation
shall be entitled to vote, and each holder of Class A Common Stock
shall be entitled to one (1) vote for each share of such stock held by
such holder.
(b) Class B. Common Stock. Except as otherwise required by
law, each outstanding share of Class B Common Stock shall be entitled
to vote on each matter on which the stockholders of the Corporation
shall be entitled to vote, and each holder of Class B Common Stock
shall be entitled to ten (10) votes for each share of such stock
held by such holder.
(c) Class C Common Stock. Except as otherwise required by
---------------------
law, each outstanding share of Class C Common Stock shall not be
entitled to vote on any matter on which the stockholders of the
Corporation shall be entitled to vote and shares of Class C
Common Stock shall not be included in determining the number of
shares voting or entitled to vote on any matter.
(d) All Classes To Vote As A Single Class. Except as
--------------------------------------
otherwise required by law, the holders of the Common Stock entitled to
vote on any matter shall vote together as a single class on all such
matters. The stockholders of the Corporation shall not be entitled to
cumulate their votes in any election of the directors of the
Corporation or with respect to any other matter.
5.3 Dividends. The Board of Directors of the Corporation may
----------
cause dividends to be paid to holders of shares of Common Stock out of
funds legally available for the payment of dividends. Any dividend or
distribution on the Common Stock shall be payable on shares of Class A
Common Stock, Class B Common Stock and Class C Common Stock share and
share alike; provided that in the case of dividends payable in shares
of Common Stock of the Corporation, or options, warrants or rights to
acquire shares of such Common Stock or securities convertible into or
exchangeable for shares of such Common Stock, the shares, options,
warrants, rights or securities so payable shall be payable in shares
of, or options, warrants or rights to acquire or securities
convertible into or exchangeable for, either Class C Common Stock (if
so determined by the Board of Directors) or Common Stock of the same
class upon which the dividend or distribution is being paid.
5.4 Liquidation Rights. In the event of any dissolution,
-------------------
liquidation or winding up of the affairs of the Corporation, whether
voluntary or involuntary, after payment or provision for payment of
the debts and other liabilities of the Corporation, the remaining
assets and funds of the Corporation, if any, shall be divided among
and paid ratably to the holders of Class A Common Stock, the holders
of Class B Common Stock and the holders of Class C Common Stock share
and share alike. A merger or consolidation of the Corporation with or
into any other corporation or a sale or conveyance of all or any part
of the assets of the Corporation (which shall not in fact result in
the liquidation of the Corporation and the distribution of assets to
stockholders) shall not be deemed to be a voluntary or involuntary
liquidation or dissolution or winding up of the Corporation within the
meaning of this Section 5.4
5.5 Preemptive Rights. No stockholder of the Corporation
shall, by reason of holding any equity or voting shares of any class of
Common Stock, have any preemptive or preferential right to purchase or
subscribe to any shares of any
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<PAGE> 19
class of Common Stock, now or hereafter to be authorized, or any shares
or other securities convertible into or carrying rights or options to
purchase any shares of any class of Common Stock, now or hereafter to
be authorized, whether or not the issuance of any such shares or other
securities would adversely affect the dividend or voting rights of such
stockholder, other than such rights, if any, as the Board of Directors
of the Corporation in its discretion may fix; and the Board of
Directors may issue shares of any class of Common Stock or other
securities convertible into or carrying rights or options to purchase
any shares of any class of the Corporation, without offering any such
shares or securities, either in whole or in part, to the existing
stockholders of any class of Common Stock.
5.6 Conversion Rights.
(a) Class B Voluntary Conversion. Each and every shares of
Class B Common Stock is convertible into Class A Common Stock at any
time at the option of the holder thereof. Such conversion shall be a
share-for-share basis, one share of Class A Common Stock for each share
of Class B Common Stock so converted.
(b) Class B Automatic Conversion. Each share of Class B Common
Stock shall convert automatically into one fully paid and
non-assessable share of Class A Common stock upon its sale, assignment,
gift or other transfer to a party or entitle other than a Permitted
Transferee. For purposes of this Section 5.6(b), a "Permitted
Transferee" of a holder a Class B Common Stock (a "Class B
Stockholder") shall be (i) any of Gerard G. Leeds, Liselotte J. Leeds,
Michael S. Leeds, Richard A. Leeds, Daniel H. Leeds, Greg Joblin-Leeds,
Jennifer Leeds-Lukehart and any lineal descendant (including any
adopted child) thereof (each a "Leeds Family Member" and collectively
the "Leeds Family Members"); (ii) any trust established and maintained
principally for the benefit of one or more Leeds Family Members and
where one or more Leeds Family Members has a general or special
testamentary power of appointment or general or special
non-testamentary power of appointment limited to any Permitted
Transferee or Permitted Transferees thereof; or (iii) any corporation,
partnership or other business entity where (A) the majority of the
board of directors of other managing body are comprised of Leeds Family
Members and/or any Permitted Transferee or Permitted Transferees, or
(B) all the beneficial ownership, or ownership of equity securities of
such business entity representing voting control over such entity, is
held by Leeds Family Members and/or any Permitted Transferee or
Permitted Transferees thereof; provided, however, that if the Class B
Stockholder who made such transfer, and all Permitted Transferees
thereof, cease, for whatever reason, to hold all of the beneficial
ownership, or ownership of equity securities representing voting
control, of such corporation, partnership or other business entity,
then any
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<PAGE> 20
and all shares of Class B Common Stock owned by such corporation,
partnership or other business entity shall be converted automatically,
without further action by or on behalf of any person, into shares of
Class A Common Stock as provided by Section 5.6(b) above and such
corporation, partnership or other business entity shall no longer be a
Class B Stockholder.
Notwithstanding anything to the contrary set forth herein, any
Class B Stockholder may pledge his shares of Class B Common Stock to a
pledgee pursuant to a bona fide pledge of such shares as collateral
security for indebtedness due to the pledgee, provided that such shares
may not be transferred to or registered in the name of the pledgee
unless such pledgee is a Permitted Transferee. In the even to
foreclosure or other similar action by the pledgee (other than a
pledgee who is a Permitted Transferee), such pledged shares of Class B
Common Stock shall be converted automatically, without further action
by or on behalf of any person, into shares o Class A Common Stock, as
provide in this Section 5.6(b) upon such foreclosure; provided,
however, that if within ten business days after such foreclosure or
similar event such converted shares are returned to the pledgor or
transferred to a Permitted Transferee of the pledgor, such shares shall
be converted automatically, without any act or deed on the part of the
Corporation or any other person, into the same number of shares of
Class B Common Stock.
Notwithstanding anything to the contrary set forth herein, the
foregoing automatic conversion provisions of this Section 5.6(b) shall
not be applicable to any transfer of shares of Class B Common Stock by
operation of law upon incompetence, death, dissolution or bankruptcy of
any Class B Stockholder to an executor, guardian or trustee,
respectively, of such Class B Stockholder as long as the beneficial
ownership of such shares continues to be held by one or more Leeds
Family Members or Permitted Transferees thereof.
(c) Class C Conversion. Shares of Class C Common Stock
generally shall not be convertible into any other shares of capital
stock of the Corporation; provided, however, that the Corporation's
Board of Directors shall have the authority to designate any shares of
Class C Common Stock previously or hereafter issued as a dividend
payable with respect to any other shares of the Company's Common Stock
as being shares that may be automatically converted without further
action on the part of any stockholder, upon consummation of a firm
commitment underwritten initial public offering of the Corporation's
Class A Common Stock (an "IPO"), into an equal number of shares of the
class of Common Stock upon which such Class C Common Stock shares were
declared as dividends (the "Underlying Common Stock"); provided,
however, that if, subsequent to the declaration of a stock dividend of
shares of convertible Class C
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<PAGE> 21
Common Stock, any shares of the Underlying Common Stock are converted
into a different class of Common Stock, upon the consummation of an IPO
the shares of Class C Common Stock issued as a dividend payable with
respect to such converted shares of Underlying Common Stock shall be
converted into an equal number of shares of the same class of such
shares of the Underlying Common Stock as so converted.
(2) In the event of the automatic conversion of
shares of Class B Common Stock or Class C Stock into shares of Class A
Common Stock or Class B Common Stock, as the case may be, the holder of
such shares shall surrender the certificate or certificates
representing the Converting Shares in accordance with, and the parties
to the transfer and the Corporation shall otherwise comply with, the
procedures set forth in Section 5.6(d)(1) hereof; provided, however,
that, notwithstanding that any certificate for Converting Shares shall
not have been surrendered for cancellation, all such Converting Shares
shall no longer be deemed outstanding on and after the effective date
of conversion as set forth in Section 5.6(a) or 5.6(b), as the case may
be, and all rights with respect to such Converting Shares shall
forthwith on the effective date of such transfer cease and terminate,
except only the right of the holder or holders thereof to receive the
same number of shares of Converted Shares on the conversion thereof.
(3) Upon the issuance of shares in accordance with
this Section 5.6(c), such shares shall be deemed to be duly authorized,
validly issued, fully paid and nonassessable.
(e) Reservation. The Corporation hereby reserves and shall at
all times reserve and keep available, out of its authorized an unissued
shares of Class A Common Stock, for the purpose of effecting
conversions, such number of duly authorized shares of Class A Common
Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of Class B Common Stock. The Corporation
covenants that all the shares of Class A Common Stock so issuable
shall, when so issued, be duly and validly issued, fully paid and
non-assessable, and free from liens and charges with respect to the
issue. The Corporation will take all such action as may be necessary to
assure that all such shares of Class A Common Stock may be so issued
without violation of any applicable law or regulation. The Corporation
will not take any action that results in any adjustment of the
conversion ratio if the total number of shares of Class A Common Stock
issued and issuable after such action upon conversion of the shares of
Class B Common Stock would exceed the total number of shares of Class A
Common Stock then authorized by the Corporation's Certificate of
Incorporation, as the same may have been amended or restated.
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<PAGE> 22
(f) No Dividends. If a share of Class B Common Stock shall be
converted subsequent to the record date for the payment of a dividend
or other distribution on Class B Common Stock but prior to such
payment, the registered holder of such share at the close of business
on such record date shall be entitled to receive the dividend or other
distribution payable on such share on the date set for payment of such
dividend or other distribution notwithstanding the conversion thereof
hereunder or the Corporation's default in payment of the dividend due
on such date.
5.7 Change in Class. No shares of any class of Common Stock
may be subdivided, consolidated, reclassified or otherwise changed
unless concurrently the shares of the other classes of Common Stock are
subdivided, consolidated, reclassified or otherwise changed in the same
proportion and the same manner.
5.8 Mergers and Consolidations. In the event of a merger,
consolidation or other business combination of the Corporation with or
into another entity (whether or not the Corporation is the surviving
entity), or in the event of the dissolution of the Corporation,
provision shall be made so that the holders of each class of Common
Stock will be entitled to receive the same amount and form of
consideration per shares as the per share consideration, if any,
received by holders of the other classes of Common Stock in such
merger, consolidation, combination or dissolution; provided, however,
that in connection with any such merger, consolidation or business
combination in which shares of capital stock are distributed, such
shares may differ as to voting rights to the extent and only tot he
extent that the voting rights of the Class A Common Stock, Class B
Common Stock and Class C Common Stock differ as provided herein; and
provided further, however, that if such shares differ as to voting
rights, the shares having superior voting rights shall be subject to
conversion provisions that are no more or less favorable to the holders
of such shares than those provided in ARTICLE FIVE hereof with respect
to the Class B Common Stock.
3. The aforesaid amendment to the Company's Certificate of
Incorporation shall be effective as of the effective date of the filing of this
Certificate of Amendment of the Certificate of Incorporation with the Secretary
of State of the State of Delaware.
4. The capital of the Company will not be reduced under or by reason of
said amendment.
IN WITNESS WHEREOF, CMP Media Inc. has caused this Certificate to be
executed by Michael S. Leeds, its President and CEO, as of February 26, 1997.
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<PAGE> 23
By: /s/ MICHAEL S. LEEDS
--------------------
Michael S. Leeds
President
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<PAGE> 24
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CMP MEDIA INC.
Pursuant to Section 242 of the Delaware General Corporation Law, CMP
Media Inc., a corporation organized and existing under and by virtue of the
laws of the State of Delaware (the "Company"), does hereby certify as follows:
1. The Board of Directors of the Company, by unanimous written consent
pursuant to Section 141(f) of the Delaware Corporation Law, duly adopted
resolutions proposing and declaring advisable an amendment to the Certificate of
Incorporation of the Company to increase the authorized number of shares of
Common stock of the Company and directing that said amendment be submitted to
the stockholders of the Company for consideration and approval thereof. The
resolutions setting forth the proposed amendment are as follows:
RESOLVED, that in order to effectuate an increase in the
authorized number of shares of Common Stock of the Company,
the Certificate of Incorporation of the Company be amended by
striking out Article Four thereof and substituting in lieu of
such Article Four the following new Article:
ARTICLE FOUR
CAPITAL STRUCTURE
The aggregate number of shares of capital stock which the Corporation
shall have the authority to issue is 3,000,000 shares, which shall be classified
into three classes of common stock, as follows:
1,000,000 shares of Class A Common Stock, par value $0.10 per
share (the "Class A Common Stock");
1,000,000 shares of Class B Common Stock, par value $0.10 per
share (the "Class B Common Stock");
1,000,000 shares of Class C Common Stock, par value $0.10 per
share (the "Class C Common Stock");
The Class A Common Stock, the Class B Common Stock,
and the Class C Common Stock collectively are sometimes
referred to as the "Common Stock".
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<PAGE> 25
2. Thereafter, all the stockholders of the Company waived all notice of
the time, place and purposes of a meeting of the stockholders of the Company and
gave their unanimous written consent to said amendment in accordance with the
provisions of Section 228 of the Delaware General Corporation Law, and such
unanimous written consent was filed with the Secretary of the Company.
3. The amendment of the Certificate of incorporation herein certified
has been duly adopted in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware.
4. The aforesaid amendment to the Company's Certificate of
Incorporation shall be effective as of the effective date of the filing of this
Certificate of Amendment of the Certificate of Incorporation with the Secretary
of the State of Delaware.
5. The capital of the company will not be reduced under or by reason of
said amendment.
IN WITNESS WHEREOF, CMP Media Inc. has caused this Certificate to be
executed by Michael S. Leeds, its President, as of the 31st day of January,
1997.
CMP MEDIA INC.
By: /s/ MICHAEL LEEDS
-------------------------------
Michael Leeds
President
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<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
CMP MEDIA INC.
(A DELAWARE CORPORATION)
ARTICLE I
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK. Certificates representing stock in
the corporation shall be signed by, or in the name of, the corporation by the
President or a Vice-President and by the Secretary or an Assistant Secretary of
the corporation. Any or all the signatures on any such certificate may be a
facsimile. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent, or registrar at the date of issue.
Whenever the corporation shall be authorized to issue more than one
class of stock or more than one series of any class of stock, and whenever the
corporation shall issue any shares of its stock as partly paid stock, the
certificates representing shares of any such class or series or of any such
partly paid stock shall set forth thereon the statements prescribed by the
General Corporation Law. Any restrictions on the transfer or registration of
transfer of any shares of stock of any class or series shall be noted
conspicuously on the certificate representing such shares.
The corporation may issue a new certificate of stock or uncertificated
shares in place of any certificate theretofore issued by it, alleged to have
been lost, stolen,
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<PAGE> 2
or destroyed, and the Board of Directors may require the owner of the lost,
stolen, or destroyed certificate, or his legal representative, to give the
corporation a bond sufficient to indemnify the corporation against any claim
that may be made against it on account of the alleged loss, theft, or
destruction of any such certificate or the issuance of any such new certificate
or uncertificated shares.
2. UNCERTIFICATED SHARES. Subject to any conditions imposed by the
General Corporation Law, the Board of Directors of the corporation may provide
by resolution or resolutions that some or all of any or all classes or series of
the stock of the corporation shall be uncertificated shares. Within a reasonable
time after the issuance or transfer of any uncertificated shares, the
corporation shall send to the registered owner thereof any written notice
prescribed by the General Corporation Law.
3. FRACTIONAL SHARE INTERESTS. The corporation may, but shall not be
required to, issue fractions of a share. If the corporation does not issue
fractions of a share, it shall (1) arrange for the disposition of fractional
interests by those entitled thereto, (2) pay in cash the fair value of fractions
of a share as of the time when those entitled to receive such fractions are
determined, or (3) issue scrip or warrants in registered form (either
represented by a certificate or uncertificated) or bearer form (represented by a
certificate) which shall entitle the holder to receive a full share upon the
surrender of such scrip or warrants aggregating a full share. A certificate for
a fractional share or an uncertificated fractional share shall, but scrip or
warrants shall not unless otherwise provided therein, entitle the holder to
exercise voting rights, to receive dividends thereon, and to participate in any
of the assets of the corporation in the event of liquidation. The Board of
Directors may cause scrip or warrants to be issued subject to the conditions
that they shall become void if not exchanged for certificates representing the
full shares or uncertificated full shares before a specified date, or subject to
the conditions that the shares for which scrip or warrants are exchangeable may
be sold by the corporation and the proceeds thereof distributed to the holders
of scrip or warrants, or subject to any other conditions which the Board of
Directors may impose.
4. STOCK TRANSFERS. Upon compliance with provisions restricting the
transfer or registration of transfer of shares of stock, if any, transfers or
registration
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<PAGE> 3
of transfers of shares of stock of the corporation shall be made only on the
stock ledger of the corporation by the registered holder thereof, or by his
attorney thereunto authorized by power of attorney duly executed and filed with
the Secretary of the corporation, or in his absence, an Assistant Secretary, or
with a transfer agent or a registrar, if any, and, in the case of shares
represented by certificates, on surrender of the certificate or certificates for
such shares of stock properly endorsed and the payment of all taxes due thereon.
5. RECORD DATE FOR STOCKHOLDERS. In order that the corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date shall not be more than sixty nor less than ten days before the date of such
meeting. If no record date is fixed by the Board of Directors, the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
In order that the corporation may determine the stockholders entitled to consent
to corporate action in writing without a meeting, the Board of Directors may fix
a record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors. If no
record date has been fixed by the Board of Directors, the record date for
determining the stockholders entitled to consent to Corporate action in writing
without a meeting, when no prior action by the Board of Directors is required by
the General Corporation Law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the corporation by delivery to its registered office in the State of Delaware,
its principal place of business, or an officer or agent of the corporation
having custody of the book(s) in which proceedings of meetings of stockholders
are recorded. Delivery made to the corporation's registered office shall be by
hand or by certified or registered mail, return receipt requested. If no record
date has been fixed by the Board of Directors and prior
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<PAGE> 4
action by the Board of Directors is required by the General Corporation Law, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action. In
order that the corporation may determine the stockholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion, or exchange of stock, or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted,
and which record date shall be not more than sixty days prior to such action. If
no record date is fixed, the record date for determining stockholders for any
such purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
6. MEANING OF CERTAIN TERMS. As used herein in respect of the right to
notice of a meeting of stockholders or a waiver thereof or to participate or
vote thereat or to consent or dissent in writing in lieu of a meeting, as the
case may be, the term "share" or "shares" or "share of stock" or "shares of
stock" or "stockholder" or "stockholders" refers to an outstanding share or
shares of stock and to a holder or holders of record of outstanding shares of
stock when the corporation is authorized to issue only one class of shares of
stock, and said reference is also intended to include any outstanding share or
shares of stock and any holder or holders of record of outstanding shares of
stock of any class upon which or upon whom the certificate of incorporation
confers such rights where there are two or more classes or series of shares of
stock or upon which or upon whom the General Corporation Law confers such rights
notwithstanding that the certificate of incorporation may provide for more than
one class or series of shares of stock, one or more of which are limited or
denied such rights thereunder; provided, however, that no such right shall vest
in the event of an increase or a decrease in the authorized number of shares of
stock of any class or series which is otherwise denied voting rights under the
provisions of the certificate of incorporation, except as any provision of law
may otherwise require.
7. STOCKHOLDER MEETINGS.
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<PAGE> 5
- TIME. The annual meeting shall be held on the date and at the time
fixed, from time to time, by the directors, provided, that the first annual
meeting shall be held on a date within thirteen months after the organization of
the corporation, and each successive annual meeting shall be held on a date
within thirteen months after the date of the preceding annual meeting. A special
meeting shall be held on the date and at the time fixed by the directors.
- PLACE. Annual meetings and special meetings shall be held at such
place, within or without the State of Delaware, as the directors may, from time
to time, fix. Whenever the directors shall fail to fix such place, the meeting
shall be held at the registered office of the corporation in the State of
Delaware.
- CALL. Annual meetings and special meetings may be called by the
directors or by any officer instructed by the directors to call the meeting.
- NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall be
given, stating the place, date, and hour of the meeting and stating the place
within the city or other municipality or community at which the list of
stockholders of the corporation may be examined. The notice of an annual meeting
shall state that the meeting is called for the election of directors and for the
transaction of other business which may properly come before the meeting, and
shall (if any other action which could be taken at a special meeting is to be
taken at such annual meeting) state the purpose or purposes. The notice of a
special meeting shall in all instances state the purpose or purposes for which
the meeting is called. The notice of any meeting shall also include, or be
accompanied by, any additional statements, information, or documents prescribed
by the General Corporation Law, a copy of the notice of any meeting shall be
given, personally or by mail, not less than ten days nor more than sixty days
before the date of the meeting, unless the lapse of the prescribed period of
time shall have been waived, and directed to each stockholder at his record
address or at such other address which he may have furnished by request in
writing to the Secretary of the corporation. Notice by mail shall be deemed to
be given when deposited, with postage thereon prepaid, in the United States
Mail. If a meeting is adjourned to another time, not more than thirty days
hence, and/or to another place, and if an announcement of the adjourned time
and/or place is made at the meeting, it shall
5
<PAGE> 6
not be necessary to give notice of the adjourned meeting unless the directors,
after adjournment, fix a new record date for the adjourned meeting. Notice need
not be given to any stockholder who submits a written waiver of notice signed by
him before or after the time stated therein. Attendance of a stockholder at a
meeting of stockholders shall constitute a waiver of notice of such meeting,
except when the stockholder attends the meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
stockholders need be specified in any written waiver of notice.
- STOCKHOLDER LIST. The officer who has charge of the stock ledger of
the corporation shall prepare and make, at least ten days before every meeting
of stockholders, a complete list of the stockholders, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the meeting,
either at a place within the city or other municipality or community where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the corporation, or to vote at any meeting of
stockholders.
- CONDUCT OF MEETING. Meetings of the stockholders shall be presided
over by, in the order of seniority and if present and acting, the President or a
Vice-President, or, if none of the foregoing is in office and present and
acting, by a chairman to be chosen by the stockholders. The Secretary of the
corporation, or in his absence, an Assistant Secretary, shall act as secretary
of every meeting, but if neither the Secretary nor an Assistant Secretary is
present the Chairman of the meeting shall appoint a secretary of the meeting.
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<PAGE> 7
- PROXY REPRESENTATION. Every stockholder may authorize another person
or persons to act for him by proxy in all matters in which a stockholder is
entitled to participate, whether by waiving notice of any meeting, voting or
participating at a meeting, or expressing consent or dissent without a meeting.
Every proxy must be signed by the stockholder or by his attorney-in-fact. No
proxy shall be voted or acted upon after three years from its date unless such
proxy provides for a longer period. A duly executed proxy shall be irrevocable
if it states that it is irrevocable and, if, and only as long as, it is coupled
with an interest sufficient in law to support an irrevocable power. A proxy may
be made irrevocable regardless of whether the interest with which it is coupled
is an interest in the stock itself or an interest in the corporation generally.
- INSPECTORS. The directors, in advance of any meeting, may, but need
not, appoint one or more inspectors of election to act at the meeting or any
adjournment thereof. If an inspector or inspectors are not appointed, the person
presiding at the meeting may, but need not, appoint one or more inspectors. In
case any person who may be appointed as an inspector fails to appear or act, the
vacancy may be filled by appointment made by the directors in advance of the
meeting or at the meeting by the person presiding thereat. Each inspector, if
any, before entering upon the discharge of his duties, shall take and sign an
oath faithfully to execute the duties of inspectors at such meeting with strict
impartiality and according to the best of his ability. The inspectors, if any,
shall determine the number of shares of stock outstanding and the voting power
of each, the shares of stock represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive votes, ballots, or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots, or consents,
determine the result, and do such acts as are proper to conduct the election or
vote with fairness to all stockholders. On request of the person presiding at
the meeting, the inspector or inspectors, if any, shall make a report in writing
of any challenge, question or matter determined by him or them and execute a
certificate of any fact found by him or them.
- QUORUM. The holders of a majority of the outstanding shares of stock
shall constitute a quorum at a meeting of stockholders for the transaction of
any business. The stockholders present may adjourn the meeting despite the
absence of a quorum.
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- VOTING. Each share of stock shall entitle the holders thereof to the
number of votes indicated in the Certificate of Incorporation. Directors shall
be elected by a plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote on the election of
directors. Any other action shall be authorized by a majority of the votes cast
except where the General Corporation Law prescribes a different percentage of
votes and/or a different exercise of voting power, and except as may be
otherwise prescribed by the provisions of the certificate of incorporation and
these Bylaws. In the election of directors, and for any other action, voting
need not be by ballot.
8. STOCKHOLDER ACTION WITHOUT MEETING. Any action required by the
General Corporation Law to be taken at any annual or special meeting of
stockholders, or any action which may be taken at any annual or special meeting
of stockholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. Action taken pursuant to this paragraph shall be
subject to the provisions of Section 228 of the General Corporation Law.
ARTICLE II
DIRECTORS
1. FUNCTIONS AND DEFINITION. The business and affairs of the
corporation shall be managed by or under the direction of the Board of Directors
of the corporation. The Board of Directors shall have the authority to fix the
compensation of the members thereof. The use of the phrase "whole board" herein
refers to the total number of directors which the corporation would have if
there
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were no vacancies.
2. QUALIFICATIONS AND NUMBER. A director need not be a stockholder, a
citizen of the United States, or a resident of the State of Delaware. The
initial Board of Directors shall consist of five persons. Thereafter the number
of directors constituting the whole board shall be at least one. Subject to the
foregoing limitation and except for the first Board of Directors, such number
may be increased or decreased from time to time by action of the stockholders or
of the directors.
3. ELECTION AND TERM. The first Board of Directors, unless the members
thereof shall have been named in the certificate of incorporation, shall be
elected by the incorporator or incorporators and shall hold office until the
first annual meeting of stockholders and until their successors are elected and
qualified or until their earlier resignation or removal. Any director may resign
at any time upon written notice to the corporation. Thereafter, directors who
are elected at an annual meeting of stockholders, and directors who are elected
in the interim to fill vacancies and newly created directorships, shall hold
office until the next annual meeting of stockholders and until their successors
are elected and qualified or until their earlier resignation or removal. Except
as the General Corporation Law may otherwise require, in the interim between
annual meetings of stockholders or of special meetings of stockholders called
for the election of directors and/or for the removal of one or more directors
and for the filling of any vacancy in that connection, newly created
directorships and any vacancies resulting from the removal of directors for
cause or without cause, may be filled by the vote of a majority of the remaining
directors then in office, although less than a quorum, or by the sole remaining
director.
4. MEETINGS.
- TIME. Meetings shall be held at such time as the Board shall fix,
except that the first meeting of a newly elected Board shall be held as soon
after its election as the directors may conveniently assemble.
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- PLACE. Meetings shall be held at such place within or without the
State of Delaware as shall be fixed by the Board.
- CALL. No call shall be required for regular meetings for which the
time and place have been fixed. Special meetings may be called by or at the
direction of the President or of a majority of the directors in office.
- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required
for regular meetings for which the time and place have been fixed. Written,
oral, or any other mode of notice of the time and place shall be given for
special meetings in sufficient time for the convenient assembly of the directors
thereat. Notice need not be given to any director or to any member of a
committee of directors who submits a written waiver of notice signed by him
before or after the time stated therein. Attendance of any such person at a
meeting shall constitute a waiver of notice of such meeting, except when he
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the directors need be specified in any
written waiver of notice.
- QUORUM AND ACTION. A majority of the whole Board shall constitute a
quorum except when a vacancy or vacancies prevents such majority, whereupon a
majority of the directors in office shall constitute a quorum, provided, that
such majority shall constitute at least one-third of the whole Board. A majority
of the directors present, whether or not a quorum is present, may adjourn a
meeting to another time and place. Except as herein otherwise provided, and
except as otherwise provided by the General Corporation Law, the vote of the
majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board. The quorum and voting provisions herein stated
shall not be construed as conflicting with any provisions of the General
Corporation Law and these Bylaws which govern a meeting of directors held to
fill vacancies and newly created directorships in the Board or action of
disinterested directors.
Any member or members of the Board of Directors or of any committee
designated by the Board, may participate in a meeting of the Board, or any such
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committee, as the case may be, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other.
- CHAIRMAN OF THE MEETING. The Co-Chairpersons of the Board, if any and
if present and acting, shall preside at all meetings. Otherwise any other
director chosen by the Board shall preside.
5. REMOVAL OF DIRECTORS. Except as may otherwise be provided by the
General Corporation Law, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
6. COMMITTEES. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of any member of any such committee or
committees, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board, shall have and
may exercise the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation with the exception of
any authority the delegation of which is prohibited by Section 141 of the
General Corporation Law, and may authorize the seal of the corporation to be
affixed to all papers which may require it.
7. WRITTEN ACTION. Any action required or permitted to be taken at any
meeting of the Board of Directors or any committee thereof may be taken without
a meeting if all members of the Board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
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ARTICLE III
OFFICERS
The officers of the corporation shall consist of a President and a
Secretary and, if deemed necessary, expedient, or desirable by the Board of
Directors, one or more Chairpersons of the Board, a Vice-Chairperson of the
Board, one or more other Executive Vice Presidents, Senior Vice Presidents or
Vice-Presidents, one or more other Presidents of units or divisions of the
corporation's business, a Chief Financial Officer, a Treasurer, one or more
Assistant Secretaries, one or more Assistant Treasurers, and such other officers
with such titles as the resolution of the Board of Directors choosing them shall
designate. Except as may otherwise be provided in the resolution of the Board of
Directors choosing him, no officer other than the Chairperson(s) or
Vice-Chairperson of the Board, if any, need be a director. Any number of offices
may be held by the same person, as the directors may determine.
Unless otherwise provided in the resolution choosing him, each officer
shall be chosen for a term which shall continue until the meeting of the Board
of Directors following the next annual meeting of stockholders and until his
successor shall have been chosen and qualified.
All officers of the corporation shall have such authority and perform
such duties in the management and operation of the corporation as shall be
prescribed in the resolutions of the Board of Directors designating and choosing
such officers and prescribing their authority and duties, and shall have such
additional authority and duties as are incident to their office except to the
extent that such resolutions may be inconsistent therewith. The Secretary or an
Assistant Secretary of the corporation shall record all of the proceedings of
all meetings and actions in writing of stockholders, directors, and committees
of directors, and shall exercise such additional authority and perform such
additional duties as the Board shall assign to him. Any officer may be removed,
with or without cause, by the Board of Directors. Any vacancy in any office may
be filled by the Board of Directors.
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ARTICLE IV
CORPORATE SEAL
The corporate seal shall be in such form as the Board of Directors
shall prescribe.
ARTICLE V
FISCAL YEAR
The fiscal year of the corporation shall be fixed, and shall be subject
to change, by the Board of Directors.
ARTICLE VI
CONTROL OVER BYLAWS
Subject to the provisions of the certificate of incorporation and the
provisions of the General Corporation Law, the power to amend, alter, or repeal
these Bylaws and to adopt new Bylaws may be exercised by the Board of Directors
or by the stockholders.
ARTICLE VII
INDEMNIFICATION
The corporation shall have the power to indemnify its officers,
directors, employees and agents, and such other persons as may be designated by
the Board of Directors, to the full extent permitted under the laws of the State
of Delaware.
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I HEREBY CERTIFY that the foregoing is a full, true and correct copy of
the Bylaws of CMP MEDIA INC., a Delaware corporation, as in effect on the date
hereof.
DATED: May 28, 1996
/s/ ROBERT D. MARAFIOTI
--------------------------------
Assistant Secretary of
CMP MEDIA INC.
(SEAL)
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<PAGE> 1
DL&A EXHIBIT 10.1
EMPLOYMENT AGREEMENT
BY AND BETWEEN
CMP MEDIA INC. AND MICHAEL S. LEEDS
NOVEMBER, 27, 1996
<PAGE> 2
EMPLOYMENT AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I - EMPLOYMENT
SECTION 1.1 Services.......................................... 2
SECTION 1.2 Term.............................................. 2
SECTION 1.3 Representations and Warranties.................... 3
SECTION 1.4 Intellectual Property............................. 3
ARTICLE II - COMPENSATION
SECTION 2.1 Base Salary....................................... 4
SECTION 2.2 Incentive Bonus................................... 4
SECTION 2.3 Stock............................................. 4
SECTION 2.4 Fringe Benefits................................... 5
SECTION 2.5 Reimbursement of Expenses......................... 5
ARTICLE III - CONFIDENTIALITY; NON-COMPETITION
SECTION 3.1 Protection of Company's Business Interests........ 6
SECTION 3.2 Non-Disclosure and Non-Use of Confidential
Information..................................... 6
SECTION 3.3 Protection from Unfair Competition................ 7
SECTION 3.4 Prior Notice; Opportunity to Cure................. 10
SECTION 3.5 Other Post-Employment Covenants................... 11
SECTION 3.6 Confidentiality of Agreement...................... 13
SECTION 3.7 Relief for Breach................................. 14
SECTION 3.8 Separate Covenants................................ 15
ARTICLE IV - TERMINATION OF EMPLOYMENT
SECTION 4.1 Dismissal Without Cause or Resignation For
Good Reason..................................... 15
SECTION 4.2 Other Termination................................. 16
SECTION 4.3 Retirement........................................ 16
ARTICLE V - PROCEDURE TO BE FOLLOWED IN CASE OF RESIGNATION FOR
GOOD REASON OR DISMISSAL FOR CAUSE
SECTION 5.1 Resignation for Good Reason....................... 17
SECTION 5.2 Dismissal For Cause............................... 18
ARTICLE VI - RESOLUTION OF DISPUTES
SECTION 6.1 Arbitration....................................... 19
SECTION 6.2 Equitable Remedies................................ 19
ARTICLE VII - DEFINITIONS............................................... 19
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VIII - MISCELLANEOUS
SECTION 8.1 Entire Agreement; Binding Effect................. 23
SECTION 8.2 Amendment........................................ 23
SECTION 8.3 Applicable Law................................... 23
SECTION 8.4 Severability..................................... 23
SECTION 8.5 No Waiver........................................ 24
SECTION 8.6 Notices.......................................... 24
SECTION 8.7 Assignment....................................... 25
SECTION 8.8 Survival......................................... 25
SECTION 8.9 Headings......................................... 26
SECTION 8.10 Counterparts..................................... 26
</TABLE>
<PAGE> 4
EMPLOYMENT AGREEMENT
This Agreement, made and entered into as of the 27th day of November,
1996, by and between CMP Media Inc., a Delaware corporation (the "Company") and
Michael S. Leeds ("Michael").
W I T N E S S E T H :
WHEREAS, Michael is a key senior executive of the Company; and
WHEREAS, from his long employment with the Company, Michael possesses
substantial knowledge, experience and expertise in the businesses in which the
Company is engaged; and
WHEREAS, the parties desire to set forth the terms under which Michael's
employment with the Company will continue and upon which he will refrain from
competing against the Company after the termination of his employment;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each of the parties, the parties
hereto hereby covenant and agree as follows:
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ARTICLE I
EMPLOYMENT
SECTION 1.1. SERVICES.
The Company shall employ Michael, and Michael shall serve the Company, as
its President and chief executive officer or in such other position as may be
assigned to him from time to time, and he shall perform such services and duties
as are commensurate with such position or as may be from time to time specified
by the Company, consistent with the other terms of this Agreement. At all times
during his employment with the Company, Michael shall use his best efforts to
promote the interests of the Company and shall devote his full time and energies
to the business and affairs of the Company. Michael shall not, without his
consent, be obligated to perform duties that would require him to report
regularly to an office located more than fifty (50) miles from Manhasset, New
York; provided, however, that Michael shall undertake all such travel as may be
necessary or appropriate to the performance of his duties hereunder.
SECTION 1.2. TERM.
Michael's employment by the Company shall be deemed employment at will and
shall not be subject to a fixed term. Either Michael or the Company may
terminate his employment at any time and for any reason, with or without cause,
by delivering written notice to the other party. If Michael terminates his
employment by Voluntary Resignation, he shall give the Company not less than
ninety (90) days' prior written notice. In such event, the Company shall have
the right to waive all or part of such notice-period and accept Michael's
Voluntary Resignation effective as of any date prior to the expiration of such
90-day period.
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<PAGE> 6
SECTION 1.3. REPRESENTATIONS AND WARRANTIES.
(a) Michael represents and warrants to the Company that (i) he has full
legal right, power and authority to enter into this Agreement and to consummate
the transactions herein contemplated; (ii) this Agreement constitutes the valid
and binding obligation of Michael, enforceable in accordance with its terms,
except to the extent that such enforcement may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
by general principles of equity; and (iii) neither this Agreement nor the
consummation of the transactions herein contemplated will conflict with, violate
or infringe any legal restriction, contract or instrument to which Michael is
subject or by which he is bound.
(b) The Company represents and warrants to Michael that (i) it has full
legal right, power and authority to enter into this Agreement and to consummate
the transactions herein contemplated; (ii) the execution and delivery of this
Agreement has been duly authorized by all necessary corporate action; (iii) this
Agreement constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally and by general principles of equity; and
(iv) neither this Agreement nor the consummation of the transactions herein
contemplated will conflict with, violate or infringe any legal restriction,
contract or instrument to which the Company is subject or by which it is bound.
SECTION 1.4. INTELLECTUAL PROPERTY.
All ideas, designs, plans and materials developed by Michael during the
period of his employment with the Company which relate to any business of the
CMP Group shall be the exclusive property of the Company. Michael shall
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disclose all such ideas, designs, plans and materials to the Company and shall
not, without the Company's prior written consent, use them except for the
benefit of the Company. At the Company's request and cost, Michael shall take
all such actions and shall execute, acknowledge and deliver all such documents
as the Company may deem necessary or advisable in order to secure to the Company
the rights thereto by patent, copyright, trademark or otherwise.
ARTICLE II
COMPENSATION
SECTION 2.1. BASE SALARY.
As compensation for his services hereunder, the Company shall pay Michael
a base salary at a rate to be determined on an annual basis.
SECTION 2.2. INCENTIVE BONUS.
In addition to his base salary, Michael shall be entitled to participate
in an annual incentive bonus program based on the Company's achievement of its
financial goals and other objectives. The terms of such plan shall be as
determined by the Compensation Committee of the Board of Directors.
SECTION 2.3. STOCK.
In addition to his base salary and incentive bonus, Michael shall have the
right, pursuant to and subject to the provisions of the Share Purchase Agreement
and the Option Agreement, to purchase restricted shares and option shares of the
Company's Class A Common Stock.
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SECTION 2.4. FRINGE BENEFITS.
During his employment Michael shall be entitled to participate in all
employee benefit plans which now or hereafter may be in effect for the benefit
of employees of the Company generally and for which he may qualify, subject to
and in accordance with the provisions of such plans as in effect from time to
time.
SECTION 2.5. REIMBURSEMENT OF EXPENSES.
The Company shall reimburse Michael for all reasonable out-of-pocket
expenses actually incurred by him in the performance of his services hereunder
in accordance with the Company's standard travel and business
expense-reimbursement policy as in effect from time to time.
ARTICLE III
CONFIDENTIALITY; NON-COMPETITION
In consideration of the Company's agreement to make post-employment
payments to Michael under Article IV, which payments Michael acknowledges and
agrees will provide full and sufficient income to support himself and his
dependents during the period in which such payments are made, and as a specific
inducement to the Company to enter into this Agreement, the Stockholders'
Agreement and the Option Agreement, Michael hereby accepts and agrees to the
provisions of this Article III and acknowledges that such provisions are
necessary and appropriate for the reasonable protection of the Company's
property, investments, business relationships, economic advantages and goodwill.
SECTION 3.1. PROTECTION OF COMPANY'S BUSINESS INTERESTS.
As a key senior executive of the Company, Michael has been intimately
involved in the management of all aspects of the business of the Company and its
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Affiliates and has been a major strategist in planning and implementing its
business expansion. In the course of his long employment with the Company,
Michael has developed special skills, knowledge and abilities in the publishing
field which are of a uniquely personal nature. He has also acquired detailed
knowledge of the internal operations of the Company and its Affiliates and
highly confidential information concerning the national and international
business of the Company and its Affiliates. In addition, he has been afforded
the opportunity to develop special relationships of confidence and trust with
the customers, suppliers, consultants, employees, officers, directors and
stockholders of the Company and its Affiliates. Because of his continuing
responsibilities with the Company and its Affiliates, including his involvement
in strategic planning and the evaluation of proposed investments, it is expected
that Michael will continue to be entrusted with confidential information and
will continue to have the opportunity to develop such special relationships. The
parties acknowledge and agree that the Company would be unfairly and irreparably
damaged if Michael were to take any of such skills, knowledge, information or
relationships, which he has acquired and developed during the course of his
employment with the Company, and use them to the detriment of the Company and
its Affiliates.
SECTION 3.2. NON-DISCLOSURE AND NON-USE OF CONFIDENTIAL INFORMATION.
(a) Michael represents, warrants, covenants and agrees that, without the
Company's express or implied consent while employed or, after termination,
without the prior written consent of the Company's chief executive officer or
the Board of Directors, he will not willfully or knowingly at any time directly
or indirectly disclose, communicate or divulge, or use for the benefit of
himself or of any third party, any of the business or trade secrets or other
confidential information of the CMP Group including, solely by way of
illustration but not of limitation, their business strategies, business plans,
budgets, pricing, selling
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techniques, marketing techniques, operating systems, financial systems,
financial data, procedures, manuals, confidential reports, personnel records,
potential acquisitions, potential business expansions, credit and financial data
of their suppliers and of their present and prospective customers, data about
competitors, new product-development initiatives, custom research and new
product or service concepts and marketing strategy.
(b) Any and all materials of or concerning the CMP Group or their business
or affairs, including without limitation files, memoranda, notes,
correspondence, lists, records, video reproductions, computer tapes and disks,
design and other documents, and data storage and retrieval materials (and all
copies, compilations and summaries thereof), and any and all property of the CMP
Group, including without limitation equipment, software, keys, business cards
and credit cards, that are in Michael's custody or control shall be delivered to
the Company at the time Michael's employment with the Company terminates for any
reason. Michael shall not destroy any such materials or property, shall not
retain any copies thereof and shall certify in writing to the Company upon
request that all such materials and property have been delivered to the Company.
SECTION 3.3. PROTECTION FROM UNFAIR COMPETITION.
(a) For as long as Michael is employed by the CMP Group and through the
period ending on the earlier of (i) the third anniversary of the date of his
termination of employment (or, if the Company elects to pay him for an
additional period of time under Section 4.1(b), through the end of such
additional period) or (ii) the date Michael attains the age of sixty-five (65),
Michael shall not engage in competition with the CMP Group. For the purposes of
this Agreement, Michael shall be deemed to engage in competition with the CMP
Group if Michael does any of the following, whether or not in exchange for
consideration, without the
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Company's express or implied consent while employed or without the Company's
prior written consent after termination:
(A) On his own behalf or on behalf of any other person or entity,
(1) participates or is involved in or has direct responsibility for the
day-to-day management or operation of a Directly Competitive Business, an
Indirectly Competitive Business or any material function thereof (E.G.,
advertising, circulation, production and the like); (2) owns, in whole or in
part, beneficially or of record, directly or indirectly, an equity interest (or
an interest convertible into equity) in a Directly Competitive Business or a
Direct Competitor; (3) renders services as a director, officer, employee,
consultant, advisor, agent or independent sales representative to a Direct
Competitor; or (4) renders services as a director, officer, employee,
consultant, advisor, agent or independent sales representative to an Indirect
Competitor unless Michael has no responsibility for or participation or
involvement in any Indirectly Competitive Business of such Indirect Competitor,
provided, however, that Michael may have supervisory, advisory, consulting or
sales-representative responsibility over an Indirectly Competitive Business if
the revenue of all Indirectly Competitive Businesses of such Indirect Competitor
over which Michael has such responsibility represents no more than fifteen
percent (15%) of the total revenue over which Michael has such responsibility.
(B) Solicits the service of any employee of the CMP Group for
Michael's own benefit or for the benefit of any person or entity other than the
CMP Group, or induces or helps to induce any such employee to leave employment
with the CMP Group.
(C) Assists, induces or helps any employee or former employee of the
CMP Group or any other person or entity to engage in competition with the CMP
Group or any of its business activities, provided that the giving of a favorable
reference by Michael on behalf of such former employee shall not be prohibited
by this clause (C).
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(D) Employs or causes any person or entity other than the CMP Group
to employ any former employee of the CMP Group within one (1) year after the
resignation of such former employee from the CMP Group.
(E) Willfully induces or attempts to induce any customer, supplier
or contractor of the Company to terminate any agreement or arrangement with the
Company, or willfully induces or attempts to induce any customer, supplier or
contractor, or any potential customer, supplier or contractor, of the Company
not to enter into any agreement or arrangement with the Company.
(F) Communicates publicly (other than pursuant to subpoena in a
legal proceeding) or to the press, or writes or produces for publication in any
medium, on the subject of, or with express or implied reference to, the CMP
Group or any of their former, current or future stockholders, directors,
officers or employees in their capacities as such. For the purpose hereof,
"implied reference" shall mean a reference that does not expressly name the CMP
Group or any of their former, current or future stockholders, directors,
officers or employees but that nevertheless would be understood by the average
reader or audience-member to refer thereto. It shall not be deemed a violation
of this clause (F) if, after the termination of his employment with the Company,
Michael responds to inquiries from the public or the press solely by stating, in
form or substance, "I do not discuss any matters relating to CMP; please address
your inquiries directly to the company" or Michael communicates the fact that he
was formerly employed by the Company and identifies the positions he held and
the dates thereof.
(b) Notwithstanding the provisions of paragraph (a) of this Section 3.3,
Michael shall not be deemed to be engaged in competition with the CMP Group
solely by reason of Michael's ownership of (i) an equity interest of less than
one-half of one percent (0.5%) in the securities of a Direct Competitor or
Indirect Competitor listed for trading on a national securities exchange or
quoted in the National Market List of NASDAQ or (ii) an interest in a mutual or
other
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investment fund which owns an interest in a Direct Competitor or Indirect
Competitor, provided that Michael has no influence or control over the selection
of such fund's investment decisions.
SECTION 3.4. PRIOR NOTICE; OPPORTUNITY TO CURE.
(a) Michael shall give the Company written notice at least twenty (20)
Business Days before entering into any relationship, transaction or business, or
engaging in any activity, or taking or omitting to take any action, which might
reasonably be deemed a breach of any provision of Section 3.2 or Section 3.3,
such notice to include full and complete particulars as to the proposed
relationship, transaction, activity, action or omission, the services or duties
contemplated and such other facts and circumstances as are reasonably necessary
for the Company to make an informed decision. The Company shall advise Michael
in writing, within ten (10) Business Days after such notice is given, of the
Board of Directors' determination as to whether such relationship, transaction,
business, activity, action or omission would materially breach any of the
provisions of Section 3.2 or Section 3.3. In the event that, for reasons not
within his control, Michael gives the Company less than twenty (20) Business
Days' prior written notice, the Company will endeavor in good faith to advise
Michael of the Board of Directors' determination in less than ten (10) Business
Days after such notice is given, provided that the Company's failure to advise
Michael in less than ten (10) Business Days shall not be deemed to constitute
consent to such relationship, transaction, business, activity, action or
omission and shall not give rise to any liability of the Company to Michael or
to any third party.
(b) Once the Company has advised Michael in writing that the Board of
Directors has determined that a proposed relationship, transaction, business,
activity, action or omission would not materially breach any of the provisions
of Section 3.2 or Section 3.3, and Michael has thereupon entered into such
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relationship, transaction or business or has begun to engage in such activity or
to take or omit to take such action, the Board of Directors shall have no right
to reverse or otherwise modify its determination; provided, however, that if the
nature, scope or terms of such relationship, transaction, business, activity,
action or omission are to be modified after such determination is made, then in
accordance with paragraph (a) hereof Michael shall give the Company prior
written notice of such modification and the Company shall advise him as to
whether such relationship, transaction, business, activity, action or omission,
as so modified, would materially breach any of the provisions of Section 3.2 or
Section 3.3.
(c) In the event that, without having given the Company prior notice
pursuant to paragraphs (a) or (b) hereof, Michael enters into any relationship,
transaction or business or begins to engage in any activity or to take or omit
to take any action, or there is a modification of the nature, scope or terms of
such relationship, transaction, business, activity, action or omission that the
Board of Directors determines is a material breach of any of the provisions of
Section 3.2 or Section 3.3, the Company shall give Michael written notice of
such determination and, if such breach is continuing, an opportunity to cure
such breach before the Company seeks remedy or relief by judicial process or
arbitration. The opportunity to cure shall be sixty (60) days to the extent such
continuing breach consists of holding an ownership interest in a competitive
business and fifteen (15) days with respect to any other continuing breach.
SECTION 3.5. OTHER POST-EMPLOYMENT COVENANTS.
(a) During the period in which the Company is making payments to Michael
pursuant to Article IV, Michael shall not willfully take any action materially
adverse to the interests of the Company, even if such action is in technical
compliance with the other provisions of this Article III, but shall at all
11
<PAGE> 15
times conduct himself in the same manner and with the same degree of loyalty to
the Company as if he were still an employee of the Company.
(b) During the period in which the Company is making payments to Michael
pursuant to Article IV, Michael shall make himself available to the Company for
consultation and advice at such times as it may reasonably request and as do not
unreasonably interfere with Michael's other permitted business activities or
commitments. Michael shall not be required to be physically present at any
office of the Company or to allocate regular time to making himself available
for such consultation or advice, provided that he shall respond timely to any
requests by the Company for consultation. Michael shall maintain, at his own
expense, an office at his home with all furniture and equipment necessary to
carry out his obligations under this Section 3.5(b). The Company shall reimburse
Michael for all reasonable out-of-pocket expenses he incurs in rendering such
consultation or advice (other than expenses of maintaining his home office).
(c) Both during the period in which the Company is making payments to
Michael pursuant to Article IV and thereafter, Michael shall, if requested by
the Company, provide information, testimony and assistance in connection with
the prosecution or defense of any claims by or against the Company arising out
of matters of which he acquired knowledge while an employee of the Company. The
Company shall reimburse Michael for all reasonable out-of-pocket expenses he
incurs in rendering such assistance.
(d) Both during the period in which the Company is making payments to
Michael pursuant to Article IV and thereafter, Michael shall not willfully make
any oral or written statement which reflects adversely upon the character,
honesty, credit, efficiency or business practices of the CMP Group or its
former, current or future stockholders, directors, officers or employees in
their capacities as such.
12
<PAGE> 16
SECTION 3.6. CONFIDENTIALITY OF AGREEMENT.
The terms and conditions of this Agreement shall be kept confidential by
the parties, and neither of the parties shall disclose them to any non-party
unless such disclosure is necessitated by (a) legal and/or financial
requirements of the Company, in which case the form of such disclosure shall
first be mutually agreed upon by the Company and Michael, or (b) any arbitration
or other legal proceeding contesting or seeking to enforce any provision or
interpretation of this Agreement (including any deposition or testimony that
either party provides in connection therewith), regardless of whether such
proceeding is initiated by Michael or the Company. Except as provided in the
preceding sentence, and without limiting the generality of the foregoing,
Michael shall not respond to or in any way participate in or contribute to any
public discussion, notice or other publicity concerning or in any way relating
to execution of this Agreement or the events (including any negotiations) which
led to its execution, and Michael specifically agrees that he shall not disclose
information regarding this Agreement to any current or former employees of the
Company other than those expressly authorized by the Company to have knowledge
hereof. Without limiting the comprehensive confidentiality agreed to, Michael
may disclose this Agreement to his attorneys, financial advisors and members of
his and his spouse's immediate families, provided he informs them of this
confidentiality provision and they agree to abide by it. Michael hereby agrees
that any disclosure by him of any of the terms and conditions of this Agreement
in violation of the foregoing shall constitute and be treated as a material
breach of this Agreement and Michael shall be responsible for damages occasioned
thereby, including but not limited to reasonable attorneys' fees incurred by the
Company to enforce this Section 3.6.
13
<PAGE> 17
SECTION 3.7. RELIEF FOR BREACH.
(a) Michael acknowledges and agrees that any breach or anticipatory breach
by him of any of the provisions of this Article III would cause the Company
irreparable injury not compensable by monetary damages alone and that,
accordingly, in any such event, the Company shall be entitled to injunctions,
both preliminary and permanent, enjoining or restraining such breach or
anticipatory breach (and Michael hereby consents to the issuance thereof without
bond by any court of competent jurisdiction), in addition to monetary damages in
such amount as the evidence may show and such other remedies as may be available
at law or in equity.
(b) Michael shall not have the power or right to avoid any of his
obligations under this Article III by refusing or failing to accept from the
Company payment of any amounts duly tendered to him by the Company pursuant to
Article IV. It shall not be a valid defense, and Michael shall not raise as a
defense, in any proceeding by the Company to enforce its rights under this
Article III that Michael shall have refused or failed to accept any such
payments, and no way impaired or affected by Michael's refusal or failure to
accept any such payments from the Company.
SECTION 3.8. SEPARATE COVENANTS.
Michael understands and agrees that the covenants contained in this
Article III constitute a series of separate covenants, one for each applicable
state in the United States and the District of Columbia, and one for each
applicable foreign country. If in any judicial proceeding a court shall hold
unenforceable any of the separate covenants included in this Article III, such
unenforceable covenant or covenants shall be deemed limited as necessary or
eliminated from the provisions of this Article III for the purpose of such
proceeding to the extent necessary to
14
<PAGE> 18
permit the remaining separate covenants of this Article III to be enforced in
such proceeding, and to permit such unenforceable covenant or covenants to be
enforced as limited.
ARTICLE IV
TERMINATION OF EMPLOYMENT
SECTION 4.1. DISMISSAL WITHOUT CAUSE OR RESIGNATION FOR GOOD REASON.
(a) In the event that Michael's employment with the Company terminates by
reason of his Dismissal Without Cause or his Resignation For Good Reason, the
Company shall, in consideration of Michael's compliance with the restrictive
covenants set forth in Article III and in lieu of any other severance
obligations to Michael, pay him through the period ending on the earlier of (i)
the third anniversary of the date of his termination of employment or (ii) the
date Michael attains the age of sixty-five (65), an annual amount equal to the
average of (A) his total annual income projected to be paid by the Company for
the calendar year in which such termination of employment occurs and (B) his
total annual income actually paid by, or due from, the Company for the
immediately preceding calendar year, less fifty percent (50%) of (1) any current
cash compensation, and (2) the present value of any deferred cash compensation,
that he earns from other sources as an employee, consultant, partner or
proprietor for each such year in which payments from the Company hereunder are
due. Payments shall be made in bi-weekly installments or on such other periodic
basis as the Company then makes salary payments to its employees generally.
(b) In addition, the Company shall have the right, but not the obligation,
to require Michael's continued compliance with the restrictive covenants set
forth in Article III for up to two (2) years after the expiration of the period
for which the
15
<PAGE> 19
Company is obligated to pay Michael under paragraph (a) of this Section 4.1, in
consideration of which the Company shall continue to pay Michael, during the
period of time elected by the Company, on the same basis and in the same manner
as set forth in paragraph (a) of this Section 4.1.
SECTION 4.2. OTHER TERMINATION.
In the event that Michael's employment with the Company terminates for any
reason other than Dismissal Without Cause or Resignation For Good Reason, no
compensation or other rights shall accrue to Michael or his estate under this
Agreement after the date of termination, other than benefits which shall accrue
after such date pursuant to the terms of Company benefit plans in which Michael
participated on the date of termination, which benefits shall be paid in
accordance with the terms of such plans. Michael or his estate shall be entitled
to receive from the Company any compensation that was earned but unpaid as of
the date of termination of his employment.
SECTION 4.3. RETIREMENT.
In the event that Michael's employment with the Company terminates by
reason of his retirement at or after the date he attains the age of sixty-five
(65), the Company shall have the right, but not the obligation, to require
Michael's continued compliance with the restrictive covenants set forth in
Article III for up to two (2) additional years, in consideration of which the
Company shall continue to pay Michael, during the period of time elected by the
Company, on the same basis and in the same manner as set forth in Section 4.1.
16
<PAGE> 20
ARTICLE V
PROCEDURE TO BE FOLLOWED IN CASE OF
RESIGNATION FOR GOOD REASON OR DISMISSAL FOR CAUSE
SECTION 5.1. RESIGNATION FOR GOOD REASON.
In the event Michael terminates his employment with the Company as a
Resignation For Good Reason, Michael shall give the Company at least ten (10)
Business Days' prior written notice specifying in reasonable detail the specific
conduct of the Company that he considers grounds for Resignation For Good Reason
and the specific provision of the definition of "Resignation For Good Reason"
upon which he relies. Michael's employment with the Company shall terminate as
of the tenth Business Day after such notice is given, or such other date as the
parties mutually agree. Should the Company dispute the basis for such
resignation in a written notice given to Michael on or before his termination
date, the parties shall meet and endeavor to resolve the dispute amicably within
the twenty (20) Business Days after the Company's notice is given. If they
cannot so resolve the dispute within such twenty (20) Business Days after the
Company's notice is given, Michael and the Company shall submit the dispute to
binding arbitration in accordance with Section 6.1. The decision rendered in
such arbitration shall be final and binding on both Michael and the Company for
all purposes. If the arbitrators determine that Michael did not have a proper
basis on which to terminate his employment as Resignation For Good Reason within
the meaning of this Agreement, the termination of Michael's employment shall be
treated for all purposes of this Agreement as a Voluntary Resignation. In
addition to any other rights which a party may have, the party prevailing in
such arbitration proceeding shall be entitled to recover from the losing party
any and all of the expenses incurred by the prevailing party in such proceeding,
including reasonable attorney's fees.
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<PAGE> 21
SECTION 5.2. DISMISSAL FOR CAUSE.
In the event the Company terminates Michael's employment as a Dismissal
For Cause, the Company shall give Michael at least ten (10) Business Days' prior
written notice specifying in reasonable detail the specific conduct of Michael
that it considers grounds for Dismissal For Cause and the specific provision of
the definition of "Dismissal For Cause" upon which it relies. Michael's
employment with the Company shall terminate as of the tenth Business Day after
such notice is given, or such other date as the parties mutually agree. Should
Michael dispute the basis for such termination in a written notice given to the
Company on or before his termination date, the parties shall meet and endeavor
to resolve the dispute amicably within twenty (20) Business Days after Michael's
notice is given. If they cannot so resolve the dispute within such twenty (20)
Business Days after Michael's notice is given, Michael and the Company shall
submit the dispute to binding arbitration in accordance with Section 6.1. The
decision rendered in such arbitration shall be final and binding on both Michael
and the Company for all purposes. If the arbitrators determine that the Company
did not have a proper basis on which to terminate Michael's employment as a
Dismissal For Cause within the meaning of this Agreement, the termination of
Michael's employment shall be treated for all purposes of this Agreement as a
Dismissal Without Cause. In addition to any other rights which a party may have,
the party prevailing in such arbitration proceeding shall be entitled to recover
from the losing party any and all of the expenses incurred by the prevailing
party in such proceeding, including reasonable attorney's fees.
18
<PAGE> 22
ARTICLE VI
RESOLUTION OF DISPUTES
SECTION 6.1. ARBITRATION.
Except as provided in Section 6.2, all controversies arising out of or
relating to this Agreement or the breach hereof shall be settled by arbitration
in the County of Nassau, State of New York, in accordance with the rules of the
American Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. Any
arbitration hereunder shall be before three (3) arbitrators.
SECTION 6.2. EQUITABLE REMEDIES.
Notwithstanding the provisions of Section 6.1, any proceeding for
injunctive relief or specific performance in connection with this Agreement
shall be commenced in Supreme Court of the State of New York, County of Nassau,
and each of the parties hereby accepts the exclusive jurisdiction of such Court
for such purpose; provided, however, that the petitioner may commence such
proceeding in such other court as may be necessary, in the petitioner's
judgment, in order to more effectively or expeditiously obtain personal
jurisdiction over the respondent.
ARTICLE VII
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
"Affiliates" shall mean all entities controlling, controlled by or under
common control with the Company.
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<PAGE> 23
"Board Of Directors" shall mean the Board of Directors of the Company.
"Business Day" shall mean any day on which the Company is scheduled to be
open for business.
"Change In Control" shall mean a direct or indirect transfer of fifty
percent (50%) or more of the voting control of the Company or the sale of
substantially all of the assets of the Company, in one or more transactions, to
(a) one or more persons who are not (i) members of the Leeds Family or (ii)
spouses, children or grandchildren of members of the Leeds Family and/or (b) one
or more entities which are not controlled by (i) one or more members of the
Leeds Family or (ii) one or more of the spouses, children or grandchildren of
members of the Leeds Family.
"CMP Business" shall mean any publication, product, service or business
(a) which the CMP Group publishes, produces, provides or engages in or (b) which
the CMP Group has a bona fide plan or intention to publish, produce, provide or
engage in within the succeeding 12-month period, the research and development of
which the CMP Group has devoted substantive time and attention to, and which
plan or intention Michael has actual knowledge of before he engages in any
activity competitive with such CMP Business as contemplated by clause (A) of
Section 3.3(a).
"CMP Group" shall mean the Company or any of its Affiliates.
"Direct Competitor" shall mean a business enterprise that produces or
operates, or owns directly or indirectly an interest of twenty percent (20%) or
more in, one or more Directly Competitive Businesses.
"Directly Competitive Business" shall mean any competitive publication,
product, service or business (a) the target audience of which is substantially
the same as the target audience of a CMP Business or (b) forty percent (40%) or
more of the annual revenue of which is derived from substantially the same
customers as a CMP Business derives twenty percent (20%) or more of its annual
revenue.
20
<PAGE> 24
"Dismissal For Cause" shall mean the termination of Michael's employment
with the Company by the Board of Directors for (i) the willful and continued
failure of Michael substantially to perform his duties as an officer and
employee of the Company or comply with the written policies of the Company after
the Company has delivered to Michael a written demand for substantial
performance or compliance that specifies such failure in reasonable detail; (ii)
illegal conduct or gross misconduct by Michael, in either case that is willful
and results (or is reasonably likely to result) in material damage to the
business or reputation of the Company; or (iii) the resignation by Michael from
his employment following his act or omission which would constitute grounds for
Dismissal For Cause hereunder. No act or failure to act on the part of Michael
(other than non-compliance with lawful instructions given to Michael by the
Company) shall be considered "willful" unless it is done or omitted to be done
by him in bad faith or without reasonable belief that his action or omission was
in the best interests of the Company. Any act or failure to act that is pursuant
to resolution duly adopted by the Board of Directors shall be conclusively
presumed to be done or omitted to be done by Michael in good faith and in the
best interests of the Company.
"Dismissal Without Cause" shall mean the termination of Michael's
employment by the Company on any grounds other than grounds for Dismissal For
Cause or as a result of his Permanent Disability.
"Indirect Competitor" shall mean a business enterprise that does not
produce or operate, or own directly or indirectly an interest in, any Directly
Competitive Businesses but produces or operates, or owns directly or indirectly
an interest of twenty percent (20%) or more in, one or more Indirectly
Competitive Businesses.
"Indirectly Competitive Business" shall mean any competitive or
potentially competitive publication, product, service or business which derives
from twenty percent (20%) to but not including forty percent (40%) of its annual
21
<PAGE> 25
revenue from substantially the same customers as a CMP Business derives twenty
percent (20%) or more of its annual revenue.
"Leeds Family" shall mean Gerard G. Leeds, Liselotte J. Leeds, Michael S.
Leeds, Richard A. Leeds, Daniel H. Leeds, Greg Jobin-Leeds and Jennifer
Leeds-Lukehart.
"Option Agreement" shall mean that certain Option Agreement entered into
as of the date hereof by and between the Company and Michael.
"Permanent Disability" shall mean a physical or mental impairment, as a
result of which Michael shall have been unable, with or without reasonable
accommodation, to perform the essential functions of his employment position for
a period of at least sixteen (16) weeks during any 12-month period.
"Resignation For Good Reason" shall mean Michael's resignation from his
employment with the Company (a) after the Company has, without his consent (i)
materially reduced his package of compensation and benefits, (ii) materially
diminished his position, authority, duties or responsibilities, or (iii)
required him to report regularly to an office located more than fifty (50) miles
from Manhasset, New York or (b) within three (3) years after a Change In Control
occurs. Any reduction in Michael's compensation package made pursuant to the
written compensation plan between Michael and the Company dated as of the date
hereof shall not be deemed grounds for Resignation For Good Reason.
"Share Purchase Agreement" shall mean that certain Share Purchase
Agreement entered into as of the date hereof by and among Gerard G. Leeds,
Liselotte J. Leeds and Michael.
"Voluntary Resignation" shall mean Michael's resignation from his
employment with the Company on any grounds other than grounds for Resignation
For Good Reason or as a result of his Permanent Disability.
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<PAGE> 26
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. ENTIRE AGREEMENT; BINDING EFFECT.
This Agreement contains all of the terms agreed upon by the parties with
respect to the subject matter hereof and replaces and supersedes any and all
prior agreements, written or oral, between the parties relating to the terms of
Michael's employment with the Company. No promises, agreements or
representations with respect to the matters herein contained shall be binding
upon any of the parties unless set forth herein. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective heirs,
representatives, successors and permitted assigns.
SECTION 8.2. AMENDMENT.
No provision of this Agreement may be amended or waived except by a
writing making reference to this Agreement and signed by the party against whom
the enforcement of such amendment or waiver is sought.
SECTION 8.3. APPLICABLE LAW.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York, without reference to its
principles regarding choice or conflicts of law.
SECTION 8.4 SEVERABILITY.
Wherever possible, each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provisions hereof shall be prohibited by or invalid under any such law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
23
<PAGE> 27
without invalidating or nullifying the remainder of such provision or any other
provision of this Agreement.
SECTION 8.5. NO WAIVER.
No delay or omission by any party in exercising or enforcing any right
hereunder shall operate as a waiver of such right, and a waiver on one occasion
shall not be construed as a waiver of any right or remedy on any future
occasion.
SECTION 8.6. NOTICES.
All notices, requests, consents, designations and demands required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given (a) when personally delivered to an individual
party or to an authorized officer of a corporate party, whether by messenger,
courier or other person, (b) on the second Business Day after the date it is
sent by certified or registered mail, return receipt requested, or (c) on the
next Business Day after the date it is sent via telefacsimile (provided it is
actually received and is not materially illegible), as follows:
If to the Company:
CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Attention: President
Fax: (516) 562-5718
with a copy to:
CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Attention: General Counsel
Fax: (516) 562-7123
24
<PAGE> 28
If to Michael:
Michael S. Leeds
c/o CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Fax: (516) 562-7123
with a copy to Michael at his last known address as reflected on the records of
the Company or to such other mail or facsimile address as the recipient party
shall have last designated by notice given to the other in accordance herewith.
SECTION 8.7. ASSIGNMENT.
This Agreement is a contract for personal services and, without the
Company's prior written consent, Michael may not assign, delegate or transfer
any of his rights or obligations hereunder. The Company may not, without
Michael's prior written consent, assign any of its rights or delegate any of its
obligations or liabilities under this Agreement to any person or entity other
than an entity that controls, is controlled by or is under common control with
the Company; provided, however, that no such assignment or delegation shall
relieve the Company from its obligations or liabilities hereunder.
SECTION 8.8. SURVIVAL
This Agreement shall survive any merger, sale or other disposition of the
Company and shall survive the termination of Michael's employment with the
Company.
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<PAGE> 29
SECTION 8.9. HEADINGS.
The headings herein are for convenience of reference only and shall not be
considered in construing this Agreement.
Section 8.10. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed as an original and all of which shall together constitute
one and the same instrument.
IN WITNESS WHEREOF, Michael has executed this Agreement and the Company
has caused this Agreement to be executed by an officer thereunto duly authorized
on the day and year first above written.
CMP MEDIA INC.
By /s/ LILO J. LEEDS
--------------------------------
Name: Lilo J. Leeds
Title:
Attest:
/s/ ROBERT D. MARAFIOTI
----------------------------------------------
(CORPORATE SEAL)
/s/ MICHAEL S. LEEDS
- ------------------------------
MICHAEL S. LEEDS
26
<PAGE> 1
EXHIBIT 10.2
SHARE PURCHASE AGREEMENT
BY AND AMONG
GERARD G. LEEDS AND LISELOTTE J. LEEDS
AND
MICHAEL S. LEEDS
DL&A
NOVEMBER 27, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I - SALE AND PURCHASE
SECTION 1.1 Transfer of Shares................................. 2
SECTION 1.2 Purchase Price and Payment......................... 2
ARTICLE II - REPRESENTATIONS AND WARRANTIES
SECTION 2.1 Representations of Gerry and Lilo.................. 3
SECTION 2.2 Representations of Michael......................... 4
ARTICLE III - CONFIDENTIALITY............................................. 4
ARTICLE IV - RESOLUTION OF DISPUTES
SECTION 4.1 Arbitration........................................ 5
SECTION 4.2 Equitable Remedies................................. 6
ARTICLE V - DEFINITIONS................................................... 6
ARTICLE IV - MISCELLANEOUS
SECTION 6.1 Further Assurances................................. 7
SECTION 6.2 Entire Agreement; Binding Effect................... 7
SECTION 6.3 Amendment.......................................... 8
SECTION 6.4 Applicable Law..................................... 8
SECTION 6.5 Severability....................................... 8
SECTION 6.6 No Waiver.......................................... 9
SECTION 6.7 Notices............................................ 9
SECTION 6.8 Assignment......................................... 10
SECTION 6.9 Gender and Number.................................. 10
SECTION 6.10 Headings.......................................... 10
SECTION 6.11 Counterparts...................................... 11
</TABLE>
<PAGE> 3
SHARE PURCHASE AGREEMENT
This Share Purchase Agreement, made and entered into on this 27th day of
November 1996, by and among Gerard G. Leeds ("Gerry ), Liselotte J. Leeds
("Lilo") (Gerry and Lilo sometimes collectively the "Selling Stockholders"), and
Michael S. Leeds ("Michael").
W I T N E S S E T H:
WHEREAS, Michael is a key senior executive of CMP Media Inc., a Delaware
corporation (the "Company");
WHEREAS, Gerry and Lilo desire to create substantial incentives for
Michael to (i) cause the Company to grow continuously and successfully in sales,
profits and profitability, (ii) take a long-term view of the Company's future,
(iii) help the Company attain its long-term goals, including its diversity goals
as set forth in its corporate Principles, and (iv) remain with the Company for
the long term; and
WHEREAS, to create such incentives, Gerry and Lilo desire to provide
Michael with the opportunity to purchase shares of the Company's Class A Common
Stock from them, provided that Michael simultaneously enters into a
Stockholders' Agreement with the Company, Gerry and Lilo, which provides for
certain restrictions on Michael's right to sell such shares and to compete with
the Company; and
WHEREAS, Michael desires to have the opportunity to purchase such shares
of Class A Common Stock from Gerry and Lilo and, as an inducement to Gerry and
Lilo to sell him such shares of the Company's Class A Common Stock
<PAGE> 4
and as a condition to the closing of such sale, Michael desires to enter
simultaneously therewith into such Stockholders' Agreement;
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements herein contained and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by each of the parties, the parties hereto hereby represent,
warrant, covenant and agree, as follows:
ARTICLE I
SALE AND PURCHASE
SECTION 1.1. TRANSFER OF SHARES.
Subject to the terms and conditions of this Agreement, each of Gerry and
Lilo hereby sells to Michael, and Michael hereby purchases from each of Gerry
and Lilo, seven hundred ninety-two (792) shares of Class A Stock (which number
of shares equals approximately one and one-half percent (1.5%) of the number of
shares of the Company's Common Stock issued and outstanding as of the date
hereof), or an aggregate of one thousand five hundred eighty-four (1,584) shares
of Class A Stock (which number of shares equals approximately three percent (3%)
of the number of shares of the Company's Common Stock issued and outstanding as
of the date hereof).
SECTION 1.2. PURCHASE PRICE AND PAYMENT.
The purchase price for such shares of Class A Stock (the "Shares ) shall
be Three Hundred Seventy-Five Dollars ($375.00) per Share. Subject to the terms
and conditions of this Agreement, Michael shall pay to each of Gerry and Lilo,
as
2
<PAGE> 5
the full purchase price for the Shares purchased by Michael from such Selling
Stockholder hereunder, the sum of two hundred ninety-seven thousand dollars
($297,000), or an aggregate purchase price of five hundred ninety-four thousand
dollars ($594,000). Payment shall be made simultaneously herewith in cash or by
check, bank draft or wire transfer, in exchange for which each of Gerry and Lilo
shall cause to be delivered to Michael stock certificates representing the
Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.1. REPRESENTATIONS OF GERRY AND LILO.
Each of the Selling Stockholders hereby represents and warrants to Michael
that (a) such Selling Stockholder has full legal right, power and authority to
enter into this Agreement and to consummate the transactions herein
contemplated; (b) this Agreement constitutes the valid and binding obligation of
such Selling Stockholder, enforceable in accordance with its terms, except to
the extent that such enforcement may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally and by general
principles of equity; (c) neither this Agreement nor the consummation of the
transactions herein contemplated will conflict with, violate or infringe any
legal restriction, contract or instrument to which such Selling Stockholder is
subject, other than the restrictions set forth in the Shareholders' Agreement
and in the Credit Agreement and the Negative Pledge Agreement, all the
applicable provisions of which have been waived and/or satisfied to permit the
sale and purchase contemplated by this Agreement; (d) such Selling Stockholder
is the legal and beneficial owner of the Shares to be transferred by such
Selling Stockholder hereunder and has not previously sold, assigned or
transferred such Shares, or created or suffered to exist
3
<PAGE> 6
any security interest therein or lien or encumbrance thereon; (e) such Selling
Stockholder has full power to convey to Michael good title to the Shares to be
so transferred hereunder, free and clear of any liens, charges, encumbrances,
options, pledges or claims of any nature whatsoever; and (f) the sale of such
Shares to Michael will, absent any incapacities occurring through an action or
omission of Michael, transfer to Michael good, legal and valid right, title and
interest in and to such Shares.
SECTION 2.2. REPRESENTATIONS OF MICHAEL.
Michael hereby represents and warrants to each of Gerry and Lilo that (a)
he has full legal right, power and authority to enter into this Agreement and to
consummate the transactions herein contemplated; (b) this Agreement constitutes
the valid and binding obligation of Michael, enforceable in accordance with its
terms, except to the extent that such enforcement may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
by general principles of equity; and (c) neither this Agreement nor the
consummation of the transactions herein contemplated will conflict with, violate
or infringe any legal restriction, contract or instrument to which Michael is
subject or by which he is bound.
ARTICLE III
CONFIDENTIALITY
The terms and conditions of this Agreement shall be kept confidential by
the parties, and none of the parties shall disclose them to any non-party unless
such disclosure is necessitated by (a) legal and/or financial requirements of
any of the parties or the Company, in which case the form of such disclosure
shall first be
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mutually agreed upon by Gerry, Lilo, the Company and Michael, or (b) any
arbitration or other legal proceeding contesting or seeking to enforce any
provision or interpretation of this Agreement (including any deposition or
testimony that either party provides in connection therewith), regardless of
whether such proceeding is initiated by Michael, Gerry or Lilo. Except as
provided in the preceding sentence, and without limiting the generality of the
foregoing, Michael shall not respond to or in any way participate in or
contribute to any public discussion, notice or other publicity concerning or in
any way relating to execution of this Agreement or the events (including any
negotiations) which led to its execution, and Michael specifically agrees that
he shall not disclose information regarding this Agreement to any current or
former employees of the Company other than those expressly authorized by the
Company to have knowledge hereof. Without limiting the comprehensive
confidentiality agreed to, Michael may disclose this Agreement to his attorneys,
financial advisors and members of his and his spouse's immediate families,
provided he informs them of this confidentiality provision and they agree to
abide by it. Michael hereby agrees that any disclosure by him of any of the
terms and conditions of this Agreement in violation of the foregoing shall
constitute and be treated as a material breach of this Agreement and Michael
shall be responsible for damages occasioned thereby, including but not limited
to reasonable attorneys' fees incurred by the Company to enforce this Article
III.
ARTICLE IV
RESOLUTION OF DISPUTES
SECTION 4.1. ARBITRATION.
Except as provided in Section 4.2, all controversies arising out of or
relating to this Agreement or the breach hereof shall be settled by arbitration
in the County
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of Nassau, State of New York, in accordance with the rules of the American
Arbitration Association, and judgment upon the award rendered by the arbitrators
may be entered in any court having jurisdiction thereof. Any arbitration
hereunder shall be before three (3) arbitrators.
SECTION 4.2. EQUITABLE REMEDIES.
Notwithstanding the provisions of Section 4.1, any proceeding for
injunctive relief or specific performance in connection with this Agreement
shall be commenced in Supreme Court of the State of New York, County of Nassau,
and each of the parties hereby accepts the exclusive jurisdiction of such Court
for such purpose; provided, however, that the petitioner may commence such
proceeding in such other court as may be necessary, in the petitioner's
judgment, in order to more effectively or expeditiously obtain personal
jurisdiction over the respondent.
ARTICLE V
DEFINITIONS
"Credit Agreement" shall mean that certain Credit Agreement originally
dated as of July 15, 1993 by and among the Company (fka CMP Publications, Inc.),
Fleet National Bank (fka Shawmut Bank Connecticut, National Association) and The
Chase Manhattan Bank (fka The Chase Manhattan Bank, National Association), as
most recently amended on November 14, 1996.
"Negative Pledge Agreement" shall mean that certain Negative Pledge
Agreement originally dated as of July 15, 1993 by and among Gerry, Lilo and
Fleet National Bank (f/k/a/ Shawmut Bank Connecticut, National Association), as
most recently amended and confirmed by Gerry, Lilo, Michael and Daniel H. Leeds
to Fleet National Bank and The Chase Manhattan Bank on November 14, 1996.
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"Option Agreement" shall mean that certain Option Agreement entered into
as of the date hereof by and between the Company and Michael.
"Shareholders' Agreement" shall mean that certain Shareholders' Agreement
entered into as of June 30, 1991 by and among the Company, certain of its
affiliates, Gerry, Lilo and their children.
"Stockholders' Agreement" shall mean that certain Stockholders' Agreement
entered into as of the date hereof by and among the Company, Gerry, Lilo and
Michael.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. FURTHER ASSURANCES.
Each of the parties hereto, upon request of another party, shall take all
such actions and execute and deliver all such further instruments of sale,
assignment, conveyance, transfer and exchange, and all such other documents and
agreements, as may be necessary or appropriate to assure, complete and evidence
the full and effective sale, assignment, transfer, conveyance and exchange of
the Shares as herein required and as may otherwise be necessary or appropriate
to comply with the terms and conditions of this Agreement.
SECTION 6.2. ENTIRE AGREEMENT; BINDING EFFECT.
This Agreement contains all of the terms agreed upon by the parties with
respect to the subject matter hereof and replaces and supersedes any and all
prior agreements, written or oral, between the parties relating to the Shares
(except for the Stockholders' Agreement and the Option Agreement to the extent
their respective terms are not inconsistent herewith). No promises, agreements
or representations with respect to the matters herein contained shall be binding
upon
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any of the parties unless set forth herein. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective heirs,
representatives, successors and permitted assigns.
SECTION 6.3. AMENDMENT.
No provision of this Agreement may be amended or waived except by a
writing making reference to this Agreement and signed by the party against whom
the enforcement of such amendment or waiver is sought.
SECTION 6.4. APPLICABLE LAW.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York, without reference to its
principles regarding choice or conflicts of law, and in accordance with and
consistent with the Company's election to be treated as an S Corporation.
SECTION 6.5. SEVERABILITY.
Wherever possible, each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law and the
Company's S Corporation election, but if any provisions hereof shall be
prohibited by or invalid under any such law or the Company's S Corporation
election, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating or nullifying the remainder of such
provision or any other provision of this Agreement.
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SECTION 6.6. NO WAIVER.
No delay or omission by any party in exercising or enforcing any right
hereunder shall operate as a waiver of such right, and a waiver on one occasion
shall not be construed as a waiver of any right or remedy on any future
occasion.
SECTION 6.7. NOTICES.
All notices, requests, consents, designations and demands required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given (a) when personally delivered, whether by
messenger, courier or other person, (b) on the second Business Day after the
date it is sent by certified or registered mail, return receipt requested, or
(c) on the next Business Day after the date it is sent via telefacsimile
(provided it is actually received and is not materially illegible), as follows:
If to Michael:
Michael S. Leeds
c/o CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Fax: (516)562-5718
with a copy to Michael at his last known address as reflected on the records of
the Company
If to Gerry:
Gerard G. Leeds
c/o CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Fax: (516) 562-7123
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If to Lilo:
Liselotte J. Leeds
c/o CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Fax: (516) 562-7123
or to such other mail or facsimile address as the recipient party shall have
last designated by notice given to the other in accordance herewith.
SECTION 6.8. ASSIGNMENT.
Except as expressly provided in this Agreement, no party may assign any
rights or delegate any obligations or liabilities hereunder without the prior
written consent of the other parties, except that each of Gerry and Lilo may
assign any of his or her rights and delegate any of his or her obligations or
liabilities to the other; provided, however, that no such assignment or
delegation shall relieve such assignor from his or her obligations or
liabilities hereunder.
SECTION 6.9. GENDER AND NUMBER.
Except when otherwise indicated by the context, references herein to one
gender shall include the other genders, and references herein to the plural
shall include the singular.
SECTION 6.10. HEADINGS.
The headings herein are for convenience of reference only and shall not be
considered in construing this Agreement.
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SECTION 6.11. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed as an original and all of which shall together constitute
one and the same instrument.
IN WITNESS WHEREOF, the individual parties have executed this Agreement on
the day and year first above written.
/s/GERARD G. LEEDS /s/LISELOTTE J. LEEDS
- ------------------------------ --------------------------------
GERARD G. LEEDS LISELOTTE J. LEEDS
/s/MICHAEL S. LEEDS
-------------------------------
MICHAEL S. LEEDS
11
<PAGE> 1
EXHIBIT 10.3
STOCKHOLDERS' AGREEMENT
BY AND AMONG
CMP MEDIA INC.,
GERARD G. LEEDS AND LISELOTTE J. LEEDS
AND
MICHAEL S. LEEDS
DL&A
NOVEMBER 27, 1996
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C>
ARTICLE I - CONFIDENTIALITY; NON-COMPETITION
SECTION 1.1 Protection of Company's Business Interests .......................... 2
SECTION 1.2 Non-Disclosure and Non-Use of Confidential Information .............. 3
SECTION 1.3 Protection from Unfair Competition .................................. 4
SECTION 1.4 Prior Notice; Opportunity to Cure ................................... 6
SECTION 1.5 Other Covenants ..................................................... 8
SECTION 1.6 Confidentiality of Agreement ........................................ 9
SECTION 1.7 Relief for Breach ................................................... 10
SECTION 1.8 Separate Covenants .................................................. 10
ARTICLE II - REPRESENTATIONS AND WARRANTIES
SECTION 2.1 Representations of the Company ...................................... 11
SECTION 2.2 Representations of Michael .......................................... 11
SECTION 2.3 Representations of Gerry and Lilo ................................... 12
ARTICLE III - TRANSFERABILITY OF SHARES AT TIME WHEN COMPANY IS
PRIVATELY HELD AND THERE IS NO PUBLIC MARKET
SECTION 3.1 General Restriction on Transfer ..................................... 12
SECTION 3.2 Sale After December 31, 2005 ........................................ 13
SECTION 3.3 Sale After Death or Permanent Disability ............................ 13
SECTION 3.4 Sale After Termination of Employment or Competition ................. 14
SECTION 3.5 Purchase Price of Restricted Shares
(a) Price to be Paid for Restricted Shares ................................. 14
(b) Determination of Fair Market Value ..................................... 15
(c) Payment of Purchase Price .............................................. 16
(i) Lump Sum or Installments ........................................... 16
(ii) Initial Installment ............................................... 16
(iii) Cash Flow Limitations ............................................ 17
(d) Closing of Transaction ................................................. 18
SECTION 3.6 Assignment and Delegation by the Company to
Class B Stockholders ....................................................... 19
SECTION 3.7 Tag-Along Rights - Drag-Along Rights ................................ 19
ARTICLE IV - TRANSFERABILITY OF SHARES AT TIME COMPANY SHARES ARE
PUBLICLY TRADED
SECTION 4.1 General Restriction on Transfer ..................................... 21
SECTION 4.2 Sale on or before December 31, 2005
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
(a) Minimum Market Capitalization .......................................... 21
(b) Maximum Number of Shares ............................................... 21
SECTION 4.3 Sale After December 31, 2005 ........................................ 22
SECTION 4.4 Sale After Death or Permanent Disability ............................ 22
SECTION 4.5 Sale After Competition .............................................. 24
SECTION 4.6 Tender, Merger, Consolidation ....................................... 25
SECTION 4.7 Compliance with Securities Laws ..................................... 25
ARTICLE V - FUTURE CHANGES IN CAPITAL STRUCTURE AND REDEMPTION OF SHARES
SECTION 5.1 Changes in Capital Structure ........................................ 26
SECTION 5.2 Redemption of Class B Stock ......................................... 26
ARTICLE VI - PROCEDURE TO BE FOLLOWED IN CASE OF DISMISSAL FOR CAUSE ....................... 27
ARTICLE VII - RESOLUTION OF DISPUTES
SECTION 7.1 Arbitration ......................................................... 28
SECTION 7.2 Equitable Remedies .................................................. 28
ARTICLE VIII - DEFINITIONS ................................................................. 29
ARTICLE IX - MISCELLANEOUS
SECTION 9.1 Legend on Certificates .............................................. 34
SECTION 9.2 Permitted Transferees; Representative and Successors In Interest .... 35
SECTION 9.3 Further Assurances .................................................. 36
SECTION 9.4 S Corporation ....................................................... 37
SECTION 9.5 Credit Facilities ................................................... 38
SECTION 9.6 Other Transfers ..................................................... 38
SECTION 9.7 Entire Agreement; Binding Effect .................................... 39
SECTION 9.8 Amendment ........................................................... 39
SECTION 9.9 Applicable Law ...................................................... 39
SECTION 9.10 Severability ....................................................... 39
SECTION 9.11 No Waiver .......................................................... 40
SECTION 9.12 Notices ............................................................ 40
SECTION 9.13 Assignment ......................................................... 41
SECTION 9.14 Survival ........................................................... 42
SECTION 9.15 Gender and Number .................................................. 42
SECTION 9.16 Dates .............................................................. 42
SECTION 9.17 Headings ........................................................... 42
SECTION 9.18 Counterparts ....................................................... 43
</TABLE>
<PAGE> 4
STOCKHOLDERS' AGREEMENT
This Stockholders' Agreement, made and entered into on this 27th of
November, 1996, by and among CMP Media Inc., a Delaware corporation (the
"Company"), Michael S. Leeds ("Michael"), Gerard G. Leeds ("Gerry"), and
Liselotte J. Leeds ("Lilo").
W I T N E S S E T H:
WHEREAS, Michael is a key senior executive of the Company; and
WHEREAS, Gerry and Lilo are major stockholders of the Company; and
WHEREAS, the Company, Gerry and Lilo desire to create substantial
incentives for Michael to (i) cause the Company to grow continuously and
successfully in sales, profits and profitability, (ii) take a long-term view of
the Company's future, (iii) help the Company attain its long-term goals,
including its diversity goals as set forth in its corporate Principles, and (iv)
remain with the Company for the long term; and
WHEREAS, to create such incentives, Gerry and Lilo desire to provide
Michael with the opportunity to purchase shares of the Company's Class A Common
Stock from them, and Michael desires to have the opportunity to purchase such
shares of Class A Common Stock from Gerry and Lilo; and
WHEREAS, as an inducement to Gerry and Lilo to sell him shares of the
Company's Class A Common Stock and as a condition to the closing of such sale,
Michael desires to enter simultaneously therewith into this Agreement with the
Company, Gerry and Lilo;
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NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements herein contained and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by each of the parties, the parties hereto hereby represent,
warrant, covenant and agree, as follows:
ARTICLE I
CONFIDENTIALITY; NON-COMPETITION
Michael hereby accepts and agrees to the provisions of this Article I
and acknowledges that such provisions are necessary and appropriate for the
reasonable protection of Gerry and Lilo's interests and the Company's property,
investments, business relationships, economic advantages and goodwill.
SECTION 1.1. PROTECTION OF COMPANY'S BUSINESS INTERESTS.
As a Key Senior Executive, Michael has been intimately involved in the
management of all aspects of the business of the Company and its Affiliates and
has been a major strategist in planning and implementing its business expansion.
In the course of his long employment with the Company, Michael has developed
special skills, knowledge and abilities in the publishing field which are of a
uniquely personal nature. He has also acquired detailed knowledge of the
internal operations of the Company and its Affiliates and highly confidential
information concerning the national and international business of the Company
and its Affiliates. In addition, he has been afforded the opportunity to develop
special relationships of confidence and trust with the customers, suppliers,
consultants, employees, officers, directors and stockholders of the Company and
its Affiliates. Because of his continuing responsibilities with the Company and
its Affiliates,
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<PAGE> 6
including his involvement in strategic planning and the evaluation of proposed
investments, it is expected that Michael will continue to be entrusted with
confidential information and will continue to have the opportunity to develop
such special relationships. The parties acknowledge and agree that the Company
and Gerry and Lilo would be unfairly and irreparably damaged if Michael were to
take any of such skills, knowledge, information or relationships, which he has
acquired and developed during the course of his employment with the Company, and
use them to the detriment of the Company and its Affiliates.
SECTION 1.2. NON-DISCLOSURE AND NON-USE OF CONFIDENTIAL INFORMATION.
(a) Michael represents, warrants, covenants and agrees that, without the
Company's express or implied consent while employed or, after termination,
without the prior written consent of the Board of Directors, he will not
willfully or knowingly at any time directly or indirectly disclose, communicate
or divulge, or use for the benefit of himself or of any third party, any of the
business or trade secrets or other confidential information of the CMP Group
including, solely by way of illustration but not of limitation, their business
strategies, business plans, budgets, pricing, selling techniques, marketing
techniques, operating systems, financial systems, financial data, procedures,
manuals, confidential reports, personnel records, potential acquisitions,
potential business expansions, credit and financial data of their suppliers and
of their present and prospective customers, data about competitors, new
product-development initiatives, custom research and new product or service
concepts and marketing strategy.
(b) Any and all materials of or concerning the CMP Group or their business
or affairs, including without limitation files, memoranda, notes,
correspondence, lists, records, video reproductions, computer tapes and disks,
design and other documents, and
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data storage and retrieval materials (and all copies, compilations and summaries
thereof), and any and all property of the CMP Group, including without
limitation equipment, software, keys, business cards and credit cards, that are
in Michael's custody or control shall be delivered to the Company at the time
Michael's employment with the Company terminates for any reason. Michael shall
not destroy any such materials or property, shall not retain any copies thereof
and shall certify in writing to the Company upon request that all such materials
and property have been delivered to the Company.
SECTION 1.3. PROTECTION FROM UNFAIR COMPETITION.
(a) For as long as Michael is employed by the CMP Group and for the
greater of (i) a period of two (2) years after termination of his employment or
(ii) as long as Michael or any Permitted Transferee owns any Restricted Shares,
Michael shall not engage in competition with the CMP Group. For the purposes of
this Agreement, Michael shall be deemed to engage in competition with the CMP
Group if Michael does any of the following, whether or not in exchange for
consideration, without the Company's express or implied consent while employed
or without the Company's prior written consent after termination:
(A) On his own behalf or on behalf of any other person or entity, (1)
participates or is involved in or has direct responsibility for the day-to-day
management or operation of a Directly Competitive Business, an Indirectly
Competitive Business or any material function thereof (e.g., advertising,
circulation, production and the like); (2) owns, in whole or in part,
beneficially or of record, directly or indirectly, an equity interest (or an
interest convertible into equity) in a Directly Competitive Business or a Direct
Competitor; (3) renders services as a director, officer, employee, consultant,
advisor, agent or independent sales representative to a Direct Competitor; or
(4) renders
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services as a director, officer, employee, consultant, advisor, agent or
independent sales representative to an Indirect Competitor unless Michael has no
responsibility for or participation or involvement in any Indirectly Competitive
Business of such Indirect Competitor, provided, however, that Michael may have
supervisory, advisory, consulting or sales-representative responsibility over an
Indirectly Competitive Business if the revenue of all Indirectly Competitive
Businesses of such Indirect Competitor over which Michael has such
responsibility represents no more than fifteen percent (15%) of the total
revenue over which Michael has such responsibility.
(B) Solicits the service of any employee of the CMP Group for Michael's
own benefit or for the benefit of any person or entity other than the CMP Group,
or induces or helps to induce any such employee to leave employment with the CMP
Group.
(C) Assists, induces or helps any employee or former employee of the
CMP Group or any other person or entity to engage in competition with the CMP
Group or any of its business activities, provided that the giving of a favorable
reference by Michael on behalf of such former employee shall not be prohibited
by this clause (C).
(D) Employs or causes any person or entity other than the CMP Group to
employ any former employee of the CMP Group within one (1) year after the
resignation of such former employee from the CMP Group.
(E) Willfully induces or attempts to induce any customer, supplier or
contractor of the Company to terminate any agreement or arrangement with the
Company, or willfully induces or attempts to induce any customer, supplier or
contractor, or any potential customer, supplier or contractor, of the Company
not to enter into any agreement or arrangement with the Company.
(F) Communicates publicly (other than pursuant to subpoena in a legal
proceeding) or to the press, or writes or produces for publication in any
medium, on the
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subject of, or with express or implied reference to, the CMP Group or any of
their former, current or future stockholders, directors, officers or employees
in their capacities as such. For the purpose hereof, "implied reference" shall
mean a reference that does not expressly name the CMP Group or any of their
former, current or future stockholders, directors, officers or employees but
that nevertheless would be understood by the average reader or audience-member
to refer thereto. It shall not be deemed a violation of this clause (F) if,
after the termination of his employment with the Company, Michael responds to
inquiries from the public or the press solely by stating, in form or substance,
"I do not discuss any matters relating to CMP; please address your inquiries
directly to the company" or Michael communicates the fact that he was formerly
employed by the Company and identifies the positions he held and the dates
thereof.
(b) Notwithstanding the provisions of paragraph (a) of this Section
1.3, Michael shall not be deemed to be engaged in competition with the CMP Group
solely by reason of Michael's ownership of (i) an equity interest of less than
one-half of one percent (0.5%) in the securities of a Direct Competitor or
Indirect Competitor listed for trading on a national securities exchange or
quoted in the National Market List of NASDAQ or (ii) an interest in a mutual or
other investment fund which owns an interest in a Direct Competitor or Indirect
Competitor, provided that Michael has no influence or control over the selection
of such fund's investment decisions.
SECTION 1.4. PRIOR NOTICE; OPPORTUNITY TO CURE.
(a) Michael shall give the Company written notice at least twenty (20)
Business Days before entering into any relationship or transaction, or engaging
in any activity, or taking or omitting to take any action, which might
reasonably be deemed a breach of any provision of Section 1.2 or Section 1.3,
such notice to include full and complete
6
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particulars as to the proposed relationship, transaction, activity, action or
omission, the services or duties contemplated and such other facts and
circumstances as are reasonably necessary for the Company to make an informed
decision. The Company shall advise Michael in writing, within ten (10) Business
Days after such notice is given, of the Board of Directors' determination as to
whether such relationship, transaction, activity, action or omission would
materially breach any of the provisions of Section 1.2 or Section 1.3. In the
event that, for reasons not within his control, Michael gives the Company less
than twenty (20) Business Days' prior written notice, the Company will endeavor
in good faith to advise Michael of the Board of Directors' determination in less
than ten (10) Business Days after such notice is given, provided that the
Company's failure to advise Michael in less than ten (10) Business Days shall
not be deemed to constitute consent to such relationship, transaction, activity,
action or omission and shall not give rise to any liability of the Company to
Michael or to any third party.
(b) Once the Company has advised Michael in writing that the Board of
Directors has determined that a proposed relationship, transaction, activity,
action or omission would not materially breach any of the provisions of Section
1.2 or Section 1.3, and Michael has thereupon entered into such relationship or
transaction or has begun to engage in such activity or to take or omit to take
such action, the Board of Directors shall have no right to reverse or otherwise
modify its determination; provided, however, that if the nature, scope or terms
of such relationship, transaction, activity, action or omission are to be
modified after such determination is made, then in accordance with paragraph (a)
hereof Michael shall give the Company prior written notice of such modification
and the Company shall advise him in writing, within ten (10) Business Days after
such notice is given, of the Board of Directors' determination as to whether
such relationship, transaction, activity, action or omission, as so modified,
would materially breach any of
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the provisions of Section 1.2 or Section 1.3.
(c) In the event that, without having given the Company prior notice
pursuant to paragraphs (a) or (b) hereof, Michael enters into any relationship
or transaction or begins to engage in any activity or to take or omit to take
any action that the Board of Directors determines is a material breach of any of
the provisions of Section 1.2 or Section 1.3, the Company shall give Michael
written notice of such determination and, if such breach is continuing, an
opportunity to cure such breach before the Company seeks remedy or relief by
judicial process or arbitration or exercises its rights under Section 3.4(b),
and before Gerry or Lilo exercises his or her rights under Section 4.5. The
opportunity to cure shall be sixty (60) days to the extent such continuing
breach consists of holding an ownership interest in a competitive business and
fifteen (15) days with respect to any other continuing breach.
SECTION 1.5. OTHER COVENANTS.
(a) For as long as Michael or any Permitted Transferee owns any Restricted
Shares, Michael shall, if requested by the Company, provide information,
testimony and assistance in connection with the prosecution or defense of any
claims by or against the Company arising out of matters of which he acquired
knowledge while an employee of the Company. The Company shall reimburse Michael
for all reasonable out-of-pocket expenses he incurs in rendering such
assistance.
(b) For as long as Michael or any Permitted Transferee owns any Restricted
Shares, Michael shall not willfully make any oral or written statement which
reflects adversely upon the character, honesty, credit, efficiency or business
practices of the CMP Group or its former, current or future stockholders,
directors, officers or employees in their capacities as such.
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SECTION 1.6. CONFIDENTIALITY OF AGREEMENT.
The terms and conditions of this Agreement shall be kept confidential
by the parties, and none of the parties shall disclose them to any non-party
unless such disclosure is necessitated by (a) legal and/or financial
requirements of the Company, in which case the form of such disclosure shall
first be mutually agreed upon by the Company and Michael, or (b) any arbitration
or other legal proceeding contesting or seeking to enforce any provision or
interpretation of this Agreement (including any deposition or testimony that
either party provides in connection therewith), regardless of whether such
proceeding is initiated by Michael or the Company. Except as provided in the
preceding sentence, and without limiting the generality of the foregoing,
Michael shall not respond to or in any way participate in or contribute to any
public discussion, notice or other publicity concerning or in any way relating
to execution of this Agreement or the events (including any negotiations) which
led to its execution, and Michael specifically agrees that he shall not disclose
information regarding this Agreement to any current or former employees of the
Company other than those expressly authorized by the Company to have knowledge
hereof. Without limiting the comprehensive confidentiality agreed to, Michael
may disclose this Agreement to his attorneys, financial advisors and members of
his and his spouse's immediate families, provided he informs them of this
confidentiality provision and they agree to abide by it. Michael hereby agrees
that any disclosure by him of any of the terms and conditions of this Agreement
in violation of the foregoing shall constitute and be treated as a material
breach of this Agreement and Michael shall be responsible for damages occasioned
thereby, including but not limited to reasonable attorneys' fees incurred by the
Company to enforce this Section 1.6.
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SECTION 1.7. RELIEF FOR BREACH.
Michael acknowledges and agrees that any breach or anticipatory breach by
him of any of the provisions of this Article I would cause the Company
irreparable injury not compensable by monetary damages alone and that,
accordingly, in any such event, the Company shall be entitled to injunctions,
both preliminary and permanent, enjoining or restraining such breach or
anticipatory breach (and Michael hereby consents to the issuance thereof without
bond by any court of competent jurisdiction), in addition to monetary damages in
such amount as the evidence may show and such other remedies as may be available
at law or in equity. In addition, in the event of any material breach by Michael
of any of the provisions of Section 1.2 or Section 1.3, Michael may be required
to sell to the Company or the holders of the Class B Stock or to Gerry and Lilo
any or all of the Restricted Shares then owned by Michael, in accordance with
the provisions of Section 3.4, Section 3.6 or Section 4.5, as applicable;
provided, however, that Michael shall not be required to sell such Restricted
Shares unless and until the Company has first complied with its obligations
under Section 1.4.
SECTION 1.8. SEPARATE COVENANTS.
Michael understands and agrees that the covenants contained in this
Article I constitute a series of separate covenants, one for each applicable
state in the United States and the District of Columbia, and one for each
applicable foreign country. If in any judicial proceeding a court shall hold
unenforceable any of the separate covenants included in this Article I, then
such unenforceable covenant or covenants shall be deemed limited as necessary or
eliminated from the provisions of this Article I for the purpose of such
proceeding to the extent necessary to permit the remaining separate covenants of
this
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Article I to be enforced in such proceeding, and to permit such unenforceable
covenant or covenants to be enforced as limited.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.1. REPRESENTATIONS OF THE COMPANY.
The Company hereby represents and warrants to Michael that (a) it has
full legal right, power and authority to enter into this Agreement and to
consummate the transactions herein contemplated; (b) the execution and delivery
of this Agreement has been duly authorized by all necessary corporate action;
(c) this Agreement constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally and by general principles of equity; and
(d) neither this Agreement nor the consummation of the transactions herein
contemplated will conflict with, violate or infringe any legal restriction,
contract or instrument to which the Company is subject or by which it is bound.
SECTION 2.2. REPRESENTATIONS OF MICHAEL.
Michael hereby represents and warrants to each of the Company, Gerry
and Lilo that (a) he has full legal right, power and authority to enter into
this Agreement and to consummate the transactions herein contemplated; (b) this
Agreement constitutes the valid and binding obligation of Michael, enforceable
in accordance with its terms, except to the extent that such enforcement may be
limited by applicable bankruptcy, insolvency
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or similar laws affecting creditors' rights generally and by general principles
of equity; and (c) neither this Agreement nor the consummation of the
transactions herein contemplated will conflict with, violate or infringe any
legal restriction, contract or instrument to which Michael is subject or by
which he is bound.
SECTION 2.3 REPRESENTATIONS OF GERRY AND LILO.
Each of Gerry and Lilo hereby represents and warrants to Michael that
(a) each of them has full legal right, power and authority to enter into this
Agreement and to consummate the transactions herein contemplated; (b) this
Agreement constitutes the valid and binding obligation of each of them,
enforceable in accordance with its terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally and by general principles of equity; and
(c) neither this Agreement nor the consummation of the transactions herein
contemplated will conflict with, violate or infringe any legal restriction,
contract or instrument to which either of them is subject or by which either of
them is bound.
ARTICLE III
TRANSFERABILITY OF SHARES AT TIME WHEN
COMPANY IS PRIVATELY HELD AND THERE IS NO PUBLIC MARKET
SECTION 3.1. GENERAL RESTRICTION ON TRANSFER.
At any time when the Company is privately held and there is no public
market for the Class A Stock, Michael shall not, voluntarily or involuntarily,
by operation of law or otherwise, sell, mortgage, pledge, hypothecate, assign as
security, grant or permit to exist or continue a security interest in, or in any
way transfer by gift, will, trust or intestate
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succession any of the Restricted Shares, except to a Permitted Transferee as
provided in Section 9.2(a) or except as specifically provided in this Article
III. Any attempt by Michael to do any of the aforementioned acts or otherwise to
alienate or dispose of any Restricted Shares, except in accordance with this
Agreement, shall be null and void.
SECTION 3.2. SALE AFTER DECEMBER 31, 2003.
During each and any calendar year beginning with the calendar year
2004, Michael shall have the right, exercisable upon notice to the Company given
during the first three (3) months of such calendar year, to require the Company
to purchase up to five hundred twenty-eight (528) shares of his Class A Stock
(which number of shares equals approximately one percent (1%) of the number of
shares of the Company's Common Stock issued and outstanding as of the date
hereof), including both Restricted Shares and Option Shares, at the price
provided in Section 3.5 (a).
SECTION 3.3. SALE AFTER DEATH OR PERMANENT DISABILITY.
In the event that Michael's employment with the Company terminates as a
result of his death or the Company terminates his employment by reason of his
Permanent Disability (whether before or after December 31, 2003), then and in
that event, notwithstanding the provisions of Section 3.2, the parties shall
have the following rights:
(a) RIGHTS OF MICHAEL TO SELL. Michael or his representative and/or
successors in interest shall have the right, exercisable upon notice to the
Company given no later than one hundred eighty (180) days after such termination
of employment occurs and/or during the first three (3) months of any succeeding
calendar year, to require the Company to purchase any or all of the Restricted
Shares then owned by Michael or his successors in interest, at the price
provided in Section 3.5 (a).
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(b) RIGHTS OF COMPANY TO PURCHASE. The Company shall have the right,
exercisable upon notice to Michael or his representative and/or successors in
interest given during the first three (3) months of the third calendar year
after the year in which such termination of employment occurs and/or during the
first three (3) months of any succeeding calendar year, to require Michael or
his representative and/or successors in interest to sell to the Company any or
all of the Restricted Shares then owned by Michael or any successor in interest,
at the price provided in Section 3.5 (a).
SECTION 3.4. SALE AFTER TERMINATION OF EMPLOYMENT OR COMPETITION.
In the event that (a) Michael's employment with the Company terminates
for any reason other than death or Permanent Disability or (b) Michael
materially breaches any of the provisions of Section 1.2 or Section 1.3 (whether
before or after the termination of his employment for any reason) and, if the
Company has given him notice to cure, fails to cure such breach on a timely
basis, then and in that event, in addition to any rights that Michael has under
Section 3.2, the Company shall have the right, exercisable upon notice to
Michael given at any time or times after such event occurs (whether before or
after December 31, 2003), to require Michael to sell to the Company any or all
of the Restricted Shares then owned by Michael, at the price provided in Section
3.5 (a). The death or Permanent Disability of Michael occurring subsequent to
the termination of his employment or such breach of any of the provisions of
Section 1.2 or Section 1.3 shall not modify or affect the rights and obligations
of the parties as set forth in this Section 3.4.
SECTION 3.5. PURCHASE PRICE OF RESTRICTED SHARES.
(a) PRICE TO BE PAID FOR RESTRICTED SHARES. The purchase price for any
Restricted Shares to be purchased pursuant to this Article III shall be the Fair
Market
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Value of such Restricted Shares, except that the purchase price for any
Restricted Shares to be purchased by reason of Michael's breach of any of the
provisions of Section 1.2 or Section 1.3 shall be the lower of the Original
Price of such Restricted Shares or the Fair Market Value of such Restricted
Shares.
(b) DETERMINATION OF FAIR MARKET VALUE. Within sixty (60) days after
Michael has given the Company notice of intent to sell Restricted Shares or the
Company has given Michael notice of intent to purchase Restricted Shares
pursuant to this Article III, the Company and Michael shall negotiate in good
faith in an effort to reach mutual agreement as to the Fair Market Value of such
Restricted Shares. If the Company and Michael are unable to reach agreement as
to the Fair Market Value of such Restricted Shares within such 60-day period,
the Fair Market Value of such Restricted Shares shall be determined by an
appraisal process as follows. Each of the Company and Michael shall designate,
within thirty (30) days after the conclusion of the 60-day negotiation period
referred to above, an independent and experienced appraiser familiar with the
business in which the Company is then engaged (each individually an "Appraiser"
and collectively the "Appraisers"). The Appraisers shall be instructed to
complete their respective determinations of the Fair Market Value of such
Restricted Shares and to deliver their written reports on such determinations no
later than sixty (60) days after both of such Appraisers have been appointed. If
the determination of one of the Appraisers does not exceed the determination of
the other Appraiser by more than fifteen percent (15%) of the lower of the two
determinations, the Fair Market Value of such Restricted Shares shall be equal
to the average of the two determinations. If the higher determination exceeds
the lower determination by more than fifteen percent (15%) of the lower
determination, then the two Appraisers shall jointly appoint a third,
independent and similarly experienced Appraiser within fifteen (15) days after
both of such two Appraisers have delivered their
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reports. Such third Appraiser shall deliver his report on his determination of
the Fair Market Value of such Restricted Shares within sixty (60) days after his
appointment, and his determination of Fair Market Value shall be conclusive and
binding on the parties for all purposes hereof. The cost of all such appraisals
shall be borne one-half by the Company and one-half by Michael.
(c) PAYMENT OF PURCHASE PRICE.
(i) LUMP SUM OR INSTALLMENTS. The purchase price for Restricted
Shares shall be paid by the Company in full at the closing or, at the election
of the Company, in equal annual installments, together with interest payable
quarterly at the rate of interest announced publicly on the first day of each
calendar quarter by a major United States money market bank, selected by the
Company, as such bank's base rate, over a number of years to be determined by
the Company but in no event exceeding five (5) years if the purchase is pursuant
to Section 3.2, or ten (10) years if the purchase is pursuant to Section 3.3 or
Section 3.4.
(ii) INITIAL INSTALLMENT. In the event the Company elects to pay for
Restricted Shares hereunder on an installment basis, all annual installments
shall be equal in principal amount except as follows:
(A) The initial installment for any such sale of Restricted
Shares, other than a sale occurring by reason of Michael's death, Dismissal For
Cause or breach of any of the provisions of Section 1.2 or Section 1.3, shall be
not less than the amount, if any, of Michael's additional income tax liability
(federal, state and local) actually occasioned as a result of such sale,
provided that such amount shall have been certified to the Company in writing by
Michael's tax accountant.
(B) The initial installment for the first sale of shares of
Class A Stock that Michael makes under this Agreement or the Option Agreement,
other than a
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sale occurring by reason of Michael's death, Dismissal For Cause or breach of
any of the provisions of Section 1.2 or Section 1.3, shall be at least (1) the
amount due under clause (A) above plus the amount of one million dollars
($1,000,000) or (2) if less, the total purchase price for such Restricted
Shares.
(C) The initial installment for any sale of Restricted Shares
occurring by reason of Michael's death shall be not less than the amount of the
estate and succession tax liability (federal and state) occasioned as a result
of the inclusion of the Restricted Shares in Michael's estate (giving effect to
any deferral permitted by law or regulation in the payment thereof) together
with any and all costs and expenses of administration of Michael's estate as
reasonably estimated by Michael's representative, all as certified to the
Company in writing by Michael's representative.
(iii) CASH FLOW LIMITATIONS. Notwithstanding any other provision of
this Article III, in the event that the amount due from the Company in payment
for Restricted Shares purchased hereunder (including both principal and
interest) in any one fiscal year of the Company (other than a purchase occurring
by reason of Michael's death) exceeds fifty percent (50%) of the Company's Free
Cash Flow for the preceding year, then and in that event the Company in its sole
discretion may elect to defer payment of any portion of such principal and/or
interest to the extent that payment would require the Company to pay more than
fifty percent (50%) of its Free Cash Flow for such preceding year, provided that
any such deferred amounts shall continue to earn interest as described in
Section 3.5 (c)(i) until paid; and provided further that in any event all
principal and interest shall be paid in full no later than five (5) years or ten
(10) years, as the case may be, after the date of the closing. If, in the same
fiscal year, the Company is also required to pay any persons or entities other
than Michael for shares of Class A Stock that such persons or entities acquired
from Gerry and/or Lilo as of the date hereof or pursuant to
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options granted by the Company and/or is required to make payment to Michael
and/or any other persons under any comparable long-term senior executive
compensation plan in effect from time to time, the amounts due to such other
persons or entities in such fiscal year shall be aggregated with the amount due
with respect to the Restricted Shares in such fiscal year and, if the aggregate
amount due exceeds fifty percent (50%) of the Company's Free Cash Flow for the
preceding fiscal year, then and in that event the Company in its sole discretion
may elect to defer payment of any portion of such aggregate amount (principal
and/or interest) to the extent that it would exceed fifty percent (50%) of the
Company's Free Cash Flow for the preceding year, and payments and deferments
shall be effected among Michael and such other persons or entities in proportion
to the amounts (both principal and interest) then due and owing to each, subject
to any provisions in such plans as to priority of payment.
(d) CLOSING OF TRANSACTION. The closing of any purchase of Restricted
Shares hereunder shall be held no later than ninety (90) days after the final
determination of the Fair Market Value of such Restricted Shares, at such time
and place as the Company may reasonably designate. At the closing, Michael shall
deliver or cause to be delivered to the Company the stock certificates
representing such Restricted Shares, duly endorsed for transfer in blank or with
duly executed stock powers attached, and with signature guaranteed, in exchange
for which the Company shall deliver to Michael the amount of the purchase price
then due, together with the Company's promissory note evidencing the Company's
obligation to pay the balance, if any, of the purchase price in accordance with
the terms of Section 3.5(c). All payments to Michael hereunder shall be made in
cash or by Company check, bank draft or wire transfer.
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SECTION 3.6. ASSIGNMENT AND DELEGATION BY THE COMPANY TO CLASS B
STOCKHOLDERS.
The Company shall have the right, exercisable upon notice to Michael,
to assign any or all of its rights and/or delegate any or all of its obligations
under this Article III to the holders of the Class B Stock, in proportion to
their respective ownership interests or as they may otherwise unanimously agree,
provided that the Company shall not be relieved of its obligation to purchase
from Michael in accordance herewith any Restricted Shares duly tendered and not
purchased and paid for by such holders of the Class B Stock.
SECTION 3.7. TAG-ALONG RIGHTS -- DRAG-ALONG RIGHTS.
(a) In the event the Controlling Stockholders of the Company determine
to dispose of all or a portion of their shares of Common Stock, with the result
that they will no longer control the Company, then and in that event the Company
shall give Michael a notice (a "Tag-Along Notice") of such proposed sale (a
"Tag-Along Sale") and the material terms of the Tag-Along Sale (the "Material
Terms") no later than thirty (30) days prior to the consummation of the
Tag-Along Sale. If, within twenty (20) days after a Tag-Along Notice is given to
Michael (or within ten (10) days after any notice of a change in the Material
Terms is given to Michael), the Company receives from Michael a written request
(a "Tag-Along Request") to include in the Tag-Along Sale any of the Restricted
Shares held by him, such Restricted Shares (in the same proportion as the total
number of shares of the Common Stock held by the Controlling Stockholders bears
to the number of shares being sold by the Controlling Stockholders) shall be
included in the Tag-Along Sale on the same terms and conditions and subject to
the same obligations as the sale by the Controlling Stockholders, taking into
account the proportionate ownership of the Controlling Stockholders and Michael.
The Company shall give Michael prompt notice
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of any change in the Material Terms and, in such event, Michael shall have the
opportunity, for a period of ten (10) days after such notice has been given, to
submit a Tag-Along Request if Michael did not previously submit a Tag-Along
Request or to withdraw or modify a Tag-Along Request previously made.
(b) Michael's rights hereunder to participate in a Tag-Along Sale shall
be contingent on Michael's compliance with each of the provisions hereof,
Michael's acceptance of a proportionate delegation of any duties or obligations
related to the Tag-Along Sale, including any indemnification obligations, and
Michael's execution of such documents in connection with the Tag-Along Sale as
may be reasonably requested by the Controlling Stockholders.
(c) In connection with any proposed sale of shares of Common Stock by
the Controlling Stockholders to a non-affiliated person or entity in an
arms-length transaction, if Michael has not exercised his rights to sell
Restricted Shares as contemplated under paragraph (a) of this Section 3.7, the
Company shall have the right, exercisable upon notice to Michael, to require
that Michael sell to the purchaser of the shares of the Controlling Stockholders
the same proportion of the Restricted Shares then owned by Michael as are being
sold by the Controlling Stockholders, on the same terms and conditions and
subject to the same obligations including any indemnification obligations, as
the sale by the Controlling Stockholders, taking into account the proportionate
ownership of the Controlling Stockholders and Michael. Michael agrees that he
will cooperate with the Company and the Controlling Stockholders in taking all
such actions, including executing all such documentation, as the Company and/or
the Controlling Stockholders may reasonably request.
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ARTICLE IV
TRANSFERABILITY OF SHARES AT TIME COMPANY SHARES ARE PUBLICLY TRADED
SECTION 4.1. GENERAL RESTRICTION ON TRANSFER.
In the event that shares of the Class A Stock become listed on a
national securities exchange or quoted in the National Market List of NASDAQ,
then and in that event the provisions of Article III shall cease to be
operative, and Michael shall not, voluntarily or involuntarily, by operation of
law or otherwise, sell, mortgage, pledge, hypothecate, assign as security, grant
or permit to exist or continue a security interest in, or in any way transfer by
gift, will, trust or intestate succession any of the Restricted Shares, except
to a Permitted Transferee as provided in Section 9.2(a) or except as
specifically provided in this Article IV. Any attempt by Michael to do any of
the aforementioned acts or otherwise to alienate or dispose of any Restricted
Shares, except in accordance with this Agreement, shall be null and void.
SECTION 4.2. SALE ON OR BEFORE DECEMBER 31, 2003.
Except as otherwise provided in Section 4.4 and Section 4.6, from
January 1, 1998 through December 31, 2003, Michael shall have the right to sell
Restricted Shares on the public market, subject to the following conditions:
(a) MINIMUM MARKET CAPITALIZATION. Michael may not sell any Restricted
Shares under this Section 4.2 unless the market capitalization of the Company as
of the Business Day immediately preceding the date of sale is greater than three
hundred forty million ($340,000,000). The market capitalization of the Company
shall be determined by multiplying the Fair Market Value of a share of Class A
Stock by the total number of shares of the Common Stock then issued and
outstanding.
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(b) MAXIMUM NUMBER OF SHARES.
(i) The maximum number of shares of Class A Stock (including both
Restricted Shares and Option Shares) that Michael may sell in any single
calendar year shall be five hundred twenty-eight (528) shares of Class A Stock
(which number of shares equals approximately one percent (1%) of the number of
shares of the Company's Common Stock issued and outstanding as of the date
hereof); and
(ii) the maximum number of Restricted Shares that may be included in
such shares of Class A Stock sold in any single calendar year shall be the
smaller of (A) the number of Restricted Shares whose Fair Market Value as of the
Business Day immediately preceding the date of sale does not exceed $500,000 or
(B) fifty-three (53) Shares (which number equals approximately 1/10 of one
percent (0.1%) of the number of shares of the Company's Common Stock issued and
outstanding as of the date hereof).
SECTION 4.3. SALE AFTER DECEMBER 31, 2003.
Except as otherwise provided in Section 4.4 and Section 4.6, after
December 31, 2003, Michael shall have the right to sell Restricted Shares on the
public market, provided only that the maximum number of shares of Class A Stock
(including both Restricted Shares and Option Shares) that Michael may sell in
any single calendar year shall be five hundred twenty-eight (528) shares of
Class A Stock (which number of shares equals approximately one percent (1%) of
the number of shares of the Company's Common Stock issued and outstanding as of
the date hereof).
SECTION 4.4. SALE AFTER DEATH OR PERMANENT DISABILITY.
(a) Notwithstanding the provisions of Section 4.2, in the event that
Michael's employment terminates as a result of his death or the Company
terminates his
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employment by reason of his Permanent Disability, then and in that event (i) the
pre-condition to sales on or before December 31, 2003, which is set forth in
Section 4.2(a) with respect to the Company's minimum market capitalization,
shall not apply, and Michael and/or his representative and/or his successors in
interest shall have the right to sell Restricted Shares pursuant to Section 4.2
on or before December 31, 2003 irrespective of the market capitalization of the
Company; and (ii) the limitation set forth in Section 4.2(b)(ii) shall not apply
and, instead, the maximum number of Restricted Shares that may be included in
the shares of Class A Stock sold in any calendar year by Michael and/or his
representative and/or successors in interest, as a group, shall be three hundred
ninety-six (396) Restricted Shares.
(b) Notwithstanding the provisions of Section 4.2, Section 4.3 and
Section 4.4 (a)(ii), in the event that Michael's employment terminates as a
result of his death, Michael's representative and/or successors in interest
shall have the right to sell in any calendar year up to such number of shares of
Class A Stock (including both Restricted Shares and Option Shares) as shall
equal the greater of (i) the number of such shares that is permitted to be sold
under Section 4.2 or Section 4.3, as applicable, or (ii) the number of such
shares that is necessary in order for the proceeds of such sale to equal the
amount of the estate and succession tax liability (federal and state), including
any interest thereon, due in such year as a result of the inclusion of such
shares of Class A Stock in Michael's estate (giving effect to any deferral
permitted by law or regulation in the payment thereof), together with any and
all costs and expenses of administration of Michael's estate for such year as
reasonably estimated by Michael's representative, all as certified to the
Company in writing by Michael's representative.
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SECTION 4.5. SALE AFTER COMPETITION.
In the event that Michael materially breaches any of the provisions of
Section 1.2 or Section 1.3 (whether before or after the termination of his
employment for any reason) and, if the Company has given him notice to cure,
fails to cure such breach on a timely basis, then and in that event, in addition
to any other rights that the parties have under this Article IV, Gerry and Lilo
shall have the following rights:
(a) Each of Gerry and Lilo shall have the right, exercisable upon
notice to Michael given at any time or times after such event occurs, to require
Michael to sell back to him or her, as the case may be, all of the Restricted
Shares then owned by Michael which he purchased from Gerry or Lilo, as the case
may be, under the Share Purchase Agreement. The purchase price for Restricted
Shares re-purchased hereunder shall be the lower of (i) the Original Price of
such Restricted Shares or (ii) the Fair Market Value of such Restricted Shares
as of the date of such notice.
(b) If Gerry and/or Lilo exercise any rights hereunder, the closing of
their respective purchases of Restricted Shares shall be held no later than
ninety (90) days after their respective notices of exercise are given and at
such time and place as they may reasonably designate. At the closing, Michael
shall deliver or cause to be delivered to Gerry and/or Lilo, as the case may be,
the stock certificates representing such Restricted Shares, duly endorsed for
transfer in blank or with duly executed stock powers attached, and with
signature guaranteed, in exchange for which the purchasers shall deliver to
Michael the full amount of their respective purchase prices in cash or by check,
bank draft or wire transfer.
(c) To the extent, if any, that Gerry and Lilo have not exercised their
rights to purchase any or all of Michael's Restricted Shares in accordance with
paragraph (a) of this Section 4.5, Michael shall continue to have the right to
sell such unpurchased
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Restricted Shares subject to and in accordance with the other provisions of this
Article IV.
(d) Each of Gerry and Lilo shall have the right, exercisable upon
notice to Michael, to assign any or all of his or her rights and/or delegate any
or all of his or her obligations under this Section 4.5 to the holders of the
Class B Stock or their children, in proportion to the respective ownership
interests of the holders of the Class B Stock or as they may otherwise
unanimously agree.
(e) In the event that the Company makes a determination that Michael
has not materially breached any of the provisions of Section 1.2 or Section 1.3,
such determination shall be binding upon Gerry and Lilo for the purposes of this
Agreement.
SECTION 4.6. TENDER, MERGER, CONSOLIDATION.
In the event the Controlling Stockholders of the Company determine to
dispose all or a portion of their shares of Common Stock in a tender, merger,
consolidation or similar type of transaction, with the result that they no
longer control the Company, then and in that event, Michael shall have the
right, but not the obligation, to dispose of a proportionate number of shares of
his Class A Stock in any such transaction.
SECTION 4.7. COMPLIANCE WITH SECURITIES LAWS.
Neither Michael nor his representative will sell or attempt to sell any
shares of Class A Stock under this Article IV except in accordance with all
applicable federal and state securities laws, all applicable rules and
regulations of the Securities and Exchange Commission, and any applicable
underwriters' limitations and restrictions.
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ARTICLE V
FUTURE CHANGES IN CAPITAL STRUCTURE AND REDEMPTION OF SHARES
SECTION 5.1. CHANGES IN CAPITAL STRUCTURE.
If the Company hereafter declares a dividend payable in, or subdivides
or combines, shares of the Class A Stock, or if the Company engages in a
recapitalization, reorganization, merger, consolidation, split-up, transfer of
assets, combination or exchange of shares of Common Stock, or if any other event
shall occur which in the judgment of the Board of Directors calls for action by
way of adjusting the number of Restricted Shares, the Board of Directors shall
forthwith take such action as in its judgment shall be necessary or appropriate
to preserve Michael's rights with respect to the Restricted Shares substantially
proportionate to his rights existing prior to such event. The decision of the
Board of Directors with respect to any matter referred to in this Section 5.1
shall be conclusive and binding upon Michael. Nothing in this Agreement is
intended to preserve Michael's equity interest in the Company against dilution
resulting from the issuance of securities by the Company in the future.
SECTION 5.2. REDEMPTION OF CLASS B STOCK.
If and when any shares of the Class B Stock owned by any member of the
Leeds Family are redeemed by the Company in accordance with the terms and
provisions of the Shareholders' Agreement, then, in order to ensure that
Michael's percentage interest in the Company will remain the same as his
interest would have been but for such redemption (the "Class B Stock
Redemption"), the Company shall, promptly following the Class B Stock
Redemption, redeem at a price equal to their par value (currently $.10 per
share) a number of the Restricted Shares such that (a) the ratio of (i) the
number of Restricted
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Shares outstanding immediately after such redemption of Restricted Shares (the
"Class A Stock Redemption") to (ii) the total number of shares of Common Stock
outstanding immediately after the Class A Stock Redemption is the same as (b)
the ratio of (i) the number of Restricted Shares outstanding immediately prior
to the Class B Stock Redemption to (ii) the total number of shares of Common
Stock outstanding immediately prior to the Class B Stock Redemption.
ARTICLE VI
PROCEDURE TO BE FOLLOWED IN CASE OF
DISMISSAL FOR CAUSE
In the event the Company terminates Michael's employment as a Dismissal
For Cause, the Company shall give Michael at least ten (10) Business Days' prior
written notice specifying in reasonable detail the specific conduct of Michael
that it considers grounds for Dismissal For Cause and the specific provision of
the definition of "Dismissal For Cause" upon which it relies. Michael's
employment with the Company shall terminate as of the tenth Business Day after
such notice is given, or such other date as the parties mutually agree. Should
Michael dispute the basis for such termination in a written notice given to the
Company on or before his termination date, the parties shall meet and endeavor
to resolve the dispute amicably within twenty (20) Business Days after Michael's
notice is given. If they cannot so resolve the dispute within such twenty (20)
Business Days after Michael's notice is given, Michael and the Company shall
submit the dispute to binding arbitration in accordance with Section 7.1. The
decision rendered in such arbitration shall be final and binding on both Michael
and the Company for all purposes. If the arbitrators determine that the Company
did not have a proper basis on
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which to terminate Michael's employment as a Dismissal For Cause within the
meaning of this Agreement, the termination of Michael's employment shall be
treated for all purposes of this Agreement as a Dismissal Without Cause. In
addition to any other rights which a party may have, the party prevailing in
such arbitration proceeding shall be entitled to recover from the losing party
any and all of the expenses incurred by the prevailing party in such proceeding,
including reasonable attorney's fees.
ARTICLE VII
RESOLUTION OF DISPUTES
SECTION 7.1. ARBITRATION.
Except as provided in Section 7.2, all controversies arising out of or
relating to this Agreement or the breach hereof shall be settled by arbitration
in the County of Nassau, State of New York, in accordance with the rules of the
American Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. Any
arbitration hereunder shall be before three (3) arbitrators.
SECTION 7.2. EQUITABLE REMEDIES.
Notwithstanding the provisions of Section 7.1, any proceeding for
injunctive relief or specific performance in connection with this Agreement
shall be commenced in Supreme Court of the State of New York, County of Nassau,
and each of the parties hereby accepts the exclusive jurisdiction of such Court
for such purpose; provided, however, that the petitioner may commence such
proceeding in such other court as may
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be necessary, in the petitioner's judgment, in order to more effectively or
expeditiously obtain personal jurisdiction over the respondent.
ARTICLE VIII
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
"Affiliates" shall mean all entities controlling, controlled by or
under common control with the Company.
"Appraiser" or "Appraisers" shall have the meaning specified in Section
3.5(b).
"Board of Directors" shall mean the Board of Directors of the Company.
"Business Day" shall mean any day on which the Company is scheduled to
be open for business.
"Class A Stock" shall mean the Class A Common Stock of the Company.
"Class A Stock Redemption" shall have the meaning specified in Section
5.2.
"Class B Stock" shall mean the Class B Common Stock of the Company.
"Class B Stock Redemption" shall have the meaning specified in Section
5.2.
"Closing Price" shall mean the last-quoted price at which shares of
Class A Stock were traded at the close of business on a national securities
exchange or NASDAQ on any day on which shares of the Class A Stock were publicly
held.
"CMP Business" shall mean any publication, product, service or business
(a) which the CMP Group publishes, produces, provides or engages in or (b) which
the CMP Group has a bona fide plan or intention to publish, produce, provide or
engage in within the succeeding 12-month period, the research and development of
which the CMP Group
29
<PAGE> 33
has devoted substantive time and attention to, and which plan or intention
Michael has actual knowledge of before he engages in any activity competitive
with such CMP Business as contemplated by clause (A) of Section 2.3(a).
"CMP Group" shall mean the Company or any of its Affiliates.
"Common Stock" shall mean all the classes of the Common Stock of the
Company collectively.
"Controlling Stockholders" shall mean the members of the Leeds Family
who hold shares of capital stock of the Company collectively representing a
majority of the votes that may be cast on any matter on which stockholders of
the Company shall be entitled to vote.
"Direct Competitor" shall mean a business enterprise that produces or
operates, or owns directly or indirectly an interest of twenty percent (20%) or
more in, one or more Directly Competitive Businesses.
"Directly Competitive Business" shall mean any competitive publication,
product, service or business (a) the target audience of which is substantially
the same as the target audience of a CMP Business or (b) forty percent (40%) or
more of the annual revenue of which is derived from substantially the same
customers as a CMP Business derives twenty percent (20%) or more of its annual
revenue.
"Dismissal For Cause" shall mean the termination of Michael's employment
with the Company by the Board of Directors for (i) the willful and continued
failure of Michael substantially to perform his duties as an officer and
employee of the Company or comply with the written policies of the Company after
the Company has delivered to Michael a written demand for substantial
performance or compliance that specifies such failure in reasonable detail; (ii)
illegal conduct or gross misconduct by Michael, in either case that is willful
and results (or is reasonably likely to result) in material damage to the
30
<PAGE> 34
business or reputation of the Company; or (iii) the resignation by Michael from
his employment following his act or omission which would constitute grounds for
Dismissal For Cause hereunder. No act or failure to act on the part of Michael
(other than non-compliance with lawful instructions given to Michael by the
Company) shall be considered "willful" unless it is done or omitted to be done
by him in bad faith or without reasonable belief that his action or omission was
in the best interests of the Company. Any act or failure to act that is pursuant
to resolution duly adopted by the Board of Directors shall be conclusively
presumed to be done or omitted to be done by Michael in good faith and in the
best interests of the Company.
"Dismissal Without Cause" shall mean the termination of Michael's
employment by the Company on any grounds other than grounds for Dismissal For
Cause or as a result of his Permanent Disability.
"Fair Market Value" shall mean the fair market value of a share of
Class A Stock, which shall be the Closing Price on the trading day immediately
preceding the date of determination of fair market value or, if the Company is
privately held, the best estimate of the fair market value of a share of Class A
Stock as of the last day of the month immediately preceding the month in which
notice to buy or sell a share of Class A Stock is given, as determined with
reference to publicly held companies comparable to the Company.
"Financial Statements" shall mean the combined or consolidated
financial statements of the Company and its Affiliates prepared in accordance
with generally accepted accounting principles and audited by the Company's
independent certified public accountants.
"Free Cash Flow" of the Company with respect to any fiscal year shall
mean the combined or consolidated net income of the Company for such year as
reflected in the
31
<PAGE> 35
Financial Statements, adjusted so as (a) to exclude the amount, if any, that, in
determining such combined or consolidated net income, represented (i) an expense
for depreciation and/or amortization or (ii) a provision or credit for federal,
state, local or foreign income taxes; and (b) to include the amount, if any, of
cash payments that the Company actually made in such fiscal year (i) for
federal, state, local and foreign income taxes owed by the Company (and, if the
Company is an S Corporation, in distributions to its stockholders for the
payment of federal, state, local and foreign taxes owed by such stockholders
with respect to the Company's income), (ii) for capital expenditures, (iii)
pursuant to the Company's 1988 Equity Appreciation Plan or (iv) as required
under the terms of the Company's then-existing financing arrangements to reduce
the principal amount of indebtedness. The Company's determination of Free Cash
Flow shall be conclusive and binding for all purposes of this Agreement provided
that the Company's certified public accountants render a written opinion that
such determination presents fairly, in all material respects, the Free Cash Flow
of the Company as herein defined. (A hypothetical illustration of the
calculation of Free Cash Flow is set forth on Schedule VIII hereto.)
"Indirect Competitor" shall mean a business enterprise that does not
produce or operate, or own directly or indirectly an interest in, any Directly
Competitive Businesses but produces or operates, or owns directly or indirectly
an interest of twenty percent (20%) or more in, one or more Indirectly
Competitive Businesses.
"Indirectly Competitive Business" shall mean any competitive or
potentially competitive publication, product, service or business which derives
from twenty percent (20%) to but not including forty percent (40%) of its annual
revenue from substantially the same customers as a CMP Business derives twenty
percent (20%) or more of its annual revenue.
"Key Senior Executive" shall mean a Company employee holding a position
of
32
<PAGE> 36
responsibility no lower than that currently titled President of the Company.
"Leeds Family" shall mean Gerard G. Leeds, Liselotte J. Leeds, Michael,
Richard A. Leeds, Daniel H. Leeds, Greg Jobin-Leeds and Jennifer Leeds-Lukehart.
"Negative Pledge Agreement" shall mean that certain Negative Pledge
Agreement originally dated as of July 15, 1993 by and among Gerry, Lilo and
Fleet National Bank (f/k/a/ Shawmut Bank Connecticut, National Association), as
most recently amended and confirmed by Gerry, Lilo, Michael and Daniel H. Leeds
to Fleet National Bank and The Chase Manhattan Bank on November 14, 1996.
"Option Agreement" shall mean that certain Option Agreement entered
into as of the date hereof by and between the Company and Michael.
"Option Shares" shall mean the shares of Class A Stock owned by Michael
pursuant to the Option Agreement.
"Original Price" shall mean the per-share price at which Michael shall
have purchased the Restricted Shares from Gerry and Lilo, as adjusted to take
into account any changes in the Company's capital structure and any stock
redemptions that may have occurred subsequent to the purchase of such Restricted
Shares by Michael hereunder.
"Permanent Disability" shall mean a physical or mental impairment, as a
result of which Michael shall have been unable, with or without reasonable
accommodation, to perform the essential functions of his employment position for
a period of at least sixteen (16) weeks during any 12-month period.
"Permitted Transferee" shall mean a spouse, child, or grandchild of
Michael, or an entity (e.g., a trust, corporation or partnership) in which
Michael has the majority voting interest and of which the beneficiaries are a
spouse and/or one or more children or grandchildren of Michael.
"Restricted Shares" shall mean the shares of Class A Stock which
Michael shall
33
<PAGE> 37
have purchased from Gerry and Lilo pursuant to the Share Purchase
Agreement, plus any additional shares of Class A Stock that may be issued from
time to time with respect to such Restricted Shares as a result of any changes
in the Company's capital structure as contemplated in Section 5.1, and less any
Restricted Shares that may be canceled or redeemed from time to time as a result
of any such changes in the Company's capital structure or of any stock
redemptions as contemplated in Section 5.2.
"Share Purchase Agreement" shall mean that certain Share Purchase
Agreement entered into as of the date hereof by and among Gerry, Lilo and
Michael.
"Shareholders' Agreement" shall mean that certain Shareholders'
Agreement entered into as of June 30, 1991 by and among the Company, certain of
the Affiliates and the members of the Leeds Family.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. LEGEND ON CERTIFICATES.
Upon the execution of this Agreement, each certificate evidencing any of
the Restricted Shares held by Michael shall be endorsed as follows:
The shares of stock evidenced by this certificate are subject to the
restrictions of and are transferable only upon compliance with the
provisions of a certain Stockholders' Agreement entered into by and among
Gerard G. Leeds, Liselotte J. Leeds, Michael S. Leeds and the Company. A
copy of such Agreement is on file in the office of the Company.
In addition, all such certificates shall bear such other legends as, in
the opinion of the Company's counsel, are necessary or appropriate to ensure
compliance with all applicable federal and state securities laws.
34
<PAGE> 38
SECTION 9.2. PERMITTED TRANSFEREES; REPRESENTATIVE AND SUCCESSORS IN INTEREST.
(a) PERMITTED TRANSFEREES. Subject to Section 9.4 but notwithstanding
any other provision of this Agreement, Michael shall be permitted to sell, give
or bequeath all or any portion of the Restricted Shares or interest therein, or
pass such Restricted Shares or interest by means of intestate succession or
otherwise, either outright or in trust, to a Permitted Transferee, provided that
such transfer shall be implemented in a manner acceptable to legal counsel for
the Company. In case of any such transfer by Michael, each Permitted Transferee
shall receive and hold the transferred Restricted Shares subject to all the
terms and conditions of this Agreement, and there shall be no further transfer
of such Restricted Shares except by such Permitted Transferee to another
Permitted Transferee in accordance with the terms of this Agreement. Before
Michael transfers any Restricted Shares to a Permitted Transferee, and before
any Permitted Transferee transfers any Restricted Shares to another Permitted
Transferee, Michael or the transferring Permitted Transferee, as the case may
be, shall give the Company written notice of such intended transfer. Any
Permitted Transferee shall, to the extent of the Restricted Shares transferred,
succeed to all the rights and obligations of the transferor under this Agreement
and shall become bound by all the terms and conditions hereof; provided that, as
a condition precedent to a Permitted Transferee's exercising any rights under
this Agreement and to the Company's obligation to change its records to reflect
the record ownership of such Restricted Shares in the name of such Permitted
Transferee, the Permitted Transferee shall execute such documents and
instruments as may reasonably be required by legal counsel to the Company.
Unless otherwise expressly provided in this Agreement, any reference herein to a
right or obligation of Michael to sell or receive payment for any shares of
Class A Stock shall be deemed to refer equally to any Permitted Transferee, and
any limitations herein with respect to the number or category of
35
<PAGE> 39
shares of Class A Stock which Michael shall have a right or obligation to sell
in any calendar year shall apply to Michael and all Permitted Transferees as a
group.
(b) REPRESENTATIVE AND SUCCESSORS IN INTEREST. Except as may be
otherwise specifically provided in this Agreement, in the event of Michael's
death or incapacity his representative and/or successors in interest shall
succeed to all his rights and obligations under this Agreement and be bound by
all the terms and conditions hereof, and they shall be entitled to exercise such
rights, and shall be required to fulfill such obligations, in the same manner
and to the same extent that Michael would have been so entitled or required but
for his death or incapacity.
SECTION 9.3. FURTHER ASSURANCES.
Each of the parties hereto, upon request of another party, shall take
all such actions and execute and deliver all such further instruments of sale,
assignment, conveyance, transfer and exchange, and all such other documents and
agreements, as may be necessary or appropriate to assure, complete and evidence
the full and effective sale, assignment, transfer, conveyance and exchange of
the Restricted Shares as herein required and as may otherwise be necessary or
appropriate to comply with the terms and conditions of this Agreement. In the
event a party shall not take all such actions or execute or deliver all such
further instruments, then and in that event each such party hereby appoints the
Company such party's agent and attorney-in-fact for the purpose of executing and
delivering (a) any and all documents necessary to convey and/or exchange the
Restricted Shares pursuant to the provisions of this Agreement, any conveyance
or exchange so made fully divesting the party whose interest is so conveyed of
all right, title or equity in or to the Restricted Shares formerly owned by such
party, and (b) any and all other documents, instruments, agreements and other
writings necessary to effectuate the terms
36
<PAGE> 40
of this Agreement. The powers of attorney herein granted, being coupled with an
interest, are irrevocable and shall not be revoked by the death, dissolution or
incapacity of any party hereto or for any other reason. Each party hereto hereby
releases any other party who conveys or exchanges the Restricted Shares formerly
owned by such party as provided in this Section 9.3 from any and all claims and
liabilities for or resulting from the conveying or exchanging of such Restricted
Shares.
SECTION 9.4. S CORPORATION.
It is intended that for federal income tax purposes the Company will
continue to qualify as an "S Corporation" as defined in Section 1361 of the
Internal Revenue Code or any successor provision of the federal income tax laws.
Accordingly, the Company and Michael shall execute and keep in full force and
effect the consent described in Section 1362(a)(2) of the Internal Revenue Code
or any successor provision until such time as the Company and the Controlling
Stockholders determine not to continue to qualify the Company as an S
Corporation. In addition, notwithstanding the provisions of any other Section of
this Agreement, no transfer of any shares of Class A Stock shall be made to any
person or entity, nor shall Michael by action or inaction cause any
circumstances to exist, which would disqualify the Company as an S Corporation.
SECTION 9.5. CREDIT FACILITIES.
It is understood and acknowledged that one or more banks or lending
institutions of the Company may from time to time require, as a condition to
extending or continuing to extend credit to the Company, that persons who are
both stockholders and members of management of the Company execute and deliver
to such banks or lending institutions certain assurances and agreements such as
the Negative Pledge Agreement. For as long
37
<PAGE> 41
as he is a Key Senior Executive, Michael shall, if requested by the Company,
promptly take all such actions and execute and deliver all such documents
containing such assurances and agreements (other than personal guarantees) as
may be reasonably required by such banks or lending institutions, on the same
basis and in substantially the same form and manner as other persons who are
both stockholders and members of management of the Company.
SECTION 9.6. OTHER TRANSFERS.
In the event of any transfer of any Restricted Shares by Michael, his
representative, any successor in interest or any Permitted Transferee, by
operation of law (other than transfers occasioned by an individual's death) or
court order, including but not limited to any foreclosure, adjudication in
bankruptcy, appointment of a receiver of the assets of Michael, or levy and
execution, Michael shall give immediate notice thereof to the Company, including
in such notice the date and circumstances of such transfer and the name and
address of the transferee. Gerry and Lilo or their designees, at their option,
upon giving sixty (60) days' prior written notice to such transferee, shall have
the right to purchase such Restricted Shares at the Original Price. The purchase
price for any such Restricted Shares shall be paid in full at the closing, which
shall not be later than thirty (30) Business Days after such notice to purchase
is given, at such time and place as the purchaser(s) may designate.
SECTION 9.7. ENTIRE AGREEMENT; BINDING EFFECT.
This Agreement contains all of the terms agreed upon by the parties
with respect to the subject matter hereof and replaces and supersedes any and
all prior agreements, written or oral, between the parties relating to the
Restricted Shares (except for the Option
38
<PAGE> 42
Agreement to the extent its terms are not inconsistent herewith). No promises,
agreements or representations with respect to the matters herein contained shall
be binding upon any of the parties unless set forth herein. This Agreement shall
be binding upon and inure to the benefit of the parties and their respective
heirs, representatives, successors and permitted assigns.
SECTION 9.8. AMENDMENT.
No provision of this Agreement may be amended or waived except by a
writing making reference to this Agreement and signed by the party against whom
the enforcement of such amendment or waiver is sought.
SECTION 9.9. APPLICABLE LAW.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York, without reference to its
principles regarding choice or conflicts of law, and in accordance with and
consistent with the Company's election to be treated as an S Corporation.
SECTION 9.10 SEVERABILITY.
Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law and
the Company's S Corporation election, but if any provisions hereof shall be
prohibited by or invalid under any such law or the Company's S Corporation
election, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating or nullifying the remainder of such
provision or any other provision of this Agreement.
39
<PAGE> 43
SECTION 9.11. NO WAIVER.
No delay or omission by any party in exercising or enforcing any right
hereunder shall operate as a waiver of such right, and a waiver on one occasion
shall not be construed as a waiver of any right or remedy on any future
occasion.
SECTION 9.12. NOTICES.
All notices, requests, consents, designations and demands required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given (a) when personally delivered to an individual
party or to an authorized officer of a corporate party, whether by messenger,
courier or other person, (b) on the second Business Day after the date it is
sent by certified or registered mail, return receipt requested, or (c) on the
next Business Day after the date it is sent via telefacsimile (provided it is
actually received and is not materially illegible), as follows:
If to the Company:
CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Attention: President
Fax: (516) 562-5718
with a copy to:
CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Attention: General Counsel
Fax: (516) 562-7123
40
<PAGE> 44
If to Michael:
Michael S. Leeds
c/o CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Fax: (516) 562-5718
with a copy to Michael at his last known address as reflected on the
records of the Company
If to Gerry:
Gerard G. Leeds
c/o CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Fax: (516) 562-7123
If to Lilo:
Liselotte J. Leeds
c/o CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Fax: (516) 562-7123
or to such other mail or facsimile address as the recipient party shall have
last designated by notice given to the other in accordance herewith.
SECTION 9.13. ASSIGNMENT.
Except as expressly provided in this Agreement, no party may assign any
rights or delegate any obligations or liabilities hereunder without the prior
written consent of the other parties, except that each of Gerry and Lilo may
assign any of his or her rights and delegate any of his or her obligations or
liabilities to the other, and the Company may
41
<PAGE> 45
assign any of its rights and delegate any of its duties to an entity that
controls, is controlled by or is under common control with the Company;
provided, however, that no such assignment or delegation shall relieve such
assignor from his, her or its obligations or liabilities hereunder.
SECTION 9.14. SURVIVAL.
This Agreement shall survive any merger, sale or other disposition of
the Company.
SECTION 9.15. GENDER AND NUMBER.
Except when otherwise indicated by the context, references herein to
one gender shall include the other genders, and references herein to the plural
shall include the singular.
SECTION 9.16. DATES.
If any date referenced in this Agreement falls on a day that is not a
Business Day, the next succeeding Business Day shall be deemed substituted for
such date.
SECTION 9.17. HEADINGS.
The headings herein are for convenience of reference only and shall not
be considered in construing this Agreement.
42
<PAGE> 46
SECTION 9.18. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed as an original and all of which shall together constitute
one and the same instrument.
IN WITNESS WHEREOF, the individual parties have executed this Agreement
and the Company has caused this Agreement to be executed by an officer thereunto
duly authorized on the day and year first above written.
CMP MEDIA INC.
By /s/GERALD G. LEEDS
-------------------------------------
Name: GERALD G. LEEDS
Title: Co-Chairperson
Attest:
/s/ROBERT D. MARAFIOTI
-----------------------------
(CORPORATE SEAL)
[Imprint on original]
/s/GERARD G. LEEDS
- ---------------------------------
GERARD G. LEEDS
/s/LISELOTTE J. LEEDS
- --------------------------------
LISELOTTE J. LEEDS
/s/MICHAEL S. LEEDS
- -------------------------------
MICHAEL S. LEEDS
<PAGE> 1
EXHIBIT 10.4
OPTION AGREEMENT
BY AND BETWEEN
CMP MEDIA INC. AND MICHAEL S. LEEDS
DL&A
NOVEMBER 27, 1996
<PAGE> 2
OPTION AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I - OPTIONS
SECTION 1.1 Grant of Options.............................. 2
SECTION 1.2 Option Price.................................. 2
ARTICLE II - CONFIDENTIALITY; NON-COMPETITION
SECTION 2.1 Protection of Company's Business Interests.... 3
SECTION 2.2 Non-Disclosure and Non-Use of Confidential
Information................................. 3
SECTION 2.3 Protection from Unfair Competition............ 4
SECTION 2.4 Prior Notice; Opportunity to Cure............. 7
SECTION 2.5 Other Covenants............................... 9
SECTION 2.6 Confidentiality of Agreement.................. 9
SECTION 2.7 Relief for Breach............................. 10
SECTION 2.8 Separate Covenants............................ 10
ARTICLE III - VESTING OF OPTIONS
SECTION 3.1 Vesting on December 31, 2005.................. 11
SECTION 3.2 Acceleration of Vesting: First Series......... 11
SECTION 3.3 Acceleration of Vesting: Second Series........ 12
SECTION 3.4 Acceleration of Vesting: Third Series......... 13
SECTION 3.5 Acceleration of Vesting: Fourth Series........ 14
SECTION 3.6 Satisfaction of Conditions.................... 15
ARTICLE IV - EXERCISE OF OPTIONS
SECTION 4.1 Exercise of Options........................... 18
SECTION 4.2 Withholding Taxes............................. 19
SECTION 4.3 Determination of Fair Market Value............ 20
SECTION 4.4 Non-Transferability of Options................ 20
SECTION 4.5 Michael's Representative...................... 20
ARTICLE V - EXPIRATION OF OPTIONS
SECTION 5.1 Expiration of Options......................... 21
SECTION 5.2 Expiration upon Death, Permanent Disability,
Dismissal Without Cause or Resignation For
Good Reason................................. 22
SECTION 5.3 Expiration upon Voluntary Resignation,
Dismissal For Cause or Competition.......... 23
SECTION 5.4 Change in Control............................. 23
</TABLE>
<PAGE> 3
ARTICLE VI - TRANSFERABILITY OF SHARES AT TIME WHEN COMPANY IS
PRIVATELY HELD AND THERE IS NO PUBLIC MARKET
SECTION 6.1 General Restriction on Transfer.....................24
SECTION 6.2 Sale to Satisfy Income Tax Liabilities..............25
SECTION 6.3 Sale After December 31, 2005........................26
SECTION 6.4 Sale After Death or Permanent Disability............26
SECTION 6.5 Sale After Dismissal Without Cause or
Resignation For Good Reason.......................27
SECTION 6.6 Sale After Voluntary Resignation, Dismissal For
Good Cause, or Competition........................28
SECTION 6.7 Purchase Price of Option Shares.....................29
(a) Price to be Paid for Option Shares..................29
(b) Determination of Fair Market Value..................29
(c) Payment of Purchase Price...........................30
(i) Lump Sum or Installments...................30
(ii) Initial Installment........................30
(iii) Cash Flow Limitations......................31
(d) Closing of Transaction..............................32
SECTION 6.8 Assignment and Delegation by the Company to
Class B Stockholders..............................33
SECTION 6.9 Tag-Along rights -- Drag-Along Rights...............33
ARTICLE VII - TRANSFERABILITY OF SHARES AT TIME COMPANY'S SHARES
ARE PUBLICLY TRADED
SECTION 7.1 General Restriction on Transfer.....................35
SECTION 7.2 Sale to Satisfy Income Tax Liabilities..............35
SECTION 7.3 Sale on or before December 31, 2005
(a) Minimum Market Capitalization.......................36
(b) Maximum Number of Shares............................36
SECTION 7.4 Sale After December 31, 2005........................37
SECTION 7.5 Sale After Death or Disability......................37
SECTION 7.6 Tender, Merger, Consolidation.......................38
SECTION 7.7 Compliance with Securities Laws.....................39
ARTICLE VIII - FUTURE CHANGES IN CAPITAL STRUCTURE AND REDEMPTION
OF SHARES
SECTION 8.1 Changes in Capital Structure........................39
SECTION 8.2 Redemption of Class B Stock.........................40
ARTICLE IX - PROCEDURE TO BE FOLLOWED IN CASE OF RESIGNATION FOR
GOOD REASON OR DISMISSAL FOR CAUSE
SECTION 9.1 Resignation for Good Reason.........................41
SECTION 9.2 Dismissal For Cause.................................42
<PAGE> 4
ARTICLE X - RESOLUTION OF DISPUTES
SECTION 10.1 Arbitration.........................................43
SECTION 10.2 Equitable Relief....................................43
ARTICLE XI - REPRESENTATIONS AND WARRANTIES
SECTION 11.1 Representations of the Company......................44
SECTION 11.2 Representations of Michael..........................44
ARTICLE XII - DEFINITIONS...................................................45
ARTICLE XIII - MISCELLANEOUS PROVISIONS
SECTION 13.1 Legend on Certificates..............................51
SECTION 13.2 Permitted Transferees; Representative and
Successors in Interest............................52
SECTION 13.3 Further Assurances..................................53
SECTION 13.4 S Corporation.......................................54
SECTION 13.5 Credit Facilities...................................55
SECTION 13.6 Accelerated Vesting Chart...........................55
SECTION 13.7 Entire Agreement; Binding Effect....................55
SECTION 13.8 Amendment...........................................56
SECTION 13.9 Applicable Law......................................56
SECTION 13.10 Severability.......................................56
SECTION 13.11 No Waiver..........................................56
SECTION 13.12 Notices............................................57
SECTION 13.13 Assignment.........................................58
SECTION 13.14 Survival...........................................58
SECTION 13.15 Gender and Number..................................58
SECTION 13.16 Dates..............................................58
SECTION 13.17 Headings...........................................59
SECTION 13.18 Counterparts.......................................59
SCHEDULE 5.2(b)
Hypothetical Illustration of Calculation of Options Vesting
Under Section 5.2(b)..............................................60
SCHEDULE XI
Hypothetical Illustration of Calculation of Free Cash Flow..........61
SCHEDULE 13.6
Accelerated Vesting Chart...........................................62
<PAGE> 5
OPTION AGREEMENT
This Option Agreement, made and entered into on this 27th day of
November, 1996, by and between CMP Media Inc., a Delaware corporation (the
"Company"), and Michael S. Leeds ("Michael ).
W I T N E S S E T H:
WHEREAS, Michael is a key senior executive of the Company; and
WHEREAS, the Company desires to create substantial incentives for
Michael to (i) cause the Company to grow continuously and successfully in sales,
profits and profitability, (ii) take a long-term view of the Company's future,
(iii) help the Company attain its long-term goals, including its diversity goals
as set forth in its corporate Principles, and (iv) remain with the Company for
the long term; and
WHEREAS, to create such incentives, the Company desires to provide
Michael with the opportunity to purchase shares of the Company's Class A Common
Stock, and Michael desires to have the opportunity to purchase shares of such
Class A Common Stock;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each of the parties, the parties
hereto hereby covenant and agree, as follows:
1
<PAGE> 6
ARTICLE I
OPTIONS
SECTION 1.1. GRANT OF OPTIONS.
Subject to the terms and conditions of this Agreement, the Company
hereby grants Michael the right to purchase from the Company up to two thousand
one hundred twelve (2,112) shares of the Class A Stock (which number of shares
equals approximately four percent (4%) of the number of shares of the Company's
Common Stock issued and outstanding as of the date hereof).
SECTION 1.2. OPTION PRICE.
The Option Price shall be the fair market value of a share of the
Company's Common Stock on the date hereof. Such fair market value shall be
calculated by dividing the aggregate fair market value of all the Common Stock,
as determined by an independent appraisal conducted by Furman Selz L.L.C., by
the total number of shares of the Common Stock issued and outstanding as of the
date hereof.
ARTICLE II
CONFIDENTIALITY; NON-COMPETITION
In consideration of the grant of the Options by the Company hereunder,
and as a specific inducement to the Company to enter into this Agreement,
Michael hereby accepts and agrees to the provisions of this Article II and
acknowledges that such provisions are necessary and appropriate for the
reasonable protection of the Company's property, investments, business
relationships, economic advantages and goodwill.
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SECTION 2.1. PROTECTION OF COMPANY'S BUSINESS INTERESTS.
As a Key Senior Executive, Michael has been intimately involved in the
management of all aspects of the business of the Company and its Affiliates and
has been a major strategist in planning and implementing its business expansion.
In the course of his long employment with the Company, Michael has developed
special skills, knowledge and abilities in the publishing field which are of a
uniquely personal nature. He has also acquired detailed knowledge of the
internal operations of the Company and its Affiliates and highly confidential
information concerning the national and international business of the Company
and its Affiliates. In addition, he has been afforded the opportunity to develop
special relationships of confidence and trust with the customers, suppliers,
consultants, employees, officers, directors and stockholders of the Company and
its Affiliates. Because of his continuing responsibilities with the Company and
its Affiliates, including his involvement in strategic planning and the
evaluation of proposed investments, it is expected that Michael will continue to
be entrusted with confidential information and will continue to have the
opportunity to develop such special relationships. The parties acknowledge and
agree that the Company would be unfairly and irreparably damaged if Michael were
to take any of such skills, knowledge, information or relationships, which he
has acquired and developed during the course of his employment with the Company,
and use them to the detriment of the Company and its Affiliates.
SECTION 2.2. NON-DISCLOSURE AND NON-USE OF CONFIDENTIAL INFORMATION.
(a) Michael represents, warrants, covenants and agrees that, without
the Company's express or implied consent while employed or, after termination,
without the
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prior written consent of the Board of Directors, he will not willfully or
knowingly at any time directly or indirectly disclose, communicate or divulge,
or use for the benefit of himself or of any third party, any of the business or
trade secrets or other confidential information of the CMP Group including,
solely by way of illustration but not of limitation, their business strategies,
business plans, budgets, pricing, selling techniques, marketing techniques,
operating systems, financial systems, financial data, procedures, manuals,
confidential reports, personnel records, potential acquisitions, potential
business expansions, credit and financial data of their suppliers and of their
present and prospective customers, data about competitors, new
product-development initiatives, custom research and new product or service
concepts and marketing strategy.
(b) Any and all materials of or concerning the CMP Group or their
business or affairs, including without limitation files, memoranda, notes,
correspondence, lists, records, video reproductions, computer tapes and disks,
design and other documents, and data storage and retrieval materials (and all
copies, compilations and summaries thereof), and any and all property of the CMP
Group, including without limitation equipment, software, keys, business cards
and credit cards, that are in Michael's custody or control shall be delivered to
the Company at the time Michael's employment with the Company terminates for any
reason. Michael shall not destroy any such materials or property, shall not
retain any copies thereof and shall certify in writing to the Company upon
request that all such materials and property have been delivered to the Company.
SECTION 2.3. PROTECTION FROM UNFAIR COMPETITION.
(a) For as long as Michael is employed by the CMP Group and for the
greater of (i) a period of two (2) years after termination of his employment or
(ii) as long as Michael or any Permitted Transferee owns any Option Shares,
Michael shall not engage
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in competition with the CMP Group. For the purposes of this Agreement, Michael
shall be deemed to engage in competition with the CMP Group if Michael does any
of the following, whether or not in exchange for consideration, without the
Company's express or implied consent while employed or without the Company's
prior written consent after termination:
(A) On his own behalf or on behalf of any other person or
entity, (1) participates or is involved in or has direct responsibility for the
day-to-day management or operation of a Directly Competitive Business, an
Indirectly Competitive Business or any material function thereof (e.g.,
advertising, circulation, production and the like); (2) owns, in whole or in
part, beneficially or of record, directly or indirectly, an equity interest (or
an interest convertible into equity) in a Directly Competitive Business or a
Direct Competitor; (3) renders services as a director, officer, employee,
consultant, advisor, agent or independent sales representative to a Direct
Competitor; or (4) renders services as a director, officer, employee,
consultant, advisor, agent or independent sales representative to an Indirect
Competitor unless Michael has no responsibility for or participation or
involvement in any Indirectly Competitive Business of such Indirect Competitor,
provided, however, that Michael may have supervisory, advisory, consulting or
sales-representative responsibility over an Indirectly Competitive Business if
the revenue of all Indirectly Competitive Businesses of such Indirect Competitor
over which Michael has such responsibility represents no more than fifteen
percent (15%) of the total revenue over which Michael has such responsibility.
(B) Solicits the service of any employee of the CMP Group for
Michael's own benefit or for the benefit of any person or entity other than the
CMP Group, or induces or helps to induce any such employee to leave employment
with the CMP Group.
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(C) Assists, induces or helps any employee or former employee
of the CMP Group or any other person or entity to engage in competition with the
CMP Group or any of its business activities, provided that the giving of a
favorable reference by Michael on behalf of such former employee shall not be
prohibited by this clause (C).
(D) Employs or causes any person or entity other than the CMP
Group to employ any former employee of the CMP Group within one (1) year after
the resignation of such former employee from the CMP Group.
(E) Willfully induces or attempts to induce any customer,
supplier or contractor of the Company to terminate any agreement or arrangement
with the Company, or willfully induces or attempts to induce any customer,
supplier or contractor, or any potential customer, supplier or contractor, of
the Company not to enter into any agreement or arrangement with the Company.
(F) Communicates publicly (other than pursuant to subpoena in
a legal proceeding) or to the press, or writes or produces for publication in
any medium, on the subject of, or with express or implied reference to, the CMP
Group or any of their former, current or future stockholders, directors,
officers or employees in their capacities as such. For the purpose hereof,
"implied reference shall mean a reference that does not expressly name the CMP
Group or any of their former, current or future stockholders, directors,
officers or employees but that nevertheless would be understood by the average
reader or audience-member to refer thereto. It shall not be deemed a violation
of this clause (F) if, after the termination of his employment with the Company,
Michael responds to inquiries from the public or the press solely by stating, in
form or substance, "I do not discuss any matters relating to CMP; please address
your inquiries directly to the company" or Michael communicates the fact that he
was formerly employed by the Company and identifies the positions he held and
the dates thereof.
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(b) Notwithstanding the provisions of paragraph (a) of this Section
2.3, Michael shall not be deemed to be engaged in competition with the CMP Group
solely by reason of Michael's ownership of (i) an equity interest of less than
one-half of one percent (0.5%) in the securities of a Direct Competitor or
Indirect Competitor listed for trading on a national securities exchange or
quoted in the National Market List of NASDAQ or (ii) an interest in a mutual or
other investment fund which owns an interest in a Direct Competitor or Indirect
Competitor, provided that Michael has no influence or control over the selection
of such fund's investment decisions.
SECTION 2.4. PRIOR NOTICE; OPPORTUNITY TO CURE.
(a) Michael shall give the Company written notice at least twenty (20)
Business Days before entering into any relationship or transaction, or engaging
in any activity, or taking or omitting to take any action, which might
reasonably be deemed a breach of any provision of Section 2.2 or Section 2.3,
such notice to include full and complete particulars as to the proposed
relationship, transaction, activity, action or omission, the services or duties
contemplated and such other facts and circumstances as are reasonably necessary
for the Company to make an informed decision. The Company shall advise Michael
in writing, within ten (10) Business Days after such notice is given, of the
Board of Directors' determination as to whether such relationship, transaction,
activity, action or omission would materially breach any of the provisions of
Section 2.2 or Section 2.3. In the event that, for reasons not within his
control, Michael gives the Company less than twenty (20) Business Days' prior
written notice, the Company will endeavor in good faith to advise Michael of the
Board of Directors' determination in less than ten (10) Business Days after such
notice is given, provided that the Company's failure to advise Michael in less
than ten (10) Business Days shall not be deemed to constitute consent to such
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relationship, transaction, activity, action or omission and shall not give rise
to any liability of the Company to Michael or to any third party.
(b) Once the Company has advised Michael in writing that the Board of
Directors has determined that a proposed relationship, transaction, activity,
action or omission would not materially breach any of the provisions of Section
2.2 or Section 2.3, and Michael has thereupon entered into such relationship or
transaction or has begun to engage in such activity or to take or omit to take
such action, the Board of Directors shall have no right to reverse or otherwise
modify its determination; provided, however, that if the nature, scope or terms
of such relationship, transaction, activity, action or omission are to be
modified after such determination is made, then in accordance with paragraph (a)
hereof Michael shall give the Company prior written notice of such modification
and the Company shall advise him in writing, within ten (10) Business Days after
such notice is given, of the Board of Directors' determination as to whether
such relationship, transaction, activity, action or omission, as so modified,
would materially breach any of the provisions of Section 2.2 or Section 2.3.
(c) In the event that, without having given the Company prior notice
pursuant to paragraphs (a) or (b) hereof, Michael enters into any relationship
or transaction or begins to engage in any activity or to take or omit to take
any action that the Board of Directors determines is a material breach of any of
the provisions of Section 2.2 or Section 2.3, the Company shall give Michael
written notice of such determination and, if such breach is continuing, an
opportunity to cure such breach before the Company seeks remedy or relief by
judicial process or arbitration or exercises its rights under Section 6.6(b)
hereof. The opportunity to cure shall be sixty (60) days to the extent such
continuing breach consists of holding an ownership interest in a competitive
business and fifteen (15) days with respect to any other continuing breach.
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SECTION 2.5. OTHER COVENANTS.
(a) For as long as Michael or any Permitted Transferee owns any Option
Shares, Michael shall, if requested by the Company, provide information,
testimony and assistance in connection with the prosecution or defense of any
claims by or against the Company arising out of matters of which he acquired
knowledge while an employee of the Company. The Company shall reimburse Michael
for all reasonable out-of-pocket expenses he incurs in rendering such
assistance.
(b) For as long as Michael or any Permitted Transferee owns any Option
Shares, Michael shall not willfully make any oral or written statement which
reflects adversely upon the character, honesty, credit, efficiency or business
practices of the CMP Group or its former, current or future stockholders,
directors, officers or employees in their capacities as such.
SECTION 2.6. CONFIDENTIALITY OF AGREEMENT.
The terms and conditions of this Agreement shall be kept confidential
by the parties, and none of the parties shall disclose them to any non-party
unless such disclosure is necessitated by (a) legal and/or financial
requirements of the Company, in which case the form of such disclosure shall
first be mutually agreed upon by the Company and Michael, or (b) any arbitration
or other legal proceeding contesting or seeking to enforce any provision or
interpretation of this Agreement (including any deposition or testimony that
either party provides in connection therewith), regardless of whether such
proceeding is initiated by Michael or the Company. Except as provided in the
preceding sentence, and without limiting the generality of the foregoing,
Michael shall not respond to or in any way participate in or contribute to any
public discussion, notice or other publicity concerning or in any way relating
to execution of this Agreement or the
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events (including any negotiations) which led to its execution, and Michael
specifically agrees that he shall not disclose information regarding this
Agreement to any current or former employees of the Company other than those
expressly authorized by the Company to have knowledge hereof. Without limiting
the comprehensive confidentiality agreed to, Michael may disclose this Agreement
to his attorneys, financial advisors and members of his and his spouse's
immediate families, provided he informs them of this confidentiality provision
and they agree to abide by it. Michael hereby agrees that any disclosure by him
of any of the terms and conditions of this Agreement in violation of the
foregoing shall constitute and be treated as a material breach of this Agreement
and Michael shall be responsible for damages occasioned thereby, including but
not limited to reasonable attorneys' fees incurred by the Company to enforce
this Section 2.6.
SECTION 2.7. RELIEF FOR BREACH.
Michael acknowledges and agrees that any breach or anticipatory breach
by him of any of the provisions of this Article II would cause the Company
irreparable injury not compensable by monetary damages alone and that,
accordingly, in any such event, the Company shall be entitled to injunctions,
both preliminary and permanent, enjoining or restraining such breach or
anticipatory breach (and Michael hereby consents to the issuance thereof without
bond by any court of competent jurisdiction), in addition to monetary damages in
such amount as the evidence may show and such other remedies as may be available
at law or in equity.
SECTION 2.8. SEPARATE COVENANTS.
Michael understands and agrees that the covenants contained in this
Article II constitute a series of separate covenants, one for each applicable
state in the United States
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and the District of Columbia, and one for each applicable foreign country. If in
any judicial proceeding a court shall hold unenforceable any of the separate
covenants included in this Article II, then such unenforceable covenant or
covenants shall be deemed limited as necessary or eliminated from the provisions
of this Article II for the purpose of such proceeding to the extent necessary to
permit the remaining separate covenants of this Article II to be enforced in
such proceeding, and to permit such unenforceable covenant or covenants to be
enforced as limited.
ARTICLE III
VESTING OF OPTIONS
SECTION 3.1. VESTING ON DECEMBER 31, 2003.
All Options granted under this Agreement shall vest and become fully
exercisable on December 31, 2003, provided only that Michael is a Key Senior
Executive on such date.
SECTION 3.2. ACCELERATION OF VESTING: FIRST SERIES.
Notwithstanding the provisions of Section 3.1, if on December 31 of any
year from 1997 to and including 2002 (a) Michael is a Key Senior Executive, (b)
the Company's annual Pre-Tax Income was not less than five percent (5%) of its
Net Sales Revenue for both the year ending on such December 31 and the entire
preceding year, and (c) at least two (2) of the full-time executives of the
Company reporting directly to Michael for the entire year ending on such
December 31 were female or, if more than eight (8) full-time executives reported
directly to Michael for the entire year, at least three (3) were female,
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then and in that event Options with respect to two hundred sixty-four (264)
Unexercised Shares (which number equals approximately one half of one percent
(0.5%) of the number of shares of the Company's Common Stock issued and
outstanding as of the date hereof) shall vest and become exercisable as of the
first such December 31 on which all of the three (3) aforementioned conditions
(the "Conditions") are satisfied.
SECTION 3.3. ACCELERATION OF VESTING: SECOND SERIES.
(a) Notwithstanding the provisions of Section 3.1, if on December 31 of
any year from 1999 to and including 2002 the Conditions are satisfied, then and
in that event Options with respect to two hundred sixty-four (264) Unexercised
Shares (which number equals approximately one half of one percent (0.5%) of the
number of shares of the Company's Common Stock issued and outstanding as of the
date hereof) shall vest and become exercisable as of the first such December 31
on which the Conditions are satisfied.
(b) Notwithstanding the provisions of Section 3.1 and paragraph (a) of
this Section 3.3, if on December 31, 1997 or December 31, 1998 the Conditions
are satisfied and, in addition, (i) the Net Sales Revenue of the Company for the
year then ending exceeds $600 million and (ii) the Company's annual Pre-Tax
Income was not less than ten percent (10%) of its Net Sales Revenue for both the
year then ending and the entire preceding year, then and in that event fifty
percent (50%) of the Unexercised Shares referred to in paragraph (a) of this
Section 3.3, or one hundred thirty-two (132) Unexercised Shares, shall
accelerate and shall vest and become exercisable as of the first such December
31 on which all the aforementioned conditions are satisfied.
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SECTION 3.4. ACCELERATION OF VESTING: THIRD SERIES.
(a) Notwithstanding the provisions of Section 3.1, if on December 31,
2001 or December 31, 2002 the Conditions are satisfied, then and in that event
Options with respect to five hundred twenty eight (528) Unexercised Shares
(which number equals approximately one percent (1.0%) of the number of shares of
the Company's Common Stock issued and outstanding as of the date hereof) shall
vest and become exercisable as of the first such December 31 on which the
Conditions are satisfied.
(b) Notwithstanding the provisions of Section 3.1 and paragraph (a) of
this Section 3.4, if on December 31 of any year from 1997 to and including 2000
the Conditions are satisfied and, in addition, (i) the Net Sales Revenue of the
Company for the year then ending exceeds $800 million and (ii) the Company's
annual Pre-Tax Income was not less than ten percent (10%) of its Net Sales
Revenue for both the year then ending and the entire preceding year, then and in
that event Options with respect to twenty-five percent (25%) of the Unexercised
Shares referred to in paragraph (a) of this Section 3.4, or one hundred
thirty-two (132) Unexercised Shares, shall accelerate and shall vest and become
exercisable as of the first such December 31 on which all the aforementioned
conditions are satisfied.
(c) Notwithstanding the provisions of Section 3.1 and paragraph (a) of
this Section 3.4, if on December 31 of any year from 1997 to and including 2000
the Conditions are satisfied and, in addition, (i) at least thirty-one percent
(31%) of the full-time United States employees of the Company holding the
position of Vice President or a higher level position are female or Minority
Group Members and (ii) at least thirty-nine percent (39%) of the most highly
compensated five percent (5%) of all full-time United States employees of the
Company (as measured by projected total income for such year) are female or
Minority Group Members, then and in that event Options with respect to
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another twenty-five percent (25%) of the Unexercised Shares referred to in
paragraph (a) of this Section 3.4, or one hundred thirty-two (132) Unexercised
Shares, shall accelerate and shall vest and become exercisable as of the first
such December 31 on which all the aforementioned conditions are satisfied.
SECTION 3.5. ACCELERATION OF VESTING: FOURTH SERIES.
(a) Notwithstanding the provisions of Section 3.1, if on December 31 of
any year from 1997 to and including 2002 the Conditions are satisfied, the
conditions set forth in Section 3.4(c) are satisfied and, in addition, (i) the
Net Sales Revenue of the Company for the year then ending exceeds $1 billion and
(ii) the Company's annual Pre-Tax Income was not less than ten percent (10%) of
its Net Sales Revenue for both the year then ending and the entire preceding
year, then and in that event Options with respect to five hundred twenty-eight
(528) Unexercised Shares (which number equals approximately one percent (1%) of
the number of shares of the Company's Common Stock issued and outstanding as of
the date hereof) shall vest and become exercisable as of the first such December
31 on which all the aforementioned conditions are satisfied.
(b) Notwithstanding the provisions of Section 3.1, if on December 31 of
any year from 1997 to and including 2002 the Conditions are satisfied, the
conditions set forth in Section 3.4(c) are satisfied and, in addition, (i) the
Net Sales Revenue of the Company for the year then ending exceeds $1.25 billion
and (ii) the Company's annual Pre-Tax Income was not less than ten percent (10%)
of its Net Sales Revenue for both the year then ending and the entire preceding
year, then and in that event Options with respect to two hundred sixty-four
(264) Unexercised Shares (which number equals approximately one half of one
percent (0.5%) of the number of shares of the Company's Common Stock issued and
outstanding as of the date hereof) shall vest and become exercisable as of the
first such December 31 on which all the aforementioned conditions are satisfied.
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(c) Notwithstanding the provisions of Section 3.1, if on December 31 of
any year from 1997 to and including 2002 the Conditions are satisfied, the
conditions set forth in Section 3.4(c) are satisfied and, in addition, (i) the
Net Sales Revenue of the Company for the year then ending exceeds $1.5 billion
and (ii) the Company's annual Pre-Tax Income was not less than ten percent (10%)
of its Net Sales Revenue for both the year then ending and the entire preceding
year, then and in that event Options with respect to one hundred thirty-two
(132) Unexercised Shares (which number equals approximately one quarter of one
percent (0.25%) of the number of shares of the Company's Common Stock issued and
outstanding as of the date hereof) shall vest and become exercisable as of the
first such December 31 on which all the aforementioned conditions are satisfied.
(d) Notwithstanding the provisions of Section 3.1, if on December 31 of
any year from 1997 to and including 2002 the Conditions are satisfied and, in
addition, (i) at least thirty-one percent (31%) of the full-time United States
employees of the Company holding the position of Vice President or a higher
level position are female or Minority Group Members and (ii) at least
forty-three percent (43%) of the most highly compensated five percent (5%) of
all full-time United States employees of the Company (as measured by projected
total income for such year) are female or Minority Group Members, then and in
that event Options with respect to one hundred thirty-two (132) Unexercised
Shares (which number equals approximately one quarter of one percent (0.25%) of
the number of shares of the Company's Common Stock issued and outstanding as of
the date hereof) shall vest and become exercisable as of the first such December
31 on which all the aforementioned conditions are satisfied.
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SECTION 3.6. SATISFACTION OF CONDITIONS.
(a) Notwithstanding anything to the contrary contained in this Article
III, in the event that any of the Conditions set forth in Section 3.2, or any of
the conditions with respect to Net Sales Revenue or Pre-Tax Income set forth in
paragraph (b) of Section 3.3, Section 3.4 or Section 3.5, is not satisfied on
December 31 of any year from 1997 through 2002 by reason of the fact that the
Company took or omitted to take an action for the purpose of preventing or
delaying the accelerated vesting of Options on such December 31 or by reason of
the fact that the Company willfully engaged in one or more transactions for the
direct benefit of any of the holders of the Class B Stock or any affiliate
thereof, which transaction was not on an arms-length basis, commercially
reasonable and in the ordinary course of business or consistent with the
Company's past practice, then and in that event such Condition or condition
shall nevertheless be deemed satisfied as of such December 31 for all purposes
of this Agreement.
(b) Notwithstanding anything to the contrary contained in this Article
III, in the event that the Condition set forth in Section 3.2(a) is not
satisfied on December 31 of any year from 1997 through 2002 by reason of the
fact that the Company demoted Michael to a position lower than that of a Key
Senior Executive at the Company's initiative and without a bona fide business
reason to do so, then and in that event such Condition shall nevertheless be
deemed satisfied as of such December 31 for all purposes of this Agreement. As
used herein, a "bona fide business reason shall include but not be limited to
material deficiencies in Michael's performance of his duties, and actions or
omissions by Michael that would constitute grounds for Dismissal For Cause.
(c) Notwithstanding anything to the contrary contained in this Article
III, (i) in the event that the Condition set forth in Section 3.2(c) is not
satisfied on December 31 of
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any year from 1997 through 2002 by reason of the fact that, during the year
ending on such December 31, the Company, over Michael's protest, removed a
qualified female executive from a position reporting directly to Michael or,
during the final three (3) months of the preceding year, the Company, over
Michael's protest, refused to allow the appointment of a qualified female to
such position, or (ii) in the event that either of the additional conditions set
forth in clauses (i) and (ii) of Section 3.4(c) is not satisfied on December 31
of any year from 1997 through 2000, or either of the additional conditions set
forth in clauses (i) and (ii) of Section 3.5(d) is not satisfied on December 31
of any year from 1997 through 2002, by reason of the fact that, during the year
ending on such December 31, the Company, over Michael's protest, removed a
qualified female or Minority Group Member from a position of Vice President or a
higher level position or, during the final three (3) months of the preceding
year, the Company, over Michael's protest, refused to allow the appointment of a
qualified female or Minority Group Member to such position, then and in that
event such Condition or condition shall nevertheless be deemed satisfied as of
such December 31 for all purposes of this Agreement. As used herein, a
"qualified female or Minority Group Member" shall mean a female or a Minority
Group Member reasonably qualified to perform the duties and discharge the
responsibilities of such position based on her or his abilities, experience and
past performance.
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ARTICLE IV
EXERCISE OF OPTIONS
SECTION 4.1. EXERCISE OF OPTIONS.
Michael may exercise a vested Option by giving the Company written
notice of exercise specifying the number of Unexercised Shares to be acquired
together with payment of the full Option Price for such Unexercised Shares.
Michael may exercise fewer than all the Options which are then exercisable, but
Michael may not exercise a partial Option for less than a full Unexercised
Share. Michael may pay the Option Price for Unexercised Shares to be acquired:
(a) by delivering to the Company United States dollars in cash or by
check, bank draft or wire transfer payable to the order of the Company;
(b) by transferring and delivering to the Company shares of Class A
Stock (to the extent their transfer is not otherwise restricted) having an
aggregate Fair Market Value as of the date of exercise equal to the aggregate
Option Price to be paid; provided that if Michael originally acquired such
shares of Class A Stock pursuant to this Agreement or the Share Purchase
Agreement, he may use such shares to pay the Option Price for Unexercised Shares
only if he has then owned and been entitled to sell such shares of Class A Stock
(subject only to limitations set forth in such Agreements as to the maximum
aggregate number of such shares saleable in any single calendar year and to
pre-conditions to sale set forth in such Agreements as to the market
capitalization of the Company) for at least six (6) months; or
(c) by any combination of the above methods of payment.
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Upon receipt of payment for such Unexercised Shares, the Company shall
duly issue such Unexercised Shares to Michael (whereupon such Unexercised Shares
shall become Option Shares), and the Company shall deliver to Michael stock
certificates representing such Option Shares and bearing the legends
contemplated in Section 13.1.
SECTION 4.2. WITHHOLDING TAXES.
The Company may, in its discretion, require Michael to pay to the
Company upon the exercise of any Option the amount that the Company reasonably
deems to be the minimum amount of tax that the Company is required by federal,
state or local statute to withhold (including FICA) in connection with such
exercise, using the method of calculating tax withholdings that results in the
least amount withheld. Michael may pay the amount of his withholding tax
liability by using any of the methods set forth in Section 4.1. In addition, he
may pay up to the minimum amount of such required tax withholdings (but no more
than such minimum amount):
(a) by transferring and delivering to the Company shares of Class A
Stock (to the extent their transfer is not otherwise restricted) having an
aggregate Fair Market Value as of the date of exercise equal to the amount of
such minimum required tax withholdings, regardless of how long Michael has then
owned or been entitled to sell such shares of Class A Stock or how he acquired
such shares of Class A Stock;
(b) with the prior approval of the Board of Directors, by authorizing
the Company in writing to deduct and retain, from the Unexercised Shares
otherwise to be issued to Michael, Unexercised Shares having an aggregate Fair
Market Value as of the date of exercise equal to such minimum amount of required
tax withholdings; or
(c) by any combination of the above methods of payment.
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SECTION 4.3. DETERMINATION OF FAIR MARKET VALUE.
In the event that, at a time when the Company is privately held and
there is no public market for the Class A Stock, Michael elects to pay the
Option Price for any Unexercised Shares or to pay his withholding tax liability
thereon by transferring and delivering shares of Class A Stock to the Company,
or to pay such withholding tax liability by authorizing the Company to deduct
and retain Unexercised Shares, he shall so advise the Company in his notice of
exercise and the parties shall promptly determine the Fair Market Value of such
shares of Class A Stock pursuant to the procedure set forth in Section 6.7(b).
SECTION 4.4. NON-TRANSFERABILITY OF OPTIONS.
Each vested Option shall be exercisable only by Michael or, in the
event of Michael's death or incapacity, by the representative of Michael duly
authorized pursuant to Section 4.4. No Option or any rights thereunder shall be
transferable other than by will, by the laws of descent and distribution, or for
tax withholding purposes pursuant to Section 4.2, or be subject to attachment,
execution or other similar process. Any attempt by Michael to alienate, assign,
pledge, hypothecate or otherwise dispose of an Option or any right thereunder,
except as provided for herein, and any levy or attachment, execution or similar
process upon the rights or interest conferred under any Option, shall be null
and void.
SECTION 4.5. MICHAEL'S REPRESENTATIVE.
Promptly following execution of this Agreement, Michael shall give the
Company written notice designating one or more representatives who shall be
entitled, following Michael's death or incapacity, to exercise his rights under
this Agreement. Michael may, from time to time, revoke or change his designation
of representatives, without the
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consent of any prior representative, by giving the Company notice of revocation
or change. The last notice duly given to the Company prior to Michael's death or
incapacity shall be controlling. If, at the time of his death or incapacity,
Michael has not properly designated a representative or if the designated
representative does not survive such event, then the following persons or
entity, in the following order, shall be deemed Michael's representative
hereunder: (a) Michael's surviving spouse; (b) if there is no surviving spouse,
then Michael's children, PER STIRPES; (c) if there are no children, then
Michael's estate.
ARTICLE V
EXPIRATION OF OPTIONS
SECTION 5.1. EXPIRATION OF OPTIONS.
Except as provided otherwise in this Article V, every vested but
unexercised Option shall expire and all rights thereunder shall be extinguished
upon the expiration of the later of (a) five (5) years after the date on which
such Option vested or (b) eighteen (18) months after the date on which the
Company makes an initial public offering of shares of the Class A Stock (unless
such Option has already expired by the date of such offering); provided that all
unexercised Options shall expire and be extinguished no later than the close of
business on December 31, 2008.
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SECTION 5.2. EXPIRATION UPON DEATH, PERMANENT DISABILITY, DISMISSAL WITHOUT
CAUSE OR RESIGNATION FOR GOOD REASON.
In the event Michael's employment with the Company terminates as a
result of his death, Permanent Disability, Dismissal Without Cause or
Resignation For Good Reason, then and in that event:
(a) Every vested but unexercised Option shall remain exercisable for
one (1) year from the date of such termination of employment. Upon the
expiration of such 1-year period, any such Options that have not then been
exercised shall expire and all rights thereunder shall be extinguished.
(b) On the date of such termination of Michael's employment, such
number of unvested Options shall vest and become exercisable as shall equal the
number of Options that, but for such termination of employment, would have
vested within twenty-four (24) months after the date of such termination
assuming the Conditions were satisfied at all times during such 24-month period,
multiplied by a fraction the numerator of which shall equal the number of full
months that, on the date of such termination, have elapsed since the nearest
preceding December 31 on which Options vested under paragraph (a) of Section
3.2, Section 3.3, Section 3.4 or Section 3.5, as the case may be (or could have
vested under such paragraphs if the Conditions had been satisfied on such
preceding December 31), and the denominator of which shall be twenty-four (24).
(A hypothetical illustration of the calculation of such number of Options is set
forth on Schedule 5.2(b) hereto.) All Options which vest pursuant to this
paragraph (b) shall remain exercisable for one (1) year from the date of such
termination of Michael's employment. Upon the expiration of such 1-year period,
any such Options that have not then been exercised shall expire and all rights
thereunder shall be extinguished.
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(c) Every Option which neither vested prior to such termination of
Michael's employment nor vests pursuant to paragraph (b) of this Section 5.2
shall expire and all rights thereunder shall be extinguished as of the date of
such termination of employment.
SECTION 5.3. EXPIRATION UPON VOLUNTARY RESIGNATION, DISMISSAL FOR
CAUSE OR COMPETITION.
In the event that Michael's employment with the Company terminates as a
result of his Voluntary Resignation or Dismissal For Cause, or in the event that
Michael materially breaches any of the provisions of Section 2.2 or Section 2.3,
then and in that event all unvested Options and all vested Options that have not
yet been duly exercised shall expire and all rights thereunder shall be
extinguished as of the earlier of the date of such termination of employment or
the date of such breach of Section 2.2 or Section 2.3. In the event that Michael
exercises any Option at a time when he has breached any of the provisions of
Section 2.2 or Section 2.3, such purported exercise shall be null and void, and
Michael shall return to the Company immediately upon demand any and all stock
certificates representing Option Shares issued to him upon exercise of such
Option, in exchange for which the Company shall return to Michael any
consideration he paid for such Option Shares.
SECTION 5.4. CHANGE IN CONTROL.
Notwithstanding anything to the contrary contained in Article III or
this Article V, in the event that there is a Change in Control and, in
connection therewith or subsequently, Michael's employment with the Company
terminates as a result of his Dismissal Without Cause or Resignation For Good
Reason, then and in that event:
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(a) Every vested but unexercised Option shall remain exercisable in
accordance with the provisions of Section 5.1 as if Michael's employment had not
so terminated.
(b) Every unvested Option shall vest in accordance with the provisions
of Article III except that the requirement that Michael be a Key Senior
Executive on December 31, 2003 and any requirement that the Conditions be
satisfied on any December 31 shall be deemed eliminated from this Agreement as
conditions to vesting, and such unvested Options shall vest in accordance with
the provisions of Article III as if Michael's employment as a Key Senior
Executive had not so terminated and as if the Conditions were fully satisfied at
all times through December 31, 2003; provided, however, that in the event of
Michael's death following such termination of employment, Options then unvested
shall vest and become exercisable in accordance with the provisions of Section
5.2(b) as if Michael had been employed as a Key Senior Executive on the date of
his death.
ARTICLE VI
TRANSFERABILITY OF SHARES AT TIME WHEN
COMPANY IS PRIVATELY HELD AND THERE IS NO PUBLIC MARKET
SECTION 6.1. GENERAL RESTRICTION ON TRANSFER.
(a) At any time when the Company is privately held and there is no
public market for the Class A Stock, Michael shall not, voluntarily or
involuntarily, by operation of law or otherwise, sell, mortgage, pledge,
hypothecate, assign as a security, grant or permit to exist or continue a
security interest in, or in any way transfer by gift, will, trust or intestate
succession any of the Option Shares, except to a Permitted Transferee as
provided in Section 13.2(a) or except as specifically provided in this Article
VI. Any
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attempt by Michael to do any of the aforementioned acts or otherwise to
alienate or dispose of any Option Shares, except in accordance with this
Agreement, shall be null and void.
(b) Notwithstanding anything to the contrary contained in this Article
VI, Michael shall not have the right to require the Company to purchase any
Option Shares hereunder unless and until Michael has owned and been entitled to
sell such Option Shares (subject only to limitations set forth in this Agreement
as to the maximum aggregate number of such shares saleable in any single
calendar year and to pre-conditions to sale set forth in this Agreement as to
the market capitalization of the Company) for at least six (6) months prior to
such purchase, and the Company shall have the right, in purchasing Option Shares
from Michael hereunder, to defer the purchase of any such Option Shares until
such time as Michael has so owned and been entitled to sell them for six (6)
months.
SECTION 6.2. SALE TO SATISFY INCOME TAX LIABILITIES.
Subject to the provisions of Section 6.1(b), but notwithstanding the
limitations set forth in any other Section of this Article VI, Michael shall
have the right, exercisable upon notice to the Company given no later than
twelve (12) months after the exercise of any Option, to require the Company to
purchase a number of Option Shares (and/or, to the extent their sale is not
otherwise restricted, Restricted Shares) at the price provided in Section 6.7,
such that the proceeds of such purchase shall equal the amount, if any, of
Michael's additional income tax liability (federal, state and local) actually
occasioned as a result of the exercise of such Option. Such notice shall include
a written certification of such amount by Michael's tax accountant. Any shares
of Class A Stock sold under this Section 6.2 shall be taken into account when
calculating the aggregate number of shares of Class A Stock that Michael shall
be entitled to sell in any single calendar year under
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any other Section of this Article VI, it being the intent of the parties that
shares of Class A Stock sold under this Section 6.2 shall be included in, and
shall not be in addition to, such aggregate number of shares permitted to be
sold in any single calendar year under any such other Section of this Article
VI.
SECTION 6.3. SALE AFTER DECEMBER 31, 2003.
Subject to the provisions of Section 6.1(b), during each and any
calendar year beginning with the calendar year 2004, Michael shall have the
right, exercisable upon notice to the Company given during the first three (3)
months of such calendar year, to require the Company to purchase up to five
hundred twenty-eight (528) shares of his Class A Stock (which number of shares
equals approximately one percent (1%) of the number of shares of the Company's
Common Stock issued and outstanding as of the date hereof), including both
Option Shares and Restricted Shares, at the price provided in Section 6.7(a).
SECTION 6.4. SALE AFTER DEATH OR PERMANENT DISABILITY.
Subject to the provisions of Section 6.1(b), in the event that
Michael's employment with the Company terminates as a result of his death or the
Company terminates his employment by reason of his Permanent Disability (whether
before or after December 31, 2003), then and in that event, notwithstanding the
provisions of Section 6.2 and Section 6.3, the parties shall have the following
rights:
(a) RIGHTS OF MICHAEL TO SELL. Michael or his representative and/or
successors in interest shall have the right, exercisable upon notice to the
Company given no later than one hundred eighty (180) days after such termination
of employment occurs, or during the first three (3) months of any succeeding
calendar year, to require the Company to
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purchase any or all of the Option Shares then owned by Michael or his successors
in interest, at the price provided in Section 6.7(a).
(b) RIGHTS OF COMPANY TO PURCHASE. The Company shall have the right,
exercisable upon notice to Michael or his representative and/or successors in
interest given during the first three (3) months of the third calendar year
after the year in which such termination of employment occurs and/or during the
first three (3) months of any succeeding calendar year, to require Michael or
his representative and/or successors in interest to sell to the Company any or
all of the Option Shares then owned by Michael or any successor in interest, at
the price provided in Section 6.7(a).
SECTION 6.5. SALE AFTER DISMISSAL WITHOUT CAUSE OR RESIGNATION FOR
GOOD REASON.
Subject to the provisions of Section 6.1(b), in the event that
Michael's employment with the Company terminates as a result of his Dismissal
Without Cause or Resignation For Good Reason, then and in that event the parties
shall have the following rights:
(a) RIGHTS OF MICHAEL TO SELL. In addition to his rights under Section
6.3 with respect to sales after December 31, 2003, Michael shall also have the
right prior to December 31, 2003, exercisable upon notice to the Company given
during the first three (3) months of the calendar year after which such
Dismissal Without Cause or Resignation For Good Reason occurs and/or during the
first three (3) months of any succeeding calendar year, to require the Company
to purchase up to five hundred twenty-eight (528) of his Option Shares (which
number of shares equals approximately one percent (1%) of the number of shares
of the Company's Common Stock issued and outstanding as of the date hereof), at
the price provided in Section 6.7(a).
(b) RIGHTS OF COMPANY TO PURCHASE. The Company shall have the right,
exercisable upon notice to Michael given during the first three (3) months of
the third
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calendar year after the year in which such Dismissal Without Cause or
Resignation For Good Reason occurs and/or during the first three (3) months of
any succeeding calendar year, to require Michael to sell to the Company any or
all of the Option Shares then owned by Michael, at the price provided in Section
6.7(a). The death or Permanent Disability of Michael occurring subsequent to his
Dismissal Without Cause or Resignation For Good Reason shall not modify or
affect the rights and obligations of the parties as set forth in this Section
6.5.
SECTION 6.6. SALE AFTER VOLUNTARY RESIGNATION, DISMISSAL FOR CAUSE, OR
COMPETITION.
Subject to the provisions of Section 6.1(b), in the event that (a)
Michael's employment with the Company terminates as a result of his Voluntary
Resignation or Dismissal For Cause or (b) Michael materially breaches any of the
provisions of Section 2.2 or Section 2.3 (whether before or after the
termination of his employment for any reason) and, if the Company has given him
notice to cure, fails to cure such breach on a timely basis, then and in that
event, in addition to any rights that Michael has under Section 6.2 and Section
6.3, the Company shall have the right, exercisable upon notice to Michael given
at any time or times after such event occurs (whether before or after December
31, 2003), to require Michael to sell to the Company any or all of the Option
Shares then owned by Michael, at the price provided in Section 6.7(a). The death
or Permanent Disability of Michael occurring subsequent to his Voluntary
Resignation, Dismissal For Cause or material breach of any of the provisions of
Section 2.2 or Section 2.3 shall not modify or affect the rights and obligations
of the parties as set forth in this Section 6.6.
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SECTION 6.7. PURCHASE PRICE OF OPTION SHARES.
(a) PRICE TO BE PAID FOR OPTION SHARES. The purchase price for any
Option Shares to be purchased pursuant to this Article VI shall be the Fair
Market Value of such Option Shares.
(b) DETERMINATION OF FAIR MARKET VALUE. Within the sixty (60) days
after Michael has given the Company notice of intent to sell Option Shares or
the Company has given Michael notice of intent to purchase Option Shares
pursuant to this Article VI, the Company and Michael shall negotiate in good
faith in an effort to reach mutual agreement as to the Fair Market Value of such
Option Shares. If the Company and Michael are unable to reach agreement as to
the Fair Market Value of such Option Shares within such 60-day period, the Fair
Market Value of such Option Shares shall be determined by an appraisal process
as follows. Each of the Company and Michael shall designate, within thirty (30)
days after the conclusion of the 60-day negotiation period referred to above, an
independent and experienced appraiser familiar with the business in which the
Company is then engaged (each individually an "Appraiser" and collectively the
"Appraisers"). The Appraisers shall be instructed to complete their respective
determinations of the Fair Market Value of such Option Shares and deliver their
written reports on such determinations no later than sixty (60) days after both
of such Appraisers have been appointed. If the determination of one of the
Appraisers does not exceed the determination of the other Appraiser by more than
fifteen percent (15%) of the lower of the two determinations, the Fair Market
Value of such Option Shares shall be equal to the average of the two
determinations. If the higher determination exceeds the lower determination by
more than fifteen percent (15%) of the lower determination, then the two
Appraisers shall jointly appoint a third, independent and similarly experienced
Appraiser within fifteen (15) days after both of such two Appraisers have
delivered their
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reports. Such third Appraiser shall deliver his report on his determination of
the Fair Market Value of such Option Shares within sixty (60) days after his
appointment, and his determination of Fair Market Value shall be conclusive and
binding on the parties for all purposes hereof. The cost of all such appraisals
shall be borne one-half by the Company and one-half by Michael.
(c) PAYMENT OF PURCHASE PRICE.
(i) LUMP SUM OR INSTALLMENTS. The purchase price for Option Shares
shall be paid by the Company in full at the closing or, at the election of the
Company, in equal annual installments, together with interest payable quarterly
at the rate of interest announced publicly on the first day of each calendar
quarter by a major United States money market bank, selected by the Company, as
such bank's base rate, over a number of years to be determined by the Company
but in no event exceeding five (5) years if the purchase is pursuant to Section
6.3 or Section 6.5, or ten (10) years if the purchase is pursuant to Section 6.4
or Section 6.6; provided, however, that the purchase price for any Option Shares
purchased by the Company pursuant to Section 6.2 shall be paid in full at the
closing.
(ii) INITIAL INSTALLMENT. In the event the Company elects to pay for
Option Shares hereunder on an installment basis, all annual installments shall
be equal in principal amount except as follows:
(A) The initial installment for any such sale of Option
Shares, other than a sale occurring by reason of Michael's death, Dismissal For
Cause or breach of any of the provisions of Section 2.2 or Section 2.3, shall be
not less than the amount, if any, of Michael's additional income tax liability
(federal, state and local) actually occasioned as a result of such sale,
provided that such amount shall have been certified to the Company in writing by
Michael's tax accountant.
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(B) The initial installment for the first sale of shares of
Class A Stock that Michael makes under this Agreement or the Stockholders'
Agreement, other than a sale occurring by reason of Michael's death, Dismissal
For Cause or breach of any of the provisions of Section 2.2 or Section 2.3,
shall be at least (1) the amount due under clause (A) above plus the amount of
one million dollars ($1,000,000) or (2) if less, the total purchase price for
such Option Shares.
(C) The initial installment for any sale of Option Shares
occurring by reason of Michael's death shall be not less than the amount of the
estate and succession tax liability (federal and state) occasioned as a result
of the inclusion of the Option Shares in Michael's estate (giving effect to any
deferral permitted by law or regulation in the payment thereof) together with
any and all costs and expenses of administration of Michael's estate as
reasonably estimated by Michael's representative, all as certified to the
Company in writing by Michael's representative.
(iii) CASH FLOW LIMITATIONS. Notwithstanding any other provision of
this Article VI, in the event that the amount due from the Company in payment
for Option Shares purchased hereunder (including both principal and interest) in
any one fiscal year of the Company (other than a purchase occurring by reason of
Michael's death) exceeds fifty percent (50%) of the Company's Free Cash Flow for
the preceding year, then and in that event the Company in its sole discretion
may elect to defer payment of any portion of such principal and/or interest to
the extent that payment would require the Company to pay more than fifty percent
(50%) of its Free Cash Flow for such preceding year, provided that any such
deferred amounts shall continue to earn interest as described in Section 6.7
(c)(i) until paid; and provided further that in any event all principal and
interest shall be paid in full no later than five (5) years or ten (10) years,
as the case may be, after the date of the closing. If, in the same fiscal year,
the Company is also required
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to pay any persons or entities other than Michael for shares of Class A Stock
that such persons or entities originally acquired from other stockholders of the
Company as of the date hereof or pursuant to options granted by the Company
and/or is required to make payment to Michael and/or any other persons under any
comparable long-term senior executive compensation plan in effect from time to
time, the amounts due to such other persons or entities in such fiscal year
shall be aggregated with the amount due with respect to the Option Shares in
such fiscal year and, if the aggregate amount due exceeds fifty percent (50%) of
the Company's Free Cash Flow for the preceding fiscal year, then and in that
event the Company in its sole discretion may elect to defer payment of any
portion of such aggregate amount (principal and/or interest) to the extent that
it would exceed fifty (50%) of the Company's Free Cash Flow for the preceding
year, and payments and deferments shall be effected among Michael and such other
persons in proportion to the amounts (both principal and interest) then due and
owing to each, subject to any provisions in such plans as to priority of
payment.
(d) CLOSING OF TRANSACTION. The closing of any purchase of Option
Shares hereunder shall be held no later than ninety (90) days after the final
determination of the Fair Market Value of such Option Shares, at such time and
place as the Company may reasonably designate. At the closing, Michael shall
deliver or cause to be delivered to the Company the stock certificates
representing such Option Shares, duly endorsed for transfer in blank or with
duly executed stock powers attached, and with signature guaranteed, in exchange
for which the Company shall deliver to Michael the amount of the purchase price
then due, together with the Company's promissory note evidencing the Company's
obligation to pay the balance, if any, of the purchase price in accordance with
the terms of Section 6.7(c). All payments to Michael hereunder shall be made in
cash or by Company check, bank draft or wire transfer.
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SECTION 6.8. ASSIGNMENT AND DELEGATION BY THE COMPANY TO CLASS
B STOCKHOLDERS.
The Company shall have the right, exercisable upon notice to Michael,
to assign any or all of its rights and/or delegate any or all of its obligations
under this Article VI to the holders of the Class B Stock, in proportion to
their respective ownership interests or as they may otherwise unanimously agree,
provided that the Company shall not be relieved of its obligation to purchase
from Michael in accordance herewith any Option Shares duly tendered and not
purchased and paid for by such holders of Class B Stock.
SECTION 6.9. TAG-ALONG RIGHTS -- DRAG-ALONG RIGHTS.
(a) In the event the Controlling Stockholders of the Company determine
to dispose of all or a portion of their shares of Common Stock, with the result
that they will no longer control the Company, then and in that event the Company
shall give Michael a notice (a "Tag-Along Notice") of such proposed sale (a
"Tag-Along Sale") and the material terms of the Tag-Along Sale (the "Material
Terms") no later than thirty (30) days prior to the consummation of the
Tag-Along Sale. If, within twenty (20) days after a Tag-Along Notice is given to
Michael (or within ten (10) days after any notice of a change in the Material
Terms is given to Michael), the Company receives from Michael a written request
(a "Tag-Along Request") to include in the Tag-Along Sale any of the Option
Shares held by him, such Option Shares (in the same proportion as the total
number of shares of Common Stock held by the Controlling Stockholders bears to
the number of shares being sold by the Controlling Stockholders) shall be
included in the Tag-Along Sale on the same terms and conditions and subject to
the same obligations as the sale by the Controlling Stockholders, taking into
account the proportionate ownership of the Controlling Stockholders and Michael.
The Company shall give Michael prompt notice
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of any change in the Material Terms and, in such event, Michael shall have the
opportunity, for a period of ten (10) days after such notice has been given, to
submit a Tag-Along Request if Michael did not previously submit a Tag-Along
Request or to withdraw or modify a Tag-Along Request previously made.
(b) Michael's rights hereunder to participate in a Tag-Along Sale shall
be contingent on Michael's compliance with each of the provisions hereof,
Michael's acceptance of a proportionate delegation of any duties or obligations
related to the Tag-Along Sale, including any indemnification obligations, and
Michael's execution of such documents in connection with the Tag-Along Sale as
may be reasonably requested by the Controlling Stockholders.
(c) In connection with any proposed sale of shares of Common Stock by
the Controlling Stockholders to a non-affiliated person or entity in an
arms-length transaction, if Michael has not exercised his rights to sell Option
Shares as contemplated under paragraph (a) of this Section 6.9, the Company
shall have the right, exercisable upon notice to Michael, to require that
Michael sell to the purchaser of the shares of the Controlling Stockholders the
same proportion of Option Shares owned by Michael as are being sold by the
Controlling Stockholders, on the same terms and conditions and subject to the
same obligations including any indemnification obligations, as the sale by the
Controlling Stockholders, taking into account the proportionate ownership of the
Controlling Stockholders and Michael. Michael agrees that he will cooperate with
the Company and the Controlling Stockholders in taking all such actions,
including executing all such documentation, as the Company and /or the
Controlling Stockholders may reasonably request.
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ARTICLE VII
TRANSFERABILITY OF SHARES AT TIME COMPANY SHARES ARE PUBLICLY TRADED
SECTION 7.1. GENERAL RESTRICTION ON TRANSFER.
In the event that shares of the Class A Stock become listed on a
national securities exchange or quoted in the National Market List of NASDAQ,
then and in that event the provisions of Article VI shall cease to be operative,
and Michael shall not, voluntarily or involuntarily, by operation of law or
otherwise, sell, mortgage, pledge, hypothecate, assign as a security, grant or
permit to exist or continue a security interest in, or in any way transfer by
gift, will, trust or intestate succession any of the Option Shares, except to a
Permitted Transferee as provided in Section 12.2(a) or except as specifically
provided in this Article VII. Any attempt by Michael to do any of the
aforementioned acts or otherwise to alienate or dispose of any Option Shares,
except in accordance with this Agreement, shall be null and void.
SECTION 7.2. SALE TO SATISFY INCOME TAX LIABILITIES.
Notwithstanding the limitations set forth in any other Section of this
Article VII, Michael shall have the right, exercisable upon notice to the
Company given no later than twelve (12) months after the exercise of any Option,
to sell a number of Option Shares (and/or, to the extent their sale is not
otherwise restricted, Restricted Shares) on the public market, such that the
proceeds of such sale shall equal the amount, if any, of Michael's additional
income tax liability (federal, state and local) actually occasioned as a result
of the exercise of such Option. Such notice shall include a written
certification of such amount by Michael's tax accountant. Any shares of Class A
Stock sold under this Section 7.2 shall be taken into account when calculating
the aggregate number of shares
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of Class A Stock that Michael shall be entitled to sell in any single calendar
year under any other Section of this Article VII, it being the intent of the
parties that shares of Class A Stock sold under this Section 7.2 shall be
included in, and shall not be in addition to, such aggregate number of shares
permitted to be sold in any single calendar year under any such other Section of
this Article VII.
SECTION 7.3. SALE ON OR BEFORE DECEMBER 31, 2003.
Except as otherwise provided in Section 7.5 and Section 7.6, from
January 1, 1998 through December 31, 2003, Michael shall have the right to sell
Option Shares on the public market, subject to the following conditions:
(a) MINIMUM MARKET CAPITALIZATION. Michael may not sell any Option
Shares under this Section 7.3 unless the market capitalization of the Company as
of the Business Day immediately preceding the date of sale is greater than three
hundred forty million dollars ($340,000,000). The market capitalization of the
Company shall be determined by multiplying the Fair Market Value of a share of
Class A Stock by the total number of shares of the Common Stock then issued and
outstanding.
(b) MAXIMUM NUMBER OF SHARES.
(i) The maximum number of shares of Class A Stock (including both
Option Shares and Restricted Shares) that Michael may sell in any single
calendar year shall be five hundred twenty-eight (528) shares of Class A Stock,
(which number of shares equals approximately one percent (1%) of the number of
shares of the Company's Common Stock issued and outstanding as of the date
hereof); and
(ii) the maximum number of Restricted Shares that may be included in
such shares of Class A Stock sold in any single calendar year shall be the
smaller of (A) the number of Restricted Shares whose Fair Market Value as of the
Business Day
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immediately preceding the date of sale does not exceed $500,000 or
(B) fifty-three (53) Restricted Shares (which number equals approximately 1/10
of one percent (0.1%) of the number of shares of the Company's Common Stock
issued and outstanding as of the date hereof).
SECTION 7.4. SALE AFTER DECEMBER 31, 2003.
Except as otherwise provided in Section 7.5, after December 31, 2003,
Michael shall have the right to sell Option Shares on the public market,
provided only that the maximum number of shares of Class A Stock (including both
Option Shares and Restricted Shares) that Michael may sell in any single
calendar year shall be five hundred twenty-eight (528) shares of Class A Stock
(which number of shares equals approximately one percent (1%) of the number of
shares of the Company's Common Stock issued and outstanding as of the date
hereof).
SECTION 7.5. SALE AFTER DEATH OR PERMANENT DISABILITY.
(a) Notwithstanding the provisions of Section 7.3, in the event that
Michael's employment terminates as a result of his death or the Company
terminates his employment by reason of his Permanent Disability, then and in
that event (i) the pre-condition to sales on or before December 31, 2003, which
is set forth in Section 7.3(a) with respect to the Company's minimum market
capitalization, shall not apply, and Michael and/or his representative and/or
his successors in interest shall have the right to sell Option Shares pursuant
to Section 7.3 on or before December 31, 2003 irrespective of the market
capitalization of the Company; and (ii) the limitation set forth in Section
7.3(b)(ii) shall not apply and, instead, the maximum number of Restricted Shares
that may be included in the shares of Class A Stock sold in any calendar year by
Michael
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and/or his representative and/or successors in interest, as a group, shall be
three hundred ninety-six (396) Restricted Shares.
(b) Notwithstanding the provisions of Section 7.3, Section 7.4 and
Section 7.5(a)(ii), in the event that Michael's employment terminates as a
result of his death, Michael's representative and/or successors in interest
shall have the right to sell in any calendar year up to such number of shares of
Class A Stock (including both Option Shares and Restricted Shares) as shall
equal the greater of (i) the number of such shares that is permitted to be sold
under Section 7.3 or Section 7.4, as applicable, or (ii) the number of such
shares that is necessary in order for the proceeds of such sale to equal the
amount of the estate and succession tax liability (federal and state) ,
including any interest thereon, due in such year as a result of the inclusion of
such shares of Class A Stock in Michael's estate (giving effect to any deferral
permitted by law or regulation in the payment thereof), together with any and
all costs and expenses of administration of Michael's estate for such year as
reasonably estimated by Michael's representative, all as certified to the
Company in writing by Michael's representative.
SECTION 7.6. TENDER, MERGER, CONSOLIDATION.
In the event the Controlling Stockholders of the Company determine to
dispose all or a portion of their shares of Common Stock in a tender, merger,
consolidation or similar type of transaction, with the result that they no
longer control the Company, then and in that event, Michael shall have the
right, but not the obligation, to dispose of a proportionate number of shares of
his Class A Stock in any such transaction.
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SECTION 7.7. COMPLIANCE WITH SECURITIES LAWS.
Neither Michael nor his representative will sell or attempt to sell any
shares of Class A Stock under this Article VII except in accordance with all
applicable federal and state securities laws, all applicable rules and
regulations of the Securities and Exchange Commission, and any applicable
underwriters' limitations and restrictions.
ARTICLE VIII
FUTURE CHANGES IN CAPITAL STRUCTURE AND REDEMPTION OF SHARES
SECTION 8.1. CHANGES IN CAPITAL STRUCTURE.
If the Company hereafter declares a dividend payable in, or subdivides
or combines, shares of the Class A Stock, or if the Company engages in a
recapitalization, reorganization, merger, consolidation, split-up, transfer of
assets, combination or exchange of shares of Common Stock, or if any other event
shall occur which in the judgment of the Board of Directors calls for action by
way of adjusting the terms of the unexercised Options hereunder or the number of
Option Shares, the Board of Directors shall forthwith take such action as in its
judgment shall be necessary or appropriate to preserve Michael's rights with
respect to such Options and Option Shares substantially proportionate to his
rights existing prior to such event, and to the extent that such action shall
include an increase or decrease in the number of Unexercised Shares hereunder,
the Option Price shall be adjusted inversely to the change in the number of
Unexercised Shares in order that the total amount payable by Michael upon
exercise of all the Options granted under this Agreement shall remain unchanged.
The decision of the Board of Directors with respect to any matter referred to in
this Section 8.1 shall be conclusive and binding upon Michael. Nothing in this
Agreement is intended to preserve Michael's
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equity interest in the Company against dilution resulting from the issuance of
securities by the Company in the future.
SECTION 8.2. REDEMPTION OF CLASS B STOCK.
If and when any shares of the Class B Stock owned by any member of the
Leeds Family are redeemed by the Company in accordance with the terms and
provisions of the Shareholders' Agreement, then, in order to ensure that
Michael's percentage interest in the Company will remain the same as his
interest would have been but for such redemption (the "Class B Stock
Redemption"), the Company shall, promptly following the Class B Stock
Redemption, adjust the number of the Unexercised Shares and, if Michael then
owns any Option Shares, redeem at a price equal to their par value (currently
$.10 per share) a number of such Option Shares such that the adjustment of the
number of the Unexercised Shares (the "Option Adjustment") and the redemption of
Option Shares (the "Class A Stock Redemption") shall result in (a) the ratio of
(i) the sum of the number of Unexercised Shares and the number of Option Shares
outstanding immediately after the Option Adjustment and the Class A Stock
Redemption to (ii) the total number of shares of Common Stock outstanding
immediately after the Class A Stock Redemption being the same as (b) the ratio
of (i) the sum of the number of Unexercised Shares and the number of Option
Shares outstanding immediately prior to the Class B Stock Redemption to (ii) the
total number of shares of Common Stock outstanding immediately prior to the
Class B Stock Redemption. In such event, the Option Price shall also be adjusted
so that the total amount payable upon exercise of all the Options granted under
this Agreement shall remain unchanged.
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ARTICLE IX
PROCEDURE TO BE FOLLOWED IN CASE OF
RESIGNATION FOR GOOD REASON OR DISMISSAL FOR CAUSE
SECTION 9.1. RESIGNATION FOR GOOD REASON.
In the event Michael terminates his employment with the Company as a
Resignation For Good Reason, Michael shall give the Company at least ten (10)
Business Days' prior written notice specifying in reasonable detail the specific
conduct of the Company that he considers grounds for Resignation For Good Reason
and the specific provision of the definition of "Resignation For Good Reason"
upon which he relies. Michael's employment with the Company shall terminate as
of the tenth Business Day after such notice is given, or such other date as the
parties mutually agree. Should the Company dispute the basis for such
resignation in a written notice given to Michael on or before his termination
date, the parties shall meet and endeavor to resolve the dispute amicably within
the twenty (20) Business Days after the Company's notice is given. If they
cannot so resolve the dispute within such twenty (20) Business Days after the
Company's notice is given, Michael and the Company shall submit the dispute to
binding arbitration in accordance with Section 10.1. The decision rendered in
such arbitration shall be final and binding on both Michael and the Company for
all purposes. If the arbitrators determine that Michael did not have a proper
basis on which to terminate his employment as Resignation For Good Reason within
the meaning of this Agreement, the termination of Michael's employment shall be
treated for all purposes of this Agreement as a Voluntary Resignation. In
addition to any other rights which a party may have, the party prevailing in
such arbitration proceeding shall be entitled to recover from the losing
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party any and all of the expenses incurred by the prevailing party in such
proceeding, including reasonable attorney's fees.
SECTION 9.2. DISMISSAL FOR CAUSE.
In the event the Company terminates Michael's employment as a Dismissal
For Cause, the Company shall give Michael at least ten (10) Business Days' prior
written notice specifying in reasonable detail the specific conduct of Michael
that it considers grounds for Dismissal For Cause and the specific provision of
the definition of "Dismissal For Cause upon which it relies. Michael's
employment with the Company shall terminate as of the tenth Business Day after
such notice is given, or such other date as the parties mutually agree. Should
Michael dispute the basis for such termination in a written notice given to the
Company on or before his termination date, the parties shall meet and endeavor
to resolve the dispute amicably within twenty (20) Business Days after Michael's
notice is given. If they cannot so resolve the dispute within such twenty (20)
Business Days after Michael's notice is given, Michael and the Company shall
submit the dispute to binding arbitration in accordance with Section 10.1. The
decision rendered in such arbitration shall be final and binding on both Michael
and the Company for all purposes. If the arbitrators determine that the Company
did not have a proper basis on which to terminate Michael's employment as a
Dismissal For Cause within the meaning of this Agreement, the termination of
Michael's employment shall be treated for all purposes of this Agreement as a
Dismissal Without Cause. In addition to any other rights which a party may have,
the party prevailing in such arbitration proceeding shall be entitled to recover
from the losing party any and all of the expenses incurred by the prevailing
party in such proceeding, including reasonable attorney's fees.
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ARTICLE X
RESOLUTION OF DISPUTES
SECTION 10.1. ARBITRATION.
Except as provided in Section 10.2, all controversies arising out of or
relating to this Agreement or the breach hereof shall be settled by arbitration
in the County of Nassau, State of New York, in accordance with the rules of the
American Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. Any
arbitration hereunder shall be before three (3) arbitrators.
SECTION 10.2. EQUITABLE RELIEF.
Notwithstanding the provisions of Section 10.1, any proceeding for
injunctive relief or specific performance in connection with this Agreement
shall be commenced in Supreme Court of the State of New York, County of Nassau,
and each of the parties hereby accepts the exclusive jurisdiction of such Court
for such purpose; provided, however, that the petitioner may commence such
proceeding in such other court as may be necessary, in the petitioner's
judgment, in order to more effectively or expeditiously obtain personal
jurisdiction over the respondent.
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ARTICLE XI
REPRESENTATIONS AND WARRANTIES
SECTION 11.1. REPRESENTATIONS OF THE COMPANY.
The Company hereby represents and warrants to Michael that (a) it has
full legal right, power and authority to enter into this Agreement and to
consummate the transactions herein contemplated; (b) the execution and delivery
of this Agreement has been duly authorized by all necessary corporate action;
(c) this Agreement constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally and by general principles of equity; and
(d) neither this Agreement nor the consummation of the transactions herein
contemplated will conflict with, violate or infringe any legal restriction,
contract or instrument to which the Company is subject or by which it is bound.
SECTION 11.2. REPRESENTATIONS OF MICHAEL.
Michael hereby represents and warrants to the Company that (a) he has
full legal right, power and authority to enter into this Agreement and to
consummate the transactions herein contemplated; (b) this Agreement constitutes
the valid and binding obligation of Michael, enforceable in accordance with its
terms, except to the extent that such enforcement may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
by general principles of equity; and (c) neither this Agreement nor the
consummation of the transactions herein contemplated will conflict with, violate
or infringe any legal restriction, contract or instrument to which Michael is
subject or by which he is bound.
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ARTICLE XII
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
"Affiliates" shall mean all entities controlling, controlled by or
under common control with the Company.
"Appraiser" or "Appraisers" shall have the meaning specified in Section
6.7(b).
"Board of Directors" shall mean the Board of Directors of the Company.
"Business Day" shall mean any day on which the Company is scheduled to
be open for business.
"Change in Control" shall mean a direct or indirect transfer of fifty
percent (50%) or more of the voting control of the Company or the sale of
substantially all of the assets of the Company, in one or more transactions, to
(a) one or more persons who are not (i) members of the Leeds Family or (ii)
spouses, children or grandchildren of members of the Leeds Family and/or (b) one
or more entities which are not controlled by (i) one or more members of the
Leeds Family or (ii) one or more of the spouses, children or grandchildren of
members of the Leeds Family.
"Class A Stock" shall mean the Class A Common Stock of the Company.
"Class A Stock Redemption" shall have the meaning specified in Section
8.2.
"Class B Stock" shall mean the Class B Common Stock of the Company.
"Class B Stock Redemption" shall have the meaning specified in Section
8.2.
"Closing Price" shall mean the last-quoted price at which shares of
Class A Stock were traded at the close of business on a national securities
exchange or NASDAQ on any day on which shares of the Class A Stock were publicly
held.
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"CMP Business" shall mean any publication, product, service or business
(a) which the CMP Group publishes, produces, provides or engages in or (b) which
the CMP Group has a bona fide plan or intention to publish, produce, provide or
engage in within the succeeding 12-month period, the research and development of
which the CMP Group has devoted substantive time and attention to, and which
plan or intention Michael has actual knowledge of before he engages in any
activity competitive with such CMP Business as contemplated by clause (A) of
Section 2.3(a).
"CMP Group" shall mean the Company or any of its Affiliates.
"Common Stock" shall mean all the classes of the Common Stock of the
Company collectively.
"Conditions" shall have the meaning specified in Section 3.2.
"Controlling Stockholders" shall mean the members of the Leeds Family
who hold shares of capital stock of the Company collectively representing a
majority of the votes that may be cast on any matter on which stockholders of
the Company shall be entitled to vote.
"Direct Competitor" shall mean a business enterprise that produces or
operates, or owns directly or indirectly an interest of twenty percent (20%) or
more in, one or more Directly Competitive Businesses.
"Directly Competitive Business" shall mean any competitive publication,
product, service or business (a) the target audience of which is substantially
the same as the target audience of a CMP Business or (b) forty percent (40%) or
more of the annual revenue of which is derived from substantially the same
customers as a CMP Business derives twenty percent (20%) or more of its annual
revenue.
"Dismissal For Cause" shall mean the termination of Michael's
employment with the Company by the Board of Directors for (i) the willful and
continued failure of
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Michael substantially to perform his duties as an officer and employee of the
Company or comply with the written policies of the Company after the Company has
delivered to Michael a written demand for substantial performance or compliance
that specifies such failure in reasonable detail; (ii) illegal conduct or gross
misconduct by Michael, in either case that is willful and results (or is
reasonably likely to result) in material damage to the business or reputation of
the Company; or (iii) the resignation by Michael from his employment following
his act or omission which would constitute grounds for Dismissal For Cause
hereunder. No act or failure to act on the part of Michael (other than
non-compliance with lawful instructions given to Michael by the Company) shall
be considered "willful unless it is done or omitted to be done by him in bad
faith or without reasonable belief that his action or omission was in the best
interests of the Company. Any act or failure to act that is pursuant to
resolution duly adopted by the Board of Directors shall be conclusively presumed
to be done or omitted to be done by Michael in good faith and in the best
interests of the Company.
"Dismissal Without Cause" shall mean the termination of Michael's
employment by the Company on any grounds other than Dismissal For Cause or as a
result of his Permanent Disability.
"Fair Market Value" shall mean the fair market value of a share of
Class A Stock, which shall be the Closing Price on the trading day immediately
preceding the date of determination of fair market value or, if the Company is
privately held, the best estimate of the fair market value of a share of Class A
Stock as of the last day of the month immediately preceding the month in which
notice to buy or sell a share of Class A Stock or exercise an Option is given,
as determined with reference to publicly held companies comparable to the
Company.
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"Financial Statements" shall mean the combined or consolidated financial
statements of the Company and its Affiliates prepared in accordance with
generally accepted accounting principles and audited by the Company's
independent certified public accountants.
"Free Cash Flow" of the Company with respect to any fiscal year shall
mean the combined or consolidated net income of the Company for such year as
reflected in the Financial Statements, adjusted so as (a) to exclude the amount,
if any, that, in determining such combined or consolidated net income,
represented (i) an expense for depreciation and/or amortization or (ii)
a provision or credit for federal, state, local or foreign income taxes; and (b)
to include the amount, if any, of cash payments that the Company actually made
in such fiscal year (i) for federal, state, local and foreign income taxes owed
by the Company (and, if the Company is an S Corporation, in distributions to its
stockholders for the payment of federal, state, local and foreign taxes owed by
such stockholders with respect to the Company's income), (ii) for capital
expenditures, (iii) pursuant to the Company's 1988 Equity Appreciation Plan or
(iv) as required under the terms of the Company's then-existing financing
arrangements to reduce the principal amount of indebtedness. The Company's
determination of Free Cash Flow shall be conclusive and binding for all purposes
of this Agreement provided that the Company's certified public accountants
render a written opinion that such determination presents fairly, in all
material respects, the Free Cash Flow of the Company as herein defined. (A
hypothetical illustration of the calculation of Free Cash Flow is set forth on
Schedule XI hereto.)
"Indirect Competitor" shall mean a business enterprise that does not
produce or operate, or own directly or indirectly an interest in, any Directly
Competitive Businesses but produces or operates, or owns directly or indirectly
an interest of twenty percent (20%) or more in, one or more Indirectly
Competitive Businesses.
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"Indirectly Competitive Business" shall mean any competitive or
potentially competitive publication, product, service or business which derives
from twenty percent (20%) to but not including forty percent (40%) of its annual
revenue from substantially the same customers as a CMP Business derives twenty
percent (20%) or more of its annual revenue.
"Key Senior Executive" shall mean a Company employee holding a position
of responsibility no lower than that currently titled President of the Company.
"Leeds Family" shall mean Gerard G. Leeds, Liselotte J. Leeds, Michael,
Richard A. Leeds, Daniel H. Leeds, Greg Jobin-Leeds and Jennifer Leeds-Lukehart.
"Minority Group Members" shall mean individuals who are black, Native
American or of Hispanic, Asian or Pacific Island origin.
"Negative Pledge Agreement" shall mean that certain Negative Pledge
Agreement originally dated as of July 15, 1993 by and among Gerard G. Leeds,
Lilo J. Leeds and Fleet National Bank (f/k/a/ Shawmut Bank Connecticut, National
Association), as most recently amended and confirmed by Gerard G. Leeds, Lilo J.
Leeds, Daniel H. Leeds and Michael to Fleet National Bank and The Chase
Manhattan Bank on November 14, 1996.
"Net Sales Revenue" of the Company with respect to any fiscal year
shall mean the combined or consolidated net sales of the Company and its
Affiliates as reflected in the Financial Statements for such year.
"Option" shall mean the right of Michael to purchase any Option Share
hereunder.
"Option Adjustment" shall have the meaning specified in Section 8.2.
"Option Price" shall mean the price at which Michael may purchase an
Option Share hereunder.
"Option Shares" shall mean the shares of Class A Stock issued to
Michael pursuant to this Agreement, plus any additional shares of Class A Stock
that may be
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the Company's capital structure as contemplated in Section 8.1, and less any
Option Shares that may be canceled or redeemed from time to time as a result of
any such changes in the Company's capital structure or of any stock redemptions
as contemplated in Section 8.2.
"Permanent Disability" shall mean a physical or mental impairment, as a
result of which Michael shall have been unable, with or without reasonable
accommodation, to perform the essential functions of his employment position for
a period of at least sixteen (16) weeks during any 12-month period.
"Permitted Transferee" shall mean a spouse, child or grandchild of
Michael, or an entity (e.g., a trust, corporation or partnership) in which
Michael has the majority voting interest and of which the beneficiaries are a
spouse and/or one or more children or grandchildren of Michael.
"Pre-Tax Income" of the Company with respect to any fiscal year shall
mean the combined or consolidated net income of the Company and its Affiliates
as reflected in the Financial Statements for such year plus the sum of all
federal, state, local and foreign income taxes that were deducted in determining
such combined or consolidated net income.
"Resignation For Good Reason" shall mean Michael's resignation from his
employment with the Company after the Company has, without his consent, (i)
materially reduced his package of compensation and benefits, (ii) materially
diminished his position, authority, duties or responsibilities, or (iii)
required him to report regularly to an office located more than fifty (50) miles
from Manhasset, New York. Any reduction in Michael's compensation package made
pursuant to the written compensation plan between Michael and the Company dated
as of the date hereof shall not be deemed grounds for Resignation For Good
Reason.
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"Restricted Shares" shall mean the shares of Class A Stock owned by
Michael that are subject to restrictions under the Stockholders' Agreement.
"Share Purchase Agreement" shall mean that certain Share Purchase
Agreement entered into as of the date hereof by and among Gerard G. Leeds,
Liselotte J. Leeds and Michael.
"Shareholders' Agreement" shall mean that certain Shareholders'
Agreement entered into as of June 30, 1991 by and among the Company, certain of
the Affiliates and the members of the Leeds Family.
"Stockholders' Agreement" shall mean that certain Stockholders'
Agreement entered into as of the date hereof by and among the Company, Gerard G.
Leeds, Liselotte J. Leeds and Michael.
"Unexercised Shares" shall mean the authorized but unissued shares of
Class A Stock with respect to which Michael is granted an Option under this
Agreement but with respect to which such Option has not yet been exercised.
"Voluntary Resignation" shall mean Michael's resignation from his
employment with the Company on any grounds other than grounds for Resignation
For Good Reason or as a result of his Permanent Disability.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.1. LEGEND ON CERTIFICATES.
Upon the execution of this Agreement, each certificate evidencing any
of the Option Shares held by Michael shall be endorsed as follows:
The shares of stock evidenced by this certificate are subject to the
restrictions of and are transferable only upon compliance with the
provisions of a certain Option
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Agreement entered into by and between Michael S. Leeds and the Company.
A copy of such Agreement is on file in the office of the Company.
In addition, all such certificates shall bear such other legends as, in the
opinion of the Company's counsel, are necessary or appropriate to ensure
compliance with all applicable federal and state securities laws.
SECTION 13.2. PERMITTED TRANSFEREES; REPRESENTATIVE AND
SUCCESSORS IN INTEREST.
(a) PERMITTED TRANSFEREES. Subject to Section 12.4 but notwithstanding
any other provision of this Agreement, Michael shall be permitted to sell, give
or bequeath all or any portion of the Option Shares or interest therein, or pass
such Option Shares or interest by means of intestate succession or otherwise,
either outright or in trust, to a Permitted Transferee, provided that such
transfer shall be implemented in a manner acceptable to legal counsel for the
Company. In case of any such transfer by Michael, each Permitted Transferee
shall receive and hold the transferred Option Shares subject to all the terms
and conditions of this Agreement, and there shall be no further transfer of such
Option Shares except by such Permitted Transferee to another Permitted
Transferee in accordance with the terms of this Agreement. Before Michael
transfers any Option Shares to a Permitted Transferee, and before any Permitted
Transferee transfers any Option Shares to another Permitted Transferee, Michael
or the transferring Permitted Transferee, as the case may be, shall give the
Company written notice of such intended transfer. Any Permitted Transferee
shall, to the extent of the Option Shares transferred, succeed to all the rights
and obligations of the transferor under this Agreement and shall become bound by
all the terms and conditions hereof; provided that, as a condition precedent to
a Permitted Transferee's exercising any rights under this Agreement and to the
Company's obligation to change its records to reflect the record ownership of
such
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Option Shares in the name of such Permitted Transferee, the Permitted Transferee
shall execute such documents and instruments as may reasonably be required by
legal counsel to the Company. Unless otherwise expressly provided in this
Agreement, any reference herein to a right or obligation of Michael to sell or
receive payment for any shares of Class A Stock shall be deemed to refer equally
to any Permitted Transferee, and any limitations herein with respect to the
number or category of shares of Class A Stock which Michael shall have a right
or obligation to sell in any calendar year shall apply to Michael and all
Permitted Transferees as a group.
(b) REPRESENTATIVE AND SUCCESSORS IN INTEREST. Except as may be
otherwise specifically provided in this Agreement, in the event of Michael's
death or incapacity his representative and/or successors in interest shall
succeed to all his rights and obligations under this Agreement and be bound by
all the terms and conditions hereof, and they shall be entitled to exercise such
rights, and shall be required to fulfill such obligations, in the same manner
and to the same extent that Michael would have been so entitled or required but
for his death or incapacity.
SECTION 13.3. FURTHER ASSURANCES.
Each of the parties hereto, upon request of another party, shall take
all such actions and execute and deliver all such further instruments of sale,
assignment, conveyance, transfer and exchange, and all such other documents and
agreements, as may be necessary or appropriate to assure, complete and evidence
the full and effective sale, assignment, transfer, conveyance and exchange of
the Option Shares as herein required and as may otherwise be necessary or
appropriate to comply with the terms and conditions of this Agreement. In the
event a party shall not take all such actions or execute or deliver all such
further instruments, then and in that event each such party hereby appoints the
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Company such party's agent and attorney-in-fact for the purpose of executing and
delivering (a) any and all documents necessary to convey and/or exchange the
Option Shares pursuant to the provisions of this Agreement, any conveyance or
exchange so made fully divesting the party whose interest is so conveyed of all
right, title or equity in or to the Option Shares formerly owned by such party,
and (b) any and all other documents, instruments, agreements and other writings
necessary to effectuate the terms of this Agreement. The powers of attorney
herein granted, being coupled with an interest, are irrevocable and shall not be
revoked by the death, dissolution or incapacity of any party hereto or for any
other reason. Each party hereto hereby releases any other party who conveys or
exchanges the Option Shares formerly owned by such party as provided in this
Section 13.3 from any and all claims and liabilities for or resulting from the
conveying or exchanging of such Option Shares.
SECTION 13.4. S CORPORATION.
It is intended that for federal income tax purposes the Company will
continue to qualify as an "S Corporation" as defined in Section 1361 of the
Internal Revenue Code or any successor provision of the federal income tax laws.
Accordingly, the Company and Michael shall execute and keep in full force and
effect the consent described in Section 1362(a)(2) of the Internal Revenue Code
or any successor provision until such time as the Company and the Controlling
Stockholders determine not to continue to qualify the Company as an S
Corporation. In addition, notwithstanding the provisions of any other Section of
this Agreement, no transfer of any shares of Class A Stock shall be made to any
person or entity, nor shall Michael by action or inaction cause any
circumstances to exist, which would disqualify the Company as an S Corporation.
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SECTION 13.5. CREDIT FACILITIES.
It is understood and acknowledged that one or more banks or lending
institutions of the Company may from time to time require, as a condition to
extending or continuing to extend credit to the Company, that persons who are
both stockholders and members of management of the Company execute and deliver
to such banks or lending institutions certain assurances and agreements such as
the Negative Pledge Agreement. For as long as he is a Key Senior Executive,
Michael shall, if requested by the Company, promptly take all such actions and
execute and deliver all such documents containing such assurances and agreements
(other than personal guarantees) as may be reasonably required by such banks or
lending institutions, on the same basis and in substantially the same form and
manner as other persons who are both stockholders and members of management of
the Company.
SECTION 13.6. ACCELERATED VESTING CHART.
For convenience of reference, a chart summarizing the accelerated
vesting provisions set forth in Article III of this Agreement is set forth on
Schedule 13.6 hereto.
SECTION 13.7. ENTIRE AGREEMENT; BINDING EFFECT.
This Agreement contains all of the terms agreed upon by the parties
with respect to the subject matter hereof and replaces and supersedes any and
all prior agreements, written or oral, between the parties relating to the
Option Shares (except for the Stockholders' Agreement to the extent its terms
are not inconsistent herewith). No promises, agreements or representations with
respect to the matters herein contained shall be binding upon any of the parties
unless set forth herein. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective heirs, representatives, successors
and permitted assigns.
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SECTION 13.8. AMENDMENT.
No provision of this Agreement may be amended or waived except by a
writing making reference to this Agreement and signed by the party against whom
the enforcement of such amendment or waiver is sought.
SECTION 13.9. APPLICABLE LAW.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York, without reference to its
principles regarding choice or conflicts of law, and in accordance with and
consistent with the Company's election to be treated as an S Corporation.
SECTION 13.10 SEVERABILITY.
Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law and
the Company's S Corporation election, but if any provisions hereof shall be
prohibited by or invalid under any such law or the Company's S Corporation
election, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating or nullifying the remainder of such
provision or any other provision of this Agreement.
SECTION 13.11. NO WAIVER.
No delay or omission by any party in exercising or enforcing any right
hereunder shall operate as a waiver of such right, and a waiver on one occasion
shall not be construed as a waiver of any right or remedy on any future
occasion.
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SECTION 13.12. NOTICES.
All notices, requests, consents, designations and demands required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given (a) when personally delivered to Michael or to an
authorized officer of the Company, whether by messenger, courier or other
person, (b) on the second Business Day after the date it is sent by certified or
registered mail, return receipt requested, or (c) on the next Business Day after
the date it is sent via telefacsimile (provided it is actually received and is
not materially illegible), as follows:
If to the Company:
CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Attention: Co-Chairpersons
Fax: (516) 562-5718
with a copy to:
CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Attention: General Counsel
Fax: (516) 562-7123
If to Michael:
Michael S. Leeds
c/o CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Fax: (516)562-5718
with a copy to Michael at his last known address as reflected on the
records of the Company
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or to such other mail or facsimile address as the recipient party shall have
last designated by notice given to the other in accordance herewith.
SECTION 13.13. ASSIGNMENT.
Except as expressly provided in this Agreement, no party may assign any
rights or delegate any obligations or liabilities hereunder without the prior
written consent of the other parties, except that the Company may assign any of
its rights and delegate any of its duties to an entity that controls, is
controlled by or is under common control with the Company; provided, however,
that no such assignment or delegation shall relieve the Company from its
obligations or liabilities hereunder.
SECTION 13.14. SURVIVAL.
This Agreement shall survive any merger, sale or other disposition of
the Company.
SECTION 13.15. GENDER AND NUMBER.
Except when otherwise indicated by the context, references herein to
one gender shall include the other genders, and references herein to the plural
shall include the singular.
SECTION 13.16. DATES.
If any date referred to in any provision of this Agreement falls on a
day that is not a Business Day, such provision shall be deemed to refer to the
next succeeding Business Day.
58
<PAGE> 63
SECTION 13.17. HEADINGS.
The headings herein are for convenience of reference only and shall not
be considered in construing this Agreement.
SECTION 13.18. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original and all of which shall together constitute one
and the same instrument.
IN WITNESS WHEREOF, Michael has executed this Agreement and the Company
has caused this Agreement to be executed by an officer thereunto duly authorized
on the day and year first above written.
CMP MEDIA INC.
By /s/LISELOTTE J. LEEDS
----------------------------------
Name: Lilo J. Leeds
Title: Co-Chairperson
Attest:
/s/ROBERT D. MARAFIOTI
------------------------
[CORPORATE SEAL]
/s/MICHAEL S. LEEDS
- ------------------------------
MICHAEL S. LEEDS
59
<PAGE> 64
SCHEDULE 5.2(b)
HYPOTHETICAL ILLUSTRATION OF
CALCULATION OF OPTIONS VESTING
UNDER SECTION 5.2(b)
Assume Michael's employment with the Company terminates on May 10, 2001 and that
all shares that could have vested under Section 3.2 and Section 3.3 have vested.
The number of Options that would have vested within 24 months after such
termination date (i.e., on or before May 9, 2003) assuming the Conditions were
satisfied is 528 Options, pursuant to Section 3.4(a).
The nearest preceding December 31 on which Options vested or could have vested
under paragraph (a) of Sections 3.2, 3.3, 3.4 or 3.5 was December 31, 1999,
pursuant to Section 3.3(a).
The number of full months that, as of the date of termination, have elapsed
since December 31, 1999 is 16 (January 2000 through April 2001).
The numerator of the fraction is therefore 16 and the denominator is 24.
16/24 X 528 = 352 Options.
Therefore, 352 Options would vest and become exercisable on the date of
termination.
60
<PAGE> 65
SCHEDULE XI
HYPOTHETICAL ILLUSTRATION OF
CALCULATION OF FREE CASH FLOW
CMP MEDIA INC.
CALCULATION OF FREE CASH FLOW
FOR THE YEAR ENDED DECEMBER 31, XXXX
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
Combined (or Consolidated) net income $ 25,000
Depreciation and amortization expense 7,500
Federal, foreign, state and local income tax expense
of the Company 650
Cash payments for federal, foreign, state and local
income taxes of the Company (750)
Cash distributions to the S Corporation stockholders
for payment of federal, foreign, state and local income
taxes owed by such stockholders on Company income (10,200)
Capital expenditures (8,500)
Cash payments under the Company's 1988 Equity
Appreciation Plan (250)
Debt payments to reduce principal (500)
--------
Free cash flow $ 12,950
--------
</TABLE>
Note: Illustration assumes Company is an S Corporation.
61
<PAGE> 66
SCHEDULE 13.6
CMP Media Inc.
Option Agreement
Vesting Schedule
Michael S. Leeds
<TABLE>
<CAPTION>
- ----------------- ----------------- ---------------- ------------------------------------------------------------------
Accelerators Percentage Vested Years Applicable Description
- ---------------- ----------------- ---------------- ------------------------------------------------------------------
<S> <C> <C> <C>
First Series 0.50% 12/31/97-12/31/02 .50% (264 shares) will vest as of the first December 31 on which
(section 3.2) the conditions set forth in section 3.2 are satisfied
Second Series 0.50% 12/31/99-12/31/02 .50% (264 shares) will vest as of the first December 31 on which
(section 3.3) the conditions set forth in section 3.2 are satisfied
12/31/97-12/31/98 Vesting of 50% of the Second Series shares (132 shares) will
accelerate as of the first December 31 on which the conditions
set forth in sections 3.2 and 3.3(b) are satisfied
Third Series 1.00% 12/31/01-12/31/02 1.00% (528 shares) will vest as of the first December 31 on which
(section 3.4) the conditions set forth in section 3.2 are satisfied
12/31/97-12/31/00 Vesting of 25% of the Third Series shares (132 shares) will
accelerate as of the first December 31 on which the conditions
set forth in sections 3.2 and 3.4(b) are satisfied
12/31/97-12/31/00 Vesting of 25% of the Third Series shares (132 shares) will
accelerate as of the first December 31 on which the conditions
set forth in sections 3.2 and 3.4(c) are satisfied
Fourth Series 1.00% 12/31/97-12/31/02 1.00% (528 shares) will vest as of the first December 31 on which
(section 3.5) the conditions set forth in sections 3.2, 3.4(c) and 3.5(a) are
satisfied
0.50% 12/31/97-12/31/02 .50% (264 shares) will vest as of the first December 31 on which
the conditions set forth in sections 3.2, 3.4(c) and 3.5(b) are
satisfied
0.25% 12/31/97-12/31/02 .25% (132 shares) will vest as of the first December 31 on which
the conditions set forth in sections 3.2, 3.4(c) and 3.5(c) are
satisfied
0.25% 12/31/97-12/31/02 .25% (132 shares) will vest as of the first December 31 on which
the conditions set forth in sections 3.2 and 3.5(d) are satisfied
Total 4.00%
</TABLE>
Any shares which do not vest in accordance with the above schedule vest on
December 31, 2003 provided that Michael is a Key Senior Executive as defined in
the agreement.
62
<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
by and between
CMP MEDIA INC. and DANIEL H. LEEDS
DL & A
November 27, 1996
<PAGE> 2
EMPLOYMENT AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I - EMPLOYMENT
SECTION 1.1 Services........................................... 2
SECTION 1.2 Term............................................... 2
SECTION 1.3 Representation and Warranty........................ 3
SECTION 1.4 Intellectual Property.............................. 3
ARTICLE II - COMPENSATION; BENEFITS; EXPENSE REIMBURSEMENT
SECTION 2.1 Base Salary........................................ 4
SECTION 2.2 Incentive Bonus.................................... 4
SECTION 2.3 Stock.............................................. 4
SECTION 2.4 Fringe Benefits.................................... 5
SECTION 2.5 Reimbursement of Expenses.......................... 5
ARTICLE III - CONFIDENTIALITY; NON-COMPETITION
SECTION 3.1 Protection of Company's Business Interests......... 6
SECTION 3.2 Non-Disclosure and Non-Use of Confidential
Information........................................ 6
SECTION 3.3 Protection from Unfair Competition................. 7
SECTION 3.4 Prior Notice; Opportunity to Cure.................. 10
SECTION 3.5 Other Post-Employment Covenants.................... 12
SECTION 3.6 Confidentiality of Agreement....................... 13
SECTION 3.7 Relief for Breach.................................. 14
SECTION 3.8 Separate Covenants................................. 15
ARTICLE IV - TERMINATION OF EMPLOYMENT
SECTION 4.1 Dismissal Without Cause or Resignation For
Good Reason........................................ 15
SECTION 4.2 Other Termination.................................. 16
SECTION 4.3 Retirement......................................... 16
ARTICLE V - PROCEDURE TO BE FOLLOWED IN CASE OF RESIGNATION FOR
GOOD REASON OR DISMISSAL FOR CAUSE
SECTION 5.1 Resignation for Good Reason........................ 17
SECTION 5.2 Dismissal For Cause................................ 18
ARTICLE VI - RESOLUTION OF DISPUTES
SECTION 6.1 Arbitration........................................ 19
SECTION 6.2 Equitable Remedies................................. 19
ARTICLE VII - DEFINITIONS.............................................. 20
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
ARTICLE VIII - MISCELLANEOUS
SECTION 8.1 Entire Agreement; Binding Effect................... 23
SECTION 8.2 Amendment.......................................... 23
SECTION 8.3 Applicable Law..................................... 24
SECTION 8.4 Severability....................................... 24
SECTION 8.5 No Waiver.......................................... 24
SECTION 8.6 Notices............................................ 24
SECTION 8.7 Assignment......................................... 25
SECTION 8.8 Survival........................................... 26
SECTION 8.9 Headings........................................... 26
SECTION 8.10 Counterparts...................................... 26
</TABLE>
<PAGE> 4
EMPLOYMENT AGREEMENT
This Agreement, made and entered into as of the 27th day of November,
1996, by and between CMP Media Inc., a Delaware corporation (the "Company") and
Daniel H. Leeds ("Dan").
W I T N E S S E T H :
WHEREAS, Dan is a key senior executive of the Company; and
WHEREAS, from his long employment with the Company, Dan possesses
substantial knowledge, experience and expertise in the businesses in which the
Company is engaged; and
WHEREAS, the parties desire to set forth the terms under which Dan's
employment with the Company will continue and upon which he will refrain from
competing against the Company after the termination of his employment;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each of the parties, the parties
hereto hereby covenant and agree as follows:
1
<PAGE> 5
ARTICLE I
EMPLOYMENT
SECTION 1.1. SERVICES.
The Company shall employ Dan, and Dan shall serve the Company, as its
President of International or in such other position as may be assigned to him
from time to time, and he shall perform such services and duties as are
commensurate with such position or as may be from time to time specified by the
Company, consistent with the other terms of this Agreement. At all times during
his employment with the Company, Dan shall use his best efforts to promote the
interests of the Company and shall devote his full time and energies to the
business and affairs of the Company. Dan shall not, without his consent, be
obligated to perform duties that would require him to report regularly to an
office located more than fifty (50) miles from Manhasset, New York; provided,
however, that Dan shall undertake all such travel as may be necessary or
appropriate to the performance of his duties hereunder.
SECTION 1.2. TERM.
Dan's employment by the Company shall be deemed employment at will and
shall not be subject to a fixed term. Either Dan or the Company may terminate
his employment at any time and for any reason, with or without cause, by
delivering written notice to the other party. If Dan terminates his employment
by Voluntary Resignation, he shall give the Company not less than ninety (90)
days' prior written notice. In such event, the Company shall have the right to
waive all or part of such notice-period and accept Dan's Voluntary Resignation
effective as of any date prior to the expiration of such 90-day period.
2
<PAGE> 6
SECTION 1.3. REPRESENTATIONS AND WARRANTIES.
(a) Dan represents and warrants to the Company that (i) he has full legal
right, power and authority to enter into this Agreement and to consummate the
transactions herein contemplated; (ii) this Agreement constitutes the valid and
binding obligation of Dan, enforceable in accordance with its terms, except to
the extent that such enforcement may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally and by general
principles of equity; and (iii) neither this Agreement nor the consummation of
the transactions herein contemplated will conflict with, violate or infringe any
legal restriction, contract or instrument to which Dan is subject or by which he
is bound.
(b) The Company represents and warrants to Dan that (i) it has full legal
right, power and authority to enter into this Agreement and to consummate the
transactions herein contemplated; (ii) the execution and delivery of this
Agreement has been duly authorized by all necessary corporate action; (iii) this
Agreement constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally and by general principles of equity; and
(iv) neither this Agreement nor the consummation of the transactions herein
contemplated will conflict with, violate or infringe any legal restriction,
contract or instrument to which the Company is subject or by which it is bound.
SECTION 1.4. INTELLECTUAL PROPERTY.
All ideas, designs, plans and materials developed by Dan during the period
of his employment with the Company which relate to any business of the CMP Group
shall be the exclusive property of the Company. Dan shall disclose all such
3
<PAGE> 7
ideas, designs, plans and materials to the Company and shall not, without the
Company's prior written consent, use them except for the benefit of the Company.
At the Company's request and cost, Dan shall take all such actions and shall
execute, acknowledge and deliver all such documents as the Company may deem
necessary or advisable in order to secure to the Company the rights thereto by
patent, copyright, trademark or otherwise.
ARTICLE II
COMPENSATION
SECTION 2.1. BASE SALARY.
As compensation for his services hereunder, the Company shall pay Dan a
base salary at a rate to be determined on an annual basis.
SECTION 2.2. INCENTIVE BONUS.
In addition to his base salary, Dan shall be entitled to participate in an
annual incentive bonus program based on the Company's achievement of its
financial goals and other objectives. The terms of such plan shall be as
determined by the Compensation Committee of the Board of Directors.
SECTION 2.3. STOCK.
In addition to his base salary and incentive bonus, Dan shall have the
right, pursuant to and subject to the provisions of the Share Purchase Agreement
and the Option Agreement, to purchase restricted shares and option shares of the
Company's Class A Common Stock.
4
<PAGE> 8
SECTION 2.4. FRINGE BENEFITS.
During his employment Dan shall be entitled to participate in all employee
benefit plans which now or hereafter may be in effect for the benefit of
employees of the Company generally and for which he may qualify, subject to and
in accordance with the provisions of such plans as in effect from time to time.
SECTION 2.5. REIMBURSEMENT OF EXPENSES.
The Company shall reimburse Dan for all reasonable out-of-pocket expenses
actually incurred by him in the performance of his services hereunder in
accordance with the Company's standard travel and business expense-reimbursement
policy as in effect from time to time.
ARTICLE III
CONFIDENTIALITY; NON-COMPETITION
In consideration of the Company's agreement to make post-employment
payments to Dan under Article IV, which payments Dan acknowledges and agrees
will provide full and sufficient income to support himself and his dependents
during the period in which such payments are made, and as a specific inducement
to the Company to enter into this Agreement, the Stockholders' Agreement and the
Option Agreement, Dan hereby accepts and agrees to the provisions of this
Article III and acknowledges that such provisions are necessary and appropriate
for the reasonable protection of the Company's property, investments, business
relationships, economic advantages and goodwill.
5
<PAGE> 9
SECTION 3.1 PROTECTION OF COMPANY'S BUSINESS INTERESTS.
As a key senior executive of the Company, Dan has been intimately involved
in the management of all aspects of the business of the Company and its
Affiliates and has been a major strategist in planning and implementing its
business expansion. In the course of his long employment with the Company, Dan
has developed special skills, knowledge and abilities in the publishing field
which are of a uniquely personal nature. He has also acquired detailed knowledge
of the internal operations of the Company and its Affiliates and highly
confidential information concerning the national and international business of
the Company and its Affiliates. In addition, he has been afforded the
opportunity to develop special relationships of confidence and trust with the
customers, suppliers, consultants, employees, officers, directors and
stockholders of the Company and its Affiliates. Because of his continuing
responsibilities with the Company and its Affiliates, including his involvement
in strategic planning and the evaluation of proposed investments, it is expected
that Dan will continue to be entrusted with confidential information and will
continue to have the opportunity to develop such special relationships. The
parties acknowledge and agree that the Company would be unfairly and irreparably
damaged if Dan were to take any of such skills, knowledge, information or
relationships, which he has acquired and developed during the course of his
employment with the Company, and use them to the detriment of the Company and
its Affiliates.
SECTION 3.2. NON-DISCLOSURE AND NON-USE OF CONFIDENTIAL INFORMATION.
(a) Dan represents, warrants, covenants and agrees that, without the
Company's express or implied consent while employed or, after termination,
without the prior written consent of the Company's chief executive officer or
the Board of Directors, he will not willfully or knowingly at any time directly
or
6
<PAGE> 10
indirectly disclose, communicate or divulge, or use for the benefit of himself
or of any third party, any of the business or trade secrets or other
confidential information of the CMP Group including, solely by way of
illustration but not of limitation, their business strategies, business plans,
budgets, pricing, selling techniques, marketing techniques, operating systems,
financial systems, financial data, procedures, manuals, confidential reports,
personnel records, potential acquisitions, potential business expansions, credit
and financial data of their suppliers and of their present and prospective
customers, data about competitors, new product-development initiatives, custom
research and new product or service concepts and marketing strategy.
(b) Any and all materials of or concerning the CMP Group or their business
or affairs, including without limitation files, memoranda, notes,
correspondence, lists, records, video reproductions, computer tapes and disks,
design and other documents, and data storage and retrieval materials (and all
copies, compilations and summaries thereof), and any and all property of the CMP
Group, including without limitation equipment, software, keys, business cards
and credit cards, that are in Dan's custody or control shall be delivered to the
Company at the time Dan's employment with the Company terminates for any reason.
Dan shall not destroy any such materials or property, shall not retain any
copies thereof and shall certify in writing to the Company upon request that all
such materials and property have been delivered to the Company.
SECTION 3.3 PROTECTION FROM UNFAIR COMPETITION.
(a) For as long as Dan is employed by the CMP Group and through the period
ending on the earlier of (i) the third anniversary of the date of his
termination of employment (or, if the Company elects to pay him for an
additional period of time under Section 4.1(b), through the end of such
additional period) or
7
<PAGE> 11
(ii) the date Dan attains the age of sixty-five (65), Dan shall not engage in
competition with the CMP Group. For the purposes of this Agreement, Dan shall be
deemed to engage in competition with the CMP Group if Dan does any of the
following, whether or not in exchange for consideration, without the Company's
express or implied consent while employed or without the Company's prior written
consent after termination:
(A) On his own behalf or on behalf of any other person or entity, (1)
participates or is involved in or has direct responsibility for the day-to-day
management or operation of a Directly Competitive Business, an Indirectly
Competitive Business or any material function thereof (E.G., advertising,
circulation, production and the like); (2) owns, in whole or in part,
beneficially or of record, directly or indirectly, an equity interest (or an
interest convertible into equity) in a Directly Competitive Business or a Direct
Competitor; (3) renders services as a director, officer, employee, consultant,
advisor, agent or independent sales representative to a Direct Competitor; or
(4) renders services as a director, officer, employee, consultant, advisor,
agent or independent sales representative to an Indirect Competitor unless Dan
has no responsibility for or participation or involvement in any Indirectly
Competitive Business of such Indirect Competitor, provided, however, that Dan
may have supervisory, advisory, consulting or sales-representative
responsibility over an Indirectly Competitive Business if the revenue of all
Indirectly Competitive Businesses of such Indirect Competitor over which Dan has
such responsibility represents no more than fifteen percent (15%) of the total
revenue over which Dan has such responsibility.
(B) Solicits the service of any employee of the CMP Group for Dan's own
benefit or for the benefit of any person or entity other than the CMP Group, or
induces or helps to induce any such employee to leave employment with the CMP
Group.
8
<PAGE> 12
(C) Assists, induces or helps any employee or former employee of the CMP
Group or any other person or entity to engage in competition with the CMP Group
or any of its business activities, provided that the giving of a favorable
reference by Dan on behalf of such former employee shall not be prohibited by
this clause (C).
(D) Employs or causes any person or entity other than the CMP Group to
employ any former employee of the CMP Group within one (1) year after the
resignation of such former employee from the CMP Group.
(E) Willfully induces or attempts to induce any customer, supplier or
contractor of the Company to terminate any agreement or arrangement with the
Company, or willfully induces or attempts to induce any customer, supplier or
contractor, or any potential customer, supplier or contractor, of the Company
not to enter into any agreement or arrangement with the Company.
(F) Communicates publicly (other than pursuant to subpoena in a legal
proceeding) or to the press, or writes or produces for publication in any
medium, on the subject of, or with express or implied reference to, the CMP
Group or any of their former, current or future stockholders, directors,
officers or employees in their capacities as such. For the purpose hereof,
"implied reference shall mean a reference that does not expressly name the CMP
Group or any of their former, current or future stockholders, directors,
officers or employees but that nevertheless would be understood by the average
reader or audience-member to refer thereto. It shall not be deemed a violation
of this clause (F) if, after the termination of his employment with the Company,
Dan responds to inquiries from the public or the press solely by stating, in
form or substance, "I do not discuss any matters relating to CMP; please address
your inquiries directly to the company" or Dan communicates the fact that he was
formerly employed by the Company and identifies the positions he held and the
dates thereof.
9
<PAGE> 13
(b) Notwithstanding the provisions of paragraph (a) of this Section 3.3,
Dan shall not be deemed to be engaged in competition with the CMP Group solely
by reason of Dan's ownership of (i) an equity interest of less than one-half of
one percent (0.5%) in the securities of a Direct Competitor or Indirect
Competitor listed for trading on a national securities exchange or quoted in the
National Market List of NASDAQ or (ii) an interest in a mutual or other
investment fund which owns an interest in a Direct Competitor or Indirect
Competitor, provided that Dan has no influence or control over the selection of
such fund's investment decisions.
SECTION 3.4. PRIOR NOTICE; OPPORTUNITY TO CURE.
(a) Dan shall give the Company written notice at least twenty (20)
Business Days before entering into any relationship, transaction or business, or
engaging in any activity, or taking or omitting to take any action, which might
reasonably be deemed a breach of any provision of Section 3.2 or Section 3.3,
such notice to include full and complete particulars as to the proposed
relationship, transaction, activity, action or omission, the services or duties
contemplated and such other facts and circumstances as are reasonably necessary
for the Company to make an informed decision. The Company shall advise Dan in
writing, within ten (10) Business Days after such notice is given, of the Board
of Directors' determination as to whether such relationship, transaction,
business, activity, action or omission would materially breach any of the
provisions of Section 3.2 or Section 3.3. In the event that, for reasons not
within his control, Dan gives the Company less than twenty (20) Business Days'
prior written notice, the Company will endeavor in good faith to advise Dan of
the Board of Directors' determination in less than ten (10) Business Days after
such notice is given, provided that the Company's failure to advise Dan in less
than ten (10) Business Days shall not be deemed to constitute
10
<PAGE> 14
consent to such relationship, transaction, business, activity, action or
omission and shall not give rise to any liability of the Company to Dan or to
any third party.
(b) Once the Company has advised Dan in writing that the Board of
Directors has determined that a proposed relationship, transaction, business,
activity, action or omission would not materially breach any of the provisions
of Section 3.2 or Section 3.3, and Dan has thereupon entered into such
relationship, transaction or business or has begun to engage in such activity or
to take or omit to take such action, the Board of Directors shall have no right
to reverse or otherwise modify its determination; provided, however, that if the
nature, scope or terms of such relationship, transaction, business, activity,
action or omission are to be modified after such determination is made, then in
accordance with paragraph (a) hereof Dan shall give the Company prior written
notice of such modification and the Company shall advise him as to whether such
relationship, transaction, business, activity, action or omission, as so
modified, would materially breach any of the provisions of Section 3.2 or
Section 3.3.
(c) In the event that, without having given the Company prior notice
pursuant to paragraphs (a) or (b) hereof, Dan enters into any relationship,
transaction or business or begins to engage in any activity or to take or omit
to take any action, or there is a modification of the nature, scope or terms of
such relationship, transaction, business, activity, action or omission that the
Board of Directors determines is a material breach of any of the provisions of
Section 3.2 or Section 3.3, the Company shall give Dan written notice of such
determination and, if such breach is continuing, an opportunity to cure such
breach before the Company seeks remedy or relief by judicial process or
arbitration. The opportunity to cure shall be sixty (60) days to the extent such
continuing breach consists of holding an ownership interest in a competitive
business and fifteen (15) days with respect to any other continuing breach.
11
<PAGE> 15
SECTION 3.5. OTHER POST-EMPLOYMENT COVENANTS.
(a) During the period in which the Company is making payments to Dan
pursuant to Article IV, Dan shall not willfully take any action materially
adverse to the interests of the Company, even if such action is in technical
compliance with the other provisions of this Article III, but shall at all times
conduct himself in the same manner and with the same degree of loyalty to the
Company as if he were still an employee of the Company.
(b) During the period in which the Company is making payments to Dan
pursuant to Article IV, Dan shall make himself available to the Company for
consultation and advice at such times as it may reasonably request and as do not
unreasonably interfere with Dan's other permitted business activities or
commitments. Dan shall not be required to be physically present at any office of
the Company or to allocate regular time to making himself available for such
consultation or advice, provided that he shall respond timely to any requests by
the Company for consultation. Dan shall maintain, at his own expense, an office
at his home with all furniture and equipment necessary to carry out his
obligations under this Section 3.5(b). The Company shall reimburse Dan for all
reasonable out-of-pocket expenses he incurs in rendering such consultation or
advice (other than expenses of maintaining his home office).
(c) Both during the period in which the Company is making payments to Dan
pursuant to Article IV and thereafter, Dan shall, if requested by the Company,
provide information, testimony and assistance in connection with the prosecution
or defense of any claims by or against the Company arising out of matters of
which he acquired knowledge while an employee of the Company. The Company shall
reimburse Dan for all reasonable out-of-pocket expenses he incurs in rendering
such assistance.
12
<PAGE> 16
(d) Both during the period in which the Company is making payments to Dan
pursuant to Article IV and thereafter, Dan shall not willfully make any oral or
written statement which reflects adversely upon the character, honesty, credit,
efficiency or business practices of the CMP Group or its former, current or
future stockholders, directors, officers or employees in their capacities as
such.
SECTION 3.6. CONFIDENTIALITY OF AGREEMENT.
The terms and conditions of this Agreement shall be kept confidential by
the parties, and neither of the parties shall disclose them to any non-party
unless such disclosure is necessitated by (a) legal and/or financial
requirements of the Company, in which case the form of such disclosure shall
first be mutually agreed upon by the Company and Dan, or (b) any arbitration or
other legal proceeding contesting or seeking to enforce any provision or
interpretation of this Agreement (including any deposition or testimony that
either party provides in connection therewith), regardless of whether such
proceeding is initiated by Dan or the Company. Except as provided in the
preceding sentence, and without limiting the generality of the foregoing, Dan
shall not respond to or in any way participate in or contribute to any public
discussion, notice or other publicity concerning or in any way relating to
execution of this Agreement or the events (including any negotiations) which led
to its execution, and Dan specifically agrees that he shall not disclose
information regarding this Agreement to any current or former employees of the
Company other than those expressly authorized by the Company to have knowledge
hereof. Without limiting the comprehensive confidentiality agreed to, Dan may
disclose this Agreement to his attorneys, financial advisors and members of his
and his spouse's immediate families, provided he informs them of this
confidentiality provision and they agree to abide by it. Dan hereby agrees that
any disclosure by him of any of the terms and conditions of this Agreement in
13
<PAGE> 17
violation of the foregoing shall constitute and be treated as a material breach
of this Agreement and Dan shall be responsible for damages occasioned thereby,
including but not limited to reasonable attorneys' fees incurred by the Company
to enforce this Section 3.6.
SECTION 3.7. RELIEF FOR BREACH.
(a) Dan acknowledges and agrees that any breach or anticipatory breach by
him of any of the provisions of this Article III would cause the Company
irreparable injury not compensable by monetary damages alone and that,
accordingly, in any such event, the Company shall be entitled to injunctions,
both preliminary and permanent, enjoining or restraining such breach or
anticipatory breach (and Dan hereby consents to the issuance thereof without
bond by any court of competent jurisdiction), in addition to monetary damages in
such amount as the evidence may show and such other remedies as may be available
at law or in equity.
(b) Dan shall not have the power or right to avoid any of his obligations
under this Article III by refusing or failing to accept from the Company payment
of any amounts duly tendered to him by the Company pursuant to Article IV. It
shall not be a valid defense, and Dan shall not raise as a defense, in any
proceeding by the Company to enforce its rights under this Article III that Dan
shall have refused or failed to accept any such payments, and the right of the
Company to equitable relief under this Article III shall be in no way impaired
or affected by Dan's refusal or failure to accept any such payments from the
Company.
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SECTION 3.8. SEPARATE COVENANTS.
Dan understands and agrees that the covenants contained in this Article
III constitute a series of separate covenants, one for each applicable state in
the United States and the District of Columbia, and one for each applicable
foreign country. If in any judicial proceeding a court shall hold unenforceable
any of the separate covenants included in this Article III, such unenforceable
covenant or covenants shall be deemed limited as necessary or eliminated from
the provisions of this Article III for the purpose of such proceeding to the
extent necessary to permit the remaining separate covenants of this Article III
to be enforced in such proceeding, and to permit such unenforceable covenant or
covenants to be enforced as limited.
ARTICLE IV
TERMINATION OF EMPLOYMENT
SECTION 4.1. DISMISSAL WITHOUT CAUSE OR RESIGNATION FOR GOOD REASON.
(a) In the event that Dan's employment with the Company terminates by
reason of his Dismissal Without Cause or his Resignation For Good Reason, the
Company shall, in consideration of Dan's compliance with the restrictive
covenants set forth in Article III and in lieu of any other severance
obligations to Dan, pay him through the period ending on the earlier of (i) the
third anniversary of the date of his termination of employment or (ii) the date
Dan attains the age of sixty-five (65), an annual amount equal to the average of
(A) his total annual income projected to be paid by the Company for the calendar
year in which such termination of employment occurs and (B) his total annual
income actually paid by, or due from, the Company for the immediately preceding
calendar year, less fifty percent (50%) of (1) any current cash compensation,
and (2) the present value of any deferred cash compensation, that he earns from
other sources as an
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employee, consultant, partner or proprietor for each such year in which payments
from the Company hereunder are due. Payments shall be made in bi-weekly
installments or on such other periodic basis as the Company then makes salary
payments to its employees generally.
(b) In addition, the Company shall have the right, but not the obligation,
to require Dan's continued compliance with the restrictive covenants set forth
in Article III for up to two (2) years after the expiration of the period for
which the Company is obligated to pay Dan under paragraph (a) of this Section
4.1, in consideration of which the Company shall continue to pay Dan, during the
period of time elected by the Company, on the same basis and in the same manner
as set forth in paragraph (a) of this Section 4.1.
SECTION 4.2. OTHER TERMINATION.
In the event that Dan's employment with the Company terminates for any
reason other than Dismissal Without Cause or Resignation For Good Reason, no
compensation or other rights shall accrue to Dan or his estate under this
Agreement after the date of termination, other than benefits which shall accrue
after such date pursuant to the terms of Company benefit plans in which Dan
participated on the date of termination, which benefits shall be paid in
accordance with the terms of such plans. Dan or his estate shall be entitled to
receive from the Company any compensation that was earned but unpaid as of the
date of termination of his employment.
SECTION 4.3. RETIREMENT.
In the event that Dan's employment with the Company terminates by reason of
his retirement at or after the date he attains the age of sixty-five (65), the
16
<PAGE> 20
Company shall have the right, but not the obligation, to require Dan's continued
compliance with the restrictive covenants set forth in Article III for up to two
(2) additional years, in consideration of which the Company shall continue to
pay Dan, during the period of time elected by the Company, on the same basis and
in the same manner as set forth in Section 4.1.
ARTICLE V
PROCEDURE TO BE FOLLOWED IN CASE OF
RESIGNATION FOR GOOD REASON OR DISMISSAL FOR CAUSE
SECTION 5.1. RESIGNATION FOR GOOD REASON.
In the event Dan terminates his employment with the Company as a
Resignation For Good Reason, Dan shall give the Company at least ten (10)
Business Days' prior written notice specifying in reasonable detail the specific
conduct of the Company that he considers grounds for Resignation For Good Reason
and the specific provision of the definition of "Resignation For Good Reason"
upon which he relies. Dan's employment with the Company shall terminate as of
the tenth Business Day after such notice is given, or such other date as the
parties mutually agree. Should the Company dispute the basis for such
resignation in a written notice given to Dan on or before his termination date,
the parties shall meet and endeavor to resolve the dispute amicably within the
twenty (20) Business Days after the Company's notice is given. If they cannot so
resolve the dispute within such twenty (20) Business Days after the Company's
notice is given, Dan and the Company shall submit the dispute to binding
arbitration in accordance with Section 6.1. The decision rendered in such
arbitration shall be final and binding on both Dan and the Company for all
purposes. If the arbitrators determine that Dan did not have a proper basis on
which to terminate his
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employment as Resignation For Good Reason within the meaning of this Agreement,
the termination of Dan's employment shall be treated for all purposes of this
Agreement as a Voluntary Resignation. In addition to any other rights which a
party may have, the party prevailing in such arbitration proceeding shall be
entitled to recover from the losing party any and all of the expenses incurred
by the prevailing party in such proceeding, including reasonable attorney's
fees.
SECTION 5.2. DISMISSAL FOR CAUSE.
In the event the Company terminates Dan's employment as a Dismissal For
Cause, the Company shall give Dan at least ten (10) Business Days' prior written
notice specifying in reasonable detail the specific conduct of Dan that it
considers grounds for Dismissal For Cause and the specific provision of the
definition of "Dismissal For Cause" upon which it relies. Dan's employment with
the Company shall terminate as of the tenth Business Day after such notice is
given, or such other date as the parties mutually agree. Should Dan dispute the
basis for such termination in a written notice given to the Company on or before
his termination date, the parties shall meet and endeavor to resolve the dispute
amicably within twenty (20) Business Days after Dan's notice is given. If they
cannot so resolve the dispute within such twenty (20) Business Days after Dan's
notice is given, Dan and the Company shall submit the dispute to binding
arbitration in accordance with Section 6.1. The decision rendered in such
arbitration shall be final and binding on both Dan and the Company for all
purposes. If the arbitrators determine that the Company did not have a proper
basis on which to terminate Dan's employment as a Dismissal For Cause within the
meaning of this Agreement, the termination of Dan's employment shall be treated
for all purposes of this Agreement as a Dismissal Without Cause. In addition to
any other rights which a party may have, the party prevailing in such
arbitration
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<PAGE> 22
proceeding shall be entitled to recover from the losing party any and all of the
expenses incurred by the prevailing party in such proceeding, including
reasonable attorney's fees.
ARTICLE VI
RESOLUTION OF DISPUTES
SECTION 6.1. ARBITRATION.
Except as provided in Section 6.2, all controversies arising out of or
relating to this Agreement or the breach hereof shall be settled by arbitration
in the County of Nassau, State of New York, in accordance with the rules of the
American Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. Any
arbitration hereunder shall be before three (3) arbitrators.
SECTION 6.2. EQUITABLE REMEDIES.
Notwithstanding the provisions of Section 6.1, any proceeding for
injunctive relief or specific performance in connection with this Agreement
shall be commenced in Supreme Court of the State of New York, County of Nassau,
and each of the parties hereby accepts the exclusive jurisdiction of such Court
for such purpose; provided, however, that the petitioner may commence such
proceeding in such other court as may be necessary, in the petitioner's
judgment, in order to more effectively or expeditiously obtain personal
jurisdiction over the respondent.
19
<PAGE> 23
ARTICLE VII
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
"Affiliates" shall mean all entities controlling, controlled by or under
common control with the Company.
"Board of Directors" shall mean the Board of Directors of the Company.
"Business Day" Shall mean any day on which the Company is scheduled to be
open for business.
"Change In Control" shall mean a direct or indirect transfer of fifty
percent (50%) or more of the voting control of the Company or the sale of
substantially all of the assets of the Company, in one or more transactions, to
(a) one or more persons who are not (i) members of the Leeds Family or (ii)
spouses, children or grandchildren of members of the Leeds Family and/or (b) one
or more entities which are not controlled by (i) one or more members of the
Leeds Family or (ii) one or more of the spouses, children or grandchildren of
members of the Leeds Family.
"CMP Business" shall mean any publication, product, service or business
(a) which the CMP Group publishes, produces, provides or engages in or (b) which
the CMP Group has a bona fide plan or intention to publish, produce, provide or
engage in within the succeeding 12-month period, the research and development of
which the CMP Group has devoted substantive time and attention to, and which
plan or intention Dan has actual knowledge of before he engages in any activity
competitive with such CMP Business as contemplated by clause (A) of Section
3.3(a).
"CMP Group" shall mean the Company or any of its Affiliates.
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<PAGE> 24
"Direct Competitor" shall mean a business enterprise that produces or
operates, or owns directly or indirectly an interest of twenty percent (20%) or
more in, one or more Directly Competitive Businesses.
"Directly Competitive Business" shall mean any competitive publication,
product, service or business (a) the target audience of which is substantially
the same as the target audience of a CMP Business or (b) forty percent (40%) or
more of the annual revenue of which is derived from substantially the same
customers as a CMP Business derives twenty percent (20%) or more of its annual
revenue.
"Dismissal For Cause" shall mean the termination of Dan's employment with
the Company by the Board of Directors for (i) the willful and continued failure
of Dan substantially to perform his duties as an officer and employee of the
Company or comply with the written policies of the Company after the Company has
delivered to Dan a written demand for substantial performance or compliance that
specifies such failure in reasonable detail; (ii) illegal conduct or gross
misconduct by Dan, in either case that is willful and results (or is reasonably
likely to result) in material damage to the business or reputation of the
Company; or (iii) the resignation by Dan from his employment following his act
or omission which would constitute grounds for Dismissal For Cause hereunder. No
act or failure to act on the part of Dan (other than non-compliance with lawful
instructions given to Dan by the Company) shall be considered "willful unless it
is done or omitted to be done by him in bad faith or without reasonable belief
that his action or omission was in the best interests of the Company. Any act or
failure to act that is pursuant to resolution duly adopted by the Board of
Directors shall be conclusively presumed to be done or omitted to be done by Dan
in good faith and in the best interests of the Company.
"Dismissal Without Cause" shall mean the termination of Dan's employment
by the Company on any grounds other than grounds for Dismissal For Cause or as a
result of his Permanent Disability.
21
<PAGE> 25
"Indirect Competitor" shall mean a business enterprise that does not
produce or operate, or own directly or indirectly an interest in, any Directly
Competitive Businesses but produces or operates, or owns directly or indirectly
an interest of twenty percent (20%) or more in, one or more Indirectly
Competitive Businesses.
"Indirectly Competitive Business" shall mean any competitive or
potentially competitive publication, product, service or business which derives
from twenty percent (20%) to but not including forty percent (40%) of its annual
revenue from substantially the same customers as a CMP Business derives twenty
percent (20%) or more of its annual revenue.
"Leeds Family" shall mean Gerard G. Leeds, Liselotte J. Leeds, Michael S.
Leeds, Richard A. Leeds, Daniel H. Leeds, Greg Jobin-Leeds and Jennifer
Leeds-Lukehart.
"Option Agreement" shall mean that certain Option Agreement entered into
as of the date hereof by and between the Company and Dan.
"Permanent Disability" shall mean a physical or mental impairment, as a
result of which Dan shall have been unable, with or without reasonable
accommodation, to perform the essential functions of his employment position for
a period of at least sixteen (16) weeks during any 12-month period.
"Resignation For Good Reason" shall mean Dan's resignation from his
employment with the Company (a) after the Company has, without his consent, (i)
materially reduced his package of compensation and benefits, (ii) materially
diminished his position, authority, duties or responsibilities, or (iii)
required him to report regularly to an office located more than fifty (50) miles
from Manhasset, New York or (b) within three (3) years after a Change In Control
occurs.
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<PAGE> 26
"Share Purchase Agreement" shall mean that certain Share Purchase
Agreement entered into as of the date hereof by and among Gerard G. Leeds,
Liselotte J. Leeds and Dan.
"Voluntary Resignation" shall mean Dan's resignation from his employment
with the Company on any grounds other than grounds for Resignation For Good
Reason or as a result of his Permanent Disability.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. ENTIRE AGREEMENT; BINDING EFFECT.
This Agreement contains all of the terms agreed upon by the parties with
respect to the subject matter hereof and replaces and supersedes any and all
prior agreements, written or oral, between the parties relating to the terms of
Dan's employment with the Company. No promises, agreements or representations
with respect to the matters herein contained shall be binding upon any of the
parties unless set forth herein. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective heirs, representatives,
successors and permitted assigns.
SECTION 8. AMENDMENT.
No provision of this Agreement may be amended or waived except by a
writing making reference to this Agreement and signed by the party against whom
the enforcement of such amendment or waiver is sought.
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<PAGE> 27
SECTION 8. APPLICABLE LAW.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York, without reference to its
principles regarding choice or conflicts of law.
SECTION 8.4. SEVERABILITY.
Wherever possible, each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provisions hereof shall be prohibited by or invalid under any such law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating or nullifying the remainder of such provision or any other
provision of this Agreement.
SECTION 8.5. NO WAIVER.
No delay or omission by any party in exercising or enforcing any right
hereunder shall operate as a waiver of such right, and a waiver on one occasion
shall not be construed as a waiver of any right or remedy on any future
occasion.
SECTION 8.6. NOTICES.
All notices, requests, consents, designations and demands required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given (a) when personally delivered to an individual
party or to an authorized officer of a corporate party, whether by messenger,
courier or other person, (b) on the second Business Day after the date it is
sent by certified or registered mail, return receipt requested, or (c) on the
next Business Day after the date it is sent via telefacsimile (provided it is
actually received and is not materially illegible), as follows:
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<PAGE> 28
If to the Company:
CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Attention: President
Fax: (516) 562-5718
with a copy to:
CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Attention: General Counsel
Fax: (516) 562-7123
If to Dan:
Daniel H. Leeds
c/o CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Fax: (516) 562-7123
with a copy to Dan at his last known address as reflected on the records
of the Company
or to such other mail or facsimile address as the recipient party shall have
last designated by notice given to the other in accordance herewith.
SECTION 8.7. ASSIGNMENT.
This Agreement is a contract for personal services and, without the
Company's prior written consent, Dan may not assign, delegate or transfer any of
his rights or obligations hereunder. The Company may not, without Dan's prior
written consent, assign any of its rights or delegate any of its obligations or
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<PAGE> 29
liabilities under this Agreement to any person or entity other than an entity
that controls, is controlled by or is under common control with the Company;
provided, however, that no such assignment or delegation shall relieve the
Company from its obligations or liabilities hereunder.
SECTION 8.8. SURVIVAL
This Agreement shall survive any merger, sale or other disposition of the
Company and shall survive the termination of Dan's employment with the Company.
SECTION 8.9. HEADINGS.
The headings herein are for convenience of reference only and shall not be
considered in construing this Agreement.
SECTION 8.10. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed as an original and all of which shall together constitute
one and the same instrument.
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<PAGE> 30
IN WITNESS WHEREOF, Dan has executed this Agreement and the Company has
caused this Agreement to be executed by an officer thereunto duly authorized on
the day and year first above written.
CMP MEDIA INC.
By /s/MICHAEL S. LEEDS
---------------------------------
Name: Michael S. Leeds
Title: President
Attest:
/s/ROBERT D. MARAFIOTI
-------------------------------------
(CORPORATE SEAL)
/s/DANIEL H. LEEDS
- -----------------------------
DANIEL H. LEEDS
27
<PAGE> 1
EXHIBIT 10.6
SHARE PURCHASE AGREEMENT
BY AND AMONG
GERARD G. LEEDS and LISELOTTE J. LEEDS
AND
DANIEL H. LEEDS
DL&A
NOVEMBER 27, 1996
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE I - SALE AND PURCHASE
SECTION 1.1 Transfer of Shares........................ 2
SECTION 1.2 Purchase Price and Payment.. ............. 2
ARTICLE II - REPRESENTATIONS AND WARRANTIES
SECTION 2.1 Representations of Gerry and Lilo......... 3
SECTION 2.2 Representations of Dan.................... 4
ARTICLE III - CONFIDENTIALITY.................................... 4
ARTICLE IV - RESOLUTION OF DISPUTES
SECTION 4.1 Arbitration............................... 5
SECTION 4.2 Equitable Remedies........................ 6
ARTICLE V - DEFINITIONS.......................................... 6
ARTICLE VI - MISCELLANEOUS
SECTION 6.1 Further Assurances........................ 7
SECTION 6.2 Entire Agreement; Binding Effect.......... 7
SECTION 6.3 Amendment................................. 8
SECTION 6.4 Applicable Law............................ 8
SECTION 6.5 Severability.............................. 8
SECTION 6.6 No Waiver................................. 8
SECTION 6.7 Notices................................... 9
SECTION 6.8 Assignment................................ 10
SECTION 6.9 Gender and Number......................... 10
SECTION 6.10 Headings................................. 10
SECTION 6.11 Counterparts.......................... .. 10
<PAGE> 3
SHARE PURCHASE AGREEMENT
This Share Purchase Agreement, made and entered into on this 27th day of
November, 1996, by and among Gerard G. Leeds ("Gerry"), Liselotte J. Leeds
("Lilo") (Gerry and Lilo sometimes collectively the "Selling Stockholders"), and
Daniel H. Leeds ("Dan").
W I T N E S S E T H:
WHEREAS, Dan is a key senior executive of CMP Media Inc., a Delaware
corporation (the "Company");
WHEREAS, Gerry and Lilo desire to create substantial incentives for Dan to
(i) cause the Company to grow continuously and successfully in sales, profits
and profitability, (ii) take a long-term view of the Company's future, (iii)
help the Company attain its long-term goals, including its diversity goals as
set forth in its corporate Principles, and (iv) remain with the Company for the
long term; and
WHEREAS, to create such incentives, Gerry and Lilo desire to provide Dan
with the opportunity to purchase shares of the Company's Class A Common Stock
from them, provided that Dan simultaneously enters into a Stockholders'
Agreement with the Company, Gerry and Lilo, which provides for certain
restrictions on Dan's right to sell such shares and to compete with the Company;
and
WHEREAS, Dan desires to have the opportunity to purchase such shares of
Class A Common Stock from Gerry and Lilo and, as an inducement to Gerry and Lilo
to sell him such shares of the Company's Class A Common Stock and as a condition
to the closing of such sale, Dan desires to enter simultaneously therewith into
such Stockholders' Agreement;
<PAGE> 4
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements herein contained and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by each of the parties, the parties hereto hereby represent,
warrant, covenant and agree, as follows:
ARTICLE I
SALE AND PURCHASE
SECTION 1.1. TRANSFER OF SHARES.
Subject to the terms and conditions of this Agreement, each of Gerry and
Lilo hereby sells to Dan, and Dan hereby purchases from each of Gerry and Lilo,
five hundred twenty-eight (528) shares of Class A Stock (which number of shares
equals approximately one percent (1%) of the number of shares of the Company's
Common Stock issued and outstanding as of the date hereof), or an aggregate of
one thousand fifty-six (1,056) shares of Class A Stock (which number of shares
equals approximately two percent (2%) of the number of shares of the Company's
Common Stock issued and outstanding as of the date hereof).
SECTION 1.2. PURCHASE PRICE AND PAYMENT
The purchase price for such shares of Class A Stock (the "Shares") shall
be Three Hundred Seventy-Five Dollars ($375.00) per Share. Subject to the terms
and conditions of this Agreement, Dan shall pay to each of Gerry and Lilo, as
the full purchase price for the Shares purchased by Dan from such Selling
Stockholder hereunder, the sum of one hundred ninety-eight thousand dollars
($198,000), or an aggregate purchase price of three hundred and ninety-six
thousand dollars
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<PAGE> 5
($396,000). Payment shall be made simultaneously herewith in cash or by check,
bank draft or wire transfer, in exchange for which each of Gerry and Lilo shall
cause to be delivered to Dan stock certificates representing the Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.1. REPRESENTATIONS OF GERRY AND LILO.
Each of the Selling Stockholders hereby represents and warrants to Dan
that (a) such Selling Stockholder has full legal right, power and authority to
enter into this Agreement and to consummate the transactions herein
contemplated; (b) this Agreement constitutes the valid and binding obligation of
such Selling Stockholder, enforceable in accordance with its terms, except to
the extent that such enforcement may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally and by general
principles of equity; (c) neither this Agreement nor the consummation of the
transactions herein contemplated will conflict with, violate or infringe any
legal restriction, contract or instrument to which such Selling Stockholder is
subject, other than the restrictions set forth in the Shareholders' Agreement
and in the Credit Agreement and the Negative Pledge Agreement, all the
applicable provisions of which have been waived and/or satisfied to permit the
sale and purchase contemplated by this Agreement; (d) such Selling Stockholder
is the legal and beneficial owner of the Shares to be transferred by such
Selling Stockholder hereunder and has not previously sold, assigned or
transferred such Shares, or created or suffered to exist any security interest
therein or lien or encumbrance thereon; (e) such Selling Stockholder has full
power to convey to Dan good title to the Shares to be so transferred hereunder,
free and clear of any liens, charges, encumbrances, options,
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<PAGE> 6
pledges or claims of any nature whatsoever; and (f) the sale of such Shares to
Dan will, absent any incapacities occurring through an action or omission of
Dan, transfer to Dan good, legal and valid right, title and interest in and to
such Shares.
SECTION 2.2. REPRESENTATIONS OF DAN.
Dan hereby represents and warrants to each of Gerry and Lilo that (a) he
has full legal right, power and authority to enter into this Agreement and to
consummate the transactions herein contemplated; (b) this Agreement constitutes
the valid and binding obligation of Dan, enforceable in accordance with its
terms, except to the extent that such enforcement may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
by general principles of equity; and (c) neither this Agreement nor the
consummation of the transactions herein contemplated will conflict with, violate
or infringe any legal restriction, contract or instrument to which Dan is
subject or by which he is bound.
ARTICLE III
CONFIDENTIALITY
The terms and conditions of this Agreement shall be kept confidential by
the parties, and none of the parties shall disclose them to any non-party unless
such disclosure is necessitated by (a) legal and/or financial requirements of
any of the parties or the Company, in which case the form of such disclosure
shall first be mutually agreed upon by Gerry, Lilo, the Company and Dan, or (b)
any arbitration or other legal proceeding contesting or seeking to enforce any
provision or interpretation of this Agreement (including any deposition or
testimony that either party provides in connection therewith), regardless of
whether such proceeding is
4
<PAGE> 7
initiated by Dan, Gerry or Lilo. Except as provided in the preceding sentence,
and without limiting the generality of the foregoing, Dan shall not respond to
or in any way participate in or contribute to any public discussion, notice or
other publicity concerning or in any way relating to execution of this Agreement
or the events (including any negotiations) which led to its execution, and Dan
specifically agrees that he shall not disclose information regarding this
Agreement to any current or former employees of the Company other than those
expressly authorized by the Company to have knowledge hereof. Without limiting
the comprehensive confidentiality agreed to, Dan may disclose this Agreement to
his attorneys, financial advisors and members of his and his spouse's immediate
families, provided he informs them of this confidentiality provision and they
agree to abide by it. Dan hereby agrees that any disclosure by him of any of the
terms and conditions of this Agreement in violation of the foregoing shall
constitute and be treated as a material breach of this Agreement and Dan shall
be responsible for damages occasioned thereby, including but not limited to
reasonable attorneys' fees incurred by the Company to enforce this Article III.
ARTICLE IV
RESOLUTION OF DISPUTES
SECTION 4.1. ARBITRATION.
Except as provided in Section 4.2, all controversies arising out of or
relating to this Agreement or the breach hereof shall be settled by arbitration
in the County of Nassau, State of New York, in accordance with the rules of the
American Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. Any
arbitration hereunder shall be before three (3) arbitrators.
5
<PAGE> 8
SECTION 4.2. EQUITABLE REMEDIES.
Notwithstanding the provisions of Section 4.1, any proceeding for
injunctive relief or specific performance in connection with this Agreement
shall be commenced in Supreme Court of the State of New York, County of Nassau,
and each of the parties hereby accepts the exclusive jurisdiction of such Court
for such purpose; provided, however, that the petitioner may commence such
proceeding in such other court as may be necessary, in the petitioner's
judgment, in order to more effectively or expeditiously obtain personal
jurisdiction over the respondent.
ARTICLE V
DEFINITIONS
"CREDIT AGREEMENT" shall mean that certain Credit Agreement originally
dated as of July 15, 1993 by and among the Company (fka CMP Publications, Inc.),
Fleet National Bank (fka Shawmut Bank Connecticut, National Association) and The
Chase Manhattan Bank (fka The Chase Manhattan Bank, National Association), as
most recently amended on November 14, 1996.
"NEGATIVE PLEDGE AGREEMENT" shall mean that certain Negative Pledge
Agreement originally dated as of July 15, 1993 by and among Gerry, Lilo and
Fleet National Bank (f/k/a/ Shawmut Bank Connecticut, National Association), as
most recently amended and confirmed by Gerry, Lilo, Michael S. Leeds and Dan to
Fleet National Bank and The Chase Manhattan Bank on November 14, 1996.
"OPTION AGREEMENT" shall mean that certain Option Agreement entered into
as of the date hereof by and between the Company and Dan.
"SHAREHOLDERS' AGREEMENT" shall mean that certain Shareholders' Agreement
entered into as of June 30, 1991 by and among the Company, certain of its
affiliates, Gerry, Lilo and their children.
6
<PAGE> 9
"STOCKHOLDERS' AGREEMENT" shall mean that certain Stockholders' Agreement
entered into as of the date hereof by and among the Company, Gerry, Lilo and
Dan.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. FURTHER ASSURANCES.
Each of the parties hereto, upon request of another party, shall take all
such actions and execute and deliver all such further instruments of sale,
assignment, conveyance, transfer and exchange, and all such other documents and
agreements, as may be necessary or appropriate to assure, complete and evidence
the full and effective sale, assignment, transfer, conveyance and exchange of
the Shares as herein required and as may otherwise be necessary or appropriate
to comply with the terms and conditions of this Agreement.
SECTION 6.2. ENTIRE AGREEMENT; BINDING EFFECT.
This Agreement contains all of the terms agreed upon by the parties with
respect to the subject matter hereof and replaces and supersedes any and all
prior agreements, written or oral, between the parties relating to the Shares
(except for the Stockholders' Agreement and the Option Agreement to the extent
their respective terms are not inconsistent herewith). No promises, agreements
or representations with respect to the matters herein contained shall be binding
upon any of the parties unless set forth herein. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective heirs,
representatives, successors and permitted assigns.
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SECTION 6.3. AMENDMENT.
No provision of this Agreement may be amended or waived except by a
writing making reference to this Agreement and signed by the party against whom
the enforcement of such amendment or waiver is sought.
SECTION 6.4. APPLICABLE LAW.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York, without reference to its
principles regarding choice or conflicts of law, and in accordance with and
consistent with the Company's election to be treated as an S Corporation.
SECTION 6.5. SEVERABILITY.
Wherever possible, each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law and the
Company's S Corporation election, but if any provisions hereof shall be
prohibited by or invalid under any such law or the Company's S Corporation
election, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating or nullifying the remainder of such
provision or any other provision of this Agreement.
SECTION 6.6. NO WAIVER.
No delay or omission by any party in exercising or enforcing any right
hereunder shall operate as a waiver of such right, and a waiver on one occasion
shall not be construed as a waiver of any right or remedy on any future
occasion.
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SECTION 6.7. NOTICES.
All notices, requests, consents, designations and demands required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given (a) when personally delivered, whether by
messenger, courier or other person, (b) on the second Business Day after the
date it is sent by certified or registered mail, return receipt requested, or
(c) on the next Business Day after the date it is sent via telefacsimile
(provided it is actually received and is not materially illegible), as follows:
If to Dan:
Daniel H. Leeds
c/o CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Fax: (516) 562-7123
with a copy to Dan at his last known address as reflected on the records of the
Company
If to Gerry:
Gerard G. Leeds
c/o CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Fax: (516) 562-7123
If to Lilo:
Liselotte J. Leeds
c/o CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Fax: (516) 562-7123
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or to such other mail or facsimile address as the recipient party shall have
last designated by notice given to the other in accordance herewith.
SECTION 6.8. ASSIGNMENT.
Except as expressly provided in this Agreement, no party may assign any
rights or delegate any obligations or liabilities hereunder without the prior
written consent of the other parties, except that each of Gerry and Lilo may
assign any of his or her rights and delegate any of his or her obligations or
liabilities to the other; provided, however, that no such assignment or
delegation shall relieve such assignor from his or her obligations or
liabilities hereunder.
SECTION 6.9. GENDER AND NUMBER.
Except when otherwise indicated by the context, references herein to one
gender shall include the other genders, and references herein to the plural
shall include the singular.
SECTION 6.10. HEADINGS.
The headings herein are for convenience of reference only and shall not be
considered in construing this Agreement.
SECTION 6.11. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed as an original and all of which shall together constitute
one and the same instrument.
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IN WITNESS WHEREOF, the individual parties have executed this Agreement on
the day and year first above written.
/s/ GERARD G. LEEDS /s/ LISELOTTE J. LEEDS
- ------------------------------- ----------------------------------
GERARD G. LEEDS LISELOTTE J. LEEDS
/s/DANIEL H. LEEDS
-----------------------------
DANIEL H. LEEDS
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<PAGE> 1
Exhibit 10.7
STOCKHOLDERS' AGREEMENT
BY AND AMONG
CMP MEDIA INC.,
GERARD G. LEEDS AND LISELOTTE J. LEEDS
AND
DANIEL H. LEEDS
DL&A
NOVEMBER 27, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I - CONFIDENTIALITY; NON-COMPETITION
SECTION 1.1 Protection of Company's Business Interests................ 2
SECTION 1.2 Non-Disclosure and Non-Use of Confidential Information.... 3
SECTION 1.3 Protection from Unfair Competition........................ 4
SECTION 1.4 Prior Notice; Opportunity to Cure......................... 6
SECTION 1.5 Other Covenants........................................... 8
SECTION 1.6 Confidentiality of Agreement.............................. 9
SECTION 1.7 Relief for Breach......................................... 10
SECTION 1.8 Separate Covenants........................................ 10
ARTICLE II - REPRESENTATIONS AND WARRANTIES
SECTION 2.1 Representations of the Company............................ 11
SECTION 2.2 Representations of Dan.................................... 11
SECTION 2.3 Representations of Gerry and Lilo......................... 12
ARTICLE III - TRANSFERABILITY OF SHARES AT TIME WHEN COMPANY IS
PRIVATELY HELD AND THERE IS NO PUBLIC MARKET
SECTION 3.1 General Restriction on Transfer........................... 12
SECTION 3.2 Sale After December 31, 2005.............................. 13
SECTION 3.3 Sale After Death or Permanent Disability.................. 13
SECTION 3.4 Sale After Termination of Employment or Competition....... 14
SECTION 3.5 Purchase Price of Restricted Shares
(a) Price to be Paid for Restricted Shares.................... 14
(b) Determination of Fair Market Value........................ 15
(c) Payment of Purchase Price................................. 16
(i) Lump Sum or Installments............................ 16
(ii) Initial Installment................................ 16
(iii) Cash Flow Limitations............................. 17
(d) Closing of Transaction.................................... 18
SECTION 3.6 Assignment and Delegation by the Company to
Class B Stockholders.............................................. 19
SECTION 3.7 Tag-Along Rights -- Drag Along Rights..................... 19
ARTICLE IV - TRANSFERABILITY OF SHARES AT TIME COMPANY SHARES ARE
PUBLICLY TRADED
SECTION 4.1 General Restriction on Transfer........................... 21
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
SECTION 4.2 Sale on or before December 31, 2005
(a) Minimum Market Capitalization.............................. 21
(b) Maximum Number of Shares................................... 22
SECTION 4.3 Sale After December 31, 2005.............................. 22
SECTION 4.4 Sale After Death or Permanent Disability.................. 22
SECTION 4.5 Sale After Competition.................................... 24
SECTION 4.6 Tender, Merger, Consolidation............................. 25
SECTION 4.7 Compliance with Securities Laws........................... 25
ARTICLE V - FUTURE CHANGES IN CAPITAL STRUCTURE AND REDEMPTION OF SHARES
SECTION 5.1 Changes in Capital Structure.............................. 26
SECTION 5.2 Redemption of Class B Stock............................... 26
ARTICLE VI - PROCEDURE TO BE FOLLOWED IN CASE OF DISMISSAL FOR CAUSE............ 27
ARTICLE VII - RESOLUTION OF DISPUTES
SECTION 7.1 Arbitration............................................... 28
SECTION 7.2 Equitable Remedies........................................ 28
ARTICLE VIII - DEFINITIONS...................................................... 29
ARTICLE IX - MISCELLANEOUS
SECTION 9.1 Legend on Certificates.................................... 34
SECTION 9.2 Permitted Transferees; Representative and Successors
In Interest....................................................... 35
SECTION 9.3 Further Assurances........................................ 36
SECTION 9.4 S Corporation............................................. 37
SECTION 9.5 Credit Facilities......................................... 38
SECTION 9.6 Other Transfers........................................... 38
SECTION 9.7 Entire Agreement; Binding Effect.......................... 39
SECTION 9.8 Amendment................................................. 39
SECTION 9.9 Applicable Law............................................ 39
SECTION 9.10 Severability.............................................. 39
SECTION 9.11 No Waiver................................................. 40
SECTION 9.12 Notices................................................... 40
SECTION 9.13 Assignment................................................ 42
SECTION 9.14 Survival.................................................. 42
SECTION 9.15 Gender and Number......................................... 42
SECTION 9.16 Dates..................................................... 42
SECTION 9.17 Headings.................................................. 43
SECTION 9.18 Counterparts.............................................. 43
</TABLE>
<PAGE> 4
STOCKHOLDERS' AGREEMENT
This Stockholders' Agreement, made and entered into on this 27th day of
November, 1996, by and among CMP Media Inc., a Delaware corporation (the
"Company"), Daniel H. Leeds ("Dan"), Gerard G. Leeds ("Gerry"), and Liselotte J.
Leeds ("Lilo").
W I T N E S S E T H:
WHEREAS, Dan is a key senior executive of the Company; and
WHEREAS, Gerry and Lilo are major stockholders of the Company; and
WHEREAS, the Company, Gerry and Lilo desire to create substantial
incentives for Dan to (i) cause the Company to grow continuously and
successfully in sales, profits and profitability, (ii) take a long-term view of
the Company's future, (iii) help the Company attain its long-term goals,
including its diversity goals as set forth in its corporate Principles, and (iv)
remain with the Company for the long term; and
WHEREAS, to create such incentives, Gerry and Lilo desire to provide
Dan with the opportunity to purchase shares of the Company's Class A Common
Stock from them, and Dan desires to have the opportunity to purchase such shares
of Class A Common Stock from Gerry and Lilo; and
WHEREAS, as an inducement to Gerry and Lilo to sell him shares of the
Company's Class A Common Stock and as a condition to the closing of such sale,
Dan desires to enter simultaneously therewith into this Agreement with the
Company, Gerry and Lilo;
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NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements herein contained and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by each of the parties, the parties hereto hereby represent,
warrant, covenant and agree, as follows:
ARTICLE I
CONFIDENTIALITY; NON-COMPETITION
Dan hereby accepts and agrees to the provisions of this Article I and
acknowledges that such provisions are necessary and appropriate for the
reasonable protection of Gerry and Lilo's interests and the Company's property,
investments, business relationships, economic advantages and goodwill.
SECTION 1.1. PROTECTION OF COMPANY'S BUSINESS INTERESTS.
As a Key Senior Executive, Dan has been intimately involved in the
management of all aspects of the business of the Company and its Affiliates and
has been a major strategist in planning and implementing its business expansion.
In the course of his long employment with the Company, Dan has developed special
skills, knowledge and abilities in the publishing field which are of a uniquely
personal nature. He has also acquired detailed knowledge of the internal
operations of the Company and its Affiliates and highly confidential information
concerning the national and international business of the Company and its
Affiliates. In addition, he has been afforded the opportunity to develop special
relationships of confidence and trust with the customers, suppliers,
consultants, employees, officers, directors and stockholders of the Company and
its Affiliates. Because of his continuing responsibilities with the Company and
its Affiliates,
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<PAGE> 6
including his involvement in strategic planning and the evaluation of proposed
investments, it is expected that Dan will continue to be entrusted with
confidential information and will continue to have the opportunity to develop
such special relationships. The parties acknowledge and agree that the Company
and Gerry and Lilo would be unfairly and irreparably damaged if Dan were to take
any of such skills, knowledge, information or relationships, which he has
acquired and developed during the course of his employment with the Company, and
use them to the detriment of the Company and its Affiliates.
SECTION 1.2. NON-DISCLOSURE AND NON-USE OF CONFIDENTIAL INFORMATION.
(a) Dan represents, warrants, covenants and agrees that, without the
Company's express or implied consent while employed or, after termination,
without the prior written consent of the Company's chief executive officer or
the Board of Directors, he will not willfully or knowingly at any time directly
or indirectly disclose, communicate or divulge, or use for the benefit of
himself or of any third party, any of the business or trade secrets or other
confidential information of the CMP Group including, solely by way of
illustration but not of limitation, their business strategies, business plans,
budgets, pricing, selling techniques, marketing techniques, operating systems,
financial systems, financial data, procedures, manuals, confidential reports,
personnel records, potential acquisitions, potential business expansions, credit
and financial data of their suppliers and of their present and prospective
customers, data about competitors, new product-development initiatives, custom
research and new product or service concepts and marketing strategy.
(b) Any and all materials of or concerning the CMP Group or their
business or affairs, including without limitation files, memoranda, notes,
correspondence, lists, records, video reproductions, computer tapes and disks,
design and other documents, and
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<PAGE> 7
data storage and retrieval materials (and all copies, compilations and summaries
thereof), and any and all property of the CMP Group, including without
limitation equipment, software, keys, business cards and credit cards, that are
in Dan's custody or control shall be delivered to the Company at the time Dan's
employment with the Company terminates for any reason. Dan shall not destroy any
such materials or property, shall not retain any copies thereof and shall
certify in writing to the Company upon request that all such materials and
property have been delivered to the Company.
SECTION 1.3. PROTECTION FROM UNFAIR COMPETITION.
(a) For as long as Dan is employed by the CMP Group and for the greater
of (i) a period of two (2) years after termination of his employment or (ii) as
long as Dan or any Permitted Transferee owns any Restricted Shares, Dan shall
not engage in competition with the CMP Group. For the purposes of this
Agreement, Dan shall be deemed to engage in competition with the CMP Group if
Dan does any of the following, whether or not in exchange for consideration,
without the Company's express or implied consent while employed or without the
Company's prior written consent after termination:
(A) On his own behalf or on behalf of any other person or entity, (1)
participates or is involved in or has direct responsibility for the day-to-day
management or operation of a Directly Competitive Business, an Indirectly
Competitive Business or any material function thereof (E.G., advertising,
circulation, production and the like); (2) owns, in whole or in part,
beneficially or of record, directly or indirectly, an equity interest (or an
interest convertible into equity) in a Directly Competitive Business or a Direct
Competitor; (3) renders services as a director, officer, employee, consultant,
advisor, agent or independent sales representative to a Direct Competitor; or
(4) renders services as a director, officer, employee, consultant, advisor,
agent or independent sales representative to an Indirect Competitor unless Dan
has no responsibility for or
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<PAGE> 8
participation or involvement in any Indirectly Competitive Business of such
Indirect Competitor, provided, however, that Dan may have supervisory, advisory,
consulting or sales-representative responsibility over an Indirectly Competitive
Business if the revenue of all Indirectly Competitive Businesses of such
Indirect Competitor over which Dan has such responsibility represents no more
than fifteen percent (15%) of the total revenue over which Dan has such
responsibility.
(B) Solicits the service of any employee of the CMP Group for Dan's own
benefit or for the benefit of any person or entity other than the CMP Group, or
induces or helps to induce any such employee to leave employment with the CMP
Group.
(C) Assists, induces or helps any employee or former employee of the
CMP Group or any other person or entity to engage in competition with the CMP
Group or any of its business activities, provided that the giving of a favorable
reference by Dan on behalf of such former employee shall not be prohibited by
this clause (C).
(D) Employs or causes any person or entity other than the CMP Group to
employ any former employee of the CMP Group within one (1) year after the
resignation of such former employee from the CMP Group.
(E) Willfully induces or attempts to induce any customer, supplier or
contractor of the Company to terminate any agreement or arrangement with the
Company, or willfully induces or attempts to induce any customer, supplier or
contractor, or any potential customer, supplier or contractor, of the Company
not to enter into any agreement or arrangement with the Company.
(F) Communicates publicly (other than pursuant to subpoena in a legal
proceeding) or to the press, or writes or produces for publication in any
medium, on the subject of, or with express or implied reference to, the CMP
Group or any of their former, current or future stockholders, directors,
officers or employees in their capacities as such.
5
<PAGE> 9
For the purpose hereof, "implied reference" shall mean a reference that does not
expressly name the CMP Group or any of their former, current or future
stockholders, directors, officers or employees but that nevertheless would be
understood by the average reader or audience-member to refer thereto. It shall
not be deemed a violation of this clause (F) if, after the termination of his
employment with the Company, Dan responds to inquiries from the public or the
press solely by stating, in form or substance, "I do not discuss any matters
relating to CMP; please address your inquiries directly to the company" or Dan
communicates the fact that he was formerly employed by the Company and
identifies the positions he held and the dates thereof.
(b) Notwithstanding the provisions of paragraph (a) of this Section
1.3, Dan shall not be deemed to be engaged in competition with the CMP Group
solely by reason of Dan's ownership of (i) an equity interest of less than
one-half of one percent (0.5%) in the securities of a Direct Competitor or
Indirect Competitor listed for trading on a national securities exchange or
quoted in the National Market List of NASDAQ or (ii) an interest in a mutual or
other investment fund which owns an interest in a Direct Competitor or Indirect
Competitor, provided that Dan has no influence or control over the selection of
such fund's investment decisions.
SECTION 1.4. PRIOR NOTICE; OPPORTUNITY TO CURE.
(a) Dan shall give the Company written notice at least twenty (20)
Business Days before entering into any relationship or transaction, or engaging
in any activity, or taking or omitting to take any action, which might
reasonably be deemed a breach of any provision of Section 1.2 or Section 1.3,
such notice to include full and complete particulars as to the proposed
relationship, transaction, activity, action or omission, the
6
<PAGE> 10
services or duties contemplated and such other facts and circumstances as are
reasonably necessary for the Company to make an informed decision. The Company
shall advise Dan in writing, within ten (10) Business Days after such notice is
given, of the Board of Directors' determination as to whether such relationship,
transaction, activity, action or omission would materially breach any of the
provisions of Section 1.2 or Section 1.3. In the event that, for reasons not
within his control, Dan gives the Company less than twenty (20) Business Days'
prior written notice, the Company will endeavor in good faith to advise Dan of
the Board of Directors' determination in less than ten (10) Business Days after
such notice is given, provided that the Company's failure to advise Dan in less
than ten (10) Business Days shall not be deemed to constitute consent to such
relationship, transaction, activity, action or omission and shall not give rise
to any liability of the Company to Dan or to any third party.
(b) Once the Company has advised Dan in writing that the Board of
Directors has determined that a proposed relationship, transaction, activity,
action or omission would not materially breach any of the provisions of Section
1.2 or Section 1.3, and Dan has thereupon entered into such relationship or
transaction or has begun to engage in such activity or to take or omit to take
such action, the Board of Directors shall have no right to reverse or otherwise
modify its determination; provided, however, that if the nature, scope or terms
of such relationship, transaction, activity, action or omission are to be
modified after such determination is made, then in accordance with paragraph (a)
hereof Dan shall give the Company prior written notice of such modification and
the Company shall advise him in writing, within ten (10) Business Days after
such notice is given, of the Board of Directors' determination as to whether
such relationship, transaction, activity, action or omission, as so modified,
would materially breach any of the provisions of Section 1.2 or Section 1.3.
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<PAGE> 11
(c) In the event that, without having given the Company prior notice
pursuant to paragraphs (a) or (b) hereof, Dan enters into any relationship or
transaction or begins to engage in any activity or to take or omit to take any
action that the Board of Directors determines is a material breach of any of the
provisions of Section 1.2 or Section 1.3, the Company shall give Dan written
notice of such determination and, if such breach is continuing, an opportunity
to cure such breach before the Company seeks remedy or relief by judicial
process or arbitration or exercises its rights under Section 3.4(b), and before
Gerry or Lilo exercises his or her rights under Section 4.5. The opportunity to
cure shall be sixty (60) days to the extent such continuing breach consists of
holding an ownership interest in a competitive business and fifteen (15) days
with respect to any other continuing breach.
SECTION 1.5. OTHER COVENANTS.
(a) For as long as Dan or any Permitted Transferee owns any Restricted
Shares, Dan shall, if requested by the Company, provide information, testimony
and assistance in connection with the prosecution or defense of any claims by or
against the Company arising out of matters of which he acquired knowledge while
an employee of the Company. The Company shall reimburse Dan for all reasonable
out-of-pocket expenses he incurs in rendering such assistance.
(b) For as long as Dan or any Permitted Transferee owns any Restricted
Shares, Dan shall not willfully make any oral or written statement which
reflects adversely upon the character, honesty, credit, efficiency or business
practices of the CMP Group or its former, current or future stockholders,
directors, officers or employees in their capacities as such.
8
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SECTION 1.6. CONFIDENTIALITY OF AGREEMENT.
The terms and conditions of this Agreement shall be kept confidential
by the parties, and none of the parties shall disclose them to any non-party
unless such disclosure is necessitated by (a) legal and/or financial
requirements of the Company, in which case the form of such disclosure shall
first be mutually agreed upon by the Company and Dan, or (b) any arbitration or
other legal proceeding contesting or seeking to enforce any provision or
interpretation of this Agreement (including any deposition or testimony that
either party provides in connection therewith), regardless of whether such
proceeding is initiated by Dan or the Company. Except as provided in the
preceding sentence, and without limiting the generality of the foregoing, Dan
shall not respond to or in any way participate in or contribute to any public
discussion, notice or other publicity concerning or in any way relating to
execution of this Agreement or the events (including any negotiations) which led
to its execution, and Dan specifically agrees that he shall not disclose
information regarding this Agreement to any current or former employees of the
Company other than those expressly authorized by the Company to have knowledge
hereof. Without limiting the comprehensive confidentiality agreed to, Dan may
disclose this Agreement to his attorneys, financial advisors and members of his
and his spouse's immediate families, provided he informs them of this
confidentiality provision and they agree to abide by it. Dan hereby agrees that
any disclosure by him of any of the terms and conditions of this Agreement in
violation of the foregoing shall constitute and be treated as a material breach
of this Agreement and Dan shall be responsible for damages occasioned thereby,
including but not limited to reasonable attorneys' fees incurred by the Company
to enforce this Section 1.6.
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SECTION 1.7. RELIEF FOR BREACH.
Dan acknowledges and agrees that any breach or anticipatory breach by
him of any of the provisions of this Article I would cause the Company
irreparable injury not compensable by monetary damages alone and that,
accordingly, in any such event, the Company shall be entitled to injunctions,
both preliminary and permanent, enjoining or restraining such breach or
anticipatory breach (and Dan hereby consents to the issuance thereof without
bond by any court of competent jurisdiction), in addition to monetary damages in
such amount as the evidence may show and such other remedies as may be available
at law or in equity. In addition, in the event of any material breach by Dan of
any of the provisions of Section 1.2 or Section 1.3, Dan may be required to sell
to the Company or the holders of the Class B Stock or to Gerry and Lilo any or
all of the Restricted Shares then owned by Dan, in accordance with the
provisions of Section 3.4, Section 3.6 or Section 4.5, as applicable; provided,
however, that Dan shall not be required to sell such Restricted Shares unless
and until the Company has first complied with its obligations under Section 1.4.
SECTION 1.8. SEPARATE COVENANTS.
Dan understands and agrees that the covenants contained in this Article
I constitute a series of separate covenants, one for each applicable state in
the United States and the District of Columbia, and one for each applicable
foreign country. If in any judicial proceeding a court shall hold unenforceable
any of the separate covenants included in this Article I, then such
unenforceable covenant or covenants shall be deemed limited as necessary or
eliminated from the provisions of this Article I for the purpose of such
proceeding to the extent necessary to permit the remaining separate covenants of
this
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<PAGE> 14
Article I to be enforced in such proceeding, and to permit such unenforceable
covenant or covenants to be enforced as limited.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.1. REPRESENTATIONS OF THE COMPANY.
The Company hereby represents and warrants to Dan that (a) it has full
legal right, power and authority to enter into this Agreement and to consummate
the transactions herein contemplated; (b) the execution and delivery of this
Agreement has been duly authorized by all necessary corporate action; (c) this
Agreement constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally and by general principles of equity; and
(d) neither this Agreement nor the consummation of the transactions herein
contemplated will conflict with, violate or infringe any legal restriction,
contract or instrument to which the Company is subject or by which it is bound.
SECTION 2.2. REPRESENTATIONS OF DAN.
Dan hereby represents and warrants to each of the Company, Gerry and
Lilo that (a) he has full legal right, power and authority to enter into this
Agreement and to consummate the transactions herein contemplated; (b) this
Agreement constitutes the valid and binding obligation of Dan, enforceable in
accordance with its terms, except to the extent that such enforcement may be
limited by applicable bankruptcy, insolvency or
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<PAGE> 15
similar laws affecting creditors' rights generally and by general principles of
equity; and (c) neither this Agreement nor the consummation of the transactions
herein contemplated will conflict with, violate or infringe any legal
restriction, contract or instrument to which Dan is subject or by which he is
bound.
SECTION 2.3 REPRESENTATIONS OF GERRY AND LILO.
Each of Gerry and Lilo hereby represents and warrants to Dan that (a)
each of them has full legal right, power and authority to enter into this
Agreement and to consummate the transactions herein contemplated; (b) this
Agreement constitutes the valid and binding obligation of each of them,
enforceable in accordance with its terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally and by general principles of equity; and
(c) neither this Agreement nor the consummation of the transactions herein
contemplated will conflict with, violate or infringe any legal restriction,
contract or instrument to which either of them is subject or by which either of
them is bound.
ARTICLE III
TRANSFERABILITY OF SHARES AT TIME WHEN
COMPANY IS PRIVATELY HELD AND THERE IS NO PUBLIC MARKET
SECTION 3.1. GENERAL RESTRICTION ON TRANSFER.
At any time when the Company is privately held and there is no public
market for the Class A Stock, Dan shall not, voluntarily or involuntarily, by
operation of law or otherwise, sell, mortgage, pledge, hypothecate, assign as
security, grant or permit to exist or continue a security interest in, or in any
way transfer by gift, will, trust or intestate
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succession any of the Restricted Shares, except to a Permitted Transferee as
provided in Section 9.2(a) or except as specifically provided in this Article
III. Any attempt by Dan to do any of the aforementioned acts or otherwise to
alienate or dispose of any Restricted Shares, except in accordance with this
Agreement, shall be null and void.
SECTION 3.2. SALE AFTER DECEMBER 31, 2005.
During each and any calendar year beginning with the calendar year
2006, Dan shall have the right, exercisable upon notice to the Company given
during the first three (3) months of such calendar year, to require the Company
to purchase up to five hundred twenty-eight (528) shares of his Class A Stock
(which number of shares equals approximately one percent (1%) of the number of
shares of the Company's Common Stock issued and outstanding as of the date
hereof), including both Restricted Shares and Option Shares, at the price
provided in Section 3.5 (a).
SECTION 3.3. SALE AFTER DEATH OR PERMANENT DISABILITY.
In the event that Dan's employment with the Company terminates as a
result of his death or the Company terminates his employment by reason of his
Permanent Disability (whether before or after December 31, 2005), then and in
that event, notwithstanding the provisions of Section 3.2, the parties shall
have the following rights:
(a) RIGHTS OF DAN TO SELL. Dan or his representative and/or successors
in interest shall have the right, exercisable upon notice to the Company given
no later than one hundred eighty (180) days after such termination of employment
occurs and/or during the first three (3) months of any succeeding calendar year,
to require the Company to purchase any or all of the Restricted Shares then
owned by Dan or his successors in interest, at the price provided in Section 3.5
(a).
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(b) RIGHTS OF COMPANY TO PURCHASE. The Company shall have the right,
exercisable upon notice to Dan or his representative and/or successors in
interest given during the first three (3) months of the third calendar year
after the year in which such termination of employment occurs and/or during the
first three (3) months of any succeeding calendar year, to require Dan or his
representative and/or successors in interest to sell to the Company any or all
of the Restricted Shares then owned by Dan or any successor in interest, at the
price provided in Section 3.5 (a).
SECTION 3.4. SALE AFTER TERMINATION OF EMPLOYMENT OR COMPETITION.
In the event that (a) Dan's employment with the Company terminates for
any reason other than death or Permanent Disability or (b) Dan materially
breaches any of the provisions of Section 1.2 or Section 1.3 (whether before or
after the termination of his employment for any reason) and, if the Company has
given him notice to cure, fails to cure such breach on a timely basis, then and
in that event, in addition to any rights that Dan has under Section 3.2, the
Company shall have the right, exercisable upon notice to Dan given at any time
or times after such event occurs (whether before or after December 31, 2005), to
require Dan to sell to the Company any or all of the Restricted Shares then
owned by Dan, at the price provided in Section 3.5 (a). The death or Permanent
Disability of Dan occurring subsequent to the termination of his employment or
such breach of any of the provisions of Section 1.2 or Section 1.3 shall not
modify or affect the rights and obligations of the parties as set forth in this
Section 3.4.
SECTION 3.5. PURCHASE PRICE OF RESTRICTED SHARES.
(a) PRICE TO BE PAID FOR RESTRICTED SHARES. The purchase price for any
Restricted Shares to be purchased pursuant to this Article III shall be the Fair
Market
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Value of such Restricted Shares, except that the purchase price for any
Restricted Shares to be purchased by reason of Dan's material breach of any of
the provisions of Section 1.2 or Section 1.3 shall be the lower of the Original
Price of such Restricted Shares or the Fair Market Value of such Restricted
Shares.
(b) DETERMINATION OF FAIR MARKET VALUE. Within sixty (60) days after
Dan has given the Company notice of intent to sell Restricted Shares or the
Company has given Dan notice of intent to purchase Restricted Shares pursuant to
this Article III, the Company and Dan shall negotiate in good faith in an effort
to reach mutual agreement as to the Fair Market Value of such Restricted Shares.
If the Company and Dan are unable to reach agreement as to the Fair Market Value
of such Restricted Shares within such 60-day period, the Fair Market Value of
such Restricted Shares shall be determined by an appraisal process as follows.
Each of the Company and Dan shall designate, within thirty (30) days after the
conclusion of the 60-day negotiation period referred to above, an independent
and experienced appraiser familiar with the business in which the Company is
then engaged (each individually an "Appraiser" and collectively the
"Appraisers"). The Appraisers shall be instructed to complete their respective
determinations of the Fair Market Value of such Restricted Shares and to deliver
their written reports on such determinations no later than sixty (60) days after
both of such Appraisers have been appointed. If the determination of one of the
Appraisers does not exceed the determination of the other Appraiser by more than
fifteen percent (15%) of the lower of the two determinations, the Fair Market
Value of such Restricted Shares shall be equal to the average of the two
determinations. If the higher determination exceeds the lower determination by
more than fifteen percent (15%) of the lower determination, then the two
Appraisers shall jointly appoint a third, independent and similarly experienced
Appraiser within fifteen (15) days after both of such two Appraisers have
delivered their
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reports. Such third Appraiser shall deliver his report on his determination of
the Fair Market Value of such Restricted Shares within sixty (60) days after his
appointment, and his determination of Fair Market Value shall be conclusive and
binding on the parties for all purposes hereof. The cost of all such appraisals
shall be borne one-half by the Company and one-half by Dan.
(c) PAYMENT OF PURCHASE PRICE.
(i) LUMP SUM OR INSTALLMENTS. The purchase price for Restricted Shares
shall be paid by the Company in full at the closing or, at the election of the
Company, in equal annual installments, together with interest payable quarterly
at the rate of interest announced publicly on the first day of each calendar
quarter by a major United States money market bank, selected by the Company, as
such bank's base rate, over a number of years to be determined by the Company
but in no event exceeding five (5) years if the purchase is pursuant to Section
3.2, or ten (10) years if the purchase is pursuant to Section 3.3 or Section
3.4.
(ii) INITIAL INSTALLMENT. In the event the Company elects to pay for
Restricted Shares hereunder on an installment basis, all annual installments
shall be equal in principal amount except as follows:
(A) The initial installment for any such sale of Restricted Shares,
other than a sale occurring by reason of Dan's death, Dismissal For Cause or
breach of any of the provisions of Section 1.2 or Section 1.3, shall be not less
than the amount, if any, of Dan's additional income tax liability (federal,
state and local) actually occasioned as a result of such sale, provided that
such amount shall have been certified to the Company in writing by Dan's tax
accountant.
(B) The initial installment for the first sale of shares of Class A
Stock that Dan makes under this Agreement or the Option Agreement, other than a
sale
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occurring by reason of Dan's death, Dismissal For Cause or breach of any of
the provisions of Section 1.2 or Section 1.3, shall be at least (1) the amount
due under clause (A) above plus the amount of one million dollars ($1,000,000)
or (2) if less, the total purchase price for such Restricted Shares.
(C) The initial installment for any sale of Restricted Shares occurring
by reason of Dan's death shall be not less than the amount of the estate and
succession tax liability (federal and state) occasioned as a result of the
inclusion of the Restricted Shares in Dan's estate (giving effect to any
deferral permitted by law or regulation in the payment thereof) together with
any and all costs and expenses of administration of Dan's estate as reasonably
estimated by Dan's representative, all as certified to the Company in writing by
Dan's representative.
(iii) CASH FLOW LIMITATIONS. Notwithstanding any other provision of
this Article III, in the event that the amount due from the Company in payment
for Restricted Shares purchased hereunder (including both principal and
interest) in any one fiscal year of the Company (other than a purchase occurring
by reason of Dan's death) exceeds fifty percent (50%) of the Company's Free Cash
Flow for the preceding year, then and in that event the Company in its sole
discretion may elect to defer payment of any portion of such principal and/or
interest to the extent that payment would require the Company to pay more than
fifty percent (50%) of its Free Cash Flow for such preceding year, provided that
any such deferred amounts shall continue to earn interest as described in
Section 3.5 (c)(i) until paid; and provided further that in any event all
principal and interest shall be paid in full no later than five (5) years or ten
(10) years, as the case may be, after the date of the closing. If, in the same
fiscal year, the Company is also required to pay any persons or entities other
than Dan for shares of Class A Stock that such persons or entities acquired from
Gerry and/or Lilo as of the date hereof or pursuant to
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options granted by the Company and/or is required to make payment to Dan and/or
any other persons under any comparable long-term senior executive compensation
plan in effect from time to time, the amounts due to such other persons or
entities in such fiscal year shall be aggregated with the amount due with
respect to the Restricted Shares in such fiscal year and, if the aggregate
amount due exceeds fifty percent (50%) of the Company's Free Cash Flow for the
preceding fiscal year, then and in that event the Company in its sole discretion
may elect to defer payment of any portion of such aggregate amount (principal
and/or interest) to the extent that it would exceed fifty percent (50%) of the
Company's Free Cash Flow for the preceding year, and payments and deferments
shall be effected among Dan and such other persons or entities in proportion to
the amounts (both principal and interest) then due and owing to each, subject to
any provisions in such plans as to priority of payment.
(d) CLOSING OF TRANSACTION. The closing of any purchase of Restricted
Shares hereunder shall be held no later than ninety (90) days after the final
determination of the Fair Market Value of such Restricted Shares, at such time
and place as the Company may reasonably designate. At the closing, Dan shall
deliver or cause to be delivered to the Company the stock certificates
representing such Restricted Shares, duly endorsed for transfer in blank or with
duly executed stock powers attached, and with signature guaranteed, in exchange
for which the Company shall deliver to Dan the amount of the purchase price then
due, together with the Company's promissory note evidencing the Company's
obligation to pay the balance, if any, of the purchase price in accordance with
the terms of Section 3.5(c). All payments to Dan hereunder shall be made in cash
or by Company check, bank draft or wire transfer.
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SECTION 3.6. ASSIGNMENT AND DELEGATION BY THE COMPANY TO CLASS B
STOCKHOLDERS.
The Company shall have the right, exercisable upon notice to Dan, to
assign any or all of its rights and/or delegate any or all of its obligations
under this Article III to the holders of the Class B Stock, in proportion to
their respective ownership interests or as they may otherwise unanimously agree,
provided that the Company shall not be relieved of its obligation to purchase
from Dan in accordance herewith any Restricted Shares duly tendered and not
purchased and paid for by such holders of the Class B Stock.
SECTION 3.7. TAG-ALONG RIGHTS -- DRAG-ALONG RIGHTS.
(a) In the event the Controlling Stockholders of the Company determine
to dispose of all or a portion of their shares of Common Stock, with the result
that they will no longer control the Company, then and in that event the Company
shall give Dan a notice (a "Tag-Along Notice") of such proposed sale (a
"Tag-Along Sale") and the material terms of the Tag-Along Sale (the "Material
Terms") no later than thirty (30) days prior to the consummation of the
Tag-Along Sale. If, within twenty (20) days after a Tag-Along Notice is given to
Dan (or within ten (10) days after any notice of a change in the Material Terms
is given to Dan), the Company receives from Dan a written request (a "Tag-Along
Request") to include in the Tag-Along Sale any of the Restricted Shares held by
him, such Restricted Shares (in the same proportion as the total number of
shares of the Common Stock held by the Controlling Stockholders bears to the
number of shares being sold by the Controlling Stockholders) shall be included
in the Tag-Along Sale on the same terms and conditions and subject to the same
obligations as the sale by the Controlling Stockholders, taking into account the
proportionate ownership of the Controlling Stockholders and Dan. The Company
shall give Dan prompt notice of any change in the Material Terms and, in such
event, Dan shall have the opportunity, for a
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period of ten (10) days after such notice has been given, to submit a Tag-Along
Request if Dan did not previously submit a Tag-Along Request or to withdraw or
modify a Tag-Along Request previously made.
(b) Dan's rights hereunder to participate in a Tag-Along Sale shall be
contingent on Dan's compliance with each of the provisions hereof, Dan's
acceptance of a proportionate delegation of any duties or obligations related to
the Tag-Along Sale, including any indemnification obligations, and Dan's
execution of such documents in connection with the Tag-Along Sale as may be
reasonably requested by the Controlling Stockholders.
(c) In connection with any proposed sale of shares of Common Stock by
the Controlling Stockholders to a non-affiliated person or entity in an
arms-length transaction, if Dan has not exercised his rights to sell Restricted
Shares as contemplated under paragraph (a) of this Section 3.7, the Company
shall have the right, exercisable upon notice to Dan, to require that Dan sell
to the purchaser of the shares of the Controlling Stockholders the same
proportion of the Restricted Shares then owned by Dan as are being sold by the
Controlling Stockholders, on the same terms and conditions and subject to the
same obligations including any indemnification obligations, as the sale by the
Controlling Stockholders, taking into account the proportionate ownership of the
Controlling Stockholders and Dan. Dan agrees that he will cooperate with the
Company and the Controlling Stockholders in taking all such actions, including
executing all such documentation, as the Company and/or the Controlling
Stockholders may reasonably request.
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ARTICLE IV
TRANSFERABILITY OF SHARES AT TIME COMPANY SHARES ARE PUBLICLY TRADED
SECTION 4.1. GENERAL RESTRICTION ON TRANSFER.
In the event that shares of the Class A Stock become listed on a
national securities exchange or quoted in the National Market List of NASDAQ,
then and in that event the provisions of Article III shall cease to be
operative, and Dan shall not, voluntarily or involuntarily, by operation of law
or otherwise, sell, mortgage, pledge, hypothecate, assign as security, grant or
permit to exist or continue a security interest in, or in any way transfer by
gift, will, trust or intestate succession any of the Restricted Shares, except
to a Permitted Transferee as provided in Section 9.2(a) or except as
specifically provided in this Article IV. Any attempt by Dan to do any of the
aforementioned acts or otherwise to alienate or dispose of any Restricted
Shares, except in accordance with this Agreement, shall be null and void.
SECTION 4.2. SALE ON OR BEFORE DECEMBER 31, 2005.
Except as otherwise provided in Section 4.4 and Section 4.6, from
January 1, 1998 through December 31, 2005, Dan shall have the right to sell
Restricted Shares on the public market, subject to the following conditions:
(a) MINIMUM MARKET CAPITALIZATION. Dan may not sell any Restricted
Shares under this Section 4.2 unless the market capitalization of the Company as
of the Business Day immediately preceding the date of sale is greater than three
hundred forty million dollars ($340,000,000). The market capitalization of the
Company shall be determined by multiplying the Fair Market Value of a share of
Class A Stock by the total number of shares of the Common Stock then issued and
outstanding.
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(b) MAXIMUM NUMBER OF SHARES.
(i) The maximum number of shares of Class A Stock (including both
Restricted Shares and Option Shares) that Dan may sell in any single calendar
year shall be five hundred twenty-eight (528) shares of Class A Stock (which
number of shares equals approximately one percent (1%) of the number of shares
of the Company's Common Stock issued and outstanding as of the date hereof); and
(ii) the maximum number of Restricted Shares that may be included in
such shares of Class A Stock sold in any single calendar year shall be the
smaller of (A) the number of Restricted Shares whose Fair Market Value as of the
Business Day immediately preceding the date of sale does not exceed $500,000 or
(B) fifty-three (53) Shares (which number equals approximately 1/10 of one
percent (0.1%) of the number of shares of the Company's Common Stock issued and
outstanding as of the date hereof).
SECTION 4.3. SALE AFTER DECEMBER 31, 2005.
Except as otherwise provided in Section 4.4 and Section 4.6, after
December 31, 2005, Dan shall have the right to sell Restricted Shares on the
public market, provided only that the maximum number of shares of Class A Stock
(including both Restricted Shares and Option Shares) that Dan may sell in any
single calendar year shall be five hundred twenty-eight (528) shares of Class A
Stock (which number of shares equals approximately one percent (1%) of the
number of shares of the Company's Common Stock issued and outstanding as of the
date hereof).
SECTION 4.4. SALE AFTER DEATH OR PERMANENT DISABILITY.
(a) Notwithstanding the provisions of Section 4.2, in the event that
Dan's employment terminates as a result of his death or the Company terminates
his
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employment by reason of his Permanent Disability, then and in that event (i)
the pre-condition to sales on or before December 31, 2005, which is set forth in
Section 4.2(a) with respect to the Company's minimum market capitalization,
shall not apply, and Dan and/or his representative and/or his successors in
interest shall have the right to sell Restricted Shares pursuant to Section 4.2
on or before December 31, 2005 irrespective of the market capitalization of the
Company; and (ii) the limitation set forth in Section 4.2(b)(ii) shall not apply
and, instead, the maximum number of Restricted Shares that may be included in
the shares of Class A Stock sold in any calendar year by Dan and/or his
representative and/or successors in interest, as a group, shall be two hundred
sixty-four (264) Restricted Shares.
(b) Notwithstanding the provisions of Section 4.2, Section 4.3 and
Section 4.4 (a)(ii), in the event that Dan's employment terminates as a result
of his death, Dan's representative and/or successors in interest shall have the
right to sell in any calendar year up to such number of shares of Class A Stock
(including both Restricted Shares and Option Shares) as shall equal the greater
of (i) the number of such shares that is permitted to be sold under Section 4.2
or Section 4.3, as applicable, or (ii) the number of such shares that is
necessary in order for the proceeds of such sale to equal the amount of the
estate and succession tax liability (federal and state), including any interest
thereon, due in such year as a result of the inclusion of such shares of Class A
Stock in Dan's estate (giving effect to any deferral permitted by law or
regulation in the payment thereof), together with any and all costs and expenses
of administration of Dan's estate for such year as reasonably estimated by Dan's
representative, all as certified to the Company in writing by Dan's
representative.
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SECTION 4.5. SALE AFTER COMPETITION.
In the event that Dan materially breaches any of the provisions of
Section 1.2 or Section 1.3 (whether before or after the termination of his
employment for any reason) and, if the Company has given him notice to cure,
fails to cure such breach on a timely basis, then and in that event, in addition
to any other rights that the parties have under this Article IV, Gerry and Lilo
shall have the following rights:
(a) Each of Gerry and Lilo shall have the right, exercisable upon
notice to Dan given at any time or times after such event occurs, to require Dan
to sell back to him or her, as the case may be, all of the Restricted Shares
then owned by Dan which he purchased from Gerry or Lilo, as the case may be,
under the Share Purchase Agreement. The purchase price for Restricted Shares
re-purchased hereunder shall be the lower of (i) the Original Price of such
Restricted Shares or (ii) the Fair Market Value of such Restricted Shares as of
the date of such notice.
(b) If Gerry and/or Lilo exercise any rights hereunder, the closing of
their respective purchases of Restricted Shares shall be held no later than
ninety (90) days after their respective notices of exercise are given and at
such time and place as they may reasonably designate. At the closing, Dan shall
deliver or cause to be delivered to Gerry and/or Lilo, as the case may be, the
stock certificates representing such Restricted Shares, duly endorsed for
transfer in blank or with duly executed stock powers attached, and with
signature guaranteed, in exchange for which the purchasers shall deliver to Dan
the full amount of their respective purchase prices in cash or by check, bank
draft or wire transfer.
(c) To the extent, if any, that Gerry and Lilo have not exercised their
rights to purchase any or all of Dan's Restricted Shares in accordance with
paragraph (a) of this
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Section 4.5, Dan shall continue to have the right to sell such unpurchased
Restricted Shares subject to and in accordance with the other provisions of this
Article IV.
(d) Each of Gerry and Lilo shall have the right, exercisable upon
notice to Dan, to assign any or all of his or her rights and/or delegate any or
all of his or her obligations under this Section 4.5 to the holders of the Class
B Stock or their children, in proportion to the respective ownership interests
of the holders of the Class B Stock or as they may otherwise unanimously agree.
(e) In the event that the Company makes a determination that Dan has
not materially breached any of the provisions of Section 1.2 or Section 1.3,
such determination shall be binding upon Gerry and Lilo for the purposes of this
Agreement.
SECTION 4.6. TENDER, MERGER, CONSOLIDATION.
In the event the Controlling Stockholders of the Company determine to
dispose all or a portion of their shares of Common Stock in a tender, merger,
consolidation or similar type of transaction, with the result that they no
longer control the Company, then and in that event, Dan shall have the right,
but not the obligation, to dispose of a proportionate number of shares of his
Class A Stock in any such transaction.
SECTION 4.7. COMPLIANCE WITH SECURITIES LAWS.
Neither Dan nor his representative will sell or attempt to sell any
shares of Class A Stock under this Article IV except in accordance with all
applicable federal and state securities laws, all applicable rules and
regulations of the Securities and Exchange Commission, and any applicable
underwriters' limitations and restrictions.
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ARTICLE V
FUTURE CHANGES IN CAPITAL STRUCTURE AND REDEMPTION OF SHARES
SECTION 5.1. CHANGES IN CAPITAL STRUCTURE.
If the Company hereafter declares a dividend payable in, or subdivides
or combines, shares of the Class A Stock, or if the Company engages in a
recapitalization, reorganization, merger, consolidation, split-up, transfer of
assets, combination or exchange of shares of Common Stock, or if any other event
shall occur which in the judgment of the Board of Directors calls for action by
way of adjusting the number of Restricted Shares, the Board of Directors shall
forthwith take such action as in its judgment shall be necessary or appropriate
to preserve Dan's rights with respect to the Restricted Shares substantially
proportionate to his rights existing prior to such event. The decision of the
Board of Directors with respect to any matter referred to in this Section 5.1
shall be conclusive and binding upon Dan. Nothing in this Agreement is intended
to preserve Dan's equity interest in the Company against dilution resulting from
the issuance of securities by the Company in the future.
SECTION 5.2. REDEMPTION OF CLASS B STOCK.
If and when any shares of the Class B Stock owned by any member of the
Leeds Family are redeemed by the Company in accordance with the terms and
provisions of the Shareholders' Agreement, then, in order to ensure that Dan's
percentage interest in the Company will remain the same as his interest would
have been but for such redemption (the "Class B Stock Redemption"), the Company
shall, promptly following the Class B Stock Redemption, redeem at a price equal
to their par value (currently $.10 per share) a number of the Restricted Shares
such that (a) the ratio of (i) the number of Restricted
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Shares outstanding immediately after such redemption of Restricted Shares (the
"Class A Stock Redemption") to (ii) the total number of shares of Common Stock
outstanding immediately after the Class A Stock Redemption is the same as (b)
the ratio of (i) the number of Restricted Shares outstanding immediately prior
to the Class B Stock Redemption to (ii) the total number of shares of Common
Stock outstanding immediately prior to the Class B Stock Redemption.
ARTICLE VI
PROCEDURE TO BE FOLLOWED IN CASE OF
DISMISSAL FOR CAUSE
In the event the Company terminates Dan's employment as a Dismissal For
Cause, the Company shall give Dan at least ten (10) Business Days' prior written
notice specifying in reasonable detail the specific conduct of Dan that it
considers grounds for Dismissal For Cause and the specific provision of the
definition of "Dismissal For Cause" upon which it relies. Dan's employment with
the Company shall terminate as of the tenth Business Day after such notice is
given, or such other date as the parties mutually agree. Should Dan dispute the
basis for such termination in a written notice given to the Company on or before
his termination date, the parties shall meet and endeavor to resolve the dispute
amicably within twenty (20) Business Days after Dan's notice is given. If they
cannot so resolve the dispute within such twenty (20) Business Days after Dan's
notice is given, Dan and the Company shall submit the dispute to binding
arbitration in accordance with Section 7.1. The decision rendered in such
arbitration shall be final and binding on both Dan and the Company for all
purposes. If the arbitrators determine that the Company did not have a proper
basis on which to terminate Dan's employment as a
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Dismissal For Cause within the meaning of this Agreement, the termination of
Dan's employment shall be treated for all purposes of this Agreement as a
Dismissal Without Cause. In addition to any other rights which a party may have,
the party prevailing in such arbitration proceeding shall be entitled to recover
from the losing party any and all of the expenses incurred by the prevailing
party in such proceeding, including reasonable attorney's fees.
ARTICLE VII
RESOLUTION OF DISPUTES
SECTION 7.1. ARBITRATION.
Except as provided in Section 7.2, all controversies arising out of or
relating to this Agreement or the breach hereof shall be settled by arbitration
in the County of Nassau, State of New York, in accordance with the rules of the
American Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. Any
arbitration hereunder shall be before three (3) arbitrators.
SECTION 7.2. EQUITABLE REMEDIES.
Notwithstanding the provisions of Section 7.1, any proceeding for
injunctive relief or specific performance in connection with this Agreement
shall be commenced in Supreme Court of the State of New York, County of Nassau,
and each of the parties hereby accepts the exclusive jurisdiction of such Court
for such purpose; provided, however, that the petitioner may commence such
proceeding in such other court as may
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be necessary, in the petitioner's judgment, in order to more effectively or
expeditiously obtain personal jurisdiction over the respondent.
ARTICLE VIII
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
"Affiliates" shall mean all entities controlling, controlled by or
under common control with the Company.
"Appraiser" or "Appraisers" shall have the meaning specified in Section
3.5(b).
"Board Of Directors" shall mean the Board of Directors of the Company.
"Business Day" shall mean any day on which the Company is scheduled to
be open for business.
"Class A Stock" shall mean the Class A Common Stock of the Company.
"Class A Stock Redemption" shall have the meaning specified in Section
5.2.
"Class B Stock" shall mean the Class B Common Stock of the Company.
"Class B Stock Redemption" shall have the meaning specified in Section
5.2.
"Closing Price" shall mean the last-quoted price at which shares of
Class A Stock were traded at the close of business on a national securities
exchange or NASDAQ on any day on which shares of the Class A Stock were publicly
held.
"CMP Business" shall mean any publication, product, service or business
(a) which the CMP Group publishes, produces, provides or engages in or (b) which
the CMP Group has a bona fide plan or intention to publish, produce, provide or
engage in within the succeeding 12-month period, the research and development of
which the CMP Group
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has devoted substantive time and attention to, and which plan or intention Dan
has actual knowledge of before he engages in any activity competitive with such
CMP Business as contemplated by clause (A) of Section 2.3(a).
"CMP Group" shall mean the Company or any of its Affiliates.
"Common Stock" shall mean all the classes of the Common Stock of the
Company collectively.
"Controlling Stockholders" shall mean the members of the Leeds Family
who hold shares of capital stock of the Company collectively representing a
majority of the votes that may be cast on any matter on which stockholders of
the Company shall be entitled to vote.
"Direct Competitor" shall mean a business enterprise that produces or
operates, or owns directly or indirectly an interest of twenty percent (20%) or
more in, one or more Directly Competitive Businesses.
"Directly Competitive Business" shall mean any competitive publication,
product, service or business (a) the target audience of which is substantially
the same as the target audience of a CMP Business or (b) forty percent (40%) or
more of the annual revenue of which is derived from substantially the same
customers as a CMP Business derives twenty percent (20%) or more of its annual
revenue.
"Dismissal For Cause" shall mean the termination of Dan's employment
with the Company by the Board of Directors for (i) the willful and continued
failure of Dan substantially to perform his duties as an officer and employee of
the Company or comply with the written policies of the Company after the Company
has delivered to Dan a written demand for substantial performance or compliance
that specifies such failure in reasonable detail; (ii) illegal conduct or gross
misconduct by Dan, in either case that is willful and results (or is reasonably
likely to result) in material damage to the business or
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reputation of the Company; or (iii) the resignation by Dan from his employment
following his act or omission which would constitute grounds for Dismissal For
Cause hereunder. No act or failure to act on the part of Dan (other than
non-compliance with lawful instructions given to Dan by the Company) shall be
considered "willful" unless it is done or omitted to be done by him in bad faith
or without reasonable belief that his action or omission was in the best
interests of the Company. Any act or failure to act that is pursuant to
resolution duly adopted by the Board of Directors shall be conclusively presumed
to be done or omitted to be done by Dan in good faith and in the best interests
of the Company.
"Dismissal Without Cause" shall mean the termination of Dan's
employment by the Company on any grounds other than grounds for Dismissal For
Cause or as a result of his Permanent Disability.
"Fair Market Value" shall mean the fair market value of a share of
Class A Stock, which shall be the Closing Price on the trading day immediately
preceding the date of determination of fair market value or, if the Company is
privately held, the best estimate of the fair market value of a share of Class A
Stock as of the last day of the month immediately preceding the month in which
notice to buy or sell a share of Class A Stock is given, as determined with
reference to publicly held companies comparable to the Company.
"Financial Statements" shall mean the combined or consolidated
financial statements of the Company and its Affiliates prepared in accordance
with generally accepted accounting principles and audited by the Company's
independent certified public accountants.
"Free Cash Flow" of the Company with respect to any fiscal year shall
mean the combined or consolidated net income of the Company for such year as
reflected in the
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Financial Statements, adjusted so as (a) to exclude the amount, if any, that, in
determining such combined or consolidated net income, represented (i) an expense
for depreciation and/or amortization or (ii) a provision or credit for federal,
state, local or foreign income taxes; and (b) to include the amount, if any, of
cash payments that the Company actually made in such fiscal year (i) for
federal, state, local and foreign income taxes owed by the Company (and, if the
Company is an S Corporation, in distributions to its stockholders for the
payment of federal, state, local and foreign taxes owed by such stockholders
with respect to the Company's income), (ii) for capital expenditures, (iii)
pursuant to the Company's 1988 Equity Appreciation Plan or (iv) as required
under the terms of the Company's then-existing financing arrangements to reduce
the principal amount of indebtedness. The Company's determination of Free Cash
Flow shall be conclusive and binding for all purposes of this Agreement provided
that the Company's certified public accountants render a written opinion that
such determination presents fairly, in all material respects, the Free Cash Flow
of the Company as herein defined. (A hypothetical illustration of the
calculation of Free Cash Flow is set forth on Schedule VIII hereto.)
"Indirect Competitor" shall mean a business enterprise that does not
produce or operate, or own directly or indirectly an interest in, any Directly
Competitive Businesses but produces or operates, or owns directly or indirectly
an interest of twenty percent (20%) or more in, one or more Indirectly
Competitive Businesses.
"Indirectly Competitive Business" shall mean any competitive or
potentially competitive publication, product, service or business which derives
from twenty percent (20%) to but not including forty percent (40%) of its annual
revenue from substantially the same customers as a CMP Business derives twenty
percent (20%) or more of its annual revenue.
"Key Senior Executive" shall mean a Company employee holding a position
of responsibility comparable to that currently titled President of International
(but in any
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case a level of responsibility no lower than the position currently titled Vice
President/Group Publisher).
"Leeds Family" shall mean Gerard G. Leeds, Liselotte J. Leeds, Michael
S. Leeds, Richard A. Leeds, Daniel H. Leeds, Greg Jobin-Leeds and Jennifer
Leeds-Lukehart.
"Negative Pledge Agreement" shall mean that certain Negative Pledge
Agreement originally dated as of July 15, 1993 by and among Gerry, Lilo and
Fleet National Bank (f/k/a/ Shawmut Bank Connecticut, National Association), as
most recently amended and confirmed by Gerry, Lilo, Dan and Michael S. Leeds to
Fleet National Bank and The Chase Manhattan Bank on November 14, 1996.
"Option Agreement" shall mean that certain Option Agreement entered
into as of the date hereof by and between the Company and Dan.
"Option Shares" shall mean the shares of Class A Stock owned by Dan
pursuant to the Option Agreement.
"Original Price" shall mean the per-share price at which Dan shall have
purchased the Restricted Shares from Gerry and Lilo, as adjusted to take into
account any changes in the Company's capital structure and any stock redemptions
that may have occurred subsequent to the purchase of such Restricted Shares by
Dan hereunder.
"Permanent Disability" shall mean a physical or mental impairment, as a
result of which Dan shall have been unable, with or without reasonable
accommodation, to perform the essential functions of his employment position for
a period of at least sixteen (16) weeks during any 12-month period.
"Permitted Transferee" shall mean a spouse, child, or grandchild of
Dan, or an entity (e.g., a trust, corporation or partnership) in which Dan has
the majority voting interest and of which the beneficiaries are a spouse and/or
one or more children or grandchildren of Dan.
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"Restricted Shares" shall mean the shares of Class A Stock which Dan
shall have purchased from Gerry and Lilo pursuant to the Share Purchase
Agreement, plus any additional shares of Class A Stock that may be issued from
time to time with respect to such Restricted Shares as a result of any changes
in the Company's capital structure as contemplated in Section 5.1, and less any
Restricted Shares that may be canceled or redeemed from time to time as a result
of any such changes in the Company's capital structure or of any stock
redemptions as contemplated in Section 5.2.
"Share Purchase Agreement" shall mean that certain Share Purchase
Agreement entered into as of the date hereof by and among Gerry, Lilo and Dan.
"Shareholders' Agreement" shall mean that certain Shareholders'
Agreement entered into as of June 30, 1991 by and among the Company, certain of
the Affiliates and the members of the Leeds Family.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. LEGEND ON CERTIFICATES.
Upon the execution of this Agreement, each certificate evidencing any
of the Restricted Shares held by Dan shall be endorsed as follows:
The shares of stock evidenced by this certificate are subject to the
restrictions of and are transferable only upon compliance with the
provisions of a certain Stockholders' Agreement entered into by and
among Gerard G. Leeds, Liselotte J. Leeds, Daniel H. Leeds and the
Company. A copy of such Agreement is on file in the office of the
Company.
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In addition, all such certificates shall bear such other legends as, in the
opinion of the Company's counsel, are necessary or appropriate to ensure
compliance with all applicable federal and state securities laws.
SECTION 9.2. PERMITTED TRANSFEREES; REPRESENTATIVE AND SUCCESSORS IN
INTEREST.
(a) PERMITTED TRANSFEREES. Subject to Section 9.4 but notwithstanding
any other provision of this Agreement, Dan shall be permitted to sell, give or
bequeath all or any portion of the Restricted Shares or interest therein, or
pass such Restricted Shares or interest by means of intestate succession or
otherwise, either outright or in trust, to a Permitted Transferee, provided that
such transfer shall be implemented in a manner acceptable to legal counsel for
the Company. In case of any such transfer by Dan, each Permitted Transferee
shall receive and hold the transferred Restricted Shares subject to all the
terms and conditions of this Agreement, and there shall be no further transfer
of such Restricted Shares except by such Permitted Transferee to another
Permitted Transferee in accordance with the terms of this Agreement. Before Dan
transfers any Restricted Shares to a Permitted Transferee, and before any
Permitted Transferee transfers any Restricted Shares to another Permitted
Transferee, Dan or the transferring Permitted Transferee, as the case may be,
shall give the Company written notice of such intended transfer. Any Permitted
Transferee shall, to the extent of the Restricted Shares transferred, succeed to
all the rights and obligations of the transferor under this Agreement and shall
become bound by all the terms and conditions hereof; provided that, as a
condition precedent to a Permitted Transferee's exercising any rights under this
Agreement and to the Company's obligation to change its records to reflect the
record ownership of such Restricted Shares in the name of such Permitted
Transferee, the Permitted Transferee shall execute such documents and
instruments as may reasonably be required by legal counsel to the
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Company. Unless otherwise expressly provided in this Agreement, any reference
herein to a right or obligation of Dan to sell or receive payment for any shares
of Class A Stock shall be deemed to refer equally to any Permitted Transferee,
and any limitations herein with respect to the number or category of shares of
Class A Stock which Dan shall have a right or obligation to sell in any calendar
year shall apply to Dan and all Permitted Transferees as a group.
(b) REPRESENTATIVE AND SUCCESSORS IN INTEREST. Except as may be
otherwise specifically provided in this Agreement, in the event of Dan's death
or incapacity his representative and/or successors in interest shall succeed to
all his rights and obligations under this Agreement and be bound by all the
terms and conditions hereof, and they shall be entitled to exercise such rights,
and shall be required to fulfill such obligations, in the same manner and to the
same extent that Dan would have been so entitled or required but for his death
or incapacity.
SECTION 9.3. FURTHER ASSURANCES.
Each of the parties hereto, upon request of another party, shall take
all such actions and execute and deliver all such further instruments of sale,
assignment, conveyance, transfer and exchange, and all such other documents and
agreements, as may be necessary or appropriate to assure, complete and evidence
the full and effective sale, assignment, transfer, conveyance and exchange of
the Restricted Shares as herein required and as may otherwise be necessary or
appropriate to comply with the terms and conditions of this Agreement. In the
event a party shall not take all such actions or execute or deliver all such
further instruments, then and in that event each such party hereby appoints the
Company such party's agent and attorney-in-fact for the purpose of executing and
delivering (a) any and all documents necessary to convey and/or exchange the
Restricted
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Shares pursuant to the provisions of this Agreement, any conveyance or exchange
so made fully divesting the party whose interest is so conveyed of all right,
title or equity in or to the Restricted Shares formerly owned by such party, and
(b) any and all other documents, instruments, agreements and other writings
necessary to effectuate the terms of this Agreement. The powers of attorney
herein granted, being coupled with an interest, are irrevocable and shall not be
revoked by the death, dissolution or incapacity of any party hereto or for any
other reason. Each party hereto hereby releases any other party who conveys or
exchanges the Restricted Shares formerly owned by such party as provided in this
Section 9.3 from any and all claims and liabilities for or resulting from the
conveying or exchanging of such Restricted Shares.
SECTION 9.4. S CORPORATION.
It is intended that for federal income tax purposes the Company will
continue to qualify as an "S Corporation" as defined in Section 1361 of the
Internal Revenue Code or any successor provision of the federal income tax laws.
Accordingly, the Company and Dan shall execute and keep in full force and effect
the consent described in Section 1362(a)(2) of the Internal Revenue Code or any
successor provision until such time as the Company and the Controlling
Stockholders determine not to continue to qualify the Company as an S
Corporation. In addition, notwithstanding the provisions of any other Section of
this Agreement, no transfer of any shares of Class A Stock shall be made to any
person or entity, nor shall Dan by action or inaction cause any circumstances to
exist, which would disqualify the Company as an S Corporation.
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SECTION 9.5. CREDIT FACILITIES.
It is understood and acknowledged that one or more banks or lending
institutions of the Company may from time to time require, as a condition to
extending or continuing to extend credit to the Company, that persons who are
both stockholders and members of management of the Company execute and deliver
to such banks or lending institutions certain assurances and agreements such as
the Negative Pledge Agreement. For as long as he is a Key Senior Executive, Dan
shall, if requested by the Company, promptly take all such actions and execute
and deliver all such documents containing such assurances and agreements (other
than personal guarantees) as may be reasonably required by such banks or lending
institutions, on the same basis and in substantially the same form and manner as
other persons who are both stockholders and members of management of the
Company.
SECTION 9.6. OTHER TRANSFERS.
In the event of any transfer of any Restricted Shares by Dan, his
representative, any successor in interest or any Permitted Transferee, by
operation of law (other than transfers occasioned by an individual's death) or
court order, including but not limited to any foreclosure, adjudication in
bankruptcy, appointment of a receiver of the assets of Dan, or levy and
execution, Dan shall give immediate notice thereof to the Company, including in
such notice the date and circumstances of such transfer and the name and address
of the transferee. Gerry and Lilo or their designees, at their option, upon
giving sixty (60) days' prior written notice to such transferee, shall have the
right to purchase such Restricted Shares at the Original Price. The purchase
price for any such Restricted Shares shall be paid in full at the closing, which
shall not be later than thirty (30) Business Days after such notice to purchase
is given, at such time and place as the purchaser(s) may designate.
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SECTION 9.7. ENTIRE AGREEMENT; BINDING EFFECT.
This Agreement contains all of the terms agreed upon by the parties
with respect to the subject matter hereof and replaces and supersedes any and
all prior agreements, written or oral, between the parties relating to the
Restricted Shares (except for the Option Agreement to the extent its terms are
not inconsistent herewith). No promises, agreements or representations with
respect to the matters herein contained shall be binding upon any of the parties
unless set forth herein. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective heirs, representatives, successors
and permitted assigns.
SECTION 9.8. AMENDMENT.
No provision of this Agreement may be amended or waived except by a
writing making reference to this Agreement and signed by the party against whom
the enforcement of such amendment or waiver is sought.
SECTION 9.9. APPLICABLE LAW.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York, without reference to its
principles regarding choice or conflicts of law, and in accordance with and
consistent with the Company's election to be treated as an S Corporation.
SECTION 9.10 SEVERABILITY.
Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law and
the Company's S
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Corporation election, but if any provisions hereof shall be prohibited by or
invalid under any such law or the Company's S Corporation election, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating or nullifying the remainder of such provision or any other
provision of this Agreement.
SECTION 9.11. NO WAIVER.
No delay or omission by any party in exercising or enforcing any right
hereunder shall operate as a waiver of such right, and a waiver on one occasion
shall not be construed as a waiver of any right or remedy on any future
occasion.
SECTION 9.12. NOTICES.
All notices, requests, consents, designations and demands required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given (a) when personally delivered to an individual
party or to an authorized officer of a corporate party, whether by messenger,
courier or other person, (b) on the second Business Day after the date it is
sent by certified or registered mail, return receipt requested, or (c) on the
next Business Day after the date it is sent via telefacsimile (provided it is
actually received and is not materially illegible), as follows:
If to the Company:
CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Attention: President
Fax: (516) 562-5718
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with a copy to:
CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Attention: General Counsel
Fax: (516) 562-7123
If to Dan:
Daniel H. Leeds
c/o CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Fax: (516) 562-7123
with a copy to Dan at his last known address as reflected on the
records of the Company
If to Gerry:
Gerard G. Leeds
c/o CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Fax: (516) 562-7123
If to Lilo:
Liselotte J. Leeds
c/o CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Fax: (516) 562-7123
or to such other mail or facsimile address as the recipient party shall have
last designated by notice given to the other in accordance herewith.
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SECTION 9.13. ASSIGNMENT.
Except as expressly provided in this Agreement, no party may assign any
rights or delegate any obligations or liabilities hereunder without the prior
written consent of the other parties, except that each of Gerry and Lilo may
assign any of his or her rights and delegate any of his or her obligations or
liabilities to the other, and the Company may assign any of its rights and
delegate any of its duties to an entity that controls, is controlled by or is
under common control with the Company; provided, however, that no such
assignment or delegation shall relieve such assignor from his, her or its
obligations or liabilities hereunder.
SECTION 9.14. SURVIVAL.
This Agreement shall survive any merger, sale or other disposition of
the Company.
SECTION 9.15. GENDER AND NUMBER.
Except when otherwise indicated by the context, references herein to
one gender shall include the other genders, and references herein to the plural
shall include the singular.
SECTION 9.16. DATES.
If any date referenced in this Agreement falls on a day that is not a
Business Day, the next succeeding Business Day shall be deemed substituted for
such date.
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SECTION 9.17. HEADINGS.
The headings herein are for convenience of reference only and shall not
be considered in construing this Agreement.
SECTION 9.18. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed as an original and all of which shall together constitute
one and the same instrument.
IN WITNESS WHEREOF, the individual parties have executed this Agreement
and the Company has caused this Agreement to be executed by an officer thereunto
duly authorized on the day and year first above written.
CMP MEDIA INC.
By /s/ MICHAEL S. LEEDS
---------------------------
Name: MICHAEL S. LEEDS
Title: President
Attest:
/s/ROBERT D. MARAFIOTI
------------------------------
(CORPORATE SEAL)
/s/GERARD G. LEEDS
- -----------------------------
GERARD G. LEEDS
/s/LISELOTTE J. LEEDS
- -----------------------------
LISELOTTE J. LEEDS
/s/DANIEL J. LEEDS
- -------------------------------
DANIEL H. LEEDS
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EXHIBIT 10.8
OPTION AGREEMENT
This Option Agreement, made and entered into on this 27th day of
November, 1996, by and between CMP Media Inc., a Delaware corporation (the
"Company"), and Daniel H. Leeds ("Dan").
OPTION AGREEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C>
OPTION AGREEMENT.................................................................................................. 1
ARTICLE I -OPTIONS................................................................................................ 1
SECTION 1.1. GRANT OF OPTIONS............................................................................ 1
SECTION 1.2 OPTION PRICE................................................................................ 1
ARTICLE II -CONFIDENTIALITY; NON-COMPETITION...................................................................... 2
SECTION 2.1. PROTECTION OF COMPANY'S BUSINESS INTERESTS.................................................. 2
SECTION 2.2. NON-DISCLOSURE AND NON-USE OF CONFIDENTIAL INFORMATION...................................... 2
SECTION 2.3. PROTECTION FROM UNFAIR COMPETITION.......................................................... 3
SECTION 2.4. PRIOR NOTICE; OPPORTUNITY TO CURE........................................................... 4
SECTION 2.5. OTHER COVENANTS............................................................................. 5
SECTION 2.6. CONFIDENTIALITY OF AGREEMENT................................................................ 6
SECTION 2.7. RELIEF FOR BREACH........................................................................... 6
SECTION 2.8. SEPARATE COVENANTS.......................................................................... 6
ARTICLE III -VESTING OF OPTIONS................................................................................... 7
SECTION 3.1. VESTING ON DECEMBER 31, 2005................................................................ 7
SECTION 3.2. ACCELERATION OF VESTING: FIRST SERIES....................................................... 7
SECTION 3.3. ACCELERATION OF VESTING: SECOND SERIES..................................................... 7
SECTION 3.4. ACCELERATION OF VESTING: THIRD SERIES...................................................... 8
SECTION 3.5. ACCELERATION OF VESTING: FOURTH SERIES..................................................... 8
SECTION 3.6. SATISFACTION OF CONDITIONS.................................................................. 9
SECTION 4.1. EXERCISE OF OPTIONS......................................................................... 10
SECTION 4.2. WITHHOLDING TAXES........................................................................... 11
SECTION 4.3. DETERMINATION OF FAIR MARKET VALUE.......................................................... 12
SECTION 4.4. NON-TRANSFERABILITY OF OPTIONS.............................................................. 12
SECTION 4.5. DAN'S REPRESENTATIVE........................................................................ 12
ARTICLE V - EXPIRATION OF OPTIONS ............................................................................... 13
SECTION 5.1. EXPIRATION OF OPTIONS...................................................................... 13
</TABLE>
1
<PAGE> 2
<TABLE>
<S> <C>
SECTION 5.2. EXPIRATION UPON DEATH, PERMANENT DISABILITY, DISMISSAL WITHOUT CAUSE OR
RESIGNATION FOR GOOD REASON.................................................................... 13
SECTION 5.3. EXPIRATION UPON VOLUNTARY RESIGNATION, DISMISSAL FOR CAUSE OR COMPETITION................. 14
SECTION 5.4. CHANGE IN CONTROL......................................................................... 14
ARTICLE VI - TRANSFERABILITY OF SHARES AT TIME WHEN COMPANY IS PRIVATELY HELD AND THERE IS NOT PUBLIC MARKET..... 15
SECTION 6.1. GENERAL RESTRICTION ON TRANSFER........................................................... 15
SECTION 6.2. SALE TO SATISFY INCOME TAX LIABILITIES.................................................... 15
SECTION 6.3. SALE AFTER DECEMBER 31, 2003.............................................................. 16
SECTION 6.4. SALE AFTER DEATH OR PERMANENT DISABILITY.................................................. 16
(a) Rights of Dan to Sell..................................................................... 16
(b) Rights of Company to Purchase............................................................. 16
SECTION 6.5. SALE AFTER DISMISSAL WITHOUT CAUSE OR RESIGNATION FOR GOOD REASON......................... 16
(a) Rights of Dan to Sell..................................................................... 16
(b) Rights of Company to Purchase............................................................. 17
SECTION 6.6. SALE AFTER VOLUNTARY RESIGNATION, DISMISSAL FOR CAUSE, OR COMPETITION...................... 17
(a) Price to be Paid for Option Shares........................................................ 17
(b) Determination of Fair Market Value........................................................ 17
(c) Payment of Purchase Price................................................................. 18
(i) Lump Sum or Installments......................................................... 18
(ii) Initial Installment............................................................. 18
(iii) Cash Flow Limitations......................................................... 19
(d) Closing of Transaction.................................................................... 19
SECTION 6.8. ASSIGNMENT AND DELEGATION BY THE COMPANY TO CLASS B STOCKHOLDERS.......................... 20
SECTION 6.9. TAG-ALONG RIGHTS -- DRAG-ALONG RIGHTS..................................................... 20
ARTICLE VII - TRANSFERABILITY OF SHARES AT TIME COMPANY SHARES ARE PUBLICLY TRADED .............................. 21
SECTION 7.1. GENERAL RESTRICTION ON TRANSFER........................................................... 21
SECTION 7.2. SALE TO SATISFY INCOME TAX LIABILITIES.................................................... 21
SECTION 7.3. SALE ON OR BEFORE DECEMBER 31, 2003....................................................... 22
(a) Minimum Market Capitalization............................................................. 22
(b) Maximum Number of Shares. .............................................................. 22
SECTION 7.4. SALE AFTER DECEMBER 31, 2003.............................................................. 22
SECTION 7.6. TENDER, MERGER, CONSOLIDATION. .......................................................... 23
SECTION 7.7. COMPLIANCE WITH SECURITIES LAWS........................................................... 23
ARTICLE VIII - FUTURE CHANGES IN CAPITAL STRUCTURE AND REDEMPTION OF
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C>
SHARES.................................................................................................. 24
SECTION 8.1. CHANGES IN CAPITAL STRUCTURE.............................................................. 24
SECTION 8.2. REDEMPTION OF CLASS B STOCK............................................................... 24
ARTICLE IX - PROCEDURE TO BE FOLLOWED IN CASE OF RESIGNATION FOR GOOD REASONS.................................... 25
SECTION 9.1. RESIGNATION FOR GOOD REASON............................................................... 25
SECTION 9.2. DISMISSAL FOR CAUSE....................................................................... 25
ARTICLE X - RESOLUTION OF DISPUTES............................................................................... 26
SECTION 10.1. ARBITRATION............................................................................... 26
SECTION 10.2. EQUITABLE RELIEF.......................................................................... 26
ARTICLE XI - REPRESENTATIONS AND WARRANTIES...................................................................... 26
SECTION 11.1. REPRESENTATIONS OF THE COMPANY............................................................ 26
SECTION 11.2. REPRESENTATIONS OF DAN.................................................................... 27
ARTICLE XII - DEFINITIONS........................................................................................ 27
HYPOTHETICAL ILLUSTRATION OF
CALCULATION OF OPTIONS VESTING UNDER SECTION 5.2(b)..................................................... 38
HYPOTHETICAL ILLUSTRATION OF
CALCULATION OF FREE CASH FLOW........................................................................... 39
</TABLE>
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W I T N E S S E T H:
WHEREAS, Dan is a key senior executive of the Company; and
WHEREAS, the Company desires to create substantial incentives for Dan
to (i) cause the Company to grow continuously and successfully in sales, profits
and profitability, (ii) take a long-term view of the Company's future, (iii)
help the Company attain its long-term goals, including its diversity goals as
set forth in its corporate Principles, and (iv) remain with the Company for the
long term; and
WHEREAS, to create such incentives, the Company desires to provide Dan
with the opportunity to purchase shares of the Company's Class A Common Stock,
and Dan desires to have the opportunity to purchase shares of such Class A
Common Stock;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each of the parties, the parties
hereto hereby covenant and agree, as follows:
ARTICLE I
OPTIONS
SECTION 1.1. GRANT OF OPTIONS.
Subject to the terms and conditions of this Agreement, the Company
hereby grants Dan the right to purchase from the Company up to two thousand
six-hundred forty (2,640) shares of the Class A Stock (which number of shares
equals approximately five percent (5%) of the number of shares of the Company's
Common Stock issued and outstanding as of the date hereof).
SECTION 1.2 OPTION PRICE.
The Option Price shall be the fair market value of a share of the
Company's Common Stock on the date hereof. Such fair market value shall be
calculated by dividing the aggregate fair market value of all the Common Stock,
as determined by an independent appraisal conducted by Furman Selz L.L.C., by
the total number of shares of the Common Stock issued and outstanding as of the
date hereof.
ARTICLE II
CONFIDENTIALITY; NON-COMPETITION
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<PAGE> 5
In consideration of the grant of the Options by the Company hereunder,
and as a specific inducement to the Company to enter into this Agreement, Dan
hereby accepts and agrees to the provisions of this Article II and acknowledges
that such provisions are necessary and appropriate for the reasonable protection
of the Company's property, investments, business relationships, economic
advantages and goodwill.
SECTION 2.1. PROTECTION OF COMPANY'S BUSINESS INTERESTS.
As a Key Senior Executive, Dan has been intimately involved in the
management of all aspects of the business of the Company and its Affiliates and
has been a major strategist in planning and implementing its business expansion.
In the course of his long employment with the Company, Dan has developed special
skills, knowledge and abilities in the publishing field which are of a uniquely
personal nature. He has also acquired detailed knowledge of the internal
operations of the Company and its Affiliates and highly confidential information
concerning the national and international business of the Company and its
Affiliates. In addition, he has been afforded the opportunity to develop special
relationships of confidence and trust with the customers, suppliers,
consultants, employees, officers, directors and stockholders of the Company and
its Affiliates. Because of his continuing responsibilities with the Company and
its Affiliates, including his involvement in strategic planning and the
evaluation of proposed investments, it is expected that Dan will continue to be
entrusted with confidential information and will continue to have the
opportunity to develop such special relationships. The parties acknowledge and
agree that the Company would be unfairly and irreparably damaged if Dan were to
take any of such skills, knowledge, information or relationships, which he has
acquired and developed during the course of his employment with the Company, and
use them to the detriment of the Company and its Affiliates.
SECTION 2.2. NON-DISCLOSURE AND NON-USE OF CONFIDENTIAL INFORMATION.
(a) Dan represents, warrants, covenants and agrees that, without the
Company's express or implied consent while employed or, after termination,
without the prior written consent of the Board of Directors, he will not
willfully or knowingly at any time directly or indirectly disclose, communicate
or divulge, or use for the benefit of himself or of any third party, any of the
business or trade secrets or other confidential information of the CMP Group
including, solely by way of illustration but not of limitation, their business
strategies, business plans, budgets, pricing, selling techniques, marketing
techniques, operating systems, financial systems, financial data, procedures,
manuals, confidential reports, personnel records, potential acquisitions,
potential business expansions, credit and financial data of their suppliers and
of their present and prospective customers, data about competitors, new
product-development initiatives, custom research and new product or service
concepts and marketing strategy.
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(b) Any and all materials of or concerning the CMP Group or their
business or affairs, including without limitation files, memoranda, notes,
correspondence, lists, records, video reproductions, computer tapes and disks,
design and other documents, and data storage and retrieval materials (and all
copies, compilations and summaries thereof), and any and all property of the CMP
Group, including without limitation equipment, software, keys, business cards
and credit cards, that are in Dan's custody or control shall be delivered to the
Company at the time Dan's employment with the Company terminates for any reason.
Dan shall not destroy any such materials or property, shall not retain any
copies thereof and shall certify in writing to the Company upon request that all
such materials and property have been delivered to the Company.
SECTION 2.3. PROTECTION FROM UNFAIR COMPETITION.
(a) For as long as Dan is employed by the CMP Group and for the greater
of (i) a period of two (2) years after termination of his employment or (ii) as
long as Dan or any Permitted Transferee owns any Option Shares, Dan shall not
engage in competition with the CMP Group. For the purposes of this Agreement,
Dan shall be deemed to engage in competition with the CMP Group if Dan does any
of the following, whether or not in exchange for consideration, without the
Company's express or implied consent while employed or without the Company's
prior written consent after termination:
(A) On his own behalf or on behalf of any other person or
entity, (1) participates or is involved in or has direct responsibility for the
day-to-day management or operation of a Directly Competitive Business, an
Indirectly Competitive Business or any material function thereof (e.g.,
advertising, circulation, production and the like); (2) owns, in whole or in
part, beneficially or of record, directly or indirectly, an equity interest (or
an interest convertible into equity) in a Directly Competitive Business or a
Direct Competitor; (3) renders services as a director, officer, employee,
consultant, advisor, agent or independent sales representative to a Direct
Competitor; or (4) renders services as a director, officer, employee,
consultant, advisor, agent or independent sales representative to an Indirect
Competitor unless Dan has no responsibility for or participation or involvement
in any Indirectly Competitive Business of such Indirect Competitor, provided,
however, that Dan may have supervisory, advisory, consulting or
sales-representative responsibility over an Indirectly Competitive Business if
the revenue of all Indirectly Competitive Businesses of such Indirect Competitor
over which Dan has such responsibility represents no more than fifteen percent
(15%) of the total revenue over which Dan has such responsibility.
(B) Solicits the service of any employee of the CMP Group for
Dan's own benefit or for the benefit of any person or entity other than the CMP
Group, or induces or helps to induce any such employee to leave employment with
the CMP Group.
(C) Assists, induces or helps any employee or former employee
of the CMP Group or any other person or entity to engage in competition with the
CMP Group or any of its business activities, provided that the giving of a
favorable reference by Dan on behalf of such
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former employee shall not be prohibited by this clause (C).
(D) Employs or causes any person or entity other than the CMP
Group to employ any former employee of the CMP Group within one (1) year after
the resignation of such former employee from the CMP Group.
(E) Willfully induces or attempts to induce any customer,
supplier or contractor of the Company to terminate any agreement or arrangement
with the Company, or willfully induces or attempts to induce any customer,
supplier or contractor, or any potential customer, supplier or contractor, of
the Company not to enter into any agreement or arrangement with the Company.
(F) Communicates publicly (other than pursuant to subpoena in
a legal proceeding) or to the press, or writes or produces for publication in
any medium, on the subject of, or with express or implied reference to, the CMP
Group or any of their former, current or future stockholders, directors,
officers or employees in their capacities as such. For the purpose hereof,
"implied reference shall mean a reference that does not expressly name the CMP
Group or any of their former, current or future stockholders, directors,
officers or employees but that nevertheless would be understood by the average
reader or audience-member to refer thereto. It shall not be deemed a violation
of this clause (F) if, after the termination of his employment with the Company,
Dan responds to inquiries from the public or the press solely by stating, in
form or substance, "I do not discuss any matters relating to CMP; please address
your inquiries directly to the company" or Dan communicates the fact that he was
formerly employed by the Company and identifies the positions he held and the
dates thereof.
(b) Notwithstanding the provisions of paragraph (a) of this Section
2.3, Dan shall not be deemed to be engaged in competition with the CMP Group
solely by reason of Dan's ownership of (i) an equity interest of less than
one-half of one percent (0.5%) in the securities of a Direct Competitor or
Indirect Competitor listed for trading on a national securities exchange or
quoted in the National Market List of NASDAQ or (ii) an interest in a mutual or
other investment fund which owns an interest in a Direct Competitor or Indirect
Competitor, provided that Dan has no influence or control over the selection of
such fund's investment decisions.
SECTION 2.4. PRIOR NOTICE; OPPORTUNITY TO CURE.
(a) Dan shall give the Company written notice at least twenty (20)
Business Days before entering into any relationship or transaction, or engaging
in any activity, or taking or omitting to take any action, which might
reasonably be deemed a breach of any provision of Section 2.2 or Section 2.3,
such notice to include full and complete particulars as to the proposed
relationship, transaction, activity, action or omission, the services or duties
contemplated and such other facts and circumstances as are reasonably necessary
for the Company to make an informed decision. The Company shall advise Dan in
writing, within ten (10) Business Days after such notice is given, of the Board
of Directors' determination as to whether such relationship, transaction,
activity, action or omission would materially breach any of the provisions of
Section 2.2 or
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Section 2.3. In the event that, for reasons not within his control, Dan gives
the Company less than twenty (20) Business Days' prior written notice, the
Company will endeavor in good faith to advise Dan of the Board of Directors'
determination in less than ten (10) Business Days after such notice is given,
provided that the Company's failure to advise Dan in less than ten (10) Business
Days shall not be deemed to constitute consent to such relationship,
transaction, activity, action or omission and shall not give rise to any
liability of the Company to Dan or to any third party.
(b) Once the Company has advised Dan in writing that the Board of
Directors has determined that a proposed relationship, transaction, activity,
action or omission would not materially breach any of the provisions of Section
2.2 or Section 2.3, and Dan has thereupon entered into such relationship or
transaction or has begun to engage in such activity or to take or omit to take
such action, the Board of Directors shall have no right to reverse or otherwise
modify its determination; provided, however, that if the nature, scope or terms
of such relationship, transaction, activity, action or omission are to be
modified after such determination is made, then in accordance with paragraph (a)
hereof Dan shall give the Company prior written notice of such modification and
the Company shall advise him in writing, within ten (10) Business Days after
such notice is given, of the Board of Directors' determination as to whether
such relationship, transaction, activity, action or omission, as so modified,
would materially breach any of the provisions of Section 2.2 or Section 2.3.
(c) In the event that, without having given the Company prior notice
pursuant to paragraphs (a) or (b) hereof, Dan enters into any relationship or
transaction or begins to engage in any activity or to take or omit to take any
action that the Board of Directors determines is a material breach of any of the
provisions of Section 2.2 or Section 2.3, the Company shall give Dan written
notice of such determination and, if such breach is continuing, an opportunity
to cure such breach before the Company seeks remedy or relief by judicial
process or arbitration or exercises its rights under Section 6.6(b) hereof. The
opportunity to cure shall be sixty (60) days to the extent such continuing
breach consists of holding an ownership interest in a competitive business and
fifteen (15) days with respect to any other continuing breach.
SECTION 2.5. OTHER COVENANTS.
(a) For as long as Dan or any Permitted Transferee owns any Option
Shares, Dan shall, if requested by the Company, provide information, testimony
and assistance in connection with the prosecution or defense of any claims by or
against the Company arising out of matters of which he acquired knowledge while
an employee of the Company. The Company shall reimburse Dan for all reasonable
out-of-pocket expenses he incurs in rendering such assistance.
(b) For as long as Dan or any Permitted Transferee owns any Option
Shares, Dan shall not willfully make any oral or written statement which
reflects adversely upon the character, honesty, credit, efficiency or business
practices of the CMP Group or its former, current or future stockholders,
directors, officers or employees in their capacities as such.
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SECTION 2.6. CONFIDENTIALITY OF AGREEMENT.
The terms and conditions of this Agreement shall be kept confidential
by the parties, and none of the parties shall disclose them to any non-party
unless such disclosure is necessitated by (a) legal and/or financial
requirements of the Company, in which case the form of such disclosure shall
first be mutually agreed upon by the Company and Dan, or (b) any arbitration or
other legal proceeding contesting or seeking to enforce any provision or
interpretation of this Agreement (including any deposition or testimony that
either party provides in connection therewith), regardless of whether such
proceeding is initiated by Dan or the Company. Except as provided in the
preceding sentence, and without limiting the generality of the foregoing, Dan
shall not respond to or in any way participate in or contribute to any public
discussion, notice or other publicity concerning or in any way relating to
execution of this Agreement or the events (including any negotiations) which led
to its execution, and Dan specifically agrees that he shall not disclose
information regarding this Agreement to any current or former employees of the
Company other than those expressly authorized by the Company to have knowledge
hereof. Without limiting the comprehensive confidentiality agreed to, Dan may
disclose this Agreement to his attorneys, financial advisors and members of his
and his spouse's immediate families, provided he informs them of this
confidentiality provision and they agree to abide by it. Dan hereby agrees that
any disclosure by him of any of the terms and conditions of this Agreement in
violation of the foregoing shall constitute and be treated as a material breach
of this Agreement and Dan shall be responsible for damages occasioned thereby,
including but not limited to reasonable attorneys' fees incurred by the Company
to enforce this Section 2.6.
SECTION 2.7. RELIEF FOR BREACH.
Dan acknowledges and agrees that any breach or anticipatory breach by
him of any of the provisions of this Article II would cause the Company
irreparable injury not compensable by monetary damages alone and that,
accordingly, in any such event, the Company shall be entitled to injunctions,
both preliminary and permanent, enjoining or restraining such breach or
anticipatory breach (and Dan hereby consents to the issuance thereof without
bond by any court of competent jurisdiction), in addition to monetary damages in
such amount as the evidence may show and such other remedies as may be available
at law or in equity.
SECTION 2.8. SEPARATE COVENANTS.
Dan understands and agrees that the covenants contained in this Article
II constitute a series of separate covenants, one for each applicable state in
the United States and the District of Columbia, and one for each applicable
foreign country. If in any judicial proceeding a court shall hold unenforceable
any of the separate covenants included in this Article II, then such
unenforceable covenant or covenants shall be deemed limited as necessary or
eliminated from the provisions of this Article II for the purpose of such
proceeding to the extent necessary to permit the remaining separate covenants of
this Article II to be enforced in such proceeding, and to permit such
unenforceable covenant or covenants to be enforced as limited.
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ARTICLE III
VESTING OF OPTIONS
SECTION 3.1. VESTING ON DECEMBER 31, 2005.
All Options granted under this Agreement shall vest and become fully
exercisable on December 31, 2005, provided only that Dan is a Key Senior
Executive on such date.
SECTION 3.2. ACCELERATION OF VESTING: FIRST SERIES.
Notwithstanding the provisions of Section 3.1, if on December 31 of any
year from 1997 to and including 2004 (a) Dan is a Key Senior Executive, (b) the
Company's annual Pre-Tax Income was not less than five percent (5%) of its Net
Sales Revenue for both the year ending on such December 31 and the entire
preceding year, and (c) at least one (1) of the full-time female employees of
the CMP Group has held an international senior-level executive position (such as
chief financial officer of the Company's international business, a country
manager, or a manager with profit-and-loss responsibility for a significant
international business unit of the CMP Group) or a higher level position for the
entire year ending on such December 31, then and in that event Options with
respect to one hundred thirty-two (132) Unexercised Shares (which number equals
approximately one quarter of one percent (0.25%) of the number of shares of the
Company's Common Stock issued and outstanding as of the date hereof) shall vest
and become exercisable as of the first such December 31 on which all of the
three (3) aforementioned conditions (the "Conditions") are satisfied.
SECTION 3.3. ACCELERATION OF VESTING: SECOND SERIES.
(a) Notwithstanding the provisions of Section 3.1, if on December 31 of
any year from 1999 to and including 2004 the Conditions are satisfied, then and
in that event Options with respect to two hundred sixty-four (264) Unexercised
Shares (which number equals approximately one half of one percent (0.5%) of the
number of shares of the Company's Common Stock issued and outstanding as of the
date hereof) shall vest and become exercisable as of the first such December 31
on which the Conditions are satisfied.
(b) Notwithstanding the provisions of Section 3.1 and paragraph (a) of
this Section 3.3, if on December 31, 1997 or December 31, 1998 the Conditions
are satisfied and, in addition, (i) the Net Sales Revenue of the Company for the
year then ending exceeds $600 million and (ii) the Company's annual Pre-Tax
Income was not less than ten percent (10%) of its Net Sales Revenue for both the
year then ending and the entire preceding year, then and in that event fifty
percent (50%) of the Unexercised Shares referred to in paragraph (a) of this
Section 3.3, or one hundred thirty-two (132) Unexercised Shares, shall
accelerate and shall vest and become exercisable as of the first such December
31 on which all the aforementioned conditions are satisfied.
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SECTION 3.4. ACCELERATION OF VESTING: THIRD SERIES.
(a) Notwithstanding the provisions of Section 3.1, if on December 31,
2001 or December 31, 2004 the Conditions are satisfied, then and in that event
Options with respect to five hundred twenty eight (528) Unexercised Shares
(which number equals approximately one percent (1.0%) of the number of shares of
the Company's Common Stock issued and outstanding as of the date hereof) shall
vest and become exercisable as of the first such December 31 on which the
Conditions are satisfied.
(b) Notwithstanding the provisions of Section 3.1 and paragraph (a) of
this Section 3.4, if on December 31 of any year from 1997 to and including 2000
the Conditions are satisfied and, in addition, (i) the Net Sales Revenue of the
Company for the year then ending exceeds $800 million and (ii) the Company's
annual Pre-Tax Income was not less than ten percent (10%) of its Net Sales
Revenue for both the year then ending and the entire preceding year, then and in
that event Options with respect to twenty-five percent (25%) of the Unexercised
Shares referred to in paragraph (a) of this Section 3.4, or two hundred
sixty-four (264) Unexercised Shares, shall accelerate and shall vest and become
exercisable as of the first such December 31 on which all the aforementioned
conditions are satisfied.
(c) Notwithstanding the provisions of Section 3.1 and paragraph (a) of
this Section 3.4, if on December 31 of any year from 1997 to and including 2000
all the conditions set forth in paragraph (a) of this Section 3.4 are satisfied
and, in addition, (i) the Net International Sales Revenue of the Company for the
year ending exceeds $60 million and (ii) the Company's annual International
Pre-Tax Income for such year was not less than the greater of (A) $3 million or
(B) five percent (5%) of its Net International Sales Revenue, then and in that
event Options with respect to twenty-five percent (25%) of the Unexercised
Shares referred to in paragraph (a) of this Section 3.4, or two hundred
sixty-four (264) Unexercised Shares, shall accelerate and shall vest and become
exercisable as of the first such December 31 on which all the aforementioned
conditions are satisfied.
SECTION 3.5. ACCELERATION OF VESTING: FOURTH SERIES.
(a) Notwithstanding the provisions of Section 3.1, if on December 31 of
any year from 1997 to and including 2004 the Conditions are satisfied, the
conditions set forth in Section 3.4(c) are satisfied and, in addition then and
in that event Options with respect six hundred sixty (660) Unexercised Shares
(which number equals approximately one and one quarter percent (1.25%) of the
number of shares of the Company's Common Stock issued and outstanding as of the
date hereof) shall vest and become exercisable as of the first such December 31
on which all the aforementioned conditions are satisfied.
(b) Notwithstanding the provisions of Section 3.1, if on December 31 of
any year from 1997 to and including 2002 the Conditions are satisfied, the
conditions set forth in Section 3.4(c) are satisfied and, in addition, (i) the
Net Sales Revenue of the Company for the year then ending
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exceeds $1 billion and (ii) the Company's annual Pre-Tax Income was not less
than ten percent (10%) of its Net Sales Revenue for both the year then ending
and the entire preceding year, then and in that event Options with respect to
forty percent (40%) of the Unexercised Shares referred to in paragraph (a) of
this Section 3.5, or two hundred sixty-four (264) Unexercised Shares, shall
accelerate and shall vest and become exercisable as of the first such December
31 on which all the aforementioned conditions are satisfied.
(c) Notwithstanding the provisions of paragraph (a) of this Section
3.5, if on December 31 of any year from 1997 to and including 2002 the
Conditions are satisfied, the conditions set forth in paragraph (a) of Section
3.4(c) are satisfied and, in addition, (i) the Net Sales Revenue of the Company
for the year then ending exceeds $1.25 billion and (ii) the Company's annual
Pre-Tax Income was not less than ten percent (10%) of its Net Sales Revenue for
both the year then ending and the entire preceding year, then and in that event
Options with respect to two hundred sixty-four (264) Unexercised Shares (which
number equals approximately one half of one percent (0.5%) of the number of
shares of the Company's Common Stock issued and outstanding as of the date
hereof) shall vest and become exercisable as of the first such December 31 on
which all the aforementioned conditions are satisfied.
(d) Notwithstanding the provisions of Section 3.1, if on December 31 of
any year from 1997 to and including 2004 the Conditions are satisfied and, in
addition, (i) at least thirty-one percent (31%) of the full-time United States
employees of the Company holding the position of Vice President or a higher
level position are female or Minority Group Members and (ii) at least
forty-three percent (43%) of the most highly compensated five percent (5%) of
all full-time United States employees of the Company (as measured by projected
total income for such year) are female or Minority Group Members, then and in
that event Options with respect to one hundred thirty-two (132) Unexercised
Shares (which number equals approximately one quarter of one percent (0.25%) of
the number of shares of the Company's Common Stock issued and outstanding as of
the date hereof) shall vest and become exercisable as of the first such December
31 on which all the aforementioned conditions are satisfied.
SECTION 3.6. SATISFACTION OF CONDITIONS.
(a) Notwithstanding anything to the contrary contained in this Article
III, in the event that any of the Conditions set forth in Section 3.2, or any of
the conditions with respect to Net Sales Revenue or Pre-Tax Income set forth in
paragraph (b) of Section 3.3, Section 3.4 or Section 3.5, is not satisfied on
December 31 of any year from 1997 through 2002 by reason of the fact that the
Company took or omitted to take an action for the purpose of preventing or
delaying the accelerated vesting of Options on such December 31 or by reason of
the fact that the Company willfully engaged in one or more transactions for the
direct benefit of any of the holders of the Class B Stock or any affiliate
thereof, which transaction was not on an arms-length basis, commercially
reasonable and in the ordinary course of business or consistent with the
Company's past practice, then and in that event such Condition or condition
shall nevertheless be deemed satisfied as of such December 31 for all purposes
of this Agreement.
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(b) Notwithstanding anything to the contrary contained in this Article
III, in the event that the Condition set forth in Section 3.2(a) is not
satisfied on December 31 of any year from 1997 through 2002 by reason of the
fact that the Company demoted Dan to a position lower than that of a Key Senior
Executive at the Company's initiative and without a bona fide business reason to
do so, then and in that event such Condition shall nevertheless be deemed
satisfied as of such December 31 for all purposes of this Agreement. As used
herein, a "bona fide business reason shall include but not be limited to
material deficiencies in Dan's performance of his duties, and actions or
omissions by Dan that would constitute grounds for Dismissal For Cause.
(c) Notwithstanding anything to the contrary contained in this Article
III, (i) in the event that the Condition set forth in Section 3.2(c) is not
satisfied on December 31 of any year from 1997 through 2002 by reason of the
fact that, during the year ending on such December 31, the Company, over Dan's
protest, removed a qualified female executive from a position reporting directly
to Dan or, during the final three (3) months of the preceding year, the Company,
over Dan's protest, refused to allow the appointment of a qualified female to
such position, or (ii) in the event that either of the additional conditions set
forth in clauses (i) and (ii) of Section 3.4(c) is not satisfied on December 31
of any year from 1997 through 2000, or either of the additional conditions set
forth in clauses (i) and (ii) of Section 3.5(d) is not satisfied on December 31
of any year from 1997 through 2002, by reason of the fact that, during the year
ending on such December 31, the Company, over Dan's protest, removed a qualified
female or Minority Group Member from a position of Vice President or a higher
level position or, during the final three (3) months of the preceding year, the
Company, over Dan's protest, refused to allow the appointment of a qualified
female or Minority Group Member to such position, then and in that event such
Condition or condition shall nevertheless be deemed satisfied as of such
December 31 for all purposes of this Agreement. As used herein, a "qualified
female or Minority Group Member shall mean a female or a Minority Group Member
reasonably qualified to perform the duties and discharge the responsibilities of
such position based on her or his abilities, experience and past performance.
ARTICLE IV
EXERCISE OF OPTIONS
SECTION 4.1. EXERCISE OF OPTIONS.
Dan may exercise a vested Option by giving the Company written notice
of exercise specifying the number of Unexercised Shares to be acquired together
with payment of the full Option Price for such Unexercised Shares. Dan may
exercise fewer than all the Options which are then exercisable, but Dan may not
exercise a partial Option for less than a full Unexercised Share. Dan may pay
the Option Price for Unexercised Shares to be acquired:
(a) by delivering to the Company United States dollars in cash
or by check,
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bank draft or wire transfer payable to the order of the Company;
(b) by transferring and delivering to the Company shares of
Class A Stock (to the extent their transfer is not otherwise restricted) having
an aggregate Fair Market Value as of the date of exercise equal to the aggregate
Option Price to be paid; provided that if Dan originally acquired such shares of
Class A Stock pursuant to this Agreement or the Share Purchase Agreement, he may
use such shares to pay the Option Price for Unexercised Shares only if he has
then owned and been entitled to sell such shares of Class A Stock (subject only
to limitations set forth in such Agreements as to the maximum aggregate number
of such shares saleable in any single calendar year and to pre-conditions to
sale set forth in such Agreements as to the market capitalization of the
Company) for at least six (6) months; or
(c) by any combination of the above methods of payment.
Upon receipt of payment for such Unexercised Shares, the Company shall
duly issue such Unexercised Shares to Dan (whereupon such Unexercised Shares
shall become Option Shares), and the Company shall deliver to Dan stock
certificates representing such Option Shares and bearing the legends
contemplated in Section 13.1.
SECTION 4.2. WITHHOLDING TAXES.
The Company may, in its discretion, require Dan to pay to the Company
upon the exercise of any Option the amount that the Company reasonably deems to
be the minimum amount of tax that the Company is required by federal, state or
local statute to withhold (including FICA) in connection with such exercise,
using the method of calculating tax withholdings that results in the least
amount withheld. Dan may pay the amount of his withholding tax liability by
using any of the methods set forth in Section 4.1. In addition, he may pay up to
the minimum amount of such required tax withholdings (but no more than such
minimum amount):
(a) by transferring and delivering to the Company shares of Class A
Stock (to the extent their transfer is not otherwise restricted) having an
aggregate Fair Market Value as of the date of exercise equal to the amount of
such minimum required tax withholdings, regardless of how long Dan has then
owned or been entitled to sell such shares of Class A Stock or how he acquired
such shares of Class A Stock;
(b) with the prior approval of the Board of Directors, by authorizing
the Company in writing to deduct and retain, from the Unexercised Shares
otherwise to be issued to Dan, Unexercised Shares having an aggregate Fair
Market Value as of the date of exercise equal to such minimum amount of required
tax withholdings; or
(c) by any combination of the above methods of payment.
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SECTION 4.3. DETERMINATION OF FAIR MARKET VALUE.
In the event that, at a time when the Company is privately held and
there is no public market for the Class A Stock, Dan elects to pay the Option
Price for any Unexercised Shares or to pay his withholding tax liability thereon
by transferring and delivering shares of Class A Stock to the Company, or to pay
such withholding tax liability by authorizing the Company to deduct and retain
Unexercised Shares, he shall so advise the Company in his notice of exercise and
the parties shall promptly determine the Fair Market Value of such shares of
Class A Stock pursuant to the procedure set forth in Section 6.7(b).
SECTION 4.4. NON-TRANSFERABILITY OF OPTIONS.
Each vested Option shall be exercisable only by Dan or, in the event of
Dan's death or incapacity, by the representative of Dan duly authorized pursuant
to Section 4.4. No Option or any rights thereunder shall be transferable other
than by will, by the laws of descent and distribution, or for tax withholding
purposes pursuant to Section 4.2, or be subject to attachment, execution or
other similar process. Any attempt by Dan to alienate, assign, pledge,
hypothecate or otherwise dispose of an Option or any right thereunder, except as
provided for herein, and any levy or attachment, execution or similar process
upon the rights or interest conferred under any Option, shall be null and void.
SECTION 4.5. DAN'S REPRESENTATIVE.
Promptly following execution of this Agreement, Dan shall give the
Company written notice designating one or more representatives who shall be
entitled, following Dan's death or incapacity, to exercise his rights under this
Agreement. Dan may, from time to time, revoke or change his designation of
representatives, without the consent of any prior representative, by giving the
Company notice of revocation or change. The last notice duly given to the
Company prior to Dan's death or incapacity shall be controlling. If, at the time
of his death or incapacity, Dan has not properly designated a representative or
if the designated representative does not survive such event, then the following
persons or entity, in the following order, shall be deemed Dan's representative
hereunder: (a) Dan's surviving spouse; (b) if there is no surviving spouse, then
Dan's children, per stirpes; (c) if there are no children, then Dan's estate.
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ARTICLE V
EXPIRATION OF OPTIONS
SECTION 5.1. EXPIRATION OF OPTIONS.
Except as provided otherwise in this Article V, every vested but
unexercised Option shall expire and all rights thereunder shall be extinguished
upon the expiration of the later of (a) five (5) years after the date on which
such Option vested or (b) eighteen (18) months after the date on which the
Company makes an initial public offering of shares of the Class A Stock (unless
such Option has already expired by the date of such offering); provided that all
unexercised Options shall expire and be extinguished no later than the close of
business on December 31, 2008.
SECTION 5.2. EXPIRATION UPON DEATH, PERMANENT DISABILITY, DISMISSAL
WITHOUT CAUSE OR RESIGNATION FOR GOOD REASON.
In the event Dan's employment with the Company terminates as a result
of his death, Permanent Disability, Dismissal Without Cause or Resignation For
Good Reason, then and in that event:
(a) Every vested but unexercised Option shall remain exercisable for
one (1) year from the date of such termination of employment. Upon the
expiration of such 1-year period, any such Options that have not then been
exercised shall expire and all rights thereunder shall be extinguished.
(b) On the date of such termination of Dan's employment, such number of
unvested Options shall vest and become exercisable as shall equal the number of
Options that, but for such termination of employment, would have vested within
twenty-four (24) months after the date of such termination assuming the
Conditions were satisfied at all times during such 24-month period, multiplied
by a fraction the numerator of which shall equal the number of full months that,
on the date of such termination, have elapsed since the nearest preceding
December 31 on which Options vested under paragraph (a) of Section 3.2, Section
3.3, Section 3.4 or Section 3.5, as the case may be (or could have vested under
such paragraphs if the Conditions had been satisfied on such preceding December
31), and the denominator of which shall be twenty-four (24). (A hypothetical
illustration of the calculation of such number of Options is set forth on
Schedule 5.2(b) hereto.) All Options which vest pursuant to this paragraph (b)
shall remain exercisable for one (1) year from the date of such termination of
Dan's employment. Upon the expiration of such 1-year period, any such Options
that have not then been exercised shall expire and all rights thereunder shall
be extinguished.
(c) Every Option which neither vested prior to such termination of
Dan's employment nor vests pursuant to paragraph (b) of this Section 5.2 shall
expire and all rights thereunder shall be extinguished as of the date of such
termination of employment.
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SECTION 5.3. EXPIRATION UPON VOLUNTARY RESIGNATION, DISMISSAL FOR
CAUSE OR COMPETITION.
In the event that Dan's employment with the Company terminates as a
result of his Voluntary Resignation or Dismissal For Cause, or in the event that
Dan materially breaches any of the provisions of Section 2.2 or Section 2.3,
then and in that event all unvested Options and all vested Options that have not
yet been duly exercised shall expire and all rights thereunder shall be
extinguished as of the earlier of the date of such termination of employment or
the date of such breach of Section 2.2 or Section 2.3. In the event that Dan
exercises any Option at a time when he has breached any of the provisions of
Section 2.2 or Section 2.3, such purported exercise shall be null and void, and
Dan shall return to the Company immediately upon demand any and all stock
certificates representing Option Shares issued to him upon exercise of such
Option, in exchange for which the Company shall return to Dan any consideration
he paid for such Option Shares.
SECTION 5.4. CHANGE IN CONTROL.
Notwithstanding anything to the contrary contained in Article III or
this Article V, in the event that there is a Change in Control and, in
connection therewith or subsequently, Dan's employment with the Company
terminates as a result of his Dismissal Without Cause or Resignation For Good
Reason, then and in that event:
(a) Every vested but unexercised Option shall remain exercisable in
accordance with the provisions of Section 5.1 as if Dan's employment had not so
terminated.
(b) Every unvested Option shall vest in accordance with the provisions
of Article III except that the requirement that Dan be a Key Senior Executive on
December 31, 2003 and any requirement that the Conditions or the conditions set
forth in Section 3.4(c) or Section 3.5(d) be satisfied on any December 31 shall
be deemed eliminated from this Agreement as conditions to vesting, and such
unvested Options shall vest in accordance with the provisions of Article III as
if Dan's employment as a Key Senior Executive had not so terminated and as if
the Conditions and the conditions set forth in Section 3.4(c) and Section 3.5(d)
were fully satisfied at all times through December 31, 2003; provided, however,
that in the event of Dan's death following such termination of employment,
Options then unvested shall vest and become exercisable in accordance with the
provisions of Section 5.2(b) as if Dan had been employed as a Key Senior
Executive on the date of his death.
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ARTICLE VI
TRANSFERABILITY OF SHARES AT TIME WHEN
COMPANY IS PRIVATELY HELD AND THERE IS NOT PUBLIC MARKET
SECTION 6.1. GENERAL RESTRICTION ON TRANSFER.
(a) At any time when the Company is privately held and there is no
public market for the Class A Stock, Dan shall not, voluntarily or
involuntarily, by operation of law or otherwise, sell, mortgage, pledge,
hypothecate, assign as a security, grant or permit to exist or continue a
security interest in, or in any way transfer by gift, will, trust or intestate
succession any of the Option Shares, except to a Permitted Transferee as
provided in Section 13.2(a) or except as specifically provided in this Article
VI. Any attempt by Dan to do any of the aforementioned acts or otherwise to
alienate or dispose of any Option Shares, except in accordance with this
Agreement, shall be null and void.
(b) Notwithstanding anything to the contrary contained in this Article
VI, Dan shall not have the right to require the Company to purchase any Option
Shares hereunder unless and until Dan has owned and been entitled to sell such
Option Shares (subject only to limitations set forth in this Agreement as to the
maximum aggregate number of such shares saleable in any single calendar year and
to pre-conditions to sale set forth in this Agreement as to the market
capitalization of the Company) for at least six (6) months prior to such
purchase, and the Company shall have the right, in purchasing Option Shares from
Dan hereunder, to defer the purchase of any such Option Shares until such time
as Dan has so owned and been entitled to sell them for six (6) months.
SECTION 6.2. SALE TO SATISFY INCOME TAX LIABILITIES.
Subject to the provisions of Section 6.1(b), but notwithstanding the
limitations set forth in any other Section of this Article VI, Dan shall have
the right, exercisable upon notice to the Company given no later than twelve
(12) months after the exercise of any Option, to require the Company to purchase
a number of Option Shares (and/or, to the extent their sale is not otherwise
restricted, Restricted Shares) at the price provided in Section 6.7, such that
the proceeds of such purchase shall equal the amount, if any, of Dan's
additional income tax liability (federal, state and local) actually occasioned
as a result of the exercise of such Option. Such notice shall include a written
certification of such amount by Dan's tax accountant. Any shares of Class A
Stock sold under this Section 6.2 shall be taken into account when calculating
the aggregate number of shares of Class A Stock that Dan shall be entitled to
sell in any single calendar year under any other Section of this Article VI, it
being the intent of the parties that shares of Class A Stock sold under this
Section 6.2 shall be included in, and shall not be in addition to, such
aggregate number of shares permitted to be sold in any single calendar year
under any such other Section of this Article VI.
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SECTION 6.3. SALE AFTER DECEMBER 31, 2003.
Subject to the provisions of Section 6.1(b), during each and any
calendar year beginning with the calendar year 2004, Dan shall have the right,
exercisable upon notice to the Company given during the first three (3) months
of such calendar year, to require the Company to purchase up to five hundred
twenty-eight (528) shares of his Class A Stock (which number of shares equals
approximately one percent (1%) of the number of shares of the Company's Common
Stock issued and outstanding as of the date hereof), including both Option
Shares and Restricted Shares, at the price provided in Section 6.7(a).
SECTION 6.4. SALE AFTER DEATH OR PERMANENT DISABILITY.
Subject to the provisions of Section 6.1(b), in the event that Dan's
employment with the Company terminates as a result of his death or the Company
terminates his employment by reason of his Permanent Disability (whether before
or after December 31, 2003), then and in that event, notwithstanding the
provisions of Section 6.2 and Section 6.3, the parties shall have the following
rights:
(a) Rights of Dan to Sell. Dan or his representative and/or successors
in interest shall have the right, exercisable upon notice to the Company given
no later than one hundred eighty (180) days after such termination of employment
occurs, or during the first three (3) months of any succeeding calendar year, to
require the Company to purchase any or all of the Option Shares then owned by
Dan or his successors in interest, at the price provided in Section 6.7(a).
(b) Rights of Company to Purchase. The Company shall have the right,
exercisable upon notice to Dan or his representative and/or successors in
interest given during the first three (3) months of the third calendar year
after the year in which such termination of employment occurs and/or during the
first three (3) months of any succeeding calendar year, to require Dan or his
representative and/or successors in interest to sell to the Company any or all
of the Option Shares then owned by Dan or any successor in interest, at the
price provided in Section 6.7(a).
SECTION 6.5. SALE AFTER DISMISSAL WITHOUT CAUSE OR RESIGNATION FOR
GOOD REASON.
Subject to the provisions of Section 6.1(b), in the event that Dan's
employment with the Company terminates as a result of his Dismissal Without
Cause or Resignation For Good Reason, then and in that event the parties shall
have the following rights:
(a) Rights of Dan to Sell. In addition to his rights under Section 6.3
with respect to sales after December 31, 2003, Dan shall also have the right
prior to December 31, 2003, exercisable upon notice to the Company given during
the first three (3) months of the calendar year after which such Dismissal
Without Cause or Resignation For Good Reason occurs and/or during the first
three (3) months of any succeeding calendar year, to require the Company to
purchase up to
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five hundred twenty-eight (528) of his Option Shares (which number of shares
equals approximately one percent (1%) of the number of shares of the Company's
Common Stock issued and outstanding as of the date hereof), at the price
provided in Section 6.7(a).
(b) Rights of Company to Purchase. The Company shall have the right,
exercisable upon notice to Dan given during the first three (3) months of the
third calendar year after the year in which such Dismissal Without Cause or
Resignation For Good Reason occurs and/or during the first three (3) months of
any succeeding calendar year, to require Dan to sell to the Company any or all
of the Option Shares then owned by Dan, at the price provided in Section 6.7(a).
The death or Permanent Disability of Dan occurring subsequent to his Dismissal
Without Cause or Resignation For Good Reason shall not modify or affect the
rights and obligations of the parties as set forth in this Section 6.5.
SECTION 6.6. SALE AFTER VOLUNTARY RESIGNATION, DISMISSAL FOR CAUSE,
OR COMPETITION.
Subject to the provisions of Section 6.1(b), in the event that (a)
Dan's employment with the Company terminates as a result of his Voluntary
Resignation or Dismissal For Cause or (b) Dan materially breaches any of the
provisions of Section 2.2 or Section 2.3 (whether before or after the
termination of his employment for any reason) and, if the Company has given him
notice to cure, fails to cure such breach on a timely basis, then and in that
event, in addition to any rights that Dan has under Section 6.2 and Section 6.3,
the Company shall have the right, exercisable upon notice to Dan given at any
time or times after such event occurs (whether before or after December 31,
2003), to require Dan to sell to the Company any or all of the Option Shares
then owned by Dan, at the price provided in Section 6.7(a). The death or
Permanent Disability of Dan occurring subsequent to his Voluntary Resignation,
Dismissal For Cause or material breach of any of the provisions of Section 2.2
or Section 2.3 shall not modify or affect the rights and obligations of the
parties as set forth in this Section 6.6.
SECTION 6.7. PURCHASE PRICE OF OPTION SHARES.
(a) Price to be Paid for Option Shares.
(i) The purchase price for any Option Shares to be purchased
pursuant to this Article VI shall be the Fair Market Value of such Option
Shares.
(b) Determination of Fair Market Value.
(i) Within the sixty (60) days after Dan has given the Company
notice of intent to sell Option Shares or the Company has given Dan notice of
intent to purchase Option Shares pursuant to this Article VI, the Company and
Dan shall negotiate in good faith in an effort to reach mutual agreement as to
the Fair Market Value of such Option Shares. If the Company and Dan are unable
to reach agreement as to the Fair Market Value of such Option Shares within
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such 60-day period, the Fair Market Value of such Option Shares shall be
determined by an appraisal process as follows. Each of the Company and Dan shall
designate, within thirty (30) days after the conclusion of the 60-day
negotiation period referred to above, an independent and experienced appraiser
familiar with the business in which the Company is then engaged (each
individually an "Appraiser" and collectively the "Appraisers"). The Appraisers
shall be instructed to complete their respective determinations of the Fair
Market Value of such Option Shares and deliver their written reports on such
determinations no later than sixty (60) days after both of such Appraisers have
been appointed. If the determination of one of the Appraisers does not exceed
the determination of the other Appraiser by more than fifteen percent (15%) of
the lower of the two determinations, the Fair Market Value of such Option Shares
shall be equal to the average of the two determinations. If the higher
determination exceeds the lower determination by more than fifteen percent (15%)
of the lower determination, then the two Appraisers shall jointly appoint a
third, independent and similarly experienced Appraiser within fifteen (15) days
after both of such two Appraisers have delivered their reports. Such third
Appraiser shall deliver his report on his determination of the Fair Market Value
of such Option Shares within sixty (60) days after his appointment, and his
determination of Fair Market Value shall be conclusive and binding on the
parties for all purposes hereof. The cost of all such appraisals shall be borne
one-half by the Company and one-half by Dan.
(c) Payment of Purchase Price.
(i) Lump Sum or Installments. The purchase price for Option
Shares shall be paid by the Company in full at the closing or, at the election
of the Company, in equal annual installments, together with interest payable
quarterly at the rate of interest announced publicly on the first day of each
calendar quarter by a major United States money market bank, selected by the
Company, as such bank's base rate, over a number of years to be determined by
the Company but in no event exceeding five (5) years if the purchase is pursuant
to Section 6.3 or Section 6.5, or ten (10) years if the purchase is pursuant to
Section 6.4 or Section 6.6; provided, however, that the purchase price for any
Option Shares purchased by the Company pursuant to Section 6.2 shall be paid in
full at the closing.
(ii) Initial Installment. In the event the Company elects to
pay for Option Shares hereunder on an installment basis, all annual installments
shall be equal in principal amount except as follows:
(A) The initial installment for any such sale of
Option Shares, other than a sale occurring by reason of Dan's death, Dismissal
For Cause or breach of any of the provisions of Section 2.2 or Section 2.3,
shall be not less than the amount, if any, of Dan's additional income tax
liability (federal, state and local) actually occasioned as a result of such
sale, provided that such amount shall have been certified to the Company in
writing by Dan's tax accountant.
(B) The initial installment for the first sale of
shares of Class A Stock that Dan makes under this Agreement or the Stockholders'
Agreement, other than a sale occurring by
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reason of Dan's death, Dismissal For Cause or breach of any of the provisions of
Section 2.2 or Section 2.3, shall be at least (1) the amount due under clause
(A) above plus the amount of one million dollars ($1,000,000) or (2) if less,
the total purchase price for such Option Shares.
(C) The initial installment for any sale of Option
Shares occurring by reason of Dan's death shall be not less than the amount of
the estate and succession tax liability (federal and state) occasioned as a
result of the inclusion of the Option Shares in Dan's estate (giving effect to
any deferral permitted by law or regulation in the payment thereof) together
with any and all costs and expenses of administration of Dan's estate as
reasonably estimated by Dan's representative, all as certified to the Company in
writing by Dan's representative.
(iii) Cash Flow Limitations. Notwithstanding any other
provision of this Article VI, in the event that the amount due from the Company
in payment for Option Shares purchased hereunder (including both principal and
interest) in any one fiscal year of the Company (other than a purchase occurring
by reason of Dan's death) exceeds fifty percent (50%) of the Company's Free Cash
Flow for the preceding year, then and in that event the Company in its sole
discretion may elect to defer payment of any portion of such principal and/or
interest to the extent that payment would require the Company to pay more than
fifty percent (50%) of its Free Cash Flow for such preceding year, provided that
any such deferred amounts shall continue to earn interest as described in
Section 6.7 (c)(i) until paid; and provided further that in any event all
principal and interest shall be paid in full no later than five (5) years or ten
(10) years, as the case may be, after the date of the closing. If, in the same
fiscal year, the Company is also required to pay any persons or entities other
than Dan for shares of Class A Stock that such persons or entities originally
acquired from other stockholders of the Company as of the date hereof or
pursuant to options granted by the Company and/or is required to make payment to
Dan and/or any other persons under any comparable long-term senior executive
compensation plan in effect from time to time, the amounts due to such other
persons or entities in such fiscal year shall be aggregated with the amount due
with respect to the Option Shares in such fiscal year and, if the aggregate
amount due exceeds fifty percent (50%) of the Company's Free Cash Flow for the
preceding fiscal year, then and in that event the Company in its sole discretion
may elect to defer payment of any portion of such aggregate amount (principal
and/or interest) to the extent that it would exceed fifty (50%) of the Company's
Free Cash Flow for the preceding year, and payments and deferments shall be
effected among Dan and such other persons in proportion to the amounts (both
principal and interest) then due and owing to each, subject to any provisions in
such plans as to priority of payment.
(d) Closing of Transaction. The closing of any purchase of Option
Shares hereunder shall be held no later than ninety (90) days after the final
determination of the Fair Market Value of such Option Shares, at such time and
place as the Company may reasonably designate. At the closing, Dan shall deliver
or cause to be delivered to the Company the stock certificates representing such
Option Shares, duly endorsed for transfer in blank or with duly executed stock
powers attached, and with signature guaranteed, in exchange for which the
Company shall deliver to Dan the amount of the purchase price then due, together
with the Company's
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promissory note evidencing the Company's obligation to pay the balance, if any,
of the purchase price in accordance with the terms of Section 6.7(c). All
payments to Dan hereunder shall be made in cash or by Company check, bank draft
or wire transfer.
SECTION 6.8. ASSIGNMENT AND DELEGATION BY THE COMPANY TO CLASS B
STOCKHOLDERS.
The Company shall have the right, exercisable upon notice to Dan, to
assign any or all of its rights and/or delegate any or all of its obligations
under this Article VI to the holders of the Class B Stock, in proportion to
their respective ownership interests or as they may otherwise unanimously agree,
provided that the Company shall not be relieved of its obligation to purchase
from Dan in accordance herewith any Option Shares duly tendered and not
purchased and paid for by such holders of Class B Stock.
SECTION 6.9. TAG-ALONG RIGHTS -- DRAG-ALONG RIGHTS.
(a) In the event the Controlling Stockholders of the Company determine
to dispose of all or a portion of their shares of Common Stock, with the result
that they will no longer control the Company, then and in that event the Company
shall give Dan a notice (a "Tag-Along Notice") of such proposed sale (a
"Tag-Along Sale") and the material terms of the Tag-Along Sale (the "Material
Terms") no later than thirty (30) days prior to the consummation of the
Tag-Along Sale. If, within twenty (20) days after a Tag-Along Notice is given to
Dan (or within ten (10) days after any notice of a change in the Material Terms
is given to Dan), the Company receives from Dan a written request (a "Tag-Along
Request") to include in the Tag-Along Sale any of the Option Shares held by him,
such Option Shares (in the same proportion as the total number of shares of
Common Stock held by the Controlling Stockholders bears to the number of shares
being sold by the Controlling Stockholders) shall be included in the Tag-Along
Sale on the same terms and conditions and subject to the same obligations as the
sale by the Controlling Stockholders, taking into account the proportionate
ownership of the Controlling Stockholders and Dan. The Company shall give Dan
prompt notice of any change in the Material Terms and, in such event, Dan shall
have the opportunity, for a period of ten (10) days after such notice has been
given, to submit a Tag-Along Request if Dan did not previously submit a
Tag-Along Request or to withdraw or modify a Tag-Along Request previously made.
(b) Dan's rights hereunder to participate in a Tag-Along Sale shall be
contingent on Dan's compliance with each of the provisions hereof, Dan's
acceptance of a proportionate delegation of any duties or obligations related to
the Tag-Along Sale, including any indemnification obligations, and Dan's
execution of such documents in connection with the Tag-Along Sale as may be
reasonably requested by the Controlling Stockholders.
(c) In connection with any proposed sale of shares of Common Stock by
the Controlling Stockholders to a non-affiliated person or entity in an
arms-length transaction, if Dan has not exercised his rights to sell Option
Shares as contemplated under paragraph (a) of this Section 6.9,
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the Company shall have the right, exercisable upon notice to Dan, to require
that Dan sell to the purchaser of the shares of the Controlling Stockholders the
same proportion of Option Shares owned by Dan as are being sold by the
Controlling Stockholders, on the same terms and conditions and subject to the
same obligations including any indemnification obligations, as the sale by the
Controlling Stockholders, taking into account the proportionate ownership of the
Controlling Stockholders and Dan. Dan agrees that he will cooperate with the
Company and the Controlling Stockholders in taking all such actions, including
executing all such documentation, as the Company and /or the Controlling
Stockholders may reasonably request.
ARTICLE VII
TRANSFERABILITY OF SHARES AT TIME
COMPANY SHARES ARE PUBLICLY TRADED
SECTION 7.1. GENERAL RESTRICTION ON TRANSFER.
In the event that shares of the Class A Stock become listed on a
national securities exchange or quoted in the National Market List of NASDAQ,
then and in that event the provisions of Article VI shall cease to be operative,
and Dan shall not, voluntarily or involuntarily, by operation of law or
otherwise, sell, mortgage, pledge, hypothecate, assign as a security, grant or
permit to exist or continue a security interest in, or in any way transfer by
gift, will, trust or intestate succession any of the Option Shares, except to a
Permitted Transferee as provided in Section 12.2(a) or except as specifically
provided in this Article VII. Any attempt by Dan to do any of the aforementioned
acts or otherwise to alienate or dispose of any Option Shares, except in
accordance with this Agreement, shall be null and void.
SECTION 7.2. SALE TO SATISFY INCOME TAX LIABILITIES.
Notwithstanding the limitations set forth in any other Section of this
Article VII, Dan shall have the right, exercisable upon notice to the Company
given no later than twelve (12) months after the exercise of any Option, to sell
a number of Option Shares (and/or, to the extent their sale is not otherwise
restricted, Restricted Shares) on the public market, such that the proceeds of
such sale shall equal the amount, if any, of Dan's additional income tax
liability (federal, state and local) actually occasioned as a result of the
exercise of such Option. Such notice shall include a written certification of
such amount by Dan's tax accountant. Any shares of Class A Stock sold under this
Section 7.2 shall be taken into account when calculating the aggregate number of
shares of Class A Stock that Dan shall be entitled to sell in any single
calendar year under any other Section of this Article VII, it being the intent
of the parties that shares of Class A Stock sold under this Section 7.2 shall be
included in, and shall not be in addition to, such aggregate number of shares
permitted to be sold in any single calendar year under any such other Section of
this Article VII.
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SECTION 7.3. SALE ON OR BEFORE DECEMBER 31, 2003.
Except as otherwise provided in Section 7.5 and Section 7.6, from
January 1, 1998 through December 31, 2003, Dan shall have the right to sell
Option Shares on the public market, subject to the following conditions:
(a) Minimum Market Capitalization. Dan may not sell any Option Shares
under this Section 7.3 unless the market capitalization of the Company as of the
Business Day immediately preceding the date of sale is greater than three
hundred forty million dollars ($340,000,000). The market capitalization of the
Company shall be determined by multiplying the Fair Market Value of a share of
Class A Stock by the total number of shares of the Common Stock then issued and
outstanding.
(b) Maximum Number of Shares.
(i) the maximum number of shares of Class A Stock (including
both Option Shares and Restricted Shares) that Dan may sell in any single
calendar year shall be five hundred twenty-eight (528) shares of Class A Stock,
(which number of shares equals approximately one percent (1%) of the number of
shares of the Company's Common Stock issued and outstanding as of the date
hereof); and
(ii) the maximum number of Restricted Shares that may be
included in such shares of Class A Stock sold in any single calendar year shall
be the smaller of (A) the number of Restricted Shares whose Fair Market Value as
of the Business Day immediately preceding the date of sale does not exceed
$500,000 or (B) fifty-three (53) Restricted Shares (which number equals
approximately 1/10 of one percent (0.1%) of the number of shares of the
Company's Common Stock issued and outstanding as of the date hereof).
SECTION 7.4. SALE AFTER DECEMBER 31, 2003.
Except as otherwise provided in Section 7.5, after December 31, 2003,
Dan shall have the right to sell Option Shares on the public market, provided
only that the maximum number of shares of Class A Stock (including both Option
Shares and Restricted Shares) that Dan may sell in any single calendar year
shall be five hundred twenty-eight (528) shares of Class A Stock (which number
of shares equals approximately one percent (1%) of the number of shares of the
Company's Common Stock issued and outstanding as of the date hereof).
SECTION 7.5. SALE AFTER DEATH OR PERMANENT DISABILITY.
(a) Notwithstanding the provisions of Section 7.3, in the event that
Dan's employment terminates as a result of his death or the Company terminates
his employment by reason of his Permanent Disability, then and in that event (i)
the pre-condition to sales on or before December 31, 2003, which is set forth in
Section 7.3(a) with respect to the Company's minimum market
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capitalization, shall not apply, and Dan and/or his representative and/or his
successors in interest shall have the right to sell Option Shares pursuant to
Section 7.3 on or before December 31, 2003 irrespective of the market
capitalization of the Company; and (ii) the limitation set forth in Section
7.3(b)(ii) shall not apply and, instead, the maximum number of Restricted Shares
that may be included in the shares of Class A Stock sold in any calendar year by
Dan and/or his representative and/or successors in interest, as a group, shall
be three hundred ninety-six (396) Restricted Shares.
(b) Notwithstanding the provisions of Section 7.3, Section 7.4 and
Section 7.5(a)(ii), in the event that Dan's employment terminates as a result of
his death, Dan's representative and/or successors in interest shall have the
right to sell in any calendar year up to such number of shares of Class A Stock
(including both Option Shares and Restricted Shares) as shall equal the greater
of (i) the number of such shares that is permitted to be sold under Section 7.3
or Section 7.4, as applicable, or (ii) the number of such shares that is
necessary in order for the proceeds of such sale to equal the amount of the
estate and succession tax liability (federal and state), including any interest
thereon, due in such year as a result of the inclusion of such shares of Class A
Stock in Dan's estate (giving effect to any deferral permitted by law or
regulation in the payment thereof), together with any and all costs and expenses
of administration of Dan's estate for such year as reasonably estimated by Dan's
representative, all as certified to the Company in writing by Dan's
representative.
SECTION 7.6. TENDER, MERGER, CONSOLIDATION.
In the event the Controlling Stockholders of the Company determine to
dispose all or a portion of their shares of Common Stock in a tender, merger,
consolidation or similar type of transaction, with the result that they no
longer control the Company, then and in that event, Dan shall have the right,
but not the obligation, to dispose of a proportionate number of shares of his
Class A Stock in any such transaction.
SECTION 7.7. COMPLIANCE WITH SECURITIES LAWS.
Neither Dan nor his representative will sell or attempt to sell any
shares of Class A Stock under this Article VII except in accordance with all
applicable federal and state securities laws, all applicable rules and
regulations of the Securities and Exchange Commission, and any applicable
underwriters' limitations and restrictions.
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ARTICLE VIII
FUTURE CHANGES IN CAPITAL STRUCTURE AND REDEMPTION OF SHARES
SECTION 8.1. CHANGES IN CAPITAL STRUCTURE.
If the Company hereafter declares a dividend payable in, or subdivides
or combines, shares of the Class A Stock, or if the Company engages in a
recapitalization, reorganization, merger, consolidation, split-up, transfer of
assets, combination or exchange of shares of Common Stock, or if any other event
shall occur which in the judgment of the Board of Directors calls for action by
way of adjusting the terms of the unexercised Options hereunder or the number of
Option Shares, the Board of Directors shall forthwith take such action as in its
judgment shall be necessary or appropriate to preserve Dan's rights with respect
to such Options and Option Shares substantially proportionate to his rights
existing prior to such event, and to the extent that such action shall include
an increase or decrease in the number of Unexercised Shares hereunder, the
Option Price shall be adjusted inversely to the change in the number of
Unexercised Shares in order that the total amount payable by Dan upon exercise
of all the Options granted under this Agreement shall remain unchanged. The
decision of the Board of Directors with respect to any matter referred to in
this Section 8.1 shall be conclusive and binding upon Dan. Nothing in this
Agreement is intended to preserve Dan's equity interest in the Company against
dilution resulting from the issuance of securities by the Company in the future.
SECTION 8.2. REDEMPTION OF CLASS B STOCK.
If and when any shares of the Class B Stock owned by any member of the
Leeds Family are redeemed by the Company in accordance with the terms and
provisions of the Shareholders' Agreement, then, in order to ensure that Dan's
percentage interest in the Company will remain the same as his interest would
have been but for such redemption (the "Class B Stock Redemption"), the Company
shall, promptly following the Class B Stock Redemption, adjust the number of the
Unexercised Shares and, if Dan then owns any Option Shares, redeem at a price
equal to their par value (currently $.10 per share) a number of such Option
Shares such that the adjustment of the number of the Unexercised Shares (the
"Option Adjustment") and the redemption of Option Shares (the "Class A Stock
Redemption") shall result in (a) the ratio of (i) the sum of the number of
Unexercised Shares and the number of Option Shares outstanding immediately after
the Option Adjustment and the Class A Stock Redemption to (ii) the total number
of shares of Common Stock outstanding immediately after the Class A Stock
Redemption being the same as (b) the ratio of (i) the sum of the number of
Unexercised Shares and the number of Option Shares outstanding immediately prior
to the Class B Stock Redemption to (ii) the total number of shares of Common
Stock outstanding immediately prior to the Class B Stock Redemption. In such
event, the Option Price shall also be adjusted so that the total amount payable
upon exercise of all the Options granted under this Agreement shall remain
unchanged.
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ARTICLE IX
PROCEDURE TO BE FOLLOWED IN CASE OF
RESIGNATION FOR GOOD REASON OR DISMISSAL FOR CAUSE
SECTION 9.1. RESIGNATION FOR GOOD REASON.
In the event Dan terminates his employment with the Company as a
Resignation For Good Reason, Dan shall give the Company at least ten (10)
Business Days' prior written notice specifying in reasonable detail the specific
conduct of the Company that he considers grounds for Resignation For Good Reason
and the specific provision of the definition of "Resignation For Good Reason"
upon which he relies. Dan's employment with the Company shall terminate as of
the tenth Business Day after such notice is given, or such other date as the
parties mutually agree. Should the Company dispute the basis for such
resignation in a written notice given to Dan on or before his termination date,
the parties shall meet and endeavor to resolve the dispute amicably within the
twenty (20) Business Days after the Company's notice is given. If they cannot so
resolve the dispute within such twenty (20) Business Days after the Company's
notice is given, Dan and the Company shall submit the dispute to binding
arbitration in accordance with Section 10.1. The decision rendered in such
arbitration shall be final and binding on both Dan and the Company for all
purposes. If the arbitrators determine that Dan did not have a proper basis on
which to terminate his employment as Resignation For Good Reason within the
meaning of this Agreement, the termination of Dan's employment shall be treated
for all purposes of this Agreement as a Voluntary Resignation. In addition to
any other rights which a party may have, the party prevailing in such
arbitration proceeding shall be entitled to recover from the losing party any
and all of the expenses incurred by the prevailing party in such proceeding,
including reasonable attorney's fees.
SECTION 9.2. DISMISSAL FOR CAUSE.
In the event the Company terminates Dan's employment as a Dismissal For
Cause, the Company shall give Dan at least ten (10) Business Days' prior written
notice specifying in reasonable detail the specific conduct of Dan that it
considers grounds for Dismissal For Cause and the specific provision of the
definition of "Dismissal For Cause upon which it relies. Dan's employment with
the Company shall terminate as of the tenth Business Day after such notice is
given, or such other date as the parties mutually agree. Should Dan dispute the
basis for such termination in a written notice given to the Company on or before
his termination date, the parties shall meet and endeavor to resolve the dispute
amicably within twenty (20) Business Days after Dan's notice is given. If they
cannot so resolve the dispute within such twenty (20) Business Days after Dan's
notice is given, Dan and the Company shall submit the dispute to binding
arbitration in accordance with Section 10.1. The decision rendered in such
arbitration shall be final and binding on both Dan and the Company for all
purposes. If the arbitrators determine that the Company did not have a proper
basis on which to terminate Dan's employment as a Dismissal For Cause within the
meaning of this Agreement, the termination of
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<PAGE> 29
Dan's employment shall be treated for all purposes of this Agreement as a
Dismissal Without Cause. In addition to any other rights which a party may have,
the party prevailing in such arbitration proceeding shall be entitled to recover
from the losing party any and all of the expenses incurred by the prevailing
party in such proceeding, including reasonable attorney's fees.
ARTICLE X
RESOLUTION OF DISPUTES
SECTION 10.1. ARBITRATION.
Except as provided in Section 10.2, all controversies arising out of or
relating to this Agreement or the breach hereof shall be settled by arbitration
in the County of Nassau, State of New York, in accordance with the rules of the
American Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. Any
arbitration hereunder shall be before three (3) arbitrators.
SECTION 10.2. EQUITABLE RELIEF.
Notwithstanding the provisions of Section 10.1, any proceeding for
injunctive relief or specific performance in connection with this Agreement
shall be commenced in Supreme Court of the State of New York, County of Nassau,
and each of the parties hereby accepts the exclusive jurisdiction of such Court
for such purpose; provided, however, that the petitioner may commence such
proceeding in such other court as may be necessary, in the petitioner's
judgment, in order to more effectively or expeditiously obtain personal
jurisdiction over the respondent.
ARTICLE XI
REPRESENTATIONS AND WARRANTIES
SECTION 11.1. REPRESENTATIONS OF THE COMPANY.
The Company hereby represents and warrants to Dan that (a) it has full
legal right, power and authority to enter into this Agreement and to consummate
the transactions herein contemplated; (b) the execution and delivery of this
Agreement has been duly authorized by all necessary corporate action; (c) this
Agreement constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally and by general principles of equity; and
(d) neither this Agreement nor the
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<PAGE> 30
consummation of the transactions herein contemplated will conflict with, violate
or infringe any legal restriction, contract or instrument to which the Company
is subject or by which it is bound.
SECTION 11.2. REPRESENTATIONS OF DAN.
Dan hereby represents and warrants to the Company that (a) he has full
legal right, power and authority to enter into this Agreement and to consummate
the transactions herein contemplated; (b) this Agreement constitutes the valid
and binding obligation of Dan, enforceable in accordance with its terms, except
to the extent that such enforcement may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally and by general
principles of equity; and (c) neither this Agreement nor the consummation of the
transactions herein contemplated will conflict with, violate or infringe any
legal restriction, contract or instrument to which Dan is subject or by which he
is bound.
ARTICLE XII
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
"Affiliates" shall mean all entities controlling, controlled by or
under common control with the Company.
"Appraiser" or "Appraisers" shall have the meaning specified in Section
6.7(b).
"Board of Directors" shall mean the Board of Directors of the Company.
"Business Day" shall mean any day on which the Company is scheduled to
be open for business.
"Change in Control" shall mean a direct or indirect transfer of fifty
percent (50%) or more of the voting control of the Company or the sale of
substantially all of the assets of the Company, in one or more transactions, to
(a) one or more persons who are not (i) members of the Leeds Family or (ii)
spouses, children or grandchildren of members of the Leeds Family and/or (b) one
or more entities which are not controlled by (i) one or more members of the
Leeds Family or (ii) one or more of the spouses, children or grandchildren of
members of the Leeds Family.
"Class A Stock" shall mean the Class A Common Stock of the Company.
"Class A Stock Redemption" shall have the meaning specified in Section
8.2.
"Class B Stock" shall mean the Class B Common Stock of the Company.
30
<PAGE> 31
"Class B Stock Redemption" shall have the meaning specified in Section
8.2.
"Closing Price" shall mean the last-quoted price at which shares of
Class A Stock were traded at the close of business on a national securities
exchange or NASDAQ on any day on which shares of the Class A Stock were publicly
held.
"CMP Business" shall mean any publication, product, service or business
(a) which the CMP Group publishes, produces, provides or engages in or (b) which
the CMP Group has a bona fide plan or intention to publish, produce, provide or
engage in within the succeeding 12-month period, the research and development of
which the CMP Group has devoted substantive time and attention to, and which
plan or intention Dan has actual knowledge of before he engages in any activity
competitive with such CMP Business as contemplated by clause (A) of Section
2.3(a).
"CMP Group" shall mean the Company or any of its Affiliates.
"Common Stock" shall mean all the classes of the Common Stock of the
Company collectively.
"Conditions" shall have the meaning specified in Section 3.2.
"Controlling Stockholders" shall mean the members of the Leeds Family
who hold shares of capital stock of the Company collectively representing a
majority of the votes that may be cast on any matter on which stockholders of
the Company shall be entitled to vote.
"Direct Competitor" shall mean a business enterprise that produces or
operates, or owns directly or indirectly an interest of twenty percent (20%) or
more in, one or more Directly Competitive Businesses.
"Directly Competitive Business" shall mean any competitive publication,
product, service or business (a) the target audience of which is substantially
the same as the target audience of a CMP Business or (b) forty percent (40%) or
more of the annual revenue of which is derived from substantially the same
customers as a CMP Business derives twenty percent (20%) or more of its annual
revenue.
"Dismissal For Cause" shall mean the termination of Dan's employment
with the Company by the Board of Directors for (i) the willful and continued
failure of Dan substantially to perform his duties as an officer and employee of
the Company or comply with the written policies of the Company after the Company
has delivered to Dan a written demand for substantial performance or compliance
that specifies such failure in reasonable detail; (ii) illegal conduct or gross
misconduct by Dan, in either case that is willful and results (or is reasonably
likely to result) in material damage to the business or reputation of the
Company; or (iii) the resignation by Dan from his employment following his act
or omission which would constitute grounds for Dismissal For Cause hereunder. No
act or failure to act on the part of Dan (other
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<PAGE> 32
than non-compliance with lawful instructions given to Dan by the Company) shall
be considered "willful unless it is done or omitted to be done by him in bad
faith or without reasonable belief that his action or omission was in the best
interests of the Company. Any act or failure to act that is pursuant to
resolution duly adopted by the Board of Directors shall be conclusively presumed
to be done or omitted to be done by Dan in good faith and in the best interests
of the Company.
"Dismissal Without Cause" shall mean the termination of Dan's
employment by the Company on any grounds other than Dismissal For Cause or as a
result of his Permanent Disability.
"Fair Market Value" shall mean the fair market value of a share of
Class A Stock, which shall be the Closing Price on the trading day immediately
preceding the date of determination of fair market value or, if the Company is
privately held, the best estimate of the fair market value of a share of Class A
Stock as of the last day of the month immediately preceding the month in which
notice to buy or sell a share of Class A Stock or exercise an Option is given,
as determined with reference to publicly held companies comparable to the
Company.
"Financial Statements" shall mean the combined or consolidated
financial statements of the Company and its Affiliates prepared in accordance
with generally accepted accounting principles and audited by the Company's
independent certified public accountants.
"Free Cash Flow" of the Company with respect to any fiscal year shall
mean the combined or consolidated net income of the Company for such year as
reflected in the Financial Statements, adjusted so as (a) to exclude the amount,
if any, that, in determining such combined or consolidated net income,
represented (i) an expense for depreciation and/or amortization or (ii) a
provision or credit for federal, state, local or foreign income taxes; and (b)
to include the amount, if any, of cash payments that the Company actually made
in such fiscal year (i) for federal, state, local and foreign income taxes owed
by the Company (and, if the Company is an S Corporation, in distributions to its
stockholders for the payment of federal, state, local and foreign taxes owed by
such stockholders with respect to the Company's income), (ii) for capital
expenditures, (iii) pursuant to the Company's 1988 Equity Appreciation Plan or
(iv) as required under the terms of the Company's then-existing financing
arrangements to reduce the principal amount of indebtedness. The Company's
determination of Free Cash Flow shall be conclusive and binding for all purposes
of this Agreement provided that the Company's certified public accountants
render a written opinion that such determination presents fairly, in all
material respects, the Free Cash Flow of the Company as herein defined. (A
hypothetical illustration of the calculation of Free Cash Flow is set forth on
Schedule XI hereto.)
"Indirect Competitor" shall mean a business enterprise that does not
produce or operate, or own directly or indirectly an interest in, any Directly
Competitive Businesses but produces or operates, or owns directly or indirectly
an interest of twenty percent (20%) or more in, one or more Indirectly
Competitive Businesses.
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<PAGE> 33
"Indirectly Competitive Business" shall mean any competitive or
potentially competitive publication, product, service or business which derives
from twenty percent (20%) to but not including forty percent (40%) of its annual
revenue from substantially the same customers as a CMP Business derives twenty
percent (20%) or more of its annual revenue.
"Key Senior Executive" shall mean a Company employee holding a position
of responsibility no lower than that currently titled President of the Company.
"Leeds Family" shall mean Gerard G. Leeds, Liselotte J. Leeds, Dan,
Richard A. Leeds, Daniel H. Leeds, Greg Jobin-Leeds and Jennifer Leeds-Lukehart.
"Minority Group Members" shall mean individuals who are black, Native
American or of Hispanic, Asian or Pacific Island origin.
"Negative Pledge Agreement" shall mean that certain Negative Pledge
Agreement originally dated as of July 15, 1993 by and among Gerard G. Leeds,
Lilo J. Leeds and Fleet National Bank (f/k/a/ Shawmut Bank Connecticut, National
Association), as most recently amended and confirmed by Gerard G. Leeds, Lilo J.
Leeds, Daniel H. Leeds and Dan to Fleet National Bank and The Chase Manhattan
Bank on November 14, 1996.
"Net Sales Revenue" of the Company with respect to any fiscal year
shall mean the combined or consolidated net sales of the Company and its
Affiliates as reflected in the Financial Statements for such year.
"Option shall mean the right of Dan to purchase any Option Share
hereunder.
"Option Adjustment" shall have the meaning specified in Section 8.2.
"Option Price" shall mean the price at which Dan may purchase an Option
Share hereunder.
"Option Shares" shall mean the shares of Class A Stock issued to Dan
pursuant to this Agreement, plus any additional shares of Class A Stock that may
be issued from time to time with respect to such Option Shares as a result of
any changes in the Company's capital structure as contemplated in Section 8.1,
and less any Option Shares that may be canceled or redeemed from time to time as
a result of any such changes in the Company's capital structure or of any stock
redemptions as contemplated in Section 8.2.
"Permanent Disability" shall mean a physical or mental impairment, as a
result of which Dan shall have been unable, with or without reasonable
accommodation, to perform the essential functions of his employment position for
a period of at least sixteen (16) weeks during any 12-month period.
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<PAGE> 34
"Permitted Transferee" shall mean a spouse, child or grandchild of Dan,
or an entity (e.g., a trust, corporation or partnership) in which Dan has the
majority voting interest and of which the beneficiaries are a spouse and/or one
or more children or grandchildren of Dan.
"Pre-Tax Income" of the Company with respect to any fiscal year shall
mean the combined or consolidated net income of the Company and its Affiliates
as reflected in the Financial Statements for such year plus the sum of all
federal, state, local and foreign income taxes that were deducted in determining
such combined or consolidated net income.
"Resignation For Good Reason" shall mean Dan's resignation from his
employment with the Company after the Company has, without his consent, (i)
materially reduced his package of compensation and benefits, (ii) materially
diminished his position, authority, duties or responsibilities, or (iii)
required him to report regularly to an office located more than fifty (50) miles
from Manhasset, New York. Any reduction in Dan's compensation package made
pursuant to the written compensation plan between Dan and the Company dated as
of the date hereof shall not be deemed grounds for Resignation For Good Reason.
"Restricted Shares" shall mean the shares of Class A Stock owned by Dan
that are subject to restrictions under the Stockholders' Agreement.
"Share Purchase Agreement" shall mean that certain Share Purchase
Agreement entered into as of the date hereof by and among Gerard G. Leeds,
Liselotte J. Leeds and Dan.
"Shareholders' Agreement" shall mean that certain Shareholders'
Agreement entered into as of June 30, 1991 by and among the Company, certain of
the Affiliates and the members of the Leeds Family.
"Stockholders' Agreement" shall mean that certain Stockholders'
Agreement entered into as of the date hereof by and among the Company, Gerard G.
Leeds, Liselotte J. Leeds and Dan.
"Unexercised Shares" shall mean the authorized but unissued shares of
Class A Stock with respect to which Dan is granted an Option under this
Agreement but with respect to which such Option has not yet been exercised.
"Voluntary Resignation" shall mean Dan's resignation from his
employment with the Company on any grounds other than grounds for Resignation
For Good Reason or as a result of his Permanent Disability.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
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<PAGE> 35
SECTION 13.1. LEGEND ON CERTIFICATES.
Upon the execution of this Agreement, each certificate evidencing any
of the Option Shares held by Dan shall be endorsed as follows:
The shares of stock evidenced by this certificate are subject to the
restrictions of and are transferable only upon compliance with the provisions of
a certain Option Agreement entered into by and between Dan S. Leeds and the
Company. A copy of such Agreement is on file in the office of the Company.
In addition, all such certificates shall bear such other legends as, in
the opinion of the Company's counsel, are necessary or appropriate to ensure
compliance with all applicable federal and state securities laws.
SECTION 13.2. PERMITTED TRANSFEREES; REPRESENTATIVE AND SUCCESSORS
IN INTEREST.
(a) Permitted Transferees. Subject to Section 12.4 but notwithstanding
any other provision of this Agreement, Dan shall be permitted to sell, give or
bequeath all or any portion of the Option Shares or interest therein, or pass
such Option Shares or interest by means of intestate succession or otherwise,
either outright or in trust, to a Permitted Transferee, provided that such
transfer shall be implemented in a manner acceptable to legal counsel for the
Company. In case of any such transfer by Dan, each Permitted Transferee shall
receive and hold the transferred Option Shares subject to all the terms and
conditions of this Agreement, and there shall be no further transfer of such
Option Shares except by such Permitted Transferee to another Permitted
Transferee in accordance with the terms of this Agreement. Before Dan transfers
any Option Shares to a Permitted Transferee, and before any Permitted Transferee
transfers any Option Shares to another Permitted Transferee, Dan or the
transferring Permitted Transferee, as the case may be, shall give the Company
written notice of such intended transfer. Any Permitted Transferee shall, to the
extent of the Option Shares transferred, succeed to all the rights and
obligations of the transferor under this Agreement and shall become bound by all
the terms and conditions hereof; provided that, as a condition precedent to a
Permitted Transferee's exercising any rights under this Agreement and to the
Company's obligation to change its records to reflect the record ownership of
such Option Shares in the name of such Permitted Transferee, the Permitted
Transferee shall execute such documents and instruments as may reasonably be
required by legal counsel to the Company. Unless otherwise expressly provided in
this Agreement, any reference herein to a right or obligation of Dan to sell or
receive payment for any shares of Class A Stock shall be deemed to refer equally
to any Permitted Transferee, and any limitations herein with respect to the
number or category of shares of Class A Stock which Dan shall have a right or
obligation to sell in any calendar year shall apply to Dan and all Permitted
Transferees as a group.
(b) Representative and Successors in Interest. Except as may be
otherwise specifically provided in this Agreement, in the event of Dan's death
or incapacity his representative and/or
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<PAGE> 36
successors in interest shall succeed to all his rights and obligations under
this Agreement and be bound by all the terms and conditions hereof, and they
shall be entitled to exercise such rights, and shall be required to fulfill such
obligations, in the same manner and to the same extent that Dan would have been
so entitled or required but for his death or incapacity.
SECTION 13.3. FURTHER ASSURANCES.
Each of the parties hereto, upon request of another party, shall take
all such actions and execute and deliver all such further instruments of sale,
assignment, conveyance, transfer and exchange, and all such other documents and
agreements, as may be necessary or appropriate to assure, complete and evidence
the full and effective sale, assignment, transfer, conveyance and exchange of
the Option Shares as herein required and as may otherwise be necessary or
appropriate to comply with the terms and conditions of this Agreement. In the
event a party shall not take all such actions or execute or deliver all such
further instruments, then and in that event each such party hereby appoints the
Company such party's agent and attorney-in-fact for the purpose of executing and
delivering (a) any and all documents necessary to convey and/or exchange the
Option Shares pursuant to the provisions of this Agreement, any conveyance or
exchange so made fully divesting the party whose interest is so conveyed of all
right, title or equity in or to the Option Shares formerly owned by such party,
and (b) any and all other documents, instruments, agreements and other writings
necessary to effectuate the terms of this Agreement. The powers of attorney
herein granted, being coupled with an interest, are irrevocable and shall not be
revoked by the death, dissolution or incapacity of any party hereto or for any
other reason. Each party hereto hereby releases any other party who conveys or
exchanges the Option Shares formerly owned by such party as provided in this
Section 13.3 from any and all claims and liabilities for or resulting from the
conveying or exchanging of such Option Shares.
SECTION 13.4. S CORPORATION.
It is intended that for federal income tax purposes the Company will
continue to qualify as an "S Corporation" as defined in Section 1361 of the
Internal Revenue Code or any successor provision of the federal income tax laws.
Accordingly, the Company and Dan shall execute and keep in full force and effect
the consent described in Section 1362(a)(2) of the Internal Revenue Code or any
successor provision until such time as the Company and the Controlling
Stockholders determine not to continue to qualify the Company as an S
Corporation. In addition, notwithstanding the provisions of any other Section of
this Agreement, no transfer of any shares of Class A Stock shall be made to any
person or entity, nor shall Dan by action or inaction cause any circumstances to
exist, which would disqualify the Company as an S Corporation.
SECTION 13.5. CREDIT FACILITIES.
It is understood and acknowledged that one or more banks or lending
institutions of the Company may from time to time require, as a condition to
extending or continuing to extend
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<PAGE> 37
credit to the Company, that persons who are both stockholders and members of
management of the Company execute and deliver to such banks or lending
institutions certain assurances and agreements such as the Negative Pledge
Agreement. For as long as he is a Key Senior Executive, Dan shall, if requested
by the Company, promptly take all such actions and execute and deliver all such
documents containing such assurances and agreements (other than personal
guarantees) as may be reasonably required by such banks or lending institutions,
on the same basis and in substantially the same form and manner as other persons
who are both stockholders and members of management of the Company.
SECTION 13.6. ACCELERATED VESTING CHART.
For convenience of reference, a chart summarizing the accelerated
vesting provisions set forth in Article III of this Agreement is set forth on
Schedule 13.6 hereto.
SECTION 13.7. ENTIRE AGREEMENT; BINDING EFFECT.
This Agreement contains all of the terms agreed upon by the parties
with respect to the subject matter hereof and replaces and supersedes any and
all prior agreements, written or oral, between the parties relating to the
Option Shares (except for the Stockholders' Agreement to the extent its terms
are not inconsistent herewith). No promises, agreements or representations with
respect to the matters herein contained shall be binding upon any of the parties
unless set forth herein. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective heirs, representatives, successors
and permitted assigns.
SECTION 13.8. AMENDMENT.
No provision of this Agreement may be amended or waived except by a
writing making reference to this Agreement and signed by the party against whom
the enforcement of such amendment or waiver is sought.
SECTION 13.9. APPLICABLE LAW.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York, without reference to its
principles regarding choice or conflicts of law, and in accordance with and
consistent with the Company's election to be treated as an S Corporation.
SECTION 13.10 SEVERABILITY.
Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law and
the Company's S Corporation election, but if any provisions hereof shall be
prohibited by or invalid under any such law or the Company's S Corporation
election, such provision shall be ineffective to the extent of such prohibition
or
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<PAGE> 38
invalidity, without invalidating or nullifying the remainder of such provision
or any other provision of this Agreement.
SECTION 13.11. NO WAIVER.
No delay or omission by any party in exercising or enforcing any right
hereunder shall operate as a waiver of such right, and a waiver on one occasion
shall not be construed as a waiver of any right or remedy on any future
occasion.
SECTION 13.12. NOTICES.
All notices, requests, consents, designations and demands required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given (a) when personally delivered to Dan or to an
authorized officer of the Company, whether by messenger, courier or other
person, (b) on the second Business Day after the date it is sent by certified or
registered mail, return receipt requested, or (c) on the next Business Day after
the date it is sent via telefacsimile (provided it is actually received and is
not materially illegible), as follows:
If to the Company:
CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Attention: Co-Chairpersons
Fax: (516) 562-5718
with a copy to:
CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Attention: General Counsel
Fax: (516) 562-7123
If to Dan:
Dan S. Leeds
c/o CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Fax: (516)562-5718
with a copy to Dan at his last known address as reflected on the records of the
Company or to such other mail or facsimile address as the recipient party shall
have last designated by notice given to the other in accordance herewith.
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SECTION 13.13. ASSIGNMENT.
Except as expressly provided in this Agreement, no party may assign any
rights or delegate any obligations or liabilities hereunder without the prior
written consent of the other parties, except that the Company may assign any of
its rights and delegate any of its duties to an entity that controls, is
controlled by or is under common control with the Company; provided, however,
that no such assignment or delegation shall relieve the Company from its
obligations or liabilities hereunder.
SECTION 13.14. SURVIVAL.
This Agreement shall survive any merger, sale or other disposition of
the Company.
SECTION 13.15. GENDER AND NUMBER.
Except when otherwise indicated by the context, references herein to
one gender shall include the other genders, and references herein to the plural
shall include the singular.
SECTION 13.16. DATES.
If any date referred to in any provision of this Agreement falls on a
day that is not a Business Day, such provision shall be deemed to refer to the
next succeeding Business Day.
SECTION 13.17. HEADINGS.
The headings herein are for convenience of reference only and shall not
be considered in construing this Agreement.
SECTION 13.18. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original and all of which shall together constitute one
and the same instrument.
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<PAGE> 40
IN WITNESS WHEREOF, Dan has executed this Agreement and the Company has
caused this Agreement to be executed by an officer thereunto duly authorized on
the day and year first above written.
CMP MEDIA INC.
By /s/ LISELOTTE J. LEEDS
-----------------------
Name: Lilo J. Leeds
Title: Co-Chairperson
Attest:
/s/ ROBERT D. MARAFIOTI
-----------------------
[CORPORATE SEAL]
/s/ DAN S. LEEDS
- ---------------------
Dan S. Leeds
40
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Schedule 5.2(b)
HYPOTHETICAL ILLUSTRATION OF
CALCULATION OF OPTIONS VESTING
UNDER SECTION 5.2(b)
Assume Dan's employment with the Company terminates on May 10, 2001 and that all
shares that could have vested under Section 3.2 and Section 3.3 have vested.
The number of Options that would have vested within 24 months after such
termination date (i.e., on or before May 9, 2003) assuming the Conditions were
satisfied is 528 Options, pursuant to Section 3.4(a).
The nearest preceding December 31 on which Options vested or could have vested
under paragraph (a) of Sections 3.2, 3.3, 3.4 or 3.5 was December 31, 1999,
pursuant to Section 3.3(a).
The number of full months that, as of the date of termination, have elapsed
since December 31, 1999 is 16 (January 2000 through April 2001).
The numerator of the fraction is therefore 16 and the denominator is 24.
16/24 X 528 = 352 Options.
Therefore, 352 Options would vest and become exercisable on the date of
termination.
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Schedule XI
HYPOTHETICAL ILLUSTRATION OF
CALCULATION OF FREE CASH FLOW
CMP Media Inc.
Calculation of Free Cash Flow
For the year ended December 31, XXXX
(Dollars in Thousands)
<TABLE>
<S> <C>
Combined (or Consolidated) net income $25,000
Depreciation and amortization expense 7,500
Federal, foreign, state and local income tax expense
of the Company 650
Cash payments for federal, foreign, state and local
income taxes of the Company (750)
Cash distributions to the S Corporation stockholders
for payment of federal, foreign, state and local income
taxes owed by such stockholders on Company income (10,200)
Capital expenditures (8,500)
Cash payments under the Company's 1988 Equity
Appreciation Plan (250)
Debt payments to reduce principal (500)
---
Free cash flow $12,950
-------
</TABLE>
Note: Illustration assumes Company is an S Corporation.
<PAGE> 1
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
BY AND AMONG
CMP MEDIA INC.
AND
KENNETH D. CRON
DL&A
NOVEMBER 27, 1996
<PAGE> 2
EMPLOYMENT AGREEMENT
TABLE OF CONTENTS
ARTICLE I - EMPLOYMENT
SECTION 1.1 Services...................................... 2
SECTION 1.2 Term.......................................... 2
SECTION 1.3 Representation and Warranties................. 3
SECTION 1.4 Intellectual Property......................... 3
ARTICLE II - COMPENSATION
SECTION 2.1 Base Salary................................... 4
SECTION 2.2 Incentive Bonus............................... 4
SECTION 2.3 Stock......................................... 4
SECTION 2.4 Fringe Benefits............................... 5
SECTION 2.5 Reimbursement of Expenses..................... 5
ARTICLE III - CONFIDENTIALITY; NON-COMPETITION
SECTION 3.1 Protection of Company's business Interests.... 6
SECTION 3.2 Non-Disclosure and Non-Use of Confidential
Information................................. 6
SECTION 3.3 Protection from Unfair Competition............ 7
SECTION 3.4 Prior Notice; Opportunity to Cure............. 10
SECTION 3.5 Other Post-Employment Covenants............... 12
SECTION 3.6 Confidentiality of Agreement.................. 13
SECTION 3.7 Relief for Breach............................. 14
SECTION 3.8 Separate Covenants............................ 15
ARTICLE IV - TERMINATION OF EMPLOYMENT
SECTION 4.1 Death......................................... 15
SECTION 4.2 Permanent Disability.......................... 15
SECTION 4.3 Dismissal Without Cause or Resignation For
Good Reason................................. 17
SECTION 4.4 Voluntary Resignation or Dismissal For Cause.. 18
SECTION 4.5 Retirement.................................... 18
ARTICLE V - PROCEDURE TO BE FOLLOWED IN CASE OF RESIGNATION FOR
GOOD REASON OR DISMISSAL FOR CAUSE
SECTION 5.1 Resignation for Good Reason................... 19
SECTION 5.2 Dismissal For Cause........................... 20
ARTICLE VI - RESOLUTION OF DISPUTES
SECTION 6.1 Arbitration................................... 21
<PAGE> 3
SECTION 6.2 Equitable Remedies............................ 21
ARTICLE VII - DEFINITIONS............................................ 21
ARTICLE VIII - MISCELLANEOUS.........................................
SECTION 8.1 Entire Agreement; Binding Effect.............. 24
SECTION 8.2 Amendment..................................... 25
SECTION 8.3 Applicable Law................................ 25
SECTION 8.4 Severability.................................. 25
SECTION 8.5 No Waiver..................................... 25
SECTION 8.6 Notices....................................... 25
SECTION 8.7 Assignment.................................... 27
SECTION 8.8 Survival...................................... 27
SECTION 8.9 Headings...................................... 27
SECTION 8.10 Counterparts.................................. 27
<PAGE> 4
EMPLOYMENT AGREEMENT
This Agreement, made and entered into on this 27th day of November, 1996,
by and between CMP Media Inc., a Delaware corporation (the "Company") and
Kenneth D. Cron ("Ken").
W I T N E S S E T H :
WHEREAS, Ken is a key senior executive of the Company; and
WHEREAS, from his long employment with the Company, Ken possesses
substantial knowledge, experience and expertise in the businesses in which the
Company is engaged; and
WHEREAS, the parties desire to set forth the terms under which Ken's
employment with the Company will continue and upon which he will refrain from
competing against the Company after the termination of his employment;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each of the parties, the parties
hereto hereby covenant and agree as follows:
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ARTICLE I
EMPLOYMENT
SECTION 1.1. SERVICES.
The Company shall employ Ken, and Ken shall serve the Company, as its
President of Publishing or in such other position as may be assigned to him from
time to time, and he shall perform such services and duties as are commensurate
with such position or as may be from time to time specified by the Company,
consistent with the other terms of this Agreement. At all times during his
employment with the Company, Ken shall use his best efforts to promote the
interests of the Company and shall devote his full time and energies to the
business and affairs of the Company. Ken shall not be obligated to perform
duties that would require him to report regularly to an office located more than
fifty (50) miles from Manhasset, New York; provided, however, that Ken shall
undertake all such travel as may be necessary or appropriate to the performance
of his duties hereunder.
SECTION 1.2. TERM.
Ken's employment by the Company shall be deemed employment at will and
shall not be subject to a fixed term. Either Ken or the Company may terminate
his employment at any time and for any reason, with or without cause, by
delivering written notice to the other party. If Ken terminates his employment
by Voluntary Resignation, he shall give the Company not less than ninety (90)
days' prior written notice. In such event, the Company shall have the right to
waive all or part of such notice-period and accept Ken's Voluntary Resignation
effective as of any date prior to the expiration of such 90- day period.
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SECTION 1.3. REPRESENTATIONS AND WARRANTIES.
(a) Ken represents and warrants to the Company that (i) he has full legal
right, power and authority to enter into this Agreement and to consummate the
transactions herein contemplated; (ii) this Agreement constitutes the valid and
binding obligation of Ken, enforceable in accordance with its terms, except to
the extent that such enforcement may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally and by general
principles of equity; and (iii) neither this Agreement nor the consummation of
the transactions herein contemplated will conflict with, violate or infringe any
legal restriction, contract or instrument to which Ken is subject or by which he
is bound.
(b) The Company represents and warrants to Ken that (i) it has full legal
right, power and authority to enter into this Agreement and to consummate the
transactions herein contemplated; (ii) the execution and delivery of this
Agreement has been duly authorized by all necessary corporate action; (iii) this
Agreement constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally and by general principles of equity; and
(iv) neither this Agreement nor the consummation of the transactions herein
contemplated will conflict with, violate or infringe any legal restriction,
contract or instrument to which the Company is subject or by which it is bound.
SECTION 1.4. INTELLECTUAL PROPERTY.
All ideas, designs, plans and materials developed by Ken during the period
of his employment with the Company which relate to any business of the CMP Group
shall be the exclusive property of the Company. Ken shall disclose all such
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ideas, designs, plans and materials to the Company and shall not, without the
Company's prior written consent, use them except for the benefit of the Company.
At the Company's request and cost, Ken shall take all such actions and shall
execute, acknowledge and deliver all such documents as the Company may deem
necessary or advisable in order to secure to the Company the rights thereto by
patent, copyright, trademark or otherwise.
ARTICLE II
COMPENSATION
SECTION 2.1. BASE SALARY.
As compensation for his services hereunder, the Company shall pay Ken a
base salary at the rate of $500,000 per year.
SECTION 2.2. INCENTIVE BONUS.
In addition to his base salary, Ken shall be entitled to participate in an
annual incentive bonus program based on the Company's achievement of its
financial goals and other objectives. The terms of such plan shall be as
determined by the Compensation Committee of the Board of Directors.
SECTION 2.3. STOCK.
In addition to his base salary and incentive bonus, Ken shall have the
right, pursuant to and subject to the provisions of the Share Purchase Agreement
and the Option Agreement, to purchase restricted shares and option shares of the
Company's Class A Common Stock.
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SECTION 2.4. FRINGE BENEFITS.
During his employment Ken shall be entitled to participate in all employee
benefit plans which now or hereafter may be in effect for the benefit of
employees of the Company generally and for which he may qualify, subject to and
in accordance with the provisions of such plans as in effect from time to time.
SECTION 2.5. REIMBURSEMENT OF EXPENSES.
The Company shall reimburse Ken for all reasonable out-of-pocket expenses
actually incurred by him in the performance of his services hereunder in
accordance with the Company's standard travel and business expense-reimbursement
policy as in effect from time to time.
ARTICLE III
CONFIDENTIALITY; NON-COMPETITION
In consideration of the Company's agreement to make post-employment
payments to Ken under Article IV, which payments Ken acknowledges and agrees
will provide full and sufficient income to support himself and his dependents
during the period in which such payments are made, and as a specific inducement
to the Company to enter into this Agreement, the Stockholders' Agreement and the
Option Agreement, Ken hereby accepts and agrees to the provisions of this
Article III and acknowledges that such provisions are necessary and appropriate
for the reasonable protection of the Company's property, investments, business
relationships, economic advantages and goodwill.
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SECTION 3.1. PROTECTION OF COMPANY'S BUSINESS INTERESTS.
As a key senior executive of the Company, Ken has been intimately involved
in the management of all aspects of the business of the Company and its
Affiliates and has been a major strategist in planning and implementing its
business expansion. In the course of his long employment with the Company, Ken
has developed special skills, knowledge and abilities in the publishing field
which are of a uniquely personal nature. He has also acquired detailed knowledge
of the internal operations of the Company and its Affiliates and highly
confidential information concerning the national and international business of
the Company and its Affiliates. In addition, he has been afforded the
opportunity to develop special relationships of confidence and trust with the
customers, suppliers, consultants, employees, officers, directors and
stockholders of the Company and its Affiliates. Because of his continuing
responsibilities with the Company and its Affiliates, including his involvement
in strategic planning and the evaluation of proposed investments, it is expected
that Ken will continue to be entrusted with confidential information and will
continue to have the opportunity to develop such special relationships. The
parties acknowledge and agree that the Company would be unfairly and irreparably
damaged if Ken were to take any of such skills, knowledge, information or
relationships, which he has acquired and developed during the course of his
employment with the Company, and use them to the detriment of the Company and
its Affiliates.
SECTION 3.2. NON-DISCLOSURE AND NON-USE OF CONFIDENTIAL INFORMATION.
(a) Ken represents, warrants, covenants and agrees that, without the
Company's express or implied consent while employed or, after termination,
without the prior written consent of the Company's chief executive officer or
the Board of Directors, he will not willfully or knowingly at any time directly
or
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indirectly disclose, communicate or divulge, or use for the benefit of himself
or of any third party, any of the business or trade secrets or other
confidential information of the CMP Group including, solely by way of
illustration but not of limitation, their business strategies, business plans,
budgets, pricing, selling techniques, marketing techniques, operating systems,
financial systems, financial data, procedures, manuals, confidential reports,
personnel records, potential acquisitions, potential business expansions, credit
and financial data of their suppliers and of their present and prospective
customers, data about competitors, new product- development initiatives, custom
research and new product or service concepts and marketing strategy.
(b) Any and all materials of or concerning the CMP Group or their business
or affairs, including without limitation files, memoranda, notes,
correspondence, lists, records, video reproductions, computer tapes and disks,
design and other documents, and data storage and retrieval materials (and all
copies, compilations and summaries thereof), and any and all property of the CMP
Group, including without limitation equipment, software, keys, business cards
and credit cards, that are in Ken's custody or control shall be delivered to the
Company at the time Ken's employment with the Company terminates for any reason.
Ken shall not destroy any such materials or property, shall not retain any
copies thereof and shall certify in writing to the Company upon request that all
such materials and property have been delivered to the Company.
SECTION 3.3. PROTECTION FROM UNFAIR COMPETITION.
(a) For as long as Ken is employed by the CMP Group and through the period
ending on the earlier of (i) the fifth anniversary of the date of his
termination of employment or (ii) the date Ken attains the age of sixty-five
(65), Ken shall not engage in competition with the CMP Group. For the purposes
of this
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Agreement, Ken shall be deemed to engage in competition with the CMP
Group if Ken does any of the following, whether or not in exchange for
consideration, without the Company's express or implied consent while employed
or without the Company's prior written consent after termination:
(A) On his own behalf or on behalf of any other person or entity,
(1) participates or is involved in or has direct responsibility for the
day-to-day management or operation of a Directly Competitive Business, an
Indirectly Competitive Business or any material function thereof (e.g.,
advertising, circulation, production and the like); (2) owns, in whole or in
part, beneficially or of record, directly or indirectly, an equity interest (or
an interest convertible into equity) in a Directly Competitive Business or a
Direct Competitor; (3) renders services as a director, officer, employee,
consultant, advisor, agent or independent sales representative to a Direct
Competitor; or (4) renders services as a director, officer, employee,
consultant, advisor, agent or independent sales representative to an Indirect
Competitor unless Ken has no responsibility for or participation or involvement
in any Indirectly Competitive Business of such Indirect
Competitor, provided, however, that Ken may have supervisory, advisory,
consulting or sales-representative responsibility over an Indirectly Competitive
Business if the revenue of all Indirectly Competitive Businesses of such
Indirect Competitor over which Ken has such responsibility represents no more
than fifteen percent (15%) of the total revenue over which Ken has such
responsibility.
(B) Solicits the service of any employee of the CMP Group for Ken's
own benefit or for the benefit of any person or entity other than the CMP Group,
or induces or helps to induce any such employee to leave employment with the CMP
Group.
(C) Assists, induces or helps any employee or former employee of the
CMP Group or any other person or entity to engage in competition with the CMP
Group or any of its business activities, provided that the giving of a
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favorable reference by Ken on behalf of such former employee shall not be
prohibited by this clause (C).
(D) Employs or causes any person or entity other than the CMP Group
to employ any former employee of the CMP Group within one (1) year after the
resignation of such former employee from the CMP Group.
(E) Willfully induces or attempts to induce any customer, supplier
or contractor of the Company to terminate any agreement or arrangement with the
Company, or willfully induces or attempts to induce any customer, supplier or
contractor, or any potential customer, supplier or contractor, of the Company
not to enter into any agreement or arrangement with the Company.
(F) Communicates publicly (other than pursuant to subpoena in a
legal proceeding) or to the press, or writes or produces for publication in any
medium, on the subject of, or with express or implied reference to, the CMP
Group or any of their former, current or future stockholders, directors,
officers or employees in their capacities as such. For the purpose hereof,
"implied reference" shall mean a reference that does not expressly name the CMP
Group or any of their former, current or future stockholders, directors,
officers or employees but that nevertheless would be understood by the average
reader or audience-member to refer thereto. It shall not be deemed a violation
of this clause (F) if, after the termination of his employment with the Company,
Ken responds to inquiries from the public or the press solely by stating, in
form or substance, "I do not discuss any matters relating to CMP; please address
your inquiries directly to the company" or Ken communicates the fact that he was
formerly employed by the Company and identifies the positions he held and the
dates thereof.
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(b) Notwithstanding the provisions of paragraph (a) of this Section
3.3, Ken shall not be deemed to be engaged in competition with the CMP Group
solely by reason of Ken's ownership of (i) an equity interest of less than
one-half of one percent (0.5%) in the securities of a Direct Competitor or
Indirect Competitor listed for trading on a national securities exchange or
quoted in the National Market List of NASDAQ or (ii) an interest in a mutual or
other investment fund which owns an interest in a Direct Competitor or Indirect
Competitor, provided that Ken has no influence or control over the selection of
such fund's investment decisions.
SECTION 3.4. PRIOR NOTICE; OPPORTUNITY TO CURE.
(a) Ken shall give the Company written notice at least twenty (20)
Business Days before entering into any relationship, transaction or business, or
engaging in any activity, or taking or omitting to take any action, which might
reasonably be deemed a breach of any provision of Section 3.2 or Section 3.3,
such notice to include full and complete particulars as to the proposed
relationship, transaction, activity, action or omission, the services or duties
contemplated and such other facts and circumstances as are reasonably necessary
for the Company to make an informed decision. The Company shall advise Ken in
writing, within ten (10) Business Days after such notice is given, of the Board
of Directors' determination as to whether such relationship, transaction,
business, activity, action or omission would materially breach any of the
provisions of Section 3.2 or Section 3.3. In the event that, for reasons not
within his control, Ken gives the Company less than twenty (20) Business Days'
prior written notice, the Company will endeavor in good faith to advise Ken of
the Board of Directors' determination in less than ten (10) Business Days after
such notice is given, provided that the Company's failure to advise Ken in less
than ten (10) Business Days shall not be deemed to constitute
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consent to such relationship, transaction, business, activity, action or
omission and shall not give rise to any liability of the Company to Ken or to
any third party.
(b) Once the Company has advised Ken in writing that the Board of
Directors has determined that a proposed relationship, transaction, business,
activity, action or omission would not materially breach any of the provisions
of Section 3.2 or Section 3.3, and Ken has thereupon entered into such
relationship, transaction or business or has begun to engage in such activity or
to take or omit to take such action, the Board of Directors shall have no right
to reverse or otherwise modify its determination; provided, however, that if the
nature, scope or terms of such relationship, transaction, business, activity,
action or omission are to be modified after such determination is made, then in
accordance with paragraph (a) hereof Ken shall give the Company prior written
notice of such modification and the Company shall advise him as to whether such
relationship, transaction, business, activity, action or omission, as so
modified, would materially breach any of the provisions of Section 3.2 or
Section 3.3.
(c) In the event that, without having given the Company prior notice
pursuant to paragraphs (a) or (b) hereof, Ken enters into any relationship,
transaction or business or begins to engage in any activity or to take or omit
to take any action, or there is a modification of the nature, scope or terms of
such relationship, transaction, business, activity, action or omission that the
Board of Directors determines is a material breach of any of the provisions of
Section 3.2 or Section 3.3, the Company shall give Ken written notice of such
determination and, if such breach is continuing, an opportunity to cure such
breach before the Company seeks remedy or relief by judicial process or
arbitration. The opportunity to cure shall be sixty (60) days to the extent such
continuing breach consists of holding an ownership interest in a competitive
business and fifteen (15) days with respect to any other continuing breach.
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SECTION 3.5. OTHER POST-EMPLOYMENT COVENANTS.
(a) During the period in which the Company is making payments to Ken
pursuant to Article IV, Ken shall not willfully take any action materially
adverse to the interests of the Company, even if such action is in technical
compliance with the other provisions of this Article III, but shall at all times
conduct himself in the same manner and with the same degree of loyalty to the
Company as if he were still an employee of the Company.
(b) During the period in which the Company is making payments to Ken
pursuant to Article IV, Ken shall make himself available to the Company for
consultation and advice at such times as it may reasonably request and as do not
unreasonably interfere with Ken's other permitted business activities or
commitments. Ken shall not be required to be physically present at any office of
the Company or to allocate regular time to making himself available for such
consultation or advice, provided that he shall respond timely to any requests by
the Company for consultation. Ken shall maintain, at his own expense, an office
at his home with all furniture and equipment necessary to carry out his
obligations under this Section 3.5(b). The Company shall reimburse Ken for all
reasonable out-of-pocket expenses he incurs in rendering such consultation or
advice (other than expenses of maintaining his home office).
(c) Both during the period in which the Company is making payments to Ken
pursuant to Article IV and thereafter, Ken shall, if requested by the Company,
provide information, testimony and assistance in connection with the prosecution
or defense of any claims by or against the Company arising out of matters of
which he acquired knowledge while an employee of the Company. The Company shall
reimburse Ken for all reasonable out-of-pocket expenses he incurs in rendering
such assistance.
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(d) Both during the period in which the Company is making payments to Ken
pursuant to Article IV and thereafter, Ken shall not willfully make any oral or
written statement which reflects adversely upon the character, honesty, credit,
efficiency or business practices of the CMP Group or its former, current or
future stockholders, directors, officers or employees in their capacities as
such.
SECTION 3.6. CONFIDENTIALITY OF AGREEMENT.
The terms and conditions of this Agreement shall be kept confidential by
the parties, and neither of the parties shall disclose them to any non-party
unless such disclosure is necessitated by (a) legal and/or financial
requirements of the Company, in which case the form of such disclosure shall
first be mutually agreed upon by the Company and Ken, or (b) any arbitration or
other legal proceeding contesting or seeking to enforce any provision or
interpretation of this Agreement (including any deposition or testimony that
either party provides in connection therewith), regardless of whether such
proceeding is initiated by Ken or the Company. Except as provided in the
preceding sentence, and without limiting the generality of the foregoing, Ken
shall not respond to or in any way participate in or contribute to any public
discussion, notice or other publicity concerning or in any way relating to
execution of this Agreement or the events (including any negotiations) which led
to its execution, and Ken specifically agrees that he shall not disclose
information regarding this Agreement to any current or former employees of the
Company other than those expressly authorized by the Company to have knowledge
hereof. Without limiting the comprehensive confidentiality agreed to, Ken may
disclose this Agreement to his attorneys, financial advisors and members of his
and his spouse's immediate families, provided he informs them of this
confidentiality provision and they agree to abide by it. Ken hereby agrees that
any disclosure by him of any of the terms and conditions of this Agreement in
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violation of the foregoing shall constitute and be treated as a material breach
of this Agreement and Ken shall be responsible for damages occasioned thereby,
including but not limited to reasonable attorneys' fees incurred by the Company
to enforce this Section 3.6.
SECTION 3.7. RELIEF FOR BREACH.
(a) Ken acknowledges and agrees that any breach or anticipatory breach by
him of any of the provisions of this Article III would cause the Company
irreparable injury not compensable by monetary damages alone and that,
accordingly, in any such event, the Company shall be entitled to injunctions,
both preliminary and permanent, enjoining or restraining such breach or
anticipatory breach (and Ken hereby consents to the issuance thereof without
bond by any court of competent jurisdiction), in addition to monetary damages in
such amount as the evidence may show and such other remedies as may be available
at law or in equity.
(b) Ken shall not have the power or right to avoid any of his obligations
under this Article III by refusing or failing to accept from the Company payment
of any amounts duly tendered to him by the Company pursuant to Article IV. It
shall not be a valid defense, and Ken shall not raise as a defense, in any
proceeding by the Company to enforce its rights under this Article III that Ken
shall have refused or failed to accept any such payments, and the right of the
Company to equitable relief under this Article III shall be in no way impaired
or affected by Ken's refusal or failure to accept any such payments from the
Company.
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SECTION 3.8. SEPARATE COVENANTS.
Ken understands and agrees that the covenants contained in this Article
III constitute a series of separate covenants, one for each applicable state in
the United States and the District of Columbia, and one for each applicable
foreign country. If in any judicial proceeding a court shall hold unenforceable
any of the separate covenants included in this Article III, such unenforceable
covenant or covenants shall be deemed limited as necessary or eliminated from
the provisions of this Article III for the purpose of such proceeding to the
extent necessary to permit the remaining separate covenants of this Article III
to be enforced in such proceeding, and to permit such unenforceable covenant or
covenants to be enforced as limited.
ARTICLE IV
TERMINATION OF EMPLOYMENT
SECTION 4.1. DEATH.
In the event of Ken's death, his employment with the Company shall
immediately terminate, and no compensation or other rights shall accrue to Ken
or his estate under this Agreement after the date of termination, other than
benefits which shall accrue after such date pursuant to the terms of Company
benefit plans in which Ken participated on the date of termination, which
benefits shall be paid in accordance with the terms of such plans. Ken or his
estate shall be entitled to receive from the Company any compensation that was
earned but unpaid as of the date of termination of his employment.
SECTION 4.2. PERMANENT DISABILITY.
(a) In the event that Ken's employment with the Company terminates by
reason of his Permanent Disability, no compensation or other rights shall accrue
to
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Ken under this Agreement after the date of termination, other than benefits
which accrue after such date pursuant to the terms of Company benefit plans in
which Ken participated on the date of termination, which benefits shall be paid
in accordance with the terms of such plans. Ken shall be entitled to receive
from the Company any compensation that was earned but unpaid as of the date of
termination of his employment.
(b) In the event that, within five (5) years after such termination of his
employment, Ken recovers from such Permanent Disability to the extent that he is
able to resume his former position as a Key Senior Executive of the Company, he
shall so notify the Company, and the Company shall have the right to have him
examined by its designated medical doctor. If the Company determines that Ken is
able, with or without reasonable accommodation, to perform the essential
functions of such former position, it may re-hire him or, if it declines to
re-hire him, the Company shall, in consideration of Ken's compliance with the
restrictive covenants set forth in Article III, pay him through the period
ending on the earlier of (a) the fifth anniversary of the date of his
termination of employment or (b) the date Ken attains the age of sixty-five
(65), the amount of $750,000 per year (pro rated for partial years) less fifty
percent (50%) of (i) any current cash compensation, and (ii) the present value
of any deferred cash compensation, that he earns from other sources as an
employee, consultant, partner or proprietor during each such year. Payments
shall be made in bi-weekly installments or on such other periodic basis as the
Company then makes salary payments to its employees generally.
(c) In the event that the Company determines that Ken is not able, with or
without reasonable accommodation, to perform the essential functions of his
former position as a Key Senior Executive of the Company, the Company shall not
be obligated to re-hire Ken or to pay him any monies hereunder. Ken shall
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continue to be subject to the provisions of Section 3.4, however, and shall duly
give the Company any notices he is required to give thereunder; provided,
however, that the Company shall not be entitled to enforce any of its other
rights under Article III hereof, or its rights under Section 3.4(b) or Section
4.5 of the Stockholders' Agreement or under Section 6.6(b) of the Option
Agreement, unless the Company pays him in accordance with the provisions of
paragraph (b) of this Section 4.2 with effect from the date such notice is given
through the earlier of (i) the fifth anniversary of the date of his termination
of employment or (ii) the date Ken attains the age of sixty-five (65), and the
willful failure by the Company so to pay Ken hereunder shall constitute a waiver
of such rights by the Company.
SECTION 4.3. DISMISSAL WITHOUT CAUSE OR RESIGNATION FOR GOOD REASON.
In the event that Ken's employment with the Company terminates by reason
of his Dismissal Without Cause or his Resignation For Good Reason, the Company
shall, in consideration of Ken's compliance with the restrictive covenants set
forth in Article III and in lieu of any other severance obligations to Ken, pay
him through the period ending on the earlier of (a) the fifth anniversary of the
date of his termination of employment or (b) the date Ken attains the age of
sixty-five (65), the amount of $1,500,000 per year (pro rated for partial years)
less fifty percent (50%) of (i) any current cash compensation, and (ii) the
present value of any deferred cash compensation, that he earns from other
sources as an employee, consultant, partner or proprietor during each such year.
Payments shall be made in bi-weekly installments or on such other periodic basis
as the Company then makes salary payments to its employees generally.
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SECTION 4.4. VOLUNTARY RESIGNATION OR DISMISSAL FOR CAUSE.
In the event that Ken's employment with the Company terminates as a result
of his Voluntary Resignation or Dismissal For Cause, the Company shall , in
consideration of Ken's compliance with the restrictive covenants set forth in
Article III and in lieu of any other severance obligations to Ken, pay him
through the period ending on the earlier of (a) the fifth anniversary of the
date of his termination of employment or (b) the date Ken attains the age of
sixty-five (65), the amount of $750,000 per year (pro rated for partial years)
less fifty percent (50%) of (i) any current cash compensation, and (ii) the
present value of any deferred cash compensation, that he earns from other
sources as an employee, consultant, partner or proprietor during each such year.
Payments shall be made in bi-weekly installments or on such other periodic basis
as the Company then makes salary payments to its employees generally.
SECTION 4.5. RETIREMENT.
In the event that Ken's employment with the Company terminates by reason
of his retirement at or after the date Ken attains the age of sixty-five (65),
the Company shall have the right, but not the obligation, to require Ken's
continued compliance with the restrictive covenants set forth in Article III for
such period of time (not to exceed five (5) years) as the Company may elect, in
consideration of which the Company shall pay Ken, during the period of time so
elected by the Company, the amount of $750,000 per year (pro rated for partial
years) less fifty percent (50%) of (i) any current cash compensation, and (ii)
the present value of any deferred cash compensation, that he earns from other
sources as an employee, consultant, partner or proprietor during each such year.
Payments shall be made in bi-weekly installments or on such other periodic basis
as the Company then makes salary payments to its employees generally.
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ARTICLE V
PROCEDURE TO BE FOLLOWED IN CASE OF
RESIGNATION FOR GOOD REASON OR DISMISSAL FOR CAUSE
SECTION 5.1. RESIGNATION FOR GOOD REASON.
In the event Ken terminates his employment with the Company as a
Resignation For Good Reason, Ken shall give the Company at least ten (10)
Business Days' prior written notice specifying in reasonable detail the specific
conduct of the Company that he considers grounds for Resignation For Good Reason
and the specific provision of the definition of "Resignation For Good Reason"
upon which he relies. Ken's employment with the Company shall terminate as of
the tenth Business Day after such notice is given, or such other date as the
parties mutually agree. Should the Company dispute the basis for such
resignation in a written notice given to Ken on or before his termination date,
the parties shall meet and endeavor to resolve the dispute amicably within the
twenty (20) Business Days after the Company's notice is given. If they cannot so
resolve the dispute within such twenty (20) Business Days after the Company's
notice is given, Ken and the Company shall submit the dispute to binding
arbitration in accordance with Section 6.1. The decision rendered in such
arbitration shall be final and binding on both Ken and the Company for all
purposes. If the arbitrators determine that Ken did not have a proper basis on
which to terminate his employment as Resignation For Good Reason within the
meaning of this Agreement, the termination of Ken's employment shall be treated
for all purposes of this Agreement as a Voluntary Resignation. In addition to
any other rights which a party may have, the party prevailing in such
arbitration proceeding shall be entitled to recover from the losing party any
and all of the expenses incurred by the prevailing party in such proceeding,
including reasonable attorney's fees.
19
<PAGE> 23
SECTION 5.2. DISMISSAL FOR CAUSE.
In the event the Company terminates Ken's employment as a Dismissal For
Cause, the Company shall give Ken at least ten (10) Business Days' prior written
notice specifying in reasonable detail the specific conduct of Ken that it
considers grounds for Dismissal For Cause and the specific provision of the
definition of "Dismissal For Cause" upon which it relies. Ken's employment with
the Company shall terminate as of the tenth Business Day after such notice is
given, or such other date as the parties mutually agree. Should Ken dispute the
basis for such termination in a written notice given to the Company on or before
his termination date, the parties shall meet and endeavor to resolve the dispute
amicably within twenty (20) Business Days after Ken's notice is given. If they
cannot so resolve the dispute within such twenty (20) Business Days after Ken's
notice is given, Ken and the Company shall submit the dispute to binding
arbitration in accordance with Section 6.1. The decision rendered in such
arbitration shall be final and binding on both Ken and the Company for all
purposes. If the arbitrators determine that the Company did not have a proper
basis on which to terminate Ken's employment as a Dismissal For Cause within the
meaning of this Agreement, the termination of Ken's employment shall be treated
for all purposes of this Agreement as a Dismissal Without Cause. In addition to
any other rights which a party may have, the party prevailing in such
arbitration proceeding shall be entitled to recover from the losing party any
and all of the expenses incurred by the prevailing party in such proceeding,
including reasonable attorney's fees.
20
<PAGE> 24
ARTICLE VI
RESOLUTION OF DISPUTES
SECTION 6.1. ARBITRATION.
Except as provided in Section 6.2, all controversies arising out of or
relating to this Agreement or the breach hereof shall be settled by arbitration
in the County of Nassau, State of New York, in accordance with the rules of the
American Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. Any
arbitration hereunder shall be before three (3) arbitrators.
SECTION 6.2. EQUITABLE REMEDIES.
Notwithstanding the provisions of Section 6.1, any proceeding for
injunctive relief or specific performance in connection with this Agreement
shall be commenced in Supreme Court of the State of New York, County of Nassau,
and each of the parties hereby accepts the exclusive jurisdiction of such Court
for such purpose; provided, however, that the petitioner may commence such
proceeding in such other court as may be necessary, in the petitioner's
judgment, in order to more effectively or expeditiously obtain personal
jurisdiction over the respondent.
ARTICLE VII
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
"Affiliates" shall mean all entities controlling, controlled by or under
common control with the Company.
"Board of Directors" shall mean the Board of Directors of the Company.
21
<PAGE> 25
"Business Day" shall mean any day on which the Company is scheduled to be
open for business.
"CMP Business" shall mean any publication, product, service or business
(a) which the CMP Group publishes, produces, provides or engages in or (b) which
the CMP Group has a bona fide plan or intention to publish, produce, provide or
engage in within the succeeding 12-month period, the research and development of
which the CMP Group has devoted substantive time and attention to, and which
plan or intention Ken has actual knowledge of before he engages in any activity
competitive with such CMP Business as contemplated by clause (A) of Section
3.3(a).
"CMP Group" shall mean the Company or any of its Affiliates.
"Direct Competitor" shall mean a business enterprise that produces or
operates, or owns directly or indirectly an interest of twenty percent (20%) or
more in, one or more Directly Competitive Businesses.
"Directly Competitive Business" shall mean any competitive publication,
product, service or business (a) the target audience of which is substantially
the same as the target audience of a CMP Business or (b) forty percent (40%) or
more of the annual revenue of which is derived from substantially the same
customers as a CMP Business derives twenty percent (20%) or more of its annual
revenue.
"Dismissal For Cause" shall mean the termination of Ken's employment with
the Company by the Board of Directors for (i) the willful and continued failure
of Ken substantially to perform his duties as an officer and employee of the
Company or comply with the written policies of the Company after the Company has
delivered to Ken a written demand for substantial performance or compliance that
specifies such failure in reasonable detail; (ii) illegal conduct or gross
misconduct by Ken, in either case that is willful and results (or is reasonably
likely to result) in material damage to the business or reputation of the
Company; or (iii)
22
<PAGE> 26
the resignation by Ken from his employment following his act or omission which
would constitute grounds for Dismissal For Cause hereunder. No act or failure to
act on the part of Ken (other than non-compliance with lawful instructions given
to Ken by the Company) shall be considered "willful" unless it is done or
omitted to be done by him in bad faith or without reasonable belief that his
action or omission was in the best interests of the Company. Any act or failure
to act that is pursuant to resolution duly adopted by the Board of Directors
shall be conclusively presumed to be done or omitted to be done by Ken in good
faith and in the best interests of the Company.
"Dismissal Without Cause" shall mean the termination of Ken's employment
by the Company on any grounds other than grounds for Dismissal For Cause or as a
result of his Permanent Disability.
"Indirect Competitor" shall mean a business enterprise that does not
produce or operate, or own directly or indirectly an interest in, any Directly
Competitive Businesses but produces or operates, or owns directly or indirectly
an interest of twenty percent (20%) or more in, one or more Indirectly
Competitive Businesses.
"Indirectly Competitive Business" shall mean any competitive or
potentially competitive publication, product, service or business which derives
from twenty percent (20%) to but not including forty percent (40%) of its annual
revenue from substantially the same customers as a CMP Business derives twenty
percent (20%) or more of its annual revenue.
"Option Agreement" shall mean that certain Option Agreement entered into
as of the date hereof by and between the Company and Ken.
"Permanent Disability" shall mean a physical or mental impairment, as a
result of which Ken shall have been unable, with or without reasonable
23
<PAGE> 27
accommodation, to perform the essential functions of his employment position for
a period of at least sixteen (16) weeks during any 12-month period.
"Resignation For Good Reason" shall mean Ken's resignation from his
employment with the Company after the Company has (i) materially reduced his
package of compensation and benefits, (ii) materially diminished his position,
authority, duties or responsibilities, or (iii) required him to report regularly
to an office located more than fifty (50) miles from Manhasset, New York. Any
reduction in Ken's compensation package made pursuant to the written
compensation plan between Ken and the Company dated as of the date hereof shall
not be deemed grounds for Resignation For Good Reason.
"Share Purchase Agreement" shall mean that certain Share Purchase
Agreement entered into as of the date hereof by and among Gerard G. Leeds,
Liselotte J. Leeds and Ken.
"Voluntary Resignation" shall mean Ken's resignation from his employment
with the Company on any grounds other than grounds for Resignation For Good
Reason or as a result of his Permanent Disability.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. ENTIRE AGREEMENT; BINDING EFFECT.
This Agreement contains all of the terms agreed upon by the parties with
respect to the subject matter hereof and replaces and supersedes any and all
prior agreements, written or oral, between the parties relating to the terms of
Ken's employment with the Company. No promises, agreements or representations
with respect to the matters herein contained shall be binding upon any of the
parties unless set forth herein. This Agreement shall be binding upon and inure
to the benefit of the parties and their respective heirs, representatives,
successors and permitted assigns.
24
<PAGE> 28
SECTION 8.2. AMENDMENT.
No provision of this Agreement may be amended or waived except by a
writing making reference to this Agreement and signed by the party against whom
the enforcement of such amendment or waiver is sought.
SECTION 8.3. APPLICABLE LAW.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York, without reference to its
principles regarding choice or conflicts of law.
SECTION 8.4. SEVERABILITY.
Wherever possible, each provision of this Agreement shall be interpreted
in such manner as to be effective and valid under applicable law, but if any
provisions hereof shall be prohibited by or invalid under any such law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating or nullifying the remainder of such provision or any other
provision of this Agreement.
SECTION 8.5. NO WAIVER.
No delay or omission by any party in exercising or enforcing any right
hereunder shall operate as a waiver of such right, and a waiver on one occasion
shall not be construed as a waiver of any right or remedy on any future
occasion.
SECTION 8.6. NOTICES.
All notices, requests, consents, designations and demands required or
permitted to be given under this Agreement shall be in writing and shall be
deemed
25
<PAGE> 29
to have been duly given (a) when personally delivered to an individual
party or to an authorized officer of a corporate party, whether by messenger,
courier or other person, (b) on the second Business Day after the date it is
sent by certified or registered mail, return receipt requested, or (c) on the
next Business Day after the date it is sent via telefacsimile (provided it is
actually received and is not materially illegible), as follows:
If to the Company:
CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Attention: President
Fax: (516) 562-5718
with a copy to:
CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Attention: General Counsel
Fax: (516) 562-7123
If to Ken:
Kenneth D. Cron
c/o Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004-1490
Attention: Richard G. Cohen, Esq.
Fax: (212)858-1500
with a copy to Ken at his last known address as reflected on the records of
the Company
26
<PAGE> 30
or to such other mail or facsimile address as the recipient party shall have
last designated by notice given to the other in accordance herewith.
SECTION 8.7. ASSIGNMENT.
This Agreement is a contract for personal services and, without the
Company's prior written consent, Ken may not assign, delegate or transfer any of
his rights or obligations hereunder. The Company may not, without Ken's prior
written consent, assign any of its rights or delegate any of its obligations or
liabilities under this Agreement to any person or entity other than an entity
that controls, is controlled by or is under common control with the Company;
provided, however, that no such assignment or delegation shall relieve the
Company from its obligations or liabilities hereunder.
SECTION 8.8. SURVIVAL
This Agreement shall survive any merger, sale or other disposition of the
Company and shall survive the termination of Ken's employment with the Company.
SECTION 8.9. HEADINGS.
The headings herein are for convenience of reference only and shall not be
considered in construing this Agreement.
SECTION 8.10. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed as an original and all of which shall together constitute
one and the same instrument.
27
<PAGE> 31
IN WITNESS WHEREOF, Ken has executed this Agreement and the Company has
caused this Agreement to be executed by an officer thereunto duly authorized on
the day and year first above written.
CMP MEDIA INC.
By /s/MICHAEL S. LEEDS
---------------------------
Name: Michael S. Leeds
Title: President
Attest:
/s/ROBERT D. MARAFIOTI
---------------------------------
(CORPORATE SEAL)
/s/KENNETH D. CRON
- -------------------------------
KENNETH D. CRON
28
<PAGE> 1
EXHIBIT 10.10
SHARE PURCHASE AGREEMENT
BY AND AMONG
GERARD G. LEEDS AND LISELOTTE J. LEEDS
AND
KENNETH D. CRON
DL&A
NOVEMBER 27, 1996
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE I - SALE AND PURCHASE
SECTION 1.1 Transfer of Shares ........................... 2
SECTION 1.2 Purchase Price and Payment ................... 2
ARTICLE II - REPRESENTATIONS AND WARRANTIES
SECTION 2.1 Representations of Gerry and Lilo ............ 3
SECTION 2.2 Representations of Ken ....................... 4
ARTICLE III - CONFIDENTIALITY ....................................... 4
ARTICLE IV - RESOLUTION OF DISPUTES
SECTION 4.1 Arbitration .................................. 5
SECTION 4.2 Equitable Remedies ........................... 6
ARTICLE V - DEFINITIONS ............................................. 6
ARTICLE VI - MISCELLANEOUS
SECTION 6.1 Further Assurances ........................... 7
SECTION 6.2 Entire Agreement; Binding Effect ............. 7
SECTION 6.3 Amendment .................................... 8
SECTION 6.4 Applicable Law ............................... 8
SECTION 6.5 Severability ................................. 8
SECTION 6.6 No Waiver .................................... 8
SECTION 6.7 Notices ...................................... 9
SECTION 6.8 Assignment ................................... 10
SECTION 6.9 Gender and Number ............................ 10
SECTION 6.10 Headings ..................................... 10
SECTION 6.11 Counterparts ................................. 10
<PAGE> 3
SHARE PURCHASE AGREEMENT
This Share Purchase Agreement, made and entered into on this 27th day
of November, 1996, by and among Gerard G. Leeds ("Gerry"), Liselotte J. Leeds
("Lilo") (Gerry and Lilo sometimes collectively the "Selling Stockholders"), and
Kenneth D. Cron ("Ken").
W I T N E S S E T H:
WHEREAS, Ken is a key senior executive of CMP Media Inc., a Delaware
corporation (the "Company");
WHEREAS, Gerry and Lilo desire to create substantial incentives for Ken
to (i) cause the Company to grow continuously and successfully in sales, profits
and profitability, (ii) take a long-term view of the Company's future, (iii)
help the Company attain its long-term goals, including its diversity goals as
set forth in its corporate Principles, and (iv) remain with the Company for the
long term; and
WHEREAS, to create such incentives, Gerry and Lilo desire to provide
Ken with the opportunity to purchase shares of the Company's Class A Common
Stock from them, provided that Ken simultaneously enters into a Stockholders'
Agreement with the Company, Gerry and Lilo, which provides for certain
restrictions on Ken's right to sell such shares and to compete with the Company;
and
WHEREAS, Ken desires to have the opportunity to purchase such shares of
Class A Common Stock from Gerry and Lilo and, as an inducement to Gerry and Lilo
to sell him such shares of the Company's Class A Common Stock and as a condition
to the closing of such sale, Ken desires to enter simultaneously therewith into
such Stockholders' Agreement;
<PAGE> 4
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements herein contained and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by each of the parties, the parties hereto hereby represent,
warrant, covenant and agree, as follows:
ARTICLE I
SALE AND PURCHASE
SECTION 1.1. TRANSFER OF SHARES.
Subject to the terms and conditions of this Agreement, each of Gerry
and Lilo hereby sells to Ken, and Ken hereby purchases from each of Gerry and
Lilo, five hundred twenty-eight (528) shares of Class A Stock (which number of
shares equals approximately one percent (1%) of the number of shares of the
Company's Common Stock issued and outstanding as of the date hereof), or an
aggregate of one thousand fifty-six (1,056) shares of Class A Stock (which
number of shares equals approximately two percent (2%) of the number of shares
of the Company's Common Stock issued and outstanding as of the date hereof).
SECTION 1.2. PURCHASE PRICE AND PAYMENT.
The purchase price for such shares of Class A Stock (the "Shares")
shall be Three Hundred Seventy-Five Dollars ($375.00) per Share. Subject to the
terms and conditions of this Agreement, Ken shall pay to each of Gerry and Lilo,
as the full purchase price for the Shares purchased by Ken from such Selling
Stockholder hereunder, the sum of one hundred ninety-eight thousand dollars
($198,000), or an
2
<PAGE> 5
aggregate purchase price of three hundred and ninety-six thousand dollars
($396,000). Payment shall be made simultaneously herewith in cash or by check,
bank draft or wire transfer, in exchange for which each of Gerry and Lilo shall
cause to be delivered to Ken stock certificates representing the Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.1. REPRESENTATIONS OF GERRY AND LILO.
Each of the Selling Stockholders hereby represents and warrants to Ken
that (a) such Selling Stockholder has full legal right, power and authority to
enter into this Agreement and to consummate the transactions herein
contemplated; (b) this Agreement constitutes the valid and binding obligation of
such Selling Stockholder, enforceable in accordance with its terms, except to
the extent that such enforcement may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally and by general
principles of equity; (c) neither this Agreement nor the consummation of the
transactions herein contemplated will conflict with, violate or infringe any
legal restriction, contract or instrument to which such Selling Stockholder is
subject, other than the restrictions set forth in the Shareholders' Agreement
and in the Credit Agreement and the Negative Pledge Agreement, all the
applicable provisions of which have been waived and/or satisfied to permit the
sale and purchase contemplated by this Agreement; (d) such Selling Stockholder
is the legal and beneficial owner of the Shares to be transferred by such
Selling Stockholder hereunder and has not previously sold, assigned or
transferred such Shares, or created or suffered to exist any security interest
therein or lien or encumbrance thereon; (e) such Selling Stockholder has full
power to convey to Ken good title to the Shares to be so
3
<PAGE> 6
transferred hereunder, free and clear of any liens, charges, encumbrances,
options, pledges or claims of any nature whatsoever; and (f) the sale of such
Shares to Ken will, absent any incapacities occurring through an action or
omission of Ken, transfer to Ken good, legal and valid right, title and interest
in and to such Shares.
SECTION 2.2. REPRESENTATIONS OF KEN.
Ken hereby represents and warrants to each of Gerry and Lilo that (a)
he has full legal right, power and authority to enter into this Agreement and to
consummate the transactions herein contemplated; (b) this Agreement constitutes
the valid and binding obligation of Ken, enforceable in accordance with its
terms, except to the extent that such enforcement may be limited by applicable
bankruptcy, insolvency or similar laws affecting creditors' rights generally and
by general principles of equity; and (c) neither this Agreement nor the
consummation of the transactions herein contemplated will conflict with, violate
or infringe any legal restriction, contract or instrument to which Ken is
subject or by which he is bound.
ARTICLE III
CONFIDENTIALITY
The terms and conditions of this Agreement shall be kept confidential
by the parties, and none of the parties shall disclose them to any non-party
unless such disclosure is necessitated by (a) legal and/or financial
requirements of any of the parties or the Company, in which case the form of
such disclosure shall first be mutually agreed upon by Gerry, Lilo, the Company
and Ken, or (b) any arbitration or other legal proceeding contesting or seeking
to enforce any provision or interpretation of this Agreement (including any
deposition or testimony that either
4
<PAGE> 7
party provides in connection therewith), regardless of whether such proceeding
is initiated by Ken, Gerry or Lilo. Except as provided in the preceding
sentence, and without limiting the generality of the foregoing, Ken shall not
respond to or in any way participate in or contribute to any public discussion,
notice or other publicity concerning or in any way relating to execution of this
Agreement or the events (including any negotiations) which led to its execution,
and Ken specifically agrees that he shall not disclose information regarding
this Agreement to any current or former employees of the Company other than
those expressly authorized by the Company to have knowledge hereof. Without
limiting the comprehensive confidentiality agreed to, Ken may disclose this
Agreement to his attorneys, financial advisors and members of his and his
spouse's immediate families, provided he informs them of this confidentiality
provision and they agree to abide by it. Ken hereby agrees that any disclosure
by him of any of the terms and conditions of this Agreement in violation of the
foregoing shall constitute and be treated as a material breach of this Agreement
and Ken shall be responsible for damages occasioned thereby, including but not
limited to reasonable attorneys' fees incurred by the Company to enforce this
Article III.
ARTICLE IV
RESOLUTION OF DISPUTES
SECTION 4.1. ARBITRATION.
Except as provided in Section 4.2, all controversies arising out of or
relating to this Agreement or the breach hereof shall be settled by arbitration
in the County of Nassau, State of New York, in accordance with the rules of the
American Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. Any
arbitration hereunder shall be before three (3) arbitrators.
5
<PAGE> 8
SECTION 4.2. EQUITABLE REMEDIES.
Notwithstanding the provisions of Section 4.1, any proceeding for
injunctive relief or specific performance in connection with this Agreement
shall be commenced in Supreme Court of the State of New York, County of Nassau,
and each of the parties hereby accepts the exclusive jurisdiction of such Court
for such purpose; provided, however, that the petitioner may commence such
proceeding in such other court as may be necessary, in the petitioner's
judgment, in order to more effectively or expeditiously obtain personal
jurisdiction over the respondent.
ARTICLE V
DEFINITIONS
"Credit Agreement" shall mean that certain Credit Agreement originally
dated as of July 15, 1993 by and among the Company (fka CMP Publications, Inc.),
Fleet National Bank (fka Shawmut Bank Connecticut, National Association) and The
Chase Manhattan Bank (fka The Chase Manhattan Bank, National Association), as
most recently amended on November 14, 1996.
"Negative Pledge Agreement" shall mean that certain Negative Pledge
Agreement originally dated as of July 15, 1993 by and among Gerry, Lilo and
Fleet National Bank (f/k/a/ Shawmut Bank Connecticut, National Association), as
most recently amended and confirmed by Gerry, Lilo, Michael S. Leeds and Daniel
H. Leeds to Fleet National Bank and The Chase Manhattan Bank on November 14,
1996.
"Option Agreement" shall mean that certain Option Agreement entered
into as of the date hereof by and between the Company and Ken.
6
<PAGE> 9
"Shareholders' Agreement" shall mean that certain Shareholders'
Agreement entered into as of June 30, 1991 by and among the Company, certain of
its affiliates, Gerry, Lilo and their children.
"Stockholders' Agreement" shall mean that certain Stockholders'
Agreement entered into as of the date hereof by and among the Company, Gerry,
Lilo and Ken.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. FURTHER ASSURANCES.
Each of the parties hereto, upon request of another party, shall take
all such actions and execute and deliver all such further instruments of sale,
assignment, conveyance, transfer and exchange, and all such other documents and
agreements, as may be necessary or appropriate to assure, complete and evidence
the full and effective sale, assignment, transfer, conveyance and exchange of
the Shares as herein required and as may otherwise be necessary or appropriate
to comply with the terms and conditions of this Agreement.
SECTION 6.2. ENTIRE AGREEMENT; BINDING EFFECT.
This Agreement contains all of the terms agreed upon by the parties
with respect to the subject matter hereof and replaces and supersedes any and
all prior agreements, written or oral, between the parties relating to the
Shares (except for the Stockholders' Agreement and the Option Agreement to the
extent their respective terms are not inconsistent herewith). No promises,
agreements or representations with respect to the matters herein contained shall
be binding upon any of the parties unless set forth herein. This Agreement shall
be binding upon
7
<PAGE> 10
and inure to the benefit of the parties and their respective heirs,
representatives, successors and permitted assigns.
SECTION 6.3. AMENDMENT.
No provision of this Agreement may be amended or waived except by a
writing making reference to this Agreement and signed by the party against whom
the enforcement of such amendment or waiver is sought.
SECTION 6.4. APPLICABLE LAW.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York, without reference to its
principles regarding choice or conflicts of law, and in accordance with and
consistent with the Company's election to be treated as an S Corporation.
SECTION 6.5. SEVERABILITY.
Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law and
the Company's S Corporation election, but if any provisions hereof shall be
prohibited by or invalid under any such law or the Company's S Corporation
election, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating or nullifying the remainder of such
provision or any other provision of this Agreement.
SECTION 6.6. NO WAIVER.
No delay or omission by any party in exercising or enforcing any right
hereunder shall operate as a waiver of such right, and a waiver on one occasion
shall not be construed as a waiver of any right or remedy on any future
occasion.
8
<PAGE> 11
SECTION 6.7. NOTICES.
All notices, requests, consents, designations and demands required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given (a) when personally delivered, whether by
messenger, courier or other person, (b) on the second Business Day after the
date it is sent by certified or registered mail, return receipt requested, or
(c) on the next Business Day after the date it is sent via telefacsimile
(provided it is actually received and is not materially illegible), as follows:
If to Ken:
Kenneth D. Cron
c/o Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, NY 10004-1490
Attention: Richard G. Cohen, Esq.
Fax: (212) 858-1500
with a copy to Ken at his last known address as reflected on the
records of the Company.
If to Gerry:
Gerard G. Leeds
c/o CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Fax: (516) 562-7123
If to Lilo:
Liselotte J. Leeds
c/o CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Fax: (516) 562-7123
9
<PAGE> 12
or to such other mail or facsimile address as the recipient party shall have
last designated by notice given to the other in accordance herewith.
SECTION 6.8. ASSIGNMENT.
Except as expressly provided in this Agreement, no party may assign any
rights or delegate any obligations or liabilities hereunder without the prior
written consent of the other parties, except that each of Gerry and Lilo may
assign any of his or her rights and delegate any of his or her obligations or
liabilities to the other; provided, however, that no such assignment or
delegation shall relieve such assignor from his or her obligations or
liabilities hereunder.
SECTION 6.9. GENDER AND NUMBER.
Except when otherwise indicated by the context, references herein to
one gender shall include the other genders, and references herein to the plural
shall include the singular.
SECTION 6.10. HEADINGS.
The headings herein are for convenience of reference only and shall not
be considered in construing this Agreement.
SECTION 6.11. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed as an original and all of which shall together constitute
one and the same instrument.
10
<PAGE> 13
IN WITNESS WHEREOF, the individual parties have executed this Agreement
on the day and year first above written.
/s/GERARD G. LEEDS /s/LISELOTTE J. LEEDS
- ----------------------------- ---------------------------
GERARD G. LEEDS LISELOTTE J. LEEDS
/s/KENNETH D. CRON
---------------------------
KENNETH D. CRON
11
<PAGE> 1
EXHIBIT 10.11
STOCKHOLDERS' AGREEMENT
This Stockholders' Agreement, made and entered into on this 27th day of
November, 1996, by and among CMP Media Inc., a Delaware corporation (the
"Company"), Kenneth D. Cron ("Ken"), Gerard G. Leeds ("Gerry"), and Liselotte J.
Leeds ("Lilo").
W I T N E S S E T H:
WHEREAS, Ken is a key senior executive of the Company; and
WHEREAS, Gerry and Lilo are major stockholders of the Company; and
WHEREAS, the Company, Gerry and Lilo desire to create substantial
incentives for Ken to (i) cause the Company to grow continuously and
successfully in sales, profits and profitability, (ii) take a long-term view of
the Company's future, (iii) help the Company attain its long-term goals,
including its diversity goals as set forth in its corporate Principles, and (iv)
remain with the Company for the long term; and
WHEREAS, to create such incentives, Gerry and Lilo desire to provide
Ken with the opportunity to purchase shares of the Company's Class A Common
Stock from them, and Ken desires to have the opportunity to purchase such shares
of Class A Common Stock from Gerry and Lilo; and
WHEREAS, as an inducement to Gerry and Lilo to sell him shares of the
Company's Class A Common Stock and as a condition to the closing of such sale,
Ken desires to enter simultaneously therewith into this Agreement with the
Company, Gerry and Lilo;
1
<PAGE> 2
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements herein contained and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by each of the parties, the parties hereto hereby represent,
warrant, covenant and agree, as follows:
ARTICLE I
CONFIDENTIALITY; NON-COMPETITION
Ken hereby accepts and agrees to the provisions of this Article I and
acknowledges that such provisions are necessary and appropriate for the
reasonable protection of Gerry and Lilo's interests and the Company's property,
investments, business relationships, economic advantages and goodwill.
SECTION 1.1. PROTECTION OF COMPANY'S BUSINESS INTERESTS.
As a Key Senior Executive, Ken has been intimately involved in the
management of all aspects of the business of the Company and its Affiliates and
has been a major strategist in planning and implementing its business expansion.
In the course of his long employment with the Company, Ken has developed special
skills, knowledge and abilities in the publishing field which are of a uniquely
personal nature. He has also acquired detailed knowledge of the internal
operations of the Company and its Affiliates and highly confidential information
concerning the national and international business of the Company and its
Affiliates. In addition, he has been afforded the opportunity to develop special
relationships of confidence and trust with the customers, suppliers,
consultants, employees, officers, directors and stockholders of the Company and
its Affiliates. Because of his continuing responsibilities with the Company and
its Affiliates,
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including his involvement in strategic planning and the evaluation of proposed
investments, it is expected that Ken will continue to be entrusted with
confidential information and will continue to have the opportunity to develop
such special relationships. The parties acknowledge and agree that the Company
and Gerry and Lilo would be unfairly and irreparably damaged if Ken were to take
any of such skills, knowledge, information or relationships, which he has
acquired and developed during the course of his employment with the Company, and
use them to the detriment of the Company and its Affiliates.
SECTION 1.2. NON-DISCLOSURE AND NON-USE OF CONFIDENTIAL INFORMATION.
(a) Ken represents, warrants, covenants and agrees that, without the
Company's express or implied consent while employed or, after termination,
without the prior written consent of the Company's chief executive officer or
the Board of Directors, he will not willfully or knowingly at any time directly
or indirectly disclose, communicate or divulge, or use for the benefit of
himself or of any third party, any of the business or trade secrets or other
confidential information of the CMP Group including, solely by way of
illustration but not of limitation, their business strategies, business plans,
budgets, pricing, selling techniques, marketing techniques, operating systems,
financial systems, financial data, procedures, manuals, confidential reports,
personnel records, potential acquisitions, potential business expansions, credit
and financial data of their suppliers and of their present and prospective
customers, data about competitors, new product-development initiatives, custom
research and new product or service concepts and marketing strategy.
(b) Any and all materials of or concerning the CMP Group or their
business or affairs, including without limitation files, memoranda, notes,
correspondence, lists, records, video reproductions, computer tapes and disks,
design and other documents, and
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data storage and retrieval materials (and all copies, compilations and summaries
thereof), and any and all property of the CMP Group, including without
limitation equipment,
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software, keys, business cards and credit cards, that are in Ken's custody or
control shall be delivered to the Company at the time Ken's employment with the
Company terminates for any reason. Ken shall not destroy any such materials or
property, shall not retain any copies thereof and shall certify in writing to
the Company upon request that all such materials and property have been
delivered to the Company.
SECTION 1.3. PROTECTION FROM UNFAIR COMPETITION.
(a) For as long as Ken is employed by the CMP Group and for the greater
of (i) a period of five (5) years after termination of his employment or (ii) as
long as Ken or any Permitted Transferee owns any Restricted Shares, Ken shall
not engage in competition with the CMP Group. For the purposes of this
Agreement, Ken shall be deemed to engage in competition with the CMP Group if
Ken does any of the following, whether or not in exchange for consideration,
without the Company's express or implied consent while employed or without the
Company's prior written consent after termination:
(A) On his own behalf or on behalf of any other person or
entity, (1) participates or is involved in or has direct responsibility for the
day-to-day management or operation of a Directly Competitive Business, an
Indirectly Competitive Business or any material function thereof (E.G.,
advertising, circulation, production and the like); (2) owns, in whole or in
part, beneficially or of record, directly or indirectly, an equity interest (or
an interest convertible into equity) in a Directly Competitive Business or a
Direct Competitor; (3) renders services as a director, officer, employee,
consultant, advisor, agent or independent sales representative to a Direct
Competitor; or (4) renders services as a director, officer, employee,
consultant, advisor, agent or independent sales representative to an Indirect
Competitor unless Ken has no responsibility for or participation or involvement
in any Indirectly Competitive Business of such Indirect
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Competitor, provided, however, that Ken may have supervisory, advisory,
consulting or sales-representative responsibility over an Indirectly Competitive
Business if the revenue of all Indirectly Competitive Businesses of such
Indirect Competitor over which Ken has such responsibility represents no more
than fifteen percent (15%) of the total revenue over which Ken has such
responsibility.
(B) Solicits the service of any employee of the CMP Group for
Ken's own benefit or for the benefit of any person or entity other than the CMP
Group, or induces or helps to induce any such employee to leave employment with
the CMP Group.
(C) Assists, induces or helps any employee or former employee
of the CMP Group or any other person or entity to engage in competition with the
CMP Group or any of its business activities, provided that the giving of a
favorable reference by Ken on behalf of such former employee shall not be
prohibited by this clause (C).
(D) Employs or causes any person or entity other than the CMP
Group to employ any former employee of the CMP Group within one (1) year after
the resignation of such former employee from the CMP Group.
(E) Willfully induces or attempts to induce any customer,
supplier or contractor of the Company to terminate any agreement or arrangement
with the Company, or willfully induces or attempts to induce any customer,
supplier or contractor, or any potential customer, supplier or contractor, of
the Company not to enter into any agreement or arrangement with the Company.
(F) Communicates publicly (other than pursuant to subpoena in
a legal proceeding) or to the press, or writes or produces for publication in
any medium, on the subject of, or with express or implied reference to, the CMP
Group or any of their former, current or future stockholders, directors,
officers or employees in their capacities as such. For the purpose hereof,
"implied reference" shall mean a reference that does not expressly
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name the CMP Group or any of their former, current or future stockholders,
directors, officers or employees but that nevertheless would be understood by
the average reader or audience-member to refer thereto. It shall not be deemed a
violation of this clause (F) if, after the termination of his employment with
the Company, Ken responds to inquiries from the public or the press solely by
stating, in form or substance, "I do not discuss any matters relating to CMP;
please address your inquiries directly to the company" or Ken communicates the
fact that he was formerly employed by the Company and identifies the positions
he held and the dates thereof.
(b) Notwithstanding the provisions of paragraph (a) of this Section
1.3, Ken shall not be deemed to be engaged in competition with the CMP Group
solely by reason of Ken's ownership of (i) an equity interest of less than
one-half of one percent (0.5%) in the securities of a Direct Competitor or
Indirect Competitor listed for trading on a national securities exchange or
quoted in the National Market List of NASDAQ or (ii) an interest in a mutual or
other investment fund which owns an interest in a Direct Competitor or Indirect
Competitor, provided that Ken has no influence or control over the selection of
such fund's investment decisions.
SECTION 1.4. PRIOR NOTICE; OPPORTUNITY TO CURE.
(a) Ken shall give the Company written notice at least twenty (20)
Business Days before entering into any relationship or transaction, or engaging
in any activity, or taking or omitting to take any action, which might
reasonably be deemed a breach of any provision of Section 1.2 or Section 1.3,
such notice to include full and complete particulars as to the proposed
relationship, transaction, activity, action or omission, the services or duties
contemplated and such other facts and circumstances as are reasonably necessary
for the Company to make an informed decision. The Company shall advise Ken in
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writing, within ten (10) Business Days after such notice is given, of the Board
of Directors' determination as to whether such relationship, transaction,
activity, action or omission would materially breach any of the provisions of
Section 1.2 or Section 1.3. In the event that, for reasons not within his
control, Ken gives the Company less than twenty (20) Business Days' prior
written notice, the Company will endeavor in good faith to advise Ken of the
Board of Directors' determination in less than ten (10) Business Days after such
notice is given, provided that the Company's failure to advise Ken in less than
ten (10) Business Days shall not be deemed to constitute consent to such
relationship, transaction, activity, action or omission and shall not give rise
to any liability of the Company to Ken or to any third party.
(b) Once the Company has advised Ken in writing that the Board of
Directors has determined that a proposed relationship, transaction, activity,
action or omission would not materially breach any of the provisions of Section
1.2 or Section 1.3, and Ken has thereupon entered into such relationship or
transaction or has begun to engage in such activity or to take or omit to take
such action, the Board of Directors shall have no right to reverse or otherwise
modify its determination; provided, however, that if the nature, scope or terms
of such relationship, transaction, activity, action or omission are to be
modified after such determination is made, then in accordance with paragraph (a)
hereof Ken shall give the Company prior written notice of such modification and
the Company shall advise him in writing, within ten (10) Business Days after
such notice is given, of the Board of Directors' determination as to whether
such relationship, transaction, activity, action or omission, as so modified,
would materially breach any of the provisions of Section 1.2 or Section 1.3.
(c) In the event that, without having given the Company prior notice
pursuant to paragraphs (a) or (b) hereof, Ken enters into any relationship or
transaction or begins to
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engage in any activity or to take or omit to take any action that the Board of
Directors determines is a material breach of any of the provisions of Section
1.2 or Section 1.3, the Company shall give Ken written notice of such
determination and, if such breach is continuing, an opportunity to cure such
breach before the Company seeks remedy or relief by judicial process or
arbitration or exercises its rights under Section 3.4(b), and before Gerry or
Lilo exercises his or her rights under Section 4.5. The opportunity to cure
shall be sixty (60) days to the extent such continuing breach consists of
holding an ownership interest in a competitive business and fifteen (15) days
with respect to any other continuing breach.
SECTION 1.5. OTHER COVENANTS.
(a) For as long as Ken or any Permitted Transferee owns any Restricted
Shares, Ken shall, if requested by the Company, provide information, testimony
and assistance in connection with the prosecution or defense of any claims by or
against the Company arising out of matters of which he acquired knowledge while
an employee of the Company. The Company shall reimburse Ken for all reasonable
out-of-pocket expenses he incurs in rendering such assistance.
(b) For as long as Ken or any Permitted Transferee owns any Restricted
Shares, Ken shall not willfully make any oral or written statement which
reflects adversely upon the character, honesty, credit, efficiency or business
practices of the CMP Group or its former, current or future stockholders,
directors, officers or employees in their capacities as such.
SECTION 1.6. CONFIDENTIALITY OF AGREEMENT.
The terms and conditions of this Agreement shall be kept confidential
by the
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parties, and none of the parties shall disclose them to any non-party unless
such disclosure is necessitated by (a) legal and/or financial requirements of
the Company, in which case the form of such disclosure shall first be mutually
agreed upon by the Company and Ken, or (b) any arbitration or other legal
proceeding contesting or seeking to enforce any provision or interpretation of
this Agreement (including any deposition or testimony that either party provides
in connection therewith), regardless of whether such proceeding is initiated by
Ken or the Company. Except as provided in the preceding sentence, and without
limiting the generality of the foregoing, Ken shall not respond to or in any way
participate in or contribute to any public discussion, notice or other publicity
concerning or in any way relating to execution of this Agreement or the events
(including any negotiations) which led to its execution, and Ken specifically
agrees that he shall not disclose information regarding this Agreement to any
current or former employees of the Company other than those expressly authorized
by the Company to have knowledge hereof. Without limiting the comprehensive
confidentiality agreed to, Ken may disclose this Agreement to his attorneys,
financial advisors and members of his and his spouse's immediate families,
provided he informs them of this confidentiality provision and they agree to
abide by it. Ken hereby agrees that any disclosure by him of any of the terms
and conditions of this Agreement in violation of the foregoing shall constitute
and be treated as a material breach of this Agreement and Ken shall be
responsible for damages occasioned thereby, including but not limited to
reasonable attorneys' fees incurred by the Company to enforce this Section 1.6.
SECTION 1.7. RELIEF FOR BREACH.
Ken acknowledges and agrees that any breach or anticipatory breach by
him of any of the provisions of this Article I would cause the Company
irreparable injury not com-
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pensable by monetary damages alone and that, accordingly, in any such event, the
Company shall be entitled to injunctions, both preliminary and permanent,
enjoining or restraining such breach or anticipatory breach (and Ken hereby
consents to the issuance thereof without bond by any court of competent
jurisdiction), in addition to monetary damages in such amount as the evidence
may show and such other remedies as may be available at law or in equity. In
addition, in the event of any material breach by Ken of any of the provisions of
Section 1.2 or Section 1.3, Ken may be required to sell to the Company or the
holders of the Class B Stock or to Gerry and Lilo any or all of the Restricted
Shares then owned by Ken, in accordance with the provisions of Section 3.4,
Section 3.6 or Section 4.5, as applicable; provided, however, that Ken shall not
be required to sell such Restricted Shares unless and until the Company has
first complied with its obligations under Section 1.4.
SECTION 1.8. SEPARATE COVENANTS.
Ken understands and agrees that the covenants contained in this Article
I constitute a series of separate covenants, one for each applicable state in
the United States and the District of Columbia, and one for each applicable
foreign country. If in any judicial proceeding a court shall hold unenforceable
any of the separate covenants included in this Article I, then such
unenforceable covenant or covenants shall be deemed limited as necessary or
eliminated from the provisions of this Article I for the purpose of such
proceeding to the extent necessary to permit the remaining separate covenants of
this Article I to be enforced in such proceeding, and to permit such
unenforceable covenant or covenants to be enforced as limited.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
SECTION 2.1. REPRESENTATIONS OF THE COMPANY.
The Company hereby represents and warrants to Ken that (a) it has full
legal right, power and authority to enter into this Agreement and to consummate
the transactions herein contemplated; (b) the execution and delivery of this
Agreement has been duly authorized by all necessary corporate action; (c) this
Agreement constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally and by general principles of equity; and
(d) neither this Agreement nor the consummation of the transactions herein
contemplated will conflict with, violate or infringe any legal restriction,
contract or instrument to which the Company is subject or by which it is bound.
SECTION 2.2. REPRESENTATIONS OF KEN.
Ken hereby represents and warrants to each of the Company, Gerry and Lilo
that (a) he has full legal right, power and authority to enter into this
Agreement and to consummate the transactions herein contemplated; (b) this
Agreement constitutes the valid and binding obligation of Ken, enforceable in
accordance with its terms, except to the extent that such enforcement may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally and by general principles of equity; and (c) neither
this Agreement nor the consummation of the transactions herein contemplated will
conflict with, violate or infringe any legal restriction, contract or instrument
to which Ken is subject or by which he is bound.
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SECTION 2.3. REPRESENTATIONS OF GERRY AND LILO.
Each of Gerry and Lilo hereby represents and warrants to Ken that (a)
each of them has full legal right, power and authority to enter into this
Agreement and to consummate the transactions herein contemplated; (b) this
Agreement constitutes the valid and binding obligation of each of them,
enforceable in accordance with its terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally and by general principles of equity; and
(c) neither this Agreement nor the consummation of the transactions herein
contemplated will conflict with, violate or infringe any legal restriction,
contract or instrument to which either of them is subject or by which either of
them is bound.
ARTICLE III
TRANSFERABILITY OF SHARES AT TIME WHEN
COMPANY IS PRIVATELY HELD AND THERE IS NO PUBLIC MARKET
SECTION 3.1. GENERAL RESTRICTION ON TRANSFER.
At any time when the Company is privately held and there is no public
market for the Class A Stock, Ken shall not, voluntarily or involuntarily, by
operation of law or otherwise, sell, mortgage, pledge, hypothecate, assign as
security, grant or permit to exist or continue a security interest in, or in any
way transfer by gift, will, trust or intestate succession any of the Restricted
Shares, except to a Permitted Transferee as provided in Section 9.2(a) or except
as specifically provided in this Article III. Any attempt by Ken to do any of
the aforementioned acts or otherwise to alienate or dispose of any Restricted
Shares, except in accordance with this Agreement, shall be null and void.
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SECTION 3.2. SALE AFTER DECEMBER 31, 2005.
During each and any calendar year beginning with the calendar year
2006, Ken shall have the right, exercisable upon notice to the Company given
during the first three (3) months of such calendar year, to require the Company
to purchase up to five hundred twenty-eight (528) shares of his Class A Stock
(which number of shares equals approximately one percent (1%) of the number of
shares of the Company's Common Stock issued and outstanding as of the date
hereof), including both Restricted Shares and Option Shares, at the price
provided in Section 3.5 (a).
SECTION 3.3. SALE AFTER DEATH OR PERMANENT DISABILITY.
In the event that Ken's employment with the Company terminates as a
result of his death or the Company terminates his employment by reason of his
Permanent Disability (whether before or after December 31, 2005), then and in
that event, notwithstanding the provisions of Section 3.2, the parties shall
have the following rights:
(a) RIGHTS OF KEN TO SELL. Ken or his representative and/or successors
in interest shall have the right, exercisable upon notice to the Company given
no later than one hundred eighty (180) days after such termination of employment
occurs and/or during the first three (3) months of any succeeding calendar year,
to require the Company to purchase any or all of the Restricted Shares then
owned by Ken or his successors in interest, at the price provided in Section 3.5
(a).
(b) RIGHTS OF COMPANY TO PURCHASE. The Company shall have the right,
exercisable upon notice to Ken or his representative and/or successors in
interest given during the first three (3) months of the third calendar year
after the year in which such termination of employment occurs and/or during the
first three (3) months of any succeeding calendar year, to require Ken or his
representative and/or successors in
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interest to sell to the Company any or all of the Restricted Shares then owned
by Ken or any successor in interest, at the price provided in Section 3.5 (a).
SECTION 3.4. SALE AFTER TERMINATION OF EMPLOYMENT OR COMPETITION.
In the event that (a) Ken's employment with the Company terminates for
any reason other than death or Permanent Disability or (b) Ken materially
breaches any of the provisions of Section 1.2 or Section 1.3 (whether before or
after the termination of his employment for any reason) and, if the Company has
given him notice to cure, fails to cure such breach on a timely basis, then and
in that event, in addition to any rights that Ken has under Section 3.2 (but
subject to the provisions of Section 4.2(c) of the Employment Agreement), the
Company shall have the right, exercisable upon notice to Ken given at any time
or times after such event occurs (whether before or after December 31, 2005), to
require Ken to sell to the Company any or all of the Restricted Shares then
owned by Ken, at the price provided in Section 3.5 (a). The death or Permanent
Disability of Ken occurring subsequent to the termination of his employment or
such breach of any of the provisions of Section 1.2 or Section 1.3 shall not
modify or affect the rights and obligations of the parties as set forth in this
Section 3.4.
SECTION 3.5. PURCHASE PRICE OF RESTRICTED SHARES.
(a) PRICE TO BE PAID FOR RESTRICTED SHARES. The purchase price for any
Restricted Shares to be purchased pursuant to this Article III shall be the Fair
Market Value of such Restricted Shares, except that the purchase price for any
Restricted Shares to be purchased by reason of Ken's breach of any of the
provisions of Section 1.2 or Section 1.3 shall be the lower of the Original
Price of such Restricted Shares or the Fair Market Value of such Restricted
Shares.
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(b) DETERMINATION OF FAIR MARKET VALUE. Within sixty (60) days after Ken
has given the Company notice of intent to sell Restricted Shares or the Company
has given Ken notice of intent to purchase Restricted Shares pursuant to this
Article III, the Company and Ken shall negotiate in good faith in an effort to
reach mutual agreement as to the Fair Market Value of such Restricted Shares. If
the Company and Ken are unable to reach agreement as to the Fair Market Value of
such Restricted Shares within such 60-day period, the Fair Market Value of such
Restricted Shares shall be determined by an appraisal process as follows. Each
of the Company and Ken shall designate, within thirty (30) days after the
conclusion of the 60-day negotiation period referred to above, an independent
and experienced appraiser familiar with the business in which the Company is
then engaged (each individually an "Appraiser" and collectively the
"Appraisers"). The Appraisers shall be instructed to complete their respective
determinations of the Fair Market Value of such Restricted Shares and to deliver
their written reports on such determinations no later than sixty (60) days after
both of such Appraisers have been appointed. If the determination of one of the
Appraisers does not exceed the determination of the other Appraiser by more than
fifteen percent (15%) of the lower of the two determinations, the Fair Market
Value of such Restricted Shares shall be equal to the average of the two
determinations. If the higher determination exceeds the lower determination by
more than fifteen percent (15%) of the lower determination, then the two
Appraisers shall jointly appoint a third, independent and similarly experienced
Appraiser within fifteen (15) days after both of such two Appraisers have
delivered their reports. Such third Appraiser shall deliver his report on his
determination of the Fair Market Value of such Restricted Shares within sixty
(60) days after his appointment, and his determination of Fair Market Value
shall be conclusive and binding on the parties for all purposes hereof. The cost
of all such appraisals shall be borne one-half by the
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Company and one-half by Ken.
(c) PAYMENT OF PURCHASE PRICE.
(i) LUMP SUM OR INSTALLMENTS. The purchase price for Restricted
Shares shall be paid by the Company in full at the closing or, at the election
of the Company, in equal annual installments, together with interest payable
quarterly at the rate of interest announced publicly on the first day of each
calendar quarter by a major United States money market bank, selected by the
Company, as such bank's base rate, over a number of years to be determined by
the Company but in no event exceeding five (5) years if the purchase is pursuant
to Section 3.2, or ten (10) years if the purchase is pursuant to Section 3.3 or
Section 3.4.
(ii) INITIAL INSTALLMENT. In the event the Company elects to pay for
Restricted Shares hereunder on an installment basis, all annual installments
shall be equal in principal amount except as follows:
(A) The initial installment for any such sale of Restricted
Shares, other than a sale occurring by reason of Ken's death, Dismissal For
Cause or breach of any of the provisions of Section 1.2 or Section 1.3, shall be
not less than the amount, if any, of Ken's additional income tax liability
(federal, state and local) actually occasioned as a result of such sale,
provided that such amount shall have been certified to the Company in writing by
Ken's tax accountant.
(B) The initial installment for the first sale of shares of
Class A Stock that Ken makes under this Agreement or the Option Agreement, other
than a sale occurring by reason of Ken's death, Dismissal For Cause or breach of
any of the provisions of Section 1.2 or Section 1.3, shall be at least (1) the
amount due under clause (A) above plus the amount of one million dollars
($1,000,000) or (2) if less, the total purchase price for such Restricted
Shares.
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(C) The initial installment for any sale of Restricted Shares
occurring by reason of Ken's death shall be not less than the amount of the
estate and succession tax liability (federal and state) occasioned as a result
of the inclusion of the Restricted Shares in Ken's estate (giving effect to any
deferral permitted by law or regulation in the payment thereof) together with
any and all costs and expenses of administration of Ken's estate as reasonably
estimated by Ken's representative, all as certified to the Company in writing by
Ken's representative.
(iii) CASH FLOW LIMITATIONS. Notwithstanding any other provision of
this Article III, in the event that the amount due from the Company in payment
for Restricted Shares purchased hereunder (including both principal and
interest) in any one fiscal year of the Company (other than a purchase occurring
by reason of Ken's death) exceeds fifty percent (50%) of the Company's Free Cash
Flow for the preceding year, then and in that event the Company in its sole
discretion may elect to defer payment of any portion of such principal and/or
interest to the extent that payment would require the Company to pay more than
fifty percent (50%) of its Free Cash Flow for such preceding year, provided that
any such deferred amounts shall continue to earn interest as described in
Section 3.5 (c)(i) until paid; and provided further that in any event all
principal and interest shall be paid in full no later than five (5) years or ten
(10) years, as the case may be, after the date of the closing. If, in the same
fiscal year, the Company is also required to pay any persons or entities other
than Ken for shares of Class A Stock that such persons or entities acquired from
Gerry and/or Lilo as of the date hereof or pursuant to options granted by the
Company and/or is required to make payment to Ken and/or any other persons under
any comparable long-term senior executive compensation plan in effect from time
to time, the amounts due to such other persons or entities in such fiscal year
shall be aggregated with the amount due with respect to the Restricted Shares in
such
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fiscal year and, if the aggregate amount due exceeds fifty percent (50%) of the
Company's Free Cash Flow for the preceding fiscal year, then and in that event
the Company in its sole discretion may elect to defer payment of any portion of
such aggregate amount (principal and/or interest) to the extent that it would
exceed fifty percent (50%) of the Company's Free Cash Flow for the preceding
year, and payments and deferments shall be effected among Ken and such other
persons or entities in proportion to the amounts (both principal and interest)
then due and owing to each, subject to any provisions in such plans as to
priority of payment.
(d) CLOSING OF TRANSACTION. The closing of any purchase of Restricted
Shares hereunder shall be held no later than ninety (90) days after the final
determination of the Fair Market Value of such Restricted Shares, at such time
and place as the Company may reasonably designate. At the closing, Ken shall
deliver or cause to be delivered to the Company the stock certificates
representing such Restricted Shares, duly endorsed for transfer in blank or with
duly executed stock powers attached, and with signature guaranteed, in exchange
for which the Company shall deliver to Ken the amount of the purchase price then
due, together with the Company's promissory note evidencing the Company's
obligation to pay the balance, if any, of the purchase price in accordance with
the terms of Section 3.5(c). All payments to Ken hereunder shall be made in cash
or by Company check, bank draft or wire transfer.
SECTION 3.6. ASSIGNMENT AND DELEGATION BY THE COMPANY TO CLASS B
STOCKHOLDERS.
The Company shall have the right, exercisable upon notice to Ken, to
assign any or all of its rights and/or delegate any or all of its obligations
under this Article III to the holders of the Class B Stock, in proportion to
their respective ownership interests or as they may otherwise unanimously agree,
provided that the Company shall not be relieved
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of its obligation to purchase from Ken in accordance herewith any Restricted
Shares duly tendered and not purchased and paid for by such holders of the Class
B Stock.
SECTION 3.7. TAG-ALONG RIGHTS -- DRAG-ALONG RIGHTS.
(a) In the event the Controlling Stockholders of the Company determine
to dispose of all or a portion of their shares of Common Stock, with the result
that they will no longer control the Company, then and in that event the Company
shall give Ken a notice (a "Tag-Along Notice") of such proposed sale (a
"Tag-Along Sale") and the material terms of the Tag-Along Sale (the "Material
Terms") no later than thirty (30) days prior to the consummation of the
Tag-Along Sale. If, within twenty (20) days after a Tag-Along Notice is given
to Ken (or within ten (10) days after any notice of a change in the Material
Terms is given to Ken), the Company receives from Ken a written request (a
"Tag-Along Request") to include in the Tag-Along Sale any of the Restricted
Shares held by him, such Restricted Shares (in the same proportion as the total
number of shares of the Common Stock held by the Controlling Stockholders bears
to the number of shares being sold by the Controlling Stockholders) shall be
included in the Tag-Along Sale on the same terms and conditions and subject to
the same obligations as the sale by the Controlling Stockholders, taking into
account the proportionate ownership of the Controlling Stockholders and Ken. The
Company shall give Ken prompt notice of any change in the Material Terms and, in
such event, Ken shall have the opportunity, for a period of ten (10) days after
such notice has been given, to submit a Tag-Along Request if Ken did not
previously submit a Tag-Along Request or to withdraw or modify a Tag-Along
Request previously made.
(b) Ken's rights hereunder to participate in a Tag-Along Sale shall be
contingent on Ken's compliance with each of the provisions hereof, Ken's
acceptance of a
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proportionate delegation of any duties or obligations related to the Tag-Along
Sale, including any indemnification obligations, and Ken's execution of such
documents in connection with the Tag-Along Sale as may be reasonably requested
by the Controlling Stockholders.
(c) In connection with any proposed sale of shares of Common Stock by
the Controlling Stockholders to a non-affiliated person or entity in an
arms-length transaction, if Ken has not exercised his rights to sell Restricted
Shares as contemplated under paragraph (a) of this Section 3.7, the Company
shall have the right, exercisable upon notice to Ken, to require that Ken sell
to the purchaser of the shares of the Controlling Stockholders the same
proportion of the Restricted Shares then owned by Ken as are being sold by the
Controlling Stockholders, on the same terms and conditions and subject to the
same obligations including any indemnification obligations, as the sale by the
Controlling Stockholders, taking into account the proportionate ownership of the
Controlling Stockholders and Ken. Ken agrees that he will cooperate with the
Company and the Controlling Stockholders in taking all such actions, including
executing all such documentation, as the Company and/or the Controlling
Stockholders may reasonably request.
ARTICLE IV
TRANSFERABILITY OF SHARES AT TIME COMPANY SHARES ARE PUBLICLY TRADED
SECTION 4.1. GENERAL RESTRICTION ON TRANSFER.
In the event that shares of the Class A Stock become listed on a national
securities exchange or quoted in the National Market List of NASDAQ, then and in
that event the provisions of Article III shall cease to be operative, and Ken
shall not, voluntarily or involuntarily, by operation of law or otherwise, sell,
mortgage, pledge, hypothecate,
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assign as security, grant or permit to exist or continue a security interest in,
or in any way transfer by gift, will, trust or intestate succession any of the
Restricted Shares, except to a Permitted Transferee as provided in Section
9.2(a) or except as specifically provided in this Article IV. Any attempt by Ken
to do any of the aforementioned acts or otherwise to alienate or dispose of any
Restricted Shares, except in accordance with this Agreement, shall be null and
void.
SECTION 4.2. SALE ON OR BEFORE DECEMBER 31, 2005.
Except as otherwise provided in Section 4.4 and Section 4.6, from
January 1, 1998 through December 31, 2005, Ken shall have the right to sell
Restricted Shares on the public market, subject to the following conditions:
(a) MINIMUM MARKET CAPITALIZATION. Ken may not sell any Restricted
Shares under this Section 4.2 unless the market capitalization of the Company as
of the Business Day immediately preceding the date of sale is greater than three
hundred forty million dollars ($340,000,000). The market capitalization of the
Company shall be determined by multiplying the Fair Market Value of a share of
Class A Stock by the total number of shares of the Common Stock then issued and
outstanding.
(b) MAXIMUM NUMBER OF SHARES.
(i) The maximum number of shares of Class A Stock (including both
Restricted Shares and Option Shares) that Ken may sell in any single calendar
year shall be five hundred twenty-eight (528) shares of Class A Stock (which
number of shares equals approximately one percent (1%) of the number of shares
of the Company's Common Stock issued and outstanding as of the date hereof); and
(ii) the maximum number of Restricted Shares that may be included in
such shares of Class A Stock sold in any single calendar year shall be the
smaller of (A) the
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number of Restricted Shares whose Fair Market Value as of the Business Day
immediately preceding the date of sale does not exceed $500,000 or (B)
fifty-three (53) Shares (which number equals approximately 1/10 of one percent
(0.1%) of the number of shares of the Company's Common Stock issued and
outstanding as of the date hereof).
SECTION 4.3. SALE AFTER DECEMBER 31, 2005.
Except as otherwise provided in Section 4.4 and Section 4.6, after
December 31, 2005, Ken shall have the right to sell Restricted Shares on the
public market, provided only that the maximum number of shares of Class A Stock
(including both Restricted Shares and Option Shares) that Ken may sell in any
single calendar year shall be five hundred twenty-eight (528) shares of Class A
Stock (which number of shares equals approximately one percent (1%) of the
number of shares of the Company's Common Stock issued and outstanding as of the
date hereof).
SECTION 4.4. SALE AFTER DEATH OR PERMANENT DISABILITY.
(a) Notwithstanding the provisions of Section 4.2, in the event that
Ken's employment terminates as a result of his death or the Company terminates
his employment by reason of his Permanent Disability, then and in that event (i)
the precondition to sales on or before December 31, 2005, which is set forth in
Section 4.2(a) with respect to the Company's minimum market capitalization,
shall not apply, and Ken and/or his representative and/or his successors in
interest shall have the right to sell Restricted Shares pursuant to Section 4.2
on or before December 31, 2005 irrespective of the market capitalization of the
Company; and (ii) the limitation set forth in Section 4.2(b)(ii) shall not apply
and, instead, the maximum number of Restricted Shares that may be included in
the shares of Class A Stock sold in any calendar year by Ken and/or
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his representative and/or successors in interest, as a group, shall be two
hundred sixty-four (264) Restricted Shares.
(b) Notwithstanding the provisions of Section 4.2, Section 4.3 and
Section 4.4 (a)(ii), in the event that Ken's employment terminates as a result
of his death, Ken's representative and/or successors in interest shall have the
right to sell in any calendar year up to such number of shares of Class A Stock
(including both Restricted Shares and Option Shares) as shall equal the greater
of (i) the number of such shares that is permitted to be sold under Section 4.2
or Section 4.3, as applicable, or (ii) the number of such shares that is
necessary in order for the proceeds of such sale to equal the amount of the
estate and succession tax liability (federal and state), including any interest
thereon, due in such year as a result of the inclusion of such shares of Class A
Stock in Ken's estate (giving effect to any deferral permitted by law or
regulation in the payment thereof), together with any and all costs and expenses
of administration of Ken's estate for such year as reasonably estimated by Ken's
representative, all as certified to the Company in writing by Ken's
representative.
SECTION 4.5. SALE AFTER COMPETITION.
In the event that Ken materially breaches any of the provisions of
Section 1.2 or Section 1.3 (whether before or after the termination of his
employment for any reason) and, if the Company has given him notice to cure,
fails to cure such breach on a timely basis, then and in that event, in addition
to any other rights that the parties have under this Article IV (but subject to
the provisions of Section 4.2(c) of the Employment Agreement), Gerry and Lilo
shall have the following rights:
(a) Each of Gerry and Lilo shall have the right, exercisable upon
notice to Ken given at any time or times after such event occurs, to require Ken
to sell back to him
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or her, as the case may be, all of the Restricted Shares then owned by Ken which
he purchased from Gerry or Lilo, as the case may be, under the Share Purchase
Agreement. The purchase price for Restricted Shares re-purchased hereunder shall
be the lower of (i) the Original Price of such Restricted Shares or (ii) the
Fair Market Value of such Restricted Shares as of the date of such notice.
(b) If Gerry and/or Lilo exercise any rights hereunder, the closing of
their respective purchases of Restricted Shares shall be held no later than
ninety (90) days after their respective notices of exercise are given and at
such time and place as they may reasonably designate. At the closing, Ken shall
deliver or cause to be delivered to Gerry and/or Lilo, as the case may be, the
stock certificates representing such Restricted Shares, duly endorsed for
transfer in blank or with duly executed stock powers attached, and with
signature guaranteed, in exchange for which the purchasers shall deliver to Ken
the full amount of their respective purchase prices in cash or by check, bank
draft or wire transfer.
(c) To the extent, if any, that Gerry and Lilo have not exercised their
rights to purchase any or all of Ken's Restricted Shares in accordance with
paragraph (a) of this Section 4.5, Ken shall continue to have the right to sell
such unpurchased Restricted Shares subject to and in accordance with the other
provisions of this Article IV.
(d) Each of Gerry and Lilo shall have the right, exercisable upon
notice to Ken, to assign any or all of his or her rights and/or delegate any or
all of his or her obligations under this Section 4.5 to the holders of the Class
B Stock or their children, in proportion to the respective ownership interests
of the holders of the Class B Stock or as they may otherwise unanimously agree.
(e) In the event that the Company makes a determination that Ken has
not materially breached any of the provisions of Section 1.2 or Section 1.3,
such
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determination shall be binding upon Gerry and Lilo for the purposes of this
Agreement.
SECTION 4.6. TENDER, MERGER, CONSOLIDATION.
In the event the Controlling Stockholders of the Company determine to
dispose all or a portion of their shares of Common Stock in a tender, merger,
consolidation or similar type of transaction, with the result that they no
longer control the Company, then and in that event, Ken shall have the right,
but not the obligation, to dispose of a proportionate number of shares of his
Class A Stock in any such transaction.
SECTION 4.7. COMPLIANCE WITH SECURITIES LAWS.
Neither Ken nor his representative will sell or attempt to sell any
shares of Class A Stock under this Article IV except in accordance with all
applicable federal and state securities laws, all applicable rules and
regulations of the Securities and Exchange Commission, and any applicable
underwriters' limitations and restrictions.
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ARTICLE V
FUTURE CHANGES IN CAPITAL STRUCTURE AND REDEMPTION OF SHARES
SECTION 5.1. CHANGES IN CAPITAL STRUCTURE.
If the Company hereafter declares a dividend payable in, or subdivides
or combines, shares of the Class A Stock, or if the Company engages in a
recapitalization, reorganization, merger, consolidation, split-up, transfer of
assets, combination or exchange of shares of Common Stock, or if any other event
shall occur which in the judgment of the Board of Directors calls for action by
way of adjusting the number of Restricted Shares, the Board of Directors shall
forthwith take such action as in its judgment shall be necessary or appropriate
to preserve Ken's rights with respect to the Restricted Shares substantially
proportionate to his rights existing prior to such event. The decision of the
Board of Directors with respect to any matter referred to in this Section 5.1
shall be conclusive and binding upon Ken. Nothing in this Agreement is intended
to preserve Ken's equity interest in the Company against dilution resulting from
the issuance of securities by the Company in the future.
SECTION 5.2. REDEMPTION OF CLASS B STOCK.
If and when any shares of the Class B Stock owned by any member of the
Leeds Family are redeemed by the Company in accordance with the terms and
provisions of the Shareholders' Agreement, then, in order to ensure that Ken's
percentage interest in the Company will remain the same as his interest would
have been but for such redemption (the "Class B Stock Redemption"), the Company
shall, promptly following the Class B Stock Redemption, redeem at a price equal
to their par value (currently $.10 per share) a
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number of the Restricted Shares such that (a) the ratio of (i) the number of
Restricted Shares outstanding immediately after such redemption of Restricted
Shares (the "Class A Stock Redemption") to (ii) the total number of shares of
Common Stock outstanding immediately after the Class A Stock Redemption is the
same as (b) the ratio of (i) the number of Restricted Shares outstanding
immediately prior to the Class B Stock Redemption to (ii) the total number of
shares of Common Stock outstanding immediately prior to the Class B Stock
Redemption.
ARTICLE VI
PROCEDURE TO BE FOLLOWED IN CASE OF
DISMISSAL FOR CAUSE
In the event the Company terminates Ken's employment as a Dismissal For
Cause, the Company shall give Ken at least ten (10) Business Days' prior written
notice specifying in reasonable detail the specific conduct of Ken that it
considers grounds for Dismissal For Cause and the specific provision of the
definition of "Dismissal For Cause" upon which it relies. Ken's employment with
the Company shall terminate as of the tenth Business Day after such notice is
given, or such other date as the parties mutually agree. Should Ken dispute the
basis for such termination in a written notice given to the Company on or before
his termination date, the parties shall meet and endeavor to resolve the dispute
amicably within twenty (20) Business Days after Ken's notice is given. If they
cannot so resolve the dispute within such twenty (20) Business Days after Ken's
notice is given, Ken and the Company shall submit the dispute to binding
arbitration in accordance with Section 7.1. The decision rendered in such
arbitration shall be final and binding on both Ken and the Company for all
purposes. If the arbitrators determine that
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the Company did not have a proper basis on which to terminate Ken's employment
as a Dismissal For Cause within the meaning of this Agreement, the termination
of Ken's employment shall be treated for all purposes of this Agreement as a
Dismissal Without Cause. In addition to any other rights which a party may have,
the party prevailing in such arbitration proceeding shall be entitled to recover
from the losing party any and all of the expenses incurred by the prevailing
party in such proceeding, including reasonable attorney's fees.
ARTICLE VII
RESOLUTION OF DISPUTES
SECTION 7.1. ARBITRATION.
Except as provided in Section 7.2, all controversies arising out of or
relating to this Agreement or the breach hereof shall be settled by arbitration
in the County of Nassau, State of New York, in accordance with the rules of the
American Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. Any
arbitration hereunder shall be before three (3) arbitrators.
SECTION 7.2. EQUITABLE REMEDIES.
Notwithstanding the provisions of Section 7.1, any proceeding for
injunctive relief or specific performance in connection with this Agreement
shall be commenced in Supreme Court of the State of New York, County of Nassau,
and each of the parties hereby accepts the exclusive jurisdiction of such Court
for such purpose; provided, however, that the petitioner may commence such
proceeding in such other court as may
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be necessary, in the petitioner's judgment, in order to more effectively or
expeditiously obtain personal jurisdiction over the respondent.
ARTICLE VIII
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
"Affiliates" shall mean all entities controlling, controlled by or
under common control with the Company.
"Appraiser" or "Appraisers" shall have the meaning specified in Section
3.5(b).
"Board of Directors" shall mean the Board of Directors of the Company.
"Business Day" shall mean any day on which the Company is scheduled to
be open for business.
"Class A Stock" shall mean the Class A Common Stock of the Company.
"Class A Stock Redemption" shall have the meaning specified in Section
5.2.
"Class B Stock" shall mean the Class B Common Stock of the Company.
"Class B Stock Redemption" shall have the meaning specified in Section
5.2.
"Closing Price" shall mean the last-quoted price at which shares of
Class A Stock were traded at the close of business on a national securities
exchange or NASDAQ on any day on which shares of the Class A Stock were publicly
held.
"CMP Business" shall mean any publication, product, service or business
(a) which the CMP Group publishes, produces, provides or engages in or (b) which
the CMP Group has a bona fide plan or intention to publish, produce, provide or
engage in within the succeeding 12-month period, the research and development of
which the CMP Group
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has devoted substantive time and attention to, and which plan or intention Ken
has actual knowledge of before he engages in any activity competitive with such
CMP Business as contemplated by clause (A) of Section 2.3(a).
"CMP Group" shall mean the Company or any of its Affiliates.
"Common Stock" shall mean all the classes of the Common Stock of the
Company collectively.
"Controlling Stockholders" shall mean the members of the Leeds Family
who hold shares of capital stock of the Company collectively representing a
majority of the votes that may be cast on any matter on which stockholders of
the Company shall be entitled to vote.
"Direct Competitor" shall mean a business enterprise that produces or
operates, or owns directly or indirectly an interest of twenty percent (20%) or
more in, one or more Directly Competitive Businesses.
"Directly Competitive Business" shall mean any competitive publication,
product, service or business (a) the target audience of which is substantially
the same as the target audience of a CMP Business or (b) forty percent (40%) or
more of the annual revenue of which is derived from substantially the same
customers as a CMP Business derives twenty percent (20%) or more of its annual
revenue.
"Dismissal For Cause" shall mean the termination of Ken's employment
with the Company by the Board of Directors for (i) the willful and continued
failure of Ken substantially to perform his duties as an officer and employee of
the Company or comply with the written policies of the Company after the Company
has delivered to Ken a written demand for substantial performance or compliance
that specifies such failure in reasonable detail; (ii) illegal conduct or gross
misconduct by Ken, in either case that is willful and results (or is reasonably
likely to result) in material damage to the business or
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reputation of the Company; or (iii) the resignation by Ken from his employment
following his act or omission which would constitute grounds for Dismissal For
Cause hereunder. No act or failure to act on the part of Ken (other than
non-compliance with lawful instructions given to Ken by the Company) shall be
considered "willful" unless it is done or omitted to be done by him in bad faith
or without reasonable belief that his action or omission was in the best
interests of the Company. Any act or failure to act that is pursuant to
resolution duly adopted by the Board of Directors shall be conclusively presumed
to be done or omitted to be done by Ken in good faith and in the best interests
of the Company.
"Dismissal Without Cause" shall mean the termination of Ken's
employment by the Company on any grounds other than grounds for Dismissal For
Cause or as a result of his Permanent Disability.
"Employment Agreement" shall mean that certain Employment Agreement
entered into as of the date hereof by and between the Company and Ken.
"Fair Market Value" shall mean the fair market value of a share of
Class A Stock, which shall be the Closing Price on the trading day immediately
preceding the date of determination of fair market value or, if the Company is
privately held, the best estimate of the fair market value of a share of Class A
Stock as of the last day of the month immediately preceding the month in which
notice to buy or sell a share of Class A Stock is given, as determined with
reference to publicly held companies comparable to the Company.
"Financial Statements" shall mean the combined or consolidated
financial statements of the Company and its Affiliates prepared in accordance
with generally accepted accounting principles and audited by the Company's
independent certified public accountants.
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"Free Cash Flow" of the Company with respect to any fiscal year shall
mean the combined or consolidated net income of the Company for such year as
reflected in the Financial Statements, adjusted so as (a) to exclude the amount,
if any, that, in determining such combined or consolidated net income,
represented (i) an expense for depreciation and/or amortization or (ii) a
provision or credit for federal, state, local or foreign income taxes; and (b)
to include the amount, if any, of cash payments that the Company actually made
in such fiscal year (i) for federal, state, local and foreign income taxes owed
by the Company (and, if the Company is an S Corporation, in distributions to its
stockholders for the payment of federal, state, local and foreign taxes owed by
such stockholders with respect to the Company's income), (ii) for capital
expenditures, (iii) pursuant to the Company's 1988 Equity Appreciation Plan or
(iv) as required under the terms of the Company's then-existing financing
arrangements to reduce the principal amount of indebtedness. The Company's
determination of Free Cash Flow shall be conclusive and binding for all purposes
of this Agreement provided that the Company's certified public accountants
render a written opinion that such determination presents fairly, in all
material respects, the Free Cash Flow of the Company as herein defined. (A
hypothetical illustration of the calculation of Free Cash Flow is set forth on
Schedule VIII hereto.)
"Indirect Competitor" shall mean a business enterprise that does not
produce or operate, or own directly or indirectly an interest in, any Directly
Competitive Businesses but produces or operates, or owns directly or indirectly
an interest of twenty percent (20%) or more in, one or more Indirectly
Competitive Businesses.
"Indirectly Competitive Business" shall mean any competitive or
potentially competitive publication, product, service or business which derives
from twenty percent (20%) to but not including forty percent (40%) of its annual
revenue from substantially the same customers as a CMP Business derives twenty
percent (20%) or more of its
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annual revenue.
"Key Senior Executive" shall mean a Company employee holding a position
of responsibility no lower than that currently titled President of Publishing,
or a position with a comparable level of responsibility (but in any case a level
of responsibility higher than the position currently titled Senior Vice
President/Group Publisher).
"Leeds Family" shall mean Gerard G. Leeds, Liselotte J. Leeds, Michael
S. Leeds, Richard A. Leeds, Daniel H. Leeds, Greg Jobin-Leeds and Jennifer
Leeds-Lukehart.
"Negative Pledge Agreement" shall mean that certain Negative Pledge
Agreement originally dated as of July 15, 1993 by and among Gerry, Lilo and
Fleet National Bank (f/k/a/ Shawmut Bank Connecticut, National Association), as
most recently amended and confirmed by Gerry, Lilo, Michael S. Leeds and Daniel
H. Leeds to Fleet National Bank and The Chase Manhattan Bank on November 14,
1996.
"Option Agreement" shall mean that certain Option Agreement entered
into as of the date hereof by and between the Company and Ken.
"Option Shares" shall mean the shares of Class A Stock owned by Ken
pursuant to the Option Agreement.
"Original Price" shall mean the per-share price at which Ken shall have
purchased the Restricted Shares from Gerry and Lilo, as adjusted to take into
account any changes in the Company's capital structure and any stock redemptions
that may have occurred subsequent to the purchase of such Restricted Shares by
Ken hereunder.
"Permanent Disability" shall mean a physical or mental impairment, as a
result of which Ken shall have been unable, with or without reasonable
accommodation, to perform the essential functions of his employment position for
a period of at least sixteen (16) weeks during any 12-month period.
"Permitted Transferee" shall mean a spouse, child, or grandchild of
Ken, or an
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entity (e.g., a trust, corporation or partnership) in which Ken has the majority
voting interest and of which the beneficiaries are a spouse and/or one or more
children or grandchildren of Ken.
"Restricted Shares" shall mean the shares of Class A Stock which Ken
shall have purchased from Gerry and Lilo pursuant to the Share Purchase
Agreement, plus any additional shares of Class A Stock that may be issued from
time to time with respect to such Restricted Shares as a result of any changes
in the Company's capital structure as contemplated in Section 5.1, and less any
Restricted Shares that may be canceled or redeemed from time to time as a result
of any such changes in the Company's capital structure or of any stock
redemptions as contemplated in Section 5.2.
"Share Purchase Agreement" shall mean that certain Share Purchase
Agreement entered into as of the date hereof by and among Gerry, Lilo and Ken.
"Shareholders' Agreement" shall mean that certain Shareholders'
Agreement entered into as of June 30, 1991 by and among the Company, certain of
the Affiliates and the members of the Leeds Family.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. LEGEND ON CERTIFICATES.
Upon the execution of this Agreement, each certificate evidencing any
of the Restricted Shares held by Ken shall be endorsed as follows:
The shares of stock evidenced by this certificate are subject to the
restrictions of and are transferable only upon compliance with the
provisions of a certain Stockholders' Agreement entered into by and among
Gerard G. Leeds, Liselotte J. Leeds, Kenneth D. Cron and the Company. A
copy of such Agreement is on file in the office of the Company.
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In addition, all such certificates shall bear such other legends as, in the
opinion of the Company's counsel, are necessary or appropriate to ensure
compliance with all applicable federal and state securities laws.
SECTION 9.2. PERMITTED TRANSFEREES; REPRESENTATIVE AND SUCCESSORS IN
INTEREST.
(a) PERMITTED TRANSFEREES. Subject to Section 9.4 but notwithstanding
any other provision of this Agreement, Ken shall be permitted to sell, give or
bequeath all or any portion of the Restricted Shares or interest therein, or
pass such Restricted Shares or interest by means of intestate succession or
otherwise, either outright or in trust, to a Permitted Transferee, provided that
such transfer shall be implemented in a manner acceptable to legal counsel for
the Company. In case of any such transfer by Ken, each Permitted Transferee
shall receive and hold the transferred Restricted Shares subject to all the
terms and conditions of this Agreement, and there shall be no further transfer
of such Restricted Shares except by such Permitted Transferee to another
Permitted Transferee in accordance with the terms of this Agreement. Before Ken
transfers any Restricted Shares to a Permitted Transferee, and before any
Permitted Transferee transfers any Restricted Shares to another Permitted
Transferee, Ken or the transferring Permitted Transferee, as the case may be,
shall give the Company written notice of such intended transfer. Any Permitted
Transferee shall, to the extent of the Restricted Shares transferred, succeed to
all the rights and obligations of the transferor under this Agreement and shall
become bound by all the terms and conditions hereof; provided that, as a
condition precedent to a Permitted Transferee's exercising any rights under this
Agreement and to the Company's obligation to change its records to reflect the
record ownership of such Restricted Shares in the name of such Permitted
Transferee, the Permitted Transferee shall execute such
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documents and instruments as may reasonably be required by legal counsel to the
Company. Unless otherwise expressly provided in this Agreement, any reference
herein to a right or obligation of Ken to sell or receive payment for any shares
of Class A Stock shall be deemed to refer equally to any Permitted Transferee,
and any limitations herein with respect to the number or category of shares of
Class A Stock which Ken shall have a right or obligation to sell in any calendar
year shall apply to Ken and all Permitted Transferees as a group.
(b) REPRESENTATIVE AND SUCCESSORS IN INTEREST. Except as may be
otherwise specifically provided in this Agreement, in the event of Ken's death
or incapacity his representative and/or successors in interest shall succeed to
all his rights and obligations under this Agreement and be bound by all the
terms and conditions hereof, and they shall be entitled to exercise such rights,
and shall be required to fulfill such obligations, in the same manner and to the
same extent that Ken would have been so entitled or required but for his death
or incapacity.
SECTION 9.3. FURTHER ASSURANCES.
Each of the parties hereto, upon request of another party, shall take all
such actions and execute and deliver all such further instruments of sale,
assignment, conveyance, transfer and exchange, and all such other documents and
agreements, as may be necessary or appropriate to assure, complete and evidence
the full and effective sale, assignment, transfer, conveyance and exchange of
the Restricted Shares as herein required and as may otherwise be necessary or
appropriate to comply with the terms and conditions of this Agreement. In the
event a party shall not take all such actions or execute or deliver all such
further instruments, then and in that event each such party hereby appoints the
Company such party's agent and attorney-in-fact for the purpose of executing and
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delivering (a) any and all documents necessary to convey and/or exchange the
Restricted Shares pursuant to the provisions of this Agreement, any conveyance
or exchange so made fully divesting the party whose interest is so conveyed of
all right, title or equity in or to the Restricted Shares formerly owned by such
party, and (b) any and all other documents, instruments, agreements and other
writings necessary to effectuate the terms of this Agreement. The powers of
attorney herein granted, being coupled with an interest, are irrevocable and
shall not be revoked by the death, dissolution or incapacity of any party hereto
or for any other reason. Each party hereto hereby releases any other party who
conveys or exchanges the Restricted Shares formerly owned by such party as
provided in this Section 9.3 from any and all claims and liabilities for or
resulting from the conveying or exchanging of such Restricted Shares.
SECTION 9.4. S CORPORATION.
It is intended that for federal income tax purposes the Company will
continue to qualify as an "S Corporation" as defined in Section 1361 of the
Internal Revenue Code or any successor provision of the federal income tax laws.
Accordingly, the Company and Ken shall execute and keep in full force and effect
the consent described in Section 1362(a)(2) of the Internal Revenue Code or any
successor provision until such time as the Company and the Controlling
Stockholders determine not to continue to qualify the Company as an S
Corporation. In addition, notwithstanding the provisions of any other Section of
this Agreement, no transfer of any shares of Class A Stock shall be made to any
person or entity, nor shall Ken by action or inaction cause any circumstances to
exist, which would disqualify the Company as an S Corporation.
SECTION 9.5. CREDIT FACILITIES.
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It is understood and acknowledged that one or more banks or lending
institutions of the Company may from time to time require, as a condition to
extending or continuing to extend credit to the Company, that persons who are
both stockholders and members of management of the Company execute and deliver
to such banks or lending institutions certain assurances and agreements such as
the Negative Pledge Agreement. For as long as he is a Key Senior Executive, Ken
shall, if requested by the Company, promptly take all such actions and execute
and deliver all such documents containing such assurances and agreements (other
than personal guarantees) as may be reasonably required by such banks or lending
institutions, on the same basis and in substantially the same form and manner as
other persons who are both stockholders and members of management of the
Company.
SECTION 9.6. OTHER TRANSFERS.
In the event of any transfer of any Restricted Shares by Ken, his
representative, any successor in interest or any Permitted Transferee, by
operation of law (other than transfers occasioned by an individual's death) or
court order, including but not limited to any foreclosure, adjudication in
bankruptcy, appointment of a receiver of the assets of Ken, or levy and
execution, Ken shall give immediate notice thereof to the Company, including in
such notice the date and circumstances of such transfer and the name and address
of the transferee. Gerry and Lilo or their designees, at their option, upon
giving sixty (60) days' prior written notice to such transferee, shall have the
right to purchase such Restricted Shares at the Original Price. The purchase
price for any such Restricted Shares shall be paid in full at the closing, which
shall not be later than thirty (30) Business Days after such notice to purchase
is given, at such time and place as the purchaser(s) may designate.
SECTION 9.7. ENTIRE AGREEMENT; BINDING EFFECT.
39
<PAGE> 40
This Agreement contains all of the terms agreed upon by the parties
with respect to the subject matter hereof and replaces and supersedes any and
all prior agreements, written or oral, between the parties relating to the
Restricted Shares (except for the Option Agreement to the extent its terms are
not inconsistent herewith). No promises, agreements or representations with
respect to the matters herein contained shall be binding upon any of the parties
unless set forth herein. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective heirs, representatives, successors
and permitted assigns.
40
<PAGE> 41
SECTION 9.8. AMENDMENT.
No provision of this Agreement may be amended or waived except by a
writing making reference to this Agreement and signed by the party against whom
the enforcement of such amendment or waiver is sought.
SECTION 9.9. APPLICABLE LAW.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York, without reference to its
principles regarding choice or conflicts of law, and in accordance with and
consistent with the Company's election to be treated as an S Corporation.
SECTION 9.10 SEVERABILITY.
Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law and
the Company's S Corporation election, but if any provisions hereof shall be
prohibited by or invalid under any such law or the Company's S Corporation
election, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating or nullifying the remainder of such
provision or any other provision of this Agreement.
SECTION 9.11. NO WAIVER.
No delay or omission by any party in exercising or enforcing any right
hereunder shall operate as a waiver of such right, and a waiver on one occasion
shall not be construed as a waiver of any right or remedy on any future
occasion.
41
<PAGE> 42
SECTION 9.12. NOTICES.
All notices, requests, consents, designations and demands required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given (a) when personally delivered to an individual
party or to an authorized officer of a corporate party, whether by messenger,
courier or other person, (b) on the second Business Day after the date it is
sent by certified or registered mail, return receipt requested, or (c) on the
next Business Day after the date it is sent via telefacsimile (provided it is
actually received and is not materially illegible), as follows:
If to the Company:
CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Attention: President
Fax: (516) 562-5718
with a copy to:
CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Attention: General Counsel
Fax: (516) 562-7123
If to Ken: Kenneth D. Cron
c/o Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, NY 10004-1490
Attention: Richard G. Cohen, Esq.
Fax: (212) 858-1500
with a copy to Ken at his last known address as reflected on the records
of the
42
<PAGE> 43
Company
If to Gerry:
Gerard G. Leeds
c/o CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Fax: (516) 562-7123
If to Lilo:
Liselotte J. Leeds
c/o CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Fax: (516) 562-7123
or to such other mail or facsimile address as the recipient party shall have
last designated by notice given to the other in accordance herewith.
SECTION 9.13. ASSIGNMENT.
Except as expressly provided in this Agreement, no party may assign any
rights or delegate any obligations or liabilities hereunder without the prior
written consent of the other parties, except that each of Gerry and Lilo may
assign any of his or her rights and delegate any of his or her obligations or
liabilities to the other, and the Company may assign any of its rights and
delegate any of its duties to an entity that controls, is controlled by or is
under common control with the Company; provided, however, that no such
assignment or delegation shall relieve such assignor from his, her or its
obligations or liabilities hereunder.
43
<PAGE> 44
SECTION 9.14. SURVIVAL.
This Agreement shall survive any merger, sale or other disposition of the
Company.
SECTION 9.15. GENDER AND NUMBER.
Except when otherwise indicated by the context, references herein to one
gender shall include the other genders, and references herein to the plural
shall include the singular.
SECTION 9.16. DATES.
If any date referenced in this Agreement falls on a day that is not a
Business Day, the next succeeding Business Day shall be deemed substituted for
such date.
SECTION 9.17. HEADINGS.
The headings herein are for convenience of reference only and shall not be
considered in construing this Agreement.
SECTION 9.18. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed as an original and all of which shall together constitute
one and the same instrument.
44
<PAGE> 45
IN WITNESS WHEREOF, the individual parties have executed this Agreement
and the Company has caused this Agreement to be executed by an officer thereunto
duly authorized on the day and year first above written.
CMP MEDIA INC.
By /s/ MICHAEL LEEDS
_______________________
Name: Michael Leeds Attest:
Title: President /s/ ROBERT D. MARAFIOTI
_______________________
(CORPORATE SEAL)
/s/ GERARD G. LEEDS
_______________________
GERARD G. LEEDS
/s/ LISELOTTE J. LEEDS
_______________________
LISELOTTE J. LEEDS
/s/ KENNETH D. CRON
_______________________
KENNETH D. CRON
45
<PAGE> 1
EXHIBIT 10.12
OPTION AGREEMENT
BY AND BETWEEN
CMP MEDIA INC. AND KENNETH D. CRON
DL&A
NOVEMBER 27, 1996
<PAGE> 2
OPTION AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I - OPTIONS
SECTION 1.1 Grant of Options.......................................... 2
SECTION 1.2 Option Price.............................................. 2
ARTICLE II - CONFIDENTIALITY; NON-COMPETITION
SECTION 2.1 Protection of Company's Business Interests................ 3
SECTION 2.2 Non-Disclosure and Non-Use of Confidential Information.... 3
SECTION 2.3 Protection from Unfair Competition........................ 4
SECTION 2.4 Prior Notice; Opportunity to Cure......................... 7
SECTION 2.5 Other Covenants........................................... 9
SECTION 2.6 Confidentiality of Agreement.............................. 10
SECTION 2.7 Relief for Breach......................................... 10
SECTION 2.8 Separate Covenants........................................ 10
ARTICLE III - VESTING OF OPTIONS
SECTION 3.1 Vesting on December 31, 2005.............................. 11
SECTION 3.2 Acceleration of Vesting: First Series..................... 11
SECTION 3.3 Acceleration of Vesting: Second Series.................... 12
SECTION 3.4 Acceleration of Vesting: Third Series..................... 12
SECTION 3.5 Acceleration of Vesting: Fourth Series.................... 13
SECTION 3.6 Acceleration of Vesting: Fifth Series..................... 14
SECTION 3.7 Satisfaction of Conditions................................ 15
ARTICLE IV - EXERCISE OF OPTIONS
SECTION 4.1 Exercise of Options....................................... 16
SECTION 4.2 Withholding Taxes......................................... 17
SECTION 4.3 Determination of Fair Market Value........................ 18
SECTION 4.4 Non-Transferability of Options............................ 19
SECTION 4.5 Ken's Representative...................................... 19
ARTICLE V - EXPIRATION OF OPTIONS
SECTION 5.1 Expiration of Options..................................... 20
SECTION 5.2 Expiration upon Death, Permanent Disability, Dismissal
Without Cause or Resignation For Good Reason.............. 20
SECTION 5.3 Expiration upon Voluntary Resignation, Dismissal
For Cause or Competition.................................. 21
SECTION 5.4 Change in Control......................................... 22
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE VI - TRANSFERABILITY OF SHARES AT TIME WHEN COMPANY IS
PRIVATELY HELD AND THERE IS NO PUBLIC MARKET
SECTION 6.1 General Restriction on Transfer........................... 23
SECTION 6.2 Sale to Satisfy Income Tax Liabilities.................... 24
SECTION 6.3 Sale After December 31, 2005.............................. 24
SECTION 6.4 Sale After Death or Permanent Disability.................. 25
SECTION 6.5 Sale After Dismissal Without Cause or Resignation
For Good Reason........................................... 26
SECTION 6.6 Sale After Voluntary Resignation, Dismissal For
Good Cause, or Competition................................ 27
SECTION 6.7 Purchase Price of Option Shares........................... 27
(a) Price to be Paid for Option shares........................ 27
(b) Determination of Fair Market Value........................ 27
(c) Payment of Purchase Price................................. 28
(i) Lump Sum or Installments.......................... 28
(ii) Initial Installment............................... 29
(iii) Cash Flow Limitations............................. 30
(d) Closing of Transaction.................................... 31
SECTION 6.8 Assignment and Delegation by the Company to Class B
Stockholders.............................................. 31
SECTION 6.9 Tag-Along Rights -- Drag-Along Rights..................... 32
ARTICLE VII - TRANSFERABILITY OF SHARES AT TIME COMPANY'S SHARES
ARE PUBLICLY TRADED
SECTION 7.1 General Restriction on Transfer........................... 33
SECTION 7.2 Sale to Satisfy Income Tax Liabilities.................... 34
SECTION 7.3 Sale on or before December 31, 2005
(a) Minimum Market Capitalization............................. 35
(b) Maximum Number of Shares.................................. 35
SECTION 7.4 Sale After December 31, 2005.............................. 36
SECTION 7.5 Sale After Death or Disability............................ 36
SECTION 7.6 Tender, Merger, Consolidation............................. 37
SECTION 7.7 Compliance with Securities Laws........................... 37
ARTICLE VIII - FUTURE CHANGES IN CAPITAL STRUCTURE AND REDEMPTION OF SHARES
SECTION 8.1 Changes in Capital Structure.............................. 38
SECTION 8.2 Redemption of Class B Stock............................... 38
ARTICLE IX - PROCEDURE TO BE FOLLOWED IN CASE OF RESIGNATION FOR GOOD
REASON OR DISMISSAL FOR CAUSE
SECTION 9.1 Resignation for Good Cause................................ 39
SECTION 9.2 Dismissal For Cause....................................... 40
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE X - RESOLUTION OF DISPUTES
SECTION 10.1 Arbitration............................................. 41
SECTION 10.2 Equitable Relief........................................ 42
ARTICLE XI - REPRESENTATIONS AND WARRANTIES
SECTION 11.1 Representations of the Company.......................... 42
SECTION 11.2 Representations of Ken.................................. 43
ARTICLE XII - DEFINITIONS................................................... 43
ARTICLE XIII - MISCELLANEOUS PROVISIONS
SECTION 13.1 Legend on Certificates.................................. 50
SECTION 13.2 Permitted Transferees; Representative and
Successors in Interest.................................. 51
SECTION 13.3 Further Assurances...................................... 52
SECTION 13.4 S Corporation........................................... 53
SECTION 13.5 Credit Facilities....................................... 53
SECTION 13.6 Accelerated Vesting Chart............................... 54
SECTION 13.7 Entire Agreement; Binding Effect........................ 54
SECTION 13.8 Amendment............................................... 54
SECTION 13.9 Applicable Law.......................................... 55
SECTION 13.10 Severability............................................ 55
SECTION 13.11 No Waiver............................................... 55
SECTION 13.12 Notices................................................. 55
SECTION 13.13 Assignment.............................................. 57
SECTION 13.14 Survival................................................ 57
SECTION 13.15 Gender and Number....................................... 57
SECTION 13.16 Dates................................................... 57
SECTION 13.17 Headings................................................ 57
SECTION 13.18 Counterparts............................................ 58
SCHEDULE 5.2(B)
Hypothetical Illustration of Calculation of Options Vesting
Under Section 5.23(b).................................................... 59
SCHEDULE XI
Hypothetical Illustration of Calculation of Free Cash Flow............... 60
SCHEDULE 13.6
Accelerated Vesting Chart................................................ 61
</TABLE>
<PAGE> 5
OPTION AGREEMENT
This Option Agreement, made and entered into as of this 27th day of
November, 1996, by and between CMP Media Inc., a Delaware corporation (the
"Company"), and Kenneth D. Cron ("Ken").
W I T N E S S E T H:
WHEREAS, Ken is a key senior executive of the Company; and
WHEREAS, the Company desires to create substantial incentives for Ken
to (i) cause the Company to grow continuously and successfully in sales, profits
and profitability, (ii) take a long-term view of the Company's future, (iii)
help the Company attain its long-term goals, including its diversity goals as
set forth in its corporate Principles, and (iv) remain with the Company for the
long term; and
WHEREAS, to create such incentives, the Company desires to provide Ken
with the opportunity to purchase shares of the Company's Class A Common Stock,
and Ken desires to have the opportunity to purchase shares of such Class A
Common Stock;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each of the parties, the parties
hereto hereby covenant and agree, as follows:
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<PAGE> 6
ARTICLE I
OPTIONS
SECTION 1.1. GRANT OF OPTIONS.
Subject to the terms and conditions of this Agreement, the Company
hereby grants Ken the right to purchase from the Company up to two thousand
six-hundred forty (2,640) shares of the Class A Stock (which number of shares
equals approximately five percent (5%) of the number of shares of the Company's
Common Stock issued and outstanding as of the date hereof).
SECTION 1.2. OPTION PRICE.
The Option Price shall be the fair market value of a share of the
Company's Common Stock at the date hereof. Such fair market value shall be
calculated by dividing the aggregate fair market value of all the Common Stock,
as determined by an independent appraisal conducted by Furman Selz L.L.C., by
the total number of shares of the Common Stock issued and outstanding as of the
date hereof.
ARTICLE II
CONFIDENTIALITY; NON-COMPETITION
In consideration of the grant of the Options by the Company hereunder,
and as a specific inducement to the Company to enter into this Agreement, Ken
hereby accepts and agrees to the provisions of this Article II and acknowledges
that such provisions are necessary and appropriate for the reasonable protection
of the Company's property, investments, business relationships, economic
advantages and goodwill.
2
<PAGE> 7
SECTION 2.1. PROTECTION OF COMPANY'S BUSINESS INTERESTS.
As a Key Senior Executive, Ken has been intimately involved in the
management of all aspects of the business of the Company and its Affiliates and
has been a major strategist in planning and implementing its business expansion.
In the course of his long employment with the Company, Ken has developed special
skills, knowledge and abilities in the publishing field which are of a uniquely
personal nature. He has also acquired detailed knowledge of the internal
operations of the Company and its Affiliates and highly confidential information
concerning the national and international business of the Company and its
Affiliates. In addition, he has been afforded the opportunity to develop special
relationships of confidence and trust with the customers, suppliers,
consultants, employees, officers, directors and stockholders of the Company and
its Affiliates. Because of his continuing responsibilities with the Company and
its Affiliates, including his involvement in strategic planning and the
evaluation of proposed investments, it is expected that Ken will continue to be
entrusted with confidential information and will continue to have the
opportunity to develop such special relationships. The parties acknowledge and
agree that the Company would be unfairly and irreparably damaged if Ken were to
take any of such skills, knowledge, information or relationships, which he has
acquired and developed during the course of his employment with the Company, and
use them to the detriment of the Company and its Affiliates.
SECTION 2.2. NON-DISCLOSURE AND NON-USE OF CONFIDENTIAL INFORMATION.
(a) Ken represents, warrants, covenants and agrees that, without the
Company's express or implied consent while employed or, after termination,
without the prior written
3
<PAGE> 8
consent of the Company's chief executive officer or the Board of Directors, he
will not willfully or knowingly at any time directly or indirectly disclose,
communicate or divulge, or use for the benefit of himself or of any third party,
any of the business or trade secrets or other confidential information of the
CMP Group including, solely by way of illustration but not of limitation, their
business strategies, business plans, budgets, pricing, selling techniques,
marketing techniques, operating systems, financial systems, financial data,
procedures, manuals, confidential reports, personnel records, potential
acquisitions, potential business expansions, credit and financial data of their
suppliers and of their present and prospective customers, data about
competitors, new product-development initiatives, custom research and new
product or service concepts and marketing strategy.
(b) Any and all materials of or concerning the CMP Group or their
business or affairs, including without limitation files, memoranda, notes,
correspondence, lists, records, video reproductions, computer tapes and disks,
design and other documents, and data storage and retrieval materials (and all
copies, compilations and summaries thereof), and any and all property of the CMP
Group, including without limitation equipment, software, keys, business cards
and credit cards, that are in Ken's custody or control shall be delivered to the
Company at the time Ken's employment with the Company terminates for any reason.
Ken shall not destroy any such materials or property, shall not retain any
copies thereof and shall certify in writing to the Company upon request that all
such materials and property have been delivered to the Company.
SECTION 2.3. PROTECTION FROM UNFAIR COMPETITION.
(a) For as long as Ken is employed by the CMP Group and for the greater
of (i) a period of five (5) years after termination of his employment or (ii) as
long as Ken or any Permitted Transferee owns any Option Shares, Ken shall not
engage in competition with the CMP Group. For the purposes of this Agreement,
Ken shall be deemed to
4
<PAGE> 9
engage in competition with the CMP Group if Ken does any of the following,
whether or not in exchange for consideration, without the Company's express or
implied consent while employed or without the Company's prior written consent
after termination:
(A) On his own behalf or on behalf of any other person or
entity, (1) participates or is involved in or has direct responsibility for the
day-to-day management or operation of a Directly Competitive Business, an
Indirectly Competitive Business or any material function thereof (E.G.,
advertising, circulation, production and the like); (2) owns, in whole or in
part, beneficially or of record, directly or indirectly, an equity interest (or
an interest convertible into equity) in a Directly Competitive Business or a
Direct Competitor; (3) renders services as a director, officer, employee,
consultant, advisor, agent or independent sales representative to a Direct
Competitor; or (4) renders services as a director, officer, employee,
consultant, advisor, agent or independent sales representative to an Indirect
Competitor unless Ken has no responsibility for or participation or involvement
in any Indirectly Competitive Business of such Indirect Competitor, provided,
however, that Ken may have supervisory, advisory, consulting or
sales-representative responsibility over an Indirectly Competitive Business if
the revenue of all Indirectly Competitive Businesses of such Indirect Competitor
over which Ken has such responsibility represents no more than fifteen percent
(15%) of the total revenue over which Ken has such responsibility.
(B) Solicits the service of any employee of the CMP Group for
Ken's own benefit or for the benefit of any person or entity other than the CMP
Group, or induces or helps to induce any such employee to leave employment with
the CMP Group.
(C) Assists, induces or helps any employee or former employee
of the CMP Group or any other person or entity to engage in competition with the
CMP Group
5
<PAGE> 10
or any of its business activities, provided that the giving of a favorable
reference by Ken on behalf of such former employee shall not be prohibited by
this clause (C).
(D) Employs or causes any person or entity other than the CMP
Group to employ any former employee of the CMP Group within one (1) year after
the resignation of such former employee from the CMP Group.
(E) Willfully induces or attempts to induce any customer,
supplier or contractor of the Company to terminate any agreement or arrangement
with the Company, or willfully induces or attempts to induce any customer,
supplier or contractor, or any potential customer, supplier or contractor, of
the Company not to enter into any agreement or arrangement with the Company.
(F) Communicates publicly (other than pursuant to subpoena in
a legal proceeding) or to the press, or writes or produces for publication in
any medium, on the subject of, or with express or implied reference to, the CMP
Group or any of their former, current or future stockholders, directors,
officers or employees in their capacities as such. For the purpose hereof,
"implied reference" shall mean a reference that does not expressly name the CMP
Group or any of their former, current or future stockholders, directors,
officers or employees but that nevertheless would be understood by the average
reader or audience-member to refer thereto. It shall not be deemed a violation
of this clause (F) if, after the termination of his employment with the Company,
Ken responds to inquiries from the public or the press solely by stating, in
form or substance, "I do not discuss any matters relating to CMP; please address
your inquiries directly to the company" or Ken communicates the fact that he was
formerly employed by the Company and identifies the positions he held and the
dates thereof.
(b) Notwithstanding the provisions of paragraph (a) of this Section
2.3, Ken shall not be deemed to be engaged in competition with the CMP Group
solely by reason of Ken's ownership of (i) an equity interest of less than
one-half of one percent (0.5%) in
6
<PAGE> 11
the securities of a Direct Competitor or Indirect Competitor listed for trading
on a national securities exchange or quoted in the National Market List of
NASDAQ or (ii) an interest in a mutual or other investment fund which owns an
interest in a Direct Competitor or Indirect Competitor, provided that Ken has no
influence or control over the selection of such fund's investment decisions.
SECTION 2.4. PRIOR NOTICE; OPPORTUNITY TO CURE.
(a) Ken shall give the Company written notice at least twenty (20)
Business Days before entering into any relationship or transaction, or engaging
in any activity, or taking or omitting to take any action, which might
reasonably be deemed a breach of any provision of Section 2.2 or Section 2.3,
such notice to include full and complete particulars as to the proposed
relationship, transaction, activity, action or omission, the services or duties
contemplated and such other facts and circumstances as are reasonably necessary
for the Company to make an informed decision. The Company shall advise Ken in
writing, within ten (10) Business Days after such notice is given, of the Board
of Directors' determination as to whether such relationship, transaction,
activity, action or omission would materially breach any of the provisions of
Section 2.2 or Section 2.3. In the event that, for reasons not within his
control, Ken gives the Company less than twenty (20) Business Days' prior
written notice, the Company will endeavor in good faith to advise Ken of the
Board of Directors' determination in less than ten (10) Business Days after such
notice is given, provided that the Company's failure to advise Ken in less than
ten (10) Business Days shall not be deemed to constitute consent to such
relationship, transaction, activity, action or omission and shall not give rise
to any liability of the Company to Ken or to any third party.
7
<PAGE> 12
(b) Once the Company has advised Ken in writing that the Board of
Directors has determined that a proposed relationship, transaction, activity,
action or omission would not materially breach any of the provisions of Section
2.2 or Section 2.3, and Ken has thereupon entered into such relationship or
transaction or has begun to engage in such activity or to take or omit to take
such action, the Board of Directors shall have no right to reverse or otherwise
modify its determination; provided, however, that if the nature, scope or terms
of such relationship, transaction, activity, action or omission are to be
modified after such determination is made, then in accordance with paragraph (a)
hereof Ken shall give the Company prior written notice of such modification and
the Company shall advise him in writing, within ten (10) Business Days after
such notice is given, of the Board of Directors' determination as to whether
such relationship, transaction, activity, action or omission, as so modified,
would materially breach any of the provisions of Section 2.2 or Section 2.3.
(c) In the event that, without having given the Company prior notice
pursuant to paragraphs (a) or (b) hereof, Ken enters into any relationship or
transaction or begins to engage in any activity or to take or omit to take any
action that the Board of Directors determines is a material breach of any of the
provisions of Section 2.2 or Section 2.3, the Company shall give Ken written
notice of such determination and, if such breach is continuing, an opportunity
to cure such breach before the Company seeks remedy or relief by judicial
process or arbitration or exercises its rights under Section 6.6(b) hereof. The
opportunity to cure shall be sixty (60) days to the extent such continuing
breach consists of holding an ownership interest in a competitive business and
fifteen (15) days with respect to any other continuing breach.
8
<PAGE> 13
SECTION 2.5. OTHER COVENANTS.
(a) For as long as Ken or any Permitted Transferee owns any Option
Shares, Ken shall, if requested by the Company, provide information, testimony
and assistance in connection with the prosecution or defense of any claims by or
against the Company arising out of matters of which he acquired knowledge while
an employee of the Company. The Company shall reimburse Ken for all reasonable
out-of-pocket expenses he incurs in rendering such assistance.
(b) For as long as Ken or any Permitted Transferee owns any Option
Shares, Ken shall not willfully make any oral or written statement which
reflects adversely upon the character, honesty, credit, efficiency or business
practices of the CMP Group or its former, current or future stockholders,
directors, officers or employees in their capacities as such.
SECTION 2.6. CONFIDENTIALITY OF AGREEMENT.
The terms and conditions of this Agreement shall be kept confidential
by the parties, and none of the parties shall disclose them to any non-party
unless such disclosure is necessitated by (a) legal and/or financial
requirements of the Company, in which case the form of such disclosure shall
first be mutually agreed upon by the Company and Ken, or (b) any arbitration or
other legal proceeding contesting or seeking to enforce any provision or
interpretation of this Agreement (including any deposition or testimony that
either party provides in connection therewith), regardless of whether such
proceeding is initiated by Ken or the Company. Except as provided in the
preceding sentence, and without limiting the generality of the foregoing, Ken
shall not respond to or in any way participate in or contribute to any public
discussion, notice or other publicity concerning or in any way relating to
execution of this Agreement or the events (including
9
<PAGE> 14
any negotiations) which led to its execution, and Ken specifically agrees that
he shall not disclose information regarding this Agreement to any current or
former employees of the Company other than those expressly authorized by the
Company to have knowledge hereof. Without limiting the comprehensive
confidentiality agreed to, Ken may disclose this Agreement to his attorneys,
financial advisors and members of his and his spouse's immediate families,
provided he informs them of this confidentiality provision and they agree to
abide by it. Ken hereby agrees that any disclosure by him of any of the terms
and conditions of this Agreement in violation of the foregoing shall constitute
and be treated as a material breach of this Agreement and Ken shall be
responsible for damages occasioned thereby, including but not limited to
reasonable attorneys' fees incurred by the Company to enforce this Section 2.6.
SECTION 2.7. RELIEF FOR BREACH.
Ken acknowledges and agrees that any breach or anticipatory breach by
him of any of the provisions of this Article II would cause the Company
irreparable injury not compensable by monetary damages alone and that,
accordingly, in any such event, the Company shall be entitled to injunctions,
both preliminary and permanent, enjoining or restraining such breach or
anticipatory breach (and Ken hereby consents to the issuance thereof without
bond by any court of competent jurisdiction), in addition to monetary damages in
such amount as the evidence may show and such other remedies as may be available
at law or in equity.
SECTION 2.8. SEPARATE COVENANTS.
Ken understands and agrees that the covenants contained in this Article
II constitute a series of separate covenants, one for each applicable state in
the United States
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<PAGE> 15
and the District of Columbia, and one for each applicable foreign country. If in
any judicial proceeding a court shall hold unenforceable any of the separate
covenants included in this Article II, then such unenforceable covenant or
covenants shall be deemed limited as necessary or eliminated from the provisions
of this Article II for the purpose of such proceeding to the extent necessary to
permit the remaining separate covenants of this Article II to be enforced in
such proceeding, and to permit such unenforceable covenant or covenants to be
enforced as limited.
ARTICLE III
VESTING OF OPTIONS
SECTION 3.1. VESTING ON DECEMBER 31, 2005.
All Options granted under this Agreement shall vest and become fully
exercisable on December 31, 2005, provided only that Ken is a Key Senior
Executive on such date.
SECTION 3.2. ACCELERATION OF VESTING: FIRST SERIES.
Notwithstanding the provisions of Section 3.1, if on December 31 of any
year from 1997 to and including 2004 (a) Ken is a Key Senior Executive, (b) the
Company's annual Pre-Tax Income was not less than five percent (5%) of its Net
Sales Revenue for both the year ending on such December 31 and the entire
preceding year, and (c) at least one (1) full-time female employee of the
Company reporting directly to Ken has held a position of Vice President/Group
Publisher, or a comparable or higher level position, for the entire year ending
on such December 31, then and in that event Options with respect to one hundred
thirty-two (132) Unexercised Shares (which number equals approximately one
quarter of one percent (0.25%) of the number of shares of the Company's Common
Stock
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issued and outstanding as of the date hereof) shall vest and become exercisable
as of the first such December 31 on which all of the three (3) aforementioned
conditions (the "Conditions") are satisfied.
SECTION 3.3. ACCELERATION OF VESTING: SECOND SERIES.
(a) Notwithstanding the provisions of Section 3.1, if on December 31 of
any year from 1999 to and including 2004 the Conditions are satisfied, then and
in that event Options with respect to two hundred sixty-four (264) Unexercised
Shares (which number equals approximately one half of one percent (0.5%) of the
number of shares of the Company's Common Stock issued and outstanding as of the
date hereof) shall vest and become exercisable as of the first such December 31
on which the Conditions are satisfied.
(b) Notwithstanding the provisions of Section 3.1 and paragraph (a) of
this Section 3.3, if on December 31, 1997 or December 31, 1998 the Conditions
are satisfied and, in addition, (i) the Net Sales Revenue of the Company for the
year then ending exceeds $600 million and (ii) the Company's annual Pre-Tax
Income was not less than ten percent (10%) of its Net Sales Revenue for both the
year then ending and the entire preceding year, then and in that event Options
with respect to fifty percent (50%) of the Unexercised Shares referred to in
paragraph (a) of this Section 3.3, or one hundred thirty-two (132) Unexercised
Shares, shall accelerate and shall vest and become exercisable as of the first
such December 31 on which all the aforementioned conditions are satisfied.
SECTION 3.4. ACCELERATION OF VESTING: THIRD SERIES.
(a) Notwithstanding the provisions of Section 3.1, if on December 31 of
any year from 2001 to and including 2004 the Conditions are satisfied, then and
in that event
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Options with respect to five hundred twenty-eight (528) Unexercised Shares
(which number equals approximately one percent (1.0%) of the number of shares of
the Company's Common Stock issued and outstanding as of the date hereof) shall
vest and become exercisable as of the first such December 31 on which the
Conditions are satisfied.
(b) Notwithstanding the provisions of Section 3.1 and paragraph (a) of
this Section 3.4, if on December 31 of any year from 1997 to and including 2000
the Conditions are satisfied and, in addition, (i) the Net Sales Revenue of the
Company for the year then ending exceeds $800 million and (ii) the Company's
annual Pre-Tax Income was not less than ten percent (10%) of its Net Sales
Revenue for both the year then ending and the entire preceding year, then and in
that event Options with respect to fifty percent (50%) of the Unexercised Shares
referred to in paragraph (a) of this Section 3.4, or two hundred sixty-four
(264) Unexercised Shares, shall accelerate and shall vest and become exercisable
as of the first such December 31 on which all the aforementioned conditions are
satisfied.
SECTION 3.5. ACCELERATION OF VESTING: FOURTH SERIES.
(a) Notwithstanding the provisions of Section 3.1, if on December 31,
2003 or December 31, 2004 the Conditions are satisfied, then and in that event
Options with respect to six hundred sixty (660) Unexercised Shares (which number
equals approximately one and one quarter percent (1.25%) of the number of shares
of the Company's Common Stock issued and outstanding as of the date hereof)
shall vest and become exercisable as of the first such December 31 on which the
Conditions are satisfied.
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(b) Notwithstanding the provisions of paragraph (a) of this Section
3.5, if on December 31 of any year from 1997 to and including 2002 the
Conditions are satisfied and, in addition, (i) the Net Sales Revenue of the
Company for the year then ending exceeds $1 billion and (ii) the Company's
annual Pre-Tax Income was not less than ten percent (10%) of its Net Sales
Revenue for both the year then ending and the entire preceding year, then and in
that event Options with respect to forty percent (40%) of the Unexercised Shares
referred to in paragraph (a) of this Section 3.5, or two hundred sixty-four
(264) Unexercised Shares, shall accelerate and shall vest and become exercisable
as of the first such December 31 on which all the aforementioned conditions are
satisfied.
SECTION 3.6. ACCELERATION OF VESTING: FIFTH SERIES.
(a) Notwithstanding the provisions of Section 3.1, if on December 31 of
any year from 1997 to and including 2004 the Conditions are satisfied and, in
addition, (i) the Net Sales Revenue of the Company for the year then ending
exceeds $1.25 billion and (ii) the Company's annual Pre-Tax Income was not less
than ten percent (10%) of its Net Sales Revenue for both the year then ending
and the entire preceding year, then and in that event Options with respect to
two hundred sixty-four (264) Unexercised Shares (which number equals
approximately one half of one percent (0.5%) of the number of shares of the
Company's Common Stock issued and outstanding as of the date hereof) shall vest
and become exercisable as of the first such December 31 on which all the
aforementioned conditions are satisfied.
(b) Notwithstanding the provisions of Section 3.1, if on December 31 of
any year from 1997 to and including 2004 the Conditions are satisfied and, in
addition, (i) the Net Sales Revenue of the Company for the year then ending
exceeds $1.5 billion and (ii) the Company's annual Pre-Tax Income was not less
than ten percent (10%) of its Net
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Sales Revenue for both the year then ending and the entire preceding year, then
and in that event Options with respect to two hundred sixty-four (264)
Unexercised Shares (which number equals approximately one half of one percent
(0.5%) of the number of shares of the Company's Common Stock issued and
outstanding as of the date hereof) shall vest and become exercisable as of the
first such December 31 on which all the aforementioned conditions are satisfied.
SECTION 3.7. SATISFACTION OF CONDITIONS.
(a) Notwithstanding anything to the contrary contained in this Article
III, in the event that any of the Conditions set forth in Section 3.2, or any of
the conditions with respect to Net Sales Revenue or Pre-Tax Income set forth in
paragraph (b) of Section 3.3, Section 3.4, Section 3.5 or Section 3.6, is not
satisfied on December 31 of any year from 1997 through 2004 by reason of the
fact that the Company took or omitted to take an action for the purpose of
preventing or delaying the accelerated vesting of Options on such December 31 or
by reason of the fact that the Company willfully engaged in one or more
transactions for the direct benefit of any of the holders of the Class B Stock
or any affiliate thereof, which transaction was not on an arms-length basis,
commercially reasonable and in the ordinary course of business or consistent
with the Company's past practice, then and in that event such Condition or
condition shall nevertheless be deemed satisfied as of such December 31 for all
purposes of this Agreement.
(b) Notwithstanding anything to the contrary contained in this Article
III, in the event that the Condition set forth in Section 3.2(a) is not
satisfied on December 31 of any year from 1997 through 2004 by reason of the
fact that the Company demoted Ken to a position lower than that of a Key Senior
Executive at the Company's initiative and without a bona fide business reason to
do so, then and in that event such Condition shall nevertheless be deemed
satisfied as of such December 31 for all purposes of this
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Agreement. As used herein, a "bona fide business reason" shall include but not
be limited to material deficiencies in Ken's performance of his duties, and
actions or omissions by Ken that would constitute grounds for Dismissal For
Cause.
(c) Notwithstanding anything to the contrary contained in this Article
III, in the event that the Condition set forth in Section 3.2(c) is not
satisfied on December 31 of any year from 1997 through 2004 by reason of the
fact that, during the year ending on such December 31, the Company, over Ken's
protest, removed a qualified female from a position of Vice President/Group
Publisher reporting directly to Ken or, during the final three (3) months of the
preceding year, the Company, over Ken's protest, refused to allow the
appointment of a qualified female to such position, then and in that event such
Condition shall nevertheless be deemed satisfied as of such December 31 for all
purposes of this Agreement. As used herein, a "qualified female" shall mean a
female reasonably qualified to perform the duties and discharge the
responsibilities of such position based on her abilities, experience and past
performance.
ARTICLE IV
EXERCISE OF OPTIONS
SECTION 4.1. EXERCISE OF OPTIONS.
Ken may exercise a vested Option by giving the Company written notice
of exercise specifying the number of Unexercised Shares to be acquired together
with payment of the full Option Price for such Unexercised Shares. Ken may
exercise fewer than all the Options which are then exercisable, but Ken may not
exercise a partial Option for less than a full Unexercised Share. Ken may pay
the Option Price for Unexercised Shares to be acquired:
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(a) by delivering to the Company United States dollars in cash or by
check, bank draft or wire transfer payable to the order of the Company;
(b) by transferring and delivering to the Company shares of Class A
Stock (to the extent their transfer is not otherwise restricted) having an
aggregate Fair Market Value as of the date of exercise equal to the aggregate
Option Price to be paid; provided that if Ken originally acquired such shares of
Class A Stock pursuant to this Agreement or the Share Purchase Agreement, he may
use such shares to pay the Option Price for Unexercised Shares only if he has
then owned and been entitled to sell such shares of Class A Stock (subject only
to limitations set forth in such Agreements as to the maximum aggregate number
of such shares saleable in any single calendar year and to pre-conditions to
sale set forth in such Agreements as to the market capitalization of the
Company) for at least six (6) months; or
(c) by any combination of the above methods of payment.
Upon receipt of payment for such Unexercised Shares, the Company shall duly
issue such Unexercised Shares to Ken (whereupon such Unexercised Shares shall
become Option Shares), and the Company shall deliver to Ken stock certificates
representing such Option Shares and bearing the legends contemplated in Section
13.1.
SECTION 4.2. WITHHOLDING TAXES.
The Company may, in its discretion, require Ken to pay to the Company
upon the exercise of any Option the amount that the Company reasonably deems to
be the minimum amount of tax that the Company is required by federal, state or
local statute to withhold (including FICA) in connection with such exercise,
using the method of calculating tax withholdings that results in the least
amount withheld. Ken may pay the
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amount of his withholding tax liability by using any of the methods set forth in
Section 4.1. In addition, he may pay up to the minimum amount of such required
tax withholdings (but no more than such minimum amount):
(a) by transferring and delivering to the Company shares of Class A
Stock (to the extent their transfer is not otherwise restricted) having an
aggregate Fair Market Value as of the date of exercise equal to the amount of
such minimum required tax withholdings, regardless of how long Ken has then
owned or been entitled to sell such shares of Class A Stock or how he acquired
such shares of Class A Stock;
(b) with the prior approval of the Board of Directors, by authorizing
the Company in writing to deduct and retain, from the Unexercised Shares
otherwise to be issued to Ken, Unexercised Shares having an aggregate Fair
Market Value as of the date of exercise equal to such minimum amount of required
tax withholdings; or
(c) by any combination of the above methods of payment.
SECTION 4.3. DETERMINATION OF FAIR MARKET VALUE.
In the event that, at a time when the Company is privately held and
there is no public market for the Class A Stock, Ken elects to pay the Option
Price for any Unexercised Shares or to pay his withholding tax liability thereon
by transferring and delivering shares of Class A Stock to the Company, or to pay
such withholding tax liability by authorizing the Company to deduct and retain
Unexercised Shares, he shall so advise the Company in his notice of exercise and
the parties shall promptly determine the Fair Market Value of such shares of
Class A Stock pursuant to the procedure set forth in Section 6.7(b).
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SECTION 4.4. NON-TRANSFERABILITY OF OPTIONS.
Each vested Option shall be exercisable only by Ken or, in the event of
Ken's death or incapacity, by the representative of Ken duly authorized pursuant
to Section 4.4. No Option or any rights thereunder shall be transferable other
than by will, by the laws of descent and distribution, or for tax withholding
purposes pursuant to Section 4.2, or be subject to attachment, execution or
other similar process. Any attempt by Ken to alienate, assign, pledge,
hypothecate or otherwise dispose of an Option or any right thereunder, except as
provided for herein, and any levy or attachment, execution or similar process
upon the rights or interest conferred under any Option, shall be null and void.
SECTION 4.5. KEN'S REPRESENTATIVE.
Promptly following execution of this Agreement, Ken shall give the
Company written notice designating one or more representatives who shall be
entitled, following Ken's death or incapacity, to exercise his rights under this
Agreement. Ken may, from time to time, revoke or change his designation of
representatives, without the consent of any prior representative, by giving the
Company notice of revocation or change. The last notice duly given to the
Company prior to Ken's death or incapacity shall be controlling. If, at the time
of his death or incapacity, Ken has not properly designated a representative or
if the designated representative does not survive such event, then the following
persons or entity, in the following order, shall be deemed Ken's representative
hereunder: (a) Ken's surviving spouse; (b) if there is no surviving spouse, then
Ken's children, PER STIRPES; (c) if there are no children, then Ken's estate.
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ARTICLE V
EXPIRATION OF OPTIONS
SECTION 5.1. EXPIRATION OF OPTIONS.
Except as provided otherwise in this Article V, every vested but
unexercised Option shall expire and all rights thereunder shall be extinguished
upon the expiration of the later of (a) five (5) years after the date on which
such Option vested or (b) eighteen (18) months after the date on which the
Company makes an initial public offering of shares of the Class A Stock (unless
such Option has already expired by the date of such offering); provided that all
unexercised Options shall expire and be extinguished no later than the close of
business on December 31, 2010.
SECTION 5.2. EXPIRATION UPON DEATH, PERMANENT DISABILITY, DISMISSAL WITHOUT
CAUSE OR RESIGNATION FOR GOOD REASON.
In the event Ken's employment with the Company terminates as a result
of his death, Permanent Disability, Dismissal Without Cause or Resignation For
Good Reason, then and in that event:
(a) Every vested but unexercised Option shall remain exercisable for
one (1) year from the date of such termination of employment. Upon the
expiration of such 1-year period, any such Options that have not then been
exercised shall expire and all rights thereunder shall be extinguished.
(b) On the date of such termination of Ken's employment, such number of
unvested Options shall vest and become exercisable as shall equal the number of
Options that, but for such termination of employment, would have vested within
twenty-four (24) months after the date of such termination assuming the
Conditions were satisfied at all
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times during such 24-month period, multiplied by a fraction the numerator of
which shall equal the number of full months that, on the date of such
termination, have elapsed since the nearest preceding December 31 on which
Options vested under paragraph (a) of Section 3.2, Section 3.3, Section 3.4 or
Section 3.5, as the case may be (or could have vested under such paragraphs if
the Conditions had been satisfied on such preceding December 31), and the
denominator of which shall be twenty-four (24). (A hypothetical illustration of
the calculation of such number of Options is set forth on Schedule 5.2(b)
hereto.) All Options which vest pursuant to this paragraph (b) shall remain
exercisable for one (1) year from the date of such termination of Ken's
employment. Upon the expiration of such 1-year period, any such Options that
have not then been exercised shall expire and all rights thereunder shall be
extinguished.
(c) Every Option which neither vested prior to such termination of
Ken's employment nor vests pursuant to paragraph (b) of this Section 5.2 shall
expire and all rights thereunder shall be extinguished as of the date of such
termination of employment.
SECTION 5.3. EXPIRATION UPON VOLUNTARY RESIGNATION, DISMISSAL FOR CAUSE OR
COMPETITION.
In the event that Ken's employment with the Company terminates as a
result of his Voluntary Resignation or Dismissal For Cause, or in the event that
Ken materially breaches any of the provisions of Section 2.2 or Section 2.3,
then and in that event all unvested Options and all vested Options that have not
yet been duly exercised shall expire and all rights thereunder shall be
extinguished as of the earlier of the date of such termination of employment or
the date of such breach of Section 2.2 or Section 2.3. In the event that Ken
exercises any Option at a time when he has breached any of the provisions of
Section 2.2 or Section 2.3, such purported exercise shall be null and void,
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and Ken shall return to the Company immediately upon demand any and all stock
certificates representing Option Shares issued to him upon exercise of such
Option, in exchange for which the Company shall return to Ken any consideration
he paid for such Option Shares.
SECTION 5.4. CHANGE IN CONTROL.
Notwithstanding anything to the contrary contained in Article III or
this Article V, in the event that there is a Change in Control and, in
connection therewith or subsequently, Ken's employment with the Company
terminates as a result of his Dismissal Without Cause or Resignation For Good
Reason, then and in that event:
(a) Every vested but unexercised Option shall remain exercisable in
accordance with the provisions of Section 5.1 as if Ken's employment had not so
terminated.
(b) Every unvested Option shall vest in accordance with the provisions
of Article III except that the requirement that Ken be a Key Senior Executive on
December 31, 2005 and the requirement that the Conditions be satisfied on any
December 31 shall be deemed eliminated from this Agreement as conditions to
vesting, and such unvested Options shall vest in accordance with the provisions
of Article III as if Ken's employment as a Key Senior Executive had not so
terminated and as if the Conditions were fully satisfied at all times through
December 31, 2005; provided, however, that in the event of Ken's death following
such termination of employment, Options then unvested shall vest and become
exercisable in accordance with the provisions of Section 5.2(b) as if Ken had
been employed as a Key Senior Executive on the date of his death.
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ARTICLE VI
TRANSFERABILITY OF SHARES AT TIME WHEN
COMPANY IS PRIVATELY HELD AND THERE IS NO PUBLIC MARKET
SECTION 6.1. GENERAL RESTRICTION ON TRANSFER.
(a) At any time when the Company is privately held and there is no
public market for the Class A Stock, Ken shall not, voluntarily or
involuntarily, by operation of law or otherwise, sell, mortgage, pledge,
hypothecate, assign as a security, grant or permit to exist or continue a
security interest in, or in any way transfer by gift, will, trust or intestate
succession any of the Option Shares, except to a Permitted Transferee as
provided in Section 13.2(a) or except as specifically provided in this Article
VI. Any attempt by Ken to do any of the aforementioned acts or otherwise to
alienate or dispose of any Option Shares, except in accordance with this
Agreement, shall be null and void.
(b) Notwithstanding anything to the contrary contained in this Article
VI, Ken shall not have the right to require the Company to purchase any Option
Shares hereunder unless and until Ken has owned and been entitled to sell such
Option Shares (subject only to limitations set forth in this Agreement as to the
maximum aggregate number of such shares saleable in any single calendar year and
to pre-conditions to sale set forth in this Agreement as to the market
capitalization of the Company) for at least six (6) months prior to such
purchase, and the Company shall have the right, in purchasing Option Shares from
Ken hereunder, to defer the purchase of any such Option Shares until such time
as Ken has so owned and been entitled to sell them for six (6) months.
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SECTION 6.2. SALE TO SATISFY INCOME TAX LIABILITIES.
Subject to the provisions of Section 6.1(b), but notwithstanding the
limitations set forth in any other Section of this Article VI, Ken shall have
the right, exercisable upon notice to the Company given no later than twelve
(12) months after the exercise of any Option, to require the Company to purchase
a number of Option Shares (and/or, to the extent their sale is not otherwise
restricted, Restricted Shares) at the price provided in Section 6.7, such that
the proceeds of such purchase shall equal the amount, if any, of Ken's
additional income tax liability (federal, state and local) actually occasioned
as a result of the exercise of such Option. Such notice shall include a written
certification of such amount by Ken's tax accountant. Any shares of Class A
Stock sold under this Section 6.2 shall be taken into account when calculating
the aggregate number of shares of Class A Stock that Ken shall be entitled to
sell in any single calendar year under any other Section of this Article VI, it
being the intent of the parties that shares of Class A Stock sold under this
Section 6.2 shall be included in, and shall not be in addition to, such
aggregate number of shares permitted to be sold in any single calendar year
under any such other Section of this Article VI.
SECTION 6.3. SALE AFTER DECEMBER 31, 2005.
Subject to the provisions of Section 6.1(b), during each and any
calendar year beginning with the calendar year 2006, Ken shall have the right,
exercisable upon notice to the Company given during the first three (3) months
of such calendar year, to require the Company to purchase up to five hundred
twenty-eight (528) shares of his Class A Stock (which number of shares equals
approximately one percent (1%) of the number of shares of the Company's Common
Stock issued and outstanding as of the date hereof),
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including both Option Shares and Restricted Shares, at the price provided in
Section 6.7(a).
SECTION 6.4. SALE AFTER DEATH OR PERMANENT DISABILITY.
Subject to the provisions of Section 6.1(b), in the event that Ken's
employment with the Company terminates as a result of his death or the Company
terminates his employment by reason of his Permanent Disability (whether before
or after December 31, 2005), then and in that event, notwithstanding the
provisions of Section 6.2 and Section 6.3, the parties shall have the following
rights:
(a) RIGHTS OF KEN TO SELL. Ken or his representative and/or successors
in interest shall have the right, exercisable upon notice to the Company given
no later than one hundred eighty (180) days after such termination of employment
occurs, or during the first three (3) months of any succeeding calendar year, to
require the Company to purchase any or all of the Option Shares then owned by
Ken or his successors in interest, at the price provided in Section 6.7(a).
(b) RIGHTS OF COMPANY TO PURCHASE. The Company shall have the right,
exercisable upon notice to Ken or his representative and/or successors in
interest given during the first three (3) months of the third calendar year
after the year in which such termination of employment occurs and/or during the
first three (3) months of any succeeding calendar year, to require Ken or his
representative and/or successors in interest to sell to the Company any or all
of the Option Shares then owned by Ken or any successor in interest, at the
price provided in Section 6.7(a).
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SECTION 6.5. SALE AFTER DISMISSAL WITHOUT CAUSE OR RESIGNATION FOR GOOD
REASON.
Subject to the provisions of Section 6.1(b), in the event that Ken's
employment with the Company terminates as a result of his Dismissal Without
Cause or Resignation For Good Reason, then and in that event the parties shall
have the following rights:
(a) RIGHTS OF KEN TO SELL. In addition to his rights under Section 6.3
with respect to sales after December 31, 2005, Ken shall also have the right
prior to December 31, 2005, exercisable upon notice to the Company given during
the first three (3) months of the calendar year after which such Dismissal
Without Cause or Resignation For Good Reason occurs and/or during the first
three (3) months of any succeeding calendar year, to require the Company to
purchase up to five hundred twenty-eight (528) of his Option Shares (which
number of shares equals approximately one percent (1%) of the number of shares
of the Company's Common Stock issued and outstanding as of the date hereof), at
the price provided in Section 6.7(a).
(b) RIGHTS OF COMPANY TO PURCHASE. The Company shall have the right,
exercisable upon notice to Ken given during the first three (3) months of the
third calendar year after the year in which such Dismissal Without Cause or
Resignation For Good Reason occurs and/or during the first three (3) months of
any succeeding calendar year, to require Ken to sell to the Company any or all
of the Option Shares then owned by Ken, at the price provided in Section 6.7(a).
The death or Permanent Disability of Ken occurring subsequent to his Dismissal
Without Cause or Resignation For Good Reason shall not modify or affect the
rights and obligations of the parties as set forth in this Section 6.5.
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SECTION 6.6. SALE AFTER VOLUNTARY RESIGNATION, DISMISSAL FOR CAUSE, OR
COMPETITION.
Subject to the provisions of Section 6.1(b), in the event that (a)
Ken's employment with the Company terminates as a result of his Voluntary
Resignation or Dismissal For Cause or (b) Ken materially breaches any of the
provisions of Section 2.2 or Section 2.3 (whether before or after the
termination of his employment for any reason) and, if the Company has given him
notice to cure, fails to cure such breach on a timely basis, then and in that
event, in addition to any rights that Ken has under Section 6.2 and Section 6.3
(but subject to the provisions of Section 4.2(c) of the Employment Agreement),
the Company shall have the right, exercisable upon notice to Ken given at any
time or times after such event occurs (whether before or after December 31,
2005), to require Ken to sell to the Company any or all of the Option Shares
then owned by Ken, at the price provided in Section 6.7(a). The death or
Permanent Disability of Ken occurring subsequent to his Voluntary Resignation,
Dismissal For Cause or material breach of any of the provisions of Section 2.2
or Section 2.3 shall not modify or affect the rights and obligations of the
parties as set forth in this Section 6.6.
SECTION 6.7. PURCHASE PRICE OF OPTION SHARES.
(a) PRICE TO BE PAID FOR OPTION SHARES. The purchase price for any
Option Shares to be purchased pursuant to this Article VI shall be the Fair
Market Value of such Option Shares.
(b) DETERMINATION OF FAIR MARKET VALUE. Within the sixty (60) days
after Ken has given the Company notice of intent to sell Option Shares or the
Company has given Ken notice of intent to purchase Option Shares pursuant to
this Article VI, the Company and Ken shall negotiate in good faith in an effort
to reach mutual agreement as to the Fair Market Value of such Option Shares. If
the Company and Ken are unable to reach
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agreement as to the Fair Market Value of such Option Shares within such 60-day
period, the Fair Market Value of such Option Shares shall be determined by an
appraisal process as follows. Each of the Company and Ken shall designate,
within thirty (30) days after the conclusion of the 60-day negotiation period
referred to above, an independent and experienced appraiser familiar with the
business in which the Company is then engaged (each individually an "Appraiser"
and collectively the "Appraisers"). The Appraisers shall be instructed to
complete their respective determinations of the Fair Market Value of such Option
Shares and deliver their written reports on such determinations no later than
sixty (60) days after both of such Appraisers have been appointed. If the
determination of one of the Appraisers does not exceed the determination of the
other Appraiser by more than fifteen percent (15%) of the lower of the two
determinations, the Fair Market Value of such Option Shares shall be equal to
the average of the two determinations. If the higher determination exceeds the
lower determination by more than fifteen percent (15%) of the lower
determination, then the two Appraisers shall jointly appoint a third,
independent and similarly experienced Appraiser within fifteen (15) days after
both of such two Appraisers have delivered their reports. Such third Appraiser
shall deliver his report on his determination of the Fair Market Value of such
Option Shares within sixty (60) days after his appointment, and his
determination of Fair Market Value shall be conclusive and binding on the
parties for all purposes hereof. The cost of all such appraisals shall be borne
one-half by the Company and one-half by Ken.
(c) PAYMENT OF PURCHASE PRICE.
(i) LUMP SUM OR INSTALLMENTS. The purchase price for Option Shares
shall be paid by the Company in full at the closing or, at the election of the
Company, in equal annual installments, together with interest payable quarterly
at the rate of interest announced publicly on the first day of each calendar
quarter by a major United States
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money market bank, selected by the Company, as such bank's base rate, over a
number of years to be determined by the Company but in no event exceeding five
(5) years if the purchase is pursuant to Section 6.3 or Section 6.5, or ten (10)
years if the purchase is pursuant to Section 6.4 or Section 6.6; provided,
however, that the purchase price for any Option Shares purchased by the Company
pursuant to Section 6.2 shall be paid in full at the closing.
(ii) INITIAL INSTALLMENT. In the event the Company elects to pay for
Option Shares hereunder on an installment basis, all annual installments shall
be equal in principal amount except as follows:
(A) The initial installment for any such sale of Option
Shares, other than a sale occurring by reason of Ken's death, Dismissal For
Cause or breach of any of the provisions of Section 2.2 or Section 2.3, shall be
not less than the amount, if any, of Ken's additional income tax liability
(federal, state and local) actually occasioned as a result of such sale,
provided that such amount shall have been certified to the Company in writing by
Ken's tax accountant.
(B) The initial installment for the first sale of shares of
Class A Stock that Ken makes under this Agreement or the Stockholders'
Agreement, other than a sale occurring by reason of Ken's death, Dismissal For
Cause or breach of any of the provisions of Section 2.2 or Section 2.3, shall be
at least (1) the amount due under clause (A) above plus the amount of one
million dollars ($1,000,000) or (2) if less, the total purchase price for such
Option Shares.
(C) The initial installment for any sale of Option Shares
occurring by reason of Ken's death shall be not less than the amount of the
estate and succession tax liability (federal and state) occasioned as a result
of the inclusion of the Option Shares in Ken's estate (giving effect to any
deferral permitted by law or regulation in the payment
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thereof) together with any and all costs and expenses of administration of Ken's
estate as reasonably estimated by Ken's representative, all as certified to the
Company in writing by Ken's representative.
(iii) CASH FLOW LIMITATIONS. Notwithstanding any other provision of
this Article VI, in the event that the amount due from the Company in payment
for Option Shares purchased hereunder (including both principal and interest) in
any one fiscal year of the Company (other than a purchase occurring by reason of
Ken's death) exceeds fifty percent (50%) of the Company's Free Cash Flow for the
preceding year, then and in that event the Company in its sole discretion may
elect to defer payment of any portion of such principal and/or interest to the
extent that payment would require the Company to pay more than fifty percent
(50%) of its Free Cash Flow for such preceding year, provided that any such
deferred amounts shall continue to earn interest as described in Section 6.7
(c)(i) until paid; and provided further that in any event all principal and
interest shall be paid in full no later than five (5) years or ten (10) years,
as the case may be, after the date of the closing. If, in the same fiscal year,
the Company is also required to pay any persons or entities other than Ken for
shares of Class A Stock that such persons or entities originally acquired from
other stockholders of the Company as of the date hereof or pursuant to options
granted by the Company and/or is required to make payment to Ken and/or any
other persons under any comparable long-term senior executive compensation plan
in effect from time to time, the amounts due to such other persons or entities
in such fiscal year shall be aggregated with the amount due with respect to the
Option Shares in such fiscal year and, if the aggregate amount due exceeds fifty
percent (50%) of the Company's Free Cash Flow for the preceding fiscal year,
then and in that event the Company in its sole discretion may elect to defer
payment of any portion of such aggregate amount (principal and/or interest) to
the extent that it would
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exceed fifty (50%) of the Company's Free Cash Flow for the preceding year, and
payments and deferments shall be effected among Ken and such other persons in
proportion to the amounts (both principal and interest) then due and owing to
each, subject to any provisions in such plans as to priority of payment.
(d) CLOSING OF TRANSACTION. The closing of any purchase of Option
Shares hereunder shall be held no later than ninety (90) days after the final
determination of the Fair Market Value of such Option Shares, at such time and
place as the Company may reasonably designate. At the closing, Ken shall deliver
or cause to be delivered to the Company the stock certificates representing such
Option Shares, duly endorsed for transfer in blank or with duly executed stock
powers attached, and with signature guaranteed, in exchange for which the
Company shall deliver to Ken the amount of the purchase price then due, together
with the Company's promissory note evidencing the Company's obligation to pay
the balance, if any, of the purchase price in accordance with the terms of
Section 6.7(c). All payments to Ken hereunder shall be made in cash or by
Company check, bank draft or wire transfer.
SECTION 6.8. ASSIGNMENT AND DELEGATION BY THE COMPANY TO CLASS B
STOCKHOLDERS.
The Company shall have the right, exercisable upon notice to Ken, to
assign any or all of its rights and/or delegate any or all of its obligations
under this Article VI to the holders of the Class B Stock, in proportion to
their respective ownership interests or as they may otherwise unanimously agree,
provided that the Company shall not be relieved of its obligation to purchase
from Ken in accordance herewith any Option Shares duly tendered and not
purchased and paid for by such holders of Class B Stock.
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SECTION 6.9. TAG-ALONG RIGHTS -- DRAG-ALONG RIGHTS.
(a) In the event the Controlling Stockholders of the Company determine
to dispose of all or a portion of their shares of Common Stock, with the result
that they will no longer control the Company, then and in that event the Company
shall give Ken a notice (a "Tag-Along Notice") of such proposed sale (a
"Tag-Along Sale") and the material terms of the Tag-Along Sale (the "Material
Terms") no later than thirty (30) days prior to the consummation of the
Tag-Along Sale. If, within twenty (20) days after a Tag-Along Notice is given to
Ken (or within ten (10) days after any notice of a change in the Material Terms
is given to Ken), the Company receives from Ken a written request (a "Tag-Along
Request") to include in the Tag-Along Sale any of the Option Shares held by him,
such Option Shares (in the same proportion as the total number of shares of
Common Stock held by the Controlling Stockholders bears to the number of shares
being sold by the Controlling Stockholders) shall be included in the Tag-Along
Sale on the same terms and conditions and subject to the same obligations as the
sale by the Controlling Stockholders, taking into account the proportionate
ownership of the Controlling Stockholders and Ken. The Company shall give Ken
prompt notice of any change in the Material Terms and, in such event, Ken shall
have the opportunity, for a period of ten (10) days after such notice has been
given, to submit a Tag-Along Request if Ken did not previously submit a
Tag-Along Request or to withdraw or modify a Tag-Along Request previously made.
(b) Ken's rights hereunder to participate in a Tag-Along Sale shall be
contingent on Ken's compliance with each of the provisions hereof, Ken's
acceptance of a proportionate delegation of any duties or obligations related to
the Tag-Along Sale, including any indemnification obligations, and Ken's
execution of such documents in
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connection with the Tag-Along Sale as may be reasonably requested by the
Controlling Stockholders.
(c) In connection with any proposed sale of shares of Common Stock by
the Controlling Stockholders to a non-affiliated person or entity in an
arms-length transaction, if Ken has not exercised his rights to sell Option
Shares as contemplated under paragraph (a) of this Section 6.9, the Company
shall have the right, exercisable upon notice to Ken, to require that Ken sell
to the purchaser of the shares of the Controlling Stockholders the same
proportion of Option Shares owned by Ken as are being sold by the Controlling
Stockholders, on the same terms and conditions and subject to the same
obligations including any indemnification obligations, as the sale by the
Controlling Stockholders, taking into account the proportionate ownership of the
Controlling Stockholders and Ken. Ken agrees that he will cooperate with the
Company and the Controlling Stockholders in taking all such actions, including
executing all such documentation, as the Company and /or the Controlling
Stockholders may reasonably request.
ARTICLE VII
TRANSFERABILITY OF SHARES AT TIME COMPANY SHARES ARE PUBLICLY TRADED
SECTION 7.1. GENERAL RESTRICTION ON TRANSFER.
In the event that shares of the Class A Stock become listed on a
national securities exchange or quoted in the National Market List of NASDAQ,
then and in that event the provisions of Article VI shall cease to be operative,
and Ken shall not, voluntarily or involuntarily, by operation of law or
otherwise, sell, mortgage, pledge, hypothecate, assign as a security, grant or
permit to exist or continue a security interest in, or in any
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way transfer by gift, will, trust or intestate succession any of the Option
Shares, except to a Permitted Transferee as provided in Section 12.2(a) or
except as specifically provided in this Article VII. Any attempt by Ken to do
any of the aforementioned acts or otherwise to alienate or dispose of any Option
Shares, except in accordance with this Agreement, shall be null and void.
SECTION 7.2. SALE TO SATISFY INCOME TAX LIABILITIES.
Notwithstanding the limitations set forth in any other Section of this
Article VII, Ken shall have the right, exercisable upon notice to the Company
given no later than twelve (12) months after the exercise of any Option, to sell
a number of Option Shares (and/or, to the extent their sale is not otherwise
restricted, Restricted Shares) on the public market, such that the proceeds of
such sale shall equal the amount, if any, of Ken's additional income tax
liability (federal, state and local) actually occasioned as a result of the
exercise of such Option. Such notice shall include a written certification of
such amount by Ken's tax accountant. Any shares of Class A Stock sold under this
Section 7.2 shall be taken into account when calculating the aggregate number of
shares of Class A Stock that Ken shall be entitled to sell in any single
calendar year under any other Section of this Article VII, it being the intent
of the parties that shares of Class A Stock sold under this Section 7.2 shall be
included in, and shall not be in addition to, such aggregate number of shares
permitted to be sold in any single calendar year under any such other Section of
this Article VII.
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SECTION 7.3. SALE ON OR BEFORE DECEMBER 31, 2005.
Except as otherwise provided in Section 7.5 and Section 7.6, from
January 1, 1998 through December 31, 2005, Ken shall have the right to sell
Option Shares on the public market, subject to the following conditions:
(a) MINIMUM MARKET CAPITALIZATION. Ken may not sell any Option Shares
under this Section 7.3 unless the market capitalization of the Company as of the
Business Day immediately preceding the date of sale is greater than three
hundred forty million dollars ($340,000,000). The market capitalization of the
Company shall be determined by multiplying the Fair Market Value of a share of
Class A Stock by the total number of shares of the Common Stock then issued and
outstanding.
(b) MAXIMUM NUMBER OF SHARES.
(i) The maximum number of shares of Class A Stock (including both
Option Shares and Restricted Shares) that Ken may sell in any single calendar
year shall be five hundred twenty-eight (528) shares of Class A Stock, (which
number of shares equals approximately one percent (1%) of the number of shares
of the Company's Common Stock issued and outstanding as of the date hereof); and
(ii) the maximum number of Restricted Shares that may be included in
such shares of Class A Stock sold in any single calendar year shall be the
smaller of (A) the number of Restricted Shares whose Fair Market Value as of the
Business Day immediately preceding the date of sale does not exceed $500,000 or
(B) fifty-three (53) Restricted Shares (which number equals approximately 1/10
of one percent (0.1%) of the number of shares of the Company's Common Stock
issued and outstanding as of the date hereof).
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SECTION 7.4. SALE AFTER DECEMBER 31, 2005.
Except as otherwise provided in Section 7.5, after December 31, 2005,
Ken shall have the right to sell Option Shares on the public market, provided
only that the maximum number of shares of Class A Stock (including both Option
Shares and Restricted Shares) that Ken may sell in any single calendar year
shall be five hundred twenty-eight (528) shares of Class A Stock (which number
of shares equals approximately one percent (1%) of the number of shares of the
Company's Common Stock issued and outstanding as of the date hereof).
SECTION 7.5. SALE AFTER DEATH OR PERMANENT DISABILITY.
(a) Notwithstanding the provisions of Section 7.3, in the event that
Ken's employment terminates as a result of his death or the Company terminates
his employment by reason of his Permanent Disability, then and in that event (i)
the pre-condition to sales on or before December 31, 2005, which is set forth in
Section 7.3(a) with respect to the Company's minimum market capitalization,
shall not apply, and Ken and/or his representative and/or his successors in
interest shall have the right to sell Option Shares pursuant to Section 7.3 on
or before December 31, 2005 irrespective of the market capitalization of the
Company; and (ii) the limitation set forth in Section 7.3(b)(ii) shall not apply
and, instead, the maximum number of Restricted Shares that may be included in
the shares of Class A Stock sold in any calendar year by Ken and/or his
representative and/or successors in interest, as a group, shall be two hundred
sixty-four (264) Restricted Shares.
(b) Notwithstanding the provisions of Section 7.3, Section 7.4 and
Section 7.5(a)(ii), in the event that Ken's employment terminates as a result of
his death, Ken's representative and/or successors in interest shall have the
right to sell in any calendar year
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up to such number of shares of Class A Stock (including both Option Shares and
Restricted Shares) as shall equal the greater of (i) the number of such shares
that is permitted to be sold under Section 7.3 or Section 7.4, as applicable, or
(ii) the number of such shares that is necessary in order for the proceeds of
such sale to equal the amount of the estate and succession tax liability
(federal and state) , including any interest thereon, due in such year as a
result of the inclusion of such shares of Class A Stock in Ken's estate (giving
effect to any deferral permitted by law or regulation in the payment thereof),
together with any and all costs and expenses of administration of Ken's estate
for such year as reasonably estimated by Ken's representative, all as certified
to the Company in writing by Ken's representative.
SECTION 7.6. TENDER, MERGER, CONSOLIDATION.
In the event the Controlling Stockholders of the Company determine to
dispose all or a portion of their shares of Common Stock in a tender, merger,
consolidation or similar type of transaction, with the result that they no
longer control the Company, then and in that event, Ken shall have the right,
but not the obligation, to dispose of a proportionate number of shares of his
Class A Stock in any such transaction.
SECTION 7.7. COMPLIANCE WITH SECURITIES LAWS.
Neither Ken nor his representative will sell or attempt to sell any
shares of Class A Stock under this Article VII except in accordance with all
applicable federal and state securities laws, all applicable rules and
regulations of the Securities and Exchange Commission, and any applicable
underwriters' limitations and restrictions.
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ARTICLE VIII
FUTURE CHANGES IN CAPITAL STRUCTURE AND REDEMPTION OF SHARES
SECTION 8.1. CHANGES IN CAPITAL STRUCTURE.
If the Company hereafter declares a dividend payable in, or subdivides
or combines, shares of the Class A Stock, or if the Company engages in a
recapitalization, reorganization, merger, consolidation, split-up, transfer of
assets, combination or exchange of shares of Common Stock, or if any other event
shall occur which in the judgment of the Board of Directors calls for action by
way of adjusting the terms of the unexercised Options hereunder or the number of
Option Shares, the Board of Directors shall forthwith take such action as in its
judgment shall be necessary or appropriate to preserve Ken's rights with respect
to such Options and Option Shares substantially proportionate to his rights
existing prior to such event, and to the extent that such action shall include
an increase or decrease in the number of Unexercised Shares hereunder, the
Option Price shall be adjusted inversely to the change in the number of
Unexercised Shares in order that the total amount payable by Ken upon exercise
of all the Options granted under this Agreement shall remain unchanged. The
decision of the Board of Directors with respect to any matter referred to in
this Section 8.1 shall be conclusive and binding upon Ken. Nothing in this
Agreement is intended to preserve Ken's equity interest in the Company against
dilution resulting from the issuance of securities by the Company in the future.
SECTION 8.2. REDEMPTION OF CLASS B STOCK.
If and when any shares of the Class B Stock owned by any member of the
Leeds Family are redeemed by the Company in accordance with the terms and
provisions of the
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Shareholders' Agreement, then, in order to ensure that Ken's percentage interest
in the Company will remain the same as his interest would have been but for such
redemption (the "Class B Stock Redemption"), the Company shall, promptly
following the Class B Stock Redemption, adjust the number of the Unexercised
Shares and, if Ken then owns any Option Shares, redeem at a price equal to their
par value (currently $.10 per share) a number of such Option Shares such that
the adjustment of the number of the Unexercised Shares (the "Option Adjustment")
and the redemption of Option Shares (the "Class A Stock Redemption") shall
result in (a) the ratio of (i) the sum of the number of Unexercised Shares and
the number of Option Shares outstanding immediately after the Option Adjustment
and the Class A Stock Redemption to (ii) the total number of shares of Common
Stock outstanding immediately after the Class A Stock Redemption being the same
as (b) the ratio of (i) the sum of the number of Unexercised Shares and the
number of Option Shares outstanding immediately prior to the Class B Stock
Redemption to (ii) the total number of shares of Common Stock outstanding
immediately prior to the Class B Stock Redemption. In such event, the Option
Price shall also be adjusted so that the total amount payable upon exercise of
all the Options granted under this Agreement shall remain unchanged.
ARTICLE IX
PROCEDURE TO BE FOLLOWED IN CASE OF
RESIGNATION FOR GOOD REASON OR DISMISSAL FOR CAUSE
SECTION 9.1. RESIGNATION FOR GOOD REASON.
In the event Ken terminates his employment with the Company as a
Resignation For Good Reason, Ken shall give the Company at least ten (10)
Business Days' prior
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written notice specifying in reasonable detail the specific conduct of the
Company that he considers grounds for Resignation For Good Reason and the
specific provision of the definition of "Resignation For Good Reason" upon which
he relies. Ken's employment with the Company shall terminate as of the tenth
Business Day after such notice is given, or such other date as the parties
mutually agree. Should the Company dispute the basis for such resignation in a
written notice given to Ken on or before his termination date, the parties shall
meet and endeavor to resolve the dispute amicably within the twenty (20)
Business Days after the Company's notice is given. If they cannot so resolve the
dispute within such twenty (20) Business Days after the Company's notice is
given, Ken and the Company shall submit the dispute to binding arbitration in
accordance with Section 10.1. The decision rendered in such arbitration shall be
final and binding on both Ken and the Company for all purposes. If the
arbitrators determine that Ken did not have a proper basis on which to terminate
his employment as Resignation For Good Reason within the meaning of this
Agreement, the termination of Ken's employment shall be treated for all purposes
of this Agreement as a Voluntary Resignation. In addition to any other rights
which a party may have, the party prevailing in such arbitration proceeding
shall be entitled to recover from the losing party any and all of the expenses
incurred by the prevailing party in such proceeding, including reasonable
attorney's fees.
SECTION 9.2. DISMISSAL FOR CAUSE.
In the event the Company terminates Ken's employment as a Dismissal For
Cause, the Company shall give Ken at least ten (10) Business Days' prior written
notice specifying in reasonable detail the specific conduct of Ken that it
considers grounds for Dismissal For Cause and the specific provision of the
definition of "Dismissal For Cause" upon which it relies. Ken's employment with
the Company shall terminate as of the tenth
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Business Day after such notice is given, or such other date as the parties
mutually agree. Should Ken dispute the basis for such termination in a written
notice given to the Company on or before his termination date, the parties shall
meet and endeavor to resolve the dispute amicably within twenty (20) Business
Days after Ken's notice is given. If they cannot so resolve the dispute within
such twenty (20) Business Days after Ken's notice is given, Ken and the Company
shall submit the dispute to binding arbitration in accordance with Section 10.1.
The decision rendered in such arbitration shall be final and binding on both Ken
and the Company for all purposes. If the arbitrators determine that the Company
did not have a proper basis on which to terminate Ken's employment as a
Dismissal For Cause within the meaning of this Agreement, the termination of
Ken's employment shall be treated for all purposes of this Agreement as a
Dismissal Without Cause. In addition to any other rights which a party may have,
the party prevailing in such arbitration proceeding shall be entitled to recover
from the losing party any and all of the expenses incurred by the prevailing
party in such proceeding, including reasonable attorney's fees.
ARTICLE X
RESOLUTION OF DISPUTES
SECTION 10.1. ARBITRATION.
Except as provided in Section 10.2, all controversies arising out of or
relating to this Agreement or the breach hereof shall be settled by arbitration
in the County of Nassau, State of New York, in accordance with the rules of the
American Arbitration Association, and judgment upon the award rendered by the
arbitrators may be entered in
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any court having jurisdiction thereof. Any arbitration hereunder shall be before
three (3) arbitrators.
SECTION 10.2. EQUITABLE RELIEF.
Notwithstanding the provisions of Section 10.1, any proceeding for
injunctive relief or specific performance in connection with this Agreement
shall be commenced in Supreme Court of the State of New York, County of Nassau,
and each of the parties hereby accepts the exclusive jurisdiction of such Court
for such purpose; provided, however, that the petitioner may commence such
proceeding in such other court as may be necessary, in the petitioner's
judgment, in order to more effectively or expeditiously obtain personal
jurisdiction over the respondent.
ARTICLE XI
REPRESENTATIONS AND WARRANTIES
SECTION 11.1. REPRESENTATIONS OF THE COMPANY.
The Company hereby represents and warrants to Ken that (a) it has full
legal right, power and authority to enter into this Agreement and to consummate
the transactions herein contemplated; (b) the execution and delivery of this
Agreement has been duly authorized by all necessary corporate action; (c) this
Agreement constitutes the valid and binding obligation of the Company,
enforceable in accordance with its terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally and by general principles of equity; and
(d) neither this Agreement nor the consummation of the transactions herein
contemplated
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will conflict with, violate or infringe any legal restriction, contract or
instrument to which the Company is subject or by which it is bound.
SECTION 11.2. REPRESENTATIONS OF KEN.
Ken hereby represents and warrants to the Company that (a) he has full
legal right, power and authority to enter into this Agreement and to consummate
the transactions herein contemplated; (b) this Agreement constitutes the valid
and binding obligation of Ken, enforceable in accordance with its terms, except
to the extent that such enforcement may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditors' rights generally and by general
principles of equity; and (c) neither this Agreement nor the consummation of the
transactions herein contemplated will conflict with, violate or infringe any
legal restriction, contract or instrument to which Ken is subject or by which he
is bound.
ARTICLE XII
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
"Affiliates" shall mean all entities controlling, controlled by or
under common control with the Company.
"Appraiser" or "Appraisers" shall have the meaning specified in Section
6.7(b).
"Board of Directors" shall mean the Board of Directors of the Company.
"Business Day" shall mean any day on which the Company is scheduled to
be open for business.
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"Change in Control" shall mean a direct or indirect transfer of fifty
percent (50%) or more of the voting control of the Company or the sale of
substantially all of the assets of the Company, in one or more transactions, to
(a) one or more persons who are not (i) members of the Leeds Family or (ii)
spouses, children or grandchildren of members of the Leeds Family and/or (b) one
or more entities which are not controlled by (i) one or more members of the
Leeds Family or (ii) one or more of the spouses, children or grandchildren of
members of the Leeds Family.
"Class A Stock" shall mean the Class A Common Stock of the Company.
"Class A Stock Redemption" shall have the meaning specified in Section
8.2.
"Class B Stock" shall mean the Class B Common Stock of the Company.
"Class B Stock Redemption" shall have the meaning specified in Section
8.2.
"Closing Price" shall mean the last-quoted price at which shares of
Class A Stock were traded at the close of business on a national securities
exchange or NASDAQ on any day on which shares of the Class A Stock were publicly
held.
"CMP Business" shall mean any publication, product, service or business
(a) which the CMP Group publishes, produces, provides or engages in or (b) which
the CMP Group has a bona fide plan or intention to publish, produce, provide or
engage in within the succeeding 12-month period, the research and development of
which the CMP Group has devoted substantive time and attention to, and which
plan or intention Ken has actual knowledge of before he engages in any activity
competitive with such CMP Business as contemplated by clause (A) of Section
2.3(a).
"CMP Group" shall mean the Company or any of its Affiliates.
"Common Stock" shall mean all the classes of the Common Stock of the
Company collectively.
"Conditions" shall have the meaning specified in Section 3.2.
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"Controlling Stockholders" shall mean the members of the Leeds Family
who hold shares of capital stock of the Company collectively representing a
majority of the votes that may be cast on any matter on which stockholders of
the Company shall be entitled to vote.
"Direct Competitor" shall mean a business enterprise that produces or
operates, or owns directly or indirectly an interest of twenty percent (20%) or
more in, one or more Directly Competitive Businesses.
"Directly Competitive Business" shall mean any competitive publication,
product, service or business (a) the target audience of which is substantially
the same as the target audience of a CMP Business or (b) forty percent (40%) or
more of the annual revenue of which is derived from substantially the same
customers as a CMP Business derives twenty percent (20%) or more of its annual
revenue.
"Dismissal For Cause" shall mean the termination of Ken's employment
with the Company by the Board of Directors for (i) the willful and continued
failure of Ken substantially to perform his duties as an officer and employee of
the Company or comply with the written policies of the Company after the Company
has delivered to Ken a written demand for substantial performance or compliance
that specifies such failure in reasonable detail; (ii) illegal conduct or gross
misconduct by Ken, in either case that is willful and results (or is reasonably
likely to result) in material damage to the business or reputation of the
Company; or (iii) the resignation by Ken from his employment following his act
or omission which would constitute grounds for Dismissal For Cause hereunder. No
act or failure to act on the part of Ken (other than non-compliance with lawful
instructions given to Ken by the Company) shall be considered "willful" unless
it is done or omitted to be done by him in bad faith or without reasonable
belief that his action or omission was in the best interests of the Company. Any
act or failure to act that
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is pursuant to resolution duly adopted by the Board of Directors shall be
conclusively presumed to be done or omitted to be done by Ken in good faith and
in the best interests of the Company.
"Dismissal Without Cause" shall mean the termination of Ken's
employment by the Company on any grounds other than Dismissal For Cause or as a
result of his Permanent Disability.
"Employment Agreement" shall mean that certain Employment Agreement
entered into as of the date hereof by and between the Company and Ken.
"Fair Market Value" shall mean the fair market value of a share of
Class A Stock, which shall be the Closing Price on the trading day immediately
preceding the date of determination of fair market value or, if the Company is
privately held, the best estimate of the fair market value of a share of Class A
Stock as of the last day of the month immediately preceding the month in which
notice to buy or sell a share of Class A Stock or exercise an Option is given,
as determined with reference to publicly held companies comparable to the
Company.
"Financial Statements" shall mean the combined or consolidated
financial statements of the Company and its Affiliates prepared in accordance
with generally accepted accounting principles and audited by the Company's
independent certified public accountants.
"Free Cash Flow" of the Company with respect to any fiscal year shall
mean the combined or consolidated net income of the Company for such year as
reflected in the Financial Statements, adjusted so as (a) to exclude the amount,
if any, that, in determining such combined or consolidated net income,
represented (i) an expense for depreciation and/or amortization or (ii) a
provision or credit for federal, state, local or foreign income taxes; and (b)
to include the amount, if any, of cash payments that the Company actually
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made in such fiscal year (i) for federal, state, local and foreign income taxes
owed by the Company (and, if the Company is an S Corporation, in distributions
to its stockholders for the payment of federal, state, local and foreign taxes
owed by such stockholders with respect to the Company's income), (ii) for
capital expenditures, (iii) pursuant to the Company's 1988 Equity Appreciation
Plan or (iv) as required under the terms of the Company's then-existing
financing arrangements to reduce the principal amount of indebtedness. The
Company's determination of Free Cash Flow shall be conclusive and binding for
all purposes of this Agreement provided that the Company's certified public
accountants render a written opinion that such determination presents fairly, in
all material respects, the Free Cash Flow of the Company as herein defined. (A
hypothetical illustration of the calculation of Free Cash Flow is set forth on
Schedule XI hereto.)
"Indirect Competitor" shall mean a business enterprise that does not
produce or operate, or own directly or indirectly an interest in, any Directly
Competitive Businesses but produces or operates, or owns directly or indirectly
an interest of twenty percent (20%) or more in, one or more Indirectly
Competitive Businesses.
"Indirectly Competitive Business" shall mean any competitive or
potentially competitive publication, product, service or business which derives
from twenty percent (20%) to but not including forty percent (40%) of its annual
revenue from substantially the same customers as a CMP Business derives twenty
percent (20%) or more of its annual revenue.
"Key Senior Executive" shall mean a Company employee holding a position
of responsibility no lower than that currently titled President of Publishing,
or a position with a comparable level of responsibility (but in any case a level
of responsibility higher than the position currently titled Senior Vice
President/Group Publisher).
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"Leeds Family" shall mean Gerard G. Leeds, Liselotte J. Leeds, Michael
S. Leeds, Richard A. Leeds, Daniel H. Leeds, Greg Jobin-Leeds and Jennifer
Leeds-Lukehart.
"Negative Pledge Agreement" shall mean that certain Negative Pledge
Agreement originally dated as of July 15, 1993 by and among Gerard G. Leeds,
Lilo J. Leeds and Fleet National Bank (f/k/a/ Shawmut Bank Connecticut, National
Association), as most recently amended and confirmed by Gerard G. Leeds, Lilo J.
Leeds, Michael S. Leeds and Daniel H. Leeds to Fleet National Bank and The Chase
Manhattan Bank on November 14, 1996.
"Net Sales Revenue" of the Company with respect to any fiscal year
shall mean the combined or consolidated net sales of the Company and its
Affiliates as reflected in the Financial Statements for such year.
"Option" shall mean the right of Ken to purchase any Option Share
hereunder.
"Option Adjustment" shall have the meaning specified in Section 8.2.
"Option Price" shall mean the price at which Ken may purchase an Option
Share hereunder.
"Option Shares" shall mean the shares of Class A Stock issued to Ken
pursuant to this Agreement, plus any additional shares of Class A Stock that may
be issued from time to time with respect to such Option Shares as a result of
any changes in the Company's capital structure as contemplated in Section 8.1,
and less any Option Shares that may be canceled or redeemed from time to time as
a result of any such changes in the Company's capital structure or of any stock
redemptions as contemplated in Section 8.2.
"Permanent Disability" shall mean a physical or mental impairment, as a
result of which Ken shall have been unable, with or without reasonable
accommodation, to perform the essential functions of his employment position for
a period of at least sixteen (16) weeks during any 12-month period.
"Permitted Transferee" shall mean a spouse, child or grandchild of Ken,
or an entity (e.g., a trust, corporation or partnership) in which Ken has the
majority voting
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<PAGE> 53
interest and of which the beneficiaries are a spouse and/or one or more children
or grandchildren of Ken.
"Pre-Tax Income" of the Company with respect to any fiscal year shall
mean the combined or consolidated net income of the Company and its Affiliates
as reflected in the Financial Statements for such year plus the sum of all
federal, state, local and foreign income taxes that were deducted in determining
such combined or consolidated net income.
"Resignation For Good Reason" shall mean Ken's resignation from his
employment with the Company after the Company has, without his consent, (i)
materially reduced his package of compensation and benefits, (ii) materially
diminished his position, authority, duties or responsibilities, or (iii)
required him to report regularly to an office located more than fifty (50) miles
from Manhasset, New York. Any reduction in Ken's compensation package made
pursuant to the written compensation plan between Ken and the Company dated as
of the date hereof shall not be deemed grounds for Resignation For Good Reason.
"Restricted Shares" shall mean the shares of Class A Stock owned by Ken
that are subject to restrictions under the Stockholders' Agreement.
"Share Purchase Agreement" shall mean that certain Share Purchase
Agreement entered into as of the date hereof by and among Gerard G. Leeds,
Liselotte J. Leeds and Ken.
"Shareholders' Agreement" shall mean that certain Shareholders'
Agreement entered into as of June 30, 1991 by and among the Company, certain of
the Affiliates and the members of the Leeds Family.
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<PAGE> 54
"Stockholders' Agreement" shall mean that certain Stockholders'
Agreement entered into as of the date hereof by and among the Company, Gerard G.
Leeds, Liselotte J. Leeds and Ken.
"Unexercised Shares" shall mean the authorized but unissued shares of
Class A Stock with respect to which Ken is granted an Option under this
Agreement but with respect to which such Option has not yet been exercised.
"Voluntary Resignation" shall mean Ken's resignation from his
employment with the Company on any grounds other than grounds for Resignation
For Good Reason or as a result of his Permanent Disability.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.1. LEGEND ON CERTIFICATES.
Upon the execution of this Agreement, each certificate evidencing any
of the Option Shares held by Ken shall be endorsed as follows:
The shares of stock evidenced by this certificate are subject to the
restrictions of and are transferable only upon compliance with the
provisions of a certain Option Agreement entered into by and between
Kenneth D. Cron and the Company. A copy of such Agreement is on file in
the office of the Company.
In addition, all such certificates shall bear such other legends as, in the
opinion of the Company's counsel, are necessary or appropriate to ensure
compliance with all applicable federal and state securities laws.
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<PAGE> 55
SECTION 13.2. PERMITTED TRANSFEREES; REPRESENTATIVE AND SUCCESSORS IN
INTEREST.
(a) PERMITTED TRANSFEREES. Subject to Section 12.4 but notwithstanding
any other provision of this Agreement, Ken shall be permitted to sell, give or
bequeath all or any portion of the Option Shares or interest therein, or pass
such Option Shares or interest by means of intestate succession or otherwise,
either outright or in trust, to a Permitted Transferee, provided that such
transfer shall be implemented in a manner acceptable to legal counsel for the
Company. In case of any such transfer by Ken, each Permitted Transferee shall
receive and hold the transferred Option Shares subject to all the terms and
conditions of this Agreement, and there shall be no further transfer of such
Option Shares except by such Permitted Transferee to another Permitted
Transferee in accordance with the terms of this Agreement. Before Ken transfers
any Option Shares to a Permitted Transferee, and before any Permitted Transferee
transfers any Option Shares to another Permitted Transferee, Ken or the
transferring Permitted Transferee, as the case may be, shall give the Company
written notice of such intended transfer. Any Permitted Transferee shall, to the
extent of the Option Shares transferred, succeed to all the rights and
obligations of the transferor under this Agreement and shall become bound by all
the terms and conditions hereof; provided that, as a condition precedent to a
Permitted Transferee's exercising any rights under this Agreement and to the
Company's obligation to change its records to reflect the record ownership of
such Option Shares in the name of such Permitted Transferee, the Permitted
Transferee shall execute such documents and instruments as may reasonably be
required by legal counsel to the Company. Unless otherwise expressly provided in
this Agreement, any reference herein to a right or obligation of Ken to sell or
receive payment for any shares of Class A Stock shall be deemed to refer equally
to any Permitted Transferee, and any limitations herein with respect to the
number or category of shares of Class A Stock which Ken shall have a right
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<PAGE> 56
or obligation to sell in any calendar year shall apply to Ken and all Permitted
Transferees as a group.
(b) REPRESENTATIVE AND SUCCESSORS IN INTEREST. Except as may be
otherwise specifically provided in this Agreement, in the event of Ken's death
or incapacity his representative and/or successors in interest shall succeed to
all his rights and obligations under this Agreement and be bound by all the
terms and conditions hereof, and they shall be entitled to exercise such rights,
and shall be required to fulfill such obligations, in the same manner and to the
same extent that Ken would have been so entitled or required but for his death
or incapacity.
SECTION 13.3. FURTHER ASSURANCES.
Each of the parties hereto, upon request of another party, shall take
all such actions and execute and deliver all such further instruments of sale,
assignment, conveyance, transfer and exchange, and all such other documents and
agreements, as may be necessary or appropriate to assure, complete and evidence
the full and effective sale, assignment, transfer, conveyance and exchange of
the Option Shares as herein required and as may otherwise be necessary or
appropriate to comply with the terms and conditions of this Agreement. In the
event a party shall not take all such actions or execute or deliver all such
further instruments, then and in that event each such party hereby appoints the
Company such party's agent and attorney-in-fact for the purpose of executing and
delivering (a) any and all documents necessary to convey and/or exchange the
Option Shares pursuant to the provisions of this Agreement, any conveyance or
exchange so made fully divesting the party whose interest is so conveyed of all
right, title or equity in or to the Option Shares formerly owned by such party,
and (b) any and all other documents, instruments, agreements and other writings
necessary to effectuate the terms
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<PAGE> 57
of this Agreement. The powers of attorney herein granted, being coupled with an
interest, are irrevocable and shall not be revoked by the death, dissolution or
incapacity of any party hereto or for any other reason. Each party hereto hereby
releases any other party who conveys or exchanges the Option Shares formerly
owned by such party as provided in this Section 13.3 from any and all claims and
liabilities for or resulting from the conveying or exchanging of such Option
Shares.
SECTION 13.4. S CORPORATION.
It is intended that for federal income tax purposes the Company will
continue to qualify as an "S Corporation" as defined in Section 1361 of the
Internal Revenue Code or any successor provision of the federal income tax laws.
Accordingly, the Company and Ken shall execute and keep in full force and effect
the consent described in Section 1362(a)(2) of the Internal Revenue
Code or any successor provision until such time as the Company and the
Controlling Stockholders determine not to continue to qualify the Company as an
S Corporation. In addition, notwithstanding the provisions of any other Section
of this Agreement, no transfer of any shares of Class A Stock shall be made to
any person or entity, nor shall Ken by action or inaction cause any
circumstances to exist, which would disqualify the Company as an S Corporation.
SECTION 13.5. CREDIT FACILITIES.
It is understood and acknowledged that one or more banks or lending
institutions of the Company may from time to time require, as a condition to
extending or continuing to extend credit to the Company, that persons who are
both stockholders and members of management of the Company execute and deliver
to such banks or lending institutions certain assurances and agreements such as
the Negative Pledge Agreement. For as long
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<PAGE> 58
as he is a Key Senior Executive, Ken shall, if requested by the Company,
promptly take all such actions and execute and deliver all such documents
containing such assurances and agreements (other than personal guarantees) as
may be reasonably required by such banks or lending institutions, on the same
basis and in substantially the same form and manner as other persons who are
both stockholders and members of management of the Company.
SECTION 13.6. ACCELERATED VESTING CHART.
For convenience of reference, a chart summarizing the accelerated
vesting provisions set forth in Article III of this Agreement is set forth on
Schedule 13.6 hereto.
SECTION 13.7. ENTIRE AGREEMENT; BINDING EFFECT.
This Agreement contains all of the terms agreed upon by the parties
with respect to the subject matter hereof and replaces and supersedes any and
all prior agreements, written or oral, between the parties relating to the
Option Shares (except for the Stockholders' Agreement to the extent its terms
are not inconsistent herewith). No promises, agreements or representations with
respect to the matters herein contained shall be binding upon any of the parties
unless set forth herein. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective heirs, representatives, successors
and permitted assigns.
SECTION 13.8. AMENDMENT.
No provision of this Agreement may be amended or waived except by a
writing making reference to this Agreement and signed by the party against whom
the enforcement of such amendment or waiver is sought.
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<PAGE> 59
SECTION 13.9. APPLICABLE LAW.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of New York, without reference to its
principles regarding choice or conflicts of law, and in accordance with and
consistent with the Company's election to be treated as an S Corporation.
SECTION 13.10 SEVERABILITY.
Wherever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law and
the Company's S Corporation election, but if any provisions hereof shall be
prohibited by or invalid under any such law or the Company's S Corporation
election, such provision shall be ineffective to the extent of such prohibition
or invalidity, without invalidating or nullifying the remainder of such
provision or any other provision of this Agreement.
SECTION 13.11. NO WAIVER.
No delay or omission by any party in exercising or enforcing any right
hereunder shall operate as a waiver of such right, and a waiver on one occasion
shall not be construed as a waiver of any right or remedy on any future
occasion.
SECTION 13.12. NOTICES.
All notices, requests, consents, designations and demands required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given (a) when personally delivered to Ken or to an
authorized officer of the Company, whether by messenger, courier or other
person, (b) on the second Business Day after the date it is sent by certified or
registered mail, return receipt requested, or (c) on the next
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<PAGE> 60
Business Day after the date it is sent via telefacsimile (provided it is
actually received and is not materially illegible), as follows:
If to the Company:
CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Attention: President
Fax: (516) 562-5718
with a copy to:
CMP Media Inc.
600 Community Drive
Manhasset, New York 11030
Attention: General Counsel
Fax: (516) 562-7123
If to Ken:
Kenneth D. Cron
c/o Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, NY 10004-1490
Attention: Richard G. Cohen, Esq.
Fax: (212) 858-1500
with a copy to Ken at his last known address as reflected on the
records of the company.
or to such other mail or facsimile address as the recipient party shall
have last designated by notice given to the other in accordance herewith.
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<PAGE> 61
SECTION 13.13. ASSIGNMENT.
Except as expressly provided in this Agreement, no party may assign any
rights or delegate any obligations or liabilities hereunder without the prior
written consent of the other parties, except that the Company may assign any of
its rights and delegate any of its duties to an entity that controls, is
controlled by or is under common control with the Company; provided, however,
that no such assignment or delegation shall relieve the Company from its
obligations or liabilities hereunder.
SECTION 13.14. SURVIVAL.
This Agreement shall survive any merger, sale or other disposition of
the Company.
SECTION 13.15. GENDER AND NUMBER.
Except when otherwise indicated by the context, references herein to
one gender shall include the other genders, and references herein to the plural
shall include the singular.
SECTION 13.16. DATES.
If any date referred to in any provision of this Agreement falls on a
day that is not a Business Day, such provision shall be deemed to refer to the
next succeeding Business Day.
SECTION 13.17. HEADINGS.
The headings herein are for convenience of reference only and shall not
be considered in construing this Agreement.
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SECTION 13.18. COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original and all of which shall together constitute one
and the same instrument.
IN WITNESS WHEREOF, Ken has executed this Agreement and the Company has
caused this Agreement to be executed by an officer thereunto duly authorized on
the day and year first above written.
CMP MEDIA INC.
By /s/MICHAEL J. LEEDS
-----------------------------
Name: MICHAEL J. LEEDS
Title: President
Attest:
/s/ROBERT D. MARAFIOTI
--------------------------
[CORPORATE SEAL]
[Imprint on original]
/s/KENNETH D. CRON
- -------------------------------
KENNETH D. CRON
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<PAGE> 63
SCHEDULE 5.2(b)
HYPOTHETICAL ILLUSTRATION OF
CALCULATION OF OPTIONS VESTING
UNDER SECTION 5.2(b)
Assume Ken's employment with the Company terminates on May 10, 2001 and that all
shares that could have vested under Section 3.2 and Section 3.3 have vested.
The number of Options that would have vested within 24 months after such
termination date (i.e., on or before May 9, 2003) assuming the Conditions were
satisfied is 528 Options, pursuant to Section 3.4(a).
The nearest preceding December 31 on which Options vested or could have vested
under paragraph (a) of Sections 3.2, 3.3, 3.4 or 3.5 was December 31, 1999,
pursuant to Section 3.3(a).
The number of full months that, as of the date of termination, have elapsed
since December 31, 1999 is 16 (January 2000 through April 2001).
The numerator of the fraction is therefore 16 and the denominator is 24.
16/24 X 528 = 352 Options.
Therefore, 352 Options would vest and become exercisable on the date of
termination.
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SCHEDULE XI
HYPOTHETICAL ILLUSTRATION OF
CALCULATION OF FREE CASH FLOW
CMP MEDIA INC.
CALCULATION OF FREE CASH FLOW
FOR THE YEAR ENDED DECEMBER 31, XXXX
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
Combined (or Consolidated) net income $ 25,000
Depreciation and amortization expense 7,500
Federal, foreign, state and local income tax
expense of the Company 650
Cash payments for federal, foreign, state and local
income taxes of the Company (750)
Cash distributions to the S Corporation stockholders
for payment of federal, foreign, state and local income
taxes owed by such stockholders on Company income (10,200)
Capital expenditures (8,500)
Cash payments under the Company's 1988 Equity
Appreciation Plan (250)
Debt payments to reduce principal (500)
--------
Free cash flow $ 12,950
--------
</TABLE>
Note: Illustration assumes Company is an S Corporation.
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SCHEDULE 13.6
CMP Media Inc.
Option Agreement
Vesting Schedule
Kenneth D. Cron
<TABLE>
<CAPTION>
- -------------- ----------------- ---------------- -----------------------------------------------------------------
Accelerators Percentage Vested Years Applicable Description
- -------------- ----------------- ---------------- -----------------------------------------------------------------
<S> <C> <C> <C>
First Series 0.25% 12/31/97-12/31/04 .25% (132 shares) will vest as of the first December 31 on which
(section 3.2) the conditions set forth in section 3.2 are satisfied
Second Series 0.50% 12/31/99-12/31/04 .50% (264 shares) will vest as of the first December 31 on which
(section 3.3) the conditions set forth in section 3.2 are satisfied
12/31/97-12/31/98 Vesting of 50% of the Second Series shares (132 shares) will
accelerate as of the first December 31 on which the conditions
set forth in sections 3.2 and 3.3(b) are satisfied
Third Series 1.00% 12/31/01-12/31/04 1.00% (528 shares) will vest as of the first December 31 on which
(section 3.4) the conditions set forth in section 3.2 are satisfied
12/31/97-12/31/00 Vesting of 50% of the Third Series shares (264 shares) will
accelerate as of the first December 31 on which the conditions
set forth in sections 3.2 and 3.4(b) are satisfied
Fourth Series 1.25% 12/31/03-12/31/04 1.25% (660 shares) will vest as of the first December 31 on which
(section 3.5) the conditions set forth in section 3.2 are satisfied
12/31/97-12/31/02 Vesting of 40% of the Fourth Series shares (264 shares) will
accelerate as of the first December 31 on which the conditions
set forth in sections 3.2 and 3.5(b) are satisfied
Fifth Series 0.50% 12/31/97-12/31/04 .50% (264 shares) will vest as of the first December 31 on which
(section 3.6) the conditions set forth in sections 3.2 and 3.6(a) are satisfied
0.50% 12/31/97-12/31/04 .50% (264 shares) will vest as of the first December 31 on which
---- the conditions set forth in sections 3.2 and 3.6(b) are satisfied
Total 4.00%
</TABLE>
Any shares which do not vest in accordance with the above schedule vest on
December 31, 2005 provided that Ken is a Key Senior Executive as defined in the
agreement.
61
<PAGE> 1
EXHIBIT 10.13
CMP MEDIA INC.
1996 STOCK OPTION PLAN
ARTICLE I
ESTABLISHMENT AND PURPOSE
This stock option plan shall be known as the CMP MEDIA INC. 1996 STOCK
OPTION PLAN (the "Plan"). The purpose of the Company in establishing the Plan is
(a) to secure for the Company and its stockholders the benefits of stock
ownership by key employees of the CMP Group who contribute materially to its
success; (b) to aid the CMP Group in attracting and retaining key employees; (c)
to align more closely the personal interests of key employees with those of the
Company and its stockholders; and (d) to motivate key employees to take a
long-term view of the best interests of the CMP Group and contribute actively to
its future growth in sales, profits and profitability, consistent with its
corporate Principles. To attain these purposes, the Plan will permit the grant
of nonqualified stock options to key employees of the CMP Group.
ARTICLE II
ADMINISTRATION
SECTION 2.1. THE COMMITTEE.
The Plan shall be administered by a Stock Option Committee consisting of
not less than three (3) persons, who shall not be eligible to be granted Options
under this Plan while serving as members thereof (the "Committee"). The
Committee shall be designated by the Board of Directors, which may from time to
time designate members in substitution for members previously designated and
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<PAGE> 2
may fill vacancies, however caused, in the Committee.
SECTION 2.2. AUTHORITY OF THE COMMITTEE.
Except as limited by law or by the certificate of incorporation or bylaws
of the Company as amended from time to time, and subject to all the provisions
of the Plan, the Committee shall have full power to administer the Plan,
including without limitation the power (a) to select the persons who shall
become Participants in the Plan; (b) to determine the terms and conditions upon
which and the price or prices at which Shares may be purchased from the Company,
and any other terms or conditions of each Option, consistent with all the
provisions of Plan; (c) to construe and interpret the provisions of the Plan and
any agreement or instrument entered into under the Plan; (d) to establish,
amend, rescind or waive rules and regulations for the Plan's administration; (e)
subject to the provisions of Article X, to amend the terms and conditions of any
outstanding Option to the extent such amended terms and conditions are
consistent with the provisions of the Plan and are within the power of the
Committee as provided herein; and (f) to take all such other action and make all
such other determinations as may be necessary or advisable in order to
administer the provisions of the Plan and effectuate the purposes hereof.
SECTION 2.3. CONDUCT OF BUSINESS.
The Committee shall hold its meetings at such times and places as it may
determine. Any member or members of the Committee may participate in a meeting
by means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other. It shall
keep minutes of its meetings and shall cause such other records to be kept as
may be necessary or advisable in connection with the proper administration of
the
2
<PAGE> 3
Plan. Any decision or determination reduced to writing and signed by all members
of the Committee shall be fully as effective as if it had been made by a
majority vote at a meeting duly called and held. The Committee may delegate its
authority and duties hereunder to the extent permitted by law.
SECTION 2.4. DECISIONS BINDING.
All determinations and decisions made by the Committee pursuant to the
provisions of the Plan and all related orders and resolutions of the Board of
Directors shall be final, conclusive and binding on all persons, including the
Company, its employees, officers and stockholders, the Affiliates, their
respective employees, officers and stockholders, the Participants, and their
estates, representatives and beneficiaries.
ARTICLE III
SHARES SUBJECT TO PLAN
Unless otherwise determined by the Board of Directors, the only stock
issuable under the Plan shall be shares of the Class A Stock. Subject to the
provisions of Article VIII, the maximum number of shares that may be issued upon
the exercise of Options under the Plan shall be Three Thousand One Hundred Sixty
Eight (3,168) shares, consisting of authorized but unissued shares, shares held
in the Company's treasury, or a combination of the two (the "Shares"). If any
Option granted hereunder shall expire or terminate for any reason without having
been exercised in full, the unpurchased Shares subject thereto shall remain
reserved for, and shall be available for, issuance upon the exercise of other
Options under the Plan.
3
<PAGE> 4
ARTICLE IV
ELIGIBILITY AND PARTICIPATION
SECTION 4.1. ELIGIBILITY.
Every key employee of the CMP Group other than Michael S. Leeds, Daniel H.
Leeds and Kenneth D. Cron shall be eligible to become a Participant in the Plan.
SECTION 4.2. PARTICIPATION.
Participants in the Plan shall be those eligible employees of the CMP
Group whom the Committee shall designate from time to time to be granted Options
in accordance with the provisions of the Plan.
ARTICLE V
STOCK OPTIONS
SECTION 5.1. GRANT OF OPTIONS.
(a) Subject to all the provisions of the Plan, the Company may grant an
Option at any time and from time to time to any eligible employee of the CMP
Group with respect to such number of Shares and upon such terms as the Committee
shall determine.
(b) All Options granted under the Plan shall be nonqualified stock options
and are not intended to meet the requirements of Section 422 or Section 422A of
the Code. Unless the Committee expressly determines that an Option shall not be
designed to comply with the safe-harbor performance-based exception from the tax
deductibility limitations of Section 162(m) of the Code, the maximum number of
Shares with respect to which an Option may be granted to any single Participant
in
4
<PAGE> 5
any single taxable year of the Company shall be one thousand (1,000), subject to
adjustment as provided in Section 8.1.
(c) In selecting a key employee to be a Participant and in determining the
number of Shares subject to any Option and the other terms and conditions
thereof, the Committee shall give consideration to the responsibility of the
Participant in the business of the CMP Group and the potential for the
Participant to contribute materially to the future success of the CMP Group.
SECTION 5.2. STOCK OPTION AGREEMENT.
Each Option granted hereunder shall be evidenced by a written Stock Option
Agreement that shall specify the number of Shares which are subject to the
Option, the Option Price, the installments, if any, in which the Option shall
vest and become exercisable, the date of expiration of the Option and such other
terms and conditions as the Committee shall determine and as are consistent with
the provisions of the Plan.
SECTION 5.3. OPTION PRICE.
Unless otherwise designated by the Committee in the Stock Option Agreement
applicable to an Option, the Option Price with respect to such Option shall be
equal to the Fair Market Value of a Share as of the date that such Option is
granted; provided, however, that in no event shall the Option Price designated
by the Committee with respect to any Option be less than seventy-five percent
(75%) of the Fair Market Value of a Share as of the date that such Option is
granted or, if greater, the par value of a Share.
5
<PAGE> 6
SECTION 5.4. EXPIRATION OF OPTIONS.
Subject to the provisions of Section 5.9, each Option granted hereunder
shall expire at such time as the Committee shall designate in the Stock Option
Agreement applicable to such Option; provided, however, that it shall in any
event expire no later than the tenth (10th) anniversary of the date it is
granted.
SECTION 5.5. EXERCISE OF OPTIONS.
Each Option granted hereunder shall be exercisable at such times and upon
such conditions as are designated in the Stock Option Agreement applicable to
such Option. To exercise an Option in whole or in part, a Participant shall give
the Company a written notice of exercise which specifies the number of Shares to
be purchased and is accompanied by payment of the full Option Price for such
Shares. An Option may be exercised with respect to fewer than all the Shares
with respect to which it is then exercisable, but it may not be exercised with
respect to less than a full Share.
SECTION 5.6. PAYMENT FOR SHARES.
Upon exercise of an Option with respect to any Shares, payment of the
Option Price may be made (i) by delivering to the Company cash or its
equivalent; (ii) by transferring and delivering to the Company shares of the
Class A Stock, which shall be valued at their Fair Market Value (provided that,
if such shares of Class A Stock were acquired by the Participant pursuant to the
Plan, such Shares have been owned by the Participant for at least six (6) months
prior to their transfer and delivery to the Company); (iii) by any other method
that may be authorized by the Committee from time to time with respect to such
Option; or (iv) by any combination of the foregoing methods of payment.
6
<PAGE> 7
SECTION 5.7. PAYMENT OF WITHHOLDING TAXES.
As a precondition to the issuance of any Shares upon the exercise of an
Option, the Company shall have the right and power to deduct or withhold, or
require a Participant to remit to the Company, an amount sufficient to satisfy
federal, state and local taxes, domestic or foreign, that are required by law or
regulation to be withheld by the Company as a result of such exercise. The
Participant may discharge such obligation in whole or in part with respect to
the minimum withholding-tax liability arising upon the exercise of an Option
(but no more than such minimum) (a) by transferring and delivering to the
Company shares of the Class A Stock, which shall be valued at their Fair Market
Value; (b) with the prior approval of the Company, by authorizing the Company in
writing to deduct and retain Shares, valued at their Fair Market Value, as of
the date of exercise, from the Shares otherwise to be issued upon such exercise;
or (c) by any combination of the foregoing methods of payment.
SECTION 5.8. ISSUANCE OF SHARES.
. (a) As soon as practicable after the exercise of an Option, including
full payment for the Shares purchased pursuant thereto and the satisfaction of
the withholding-tax liability arising from such exercise, all in accordance with
the provisions of the Plan and the terms and conditions of the applicable Stock
Option Agreement, the Company shall duly issue such Shares to the Participant
and shall cause to be delivered to the Participant a stock certificate or
certificates representing such Shares and bearing such restrictive legends as
the Committee may deem necessary or appropriate to ensure compliance with all
applicable laws, rules and regulations.
(b) Notwithstanding anything to the contrary contained herein, the Company
may, in its discretion, defer for not more than six (6) months the
7
<PAGE> 8
issuance and delivery of Shares otherwise deliverable hereunder until completion
of the process of listing the Shares on a national exchange or the filing,
registration or other qualification of the Shares under any state or federal
law, rule or regulation as the Company may deem appropriate, provided that the
Company diligently pursues such listing, registration or qualification. The
Company may require any Participant to make such representations and furnish
such information as the Company may deem appropriate in connection with the
issuance or delivery of Shares, in compliance with all applicable laws, rules
and regulations.
(c) The Committee may impose such restrictions on any Shares purchased
pursuant to the exercise of an Option as it may deem advisable, including
without limitation restrictions under applicable federal securities laws, under
the requirements of any stock exchange or market upon which such Shares are then
listed and/or traded, under any blue-sky or state securities laws applicable to
such Shares and under any applicable stockholders' or other agreement.
SECTION 5.9. TERMINATION OF EMPLOYMENT.
(a) Unless otherwise determined by the Committee, if a Participant's
employment with the CMP Group terminates as a result of his or her death,
Disability or Dismissal Without Cause, each Option of the Participant may be
exercised only to the extent of (i) the number of Shares with respect to which
such Option was exercisable on the date of such termination of employment plus
(ii) the number of additional Shares with respect to which such Option would
have been exercisable upon the vesting of the next scheduled installment, if
any, of the Option as provided in the applicable Stock Option Agreement. In the
event of the Participant's death or Disability, the Option shall remain
exercisable to such extent for a period of two (2) years after the date of
termination of employment or until the expiration date of the Option, whichever
is earlier. In the event of the
8
<PAGE> 9
Participant's Dismissal Without Cause, the Option shall remain exercisable to
such extent for a period of six (6) months after the date of termination of
employment or until the expiration date of the Option, whichever is earlier.
(b) Unless otherwise determined by the Committee, if a Participant's
employment with the CMP Group terminates as a result of his or her Retirement,
each Option of the Participant shall remain exercisable and, to the extent not
already vested, shall continue to vest in accordance with the Vesting Schedule
for a period of three (3) years after the date of termination of employment or
until the expiration date of the Option, whichever is earlier.
(c) Unless otherwise determined by the Committee, if a Participant's
employment with the CMP Group terminates for any reason other than death,
Disability, Dismissal Without Cause or Retirement, all rights of the Participant
in any Option, to the extent they have not already expired or been exercised,
shall terminate and be extinguished immediately upon such termination of
employment.
SECTION 5.10. COMPETITION.
Notwithstanding anything to the contrary contained in this Article V, if a
Participant engages in competition (as defined in the applicable Stock Option
Agreement) with the CMP Group, whether during or after his or her employment,
all rights of the Participant in any Option, to the extent such rights have not
already expired or been exercised, shall terminate and be extinguished
immediately upon the commencement of such competition. In the event that a
Participant exercises an Option at a time when he or she has already, without
the Company's knowledge or consent, commenced engaging in competition with the
CMP Group, the Company may, by notice given to the Participant, rescind and void
such purported exercise, and the Participant shall return to the Company
immediately upon demand any and all stock certificates representing Shares
issued to him or her
9
<PAGE> 10
upon the exercise at such time of such Option and still owned by the
Participant, in exchange for which the Company shall return to the Participant
any consideration paid for such Shares. The Stock Option Agreements may include
such other restrictive covenants as the Committee in its discretion deems
necessary or appropriate for the reasonable protection of the CMP Group's
business interests.
SECTION 5.11. RESTRICTIONS ON TRANSFER OF OPTIONS.
Unless otherwise designated by the Committee in the Stock Option Agreement
applicable to an Option, such Option may not be sold, transferred, pledged,
hypothecated, assigned or otherwise alienated or disposed of, other than by will
or by the laws of descent and distribution. All Options exercisable during a
Participant's lifetime shall be exercised only by such Participant.
SECTION 5.12. OTHER BENEFIT PLANS.
Neither the grant of an Option nor any income recognized upon exercise of
an Option shall be deemed compensation to a Participant for the purposes of any
other employee benefit plan of the CMP Group, unless such plan specifically so
provides in referring to the Plan by name or the Board of Directors determines
otherwise.
ARTICLE VI
BENEFICIARY DESIGNATION
Each Participant may, from time to time, designate a beneficiary or
beneficiaries (who may be named contingently or successively) who shall acquire
the Participant's rights under the Plan in case the Participant dies before
exercising all of such rights. A Participant may designate such beneficiary or
beneficiaries by
10
<PAGE> 11
giving the Company written notice thereof in a form prescribed by the Company.
Each such designation shall revoke all prior designations by the Participant,
and such notice shall be effective only when given to the Company during the
Participant's lifetime. In the absence of an effective designation or if all
duly designated beneficiaries predecease the Participant, any rights remaining
unexercised at the Participant's death shall be exercised by the Participant's
estate. In the event of a Participant's death, all actions that the Participant
would otherwise be entitled to take under the Plan may be taken by the
Participant's beneficiary or estate, as the case may be, and all references in
this Plan to "Participant" shall, under such circumstances, be deemed to include
such beneficiary or estate. Notwithstanding anything to the contrary contained
herein, any designation of a beneficiary or beneficiaries that would adversely
affect the Company's status as an S corporation at a time when it has elected to
be treated as an S corporation for tax purposes shall be null and void.
ARTICLE VII
RIGHTS OF PARTICIPANTS
No Participant shall acquire any rights as a stockholder of the Company
hereunder unless and until, and except to the extent that, a stock certificate
representing Shares duly purchased by such Participant pursuant to the exercise
of an Option hereunder has been issued to such Participant. Nothing in the Plan
shall be deemed to confer upon any Participant the right to continued employment
with the CMP Group or to limit in any way the right of the CMP Group or such
Participant to terminate the employment of such Participant at any time and for
any reason. For the purposes of the Plan, the transfer of a Participant's
employment between the Company and an Affiliate or between Affiliates shall not
11
<PAGE> 12
be deemed a termination of employment. No employee of the CMP Group shall have
the right to be selected to receive an Option under the Plan, and the granting
of an Option to a Participant shall not confer on the Participant any right to
be granted any additional Option in the future.
ARTICLE VIII
CHANGES IN CAPITAL STRUCTURE
AND REDEMPTION OF SHARES
SECTION 8.1. CHANGES IN CAPITAL STRUCTURE.
In the event that the Company hereafter declares a dividend payable in, or
subdivides or combines, shares of the Class A Stock, or engages in a
recapitalization, reorganization, merger, consolidation, split-up, transfer of
assets, combination or exchange of shares of Common Stock or any other event
affecting the Common Stock, the Committee shall make appropriate adjustment in
the number (including without limitation the aggregate numbers specified in
Article III and Section 5.1(b)) and kind of shares that are or may become
subject to Options granted or to be granted hereunder, and in the Option Price
of Shares which are subject to Options granted hereunder, and shall take such
other action as in its judgment shall be necessary or appropriate to equitably
preserve each Participant's rights with respect to such Options substantially
proportionate to his or her respective rights existing prior to such event. The
decision of the Committee with respect to any matter referred to in this Section
8.1 shall be conclusive and binding upon Participants. The Company shall give
each Participant written notice of any adjustments to an Option of the
Participant or the terms and conditions thereof made pursuant to this Section
8.1. Nothing herein is intended to preserve a Participant's equity interest in
the Company against dilution resulting from the
12
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issuance of additional securities by the Company subsequent to the grant of an
Option.
SECTION 8.2. REDEMPTION OF CLASS B STOCK.
If any shares of the Class B Stock owned by any member of the Leeds Family
are redeemed by the Company in accordance with the terms and provisions of the
Shareholders' Agreement, then, in order to ensure that each Participant's
percentage interest in the Company will remain the same as such interest would
have been but for such redemption (the "Class B Stock Redemption"), the Company
shall, promptly following the Class B Stock Redemption, adjust the number of the
unissued Shares subject to each outstanding Option and, if a Participant then
owns any issued Shares, redeem at a price equal to their par value (currently
$.10 per share) a number of such issued Shares such that the adjustment of the
number of such Participant's unissued Shares (the "Option Adjustment") and the
redemption of issued Shares (the "Class A Stock Redemption") shall result in (a)
the ratio of (i) the sum of the number of such unissued Shares and the number of
such issued Shares outstanding immediately after the Option Adjustment and the
Class A Stock Redemption to (ii) the total number of shares of Common Stock
outstanding immediately after the Class A Stock Redemption being the same as (b)
the ratio of (i) the sum of the number of such unissued Shares and the number of
such issued Shares outstanding immediately prior to the Class B Stock Redemption
to (ii) the total number of shares of Common Stock outstanding immediately prior
to the Class B Stock Redemption. In such event, the Option Price with respect to
the Shares subject to each outstanding Option shall also be adjusted so that the
total amount payable upon the full exercise of such Option remain unchanged.
13
<PAGE> 14
ARTICLE IX
CHANGE IN CONTROL
SECTION 9.1. TREATMENT OF OUTSTANDING OPTIONS.
In the event that there is a Change In Control and a Participant's employment
with the CMP Group terminates as a result of his or her Dismissal Without Cause
or Resignation For Good Reason within three (3) years after such Change In
Control, then and in that event the rights of the Participant under all of his
or her Options shall immediately become fully vested and all such Options shall
remain fully exercisable until their respective expiration dates as set forth in
the Stock Option Agreements applicable thereto.
SECTION 9.2. NO AMENDMENT.
Notwithstanding any other provision of the Plan or any provision of any
Stock Option Agreement, the provisions of this Article IX may not be amended,
modified, suspended or terminated in a manner that adversely affects any Option
theretofore granted under the Plan to any Participant without the prior written
consent of such Participant. In the event of a Change In Control, no changes in
the Plan and no adjustments, determinations or other exercises of discretion
that are made, pursuant to the Plan or otherwise, by the Committee subsequent to
such Change In Control shall be effective if and to the extent that they would
have the effect of diminishing the rights of any Participant under the Plan.
14
<PAGE> 15
ARTICLE X
AMENDMENT, MODIFICATION AND TERMINATION
SECTION 10.1. AMENDMENT.
Subject to the provisions of Section 9.2 and Section 10.2, the Board of
Directors may at any time and from time to time amend, modify, suspend or
terminate the Plan in whole or in part; provided, however, that, in the event
that any securities of the Company are publicly held, no amendment which renders
the grant or exercise of an Option non-exempt under Rule 16b-3 of the Securities
Exchange Act of 1934, including any successor to such Rule, shall be made or be
effective.
SECTION 10.2. OPTIONS PREVIOUSLY GRANTED.
Notwithstanding the provisions of Section 10.1, no amendment,
modification, suspension or termination of the Plan shall be effective to the
extent it adversely affects in any material way any Option previously granted
under the Plan, unless the Participant holding such Option consents in writing
thereto. Subject to the terms of the Plan, the Committee may modify the form,
terms and conditions of any outstanding Option in such manner, not unfavorable
to the Participant, as the Committee in its discretion may determine and, with
respect to any Participant subject to foreign tax laws or regulations, the
Committee may vary the form, terms and conditions of any Option as the Committee
in its discretion may deem necessary or advisable to allow the Participant to
qualify for favorable tax treatment under such foreign tax laws or regulations.
15
<PAGE> 16
ARTICLE XI
INDEMNIFICATION
Any claim under the Plan shall be solely the obligation of the Company. No
member of the Committee shall be personally liable by reason of any contract or
other instrument executed by such member (or on behalf of such member) in his or
her capacity as a member of the Committee or by reason of any mistake of
judgment made by him or her in good faith in such capacity. The Company shall
indemnify each employee, officer or director of the Company to whom any duty or
power relating to the administration or interpretation of the Plan may be
allocated or delegated and shall hold such person harmless against any loss,
liability, claim, cost or expense (including reasonable attorneys' fees and any
sum paid in settlement of a claim with the approval of the Board of Directors)
incurred by or asserted against such person as a result of or arising out of any
act or omission to act in connection with the Plan, unless arising out of such
person's fraud or bad faith. The right of indemnification provided for in this
Article XI shall be in addition to any rights of indemnification to which such
person may be entitled under the certificate of incorporation or bylaws of the
Company, as a matter of law or otherwise, or any power that the Company may have
to indemnify such person or hold him or her harmless.
ARTICLE XII
DURATION OF PLAN
The Plan shall commence effective on the date of its adoption by the Board
of Directors and shall remain in effect, subject to the right of the Board of
Directors to amend, modify, suspend or terminate the Plan pursuant to Article X,
16
<PAGE> 17
until all Shares have been issued in accordance herewith; provided, however,
that in no event may an Option be granted under the Plan after December 31,
2005. Any Options granted prior to approval of the Plan by the stockholders of
the Company shall be made subject to such approval.
ARTICLE XIII
DEFINITIONS
"Affiliates" shall mean shall mean all entities controlling, controlled by
or under common control with the Company.
"Board of Directors" shall mean the Board of Directors of the Company.
"Change In Control" shall mean a direct or indirect transfer of fifty
percent (50%) or more of the voting control of the Company or the sale of
substantially all of the assets of the Company, in one or more transactions, to
(a) one or more persons who are not (i) members of the Leeds Family or (ii)
spouses, children or grandchildren of members of the Leeds Family and/or (b) one
or more entities which are not controlled by (i) one or more members of the
Leeds Family or (ii) one or more of the spouses, children or grandchildren of
members of the Leeds Family.
"Class A Stock" shall mean the Class A Common Stock of the Company.
"Class A Stock Redemption" shall have the meaning specified in Section
8.2.
"Class B Stock" shall mean the Class B Common Stock of the Company.
"Class B Stock Redemption" shall have the meaning specified in Section
8.2.
"Closing Price" shall mean the last-quoted price at which shares of Class
A Stock were traded at the close of business on a national securities exchange
or the
17
<PAGE> 18
National Association of Securities Dealers Automated Quotation National Market
System.
"CMP Group" shall mean the Company or any of its Affiliates.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall have the meaning specified in Section 2.1.
"Common Stock" shall mean all the classes of the Common Stock of the
Company collectively.
"Company" shall mean CMP Media Inc., a Delaware corporation, or any
successor thereto.
"Disability" shall mean a physical or mental impairment, as a result of
which a Participant shall have been unable, with or without reasonable
accommodation, to perform the essential functions of his or her employment
position for a period of at least sixteen (16) weeks during any 12-month period.
"Dismissal Without Cause" shall mean the involuntary termination of a
Participant's employment by the CMP Group on any grounds other than "cause" or
the Disability of the Participant. For the purposes hereof, "cause" shall mean
(a) the willful and continued failure of the Participant substantially to
perform his or her duties as an employee of the CMP Group or comply with the
written policies of the CMP Group after the Company (or the Affiliate employing
the Participant) has delivered to him or her a written demand for substantial
performance or compliance that specifies such failure in reasonable detail; (b)
illegal conduct or gross misconduct by the Participant, in either case that is
willful and results (or is reasonably likely to result) in material damage to
the business or reputation of the CMP Group; or (c) the resignation by the
Participant from his or her employment following his or her act or omission
which would constitute grounds for dismissal for "cause" hereunder. No act or
failure to act on the part of a Participant (other than non-compliance with
lawful instructions given to him or her by the CMP
18
<PAGE> 19
Group) shall be considered "willful" unless it is done or omitted to be done by
him or her in bad faith or without reasonable belief that such action or
omission was in the best interests of the CMP Group.
"Fair Market Value" shall mean the fair market value of a share of Class A
Stock, which shall be (a) the Closing Price on the trading day immediately
preceding the date of determination of fair market value or (b) if the Company
is privately held and the Class A Stock is not publicly traded, the fair market
value of a share of Class A Stock as determined by such method as the Committee
shall reasonably designate.
"Leeds Family" shall mean Gerard G. Leeds, Liselotte J. Leeds, Michael S.
Leeds, Richard A. Leeds, Daniel H. Leeds, Greg Jobin-Leeds and Jennifer Leeds-
Lukehart.
"Option" shall mean the right of a Participant to purchase any Share
pursuant to the Plan.
"Option Adjustment" shall have the meaning specified in Section 8.2.
"Option Price" shall mean the price at which a Participant may purchase a
Share pursuant to an Option.
"Participant" shall mean a person who holds an Option granted to him or
her under the Plan.
"Resignation For Good Reason" shall mean a Participant's resignation from
his or her employment with the CMP Group after the CMP Group has, without the
Participant's consent, (i) materially reduced his or her package of compensation
and benefits, (ii) materially diminished his or her position, authority, duties
or responsibilities, or (iii) required him or her to report regularly to an
office located more than fifty (50) miles from the office of the CMP Group to
which he or she theretofore reported.
"Retirement" shall mean the retirement of a Participant from employment
19
<PAGE> 20
with the Company upon or after attaining the age of sixty-five (65), or such
earlier age as the Committee may in its sole discretion approve.
"Share" shall have the meaning specified in Article III.
"Shareholders' Agreement" shall mean that certain Shareholders' Agreement
entered into as of June 30, 1991 by and among the Company, certain of the
Affiliates and the members of the Leeds Family for the purpose of ensuring
continuity of control of the Company by the Leeds Family.
"Stock Option Agreement" shall mean the agreement entered into between the
Company and a Participant setting forth the terms and conditions applicable to
an Option granted to such Participant under the Plan.
ARTICLE XIV
SUCCESSORS
All obligations of the Company under the Plan with respect to Options
granted hereunder shall be binding on any successor to the Company and shall
survive any purchase, merger, consolidation or other disposition of all or
substantially all of the business and/or assets of the Company.
ARTICLE XV
MISCELLANEOUS
SECTION 15.1. APPLICABLE LAW.
To the extent not preempted by federal law, the Plan and all agreements
hereunder (including all Stock Option Agreements) shall be governed by and
construed and enforced in accordance with the laws of the State of New York,
without reference to its principles regarding choice or conflicts of law, and in
20
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accordance and consistent with any election by the Company to be treated as an S
corporation for tax purposes.
SECTION 15.2. SEVERABILITY.
In the event that any provision of the Plan shall be held for any reason
to be illegal or invalid under applicable law or under any election by the
Company to be treated as an S corporation for tax purposes, such provision shall
be ineffective to the extent of such illegality or invalidity without affecting
the remainder of such provision or any other provision of the Plan.
SECTION 15.3. GENDER AND NUMBER.
Except when otherwise indicated by the context, references herein to one
gender shall include the other genders, and references herein to the singular or
plural shall include the plural or singular.
SECTION 15.4. HEADINGS.
The headings of the Articles and Sections of the Plan are for convenience
of reference only and shall not be considered in interpreting or construing the
Plan.
21
<PAGE> 1
EXHIBIT 10.14
CMP PUBLICATIONS, INC.
PENSION PLAN
Effective as of January 1, 1989
Amended and Restated as of
January 1, 1994
<PAGE> 2
CMP PUBLICATIONS, INC.
PENSION PLAN
TABLE OF CONTENTS
Page
ARTICLE I - DEFINITIONS.................................................... 2
1.1 "Accrued Benefit"............................................ 2
1.2 "Actuarial Equivalent"....................................... 2
1.3 "Administrator".............................................. 2
1.4 "Affiliate".................................................. 3
1.5 "Anniversary Date"........................................... 3
1.6 "Annuity Starting Date"...................................... 3
1.7 "Average Monthly Compensation"............................... 3
1.8 "Beneficiary"................................................ 4
1.9 "Code"....................................................... 4
1.10 "Compensation"............................................... 4
1.11 "Covered Employee"........................................... 5
1.12 "Direct Rollover"............................................ 5
1.13 "Distributee"................................................ 5
1.14 "Effective Date"............................................. 5
1.15 "Eligible Employee".......................................... 5
1.16 "Eligible Retirement Plan"................................... 5
1.17 "Eligible Rollover Distribution"............................. 6
1.18 "Employee"................................................... 7
1.19 "Employer"................................................... 7
1.20 "ERISA"...................................................... 7
1.21 "Family Member".............................................. 7
1.22 "Former Participant"......................................... 7
1.23 "Hour of Service"............................................ 7
1.24 "Investment Manager"......................................... 9
1.25 "Key Employee"............................................... 10
1.26 "Non-Key Employee"........................................... 11
1.27 "Normal Retirement Age"...................................... 11
1.28 "Normal Retirement Benefit".................................. 11
1.29 "Normal Retirement Date"..................................... 11
1.30 "1-Year Break in Service".................................... 11
1.31 "Participant"................................................ 12
1.32 "Participating Employer"..................................... 12
1.33 "Plan"....................................................... 12
1.34 "Plan Sponsor"............................................... 12
1.35 "Plan Year".................................................. 13
1.36 "Plan Year of Service"....................................... 13
1.37 "Qualified Pre-Retirement Survivor Annuity".................. 13
<PAGE> 3
1.38 "Retired Participant"........................................ 13
1.39 "Retirement Date"............................................ 14
1.40 "Top Heavy Plan"............................................. 14
1.41 "Top Heavy Plan Year"........................................ 14
1.42 "Total and Permanent Disability"............................. 14
1.43 "Trust"...................................................... 14
1.44 "Trustee".................................................... 14
1.45 "Trust Fund"................................................. 14
1.46 "Year of Service"............................................ 14
ARTICLE II - ELIGIBILITY................................................... 15
2.1 Conditions of Eligibility.................................... 15
2.2 Effective Date of Participation.............................. 16
2.3 Determination of Eligibility................................. 16
2.4 Termination and Reemployment................................. 17
ARTICLE III - CONTRIBUTION AND VALUATION................................... 18
3.1 Payment of Contribution...................................... 18
3.2 Actuarial Methods............................................ 18
ARTICLE IV - VESTING AND FORFEITURES....................................... 19
4.1 Vesting...................................................... 19
4.2 Break In Service Rules....................................... 19
4.3 Forfeitures.................................................. 20
ARTICLE V - BENEFITS....................................................... 21
5.1 Retirement Benefits.......................................... 21
5.2 Benefit Formula.............................................. 21
5.3 Disability Retirement Benefits............................... 23
5.4 Termination of Employment Before Retirement.................. 23
5.5 Distribution of Benefits..................................... 24
5.6 In-Service Distributions..................................... 27
5.7 Time of Distribution......................................... 28
5.8 Location of Participant or Beneficiary Unknown............... 28
5.9 Limitations on Benefits...................................... 29
ARTICLE VI - DEATH BENEFITS................................................ 29
6.1 Death Before Retirement...................................... 29
6.2 Spouse's Death Benefit....................................... 29
6.3 Death Following Retirement................................... 30
6.4 Distribution of Benefits Upon Death.......................... 31
6.5 Change in Beneficiary........................................ 32
6.6 Proof of Death............................................... 33
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<PAGE> 4
6.7 Mandatory Cash-Out Payment................................... 33
6.8 Distribution to Minor Beneficiary............................ 33
6.9 Location of Beneficiary Unknown.............................. 34
ARTICLE VII - RESTRICTIONS ON CERTAIN BENEFITS............................. 34
7.1 Basic Limitation............................................. 34
7.2 Adjustments to Basic Limitation.............................. 35
7.3 Aggregation of Plans......................................... 36
ARTICLE VIII - DIRECT ROLLOVER OF BENEFITS................................. 37
8.1 Right to Direct Rollover..................................... 37
8.2 Limitations on Direct Rollover............................... 38
8.3 Election of Direct Rollover.................................. 38
8.4 Payment of Direct Rollover................................... 38
ARTICLE IX - TOP-HEAVY PROVISIONS.......................................... 39
9.1 In General................................................... 39
9.2 Top-Heavy Defined............................................ 39
9.3 Top-Heavy Contingent Provisions.............................. 41
ARTICLE X - ADMINISTRATION................................................. 43
10.1 Powers and Responsibilities of the Plan Sponsor.............. 43
10.2 Assignment and Designation of Administrative Authority....... 43
10.3 Powers, Duties and Responsibilities of the Administrator..... 46
10.4 Records and Reports.......................................... 48
10.5 Appointment of Advisors...................................... 48
10.6 Information from Employer.................................... 48
10.7 Payment of Expenses.......................................... 49
10.8 Claims Procedure............................................. 49
10.9 Claims Review Procedure...................................... 49
ARTICLE XI - AMENDMENT, TERMINATION, AND MERGERS........................... 51
11.1 Amendment.................................................... 51
11.2 Termination.................................................. 51
11.3 Limitation of Benefits on Termination........................ 52
11.4 Merger or Consolidation...................................... 52
ARTICLE XII - MISCELLANEOUS................................................ 52
12.1 Valuation.................................................... 52
12.2 Participant's Rights......................................... 53
12.3 Alienation................................................... 54
12.4 Construction................................................. 55
12.5 Gender and Number............................................ 55
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<PAGE> 5
12.6 Legal Action and Indemnification............................. 55
12.7 Prohibition Against Diversion of Funds....................... 56
12.8 Bonding...................................................... 57
12.9 Receipt and Release for Payments............................. 58
12.10 Action by the Employer....................................... 58
12.11 Named Fiduciaries and Allocation of Responsibility........... 58
12.12 Headings..................................................... 59
12.13 Approval by Internal Revenue Service......................... 59
12.14 Uniformity................................................... 60
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<PAGE> 6
CMP PUBLICATIONS, INC.
PENSION PLAN
INTRODUCTION
The CMP Publications, Inc. Pension Plan (the "Plan") is designed to
provide Covered Employees, their spouses and beneficiaries with benefits in the
event of the Covered Employee's retirement, death or disability. Capitalized
terms have the definitions hereunder set forth in Article I. This Plan was
formerly known as the CMP Publication, Inc. Pension Plan. and was initially
effective as of January 1, 1980.
This Plan constitutes a complete amendment and restatement of the
Plan as it existed just prior to the Effective Date. This Plan also constitutes
a complete amendment and restatement of the Health Week Publications Pension
Plan and Trust, effective January 1, 1988 which plan together with this Plan
have always been a single plan. This amendment and restatement has been prepared
to reflect the applicable requirements under the Code for a defined benefit
pension plan as of the Effective Date as well as subsequent changes in statutory
requirements and in the benefits provided under the Plan. Except as expressly
provided herein, the terms of the Plan are effective as of the Effective Date.
This Plan establishes the benefits, rights and obligations of all
Covered Employees in the service of the Employer on or after the Effective Date
and of all persons claiming through, under or against any Covered Employee.
<PAGE> 7
ARTICLE I
DEFINITIONS
1.1 "Accrued Benefit" means the monthly retirement benefit (whether
or not vested) that the Participant would receive at his Normal Retirement Date
as determined under Section 5.2 multiplied by a fraction not greater than one,
the numerator of which is the Participant's total number of Plan Years of
Service and the denominator of which is the aggregate number of Plan Years of
Service the Participant would accumulate if the Participant continued in
employment until Normal Retirement Age. Notwithstanding any other provisions of
the Plan to the contrary, in no event shall a Participant's Accrued Benefit be
greater than his benefit as accrued under the Plan on December 31, 1992.
1.2 "Actuarial Equivalent" shall mean a benefit of equivalent value
computed in accordance with accepted actuarial principles and based on an
interest rate assumption of 7% and the 1984 Unisex Mortality Table.
Notwithstanding the foregoing, an equivalent lump sum value shall be computed
based on the interest rate assumption of 7% after Normal Retirement Date, 8%
prior to Normal Retirement Date and the 1984 Unisex Mortality Table; but not
less than the amount of a lump-sum calculated in accordance with Section 5.5(f).
Notwithstanding the foregoing, whenever an optional form of
annuity is to be provided through an insurance company, actuarial equivalence to
the normal form shall be determined by the insurance or annuity contracts used
to provide benefits.
1.3 "Administrator" means the Administrative Committee appointed by
the Plan Sponsor in accordance with Section 10.2.
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<PAGE> 8
1.4 "Affiliate" means, for any Plan Year, a corporation which for
any part of such year is (a) a member of a controlled group of corporations (as
defined in Section 1563(a) of the Code, disregarding Sections 1563(a)(4) and
1563(e)(3)(c)) of which the Plan Sponsor is a member, (b) any trade or business,
whether incorporated or not, which for any part of such year is considered to be
under common control with the Plan Sponsor under regulations prescribed by the
U.S. Secretary of the Treasury pursuant to Section 414(c) of the Code, and (c)
any organization which for any part of such year is considered under regulations
prescribed by the U.S. Secretary of the Treasury pursuant to Section 414(m) of
the Code to be a member of an affiliated service group of which the Plan Sponsor
is a member.
1.5 "Anniversary Date" means January 1st.
1.6 "Annuity Starting Date" means the first day of the first period
for which an amount is payable as an annuity or other form of benefit.
1.7 "Average Monthly Compensation" means the monthly Compensation of
a Participant averaged over the 5 consecutive Plan Years of Service which
produce the highest monthly average within the last ten (10) completed years of
participation. If a Participant has less than 5 Plan Years of Service from his
date of participation to his date of termination, his Average Monthly
Compensation will be based on his monthly Compensation during his Plan Years of
Service from his date of participation to his date of termination. Compensation
subsequent to termination of participation pursuant to Section 2.4(a) shall not
be recognized. Furthermore, Average Monthly Compensation shall not include any
Compensation earned after December 31, 1992.
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<PAGE> 9
1.8 "Beneficiary" means the person designated to receive benefits
which are payable under the Plan upon or after the death of a Participant.
1.9 "Code" means the Internal Revenue Code of 1986, as amended.
1.10 "Compensation" with respect to any Participant means the total
compensation paid by the Employer for a Plan Year, including those amounts which
are contributed by a Participant on a pre-tax basis to the Plan or to the CMP
Publications, Inc. Flexible Spending Plan but not including (a) reimbursement
for educational expenses of the Participant, (b) any imputed income relating to
dependent care or life insurance benefits provided by the Employer; (c)
reimbursement for relocation expenses, (d) any disability payments made by a
third-party and (e) car allowances. Compensation shall not include any amounts
paid to an employee during any period when he or she was not eligible to
participate in the Plan. Effective January 1, 1989, Compensation in excess of
$200,000 (as adjusted for increases in the cost of living) shall be disregarded.
Notwithstanding the foregoing, effective for Plan Years beginning on and after
January 1, 1994, Compensation in excess of $150,000 (as adjusted for increases
in the cost of living) shall be disregarded. Notwithstanding the foregoing or
anything in this Plan to the contrary, Compensation paid on or after January 1,
1993, the date the Plan was frozen, shall be disregarded.
In determining the Compensation of a Participant, the family
aggregation rules of Section 414(q)(6) of the Code shall apply except that
Family Members shall include only the spouse of the Employee and any lineal
descendants of the Employee who have not attained age 19. In the event the
family aggregation rules apply to a Participant, the applicable Compensation
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<PAGE> 10
limit shall be allocated to each Family Member aggregated herein in proportion
to each such Family Member's Compensation.
1.11 "Covered Employee" means any Employee of the Employer except
any Employee (a) who is included in a collective bargaining unit unless
participation in the Plan by any such Employee was agreed to in the process of
good faith negotiations between the Employer and the collective bargaining
unit's representative; (b) who is employed by an Affiliate that is not a
Participating Employer; (c) who is a leased employee as defined in Section
414(n)(2) of the Code; (d) who is a nonresident alien and who receives no earned
income (within the meaning of Section 911(d)(2) of the Code) from the Employer
which constitutes income from services within the United States (within the
meaning of Section 861(a)(3) of the Code); or (e) who is a resident alien or a
nonresident and who does not make contributions under the Federal Insurance
Contributions Act.
1.12 "Direct Rollover" means the distribution of the vested portion
of a Participant's or Former Participant's Accrued Benefit in accordance with
Article VIII.
1.13 "Distributee" means a Participant, Former Participant,
Beneficiary or alternate payee under a qualified domestic relations order
entitled to a distribution under the Plan.
1.14 "Effective Date" means the general effective date of this
amended and restated Plan, which is January 1, 1989.
1.15 "Eligible Employee" means any Covered Employee who has
satisfied the provisions of Section 2.1.
1.16 "Eligible Retirement Plan" means:
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<PAGE> 11
(a) If the Distributee is not the surviving spouse of a
Participant or of a Former Participant, any of the following:
(i) an individual retirement account described in
Section 408(a) of the Code;
(ii) an individual retirement annuity described in
Section 408(a) of the Code;
(iii) an annuity plan described in Section 403(a) of the
Code; or
(iv) a qualified plan described in Section 401(a) of the
Code.
(b) If the Distributee is the surviving spouse of a
Participant or of a Former Participant, any of the following:
(i) an individual retirement account described in
Section 408(a) of the Code; or
(ii) an individual retirement annuity described in
Section 408(b) of the Code.
1.17 "Eligible Rollover Distribution" means any distribution of all
or a portion of the Participant's vested Accrued Benefit, except that such term
shall not include:
(a) any distribution that is one of a series of
substantially equal periodic payments made (not less frequently than annually)
for either:
(i) the life (or life expectancy) of the Distributee or
the joint lives (or joint life expectancies) of the Distributee and the
Distributee's Beneficiary, or
(ii) a specified period of ten years or more;
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<PAGE> 12
(b) any distribution to the extent such distribution is
required under Section 401(a)(9) of the Code;
(c) any distribution or portion of a distribution that is
not includible in the gross income of the Distributee; and
(d) any other type of distribution or similar item
designated by the Internal Revenue Service as exempt from the definition of
Eligible Rollover Distribution.
1.18 "Employee" means any person who is a common law employee of the
Employer.
1.19 "Employer" means: CMP Publications, Inc., a corporation with
principal offices in the State of New York and each Affiliate.
1.20 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
1.21 "Family Member" means the spouse, lineal ascendants and
descendants of the Employee and the spouses of such lineal ascendants and
descendants.
1.22 "Former Participant" means a person who has been a Participant,
but who has ceased to be a Participant for any reason.
1.23 "Hour of Service" means:
(a) Each hour for which an Employee is directly or
indirectly compensated or entitled to compensation by the Employer for the
performance of duties during the applicable computation period. Each such Hour
of Service shall be credited to the computation period in which the duties were
actually performed.
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<PAGE> 13
(b) Each hour for which an Employee is directly or
indirectly compensated or entitled to compensation by the Employer (irrespective
of whether the employment relationship has terminated) for reasons other than
performance of duties (such as vacation, holidays, sickness, jury duty,
disability, lay-off, military duty or leave of absence) during the applicable
computation period.
(c) Each hour for which back pay is awarded or agreed to by
the Employer without regard to mitigation of damages. Each such Hour of Service
shall be credited to the computation period to which the agreement or award with
respect to back pay pertains rather than to the computation period in which the
award, agreement or payment is made.
(d) To the extent required under The Family and Medical
Leave Act of 1993, each hour that an Employee is absent from service for a
family or medical leave of absence.
Notwithstanding the above, (i) no more than 501 Hours of
Service are required to be credited to an Employee on account of any single
continuous period during which the Employee performs no duties (whether or not
such period occurs in a single computation period); (ii) an hour for which an
Employee is directly or indirectly paid, or entitled to payment, on account of a
period during which no duties are performed is not required to be credited to
the Employee if such payment is made or due under a plan maintained solely for
the purpose of complying with applicable worker's compensation, or unemployment
compensation or disability insurance laws; (iii) Hours of Service are not
required to be credited for a payment which solely reimburses an Employee for
medical or medically related expenses incurred by the Employee; and (iv) Hours
of Service are not required to be credited during any period in which no duties
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<PAGE> 14
are performed if such hours would exceed the number of hours regularly scheduled
for the performance of duties during such period.
For purposes of this Section 1.23, a payment shall be deemed
to be made by or due from the Employer regardless of whether such payment is
made by or due from the Employer directly, or indirectly through, among others,
a trust fund or insurer to which the Employer contributes or pays premiums and
regardless of whether contributions made or due to the trust fund, insurer, or
other entity are for the benefit of particular Employees or are on behalf of a
group of Employees in the aggregate.
For purposes of this Section 1.23, Hours of Service shall be
determined based on records of hours of service maintained by the Employer
provided that such records accurately reflect the number of hours with which an
Employee is entitled to be credited. For those Employees with respect to which
the records maintained by the Employer would not accurately reflect the number
of hours for which an Employee is required to receive credit, such Employee
shall be credited with Hours of Service on the basis of months of employment --
190 Hours of Service shall be credited for each month for which the Employee
would be required to be credited with at least one Hour of Service.
Notwithstanding anything to the contrary contained herein,
Hours of Service shall be credited in accordance with Department of Labor
regulations Section 2530.200b-2 and such provisions are incorporated herein by
reference.
1.24 "Investment Manager" means any person, firm or corporation who
is a registered investment adviser under the Investment Advisers Act of 1940, a
bank or an insurance
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<PAGE> 15
company, (a) who has the power to manage, acquire, or dispose of Plan assets,
and (b) who acknowledges in writing his fiduciary responsibility to the Plan.
1.25 "Key Employee" means those Employees defined in Code Section
416(i) and the Treasury regulations thereunder. Generally, they shall include
any Employee or former Employee (and his Beneficiaries), who at any time during
the Plan Year of any of the preceding four (4) Plan Years, is:
(a) an officer of the Employer having annual Compensation
greater than 50 percent of the amount in effect under Code Section 415(b)(1)(A)
for any such Plan Year.
(b) one of the ten Employees having annual Compensation from
the Employer for a Plan Year greater than the dollar limitation in effect under
Code Section 415(c)(1)(A) for the calendar year in which such Plan Year ends and
owning (or considered as owning within the meaning of Code Section 318) both
more than one-half percent interest and the largest interests in the Employer.
(c) a "five percent owner" of the Employer. "Five percent
owner" means any person who owns (or is considered as owning within the meaning
of Code Section 318) more than five percent (5%) of the outstanding stock of the
Employer or stock possessing more than five percent (5%) of the total combined
voting power of all stock of the Employer or, in the case of an unincorporated
business, any person who owns more than five percent (5%) of the capital or
profits interest in the Employer. In determining percentage ownership hereunder,
each Affiliate shall be treated as a separate Employer.
(d) a "one percent owner" of the Employer having an annual
Compensation from the Employer of more than $150,000. "One percent owner" means
any
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<PAGE> 16
person who owns (or is considered as owning within the meaning of Code Section
318) more than one percent (1%) of the outstanding stock of the Employer or
stock possessing more than one percent (1%) of the total combined voting power
of all stock of the Employer or, in the case of an incorporated business, any
person who owns more than one percent (1%) of the capital or profits interest in
the Employer. In determining percentage ownership hereunder, each Affiliate
shall be treated as a separate Employer.
For purposes of this Section , Compensation shall be
determined without regard to contributions made pursuant to Sections 125 or
402(a)(8) of the Code.
1.26 "Non-Key Employee" means any Employee or former Employee who is
not a Key Employee.
1.27 "Normal Retirement Age" means the date upon which the
Participant attains age 65 or, if later, the date upon which a Participant
completes five (5) years of participation in the Plan.
1.28 "Normal Retirement Benefit" means the monthly benefit payable
to a Participant or Former Participant at his Normal Retirement Date as
determined under Section 5.2.
1.29 "Normal Retirement Date" means the first day of the month
coinciding with or next following the date upon which a Participant reaches
Normal Retirement Age.
1.30 "1-Year Break in Service" means a Plan Year during which an
Employee has not completed more than 500 Hours of Service with the Employer. An
Employee shall not incur a 1-Year Break in Service for the Plan Year in which he
becomes a Participant, dies, retires or suffers Total and Permanent Disability.
Further, solely for the purpose of determining whether
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<PAGE> 17
a Participant has incurred a 1-Year Break in Service, Hours of Service shall be
recognized for "maternity and paternity leaves of absence."
For purposes of this Section, a "maternity or paternity
leave of absence" shall mean an absence from work for any period by reason of
the Employee's pregnancy, birth of the Employee's child, placement of a child
with the Employee in connection with the adoption of such child, or any absence
for the purpose of caring for such child for a period immediately following such
birth or placement. For this purpose, Hours of Service shall be credited for the
computation period in which the absence from work begins, only if credit
therefore is necessary to prevent the Employee from incurring a 1-Year Break in
Service, or, in any other case, in the computation period immediately following.
The Hours of Service credited for a "maternity or paternity leave of absence"
shall be those which would normally have been credited but for such absence, or,
in any case in which the Administrator is unable to determine such hours
normally credited, eight (8) Hours of Service per day. The total Hours of
Service required to be credited for a "maternity or paternity leave of absence"
shall not exceed 501.
1.31 "Participant" shall mean any Eligible Employee who commences
participation in the Plan as provided in Article II, and has not for any reason
ceased participation in the Plan.
1.32 "Participating Employer" means the Plan Sponsor and each
Affiliate that has adopted and is participating in the Plan as listed in
Appendix A.
1.33 "Plan" means the CMP Publications, Inc. Pension Plan as set
forth on this document and as hereinafter amended.
1.34 "Plan Sponsor" means CMP Publications, Inc.
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1.35 "Plan Year" means the Plan's accounting year of twelve (12)
months commencing on January 1st and ending on the following December 31st.
1.36 "Plan Year of Service" means a Plan Year during which a
Participant completes 1,000 Hours of Service. Notwithstanding any thing in this
Plan to the contrary, no Plan Years of Service shall be credited subsequent to
December 31, 1992.
1.37 "Qualified Pre-Retirement Survivor Annuity" means an annuity
form of payment for the life of the surviving spouse of a Participant who dies
prior to his Retirement Date. Such annuity payments shall be equal to the amount
which would be payable as a survivor annuity under the joint and survivor
annuity under the Plan if:
(a) in the case of a Participant who dies after the Normal
Retirement Date, such Participant had retired with an immediate joint and
survivor annuity on the day before the Participant's death, or
(b) in the case of a Participant who dies on or before the
Normal Retirement Date, such Participant had:
(i) separated from service on the date of his death,
(ii) survived to the Normal Retirement Age,
(iii) retired with an immediate joint and survivor
annuity at the Normal Retirement Date, and
(iv) died on the day after the day on which said
Participant would have attained the Normal Retirement Age.
1.38 "Retired Participant" means a Participant who has become
entitled to retirement benefits under the Plan.
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<PAGE> 19
1.39 "Retirement Date" means the date as of which a Participant
actually retires for reasons other than Total and Permanent Disability, whether
such retirement occurs on or after the Participant's Normal Retirement Date.
1.40 "Top Heavy Plan" means a plan described in Section 9.2.
1.41 "Top Heavy Plan Year" means a Plan Year for which the Plan is a
Top Heavy Plan.
1.42 "Total and Permanent Disability" means a physical or mental
condition of a Participant resulting from bodily injury, disease, or mental
disorder which renders him incapable of continuing his usual and customary
employment with the Employer. The disability of a Participant shall be
determined by a licensed physician chosen by the Administrator. The
determination shall be applied uniformly to all Participants.
1.43 "Trust" means the legal entity created pursuant to the CMP
Publications, Inc. Pension Plan Trust, as established by the Employer and the
Trustee under which the Trustee shall receive the contributions made under the
Plan and shall hold, invest and disburse the Trust Fund to or for the benefit of
the Participants and their Beneficiaries under the Plan.
1.44 "Trustee" means J. & W. Seligman Trust Company, and any
successors.
1.45 "Trust Fund" means the assets of the Plan and the Trust as the
same shall exist from time to time.
1.46 "Year of Service" shall mean the computation period of twelve
(12) consecutive months, herein set forth, during which an Employee has at least
1,000 Hours of Service.
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<PAGE> 20
For purposes of eligibility to participate, the computation
period shall begin with the date on which the Employee first performs an Hour of
Service. An Employee shall not be credited with a Year of Service for
eligibility purposes subsequent to December 31, 1992.
For vesting purposes, a Year of Service shall be a Plan Year
in which an Employee is credited with 1,000 Hours of Service.
Years of Service with the Employer or an Affiliate shall be
recognized as Years of Service with the Employer.
ARTICLE II
ELIGIBILITY
2.1 Conditions of Eligibility.
Any Covered Employee who was a Participant in the Plan prior
to the Effective Date shall continue to participate in the Plan. Thereafter, any
Covered Employee who has completed one (1) Year of Service and has reached his
21st birthday shall be eligible to participate hereunder as of the date he has
satisfied such requirements.
Notwithstanding the above, an Employee who was not a
Participant in the Plan on December 31, 1992 shall not be eligible to become a
Participant on or after January 1, 1993.
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<PAGE> 21
2.2 Effective Date of Participation.
A Covered Employee who has satisfied the eligibility
requirements of Section 2.1 shall become a Participant effective as of the first
day of the Plan Year nearest the date such Covered Employee met such eligibility
requirements, if still employed.
2.3 Determination of Eligibility.
(a) A Participant who ceases to be a Covered Employee by
reason of termination of employment or otherwise shall immediately cease
participation in the Plan and shall be a Former Participant. A Former
Participant who again becomes an Employee shall commence participation in
accordance with the following rules:
(i) Except as otherwise provided in this Section, any
Former Participant who again becomes a Covered Employee shall commence
participation as of the date such Former Participant again becomes a Covered
Employee;
(ii) Any nonvested Former Participant or any Former
Participant who receives a distribution of the vested balance of his Account who
again becomes a Covered Employee after incurring five consecutive 1-Year Breaks
in Service shall commence participation in the Plan as a newly hired employee in
accordance with Section 2.1.
(b) Any Covered Employee who has satisfied the eligibility
requirements of Section 2.1 but who terminates employment before becoming a
Participant in the Plan and who again becomes a Covered Employee prior to
incurring a 1-Year Break in Service shall become a Participant as of the date
such Employee again becomes a Covered Employee. If such Employee again becomes a
Covered Employee after incurring a 1-Year Break in Service, such Employee shall
commence participation in the Plan in accordance with Section 2.1.
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<PAGE> 22
2.4 Termination and Reemployment.
(a) A Participant who ceases to be a Covered Employee by
reason of termination of employment or otherwise shall immediately cease
participation in the Plan and shall be a Former Participant. A Former
Participant who again becomes an Employee shall commence participation in
accordance with the following rules:
(i) Any Former Participant who again becomes a Covered
Employee prior to incurring a 1-Year Break in Service shall commence
participation as of the date such Former Participant again becomes a Covered
Employee;
(ii) Any Former Participant who again becomes a Covered
Employee after incurring a 1-Year Break in Service shall be required to complete
a Year of Service in order to again commence participation in the Plan. Upon
completion of one Year of Service the Former Participant shall, commence
participation retroactively as of the date such Former Participant again became
a Covered Employee;
(iii) Any Former Participant who again becomes a Covered
Employee after incurring five consecutive 1-Year Breaks in Service shall
commence participation in the Plan in accordance with Section 2.1; and
(iv) Notwithstanding anything in this Section to the
contrary, any Former Participant who receives a distribution of his Accrued
Benefit shall be eligible to commence participation in the Plan in accordance
with the foregoing rules only upon repayment of the distributed amount in
accordance with Section 4.3.
(b) Any Covered Employee who has satisfied the eligibility
requirements of Section 2.1; but who terminates employment before becoming a
Participant in
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<PAGE> 23
the Plan and who again becomes a Covered Employee prior to incurring a 1-Year
Break in Service shall become a Participant as of the date such Employee again
becomes a Covered Employee. If such Employee again becomes a Covered Employee
after incurring a 1-Year Break in Service, such Employee shall commence
participation in the Plan in accordance with Section 2.1.
ARTICLE III
CONTRIBUTION AND VALUATION
3.1 Payment of Contributions.
No contribution shall be required or permitted under the
Plan from any Participant. The Employer shall pay to the Trustee from time to
time such amounts in cash or property acceptable to the Trustee as the
Administrator and Employer shall determine to be necessary to provide the
benefits under the Plan determined by the application of accepted actuarial
methods and assumptions. The method of funding shall be consistent with Plan
objectives.
3.2 Actuarial Methods.
In establishing the liabilities under the Plan and
contributions thereto, the Plan actuary will use such methods and assumptions as
will reasonably reflect the cost of the benefits. The Plan assets are to be
valued on the basis of any reasonable method of valuation that takes into
account fair market value pursuant to regulations prescribed by the Secretary of
Treasury.
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ARTICLE IV
VESTING AND FORFEITURES
4.1 Vesting.
(a) The vested portion of any Participant's Accrued Benefit
shall be a percentage of such Participant's Accrued Benefit determined on the
basis of the Participant's number of Years of Service according to the following
schedule:
Vesting Schedule
Years of Service Percentage
---------------- ----------
3 20%
4 40%
5 60%
6 80%
7 100%
(b) For the Plan Year January 1, 1980 to December 31, 1980
all service prior to the later of October 1, 1974, or the January 1st preceding
a Participant's employment commencement date shall be excluded; and for all Plan
Years starting with January 1, 1981, all service prior to the later of January
1, 1974, or the January 1st preceding their employment commencement date shall
be excluded.
(c) To the extent not fully vested, a Participant shall
become 100% vested in his Accrued Benefit as of the date he attains Normal
Retirement Age, dies or terminates employment by reason of Total and Permanent
Disability.
4.2 Break In Service Rules.
If a Former Participant is reemployed by the Employer after
a 1-Year Break in Service has occurred, Years of Service and Plan Years of
Service shall include Years
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of Service and Plan Years of Service prior to his 1-Year Break in Service
subject to the following rules:
(a) If a Former Participant has a 1-Year Break in Service,
his pre-break and post-break service shall be considered in computing Years of
Service for vesting purposes only after he has been employed for one (1) Year of
Service following the date of his reemployment with the Employer;
(b) A non-vested Former Participant's Years of Service and
Plan Years of Service shall not be considered in computing his Years of Service
or Plan Years of Service if his consecutive 1-Year Breaks in Service equal or
exceed the greater of (A) five (5) or (B) the aggregate number of his pre-break
Years of Service;
(c) Any Former Participant who receives a distribution of
the vested portion of his Accrued Benefit shall be credited with Years of
Service in accordance with the foregoing rules only upon repayment of the
distributed amount in accordance with Section 4.3.
4.3 Forfeitures.
If a Participant terminates employment and receives a
distribution of the vested portion of his Accrued Benefit under the Plan, the
nonvested portion of such benefit shall be forfeited as of the date his
employment terminates. Any such forfeiture may be restored in accordance with
this Section 4.3. A Former Participant who received a distribution of the vested
portion of his Accrued Benefit and again commences employment with the Employer
may have his forfeited benefit restored if the amount distributed is repaid to
the Plan with interest at the rate determined under Code Section 411(c)(2)(C),
within the earlier of (1) the end of the 5-year period beginning with the
Employee's resumption of employment covered by the Plan, or (2) the
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<PAGE> 26
end of 5 consecutive 1-Year Breaks in Service beginning with the date of
distribution. If any forfeited amount is not restored, such Participant's Normal
Retirement Benefit and Accrued Benefit shall be reduced by the Actuarial
Equivalent (as of the date of distribution) of the value of the Participant's
Accrued Benefit determined as of the date of such benefit was first distributed.
ARTICLE V
BENEFITS
5.1 Retirement Benefits.
A Participant's Normal Retirement Benefit shall be an
amount, determined in accordance with Section 5.2, which is paid monthly to the
Participant in the form of a life annuity which commences as of the
Participant's Normal Retirement Date and continues to be paid monthly thereafter
for the Participant's lifetime.
5.2 Benefit Formula.
(a) The amount of monthly retirement benefit to be provided
for each Participant who retires on his Normal Retirement Date shall be equal to
17% of such Participant's Average Monthly Compensation. Such monthly retirement
benefit shall be reduced by one-fifteenth (1/15) for each Year of Service that
such Participant's Plan Years of Service at Normal Retirement Date are less than
15, provided that any Participant who works past his Normal Retirement Date
shall have his Years of Service subsequent to his Normal Retirement Date
credited towards the fifteen (15) years needed to receive a full benefit.
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<PAGE> 27
(b) All Employees who were Participants in the Plan as of
January 1, 1984 shall be entitled to a Normal Retirement Benefit which is the
greater of a Normal Retirement Benefit determined under Section 5.2(a), above or
a Normal Retirement Benefit determined under the following formula with no
increases in Compensation after December 31, 1984 taken into account:
10% of the Participant's Average Monthly Compensation plus 9% of
such Participant's Average Monthly Compensation in excess of covered
compensation as determined under the 1980 Table I below.
COVERED COMPENSATION - 1980 TABLE I
Year Age 65 Amount Year Age 65 Amount
1978 $ 8,400 1996 $17,400
1979 9,000 1997 18,000
1980 9,600 1998 18,600
1981 10,200 1999 19,200
1982 10,800 2000 19,800
1983 11,400 2001 20,400
1984 12,000 2002 21,000
1985 12,600 2003-2004 21,600
1986 13,200 2005 22,200
1987-1988 13,800 2006 22,800
1989 14,400 2007 23,400
1990-1991 15,000 2008 24,000
1992-1993 15,600 2009-2010 24,600
1994 16,200 2011-2012 25,200
1995 16,800 2013-2014 25,800
2015 or later 25,900
Such benefit shall be reduced by the monthly pension received by a Participant
pursuant to any other defined benefit pension plan for which the Employer
contributes on behalf of such Participant.
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<PAGE> 28
(c) Notwithstanding subsections (a) or (b) above, a
Participant's Normal Retirement Benefit shall not be less than $200 per month.
If payment of the minimum Normal Retirement Benefit determined under this
subsection commences at a date other than Normal Retirement Date, the minimum
Normal Retirement Benefit shall be the Actuarial Equivalent of the minimum
Normal Retirement Benefit commencing at Normal Retirement Date.
5.3 Disability Retirement Benefits.
If a Participant becomes Totally and Permanently Disabled
prior to retirement or separation from service, and such condition continues for
a period of six (6) consecutive months and by reason thereof such Participant's
status as an Employee ceases, then such disabled Participant shall be entitled
to receive the Actuarial Equivalent of his Accrued Benefit. As of the
Anniversary Date coinciding with or next following the event of a Participant's
Total and Permanent Disability, the Administrator shall direct the Trustee to
commence payment of the benefits payable hereunder pursuant to the provisions of
Section 5.5 as though the Participant had retired as of such date.
5.4 Termination of Employment Before Retirement.
(a) Prior to January 1, 1991, a Former Participant who has
terminated employment may not receive a distribution until such time as he has
incurred a 1-Year Break in Service.
(b) Effective January 1, 1991, a Former Participant who has
terminated employment may elect to receive his vested Accrued Benefit, which
benefit will be payable or commence to be paid within a reasonably practicable
period of time after the election to receive
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<PAGE> 29
benefits is made. Such Former Participant may elect any distribution form
available under Section 5.5.
5.5 Distribution of Benefits.
(a) Unless otherwise elected as provided below, a
Participant who terminates employment on or after his Normal Retirement Date or
Former Participant entitled to a distribution under Section 5.4 and who is
married on the Annuity Starting Date shall receive his Accrued Benefit in the
form of a joint and survivor annuity, with his spouse as Beneficiary. The joint
and survivor annuity shall be the Actuarial Equivalent of a single life annuity.
Such joint and survivor benefits following such Participant's or Former
Participant's death shall continue to be paid to his spouse during the spouse's
lifetime at a rate equal to 50% of the rate at which such benefits were payable
to such Participant or Former Participant. A Participant or Former Participant
may elect to receive a smaller annuity benefit with continuation of payments to
his spouse at a rate of either seventy-five percent (75%) or one hundred percent
(100%) of the rate payable to the Participant or Former Participant during his
lifetime.
(b) Any election to waive the joint and survivor annuity
must be made by the Participant or Former Participant in writing not more than
90 days prior to the Annuity Starting Date and must be consented to by such
Participant's or Former Participant's spouse. Such spouse's consent must be
witnessed by a Plan representative or a notary public and must acknowledge the
effect of such election. Such election must specify the Beneficiary and the form
of benefits to be paid, which Beneficiary and/or form must be consented to by
the spouse. Such consent shall not be required if it is established to the
satisfaction of the Administrator that the required consent cannot be obtained
because there is no spouse, the spouse cannot be located, or
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under such other circumstances as may be prescribed by Department of Treasury
regulations. The election made by the Participant or Former Participant and
consented to by his spouse may be changed or revoked by such Participant or
Former Participant in writing at any time prior to the Annuity Starting Date
with the written consent of the spouse. If the effect of such change or
revocation is to designate the spouse as Beneficiary of a joint and survivor
annuity no further consent shall be required. Any new election must comply with
the requirements of this paragraph. A former spouse's waiver shall not be
binding on a new spouse.
(c) The Administrator shall provide the Participant or
Former Participant within a reasonable period of time before the Annuity
Starting Date (and consistent with Department of Treasury regulations), a
written explanation of:
(i) the terms and conditions of the joint and survivor
annuity;
(ii) a Participant's or Former Participant's right to
make an election to waive the joint and survivor annuity;
(iii) the need for the spouse to consent to any election
to waive the joint and survivor annuity; and
(iv) the right of the Participant or Former Participant
to change or revoke such election, and the effect of such change or revocation.
(d) In the event a Participant or Former Participant duly
elects pursuant to paragraph (a)(2) above not to receive his retirement benefit
in the form of a joint and survivor annuity, or if such Participant or Former
Participant is not married, the Administrator shall direct the Trustee to
distribute to a Participant or Former Participant or his Beneficiary any amount
to
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which he is entitled under the Plan in one or more of the following methods at
the election of the Participant, Former Participant, or his Beneficiary:
(i) One lump-sum payment in cash; or
(ii) Payments over a period certain in monthly,
quarterly, semiannual, or annual cash installments. The period over which such
payment is to be made shall not extend beyond the Participant's or Former
Participant's life expectancy (or the life expectancy of the Participant or
Former Participant and his designated Beneficiary).
(iii) Purchase of an annuity, provided that such annuity
may not be in any form that will provide for payments over a period extending
beyond either the life of the Participant or Former Participant (or the lives of
such Participant or Former Participant and his designated Beneficiary) or the
life expectancy of the Participant or Former Participant (or the life
expectancies of such Participant or Former Participant and his designated
Beneficiary).
(e) A Participant's or Former Participant's Accrued Benefit
may not be distributed without his written consent if the value of such
Participant's or Former Participant's Accrued Benefit calculated as a lump-sum
in accordance with Section 5.5(f) exceeds $3,500. Further, the spouse of such
Participant or Former Participant must consent in writing to any such
distribution. Notwithstanding anything in this Plan to the contrary, if the
value of a Participant's or Former Participant's Accrued Benefit is $3,500 or
less, the Administrator shall distribute such benefit without consent in a
single lump-sum payment within a reasonably practicable period of time following
such Participant's or Former Participant's termination of employment or
Retirement Date.
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<PAGE> 32
(f) For the purposes of determining the amount of a lump sum
distribution, the value of a Participant's or Former Participant's Accrued
Benefit shall be calculated by using an interest rate no greater than the
applicable interest rate if the vested accrued benefit (using such rate) is not
in excess of $25,000 and by using an interest rate no greater than 120% of the
applicable interest rate if the vested accrued benefit exceeds $25,000. For this
purpose, the applicable interest rate means the interest rate in effect on the
first day of the Plan Year in which the distribution occurs which would be used
by the Pension Benefit Guaranty Corporation for plan terminations.
5.6 In-Service Distributions.
(a) A Participant who remains in employment after his Normal
Retirement Date may elect to begin receiving payment of his retirement benefit
during employment on the first day of any month coincident with or following his
Normal Retirement Date. The amount of such retirement benefit shall be
determined in the same manner as for retirement at Normal Retirement Date except
that Years of Service and Average Monthly Compensation shall be determined as of
the date of the commencement of his retirement benefit. The benefit described in
the preceding sentence shall be recalculated as of the first payment date each
year thereafter to reflect such changes in Years of Service and Average Monthly
Compensation but offset by the value of any payments received during the
preceding one (1) year period. In no event shall the retirement benefit payable
be less than the benefit being paid prior to such recalculations.
(b) In the event a Participant continues in the employ of
the Employer beyond attainment of age 70 1/2, benefits to such Participant shall
commence to be paid no later
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than the first day of April following the calendar year in which the Participant
attained age 70 1/2; provided such Participant had attained age 70 1/2 on or
after January 1, 1988. With respect to Participants who attained age 70 1/2
prior to January 1, 1988 and who were not five percent owners (as defined in
Section 416 of the Code), benefits may commence in the calendar year such
Participant terminates employment if such date is later than the date of
attainment of age 70 1/2.
5.7 Time of Distribution.
Notwithstanding any other provision of this Plan to the
contrary, whenever the Trustee is to make a distribution or to commence a series
of payments on or as of an Anniversary Date, the distribution or series of
payments may be made or begun on such Anniversary Date or as soon thereafter as
is practicable, but in no event later than 180 days after such Anniversary Date.
Notwithstanding the foregoing, unless otherwise elected in writing by the
Participant or Former Participant, (such election may not result in a death
benefit that is more than incidental), a distribution of benefits under this
Plan shall begin not later than the 60th day after the close of the Plan Year in
which the latest of the following events occur:
(1) the date on which the Participant or Former Participant
attains the age 65,
(2) the 10th anniversary of the year in which the
Participant or Former Participant commenced participation in the Plan; or
(3) the date the Participant terminates employment.
5.8 Location of Participant or Beneficiary Unknown.
In the event that all or any portion of the distribution
payable to a Participant under this Article V shall remain unpaid, at the
expiration of five (5) years after it
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<PAGE> 34
shall become payable solely by reason of the inability of the Administrator, to
locate or ascertain the whereabouts of such Participants, such unpaid amount
shall be forfeited. In the event a Participant is located subsequent to his
benefit being forfeited, such benefit shall be restored.
5.9 Limitations on Benefits.
All rights and benefits, including elections, provided to a
Participant in this Plan shall be subject to the rights afforded to any
"alternate payee" under a "qualified domestic relations order" as those terms
are defined in Code Section 414(p).
ARTICLE VI
DEATH BENEFITS
6.1 Death Before Retirement.
If a Participant dies prior to his Retirement Date or a Former
Participant dies prior to the commencement of benefit payments, his Beneficiary
shall receive a death benefit equal to the Actuarial Equivalent of the
Participant's or Former Participant's vested Accrued Benefit as of the
Anniversary Date subsequent to or coinciding with the date of death.
6.2 Spouse's Death Benefit.
(a) Unless otherwise elected as provided below, a
Participant or Former Participant who dies before the Annuity Starting Date and
who is married on the date of death shall have his vested Accrued Benefit paid
to his surviving spouse in the form of a Qualified Pre-Retirement Survivor
Annuity. A Participant or Former Participant may elect to waive the Qualified
Pre-Retirement Annuity or to designate a Beneficiary other than his spouse
provided his spouse consents to such waiver in accordance with Section 6.2(b).
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<PAGE> 35
(b) Any election to waive the Qualified Pre-Retirement
Survivor Annuity or to designate a Beneficiary other than the Participant's or
Former Participant's spouse may be made on a form prescribed by the
Administrator. Such election will be effective only if the Participant's or
Former Participant's spouse at the date of death has consented in writing to the
election, such consent is witnessed by a notary public or a plan representative
and it acknowledges the effect of the election. Such spousal consent is not
required if the Administrator is satisfied that the spouse cannot be located.
A Participant may waive the Qualified Pre-Retirement
Survivor Annuity at any time on or after the first day of the Plan Year in which
he attains age 35. A Former Participant may waive the Qualified Pre-Retirement
Survivor Annuity in accordance with the preceding sentence or at any time
following his termination of employment, if earlier. The Administrator shall
provide each Participant or Former Participant a written explanation of the
Qualified Pre-Retirement Survivor Annuity, the Participant's or Former
Participant's right to waive such benefit; the spouse's right to consent to any
waiver; and the right to change or revoke any election, the effect of such
change or revocation and any other information required pursuant to Department
of Treasury regulations.
6.3 Death Following Retirement.
(a) Upon the death of a Participant subsequent to his
Retirement Date, but prior to commencement of payment of his retirement
benefits, his Beneficiary shall be entitled to a death benefit in an amount
equal to the Actuarial Equivalent of the benefit the Participant would have
received at his Retirement Date, credited with interest subsequent to such date
at the rate determined under Section 411(c)(2)(C) of the Code, if applicable.
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<PAGE> 36
(b) Upon the death of a Participant subsequent to the
commencement of payment of his retirement benefits, his Beneficiary shall be
entitled to whatever death benefit may be available under the form of benefit
pursuant to which the Participant's benefit is payable.
6.4 Distribution of Benefits Upon Death.
(a) Payment of a benefit in the form of a Qualified
Pre-Retirement Survivor Annuity must commence by the date the Participant would
have attained the Normal Retirement Age under the Plan, unless the surviving
spouse elects a later date.
(b) In the event the death benefit is not paid in the form
of a Qualified Pre-Retirement Survivor Annuity, it shall be paid to the
Participant's Beneficiary by either of the following methods, as elected by the
Beneficiary:
(i) One lump-sum payment in cash;
(ii) Payment in monthly, quarterly, semi-annual, or
annual cash installments over a period to be elected by the Beneficiary, and in
installments as nearly equal as practicable; or
(iii) Purchase of an annuity; provided that such annuity
may not provide for payments over a period extending beyond either the life of
the Participant (or the lives of the Participant and his Beneficiary) or the
life expectancy of the Participant (or the life expectancy of the Participant
and his Beneficiary).
At the request of the Beneficiary, the Administrator may
direct the Trustee to (1) accelerate any installment payment to a Participant's
Beneficiary, or (2) at any time, purchase an annuity for the benefit of the
Participant's Beneficiary.
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<PAGE> 37
(c) If the distribution of a Participant's interest has
begun in accordance with a method selected in Section 5.5 and the Participant
dies before his entire interest has been distributed to him, the remaining
portion of such interest shall be distributed at least as rapidly as under the
method of distribution selected pursuant to Section 5.5 and in effect as of his
date of death.
(d) If a Participant dies before he has begun to receive any
distributions of his interest under the Plan, his death benefit shall be fully
distributed to his Beneficiaries within 5 years after his death. However, the
5-year distribution requirement shall not apply to any portion of a deceased
Participant's interest which is payable to or for the benefit of a designated
Beneficiary. In such event, such portion may be distributed over the life of
such designated Beneficiary (or over a period not extending beyond the life
expectancy of such designated Beneficiary) provided such distribution begins not
later than one (1) year after the date of the Participant's death (or such later
date as may be prescribed by Department of Treasury regulations).
(e) Notwithstanding anything in this Plan to the contrary,
if the value of the Participant's or Former Participant's Accrued Benefit
calculated as a lump-sum in accordance with Section 5.5(f) is $3,500 or less,
the Administrator shall direct the immediate distribution of such amount to the
Participant's or Former Participant's Beneficiary. If such value exceeds $3,500,
an immediate distribution of the entire amount may be made to a surviving
spouse, only if such surviving spouse consents in writing to such distribution.
6.5 Change in Beneficiary.
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<PAGE> 38
A Participant or Former Participant may at any time change
or revoke his designation of a Beneficiary by filing a written notice of such
change or revocation with the Administrator. Notwithstanding the foregoing, a
Participant or Former Participant who is married may change or revoke his
Beneficiary designation only in accordance with Section 6.2 unless the effect of
such change or revocation is to designate the Participant's or Former
Participant's spouse as the Beneficiary.
6.6 Proof of Death.
The Administrator may require such proper proof of death and such
evidence of the right of any person to receive payment of the Accrued Benefit of
a deceased Participant or Former Participant as the Administrator may deem
desirable. The Administrator's determination of death and of the right of any
person to receive payment shall be conclusive and binding.
6.7 Mandatory Cash-Out Payment.
Notwithstanding anything in this Article VI to the contrary, if the
value of a Participant's or Former Participant's Accrued Benefit is $3,500 or
less as of the date of such Participant's or Former Participant's death, the
Administrator shall direct the Trustee to distribute the value of the
Participant's or Former Participant's Accrued Benefit in a single lump-sum
payment.
6.8 Distribution to Minor Beneficiary.
In the event a distribution is to be made to a minor, the
Administrator may, in the Administrator's sole discretion, direct that such
distribution be paid to the legal guardian, or if none, to a parent of such
Beneficiary or a responsible adult with whom the
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<PAGE> 39
Beneficiary maintains his residence, or to the custodian for such Beneficiary
under the Uniform Gift to Minors Act or Gift to Minors Act, if such is permitted
by the laws of the state in which said Beneficiary resides. Such a payment to
the legal guardian, parent, responsible adult or custodian of a minor
Beneficiary shall fully discharge the Trustee, Employer, Administrators and Plan
from further liability on account thereof.
6.9 Location of Beneficiary Unknown.
In the event that all, or any portion of the benefit payable
to a Beneficiary under this Article VII shall, at the expiration of five (5)
years after it shall become payable, remain unpaid solely by reason of the
inability of the Administrator to locate or ascertain the whereabouts of such
Beneficiary, the amount so payable shall be forfeited and shall be used to
reduce the cost of the Plan. In the event a Beneficiary is located subsequent to
his benefit being forfeited, such benefit shall be restored.
ARTICLE VII
RESTRICTIONS ON CERTAIN BENEFITS
7.1 Basic Limitation.
Notwithstanding any provision of the Plan to the contrary, the
annual benefit paid to or on behalf of a Participant from the Plan and from any
other defined benefit plan maintained by the Employer shall not exceed the
lesser of (i) ninety thousand dollars ($90,000) (as may be adjusted under
determinations made by the Secretary of the Treasury to be effective as of
January 1 of each calendar year) or (ii) one hundred percent (100%) of the
Participant's average Compensation during the three (3) consecutive calendar
years (or actual number of years if less
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than three (3)) during which the Participant actively participated in the Plan
and had the greatest aggregate Compensation; provided, however, that the
foregoing basic limitation shall not apply in a particular Plan Year to a
Participant whose aggregate annual benefit from all defined benefit plans
maintained by the Employer does not exceed ten thousand dollars ($10,000) for
such Plan Year, or for any prior Plan Year, and who at no time was a participant
in any defined contribution plan maintained by the Employer.
7.2 Adjustments to Basic Limitation.
(a) If the benefit payable to or on behalf of a Participant
is payable in any form other than in the form of an annuity only for the life of
the recipient or a joint and 50% survivor annuity for the lives of the
Participant and his Spouse, the benefit payable shall be adjusted in accordance
with regulations prescribed by the Secretary of the Treasury for the purpose of
applying the basic limitation in Section 7.1 above so that it is the Actuarial
Equivalent (as determined under Section 7.2(e) below) of a benefit payable in
the form of an annuity for the life of the recipient.
(b) If payment of a benefit commences before the Participant
attains retirement age under Section 216(l) of the Old Age, Survivors and
Disability Insurance Act (the "Social Security Act") and on or after the date
the Participant attains age sixty-two (62), the dollar limitation in Section 7.1
shall be actuarially adjusted in accordance with regulations prescribed by the
Secretary of the Treasury or by his delegate so that it is equivalent to an
annual benefit commencing at such retirement age. If payment of such benefit
commences before the Participant attains age sixty-two (62), the dollar
limitation in Section 7.1 shall be the actuarial
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equivalent (as determined under Section 7.2(e) below) of an annual benefit
commencing at age sixty-two (62), as determined in the preceding sentence.
(c) The dollar limitation in Section 7.1 (i) for an annual
benefit commencing after retirement age under Section 216(l) of the Social
Security Act shall be increased to the Actuarial Equivalent of an annual benefit
commencing at such retirement age.
(d) If the benefit is payable to or on behalf of a
Participant who has less than ten (10) Plan Years of Service, the limitations in
Section 7.1 shall be adjusted by multiplying it by a fraction, the numerator of
which is the number of Plan Years of Service (including fractional years) of the
Participant and the denominator of which is ten (10).
(e) For purposes of determining the Actuarial Equivalent of
a benefit payable to a Participant under this Section , the interest rate
assumption shall be the greater of five percent (5%) or the rate specified in
Section 1.2 of the Plan; provided, however, that in determining the actuarial
equivalent of a benefit payable to a Participant after retirement age, the
interest rate assumption shall be the lesser of five percent (5%) or the rate
specified in Section 1.2 of the Plan.
7.3 Aggregation of Plans.
If a Participant participates in a defined contribution plan
maintained by the Employer and the sum of the defined benefit plan fraction
under the Plan and the defined contribution plan fraction under such defined
contribution plan is greater than one (1.0), his benefits under the Plan shall
be reduced first, in the amount which is necessary to cause such sum not to
exceed one (1.0). For purposes of this paragraph, the defined benefit plan
fraction for any Plan Year is a fraction, the numerator of which is the
projected annual benefit of the Participant
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under the Plan and under any other defined benefit plan maintained by the
Employer as of the close of the Plan Year and the denominator of which is the
lesser of (i) 1.25 times the dollar limitation in effect for that Plan Year
under Section 415(b)(1)(A) of the Code, or (ii) 1.4 times one hundred percent
(100%) of the Participant's highest average Compensation for any consecutive
three-year period. The defined contribution plan fraction for any Plan Year is a
fraction, the numerator of which is the sum of all of the annual additions to
the Participant's account under any defined contribution plan(s) maintained by
the Employer for the Plan Year and for all prior Plan Years, and the denominator
of which is the sum of the lesser of (iii) 1.25 times the maximum dollar
limitation for defined contribution plans which could have been made under
Section 415(c) of the Code or (iv) 1.4 times twenty-five percent (25%) of the
Participant's compensation for such Plan Year and for each prior Year of Service
with the Employer. The terms defined benefit plan fraction annual addition,
compensation, and the defined contribution plan fraction set forth in this
Section shall in any event have the meanings provided in and be computed and
adjusted as may be required by Section 415 of the Code and regulations issued by
the Secretary of the Treasury pursuant to such Section.
ARTICLE VIII
DIRECT ROLLOVER OF BENEFITS
8.1 Right to Direct Rollover.
With respect to any distributions from the Plan on or after
January 1, 1993, except as otherwise provided, any Distributee may elect, in
accordance with the provisions
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of this Section, to have all or a designated portion of an Eligible Rollover
Distribution paid directly to a specified Eligible Retirement Plan in a Direct
Rollover.
8.2 Limitations on Direct Rollover.
A Distributee may elect to have a portion of an Eligible
Rollover Distribution transferred directly to an Eligible Retirement Plan in a
Direct Rollover and the remaining portion paid directly to him or her. A
Distributee may elect only one Direct Rollover for each Eligible Rollover
Distribution.
8.3 Election of Direct Rollover.
A Distributee may elect a Direct Rollover of an Eligible
Rollover Distribution by filing with the Administrator such forms as the
Administrator may prescribe. The Administrator is entitled to reasonably rely on
the information provided on such forms by a Distributee in making a Direct
Rollover. In the event that a Distributee does not provide all of the
information requested on the form(s), or fails to submit the form(s) to the
Administrator, the Administrator may directly pay the amount of the Eligible
Rollover Distribution to the Distributee.
8.4 Payment of Direct Rollover.
If a Distributee elects a Direct Rollover of his or her
Eligible Rollover Distribution in a manner which complies with Section 8.3
hereof, such Eligible Rollover Distribution may be accomplished by any
reasonable means of direct payment to the designated Eligible Retirement Plan
selected by the Administrator. Reasonable means of direct payment shall include:
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(a) mailing a check, negotiable only by the trustee or
custodian of the designated Eligible Retirement Plan, to the trustee or
custodian of such plan;
(b) wire transfer directed exclusively to the trustee or
custodian of the designated Eligible Retirement Plan;
(c) providing the Distributee with a check for delivery to
the designated Eligible Retirement Plan so long as:
(i) the check is endorsed "[name of trustee or
custodian] as trustee of [name of Eligible
Retirement Plan]," and
(ii) the check explicitly states that it is for the
benefit of the Distributee whose Eligible Rollover
Distribution is to be transferred in a Direct
Rollover.
ARTICLE IX
TOP-HEAVY PROVISIONS
9.1 In General.
If the Plan should for any Plan Year become top-heavy as
defined in Section 9.2, then, notwithstanding any other provisions of the Plan,
the rules in Section 9.3 shall apply to the Plan.
9.2 Top-Heavy Defined.
(a) The Plan is top-heavy for a Plan Year if, as of the
Determination Date (as hereinafter defined), the value of the cumulative Accrued
Benefits for Key Employees under the Plan, exceeds 60 percent of the value of
the cumulative Accrued Benefits for all
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<PAGE> 45
Employees, valued as of the Determination Date as computed under Section 416(g)
of the Code. The "Determination Date" for purposes of this Section shall mean
the last day of the Plan Year preceding the Plan Year in question. For purposes
of determining the value of the cumulative Accrued Benefit of any Employee,
including former Employees, such value shall be increased by the aggregate
distributions made with respect to such Employee under the Plan during the
five-year period ending on the Determination Date, except that such value shall
not be increased by distributions made after the last day of the prior Plan Year
to the extent that the distributions are included in the value on such date. The
Accrued Benefit of any Employee or former Employee who has not performed
services for the Employer at any time during a five-year period ending on the
Determination Date shall not be taken into account for the purposes of this
Section. The value of the cumulative Accrued Benefit of an Employee shall
reflect a benefit payable commencing at Normal Retirement Date. To compute such
value, the actuarial assumptions specified in Section 1.2 of the Plan shall be
used, provided, however, that the applicable interest rate shall never exceed
the maximum interest rate permissible under Section 416(g) of the Code.
(b) Required Aggregation Groups. If the Plan is required to
be aggregated with other plans under the provisions of this Section, the
aggregated plans taken together shall constitute the Plan for purposes of this
Section. Notwithstanding the foregoing, if the Plan is required to be aggregated
with a group of plans in a required aggregation group, if the required
aggregation group is not top-heavy for a Plan Year, the Plan is not top-heavy
for that Plan Year, and if the required aggregation group is top-heavy for a
Plan Year, the Plan is top-heavy for that Plan Year. For purposes of the
preceding sentence, a required aggregation group means each plan of the Employer
or an Affiliate in which a Key Employee participates,
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and each other such plan which enables any plan in which a Key Employee
participates to meet the coverage and anti-discrimination requirements of
Sections 401(a)(4) and 410 of the Code.
(c) Permissive Aggregation Groups. Notwithstanding the above
provisions, the Plan will not be top-heavy in any Plan Year in which a
permissive aggregation group to which the Plan belongs is not top-heavy. A
permissive aggregation group consists of plans maintained by the Employer that
are required to be aggregated plus one or more plans that are not part of a
required aggregation group but that satisfy the requirements of Sections
401(a)(4) and 410 of the Code when considered together with the required
aggregation group.
(d) Top-Heavy Determination for a Group. A required
aggregation group or a permissive aggregation group is top-heavy for a Plan Year
if, as of the Determination Date, the sum of the present value of the cumulative
Accrued Benefits for Key Employees under all defined benefit plans included in
such group and the aggregate of the accounts of Key Employees under all defined
contribution plans included in such group exceeds sixty percent (60%) of a
similar sum determined for all participants in such plans under Section 416(g)
of the Code.
9.3 Top-Heavy Contingent Provisions.
If the Plan is top-heavy for a Plan Year, as defined in
Section 9.2, the following Plan provisions shall apply for that Plan Year:
(a) The Accrued Benefit of each Participant who is a Non-Key
Employee, when expressed as an annual benefit payable in the form of a life
annuity commencing at age 65, shall not be less than the lesser of (1) two
percent (2%) times the Participant's Years of Service, or (2) twenty percent
(20%) of a Participant's average Compensation during the
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<PAGE> 47
period of consecutive years not exceeding five (5) years during which the
Participant had the greatest total Compensation. For the purposes of this
Section, a Year of Service is not counted if the Plan was not a top-heavy plan
for any Plan Year ending during such Year of Service or if such Year of Service
was completed in a Plan Year beginning before January 1, 1984.
(b) Section 7.3 of the Plan shall be applied only after
substituting "1.0" for "1.25" in the definitions of the defined benefit plan
fraction and the defined contribution plan fraction.
(c) The vested percentage of a Participant's Accrued
Benefit, shall be determined by the total of the Participant's Years of Service
according to the following schedule:
Years of Vesting Percentage
Service of Accrued Benefit
------- ------------------
2 20
3 40
4 60
5 80
6 100
The vested percentage of a Participant's Accrued Benefit shall never be reduced
in any Plan Year without regard to whether this Article IX applies to such Plan
Year. In any Plan Year in which the Plan's top-heavy status changes, each
Participant with three (3) or more Years of Service may elect to have the
provisions of either this Section or Article IV of the Plan apply to determine
the vested percentage of his Accrued Benefit.
(d) If a Non-Key Employee participates in this Plan and a
defined contribution plan included in a required aggregation group which is
top-heavy for any Plan Year,
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<PAGE> 48
he shall receive the minimum benefit required under Code Section 416 under such
defined contribution plan.
ARTICLE X
ADMINISTRATION
10.1 Powers and Responsibilities of the Plan Sponsor.
(a) The Plan Sponsor shall be empowered, under the direction
of its board of directors, to appoint and remove the Trustee and the
Administrator from time to time as it deems necessary for the proper
administration of the Plan to assure that the Plan is being operated for the
exclusive benefit of the Participants and their Beneficiaries in accordance with
the terms of this Plan, the Code, and ERISA.
(b) The Plan Sponsor, in its discretion, may appoint an
Investment Manager to manage all or a designated portion of the assets of the
Plan. In such event, the Trustee shall follow the directive of the Investment
Manager in investing the assets of the Plan managed by the Investment Manager.
(c) The Plan Sponsor shall periodically review the
performance of any person to whom duties have been delegated or allocated by it
under the provisions of this Plan or pursuant to procedures established
hereunder.
10.2 Assignment and Designation of Administrative Authority.
(a) The Plan Sponsor shall appoint the members of the Plan
Administrative Committee (the "Administrative Committee") which shall be the
Administrator under the Plan. The Administrative Committee shall consist of
three members appointed by the Plan Sponsor. Any person, including but not
limited to Employees of an Employer shall be
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eligible to serve on the Administrative Committee. Members of the Administrative
Committee shall serve at the pleasure of the Plan Sponsor and may be removed at
any time by the Plan Sponsor. Any member may resign at any time by delivering
his written resignation to the Plan Sponsor, and any member shall be deemed to
have resigned on the date on which his employment with the Employer terminates.
Members shall serve without compensation, but shall be reimbursed for all
necessary and proper expenses incurred in carrying out their duties and
responsibilities.
(b) The Administrative Committee shall conduct its business
with a quorum of a majority of its members, and that actions taken by the
Administrative Committee may be taken upon the affirmative vote of a majority of
its members. The Administrative Committee may act by meeting (and may meet by
telephone) or by unanimous written consent without a meeting. No member of an
Administrative Committee shall participate in any decision respecting his
interest as a Participant in the Plan (other than a decision respecting the
interest of a group of similarly situated Plan Participants which includes the
Administrative Committee member).
(c) In addition to the rights and obligations of the
Administrator set forth in the Plan, but except as specifically provided in
subsection (d), the Administrative Committee is hereby granted the full
authority and power to, and the responsibility to, act as settlor of the Trust
and oversee the operation of and provide the policy for the Trust and the Plan.
Without limitation of the foregoing, that the Plan Sponsor delegates all of its
duties and responsibilities with respect to the Plan to the Administrative
Committee including, but not limited to:
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<PAGE> 50
(i) selection and removal of Trustees;
(ii) selection and removal of Investment Managers;
(iii) setting policy for the administration of the Plan
and for the investment of the Plan's assets;
(iv) adopting amendments to the Plan;
(v) periodically evaluating and reviewing the
performance of service providers and fiduciaries;
(vi) reporting annually to the Employer on the operation
and status of the Plan;
(vii) setting general investment objectives and funding
guidelines for the Plan;
(viii) securing auditing, legal and other advice as
appropriate; and
(ix) determining all matters of policy necessary for the
proper administration of the Plan.
(d) In no event shall the Administrative Committee have the
authority to adopt any amendment to the Plan which will have a material affect
on the Employer's cost of participating in the Plan, will terminate the Plan,
will merge the Plan with another tax-qualified plan, or will fundamentally
change the nature of the Plan (e.g., to an employee stock ownership plan).
(e) The Administrative Committee shall have the authority to
delegate its duties and responsibilities to any subcommittee made up of one or
more of its members or to
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<PAGE> 51
such other individuals or entities as the Administrative Committee may, in its
sole discretion, deem appropriate.
(f) Any employee or director of the Employer who is a member
of an Administrative Committee, shall be indemnified and held harmless, to the
maximum extent permitted by law, for any actions taken in good faith on behalf
of the Employer with respect to his duties and responsibilities to the Plans.
10.3 Powers, Duties and Responsibilities of the Administrator.
The primary responsibility of the Administrator is to
administer the Plan for the exclusive benefit of the Participants and their
Beneficiaries, subject to the specific terms of the Plan. The Administrator
shall administer the Plan in accordance with its terms and shall have the power
to interpret and construe the terms of the Plan and determine all questions
arising in connection with the administration, interpretation, and application
of the Plan. Any such determination by the Administrator shall be conclusive and
binding upon all persons. The Administrator may establish procedures, correct
any defect, supply any information, or reconcile any inconsistency in such
manner and to such extent as shall be deemed necessary or advisable to carry out
the purpose of this Plan; provided, that any procedure, discretionary act,
interpretation or construction shall be done in a nondiscriminatory manner based
upon uniform principles consistently applied and shall be consistent with the
intent that the Plan shall continue to be deemed a qualified plan under the
terms of Code Section 401(a), and shall comply with the terms of ERISA and all
regulations issued pursuant thereto. The Administrator shall have all powers
necessary or appropriate to accomplish his duties under this Plan.
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<PAGE> 52
The Administrator shall be charged with the duties of the
general administration of the Plan, including, but not limited to, the
following:
(a) to determine all questions relating to the eligibility
of an Employee to participate or remain a Participant hereunder;
(b) to compute, certify, and direct the Trustee with respect
to the amount and the kind of benefits to which a Participant shall be entitled
hereunder;
(c) to authorize and direct the Trustee with respect to all
nondiscretionary or otherwise directed disbursements from the Trust;
(d) to maintain all necessary records for the administration
of the Plan;
(e) to interpret the provisions of the Plan and to make and
publish such rules or regulations of the Plan as are consistent with the terms
hereof;
(f) to compute and certify to the Employer and to the
Trustee from time to time the sums of money necessary or desirable to be
contributed to the Trust Fund;
(g) to consult with the Employer and the Trustee regarding
the short and long-term liquidity needs of the Plan in order that the Trustee
can exercise any investment discretion in a manner designed to accomplish
specific objectives;
(h) to assist any Participant regarding his rights,
benefits, or elections available under the Plan;
(i) to prepare and distribute to Employees a procedure for
notifying Participants and Beneficiaries of their rights to elect joint and
survivor annuities and Pre-Retirement Survivor Annuities as required by ERISA
and regulations thereunder.
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<PAGE> 53
10.4 Records and Reports.
The Administrator shall keep a record of all actions taken
and shall keep all other books of account, records, and other data that may be
necessary for proper administration of the Plan and shall be responsible for
supplying all information and reports to the Internal Revenue Service, the
Department of Labor, Participants, Beneficiaries and others as required by law.
10.5 Appointment of Advisors.
The Administrator, or the Trustee with the consent of the
Administrator, may appoint counsel, specialists, advisors, and other persons as
the Administrator or the Trustee deems necessary or desirable in connection with
the administration of this Plan.
10.6 Information from Employer.
To enable the Administrator to perform its functions, the
Employer shall supply full and timely information to the Administrator on all
matters relating to the Compensation of all Participants, their Hours of
Service, their Years of Service, their retirement, death, disability, or
termination of employment, and such other pertinent facts as the Administrator
may require; and the Administrator shall advise the Trustee of such of the
foregoing facts as may be pertinent to the Trustee's duties under the Plan. The
Administrator may rely upon such information as is supplied by the Employer and
shall have no duty or responsibility to verify such information.
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<PAGE> 54
10.7 Payment of Expenses.
All expenses of administration shall be paid out of the
Trust Fund unless paid by the Employer. Such expenses shall include any expenses
incidental to the functioning of the Administrator, including, but not limited
to, fees of accountants, counsel, and other specialists and their agents, and
other costs of administering the Plan. Until paid, the expenses shall constitute
a liability of the Trust Fund.
10.8 Claims Procedure.
Claims for benefits under the Plan may be filed with the
Administrator on forms supplied by the Employer. Written notice of the
disposition of a claim shall be furnished to the claimant within 90 days after
the application is filed. In the event the claim is denied, the reasons for the
denial shall be specifically set forth in the notice in language calculated to
be understood by the claimant, pertinent provisions of the Plan shall be cited,
and, where appropriate, an explanation as to how the claimant can perfect the
claim will be provided. In addition, the claimant shall be furnished with an
explanation of the Plan's claims review procedure.
10.9 Claims Review Procedure.
Any Employee, former Employee, or Beneficiary of either, who
has been denied a benefit by a decision of the Administrator pursuant to Section
10.8 shall be entitled to request the Administrator to give further
consideration to his claim by filing with the Administrator (on a form which may
be obtained from the Administrator) a request for a hearing. Such request,
together with a written statement of the reasons why the claimant believes his
claim should be allowed, shall be filed with the Administrator no later than 60
days after receipt of the
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<PAGE> 55
written notification provided for in Section 10.8. The Administrator shall then
conduct a hearing within the next 60 days, at which the claimant may be
represented by an attorney or any other representative of his choosing and at
which the claimant shall have an opportunity to submit written and oral evidence
and arguments in support of his claim. At the hearing (or prior thereto upon 5
business days written notice to the Administrator) the claimant or his
representative shall have an opportunity to review all documents in the
possession of the Administrator which are pertinent to the claim at issue and
its disallowance. Either the claimant or the Administrator may cause a court
reporter to attend the hearing and record the proceedings. In such event, a
complete written transcript of the proceedings shall be furnished to both
parties by the court reporter. The full expenses of any such court reporter and
such transcripts shall be borne by the party causing the court reporter to
attend the hearing. A final decision as to the allowance of the claim shall be
made by the Administrator within 60 days of receipt of the appeal (unless there
has been an extension of 60 days due to special circumstances, provided the
delay and the special circumstances occasioning it are communicated to the
claimant within the 60 day period). Such communication shall be written in a
manner calculated to be understood by the claimant and shall include specific
reasons for the decision and specific references to the pertinent Plan
provisions on which the decision is based.
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<PAGE> 56
ARTICLE XI
AMENDMENT, TERMINATION, AND MERGERS
11.1 Amendment.
The Plan Sponsor shall have the right at any time to amend
the Plan by action of the Administrator as set forth in Section 10.2 or by
action of the Board of Directors. However, no such amendment shall authorize or
permit any part of the Trust Fund (other than such part as is required to pay
taxes and administration expenses) to be used for or diverted to purposes other
than for the exclusive benefit of the Participants or their Beneficiaries; and
no such amendment shall cause any reduction in the Accrued Benefit of any
Participant (except to the extent permitted under Code Section 412(c)(8)) or
cause or permit any portion of the Trust Fund to revert to or become the
property of the Employer.
11.2 Termination.
(a) A Participating Employer may elect to cease its
participation in the Plan at any time by providing notice to the Plan Sponsor.
(b) The Plan Sponsor shall have the right at any time to
terminate the Plan by delivering to the Trustee and Administrator written notice
of such termination. Upon any termination (full or partial), all assets shall be
allocated in accordance with ERISA Section 4044 and the provisions hereof and
the Accrued Benefit of all affected Participants' shall become 100% vested. Upon
such termination of the Plan, the Plan Sponsor, by written notice to the Trustee
and Administrator, may direct either:
(i) a complete distribution of the assets in the Trust
Fund to the Participants; or
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<PAGE> 57
(ii) continuation of the Trust and the distribution of
benefits at such time and in such manner as though the Plan had not been
terminated.
11.3 Limitation of Benefits on Termination. In the event of
termination of the Plan, the benefit of any Participant or Former Participant
who is a highly compensated employee (as defined in Code Section 414(q)), will
be limited to a benefit which is nondiscriminatory under Code Section 401(a)(4).
11.4 Merger or Consolidation.
Before this Plan and/or the Trust may be merged or
consolidated with any other tax-qualified Plan or its assets or liabilities
transferred to any other tax-qualified plan, the Administrator must secure (and
file with the Secretary of Treasury at least 30 days beforehand, or during such
other period as may be prescribed by Treasury Regulations) a certification from
an enrolled actuary that the benefits which would be received by a Participant
of this Plan, in the event of a termination of the Plan immediately after such
transfer, merger or consolidation, are at least equal to the benefits the
Participant would have received if the Plan had terminated immediately before
the transfer, merger or consolidation.
ARTICLE XII
MISCELLANEOUS
12.1 Valuation.
(a) The Administrator shall direct the Trustee, as of each
Anniversary Date, and at such other date or dates deemed necessary by the
Administrator, each such date herein called a "Valuation Date", to determine the
net worth of the assets comprising the Trust
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<PAGE> 58
Fund as it exists on such Valuation Date prior to taking into consideration any
contributions for that Plan Year. In determining such net worth, the Trustee
shall value the assets comprising the Trust Fund at their fair market value as
of the Valuation Date and shall deduct all expenses for which the Trustee is
entitled to but has not yet obtained reimbursement from the Employer or the
Trust Fund.
(b) In determining the fair market value of securities held
in the Trust Fund which are listed on a registered stock exchange, the
Administrator shall direct the Trustee to value the same at the prices they were
last traded on such exchange preceding the close of business on the Valuation
Date. If such securities were not traded on the Valuation Date, or if the
exchange on which they were traded was not open for business on the Valuation
Date, then the securities shall be valued at the prices at which they were last
traded prior to the Valuation Date. Any unlisted security held in the Trust Fund
shall be valued at its bid price next preceding the close of business on the
Valuation Date, which bid price shall be obtained from a registered broker or an
investment banker. In determining the fair market value of assets other than
securities for which trading or bid prices can be obtained, the Trustee may
appraise such assets itself, or in its discretion, employ one or more appraisers
for that purpose and rely on the values established by such appraiser or
appraisers.
12.2 Participant's Rights.
This Plan shall not be deemed to constitute a contract
between the Employer and any Participant or to be a consideration or an
inducement for the employment of any Participant or Employee. Nothing contained
in this Plan shall be deemed to give any Participant or Employee the right to be
retained in the service of the Employer or to interfere
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<PAGE> 59
with the right of the Employer to discharge any Participant or Employee at will
at any time, and for any reason, with or without cause, regardless of the effect
which such discharge shall have upon him as a Participant of this Plan.
12.3 Alienation.
(a) Subject to the exceptions provided below, no benefit
which shall be payable out of the Trust Fund to any person (including a
Participant or his Beneficiary) shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any
attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, or
charge the same shall be void; and no such benefit shall in any manner be liable
for, or subject to, the debts, contracts, liabilities, engagements, or torts of
any such person, nor shall it be subject to attachment or legal process for or
against such person, and the same shall not be recognized by the Trustee, except
to such extent as may be required by law.
(b) This Section 12.3 shall not apply to the extent a
Participant or Beneficiary is indebted to the Plan, for any reason, under any
provision hereof. At the time a distribution is to be made to or for a
Participant's or Beneficiary's benefit, such proportion of the amount
distributed as shall equal such indebtedness shall be paid by the Trustee to the
Trustee or the Administrator, at the direction of the Administrator, to apply
against or discharge such indebtedness. Prior to making such a payment, however,
the Participant or Beneficiary must be given written notice by the Administrator
that such indebtedness is to be so paid in whole or part from his Accrued
Benefit. If the Participant or Beneficiary does not agree that the indebtedness
is a valid claim against his vested Accrued Benefit, he shall be entitled to a
review of the validity of the claim in accordance with procedures provided in
Sections 10.8 and 10.9.
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<PAGE> 60
(c) This provision shall not apply to a "qualified domestic
relations order" defined in Code Section 414(p), and those other domestic
relations orders permitted to be so treated by the Administrator under the
provisions of the Retirement Equity Act of 1984. The Administrator shall
establish a written procedure to determine the qualified status of domestic
relations orders and to administer distributions under such qualified orders.
12.4 Construction.
This Plan shall be construed and enforced according to ERISA
and the laws of the State of New York, other than its laws respecting choice or
conflicts of law, to the extent not pre-empted by ERISA.
12.5 Gender and Number.
Wherever any words are used herein in the masculine,
feminine or neuter gender, they shall be construed as though they were also used
in another gender in all cases where they would so apply, and whenever any words
are used herein in the singular or plural form, they shall be construed as
though they were also used in the other form in all cases where they would so
apply.
12.6 Legal Action and Indemnification.
(a) In the event any claim, suit or proceeding is brought
regarding the Trust and/or Plan to which any member of the Employer's Board of
Directors, the Administrator or any officer or Employee of the Employer may be a
party in connection with such person's duties and responsibilities under this
Plan or the Trust and such claim, suit or proceeding is resolved in favor of
such person, he shall be entitled to be reimbursed from the Trust Fund for
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any and all costs, attorney's fees, and other expenses pertaining thereto
incurred by them for which he shall have become liable.
(b) The Administrator may from time to time request the
advice of counsel, who may be counsel to the Employer, on any legal matter,
including the interpretation of this Plan or the Trust, and shall be indemnified
and held harmless by the Employer in acting on such advice.
(c) The Employer shall indemnify each member of its Board of
Directors, the Administrator, and each officer and Employee of the Employer for
any liability, loss, expense, assessment or other cost of any kind or
description whatsoever as and when incurred, including legal fees and expenses,
which (a) are actually incurred by any such person as a result of the duties and
responsibilities allocated to such person under this Plan and (b) are not
attributable to such person's own gross negligence, willful misconduct or lack
of good faith.
12.7 Prohibition Against Diversion of Funds.
(a) Except as provided below and otherwise specifically
permitted by law, it shall be impossible by operation of the Plan or of the
Trust, by termination of either, by power of revocation or amendment, by the
happening of any contingency, by collateral arrangement or by any other means,
for any part of the corpus or income of any trust fund maintained pursuant to
the Plan or any funds contributed thereto to be used for, or diverted to,
purposes other than the exclusive benefit of Participants, Former Participants,
or their Beneficiaries.
(b) In the event the Employer shall make any contributions
under a mistake of fact pursuant to Section 403(c)(2)(A) of ERISA, the Employer
shall demand
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repayment of such contributions at any time within one (1) year following the
time of payment and the Trustee shall return such amount to the Employer within
the one (1) year period. Earnings of the Plan attributable to such contributions
may not be returned to the Employer but any losses attributable thereto must
reduce the amount so returned.
12.8 Bonding.
Every fiduciary, (as that term is defined under Section
3(21) of ERISA), except a bank or an insurance company, unless exempted by ERISA
and regulations thereunder, shall be bonded in an amount not less than 10% of
the amount of the funds such fiduciary handles; provided, however, that the
minimum bond shall be $1,000 and the maximum bond, $500,000. The amount of funds
handled shall be determined at the beginning of each Plan Year by the amount of
funds handled by such person, group, or class to be covered and their
predecessors, if any, during the preceding Plan Year, or if there is no
preceding Plan Year, then by the amount of the funds to be handled during the
then current year. The bond shall provide protection to the Plan against any
loss by reason of acts of fraud or dishonesty by the fiduciary alone or in
connivance with others. The surety shall be a corporate surety company (as such
term is used in Section 412(a)(2) of ERISA), and the bond shall be in a form
approved by the Secretary of Labor. Notwithstanding anything to the contrary
herein, the cost of such bonds shall be an expense of and may, at the election
of the Administrator, be paid from the Trust Fund or by the Employer.
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12.9 Receipt and Release for Payments.
Any payment to any Participant, his legal representative,
Beneficiary, or to any guardian or committee appointed for such Participant or
Beneficiary in accordance with the provisions of this Plan, shall, to the extent
thereof, be in full satisfaction of all claims hereunder against the Employer,
who may require such Participant, legal representative, Beneficiary, guardian or
committee, as a condition precedent to such payment, to execute a receipt and
release thereof in such form as shall be determined by the Employer.
12.10 Action by the Employer.
Whenever the Employer under the terms hereof is permitted or
required to do or perform any act, matter or thing, it shall be done and
performed by a person duly authorized by its legally constituted authority.
12.11 Named Fiduciaries and Allocation of Responsibility.
The "Named Fiduciaries" of this Plan are (a) the Plan
Sponsor, (b) the Administrator, and (c) any Investment Manager appointed
hereunder. The Named Fiduciaries shall have only those specific powers, duties,
responsibilities, and obligations as are specifically given them under the Plan.
In general, the Plan Sponsor shall have the sole responsibility for formulating
the Plan's funding policy and method; and amending or terminating, in whole or
in part, this Plan. The Administrator shall have the sole responsibility for the
administration of the Plan which responsibility is specifically described
herein. The Trustee shall have the sole responsibility of management of the
assets held under the Trust in accordance with the terms thereof, except those
assets, the management of which has been assigned to an Investment Manager, who
shall be solely responsible for the management of the assets assigned to it, all
as
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specifically provided in the Plan or the Trust. Each Named Fiduciary warrants
that any directions given, information furnished, or action taken by it shall be
in accordance with the provisions of the Plan, authorizing or providing for such
direction, information or action. Furthermore, each Named Fiduciary may rely
upon any such direction, information or action of another Named Fiduciary as
being proper under the Plan, and is not required to inquire into the propriety
of any such direction, information or action. It is intended under the Plan that
each Named Fiduciary shall be responsible for the proper exercise of its own
powers, duties, responsibilities and obligations hereunder. No Named Fiduciary
shall guarantee the Trust Fund in any manner against investment loss or
depreciation in asset value. Any person or group may serve in more than one
fiduciary capacity.
12.12 Headings.
The headings and subheadings of this Plan have been inserted
for convenience of reference and are to be ignored in any construction of the
provisions hereof.
12.13 Approval by Internal Revenue Service.
Notwithstanding any provisions to the contrary, any
contribution by the Employer to the Trust Fund is conditioned upon the
deductibility of the contribution by the Employer under the Code and, to the
extent any such deduction is disallowed, the Employer shall within one (1) year
following a final determination of the disallowance, whether by agreement with
the Internal Revenue Service or by final decision of a court of competent
jurisdiction, request repayment of the amount of such non-deductible
contribution and the Trustee shall return such amount within one (1) year
following the disallowance. Earnings of the Plan attributable
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to non-deductible contributions may not be returned to the Employer, but any
losses attributable thereto must reduce the amount so returned.
12.14 Uniformity.
All provisions of this Plan shall be interpreted and applied
in a uniform, nondiscriminatory manner.
IN WITNESS WHEREOF, this Plan is adopted in accordance with
IRS Announcement 94-136; this Plan is intended to satisfy the applicable
requirements of the Tax Reform Act of 1986 and its adoption is conditioned upon
the receipt of a determination by the Internal Revenue Service that the adoption
hereof will not adversely affect the continued qualification of the Plan under
Sections 401(a) and 501(a) of the Internal Revenue Code of 1986.
CMP PUBLICATIONS, INC.
By:_______________________________
Michael Leeds
President
ATTEST:
_______________________________
Assistant Secretary
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<PAGE> 66
APPENDIX A
Participating Affiliates of
CMP Publications, Inc.
Effective as of the Effective Date, the following Affiliates of CMP
Publications, Inc. participate in the Plan:
CMP Publications International Corp.
<PAGE> 67
AMENDMENT NUMBER ONE TO THE
CMP PUBLICATIONS, INC. PENSION PLAN
Pursuant to the powers of amendment reserved under Section 11.1 of the
CMP Publications, Inc. Pension Plan effective as of January 1, 1989 and amended
and restated as of January 1, 1994 (the "Plan"), CMP Publications, Inc. (the
"Company") hereby amends the Plan as follows:
1.
Plan Section 5.5(f) is amended by designating the sole existing
paragraph thereof as subsection (i); by adding the introductory phrase "With
respect to distributions made prior to September 1, 1995," to the first
sentence thereof and by changing the case of the existing first word thereof.
Plan Section 5.5(f) is further amended by adding the following new subparagraph
immediately at the end thereof.
(ii) With respect to distributions made on or after September 1, 1995,
for the purposes of determining the amount of a lump-sum distribution during
the stability period, the value of a Participant's or Former Participant's
Accrued Benefit shall be calculated by using an interest rate equal to the
applicable interest rate for the lookback month and by using the applicable
mortality table. The applicable interest rate in any lookback month shall be
annual rate of interest on 30-year Treasury securities as specified by the
Internal Revenue Service. For purposes of this section, the stability period
shall be the Plan Year and the lookback month shall be the third month
preceding the commencement of each stability period. The applicable mortality
table shall be the 1983 Group Annuity Mortality Table or such other standard
table as may be designated by the Internal Revenue Service under Code Section
417(e)(3).
2.
The effective date of paragraph 1 shall be August 4, 1995.
CMP PUBLICATIONS, INC.
By: /s/ Michael Leeds
-----------------------------
Title: President
[Corporate Seal]
ATTEST: /s/ Robert D. Marafioti
---------------------------
Assistant Secretary
<PAGE> 68
AMENDMENT NUMBER TWO TO THE AMENDED AND RESTATED
CMP PUBLICATIONS, INC. PENSION PLAN
Pursuant to the powers of amendment reserved under Section 11.1 of the
CMP Publications, Inc. Pension Plan, as amended and restated, effective as of
January 1, 1989 (the "Plan"), CMP Media, Inc., successor in interest to CMP
Publications, Inc., (the "Company") hereby amends the Plan as follows:
1.
All references in the Plan to "CMP Publications, Inc." shall be deleted
and the name "CMP Media Inc." shall be substituted in lieu thereof effective as
of the close of business on May 31, 1996.
2.
Plan Section 1.4 is amended by adding the following:
"Effective August 1, 1995, "Trustee" means Chemical Bank and any
successors. Effective July 1, 1996, "Trustee" means T. Rowe Price and
any successors."
CMP MEDIA INC.
By: /s/ Michael Leeds
------------------------------
Michael Leeds
Title: President
Date: June 12, 1996
[Corporate Seal]
ATTEST: /s/ Robert D. Marafioti
----------------------------
<PAGE> 69
AMENDMENT NUMBER THREE TO THE
AMENDED AND RESTATED CMP MEDIA INC. PENSION PLAN
Pursuant to the powers of amendment reserved under Section 11.1 of the
CMP Media Inc. Pension Plan effective as of January 1, 1989 and amended and
restated as of January 1, 1994 (the "Plan"), CMP Media Inc. (the "Company"),
hereby amends the Plan as follows:
1.
Section 1.11 of the Plan shall be amended by adding the following new
sentence immediately at the end of following the sole existing paragraph
thereof:
Notwithstanding the foregoing, the term Covered Employee shall not
include any individual who is classified for payroll purposes as an
independent contractor even if such individual is later determined to
be a common law employee of the Employer.
2.
The effective date of paragraph 1 shall be January 1, 1989.
CMP MEDIA INC.
By: /s/ Michael Leeds
---------------------------
Title: President & CEO
Date: February 13, 1997
[Corporate Seal]
ATTEST: /s/ Robert D. Marafioti
-------------------------
<PAGE> 70
AMENDMENT NUMBER ONE TO THE AMENDED AND RESTATED
CMP PUBLICATIONS, INC. PROFIT SHARING & RETIREMENT SAVINGS PLAN
Pursuant to the powers of amendment reserved under Section 12.1 of the
CMP Publications, Inc. Profit Sharing & Retirement Savings Plan amended and
restated as of January 1, 1989 (the "Plan"), CMP Publications, Inc. (the
"Company") hereby amends the Plan as follows:
1.
Article I of the Plan is amended by adding the following new Section
1.18A:
1.18A "Employment Commencement Date" means the first date that
an Employee performs an Hour of Service for the Employer.
2.
Plan Section 2.1(c) is amended by deleting it in its entirety and
replacing it with the following:
Each Participant shall be eligible to make a salary reduction election
(as described in Section 3.2) as of the January 1 or July 1 following
such Participant's completion of six months of service. For purposes of
the foregoing eligibility requirement, a Participant will be deemed to
have completed six months of service if such Participant remains an
Employee on the date which is six months following his or her Employment
Commencement Date. If a Participant does not complete six months of
service [in accordance with the preceding rule,] such Participant shall
be eligible to make a salary reduction election upon the earlier of the
completion of 1,000 Hours of Service during the twelve-month period
beginning on the Participant's Employment Commencement Date or the
completion of 1,000 Hours of Service in any Plan Year beginning after
the Participant's Employment Commencement Date.
<PAGE> 71
3.
Plan Section 2.1(d) is amended by deleting the first sentence thereof
in its entirety and by substituting in lieu thereof:
Notwitstanding the foregoing subsection 2.1(c), effective as of January
1, 1995, each Covered Employee shall be eligible to make a salary
reduction election (as described in Section 3.2) as of the first day of
the calendar quarter (January 1, April 1, July 1, or October 1)
following such Covered Employee's (i) attainment of age 20 1/2 and (ii)
completion of three months of service. For purposes of the foregoing
eligibility requirement, a Covered Employee will be deemed to have
completed three months of service if such Covered Employee remains an
Employee on the date which is three months following his or her
Employment Commencement Date. If a Covered Employee does not complete
three months of service [in accordance with the foregoing rule,] such
Covered Employee shall be eligible to make a salary reduction election
upon the earlier of the completion of 1000 Hours of Service during the
twelve-month period beginning on the Covered Employee's Employment
Commencement Date or the completion of 1,000 Hours of Service in any
Plan Year beginning after the Covered Employee's Employment Commencement
Date.
4.
Plan Section 4.1(b) is amended by adding the parenthetical phrase
"(determined in accordance with Section 3.6)" immediately following the phrase
"income allocable thereto" where it appears in the last sentence thereto. Plan
Section 4.1(b) shall be further amended by adding the following sentence
immediately at the end thereof:
In order to satisfy the Actual Deferral Percentage Test of Treas. Reg.
section 1.401(k)-1, any such excess 401(k) Contributions returned to any
Participant shall be returned no later than the close of the Plan Year
following the Plan Year to which such excess 401(k) Contributions relate
as required under Treas. Reg. section 1.401(k)-1(f)(6)(ii); to the
extent provided by Treas. Reg. section 1.401(k)-1(f)(6)(i), the Employer
shall be liable for a 10% excise tax on any such excess contributions
which are returned to any Participant after the date which is 2 1/2
months following the close of the Plan Year to which such excess 401(k)
Contributions relate.
2
<PAGE> 72
5.
Plan Section 4.2(a) shall be amended by adding the following sentence
immediately at the end thereof:
For purposes of the Actual Deferral Percentage Test, only those 401(k)
Contributions which relate to Compensation for services performed
during the Plan Year for which such Test is being performed and which
would have been paid no later than 2-1/2 months following the close of
such Plan Year will be taken into account.
6.
Plan Section 4.3 is amended by adding the parenthetical phrase
"(determined in accordance with Section 3.6)" immediately following the phrase
"income allocable thereto" where it appears in the last sentence thereto. Plan
Section 4.3 shall be further amended by adding the following sentence
immediately at the end thereof:
In order to satisfy the Actual Contribution Percentage Test of Treas.
Reg. section 1.401(m)-1, any such excess Matching Contributions
returned to any Participant shall be returned no later than the close
of the Plan Year following the Plan Year to which such excess Matching
Contributions relate as required under Treas. Reg. section 1.401(m)-
1(e)(5)(ii); to the extent provided by Treas. Reg. section 1.401(m)-
1(e)(5)(i), the Employer shall be liable for a 10% excise tax on any
such excess Matching Contributions which are returned to any
Participant after the date which is 2-1/2 months following the close
of the Plan Year to which such excess Matching Contributions relate.
7.
Plan Section 4.6(d) shall be deleted in its entirety and the following
Section 4.6(d) shall be substituted in lieu thereof:
(d) For purposes of this Section 4.6, Compensation shall mean
compensation as defined in Treas. Reg. section 1.415-2(d)(11)(i).
3
<PAGE> 73
8.
Plan Section 9.2(a) is amended by adding the following sentence immediately
at the end thereof:
As of the Effective Date, the initial members of the Administrative
Committee are Michael S. Leeds, Robert D. Marafioti, Joseph E. Sichler, and
Pearl Turner.
9.
Plan Section 11.3(b) is amended by adding the following sentence
immediately at the end thereof:
In order for any portion of the Accrued Benefit as of December 31, 1994 to
be used as security for a loan, the spousal consent requirements of Section
6.2(b)(ii) must be satisfied within the 90-day period ending on the date on
which the loan is to be secured.
10.
The effective date of amendments 1 through 7 and amendment 9 shall be
January 1, 1989.
The effective date of amendment 8 shall be January 1, 1995.
CMP PUBLICATIONS, INC.
By: /s/ Michael Leeds
--------------------------
Title: President
Date: 5/16/96
[Corporate Seal]
ATTEST: /s/ Robert D. Marafioti
---------------------------
4
<PAGE> 74
AMENDMENT NUMBER TWO TO THE AMENDED AND RESTATED
CMP PUBLICATIONS, INC. PROFIT SHARING & RETIREMENT SAVINGS PLAN
Pursuant to the powers of amendment reserved under Section 12.1 of the CMP
Publications, Inc. Profit Sharing & Retirement Savings Plan, as amended and
restated, effective as of January 1, 1989 (the "Plan"), CMP Media, Inc.,
successor in interest to CMP Publications, Inc. (the "Company") hereby amends
the Plan as follows:
1.
All references in the Plan to "CMP Publications, Inc." shall be deleted and
the name "CMP Media Inc." shall be substituted in lieu thereof effective as of
the close of business on May 31, 1996."
2.
Plan Section 1.50 is amended by adding the following:
"Effective August 1, 1995, "Trustee" means Chemical Bank and any
successors. Effective July 1, 1996, "Trustee" means T. Rowe Price and any
successors."
CMP MEDIA, INC.
By: /s/ Michael Leeds
----------------------------
Title: President
Date: June 12, 1996
[Corporate Seal]
ATTEST: /s/ Robert D. Marafioti
---------------------------------
<PAGE> 75
AMENDMENT NUMBER THREE TO THE AMENDED AND RESTATED
CMP MEDIA INC. PROFIT SHARING & RETIREMENT SAVINGS PLAN
Pursuant to the powers of amendment reserved under Section 12.1 of the
CMP Media Inc. Profit Sharing & Retirement Savings Plan amended and restated as
of January 1, 1989 (the "Plan"), CMP Media Inc. (the "Company"), hereby amends
the Plan as follows:
1.
Section 1.10 of the Plan shall be amended by adding the following new
sentence immediately at the end of following the sole existing paragraph
thereof:
Notwithstanding the foregoing, the term Covered Employee shall not
include any individual who is classified for payroll purposes as an independent
contractor even if such individual is later determined to be a common law
employee of the Employer.
2.
The effective date of this amendment shall be January 1, 1989.
CMP MEDIA INC.
By: /s/ Michael Leeds
--------------------------
Title: President & CEO
-----------------------
Date: February 3, 1997
-----------------------
[Corporate Seal]
ATTEST: /s/ Robert D. Marafioti
--------------------------
<PAGE> 1
EXHIBIT 10.15
CMP PUBLICATIONS, INC.
PROFIT SHARING & RETIREMENT SAVINGS PLAN
Effective as of January 1, 1989
Amended and Restated as of
January 1, 1994
<PAGE> 2
CMP PUBLICATIONS, INC.
PROFIT SHARING & RETIREMENT SAVINGS PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Article I - DEFINITIONS ........................................................................................ 2
1.1 "Account"..................................................................................... 2
1.2 "Administrator"............................................................................... 2
1.3 "Affiliate"................................................................................... 2
1.4 "Anniversary Date"............................................................................ 2
1.5 "Annuity Starting Date"....................................................................... 3
1.6 "Beneficiary"................................................................................. 3
1.7 "Code"........................................................................................ 3
1.8 "Compensation"................................................................................ 3
1.9 "Contributions"............................................................................... 4
1.10 "Covered Employee"............................................................................ 4
1.11 "Direct Rollover"............................................................................. 4
1.12 "Distributee"................................................................................. 4
1.13 "Effective Date".............................................................................. 4
1.14 "Eligible Employee"........................................................................... 5
1.15 "Eligible Retirement Plan".................................................................... 5
1.16 "Eligible Rollover Distribution".............................................................. 5
1.17 "Employee".................................................................................... 6
1.18 "Employer".................................................................................... 6
1.19 "ERISA"....................................................................................... 6
1.20 "Family Member"............................................................................... 6
1.21 "Forfeiture".................................................................................. 7
1.22 "Former Participant".......................................................................... 7
1.23 "401(k) Account".............................................................................. 7
1.24 "401(k) Contribution"......................................................................... 7
1.25 "Highly Compensated Employee"................................................................. 7
1.26 "Hour of Service"............................................................................. 9
1.27 "Investment Manager".......................................................................... 11
1.28 "Key Employee"................................................................................ 11
1.29 "Matching Account"............................................................................ 12
1.30 "Matching Contribution"....................................................................... 13
1.31 "Non-Key Employee"............................................................................ 13
1.32 "Normal Retirement Date"...................................................................... 13
1.33 "1-Year Break in Service"..................................................................... 13
1.34 "Participant"................................................................................. 14
1.36 "Plan"........................................................................................ 14
1.37 "Plan Sponsor"................................................................................ 14
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
1.38 "Plan Year"................................................................................... 14
1.39 "Profit Sharing Account"...................................................................... 14
1.40 "Profit Sharing Contribution"................................................................. 14
1.41 "Qualified Pre-Retirement Survivor Annuity"................................................... 14
1.42 "Retirement Date"............................................................................. 15
1.43 "Rollover Account"............................................................................ 15
1.44 "Rollover Contribution"....................................................................... 15
1.45 "Suspense Account"............................................................................ 15
1.46 "Top Heavy Plan".............................................................................. 15
1.47 "Top Heavy Plan Year"......................................................................... 15
1.48 "Total and Permanent Disability".............................................................. 15
1.49 "Trust"....................................................................................... 15
1.50 "Trustee"..................................................................................... 16
1.51 "Trust Fund".................................................................................. 16
1.52 "Year of Service"............................................................................. 16
Article II - ELIGIBILITY AND PARTICIPATION ..................................................................... 16
2.1 General Rules................................................................................. 16
2.2 Determination and Notice of Eligibility....................................................... 17
2.3 Termination and Reemployment.................................................................. 17
Article III - CONTRIBUTIONS AND INVESTMENTS .................................................................... 19
3.1 Employer Contributions........................................................................ 19
3.2 401(k) Contributions.......................................................................... 20
3.3 Profit Sharing and Matching Contributions..................................................... 21
3.4 Allocation of Contributions................................................................... 22
3.5 Rollover Contributions........................................................................ 23
3.6 Plan Investments.............................................................................. 24
Article IV - LIMITATIONS ON CONTRIBUTIONS ...................................................................... 26
4.1 Reduction of 401(k) Contributions............................................................. 26
4.2 Actual Deferral Percentage Test............................................................... 27
4.3 Reduction of Matching Contributions........................................................... 28
4.4 Actual Contribution Percentage Test........................................................... 29
4.5 Aggregate Limits Test......................................................................... 30
4.6 Maximum Annual Additions...................................................................... 32
Article V - VESTING AND FORFEITURES ............................................................................ 34
5.1 Vesting....................................................................................... 34
5.2 Break In Service Rules........................................................................ 35
5.3 Forfeitures................................................................................... 36
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
Article VI - BENEFITS .......................................................................................... 37
6.1 Distribution of Benefits...................................................................... 37
6.2 Form of Distribution.......................................................................... 37
6.3 Time of Distributions......................................................................... 40
6.4 Mandatory Cash Out Payment.................................................................... 41
6.5 In-Service Distributions...................................................................... 41
6.6 Location of Participant Unknown............................................................... 43
6.7 Limitations on Benefits and Distributions..................................................... 44
Article VII - DEATH BENEFITS ................................................................................... 44
7.1 Death Before Payment of Benefits.............................................................. 44
7.2 Spouse's Death Benefit........................................................................ 44
7.3 Change in Beneficiary......................................................................... 45
7.4 Proof of Death................................................................................ 45
7.5 Accrued Benefit as of December 31, 1994....................................................... 45
7.6 Mandatory Cash-Out Payment.................................................................... 47
7.7 Distribution for Minor Beneficiary............................................................ 48
7.8 Location of Beneficiary Unknown............................................................... 48
Article VIII - DIRECT ROLLOVER OF BENEFITS ..................................................................... 49
8.1 Right to Direct Rollover...................................................................... 49
8.2 Limitations on Direct Rollover................................................................ 49
8.3 Election of Direct Rollover................................................................... 49
8.4 Payment of Direct Rollover.................................................................... 50
Article IX - ADMINISTRATION .................................................................................... 51
9.1 Powers and Responsibilities of the Plan Sponsor............................................... 51
9.2 Assignment and Designation of Administrative Authority........................................ 51
9.3 Powers, Duties and Responsibilities of the Administrator...................................... 54
9.4 Records and Reports........................................................................... 56
9.5 Appointment of Advisors....................................................................... 56
9.6 Information from Employer..................................................................... 56
9.7 Payment of Expenses........................................................................... 57
9.8 Claims Procedure.............................................................................. 57
9.9 Claims Review Procedure....................................................................... 57
Article X - TOP-HEAVY PROVISIONS ............................................................................... 59
10.1 In General.................................................................................... 59
10.2 Top-Heavy Determination....................................................................... 59
10.3 Top-Heavy Contingent Provisions............................................................... 60
Article XI - PLAN LOANS ........................................................................................ 62
</TABLE>
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<PAGE> 5
<TABLE>
<CAPTION>
<S> <C> <C>
11.1 Loans to Participants......................................................................... 62
11.2 Limitations................................................................................... 63
11.3 Approval of Loans............................................................................. 63
11.4 Interest Rate................................................................................. 64
11.5 Repayment..................................................................................... 64
11.6 Default....................................................................................... 64
11.7 Other Rules................................................................................... 65
Article XII - AMENDMENT, TERMINATION, AND MERGERS .............................................................. 65
12.1 Amendment..................................................................................... 65
12.2 Termination................................................................................... 66
12.3 Merger or Consolidation....................................................................... 66
Article XIII - MISCELLANEOUS ................................................................................... 67
13.1 Valuation..................................................................................... 67
13.2 Participant's Rights.......................................................................... 68
13.3 Alienation.................................................................................... 68
13.4 Construction.................................................................................. 69
13.5 Gender and Number............................................................................. 69
13.6 Legal Action and Indemnification.............................................................. 70
13.7 Prohibition Against Diversion of Funds........................................................ 71
13.8 Bonding....................................................................................... 71
13.9 Receipt and Release for Payments.............................................................. 72
13.10 Action by the Employer ....................................................................... 72
13.11 Named Fiduciaries and Allocation of Responsibility ........................................... 73
13.12 Headings ..................................................................................... 74
13.13 Approval by Internal Revenue Service ......................................................... 74
13.14 Uniformity ................................................................................... 74
</TABLE>
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<PAGE> 6
CMP PUBLICATIONS, INC.
PROFIT SHARING & RETIREMENT SAVINGS PLAN
INTRODUCTION
The CMP Publications, Inc. Profit Sharing & Retirement Savings
Plan (the "Plan") is designed to provide Covered Employees, their spouses and
beneficiaries with benefits in the event of the Covered Employee's retirement,
death or disability. Capitalized terms have the definitions hereinafter set
forth in Article I. This Plan was formerly known as the CMP Publications, Inc.
Profit Sharing Plan & Trust. The CMP Publications Inc. Profit Sharing Plan &
Trust was itself formerly called the CMP Publications, Inc. Profit Sharing Plan
and was originally effective as of October 1, 1977.
This Plan constitutes a complete amendment and restatement of
the Plan as it existed just prior to the Effective Date. This Plan also
constitutes a complete amendment and restatement of the Healthweek Publications
Profit Sharing Plan and Trust, which plan together with this Plan have always
been a single plan. This amendment and restatement has been prepared to reflect
the applicable requirements under the Code for a profit-sharing plan including a
qualified cash or deferred arrangement under Code Section 401(k) as of the
Effective Date as well as subsequent changes in statutory requirements and in
the benefits provided under the Plan. Except as expressly provided herein, the
terms of the Plan are effective as of the Effective Date.
This Plan establishes the benefits, rights and obligations of
all Covered Employees in the service of the Employer on or after the Effective
Date and of all persons claiming through, under or against any Covered Employee.
<PAGE> 7
Article I
DEFINITIONS
1.1 "Account" means, with respect to each Participant, the
account maintained on behalf of such Participant which contains the 401(k)
Contributions, Matching Contributions, Profit Sharing Contributions and Rollover
Contributions credited to each Participant. Notwithstanding the foregoing, the
401(k) Contributions, Matching Contributions, Profit Sharing Contributions and
Rollover Contributions of each Participant shall be held in separate subaccounts
within the Account of the Participant, designated as the "401(k) Account," the
"Matching Account," the "Profit Sharing Account" and the "Rollover Account"
respectively.
1.2 "Administrator" means the Administrative Committee
appointed by the Plan Sponsor in accordance with Section 9.2.
1.3 "Affiliate" means, for any Plan Year, a corporation which
for any part of such year is (a) a member of a controlled group of corporations
(as defined in Section 1563(a) of the Code, disregarding Sections 1563(a)(4) and
1563(e)(3)(c)) of which the Plan Sponsor is a member, (b) any trade or business,
whether incorporated or not, which for any part of such year is considered to be
under common control with the Plan Sponsor under regulations prescribed by the
Secretary of the Treasury pursuant to Section 414(c) of the Code, and (c) any
organization which for any part of such year is considered under regulations
prescribed by the Secretary of the Treasury pursuant to Section 414(m) of the
Code to be a member of an affiliated service group of which the Plan Sponsor is
a member.
1.4 "Anniversary Date" means January 1st.
-2-
<PAGE> 8
1.5 "Annuity Starting Date" means the first day of the first
period for which an amount is payable as an annuity or other form of benefit
1.6 "Beneficiary" means the person to whom a share of a
deceased Participant's or Former Participant's Account is payable.
1.7 "Code" means the Internal Revenue Code of 1986, as
amended.
1.8 "Compensation" with respect to any Participant means the
total compensation paid by the Employer for a Plan Year, including those amounts
which are contributed by a Participant on a pre-tax basis to the Plan or to the
CMP Publications, Inc. Flexible Spending Plan but not including (a)
reimbursement for educational expenses of the Participant, (b) any imputed
income relating to dependent care or life insurance benefits provided by the
Employer; (c) reimbursement for relocation expenses, (d) any disability payments
made by a third-party and (e) car allowances. Compensation shall not include any
amounts paid to an employee during any period when he or she was not eligible to
participate in the Plan. Effective January 1, 1989, Compensation in excess of
$200,000 (as adjusted for increases in the cost of living) shall be disregarded.
Notwithstanding the foregoing, effective for Plan Years beginning on and after
January 1, 1994, Compensation in excess of $150,000 (as adjusted for increases
in the cost of living) shall be disregarded.
In determining the Compensation of a Participant, the family
aggregation rules of Section 414(q)(6) of the Code shall apply except that
Family Members shall include only the spouse of the Employee and any lineal
descendants of the Employee who have not attained age 19. In the event the
family aggregation rules apply to a Participant, the applicable Compensation
limit shall
-3-
<PAGE> 9
be allocated to each Family Member aggregated herein in proportion to each such
Family Member's Compensation.
1.9 "Contributions" means the 401(k) Contributions, Matching
Contributions, Profit Sharing Contributions and Rollover Contributions credited
to a Participant's Account as described in Article III.
1.10 "Covered Employee" means any Employee of the Employer
except any Employee (a) who is included in a collective bargaining unit unless
participation in the Plan by any such Employee was agreed to in the process of
good faith negotiations between the Employer and the collective bargaining
unit's representative; (b) who is employed by an Affiliate that is not a
Participating Employer; (c) who is a leased employee as defined in Section
414(n)(2) of the Code; (d) who is a nonresident alien and who receives no earned
income (within the meaning of Section 911(d)(2) of the Code) from the Employer
which constitutes income from services within the United States (within the
meaning of Section 861(a)(3) of the Code); or (e) who is a resident alien or a
nonresident and who does not make contributions under the Federal Insurance
Contributions Act.
1.11 "Direct Rollover" means the distribution of the vested
balance of a Participant's or Former Participant's Account in accordance with
Article VIII.
1.12 "Distributee" means a Participant, a Former Participant,
a Beneficiary or an alternate payee under a qualified domestic relations order
entitled to a distribution under the Plan.
1.13 "Effective Date" means the general effective date of this
amended and restated Plan, which is January 1, 1989.
-4-
<PAGE> 10
1.14 "Eligible Employee" means any Covered Employee who has
satisfied the provisions of Section 2.1.
1.15 "Eligible Retirement Plan" means:
(a) If the Distributee is not the surviving spouse of
a Participant or of a Former Participant, any of the following:
(i) an individual retirement account
described in Section 408(a) of the Code;
(ii) an individual retirement annuity
described in Section 408(a) of the Code;
(iii) an annuity plan described in Section
403(a) of the Code; or
(iv) a qualified plan described in Section
401(a) of the Code.
(b) If the Distributee is the surviving spouse of a
Participant or of a Former Participant, any of the following:
(i) an individual retirement account
described in Section 408(a) of the Code; or
(ii) an individual retirement annuity
described in Section 408(b) of the Code.
1.16 "Eligible Rollover Distribution" means any distribution
of all or a portion of the balance of a Participant's Account, except that such
term shall not include:
(a) any distribution that is one of a series of
substantially equal periodic payments made (not less frequently than annually)
for either:
-5-
<PAGE> 11
(i) the life (or life expectancy) of the
Distributee or the joint lives (or joint life expectancies) of the Distributee
and the Distributee's Beneficiary, or
(ii) a specified period of ten years or
more;
(b) any distribution to the extent such distribution
is required under Section 401(a)(9) of the Code;
(c) any distribution or portion of a distribution
that is not includible in the gross income of the Distributee;
(d) returns of Contributions that are returned as a
result of the limitations contained in Section 415 of the Code;
(e) corrective distributions of 401(k) Contributions
and the income allocable thereto and corrective distributions of Matching
Contributions and the income allocable thereto in accordance with Article IV of
the Plan; and
(f) any other type of distribution or similar item
designated by the Internal Revenue Service as exempt from the definition of
Eligible Rollover Distribution.
1.17 "Employee" means any person who is a common law employee
of the Employer.
1.18 "Employer" means CMP Publications, Inc., a corporation,
with principal offices in the State of New York and each Affiliate.
1.19 "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
-6-
<PAGE> 12
1.20 "Family Member" means the spouse, lineal ascendants and
descendants of the Employee and the spouses of such lineal ascendants and
descendants.
1.21 "Forfeiture" means the nonvested portion of a
Participant's Account that is forfeited in accordance with Section 5.3.
1.22 "Former Participant" means a person who has been a
Participant, but who has ceased to be a Participant for any reason.
1.23 "401(k) Account" means that portion of a Participant's
Account credited with his 401(k) Contributions and the earnings and losses
thereon.
1.24 "401(k) Contribution" or "Employer's 401(k) Contribution"
means the Employer's contributions to the Plan that are made pursuant to the
Participant's salary reduction election provided in Section 3.2.
1.25 "Highly Compensated Employee" means any Employee who
performs service for the Employer during the determination year (as hereinafter
defined) and who, during the look-back year (as hereinafter defined):
(a) was a five percent owner as defined in Section
1.28(c);
(b) received Compensation from the Employer in excess
of $75,000 (as adjusted by the Secretary of Treasury for cost of living
increases);
(c) received Compensation from the Employer in excess
of $50,000 (as adjusted by the Secretary of Treasury for cost of living
increases) and was a member of the top-paid group for such year (i.e., the top
20 percent of Employees ranked on the basis of Compensation received during such
year); or
-7-
<PAGE> 13
(d) was an officer of the Employer and received
Compensation during such year that is greater than 50 percent of the dollar
limitation in effect under Section 415(b)(1)(A) of the Code. If no officer of
the Employer has satisfied the foregoing Compensation requirement during the
determination year or the look-back year, the highest paid officer for such year
shall be treated as a Highly Compensated Employee. The number of officers to be
included as Highly Compensated Employees shall not exceed 50 or, if lesser, the
greater of 3 Employees or 10 percent of Employees.
The term Highly Compensated Employee also includes:
(e) Employees described in subsections (b), (c) or
(d) above if the determination year is substituted for the look-back year and
the Employee is one of the 100 Employees who received the most Compensation from
the Employer during the determination year; and
(f) Employees who are five percent owners (as defined
in Section 1.28(c)) at any time during either the determination year or the
look-back year.
For purposes of this Section 1.25, the determination
year shall be the Plan Year and the look-back year shall be the twelve-month
period immediately preceding the determination year.
If an Employee is, during a determination year or a
look-back year, a Family Member of either a five percent owner who is an active
or former Employee or a Highly Compensated Employee who is one of the ten most
Highly Compensated Employees ranked on the basis of Compensation paid by the
Employer during such year, then the Family Member and the five
-8-
<PAGE> 14
percent owner or top-ten Highly Compensated Employee shall be aggregated. In
such case, the Family Member and five percent owner or top-ten Highly
Compensated Employee shall be treated as a single Employee receiving
Compensation and Contributions equal to the sum of such Compensation and
Contributions of the Family Member and five percent owner or top-ten Highly
Compensated Employee.
The determination of who is a Highly Compensated Employee,
including the determinations of the number and identity of Employees in the
top-paid group, the number of employees treated as officers and the Compensation
that is considered, will be made in accordance with Section 414(q) of the Code
and the regulations thereunder.
1.26 "Hour of Service" means:
(a) Each hour for which an Employee is directly or
indirectly compensated or entitled to compensation by the Employer for the
performance of duties during the applicable computation period. Each such Hour
of Service shall be credited to the computation period in which the duties were
actually performed.
(b) Each hour for which an Employee is directly or
indirectly compensated or entitled to compensation by the Employer (irrespective
of whether the employment relationship has terminated) for reasons other than
performance of duties (such as vacation, holidays, sickness, jury duty,
disability, lay-off, military duty or leave of absence) during the applicable
computation period.
(c) Each hour for which back pay is awarded or agreed
to by the Employer without regard to mitigation of damages. Each such Hour of
Service shall be credited to the
-9-
<PAGE> 15
computation period to which the agreement or award with respect to back pay
pertains rather than to the computation period in which the award, agreement or
payment is made.
(d) To the extent required under The Family and
Medical Leave Act of 1993, each hour that an Employee is absent from service for
a family or medical leave of absence.
Notwithstanding the above, (i) no more than 501 Hours
of Service are required to be credited to an Employee on account of any single
continuous period during which the Employee performs no duties (whether or not
such period occurs in a single computation period); (ii) an hour for which an
Employee is directly or indirectly paid, or entitled to payment, on account of a
period during which no duties are performed is not required to be credited to
the Employee if such payment is made or due under a plan maintained solely for
the purpose of complying with applicable worker's compensation, or unemployment
compensation or disability insurance laws; (iii) Hours of Service are not
required to be credited for a payment which solely reimburses an Employee for
medical or medically related expenses incurred by the Employee; and (iv) Hours
of Service are not required to be credited during any period in which no duties
are performed if such hours would exceed the number of hours regularly scheduled
for the performance of duties during such period.
For purposes of this Section 1.26, a payment shall be
deemed to be made by or due from the Employer regardless of whether such payment
is made by or due from the Employer directly, or indirectly through, among
others, a trust fund or insurer to which the Employer contributes or pays
premiums and regardless of whether contributions made or due to the trust fund,
insurer, or other entity are for the benefit of particular Employees or are on
behalf of a group of Employees in the aggregate.
-10-
<PAGE> 16
For purposes of this Section 1.26, Hours of Service
shall be determined based on records of hours of service maintained by the
Employer provided that such records accurately reflect the number of hours with
which an Employee is entitled to be credited. For those Employees with respect
to which the records maintained by the Employer would not accurately reflect the
number of hours for which an Employee is required to receive credit, such
Employee shall be credited with Hours of Service on the basis of months of
employment--190 Hours of Service shall be credited for each month for which the
Employee would be required to be credited with at least one Hour of Service.
Notwithstanding anything to the contrary contained
herein, Hours of Service shall be credited in accordance with Department of
Labor regulations Section 2530.200b-2 and such provisions are incorporated
herein by reference.
1.27 "Investment Manager" means any person, firm or
corporation who is a registered investment adviser under the Investment Advisers
Act of 1940, a bank or an insurance company, (a) who has the power to manage,
acquire, or dispose of Plan assets, and (b) who acknowledges in writing his
fiduciary responsibility to the Plan.
1.28 "Key Employee" means those Employees defined in Code
Section 416(i) and the Treasury regulations thereunder. Generally, they shall
include any Employee or former Employee (and his Beneficiaries), who at any time
during the Plan Year or any of the preceding four (4) Plan Years, is:
(a) an officer of the Employer having annual
Compensation greater than 50 percent of the amount in effect under Code Section
415(b)(1)(A) for any such Plan Year;
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(b) one of the ten Employees having Compensation from
the Employer for a Plan Year greater than the dollar limitation in effect under
Code Section 415(c)(1)(A) for the calendar year in which such Plan Year ends and
owning (or considered as owning within the meaning of Code Section 318) both
more than one-half percent interest and the largest interests in the Employer;
(c) a "five percent owner" of the Employer. "Five
percent owner" means any person who owns (or is considered as owning within the
meaning of Code Section 318) more than five percent (5%) of the outstanding
stock of the Employer or stock possessing more than five percent (5%) of the
total combined voting power of all stock of the Employer or, in the case of an
unincorporated business, any person who owns more than five percent (5%) of the
capital or profits interest in the Employer. In determining percentage ownership
hereunder, each Affiliate shall be treated as a separate employer; or
(d) a "one percent owner" of the Employer having an
annual Compensation from the Employer of more than $150,000. "One percent owner"
means any person who owns (or is considered as owning within the meaning of Code
Section 318) more than one percent (1%) of the outstanding stock of the Employer
or stock possessing more than one percent (1%) of the total combined voting
power of all stock of the Employer or, in the case of an incorporated business,
any person who owns more than one percent (1%) of the capital or profits
interest in the Employer. In determining percentage ownership hereunder, each
Affiliate shall be treated as a separate employer.
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1.29 "Matching Account" means that portion of a Participant's
Account credited with Matching Contributions and earnings and losses thereon.
1.30 "Matching Contribution" or "Employer's Matching
Contribution" means the contribution made by the Employer to the Plan in
accordance with Section 3.1(b), on behalf of any Participant who has in effect a
salary reduction election pursuant to Section 3.2 and who otherwise satisfies
the requirements of Article III.
1.31 "Non-Key Employee" means any Employee or former Employee
who is not a Key Employee.
1.32 "Normal Retirement Date" means the first day of the month
coinciding with or next following the date the Participant attains age 65 or, if
later, the date upon which the Participant completes five (5) years of
participation in the Plan.
1.33 "1-Year Break in Service" means a Plan Year during which
an Employee has not completed more than 500 Hours of Service with the Employer.
An Employee shall not incur a 1-Year Break in Service for a Plan Year in which
he becomes a Participant, dies, retires or suffers Total and Permanent
Disability. Further, solely for the purpose of determining whether a Participant
has incurred a 1-Year Break in Service, Hours of Service shall be recognized for
"maternity or paternity leaves of absence."
For purposes of this Section, "maternity or paternity leave of
absence" shall mean an absence from work for any period by reason of the
Employee's pregnancy, birth of the Employee's child, placement of a child with
the Employee in connection with the adoption of such child, or any absence for
the purpose of caring for such child for a period immediately following such
birth or
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placement. For this purpose, Hours of Service shall be credited for the
computation period in which the absence from work begins, only if credit
therefore is necessary to prevent the Employee from incurring a 1-Year Break in
Service, or, in any other case, in the computation period immediately following.
The Hours of Service credited for a "maternity or paternity leave of absence"
shall be those which would normally have been credited but for such absence, or,
in any case in which the Administrator is unable to determine such hours
normally credited, eight (8) Hours of Service per day. The total Hours of
Service required to be credited for a "maternity or paternity leave of absence"
shall not exceed 501.
1.34 "Participant" shall mean any Eligible Employee who
commences participation in the Plan as provided in Article II, and has not for
any reason ceased participation in the Plan.
1.35 "Participating Employer" means the Plan Sponsor and each
Affiliate that has adopted and is participating in the Plan as listed in
Appendix A.
1.36 "Plan" means the CMP Profit Sharing & Retirement Savings
as set forth in this document and as hereafter amended.
1.37 "Plan Sponsor" means CMP Publications, Inc.
1.38 "Plan Year" means the Plan's accounting year of twelve
(12) months commencing on January 1st and ending on the following December 31st.
1.39 "Profit Sharing Account" means that portion of a
Participant's Account credited with Profit Sharing Contributions and earning and
losses thereon.
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1.40 "Profit Sharing Contribution" or "Employer's Profit
Sharing Contribution" means the Employer's contributions to the Plan made to the
Trust on behalf of a Participant pursuant to Section 3.3.
1.41 "Qualified Pre-Retirement Survivor Annuity" means an
annuity for the life of the Participant's spouse, the payments under which must
be equal to the amount of benefit which can be purchased with the Account of the
Participant used to provide the death benefit under the Plan.
1.42 "Retirement Date" means the date as of which a
Participant actually retires for reasons other than Total and Permanent
Disability, whether such retirement occurs on or after the Participant's Normal
Retirement Date.
1.43 "Rollover Account" means that portion of a Participant's
Account credited with Rollover Contributions and earnings or losses thereon.
1.44 "Rollover Contribution" means an Employee's contribution
to the Trust pursuant to Section 3.5.
1.45 "Suspense Account" means the account maintained under the
Trust which is credited with any unallocated forfeitures as described in Section
5.3.
1.46 "Top Heavy Plan" means a plan described in Section 10.2.
1.47 "Top Heavy Plan Year" means a Plan Year for which the
Plan is a Top Heavy Plan.
1.48 "Total and Permanent Disability" means a physical or
mental condition of a Participant resulting from bodily injury, disease, or
mental disorder which renders him incapable of
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continuing his usual and customary employment with the Employer. The disability
of a Participant shall be determined by a licensed physician chosen by the
Administrator. The determination shall be applied uniformly to all Participants.
1.49 "Trust" means the legal entity created pursuant to the
CMP Profit Sharing & Retirement Savings Plan Trust, as established by the
Employer and the Trustee under which the Trustee shall receive the Contributions
made under the Plan and shall hold, invest, and disburse the Trust Fund to or
for the benefit of the Participants and their Beneficiaries under the Plan.
1.50 "Trustee" means J. & W. Seligman Trust Company and any
successors.
1.51 "Trust Fund" means the assets of the Plan and the Trust
as the same shall exist from time to time.
1.52 "Year of Service" means a Plan Year during which an
Employee is credited with at least 1,000 Hours of Service; provided, however,
the 1,000 hour requirement set forth above shall be disregarded for the
Employee's eligibility computation period. Years of Service with the Employer or
an Affiliate shall be recognized as Years of Service with the Employer.
Article II
ELIGIBILITY AND PARTICIPATION
2.1 General Rules.
(a) Any Covered Employee who was a Participant in the
Plan prior to the Effective Date and who remains a Covered Employee as of the
Effective Date shall continue to participate in the Plan.
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(b) Each Covered Employee shall become a Participant
effective as of the first day of the Plan Year following the date on which such
Covered Employee attains age twenty and one-half (20 1/2).
(c) Each Participant shall be eligible to make a
salary reduction election (as described in Section 3.2) as of the January 1 or
July 1 following such Participant's completion of six (6) months of service
(d) Notwithstanding the foregoing subsection 2.1(c),
effective as of January 1, 1995, each Covered Employee shall be eligible to make
a salary reduction election (as described in Section 3.2) as of the first day of
the calendar quarter (January 1, April 1, July 1 or October 1) following such
Covered Employee's completion of three (3) months of service. A Covered Employee
who satisfies the eligibility criteria of this Section 2.1(d) shall be
considered a Participant for all purposes under the Plan; provided, however,
such a Covered Employee shall not be eligible to receive an allocation of any
Profit Sharing Contribution, Matching Contribution or Forfeiture as otherwise
provided in accordance with Article III and V until such time as the Covered
Employee satisfies the eligibility requirements of Section 2.1(b).
2.2 Determination and Notice of Eligibility.
(a) The Administrator shall determine the eligibility
of each Employee for participation in the Plan based upon information furnished
by the Participating Employer. Such determination shall be conclusive and
binding upon all persons, as long as the same is made in accordance with this
Plan and ERISA.
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(b) The Administrator shall notify each Covered
Employee of his eligibility to participate in the Plan prior to the date such
Covered Employee first satisfies the eligibility requirements of Section 2.1(b).
The Administrator shall notify each Participant of his eligibility to make a
salary reduction election prior to the date such Participant first satisfies the
eligibility requirements of Section 2.1(c) or 2.1(d).
2.3 Termination and Reemployment.
(a) A Participant who ceases to be a Covered Employee
by reason of termination of employment or otherwise shall immediately cease
participation in the Plan and shall be a Former Participant. A Former
Participant who again becomes an Employee shall commence participation in
accordance with the following rules:
(i) Except as otherwise provided in this
Section, any Former Participant who again becomes a Covered Employee shall
commence participation as of the date such Former Participant again becomes a
Covered Employee;
(ii) Any nonvested Former Participant or any
Former Participant who receives a distribution of the vested balance of his
Account who again becomes a Covered Employee after incurring five consecutive
1-Year Breaks in Service shall commence participation in the Plan as a newly
hired employee in accordance with Section 2.1.
(b) Any Covered Employee who has satisfied the
eligibility requirements of Section 2.1 but who terminates employment before
becoming a Participant in the Plan and who again becomes a Covered Employee
prior to incurring a 1-Year Break in Service shall become a Participant as of
the date such Employee again becomes a Covered Employee. If such Employee
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again becomes a Covered Employee after incurring a 1-Year Break in Service, such
Employee shall commence participation in the Plan in accordance with Section
2.1.
Article III
CONTRIBUTIONS AND INVESTMENTS
3.1 Employer Contributions.
For each Plan Year commencing on or after the
Effective Date, the Employer shall contribute to the Plan the aggregate of the
following amounts:
(a) An amount equal to the total salary reduction
elections of all Participants made pursuant to Section 3.2, which amount shall
be deemed the Employer's 401(k) Contribution;
(b) An Employer Matching Contribution determined as
follows:
(i) For Plan Years beginning on or after the
Effective Date but before January 1, 1993, an amount equal to 25% of the 401(k)
Contribution, which amount shall be deemed the Employer's Matching Contribution;
provided, however, in calculating the Matching Contribution, only the portion of
the salary reduction election of each Participant not in excess of $400 of such
Participant's Compensation shall be considered;
(ii) For Plan Years beginning on or after
January 1, 1993 but before January 1, 1995, an amount equal to 25% of the 401(k)
Contribution, which amount shall be deemed the Employer's Matching Contribution;
provided, however, in calculating the Matching
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Contribution, only the portion of the salary reduction election of each
Participant not in excess of 6% of such Participant's Compensation shall be
considered;
(iii) For Plan Years beginning on or after
January 1, 1995, an amount equal to 25% of the 401(k) Contribution attributable
to the salary reduction elections of those Participants who have satisfied the
eligibility requirements of Section 2.1(a) or (b), which amount shall be deemed
the Employer's Matching Contribution; provided, however, in calculating the
Matching Contribution, only the portion of the salary reduction election of each
such Participant not in excess of 6% of such Participant's Compensation shall be
considered; and
(c) An amount determined each year by the Employer in
its sole discretion, subject to the provisions of Section 3.3, which amount
shall be deemed the Employer's Profit-Sharing Contribution.
(d) Notwithstanding the above, however, the
Employer's Contributions under this Section 3.1 for any Plan Year shall not
exceed the maximum amount allowable as a deduction to the Employer under the
provisions of Code Section 404. All Contributions by the Employer shall be made
in cash or in such property as is acceptable to the Trustee.
3.2 401(k) Contributions.
Each Participant may elect to reduce his Compensation
by making a salary reduction election and filing such election with the
Administrator. In no event shall the amount of such Participant's reduction
exceed the lesser of fifteen percent (15%) of such Participant's Compensation or
the limit provided in Section 402(g) of the Code, as adjusted for increases in
the
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cost of living. The Administrator may establish any additional limitation on the
amount of any Highly Compensated Employee's salary reduction as deemed necessary
in its sole discretion and shall communicate such limitation to such Highly
Compensated Employee(s). The amount by which the Participant's Compensation is
reduced shall be allocated to that Participant's 401(k) Account from the
Employer's 401(k) Contribution. The Employer and the Administrator shall adopt a
procedure necessary to implement the salary reduction elections provided for
herein.
3.3 Profit Sharing and Matching Contributions.
(a) Profit Sharing Contribution - The Employer, in
its sole discretion, shall determine the amount of any Profit Sharing
Contribution to be made to the Plan. Effective for Plan Years beginning on an
after January 1, 1993, the Employer's Profit Sharing Contribution shall be at
least equal to an amount sufficient to provide each Participant who has
satisfied the eligibility requirements of Section 2.1(a) or (b) with an
allocation of at least $600 as described in Section 3.4. The Employer's
determination of such Profit Sharing Contribution shall be binding on all
Participants, the Employer, and the Trustee. The Trustee shall have no right or
duty to inquire into the amount of the Employer's Profit Sharing Contribution or
the method used in determining the amount of the Employer's Profit Sharing
Contribution, but shall be accountable only for funds actually received by the
Trustee.
(b) Matching Contribution - The Employer shall make
Matching Contributions as determined in accordance with Section 3.1(b).
(c) Active Employment Requirement:
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(i) Except as provided in this Section, any
Participant who is not actively employed on the last business day of the Plan
Year for any reason (including by reason of death, disability or retirement)
shall not share in the allocations of the Employer's Profit Sharing
Contributions, Matching Contributions or Forfeitures.
(ii) Notwithstanding the foregoing, for
purposes of this Section 3.3(c), Participants on short-term disability leave on
December 31st of any Plan Year shall be treated as actively employed on the last
business day of that Plan Year and shall be entitled to such Employer
Contributions as otherwise provided under the Plan.
(iii) Effective for leave commencing on or
after August 5, 1993, for purposes of this Section 3.3(c), a Participant on
leave which would qualify under the Family and Medical Leave Act shall be
treated as actively employed on the last business day of the Plan Year and shall
be entitled to such Employer Contributions as otherwise provided under the Plan;
provided that the Participant returns to active employment for 30 days following
such leave; and provided further, that the Participant is a Covered Employee on
the last day of such 30-day period.
3.4 Allocation of Contributions.
(a) The Administrator shall allocate the Employer's
Profit Sharing Contribution as follows:
(i) Effective for Plan Years beginning on
and after the Effective Date, with respect to the Employer's Profit Sharing
Contribution made pursuant to Section 3.3, to each Participant's Profit Sharing
Account in the same proportion that each such Participant's
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Compensation for the Plan Year bears to the total Compensation of all
Participants for such Plan Year.
(ii) Effective for Plan Years beginning on
and after January 1, 1993, with respect to the Employer's Profit Sharing
Contribution made pursuant to Section 3.3, to each Participant's Profit Sharing
Account: (1) an amount equal to $600; and (2) a proportionate share of the
remaining Employer Profit Sharing Contribution determined as the same proportion
that each such Participant's allocation points for the Plan Year bears to the
total allocation points of all Participants for such Plan Year. Each Participant
entitled to an allocation for a Plan Year shall be credited with one allocation
point for each dollar of Compensation for that Plan Year plus an additional 25%
of such Participant's allocation points for each Plan Year in which the
Participant is or has been credited with an allocation of a portion of the
Employer's Profit Sharing Contribution.
(b) Notwithstanding anything in this Plan to the
contrary, the Employer's Profit Sharing Contribution shall be allocated only to
those Participants who (i) have satisfied the eligibility criteria of Section
2.1(a) or (b); and (ii) have completed a Year of Service during the Plan Year
for which the Employer's Profit Sharing Contribution is made.
(c) Each Participant's 401(k) Account and Matching
Account shall be allocated 401(k) Contributions and Matching Contributions
determined in accordance with Section 3.1 based on the salary reduction election
of the Participant in effect for such Plan Year and subject to the limitations
described in Article IV to meet the requirements of the Internal Revenue Code.
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3.5 Rollover Contributions.
(a) With the consent of the Administrator, a Covered
Employee may make a Rollover Contribution to the Plan provided that such
Rollover Contribution will not jeopardize the tax exempt status of the Plan or
Trust or create adverse tax consequences for the Employer or Participants. The
amounts transferred shall be credited to the Covered Employee's Rollover
Account. Notwithstanding anything in this Plan to the contrary, a Covered
Employee who makes a Rollover Contribution shall be treated as a Participant
with respect to all amounts credited to the Covered Employee's Rollover Account;
provided, however, that such a Covered Employee shall not be eligible to make
any salary reduction contribution or to receive an allocation of any Profit
Sharing Contribution or Matching Contribution until such time as the Covered
Employee satisfies the applicable eligibility requirements of Section 2.1.
(b) For purposes of this Section, except as otherwise
provided herein, a Rollover Contribution may be made from any tax-qualified plan
or conduit individual retirement account provided that such Rollover
Contribution is eligible for tax-free rollover to the Plan in accordance with
Code Section 402. Prior to accepting any Rollover Contributions to which this
Section applies, the Administrator may require the Employee to establish that
the amounts to be transferred to this Plan meet the requirements of this Section
and may also require the Employee to provide an opinion of counsel satisfactory
to the Employer that the amounts to be transferred meet the requirements of this
Section.
(c) Notwithstanding anything herein to the contrary,
after January 1, 1985, this Plan shall not accept any direct or indirect
transfers, other than Rollover Contributions, from a
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defined benefit plan, money purchase plan (including a target benefit plan),
stock bonus or profit sharing plan which would otherwise have provided for a
life annuity form of payment to the Participant.
3.6 Plan Investments.
(a) Each Participant or Former Participant may elect
to have his Account invested by the Trustee in investments authorized under the
Trust Agreement, as directed by the Participant pursuant to procedures
established by the Administrator, which investments shall be credited to the
Participant's Account.
(b) All dividends, capital gains distributions, and
other earnings received on any investment credited to a Participant's or Former
Participant's Account under the Plan shall be reinvested in such investment and
credited to the Participant's or Former Participant's Account. Any losses
attributable to any investment credited to a Participant's or Former
Participant's Account under the Plan shall be allocated to such Participant's or
Former Participant's Account.
(c) The Trustee shall invest all Accounts that are
allocated to a Participant or Former Participant under the Plan in one or more
investments authorized under the Trust as directed by the Participant or Former
Participant. Any such investment directions by a Participant or Former
Participant shall be made in accordance with rules and procedures prescribed by
the Administrator. To the extent any Participant or Former Participant fails to
provide the Administrator with directions in accordance with such rules and
procedures, the Administrator shall be responsible for directing the investment
of such Account. If the Trustee receives any Contribution to the Trust that is
not subject to instructions directing its investment, the Trustee under the
Trust Agreement
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<PAGE> 31
may hold or return all or a portion of the Contribution pending receipt of
proper investment directions from the Administrator.
(d) Amounts credited to the Suspense Account in
accordance with Section 5.3 shall be invested by the Trustee as directed by the
Administrator in its sole discretion.
Article IV
LIMITATIONS ON CONTRIBUTIONS
4.1 Reduction of 401(k) Contributions.
(a) If at any time the Administrator determines that
the Plan may not satisfy the actual deferral percentage tests of Section
401(k)(3) of the Code, as defined in Section 4.2 hereafter, the Administrator
may, in its discretion, reduce the 401(k) Contribution of any Highly Compensated
Employee to the extent necessary to ensure, within a reasonable margin of
safety, that the above test will be satisfied. The Administrator may accomplish
this reduction by any method or combination of methods including, without
limitation, the reduction of the otherwise applicable Compensation against which
the Participant's salary reduction election is applied, the reduction of the
rate of 401(k) Contributions for any Highly Compensated Employee, or the setting
of a maximum amount of 401(k) Contributions for any Highly Compensated Employee.
(b) Notwithstanding any provisions of this Section to the
contrary, if after the close of the Plan Year the Administrator determines that
the Plan does not satisfy the actual deferral percentage test, the Administrator
shall reduce the 401(k) Contribution of Highly Compensated Employees to the
extent necessary to satisfy the actual deferral percentage test, in accordance
with
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the terms of this paragraph. First, the Highly Compensated Employee (or Highly
Compensated Employees if more than one has the same actual deferral percentage)
with the highest actual deferral percentage shall have his 401(k) Contribution
reduced until his actual deferral percentage equals the actual deferral
percentage of Highly Compensated Employee(s) with the next highest actual
deferral percentage. If the actual deferral percentage test is not satisfied by
this initial reduction, then the Highly Compensated Employees with the highest
actual deferral percentage (including the Highly Compensated Employee(s) who
already had a reduction in his 401(k) Contribution) shall have their 401(k)
Contributions reduced until their actual deferral percentages equal the actual
deferral percentage of the Highly Compensated Employee(s) with the next highest
actual deferral percentage. Such reductions shall continue in the same manner
until the actual deferral percentage test is satisfied. The amount of 401(k)
Contributions reduced in accordance with this Section and any income allocable
thereto for such Plan Year shall be returned to the appropriate Highly
Compensated Employees.
(c) The amount of excess 401(k) Contributions, if any, to be
distributed pursuant to this Section shall be reduced by the amount of 401(k)
Contributions in excess of the limitations prescribed by Section 402(g) of the
Code ("Excess Deferrals") which were returned prior to the reductions required
in this Section; provided, that in the event 401(k) Contributions are
distributed to a Participant pursuant to this Section prior to the time Excess
Deferrals with respect to a Plan Year are returned to the Participant, then the
amount of such Excess Deferrals, if any, shall be reduced by the amount of
401(k) Contributions previously returned in accordance with the provisions of
this Section.
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4.2 Actual Deferral Percentage Test.
(a) For purposes of Section 4.1, the "actual deferral
percentage test" shall mean a test which is satisfied if either one of the
following two tests are satisfied: (a) the actual deferral percentage for the
Highly Compensated Employees is not more than the actual deferral percentage for
all other Eligible Employees multiplied by 1.25; or (b) the excess of the actual
deferral percentage for the Highly Compensated Employees over the actual
deferral percentage for all other Eligible Employees is not more than two
percent (2%), and the actual deferral percentage for the Highly Compensated
Employees is not more than the actual deferral percentage for all other Eligible
Employees multiplied by 2. For purposes of this Section, the "actual deferral
percentage" for Highly Compensated Employees or for all other Eligible Employees
for a Plan Year shall mean the average of the ratios, calculated separately for
each Employee in such group, of the amount of the Elective Contributions, if
any, under the Plan paid on behalf of such Employee for such Plan Year to the
Employee's Compensation for such Plan Year.
(b) In determining the actual deferral percentage of
any Eligible Employee who is a Highly Compensated Employee and who is either a
five percent owner or one of the top-ten most Highly Compensated Employees, the
family aggregation rules of Section 414(q)(6) of the Code shall apply. The
actual deferral percentage of the family group shall be treated as the actual
deferral percentage of one Highly Compensated Employee and shall be equal to the
actual deferral percentage determined by combining the 401(k) Contributions and
Compensation of all eligible Family Members.
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4.3 Reduction of Matching Contributions.
If after the close of the Plan Year the Administrator
determines that the Plan does not satisfy the actual contribution percentage
test of Section 401(m)(2) of the Code, as defined in Section 4.4 hereafter, the
Administrator shall reduce the Matching Contribution of any Highly Compensated
Employees to the extent necessary to satisfy the actual contribution percentage
test, in accordance with the terms of this paragraph. First, the Highly
Compensated Employee (or Highly Compensated Employees if more than one has the
same actual contribution percentage) with the highest actual contribution
percentage shall have his Matching Contribution reduced until his actual
contribution percentage equals the actual contribution percentage of the Highly
Compensated Employee(s) with the next highest actual contribution percentage. If
the actual contribution percentage test is not satisfied by this initial
reduction, then the Highly Compensated Employees with the highest actual
contribution percentage (including the Highly Compensated Employee(s) who
already had a reduction in his Matching Contribution) shall have their Matching
Contributions reduced until their actual contribution percentages equal the
actual contribution percentage of the Highly Compensated Employee(s) with the
next highest actual contribution percentage. Such reductions shall continue in
the same manner until the actual contribution percentage test is satisfied. The
amount of Matching Contributions reduced in accordance with this Section and any
income allocable thereto for such Plan Year shall be returned to the appropriate
Highly Compensated Employees.
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4.4 Actual Contribution Percentage Test.
(a) For purposes of Section 4.3 the "actual
contribution percentage test" shall mean a test which is satisfied if either one
of the following two tests are satisfied: (a) the actual contribution percentage
for the Highly Compensated Employees is not more than the actual contribution
percentage for all other Eligible Employees multiplied by 1.25; or (b) the
excess of the actual contribution percentage for the Highly Compensated
Employees over the actual contribution percentage for all other Eligible
Employees is not more than two percent (2%), and the actual contribution
percentage for the Highly Compensated Employees is not more than the actual
contribution percentage for all other Eligible Employees multiplied by 2;
provided, that the test specified in (b) shall be used only to the extent
permitted by the Code if test (b) is used by the Plan under Section 4.2. For
purposes of this Section, the "actual contribution percentage" for Highly
Compensated Employees or for all other Eligible Employees for a Plan Year shall
mean the average of the ratios, calculated separately for each Employee in such
group, of the amount of the Matching Contributions under the Plan paid on behalf
of such Employee for such Plan Year to the Employee's Compensation for such Plan
Year.
(b) In determining the actual contribution percentage
of any Eligible Employee who is a Highly Compensated Employee and who is either
a five percent owner or one of the top-ten most Highly Compensated Employees,
the family aggregation rules of Section 414(q)(6) of the Code shall apply. The
actual contribution percentage of the family group shall be treated as the
actual contribution percentage of one Highly Compensated Employee and shall be
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equal to the actual contribution percentage determined by combining the Matching
Contributions and Compensation of all eligible Family Members.
4.5 Aggregate Limits Test.
(a) In the event that both the actual deferral
percentage test and the actual contribution percentage test are satisfied only
by using the test whereby the percentage for Highly Compensated Employees over
the percentage for all other Eligible Employees is not more than two percent
(2%), and the percentage for Highly Compensated Employees is not more than the
percentage for all other Eligible Employees multiplied by 2, the Plan may
satisfy the applicable nondiscrimination requirements under the Code by
satisfying the "aggregate limits test," or any other alternative test permitted
by the Internal Revenue Service.
(b) The aggregate limits test shall be satisfied if
the sum of the average of actual deferral percentages of all Highly Compensated
Employees and the average of actual contribution percentages for all Highly
Compensated Employees does not exceed the aggregate limit. For purposes of this
Section, the aggregate limit is equal to the greater of:
(i) The sum of:
(A) 125 percent of the greater of
(1) the average actual deferral percentage of all Eligible Employees who are not
Highly Compensated Employees or (2) the average actual contribution percentage
of all Eligible Employees who are not Highly Compensated Employees; and
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(B) Two plus the lesser of (1) or
(2) above; provided, that in no event shall this amount exceed two hundred
percent (200%) of the lesser of (1) or (2) above; or
(ii) The sum of:
(A) 125 percent of the lesser of (1)
the average actual deferral percentage of all Eligible Employees who are not
Highly Compensated Employees or (2) the average actual contribution percentage
of all Eligible Employees who are not Highly Compensated Employees; and
(B) Two plus the greater of (1) or
(2) above; provided, that in no event shall this amount exceed two hundred
percent (200%) of the greater of (1) or (2) above.
(c) If after the close of the Plan Year the
Administrator determines that the Plan does not satisfy the aggregate limits
test, then the Administrator shall first reduce any unmatched 401(k)
Contributions of Highly Compensated Employees in accordance with Section 4.2 to
the extent necessary to satisfy the aggregate limits test. If, after
distribution of all unmatched 401(k) Contributions, the Plan does not satisfy
the aggregate limits test, then the Administrator shall reduce the Matching
Contributions of Highly Compensated Employees in accordance with Section 4.3. to
the extent necessary to satisfy the aggregate limits test.
4.6 Maximum Annual Additions.
(a) Notwithstanding any other provision of the Plan
to the contrary, the annual additions (as that term is defined in Code Section
415(c)) to a Participant's Account under this Plan and any other defined
contribution plans maintained by the Employer or an Affiliate with
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respect to a Plan Year, which shall be the "limitation year," shall not exceed
the lesser of (i) Thirty Thousand Dollars ($30,000), or, if greater, one fourth
(1/4) of the dollar limitation in effect under Section 415(b)(1)(A) of the Code,
or (ii) twenty-five percent (25%) of the Participant's Compensation.
(b) In the event that it is determined that the
annual additions to a Participant's Account with respect to a Plan Year exceed
the limitations contained in Section 4.6(a), such annual additions shall be
reduced to the extent necessary to bring them within such limitations by (i)
reducing the Profit Sharing Contribution otherwise allocable to the
Participant's Account attributable to an allocation of Forfeitures as described
in Section 5.3; (ii) if the foregoing reduction is insufficient to satisfy Code
Section 415, reducing the Profit Sharing Contribution otherwise allocable to the
Participant's Account to the extent necessary to satisfy such limitations; (iii)
if the foregoing reductions are insufficient to satisfy Code Section 415,
reducing the Matching Contributions otherwise allocable to the Participant's
Account to the extent necessary to satisfy such limitations; and (iv) if the
foregoing reductions are insufficient to satisfy Code Section 415, reducing the
401(k) Contributions otherwise allocable to a Participant's Account to the
extent necessary to satisfy such limitations.
(c) If a Participant participates in a defined
benefit plan(s) maintained by the Employer and, for any Plan Year, the sum of
(i) the Participant's defined contribution plan fraction under the Plan and any
other defined contribution plans maintained by the Employer and (ii) the
Participant's defined benefit plan fraction under such defined benefit plan(s)
is greater than one (1.0), the Contributions for the benefit of such Participant
under this Plan shall not be affected,
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but his benefits under such defined benefit plan(s) shall be reduced by such
amount as is necessary to cause such sum not to exceed one (1.0). For purposes
of this paragraph, the defined benefit plan fraction for any Plan Year is a
fraction, the numerator of which is the projected annual benefit of the
Participant under the plan(s) as of the close of the Plan Year and the
denominator of which is the lesser of (i) 1.25 times the dollar limitation in
effect for that Plan Year under Section 4.6(a), or (ii) 1.4 times the amount
which may be taken into account under the compensation limitation for that Plan
Year under Section 415(b)(1)(B) of the Code. The defined contribution plan
fraction for any Plan Year is a fraction, the numerator of which is the sum of
all of the annual additions to the Participant's accounts under the Plan and any
other defined contribution plan(s) maintained by the Employer, or any
predecessor defined contribution plan(s), for that Plan Year and all prior Plan
Years, and the denominator of which is the lesser of (i) 1.25 times the maximum
dollar limitation of Section 3.12(a) or (ii) 1.4 times twenty-five percent (25%)
of the Participant's Compensation for such Plan Year and for each prior year of
employment with the Employer. The defined benefit plan fraction, annual addition
and the defined contribution plan fraction shall in any event have the meanings
provided in and be computed and adjusted as may be required by Section 415 of
the Code and Treasury regulations issued pursuant to such Section.
(d) For purposes of this Section 4.6, Compensation
shall mean Compensation as defined in Section 1.8 reduced by any deferrals under
Code Sections 125 or 401(k) or any alternative definition of Compensation
permitted under Code Section 415(c)(3) as may be determined by the Administrator
in its sole discretion.
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Article V
VESTING AND FORFEITURES
5.1 Vesting.
(a) The vested portion of any Participant's Profit
Sharing Account and that portion of his Matching Account attributable to
Matching Contributions for Plan Years beginning on and after January 1, 1993
shall be a percentage of the total amount credited to such Accounts determined
on the basis of the Participant's number of Years of Service according to the
following Schedule:
Vesting Schedule
<TABLE>
<CAPTION>
Years of Service Vested Percentage
---------------- -----------------
<S> <C> <C>
Less than 3 0
3 20
4 40
5 60
6 80
7 100
</TABLE>
(b) A Participant shall be 100% vested at all times
in his 401(k) Account, Rollover Account and that portion of his Matching Account
attributable to Matching Contributions for Plan Years beginning prior to January
1, 1993.
(c) To the extent not fully vested, a Participant
shall become 100% vested in all amounts credited to his Account as of his Normal
Retirement Date or the date such Participant dies, or terminates employment by
reason of Total and Permanent Disability.
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5.2 Break In Service Rules.
If any Former Participant is reemployed by the
Employer after a 1-Year Break in Service has occurred, Years of Service shall
include Years of Service prior to his 1-Year Break in Service subject to the
following rules:
(a) If a Former Participant has a 1-Year Break in
Service, both his pre-break and post-break service shall be considered in
computing Years of Service for vesting purposes only after he has been employed
for one (1) Year of Service following the date of his reemployment with the
Employer;
(b) A non-vested Former Participant's Years of
Service prior to a 1-Year Break in Service shall not be considered for vesting
purposes if such Former Participant's consecutive 1-Year Breaks in Service equal
or exceed the greater of (A) five (5) or (B) the aggregate number of his
pre-break Years of Service;
(c) Any Former Participant who receives a
distribution of the vested balance of his Account shall be credited with Years
of Service in accordance with the foregoing rules only upon repayment of the
distributed amount in accordance with Section 5.3(c).
5.3 Forfeitures.
(a) If a Participant's employment terminates and he
receives a distribution of the vested balance of his Account, the nonvested
portion of such Account shall be forfeited as of the date his employment
terminated and allocated in accordance with subsection (b), below. If the
Participant does not receive the vested portion of his Account upon termination
or if the Participant incurs a 1-Year Break in Service without termination of
employment, the nonvested portion of his
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Account shall continue to be revalued in accordance with the Participant's
investment direction pursuant to Section 3.6, and shall not be forfeited until
he incurs five consecutive 1-Year Breaks in Service after the date the
Participant terminated employment. After such period, the nonvested portion of
his Account shall be forfeited and reallocated in accordance with subsection (b)
below. Amounts forfeited in accordance with this Section shall be credited to
the Suspense Account pending allocation pursuant to subsection (b) below.
(b) The total amount of Forfeitures attributable to
all Participants' nonvested Profit Sharing Accounts determined as of the last
day of each Plan Year in accordance with (a) above shall be allocated as an
additional Profit Sharing Contribution in accordance with Section 3.4(a) to each
Participant entitled to a Profit Sharing Contribution in the same proportion
that the Participant's allocation points (as defined in Section 3.4(a)) bears to
the total allocation points for all Participants for the Plan Year for which the
Forfeitures are allocated. Forfeitures attributable to Participants' nonvested
Matching Accounts shall be used to reduce the Matching Contribution the Employer
would otherwise contribute pursuant to Section 3.1, and the amount of such
Forfeitures shall be added to and allocated together with such reduced Matching
Contribution among Matching Contribution Accounts as provided in Section 3.4(c).
(c) If a Former Participant is reemployed by the
Employer before he incurs five (5) consecutive 1-Year Breaks in Service, and
such Former Participant had received a distribution of the vested balance of his
Account, the amount forfeited in accordance with this Section shall be
reinstated if he repays the full amount distributed to him within 5 years from
the date of his reemployment. The reinstated amount shall be credited to the
Participant's Account first,
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by allocation from Forfeitures occurring in the Plan Year in which the repayment
is made and second, from the Profit Sharing Contribution for such Plan Year or
any special contribution made by the Employer as determined by the Employer in
its sole discretion.
Article VI
BENEFITS
6.1 Distribution of Benefits.
A Participant who terminates employment for any
reason other than death shall be entitled to a distribution of the vested
balance of his Account determined as of his termination of employment. The
vested balance of a Participant's Account shall be distributed in a form
provided under Section 6.2.
6.2 Form of Distribution.
(a) A Participant's benefit will be paid in a single
lump-sum payment in cash.
(b) Accrued Benefit as of December 31, 1994.
(i) Unless otherwise elected as provided
below, a Participant who is married on the Annuity Starting Date shall receive
the value of his Account determined as of December 31, 1994, in the form of a
joint and survivor annuity. The joint and survivor annuity shall be equal in
value to a single life annuity. Such joint and survivor benefits following the
Participant's death shall continue to the spouse during the spouse's lifetime at
a rate equal to 50% of the benefits which were payable to the Participant. The
Participant may elect to receive a smaller annuity benefit
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with continuation of payments to the spouse at a rate of seventy-five percent
(75%) or one hundred percent (100%) of the benefit payable to the Participant
during his lifetime.
(ii) A Participant may elect to waive the
joint and survivor annuity provided that an election to waive the joint and
survivor annuity must be made by the Participant in writing during the election
period set forth below and be consented to by the Participant's spouse. Such
spouse's consent must acknowledge the effect of such election and be witnessed
by a Plan representative or a notary public. Such consent shall not be required
if it is established to the satisfaction of the Administrator that the required
consent cannot be obtained because there is no spouse, the spouse cannot be
located, or other circumstances that may be prescribed by Treasury regulations.
The election made by the Participant and consented to by his spouse may be
revoked by the Participant in writing without the consent of the spouse at any
time during the election period. Any new election must comply with the
requirements of this paragraph. A former spouse's waiver shall not be binding on
a new spouse. The election period to waive the joint and survivor annuity shall
be the period beginning not more than 90 days prior to the Annuity Starting
Date.
(iii) A Participant who is not married or
who has waived the joint and survivor annuity distribution as provided above may
elect to receive the value of his Account determined as of December 31, 1994 in
the form of one of the following options:
(A) One lump-sum payment in cash; or
(B) Payments over a period certain
in monthly, quarterly, semiannual, or annual cash installments. The period over
which such payment is to be made shall not extend beyond the Participant's life
expectancy (or the life expectancy of the Participant and his
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designated Beneficiary). The duration and number of installment payments shall
be elected by the Participant.
(C) Purchase of an annuity; provided
that such annuity may not provide for payments over a period extending beyond
either the life of the Participant (or the lives of the Participant and his
Beneficiary) or the life expectancy of the Participant (or the life expectancy
of the Participant and his Beneficiary).
(iv) If the Participant's entire interest is
to be distributed in other than a lump sum, then the amount to be distributed
each year must be at least an amount equal to the quotient obtained by dividing
the Participant's entire interest by the life expectancy of the Participant or
the joint and life survivor expectancy of the Participant and his designated
Beneficiary. For purposes of this Section, the life expectancy of a Participant
and a Participant's spouse (other than in the case of a life annuity) may be
redetermined from time to time, but not more frequently than annually, and in
accordance with such rules as may be prescribed by Treasury regulations.
6.3 Time of Distributions.
(a) Unless otherwise elected in writing by a Former
Participant, (such election may not result in a death benefit that is more than
incidental), distribution of benefits under this Plan shall begin not later than
the 60th day after the close of the Plan Year in which the latest of the
following events occur:
(i) the date on which the Participant
attains age 65,
(ii) the 10th anniversary of the year in
which the Participant commenced participation in the Plan, or
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(iii) the date the Participant terminates
his service with the Employer.
(b) Notwithstanding the foregoing or any provision of
this Plan to the contrary, a Participant's or Former Participant's Account shall
be distributed to him in accordance with the minimum distribution requirements
of Code Section 401(a)(9) beginning no later than April 1 of the calendar year
following the calendar year in which he attains age seventy and one-half (70
1/2) but only with respect to a Participant who attains age 70 1/2 on or after
January 1, 1988 or is a "five percent owner" (as defined in Section 1.28).
6.4 Mandatory Cash Out Payment.
Notwithstanding anything to the contrary contained
herein, if the value of the vested balance of a Participant's Account is $3,500
or less as of the date such Participant terminates employment, the Administrator
shall direct the Trustee to distribute the vested balance of the Participant's
Account in a single-lump sum payment.
6.5 In-Service Distributions.
(a) Age 59 1/2.
Effective for Plan Years beginning on and
after January 1, 1993, upon attainment of age 59 1/2 a Participant may elect to
receive a distribution of all or any portion of the vested balance of his
Account. Such election must be made on forms prescribed by the Administrator.
Such distribution shall be made in accordance with Section 6.2.
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(b) Hardship Distributions.
At the discretion of the Administrator in
accordance with uniform principles consistently applied, the Administrator may
direct the Trustee to distribute to any Participant or his Beneficiary up to
100% of the aggregate of the Participant's 401(k) Account and Rollover Account,
in the case of financial hardship. A Participant may request the distribution of
some or all of the Participant's 401(k) Account (including the income
attributable to 401(k) Contributions as of December 31, 1988) and/or the
Participant's Rollover Account, if such a distribution is necessary due to the
immediate and heavy financial need of the Participant. Application to receive a
hardship distribution shall be made on a form provided by the Employer and must
specify the reasons for the distribution request. As a condition precedent to
the approval of a hardship distribution request, the Participant must take a
loan from the Plan, if available, unless the Participant demonstrates to the
satisfaction of the Administrator, that such a loan would not relieve or would
increase the Participant's financial hardship.
(i) The Participant may receive a hardship
distribution upon demonstrating to the Administrator that such distribution is
necessary to relieve a financial hardship arising due to:
(A) medical expenses incurred by the
Participant or the Participant's spouse or dependents;
(B) the purchase of Participant's
principal residence (but not including mortgage payments),
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(C) the payments of tuition and
related educational expenses for the next 12 months of post-secondary education
for the Participant, the Participant's spouse, children or dependents; or
(D) As necessary to prevent the
eviction from the Participant's principal residence or the foreclosure on the
mortgage on the Participant's principal residence.
(ii) The Participant must demonstrate to
the Administrator that the financial hardship cannot be relieved by:
(A) reimbursement or compensation by
insurance or otherwise;
(B) reasonable liquidation of the
Participant's assets, to the extent that the liquidation itself would not cause
a financial hardship;
(C) cessation of 401(k)
Contributions under the Plan; or
(D) other distributions or
nontaxable loans (determined at the time of the loan) from any other
tax-qualified plans in which the Participant participates, or by borrowing from
commercial sources at reasonable commercial terms.
(iii) For purposes of this Section 6.5(b),
the Participant's resources shall include the resources of his spouse and minor
children that are reasonably available to the Participant.
(iv) A hardship distribution cannot be made
within twelve (12) months after the last hardship distribution. A Participant's
hardship distribution must not exceed the
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amount necessary to relieve the hardship (including amounts necessary to pay any
income taxes or penalties reasonably anticipated to result from the
distribution). No distribution may be made of an amount which has been loaned to
a Participant and not repaid as of the date of the hardship distribution.
6.6 Location of Participant Unknown.
In the event that all, or any portion, of the benefit
payable to a Participant under this Article VI shall, at the expiration of five
(5) years after it shall become payable, remain unpaid solely by reason of the
inability of the Administrator to locate or ascertain the whereabouts of such
Participant, the amount so payable shall be forfeited and shall be used to
reduce the cost of the Plan. In the event a Participant is located subsequent to
his benefit being forfeited, such benefit shall be restored.
6.7 Limitations on Benefits and Distributions.
All rights and benefits, including elections,
provided to a Participant in this Plan shall be subject to the rights afforded
to any "alternate payee" under a "qualified domestic relations order" as those
terms are defined in Code Section 414(p).
Article VII
DEATH BENEFITS
7.1 Death Before Payment of Benefits.
If a Participant or Former Participant dies before he
begins to receive benefits under the Plan, the vested balance of such
Participant's or Former Participant's Account shall be distributed to the
Participant's or Former Participant's Beneficiary in a single lump sum within a
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reasonable period of time following the date of death but no later than December
31st of the calendar year following the calendar year of such Participant's or
Former Participant's death. In the event no valid designation of Beneficiary
exists at the time of the Participant's or Former Participant's death, and the
spouse's benefit provisions of Section 7.2 do not apply, the death benefit shall
be payable to his estate.
7.2 Spouse's Death Benefit.
(a) If a Participant or Former Participant is married
on the date of his death, such Participant's or Former Participant's spouse
shall be his Beneficiary unless the Participant or Former Participant waives his
spouse's death benefit and his spouse consents to such waiver in accordance with
Section 7.2(b).
(b) A Participant or Former Participant who is
married may designate a Beneficiary other than his spouse on a form prescribed
by the Administrator. Such designation shall be effective only if the
Participant's or Former Participant's spouse at the date of death has consented
in writing to the election, such consent is witnessed by a notary public or a
plan representative and acknowledges the effect of the election. Such spousal
consent is not required, however, if the Administrator is satisfied that the
spouse cannot be located.
7.3 Change in Beneficiary.
A Participant or Former Participant may at any time
change or revoke his designation of a Beneficiary by filing a written notice of
such change or revocation with the Administrator. Notwithstanding the foregoing,
a Participant or Former Participant who is married may change or revoke his
Beneficiary designation only in accordance with Section 7.2 unless the
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effect of such change or revocation is to designate the Participant's or Former
Participant's spouse as the Beneficiary.
7.4 Proof of Death.
The Administrator may require such proper proof of death and
such evidence of the right of any person to receive payment of the vested
balance of the Account of a deceased Participant or Former Participant as the
Administrator may deem desirable. The Administrator's determination of death and
of the right of any person to receive payment shall be conclusive and binding.
7.5 Accrued Benefit as of December 31, 1994.
(a) Following the death of a Participant or Former
Participant, the distribution of the value of a Participant's or Former
Participant's Account determined as of December 31, 1994 shall be made in
accordance with this Section 7.5.
(b) A Participant or Former Participant who dies
before the Annuity Starting Date and who has a surviving spouse shall have the
value of his Account determined as of December 31, 1994 paid to his surviving
spouse in the form of a Qualified Pre-Retirement Survivor Annuity. Payment of
such benefits must commence by the date the Participant or Former Participant
would have attained the Normal Retirement Age under the Plan, unless the
surviving spouse elects a later date. In no event, shall such distribution
commence later than the date on which the deceased Participant or Former
Participant would have attained age seventy and one-half (70 1/2). Any election
to waive the Qualified Pre-Retirement Survivor Annuity must be made by the
Participant or Former Participant in writing and shall require the spouse's
consent in the same manner provided for in Section 7.2.
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(c) If the Qualified Pre-Retirement Survivor Annuity
does not apply, the vested balance of the Participant or Former Participant's
Account as of December 31, 1994 may be paid to the Participant's or Former
Participant's Beneficiary by either of the following methods, at the election of
the Beneficiary:
(i) One lump-sum payment in cash;
(ii) Payments over a period certain in
monthly, quarterly, semi-annual or annual cash installments. The period over
which such payment is to be made shall not extend beyond the Beneficiary's life
expectancy. The duration and number of installment payments shall be elected by
the Participant.
(iii) Purchase of an annuity; provided that
such annuity may not provide for payments over a period extending beyond either
the life of the Participant (or the lives of the Participant and his
Beneficiary) or the life expectancy of the Participant (or the life expectancy
of the Participant and his Beneficiary).
(d) If the distribution of a Participant's or Former
Participant's interest has begun and the Participant or Former Participant dies
before his entire interest has been distributed to him under Section 7.5, the
remaining portion of such interest shall be distributed at least as rapidly as
under the method of distribution selected by the Participant or Former
Participant as of his date of death.
(e) If a Participant or Former Participant dies
before he has begun to receive any distributions of his entire interest under
the Plan, his death benefit shall be distributed to his Beneficiary within 5
years after his death. Such 5-year distribution requirement shall not
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apply to any portion of the deceased Participant's or Former Participant's
interest which is payable to or for the benefit of a designated Beneficiary. In
such event, such portion may be distributed over the life of such designated
Beneficiary (or over a period not extending beyond the life expectancy of such
designated Beneficiary) provided such distribution begins not later than one (1)
year after the date of the Participant's or Former Participant's death (or such
later date as may be prescribed by Treasury regulations). Notwithstanding the
foregoing, in the event the Participant's or Former Participant's spouse is his
Beneficiary, distributions shall be made in accordance with Section 7.2(b).
7.6 Mandatory Cash-Out Payment. Notwithstanding anything in
this Article VII to the contrary, if the value of the vested balance of a
Participant's or Former Participant's Account is $3,500 or less as of the date
of such Participant's or Former Participant's death, the Administrator shall
direct the Trustee to distribute the vested balance of the Participant's or
Former Participant's Account in a single lump-sum payment.
7.7 Distribution for Minor Beneficiary.
In the event a distribution is to be made to a minor,
the Administrator may, in the Administrator's sole discretion, direct that such
distribution be paid to the legal guardian or, if none, to a parent of such
Beneficiary or a responsible adult with whom the Beneficiary maintains his
residence, or to the custodian for such Beneficiary under the Uniform Gift to
Minors Act or Gift to Minors Act, if such is permitted by the laws of the state
in which said Beneficiary resides. Such a payment to the legal guardian, parent,
responsible adult or custodian of a minor Beneficiary shall fully discharge the
Trustee, Employer, Administrator and Plan from further liability on account
thereof.
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7.8 Location of Beneficiary Unknown.
In the event that all, or any portion of the benefit
payable to a Beneficiary under this Article VII shall, at the expiration of five
(5) years after it shall become payable, remain unpaid solely by reason of the
inability of the Administrator to locate or ascertain the whereabouts of such
Beneficiary, the amount so payable shall be forfeited and shall be used to
reduce the cost of the Plan. In the event a Beneficiary is located subsequent to
his benefit being forfeited, such benefit shall be restored.
Article VIII
DIRECT ROLLOVER OF BENEFITS
8.1 Right to Direct Rollover. With respect to any
distributions from the Plan on or after January 1, 1993, except as otherwise
provided, any Distributee may elect, in accordance with the provisions of this
Section, to have all or a designated portion of an Eligible Rollover
Distribution paid directly to a specified Eligible Retirement Plan in a Direct
Rollover.
8.2 Limitations on Direct Rollover. A Distributee may elect to
have a portion of an Eligible Rollover Distribution transferred directly to an
Eligible Retirement Plan in a Direct Rollover and the remaining portion paid
directly to him or her. A Distributee may elect only one Direct Rollover for
each Eligible Rollover Distribution.
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8.3 Election of Direct Rollover. A Distributee may elect a
Direct Rollover of an Eligible Rollover Distribution by filing with the
Administrator such forms as the Administrator may prescribe. The Administrator
is entitled to reasonably rely on the information provided on such forms by a
Distributee in making a Direct Rollover. In the event that a Distributee does
not provide all of the information requested on the forms, or fails to submit
the forms to the Administrator in a timely manner, the Administrator may
directly pay the amount of the Eligible Rollover Distribution to the
Distributee.
8.4 Payment of Direct Rollover. If a Distributee elects a
Direct Rollover of his Eligible Rollover Distribution in a manner which complies
with Section 8.3 hereof, such Eligible Rollover Distribution may be accomplished
by any reasonable means of direct payment to the designated Eligible Retirement
Plan selected by the Administrator. Reasonable means of direct payment shall
include:
(a) mailing a check, negotiable only by the trustee
or custodian of the designated Eligible Retirement Plan, to the trustee or
custodian of such plan;
(b) wire transfer directed exclusively to the trustee
or custodian of the designated Eligible Retirement Plan;
(c) providing the Distributee with a check for
delivery to the designated Eligible Retirement Plan so long as:
(i) the check is endorsed "[name of
trustee or custodian] as trustee of
[name of Eligible Retirement Plan],"
and
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(ii) the check explicitly states that it
is for the benefit of the
Distributee whose Eligible Rollover
Distribution is to be transferred in
a Direct Rollover.
Article IX
ADMINISTRATION
9.1 Powers and Responsibilities of the Plan Sponsor.
(a) The Plan Sponsor shall be empowered, under the
direction of its board of directors, to appoint and remove the Trustee and the
Administrator from time to time as it deems necessary for the proper
administration of the Plan to assure that the Plan is being operated for the
exclusive benefit of the Participants and their Beneficiaries in accordance with
the terms of this Plan, the Code, and ERISA.
(b) The Plan Sponsor, in its discretion, may appoint
an Investment Manager to manage all or a designated portion of the assets of the
Plan. In such event, the Trustee shall follow the directive of the Investment
Manager in investing the assets of the Plan managed by the Investment Manager.
(c) The Plan Sponsor shall periodically review the
performance of any person to whom duties have been delegated or allocated by it
under the provisions of this Plan or pursuant to procedures established
hereunder.
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9.2 Assignment and Designation of Administrative Authority.
(a) The Plan Sponsor shall appoint the members of the
Plan Administrative Committee (the "Administrative Committee") which shall be
the Administrator under the Plan. The Administrative Committee shall consist of
three or more members appointed by the Plan Sponsor. Any person, including but
not limited to Employees of an Employer shall be eligible to serve on the
Administrative Committee. Members of the Administrative Committee shall serve at
the pleasure of the Plan Sponsor and may be removed at any time by the Plan
Sponsor. Any member may resign at any time by delivering his written resignation
to the Plan Sponsor, and any member shall be deemed to have resigned on the date
on which his employment with the Employer terminates. Members shall serve
without compensation, but shall be reimbursed for all necessary and proper
expenses incurred in carrying out their duties and responsibilities.
(b) The Administrative Committee shall conduct its
business with a quorum of a majority of its members, and that actions taken by
the Administrative Committee may be taken upon the affirmative vote of a
majority of its members. The Administrative Committee may act by meeting (and
may meet by telephone) or by unanimous written consent without a meeting. No
member of an Administrative Committee shall participate in any decision
respecting his interest as a Participant in the Plan (other than a decision
respecting the interest of a group of similarly situated Plan Participants which
includes the Administrative Committee member).
(c) In addition to the rights and obligations of the
Administrator set forth in the Plan, but except as specifically provided in
subsection (d), the Administrative Committee is hereby granted the full
authority and power to, and the responsibility to, act as settlor of the Trust
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and oversee the operation of and provide the policy for the Trust and the Plan.
Without limitation of the foregoing, that the Plan Sponsor delegates all of its
duties and responsibilities with respect to the Plan to the Administrative
Committee including, but not limited to:
(i) selection and removal of Trustees;
(ii) selection and removal of Investment
Managers;
(iii) setting policy for the administration
of the Plan and for the investment of the Plan's assets;
(iv) adopting amendments to the Plan;
(v) periodically evaluating and reviewing
the performance of service providers and fiduciaries;
(vi) reporting annually to the Plan
Sponsor on the operation and status of the Profit Sharing Plan;
(vii) setting general investment objectives
and funding guidelines for the Plan;
(viii) securing auditing, legal and other
advice as appropriate; and
(ix) determining all matters of policy
necessary for the proper administration of the Plan.
(d) In no event shall the Administrative Committee
have the authority to adopt any amendment to the Plan which will have a material
affect on the Employer's cost of participating in the Plan, will terminate the
Plan, will merge the Plan with another tax-qualified plan, or will fundamentally
change the nature of the Plan (e.g., to an employee stock ownership plan).
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(e) The Administrative Committee shall have the
authority to delegate its duties and responsibilities to any subcommittee made
up of one or more of its members or to such other individuals or entities as the
Administrative Committee may, in its sole discretion, deem appropriate.
(f) Any employee or director of the Employer who is a
member of an Administrative Committee, shall be indemnified and held harmless,
to the maximum extent permitted by law, for any actions taken in good faith on
behalf of the Employer with respect to his duties and responsibilities to the
Plans.
9.3 Powers, Duties and Responsibilities of the Administrator.
The primary responsibility of the Administrator is to
administer the Plan for the exclusive benefit of the Participants and their
Beneficiaries, subject to the specific terms of the Plan. The Administrator
shall administer the Plan in accordance with its terms and shall have the power
to interpret and construe the terms of the Plan and determine all questions
arising in connection with the administration, interpretation, and application
of the Plan. Any such determination by the Administrator shall be conclusive and
binding upon all persons. The Administrator may establish procedures, correct
any defect, supply any information, or reconcile any inconsistency in such
manner and to such extent as shall be deemed necessary or advisable to carry out
the purpose of this Plan; provided, that any procedure, discretionary act,
interpretation or construction shall be done in a nondiscriminatory manner based
upon uniform principles consistently applied and shall be consistent with the
intent that the Plan shall continue to be deemed a qualified plan under the
terms of Code Section 401(a), and shall comply with the terms of ERISA and all
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regulations issued pursuant thereto. The Administrator shall have all powers
necessary or appropriate to accomplish his duties under this Plan.
The Administrator shall be charged with the duties of
the general administration of the Plan, including, but not limited to, the
following:
(a) to determine all questions relating to the
eligibility of an Employee to participate or remain a Participant hereunder;
(b) to compute, certify, and direct the Trustee with
respect to the amount and the kind of benefits to which a Participant shall be
entitled hereunder;
(c) to authorize and direct the Trustee with respect
to all nondiscretionary or otherwise directed disbursements from the Trust;
(d) to maintain all necessary records for the
administration of the Plan;
(e) to interpret the provisions of the Plan and to
make and publish such rules or regulations of the Plan as are consistent with
the terms hereof;
(f) to compute and certify to the Employer and to the
Trustee from time to time the sums of money necessary or desirable to be
contributed to the Trust Fund;
(g) to consult with the Employer and the Trustee
regarding the short and long-term liquidity needs of the Plan in order that the
Trustee can exercise any investment discretion in a manner designed to
accomplish specific objectives;
(h) to assist any Participant regarding his rights,
benefits, or elections available under the Plan;
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(i) to prepare and distribute to Employees a
procedure for notifying Participants and Beneficiaries of their rights to elect
joint and survivor annuities and Qualified Pre-Retirement Survivor Annuities as
required by ERISA and regulations thereunder.
(j) to prepare and implement a procedure to notify
Eligible Employees that they may elect to have a portion of their Compensation
reduced or paid to them in cash.
9.4 Records and Reports.
The Administrator shall keep a record of all actions
taken and shall keep all other books of account, records, and other data that
may be necessary for proper administration of the Plan and shall be responsible
for supplying all information and reports to the Internal Revenue Service, the
Department of Labor, Participants, Beneficiaries and others as required by law.
9.5 Appointment of Advisors.
The Administrator, or the Trustee with the consent of
the Administrator, may appoint counsel, specialists, advisors, and other persons
as the Administrator or the Trustee deems necessary or desirable in connection
with the administration of this Plan.
9.6 Information from Employer.
To enable the Administrator to perform its functions,
the Employer shall supply full and timely information to the Administrator on
all matters relating to the Compensation of all Participants, their Hours of
Service, their Years of Service, their retirement, death, disability, or
termination of employment, and such other pertinent facts as the Administrator
may require; and the Administrator shall advise the Trustee of such of the
foregoing facts as may be pertinent to the
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Trustee's duties under the Plan. The Administrator may rely upon such
information as is supplied by the Employer and shall have no duty or
responsibility to verify such information.
9.7 Payment of Expenses.
All expenses of administration shall be paid out of
the Trust Fund unless paid by the Employer. Such expenses shall include any
expenses incidental to the functioning of the Administrator, including, but not
limited to, fees of accountants, counsel, and other specialists and their
agents, and other costs of administering the Plan. Until paid, the expenses
shall constitute a liability of the Trust Fund.
9.8 Claims Procedure.
Claims for benefits under the Plan may be filed with
the Administrator on forms supplied by the Employer. Written notice of the
disposition of a claim shall be furnished to the claimant within 90 days after
the application is filed. In the event the claim is denied, the reasons for the
denial shall be specifically set forth in the notice in language calculated to
be understood by the claimant, pertinent provisions of the Plan shall be cited,
and, where appropriate, an explanation as to how the claimant can perfect the
claim will be provided. In addition, the claimant shall be furnished with an
explanation of the Plan's claims review procedure.
9.9 Claims Review Procedure.
Any Employee, former Employee, or Beneficiary of
either, who has been denied a benefit by a decision of the Administrator
pursuant to Section 9.8 shall be entitled to request the Administrator to give
further consideration to his claim by filing with the Administrator (on a form
which may be obtained from the Administrator) a request for a hearing. Such
request, together
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with a written statement of the reasons why the claimant believes his claim
should be allowed, shall be filed with the Administrator no later than 60 days
after receipt of the written notification provided for in Section 9.8. The
Administrator shall then conduct a hearing within the next 60 days, at which the
claimant may be represented by an attorney or any other representative of his
choosing and at which the claimant shall have an opportunity to submit written
and oral evidence and arguments in support of his claim. At the hearing (or
prior thereto upon 5 business days written notice to the Administrator) the
claimant or his representative shall have an opportunity to review all documents
in the possession of the Administrator which are pertinent to the claim at issue
and its disallowance. Either the claimant or the Administrator may cause a court
reporter to attend the hearing and record the proceedings. In such event, a
complete written transcript of the proceedings shall be furnished to both
parties by the court reporter. The full expenses of any such court reporter and
such transcripts shall be borne by the party causing the court reporter to
attend the hearing. A final decision as to the allowance of the claim shall be
made by the Administrator within 60 days of receipt of the appeal (unless there
has been an extension of 60 days due to special circumstances, provided the
delay and the special circumstances occasioning it are communicated to the
claimant within the 60 day period). Such communication shall be written in a
manner calculated to be understood by the claimant and shall include specific
reasons for the decision and specific references to the pertinent Plan
provisions on which the decision is based.
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Article X
TOP-HEAVY PROVISIONS
10.1 In General.
If the Plan should for any Plan Year become top-heavy
as defined in Section 10.2, then, notwithstanding any other provisions of the
Plan, the rules in Section 10.3 shall apply to the Plan.
10.2 Top-Heavy Determination.
(a) Top-Heavy Defined.
The Plan is top-heavy for a Plan Year if, as
of the Determination Date, the aggregate value of the Accounts under the Plan
for Key Employees exceeds sixty percent (60%) of the aggregate value of the
Accounts for all Employees, as computed under Section 416(g) of the Code. The
"Determination Date" for purposes of this Section shall mean the last day of the
Plan Year preceding the Plan Year in question. The value of the accumulated
benefit for any Employee as of a Plan Year shall include the aggregate
distributions, including withdrawals, made with respect to such Employee under
the Plan during the five-year period ending on the last day of the preceding
Plan Year.
(b) Required Aggregation Groups.
If the Plan is required to be aggregated
with other plans under the provisions of this Section 10.2(b) then the
aggregated plans taken together shall constitute the Plan for purposes of this
Section. Notwithstanding the foregoing, if the Plan is required to be aggregated
with a group of plans in a required aggregation group, if the required
aggregation group is not top-
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heavy for a Plan Year, the Plan is not top-heavy for that Plan Year, and if the
required aggregation group is top-heavy for a Plan Year, the Plan is top-heavy
for that Plan Year. For purposes of the preceding sentence, a required
aggregation group means each tax-qualified plan of the Employer or an Affiliate
in which a Key Employee participates, and each other such plan which enables any
plan in which a Key Employee participates to meet the coverage and anti-
discrimination requirements of Sections 401(a)(4) and 410 of the Code.
(c) Permissive Aggregation Groups.
Notwithstanding the above provisions, the Plan
will not be top-heavy in any Plan Year in which a permissive aggregation group
to which the Plan belongs is not top-heavy. A permissive aggregation group
consists of plans maintained by the Employer or by an Affiliate that are
required to be aggregated plus one or more plans that are not part of a required
aggregation group but that satisfy the requirements of Sections 401(a)(4) and
410 of the Code when considered together with the required aggregation group.
(d) Top-Heavy Determination for a Group.
A required aggregation group or a permissive
aggregation group is top-heavy for a Plan Year if, as of the Determination Date,
the sum of the present value of the cumulative accrued benefits for Key
Employees under all defined benefit plans included in such group and the
aggregate of the accounts of Key Employees under all defined contribution plans
included in such group exceeds sixty percent (60%) of a similar sum determined
for all participants in such plans under Section 416(g) of the Code.
10.3 Top-Heavy Contingent Provisions.
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If the Plan is top-heavy for a Plan Year, as defined
in Section 10.2, the following Plan provisions shall apply for that Plan Year:
(a) The combined Contributions (excluding 401(k) and
Rollover Contributions) under the Plan and any other defined contribution plan
of the Employer for the Plan Year for each Participant who is not a Key
Employee, expressed as a percentage of Compensation, shall be not less than the
lesser of 3 percent or the largest percentage calculated for any Key Employee.
For purposes of the minimum contributions set forth in the preceding sentence,
the percentage allocated to the Account of any Key Employee shall be equal to
the ratio of the sum of the Contributions (excluding Rollover Contributions) and
Forfeitures allocated on behalf of such Key Employee divided by the Compensation
for such Key Employee. For any Top Heavy Plan Year, the minimum Contributions as
determined above shall be allocated to the Accounts of all Non-Key Employees who
are Participants and who are employed by the Employer on the last day of the
Plan Year, including Non-Key Employees who have failed to complete a Year of
Service. In lieu of the above, if a Non-Key Employee participates in this Plan
and a defined benefit pension plan included in a Required Aggregation Group
which is top heavy, a minimum allocation of five percent (5%) of Compensation
shall be provided under this Plan.
(b) Section 4.6 shall be applied after substituting
"1.0" for "1.25" in the definitions of defined benefit plan fraction and defined
contribution plan fraction.
(c) The following schedule shall be substituted for
the vesting schedule in Section 5.1:
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<TABLE>
<CAPTION>
Years of Service Vested Percentage
---------------- -----------------
<S> <C> <C>
less than 2 0
2 20
3 40
4 60
5 80
6 or more 100
</TABLE>
The vested percentage of the Participant's Account for any Plan Year for which
the Plan is top-heavy shall never be reduced in any subsequent Plan Year without
regard to whether this Article applies to such Plan Year. In any Plan Year in
which the Plan's top-heavy status changes, each Participant with three (3) or
more years of vesting service may elect to have the provisions of either this
Section or Section 5.1 apply to determine the vested percentage of his Account.
Article XI
PLAN LOANS
11.1 Loans to Participants.
Upon the written application of a Participant, and
subject to the terms of this Section, the Plan may lend to such Participant an
amount from the Participant's Account, as requested by the Participant. Loans
shall be made available to all Participants who are actively employed by the
Employer. A Participant may not have more than two (2) loans from the Plan
outstanding at any time.
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11.2 Limitations.
(a) Subject to the limitations set forth below, a
Participant may borrow up to 50% of the balance of his 401(k) Account. Effective
as of August 1, 1994 and subject to the limitations set forth below, a
Participant may borrow up to 50% of the combined balance of his 401(k) and
Rollover Accounts.
(b) The amount of a loan (when added to the outstanding
balance of all other loans from the Plan) shall not exceed the lesser of (i)
$50,000, reduced by the excess of the Participant's highest outstanding loan
balance from the Plan during the one year period immediately preceding the
date of a new loan over the Participant's outstanding loan balance on such
date or (ii) one-half (1/2) the value of the Participant's vested Account
balance.
11.3 Approval of Loans.
(a) Application by a Participant for a loan shall be in
writing on a form prescribed by the Administrator and shall be submitted to
the Administrator for review. The application shall set forth facts establishing
to the satisfaction of the Administrator that the Participant is credit-worthy
and has the means and ability to repay the loan according to its terms. Approval
of the application shall be made by the Administrator. A Participant shall be
obligated to execute a promissory note and a payroll withholding form before
receiving the loan proceeds.
(b) If the Administrator approves the loan, it shall
direct the Trustee to establish a special loan account by liquidating a portion
of the investments in the Participant's Account in the amount of the loan. Each
loan shall be secured by an amount in the Participant's
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Account equal to the amount of the loan, but not greater than fifty percent
(50%) of the borrower's entire right, title and interest in his vested Account
balance.
(c) The Administrator shall make loans available to all
Participants on a reasonably equivalent basis, considering their
credit-worthiness, but without regard to the age, sex, race, color, religion or
national origin of any Participant.
11.4 Interest Rate.
Each loan agreement shall provide for the payment of a
reasonable rate of interest; such interest to be fixed by the Administrator at
an annual percentage rate equal to one percentage point plus the prime rate
charged, on the date the loan is made, by large United States money center
commercial banks as published in The Wall Street Journal. The Administrator
shall not unreasonably discriminate among Participants in the matter of interest
rates.
11.5 Repayment.
The repayment of any loan granted pursuant to this Section
shall be in accordance with the terms and conditions determined by the
Administrator; provided, every loan shall be repaid in substantially level
periodic installments of principal and interest, payable not less frequently
than quarterly over the term thereof. The term of a loan shall not exceed five
(5) years, unless such loan is for the purpose of acquiring the Participant's
principal residence, in which case the loan may be for any reasonable period of
time determined by the Administrator. A Participant may request a suspension of
repayment for a period of time not to exceed one year. Any such suspension,
however, shall not extend the maximum five (5) year term of the loan, if
applicable.
11.6 Default.
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A loan granted under this Plan that is not repaid shall be
deemed to be in default upon the earlier of (a) 60 days after the date the
Participant retires or terminates employment, (b) the Participant's failure to
make payment on the loan as due, to the extent such failure causes the loan to
fail to satisfy the requirements of Section 11.5, or (c) in the case of death
while employed, within a reasonable time established by the Administrator. At
the time of such default, the Administrator shall foreclose on the loan and
deduct any outstanding balance plus accrued interest from the Participant's
Account balances immediately prior to distribution.
11.7 Other Rules.
All loans shall be subject to such further rules and
regulations as the Administrator shall from time to time prescribe and
administer in a non-discriminatory manner.
Article XII
AMENDMENT, TERMINATION, AND MERGERS
12.1 Amendment.
The Plan Sponsor shall have the right at any time to
amend the Plan by action of the Administrator as set forth in Section 9.2 or by
action of the Board of Directors. However, no such amendment shall authorize or
permit any part of the Trust Fund (other than such part as is required to pay
taxes and administration expenses) to be used for or diverted to purposes other
than for the exclusive benefit of the Participants or their Beneficiaries; and
no such amendment shall cause any reduction in the amount credited to the
Account of any Participant or cause or permit any portion of the Trust Fund to
revert to or become the property of the Employer.
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12.2 Termination.
(a) A Participating Employer may elect to cease its
participation in the Plan at any time by providing notice to the Plan Sponsor.
(b) The Plan Sponsor shall have the right at any time
to terminate the Plan by delivering to the Trustee and Administrator written
notice of such termination. A complete discontinuance of the Contributions to
the Plan shall be deemed to constitute a termination. Upon any termination (full
or partial) or complete discontinuance of contributions, and all unallocated
amounts shall be allocated to the Accounts of all Participants in accordance
with the provisions hereof and all amounts credited to the affected
Participants' Accounts shall become 100% vested. Upon such termination of the
Plan, the Plan Sponsor, by written notice to the Trustee and Administrator, may
direct either:
(i) a complete distribution of the assets in the
Trust Fund to the Participants; or
(ii) continuation of the Trust and the distribution
of benefits at such time and in such manner as though the Plan had not been
terminated.
12.3 Merger or Consolidation.
This Plan and/or the Trust may be merged or consolidated
with, or its assets and/or liabilities may be transferred to, any other
tax-qualified plan and its associated trust only if the benefits which would
be received by a Participant of this Plan, in the event of a termination of
the Plan immediately after such transfer, merger or consolidation, are at least
equal to the benefits
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the Participant would have received if the Plan had terminated immediately
before the transfer, merger or consolidation.
Article XIII
MISCELLANEOUS
13.1 Valuation.
(a) The Administrator shall direct the Trustee, as of
each Anniversary Date, and at such other date or dates deemed necessary by the
Administrator, each such date herein called a "Valuation Date", to determine the
net worth of the assets comprising the Trust Fund as it exists on such Valuation
Date prior to taking into consideration any Contributions to be allocated for
that Plan Year. In determining such net worth, the Trustee shall value the
assets comprising the Trust Fund at their fair market value as of the Valuation
Date and shall deduct all expenses for which the Trustee is entitled to but has
not yet obtained reimbursement from the Employer or the Trust Fund.
(b) In determining the fair market value of
securities held in the Trust Fund which are listed on a registered stock
exchange, the Administrator shall direct the Trustee to value the same at the
prices they were last traded on such exchange preceding the close of business on
the Valuation Date. If such securities were not traded on the Valuation Date, or
if the exchange on which they were traded was not open for business on the
Valuation Date, then the securities shall be valued at the prices at which they
were last traded prior to the Valuation Date. Any unlisted security held in the
Trust Fund shall be valued at its bid price next preceding the close of business
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on the Valuation Date, which bid price shall be obtained from a registered
broker or an investment banker. In determining the fair market value of assets
other than securities for which trading or bid prices can be obtained, the
Trustee may appraise such assets itself, or in its discretion, employ one or
more appraisers for that purpose and rely on the values established by such
appraiser or appraisers.
13.2 Participant's Rights.
This Plan shall not be deemed to constitute a
contract between the Employer and any Participant or to be a consideration or an
inducement for the employment of any Participant or Employee. Nothing contained
in this Plan shall be deemed to give any Participant or Employee the right to be
retained in the service of the Employer or to interfere with the right of the
Employer to discharge any Participant or Employee at will at any time, and for
any reason, with or without cause, regardless of the effect which such discharge
shall have upon him as a Participant of this Plan.
13.3 Alienation.
(a) Subject to the exceptions provided below, no
benefit which shall be payable out of the Trust Fund to any person (including a
Participant or his Beneficiary) shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any
attempt to anticipate, alienate, sell, transfer, assign, pledge, encumber, or
charge the same shall be void; and no such benefit shall in any manner be liable
for, or subject to, the debts, contracts, liabilities, engagements, or torts of
any such person, nor shall it be subject to attachment or legal process for or
against such person, and the same shall not be recognized by the Trustee, except
to such extent as may be required by law.
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(b) This Section 13.3 shall not apply to the extent a
Participant or Beneficiary is indebted to the Plan, for any reason, under any
provision hereof. At the time a distribution is to be made to or for a
Participant's or Beneficiary's benefit, such proportion of the amount
distributed as shall equal such indebtedness shall be paid by the Trustee to the
Trustee or the Administrator, at the direction of the Administrator, to apply
against or discharge such indebtedness. Prior to making such a payment, however,
the Participant or Beneficiary must be given written notice by the Administrator
that such indebtedness is to be so paid in whole or part from his Account. If
the Participant or Beneficiary does not agree that the indebtedness is a valid
claim against his vested Account, he shall be entitled to a review of the
validity of the claim in accordance with procedures provided in Sections 9.8 and
9.9.
(c) This provision shall not apply to a "qualified
domestic relations order" defined in Code Section 414(p), and those other
domestic relations orders permitted to be so treated by the Administrator under
the provisions of the Retirement Equity Act of 1984. The Administrator shall
establish a written procedure to determine the qualified status of domestic
relations orders and to administer distributions under such qualified orders.
13.4 Construction.
This Plan shall be construed and enforced according
to ERISA and the laws of the State of New York, other than its laws respecting
choice or conflicts of law, to the extent not pre-empted by ERISA.
13.5 Gender and Number.
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Wherever any words are used herein in the masculine,
feminine or neuter gender, they shall be construed as though they were also used
in another gender in all cases where they would so apply, and whenever any words
are used herein in the singular or plural form, they shall be construed as
though they were also used in the other form in all cases where they would so
apply.
13.6 Legal Action and Indemnification.
(a) In the event any claim, suit or proceeding is
brought regarding the Trust and/or Plan to which any member of the Employer's
Board of Directors, the Administrator or any officer or Employee of the Employer
may be a party in connection with such persons' duties and responsibilities
under this Plan or the Trust and such claim, suit or proceeding is resolved in
favor of such person, he shall be entitled to be reimbursed from the Trust Fund
for any and all costs, attorney's fees, and other expenses pertaining thereto
incurred by them for which he shall have become liable.
(b) The Administrator may from time to time request
the advice of counsel, who may be counsel to the Employer, on any legal matter,
including the interpretation of this Plan or the Trust, and shall be indemnified
and held harmless by the Employer in acting on such advice.
(c) The Employer shall indemnify each member of its
Board of Directors, the Administrator, and each officer and Employee of the
Employer for any liability, loss, expense, assessment or other cost of any kind
or description whatsoever as and when incurred, including legal fees and
expenses, which (a) are actually incurred by any such person as a result of the
duties and
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responsibilities allocated to such person under this Plan and (b) are not
attributable to such person's own gross negligence, willful misconduct or lack
of good faith.
13.7 Prohibition Against Diversion of Funds.
(a) Except as provided below and otherwise
specifically permitted by law, it shall be impossible by operation of the Plan
or of the Trust, by termination of either, by power of revocation or amendment,
by the happening of any contingency, by collateral arrangement or by any other
means, for any part of the corpus or income of any trust fund maintained
pursuant to the Plan or any funds contributed thereto to be used for, or
diverted to, purposes other than the exclusive benefit of Participants, Former
Participants, or their Beneficiaries.
(b) In the event the Employer shall make any
Contributions under a mistake of fact pursuant to Section 403(c)(2)(A) of ERISA,
the Employer shall demand repayment of such Contributions at any time within one
(1) year following the time of payment and the Trustee shall return such amount
to the Employer within the one (1) year period. Earnings of the Plan
attributable to such Contributions may not be returned to the Employer but any
losses attributable thereto must reduce the amount so returned.
13.8 Bonding.
Every fiduciary (as that term is defined under
Section 3(21) of ERISA), except a bank or an insurance company, unless exempted
by ERISA and regulations thereunder, shall be bonded in an amount not less than
10% of the amount of the funds such fiduciary handles; provided, however, that
the minimum bond shall be $1,000 and the maximum bond, $500,000. The amount of
funds handled shall be determined at the beginning of each Plan Year by the
amount of funds
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handled by such person, group, or class to be covered and their predecessors, if
any, during the preceding Plan Year, or if there is no preceding Plan Year, then
by the amount of the funds to be handled during the then current year. The bond
shall provide protection to the Plan against any loss by reason of acts of fraud
or dishonesty by the fiduciary alone or in connivance with others. The surety
shall be a corporate surety company (as such term is used in Section 412(a)(2)
of ERISA), and the bond shall be in a form approved by the Secretary of Labor.
Notwithstanding anything to the contrary herein, the cost of such bonds shall be
an expense of and may, at the election of the Administrator, be paid from the
Trust Fund or by the Employer.
13.9 Receipt and Release for Payments.
Any payment to any Participant, his legal representative,
Beneficiary, or to any guardian or committee appointed for such Participant or
Beneficiary in accordance with the provisions of this Plan, shall, to the
extent thereof, be in full satisfaction of all claims hereunder against the
Employer, who may require such Participant, legal representative, Beneficiary,
guardian or committee, as a condition precedent to such payment, to execute a
receipt and release thereof in such form as shall be determined by the Employer.
13.10 Action by the Employer.
Whenever the Employer under the terms hereof is
permitted or required to do or perform any act, matter or thing, it shall be
done and performed by a person duly authorized by its legally constituted
authority.
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13.11 Named Fiduciaries and Allocation of Responsibility.
The "Named Fiduciaries" of this Plan are (a) the Plan
Sponsor, (b) the Administrator, and (c) any Investment Manager appointed
hereunder. The Named Fiduciaries shall have only those specific powers, duties,
responsibilities, and obligations as are specifically given them under the Plan.
In general, the Plan Sponsor shall have the sole responsibility for formulating
the Plan's funding policy and method; and amending or terminating, in whole or
in part, this Plan. The Administrator shall have the sole responsibility for the
administration of the Plan which responsibility is specifically described
herein. The Trustee shall have the sole responsibility of management of the
assets held under the Trust in accordance with the terms thereof, except those
assets, the management of which has been assigned to an Investment Manager, who
shall be solely responsible for the management of the assets assigned to it, all
as specifically provided in the Plan or the Trust. Each Named Fiduciary warrants
that any directions given, information furnished, or action taken by it shall be
in accordance with the provisions of the Plan, authorizing or providing for such
direction, information or action. Furthermore, each Named Fiduciary may rely
upon any such direction, information or action of another Named Fiduciary as
being proper under the Plan, and is not required to inquire into the propriety
of any such direction, information or action. It is intended under the Plan that
each Named Fiduciary shall be responsible for the proper exercise of its own
powers, duties, responsibilities and obligations hereunder. No Named Fiduciary
shall guarantee the Trust Fund in any manner against investment loss or
depreciation in asset value. Any person or group may serve in more than one
fiduciary capacity.
-73-
<PAGE> 79
13.12 Headings.
The headings and subheadings of this Plan have been
inserted for convenience of reference and are to be ignored in any construction
of the provisions hereof.
13.13 Approval by Internal Revenue Service.
Notwithstanding any provisions to the contrary, any
Contribution by the Employer to the Trust Fund is conditioned upon the
deductibility of the Contributions by the Employer under the Code and, to the
extent any such deduction is disallowed, the Employer shall within one (1) year
following a final determination of the disallowance, whether by agreement with
the Internal Revenue Service or by final decision of a court of competent
jurisdiction, request repayment of the amount of such non-deductible
Contribution and the Trustee shall return such amount within one (1) year
following the disallowance. Earnings of the Plan attributable to the
non-deductible Contributions may not be returned to the Employer, but any losses
attributable thereto must reduce the amount so returned.
13.14 Uniformity.
All provisions of this Plan shall be interpreted and
applied in a uniform, nondiscriminatory manner.
-74-
<PAGE> 80
IN WITNESS WHEREOF, this Plan is adopted in
accordance with IRS Announcement 94-136; this Plan is intended to satisfy the
applicable requirements of the Tax Reform Act of 1986 and its adoption is
conditioned upon the receipt of a determination by the Internal Revenue Service
that the adoption hereof will not adversely affect the continued qualification
of the Plan under Sections 401(a) and 501(a) of the Internal Revenue Code of
1986.
CMP PUBLICATIONS, INC.
By: /s/ MICHAEL LEEDS
-----------------------------
Michael Leeds
President
ATTEST:
/s/ ROBERT P. MARAFIOTI
- ------------------------------
Assistant Secretary
-75-
<PAGE> 81
APPENDIX A
Participating Affiliates of
CMP Publications, Inc.
Effective as of the Effective Date, the following Affiliates
of CMP Publications, Inc. participate in the Plan:
- CMP Publications International Corp.
-76-
<PAGE> 1
EXHIBIT 10.16
CMP PUBLICATIONS INC.
EQUITY APPRECIATION PLAN
SECTION 1. ESTABLISHMENT OF PLAN. CMP Publications Inc. hereby establishes.
this Equity Appreciation Plan (the "Plan") effective as of January 1,
1988.
SECTION 2. PURPOSES AND SUMMARY. It is the purpose of the Plan to provide
substantial incentives to eligible key executives of the Company:
to make the Company grow continuously and successfully in sales and
profits,
to take a long term view of the Company's future and help the
Company reach its long term goals,
and to remain with the Company for the long term.
The Plan allows these key executives to share directly in the growth and
success of the Company by receiving Share Appreciation Rights ("SARs").
The SARs increase in value as the company's sales and profits grow. The
SARs are redeemable in cash in installment payments, normally beginning
in 1993.
All SARs are granted by the CMP Publications Inc. Board of Directors whose
decision in all matters pertaining to SARs is final. All SAR grants shall
be confidential.
SECTION 3. ELIGIBILITY. SARs are granted only to certain key employees
elected from time to time by the Board of Directors whose exceptional
contributions, decisions, and services are expected to have a unique and
important impact on the long term growth and success of the Company, and
who are responsible for the management, success, growth and protection of
the business of the Company or of significant sectors of the business of
the Company.
SECTION 4. DEFINITIONS.
"Board of Directors" shall mean the Board of Directors of CMP Publications
Inc.
"CMP Publications Inc. Group of Companies" (the 'Company') means CMP
Publications Inc., its actual subsidiaries, and to the extent
determined by the Board of Directors, deemed subsidiaries of CMP
Publications Inc. Deemed subsidiaries are corporations or
partnerships whose stock or profit interest is owned or controlled
by the majority shareholders of CMP Publications Inc. The decision
as to which entities shall be so included shall be made from time to
time during the life of the Plan and no inferences as to whether any
entity shall be included shall be based upon the inclusion or
non-inclusion of any similar or not similar entity. once an entity
has been included for purposes of the Plan in the CMP Publications
Inc.
<PAGE> 2
Group of Companies it shall continue to be so included so long as
its stock or profit interest is owned or controlled by the majority
shareholders of CMP Publications Inc. Such deemed subsidiaries of
CMP Publications Inc. shall be considered to be part of the CMP
Publications Inc. Group of Companies for all purposes of the Plan,
including the determination of the value of Appreciation Plan
Shares. The extent or proportion to which such Net Sales and Pre-tax
Earnings of the deemed subsidiaries shall be included shall be
determined by the Board of Directors.
"Employee" shall mean any full-time employee of the Company and members of
the Board of Directors.
"Participant" means any Employee who is awarded a grant of SARs under
Section 5.1.
"Net Sales" means all sales and revenues made in the ordinary course of
business, excluding sales of capital assets, less any credits, cash
discounts, frequency discounts or other allowances and rebates, and
less bad debts, for each calendar year as determined by the Board of
Directors pursuant to Section 7.2.
"Pre-tax Earnings" means the Net Sales, less all costs and expenses,
including this Equity Appreciation Plan, all other long term
compensation, as well as regular compensation, paid to Employees, as
computed according to generally accepted accounting principles, plus
or minus such other items of income or expense, for each calendar
year as determined by the Board of Directors pursuant to Section
7.2, and adjusted by the annual provision for SARs.
A "SAR" is the right to receive the appreciation in value of one of the
Appreciation Plan Shares from the Grant Date to the relevant
Valuation Date.
An "Appreciation Plan Share" is the dollar equivalent of
50% of (10 x Pre-tax Earnings + Annual Net Sales)
-------------------------------------------------
20,000,000
As of December 31, 1987, the Grant Date, each Appreciation Plan Share
shall be deemed to have a value of $3.80.
"Compete" means the performance by a Participant or former Participant of
any act set forth in Exhibit A to the Plan.
"Termination For Cause", as determined by the Board of Directors in its
final and sole discretion, shall include, but not be limited to, a
termination of an Employee for: a criminal conviction; moral
turpitude; sexual harassment; discrimination as defined in the then
current edition of the CMP Publications Inc. Handbook; willful
<PAGE> 3
refusal to perform; gross and willful misconduct; gross negligence
in the performance of, or flagrant neglect of, duties and
obligations; fraud or misappropriation of corporate funds; willful
disregard of company policy or Principles or lawful orders of the
Board of Directors; use of drugs or drunkenness either on the job or
that materially affects the performance of duties; competition with
the Company as defined in Section 4.9; dishonesty, disloyalty,
insubordination, conflict of interest; and willful and continued
absence (other than by reason of disability), substantial
abandonment of duties and responsibilities, or any other conduct of
the Participant which in the opinion of the Board of Directors would
render the continued employment of the Participant detrimental for
the Company. Termination For Cause shall also mean the resignation
by an Employee following such Employee's commission of an act which
would constitute grounds for Termination For Cause under this
Section 4.10.
SECTION 5. SARS.
GRANT OF SARS. The Board of Directors shall determine which Employees
shall be granted SARs. The Company shall establish a bookkeeping
account for each Participant in the Plan and shall record the number
of SARs each Participant has been granted and the number of SARs
each Participant has had redeemed. Notwithstanding any other
provision of the Plan, the maximum number of SARs which all of the
Participants may receive in total shall be limited to 2,000,000.
GRANT DATE. The date of grant of each SAR granted prior to June 30, 1988,
shall be deemed to be December 31, 1987.
VALUATION DATE. The Valuation Date with respect to each SAR shall be the
December 31 immediately preceding the date the SAR is redeemed.
VALUE OF SARS. The value of SARs is the value of the Appreciation Plan
Shares represented by the SARs on each Valuation Date less the value
of the Appreciation Plan Shares on the Grant Date.
SECTION 6. REDEMPTION AND PAYMENT OF SARS.
REDEMPTION ELECTION. Participants must notify the Company in writing prior
to April 1 of each year of the percentage of their SARs they have
elected to redeem that year. Elections to redeem SARs are
irrevocable once made.
REDEMPTION PERIOD. Normally SARs shall be redeemed on June 30 of each year
a Participant elects to redeem SARs. Except as provided in Sections
6.3, 6.4, and 6.6, SARs must be redeemed during the period beginning
on June 30, 1993 and ending on June 30, 2002. No more than 20% of a
Participant's SARs granted hereunder may be redeemed in any one
year, but the Participant must have redeemed at least the following
percentages of such SARs by the following dates:
<PAGE> 4
20% as of June 30, 1998;
40% as of June 30, 1999;
60% as of June 30, 2000;
80% as of June 30, 2001; and
100% as of June 30, 2002.
EXTENSION OF REDEMPTION PERIOD. Notwithstanding Section b.2, the Board of
Director-s may provide for an extension of the period during which
Participants may redeem SARs, as well as for a modification of the
redemption schedule set forth in Section 6.2.
EARLY REDEMPTION. upon written request to the Board of Directors,
Participants may elect to have 5% of their SARs redeemed on June 30,
1991 and an additional 5% of their SARs (to a maximum total of 10%)
redeemed on June 30, 1992. Participants may, however, redeem only up
to a total of 20% of their SARs as of June 30, 1993.
PAYMENT OF SARS. Normally, payment of 50% of the value of the SARs
redeemed each year shall be made by the later of June 30 of that
year or 45 days after the audited financial statements of the
Company are available, and the remainder by December 15 of such
year.
ACCELERATION OF REDEMPTIONS AND PAYMENTS. The Board of Directors may at
any time accelerate any or all Redemptions and payments of SARs by
causing any or all SARs to be redeemed and by making payment in cash
of the value of such SARs as of the nearest valuation Date. A holder
of SARs, redemption and payment of which have been accelerated,
shall have no further rights hereunder with respect to such SARs.
DELAY OF PAYMENT. The Board of Directors may delay (but no more than 5
years) any or all payments of SARs, in the event that the total of
all payments for SARs, including previously delayed payments, for
the calendar year would otherwise exceed 20% of Pre-tax Profits of
the Company for the preceding year, or under extraordinary
circumstances for a reason deemed to be appropriate by the Board of
Directors; provided, however, at least 33 1/3% of the amount
otherwise payable with respect to SARs redeemed in that year shall
be paid each year. All delays of payments, including previously
delayed payments, shall be allocated proportionately among the
Participants to whom payments are due in such year. Such delayed
payments shall, when made, include an interest factor accrued from
the scheduled date of payment at the Prime Rate established by the
Company's primary bank.
<PAGE> 5
TERMINATION OF EMPLOYMENT. Notwithstanding the other provisions of this
Section 6, upon a Participant's termination of service with the
Company, the Participant shall be paid as follows:
In the event a Participant voluntarily terminates employment with
the Company on or prior to December 31, 1992, the Participant shall
forfeit all SARs not yet paid.
In the event a Participant's employment with the Company terminates
after December 31, 1992, for any reason other than for Termination
For Cause or death, the Participant shall remain eligible to redeem
equal percentages of such Participant's remaining SARs in five
annual installments commencing on the June 30 immediately following
the termination. If, however, a Participant's employment with the
Company terminates pursuant to this Section 6.8(b) prior to June 30,
1993, such Participant's first annual installment shall be limited
to an amount of SARs which enables the Participant to have redeemed
20% of the Participant's original amount of SARs as of June 30,
1993. The Participant's remaining SARs shall be redeemed in four
annual installments of 20% of the Participant's original amount of
SARs. All SARs redeemed pursuant to this Section 6.8(b) shall be
valued as of the Valuation Date immediately preceding their
redemption. The payments for the SARs redeemed under this Section
6.8(b) shall be made according to Section 6.5.
If a Participant's employment terminates after December 31, 1992,
due to the Participant's death, all of the Participant's remaining
SARs shall be redeemed immediately at their value as of the
Valuation Date immediately preceding the Participant's death, and
paid to the Participant's beneficiary pursuant to Section 8 in ten
semi-annual installments commencing on the June 30 immediately
following the Participant's death.
If on or prior to December 31, 1992, a Participant's employment is
terminated by death, disability, or by the Company for reasons other
than a Termination For Cause, the Participant's remaining SARs shall
be redeemed immediately at their value as of the Valuation Date
immediately preceding the termination. The Participant shall receive
in ten semiannual installments commencing on June 30, 1993, a
percentage of such value equal to 20 times the number of full
calendar years the Participant was employed by the Company after the
Grant Date.
In the event of the Participant's Termination For Cause at any time,
such Participant shall forfeit all SARs which are not yet paid.
If at any time a Participant or former Participant Competes with the
Company, such Participant or former Participant shall forfeit all
SARs not yet paid.
<PAGE> 6
The determination of the manner in which a Participant's employment
with the Company terminates, including a determination as to whether
a Termination For Cause has occurred, shall be made by the Board of
Directors.
FORM OF PAYMENTS. All payments made under the Plan shall be in the form
of cash.
WITHHOLDING. The Company shall withhold from al.1 payments made under the
Plan all taxes required by Federal, state or local tax law.
SOURCE OF PAYMENTS. All payments made under the Plan shall be p he general
assets of the company and no special or separate fund is being
established or segregated to assure such payments hereunder.
SECTION 7. ADMINISTRATION.
IN GENERAL. The Board of Directors shall have full power and authority,
subject to the provisions of the Plan, to designate Participants in
the Plan, to determine the terms of such participation, to determine
the terms and conditions of the granting of SARs or the right to
earn SARs under the Plan, to interpret the provisions of the Plan,
to supervise the administration of the Plan, to promulgate rules and
regulations, and to take all actions in connection with or relating
to the Plan as it deems to be necessary. Determinations and
designations of the Board of Directors shall be by a majority of its
members and shall be final. Any determination or designation reduced
to writing and signed by all of the members of the Board of
Directors shall be fully effective as if it had been made at a
meeting duly held. Any actions taken by the Board of Directors in
connection with or relating to this Plan shall be in its sole and
absolute discretion.
FINANCIAL DETERMINATIONS. All determinations concerning Net Sales, Pre-tax
Earnings, and values, shall be made by the Board of Directors based
upon the regular and pro forma financial statements of the Company
as available. The Company shall supply to each Participant on an
annual basis a statement of Pre-tax Earnings, annual Net Sales and
the value of Appreciation Plan Shares. Independent certified public
accountants shall certify to the Board of Directors that the amounts
used for purposes of the Plan are in accordance with the financial
statements of the Company prepared in accordance with generally
accepted accounting principles ("GAAP"). No Participant has the
right (and each Participant hereby expressly waives any right such
Participant may have possessed) to challenge a determination by the
Board of Directors or to see any of the underlying documents
referred to above. The determination of the Board of Directors shall
control for all purposes of the Plan.
SECTION 8. BENEFICIARIES. Designation of beneficiaries to receive any amounts
payable under the Plan subsequent to the death of a Participant shall be
made in writing and filed with the Company at the CMP Publications Inc.
headquarters in such form and manner as
<PAGE> 7
the Company may from time to time prescribe. Beneficiary designations may
be changed by a Participant or former Participant in the same manner at
any time prior to death, and may thereafter be designated or changed by a
surviving beneficiary eligible to receive any payment unless a successor
beneficiary to such surviving beneficiary has been designated by the
Participant, former Participant or prior beneficiary. If a Participant,
former Participant or beneficiary eligible to receive any payment under
the Plan dies without a surviving beneficiary having been designated, or
with such Participant's estate or a trust designated as beneficiary, the
Participant's interest under the Plan shall be distributed to the legal
representative of the Participant's estate, or to the trustees of any such
trust in which case the Company, the Board of Directors and the members
thereof shall not be under further liability to anyone. If the will of a
Participant or former Participant is challenged or if the Board of
Directors is otherwise in doubt as to the right of any person to receive
an amount payable under the Plan, the Board of Directors may place such
amount in an escrow account until a determination is made by a court of
appropriate jurisdiction or the rights to such amount are otherwise
determined. Alternatively, the Board of Directors may pay such amount into
any court of appropriate jurisdiction, and such payment shall be a
complete discharge of the liability of the Plan and the Company thereto.
SECTION 9. CHANGES IN BUSINESS. In the event there is a substantial change in
the structure or the business of the Company that the Board of Directors
determines significantly changes the value of SARs, the Board of Directors
shall have the power, but not the obligation, to adjust the SARs or the
methods of valuation, including changing the valuation of the Appreciation
Plan Shares.
SECTION 10. COMPANY OPERATIONS. Nothing herein shall impact upon the right of
the Board of Directors to operate the Company in any manner in which it so
chooses. For example, the Company is under no obligation to attempt to
maximize Company revenue or profits or Appreciation Plan Share values.
SECTION 11. AMENDMENT AND TERMINATION OF PLAN. The Board of Directors may at
any time terminate the plan or adopt such written amendments or
modifications of the Plan as it may deem advisable; provided, however,
that no such termination, amendment or modification shall deprive any
Participant of any right or benefit to which the Participant had
previously become entitled under the Plan.
SECTION 12. NO RIGHTS CREATED. Nothing herein is intended or shall be
interpreted to give any Participant the right to be employed, reemployed
or continue to be employed by the Company, and nothing herein shall confer
any right or benefit or any entitlement to any benefit on any person who
at any time during the duration of the Plan is participating hereunder
unless and until an amount is actually paid over to such person pursuant
to the foregoing provisions of the Plan. Furthermore, nothing herein shall
provide any Participant with any rights as a shareholder with respect to
the Company by virtue of participation in the Plan.
<PAGE> 8
SECTION 13. NO TRUST CREATED. Neither the provisions of the Plan no any
action taken by the company or the Board of Directors pursuant to the
provisions of the Plan shall be deemed to create any trust, express or
implied, or any fiduciary relationship between and among the Company, the
Board of Directors, any member of the Board of Directors or any
Participant.
SECTION 14. VALUE OF THE COMPANY. The formula to determine the value of each
Appreciation Plan Share under Section 4.8 does not in any way relate to
the value of the Company and such value shall not in any way be deemed to
be an indication of the value of the company.
SECTION 15. NO ALIENATION OF BENEFITS. No right or benefit under the Plan
shal1 be subject to anticipation, transfer, sale, assignment, pledge,
encumbrance, charge, levy, attachment or execution of a judgment of any
kind. No right or benefit under the Plan shall in any manner be subject to
or affected by the debts, contract liabilities or torts of any
Participant.
SECTION 16. CONFIDENTIALLY. The existence of the Plan and grants made
hereunder, financial results of the Company and all other information
given to Participants shall be held in strictest confidence.
SECTION 17. APPLICABLE STATE LAW. All questions pertaining to the Plan shall
be determined under the laws of the State of New York.
SECTION 18. NOTICES. All notices to Participants or their beneficiaries or
the Company provided for in the Plan shall be deemed to be duly given if
mailed, with return receipt requested, or delivered by hand (a) if to the
Participant or beneficiary, to such person's home address as reflected on
the Company payroll or other records, unless the Board of Directors has
been otherwise notified of a change in such address, and (b) if to the
Company, to CMP Publications, Inc., 600 Community Drive, Manhasset, New
York 11030.
<PAGE> 9
EXHIBIT A
For purposes of the Plan, a Participant or former Participant shall Compete with
the Company if the Participant or former Participant performs any of the
following acts:
Directly or indirectly owns, manages, operates, controls, consults for,
assists, is employed by, represents, participates in any way, or is
connected in any manner with the ownership, management, operation,
conduct or control of any business which directly or indirectly
competes with the publications or other businesses in which the
Company is engaged, including any future function, business, or
activity of the Company, the planning of which the Participant had
knowledge at the time of termination.
Solicits the service of any Employee (or former Employee who had been
employed by the Company within one year of the solicitation) for the
Participant or for any other person or company, or induces or helps
to induce any Employee to leave the Company for other employment;
Assists, induces or helps any employee or former Employee, any other
company, or any other person, to compete with the Company or any of
its activities;
Employs or causes to be employed after the Participant's termination any
person who was a Company Employee at the time of the Participant's
termination of employment from the company or during the 18 months
prior to the Participant's termination, without the prior written
consent of the Company;
Injures or hinders the business of the Company in any way or injures or
hinders its officers or employees in any way through the
Participant's activities or contacts within the Company or with the
Company's employees, customers, and suppliers, or prospective
customers and suppliers or any other person or entity. such
activities or contacts shall include, but not be limited to, any
oral or written statement which casts aspersion upon the honesty,
credit, efficiency or business practices or character of the Company
or its officers and employees;
Fails to maintain at all times the confidentiality of the Company's
records, policies, lists, financial details or any other material
not normally disclosed to the public, or fails to return to the
Company any records or properties entrusted to the Participant,
whether of value or not, at any time upon request, and automatically
and immediately upon termination and before accepting any final
payment; or
Makes copies of such Company records or other papers or destroys such
records or other papers without specific authorization or
instruction by the Company.
<PAGE> 1
EXHIBIT 10.18
CREDIT AGREEMENT dated as of July 15, 1993 among CMP PUBLICATIONS,
INC., a New York corporation (the "Borrower"), SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, formerly known as The Connecticut National Bank
("Shawmut"), THE CHASE MANHATTAN BANK, NATIONAL ASSOCIATION ("Chase", and
together with Shawmut and any successors or permitted assigns, the "Banks") and
Shawmut, as agent for the Banks (in its capacity as such, the "Agent").
The Borrower desires that the Banks extend credit as provided herein,
and the Banks are prepared to extend such credit. Accordingly, the Borrower, the
Agent and the Banks agree as follows:
ARTICLE 1. DEFINITIONS; ACCOUNTING TERMS.
SECTION 1.01. DEFINITIONS. As used in this Agreement, the following
terms have the following meanings (terms defined in the singular to have a
correlative meaning when used in the plural and vice versa):
"Accounts Receivable" means and includes accounts receivable and notes,
drafts, acceptances, and other instruments representing or evidencing a right to
payment for goods sold or leased or for services rendered, whether or not earned
by performance, of the Borrower, whether secured or unsecured, whether now
existing or hereafter created or arising, and whether or not specifically sold
or assigned hereunder.
"Affiliate" means any Person: (a) which directly or indirectly
controls, or is controlled by, or is under common control with, the Borrower or
its Subsidiaries, if any; (b) which directly or indirectly beneficially owns or
holds 5% or more of any class of voting stock of the Borrower or any such
Subsidiary; or (c) 5% or more of the voting stock of which is directly or
indirectly beneficially owned or held by the Borrower or such Subsidiary. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract, or otherwise.
"Agreement" means this Credit Agreement, as amended or supplemented
from time to time. References to Articles, Sections, Exhibits, Schedules and the
like refer to the Articles, Sections, Exhibits, Schedules and the like of this
Agreement unless otherwise indicated.
"Applicable Interest Rate" means for any Loan, the Auction Rate, Base
Rate, Eurodollar Rate or Term Rate for such Loan.
"Assignment and Acceptance" means an assignment and acceptance entered
into by a Bank and an Eligible Assignee, and accepted by the Agent, in
substantially the form of Exhibit F.
"Auction Rate" means, for any Interest Period or any other period, the
interest rate offered by a Bank and accepted by the Borrower in connection with
an Auction Rate Loan
<PAGE> 2
pursuant to the procedures set forth in Schedule 2.03.
"Auction Rate Loan" means a Loan made by a Bank in its sole and
exclusive discretion to the Borrower resulting from the auction procedures
described in Schedule 2.03.
"Base Rate" means, for any Interest Period or any other period, a
fluctuating interest rate per annum as shall be in effect from time to time
which rate per annum shall at all times be equal to the rate of interest
announced publicly by the Agent in Stamford, Connecticut, from time to time, as
the Agent's base rate.
"Base Rate Loan" means a Loan which bears interest at the Base Rate,
"Borrowing" means a borrowing consisting of simultaneous Loans from the
Banks under this Agreement.
"Business Day" means any day (other than a Saturday, Sunday or legal
holiday) on which commercial banks are not authorized or required to close in
Stamford, Connecticut or New York, New York, except that, with respect to
notices, determinations and payments with respect to Eurodollar Loans, such day
shall be a "Business Day" only if it is also a day for trading by and between
banks in the London interbank Eurodollar market.
"Capital Expenditures" means for any period, the Dollar amount of gross
expenditures (including obligations under Capital Leases) made for fixed assets,
real property, plant and equipment, and all renewals, improvements and
replacements thereto (but not repairs thereof) incurred during such period, all
as determined in accordance with GAAP.
"Capital Lease" means any lease which has been or should be capitalized
on the books of the lessee in accordance with GAAP.
"Capital Lease Obligation" means the obligation of the lessee under a
Capital Lease. The amount of a Capital Lease Obligation at any date is the
amount at which the lessee's liability under the related Capital Lease would be
required to be shown on its balance sheet at such date in accordance with GAAP.
"Cash Flow Coverage" means, for any period, (i) the total of (A) Net
Income for such period, PLUS (B) the sum of depreciation, amortization and
Operating Lease Obligations of the Borrower and the Guarantors on a combined
basis for such period, minus (C) Capital Expenditures of the Borrower and the
Guarantors on a combined basis for such period, MINUS (D) Distributions of the
Borrower and the Guarantors on a combined basis (other than actual distributions
to shareholders of the Borrower and the Guarantors for the payment of taxes up
to the maximum amount permitted under the definition of "Net Income") for such
period, DIVIDED BY (ii) the total of (X) current maturities of long-term debt of
the Borrower and the Guarantors on a combined basis for such period, PLUS (Y)
the sum of Operating Lease Obligations of the Borrower and the Guarantors on a
combined basis for such ,period, plus (Z) Interest Expense of the Borrower and
the Guarantors on a combined basis for such period.
<PAGE> 3
"Change of Control" means any sale of stock, stock transfer, merger or
other transaction or event following which (i) less than a majority of each
class of voting stock of the Borrower is owned of record and beneficially by any
of Gerard G. Leeds, Liselotte J. Leeds or any of their children or (subject to
such trusts remaining under the control of Gerard G. Leeds, Liselotte J. Leeds
or any of their children) one or more trusts for the benefit of any of them, or
(ii) Gerard G. Leeds, Liselotte J. Leeds and their children no longer have the
absolute right to elect a majority of the Board of Directors of the Borrower.
"Closing Date" means the date this Agreement has been executed by the
Borrower, the Agent and the Banks.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Commitment" means, with respect to each Bank, the commitment of such
Bank to make Loans hereunder as set forth in Schedule 1.01, as the same may be
reduced from time to time pursuant to Sections 2.04 and 2.05.
"Commitment Period" means the period from and including the date hereof
to but not including the Revolving Loan Termination Date or such earlier date as
the Commitments shall terminate as provided herein.
"Current Assets" means the aggregate amount of assets which in
accordance with GAAP may be properly classified as current assets.
"Current Liabilities" means the aggregate amount of liabilities which
in accordance with GAAP may be properly classified as current liabilities.
"Debt" means, with respect to any Person: (a) indebtedness of such
Person for borrowed money; (b) indebtedness for the deferred purchase price of
property or services (except trade payables in the ordinary course of business);
(c) Unfunded Vested Liabilities of such Person (if such Person is not the
Borrower, determined in a manner analogous to that of determining Unfunded
Vested Liabilities of the Borrower); (d) the face amount of any outstanding
letters of credit issued for the account of such Person; (e) obligations arising
under acceptance facilities; (f) guaranties, endorsements (other than for
collection in the ordinary course of business) and other contingent obligations
to purchase, to provide funds for payment, to supply funds to invest in any
Person, or otherwise to assure a creditor against loss; (g) obligations secured
by any Lien on property of such Person and (h) obligations of such Person as
lessee under Capital Leases.
"Default" means any event which with the giving of notice or lapse of
time, or both, would become an Event of Default.
"Default Rate" means a rate per annum equal at all times to the lesser
of 2% per annum above the Applicable Interest Rate in effect from time to time
or the highest rate permitted by law.
"Distributions" means (i) dividends or other distributions in respect
of capital stock of a
<PAGE> 4
Person (except distributions in such stock) and (ii) the redemption or
acquisition of such stock or of warrants, rights or other options to purchase
such stock (except when solely in exchange for such stock) unless made,
contemporaneously, from the net proceeds of a sale of such stock; in either case
valued at the greater of book or fair market value of the property being
dividended, distributed or otherwise transferred as a Distribution.
"Dollars" and the sign I$" mean lawful money of the United States of
America.
"EBIT" means, for any period, earnings before interest and taxes and
shall equal the sum of (i) Net Income for such period, (ii) Interest Expense for
such period, and (iii) federal, state and local income taxes deducted in
determining Net Income (minus any provision for tax benefits), all as determined
in accordance with GAAP.
"Eligible Assignee" means (a) a commercial bank organized under the
laws of the United States or any state thereof; (b) a savings and loan
association or savings bank organized under the Laws of the United States or any
state thereof;-(c) a commercial bank organized under the laws of any other
country which is a member of the Organization for Economic Cooperation and
Development ("OECD"), or a political subdivision of such country; provided, that
such bank is acting through a branch or agency located in the country in which
it is organized or another country which is also a member of the OECD or the
Cayman Islands; (d) the central bank of any country which is a member of the
OECD; (e) a commercial finance company or finance subsidiary of a corporation
organized under the laws of the United States or any state thereof; and (f) an
insurance company organized under the laws of the United States or any state
thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, including any rules and regulations promulgated
thereunder.
"ERISA Affiliate" means any corporation or trade or business which is a
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Borrower or is under common control (within
the meaning of Section 414(c) of the Code) with the Borrower.
"Eurodollar Loan" means a Loan which bears interest at the Eurodollar
Rate.
"Eurodollar Rate" means, for the Interest Period for each Eurodollar
Rate Loan comprising part of the same Borrowing, an interest rate per annum
equal to the average (rounded upward to the nearest whole multiple of 1116 of
I%- per annum) rate at which deposits in Dollars are offered by the Agent to
prime banks in the London interbank market at 11:00 A.M. (London time) two
Business Days before the first day of such Interest Period for a period equal to
such Interest Period, PLUS 1%.
"Event of Default" has the meaning given such term in Section 7.01.
"Funded Debt" means any Debt that bears interest.
<PAGE> 5
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time, applied on a basis consistent
with those used in the preparation of the financial statements referred to in
Section 4.05 (except for changes concurred in by the Borrower's independent
public accountants).
"Guarantor" or "Guarantors" shall mean CMP Publications International
Corp., a Delaware corporation, NRU Inc., a Delaware corporation and any other
Affiliate of the Borrower hereafter guarantying the Notes pursuant to Section
5.09 below.
"Guaranty" means a corporate guaranty in substantially the form of
Exhibit G hereto to be delivered by each Guarantor under the terms of Section
5.09 of this Agreement.
"Interest Coverage" shall have the meaning given that term in Section
6.13 hereof.
"Interest Expense" means, for any period, the gross interest expense
for such period determined in accordance with GAAP consistently applied,
including without limitation (i) the amortization of debt discounts, (ii) the
amortization of all fees payable in connection with the incurrence of Debt to
the extent included in interest expense and (iii) the portion of any payments or
accruals with respect to Capital Leases allocable to interest expense.
"Interest Period" means, (a) for each Eurodollar Loan comprising part
of the same Borrowing, the period commencing on the date of such Eurodollar Loan
or on the last day of the preceding Interest Period, as the case may be, and
ending on the last day of the period selected by the Borrower pursuant to the
following provisions: the duration of each Eurodollar Loan Interest Period shall
be one, two, three or six months, in each case as the Borrower may, upon notice
received by the Agent not later than 12:00 noon (Connecticut time) on the second
Business Day prior to the first day of such Interest Period, select; (b) for
each Auction Rate Loan comprising part of the same Borrowing, the period
commencing on the date of such Auction Rate Loan or on the last day of the
preceding Interest Period, as the case may be, and ending on the last day of the
period selected by the Borrower pursuant to the following provisions: The
duration of each Auction Rate Loan shall be one, two, three or six months, in
each case as the Borrower may, upon notice received by the Agent not later than
12:00 noon (Connecticut time) on the first Business Day prior to the first day
of such Interest Period, select; and (c) for each Base Rate Loan comprising part
of the same Borrowing, the period commencing on the date of such Base Rate Loan
or on the last day of the preceding Interest Period, as the case may be,
pursuant to notice received by the Agent not later than 12:00 noon (Connecticut
time) on any Business Day selected by the Borrower as the first day of such
Interest Period, and ending on the 90th day after the date of such Base Rate
Loan or the last day of the preceding Interest Period, as the case may be;
provided, however, that:
(i) Interest Periods commencing on the same date for Revolving
Loans comprising part of the same Borrowing shall be of the
same duration;
(ii) whenever the last day of any Interest Period would otherwise
occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to
<PAGE> 6
occur on the next succeeding Business Day; provided that, if
such extension would cause the last day of such Interest
Period to occur in the next following calendar month, the last
day of such Interest Period shall occur on the next preceding
Business Day; and
(iii) no Interest Period for any Revolving Loan shall extend beyond
the Revolving Loan Termination Date.
Lending Office,, means, for each Bank and for each type of Loan, the
lending office of such Bank (or of an affiliate of such Bank) designated as such
for such type of Loan on Schedule 1.01 or in the Assignment and Acceptance
pursuant to which it became a Bank or such other office of such Bank (or of an
affiliate of such Bank) as such Bank may from time to time specify to the Agent
and the Borrower as the office through which its Loans of such type are to be
made and maintained.
"Lien" means any lien (statutory or otherwise), security interest,
mortgage, deed of trust, priority, pledge, charge, conditional sale, title
retention agreement, financing lease or other encumbrance or similar right of
others, or any agreement to give any of the foregoing.
"Loans" means the collective reference to the Revolving Loans and the
Term Loans.
"Multiemployer Plan" means a Plan defined as such in Section 3(37) of
ERISA to which contributions have been made by the Borrower or any ERISA
Affiliate and which is covered by Title IV of ERISA.
"Negative Pledge Agreement" means the negative pledge agreement
executed by certain shareholders of the Borrower in the form of Exhibit E.
"Net Income" means, for any period, the aggregate gross revenues and
other proper income (including without limitation, interest income) of the
Borrower and the Guarantors on a combined basis during such period less the
aggregate during such period of (i) cost of goods sold and operating expenses,
(ii) selling, administrative and general expenses of the Borrower and the
Guarantors on a combined basis, (iii) actual distributions to shareholders of
the Borrower and the Guarantors for the payment of taxes up to a maximum amount
equal to the product of (A) the then applicable maximum marginal income tax rate
of such shareholders and (B) the portion of Net Income hereunder for which such
shareholders are liable for income taxes, (iv) depreciation, depletion and
amortization of properties of the Borrower and the Guarantors on a combined
basis and (v) any other items that are treated as expenses under GAAP, but
excluding from the definition of "Net Income" any extraordinary income or losses
or any gains or losses from the sale or disposition of assets other than in the
ordinary course of business, all computed in accordance with GAAP consistently
applied.
"Non-Pro Rata Loan" has the meaning given such term in Section 2.03(e).
"Notes" means the collective reference to the Revolving motes and the
Term Notes.
<PAGE> 7
"Notice of Borrowing" means the certificate in the form of Exhibit D to
be delivered by the Borrower to the Agent pursuant to Sections 2.03 and 3.02(e)
and shall include any accompanying certifications or documents.
"Obligations" means all indebtedness obligations and liabilities of the
Borrower and its Subsidiaries, if any, to the Banks, individually or
collectively, under this Agreement, any Notes or any Guaranty.
"Operating Cash Flow" means, for any period, (i) EBIT for such period,
PLUS (ii) the sum of depreciation and amortization for such period, MINUS (iii)
the sum of interest income for such period, all as determined in accordance with
GAAP.
Operating Lease Obligations" means the obligation of the lessee under
any lease of property (other than a Capital Lease) having an initial or
remaining term of more than one year that is non-cancelable or cancelable only
upon the occurrence of some remote contingency or the payment of a substantial
penalty. The amount of an Operating Lease Obligation at any date is the amount
at which the lessee's liability under the related lease would be required to be
shown on its balance sheet at such date.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
governmental authority or other entity of whatever nature.
"Plan" means any employee benefit or other plan established or
maintained, or to which contributions have been made, by the Borrower or any
ERISA Affiliate and which is covered by Title IV of ERISA or to which Section
412 of the Code applies.
"Prohibited Transaction" means any transaction set forth in Section 406
of ERISA or Section 4975 of the Code.
"Register" has the meaning given such term in Section 9.05(c).
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from time to
time.
"Reportable Event" means any of the events set forth in Section 4043(b)
of ERISA as to which events the PBGC by regulation has not waived the
requirement of Section 4043(a) of ERISA that it be notified within 30 days of
the occurrence of such event, provided that a failure to meet the minimum
funding standard of Section 412 of the Code or Section 302 of ERISA shall be a
Reportable Event regardless of any waivers given under Section 412(d) of the
Code.
"Required Banks" means, at any time, Banks holding at least a majority
of the aggregate
<PAGE> 8
amount of the Commitments.
"Revolving Loans" means any loan made by any Bank pursuant to Section
2.01. Each Revolving Loan shall be a Base Rate Loan, a Eurodollar Loan or an
Auction Rate Loan.
"Revolving Loan Termination Date" means the last day of the three-year
period commencing on the date of this Agreement, or such later date as may be
determined pursuant to Section 2.23; provided that if such date is not a
Business Day, the Revolving Loan Termination Date shall be the next preceding
Business Day.
"Revolving Note" means a promissory note of the Borrower in the form of
Exhibit A evidencing the Revolving Loans made by a Bank hereunder.
"Subsidiary" means, as to any Person, any corporation or other entity
of which at least a majority of the securities or other ownership interests
having ordinary voting power (absolutely or contingently) for the election of
directors or other persons performing similar functions are at the time owned.
directly or indirectly by such Person.
"Tangible Net Worth" means the excess of total assets over total
liabilities as determined in accordance with GAAP, excluding, however, from the
determination of total assets (a) the aggregate amount of all intangible
property existing, acquired or realized on or after the Closing Date, including
without limitation, all patents, trademarks, trade names, copyrights, licenses,
goodwill and treasury stock, except for an aggregate amount of any intangible
property acquired or realized after the Closing Date of up to (i) $7,000,000 any
time on or before December 31, 1993, (ii) $5,000,000 any time between January 1,
1994 and December 31, 1994, (iii) $3,000,000 any time between January 1, 1995
and December 31, 1995, and (iv) zero any time thereafter, and (b) any write-up
of assets after December 31, 1992.
"Term Loan Maturity Date" means the last day of the two-year period
commencing on the Revolving Loan Termination Date.
"Term Loans" means any loan made by any Bank pursuant to Section 2.09.
"Term Loan Conversion Feel' means an amount equal to the product of (i)
the principal amount of any Term Loan and (ii) 1/2%-.
"Term Note" means a promissory note of the Borrower in the form of
Exhibit B evidencing the Term Loans made by a Bank hereunder.
"Term Rate" means, with respect to the Term Loans, an interest rate per
annum equal to, at the option of the Borrower, (i) the average (rounded upward
to the nearest whole multiple of 1/16 of it per annum) rate, for loans of 90
days' duration, at which deposits in Dollars are offered by the Agent to prime
banks in the London interbank market at 11:00 A.M. (London time) two days before
the first day of such Term Loans, PLUS 1 1/2% or (ii), the Base Rate PLUS 1/2t.
<PAGE> 9
"Total Liabilities" means, on any date, all obligations that would be
included in determining total liabilities as shown on the liabilities side of a
balance sheet of a Person at such date prepared in accordance with GAAP, plus
(without duplication) any other Debt of the Borrower.
"Unfunded Vested Liabilities" means, with respect to any Plan, the
amount (if any) by which the present value of all vested benefits under the Plan
exceeds the fair market value of all Plan assets allocable to such benefits, as
determined on the most recent valuation date of the Plan and in accordance with
the provisions of ERISA for calculating the potential liability of the Borrower
or any ERISA Affiliate to the PBGC or the Plan under Title IV of ERISA.
"Wholly-Owned Subsidiary" means any Subsidiary, all of the equity
securities of which (except director's qualifying shares) are owned by the
Borrower a/or one or more Wholly-owned Subsidiaries of the Borrower.
SECTION 1.02. ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP, and all financial
data required to be delivered hereunder shall be prepared in accordance with
GAAP.
ARTICLE 2. THE CREDIT.
SECTION 2.01. THE REVOLVING LOANS. Subject to the terms and conditions
of this Agreement, each Bank severally agrees to make revolving loans to the
Borrower (hereinafter collectively referred to as the "Revolving Loan" or
"Revolving Loans") from time to time from and including the date hereof until
the earlier of the Revolving Loan Termination Date or the termination of the
Commitment of such Bank, up to but not exceeding in the aggregate principal
amount at any one time outstanding, the amount of its Commitment.
Notwithstanding the foregoing, each Bank may (but shall not be obligated to)
make Auction Rate Loans in excess of its available Commitment (but not in excess
of the aggregate available Commitment of all the Banks) and in the event one or
more Banks make any Auction Rate Loans, the Commitments of the Banks shall be
adjusted as provided in Section 2.03(e). Each Borrowing under this Section 2.01
of (i) a Base Rate Loan shall be in the principal amount of not less than
$100,000 or any greater amount which is an integral multiple of $50,000; (ii) a
Eurodollar Loan shall be in the principal amount of not less than $1,000,000 or
any greater amount which is an integral multiple of $500,000; or (iii) an
Auction Rate Loan shall be in the principal amount of not less than $500,000 or
any greater amount which is an integral multiple of $250,000, and each such
Revolving Loan (other than Auction Rate Loans) shall be made by the Banks
ratably in proportion to their respective Commitments. During the Commitment
Period and within the foregoing limits, the Borrower may borrow, reborrow and
prepay Revolving Loans, all in accordance with the terms and conditions of this
Agreement.
SECTION 2.02. THE REVOLVING NOTES.
(a) The Revolving Loans of each Bank shall be evidenced by a single.
promissory
<PAGE> 10
note in favor of such Bank in the form of Exhibit A, dated the date of this
Agreement, and duly completed and executed by the Borrower.
(b) Upon receipt of each Bank's Revolving Note pursuant to Section
3.01(a), the Agent shall mail such Revolving Note to such Bank. Each Bank shall
record and, prior to any transfer of its Revolving Note, shall endorse on a
schedule forming a part thereof appropriate notations evidencing the date, the
type, the amount and the maturity of each Revolving Loan made by it which is
evidenced by such Revolving Note and the date and amount of each payment of
principal made by the Borrower with respect thereto; provided, that failure to
make any such endorsement or notation shall not affect the Obligations of the
Borrower hereunder or under any Revolving Note. Each Bank is hereby irrevocably
authorized by the Borrower to so endorse its Revolving Note and to attach to and
make a part of any Revolving Note a continuation of any such schedule as and
when required.
SECTION 2.03. PROCEDURE FOR BORROWING.
(a) The Borrower shall give the Agent a Notice of Borrowing in the form
of Exhibit D hereto, prior to 12:00 noon (Connecticut time), on the date of a
Borrowing of a Base Rate Loan, at least two Business Days before a Borrowing of
a Eurodollar Loan, and at least one Business Day before a Borrowing of an
Auction Rate Loan, specifying:
(i) the date of such Borrowing, which shall be a Business
Day,
(ii) the principal amount of such Borrowing,
(iii) whether the Revolving Loan comprising such Borrowing is
to be a Base Rate Loan, a Eurodollar Loan or an Auction
Rate Loan, and
(iv) the Interest Period with respect to such Borrowing.
(b) Upon receipt of such Notice of Borrowing, the Agent shall promptly
notify each Bank of the contents thereof and of such Bank's pro rata share of
such Borrowing, except that in the case of an Auction Rate Loan, the Agent shall
follow the procedures set forth in Schedule 2.03. No Notice of Borrowing shall
be revocable by the Borrower.
(c) Not later than 2:00 P.M. (Connecticut time) on the date of each
Borrowing, each Bank shall (except as provided in subsection (d) of this Section
or in Schedule 2.03 with respect to an Auction Rate Loan) make available its pro
rata share of such Borrowing, in Dollars and in federal or other funds
immediately available in Stamford, Connecticut, to the Agent at its address set
forth on the signature pages hereof or at such other address as it may hereafter
designate by notice to the Borrower and the Banks and, unless the Agent
determines that any applicable condition specified in Article 3 has not been
satisfied, the Agent will promptly make the funds so received from the Banks
available to the Borrower at the Agent's aforesaid address.
(d) If any Bank makes a new Revolving Loan hereunder on a day on which
the
<PAGE> 11
Borrower is to repay an outstanding Revolving Loan from such Bank, such Bank
shall apply the proceeds of its new Revolving Loan to make such repayment and
only an amount equal to the excess (if any) of the amount being borrowed over
the amount being repaid shall be made available by such Bank to the Agent as
provided in subsection (c) of this Section, or remitted by the Borrower to the
Agent as provided in Section 2.15, as the case may be.
(e) In the event that any Bank makes an Auction Rate Loan to the
Borrower, such Auction Rate Loan shall be made severally by such Bank without
participation in such Auction Rate Loan by any other Bank. If any Bank makes an
Auction Rate Loan, such Bank's Commitment shall be reduced by the amount of such
Auction Rate Loan. Such Bank shall be required (or permitted with respect to
Auction Rate Loans) to participate in subsequent Revolving Loans to the extent
of its Commitment so reduced. Each other Bank's pro rata share of any Revolving
Loans to be made by the Banks pursuant to Section 2.01 hereof while an Auction
Rate Loan is outstanding (any such Revolving Loan or portion thereof hereafter
being referred to as a "Non-Pro Rata Loan") shall be equal to a fraction, the
numerator of which shall be such Bank's available Commitment and the denominator
of which shall be an amount equal to the difference between (i) the aggregate of
the Banks' Commitments and (ii) the amount of any Auction Rate Loans
outstanding. Notwithstanding anything to the contrary contained herein or in the
terms of any Auction Rate Loan, after giving effect to all repayments of
Borrowings and new Borrowings made on the date in question (i) no repayment in
full of an Auction Rate Loan may be made by the Borrower unless and until all
Non-Pro Rata Loans made as a result of such Auction Rate Loan shall have been
repaid in full, and (ii) no partial repayment of an Auction Rate Loan may be
made by the Borrower unless and until all Non-Pro Rata Loans made as a result of
such Auction Rate Loan shall have been partially repaid in the same proportion
as such partial repayment of such Auction Rate Loan.
(f) Notwithstanding anything to the contrary herein contained, if, upon
the expiration of any Interest Period applicable to any Borrowing of Revolving
Loans other than Auction Rate Loans, the Borrower shall fail to give a new
Notice of Borrowing as set forth in this Section 2.03, the Borrower shall be
deemed to have given a new Notice of Borrowing of Base Rate Loans in principal
amount equal to the outstanding principal amount of such Revolving Loans, and
the proceeds of the new Borrowing shall be applied directly to repay such
outstanding principal amount on the day of such Borrowing.
SECTION 2.04. TERMINATION OR REDUCTION OF COMMITMENT. The Commitment
shall terminate on the Revolving Loan Termination Date and any Revolving Loans
then outstanding (together with accrued interest thereon) shall be due and
payable on such date. No termination of the Commitment hereunder shall relieve
the Borrower of any of its outstanding Obligations to the Banks hereunder or
otherwise. The Borrower shall have the right, upon prior written notice of at
least five Business Days to the Agent, to terminate or, from time to time,
reduce the Commitment, provided that (i) any such reduction of the Commitment
shall be accompanied by the prepayment of the Revolving Notes, together with
accrued interest thereon to the date of such prepayment and any amount due
pursuant to Section 2.07, to the extent, if any, that the aggregate unpaid
principal amount thereof then outstanding exceeds the Commitment as then reduced
and (ii) any such termination of the Commitment shall be accompanied by
prepayment in full of the
<PAGE> 12
unpaid principal amount of the Revolving Notes together with accrued interest
thereon to the date of such prepayment and any amount due pursuant to Section
2.07. Any such partial reduction of the Commitment shall be in an aggregate
principal amount of $500,000 or any whole multiple thereof and shall reduce
permanently the Commitment then in effect hereunder. Each reduction of the
Commitment shall reduce, pro rata, the Commitment of each Bank.
SECTION 2.05. SPECIAL MANDATORY REDUCTION OF COMMITMENT.
(a) The Commitment of each Bank shall be reduced by an amount equal to
its pro rata share of the net cash proceeds, and any and all cash, whenever
received, derived from any non-cash proceeds, of the sale, lease or other
transfer of assets of the Borrower or any Affiliate described in the penultimate
sentence of Section 6.06 (provided that no distributions to shareholders of the
Borrower for the payment of taxes arising by reason of any such sale, lease or
transfer shall be deducted from the calculation of net proceeds), such reduction
to be effective no later than the Business Day next succeeding the day on which
such net proceeds are received by the Borrower or such Affiliate, as the case
may be.
(b) On the effective date of any reduction of the Commitment of each
Bank pursuant to Section 2.05(a), the Borrower shall repay such principal amount
(together with accrued interest thereon and any amount due pursuant to Section
2.07) of outstanding Revolving Loans, if any, As may be necessary so that after
such repayment, the aggregate unpaid principal amount of the Revolving Loans
does not exceed the Commitment as then reduced.
SECTION 2.06. MATURITY OF REVOLVING LOANS. Each Revolving Loan shall mature,
and the principal amount thereof shall be due and payable, on the last day of
the Interest Period applicable to such Revolving Loan.
SECTION 2.07. OPTIONAL PREPAYMENTS.
(a) The Borrower may, upon at least one Business Days' notice to the
Agent, prepay the Base Rate Loans, without premium or penalty, in whole at any
time or from time to time in part by paying the principal amount being prepaid
together with accrued interest thereon to the date of prepayment.
(b) The Borrower may, upon at least three Business Days' notice to the
Agent, prepay the Eurodollar Loans or the Auction Rate Loans, in whole at any
time or from time to time in part by paying the principal amount being prepaid
together with (i) accrued interest thereon to the date of prepayment and (ii)
any amounts required to compensate each Bank for any reasonable losses, costs or
expenses (excluding any losses of anticipated profit), as certified by each Bank
(such certification setting forth the basis for such compensation), which such
Bank may reasonably incur as a result of such prepayment, including without
limitation, any loss, cost or expense incurred by reason of funds liquidation or
reemployment of deposits or other funds acquired by any Bank to fund or maintain
such Eurodollar Loan or Auction Rate Loan and any administrative costs, expenses
or charges of such Bank as a result thereof.
<PAGE> 13
SECTION 2.08. INTEREST ON THE REVOLVING LOANS.
(a) Each Base Rate Loan shall bear interest on the outstanding
principal amount thereof, for each day from the date such Base Rate Loan is made
until it becomes due, at a rate per annum equal to the Base Rate for such day.
Interest shall be payable on the last day of the Interest Period applicable
thereto. Such interest shall accrue from and including the date of such
Borrowing to but excluding the date of any repayment thereof and shall be
computed on the basis of a fraction, the numerator of which is the actual number
of days elapsed from the date of Borrowing and the denominator of which is 360.
Overdue principal of and, to the extent permitted by law, overdue interest on
the Base Rate Loans shall bear interest for each day until paid at a rate per
annum equal to the Default Rate.
(b) Subject to Section 6.13 hereof, each Eurodollar
Loan shall bear interest on the unpaid principal amount thereof,
for each day from the date such Eurodollar Loan is made until it
becomes due, at a rate per annum equal to the Eurodollar Rate
for the relevant Interest Period. Interest shall be payable on
the last day of the Interest Period applicable thereto;
provided, that if such Interest Period is longer than 90 days,
interest shall be payable every 90 days and on the last day of
such Interest Period. Such interest shall accrue from and
including the date of such Borrowing to but excluding the date
of any repayment thereof and shall be computed on the basis of a
fraction, the numerator of which is the actual number of days
elapsed from the date of Borrowing and the denominator of which
is 365. Overdue principal of and, to the extent permitted by
law, overdue interest on the Eurodollar Loans shall bear
interest for each day until paid at a rate per annum equal to
the Default Rate.
(c) Each Auction Rate Loan shall bear interest on the
unpaid principal amount thereof, for each day from the date such
Auction Rate Loan is made until it becomes due, at a rate per
annum equal to the Auction Rate for the relevant Interest
Period. Interest shall be payable on the last day of the
Interest Period applicable thereto; provided, that if such
Interest Period is longer than 90 days, interest shall be
payable every 90 days and on the last day of such Interest
Period. Such interest shall accrue from and including the date
of such Borrowing to but excluding the date of any repayment
thereof and shall be computed on the basis of a fraction, the
numerator of which is the actual number of days elapsed from the
date of Borrowing and the denominator of which is 360. Overdue
principal of and, to the extent permitted by law, overdue
interest on Auction Rate Loans shall bear interest for each day
until paid at a rate per annum equal to the Default Rate.
SECTION 2.09. THE TERM LOANS. Subject to the terms and conditions of this
Agreement, each Bank severally agrees to make a term loan to the Borrower
(hereinafter collectively referred to as the "Term Loan" or "Term Loans") on the
Revolving Loan Termination Date in an amount up to the principal amount of the
Revolving Loans of such Bank then outstanding, less the amount, if any, by which
the principal amount of such Revolving Loans then outstanding exceeds such
Bank's Commitment. Each Bank shall make its Term Loan
<PAGE> 14
on the Revolving Loan Termination Date by crediting the amount thereof to the
repayment of the outstanding principal amount of such Bank's Revolving Note.
Upon any such conversion of Revolving Loans to Term Loans hereunder, the
Borrower shall pay each Bank the Term Loan Conversion Fee.
SECTION 2.10. THE TERM NOTES. The Term Loan of each Bank shall be
evidenced by a promissory note in favor of such Bank in the form of Exhibit B,
with appropriate insertions as to the date and principal amount, and duly
completed and executed by the Borrower. Upon receipt of each Bank's Term Note,
the Agent shall mail such Term Note to such Bank.
SECTION 2.11. REPAYMENT OF TERM LOAN PRINCIPAL. The principal amount of
the Term Notes shall be payable monthly in 24 equal installments, commencing on
the day that is one month from the Revolving Loan Termination Date and
continuing on the same date of each month thereafter to and including the Term
Loan Maturity Date.
SECTION 2.12. TERM LOAN PREPAYMENT. The Borrower may, upon at least
three Business Days' notice to the Agent, prepay the Term Loans in whole at any
time or from time to time in part by paying the principal amount being prepaid
together with (i) accrued interest thereon to the date of prepayment and (ii)
any amounts required to compensate each Bank for any reasonable losses, costs or
expenses (excluding any losses of anticipated profit), as certified by each Bank
(such certification setting forth the basis for such compensation), which such
Bank may reasonably incur as a result of such prepayment, including without
limitation, any loss, cost or expense incurred by reason of funds liquidation or
reemployment of deposits or other funds acquired by any Bank to fund or maintain
the Term Loans and any administrative costs, expenses or charges of such Bank as
a result thereof.
SECTION 2.13. INTEREST ON THE TERM LOANS. The Term Loans shall bear
interest on the outstanding principal amount thereof, for each day from the date
the Term Loans are made until they become due, at a rate per annum equal to the
Term Rate.
SECTION 2.14. FEES.
(a) The Borrower shall pay a $25,000 loan origination fee to Shawmut on
or before the Closing Date.
(b) The Borrower agrees to pay to the Agent for the account of each
Bank an annual facility fee of 3/16 of one percent of the amount of such Bank's
Commitment (subject to the adjustment set forth in Section 6.13 hereof), payable
in advance in four quarterly installments on the first Business Day of January,
April, July And October of each year beginning July 1, 1993. The Borrower shall
pay a pro-rated facility fee on the Closing Date, to the extent not paid prior
to the Closing Date, for the period from the Closing Date through September 30,
1993.
If the Revolving Loan Termination Date has been extended at the Banks,
discretion pursuant to Section 2.23, the Borrower shall pay to each Bank a
renewal fee of 1/8 of one percent (12.5 basis points) of the total of such
Bank's Commitment on the effective date of
<PAGE> 15
each extension.
(d) The fees required by paragraphs (a), (b) and (c) of this Section
shall not be refundable under any circumstances.
SECTION 2.15. PAYMENTS GENERALLY. All payments under this Agreement
shall be made in Dollars in immediately available funds not later than 12:00
noon (Connecticut time) on the due date (each such payment made after such time
on such due date to be deemed to have been made on the next succeeding Business
Day) to the Agent at its address set forth on the signature pages hereof or at
such other address as it may hereafter designate by notice to the Borrower and
the Banks for the account of the Lending Office of each Bank specified by such
Bank on Schedule 1.01 hereto. The Agent will promptly distribute to each Bank
its pro rata share of each such payment received for the account of each Bank,
except that principal and interest payable in respect of any Auction Rate Loan
shall be paid by the Agent to the Bank entitled thereto. The Borrower shall, at
the time of making each payment under this Agreement, specify to the Agent the
principal or other amount payable by the Borrower under this Agreement to which
such payment is to be applied (and in the event that it fails to so specify, or
if a Default or Event of Default has occurred and is continuing, the Agent may
apply such payment as it may elect in its sole discretion). If the due date of
any payment under this Agreement would otherwise fall on a day which is not a
Business Day, such date shall be extended to the next succeeding Business Day
and such extension of time shall in such case be included in the computation of
such payment; provided that, if such extension would cause the last day of an
Interest Period to occur in the next following calendar month, the last day of
such Interest Period shall occur on the next preceding Business Day.
SECTION 2.16. CAPITAL ADEQUACY. If either after the date hereof (i) the
introduction of, or any change in, or in the interpretation or enforcement of,
any law, regulation, order, ruling, directive, guideline or request or (ii)
compliance with any order, ruling, directive, guideline or request from any
central bank or other governmental authority (whether or not having the force of
law) issued, announced, published, promulgated or made after the date hereof
(including, in any event, any law, regulation, order, ruling, interpretation,
directive, guideline or request contemplated by the report dated July, 1988
entitled "International Convergence of Capital Measurement and Capital
Standards" issued by the Basle Committee on Banking Regulation and Supervisory
Practices) affects or would affect the amount of capital required or expected to
be maintained by any Bank or any corporation controlling such Bank and such Bank
reasonably determines that the amount of such required or expected capital is
increased by or based upon the existence of such Bank's Loans hereunder or such
Bank's commitment to lend hereunder and other commitments of this type, then,
upon demand by such Bank (with a copy of such demand to the Agent), the Borrower
shall be liable for, and shall pay to the Agent for the account of such Bank,
within 30 days following demand from time to time by such Bank, additional
amounts sufficient to compensate such Bank in the light of such circumstances
for the effects of such law, regulation, order, ruling, directive, guideline or
request, to the extent that such Bank reasonably determines such increase in
capital to be allocable to the existence of such Bank's Loans hereunder or of
such Bank's commitment to lend hereunder. A certificate I substantiating such
amounts and identifying the event giving rise thereto, submitted to the Borrower
and the Agent
<PAGE> 16
by such Bank, shall be conclusive, absent manifest error. Each Bank shall
promptly notify the Borrower of any event of which it has knowledge occurring
after the date of this Agreement which will entitle the Bank to compensation
pursuant to this Section, and such Bank shall take any reasonable action
available to it consistent with its internal policy and legal and regulatory
restrictions (including the designation of a different Lending Office, if any)
that will avoid the need for, or reduce the amount of, such compensation and
will not in the reasonable judgment of such Bank be otherwise disadvantageous to
the Bank.
SECTION 2.17. INCREASED COSTS. If after the date hereof, due to either
(i) the introduction of or any change in or in the interpretation or enforcement
of, any law, regulation, order, ruling, directive, guideline or request, or (ii)
the compliance with any order, ruling, directive, guideline or request from any
central bank or other governmental authority (whether or not having the force of
law) issued, announced, published, promulgated or made after the date hereof,
there shall be any increase in the cost to any Bank of agreeing to make or
making, funding or maintaining Eurodollar Loans, then the Borrower shall be
liable for, and shall from time to time, within 30 days following a demand by
such Bank (with a copy of such demand to the Agent), pay to the Agent for the
account of such Bank additional amounts sufficient to compensate such Bank for
such increased cost; provided, however, that before making any such demand, such
Bank agrees to use reasonable efforts (consistent with its internal policy and
legal and regulatory restrictions) to designate a different Lending Office if
the making of such a designation would allow such Bank or its Lending Office to
continue to perform its obligations to make Eurodollar Loans or to continue to
fund or maintain Eurodollar Loans and would not, in the reasonable judgment of
such Bank, be otherwise disadvantageous to such Bank. A certificate
substantiating the amount of such increased cost, submitted to the Borrower and
the Agent by such Bank, shall be conclusive, absent manifest error.
SECTION 2.18. ILLEGALITY. Notwithstanding any other provision of this
Agreement, if after the date hereof the introduction of, or any change in or in
the interpretation or enforcement of, any law, regulation, order, ruling,
directive, guideline or request shall make it unlawful, or any central bank or
other governmental authority shall assert that it is unlawful, for any Bank or
its Lending Office to perform its obligations hereunder to make Eurodollar Loans
or to continue to fund or maintain Eurodollar Loans hereunder, then, on notice
thereof by such Bank to the Borrower through the Agent, (i) the obligation of
the Banks affected thereby to make Eurodollar Loans shall terminate (and such
Banks shall make all of their respective Loans as Base Rate Loans or Auction
Rate Loans notwithstanding any election by the ' Borrower to have the Banks make
Eurodollar Loans) and (ii) five Business Days after such notice and demand or,
if legally permissible, at the end of the current Interest Period for such
Eurodollar Loans, all Eurodollar Loans of such Bank then outstanding will
automatically convert into Base Rate Loans; provided, however, that before
making any such demand, such Bank agrees to use reasonable efforts (consistent
with its internal policy and legal and regulatory restrictions) to designate a
different Lending Office if the making of such a designation would allow such
Bank or its Lending Office to continue to perform its obligations to make
Eurodollar Loans and would not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank. A certificate setting forth such change in or in
the interpretation or enforcement of such law, regulation, order, ruling,
directive, guideline or request, submitted to the Borrower and the Agent by such
Bank, shall be conclusive
<PAGE> 17
evidence of such change, interpretation or enforcement, absent manifest error.
The Banks and the Borrower agree to negotiate in good faith in order to agree
upon a mutually acceptable mechanism to provide that Eurodollar Loans made by
the Banks as to which the foregoing conditions occur shall convert into Base
Rate Loans.
SECTION 2.19. PAYMENTS TO BE FREE OF DEDUCTIONS. All payments by the
Borrower under this Agreement shall be made without setoff or counterclaim and
free and clear of, and without deduction for, any taxes (other than any taxes
imposed on or measured by the gross income or profits of any Bank), levies,
imposts, duties, charges, fees, deductions, withholdings, compulsory loans,
restrictions or conditions of any nature now or hereafter imposed or levied by
any country or any political subdivision thereof or taxing or other authority
therein unless the Borrower is compelled by law to mike such deduction or
withholding. If any such obligation is imposed upon the Borrower with respect to
any amount payable by it hereunder, it will pay to the Agent, on the date on
which such amount becomes due and payable hereunder and in Dollars, such
additional amount as shall be necessary to enable each Bank to receive the same
net amount which it would have received on such due date had no such obligation
been imposed upon the Borrower.
SECTION 2.20. COMPUTATIONS. All computations of interest and like payments
hereunder, on the Loans, shall, in the absence of clearly demonstrable error, be
considered correct and binding on the Borrower and the Banks, unless within 30
Business Days after receipt of any notice by the Agent of such outstanding
amount, the Borrower or any Bank notifies the Agent to the contrary.
SECTION 2.21. OBLIGATIONS ABSOLUTE. The Obligations of the Borrower under
this Agreement shall be unconditional and irrevocable, and shall be paid
strictly in accordance with the terms of this Agreement under all circumstances,
and irrespective of, the following circumstances:
(a) any lack of validity or enforceability of all or any portion of
this Agreement or any other agreement or any instrument-relating
hereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations of the Borrower;
(c) the existence of any claim, setoff, defense or other right that
the Borrower may have; or
(d) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including without limitation, any
other circumstance that might otherwise constitute a defense
available to, or a discharge of, the Borrower.
SECTION 2.22. SHARING OF PAYMENTS, ETC.- If any Bank shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
setoff, or otherwise) on account of the Loans made by it (other than pursuant to
Section 2.16, 2.17, 2.18 or 2.19) in excess of its ratable
<PAGE> 18
share of payments on account of outstanding Loans obtained by all the Banks,
such Bank shall forthwith purchase from the other Banks such participations in
the Loans made by them as shall be necessary to cause such Bank to share the
excess payment ratably with each of them; provided, however, that if all or any
portion of such excess payment is thereafter recovered from such purchasing
Bank, such purchase from each Bank shall be rescinded and each such Bank shall
repay to the purchasing Bank the purchase price to the extent of such recovery,
together with an amount equal to such Bank's ratable share (according to the
proportion of (i) the amount of such Bank's required repayment to (ii) the total
amount so recovered from the purchasing Bank) of any interest or other amount
paid or payable by the purchasing Bank in respect of the total amount so
recovered. The Borrower agrees that any Bank so purchasing a participation from
another Bank pursuant to this Section may, to the fullest extent permitted by
law, exercise all its rights of payment (including the right of setoff) with
respect to such participation as fully as if such Bank were the direct creditor
of the Borrower in the amount of such participation.
SECTION 2.23. EXTENSION OF REVOLVING LOAN TERMINATION DATE. The Borrower may
request, in writing to the Agent, successive one-year extensions of the
Revolving Loan Termination Date, at least 45 days prior to such Date. The Agent
shall notify the Banks of such request and each Bank may grant the requested
extension, in its sole discretion. Each Bank shall notify the Agent of its
decision at least 24 days prior to the Revolving Loan Termination Date. The
Agent shall notify the Borrower of the Banks' decision at least 15 days prior to
the Revolving Loan Termination Date.
ARTICLE 3. CONDITIONS PRECEDENT.
SECTION 3.01. DOCUMENTARY CONDITIONS PRECEDENT. The obligation of the Agent
and each Bank to execute and deliver this Agreement is subject to the condition
precedent that the Borrower shall have delivered the following, in form and
substance satisfactory to the Agent and each Bank:
(a) a Revolving Note for the account of each Bank duly executed by
the Borrower;
(b) a certificate of the Secretary or Assistant Secretary of the
Borrower, dated the Closing Date, attesting on behalf of the Borrower
to all corporate action taken by the Borrower, including resolutions
of its Board of Directors authorizing the execution, delivery and
performance of this Agreement and the Notes and each other document
to be delivered pursuant to this Agreement, and attesting to the
names and true signatures of the officers of the Borrower authorized
to sign this Agreement and the other documents to be delivered by the
Borrower under this Agreement;
(c) a certificate of a duly authorized officer of the Borrower, dated
the Closing Date, stating on behalf of the Borrower that the
representations and warranties in Article 4 are true and correct in
all material respects on such date as though made on and as of such
date and that no event has occurred and is continuing which
constitutes a Default or
<PAGE> 19
Event of Default;
(d) a favorable opinion of Robert D. Marafioti, General Counsel of
the Borrower, dated the Closing Date, in substantially the form of
Exhibit C;
(e) a loan origination fee in the amount of $25,000 to the Agent;
(f) a negative pledge agreement executed by certain shareholders of
the Borrower in the form of Exhibit E;
(g) a duly executed Guaranty from each Guarantor;
a certificate of the Secretary or Assistant Secretary of each
Guarantor, dated the Closing Date, attesting on behalf of each such
Guarantor to all corporate action taken by such Guarantor, including
resolutions of each such Guarantor's board of directors authorizing the
execution, delivery and performance of the Guaranty of such Guarantor
and any other documents to be delivered pursuant thereto, and attesting
to the names and true signatures of the officers of such Guarantor
authorized to sign its Guaranty and any other documents to be delivered
by such Guarantor pursuant thereto; and
(i) all corporate and legal proceedings and all instruments and
agreements in connection with the transactions contemplated by this
Agreement shall be satisfactory in form and substance to each Bank and
each Bank shall have received any and all other information and
documents with respect to the Borrower which it may reasonably request.
SECTION 3.02. ADDITIONAL CONDITIONS PRECEDENT TO EACH LOAN. The obligation of
each Bank to make the Loans pursuant to a Borrowing which increases the amount
outstanding hereunder (including the initial borrowing) and to make the Term
Loan, unless waived by such Bank, shall be subject to the further conditions
precedent that on the date of such Loan:
(a) the representations and warranties contained in Article 4 of this
Agreement are true and correct in all material respects on and as of
the date of such Loan (or were true and correct as of the specific
point in time to which they relate) as though made on and as of such
date;
(b) the Borrower has complied and is in compliance with all of the
terms, covenants and conditions of this Agreement;
(c) there does not exist any Event of Default under this Agreement nor
any event which, with the giving of notice or lapse of time, or both,
would constitute an Event of Default;
(d) there has been no material adverse change in the financial
condition, operating status, or business prospects of the Borrower
and its Subsidiaries, if any, since the date of
<PAGE> 20
the last Borrowing under this Agreement;
(e) the Agent shall have received a Notice of Borrowing in the form
of Exhibit D, except to the extent otherwise provided in Section
2.03(f); and
(f) at least 66-2/3% of all issued and outstanding shares of each
class of voting stock of the Borrower shall be owned of record and
beneficially by any of Gerard G. Leeds, Liselotte J. Leeds or any of
their children or (subject to such trusts remaining under the control
of Gerard G. Leeds, Liselotte J. Leeds or any of their children) one
or more trusts for the benefit of any of them, and such shares shall
not be subject to any mortgage, pledge, encumbrance, lien, security
interest or charge, except such mortgages, pledges, encumbrances,
liens, security interests and charges permitted by the terms of the
Negative Pledge Agreement.
SECTION 3.03. DEEMED REPRESENTATIONS. Each Notice of Borrowing hereunder and
acceptance by the Borrower of the proceeds of such Borrowing shall constitute a
representation and warranty that the statements contained in Section 3.02(a) are
true and correct both on the date of such Notice of Borrowing and, unless the
Borrower otherwise notifies the Agent prior to such Borrowing, as of the date of
such Borrowing.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES.
The Borrower hereby represents and warrants that:
SECTION 4.01. INCORPORATION, GOOD STANDING AND DUE QUALIFICATION. Each
of the Borrower and the Guarantors is duly incorporated, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its assets and to transact the business in
which it is now engaged or proposed to be engaged, and is duly qualified as a
foreign corporation and in good standing under the laws of each other
jurisdiction in which such qualification is required, except where the failure
to be so qualified would not have a material adverse effect on the financial
condition, operations, properties, business or, to the knowledge of the
Borrower, prospects of the Borrower. The Borrower has all requisite power and
authority to execute and deliver and to perform all of its obligations under
this Agreement and the Notes and the other writings contemplated hereby.
SECTION 4.02. CORPORATE POWER AND AUTHORITY; NO CONFLICTS. The execution,
delivery and performance by the Borrower of this Agreement and the Notes have
been duly authorized by all necessary corporate action and do not and will not
(a) require any consent or approval of its shareholders or any Person; (b)
contravene its charter or by-laws; (c) violate any provision of, or require any
filing, registration, consent or approval under, any law, rule, regulation
(including without limitation, Regulation U), order, writ, judgment, injunction,
decree, determination or award presently in effect having applicability to and
binding upon the Borrower or the Guarantors; (d) result in a breach of or
constitute a default or require any consent under any indenture or loan or
credit agreement or any other material agreement, lease or instrument to which
the Borrower is a party or by which it or its properties may be bound; (e)
result in, or require, the creation or imposition of any Lien upon or with
respect to any of the properties now
<PAGE> 21
owned or hereafter acquired by the Borrower; or (f) cause the Borrower (or any
Guarantor, as the case may be) to be in default under any such law, rule,
regulation, order, writ, judgment, injunction, decree, determination or award or
any such indenture, agreement, lease or instrument.
SECTION 4.03. LEGALLY ENFORCEABLE AGREEMENTS. This Agreement and the
Notes constitute legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their respective terms,
except to the extent that such enforcement may be limited by applicable
bankruptcy, insolvency and other similar laws affecting creditors, rights
generally and by general principles of equity.
SECTION 4.04. LITIGATION. There are no actions, suits or proceedings
pending or, to the knowledge of the Borrower, threatened, against or affecting
the Borrower or any Guarantors, before any court, governmental agency or
arbitrator, which if adversely determined would in any one case or in the
aggregate, materially adversely affect the financial condition, operations,
properties, business or, to the knowledge of the Borrower, prospects of the
Borrower and the Guarantors taken as a whole or the ability of the Borrower to
perform its obligations under this Agreement and the Notes.
SECTION 4.05. FINANCIAL STATEMENTS. The combined balance sheet of the
Borrower and the Guarantors as at December 31, 1992 and the related combined
statements of operations and retained earnings and cash flow of the Borrower and
the Guarantors for the fiscal year then ended, and the accompanying footnotes,
together with the opinion thereon, of Miller, Ellin & Company, independent
certified public accountants, and the unaudited interim combined balance sheet
of the Borrower and the Guarantors as at March 31, 1993 and the related combined
statements of income, for the three-month period then ended, copies of which
have been furnished to each Bank, are complete and correct and fairly present
the financial condition of the Borrower and the Guarantors taken as a whole as
at such dates and the results of the operations of the Borrower and the
Guarantors taken as a whole for the periods covered by such statements, all in
accordance with GAAP consistently applied (subject to year end adjustments in
the case of the interim financial statements) and assuming that the Guarantors
were Affiliates of the Borrower at such date. There are no liabilities of the
Borrower or any of the Guarantors, fixed or contingent, which are material but
are not reflected in the financial statements or in the notes thereto, other
than liabilities arising in the ordinary course of business since December 31,
1992. No information, exhibit or report furnished by the Borrower to each Bank
in connection with the negotiation of this Agreement contained any material
misstatement of fact or omitted to state any fact necessary to make the
statements contained therein not materially misleading. Since December 31, 1992
there has been no material ad-verse change in the financial condition, business,
operations, properties or, to the knowledge of the Borrower, prospects of the
Borrower and the Guarantors taken as a whole.
SECTION 4.06. OWNERSHIP AND LIENS. Each of the Borrower and the Guarantors
has title to, or valid leasehold interests in, its material properties and
assets, real and personal, including the material properties and assets, and
leasehold interests reflected in the financial statements referred to in Section
4.05 (other than any properties or assets disposed of in the ordinary course of
business), and none of the material properties and assets owned by the Borrower
or the
<PAGE> 22
Guarantors, and none of its leasehold interests is subject to any Lien, except
as disclosed in such financial statements or in Schedule 4-.06, or as may be
permitted hereunder.
SECTION 4.07. TAXES. Each of the Borrower and the Guarantors has filed
all federal and state tax returns and all other material local tax returns
required to be filed, has paid all due and payable taxes, assessments and
governmental charges and levies, including interest and penalties, imposed upon
it or upon its properties, and has made adequate provision for the payment of
such taxes, assessments and other charges accruing but not yet due and payable,
except with respect to taxes which are being contested in good faith by the
Borrower or any Guarantor and for which the Borrower or any Guarantor has set
aside adequate reserves for payment. Schedule 4.07 is a complete and accurate
description of federal and state tax audits involving the Borrower.
SECTION 4.08. ERISA. Each of the Borrower and the Guarantors is in
compliance in all material respects with all applicable provisions of ERISA.
Within the three-year period prior to the date hereof, neither a Reportable
Event nor a Prohibited Transaction has occurred with respect to any Plan; no
notice of intent to terminate a Plan has been filed nor has any Plan been
terminated; no circumstance exists which constitutes grounds under Section 4042
of ERISA entitling the PBGC to institute proceedings to terminate, or appoint a
trustee to administer, a Plan, nor has the PBGC instituted any such proceedings;
neither the Borrower nor any ERISA Affiliate has completely or partially
withdrawn under Sections 4201 or 4204 of ERISA from a Multiemployer Plan; each
of the Borrower and its ERISA Affiliates has met its minimum funding
requirements under ERISA with respect to all of its Plans and there are no
Unfunded Vested Liabilities; and neither the Borrower nor any ERISA Affiliate
has incurred any material liability to the PBGC under ERISA.
SECTION 4.09. SUBSIDIARIES, AFFILIATES AND OWNERSHIP OF STOCK. The Borrower
has no Subsidiaries. Schedule 4.09 sets forth the jurisdiction of incorporation
or organization of each Guarantor.
SECTION 4.10. CREDIT ARRANGEMENTS. Schedule 4.10 is a complete and correct
list of all credit agreements, indentures, guaranties, Capital Leases and other
investments, agreements and arrangements presently in effect providing for or
relating to extensions of credit (including agreements and arrangements for the
issuance of letters of credit or for acceptance financing) in respect of which
the Borrower or any of the Guarantors is in any manner directly or contingently
obligated; and the maximum principal or face amounts of the credit in question,
which are outstanding and which can be outstanding, are therein set forth and
are correctly stated, and all Liens of any nature given or agreed to be given as
security therefor are therein set forth and are correctly described or indicated
in such Schedule.
SECTION 4.11. OPERATION OF BUSINESS. Each of the Borrower and the Guarantors
possesses all licenses, permits and franchises, or rights thereto, material to
conduct its business substantially as now conducted and as presently proposed to
be conducted, and neither the Borrower nor any of the Guarantors is in violation
in any material respect of any valid rights of others with respect to any of the
foregoing.
<PAGE> 23
SECTION 4.12. NO DEFAULT ON OUTSTANDING JUDGMENTS OR ORDERS. Each of
the Borrower and the Guarantors has satisfied all material judgments and neither
the Borrower nor any Guarantor is in default with respect to any judgment, writ,
injunction, decree, rule or regulation of any court, arbitrator or federal,
state, municipal or other governmental authority, commission, board, bureau,
agency or instrumentality, domestic or foreign, which would, in any one case or
in the aggregate, materially adversely affect the financial condition,
operations, properties, business or, to the knowledge of the Borrower, prospects
of the Borrower and the Guarantors taken as a whole or the ability of the
Borrower to perform its obligations under this Agreement and the Notes.
SECTION 4.13. NO DEFAULTS ON OTHER AGREEMENTS. Neither the Borrower nor
any of the Guarantors is a party to any indenture, loan or credit agreement or
any lease or other agreement or instrument or subject to any charter or
corporate restriction which would have a material adverse effect on the
business, properties, assets, operations, financial condition or, to the
knowledge of the Borrower, prospects of the Borrower and the Guarantors taken as
a whole or the ability of the Borrower to carry out its obligations under this
Agreement and the Notes. Neither the Borrower nor any of the Guarantors is in
default in any material respect in the performance, observance or fulfillment of
any of the obligations, covenants or conditions contained in any agreement or
instrument material to its business to which it is a party.
SECTION 4.14. LABOR DISPUTES AND ACTS OF GOD. Neither the business nor
the material properties of the Borrower or any of the Guarantors are affected by
any fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or of the public enemy or other
casualty (whether or not covered by insurance), materially and adversely
affecting such business or properties or the operation of the Borrower or such
Guarantor.
SECTION 4.15. GOVERNMENTAL REGULATION. Neither the Borrower nor any of
the Guarantors is subject to regulation under the Public Utility Holding Company
Act of 1935, the Investment Company Act of 1940, the Federal Power Act or any
statute or regulation limiting its ability to incur indebtedness for money
borrowed as contemplated hereby.
SECTION 4.16. PARTNERSHIPS. Except as set forth in Schedule 4.16,
neither the Borrower nor any of the Guarantors is a partner in any partnership.
SECTION 4.17. ENVIRONMENTAL PROTECTION. Each of Borrower and the
Guarantors has obtained all material permits, licenses and other authorizations
which are required under all environmental laws, including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances or wastes
into the environment (including without limitation, ambient air, surface water,
ground water, or land), or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes, except to the extent failure to have any such permit,
license or authorization would not reasonably be expected to have a material
adverse effect on the business, financial condition, operations, properties or,
to the knowledge of the Borrower,
<PAGE> 24
prospects of the Borrower and the Guarantors taken as a whole. Each of the
Borrower and the Guarantors is in compliance with all terms and conditions of
the required permits, licenses and authorizations, and is also in compliance
with all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in the
environmental laws or contained in any regulation, code, plan, order, decree,
judgment, injunction, notice or demand letter issued, entered, promulgated or
approved thereunder, except to the extent failure to comply would not reasonably
be expected to have a material adverse effect on the business, financial
condition, operations, properties or, to the. knowledge of the Borrower,
prospects of the Borrower and the Guarantors taken as a whole. None of the
properties of the Borrower or the Guarantors, either owned-or leased, have been
included or proposed for inclusion on the National Priorities List adopted
pursuant to the Comprehensive Environmental Response Compensation and Liability
Act, as amended, or on any similar list or inventory of sites requiring response
or cleanup actions adopted by any other federal, state or local agency.
SECTION 4.18. COPYRIGHTS, PATENTS, TRADEMARKS, ETC. Each of the
Borrower and the Guarantors is duly licensed or otherwise entitled to use all
patents, trademarks, service marks, trade names, and copyrighted materials which
are used in the operation of its business as presently conducted, except where
the failure to be so licensed or entitled would not have a materially adverse
effect on the business, financial condition, operations, properties or, to the
knowledge of the Borrower, prospects of the Borrower and the Guarantors taken as
a whole. No claim is pending or, to the knowledge of the Borrower, threatened
against the Borrower or any of the Guarantors contesting the use of any such
patents, trademarks, service marks, trade names or copyrighted materials, nor
does the Borrower know of any valid basis for any such claims, other than claims
which, if adversely determined, would not have a material adverse effect on the
business, financial condition, operations, properties or, to the knowledge of
the Borrower, prospects of the Borrower and the Guarantors taken as a whole.
SECTION 4.19. COMPLIANCE WITH LAWS. Neither the Borrower nor any of the
Guarantors is in violation of any laws, or regulations, applicable to it, of any
municipal governmental authorities, or agencies, including without limitation,
States Occupational Safety and Health Act of all federal, state, county and
municipal laws, and regulations relating to the environment, as such may be
amended, where such violation would have a material adverse effect on the
business, financial condition, operations, properties or, to the knowledge of
the Borrower, prospects of the Borrower and the Guarantors taken as a whole.
SECTION 4.20. EVENTS OF DEFAULT. No Default or Event of Default has
occurred and is continuing.
SECTION 4.21. USE OF PROCEEDS. The Borrower shall use the proceeds of
the Loans for working capital and general corporate purposes. Such proceeds
shall not be used for the purpose, whether immediate, incidental, or ultimate,
of buying or carrying "margin stock" within the meaning of Regulation U.
SECTION 4.22. GUARANTY IN EFFECT. Each Guaranty entered into by a
Guarantor is in full
<PAGE> 25
force and effect and enforceable according to its terms.
SECTION 4.23. NEGATIVE PLEDGE IN EFFECT. The Negative Pledge Agreement
is in full force and effect and is enforceable according to its terms.
ARTICLE 5. AFFIRMATIVE COVENANTS.
During the term of this Agreement, and until performance, payment and/or
satisfaction in full of the Obligations, the Borrower covenants and agrees as
follows:
SECTION 5.01. MAINTENANCE OF EXISTENCE. Each of the Borrower and the
Guarantors shall preserve and maintain its corporate existence and good standing
in the jurisdiction of its incorporation, and qualify and remain qualified as a
foreign corporation in each jurisdiction in which such qualification is required
from time to time, except where failure to be so qualified would not have a
material adverse effect on the business, financial condition, operations,
properties or, to the knowledge of the Borrower, prospects of the Borrower and
the Guarantors taken as a whole.
SECTION 5.02. CONDUCT OF BUSINESS. Each of the Borrower and the
Guarantors shall continue to engage in a business of the same general type as
conducted by it on the date of this Agreement.
SECTION 5.03. MAINTENANCE OF PROPERTIES. Each of the Borrower and the
Guarantors shall maintain, keep and preserve all of its material properties
(tangible and intangible), necessary or useful in the proper conduct of its
business, in good working order and condition, ordinary wear and tear excepted.
SECTION 5.04. MAINTENANCE OF RECORDS. Each of the Borrower and the
Guarantors shall keep accurate and complete records and books of account, in
which complete entries will be made in accordance with GAAP, reflecting all
financial transactions of the Borrower and the Guarantors.
SECTION 5.05. MAINTENANCE OF INSURANCE. Each of the Borrower and the
Guarantors shall obtain and maintain insurance with financially sound and
reputable insurance companies with a Best's rating of A or better, in such
amounts and with such coverages (including without limitation public liability
insurance, fire, hazard and extended coverage insurance on all of its assets,
necessary workers' compensation insurance and all other coverages as are
consistent with industry practice) as are maintained by similar businesses of
similar size.
SECTION 5.06. COMPLIANCE WITH LAWS. Each of the Borrower and the Guarantors
shall comply in all material respects with all applicable laws, rules,
regulations and orders, except where the failure to so comply would not have a
material adverse effect on the business, financial condition, operations,
properties or, to the knowledge of the Borrower, prospects of the Borrower and
the Guarantors taken as whole. Such compliance shall include, without
limitation, paying all taxes, assessments and governmental charges imposed upon
it or upon its property (and all penalties and
<PAGE> 26
other costs, if any, related thereto), unless contested in good faith by
appropriate proceedings and for which adequate reserves have been set aside.
SECTION 5.07. RIGHT OF INSPECTION. From time to time upon at least one
Business Day's prior notice and in accordance with customary standards and
practices within the banking industry (including, without limitation, upon any
Event of Default or whenever the Banks may have reasonable cause to believe that
an Event of Default has occurred), the Borrower shall permit the Agent or any
Bank or any agent or representative thereof, to examine and make copies and
abstracts from the records and books of account of, and visit the properties of,
the Borrower and its Affiliates to discuss the affairs, finances and accounts of
the Borrower and any such Affiliate with any of their respective officers and
directors and the Borrower's independent accountants, and to make such
verification concerning the Borrower as may be reasonable under the
circumstances; provided, that the Banks shall use reasonable efforts to treat as
confidential any and all information obtained pursuant to this Section 5.07,
except to the extent required by any law, regulation, order, ruling, directive,
guideline or request from any central bank or other government authority
(whether or not having the force of law).
SECTION 5.08. REPORTING REQUIREMENT. The Borrower shall furnish to each
Bank:
(a) as soon as available and in any event within 120 days after the end
of each fiscal year of the Borrower, a combined and combining balance
sheet of the Borrower and the Guarantors as of the end of such fiscal
year and a combined and combining income statement and statements of
cash flow and stockholders' equity of the Borrower and the Guarantors
for such fiscal year, all in reasonable detail and stating in
comparative form the respective combined and combining figures for the
corresponding date and period in the prior fiscal year, and all
prepared in accordance with GAAP and accompanied by an unqualified
opinion thereon acceptable to the Banks by Miller, Ellin & Company, or
other independent certified public accountants of recognized national
standing selected by the Borrower and reasonably acceptable to the
Required Banks and the Agent.
(b) as soon as available and in any event within 45 days after the end
of each fiscal quarter of the Borrower, an unaudited combined and
combining balance sheet of the Borrower and the Guarantors as of the
end of such quarter and a combined and combining income statement and
statements of cash flow and stockholders' equity of the Borrower and
the Guarantors for such quarter and the year to date, all in reasonable
detail and stating in comparative form the respective combined and
combining figures for the corresponding date and period in the previous
fiscal year, and all prepared in accordance with GAAP and certified on
behalf of the Borrower by the chief financial officer and/or president
of the Borrower (subject to year-end adjustments);
(c) as soon as available and in any event within 20 days after the end
of each month, an aging summary report, giving an analysis by months of
the age of the Accounts Receivable of the Borrower indicating those
accounts of 30, 60, 90, 120 and over 120 days duration in the
Borrower's format.
<PAGE> 27
(d) simultaneously with the delivery of the financial statements
referred to in Section 5.08(b) above, for each publication title and
division of the Borrower, (i) a profit and loss statement for that
fiscal quarter and the year to date and (ii) a summary statement
indicating the ratio of advertising pages to total pages in such
quarter;
(e) promptly upon receipt thereof, copies of any material reports
submitted to the Borrower or any Guarantor by independent certified
public accountants in connection with examination of the financial
statements of the Borrower or any such Guarantor made by such
accountants;
(f) simultaneously with the delivery of the financial statements
referred to in Section 5.08(a) and (b) above, a certificate of the
chief financial officer and/or president of the Borrower (i) certifying
on behalf of the Borrower that to the best of his knowledge the
Borrower has observed or performed all of its covenants and other
agreements, and satisfied every condition, contained in this Agreement
and the Notes, and no Default or Event of Default has occurred and is
continuing or, if a Default or Event of Default has occurred and is
continuing, a statement as to the nature thereof and the action which
is proposed to be taken with respect thereto and (ii) with computations
demonstrating compliance with the covenants contained in Sections 6.10
through 6.16;
(g) simultaneously with the delivery of the annual financial statements
referred to in Section 5.08(a), a certificate of the independent public
accountants who audited such statements to the effect that, in making
the examination necessary for the audit of such statements, they have
obtained no knowledge of any condition or event which constitutes or
which with notice or lapse of time or both would constitute a Default
or Event of Default, or if such accountants shall have obtained
knowledge of any such condition or event, specifying in such
certificate each such condition or event of which they have knowledge
and the nature and status thereof, and setting forth all relevant facts
in reasonable detail to evidence, and the computations as to, whether
or not the Borrower is in compliance with the requirements contained in
Sections 6.10 through 6.16;
(h) not later than 15 days prior to the end of each fiscal year of the
Borrower, the Borrower shall provide the Banks with an opportunity to
review and take written notes on the business plan of the Borrower for
the next succeeding fiscal year, including without limitation,
quarterly operating budget and cash flow projections. Upon completion
of such review, the Borrower shall provide the Banks with a certificate
of the chief financial officer and/or president of the Borrower to the
effect that such officer believes such business plan to be reasonable
and not materially misleading. Such certificate shall further include a
detailed one to two-page synopsis of such business plan;
(i) simultaneously with the delivery of the financial statements
referred to in Section 5.08(b) above, copies of the appropriate
semiannual and annual circulation audit report of BPA International or
Audit Bureau of Circulations received by the Borrower with respect to
any of its audited publications after the date any such reports were
last delivered to the Banks hereunder;
<PAGE> 28
(j) promptly after the commencement thereof, notice of any action, suit
and proceeding before any court or governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, against
the Borrower or any Guarantor which alleges damages in excess of
$1,000,000 or, if determined adversely to the Borrower or such
Affiliate, would have a material adverse effect on the financial
condition, operations, properties, business or, to the knowledge of the
Borrower, prospects of the Borrower and the Guarantors taken as a
whole;
(k) as soon as possible, and in any event within 15 days after the
occurrence of each Default or Event of Default, a written notice
setting forth the details of such Default or Event of Default and the
action which is proposed to be taken by the Borrower with respect
thereto;
(l) at any 0 time upon the request of the Banks, the opportunity to
review copies of all reports, including annual reports, and notices
which the Borrower or any Guarantor files with or receives from the
PBGC or the U.S. Department of Labor under ERISA; and as soon as
possible and in any event within 15 days after the Borrower or any
Guarantor knows or has reason to know that any Reportable Event or
Prohibited Transaction has occurred with respect to any Plan or that
the PBGC or the Borrower or any such Guarantor has instituted or will
institute proceedings under Title IV of ERISA to terminate any Plan,
the Borrower will deliver to the Lender a certificate of the chief
financial officer and/or president of the Borrower setting forth
details as to such Reportable Event or Prohibited Transaction or Plan
termination and the action the Borrower proposes to take with respect
thereto;
(m) promptly after the furnishing thereof, copies of any statement or
report furnished to any other the terms of any indenture, loan or
credit agreement and not otherwise required to be Banks pursuant to any
other clause of this
(n) such other information respecting the operations, financial or
otherwise, of the Guarantor as the Agent or any Bank may from time to
time reasonably request.
SECTION 5.09. GUARANTY OF OBLIGATIONS. The Borrower shall promptly notify the
Banks if any entity carrying on, or intending to carry on, a business for profit
becomes an Affiliate of the Borrower that has a business relationship with the
Borrower and, if reasonably requested by the Required Banks, shall cause any
such Affiliate to execute and deliver to the Banks, in the sole discretion of
the Banks, a Guaranty in the form of Exhibit G.
SECTION 5.10. FURTHER ASSURANCES. The Borrower shall take all such further
actions and execute and file or record, at its own cost and expense, all such
further documents and instruments as the Agent or the Banks may at any time
reasonably determine may be necessary or advisable; and shall do, execute,
acknowledge, deliver, record, file, re-file, record, register and re-register
any and all such further acts, deeds, conveyances, estoppel certificates,
transfers, certificates, assurances and other instruments as the Agent or the
Banks may reasonably require from time to time in order to carry out more
effectively the purposes of this Agreement or any Note.
<PAGE> 29
ARTICLE 6. NEGATIVE COVENANTS.
During the term of this Agreement, and until performance, payment and/or
satisfaction in full of the Obligations, the Borrower covenants and agrees as
follows:
SECTION 6.01. DEBT. Neither the Borrower nor any Guarantor shall create,
incur, assume or suffer to exist any Debt, except:
(a) Debt of the Borrower under this Agreement and the Notes;
(b) Debt described in Schedule 4.10, but no renewals, extensions or
refinancings thereof;
(c) accrued expenses and current liabilities for accounts payable
incurred for the acquisition of property or services in the ordinary
course of business;
(d) Debt of the Borrower or any Guarantor secured by purchase money
Liens permitted by Section 6.03;
(e) Debt permitted under Section 6.02 hereof;
(f) Debt between the Borrower and any Guarantor; PROVIDED, that any
such debt shall be subordinated to any Obligations incurred or arising
hereunder;
(g) notes payable and any other form of Debt which constitutes a
deferred purchase price of any property or services so long as the
aggregate principal amount thereof does not exceed $1,500,000 at any
time outstanding;
(h) Debt arising by reason of any deferred compensation plans of the
Borrower existing as of the Closing Date (and any renewals or
extensions of such deferred compensation plans on substantially the
same terms and conditions thereof); and
(i) Debt not otherwise permitted under this Section 6.01, not to exceed
$500,000 in the aggregate principal amount outstanding at any time.
SECTION 6.02. GUARANTIES, Etc. Neither the Borrower nor any Guarantor shall
assume, guarantee, endorse or otherwise be or become directly or contingently
responsible or liable (including, but not limited to, an agreement to purchase
any obligation, stock, assets, goods or services or supply or advance any stock,
assets, goods or services, or an agreement to maintain or cause such Person to
maintain a minimum working capital or net worth or otherwise to assure the
creditors of any Person against loss) for the obligations of any Person, except
(a) as provided in Section 5.09, (b) guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business, (c) guaranties of indebtedness of Guarantors; PROVIDED, that
such indebtedness is permitted under Section 6.01 up to an aggregate amount of
$500,000, (d) guaranties existing on the date of this Agreement and set forth in
Schedule 6.02
<PAGE> 30
hereof, (e) guaranties made in the ordinary course of business for the benefit
of employees of the Borrower or any Guarantor up to the maximum amount of
$250,000 in the case of an individual employee and $1,000,000 in the aggregate
at any time outstanding, and (f) guaranties not otherwise permitted by this
Section 6.02, not to exceed $100,000 in the aggregate principal amount
outstanding at any time.
SECTION 6.03. LIENS. Neither the Borrower nor any Guarantor shall create,
incur, assume or suffer to exist any Lien, upon or with respect to any of its
properties, now owned or hereafter acquired, except:
(a) Liens for taxes or assessments or other government charges or
levies if not yet due and payable or if due and payable if they are
being contested in good faith by appropriate proceedings and for which
appropriate reserves are maintained;
(b) Liens imposed by law, such as mechanic's, materialmen's,
landlord's, warehousemen's and carrier's Liens, and other similar
Liens, securing obligations incurred in the ordinary course of business
which are not past due for more than 60 days, or which are being
contested in good faith by appropriate proceedings and for which
appropriate reserves have been established;
(c) Liens under workers' compensation, unemployment insurance, social
security or similar legislation (other than ERISA);
(d) Liens with respect to deposits or pledges to secure the performance
of bids, tenders, contracts (other than contracts for the payment of
money), leases (permitted under the terms of this Agreement), public or
statutory obligations, surety, stay, appeal, indemnity, performance or
other similar bonds, or other similar obligations arising in the
ordinary course of business;
(e) judgment and other similar Liens arising in connection with court
proceedings; provided that the execution or other enforcement of such
Liens is effectively stayed and the claims secured thereby are being
actively contested in good faith and by appropriate proceedings;
(f) easements, rights-of-way, restrictions and other similar
encumbrances which, in the aggregate, do not materially interfere with
the occupation, use and enjoyment by the Borrower or any such Guarantor
of the property or assets encumbered thereby in the normal course of
its business or materially impair the value of the property subject
thereto;
(g) purchase money Liens on any property hereafter acquired or the
assumption of any Lien on property existing at the time of such
acquisition, or a Lien incurred in connection with any conditional sale
or other title retention agreement or a capital Lease; provided that:
<PAGE> 31
(i) any property subject to any of the foregoing is
acquired by the Borrower or any such Guarantor in the
ordinary course of its business and the Lien on any
such property is created contemporaneously with or
within ten days after such acquisition;
(ii) the obligation secured by any Lien so created,
assumed or existing shall not exceed 100% of the lesser
of cost or fair market value as of the time of
acquisition of the property covered thereby to the
Borrower or such Guarantor acquiring the same;
(iii) each such Lien shall attach only to the property
so acquired and fixed improvements thereon;
(iv) the Debt secured by all such Liens shall not
exceed $750,000 at any time outstanding in the
aggregate; and
(v) the obligations secured by such Lien are permitted
by the provisions of Section 6.01 and the related
expenditure is permitted under Section 6.10;
(h) Liens referred to in Schedule 4.06 and any renewals and extensions
thereof;
(i) Leases or subleases of office space granted to other Persons who
are not Guarantors at market rates in the ordinary course of business
and not materially interfering with the conduct of the business of the
Borrower or any Guarantor; and
(j) Liens not otherwise provided for in Section 6.03(a) through (h)
hereof, which encumber assets (other than current assets) of the
Borrower with an aggregate value not in excess of $250,000.
SECTION 6.04. LEASES. Neither the Borrower nor any Guarantor shall agree to
a modification of any existing lease that would result in increased costs to the
Borrower or such Guarantor, or create, incur, assume or suffer to exist any
obligation as lessee for the rental or hire of any real or personal property,
except: (a) leases existing on December 31, 1992 as described in the notes to
the financial statements of the Borrower, and any extensions, renewals or
replacements thereof so long as the aggregate annual rental payments under all
such leases do not exceed 120%- of the aggregate annual rental payments
permitted for the immediately preceding year (b) leases (other than Capital
Leases) which do not in the aggregate require the Borrower and the Guarantors on
a combined basis to make payments (including taxes, insurance, maintenance and
similar expense which the Borrower or any Guarantor is required to pay under the
terms of any lease) in any fiscal year of the Borrower in excess of $1,000,000,
(c) leases between the Borrower and any Guarantor or between any such
Guarantors, and (d) Capital Leases permitted by Section 6.10.
SECTION 6.05. INVESTMENTS. Neither the Borrower nor any Guarantor shall,.
except as permitted by Sections 6.06 and 6.09, and except for any investment
existing on December 31, 1992, make any loan or advance to any Person, including
any director, officer, employee, or
<PAGE> 32
stockholder of the Borrower or any Guarantor, or purchase or otherwise acquire
any capital stock, assets, obligations or other securities of, make any capital
contribution to, or otherwise invest in, or acquire any interest in, any Person,
except: (a) direct obligations of the United States of America or any agency
thereof (or direct obligations of any foreign sovereign with a credit quality
rating of at least "AA" by Standard & Poor's Corporation or "All' by Moody's
Investors Service, Inc., up to a maximum aggregate amount, together with all
non-United States investments described in Section 6.05(b) and (c) hereof, of
$2,000,000 at any time) with maturities of two years or less from the date of
acquisition, (b) commercial paper of a domestic issuer rated at least "A-111 by
Standard & Poor's Corporation or "P-111 by Moody's Investors Service, Inc. (or
commercial paper of any foreign issuer with an equivalent credit quality rating
by Standard & Poor's Corporation or Moody's Investors Service, Inc., up to a
maximum aggregate amount, together with all non-United States investments
described in Sections 6.05(a) and (c) hereof, of $2,000,000 at any time), (c)
certificates of deposit with maturities of two years or less from the date of
acquisition issued by any commercial bank operating within the United States of
America having capital and surplus in excess of $100,000,000 (or certificates of
deposits with comparable maturities issued by any foreign commercial bank having
capital and surplus in excess of the equivalent of $100,000,000 at any time, up
to a maximum aggregate amount, together with all non-United States investments
described in Sections 6.05(a) and (b) hereof, of $2,000,000 at any time), (d)
loans and advances made by the Borrower or any Guarantor to employees, officers,
stockholders or Affiliates of the Borrower or such Guarantor not to exceed
$1,800,000 at any time outstanding in the aggregate; PROVIDED, that any such
loan or advance of $50,000 or more for a term in excess of three months shall be
secured by mortgages on real property and/or pledges and security interests in
marketable securities reasonably acceptable to the Agent, (e) stock or
obligations issued in settlement of claims against any other Person by reason of
bankruptcy, composition or reorganization of any debtor of the Borrower or any
Guarantor, (f) notes held by the Borrower or any Guarantor to the extent
permitted under Section 6.06 hereof, (g) receivables owing to the Borrower or
any Guarantor created in the ordinary course of business, and (h) as long as no
Event of Default shall have occurred and be continuing, loans to acquisition
targets up to a maximum aggregate principal amount of $1,000,000 at any time
outstanding, provided that any such loan or advance of $50,000 or more shall be
secured by collateral reasonably acceptable to the Required Banks. It is
understood that the effect of the foregoing is to prohibit the Borrower's
investment in any of the Guarantors not existing on the date hereof without the
Required Banks' approval. Notwithstanding the foregoing, as long as no Event of
Default shall have occurred and be continuing, the Borrower may invest in any of
the Guarantors to the extent required by applicable law or in amounts not to
exceed $1,500,000 in the aggregate at any time.
SECTION 6.06. CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. The Borrower
shall not (i) consolidate or merge with or into any, other Person unless the
Borrower is the surviving corporation and immediately after giving effect
thereto no Default or Event of Default shall have occurred and be continuing or
(ii) sell, lease or otherwise transfer all or substantially all of its assets to
any other Person. No Guarantor shall consolidate with, merge with or into or
transfer all or substantially of its assets to any Person other than the
Borrower or a Wholly-Owned Subsidiary. Neither the Borrower nor any Guarantor
shall sell, lease or otherwise transfer assets to any other Person (except, in
the case of any Guarantor, to the Borrower or a Wholly-Owned
<PAGE> 33
Subsidiary) except for an amount not less than the fair market value thereof
and, with respect to any such sale, lease or transfer in excess of $1,000,000,
subject to the requirements of Section 2.05(a) hereof, it being understood and
agreed, however, that the provisions of this Section 6.06 shall not apply to or
otherwise restrict the sale, lease or other transfer of inventory and services
(including without limitation the publication of advertising) by the Borrower or
the Guarantors in the ordinary course of business. For purposes of the foregoing
(but without implication that the sale, lease or other transfer of assets would
not constitute the sale, lease or other transfer of a substantial part of the
assets of the Borrower or the Guarantors), assets which generated 20%- or more
of Operating Cash Flow during any twelve-month period beginning on or after
January 1, 1992 shall be deemed to be a substantial part of the assets of the
Borrower or any Guarantor.
SECTION 6.07. STOCK OF SUBSIDIARIES, ETC. The Borrower shall not sell or
otherwise dispose of any shares of capital stock of its Subsidiaries, except in
connection with a transaction permitted under Section 6.06, or permit any such
Subsidiaries to issue any additional shares of its capital stock to any Person
other than the Borrower or any Subsidiaries, except directors' qualifying
shares.
SECTION 6.08. TRANSACTIONS WITH AFFILIATES. The Borrower shall not enter
into any transaction, including without limitation, the purchase, sale or
exchange of property or the rendering of any service, with any Affiliate (other
than any Affiliate that is a Guarantor) and no Guarantor shall enter into any
transaction, including without limitation, the purchase, sale or exchange of
property or the rendering of any service, with any Affiliate (other than any
Affiliate that is the Borrower or a Guarantor), except in the ordinary course of
and pursuant to the reasonable requirements of the Borrower's or such
Guarantor's business and upon fair and reasonable terms no less favorable to the
Borrower or such Guarantor than would obtain in a comparable arm's-length
transaction with a Person not an Affiliate, except that guaranties and loans may
be made to the extent provided in Sections 6.02 and 6.05 hereof, respectively,
and except that the Borrower may enter into transactions with the Institute for
Community Development, Inc., a New York not-for-profit corporation and
charitable organization exempt from taxation under Section 501(c)(3) of the
Internal Revenue Code of 1986, which are upon terms less favorable to the
Borrower than would b obtain in a comparable arm's-length transaction, provided,
however, that the aggregate value (which does not exceed $500,000 per annum as
of the date hereof) of the benefits provided to such organization by the
Borrower each year by reason of such terms being less favorable shall not exceed
11OP6 of the aggregate value of the benefits provided to such organization by
such reason thereof for the immediately preceding year.
SECTION 6.09. ACQUISITIONS. Neither the Borrower nor any Guarantor shall
make or permit to be made, without the prior written approval of the Required
Banks, any acquisitions (other than acquisitions of equipment, goods or services
in the ordinary course of the Borrower's business) contemplating a purchase
price greater than the amounts set forth opposite the following years:
<TABLE>
<CAPTION>
Year Amount
<S> <C> <C>
1993 $4,000,000
</TABLE>
<PAGE> 34
<TABLE>
<CAPTION>
<S> <C> <C>
1994 $5,000,000
1995 $6,000,000
1996, and each year
thereafter $7,000,000.
</TABLE>
SECTION 6.10. CAPITAL EXPENDITURES. The Borrower shall not make or permit to
be made aggregate Capital Expenditures of the Borrower and the Guarantors on a
combined basis greater than the amounts set forth opposite the following years:
<TABLE>
<CAPTION>
Year Amount
<S> <C> <C>
1993 $4,500,000
1994 $5,500,000
1995 $6,500,000
1996, and each year
thereafter $7,500,000.
</TABLE>
SECTION 6.11. CURRENT RATIO. The Borrower shall not permit the ratio of
Current Assets to Current Liabilities of the Borrower and the Guarantors on a
combined basis as at the last day of each fiscal quarter (commencing with the
fiscal quarter ending June 30, 1993) to be less than 1.1:1.0.
SECTION 6.12. MINIMUM TANGIBLE NET WORTH. The Borrower shall not permit
Tangible Net Worth of the Borrower and the Guarantors on a combined basis at any
time to be less than an amount equal to (a) $17,500,000 for the period from
January 1, 1993 to December 31, 1993, and (b) in any subsequent fiscal year of
the Borrower, $17,500,000 plus $2,000,000 per annum for each fiscal year of the
Borrower following December 31, 1993.
SECTION 6.13. INTEREST COVERAGE. The Borrower shall not permit the ratio of
EBIT to Interest Expense ("Interest Coverage") of the Borrower and the
Guarantors on a combined basis to be less than 2.0:1.0; PROVIDED, that if
Interest Coverage falls below 2.5:1.0 at any time, then during each fiscal
quarter that Interest Coverage remains below 2.5:1.0, (i) the principal amount
of any and all Eurodollar Loans then outstanding, and made thereafter, shall
bear interest at a rate equal to the Eurodollar Rate plus one-quarter of one
percentage point and (ii) the annual facility fee referred to in Section 2.14(b)
hereof shall increase to 5/16 of one percent of the amount of each Bank's
Commitment. Interest Coverage shall be measured on March 31, June 30, September
30 and December 31 (or if any such date shall not be a Business Day, the last
Business Day of the applicable fiscal quarter) of each year for the period of
twelve consecutive months preceding such measurement date.
SECTION 6.14. RATIO OF TOTAL LIABILITIES TO TANGIBLE NET WORTH. The Borrower
shall not permit the ratio of Total Liabilities to Tangible Net Worth of the
Borrower and the Guarantors on a combined basis at any time to exceed 2.5:1.0.
SECTION 6.15. CASH FLOW COVERAGE. The Borrower shall not permit Cash Flow
Coverage of
<PAGE> 35
the Borrower and the Guarantors, on a combined basis, to be less than 1.15:1.0.
Cash Flow Coverage shall be measured on March 31, June 30, September 30 and
December 31 (or if any such date shall not be a Business Day, the last Business
Day of the applicable fiscal quarter) of each year for the period of twelve
consecutive months preceding such measurement date.
SECTION 6.16. RATIO OF FUNDED DEBT TO OPERATING CASH FLOW. The Borrower
shall not permit the ratio of Funded Debt to Operating Cash Flow of the Borrower
and the Guarantors on a combined basis measured at the end of each fiscal year
of the Borrower for such fiscal year to exceed 3.0:1.0.
SECTION 6.17. DISTRIBUTIONS. The Borrower shall not in any fiscal year make
any Distributions from Net Income of the Borrower, other than Distributions from
time to time up to an aggregate amount not to exceed (a) 50% of the cumulative
Net Income earned during the period commencing January 1, 1992 and ending with
the last day of the fiscal quarter immediately preceding the date of such
Distribution less (b) any Distributions from Net Income previously made by the
Borrower during such period.
ARTICLE 7. EVENTS OF DEFAULT.
SECTION 7.01. EVENTS OF DEFAULT. Any of the following events shall be an
"Event of Default":
(a) the Borrower shall fail to pay any principal, premium, or interest,
or any fees or other amounts payable hereunder, including, but not by
way of limitation, any Obligation under this Agreement, the Notes, or
any other instrument which evidences the indebtedness of the Borrower
hereunder, when the same shall become due and payable, whether at
maturity or at any date fixed for payment or prepayment or by
declaration or otherwise, and such failure shall continue unremedied
for five Business Days;
(b) any statement, representation or warranty made by the Borrower in
this Agreement or the Notes or which is contained in any certificate,
document, opinion, financial or other statement furnished at any time
under or in connection with any this Agreement or the Notes shall
prove to have been incorrect in any material respect on or as of the
date made;
(c) the Borrower shall (i) fail to perform or observe any term,
covenant, or agreement contained in Section 4.21 or Article 6 and, if
any such failure relates to Section 6.01 or Section 6.03 hereof, such
failure shall continue unremedied for five consecutive days; or (ii)
fail to perform or observe any term, covenant, or agreement on its
part to be performed or observed (other than the obligations
specifically referred to elsewhere in this Section 7.01) in this
Agreement (including without limitation any such term, covenant or
agreement contained in Article 5 hereof) or the Notes and such failure
shall continue unremedied for 30 consecutive days. The Banks shall use
reasonable efforts to give the Borrower notice of any Default or Event
of Default under this Section 7.01(c); PROVIDED, HOWEVER, that failure
to give any such notice shall not impair or otherwise
<PAGE> 36
adversely affect the Banks, rights and remedies hereunder;
(d) the Borrower or any Guarantor shall (i) fail to pay any
indebtedness, including but not limited to indebtedness for borrowed
money (other than the payment Obligations described in (a) above), of
the Borrower or such Guarantor, as the case may be, or any interest or
premium thereon, when due(whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise); or (ii) fail to
perform or observe any term, covenant or condition on its part to be
performed or observed under any agreement or instrument relating to
any such indebtedness, when required to be performed or observed, if
the effect of such failure to perform or observe is to accelerate, or
to permit the acceleration of, after the giving of notice or passage
of time, or both, the maturity of such indebtedness, unless such
failure to perform or observe shall be ' waived by the holder of such
indebtedness within any applicable grace period, but in no event later
than 30 days after the event giving rise to such holder's right to
accelerate the maturity of such indebtedness; or (iii) any such
indebtedness shall be declared to be due and payable, or required to
be prepaid (other than by a regularly scheduled required prepayment),
prior to the stated maturity. thereof; PROVIDED, HOWEVER, that it
shall not be a Default or Event of Default under this Section 7.01(d)
unless the aggregate principal amount of all such indebtedness as
described in clauses (i) through (iii) above shall exceed $500,000;
(e) the Borrower or any Guarantor (i) shall generally not, or be
unable to, or shall admit in writing its inability to, pay its debts
as such debts become due; or (ii) shall make an assignment for the
benefit of creditors, petition or apply to any tribunal for the
appointment of a custodian, receiver or trustee for it or a
substantial part of its assets; or (iii) shall commence any proceeding
under any bankruptcy, reorganization, arrangement, readjustment of
debt, dissolution or liquidation law or statute of any jurisdiction,
whether now or hereafter in effect; or (iv) shall have had any such
petition or application filed or any such proceeding shall have been
commenced against it in which an adjudication or appointment is made
or order for relief is entered, or which petition, application or
proceeding remains undismissed for a period of 60 days or more; or (v)
shall be the subject of any proceeding under which its assets may be
subject to seizure, forfeiture or divestiture (other than a proceeding
in respect of a Lien permitted under Section 6.03(a)); or (vi) by any
act or omission shall indicate its consent to, approval of or
acquiescence in any such petition, application or proceeding or order
for relief or the appointment of a custodian, receiver or trustee for
all or any substantial part of its property; or (vii) shall suffer any
such custodianship, receivership or trusteeship to continue
undischarged for a period of 60 days or more;
(f) one or more judgments, decrees or orders for the payment of money
in excess of $250,000 in the aggregate shall be rendered against the
Borrower or any of the Guarantors and such judgments, decrees or
orders shall continue unsatisfied and in effect for a period of 60
consecutive days without being vacated, discharged, satisfied or
stayed or bonded pending appeal;
<PAGE> 37
(g) any of the following events shall occur or exist with respect to
the Borrower or any ERISA Affiliate: (i) any Prohibited Transaction
involving any Plan; (ii) any Reportable Event shall occur with respect
to any Plan; (iii) the filing under Section 4041 of ERISA of a notice
of intent to terminate any Plan or the termination of any Plan; (iv)
any event or circumstance exists which would constitute grounds
entitling the PBGC to institute proceedings under Section 4042 of
ERISA for the termination of, or for the appointment of a trustee to
administer, any Plan, or the institution by the PBGC of any such
proceedings; (v) complete or partial withdrawal under Section 4201 or
4204 of ERISA from a Multiemployer Plan or the reorganization,
insolvency or termination of any Multiemployer Plan; and in each case
above, such event or condition, together with all other such events or
conditions, if any, would in the reasonable opinion of the Banks
subject the Borrower to any tax, penalty or other liability to a Plan,
Multiemployer Plan, the PBGC or otherwise (or any combination thereof)
which in the aggregate exceed or may exceed $500,000; this Agreement
shall at any time after its execution and delivery and for any reason
cease to be in full force and effect or shall be declared null and
void, or the validity or enforceability hereof shall be contested by
the Borrower or the Borrower shall deny it has any further liability
or obligation hereunder;
(i) there shall have occurred a Change of Control; or there shall
have occurred any material misrepresentation, breach, default
or event of default under any Guaranty, which has not been
cured within any applicable grace period thereunder.
SECTION 7.02. REMEDIES. If any Event of Default shall occur and be
continuing, the Agent may, if requested by the Required Banks, by notice to the
Borrower, (i) declare the Commitment to be terminated, whereupon the same shall
forthwith terminate, and (ii) declare all amounts owing under this Agreement and
the Notes (whether or not such Obligations be contingent or unmatured) to be
forthwith due and payable, whereupon all such amounts shall become and be
forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Borrower;
provided that, in the case of an Event of Default referred to in Section 7.01(e)
above with respect to the Borrower, the Commitment shall be immediately
terminated, and the all such amounts shall be immediately due and payable
without notice, presentment, demand, protest or other formalities of any kind,
all of which are hereby expressly waived by the Borrower.
ARTICLE 8. THE AGENT.
SECTION 8.01. AUTHORIZATION AND ACTION. Each Bank hereby appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers and discretion under this Agreement and the Notes as are delegated
to the Agent by the terms hereof, together with such powers as are reasonably
incidental thereto. As to any matters not expressly provided for by this
Agreement and the Notes, the Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so
<PAGE> 38
acting or refraining from acting) upon the instructions of the Required Banks,
and such instructions shall be binding upon all Banks; provided, however, that
the Agent shall not be required to take any action which exposes the Agent to
liability or which is contrary to this Agreement and the Notes or applicable
law.
SECTION 8.02. AGENT'S RELIANCE, ETC. Neither the Agent, nor its directors,
officers, agents or employees shall be liable for any action taken or omitted to
be taken by it or them under or in connection with this Agreement and the Notes,
except for its or their own gross negligence or willful misconduct. Without
limitation of the generality of the foregoing, the Agent (i) may consult with
legal counsel (including counsel for the Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts; (ii) makes no warranty or
representation to any Bank and shall not be responsible to any Bank for any
statements, warranties or representations made in or in connection with this
Agreement or the Notes; (iii) shall have no duty to ascertain or to inquire as
to the performance or observance of any of the terms, covenants or conditions of
this Agreement and the Notes on the part of the Borrower or its Affiliates or to
inspect the properties (including books and records) of the Borrower or its
Affiliates; (iv) shall not be responsible to any Bank for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement and the Notes or any other instrument or document furnished pursuant
hereto or thereto; and (v) shall incur no liability under or in respect of this
Agreement and the Notes by acting upon any notice, consent, certificate or other
instrument or writing (which may be by telegram, cable, telex or telecopy)
purported to be genuine and signed or sent by the proper party or parties.
SECTION 8.03. SHAWMUT AND AFFILIATES. With respect to its Commitment and the
Loans made by it, the Agent shall have the same rights and powers under this
Agreement or the Notes as any other Bank and may exercise the same as though it
were not the Agent; and the term "Bank" or "Banks" shall, unless otherwise
expressly indicated, include Shawmut in its individual capacity. Shawmut and its
Affiliates may accept deposits from, lend money to, act as trustee under
indentures of, and generally engage in any kind of business with, the Borrower
and its Affiliates and any of their respective Affiliates and any Person who may
do business with or own securities of the Borrower or its Affiliates all as if
Shawmut were not the Agent, and without any duty to account therefor to the
Banks.
SECTION 8.04. CREDIT DECISION. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank and based on
such information as it deems necessary (the receipt of which such Bank
acknowledges), made its own credit analysis and decision to enter into this
Agreement. Each Bank also acknowledges that it will, independently and without
reliance upon the Agent or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement and the
Notes.
SECTION 8.05. INDEMNIFICATION. The Banks severally and ratably agree to
indemnify the Agent (to the extent not reimbursed by the Borrower), from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or
<PAGE> 39
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by, or asserted against the Agent in any way relating to or arising out of this
Agreement and the Notes, or any action taken or omitted by the Agent under this
Agreement and the Notes, provided that no Bank shall be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the Agent's
gross negligence or willful misconduct. Without limitation of the foregoing,
each Bank agrees to reimburse the Agent promptly upon demand for its ratable
share of any out-of-pocket expenses (including reasonable counsel fees) incurred
by the Agent in connection with the preparation, execution, administration, or
enforcement of, or legal advice in respect of rights or responsibilities under,
this Agreement and the Notes, to the extent that the Agent is not reimbursed for
such expenses by the Borrower.
SECTION 8.06. SUCCESSOR AGENT. The Agent may resign at any time as Agent
under this Agreement by giving written notice thereof to the Banks and the
Borrower and may be removed as Agent under this Agreement at any time with or
without cause by the Required Banks upon written notice to the Borrower. Upon
any such resignation or removal, the Required Banks shall have the right to
appoint a successor Agent hereunder with the approval of the Borrower, which
shall not be unreasonably withheld. If no successor Agent shall have been so
appointed by the Required Banks, and shall have accepted such appointment,
within 30 days after the retiring Agent's giving of notice of resignation or the
Required Banks' removal of the retiring Agent, then the retiring Agent may, on
behalf of the Banks, appoint a successor Agent with the approval of the
Borrower, which shall not be unreasonably withheld, which shall be a commercial
bank organized under the laws of the United States of America or of any state
thereof and having a combined capital and surplus of at least $500,000,000. Upon
the acceptance of any appointment as Agent under this Agreement by a successor
Agent, such successor Agent shall thereupon succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Agent, and the
retiring Agent shall be discharged from its duties and obligations under this
Agreement. After any retiring Agent's resignation or removal as Agent under this
Agreement, the provisions of this Article 8 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this
Agreement.
ARTICLE 9. MISCELLANEOUS.
SECTION 9.01. AMENDMENTS AND WAIVERS. No amendment or waiver of any
provision of this Agreement or any Note nor consent to any departure by the
Borrower therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Agent, the Borrower and the Required Banks, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given. Notwithstanding the foregoing, the written
consent of each Bank affected thereby shall be required for any amendment or
waiver having the effect of (i) extending the Revolving Loan Termination Date,
or extending the time of payment of interest or fees on any Loan or reduce the
principal amount thereof, or increasing the amount of such Bank's Commitment
over the amount then in effect (it being understood that a waiver of any Default
or Event of Default or a mandatory reduction in the Commitments shall not
constitute an increase in any Commitment of any Bank), (ii) reducing the
percentage specified in
<PAGE> 40
the definition of Required Banks, (iii) amending or waiving any provision of
this Section 9.01, or (iv) consenting to the assignment or transfer by the
Borrower of any of its rights and obligations under this Agreement or the Notes,
except to the extent permitted under Section 6.06 hereof. No failure on the part
of the Agent or any Bank to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof or preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law..
SECTION 9.02. USURY. Anything herein to the contrary notwithstanding, the
Obligations of the Borrower with respect to this Agreement and the Notes shall
be subject to the limitation that payments of interest shall not be required to
the extent that receipt thereof would be contrary to provisions of law
applicable to the Banks limiting rates of interest which may be charged or
collected by the Banks.
SECTION 9.03. EXPENSES; INDEMNITIES.
(a) Unless otherwise agreed in writing, the Borrower shall reimburse the
Agent and the Banks on demand for all reasonable costs, expenses and charges
(including without limitation, reasonable fees and charges of Day, Berry &
Howard or any other external legal counsel for the Agent and the Banks) incurred
by the Agent and the Banks in connection with the preparation, filing,
recording, modification and amendment of this Agreement or the Notes; PROVIDED,
that the Borrower shall not be required to reimburse more than the aggregate
amount of $20,000 in connection with the preparation of this Agreement and the
Notes. The Borrower further agrees to pay (i) within ten Business Days after
demand, all reasonable costs and expenses (including reasonable counsel fees and
expenses), if any, in connection with the enforcement, including without
limitation, the enforcement of judgments (whether through negotiations, legal
proceedings or otherwise) of this Agreement, the Notes or any other document to
be delivered under the this Agreement and (ii) within 30 days after demand, all
audits, all insurance costs, and all other reasonable costs and expenses which
the Agent or any Bank has or shall have paid by reason of the Borrower's failure
or refusal to do so as and when required hereunder. The Borrower agrees to
indemnify and hold harmless the Agent and the Banks from and against any and all
liabilities with respect to or resulting from any delay in paying or omission to
pay such costs, expenses, charges and fees, except to the extent caused by the
Agent's or such Banks' gross negligence or willful misconduct. Until paid, the
amount of any cost, expense or charge shall constitute, together with all
accrued interest thereon, part of the Obligations.
(b) The Borrower hereby absolutely agrees to indemnify the Agent and the
Banks upon demand at any time, against any and all losses, costs or expenses
which the Agent or any Bank may at any time or from time to time sustain or
incur as a consequence of (i) any failure by the Borrower to pay, punctually on
the due date thereof, any amount payable by the Borrower to the Agent or any
Bank or (ii) the acceleration, in accordance with the terms of this Agreement,
of the time of payment of any of the Obligations of the Borrower. Such losses,
costs or expenses may include, without limitation, (i) any costs incurred by any
Bank in carrying funds to cover any overdue principal, overdue interest, or any
other overdue sums payable by the Borrower to such Bank or (ii) any losses
incurred or sustained by any Bank in liquidating or reemploying funds
<PAGE> 41
acquired by such Bank from third parties.
(c) The Borrower agrees to indemnify the Agent and the Banks and their
directors, officers, employees, agents and Affiliates from, and hold each of
them harmless against, any and all losses, liabilities, claims, damages or
expenses incurred by any of them arising out of or by reason of any
investigation or litigation or other proceedings (including any threatened
investigation or litigation or other proceedings) relating to any transaction
contemplated by this Agreement, any actions or omissions of the Borrower or any
Affiliate or any of their respective directors, officers, employees or agents in
connection with this Agreement, or any actual or proposed use by the Borrower or
any Subsidiary of the proceeds of the Loans, including without limitation, the
reasonable fees and Disbursements of counsel incurred in connection with any
such investigation or litigation or other proceedings (but excluding any such
losses, liabilities, claims, damages or expenses incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified).
(d) The Borrower agrees to indemnify and hold harmless the Agent and the
Banks, and their directors, officers, employees, agents and Affiliates, from and
against any and all claims, damages, liabilities, costs and expenses (including
without limitation, reasonable fees and disbursements of counsel, engineers or
similar professionals) which may be incurred by or asserted against the Agent
and the Banks or any such party in connection with or arising out of or relating
to (i) the Agent's or any Bank's compliance with any environmental law with
respect to the properties or operations of the Borrower or its Affiliates, (ii)
any natural resource damages, governmental fines or penalties or other amounts
mandated by any governmental authority, court order, demand or decree in
connection with the disposal by the Borrower or its Affiliates either on-site or
offsite (including leakage or seepage from any such site including third party
treatment facilities) of pollutants, contaminants or hazardous wastes and (iii)
any personal injury or property damage to third parties resulting from such
pollutants, contaminants or hazardous wastes.
SECTION 9.04. TERM; SURVIVAL. This Agreement shall continue in full force
and effect as long as any Obligations are owing by the Borrower to the Agent or
any Bank. No termination of this Agreement shall in any way affect or impair the
rights and obligations of the parties hereto relating to any transactions or
events prior to such termination date, and all warranties and representations of
the Borrower shall survive such termination. All representations and warranties
made hereunder and in any document, certificate, or statement delivered pursuant
hereto or in connection herewith shall survive the execution and delivery of
this Agreement and the Notes. The obligations of the Borrower under Sections
2.16, 2.17 and 9.03 shall survive the repayment of the Loans and the termination
of the Commitment.
SECTION 9.05. ASSIGNMENT; PARTICIPATIONS.
(a) With the written consent of the Agent, the other Banks and the Borrower,
each Bank may assign to one or more Eligible Assignees all or a portion of its
rights and obligations under this Agreement (including without limitation, all
or a portion of its Commitment and the amounts under the Loans owing to it);
provided, however, that (i) each such assignment shall be of a
<PAGE> 42
constant, and not a varying, percentage of all of the assigning Bank's rights
and obligations under this Agreement, (ii) the amount of the Commitment of the
assigning Bank being assigned pursuant to each such assignment (determined as of
the date of the Assignment and Acceptance) with respect to such assignment shall
in no event be less than $1,000,000 and shall be an integral multiple of
$100,000 (or in the case of an Assignment and Acceptance covering all or the
remaining portion of an assigning Bank's rights and obligations under this
Agreement, any lesser increment), and (iii) the parties to each such assignment
shall execute and deliver to the Agent, for its acceptance and recording in the
Register, an Assignment and Acceptance and a $2,000 processing fee. Upon such
execution, delivery, acceptance and recording, from and after the effective date
specified in each Assignment and Acceptance, (x) the assignee thereunder shall
be a Bank party hereto and, to the extent that rights and obligations (including
any portion of any Commitment) hereunder have been assigned to it pursuant to
such Assignment and Acceptance, shall have the rights and obligations of a Bank
hereunder and (y) the Bank assignor thereunder shall, to the extent that rights
and obligations (including any portion of any Commitment) hereunder have been
assigned by it pursuant to such Assignment and Acceptance, relinquish its rights
(other than its rights to indemnification under Section 9.03) and be released
from its obligations under this Agreement (and, in the case of an assignment
covering all or the remaining portion of an assigning Bank's rights and
obligations under this Agreement, such Bank shall cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance, the Bank
assignor thereunder and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than as provided in
such Assignment and Acceptance, such assigning Bank makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement or any other instrument or document furnished pursuant
hereto; (ii) such assigning Bank makes no representation or warranty and assumes
to responsibility with respect to the financial condition of the Borrower or the
performance or observance by the Borrower or any of its obligations under this
Agreement or any other instrument or document furnished pursuant hereto, (iii)
such assignee confirms that it has received a copy of this Agreement, together
with copies of the most recent financial statements referred to in Section
5.08(a) and such other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into such Assignment and
Acceptance; (iv) such assignee will, independently and without reliance upon the
Agent, such assigning Bank or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (v) such
assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints
and authorizes the Agent to take such action as Agent on its behalf and to
exercise such powers under this Agreement as are delegated to the Agent by the
terms hereof, together with such powers as are reasonably incidental thereto;
and (vii) such assignee agrees that it will perform in accordance with the terms
all of the obligations which by the terms of this Agreement are required to be
performed by it as a Bank.
(c) The Agent shall maintain at its address set forth on the signature
pages hereto a copy of each Assignment and Acceptance delivered to and accepted
by it and a register for the
<PAGE> 43
recordation of the names and addresses of the Banks and the Commitment of, and
principal amount of the Loans owing to, each Bank from time to time (the
"Register"). The entries in the Register shall be conclusive and binding for all
purposes, absent manifest error, and the Borrower, the Agent and the Banks may
treat each Person whose name is recorded in the Register as a Bank hereunder for
all purposes of this Agreement. The Register shall be available for inspection
by the Borrower or any Bank at any reasonable time and from time to time upon
reasonable prior notice.
Upon its receipt of an Assignment and Acceptance executed by an
assigning Bank and an assignee representing that it is an Eligible Assignee, the
Agent shall, if such Assignment and Acceptance has been completed and is in
substantially the form of Exhibit F, (i) accept such Assignment and Acceptance,
(ii) record the information contained therein in the Register and (iii)give
prompt notice thereof to the Borrower.
(e) Each Bank may sell participations to one or more banks or other
entities in or to all or a portion of its rights and obligations under this
Agreement (including without limitation, all or a portion of its Commitment and
the amounts under the Loans owning to it); provided, however, that (i) such
Bank's obligations under this Agreement (including without limitation, its
Commitment to the Borrower hereunder) shall remain unchanged, (ii) such Bank
shall remain solely responsible to the other parties hereto for the performance
of such obligations and (iii) the Borrower, the Agent and the other Banks shall
continue to deal solely and directly with such Bank in connection with such
Bank's rights and obligations under this Agreement; PROVIDED, that no Bank shall
transfer or grant any participation under which the participant shall have the
right to approve any amendment to or waiver of this Agreement or any Note,
except with respect to the tenor, price or dollar amount thereof.
(f) Any Bank may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this Section, disclose to the
assignee or participant or proposed assignee or participant any information
relating to the Borrower furnished to such Bank by or on behalf of the Borrower;
provided that, prior to any such disclosure, the assignee or participant or
proposed assignee or participant shall agree in writing to preserve the
confidentiality of any confidential information relating to the Borrower
received by it from such Bank.
Nothing herein shall prohibit any Bank from pledging or assigning any
Note to any Federal Reserve Bank in accordance with applicable law.
SECTION 9.06. NOTICES. All notices, requests, demands and other
communications provided for herein shall be in writing and shall be (i) hand
delivered; (ii) sent by certified, registered or express United States mail,
return receipt requested, or reputable next-day courier service; or (iii) given
by telex, telecopy, telegraph or similar means of electronic communication. All
such communications shall be effective upon the receipt thereof. Notices shall
be addressed to the Borrower, the Agent and the Banks at their respective
addresses set forth on the signature pages of this Agreement, or to such other
address as the Borrower, the Agent or the Banks shall theretofore have
transmitted to the other parties in writing by any of the means specified in
this
<PAGE> 44
Section.
SECTION 9.07. SETOFF. The Borrower agrees that, in addition to (and without
limitation of) any right of setoff, banker's lien or counterclaim each Bank may
otherwise have, each Bank shall be entitled, at its option, to offset balances
(general or special, time or demand, provisional or final, and regardless of
whether such balances are then due to the Borrower) held by it for the account
of the Borrower at any of such Bank's offices, in Dollars or in any other
currency, against any amount payable by the Borrower under this Agreement or the
Notes which is not paid when due, taking into account any applicable grace
period, in which case it shall promptly notify the Borrower thereof; provided
that such Bank's failure to give such notice shall not affect the validity
thereof.
SECTION 9.08. JURISDICTION; IMMUNITIES.
(a) The Borrower hereby irrevocably submits to the jurisdiction of any
Connecticut State or United States Federal court sitting in Connecticut over any
action or proceeding arising out of or relating to this Agreement or the Notes,
and the Borrower hereby irrevocably agrees that all claims in respect of such
action or proceeding may be heard and determined in such Connecticut State or
Federal court. The Borrower irrevocably consents to the service of any and all
process in any such action or proceeding by the mailing of copies of such
process to the Borrower at its address specified in Section 9.06. The Borrower
agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. The Borrower further waives any objection
to venue in such State and any objection to an action or proceeding in such
State on the basis of forum non conveniens. The Borrower further agrees that any
action or proceeding brought against the Agent or the Banks shall be brought
only in Connecticut State or United States Federal courts sitting in
Connecticut.
(b) Nothing in this Section 9.08 shall affect the right of the Agent or
any Bank to serve legal process in any other manner permitted by law or affect
the right of the Agent or any Bank to bring any action or proceeding against the
Borrower or its property in the courts of any other jurisdictions.
SECTION 9.09. TABLE OF CONTENTS; HEADINGS. 'Any- table of contents and the
headings and captions hereunder are for convenience only and shall not affect
the interpretation or construction of this Agreement.
SECTION 9.10. SEVERABILITY. The provisions of this Agreement are intended to
be severable. If for any reason any provision of this Agreement shall be held
invalid or unenforceable in whole or in part in any jurisdiction, such provision
shall, as to such jurisdiction, be ineffective to the extent of such invalidity
or unenforceability without in any manner affecting the validity or
enforceability thereof in any other jurisdiction or the remaining provisions
hereof in any jurisdiction.
SECTION 9.11. COUNTERPARTS. This Agreement may be executed in any number of
<PAGE> 45
counterparts, all of which taken together shall constitute one and the same
instrument, and any party hereto may execute this Agreement by signing any such
counterpart.
SECTION 9.12. INTEGRATION. This Agreement and the Notes set forth the entire
agreement between the parties hereto relating to the transactions contemplated
hereby and thereby and supersede any prior oral or written statements or
agreements with respect to such transactions.
SECTION 9.13. GOVERNING LAW. This Agreement shall be governed by, and
interpreted and construed in accordance with, the law of the State of
Connecticut.
SECTION 9.14. BORROWER'S WAIVERS. THE BORROWER ACKNOWLEDGES THAT IT HAS BEEN
ADVISED BY COUNSEL OF ITS CHOICE WITH RESPECT TO THIS TRANSACTION AND THIS
AGREEMENT AND THAT IT MAKES THE FOLLOWING WAIVERS KNOWINGLY AND VOLUNTARILY:
(a) THE BORROWER IRREVOCABLY WAIVES TRIAL BY JURY IN ANY COURT AND IN
ANY SUIT, ACTION OR PROCEEDING OR ANY MATTER ARISING IN CONNECTION WITH
OR IN ANY WAY RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT, THE NOTES OR ANY OF THE BORROWER'S DOCUMENTS RELATED THERETO
AND THE ENFORCEMENT OF ANY OF THE AGENT'S AND EACH BANK'S RIGHTS AND
REMEDIES.
(b) THE BORROWER EXPRESSLY ACKNOWLEDGES THAT THIS AGREEMENT IS
DELIVERED AS PART OF A COMMERCIAL TRANSACTION AS SUCH TERM IS USED AND
DEFINED IN CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES AND WAIVES
ANY AND ALL RIGHTS WHICH ARE OR MAY BE CONFERRED UPON IT UNDER CHAPTER
903a OF SAID STATUTES (OR ANY OTHER STATUTE AFFECTING PREJUDGMENT
REMEDIES) TO ANY NOTICE OR HEARING OR PRIOR COURT ORDER OR THE POSTING
OF A BOND PRIOR TO ANY PREJUDGMENT REMEDY WHICH THE AGENT OR ANY BANK
MAY USE.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
CMP PUBLICATIONS, INC.
By: /s/MICHAEL S. LEEDS
----------------------
Name: - Michael S. Leeds
Title: President
Address for Notices:
600 Community Drive
Manhasset, New York 11030
<PAGE> 46
Attn: Chief Financial Officer
Telecopier No.: 516-562-7123
SHAWMUT BANK CONNECTICUT, NATIONAL ASSOCIATION, formerly known as The
Connecticut National Bank, individually as a Bank and as Agent
By: Jeffrey C. Lynch, Vice president
Address for Notices:
One Landmark Square
Stamford, Connecticut 06904
Attn: Jeffrey C. Lynch, Vice President
Telecopier No.: 203-358-6111
THE CHASE MANHATTAN BANK, NATIONAL ASSOCIATION
By: Stephan P. Rochford, Vice President
Address for Notices:
135 Pinelawn Road
Melville, New York 11747
Attn: Stephen P. Rochford, Vice President
Telecopier No.: 516-753-0878
EXHIBIT A
REVOLVING NOTE
[$____________] [Place of Issue] [Date]
CMP PUBLICATIONS, INC. (the "Borrower"), for value received, hereby
unconditionally promises to pay to the order of [_________________] (the "Bank")
at the principal office of Shawmut Bank Connecticut, National Association,
formerly known as The Connecticut National Bank (the "Agent"), at One Landmark
Square, Stamford, Connecticut 06904, for the account of the appropriate Lending
Office of the Bank, the principal sum of [_______________] Dollars
($[___________]) or, if less, the unpaid principal amount loaned by the Bank to
the Borrower pursuant to the Agreement referred to below, in lawful money of the
United States of America and in immediately available funds, on the date(s) and
in the manner provided in said
<PAGE> 47
Agreement. The Borrower also promises to pay interest on the unpaid principal
balance hereof, for the period such balance is outstanding, at said principal
office for the account of said Lending Office, in like money, at the rates of
interest, on the date(s) and in the manner provided in said Agreement; and to
pay interest on any overdue principal and interest at the Default Rate.
The date, type, amount and maturity date of each Revolving Loan made by
the Bank to the Borrower under the Agreement referred to below, and each payment
of principal thereof, shall be recorded by the Bank on its books and, prior to
any transfer of this Revolving Note (or, at the discretion of the Bank, at any
other time), endorsed by the Bank on the schedule attached hereto or any
continuation thereof.
This is one of the Revolving Notes referred to in that certain Credit
Agreement (as amended from time to time, the "Agreement") dated as of July 15,
1993 among the Borrower, the Banks named therein (including the Bank) and the
Agent and evidences the Revolving Loans made by the Bank thereunder. All terms
not defined herein shall have the meanings given to them in the Agreement.
The Agreement provides for the acceleration of the maturity of this
Revolving Note upon the occurrence of certain Events of Default and for
prepayments on the terms and conditions specified therein.
The Borrower waives presentment, notice of dishonor, protest and any
other notice or formality with respect to this Revolving Note.
No waiver of any right or remedy under this Revolving Note shall be
valid unless made in accordance with the terms of the Agreement.
The Borrower shall reimburse the Bank on demand for all reasonable
costs, expenses and charges (including without limitation, reasonable fees and
charges of external legal counsel for the Bank) incurred by the Bank in
connection with the preparation, performance or enforcement of this Revolving
Note; provided that the Borrower shall not be required to reimburse more than
the aggregate amount of $20,000 in connection with the preparation of the
Agreement and the Notes.
This Revolving Note shall be binding on the Borrower and its successors
and assigns and shall inure to the benefit of the Bank and its successors and
assigns, provided that the Borrower may not delegate any obligations hereunder
without the prior written consent of the Bank.
This Revolving Note shall be governed by, and interpreted and construed
in accordance with, the laws of the State of Connecticut.
THE BORROWER EXPRESSLY ACKNOWLEDGES THAT THE REVOLVING LOANS EVIDENCED HEREBY
ARE PART OF A COMMERCIAL TRANSACTION AS SUCH TERM IS USED AND DEFINED IN
CHAPTER'903a OF THE CONNECTICUT GENERAL STATUTES AND HEREBY VOLUNTARILY AND
KNOWINGLY WAIVES ANY AND
<PAGE> 48
ALL RIGHTS WHICH ARE OR MAY BE CONFERRED UPON IT UNDER CHAPTER 903a OF SAID
STATUTES (OR ANY OTHER STATUTES AFFECTING PREJUDGMENT REMEDIES) TO ANY NOTICE OR
HEARING OR PRIOR COURT ORDER OR THE POSTING OF A BOND PRIOR TO ANY PREJUDGMENT
REMEDY WHICH THE BANK MAY USE. THE BORROWER ACKNOWLEDGES THAT IT HAS BEEN
ADVISED BY COUNSEL OF ITS CHOICE WITH RESPECT TO THIS TRANSACTION AND THE
REVOLVING LOANS.
IN WITNESS WHEREOF, the undersigned has caused this Revolving Note to
be duly executed as of the day and year first above written.
CMP PUBLICATIONS, INC.
By: Michael S. Leeds, President
EXHIBIT B
TERM NOTE
[$_______________] [Place of Issue] (Date]
On the Term Loan Maturity Date (as defined in the Agreement referred to
below), for value received, CMP PUBLICATIONS, INC. (the "Borrower"), hereby
unconditionally promises to pay to the order of [______________] (the "Bank") at
the principal office of Shawmut National Bank, National Association, formerly
known as The Connecticut National Bank (the "Agent"), at One Landmark Square,
Stamford, Connecticut 06904, for the account of the appropriate Lending Office
of the Bank, the principal sum of [_____________] Dollars ($[__________]) or, if
less, the unpaid principal amount loaned by the Bank to the Borrower pursuant to
the Agreement referred to below, in lawful money of the United States of America
and in immediately available funds, on the date(s) and in the manner provided in
said Agreement. The Borrower also promises to pay interest on the unpaid
principal balance hereof, for the period such balance is outstanding, at said
principal office for the account of said Lending Office, in like money, at the
rates of interest, on the date(s) and in the manner provided in said Agreement;
and to pay interest on any overdue principal and interest at the Default Rate.
This is one of the Term Notes referred to in that certain Credit
Agreement (as amended from time to time, the "Agreement") dated as of July 15,
1993 among the Borrower, the Banks named therein (including the Bank) and the
Agent and evidences the Term Loan made by the Bank thereunder. All terms not
defined herein shall have the meanings given to them in the Agreement.
The Agreement provides for the acceleration of the maturity of this
Term Note upon the occurrence of certain Events of Default and for prepayments
on the terms and conditions specified therein.
<PAGE> 49
The Borrower waives presentment, notice of dishonor, protest and any
other notice or formality with respect to this Term Note.
No waiver of any right or remedy under this Term Note shall be valid
unless made in accordance with the terms of the Agreement.
The Borrower shall reimburse the Bank on demand for all reasonable
costs, expenses and charges (including without limitation, reasonable fees and
charges of external legal counsel for the Bank) incurred by the Bank in
connection with the preparation, performance or enforcement of this Term Note;
provided that the Borrower shall not be required to reimburse more than the
aggregate amount of $20,000 in connection with the preparation of the Agreement
and the Notes.
This Term Note shall be binding on the Borrower and its successors and
assigns and shall inure to the benefit of the Bank and its successors and
assigns, provided that the Borrower may not delegate any obligations hereunder
without the prior written consent of the Bank.
This Term Note shall be governed by, and interpreted and construed in
accordance with, the laws of the State of Connecticut.
THE BORROWER ACKNOWLEDGES THAT THE TERM LOAN EVIDENCED HEREBY IS PART OF A
COMMERCIAL TRANSACTION AS SUCH TERM IS USED AND DEFINED IN CHAPTER 903a OF THE
CONNECTICUT GENERAL STATUTES AND HEREBY VOLUNTARILY AND KNOWINGLY WAIVES ANY AND
ALL RIGHTS WHICH ARE OR MAY BE CONFERRED UPON IT UNDER CHAPTER 903a OF SAID
STATUTES (OR ANY OTHER STATUTE AFFECTING PREJUDGMENT REMEDIES) TO ANY NOTICE OR
HEARING OR PRIOR COURT ORDER OR THE POSTING OF A BOND PRIOR TO ANY PREJUDGMENT
REMEDY WHICH THE BANK MAY USE. THE BORROWER ACKNOWLEDGES THAT IT HAS BEEN
ADVISED BY COUNSEL OF ITS CHOICE WITH RESPECT TO THIS TRANSACTION AND THE TERM
LOAN.
IN WITNESS WHEREOF, the undersigned has caused this Term Note to be
duly executed as of the day and year first above written.
CMP PUBLICATIONS, INC.
By: _______________________________________________
Name:
Title:
EXHIBIT C
(Letterhead of counsel to the Borrower),
<PAGE> 50
[Closing Date]
Shawmut Bank Connecticut, National Association
One Landmark Square
Stamford, Connecticut 06904
The Chase Manhattan Bank, National Association
135 Pinelawn Road
Melville, New York 11747
Ladies and Gentlemen:
I am General Counsel of CMP Publications, Inc. (the "Borrower") and
have acted in such capacity in connection with the execution and delivery of
that certain Credit Agreement (the "Agreement") dated as of July 15, 1993 among
the Borrower and each of you. Except as otherwise defined herein, all terms used
herein and defined in the Agreement shall have the meanings assigned to them
therein.
In arriving at the opinions expressed below, I have examined copies of
(i) the certificates of incorporation of the Borrower and each of the
Guarantors, and all amendments thereto and restatements thereof, (ii) the
by-laws of the Borrower and each of the Guarantors and all amendments thereto,
(iii) all documents evidencing the qualification of the Borrower and each of the
Guarantors to do business in foreign jurisdictions, (iv) the Agreement, the
Notes and each Guaranty, (v) the resolutions of the boards of directors of the
Borrower and each Guarantor relating to the execution, delivery and performance
of the Agreement, the Notes and each Guaranty, and (vi) such other documents,
records, agreements and certificates as I have deemed appropriate. I have also
reviewed such matters of law as I have considered relevant for the purpose of
this opinion. In all such examinations and reviews I have assumed the
genuineness of all signatures not known to me, the authenticity of all documents
submitted to me as originals, and the conformity to the original documents of
all documents submitted to me as copies. As to any facts relevant to the
opinions expressed herein, I have relied upon the aforesaid documents and
information furnished to me by the Borrower, the Guarantors and by public
officials. I also have assumed that the parties to the Agreement other than the
Borrower and the Guarantors have the corporate power and authority to enter into
and perform the Agreement, that the Agreement has been duly authorized, executed
and delivered by each such other party and that the Agreement constitutes the
legal, valid and binding obligation against each such other party enforceable of
such other party in accordance with its terms.
Based upon the foregoing, and subject to the qualifications set forth
herein, I am of the opinion that:
1. The Borrower, and each of the Guarantors, is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority and all necessary material licenses, permits,
<PAGE> 51
franchises and other governmental authorizations (a) to own and operate its
property, (b) to carry on its business as now conducted, and nothing has come to
my attention that would preclude any of them from carrying on its business as
presently proposed to be conducted, and (c), with respect to the Borrower, (i)
to enter into the Agreement, (ii) to issue and deliver the Notes, (iii) to
execute and deliver documents and certificates in connection with the Agreement
and the Notes, and (iv) to carry out the transactions contemplated by the
Agreement and the Notes.
2. Each Guarantor has all requisite corporate power and authority and
all necessary material licenses, permits, franchises and other governmental
authorizations to execute, deliver and perform its Guaranty.
3. The Borrower, and each of the Guarantors, is duly qualified as a
foreign corporation and in good standing under the laws of each other
jurisdiction (including without limitation the jurisdictions set forth in
Schedule 1 attached hereto) in which such qualification is required, except
where the failure to be so qualified would not have a material adverse effect on
(i) the financial condition, operations, properties or business of the Borrower
and the Guarantors taken as a whole, (ii) the ability of the Borrower to perform
its obligations under the Agreement or the Notes, and (iii) the ability of any
Guarantor to perform its obligations under its Guaranty.
4. The execution, delivery and performance by the Borrower of the
Agreement, the issuance of the Notes by the Borrower, and the execution,
delivery and performance of each Guaranty by the Guarantor have been duly
authorized by all necessary corporate action and do not: (a) require any
consent, approval or authorization of the shareholders of the Borrower or any of
the Guarantors; (b) contravene the charter or by-laws of the Borrower or any of
the Guarantors; (c) violate any provision of, or require any filing,
registration, consent or approval under, any law, rule, regulation (including
without limitation, Regulation U), order, writ, judgment, injunction, decree,
determination or award in each case presently in effect and having applicability
to the Borrower or any of the Guarantors; (d) require any consent, approval or
authorization of any governmental authority; (e) result in a breach of or
constitute a default or require any consent under any indenture or loan or
credit agreement or any other agreement, lease or instrument to which the
Borrower or any of the Guarantors is a party or by which the properties of the
Borrower or any of the Guarantors may be bound or affected; (f) result in, or
require, the creation or imposition of any Lien upon or with respect to any of
the properties now owned or hereafter acquired by the Borrower or any of the
Guarantors; or (g) cause the Borrower or any of the Guarantors to be in default
under any such law, rule, regulation, order, writ, judgment, injunction, decree,
determination or award or any such indenture, agreement, lease or instrument.
5. The Agreement and the Notes have been executed and delivered by duly
authorized officers of the Borrower and constitute legal, valid and binding
obligations of the Borrower, enforceable against the Borrower in accordance with
their terms, except to the extent that such enforcement may be limited by
applicable bankruptcy, reorganization, insolvency, fraudulent conveyance and
other similar laws affecting creditors' rights generally, and by general
principles of equity.
<PAGE> 52
6. Each Guaranty has been executed and delivered by a duly authorized
officer of the Guarantor and, assuming valid consideration by each Guarantor
(but without expressing any opinion as to the existence of such consideration in
this instance), constitutes a legal, valid and binding obligation of each such
Guarantor, enforceable against such Guarantor in accordance with its terms,
except to the extent that such enforcement may be limited by applicable
bankruptcy, reorganization, insolvency and other similar laws affecting
creditors' rights generally, and by general principles of equity.
7. There are no pending or, to the best of my knowledge after due
inquiry, threatened actions, suits or proceedings against or affecting the
Borrower or any of the Guarantors before any court, governmental agency or
arbitrator, which, if determined adversely to the Borrower or any of the
Guarantors, would, in any one case or in the aggregate, materially adversely
affect (i) the financial condition, operations, properties or business of the
Borrower and the Guarantors taken as a whole, (ii) the ability of the Borrower
to perform its obligations under the Agreement and the Notes, or (iii) the
ability of any Guarantor to perform its obligations under its Guaranty.
8. To the best of my knowledge, neither the Borrower nor any of
Guarantors is in violation of any federal, state, county or municipal laws,
ordinances, rules or regulations relating to the environment, as amended,
applicable to it and does not have any existing or threatened regulatory
problems under such environmental laws, except as otherwise set forth on
Schedule 2 attached hereto or except to the extent such violation or regulatory
problems would not reasonably be expected to have a material adverse effect on
the business, financial condition, operations or properties of the Borrower,
taken as a whole.
9. The Borrower, and each of the Guarantors, is duly licensed or
otherwise entitled to use all patents, trademarks, service marks, trade names,
and copyrighted materials which are used in the operation of its business as
presently conducted, except where the failure to be so licensed or entitled
would not have a materially adverse effect on (i) the financial condition,
operations, properties or business of the Borrower and the Guarantors taken as a
whole, (ii) the ability of the Borrower to perform its obligations under the
Agreement and the Notes, and (iii) the ability of any Guarantor to perform its
obligations under its Guaranty. To the best of my knowledge, after due inquiry,
no claim is pending, and nothing has come to my attention to indicate that any
claim is threatened, against the Borrower or any of the Guarantors contesting
the use of any such patents, trademarks, service marks, trade names, or
copyrighted materials, and nothing has come to my attention to indicate any
valid basis for any such claims, other than claims which, if adversely
determined, would not have a material adverse effect on (i) the financial
condition, operations, properties or business of the Borrower and the Guarantors
taken as a whole, (ii) the ability of the Borrower to perform its obligations
under the Agreement and the Notes, and (iii) the ability of any Guarantor to
perform its obligations under its Guaranty.
10. Except as otherwise set forth in paragraph 8 above, neither the
Borrower nor any of the Guarantors is in violation of any laws, ordinances,
rules or regulations, applicable to it, of any federal, state or municipal
government authorities, instrumentalities or agencies, including without
limitation, ERISA, and the United States Occupational Safety and Health Act of
1970, and none of the Borrower's ERISA Affiliates (as such term is defined in
the Agreement) is in
<PAGE> 53
violation of any laws, ordinances, rules or regulations relating to ERISA,
applicable to it, where such violation would have a material adverse effect on
(i) the financial condition, operations, properties or business of the Borrower
or the Guarantors taken as a whole, (ii) the ability of the Borrower to perform
its obligations under the Agreement and the Notes, or (iii) the ability of any
Guarantor to perform its obligations under its Guaranty.
The opinions expressed herein are limited to the laws of the State of
New York and the federal laws of the United States of America.
The opinions expressed herein are solely for your benefit and may not
be relied upon by any other person or entity or used for any other purpose.
Very truly yours,
SCHEDULE 1
FOREIGN JURISDICTIONS IN WHICH BORROWER AND ITS AFFILIATES ARE QUALIFIED
BORROWER
California
Florida
Georgia
Illinois
Massachusetts
New Jersey
Oregon
Texas
District of Columbia
CMP PUBLICATIONS INTERNATIONAL, CORP.
France
Germany
Hong Kong
Japan
Taiwan
United Kingdom
NRU INC.
None
SCHEDULE 2
ENVIRONMENTAL ISSUES
<PAGE> 54
On October 12, 1992, the Borrower sold the assets of its printing business
located in Thorofare, New Jersey. Under the New Jersey Environmental Cleanup
Responsibility Act ("ECRA") and the regulations established thereunder by the
New Jersey Department of Environmental Protection and Energy ("NJDEPE"), the
Borrower was required to follow certain procedures to ensure adequate
preparation and implementation of acceptable cleanup procedures as a
precondition to the sale. On October 12, 1993, the Borrower entered into an
Administrative Consent Order (an "ACO") with the NJDEPE under which the Borrower
agreed, among other things, to undertake certain actions in order to comply with
ECRA. In November 1992 the Borrower submitted to NJDEPE an ECRA Update/Remedial
Investigation Report and submitted supplemental information in January and March
1993. The NJDEPE then requested that certain further actions and tests be taken,
and on June 10, 1993 the Borrower submitted an update report to the NJDEPE
documenting that such actions and tests had been taken. The NJDEPE has indicated
that it will request that one additional test be taken. The Borrower is
currently waiting to receive from the NJDEPE a written request that the
additional test be made. The Borrower does not expect its liability related to
this property to exceed $200,000.
EXHIBIT D
NOTICE OF BORROWING
__________________, 19________
Shawmut Bank Connecticut,
National Association, as Agent
One Landmark Square
Stamford, Connecticut 06904
Attention:
Re: Credit Agreement dated as of July 15, 1993 (the "Agreement") among CMP
Publications, Inc. (the "Borrower"), Shawmut Bank Connecticut, National
Association, formerly known as The Connecticut National Bank, and The Chase
Manhattan Bank, National Association.
Dear Sir:
Please take notice pursuant to Section 2.03 of the Agreement, the
undersigned Borrower hereby gives you notice, irrevocably, pursuant to the
Agreement, that the Borrower hereby requests a Revolving Loan under the
Agreement, and in that connection sets forth below the information relating to
such Revolving Loan:
Borrowing Date:
Aggregate Principal
<PAGE> 55
Amount:
Type of Loan (Base
Rate, Eurodollar,
or Auction Rate):
Interest Period:
As required by Section 3.02 of the Agreement, the undersigned officer
of the Borrower hereby certifies that:
(a) the representations and warranties contained in Article 4 of the
Agreement are true and correct in all material respects on and as of the date
hereof (or were true and correct as of the specific point in time to which they
relate) and shall be true as of the requested borrowing date;
(b) the Borrower has complied and is in compliance with all of the
terms, covenants and conditions of the Agreement;
(c) there does not exist any Event of Default under the Agreement nor
any event which, with the giving of notice or lapse of time, or both, would
constitute an Event of Default;
(d) there has been no material adverse change in the financial
condition, operating status and business prospects of the Borrower and its
Subsidiaries, if any, since the date of the last Borrowing under the Agreement;
and
(e) each of the other conditions precedent set forth in Section 3.02
have been satisfied and complied with.
All capitalized terms used in this notice not otherwise defined herein shall
have the same meaning as assigned them in the Agreement.
CMP PUBLICATIONS, INC.
By:_________________________________
Name:
Title:
EXHIBIT E
NEGATIVE PLEDGE AGREEMENT
<PAGE> 56
This Negative Pledge Agreement (this "Agreement") is dated as of July
15, 1993 and is by and among Gerard G. Leeds and Liselotte J. Leeds
(individually a "Shareholder" and collectively the "Shareholders") and Shawmut
Bank Connecticut, National Association, formerly known as The Connecticut
National Bank (the "Agent"), as agent under the Credit Agreement referred to
below. Capitalized terms used herein and not defined herein are used as defined
in the Credit Agreement referred to below.
WITNESSETH:
WHEREAS, CMP Publications, Inc., a New York corporation ("CMP"),
Shawmut Bank Connecticut, National Association, formerly known as The
Connecticut National Bank ("Shawmut"), The Chase Manhattan Bank, National
Association ("Chase" and together with Shawmut and any other financial
institutions from time to time party thereto, the "Banks"), and the Agent have
entered into a Credit Agreement of even date herewith (as amended from time to
time, the "Credit Agreement"), pursuant to which the Banks have agreed to make
Loans to CMP subject to the terms and conditions set forth therein, and
evidenced by the Notes;
WHEREAS, the Shareholders collectively own more than two thirds of the
issued and outstanding shares of stock of CMP;
WHEREAS, to induce the Banks to make the Loans, each Shareholder has
agreed not to grant to any party a security interest in such Shareholder's
shares of stock of CMP;
WHEREAS, each Shareholder expects to derive benefits from the Loans and
the transactions contemplated by the Credit Agreement; and
WHEREAS, the making of the Loans under the Credit Agreement is subject
to the condition, among others, that the Shareholders execute and deliver this
Agreement.
NOW, THEREFORE, in consideration of the premises and covenants
contained herein, and for other good and valuable consideration, the receipt of
which is hereby acknowledged by each party hereto, it is hereby agreed as
follows:
1. So long as any Obligations remain outstanding and unpaid, each Shareholder:
(a) will not create, assume or suffer to exist, any mortgage, pledge,
encumbrance, lien, security interest or charge of any kind upon his or her
shares of stock of CMP, except those that arise by operation of law or those
restrictions on transfer of the stock to any person other than to the other
Shareholder, any of their children or CMP as such restrictions exists as of the
date hereof pursuant to a certain Shareholders' Agreement dated as of June 30,
1991; and
(b) will not sell, assign, convey or otherwise dispose of or give a
proxy or
<PAGE> 57
power with respect to his or her shares of stock of CMP, other than to-the other
Shareholder, any of their children or CMP.
2. Provided that no Change of Control (as such term is defined in the
Credit Agreement) has occurred or will occur as a result of an anticipated
encumbrance or sale of shares of stock of CMP, the provisions of Paragraph 1
shall not apply if the proceeds to be realized upon the encumbrance or sale of
the shares of stock of CMP are utilized to repay the Obligations to the Bank.
3. The Shareholders recognize that any damages which the Agent and/or
the Banks may sustain upon violation of this Agreement may be difficult to
measure, and agree that violation of the provisions of this Agreement shall be
subject to injunctive relief, in addition to any other remedies available to the
Agent.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
Name: Gerard G. Leeds
Name: Liselotte J. Leeds
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, formerly The
Connecticut National Bank, as Agent
BY
Name: Jeffrey C. Lynch
Title: Vice President
<PAGE> 58
STATE OF NEW YORK)
Ss:
COUNTY OF NASSAU )
The foregoing instrument was acknowledged before me this day of July, 1993 by
Gerard G. Leeds, known to me (or satisfactorily proven) to be the person whose
name is subscribed to the within instrument and acknowledged that (s)he executed
the same for the purposes therein contained.
Notary Public
my Commission Expires:
[SEAL]
STATE OF NEW YORK
Ss:
COUNTY OF NASSAU
The foregoing instrument was acknowledged before me this day of July, 1993 by
Liselotte J. Leeds, known to me (or satisfactorily proven) to be the person
whose name is subscribed to the within instrument and acknowledged that (s)he
executed the same for the purposes therein contained.
Notary Public
my Commission Expires:
[SEAL]
<PAGE> 59
STATE OF CONNECTICUT)
COUNTY OF FAIRFIELD ) ss: STAMFORD
On this day of July, 1993,.before me,
, the undersigned officer
personally appeared Jeffrey C. Lynch who acknowledged himself to be the Vice
President of Shawmut Bank Connecticut, National Association, a national banking
association, and that he as such Vice President, being authorized so to do,
executed the foregoing instrument for the purposes herein contained by signing
the name of the corporation by himself as Vice President.
In witness whereof I hereunto set my hand and official seal.
Commissioner of the Superior Court
Notary Public
My Commission Expires:
[SEAL]
<PAGE> 60
EXHIBIT F
ASSIGNMENT AND ACCEPTANCE
Dated - 1 19-
Reference is made to the Credit Agreement dated as of July 15, 1993 (the
"Agreement") among CMP Publications, Inc., a New York corporation (the
"Company"), Shawmut Bank Connecticut, National Association, formerly known as
The Connecticut National Bank, The Chase Manhattan Bank, National Association
and the other financial institutions from time to time party thereto, (each a
"Bank", and together the "Banks") and Shawmut Bank Connecticut, National
Association, formerly known as The Connecticut National Bank, as agent for the
Banks (the "Agent"). Terms defined in the Agreement are used herein with the
same meaning. __________________________ (the "Assignor") and
_________________________________ (the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, the percentage interest
specified on Schedule 1 hereto in and to all of the Assignor's rights and
obligations under the Agreement as of the date hereof (after giving effect to
any other assignments thereof made prior to the date hereof, whether or not such
assignments have become effective, but without giving effect to any other
assignments thereof also made on the date hereof), including without limitation,
such percentage interest in the Assignor's Commitment, the Loans owing to the
Assignor, and the Note held by the Assignor.
2. The Assignor (i) represents and warrants that as of the date hereof
its Commitment (after giving effect to any other assignments thereof made prior
to the date hereof, whether or not such assignments have become effective, but
without giving effect to any other assignments thereof also made on the date
hereof) is in the dollar amount specified as the Assignor's Commitment on
Schedule 1 hereto and the aggregate outstanding principal amount of Loans owing
to it (after giving effect to any other assignments thereof made prior to the
date hereof, whether or not such assignments have become effective, but without
giving effect to any other assignments thereof also made on the date hereof) is
in the dollar amount specified as the aggregate outstanding principal amount
specified as the aggregate outstanding principal amount of Loans owing to the
Assignor on Schedule 1 hereto; (ii) represents and warrants that it is the legal
and beneficial owner of the interest being assigned by it hereunder and that
such interest is free and clear of any adverse claim; ('iii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of. the Agreement or any other instrument or document
furnished pursuant thereto; (iv) makes no representation or warranty and assumes
no responsibility with respect to the financial condition of the Company or its
Subsidiaries, if any, or the performance or observance by any party of any of
its respective obligations under the Agreement or any other instrument or
document furnished pursuant thereto; and (v) attaches the Note referred to in
paragraph I above and requests that the Agent exchange such Note for a new Note
payable to the order of the Assignee in an amount equal to the Commitment
assumed by the Assignee pursuant hereto or new Notes payable to the order of the
Assignee in an amount equal to the Commitment assumed by the Assignee pursuant
hereto and the Assignor in an amount equal to the
<PAGE> 61
Commitment, if any, retained by the Assignor under the Agreement, respectively,
as specified on Schedule 1 hereto.
3. The Assignee (i) acknowledges that other than as provided in this
Assignment and Acceptance, the Assignor makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Agreement or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of the
Agreement or any other instrument or document furnished pursuant hereto; (ii)
acknowledges that the Assignor makes no representation or warranty and assumes
no responsibility with respect to the financial condition of the Company or its
Subsidiaries, if any, or the performance or observance by any party of any of
its respective obligations under the Agreement or any other instrument or
document furnished pursuant hereto; (iii) confirms that it has received a copy
of the Agreement, together with copies of the financial statements referred to
in Section 5.08(a) thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (iv) agrees that it will, independently and
without reliance upon the Agent, the Assignor or any other Bank and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Agreement; (v) confirms that it is an Eligible Assignee; (vi) appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under the Agreement as are delegated to the Agent by the terms
thereof, together with such powers as are reasonably incidental thereto; (vii)
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Agreement are required to be performed by
it as a Bank; [and] '(viii) specifies as its Lending Office (and address for
notices) the office set forth beneath its name on the signature pages hereof
[and (ix) attaches the forms prescribed by the Internal Revenue Service of the
United States certifying as to the Assignee's status for purposes of determining
exemption from United States withholding taxes with respect to all payments to
be made to the Assignee under the Agreement and the Notes or such other
documents as are necessary to indicate that all such payments are subject to
such rates at a rate reduced by an applicable tax treaty.]*
4. Following the execution of this Assignment and Acceptance by the
Assignor and the Assignee, it will be delivered to the Agent for acceptance and
recording by the Agent. The effective date of this Assignment and Acceptance
shall be the date of acceptance thereof by the Agent and the receipt of the
consent hereto by the Company and the other Banks, unless otherwise specified on
Schedule 1 hereto (the "Effective Date").
5. Upon such acceptance and recording by the Agent and such receipt of
such consent by the Company and the other Banks, as of the Effective Date, (i)
the Assignee shall be a party to the Agreement and, to the extent provided in
this Assignment and Acceptance, have the rights and obligations of a Bank
thereunder and (ii) the Assignor shall, to the extent provided in this
Assignment and Acceptance, relinquish its rights (except its rights to
indemnification under Section 9.03 of the Agreement) and be released from its
obligations under the Agreement.
6. Upon such acceptance and recording by the Agent, from and after the
Effective
<PAGE> 62
Date, the Agent shall make all payments under the Agreement and the Notes in
respect of the interest assigned hereby (including without limitation, all
payments of principal, interest and facility fees with respect thereto) to the
Assignee. The Assignor and Assignee shall make all appropriate adjustments in
payments under the Agreement and the Notes for periods prior to the Effective
Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and construed
in accordance with, the laws of the State of Connecticut.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
(NAME OF ASSIGNOR]
-------------------------------------
* If the Assignee is organized under the laws of a jurisdiction
outside the United States.
By
Name:
Title:
[NAME OF ASSIGNEE]
Name:
Title:
Lending Office and Address for Notices:
- ---------------------------------------------
- ----------------------------------------------
Attn:
Telecopier No.:
Accepted this - day of 19-
<PAGE> 63
SHAWMUT BANK CONNECTICUT,
NATIONAL ASSOCIATION, formerly known as The Connecticut National Bank, as Agent
By
Name:
Title:
Consented to this day
of 19-
CMP PUBLICATIONS, INC.
By
Name:
Title:
<PAGE> 64
Schedule I to Assignment and Acceptance
Percentage interest assigned and assumed:
_____________%
Assignor's Commitment:
$_______________
Aggregate outstanding principal amount of Loans owing to the
Assignor:
$_______________
Commitment assumed by Assignee:
$_______________
Commitment retained by Assignor:
$_______________
Effective Date of Assignment
and Acceptance:
________________________, 19-
EXHIBIT G
CORPORATE GUARANTY
July [_], 1993
Stamford,
Connecticut
In consideration of all loans now or hereafter made to or for the
account of CMP PUBLICATIONS, INC., a New York corporation (hereinafter called
"Borrower") by SHAWMUT BANK CONNECTICUT, N.A. ("Shawmut") and/or THE CHASE
MANHATTAN BANK, N.A. ("Chase" and together with Shawmut and any successors or
permitted assigns thereof, the "Banks") pursuant to that certain Credit
Agreement, dated as of July 15, 1993 (as hereinafter amended, modified or
supplemented from time to time, the "Credit Agreement"), among Borrower, the
Banks, and Shawmut, as agent (the "Agent"), and in further consideration of the
substantial assistance provided to Guarantor (as hereinafter defined) by
Borrower, and in consideration for certain provisions in the Credit Agreement
that permit the Borrower to make investments in the Guarantor, and in order to
induce the Banks to enter into the Credit Agreement and to make advances from
time to time thereunder,
<PAGE> 65
---------------------------------------------------------
(a corporation)
-------------------
(hereinafter referred to as "Guarantor"), hereby absolutely and unconditionally
guarantees to the Banks and the Agent the prompt payment when due (whether at
the stated maturity, by acceleration or otherwise) of the principal and interest
on any and all of the Notes issued by Borrower under the Credit Agreement and on
the Loans made to Borrower thereunder and all other obligations and indebtedness
(including without limitation indemnities, fees and interest thereon) of
Borrower now existing or hereafter incurred under, arising out of or in
connection with the Credit Agreement and any and all other agreements,
instruments and documents relating thereto (collectively, the "Loan Documents")
and the due performance and compliance by Borrower with all the terms,
conditions and agreements contained in the Credit Agreement and the other Loan
Documents. All of the foregoing are hereinafter referred to as "Obligations".
Capitalized terms used herein that are not otherwise defined herein shall have
the respective meanings assigned to them in the Credit Agreement.
In addition to any rights now or hereafter granted under applicable
law, and not by way of limitation of any such rights, upon the occurrence and
during the continuance of any Event of Default, including without limitation any
event of default hereunder, the Banks are, and the Agent on behalf of the Banks
is, hereby authorized at any time and from time to time, without presentment,
demand, protest or other prior notice of any kind to Guarantor or to any other
person, to set off and appropriate and apply any and all deposits (general or
special) and any other indebtedness at any time held or owing by either of the
Banks to or for the credit or the account of Guarantor, against the Obligations
and against the amount of any and all obligations and liabilities of Guarantor
hereunder ("Liabilities"); PROVIDED, that the Banks shall use their respective
best efforts to give Guarantor notice of any such set off, appropriation or
application as soon as practicable thereafter.
Guarantor agrees that Obligations or the liability of any other
guarantor, surety, indemnitor, indorser, or any other party liable for or upon
said Obligations may, from time to time, in whole or in part, be renewed,
extended, modified, accelerated, compromised, settled or released by the Banks,
that any liens for said Obligations or any right of set-off may, from time to
time, in whole or in part, be exchanged, sold, released, surrendered or
otherwise dealt with by the Banks, and that the Banks may refuse payment, in
whole or in part, from any party liable for or upon any Obligations, all without
any notice to, or further assent by, or any reservation of rights against,
Guarantor and without in any way affecting or releasing any obligation or
liability of Guarantor hereunder. Neither the Banks or the Agent shall be liable
for failure to collect or realize upon Obligations or upon any security
therefor, or any part thereof, or for any delay in so doing, nor shall the Banks
or the Agent be under any obligation to take any
<PAGE> 66
action whatsoever with regard thereto.
Guarantor hereby covenants that so long as any of the Notes remains
outstanding and unpaid or so long as the Commitment remains unterminated,
Guarantor will, unless otherwise consented to in writing by the Banks and the
Agent, be bound by the terms of the following Sections of the Credit Agreement,
which are hereby incorporated by reference, as such Sections are applicable to
the Guarantor: Sections 5.01 through 5.07 (inclusive), 5.10, and 6.01 through
6.06 (inclusive) and 6.08.
If Guarantor shall fail to perform any agreement herein contained or
contained in any other Loan Document delivered by Guarantor to the Banks or the
Agent or if default occurs in the punctual payment of any sum payable upon any
of said obligations or said Liabilities, or if any Event of Default shall occur,
then, in any of those events, said Liabilities, although not yet due, shall,
without notice or demand forthwith become and be immediately due and payable
notwithstanding any time or credit allowed under any of the Liabilities or under
any instrument evidencing the same.
Guarantor waives any and all notice of acceptance of this Guarantee or
the creation or accrual of any of said Obligations, or of any renewals or
extensions thereof from time to time or of the reliance by the Banks or the
Agent upon this Guarantee. The Obligations shall conclusively be presumed to
have been had or consummated in reliance upon the Guarantee. Guarantor waives
protest, demand for payment, notice of default or nonpayment to or on Guarantor,
Borrower or any other party liable for or upon any of said Obligations;
PROVIDED, however, that the Banks and the Agent agree that they shall use their
respective best efforts to notify Guarantor that an Event of Default has
occurred under the Credit Agreement; PROVIDED, FURTHER, that failure of the
Banks or the Agent to notify the Guarantor shall not prejudice or otherwise
impair the Banks or the Agent in the exercise of any of their respective rights
or remedies hereunder, under the Credit Agreement, at law, in equity or
otherwise. This Guarantee shall be a continuing, absolute and unconditional
guarantee of payment regardless of the validity, regularity or enforceability of
any of said Obligations or purported Obligations.
This Guarantee shall continue in full force and effect notwithstanding
the termination or revocation of any other guarantee of Obligations by any other
guarantor or co-guarantor thereof with respect to its liability as guarantor, or
the dissolution of Guarantor, and shall be binding upon Guarantor and any
successors and assigns of Guarantor, which shall, nevertheless, remain liable
with respect to Obligations and any renewals or extensions thereof or
liabilities arising out of the same, and the Banks and the Agent shall have all
the rights herein provided for as if no such event had occurred. Any payment on
account of, or re-acknowledgment of Obligations by, Borrower, or any other party
<PAGE> 67
liable therefor, shall be deemed to be made on behalf of Guarantor and shall
serve to start anew the statutory period of limitations applicable to
Obligations and Liabilities.
Guarantor further agrees that if for any reason (including without
limitation the bankruptcy of Borrower) any payment in partial or full
satisfaction of the Obligations is or, is required to be, returned or rescinded
such Obligations shall, for purposes of this Guarantee, be deemed not to have
been so satisfied, notwithstanding that any such payment had previously been
applied by the Banks to any of such Obligations; and this Guarantee shall
thereupon continue to be in full force and effect or be deemed reinstated
(notwithstanding its termination), as the case may be, all as though such
application by the Banks had not been made and all such Obligations shall be due
and payable on demand.
The execution and delivery hereafter to the Banks or the Agent by
Guarantor of a new instrument of guarantee shall not terminate, supersede or
cancel this instrument, unless expressly provided therein, and all rights and
remedies of the Banks hereunder or under any instrument of guarantee hereafter
executed and delivered to the Banks or the Agent by Guarantor shall be
cumulative and may be exercised singly or concurrently.
No notice of termination of this Guarantee shall be effective unless in
writing and executed by Guarantor; PROVIDED, HOWEVER, that this Guarantee and
all of the provisions hereof shall continue and remain in full force and effect
with respect to Obligations theretofore created or existing as if no such notice
of termination has been given. No executory agreement and no course of dealing
between Guarantor and the Banks or the Agent shall be effective to change or
modify this Guarantee in whole or in part, nor shall any change, modification or
waiver of Liabilities or any part thereof, or waiver of any-rights or powers of
the Banks or the Agent, or consent by the Banks or the Agent, be valid or
effective unless in writing and signed by an authorized officer of each of the
Required Banks and the Agent.
All notices, requests and demands to or upon the respective parties
hereto shall be in writing and shall be deemed to have been duly given or made
when delivered by hand, or if sent by certified mail, three days after the day
on which mailed, or, in the case of telex, when answer back received, or, in the
case of an overnight courier service, one business day after delivery to such
courier service, addressed to the parties hereto at their respective addresses
set forth on the signature page hereto, or to such other address as any such
party may designate in writing to the other parties hereto. Guarantor hereby
designates the person whose name appears first below as agent to receive notice
hereunder on its behalf.
Guarantor hereby irrevocably: (a) submits in any legal proceeding
<PAGE> 68
relating to this Guarantee to the non-exclusive in personam jurisdiction of any
state or federal court of competent jurisdiction sitting in the State of
Connecticut and agrees to legal proceedings being brought in such courts, as the
Banks may elect; (b) waives any objection that Guarantor may now or hereafter
have respecting the venue of such legal proceedings in any such court or
respecting the fact that such legal proceeding was brought in an inconvenient
court; (c) agrees to service of process in any legal proceeding by mailing of
copies thereof by registered or certified mail, postage pre-paid, to Guarantor
at the last known address of Guarantor appearing on the books of the Banks or
the Agent; and (d) agrees that nothing herein shall affect either of the Banks'
or the Agent's right to effect service of process in any other manner permitted
by law and that the Banks and/or the Agent shall have the right to bring any
legal proceedings (including a proceeding for enforcement of a judgment entered
by any of the aforementioned courts) against Borrower in any other court or
jurisdiction in accordance with applicable law.
The term "Bank" as used throughout this Guarantee shall be deemed to
include all the respective branches, divisions and departments, and any
indorsees, successors or permitted assignees of each of the Banks. The term
"Borrower" as used throughout this instrument shall include the corporation
named herein as Borrower and any successor or assign thereof permitted under the
Credit Agreement. The term "Guarantor" as used through this instrument shall
include the corporation named herein as Guarantor or any successors or assigns
to which all or substantially all of the business or assets of said Guarantor
shall have been transferred to the extent permitted under the Credit Agreement.
Guarantor agrees that whenever an attorney is used to obtain payment
under or otherwise enforce this Guarantee or to enforce, declare or adjudicate
any rights or obligations under this Guarantee, whether by legal proceedings or
by any other means whatsoever, reasonable attorneys' fees shall be payable by
Guarantor against whom this Guarantee or any obligation or right hereunder is
sought to be enforced, declared or adjudicated. Guarantor, if more than one,
shall be jointly and severally bound and liable hereunder. GUARANTOR, IN ANY
LITIGATION (WHETHER OR NOT ARISING OUT OF OR RELATING TO OBLIGATIONS,
LIABILITIES OR ANY OF THE MATTERS CONTAINED IN THIS GUARANTEE) ARISING
HEREUNDER, WAIVES TRIAL BY JURY and Guarantor waives the right to interpose any
defense based upon any statute of limitations or any claim of laches and any
set-off or counterclaim of any nature or description, and waives the performance
of each and every condition precedent to which Guarantor might otherwise be
entitled by law.
This Guarantee shall be governed by and construed in accordance with
the laws of the State of Connecticut. Any provision hereof which may prove
unenforceable under any law shall not affect the validity of any other provision
<PAGE> 69
hereof.
Notwithstanding any payment or payments made by Guarantor hereunder or
any set-off, appropriation or application of property of Borrower or Guarantor
by the Banks or the Agent, Guarantor shall not be entitled to be subrogated to
any of the rights of the Banks or the Agent against Borrower, Guarantor or any
other party liable for or upon any of the Obligations therefor, nor shall
Guarantor be entitled to seek reimbursement from Borrower, Guarantor or any
other party liable for or upon any of the Obligations until all of the
Obligations are paid in full. If any amount shall be paid to the Guarantor on
account of such subrogation rights at any time when all the Obligations shall
not have been paid in full, such amount shall be held in trust for the benefit
of the Banks and the Agent and shall forthwith be paid to the Agent to be
credited and applied against the Obligations, whether matured or unmatured, in
accordance with the terms of the Credit Agreement. If (a) the Guarantor shall
make payment to the Banks or the Agent of all or any part of the Obligations and
(b) all the Obligations shall be paid in full, the Banks or the Agent will, at
the Guarantor's request, execute and deliver to the Guarantor appropriate
documents, without recourse and without representation or warranty, necessary to
evidence the transfer by subrogation to the Guarantor of an interest in the
Obligations resulting from such payment by the Guarantor.
This Guarantee constitutes the entire understanding and agreement of
the parties hereto. All prior or contemporaneous representations and
understandings with respect to this instrument of guarantee, whether oral or
written, are merged in this instrument.
IN WITNESS WHEREOF, each of the undersigned has hereunto set his hand
and his or its seal the day and year first above written, intending and
declaring this to be a duly sealed instrument.
(Corporate Seal) GUARANTOR:
By:
Title:
Attested to:
Title:
ADDRESSES FOR NOTICE:
To Shawmut:
Shawmut Bank Connecticut, N.A.
<PAGE> 70
One Landmark Square
Stamford, CT 06904
Attn: Jeffrey C. Lynch, Vice President
To Chase:
The Chase Manhattan Bank, N.A.
135 Pinelawn Road
Melville, NY 11747
Attn: Stephen Rochford, Vice President
To the Guarantor:
c/o CMP Publications, Inc.
600 Community Drive
Manhasset, New York 11030
Attn: Chief Financial Officer
SCHEDULE 1.01
COMMITMENTS AND LENDING OFFICES
<TABLE>
<CAPTION>
PERCENTAGE TYPE
NAME AND ADDRESS OF OF
OF BANK COMMITMENT COMMITMENTS LOAN
- ------- ---------- ----------- ----
<S> <C> <C> <C>
Shawmut Bank Connecticut, $10,000,000 50% Base Rate
National Association Eurodollar
one Landmark Square Auction Rate
Stamford, Connecticut 06904
The Chase Manhattan Bank, $10,000,000 50% Base Rate
National Association Eurodollar
One Chase Manhattan Plaza Auction Rate
New York, New York 10081
</TABLE>
SCHEDULE 2.03
AUCTION RATE LOAN PROCEDURES
(i) If the Borrower requests Auction Rate Loans in a Notice of
Borrowing, the Agent shall promptly notify each Bank of such request by sending
each Bank a copy of the related Notice of Borrowing.
<PAGE> 71
(ii) If, in its sole discretion, it elects to do so, each Bank shall
irrevocably offer to make one or more Auction Rate Loans to the Borrower as
requested in the Notice of Borrowing at a rate or rates of interest specified by
such Bank in its sole discretion, by notifying the Agent (which shall give
prompt notice thereof to the Borrower, before 1:00 p.m. (Connecticut time) one
Business Day before the date of such proposed Borrowing, of the minimum amount
and maximum amount of each Auction Rate Loan which such Bank would be willing to
make as part of such proposed Borrowing and the rate or rates of interest
therefor. If any Bank shall elect not to make such an offer, such Bank shall so
notify the Agent before 1:00 p.m. (Connecticut time) one Business Day before the
date of such proposed Borrowing, provided that the failure by any Bank to give
such notice shall not cause such Bank to be obligated to make any Auction Rate
Loan as part of such Borrowing. Each Bank may offer to make an Auction Rate Loan
or Loans in excess of its pro rata portion of the Commitments.
(iii) The Agent shall provide the Borrower with notice orally, but
confirmed in writing, of the offers to make Auction Rate Loans provided by the
Banks prior to 2:00 p.m. (Connecticut time) one Business Day prior to the date
of such proposed Borrowing. The Borrower shall before 2:00 p.m. (Connecticut
time) on the date of such proposed Borrowing provide the Agent with notice
canceling such proposed Borrowing or accepting one or more of the offers made by
any Bank pursuant to paragraph (ii) above, in its sole discretion, and
specifying the amount of each Auction Rate Loan (which amount shall be equal to
or greater than the minimum amount, and equal to or less than the maximum
amount), for which an offer is being accepted. In the event that the Borrower
fails to provide such notice, the Borrower shall be deemed to have declined to
incur any such Auction Rate Loans.
(iv) The Agent shall promptly notify (A) each Bank that has made an
offer as described in paragraph (ii) above, of the date and aggregate amount of
such Borrowing and whether or not any offer or offers made by such Bank pursuant
to paragraph (ii) above have been accepted by the Borrower, and (B) the Bank
that is to make an Auction Rate Loan as part of such Borrowing, of the amount of
each such Auction Rate Loan to be made by the Bank, and, upon receipt, that the
Agent has received forms of documents appearing to fulfill the applicable
conditions set forth in Article 3. The Bank that is to make an Auction Rate Loan
shall, before 2:00 p.m. (Connecticut time) on the date of such Borrowing
specified in the notice received from the Agent pursuant to Clause (A) of the
preceding sentence or such later time when such Bank shall have received notice
from the Agent pursuant to clause (B) of the preceding sentence, make available
for the account of its Lending Office to the Agent the Auction Rate Loan, in
same day funds. Upon fulfillment of the applicable conditions set forth in
Article 3 and after receipt by the Agent of such funds, the Agent will make such
funds available to the Borrower at an account of the Borrower with the Agent.
(v) The Borrower shall repay to the Agent for the account of each Bank
which has made an Auction Rate Loan, on the maturity date of each Auction Rate
Loan (such maturity date being that specified by the Borrower for repayment of
such Auction Rate Loan in the related Notice of Borrowing delivered pursuant to
paragraph (i) above), the then unpaid principal amount of such Auction Rate Loan
together with the accrued interest thereon.
<PAGE> 72
SCHEDULE 4.06
LIENS
No assets of the Borrower are subject to Liens. Financing statements
have been filed with respect to certain items of equipment leased by the
Borrower, but title to such equipment resides with the lessors.
SCHEDULE 4.07
TAX AUDITS
1. The Borrower is being audited to determine whether it is liable for Texas
state sales tax. The period under audit covers January 1, 1988 through December
31, 1991. The amount assessed by the State of Texas (inclusive of penalty and
interest) from January 1, 1988 through December 31, 1991 was $2,554,634.19.
2. The Borrower is being audited to determine whether it is liable for New
York State sales tax. The period under audit covers January 1, 1986 through
December 31, 1992. No amount has been assessed as of the date hereof.
SCHEDULE 4.09
SUBSIDIARIES AND AFFILIATES
The Borrower is an "S" corporation and has no Subsidiaries. The following are
Affiliates of the Borrower.
<TABLE>
<CAPTION>
JURISDICTION OF
AFFILIATE INCORPORATION
- --------- -------------
<S> <C>
CMP Publications Delaware
International Corp.
NRU Inc. Delaware
</TABLE>
SCHEDULE 4.10
<PAGE> 73
CREDIT ARRANGEMENTS
The Borrower has a revolving credit facility with Manufacturers Hanover
Trust Company. There is currently no outstanding indebtedness under the
facility, and the facility will be terminated upon the execution of this
Agreement.
<PAGE> 1
EXHIBIT 10.19
FIFTH AMENDMENT AND CONSOLIDATION OF PRIOR AMENDMENTS
(TOGETHER WITH SIXTH WAIVER) AGREEMENT
This FIFTH AMENDMENT AND CONSOLIDATION OF PRIOR AMENDMENTS (TOGETHER
WITH SIXTH WAIVER) AGREEMENT (this "Agreement" or the "Fifth Amendment") made as
of November 14, 1996 by and among CMP MEDIA INC. (the
"Borrower"), a Delaware corporation and the successor by merger to CMP
Publications, Inc., a New York corporation ("CMP Publications"), FLEET NATIONAL
BANK ("Fleet"), formerly known as Fleet National Bank of Connecticut and prior
to that Shawmut Bank Connecticut, N.A., and the successor by merger to Fleet
Bank N.A. ("Fleet N.A."), THE CHASE MANHATTAN BANK ("Chase"), the successor by
merger to The Chase Manhattan Bank, N.A., (Fleet and Chase and any of their
respective successors or permitted assigns, the "Banks") and Fleet as agent for
the Banks (in its capacity as such, the "Agent").
WITNESSETH:
WHEREAS, CMP Publications, Fleet, Chase and the Agent have executed and
delivered a Credit Agreement dated as of July 15, 1993 (the "Original Credit
Agreement"), which Original Credit Agreement was amended by an Amendment and
Waiver Agreement among CMP Publications, Fleet, Chase and the Agent dated
February 28, 1994 (the "First Amendment"), by a Second Amendment and Waiver
Agreement among CMP Publications, Fleet, Chase and the Agent dated as of
February 27, 1995 (the "Second Amendment"), by a Third Amendment Agreement among
CMP Publications, Fleet, Chase and the Agent dated as of May ')O, 1995 (the
"Third Amendment"), and by a Fourth Amendment Agreement, dated as of August 9,
1995, between CMP Publications, Fleet, Chase, Fleet N.A. and the Agent (the
"Fourth Amendment") (pursuant to which Fourth Amendment, among other things, (i)
the aggregate "Commitments" to lend were increased to $50,000,000, (ii) the term
loan conversion feature of Original Credit Agreement was eliminated, and (iii)
Fleet N.A. was added as a Bank under the Original Credit Agreement) (such First,
Second, Third and Fourth Amendments are sometimes collectively referred to below
as the "Prior Amendments" and the Original Credit Agreement as amended by the
Prior Amendments is referred to below as the "Agreement"); and
WHEREAS, CMP Publications, Fleet, Chase and the Agent have also
executed and delivered (i) a Third Waiver Agreement, dated April 24, 1995 (the
"Third Waiver") and (ii) a Fourth Waiver Agreement, dated June 5. 1995 (the
"Fourth Waiver"), both relating to the Agreement; and
WHEREAS, CMP Publications, Fleet, Fleet N.A., Chase and the Agent have
also executed and delivered a Fifth Waiver Agreement, dated February 28, 1996
(the "Fifth Waiver") also relating to the Agreement (the Third, Fourth and Fifth
Waivers, along with the waivers set forth in the First Amendments are sometimes
collectively referred to below as the "Prior Waivers"); and
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WHEREAS, on May 24, 1996, a new corporation having the name of "CMP
Media Inc." was formed under the general corporation laws of the State of
Delaware and such corporation is the "Borrower" under this Agreement: and
WHEREAS, on May 31, 1996, CMP Publications was merged with and into
said CMP Media Inc. (the "Merger"), with said CMP Media Inc. being the surviving
entity and (pursuant to such general corporation laws and other applicable law)
succeeding to all of the (i) rights, privileges, powers and franchises of, and
(ii) debts. liabilities and other obligations of, CMP Publications, including
without limitation all rights and obligations under the Agreement and all
obligations under each Revolving Note (as defined in the Agreement), and as a
result said CMP Media Inc. has become the Borrower under the Agreement; and
WHEREAS, without the waivers set forth below in this Agreement, the
Merger would be an Event of Default under the Agreement and the Borrower has
requested such waivers; and
WHEREAS, CMP Communications Corp., a Delaware corporation (and formerly
known as CMP Media, Inc. and prior to that NRU Inc.) is named as a Guarantor
under the Agreement; and
WHEREAS, on October 21, 1996, CMP Communications Corp. was merged with
and into the Borrower (the "CMP Comm. Merger") and thus is no longer a Guarantor
under the Agreement; and
WHEREAS, CMP Publications International Corp., a Delaware corporation
and a Guarantor under the Agreement has changed its name to CMP International
Corp.; and
WHEREAS, CMP Media was a general partnership formed under the laws of
the State of Delaware and had as its general partners CMP Communications Corp.
and the Borrower; and
WHEREAS, as a result of the CMP Comm. Merger, CMP Media's partnership
existence was terminated as it no longer had at least two partners and the
Borrower has succeeded to all of the rights and powers of, and all of the
liabilities of, CMP Media; and
WHEREAS, CMP Japan K.K., a corporation formed under the laws of Japan,
is in the process of statutory liquidation in Japan (the "CMP Japan
Liquidation"); and
WHEREAS, without the waivers set forth below in this Agreement, the CMP
Japan Liquidation would be an Event of Default under the Agreement and the
Borrower has requested such waivers; and
WHEREAS, prior to the CMP Comm. Merger, CMP Communications Corp.
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<PAGE> 3
transferred its interest in CMP France S.N.C., a general partnership formed
under the laws of France, to CMP International Corp. with the result that, after
such transfer and merger, the Borrower and CMP International Corp. are the sole
partners of CMP France S.N.C.
WHEREAS, the parties also desire to enter into this Agreement to
reflect the mergers, name changes. liquidation and other transactions described
above; and
WHEREAS, the Borrower has also requested, and the Banks and the Agent
have agreed, that the Agreement be amended to increase the aggregate of all
Commitments of the Banks under the Agreement to $75,000,000.00, with the
Commitment of Fleet to be $45,000,000.00 and of Chase to be $30,000,000.00; and
WHEREAS, the Borrower, the Banks and the Agent have also agreed to
amend the Agreement to, among other things, (i) modify certain of the interest
rate provisions under the Agreement, (ii) provide for a maturity date for the
revolving credit facility under the Agreement of November 14, 2001, (iii) modify
certain of the financial covenants under the Agreement and (iv) provide for an
additional ability of the Borrower to make acquisitions; and
WHEREAS, it is proposed that Gerard G. Leeds and Liselotte J. Leeds
sell to Kenneth D. Cron 2% of the outstanding common stock of the Borrower (the
"Cron Transfer"); and
WHEREAS, the Cron Transfer would, in the absence of a waiver by the
Banks, constitute a breach of the Amended and Restated Negative Pledge
Agreement, dated as of August 9, 1995 by and between Daniel H. Leeds, Gerard G.
Leeds, Liselotte J. Leeds, and Michael S. Leeds (collectively, the "Negative
Pledgors") and the Agent (the "Negative Pledge Agreement") and such breach would
constitute an Event of Default under the Agreement; and
WHEREAS, the Borrower has requested that the Banks grant all of the
waivers referred to above; and
WHEREAS, the Banks are only willing to enter into the above agreements
and grant such waivers if, among other things, (i) the Borrower executes and
delivers this Agreement and (ii) the parties which are listed as signatories to
the Confirmation at the end of this Agreement execute and deliver such
Confirmation; and
WHEREAS, Fleet N.A. has been merged into Fleet with the result that
Fleet has succeeded to all of Fleet N.A.'s rights and obligations under the
Agreement and to all rights of Fleet N.A. under the Revolving Note issued to
Fleet N.A.; and
WHEREAS, the parties hereto desire to reflect such merger of Fleet N.A.
into Fleet; and
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WHEREAS, for purposes of clarity, the parties desire to consolidate the
amendments set forth in the Prior Amendments into this Agreement.
NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
PART A. GENERAL MATTERS.
1. Capitalized Terms; Section References. Capitalized terms used herein
without definition and defined in the Agreement shall have the same respective
meanings given those terms in the Agreement, unless the context otherwise
requires. All Section references used herein shall, unless otherwise specified
herein, be deemed to refer to Sections in the Agreement.
PART B. AMENDMENTS TO THE CREDIT AGREEMENT AND RELATED MATTERS.
INTRODUCTION. This Part B (i) sets forth certain new amendments to the
Credit Agreement, (ii) sets forth those amendments contained in the Prior
Amendments which are still effective, and (iii) deals with certain related
matters. The derivation of a particular amendment is noted at the end thereof in
brackets (e.g., an amendment which results from the Fourth Amendment is denoted
"[Fourth Amendment]" and an amendment which results from both the Fourth
Amendment and this Agreement is denoted "[Fourth and Fifth Amendments]");
provided, that the failure to denote a derivation of an amendment shall not
affect the effectiveness or binding nature of such amendment. An amendment which
is set forth in a Prior Amendment but which is not set forth herein shall no
longer be considered effective or binding.
AMENDMENT OF SCHEDULE 1.01 TO THE CREDIT AGREEMENT. Schedule 1.01 to
the Credit Agreement is hereby amended and restated to read in its entirety as
set forth in Schedule 1.01 attached hereto and made a part hereof. [Fifth
Amendment]
AMENDMENT AND RESTATEMENT OF CERTAIN DEFINITIONS IN SECTION 1.01. The
definitions of the terms "Applicable Interest Rate", "Auction Rate", "Base
Rate", "Borrowing", "Business Day", "Capital Expenditures", "Guarantor" or
"Guarantors", "Interest Period", "Loans", "Negative Pledge Agreement", "Net
Income", "Notes", "Required Banks", "Revolving Loan Termination Date",
"Revolving Note", and "Tangible Net Worth" are respectively amended and restated
to read in their entirety as follows:
"Applicable Interest Rate" means, for any Loan, the Auction Rate, Base
Rate, or Eurodollar Rate for such Loan. [Fourth Amendment]
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<PAGE> 5
"Auction Rate" means, for any Interest Period or any other period, (a)
the interest rate offered by a Bank and accepted by the Borrower in
connection with an Auction Rate Loan pursuant to the procedures set
forth in Schedule 2.03 or (b) the interest rate determined pursuant to
the Auction Rate Interest Extension Provisions, as the case may be.
[Fourth Amendment]
"Base Rate" means, for any day, a rate per annum (rounded up, if
necessary, to the next 1/16 of 1%), equal to the greater of (i) the
Agent Base Rate in effect on such day and (b) the Federal Funds
Effective Rate on such day plus the Applicable Margin. "Federal Funds
Effective Rate" shall mean, for any day, the weighted average of the
rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published
on the next succeeding Business Day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day that is a
Business Day, the average of the quotations for the day of such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it. If for any reason the Agent shall
have determined (which determination shall be presumptively correct
absent manifest error) that it is unable to ascertain the Federal Funds
Effective Rate for any day(s), for any reason, including the inability
or failure of the Agent to obtain sufficient quotations in accordance
with the terms thereof, the Base Rate shall be the Agent Base Rate on
such day(s). Any change in the Base Rate due to a change in the Agent
Base Rate or the Federal Funds Effective Rate shall be effective on the
effective date of such change in the Agent Base Rate or the Federal
Funds Effective Rate, as the case may be. [Fourth Amendment]
"Borrowing" means a group of Loans of a single Type made by the Banks
(or, in the case of an Auction Rate Loan, by the Bank or Banks whose
offer have been accepted pursuant to Section 2.03 below and Schedule
2.03 hereof) on a single date and to which a single Interest Period is
in effect. [Fourth Amendment]
"Business Day" means any day (other than a Saturday, Sunday or legal
holiday) on which commercial banks are not authorized or required to
close in Stamford, Connecticut or New York, New York, except that (i)
for purposes of the use of the term "Business Day" in the definition of
Federal Funds Effective Rate, the above phrase "Stamford, Connecticut
or" shall be deemed deleted and (b) with respect to notices,
determinations and payments with respect to Eurodollar Loans, such day
shall be a "Business Day" only if it is also a day for trading by and
between banks in the London interbank Eurodollar market. [Fourth
Amendment]
"Capital Expenditures" means for any period the Dollar amount of all
expenditures (including obligations under Capital Leases) made for
fixed assets, real property, plant and equipment, and for intangible
assets, and all renewals, improvements and replacements thereto
incurred during such period, all as determined in accordance with GAAP.
[Fourth Amendment]
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<PAGE> 6
"Guarantor" or "Guarantors" (i) shall mean CMP International Corp., a
Delaware corporation and formerly known as CMP Publications
International Corp., and any other Affiliate of the Borrower hereafter
guarantying the Notes pursuant to Section 5.09 below, and (ii) shall
also include, for purposes hereof (including Section 5.08, Article 6
(and the definitions related thereto), and Article 7), unless the
context otherwise requires, CMP France S.N.C., a general partnership
formed under the laws of France, notwithstanding the fact that some of
the entities identified above may not have executed such a guaranty
(the Borrower hereby acknowledging and agreeing that the Required Banks
shall have the right, at any time, to require the Borrower to cause
such entities to so execute and deliver such guaranties for the benefit
of the Banks and the Agent (with such changes, in the case of a foreign
entity as the Banks may request as a result of any foreign law
requirements). [Fourth and Fifth Amendments]
"Interest Period" means, (a) for each Eurodollar Borrowing, the period
commencing on the date of the related Eurodollar Loan or on the last
day of the immediately preceding Interest Period applicable to such
Borrowing, as the case may be, and ending on the numerically
corresponding day (or, if there is no numerically corresponding day,
the last day) in the calendar month that is one, two, three or six
months thereafter in each case as the Borrower may, upon notice
received by the Agent not later than 12:00 noon (Connecticut time) on
the second Business Day prior to the first day of such Interest Period,
select; (b) for each Auction Rate Borrowing, the period commencing on
the date of the related Auction Rate Loan and ending on the last day of
the period selected by the Borrower pursuant to the following
provisions: The duration of each Auction Rate Loan shall be one, two,
three or six months, in each case as the Borrower may, upon notice
received by the Agent not later than 12:00 noon (Connecticut time) on
the first Business Day prior to the first day of such Interest Period,
select; provided. however, if, as a result of the provisions of the
last sentence of Section 2.03(e) below. the applicable Auction Rate
Loan is not paid in full on what would be, if not for this proviso, the
last day (the "Initial Last Date") of the Interest Period for such
Loan, then the Interest Period for such Loan shall be extended until
the first day on which such Loan can be paid in full under such
provisions-, provided, however, that (1) all interest accrued from the
first day of the Interest Period to the Initial Last Date shall be due
and payable, in arrears, on the Initial Last Date (provided, that, if
the Interest Period (not taking into account any such extension) is
longer than 90 days, such interest shall be payable in installments
every 90 days and on the Initial Last Date); (ii) the interest rate for
the period from the Initial Last Date to the end of the Interest Period
shall be a rate negotiated and agreed to by the Bank which made such
Loan and the Borrower (provided that, if no such rate is agreed to, the
applicable rate shall be the Base Rate), and (iii) all interest
accruing from the Initial Last Date to the end of the Interest Period
shall be due and payable, in arrears, at such intervals as such Bank
and the Borrower may agree upon and on the last day of the Interest
Period (provided, that, if such Bank and the Borrower cannot agree,
such interest shall be payable on each January 1, April 1, July I and
October I and on the last day of the Interest Period) (the provisions
of this and the immediately preceding proviso are referred to herein as
the "Auction Rate Interest Extension Provisions"); and (c) for each
Base Rate Borrowing, the period commencing on the
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<PAGE> 7
date of such Base Rate Loan or on the last day of the immediately
preceding Interest Period applicable to such Borrowing, as the case may
be, pursuant to notice received by the Agent not later than 12:00 noon
(Connecticut time) on any Business Day selected by the Borrower as the
first day of such Interest Period, and ending on the earliest of (i)
the first Business Day of the next succeeding January, April, July or
October and (ii) the Revolving Loan Maturity Date, as the case may be;
provided, however, that:
(i) whenever the last day of any Interest Period would otherwise occur
on a day other than a Business Day, the last day of such Interest
Period shall be extended to occur on the next succeeding Business Day;
provided that, if such extension would cause the last day of such
Interest Period to occur in the next following calendar month, the last
day of such Interest Period shall occur on the next preceding Business
Day; and
(ii) no Interest Period for any Revolving Loan shall extend beyond the
Revolving Loan Maturity Date.
[Fourth Amendment]
"Loans" means the Revolving Loans. [Fourth Amendment]
"Negative Pledge Agreement" means the Negative Pledge Agreement
executed by certain shareholders of the Borrower in the form of Exhibit
E, as amended and restated by the Amended and Restated Negative Pledge
Agreement, dated as of August 9, 1995, by and between Daniel H. Leeds,
Gerard G. Leeds, Liselotte J. Leeds, and Michael S. Leeds and the
Agent, and as same may otherwise be amended, supplemented or otherwise
modified from time to time. [Fifth Amendment]
"Net Income" shall mean, for any period, the aggregate net income (or
net deficit) of the Borrower and the Guarantors for such period,
computed on a combined basis in accordance with GAAP, but excluding
from the definition of Net Income (i) any extraordinary income or
losses, and (II) gains or losses from the sale or disposition of assets
other than in the ordinary course of business. [Fourth Amendment]
"Notes" shall mean the Revolving Notes. [Fourth Amendment]
"Required Banks" means, at any time, Banks holding at least
seventy-five percent (75%) of the aggregate amount of the Commitments
at such time [Fifth Amendment]
"Revolving Loan Termination Date" means November 14, 2001. [Fifth
Amendment]
"Revolving Note" means a promissory note of the Borrower substantially
in the form of Exhibit A hereto evidencing the Revolving Loans made by
a Bank hereunder, as such note may be amended or otherwise modified
from time to time. The initial Revolving
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<PAGE> 8
Notes shall be dated the Closing Date but the Borrower and the Banks
may, at any time and from time to time, agree to the issuance of new
notes, dated after the Closing Date, to evidence the Revolving Loans
and, in such event, such new notes (as same may be amended or otherwise
modified from time to time) shall be deemed the Revolving Notes
hereunder. [Fourth and Fifth Amendments]
"Tangible Net Worth" means, at any date, the difference between (a) the
total assets of the Borrower and the Guarantors, on a combined basis,
minus (b) total liabilities of the Borrower and the Guarantors, on a
combined basis, all as determined in accordance with GAAP, excluding,
however, from the determination of total assets (a) the value of all
assets of the Borrower and the Guarantors, on a combined basis, that
would be classified as "intangible assets" in accordance with GAAP, and
(b) any write-up of assets of the Borrower or the Guarantors after
December 31, 1995. (Reference is hereby made to Section 6.15(b) for use
of the term Tangible Net Worth). [fourth and Fifth Amendment]
4. Amendment of Definition of "Eurodollar Rate". The definition of the
term "Eurodollar Rate" in Section 1.01 is amended by deleting the phrase "plus
1%" and substituting for it the phrase the Applicable Margin". [Fourth
Amendment]
5. Addition of Certain Definitions to Section 1.01. Section 1.01 of the
Agreement is amended by adding the following respective definitions for the
terms "Accumulated Net Profit Distribution", "Adjusted EBITDA", "Adjusted Net
Income", "Agent Base Rate", "Applicable Fee Percentage", "Applicable Margin",
"Auction Rate Borrowing", "Auction Rate Interest Extension Provisions", "Average
Outstanding Loan Balance", "Base Rate Borrowing", "Cron Transfer", "EBITDA",
"Eurodollar Borrowing", "Federal Funds Effective Rate", "First Accumulated Net
Profit Distribution Date", "Fixed Charges", "Net Worth", "Operating Lease",
"Operating Lease Payments", "Pre-Tax Income", "Revolving Loan Maturity Date",
"Specified Distributions", "Specified Offering Proceeds" and "Type".
"Accumulated Net Profit Distribution" means any cash Distribution made
by the Borrower to its shareholders and which is identified by the
Borrower, pursuant to Section 6.15(a), as an Accumulated Net Profit
Distribution, provided, that it is understood and agreed by the
Borrower that (i) the aggregate of all Accumulated Net Profit
Distributions shall not exceed $30 million, and (ii) all Accumulated
Net Profit Distributions must be made on or prior to expiration of the
"post-termination transition period" (if any), as defined in Section
1377(b)(1) of the Code, and (iii) the aggregate of all Accumulated Net
Profit Distributions made in such post-termination transition period
shall not exceed the amount of the Borrower's "accumulated adjustments
account" (as defined in Section 1368(c) of the Code, as of the date of
such termination), [Fifth Amendment]
"Adjusted EBITDA" means for purposes of Section 6.06 below, for any
period, the
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<PAGE> 9
difference between (i) EBITDA for such period and (ii) the sum of
interest income of the Borrower and the Guarantors for such period on a
combined basis in accordance with GAAP. [Fourth Amendment]
"Adjusted Net Income" means, for any period, the Net Income for such
period plus the aggregate amount deducted in determining such Net
Income in respect of Federal, state and local income taxes paid or
payable by the Borrower and the Guarantors during such period;
provided, however, that in the event that Adjusted Net Income for any
period (if not for this proviso) would be negative, Adjusted Net Income
shall, for such period, be deemed zero.
"Agent Base Rate" means the interest rate announced by the Agent from
time to time as its Base Rate or Prime Rate. [Fourth and Fifth
Amendments]
"Applicable Fee Percentage" means for any date during any fiscal
quarter of the Borrower, the applicable percentage (on a per annum
basis) set forth below based upon the ratio of (i) the Average
Outstanding Loan Balance for such quarter to (ii) the EBITDA for the
consecutive four fiscal quarters immediately preceding such fiscal
quarter:
Average Outstanding Loan Balance/EBITDA Applicable Percentage
Ratio per annum
Equal to or Less than 1.50 to 1.00 0.125%
Equal to or greater than 1.51 0.175%
to 1.0
For purposes of illustration, in determining the amount payable, under
Section 2.14 below, on January 1, 1997 (which payment will be with
respect to the fiscal quarter ending December 31, 1996), the Applicable
Fee Percentage for each day during the fiscal quarter ending December
31, 1996 shall be based on the ratio of (i) the Average Outstanding
Loan Balance for the fiscal quarter ending December 31, 1996 to (ii)
the EBITDA for the consecutive four fiscal quarters ending September
30, 1996 so that, for example, if said ratio is 1.51 then the
Applicable Fee percentage for each day of the fiscal quarter ending
December 31, 1996 would be 0.175%. [Fourth and Fifth Amendments]
"Applicable Margin": means on any date, with respect to a Loan
comprising (i) a Eurodollar Borrowing or (ii) a Base Rate Borrowing
whose rate of interest is (on such day) based on the Federal Funds
Effective Rate, the margin (expressed as a percentage on a per annum
basis) set forth below based upon the ratio of (A) the outstanding
unpaid principal
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<PAGE> 10
balance of the Loans on the date of such Borrowing (and calculated
taking into account such Borrowing) (said balance is referred to below
as the "Loan Balance") to @B) the Applicable EBITDA (as defined below)
for such date of Borrowing:
Average Outstanding Loan Balance/ Applicable Ratio
Applicable EBITDA Percentage per Annum
Less than 1.00 to 1.00 0.35%
Equal to or greater than 1.00 to 0.50%
1.00 but less than 1.51 to 1.00
Equal to or greater than 1.51 to 1.00 0.575%
but less than 2.01 to 1.00
Equal to or greater than 2.01 to 1.0 0.825%
For purposes hereof, "Applicable EBITDA", shall mean, for the date of
the applicable Borrowing, the EBITDA for the consecutive four fiscal
quarters ending on the last day of the fiscal quarter (the "Most Recent
Ended Quarter") immediately preceding the fiscal quarter in which such
date of Borrowing occurs; provided, however, that in the event the
unaudited quarterly financial statements for such Most Recent Ended
Quarter have not been delivered, as of the date of such Borrowing,
pursuant to Section 5.08(b) below, the Applicable EBITDA shall mean
EBITDA for the consecutive four fiscal quarters ending on the last day
of the fiscal quarter immediately preceding such Most Recent Ended
Quarter.
Notwithstanding the forgoing, in the case of a Eurodollar Borrowing
with an Interest Period of six months, the Applicable Margin shall, for
the first 90 days of such six months, be calculated as set forth above,
but the Applicable Margin for the remaining portion of such Interest
Period (and any period thereafter for which such Borrowing is
outstanding) shall be calculated assuming that a new Eurodollar
Borrowing (in the amount of such Borrowing) was made on the ninety
first day of such Interest Period.
To illustrate certain of the above provisions, if (i) the Borrower
makes a Eurodollar Borrowing on September 1, 1997 and the Interest
Period for such Borrowing is one month and (ii) the unaudited financial
statements for the fiscal quarter ending June 30. 1997 have been
delivered pursuant to Section 5.08(b) below by September 1, 1997, then
the Applicable Margin shall be calculated by using the ratio of the
outstanding unpaid principal balance of the Loans (taking into account
such Borrowing) on September 1, 1997 to the EBITDA for the consecutive
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four fiscal quarters ending June 30, 1997. If the ratio is, for
example, 1.51, the Applicable Margin for such Eurodollar Borrowing
during the entire Interest Period shall be 0.575% (per annum). To
further illustrate the above provisions. if (i) the Borrower makes a
Eurodollar Borrowing on October , 1997 and the Interest Period for
such Borrowing is six months, (ii) the unaudited financial statements
for the fiscal quarter ending September 30, 1997 have not been
delivered pursuant to Section 5.08(b) below by October 30, 1997, and
(iii) the unaudited financial statements for the fiscal quarter ending
December 31, 1997 have been delivered, pursuant to Section 5.08(b)
below, by January 28, 1998, then (a) the Applicable Margin for such
Eurodollar Borrowing for the first 90 days of the Interest Period shall
be calculated by using the ratio of the outstanding unpaid principal
balance of the Loans (taking into account such Borrowing) on October
30, 1997 to the EBITDA for the consecutive four fiscal quarters ending
June 30, 1997 (if such ratio is, for example, 1.51, the Applicable
Margin during such first 90 days shall be 0.575%) and (b) the
Applicable Margin for such Eurodollar Borrowing for the remaining
portion of the Interest Period shall be calculated by using the ratio
of the outstanding unpaid principal balance of the Loans (taking into
account such Borrowing) on January 28, 1998 to the EBITDA for the
consecutive four fiscal quarters ending December 31, 1997 (if such
ratio is, for example, 1.50, the Applicable Margin during such
remaining portion shall be 0.50%).
[Fourth and Fifth Amendments]
"Auction Rate Borrowing" means a Borrowing consisting of an Auction
Rate Loan or concurrent Auction Rate Loans from the Bank or Banks whose
offer or offers for such Borrowing have been accepted by the Borrower
pursuant to Section 2.03 and Schedule 2.03. [Fourth Amendment]
"Auction Rate Interest Extension Provisions" shall have the meaning
given that term in the definition of the term "Interest Period".
[Fourth Amendment]
"Average Outstanding Loan Balance" for any period, means the average
daily outstanding unpaid balance of the Loans during such period.
[Fourth Amendment]
"Base Rate Borrowing" shall mean a Borrowing comprised of Base Rate
Loans. [Fourth Amendment]
"Cron Transfer" means the proposed sale by Gerard G. Leeds and
Liselotte J. Leeds to Kenneth D. Cron of two percent (2%) of the
outstanding common stock of the Borrower. [Fifth Amendment]
"EBITDA" means, for any period, Net Income for such period plus the
aggregate amount deducted in determining such Net Income in respect of
the following, without duplication, each as computed on a combined
basis in accordance with GAAP: (I) Interest Expense of the Borrower and
the Guarantors for such period, (ii) Federal, state and local
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<PAGE> 12
income taxes paid or payable by the Borrower and the Guarantors during
such period, and (iii) depreciation and amortization of the Borrower
and the Guarantors for such period. [Fourth Amendment]
"Eurodollar Borrowing" shall mean a Borrowing comprised of Eurodollar
Loans. [Fourth Amendment]
"Federal Funds Effective Rate" shall have the meaning given that term
in the definition of the term "Base Rate". [Fourth Amendment]
"First Accumulated Net Profit Distribution Date" means the date, if
any, on which the first Accumulated Net Profit Distribution is paid.
[Fifth Amendment]
"Fixed Charges" means, for any period, the sum of (i) Capital
Expenditures of the Borrower and the Guarantors for such period, plus
(ii) Interest Expense of the Borrower and the Guarantors for such
period, plus (iii) Operating Lease Payments of the Borrower and
Guarantors for such period, plus (iv) all Specified Distributions paid
in such period, plus (v) Federal, state and local income taxes paid or
payable by the Borrower and the Guarantors during such period, all
computed on a combined basis in accordance with GAAP. [Fourth and Fifth
Amendments]
"Net Worth" means, at any date, the difference between (a) the total
assets of the Borrower and the Guarantors, on a combined basis, minus
(b) total liabilities of the Borrower and the Guarantors, on a combined
basis, all as determined in accordance with GAAP, excluding, however,
from the determination of total assets any write-up of assets of the
Borrower or the Guarantors after December 31, 1995. [Fifth Amendment]
"Operating Lease" means any lease of any real or personal property
other than Capital Leases. [Fifth Amendment]
"Operating Lease Payments" means, for any period, the aggregate rental
expense of the Borrowers and the Guarantors for such period in respect
of all rent obligations under Operating Leases. [Fourth Amendment]
"Pre-Tax Income" shall mean Adjusted Net Income.
"Revolving Loan Maturity Date" means November 14, 2001. [Fifth
Amendment]
"Specified Distributions" means any and all Distributions made (i) by
the Borrower except for, if made, the Accumulated Net Profit
Distribution or (ii) by any Guarantor and/or any Subsidiary of the
Borrower to the extent any such Distribution is not paid to the
Borrower. [Fifth Amendment]
-12-
<PAGE> 13
"Specified Offering Proceeds" means seventy-five percent (75%) of any
and all Offering Proceeds (as defined below) directly or indirectly
received by the Borrower (and/or any of its Affiliates) in connection
with any and all Public Offerings (as defined below) consummated on or
prior to the applicable quarter ending date being measured under
Section 6.1.1. "Public Offering" means any and all public offerings of
the capital stock (or other securities) of the Borrower or any of its
Subsidiaries or other Affiliates (including any Guarantor), whether
consummated in one transaction or a series of transactions, pursuant to
a registration statement filed with the Securities and Exchange
Commission. "Offering Proceeds" means the difference between (i) the
gross proceeds (but excluding all proceeds received and retained by
individual shareholders of the Borrower for the sale of shares of
capital stock of the Borrower previously owned by such individuals (the
"Individuals' Shares")) from any and all Public Offerings less (ii) the
out-of-pocket brokers' and underwriters' fees and commissions incurred
by the Borrower in such Offerings and payable to Persons who are not
Affiliates of the Borrower and all other out-of-pocket issuing expenses
incurred by the Borrower in such Offerings and payable to Persons who
are not Affiliates of the Borrower (but excluding from this clause (ii)
that portion of brokers' and underwriters' fees (but not other
expenses) attributable to the Individuals' Shares). For example, if (a)
there is an initial public offering with respect to the common stock of
the Borrower the gross proceeds of which offering are $50,000,000, and
of such $50,000,000 the sum of $20,000,000 is received and retained by
individual shareholders for the sale of their Individual Shares and (b)
the amount under clause (ii) is $1,000,000, then the Offering Proceeds
with respect to such initial public offering would be $29,000,000.
Nothing contained in this definition of Specified Offering Proceeds
shall be interpreted or construed to limit the provisions of Section
7.01(i) of this Agreement. [Fifth Amendment]
"Type", when used in respect of any Loan or Borrowing, shall refer to
the Rate by reference to which interest on such Loan or on the Loans
comprising such Borrowing is determined. "Rate" means the Eurodollar
Rate or the Base Rate and, in the case of an Auction Rate Loan, the
applicable Auction Rate. [Fourth Amendment]
6. FURTHER AMENDMENT OF SECTION 1.01. Section 1.01 is further amended
by deleting the following definitions from such Section: "Cash Flow Coverage",
"Current Assets", "Current Liabilities", "EBIT", "Interest Coverage", "Operating
Cash Flow", ["Operating Lease Obligation",] "Term Loan Maturity Date", "Term
Loans", "Term Loan Conversion Fee", "Term Note", "Term Rate", and "Total
Liabilities". [Fourth and Fifth Amendments]
7. AMENDMENT OF SECTION 1.02. Section 1.02 is hereby amended by adding
the following sentence to the end thereof-.
"If a change should occur in GAAP after December 31, 1995 which change
has a material
-13-
<PAGE> 14
(or impact on the financial covenants set forth in Sections 6.11, 6.12
or 6.13 hereof n any other applicable provision hereof), the Agent,
Banks and Borrower hereby agree to use their best efforts to negotiate
and agree upon appropriate adjustments to said covenants (or such other
provisions), provided that if the parties cannot so agree, the Required
Banks shall have the right to make reasonable adjustments to said
covenants or other provisions." [Fifth Amendment]
8. AMENDMENT OF SECTION 2.02(A). Section 2.02(a) is amended and
restated to read in its entirety as follows:
(a) The Revolving Loans of each Bank shall be evidenced by a single
promissory note in favor of such Bank substantially in the form of
Exhibit A, duly completed and executed by the Borrower, as such note
may be amended or otherwise modified from time to time.
[Fourth Amendment]
9. AMENDMENT OF SCHEDULE 2.03. Schedule 2.03 to the Credit Agreement is
hereby amended and restated to read in its entirety as set forth in Schedule
2.03 attached hereto. [Fourth Amendment]
10. AMENDMENT TO SECTION 2.03(E). Section 2.03(e) is amended and
restated to read in its entirety as follows:
(e) In the event that any Bank makes an Auction Rate Loan, to
the Borrower, such Auction Rate Loan shall be made severally by such
Bank without participation in such Auction Rate Loan by any other Bank.
If any Bank makes an Auction Rate Loan, such Bank shall be required,
subject to the other terms and conditions hereof, to participate in
subsequent Revolving Loans to the extent provided for below in this
paragraph. Each Bank's pro rata share of any Base Rate or Eurodollar
Loans to be made by such Bank pursuant to Section 2.01 hereof while an
Auction Rate Loan is outstanding (any such Base Rate or Eurodollar Loan
or portion thereof hereafter being sometimes referred to as a "Non-Pro
Rata Loan" (whether or not the formula set forth below results in such
proposed Loan being, in fact, made on a non-pro rata basis)) shall be
equal to a fraction, the numerator of which shall be the difference
between (a) such Bank's Commitment and (b) the aggregate of all then
outstanding Revolving Loans made by such Bank (including, without
limitation, any Auction Rate Loans by such Bank but excluding (x) the
proposed Non-Pro Rata Loan by such Bank, (y) if applicable, the
Revolving Loan(s) (whether a Base Rate, Eurodollar or Auction Rate
Loan(s)), or the applicable portion thereof, which is being repaid with
the proceeds of such proposed Non-Pro Rata Loan and (z) if applicable,
that part of any Auction Rate Loan(s) by such Bank which (when added to
any other outstanding Revolving Loans made by such Bank) results in all
outstanding Revolving Loans by such Bank exceeding such Bank's
-14-
<PAGE> 15
Commitment) and the denominator of which shall be the difference
between (i) the aggregate of all Banks' Commitments and (ii) the then
aggregate outstanding amount of all Revolving Loans by all Banks
(including without limitation all Auction Rate Loans but excluding (x)
the proposed Non-Pro Rata Loans. (y) if applicable, the aggregate
Revolving Loans by all Banks (whether Base Rate, Eurodollar or Auction
Rate Loans), or applicable portion thereof, which are being repaid with
the proceeds of the proposed Non-Pro Rata Loans by the Banks and (z) if
applicable, the aggregate (if any) of any part of any Auction Rate
Loans by any Bank(s) which (when added to any other outstanding
Revolving Loans made by such Bank(s)) results in all outstanding
Revolving Loans by such Bank(s) to exceed such Bank's Commitment); if
such numerator, for the applicable Bank, is zero or negative, the
fraction, for such Bank, will be deemed to be zero and such Bank shall
not have a pro-rata portion of the proposed Non-Pro Rata Loan;
provided, that, nothing contained herein shall be interpreted or
construed to require a Bank to make Loans in excess, at any one time
outstanding, of its Commitment. Any Bank which makes an Auction Rate
Loan shall have the right to receive payment in full of same
notwithstanding the fact, if applicable, that the amount of such Loan
(plus, if applicable, any other then outstanding Revolving Loans by
such Bank) exceeds the face amount of such Bank's Revolving Note.
Notwithstanding anything to the contrary contained herein or in the
terms of any Auction Rate Loan, after giving effect to all repayments
of Borrowings and new Borrowings made on the date in question (i) no
repayment in full of an Auction Rate Loan may be made by the Borrower
unless and until all Non-Pro Rata Loans made as a result of such
Auction Rate Loan shall have been repaid in full on or prior to such
date, and (ii) no partial repayment of an Auction Rate Loan may be made
by the Borrower unless and until all Non-Pro Rata Loans made as a
result of such Auction Rate Loan shall have been partially repaid in
the same proportion as such partial repayment of such Auction Rate Loan
(provided that, it is understood and agreed that such Auction Rate Loan
shall be due and payable in full on the first date on which the
preceding provisions of this sentence do not prevent such payment in
full). [Fourth Amendment]
11. AMENDMENT OF SECTION 2.05. Section 2.05 is amended as follows:
(a) Section 2.05(a) is amended by (i) substituting the phrase
"of any and all $1,000,000 Sales (as defined in Section 6.06)" for the
phrase "of the sale, lease or other transfer of assets of the Borrower
or any Affiliate described in the penultimate sentence of Section 6.06"
and (ii) substituting the phrase "$1,000.000 Sale" for the phrase
"sale, lease or transfer".
(b) Section 2.05(b) is amended and restated to read in its
entirety as follows:
(b) On the effective date of any reduction of the Commitment
of each Bank pursuant to Section 2.05(a), the Borrower shall
repay such principal amount (together with accrued interest
thereon and any amount due pursuant to Section
-15-
<PAGE> 16
2.07) of outstanding Revolving Loans. if any, as may be
necessary so that after such repayment, the aggregate unpaid
principal amount of the Revolving Loans does not exceed the
Commitment as then reduced.
(c) Section 2.05(c) (which Section was added pursuant to the
Third Amendment) is deleted. [Fourth Amendment]
12. AMENDMENT TO SECTION 2.06. Section 2.06 is amended and restated to
read in its entirety as follows:
The outstanding principal balance of each Revolving Loan shall
be due and payable on the Revolving Loan Maturity Date. In addition,
each Auction Rate Loan shall also be due and payable on the last day of
the Interest Period of such Loan. [Fourth Amendment]
13. AMENDMENT TO SECTION 2.08. Section 2.08 is hereby amended as
follows:
(a) Section 2.08(b) is hereby amended by (i) deleting the
phrase "Subject to Section 6.13 hereof, each" and substituting for it
the word "Each" in the first sentence thereof, and (ii) substituting
the amount "360" for the amount "365" in the third sentence thereof.
(b) The second sentence of Section 2.08(c) is hereby amended
by adding the following phrase to the end thereof immediately after the
words "of such Interest Period" and immediately before the period; ";
provided, however, that, if the Auction Rate Interest Extension
Provisions are applicable, interest shall be payable as set forth in
such Provisions".
(c) A new Section 2.08(d) is hereby added to read as follows:
(d) Notwithstanding the foregoing, any interest which accrues
at the Default Rate shall be payable upon demand. [Fourth Amendment]
14. AMENDMENTS TO SECTIONS 2.09 TO 2.13. (a) Sections 2.09 to 2.13 are
hereby amended and restated to read in their entirety as follows:
15. SECTION 2.09. [Intentionally Omitted]
-16-
<PAGE> 17
16. SECTION 2.10. [Intentionally Omitted]
17. SECTION 2.11. [Intentionally Omitted]
18. SECTION 2.12. [Intentionally Omitted]
19. SECTION 2.13. [Intentionally Omitted]
[Fourth Amendment]
20. SECTION 2.14. (i) Section 2.14 is hereby amended and restated to
read in its entirety as follows:
Section 2.14 Fees.
(a) The Borrower agrees to pay, in arrears, to each Bank
through the Agent, on the first Business Day of each January, April,
July and October of each year, commencing January 1, 1997, a facility
fee (a "Facility Fee") at a rate per annum equal to the Applicable Fee
Percentage from time to time in effect applied to the amount of the
Commitment of such Bank, whether used or unused, on each day occurring
during the immediately preceding quarter. All Facility Fees shall be
computed on the basis of the actual number of days elapsed in a year of
360 days. The Facility Fee due to each Bank shall commence to accrue on
November 14, 1996 and shall cease to accrue on the termination of the
Commitment of such Bank. Notwithstanding the foregoing, the payment of
the Facility Fee to each Bank which would otherwise be due on October
1, 2001 shall be due on the Revolving Loan Maturity Date (and shall be
pro-rated, i.e., calculated for the period July 1, 2001 to the
Revolving Credit Maturity Date) and the Applicable Fee Percentage shall
be calculated by using the ratio of (a) the Average Outstanding Loan
Balance for the period July 1, 2001 to the Revolving Loan Maturity Date
to (b) EBITDA for the four fiscal quarters ending June 30, 2001.
(b) The fees required by paragraph (a) of this Section shall
not be refundable under any circumstances.
[Fourth and Fifth Amendments]
(ii) The Borrower acknowledges that, notwithstanding the
amendment to Section 2.14 set forth in (i) above, it shall pay on
January 1, 1997 (in addition to the fees accrued from the date of this
Fifth Amendment to December 31, 1996 under Section 2.14(a), as so
amended) the fees accrued from October 1, 1996 to the date of this
Fifth Amendment under the version of Section 2.14(a) as amended by the
Fourth Amendment.
21. AMENDMENT OF SECTION 2.22. Section 2.22 is hereby amended by adding
the parenthetical phrase "(it being understood and agreed that, for Eurodollar
Loans and Base Rate Loans, such ratable share shall be based on the then
respective aggregate outstanding principal
-17-
<PAGE> 18
amounts of the Eurodollar Loans and Base Rate Loans made by each Bank (and
subject to the treatment of "Non-Pro Rata Loans" under Section 2.03(e)))"
immediately after the phrase "obtained by all the Banks" and immediately before
the phrase ", such Bank".
22. SECTION 2.23 DELETED. Section 2.23 is hereby deleted. [Fourth
Amendment]
23. AMENDMENT OF SECTION 3.02. Section 3.02 is amended by deleting the
phrase "and to make the Term Loan" in the third line thereof. [Fourth Amendment]
24. AMENDMENT OF SECTION 4.05. Section 4.05 is hereby amended by (i)
deleting the date "December 31, 1992" and substituting for it the date "December
31, 1995" in the first, second and fourth sentences thereof, (ii) deleting the
date "March 31, 1993" and substituting for it the date "June 30, 1995" in the
first sentence thereof, and (iii) deleting the phrase "three-month period" and
substituting the phrase "six-month period" in the first sentence. [Fifth
Amendment]
25. AMENDMENT OF SCHEDULES 4.07 AND 4.09. Schedules 4.07 and 4.09 of
the Agreement are respectively amended and restated to read in its entirety as
set forth in Schedules 4.07 and 4.09 attached hereto and made a part hereof.
[Fourth and Fifth Amendments]
26. AMENDMENT OF SECTION 4.10. Section 4.10 to the Credit Agreement is
hereby amended and restated to read in its entirety as follows:
SECTION 4.10. CREDIT ARRANGEMENTS. Other than the revolving
credit facility under this Agreement, neither the Borrower nor any
Guarantor has any credit agreements, indentures, guaranties, Capital
Leases or other investments, agreements or arrangements presently in
effect providing for or relating to extensions of credit (including
agreements and arrangements for the issuance of letters of credit or
for acceptance financing) in respect of which the Borrower or any of
the Guarantors is in any manner directly or contingently obligated to
any third party.
(b) Schedule 4.10 of the Agreement is hereby deleted.
[Fourth and Fifth Amendments]
27. AMENDMENT OF SCHEDULE 4.16. Schedule 4.16 to the Agreement is
hereby amended and restated in its entirety as set forth in Schedule 4.16
attached hereto and made a part hereof. [Fifth Amendment]
-18-
<PAGE> 19
Exhibit E
to Exhibit 10.19
AMENDED AND RESTATED
NEGATIVE PLEDGE AGREEMENT
This Amended and Restated Negative Pledge Agreement (this "Agreement") is
dated as of August 9, 1995 and is by and among Daniel H. Leeds, Gerard G. Leeds,
Liselotte J. Leeds, and Michael S. Leeds (individually a "Shareholder" and
collectively the "Shareholders") and Shawmut Bank Connecticut, N.A. (the
"Agent"), as agent under the Credit Agreement referred to below. Capitalized
terms used herein and not otherwise defined herein are used as defined in the
Credit Agreement referred to below.
WITNESSETH:
WHEREAS, CMP Publications, Inc., a New York corporation ("CMP"), Shawmut
Bank Connecticut, N.A. ("Shawmut"), The Chase Manhattan Bank, National
Association ("Chase" and together with Shawmut and any other financial
institutions from time to time party thereto, the "Banks"), and the Agent have
entered into a Credit Agreement dated as of July 15, 1993 (as amended from time
to time, the "Credit Agreement"), pursuant to which the Banks have agreed to
make Loans to CMP subject to the terms and conditions set forth therein, and
evidenced by the Revolving Notes;
WHEREAS, in connection with the execution and delivery of the Credit
Agreement, Gerard G. Leeds and Liselotte J. Leeds, who at the time collectively
owned more than two-thirds of the issued and outstanding shares of stock of CMP,
entered into that certain Negative Pledge Agreement (the "Original Negative
Pledge Agreement") dated as of July 15, 1993 with the Agent;
WHEREAS, the Shareholders collectively own more than two-thirds of the
issued and outstanding shares of stock of CMP;
WHEREAS, Gregory G. Leeds, Jennifer R. Leeds, and Richard A. Leeds
(individually a "Non-Party Shareholder" and collectively the "Non-Party
Shareholders") are the owners of all of the issued and outstanding shares of
stock of CMP which are not owned by the Shareholders;
WHEREAS, to induce the Banks to make Loans after the execution and
delivery of that certain Fourth Amendment Agreement dated as of the date hereof
among CMP, Shawmut, Chase, Fleet Bank, N.A., and the Agent, which amends the
Credit Agreement, each Shareholder has agreed not to grant to any party, other
than another Shareholder or a Non-Party Shareholder, a security interest in such
Shareholder's shares of stock of CMP, as set forth in more detail below;
WHEREAS, each Shareholder expects to derive benefits from the Loans and
the transactions contemplated by the Credit Agreement; and
WHEREAS, the making of the Loans under the Credit Agreement is subject to
the condition, among others, that the Original Negative Pledge Agreement be
amended and restated
<PAGE> 20
and that the Shareholders execute and deliver this Amended and Restated Negative
Pledge Agreement.
NOW, THEREFORE, in consideration of the premises and covenants contained
herein, and for other good and valuable consideration, the receipt of which is
hereby acknowledged by each party hereto, it is hereby agreed as follows:
1. So long as any Obligations remain outstanding and unpaid or the
Commitments are outstanding, each Shareholder:
(a) will not create, assume or suffer to exist, any mortgage, pledge,
encumbrance, lien, security interest or charge of any kind upon his or her
shares of stock of CMP, except (i) those that are for the benefit of another
Shareholder, a Non-Party Shareholder (provided that such Non-Party Shareholder
shall have agreed to be bound by the restrictions applicable to Shareholders
contained in this Agreement pursuant to an agreement in form and substance
reasonably satisfactory to the Agent), or one or more trusts for the benefit of
any of them (provided that (x) such trusts remain under the control of any
Shareholder or Non-Party Shareholder, (y) the trustee shall have agreed to be
bound by the restrictions applicable to Shareholders contained in this Agreement
pursuant to an agreement in form and substance reasonably satisfactory to the
Agent and (z) if any trust is for the benefit of, or under the control of, a
Non-Party Shareholder, such NonParty Shareholder shall have agreed to be bound
by the restrictions applicable to Shareholders contained in this Agreement
pursuant to an agreement in form and substance reasonably satisfactory to the
Agent), (ii) those that arise by operation of law or (iii) those restrictions on
transfer of the stock to any person other than to the other Shareholders,
Non-Party Shareholders, or CMP as such restrictions exist as of the date hereof
pursuant to a certain Shareholders' Agreement dated as of June 30, 1991; and
(b) will not sell, assign, convey or otherwise dispose of or give a proxy
or power with respect to his or her shares of stock of CMP, other than to the
other Shareholders, Non-Party Shareholders (provided that such Non-Party
Shareholders shall have agreed to be bound by the restrictions applicable to
Shareholders contained in this Agreement pursuant to an agreement in form and
substance reasonably satisfactory to the Agent), one or more trusts for the
benefit of any of them (provided that (x) such trusts remain under the control
of any Shareholder or Non-Party Shareholder, (y) the trustee shall have agreed
to be bound by the restrictions applicable to Shareholders contained in this
Agreement pursuant to an agreement in form and substance reasonably satisfactory
to the Agent and (z) if any trust is for the benefit of, or under the control
of, a Non-Party Shareholder, such Non-Party Shareholder shall have agreed to be
bound by the restrictions applicable to Shareholders contained in this Agreement
pursuant to an agreement in form and substance reasonably satisfactory to the
Agent), or CMP.
2. The Shareholders recognize that any damages which the Agent and/or the
Banks may sustain upon violation of this Agreement may be difficult to measure,
and agree that violation of the provisions of this Agreement shall be subject to
injunctive relief, in addition to any other remedies available to the Agent.
<PAGE> 21
3. No amendment or waiver of any provision of this Agreement shall be
effective unless the same shall be in writing and signed by the party against
whom enforcement of such amendment or waiver is sought. This Agreement shall
inure to the benefit of, and be binding upon, the successors, assigns, heirs,
and representatives of the Agent, the Banks, the Shareholders and any Non-Party
Shareholder who agrees to be bound hereby.
4. This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument, and any party
hereto may execute this Agreement by signing any such counterpart.
5. All capitalized terms used herein which are not otherwise defined
herein shall have the meanings ascribed thereto in the Credit Agreement.
6. This Agreement amends and restates, and supersedes in its entirety, the
Original Negative Pledge Agreement.
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amended and Restated Negative Pledge Agreement as of the date first above
written.
/s/DANIEL H. LEEDS
-----------------------------
Name:Daniel H. Leeds
/s/GERARD G. LEEDS
------------------------------
Name: Gerard G. Leeds
/s/LISELOTTE J. LEEDS
--------------------------------
Name: Liselotte J. Leeds
/s/MICHAEL S. LEEDS
-------------------------------
Name: Michael S. Leeds
SHAWMUT BANK CONNECTICUT, N.A., as
Agent
/s/GARY P. KEARNS
------------------------------
Name: Gary P. Kearns
Title: Managing Director
<PAGE> 23
STATE OF NEW YORK)
)ss:
COUNTY OF NASSAU )
The foregoing instrument was acknowledged before me this 8 day of August,
1995 by Daniel H. Leeds, known to me (or satisfactorily proven) to be the person
whose name is subscribed to the within instrument and acknowledged that he
executed the same for the purposes therein contained.
/s/Janette E Yashioka
------------------------------
Notary Public
My commission expires: 3/6/97
[Seal]
STATE OF NEW YORK)
)ss:
COUNTY OF NASSAU )
The foregoing instrument was acknowledged before me this 8 day of August,
1995 by Gerard G. Leeds, known to me (or satisfactorily proven) to be the person
whose name is subscribed to the within instrument and acknowledged that he
executed the same for the purposes therein contained.
/s/Janette E. Yashioka
---------------------------
Notary Public
My commission expires: 3/6/97
[Seal]
STATE OF NEW YORK)
)ss:
COUNTY OF NASSAU )
The foregoing instrument was acknowledged before me this 8 day of August,
1995 by Liselotte J. Leeds, known to me (or satisfactorily proven) to be the
person whose name is subscribed to the within instrument and acknowledged that
he executed the same for the purposes therein contained.
/s/Janette E. Yashioka
-----------------------------
Notary Public
<PAGE> 24
My commission expires: 3/6/97
[Seal]
<PAGE> 25
STATE OF NEW YORK)
)ss:
COUNTY OF NASSAU )
The foregoing instrument was acknowledged before me this 8 day of August,
1995 by Michael S. Leeds, known to me (or satisfactorily proven) to be the
person whose name is subscribed to the within instrument and acknowledged that
he executed the same for the purposes therein contained.
/s/Janette E. Yashioka
---------------------------
Notary Public
My commission expires: 3/6/97
[Seal]
<PAGE> 1
Exhibit 10.20
SIXTH AMENDMENT AGREEMENT
This SIXTH AMENDMENT AGREEMENT ("Sixth Amendment") made as of April 15,
1997 by and among CMP MEDIA INC. (the "Borrower"), a Delaware corporation and
the successor by merger to CMP Publications, Inc., a New York corporation ("CMP
Publications"), FLEET NATIONAL BANK ("Fleet"), formerly known as Fleet National
Bank of Connecticut and prior to that Shawmut Bank Connecticut, N.A., and the
successor by merger to Fleet Bank N.A. ("Fleet N.A."), THE CHASE MANHATTAN BANK
("Chase"), the successor by merger to The Chase Manhattan Bank, N.A., (Fleet and
Chase and any of their respective successors or permitted assigns, the "Banks")
and Fleet as agent for the Banks (in its capacity as such, the "Agent").
WITNESSETH:
WHEREAS, CMP Publications, Fleet, Chase and the Agent have executed and
delivered a Credit Agreement dated as of July 15, 1993 (the "Original Credit
Agreement"), which Original Credit Agreement was amended by an Amendment and
Waiver Agreement among CMP Publications, Fleet, Chase and the Agent dated
February 28, 1994 (the "First Amendment"), by a Second Amendment and Waiver
Agreement among CMP Publications, Fleet, Chase and the Agent dated as of
February 27, 1995 (the "Second Amendment"), by a Third Amendment Agreement among
CMP Publications, Fleet, Chase and the Agent dated as of May 30, 1995 (the
"Third Amendment"), and by a Fourth Amendment Agreement, dated as of August 9,
1995, between CMP Publications, Fleet, Chase, Fleet N.A. and the Agent (the
"Fourth Amendment") (such First, Second, Third and Fourth Amendments are
collectively referred to below as the "Prior Amendments"); and
WHEREAS, CMP Publications, Fleet, Chase and the Agent also executed and
delivered (i) a Third Waiver Agreement, dated April 24, 1995 (the "Third
Waiver") and (ii) a Fourth Waiver Agreement, dated June 5, 1995 (the "Fourth
Waiver'), both relating to the Agreement, and
WHEREAS, CMP Publications, Fleet, Fleet N.A., Chase and the Agent also
executed and delivered a Fifth Waiver Agreement, dated
<PAGE> 2
February 28, 1996 (the "Fifth Waiver") also relating to the Original Credit
Agreement, as amended; and
WHEREAS, the Original Credit Agreement was subsequently amended by a Fifth
Amendment and Consolidation of Prior Amendments (Together with Sixth Waiver)
Agreement (the "Fifth Amendment"), which Fifth Amendment, among other things,
(i) set forth certain new amendments to the Original Credit Agreement, and (ii)
consolidated those amendments (to the Original Credit Agreement) which were
contained in the Prior Amendments and were still effective (the Original Credit
Agreement as amended by the Fifth Amendment (including both such new amendments
and consolidated amendments), is referred to below as the "Agreement"); and
WHEREAS, the Borrower and the Banks desire to (i) amend certain Sections
of the Agreement to allow for the Borrower to guaranty indebtedness of senior
management of the Borrower, the principal amount of which indebtedness does not
exceed $7.5 million (in the aggregate) at any one time outstanding and (ii) make
certain related amendments to the Agreement.
NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
PART A. GENERAL MATTERS.
1. Capitalized Terms; Section References. Capitalized terms used herein
without definition and defined in the Agreement shall have the same respective
meanings given those terms in the Agreement, unless the context otherwise
requires. All Section references used herein shall, unless otherwise specified
herein, be deemed to refer to Sections in the Agreement.
PART B. AMENDMENTS TO THE CREDIT AGREEMENT.
1. Amendment of Certain Definitions.
(a) The definition of the term "Applicable Fee Percentage" contained
in Section 1.01 is hereby amended by
- 2 -
<PAGE> 3
deleting the phrase "Average Outstanding Loan Balance" and substituting for it
the phrase "Average Outstanding Loan and Guarantee Balance" each time it appears
in such definition.
(b) The definition of the term "Applicable Margin" contained in
Section 1.01 is hereby amended as follows:
(i) clause (A) of the first paragraph thereof is hereby
amended and restated to read in its entirety as follows:
(A) the sum of the outstanding unpaid principal balance
of the Loans on the date of such Borrowing (and
calculated taking into account such Borrowing) plus the
aggregate outstanding principal amount of indebtedness
guaranteed by the Borrower, pursuant to Section 6.02(e)
below, as of such date (said sum is referred to below as
the "Loan and Guarantee Balance") to
(ii) the term "Loan Balance" as it appears in such definition
after such clause (A) is hereby deleted and in its place is
inserted the term "Loan and Guarantee Balance".
(iii) the phrase "outstanding unpaid principal balance of the
Loans", each time it appears in the last paragraph of such
definition, is hereby deleted and inserted in its place is the
phrase "Loan and Guarantee Balance".
2. New Definitions. The following two new definitions are hereby added to
Section 1.01, to be placed in their proper alphabetical order, to read in their
entirety as follows:
"Average Outstanding Loan and Guarantee Balance" shall mean, for any
period, the sum of (i) the Average Outstanding Loan Balance for such
period plus (ii) the average daily aggregate outstanding amount of
principal indebtedness guaranteed by the Borrower, pursuant to
Section 6.02(e) below, during such period.
- 3 -
<PAGE> 4
"Loan and Guarantee Balance" shall have the meaning given that term
in the definition of Applicable Margin.
3. Amendment of Section 2.14(a). Section 2.14(a) is hereby amended by
deleting the phrase "Average Outstanding Loan Balance" and substituting for it
the phrase "Average Outstanding Loan and Guarantee Balance".
4. Amendment of Section 6.02. A new clause (e) is added to Section 6.02
and existing clause (e) of Section 6.02 is re-lettered as clause (f) and is
amended and restated in its entirety, all as follows:
(e) a guaranty or guaranties by the Borrower of indebtedness (plus
interest thereon) for borrowed money incurred by one or more members of
senior management of the Borrower, provided, that the aggregate principal
amount of indebtedness guaranteed by the Borrower under this clause (f)
shall not exceed $7.5 million; (f) in addition to the guaranties permitted
by the preceding clause (e), guaranties made in the ordinary course of
business for the benefit of employees of the Borrower or any Guarantor,
provided, that, the maximum amount of obligations so guaranteed by the
Borrower or any Guaranty under this clause (f) shall not exceed $250,000
in the case of an individual employee and $1,000,000 in the aggregate at
any time outstanding, and
5. Amendment of Section 6.03. A new clause (j) is added to Section 6.03
and existing clause (j) of Section 6.03 is re-lettered as clause (k) and is
amended and restated in its entirety, all as follows:
(j) if at any time the obligations of the Borrower pursuant to this
Agreement are secured by a Lien on assets of the Borrower, the Borrower
shall be permitted to grant a Lien on such assets, ranking pari passu with
any Lien(s) granted by the Borrower to secure its obligations hereunder,
to secure a guarant(ies) permitted under Section 6.02(e) hereof; and
(k) Liens not otherwise provided for in Sections 6.03(a) through (j)
hereof, which encumber assets (other than
- 4 -
<PAGE> 5
current assets) of the Borrower with an aggregate value not in excess of
$250,000.
6. Section 7.01(d) is hereby amended by adding the phrase "(whether such
indebtedness consists of (x) a primary or direct obligation of the Borrower or
Guarantor or (y) a guaranty, or other contingent obligation, of the Borrower or
Guarantor)" immediately after the word "indebtedness" on the second line thereof
and immediately before the phrase ", including but not limited to".
PART C. CONDITIONS TO AMENDMENT; PAYMENT OF FEES AND EXPENSES;
MISCELLANEOUS.
1. The Borrower, the Agent and the Banks hereby ratify and confirm all
terms and provisions of the Agreement, and any other documents, instruments or
agreements executed in connection therewith and agree that, except as expressly
modified herein, all of such terms and provisions remain in full force and
effect.
2. Each Bank acknowledges and agrees with each other Bank and the Agent
that (i) it has independently evaluated any projections and other materials and
information with respect to the Borrower and/or any Guarantor and has made its
own independent decision to enter into this Amendment and is not relying on any
representation or other statement of such other Bank or the Agent in doing so
and (ii) pursuant to Section 8.04 of the Agreement, it shall make its own credit
decisions in taking or not taking any action (including without limitation
making or not making any Loan) under the Agreement and the Notes. Borrower
acknowledges that the obligations of the Banks are several and no Bank shall be
responsible for the failure (if any) of any other Bank to make any Loan required
to be made by such other Bank.
3. In order to induce the Banks to enter into this Sixth Amendment and to
make any further Loans, the Borrower hereby represents and warrants that:
(a) the representations and warranties contained in Article 4 of the
Agreement are true and correct in all material respects on the date hereof (or
were true and correct as of the
- 5 -
<PAGE> 6
specific point in time to which they relate) with the same effect as though such
representations and warranties had been made on the date hereof,
(b) the Borrower is in compliance with all of the terms and
provisions set forth in the Agreement, as hereby amended, on its part to be
observed and performed,
(c) no Event of Default or Default under the Agreement, as hereby
amended, now exists,
(d) the Agreement, as amended, and the Notes are the legal, valid
and binding obligations of the Borrower, enforceable against the Borrower in
accordance with their respective terms, and
(e) the Borrower has no claims, counterclaims, defenses, or rights
of set-off or recoupment against the Banks or the Agent.
4. This Sixth Amendment may be signed in any number of counterparts, all
of which shall be considered originals but all of which together shall be deemed
one instrument.
5. The effectiveness of the amendments set forth above is subject to the
satisfaction of the following conditions:
(a) Prior to or concurrently with the execution and delivery of this
Agreement, the Agent shall have received resolutions of the Board of Directors
of the Borrower, certified by the Secretary or Assistant Secretary of the
Borrower (or otherwise identified to the satisfaction of the Banks), authorizing
the execution and delivery by the Borrower of the Sixth Amendment and the
performance by the Borrower of the Agreement as amended by the Sixth Amendment,
in form and substance satisfactory to the Agent and the Banks.
(b) Concurrently with the execution and delivery of this Sixth
Amendment, the Agent shall have received an opinion of Robert D. Marafioti,
General Counsel of the Borrower, dated the date hereof, in form and substance
satisfactory to the Agent and the Banks.
- 6 -
<PAGE> 7
(c) Prior to or concurrently with the execution and delivery of this
Agreement, (i) the Agent shall have received such other documents, certificates,
resolutions, instruments and agreements from the Borrower as the Agent or any of
the Banks may reasonably request and (ii) the Borrower shall pay to the Agent
and the Banks such fees (and reimbursement of costs and expenses (including
counsel fees and disbursements)) as shall be required by the Banks or the Agent
and agreed to by the Borrower.
6. The parties hereto agree that any other amendment to the Agreement that
is not otherwise set forth in this Sixth Amendment but that is required to make
the Agreement consistent with the amendments set forth in Part B hereof (e.g.,
any necessary changes in Section references), are hereby deemed to have been
made.
7. This Sixth Amendment (i) shall be governed by and construed in
accordance with the internal laws of the State of Connecticut, (ii) is limited
specifically to the matters set forth herein, (iii) does not constitute directly
or by implication a waiver of any other provision of the Agreement or the
Negative Pledge Agreement and (iv) shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
8. The Borrower hereby agrees to pay the legal fees and disbursements of
Finn Dixon & Herling LLP counsel to the Agent and Banks (such fees not exceed
$7,000) incurred in connection with the drafting and negotiation of this Sixth
Amendment and related matters.
9. For purposes of this Amendment, a copy of this Amendment (or signature
page thereto) signed by a party hereto and transmitted by facsimile machine or
telecopier shall be considered to be legally delivered and such party shall not
raise the use of a facsimile machine or telecopier or the fact that any
signature was transmitted through the use of a facsimile or telecopier machine
as a defense to the enforcement of this Amendment or any document executed in
connection herewith. At the request of any party hereto, any facsimile or
telecopy document is to be promptly re-executed in original form by the party
who executed the facsimile or telecopy document.
- 7 -
<PAGE> 8
(Rest of Page Intentionally Left Blank)
- 8 -
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto each have executed this Sixth
Amendment Agreement as of the date first hereinbefore written.
CMP MEDIA INC.
By: /s/JOSEPH E. SICHLER
-----------------
Name: Joseph E. Sichler
Title: Vice President/CFO
FLEET NATIONAL BANK
By: /s/G. STEVEN KALIN
-------------------
Name: G. Steven Kalin
Title: Assistant Vice-President
THE CHASE MANHATTAN BANK
By: /s/EMILIA K. [illegible]
------------------------
Name: Emilia K. [illegible]
Title: Vice President
FLEET NATIONAL BANK,
as Agent
- 9 -
<PAGE> 10
By: /s/G. STEVEN KALIN
-------------------
Name: G. Steven Kalin
Title: Assistant Vice President
- 10 -
<PAGE> 1
Exhibit 16
[MILLER, ELLIN & COMPANY LETTERHEAD]
May 2, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Gentlemen:
We have read the statements made by CMP Media Inc. which we understand will be
filed in May 1997 with the Commission as part of the Company's Form S-1
registration statement under the caption "Change in Accountants." We agree with
the statements concerning our Firm in such Form S-1.
Very truly yours,
/s/ Miller, Ellin & Company
Miller, Ellin & Company
<PAGE> 1
EXHIBIT 21
Subsidiaries of CMP MEDIA INC.
CMP International Corp.
Englewood Enterprises Corp.
CMP France S.N.C.
CMP Media (U.K.) Limited
<PAGE> 1
Exhibit 23.1
After the approval by the Board of Directors of the exchange of the
Class C Common Stock, the common stock split and the change in par value
discussed in Notes 1 and 9 to the consolidated financial statements of CMP
Media Inc. and subsidiaries, we expect to be in a position to render the
following consent.
COOPERS & LYBRAND L.L.P.
New York, New York
May 9, 1997.
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1
of our reports dated February 28, 1997, except for Notes 1 and 9 as to which
the date is , on our audits of the consolidated financial
statements and financial statement schedule of CMP Media Inc. and
subsidiaries. We also consent to the reference to our firm under the caption
"Experts".
COOPERS & LYBRAND L.L.P.
New York, New York
, 1997.
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