<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 23, 1998
REGISTRATION NO. 333-56877
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
under
The Securities Act of 1933
------------------------
PENTON MEDIA, INC.
(Exact Name of Registrant as Specified in Its Charter)
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DELAWARE 36-2875386 2721
(State or Other Jurisdiction of (I.R.S. Employer (Primary Standard Industrial
Incorporation or Organization) Identification Number) Classification Code Number)
</TABLE>
1100 SUPERIOR AVENUE
CLEVELAND, OHIO 44114
TELEPHONE: (216) 696-7000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
PRESTON L. VICE, SENIOR VICE PRESIDENT
1100 SUPERIOR AVENUE
CLEVELAND, OHIO 44114
TELEPHONE: (216) 696-7000
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
------------------------
Copies to:
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CHRISTOPHER M. KELLY BRIAN D. HOGAN
JONES, DAY, REAVIS & POGUE KIRKLAND & ELLIS
NORTH POINT, 901 LAKESIDE AVENUE 200 EAST RANDOLPH DRIVE
CLEVELAND, OHIO 44114 CHICAGO, ILLINOIS 60601
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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 this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
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 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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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 JULY 23, 1998
LOGO
PENTON MEDIA, INC.
COMMON STOCK
DISTRIBUTED TO STOCKHOLDERS OF PITTWAY CORPORATION
This Prospectus is being furnished in connection with the distribution (the
"Stock Distribution") to stockholders of Pittway Corporation, a Delaware
corporation ("Pittway"), of common stock, par value $.01 per share ("Common
Stock"), of Penton Media, Inc., a Delaware corporation formerly known as Penton
Publishing, Inc. ("Penton" or the "Company"). Penton is currently a wholly-owned
subsidiary of Pittway.
The shares of Common Stock will be distributed on the basis of one share of
Common Stock for each share of Pittway stock, without distinction between
classes, to holders of record of Pittway common stock and Pittway class A stock
at the close of business on July 31, 1998 (the "Record Date"). No consideration
will be paid by Pittway's stockholders for the Common Stock received in the
Stock Distribution.
There is not currently a public market for the Common Stock. Application
has been made to list the Common Stock on the New York Stock Exchange.
THE STOCK DISTRIBUTION IS CONDITIONED UPON THE CLOSING IMMEDIATELY
THEREAFTER OF THE ACQUISITION BY PENTON, IN EXCHANGE FOR COMMON STOCK, CASH AND
CERTAIN CONTINGENT RIGHTS, OF DONOHUE MEEHAN PUBLISHING COMPANY, AN ILLINOIS
CORPORATION ("DM PUBLISHING"). See "Introduction." The closing of the
acquisition is conditioned upon the satisfaction or waiver of various closing
conditions. See "DM Publishing Combination Agreement -- Closing Conditions." It
is anticipated that such closing and the Stock Distribution will occur on or
about , 1998. Certificates representing the shares of Common Stock
distributed in the Stock Distribution will be mailed as soon as practicable
after the closing of the acquisition. After the Stock Distribution and the
acquisition of DM Publishing, approximately 22,739,000 shares of Common Stock
will be outstanding.
RECIPIENTS OF COMMON STOCK IN THE STOCK DISTRIBUTION SHOULD NOTE THE
FACTORS DISCUSSED IN "RISK FACTORS" BEGINNING ON PAGE 21.
------------------------
NO STOCKHOLDER APPROVAL OF THE STOCK DISTRIBUTION IS REQUIRED OR SOUGHT. PITTWAY
IS NOT ASKING YOU FOR A PROXY, AND YOU ARE REQUESTED NOT TO SEND PITTWAY A
PROXY. YOU ARE FURTHER REQUESTED NOT TO SURRENDER ANY PITTWAY COMMON STOCK OR
CLASS A STOCK CERTIFICATES.
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.
------------------------
Questions relating to the Stock Distribution should be directed to James F.
Vondrak, Secretary of Pittway Corporation, 200 South Wacker Drive, Suite 700,
Chicago, Illinois 60606-5802 (telephone: (312) 831-1070). After the Stock
Distribution, stockholders of Penton with inquiries relating to the Stock
Distribution or their ownership of Common Stock should contact Preston L. Vice,
Secretary of Penton (telephone: (216) 696-7000).
The date of this Prospectus is , 1998.
<PAGE> 3
TABLE OF CONTENTS
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PAGE
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SUMMARY OF CERTAIN INFORMATION............. 3
FORWARD-LOOKING STATEMENTS................. 6
INTRODUCTION............................... 8
The Company.............................. 8
The Stock Distribution................... 9
THE STOCK DISTRIBUTION..................... 10
Reasons for the Stock Distribution and
the DM Publishing Combination.......... 10
Manner of the Stock Distribution......... 10
Pittway Stock Held under or Issuable
pursuant to Pittway Employee Plans..... 11
Relationship between Penton and Pittway
after the Stock Distribution........... 12
Certain Federal Income Tax Aspects of the
Stock Distribution..................... 12
DM PUBLISHING COMBINATION AGREEMENT........ 13
Closing Consideration and Contingent
Rights................................. 13
Employment Agreements.................... 14
Representations and Warranties........... 14
Indemnification and Hold Harmless
Agreements............................. 15
Certain Tax Matters...................... 17
Expenses................................. 18
Registration Rights...................... 18
Closing Conditions....................... 18
RISK FACTORS............................... 21
Factors Affecting the Common Stock....... 21
Factors Relating to Taxation............. 22
Factors Relating to Operations........... 22
Effect on the Trading Prices of Pittway
Stock.................................. 24
CAPITALIZATION............................. 25
SELECTED HISTORICAL FINANCIAL
INFORMATION.............................. 26
UNAUDITED PRO FORMA COMBINED FINANCIAL
INFORMATION.............................. 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................... 32
Overview................................. 32
Results of Operations.................... 33
Foreign Currency......................... 37
Liquidity and Capital Resources.......... 37
Seasonality.............................. 38
Inflation................................ 38
Year 2000 Issue.......................... 38
Forward-Looking Statements............... 39
Changes in Accounting Standards.......... 39
BUSINESS................................... 40
Overview................................. 40
Industry................................. 41
Business Strategy........................ 43
Recent Acquisitions and Divestitures..... 44
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Sources of Revenue....................... 45
Information Products and Services........ 46
Production and Distribution.............. 54
Promotion and Marketing.................. 55
Competition.............................. 55
Trademarks and Intellectual Property
Rights................................. 55
Customers................................ 55
Environmental Matters.................... 56
Employees................................ 56
Properties............................... 56
Litigation............................... 56
MANAGEMENT................................. 57
Board of Directors....................... 57
Committees of the Board of Directors..... 59
Executive Officers....................... 59
Significant Employees.................... 61
EXECUTIVE COMPENSATION..................... 64
Compensation Tables...................... 64
Penton Compensation Plans................ 65
Employment Agreements.................... 72
CERTAIN TRANSACTIONS....................... 72
STOCK OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND EXECUTIVE OFFICERS AND
DIRECTORS................................ 73
DESCRIPTION OF CAPITAL STOCK............... 76
Common Stock............................. 76
Preferred Stock.......................... 76
Listing and Trading of Common Stock...... 76
Dividends on Common Stock................ 76
Stock Distribution Agent, Transfer Agent
and Registrar.......................... 76
ANTI-TAKEOVER EFFECTS...................... 77
Business Combinations.................... 77
Classified Board of Directors............ 78
Number of Directors; Removal;
Vacancies.............................. 78
Stockholder Action; Special Meetings..... 78
Stockholder Proposals and Nominations.... 78
Amendment of Bylaws...................... 79
LIMITATIONS ON LIABILITY AND
INDEMNIFICATION OF OFFICERS AND
DIRECTORS................................ 80
Elimination of Liability in Certain
Circumstances.......................... 80
Indemnification and Insurance............ 80
1999 ANNUAL STOCKHOLDERS MEETING........... 80
LEGAL MATTERS.............................. 80
EXPERTS.................................... 81
AVAILABLE INFORMATION...................... 81
INDEX TO FINANCIAL STATEMENTS.............. F-1
</TABLE>
2
<PAGE> 4
SUMMARY OF CERTAIN INFORMATION
This summary is qualified by the more detailed information set forth
elsewhere in this Prospectus, which should be read in its entirety. When used
with reference to periods after the Stock Distribution (as defined below), the
terms "Penton" and the "Company" mean Penton Media, Inc. and its subsidiaries
after giving effect to the DM Publishing Combination (as defined below).
Penton's logo and certain of the titles and logos of Penton's publications and
media services referred to herein are trademarks of Penton. Each trade name,
trademark or service mark of any other company appearing in the Prospectus is
the property of its holder.
PENTON........................ Penton Media, Inc. ("Penton") is a Delaware
corporation formerly known as Penton
Publishing, Inc. Founded in 1892 by John
Augustus Penton, Penton is a leading business
media company. Penton's principal media
platforms, including magazines, trade shows and
conferences, and electronic media products,
provide proprietary information to business
users and integrated marketing solutions to
industry suppliers. Penton's publications,
trade shows and conferences, and electronic
media products currently serve the electronics,
design/engineering, manufacturing, supply
chain/aviation, mechanical
systems/construction, foodservice/hospitality,
government/compliance, and management markets,
and, upon completion of the DM Publishing
Combination, will also serve the convenience
store/baking market.
DM PUBLISHING COMBINATION..... Immediately following the Stock Distribution,
Penton will acquire Donohue Meehan Publishing
Company, an Illinois corporation ("DM
Publishing"), through a merger of DM Publishing
into D-M Acquisition Corp., an Illinois
corporation and a wholly-owned subsidiary of
Penton, in exchange for common stock, par value
$.01 per share ("Common Stock"), of Penton,
cash and contingent rights to receive
additional cash (and/or under certain
circumstances additional Common Stock) (the "DM
Publishing Combination"). At the closing of the
acquisition, Penton will enter into a two-year
employment agreement with each of DM
Publishing's two shareholders. See "DM
Publishing Combination Agreement."
Penton believes that the DM Publishing
Combination will benefit Penton and its
stockholders because, among other things, it
will strengthen Penton's position in publishing
for the foodservice industry. Penton also
expects to benefit from the addition to its
management of the two shareholders of DM
Publishing, who, combined, have over fifty
years of experience in publishing for that
industry.
MANAGEMENT.................... It is expected that all current senior
management of both Penton and DM Publishing,
who have extensive experience in the business
media industry, will remain with Penton after
the Stock Distribution and the DM Publishing
Combination. The current Chief Executive
Officer and the current President of Penton,
who will be serving immediately following the
Stock Distribution and the DM Publishing
Combination, have 24 and 21 years,
respectively, of experience in this industry.
The various operating unit heads of the major
Penton operations who will be serving
immediately following the Stock Distribution
and the DM Publishing Combination have, on
average, over 25 years of experience in this
industry.
For information regarding employment agreements
with certain senior management of Penton and DM
Publishing, see "DM
3
<PAGE> 5
Publishing Combination Agreement -- Employment
Agreements" and "Executive Compensation --
Employment Agreements."
STOCK DISTRIBUTION............ The distribution of Common Stock to
stockholders of Pittway.
DISTRIBUTING COMPANY.......... Pittway Corporation, a Delaware corporation
("Pittway").
VOTE REQUIRED................. A vote of Pittway's stockholders is not
required to approve the Stock Distribution
because (i) the Stock Distribution is a
dividend, which is within the sole discretion
of Pittway's Board of Directors to declare and
(ii) the Stock Distribution does not represent
a sale, lease, or exchange of all or
substantially all of Pittway's property and
assets under the Delaware General Corporation
Law.
STOCK DISTRIBUTION RATIO...... One share of Common Stock for each share of
Pittway common stock, and one share of Common
Stock for each share of Pittway class A stock,
held of record on the Record Date.
RECORD DATE................... Close of business on July 31, 1998.
STOCK DISTRIBUTION DATE....... Expected to be on or about , 1998. On
the Stock Distribution Date, the Stock
Distribution Agent will begin distributing
Common Stock certificates to stockholders of
Pittway. Pittway stockholders will not be
required to make any payment or to take any
other action in connection with the Stock
Distribution. STOCKHOLDERS OF PITTWAY WILL
CONTINUE TO OWN THEIR PITTWAY COMMON STOCK AND
PITTWAY CLASS A STOCK AND ARE NOT REQUIRED TO,
AND SHOULD NOT, SURRENDER CERTIFICATES
REPRESENTING SUCH STOCK. See "The Stock
Distribution -- Manner of the Stock
Distribution."
STOCK DISTRIBUTION AGENT...... Harris Trust and Savings Bank
P.O. Box A-3504
Chicago, Illinois 60690-3504
(312) 461-5360
SHARES OUTSTANDING............ Approximately 21,200,000 shares of Common Stock
(based on the aggregate number of shares of
common stock and class A stock of Pittway
outstanding on the Record Date) will be
distributed in the Stock Distribution. As of
the Record Date, there were shares of
Pittway common stock outstanding and
shares of Pittway class A stock outstanding.
Approximately 1,539,000 shares of Common Stock
will be distributed in connection with the DM
Publishing Combination (excluding shares that
may be contingently issuable in the year 2000).
See "DM Publishing Combination Agreement --
Closing Consideration and Contingent Rights."
Approximately 22,739,000 shares of Common Stock
will be outstanding immediately after the Stock
Distribution and the DM Publishing Combination.
At or about such time, certain debt convertible
into Common Stock and certain options to
purchase Common Stock will also be outstanding.
See "Capitalization."
CONDITION..................... THE STOCK DISTRIBUTION IS CONDITIONED UPON THE
CLOSING IMMEDIATELY THEREAFTER OF THE DM
PUBLISHING COMBINATION. SEE "INTRODUCTION." The
closing of the DM Publishing Combination is
conditioned upon the satisfaction or waiver of
various closing
4
<PAGE> 6
conditions. See "DM Publishing Combination
Agreement -- Closing Conditions."
RISK FACTORS.................. Stockholders should consider the factors
discussed under "Risk Factors." Some of the
significant risk factors include "Factors
Affecting the Common Stock -- Ownership by
Certain Significant Stockholders," "Factors
Relating to Taxation -- Tax Aspects of the
Stock Distribution," "Factors Relating to
Operations -- Dependence on and Cyclicality of
Advertising Revenue," "-- Acquisition Risks,"
and "-- Risks Associated with International
Operations."
TRADING MARKET................ Application has been made to list the Common
Stock on the New York Stock Exchange. It is not
anticipated that there will be "when issued"
trading of the Common Stock prior to the Stock
Distribution Date.
STOCK TICKER SYMBOL........... PME
TRANSFER AGENT AND
REGISTRAR..................... Harris Trust and Savings Bank
P.O. Box A-3504
Chicago, Illinois 60690-3504
(312) 461-5360
FEDERAL INCOME TAX
CONSEQUENCES.................. Pittway has received a ruling from the Internal
Revenue Service that the Stock Distribution
will be tax-free to Pittway and its
stockholders for federal income tax purposes.
See "The Stock Distribution -- Certain Federal
Income Tax Aspects of the Stock Distribution."
ANTI-TAKEOVER PROVISIONS...... Certain provisions of Delaware corporation law
and of Penton's certificate of incorporation
and bylaws may have the effect of discouraging
unsolicited takeover bids from third parties.
See "Anti-Takeover Effects."
PENTON DIVIDEND POLICY........ Penton expects to pay initial quarterly
dividends in an amount of $.03 per share. The
future payment of dividends will depend on
business decisions that will be made by the
Board of Directors from time to time based upon
the results of operations and financial
condition of Penton and such other business
considerations as the Board of Directors
considers relevant.
PRINCIPAL OFFICE OF PENTON.... 1100 Superior Avenue
Cleveland, Ohio 44114
(216) 696-7000
5
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FORWARD-LOOKING STATEMENTS
This Prospectus contains statements that constitute forward-looking
statements in that they include statements regarding the intent, belief, or
current expectations of Penton, its directors or its officers primarily with
respect to the future operating performance of Penton. All statements other than
statements of historical facts included in this Prospectus are forward-looking
statements. Forward-looking statements are typically identified by the words
"believe," "expect," "anticipate," "intend," "estimate" and similar expressions.
Although such forward-looking statements (and the assumptions upon which they
are based) reflect Penton's current reasonable judgment regarding the direction
of its business, actual results will almost always vary, sometimes materially.
Penton undertakes no obligation to release publicly any revisions to any such
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated results. The information
contained in this Prospectus, including without limitation the information under
"Risk Factors" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations," identifies important factors that could affect
actual results, and Penton's forward-looking statements are expressly qualified
in their entirety by such factors.
RECENT DEVELOPMENTS
Penton's revenues for the three and six months ended June 30, 1998 were
$59.2 million and $111.7 million, respectively, compared to $54.1 million and
$102.7 million, respectively, for the comparable periods in 1997. Penton's
operating income for the three and six months ended June 30, 1998 was $6.9
million and $11.6 million, respectively, compared to $8.6 million and $13.4
million, respectively, for the comparable periods in 1997. Net income for the
three and six months ended June 30, 1998 was $3.7 million and $6.0 million,
respectively, equivalent to $0.17 per share and $0.28 per share, respectively,
based on 21,200,000 shares of Common Stock outstanding. Net income for the three
and six months ended June 30, 1997 was $4.9 million and $7.6 million,
respectively, or $0.23 per share and $0.36 per share, respectively, based on
21,200,000 shares of Common Stock outstanding.
The increase in revenues for the six months ended June 30, 1998 over the
comparable period in 1997 was primarily attributable to (i) an overall increase
in advertising revenues, which included the publication of Hydraulics and
Pneumatics' Fluid Power Handbook and Directory published every other year, and
an increase in advertising volume related to two new publications launched in
the first quarter of 1998, IW Growing Companies and Penton's Embedded Systems
Development, (ii) the inclusion for the first time of the operations of trade
shows acquired in December 1997 and (iii) an increase in revenues from external
customers of the Company's printing facility.
The decline in operating income and net income for the six months ended
June 30, 1998 over the comparable period in 1997 was due primarily to (i) an
increase in period costs related to trade shows acquired in December 1997
(indirect selling, general, and administrative costs are expensed as incurred
while the related revenues and direct show expenses are recognized when the
event is held), (ii) higher charges related to Pittway stock appreciation rights
held by Penton employees, and (iii) interest and amortization expenses related
to the trade shows acquired in December 1997.
6
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SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The following table summarizes certain financial data with respect to
Penton. The historical income statement data for each of the three years in the
period ended December 31, 1997 and balance sheet data as of December 31, 1996
and 1997 have been derived from Penton's audited annual financial statements and
notes thereto, which appear elsewhere in this Prospectus. The historical data as
of or for the three months ended March 31, 1998 and 1997 have been derived from
unaudited financial statements appearing elsewhere herein which, in the opinion
of management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results for the interim
periods. The unaudited pro forma data reflect adjustments to Penton's historical
data for the year ended December 31, 1997, and the three months ended March 31,
1998, to give effect to: (i) the acquisition of Independent Exhibitions Limited,
Equity Information Exchange Limited and Service Exhibitions Limited
(collectively referred to herein as "INDEX"), which was completed on December
12, 1997, as if such acquisition had occurred on January 1, 1997 and had been
included on the basis of its twelve months ended November 30, 1997, (ii) the DM
Publishing Combination as if such acquisition had occurred on January 1, 1997,
(iii) the issuance of Common Stock pursuant to the DM Publishing Combination as
if such issuance had occurred on January 1, 1997, and (iv) other adjustments
required to reflect the combined results of operations of Penton as a separate
public company. See "Unaudited Pro Forma Combined Financial Information."
Historical and pro forma results may not be indicative of the future performance
of Penton as a separate public company. The information set forth below should
be read in conjunction with the audited and unaudited Penton historical
consolidated financial information, the unaudited pro forma combined financial
information, and "Management's Discussion and Analysis of Financial Condition
and Results of Operations," included elsewhere in this Prospectus. Historical
dividends per share have not been presented because Penton was not a public
company during the periods presented.
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HISTORICAL PRO FORMA
------------------- ---------
PRO FORMA THREE MONTHS THREE
------------ MONTHS
HISTORICAL
---------------------------------------------------- ENDED
YEAR ENDED DECEMBER 31, YEAR ENDED MARCH 31, ENDED
---------------------------------------------------- DECEMBER 31, ------------------- MARCH 31,
1993 1994 1995 1996 1997 1997 1997 1998(A) 1998
-------- -------- -------- -------- -------- ------------ -------- -------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
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FOR THE PERIOD:
OPERATING RESULTS
Revenues.............. $149,991 $159,284 $179,900 $188,557 $204,931 $222,957 $ 48,666 $ 52,485 $ 54,589
Operating income
(b)................. 7,063 10,290 11,947 18,499 25,297 28,407 4,857 4,665 4,976
Income from continuing
operations.......... 3,920 6,062 8,625 10,956 14,874 14,923 2,718 2,340 2,379
Income from
discontinued
operations.......... (6) 51 (48) -- -- -- -- -- --
Cumulative effect of
changes in
accounting
principles.......... (190) -- -- -- -- -- -- -- --
Net income............ 3,724 6,113 8,577 10,956 14,874 14,923 2,718 2,340 2,379
Income from continuing
operations and net
income per share,
basic and diluted
(c)................. .18 .29 .40 .52 .70 .66 .13 .11 .10
CASH FLOWS AND OTHER
DATA
Operating............. $ 8,142 $ 5,329 $ 7,423 $ 20,507 $ 23,186 $ 24,987 $ 590 $ (1,018) $ (452)
Investing............. (5,432) (5,026) (4,989) (4,722) (53,192) (53,192) (14,799) (1,128) (1,128)
Financing............. (2,650) (668) (1,697) (15,888) 30,854 29,517 13,916 1,459 4,672
Capital
expenditures........ 6,151 7,593 4,989 4,822 5,450 5,646 759 1,128 1,153
Depreciation and
amortization........ 5,145 5,596 5,772 5,911 6,551 8,342 1,678 2,027 2,241
EBITDA (d)............ 12,208 15,886 17,719 24,410 31,848 36,749 6,535 6,692 7,217
AT END OF PERIOD:
Total assets of
continuing
operations............ $101,519 $105,901 $116,494 $108,799 $156,426 $178,440 $123,826 $159,094 $184,882
Investment in
discontinued
operations............ 4,818 5,241 -- -- -- -- -- -- --
Total assets............ 106,337 111,142 116,494 108,799 156,426 178,440 123,826 159,094 184,882
Goodwill and other
intangibles........... 22,954 22,784 21,916 21,940 71,822 103,361 36,837 71,673 102,399
Stockholder's equity.... 60,675 61,847 70,763 59,151 69,613 84,081 61,869 71,953 90,404
</TABLE>
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(a) Operating results for the period were negatively impacted by period costs of
trade shows acquired in December 1997 for which revenues will not be
recognized until the trade shows are held in future periods. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
(b) Revenues less operating expenses. See Consolidated Statement of Income
included in Penton's Consolidated Financial Statements.
(c) Historical earnings per share are based on 21,200,000 shares of Common Stock
outstanding. Pro forma earnings per share are based on 22,739,000 shares,
consisting of the historical shares outstanding increased by 1,539,000
shares issuable upon completion of the DM Publishing Combination. The actual
number of shares to be issued in the Stock Distribution and the DM
Publishing Combination may differ from the amounts presented herein.
(d) Penton defines EBITDA as operating income before depreciation and
amortization. EBITDA is often used to analyze and compare companies on the
basis of operating performance and cash flow. However, EBITDA is not
adjusted for all non-cash expenses or for working capital, capital
expenditures and other investment requirements. EBITDA should not be
considered in isolation or as a substitute for measures of performance
prepared in accordance with generally accepted accounting principles. Not
all companies calculate EBITDA in the same manner, and EBITDA as presented
may not be comparable to similarly titled measures presented by other
companies.
7
<PAGE> 9
INTRODUCTION
THE COMPANY
Penton Media, Inc., a Delaware corporation formerly known as Penton
Publishing, Inc. ("Penton" or the "Company"), is a direct, wholly-owned
subsidiary of Pittway Corporation, a Delaware corporation ("Pittway"). Founded
in 1892 by John Augustus Penton, Penton is a leading business media company.
Penton's principal media platforms, including magazines, trade shows and
conferences, and electronic media products, provide proprietary information to
business users, and integrated marketing solutions to industry suppliers.
Penton's publications, trade shows and conferences, and electronic media
products serve the electronics, design/engineering, manufacturing, supply
chain/aviation, mechanical systems/construction, foodservice/hospitality,
government/compliance, and management markets, and, upon completion of the DM
Publishing Combination (as defined below), will also serve the convenience
store/baking market. Penton's diverse array of products provide
business-to-business marketers with the tools to communicate effectively with
their customers, and provide current information to the markets served. Penton
had total revenue of approximately $205 million in 1997.
Widely recognized as a publisher of high-quality business and trade
magazines, Penton has, in recent years, diversified its media platforms to
include trade shows and conferences, electronic media products (including Web
sites and CD-ROMs), custom publishing, research, databases, and information
product sales. Penton also owns a printing plant, Penton Press, which prints
nearly all of Penton's publications and approximately 50 outside publishers'
magazines, and a direct-mail and marketing services business, Curtin &
Pease/Peneco.
Penton is the fifth largest specialized business magazine publisher in the
United States, according to the American Business Press, the leading association
for the business publishing industry. Penton publishes 42 national business and
trade publications with a combined circulation of over 2.7 million subscribers
worldwide. Of the 27 Penton magazines that serve measured, competitive market
segments, 17 are ranked either first or second in their markets. Some of
Penton's leading magazine brands include Air Transport World, American
Machinist, Computer-Aided Engineering, Electronic Design, IndustryWeek, Machine
Design, Microwaves & RF, New Equipment Digest, and Wireless Systems Design.
Penton's magazines accounted for approximately 74% of Penton's total revenue in
1997.
Penton has aggressively expanded its presence in the trade show and
conference business in recent years, and currently operates 63 trade shows and
conference events. Penton acquired three trade show companies in 1997:
<TABLE>
<CAPTION>
ACQUIRED COMPANY DATE CONSIDERATION
---------------- ---- -------------
<S> <C> <C>
A/E/C SYSTEMS International January, 1997 $14.0 million and up to $3.25
("A/E/C") million in contingent consideration,
$655,000 of which has been paid
INDEX*, comprised of: December, 1997 UK L16.1 million cash, UK L1.5
Independent Exhibitions Limited million loan note, and up to UK L2.6
Equity Information Exchange million contingent consideration
Limited
Service Exhibitions Limited
Industrial Shows of America December, 1997 $5.0 million and up to $6.0 million
("ISOA").......................... in contingent consideration
</TABLE>
- ---------------
* Each trade show company comprising INDEX was under common control.
Penton's trade shows include the A/E/C SYSTEMS International Shows,
Computers for Contractors, Computers in Manufacturing, International Leisure
Industry Week, the North American Warehousing & Distribution Exposition &
Conference, and the Wireless Symposium & Exhibition. Conferences include the
America's Best Plants Series and the Global Leadership Forum. Trade shows and
conferences accounted for approximately 5% of Penton's total revenue in 1997. On
a pro forma basis, had INDEX and ISOA been acquired in January 1997, Penton's
trade show and conference revenue would have accounted for 12% of
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<PAGE> 10
Penton's total revenue in 1997, and Penton would have sold approximately 1.4
million net square feet of exhibit space to over 5,500 exhibiting companies.
In addition to trade shows and conferences, electronic media products have
expanded Penton's service to its market segments. As business-to-business use of
the Internet has grown, Penton's product arrays have been expanded to include
World Wide Web sites that provide both information resources and market access
to advertisers. Electronic media products also include editorial content and
statistics, directories, and product selection information on CD-ROMs and
diskettes. In December of 1997, Penton signed a joint venture agreement with
Findlay Publishing of the United Kingdom to produce and market Design Selector
Global, a global database of component product information for mechanical,
electro-mechanical, and electronics engineers that will be accessible via the
Internet. Revenues from electronic media products accounted for less than 1% of
Penton's total revenue in 1997.
In addition to publications, trade shows and conferences, and electronic
media, Penton's business includes marketing and business development services
such as databases, direct-mail marketing, custom communications, and research
services. These services provide integrated market access to Penton's advertiser
customers by facilitating the flow of information between them and their
customers.
THE STOCK DISTRIBUTION
On the Stock Distribution Date (as hereinafter defined), Pittway will
distribute (the "Stock Distribution") 100% of the outstanding common stock, par
value $.01 per share, of Penton ("Common Stock"), on the basis of one share of
Common Stock for each share of Pittway common stock, of the par value of $1.00
per share ("Pittway Common Stock"), and one share of Common Stock for each share
of Pittway class A stock, of the par value of $1.00 per share ("Pittway Class A
Stock," and together with Pittway Common Stock, "Pittway Stock"), to the holders
of record of Pittway Stock as of the close of business on the Record Date (as
hereinafter defined). As discussed under "The Stock Distribution -- Reasons for
the Stock Distribution and the DM Publishing Combination," Pittway believes it
is in the best interests of Pittway and its stockholders to distribute the
Common Stock to Pittway's stockholders.
THE STOCK DISTRIBUTION IS CONDITIONED UPON THE CLOSING IMMEDIATELY
THEREAFTER OF THE ACQUISITION BY PENTON OF DONOHUE MEEHAN PUBLISHING COMPANY, AN
ILLINOIS CORPORATION ("DM PUBLISHING"), THROUGH THE MERGER OF DM PUBLISHING INTO
A WHOLLY-OWNED SUBSIDIARY OF PENTON ("COMBINATION SUBSIDIARY"). Such acquisition
is the subject of an agreement (the "DM Publishing Combination Agreement") among
Penton, Combination Subsidiary, Pittway, DM Publishing and William C. Donohue
and John J. Meehan, the stockholders of DM Publishing (the "DM Publishing
Shareholders"). See "DM Publishing Combination Agreement." DM Publishing
publishes three magazines in the convenience store/baking market. In connection
with the DM Publishing Combination, the DM Publishing Shareholders will receive
(i) Common Stock constituting 6.767% of the Common Stock outstanding immediately
following the Stock Distribution and the DM Publishing Combination, (ii) $7.0
million in cash, (iii) the right to receive up to $4.0 million of additional
cash depending on the amount by which DM Publishing's pre-tax income exceeds
$4.0 million per year during 1998 and/or 1999 (see "DM Publishing Combination
Agreement -- Closing Consideration and Contingent Rights -- Contingent Right
Based on Earnings"), and (iv) the right to receive additional cash (and/or, in
certain circumstances, additional Common Stock) equal to the excess, if any, of
$29.0 million over the lower of the average market values, during two reference
periods in the year 2000, of the shares of Common Stock issued to the DM
Publishing Shareholders at the closing of the DM Publishing Combination, subject
to certain limitations with respect to any of such shares sold prior to making
such additional payment. The reference periods are the 30 days following the
date on which Penton publicly releases its financial results for calendar year
1999 and the 30 days ending on the second anniversary of the date of the DM
Publishing Combination. See "DM Publishing Combination Agreement -- Closing
Considerations and Contingent Rights -- Contingent Right Based on Market Value."
At the closing of the DM Publishing Combination, Penton will enter into two-year
employment agreements with the DM Publishing Shareholders pursuant to which Mr.
Donohue will serve as the President and Mr. Meehan will serve as the Executive
Vice President of Combination Subsidiary, which will be renamed Donohue Meehan
Publishing Company. See "DM Publishing Combination Agreement -- Employment
Agreements." The DM Publishing Shareholders will also
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<PAGE> 11
become members of Penton's Board of Directors (the "Board"). The acquisition of
DM Publishing is referred to herein as the "DM Publishing Combination."
The closing of the DM Publishing Combination is conditioned upon the
satisfaction or waiver of various closing conditions. See "DM Publishing
Combination Agreement -- Closing Conditions." Certificates representing the
shares of Common Stock distributed in the Stock Distribution will be mailed as
soon as practicable after the closing of the DM Publishing Combination (the date
of distribution being referred to as the "Stock Distribution Date"). It is
anticipated that such closing and the Stock Distribution will occur on or about
, 1998.
Commencing with the Stock Distribution Date, Penton will operate as a
separate public company. Penton's principal executive offices are located at
1100 Superior Avenue, Cleveland, Ohio 44114.
THE STOCK DISTRIBUTION
Prior to the Stock Distribution, Pittway will deliver to Harris Trust and
Savings Bank (the "Stock Distribution Agent"), for delivery to Pittway's
stockholders in the manner described below, 100% of the outstanding Common
Stock.
REASONS FOR THE STOCK DISTRIBUTION AND THE DM PUBLISHING COMBINATION
Pittway believes that it is in the best interests of Pittway and its
stockholders to distribute the Common Stock to Pittway's stockholders.
Penton's business media operations are functionally dissimilar from
Pittway's other businesses, the principal one of which is the manufacture and
distribution of alarm and other security products. As a separate public company,
Penton will be able to offer its employees incentives that are more directly
linked to the results of the business in which they work. In addition, as an
independent company, Penton will have complete access to its cash flows from
operations, as opposed to paying a substantial portion of such cash flow as
dividends to Pittway, and will be able independently to determine its capital
structure. Another advantage to the Stock Distribution is that Penton will not
have to compete with Pittway's other business units for resources and Penton's
Board will be able to concentrate on purely business media issues. Finally,
Penton believes that it will be better able to attract acquisition targets
because of its focused business and the ability to issue Common Stock as part of
the purchase price. For a discussion of the risks associated with being an
independent company, see "Risk Factors -- Factors Relating to Operations -- No
Operating History as an Independent Company."
The Stock Distribution also makes possible the DM Publishing Combination.
The DM Publishing Shareholders indicated early in the negotiations of the DM
Publishing Combination Agreement that a combination of DM Publishing with Penton
would not be acceptable unless Penton were separated from Pittway's other
businesses and operated as a separate public company. The DM Publishing
Combination should strengthen Penton's position in publishing for the
foodservice industry. Penton also expects to benefit from the addition of the DM
Publishing Shareholders to its management.
In approving the Stock Distribution, the Pittway Board of Directors did not
consider any anti-takeover effects with respect to Pittway. The Pittway Board
was aware of the anti-takeover effects with respect to Penton, as described
under "Anti-Takeover Effects."
MANNER OF THE STOCK DISTRIBUTION
On the Stock Distribution Date, Pittway will transfer to the Stock
Distribution Agent all shares of Common Stock then owned by Pittway with
instructions to distribute to each holder of record of Pittway Common Stock or
Pittway Class A Stock at the close of business on , 1998
(the "Record Date") one share of Common Stock for each share of Pittway Common
Stock then held and one share of Common Stock for each share of Pittway Class A
Stock then held, and to transfer to Penton all remaining shares of Common Stock
held by the Stock Distribution Agent after the Stock Distribution has been made.
As of the Record Date, there were shares of Pittway Common Stock
outstanding held by approximately holders of record and
shares of Pittway Class A Stock outstanding held
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<PAGE> 12
by approximately holders of record. The Stock Distribution will
not affect the number of outstanding shares of Pittway Common Stock or Pittway
Class A Stock or any rights attached thereto.
Included among the shares of Pittway Class A Stock were approximately 6,616
shares issued in the December, 1989 merger of Pittway Corporation, a
Pennsylvania corporation ("Pennsylvania Pittway"), into Pittway (which changed
its name from Standard Shares, Inc. to Pittway Corporation in connection with
the merger) as to which the certificates continue to be held by Harris Trust and
Savings Bank, in its capacity as the successor to the merger exchange agent,
pending the surrender of the corresponding Pennsylvania Pittway stock
certificates by the holders of such certificates. Pending such surrender (or
disposition under applicable escheat laws), Harris Trust and Savings Bank, in
its capacity as the successor to the merger exchange agent, will hold the Common
Stock distributed in respect of such shares (and any dividends and other
distributions paid by Penton on such Common Stock) for the accounts of such
holders.
Holders of record of Pittway Common Stock and Pittway Class A Stock at the
close of business on the Record Date will be entitled to receive shares of
Common Stock without paying any consideration for them. HOLDERS OF PITTWAY
COMMON STOCK AND PITTWAY CLASS A STOCK WILL CONTINUE TO OWN THEIR SHARES OF
PITTWAY STOCK FOLLOWING THE STOCK DISTRIBUTION AND ARE NOT REQUIRED TO, AND
SHOULD NOT, SURRENDER THE CERTIFICATES REPRESENTING THEIR PITTWAY STOCK.
No rights of dissent or appraisal exist with regard to the Stock
Distribution under Delaware law.
A vote of Pittway's stockholders is not required to approve the Stock
Distribution because (i) the Stock Distribution is a dividend, which is within
the sole discretion of Pittway's Board of Directors to declare and (ii) the
Stock Distribution does not represent a sale, lease, or exchange of all or
substantially all of Pittway's property and assets, no stockholder vote is
required under the Delaware General Corporation Law.
Certificates representing shares of Common Stock will be mailed by the
Stock Distribution Agent to record holders of Pittway Stock commencing as soon
as practicable after the completion of the DM Publishing Combination. It is
anticipated that such mailing will commence on or about , 1998.
PITTWAY STOCK HELD UNDER OR ISSUABLE PURSUANT TO PITTWAY EMPLOYEE PLANS
Common Stock distributed in respect of Pittway Stock held in the Pittway
Corporation Blue Chip Profit Sharing and Savings Plan (the "Pittway Profit
Sharing Plan") for the accounts of participants will be delivered to the trustee
of the Pittway Profit Sharing Plan for credit to the accounts of such
participants (but purchases of Common Stock for such accounts will not be
permitted). Shares of Common Stock or other stock credited to the accounts of
participants who are employees of Penton and its subsidiaries will subsequently
be transferred to their accounts under the Penton Media, Inc. Retirement Savings
Plan. Penton may in the future require the disposition of any stock other than
Common Stock held under such plan. Pittway may in the future require the
disposition of Common Stock held under the Pittway Profit Sharing Plan for the
accounts of the remaining participants.
Holders of options to purchase Pittway Stock that are outstanding under
Pittway's 1990 Stock Awards Plan, 1996 Director Stock Option Plan or 1998
Director Stock Option Plan, but that are not exercised prior to the Record Date
(whether because then not yet exercisable or because the holder chooses not to
exercise them) will not receive upon any exercise subsequent to the Record Date
any shares of Common Stock. Instead, the numbers of shares of Pittway Stock
subject to, and the exercise prices of, such options will be adjusted as
provided in each respective plan. However, as described under "Executive
Compensation -- Employment Agreements," Thomas L. Kemp, Penton's Chief Executive
Officer, has the right under his employment agreement with Penton to surrender
to Pittway prior to the Stock Distribution his options to purchase Pittway Stock
which are outstanding under Pittway's 1990 Stock Awards Plan and receive from
Penton following the Stock Distribution options to purchase Common Stock under
Penton's Equity Incentive Plan (as defined below).
Holders of stock appreciation rights outstanding at the Record Date under
Pittway's 1990 Stock Awards Plan will not participate in the Stock Distribution.
Instead, such stock appreciation rights, which by their terms are exercisable
solely for cash, will be adjusted as provided in such plan.
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<PAGE> 13
RELATIONSHIP BETWEEN PENTON AND PITTWAY AFTER THE STOCK DISTRIBUTION
Subsequent to the Stock Distribution and the DM Publishing Combination,
Penton will operate as a separate public company. Pittway will have no
continuing relationship with Penton, other than as an arm's-length supplier of
up to a specified level of assistance in connection with Penton's preparation of
its tax returns for periods ending on or prior to December 31, 1998, and in
connection with Penton's other tax matters for such periods, if so requested by
Penton. However, the indemnification obligations of each to the other under the
DM Publishing Combination Agreement will remain in effect. See "DM Publishing
Combination Agreement -- Indemnification and Hold Harmless Agreements" and " --
Certain Tax Matters." Immediately following the Stock Distribution and the DM
Publishing Combination, two of Penton's 11 directors will also be members of
Pittway's Board of Directors. See "Management -- Board of Directors."
CERTAIN FEDERAL INCOME TAX ASPECTS OF THE STOCK DISTRIBUTION
Pittway has received a ruling from the Internal Revenue Service (the "IRS")
that for federal income tax purposes (i) Pittway will not recognize gain or loss
on the Stock Distribution, (ii) Pittway stockholders will not recognize gain or
loss (and no amount will otherwise be included in their income) on their receipt
of Penton Common Stock in the Stock Distribution, (iii) the basis of the Penton
Common Stock received by each holder of Pittway Stock will be determined by
allocating such holder's tax basis in such Pittway Stock immediately before the
Stock Distribution between such Pittway Stock and Penton Common Stock based on
the relative fair market values of each immediately after the Stock
Distribution, and (iv) the holding period of the Penton Common Stock received in
the Stock Distribution will include the holding period of the Pittway Stock on
which such Penton Common Stock was distributed, provided that such Pittway Stock
is held as a capital asset on the Stock Distribution Date. As soon as
practicable after trading in Penton Common Stock has commenced, Pittway intends
to make available to its stockholders information regarding allocation of the
basis between Penton Common Stock and Pittway Stock.
The ruling addresses only the generally applicable material federal income
tax consequences of the Stock Distribution. It does not address all federal
income tax consequences that may apply to particular stockholders nor any
foreign, state or local tax consequences. Pittway's stockholders are urged to
consult their own tax advisors regarding the particular tax consequences of
their receipt of Penton Common Stock in the Stock Distribution.
The federal income tax consequences described above could be affected by
events subsequent to the Stock Distribution. See "Risk Factors -- Factors
Relating to Taxation -- Tax Aspects of the Stock Distribution."
12
<PAGE> 14
DM PUBLISHING COMBINATION AGREEMENT
The detailed terms of and conditions to the DM Publishing Combination are
contained in the Combination Agreement dated as of May 21, 1998 by and among
Penton, Combination Subsidiary, Pittway, DM Publishing, and the DM Publishing
Shareholders, which is filed as an exhibit to the Registration Statement of
which this Prospectus is a part. The following summary description of the
material terms of the DM Publishing Combination Agreement is qualified in its
entirety by, and made subject to, the more complete information set forth in the
DM Publishing Combination Agreement.
The DM Publishing Combination Agreement deals primarily with four subjects:
(i) Penton's acquisition of DM Publishing; (ii) Penton's post-acquisition
employment of the DM Publishing Shareholders; (iii) the respective
representations and warranties and indemnification obligations of Penton,
Pittway, and the DM Publishing Shareholders relating to the DM Publishing
Combination; and (iv) Penton's grant of registration rights to the DM Publishing
Shareholders.
CLOSING CONSIDERATION AND CONTINGENT RIGHTS
At the closing under the DM Publishing Combination Agreement, DM Publishing
will be merged into Combination Subsidiary, a wholly-owned subsidiary of Penton,
which will thereupon change its name to Donohue Meehan Publishing Company. In
the merger, the DM Publishing Shareholders will receive (i) Common Stock
constituting 6.767% of the Common Stock outstanding immediately following the
Stock Distribution and the merger, (ii) cash in an amount equal to $7.0 million,
(iii) the right to receive additional cash in an amount up to a maximum of $4.0
million if certain DM Publishing earnings levels are achieved during 1998 and/or
1999, and (iv) the right to receive additional cash (and/or, in certain
circumstances, additional Common Stock) if the market price of the Common Stock
during either of two reference periods in the year 2000 is less than a specified
amount. Each of such contingent rights is described in greater detail below.
Contingent Right Based on Earnings. In the event Surviving Corporation's
Pre-Tax Profits (the pre-tax profits of DM Publishing and its successor in the
merger, adjusted as provided in the DM Publishing Combination Agreement) for
1998 exceed $4.0 million, the DM Publishing Shareholders, in the aggregate, will
be entitled to receive from Penton in cash an amount equal to 4 times the excess
of such Pre-Tax Profits over $4.0 million. In the event Surviving Corporation's
Pre-Tax Profits for 1999 exceed $4.0 million, the DM Publishing Shareholders, in
the aggregate, will be entitled to receive from Penton in cash an amount equal
to (i) 5 times the excess of such Pre-Tax Profits over $4.0 million, less (ii)
the amount of any payment to which the DM Publishing Shareholders, in the
aggregate, became entitled with respect to 1998. However, the total amount of
such contingent cash payments may not exceed $4.0 million. In the event of the
termination, effective as of a date prior to December 31, 1999, of either DM
Publishing Shareholder's employment by Penton without "Cause" or by either DM
Publishing Shareholder for "Good Reason" (in each case, as defined in the
employment agreements referred to below under " -- Employment Agreements"), or
in the event of Penton's liquidation effective as of a date prior to December
31, 1999, if such effective date precedes December 31, 1998, the contingent cash
payment on account of Surviving Corporation's Pre-Tax Profits for each of 1998
and 1999 will be $2.0 million and if such effective date is on or subsequent to
December 31, 1998, the contingent cash payment on account of Surviving
Corporation's Pre-Tax Profits for 1999 will be the excess of $4.0 million over
the amount of the contingent cash payment, if any, on account of Surviving
Corporation's Pre-Tax Profits for 1998. Various actions by DM Publishing's
successor in the merger prior to the close of business on December 31, 1999
require the prior written consent of the DM Publishing Shareholders.
Contingent Right Based on Market Value. In the event that the Average
Market Price (as defined in the DM Publishing Combination Agreement) of the
Common Stock during the period of 30 days following the date on which Penton
publicly releases its financial results for calendar year 1999 or the Average
Market Price of the Common Stock during the period of 30 days ending on the
second anniversary of the date of the DM Publishing Combination is less than
$29.0 million divided by the number of shares of Common Stock issued to the DM
Publishing Shareholders at the closing of the DM Publishing Combination (the
"Guaranteed Average Market Price"), Penton must, on the 15th day after such
second anniversary, pay to each DM
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<PAGE> 15
Publishing Shareholder cash in an amount equal to (i) the excess of the
Guaranteed Average Market Price over the lower of such Average Market Prices
(such excess being referred to as the "Spread") multiplied by (ii) the number of
shares of Common Stock issued to such DM Publishing Shareholder at the closing
of the DM Publishing Combination (whether or not held by him at the time of
payment). However, the payment to be made with respect to any such share no
longer held by such DM Publishing Shareholder at the end of the day preceding
payment that has been sold by such DM Publishing Shareholder (or by any
transferee that acquired such share from such DM Publishing Shareholder in a
transaction not involving a sale) for a gross price equal to or exceeding the
Guaranteed Average Market Price less the Spread is limited to the excess of the
Guaranteed Average Market Price over such gross price (and thus, for example, no
payment is to be made with respect to any such share so sold for a gross price
equal to or exceeding the Guaranteed Average Market Price). If and to the extent
the total amount payable to any DM Publishing Shareholder, or to the DM
Publishing Shareholders in the aggregate, would, in the reasonable judgment of
the DM Publishing Shareholders or Penton, cause the DM Publishing Combination
not to constitute a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), then, at the election of
either of the DM Publishing Shareholders or Penton, Penton will substitute for a
portion of such cash shares of Common Stock (valued at the Average Market Price
during the second reference period) to the extent necessary to avoid such result
(except that cash will be paid in lieu of fractional shares).
EMPLOYMENT AGREEMENTS
At the closing under the DM Combination Agreement, Penton will enter into a
two-year employment agreement with each of the DM Publishing Shareholders. Each
such employment agreement will provide for an annual salary of $250,000, the
right to receive a bonus at the end of the employment term of up to $114,000
dependent on Surviving Corporation's Pre-Tax Profits for 1998 and 1999 (or a
bonus in the amount of $114,000 in the event of a termination of employment or
liquidation that gives rise to the maximum $4.0 million of contingent cash
payments to the DM Publishing Shareholders based on earnings), and participation
in Penton's standard benefits package. Each employment agreement will include
non-competition, non-solicitation, and confidentiality obligations on the part
of the DM Publishing Shareholder which generally survive its termination.
REPRESENTATIONS AND WARRANTIES
Penton makes representations and warranties in the DM Publishing
Combination Agreement to the DM Publishing Shareholders with respect to, among
other things, (i) the organization and qualification of Penton and Combination
Subsidiary, (ii) the authority of Penton and Combination Subsidiary relative to
the DM Publishing Combination Agreement and the transaction contemplated
thereby, (iii) Penton's capitalization, (iv) Penton's subsidiaries and other
equity interests, (v) certain Penton financial statements, (vi) the absence of
undisclosed liabilities, (vii) the absence of material adverse changes since
December 31, 1997 with respect to Penton, (viii) pending litigation, (ix) the
absence of claims for brokerage commissions and similar compensation in
connection with the transaction contemplated by the DM Publishing Combination
Agreement, (x) employees and retiree welfare benefit liabilities, (xi)
compliance with laws, (xii) affiliate transactions, (xiii) the tax status of the
Stock Distribution and the absence of certain plans or intentions of Penton or
Combination Subsidiary relevant to the tax status of the DM Publishing
Combination, and (xiv) Penton's conduct of business prior to the DM Publishing
Combination. Many of such representations and warranties are qualified as being
to the knowledge of certain officers of Penton and are given subject to
identified and/or materiality exceptions.
The DM Publishing Shareholders jointly and severally make representations
and warranties in the DM Publishing Combination Agreement to Penton with respect
to, among other things, (i) the organization and qualification of DM Publishing,
(ii) the authority of the DM Publishing Shareholders and DM Publishing relative
to the DM Publishing Combination Agreement and the transaction contemplated
thereby, (iii) the investment purpose of each of the DM Publishing Shareholders
in acquiring the shares of Common Stock to be issued in the DM Publishing
Combination, (iv) DM Publishing's capitalization, (v) DM Publishing's
subsidiaries and other equity interests, (vi) title to and the sufficiency of DM
Publishing's assets, (vii) certain DM Publishing financial statements, (viii)
the absence of undisclosed liabilities, (ix) the absence of material
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<PAGE> 16
adverse changes since December 31, 1997 with respect to DM Publishing, (x)
pending litigation, (xi) the absence of claims for brokerage commissions and
similar compensation in connection with the transaction contemplated by the DM
Publishing Combination Agreement, (xii) employees and retiree welfare benefit
liabilities, (xiii) compliance with laws, (xiv) affiliate transactions, (xv) the
absence of certain actions or failures to act of the DM Publishing Shareholders
or DM Publishing relevant to the tax status of the DM Publishing Combination,
and (xvi) DM Publishing's conduct of business prior to the DM Publishing
Combination. Many of such representations and warranties are qualified as being
to the knowledge of the DM Publishing Shareholders after due inquiry of certain
other individuals and are given subject to identified and/or materiality
exceptions.
Pittway makes representations and warranties in the DM Publishing
Combination Agreement to Penton with respect to, among other things, (i)
Pittway's organization and qualification, (ii) Pittway's authority relative to
the DM Publishing Combination Agreement and the transaction contemplated
thereby, (iii) the absence of claims for brokerage commissions and similar
compensation in connection with the transaction contemplated by the DM
Publishing Combination Agreement, and (iv) affiliate transactions. Certain of
such representations and warranties are qualified as being to the knowledge of
certain officers of Pittway and are given subject to identified and/or
materiality exceptions.
INDEMNIFICATION AND HOLD HARMLESS AGREEMENTS
Penton Indemnification Provisions for Benefit of the DM Publishing
Shareholders. Penton agrees in the DM Publishing Combination Agreement to
indemnify, defend and hold harmless the DM Publishing Shareholders from and
against any adverse consequences asserted against or imposed upon or incurred by
either of them resulting from, relating to, or by reason of (i) any breach by
Penton of any of the representations and warranties made by Penton to the DM
Publishing Shareholders in the DM Publishing Combination Agreement or any
covenant of Penton or Combination Subsidiary in the DM Publishing Combination
Agreement or (ii) generally, any liability of any former subsidiary of Penton,
including any control group liability of Penton to the extent it is directly
attributable to any such former subsidiary.
DM Publishing Shareholder Indemnification Provisions for Benefit of Penton.
The DM Publishing Shareholders, jointly and severally, agree to indemnify,
defend and hold harmless Penton, Combination Subsidiary and their respective
directors, officers, employees and agents from and against any adverse
consequences asserted against or imposed upon or incurred by any of them
resulting from, relating to, or by reason of:
(i) any breach by the DM Publishing Shareholders of any of the
representations and warranties made by them to Penton in the DM Publishing
Combination Agreement or any covenant of any DM Publishing Shareholder or
DM Publishing in the DM Publishing Combination Agreement;
(ii) any liability of any current or former affiliate of DM
Publishing, including any control group liability of DM Publishing to the
extent it is directly attributable to any such affiliate; or
(iii) any untrue or alleged untrue statement of material fact
contained in any registration statement or filing made by Penton of the
kind described in Section 7.2(g) of the DM Publishing Combination
Agreement, or any amendment or supplement to any of the foregoing, or any
omission or alleged omission of a material fact required to be stated in
any of the foregoing or necessary to make the statements therein not
misleading, but only to the extent that such untrue statement or alleged
untrue statement or such omission or alleged omission relates to DM
Publishing or its affiliates or the DM Publishing Shareholders or their
respective affiliates.
Pittway Indemnification Provisions for Benefit of Penton. Pittway agrees to
indemnify, defend and hold harmless Penton and its subsidiaries and their
directors, officers, employees and agents from and against any adverse
consequences asserted against or imposed upon or incurred by any of them
resulting from, relating to, or by reason of:
(i) any breach by Pittway of any of the representations and warranties
made by Pittway to Penton in the DM Publishing Combination Agreement or any
covenant of Pittway in the DM Publishing Combination Agreement;
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<PAGE> 17
(ii) subject to certain exceptions, any tax liabilities of the Pittway
affiliated tax group for periods (or portions thereof) ended at the time of
or prior to the Stock Distribution which are not directly attributable to
Penton or its then or former subsidiaries, and any control group liability
arising out of events occurring or circumstances existing prior to the
Stock Distribution which is not directly attributable to Penton or its then
or former subsidiaries; or
(iii) any tax imposed on Penton or its subsidiaries resulting from the
failure, as a result of the failure of Pittway to maintain control of
Penton until the Stock Distribution as described in Section 368(c) of the
Code or of actions taken after the Stock Distribution by Pittway or any
company which after the Stock Distribution is a subsidiary of Pittway, of
the Stock Distribution to qualify as a tax-free (to Pittway and the
stockholders of Pittway) distribution under Section 355 of the Code.
Notwithstanding the foregoing or any other provision of the DM Publishing
Combination Agreement, in no event is Pittway obligated to indemnify, defend or
hold harmless, or otherwise obligated, with respect to any adverse consequences
arising out of the condition or sufficiency of the assets or stock of Penton or
any of its subsidiaries or the existence of any security interests relating
thereto.
Penton Indemnification Provisions for Benefit of Pittway. Penton agrees to
indemnify, defend and hold harmless Pittway, its post-Stock Distribution
subsidiaries, its and their directors, officers, employees and agents, and any
person who or which because of a relationship to Pittway or one of its
subsidiaries at the time of or prior to the Stock Distribution would be liable
(jointly and severally or otherwise) with respect to liabilities of Pittway or
of any subsidiary of Pittway, from and against any adverse consequences asserted
against or imposed upon or incurred by any of them resulting from, relating to,
or by reason of:
(i) any liability arising out of the operations, acts, omissions or
status of Penton or any of its subsidiaries;
(ii) any breach by Penton of any covenant of Penton in the DM
Publishing Combination Agreement; or
(iii) any untrue or allegedly untrue statement of material fact
contained in any filing of Pittway of the kind described in Section 7.2(h)
of the DM Publishing Combination Agreement, or any amendment or supplement
to any of the foregoing, or any omission or alleged omission of a material
fact required to be stated in any of the foregoing or necessary to make the
statements therein not misleading, but only to the extent that such untrue
statement or alleged untrue statement or such omission or alleged omission
relates to Penton or any of its subsidiaries or their respective affiliates
(other than Pittway or any post-Stock Distribution Pittway subsidiary), or
to DM Publishing or an affiliate of DM Publishing, or to either DM
Publishing Shareholder or his affiliates, or is contained in any
information furnished in writing by Penton or a DM Publishing Shareholder
pursuant to Section 7.2(g) or (h) of the DM Publishing Combination
Agreement or is deemed approved by the DM Publishing Shareholders pursuant
to Section 7.2(i) of the DM Publishing Combination Agreement.
Notwithstanding the foregoing, in no event is Penton obligated to indemnify,
defend or hold harmless with respect to any adverse consequences from and
against which Pittway has agreed to indemnify, defend and hold harmless Penton
and its subsidiaries and its and their directors, officers, employees and agents
pursuant to Section 7.7(c) of the DM Publishing Combination Agreement or with
respect to any adverse consequences by reason of taxes which Pittway has agreed
to pay pursuant to the final sentence of Section 7.12(a) of the DM Publishing
Combination Agreement.
DM Publishing Shareholders Indemnification Provisions for Benefit of
Pittway. The DM Publishing Shareholders, jointly and severally, agree to
indemnify, defend and hold harmless Pittway and its directors, officers,
employees and agents from and against any adverse consequences asserted against
or imposed upon or incurred by any of them resulting from, relating to, or by
reason of any untrue or allegedly untrue statement of material fact contained in
any filing of Pittway of the kind described in Section 7.2(g) of the DM
Publishing Combination Agreement, or any amendment or supplement to any of the
foregoing, or any omission or alleged omission of a material fact required to be
stated in any of the foregoing or necessary to make the statements therein not
misleading, but only to the extent that such untrue statement or alleged untrue
statement or such omission or alleged omission relates to DM Publishing or an
affiliate of DM Publishing, or to either DM Publishing Shareholder or his
affiliates, and is contained in any information furnished in writing by a DM
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Publishing Shareholder pursuant to Section 7.2(g) of the DM Publishing
Combination Agreement or is deemed approved by the DM Publishing Shareholders
pursuant to Section 7.2(i) of the DM Publishing Combination Agreement.
Limitations on Certain Indemnification Claims. The DM Publishing
Combination Agreement provides that claims against Penton or Pittway for
indemnification for adverse consequences arising out of a breach of a
representation or warranty cannot be made after the third anniversary of the
closing of the DM Publishing Combination. The DM Publishing Combination
Agreement provides that claims for indemnification against the DM Publishing
Shareholders for adverse consequences arising out of a breach of a
representation or warranty (other than those relating to taxes) cannot be made
after the 20th day after the second anniversary of the closing of the DM
Publishing Combination. In any event, Penton generally has no obligation to
indemnify the DM Publishing Shareholders from and against any adverse
consequences resulting from any breach by it of its representations and
warranties in the DM Publishing Combination Agreement until the DM Publishing
Shareholders have suffered aggregate adverse consequences by reason of all such
breaches as to which claims for indemnification have been timely made in excess
of $500,000 (at which point Penton is obligated to indemnify the DM Publishing
Shareholders from and against the adverse consequences exceeding $500,000
resulting from all such breaches; which indemnification obligation will be
discharged in full by Penton's payment to the DM Publishing Shareholders of an
amount equal to such excess adverse consequences). The DM Publishing
Shareholders generally have no obligation to indemnify Penton from and against
any adverse consequences resulting from any breach by the DM Publishing
Shareholders of the representations and warranties made by them in the DM
Publishing Combination Agreement until Penton has suffered aggregate adverse
consequences by reason of all such breaches as to which claims for
indemnification have been timely made in excess of $500,000 (at which point the
DM Publishing Shareholders are obligated to indemnify Penton from and against
the adverse consequences exceeding $500,000 resulting from all such breaches as
to which claims for indemnification have been timely made).
CERTAIN TAX MATTERS
Penton agrees in the DM Publishing Combination Agreement not to take
(directly or indirectly), and not to permit any of its subsidiaries to take
(directly or indirectly), any action (whether prior to, at the time of or after
the Stock Distribution) which would cause the Stock Distribution not to be tax
free to Pittway, its post-Stock Distribution subsidiaries and the stockholders
of Pittway under the provisions of Section 355 of the Code.
Subject to a contingent exception, each of the DM Publishing Shareholders
agrees not to take (directly or indirectly) or fail to take (directly or
indirectly) any action (whether prior to, at the time of or after the DM
Publishing Combination) and not to permit DM Publishing to take (directly or
indirectly) or fail to take (directly or indirectly) any action prior to such
time which would cause the DM Publishing Combination (i) to give rise to any tax
to DM Publishing or its successor or (ii) not to constitute a "reorganization"
under Section 368(a) of the Code.
Subject to stated exceptions, Penton agrees that after the consummation of
the Stock Distribution it will not take (directly or indirectly) any action that
would cause the DM Publishing Combination (i) to give rise to any tax to Penton,
DM Publishing's successor or the DM Publishing Shareholders or (ii) not to
constitute a "reorganization" under Section 368(a) of the Code.
Penton agrees that after the Stock Distribution it will not take (directly
or indirectly), or permit any of its subsidiaries to take (directly or
indirectly), any action that would increase the tax liability of any of the
companies included in the Pittway affiliated group for any period ending at or
prior to or including the consummation of the Stock Distribution.
The DM Publishing Shareholders agree that after the time of the DM
Publishing Combination they will not take (directly or indirectly) any action
that would increase the tax liability of DM Publishing for any period ending at
or prior to such time.
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EXPENSES
The DM Publishing Combination Agreement provides that, subject to certain
exceptions described below under " -- Closing Conditions," the DM Publishing
Shareholders, jointly and severally, will bear the costs and expenses (including
legal fees and expenses) incurred by DM Publishing or the DM Publishing
Shareholders in connection with the transaction contemplated by the DM
Publishing Combination Agreement, Pittway will bear its costs and expenses
(including legal fees and expenses) incurred in connection with the DM
Publishing Combination Agreement and the transaction contemplated thereby and
Penton will bear its costs and expenses (including legal fees and expenses)
incurred in connection with the DM Publishing Combination Agreement and the
transaction contemplated thereby; except that Penton will also bear the costs
and expenses of the audit of the DM Publishing financial statements required for
the registration statement of which this Prospectus is a part.
REGISTRATION RIGHTS
In the DM Publishing Combination Agreement, Penton grants to the DM
Publishing Shareholders certain rights with respect to registration under the
Securities Act of 1933, as amended ("the Securities Act"), of the shares of
Common Stock issued to them at the closing of the DM Publishing Combination (and
any additional shares that may be issued in respect thereof in stock splits,
stock combinations or the like). Generally, the DM Publishing Shareholders have
the right to demand one registration (which must be of at least 25% of the
shares of Common Stock issued to them at the closing of the DM Publishing
Combination) at any time during the 60 days immediately following the second
anniversary of the Stock Distribution. In addition, whenever Penton proposes to
register Common Stock under the Securities Act (other than on Form S-8 or S-4 or
any similar or successor forms) within the 30 months following the consummation
of the DM Publishing Combination, Penton is required, subject to certain
limitations, to include in such registration all shares of Common Stock issued
to the DM Publishing Shareholders at the closing of the DM Publishing
Combination (and any additional shares that may be issued in respect thereof in
stock splits, stock combinations or the like) that the DM Publishing
Shareholders request to include therein. Penton has agreed to pay all
registration expenses incurred by Penton (but not by the DM Publishing
Shareholders) in connection with any such registration.
In connection with registrations of Common Stock pursuant to such
registration rights, Penton has agreed, subject to certain limitations, to
indemnify the DM Publishing Shareholders participating therein against certain
liabilities, including liabilities under the Securities Act, or to make
provision for contribution to an indemnified party if such indemnification is
unavailable; and the DM Publishing Shareholders who participate in any such
registrations have agreed, subject to certain limitations, to indemnify Penton
against certain of such liabilities and to make provision for such contribution.
CLOSING CONDITIONS
Conditions to Obligations of Penton, Combination Subsidiary, DM Publishing,
and DM Publishing Shareholders. The obligations of Penton, Combination
Subsidiary, DM Publishing, and the DM Publishing Shareholders to effect the DM
Publishing Combination are subject to satisfaction of the following conditions:
(i) consummation of the Stock Distribution at or prior to the closing of the DM
Publishing Combination, (ii) expiration of all applicable waiting periods under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (iii)
completion of all governmental actions required to be taken, (iv) there being no
threatened, instituted, or pending material action or proceeding before any
court or governmental authority regarding the transaction, (v) there being no
action taken or statute or rule proposed that is reasonably likely to result in
a material action or proceeding before any court or governmental authority
regarding the transaction, (vi) consummation by Penton of credit arrangements
sufficient to enable it to repay at the time of the Stock Distribution its then
outstanding indebtedness to Pittway and provide for sufficient working capital,
(vii) there being no suspension or limitation on prices for trading Common Stock
on the New York Stock Exchange ("NYSE") or any action by any governmental
authority which would limit or adversely affect the extension of credit to
Penton, (viii) registration of the Common Stock under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), (ix) if necessary, registration of
the Common Stock to be issued to the DM Publishing Shareholders under all
applicable United States state securities or blue sky laws, (x) the
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effectiveness of a registration statement under the Securities Act, (xi)
approval for listing on the NYSE of the Common Stock to be issued pursuant to
the Stock Distribution and DM Publishing Combination Agreement, (xii) no receipt
by Pittway of a letter from the IRS that the Revenue Ruling has been withdrawn,
(xiii) receipt by Pittway and Penton of each consent and approval necessary in
order that the DM Publishing Combination Agreement does not constitute a breach
or violation of any material contracts, (xiv) receipt by DM Publishing of each
consent and approval necessary in order that the DM Publishing Combination
Agreement does not constitute a breach or violation of any material contracts,
(xv) except for the directors who will be serving on both Penton's and Pittway's
boards, resignation of Pittway's directors, officers, and employees from each
office and directorship held at Penton, (xvi) execution of employment agreements
between both Messrs. Donohue and Meehan and Penton, and (xvii) no termination by
any party to the DM Publishing Combination Agreement.
Additional Conditions to Obligations of DM Publishing and the DM Publishing
Shareholders. The obligations of DM Publishing and the DM Publishing
Shareholders are further subject to the following conditions: (i) the
representations and warranties of Penton are true and correct in all material
respects and satisfaction by each of Pittway, Penton, and Combination Subsidiary
of each covenant in all material respects, (ii) no discovery by the DM
Publishing Shareholders of any undisclosed matters or adverse changes of Penton,
which individually or in the aggregate, is materially adverse to the value of
Penton, (iii) Penton will have furnished the DM Publishing Shareholders a
certificate in which Penton certifies that an appropriate inquiry has been made
of Penton's executive officers regarding representations and warranties and
performance of covenants, (iv) Penton will have furnished to the DM Publishing
Shareholders certified copies of resolutions regarding the DM Publishing
Combination Agreement, (v) amendment by Penton of its Certificate of
Incorporation and By-Laws as provided in the DM Publishing Combination
Agreement, and (vi) the receipt by DM Publishing Shareholders of an opinion from
Penton's counsel regarding certain matters.
Additional Conditions to the Obligations of Penton and Combination
Subsidiary. The obligations of Penton and Combination Subsidiary to effect the
Stock Distribution and transactions under the DM Publishing Combination
Agreement are further subject to the following conditions: (i) the
representations and warranties of DM Publishing Shareholders and Pittway are
true and correct in all material respects and performance and compliance by DM
Publishing, the DM Publishing Shareholders, and Pittway with each covenant in
all material respects, (ii) no discovery by Penton of any undisclosed matter or
adverse change, which individually or in the aggregate, is materially adverse to
the value of DM Publishing, (iii) the DM Publishing Shareholders will have
furnished Penton a certificate in which they certify that an appropriate inquiry
has been made of DM Publishing's executive officers regarding representations
and warranties and the performance of covenants, (iv) the DM Publishing
Shareholders will have furnished to Penton certified copies of resolutions
regarding the DM Publishing Combination Agreement, (v) Pittway will have
furnished Penton a certificate in which they certify that an appropriate inquiry
has been made of Pittway's executive officers regarding representations and
warranties and the performance of covenants, (vi) Pittway will have furnished to
Penton certified copies of resolutions regarding the DM Publishing Combination
Agreement, (vii) receipt by Penton of an opinion from the DM Publishing
Shareholder's and DM Publishing's counsel regarding certain matters, (viii)
receipt by Penton of an opinion from Pittway's counsel regarding certain
matters, and (ix) DM Publishing's cash and cash equivalents are in an amount
sufficient to enable the Combination Subsidiary to pay its liabilities.
Additional Conditions to the Obligation of Pittway. The obligation of
Pittway to effect the Stock Distribution is further subject to the following
conditions: (i) performance by Penton, Combination Subsidiary, DM Publishing,
and the DM Publishing Shareholders of each obligation and agreement in all
material respects and compliance with each covenant to be performed pursuant to
the DM Publishing Combination Agreement, (ii) Penton will have furnished to
Pittway a certificate which certifies that an appropriate inquiry has been made
of Penton's and Combination Subsidiary's executive officers regarding the
performance of covenants, (iii) the DM Publishing Shareholders will have
furnished to Pittway a certificate which certifies that an appropriate inquiry
has been made of DM Publishing's executive officers regarding the performance of
covenants, (iv) Penton will have furnished to Pittway certified copies of
resolutions regarding
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the DM Publishing Combination Agreement, (v) receipt by Pittway of an opinion
from Penton's counsel regarding certain matters, (vi) receipt by Pittway of an
opinion from the DM Publishing's and DM Publishing's counsel regarding certain
matters, (vii) resignation of Messrs. Kemp and Ramella as an officer of Pittway,
(viii) release by Messrs. Kemp and Ramella of Pittway from all obligations under
their respective employment agreements with Penton, including the supplemental
executive retirement plans provided therein, and (ix) repayment by Penton of its
indebtedness to Pittway outstanding immediately prior to the Stock Distribution.
In the event the DM Publishing Combination fails to close, depending on the
cause of such failure, Pittway may be required to reimburse the DM Publishing
Shareholders, or the DM Publishing Shareholders may be required to reimburse
Pittway, Penton, and Combination Subsidiary, for their legal and other costs and
expenses incurred in connection with the DM Publishing Combination Agreement and
other resulting damages (including, in certain instances in which Pittway is
required to reimburse, at least $250,000 of such other damages).
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RISK FACTORS
FACTORS AFFECTING THE COMMON STOCK
No Prior Public Market; Possible Volatility of Stock Price. Application
has been made to list the Common Stock on the NYSE. However, there is no
established public trading market for the Common Stock, and there can be no
assurance as to the prices at which the Common Stock will trade after the Stock
Distribution. Until an orderly market develops (which will depend in part upon
the extent to which holders of Pittway Stock conclude that they wish to hold the
Common Stock received in the Stock Distribution), prices at which the Common
Stock trades may fluctuate significantly. Trading prices will be influenced by
many factors, including the depth and liquidity of the market for the Common
Stock, quarterly variations in operating results, announcements of new
publications, acquisitions or technological innovations by Penton or its
competitors, Penton's dividend policy, the possibility of future sales of Common
Stock by Penton or its significant stockholders, the operating and stock price
performance of other companies that investors may deem comparable to Penton,
changes in financial estimates by securities analysts, investor perception of
Penton and the prospects for its businesses, and general economic and stock
market conditions.
Certain Anti-Takeover Effects. Certain provisions of Delaware corporation
law and of Penton's Restated Certificate of Incorporation and Amended and
Restated Bylaws may inhibit changes in control of Penton not approved by the
Board and may have the effect of depriving stockholders of an opportunity to
receive a premium over the prevailing market price of the Common Stock in the
event of an attempted hostile takeover. These provisions include: (i) a
classified Board, (ii) a prohibition on stockholder action through written
consents, (iii) a requirement that special meetings of stockholders be called
only by the Board, (iv) advance notice requirements for stockholder proposals
and nominations, and (v) "blank check" preferred stock. See "Anti-Takeover
Effects." The existence of these provisions may adversely affect the
marketability and market price of the Common Stock. See also "-- Factors
Relating to Taxation -- Covenants and Indemnities."
Ownership by Certain Significant Stockholders. It is projected that
immediately following the Stock Distribution and the issuance of Common Stock at
the closing of the DM Publishing Combination, members of the Harris family will
own in the aggregate approximately 23.99% of the Common Stock, each of the DM
Publishing Shareholders will own approximately 3.38% of the Common Stock, Mario
J. Gabelli and entities controlled directly or indirectly by Mr. Gabelli will
own in the aggregate approximately 13.05% of the Common Stock and Janus Capital
Corporation will own approximately 8.33% of the Common Stock. See "Stock
Ownership of Certain Beneficial Owners and Executive Officers and Directors." At
that time, certain members of the Harris family and each of the DM Publishing
Shareholders also will serve on the Board for terms that do not expire until
2000 or later. See "Management -- Board of Directors." The concentration of
voting power among these stockholders may inhibit changes in control of Penton
and may adversely affect the liquidity of the market for Common Stock.
Shares Eligible for Future Sale. After consummation of the Stock
Distribution and the DM Publishing Combination, approximately 22,739,000 shares
of Common Stock will be outstanding, substantially all of which held by persons
other than "affiliates" of Penton will be freely tradeable.
The shares of Common Stock held by "affiliates" of Penton, including the DM
Publishing Shareholders, will not be tradeable in the absence of registration
under the Securities Act or an exemption therefrom, including the exemption
contained in Rule 144 under the Securities Act. Sales of the Common Stock issued
to the DM Publishing Shareholders in connection with the DM Publishing
Combination could be effected pursuant to Rule 144 after the first anniversary
of the consummation of the DM Publishing Combination or pursuant to the
registration rights granted to the DM Publishing Shareholders under the DM
Publishing Combination Agreement. See "DM Publishing Combination
Agreement -- Registration Rights."
After consummation of the Stock Distribution, Common Stock will be issuable
if certain outstanding debt of Penton is converted into Common Stock. In
particular, notes issued in connection with the December 1997 acquisition of
INDEX may be converted, in certain circumstances, into up to UK L3.7 million
worth of Common Stock at fair market value. See "Capitalization."
In addition, 2.6 million shares of Common Stock will be available for
awards under the Equity Incentive Plan and the Director Option Plan (as defined
below) after the Stock Distribution. See "Capitalization." It is
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anticipated that shares issued pursuant to the Equity Incentive Plan and the
Director Option Plan will be freely transferable, except that transfers by
directors and executive officers of Penton will be subject to volume limitations
under Rule 144.
No prediction can be made as to the effect, if any, that future sales of
shares, or the availability of shares for future sale, will have on the market
price of the Common Stock prevailing from time to time. Sales of substantial
amounts of Common Stock (including shares issued upon the exercise of stock
options), or the perception that such sales could occur, could adversely affect
prevailing market prices for the Common Stock. If such sales reduce the market
price of the Common Stock, Penton's ability to raise additional capital in the
equity markets could be adversely affected.
FACTORS RELATING TO TAXATION
Tax Aspects of the Stock Distribution. Pittway has received a favorable
ruling with respect to the Stock Distribution from the IRS. Actions or events
subsequent to the Stock Distribution by Penton or Pittway should not, in and of
themselves, render the Stock Distribution taxable, but under certain
circumstances could cause the IRS to review the circumstances as of the Stock
Distribution Date. If the IRS ruling were invalidated as a result of such
review, the receipt of Common Stock in the Stock Distribution could become
taxable to the recipients as a dividend and/or a corporate level gain could be
recognized by Pittway, based on the amount by which the fair market value of the
Common Stock distributed in the Stock Distribution, excluding the value of DM
Publishing, exceeds Pittway's basis in its Penton capital stock.
Covenants and Indemnities. Penton has agreed not to take (directly or
indirectly), and not to permit any of its subsidiaries to take (directly or
indirectly), any action (whether prior to, at the time of or after the Stock
Distribution) which would cause the Stock Distribution not to be tax free to
Pittway, its post-Stock Distribution subsidiaries and the stockholders of
Pittway under the provisions of Section 355 of the Code and to indemnify Pittway
for any adverse consequences suffered by it as a result of the breach of such
obligation by Penton. See "DM Publishing Combination
Agreement -- Indemnification and Hold Harmless Agreements" and "-- Certain Tax
Matters." These agreements may inhibit changes in control of Penton for a period
of time after the Stock Distribution.
FACTORS RELATING TO OPERATIONS
No Operating History as an Independent Company. Penton does not have an
operating history as an independent public company. The operations of Penton
have been conducted under separate management, but with strategic direction and
financial and administrative service support from Pittway corporate management
and financial support from Pittway. Following the Stock Distribution, Penton may
purchase from Pittway, at an arm's-length price, up to a specified level of
assistance in connection with tax-related matters for periods ending on or prior
to December 31, 1998. Penton's management will also have the benefit of advice
from its Board that, immediately following the Stock Distribution, will include
two directors who are also directors of Pittway. After the Stock Distribution
Date, however, Penton will, for the first time, be operating as a separate
public company without financial support from Pittway and will incur the
additional expense associated with being a public company and will maintain its
own lines of credit, banking relationships, and administrative functions. While
Penton has been profitable as part of Pittway, there can be no assurance that
its profits will continue at the same level as a stand-alone company.
Dependence on and Cyclicality of Advertising Revenue. Penton's principal
source of revenue is advertising. For the year ended December 31, 1997,
approximately 76% of Penton's revenues came from advertising. Penton's
advertising revenues, as well as those of business magazines in general, are
dependent upon general economic cycles. Historically, advertising revenues
increase during economic recoveries, and decrease during both general economic
downturns and regional economic recessions. Despite the strength of the current
economy, however, business publishers are experiencing increasing pressure on
advertising rates. In the event of a general economic downturn or a recession in
the United States, Penton's advertisers may reduce their advertising budgets or
intensify their attempts to negotiate lower advertising rates. Any material
decline in advertising revenue would have a material adverse effect on Penton's
business, financial condition, and results of operations.
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Competition. Penton's print publications compete with those of a number of
publishers, some of whom have greater financial resources that may enhance their
ability to compete in the business magazine publishing market. Overall
competitive factors include the market's perception of the niche served by the
magazine, readers' preference for the publication's content, editorial quality,
quantity and quality of circulation, reader response to advertisers' products
and services, the effectiveness of sales teams, customer service, and
advertising rates. Penton also faces broad competition for audiences from other
business media and trade show management companies that organize trade shows and
conferences, and from both traditional publishing companies and newly emerging
content providers in the online segment of its business.
Acquisition Risks. An important part of Penton's business strategy is the
acquisition of other business media. See "Business -- Business Strategy." The
success of Penton's acquisition strategy will depend upon Penton's ability to
complete acquisitions and integrate and manage acquired businesses, realize
economies of scale and control costs. Acquisitions involve risks, including
difficulties in integrating acquired operations, diversion of management
resources and unanticipated problems and liabilities. Although management has
successfully integrated the operations of businesses acquired in the past, there
can be no assurance that Penton will be able to implement its acquisition
strategy successfully.
Depending upon the circumstances, Penton may fund a particular acquisition
through the issuance of Common Stock, with cash flow from operations, or with
borrowed funds. Acquisitions may result in potentially dilutive issuances of
equity securities, increased depreciation and amortization expense, increased
interest expense, increased financial leverage, or decreased operating income,
any of which could have a material adverse effect on Penton's operating results.
There can be no assurance that Penton will be able to complete acquisitions on
terms favorable to it or that Penton's existing financial resources, including
cash flow from operations, will be sufficient to fund such acquisitions. If
Penton does not have sufficient cash resources available to fund acquisitions,
its growth could be limited unless it is able to obtain additional capital
through subsequent debt or equity financings. There can be no assurance that
Penton will be able to obtain such financings or that, if available, such
financings will be on terms acceptable to Penton.
New Product Risks. Penton's success has depended in part upon its ability
to monitor rapidly changing market trends and to adapt its publications and
services to meet the evolving information needs of existing and emerging target
audiences. Penton'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 Penton'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 and services generally incur
initial significant operating losses. There can be no assurance that Penton's
efforts to introduce new or assimilate acquired publications or services will be
successful or profitable. In addition, Penton has invested in, and intends to
continue to invest in, the development of certain Internet services, which 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,
Penton's profitability from year to year may be adversely affected by the number
and timing of new product launches.
Consolidation of Principal Vendors. Penton's principal vendors are paper
suppliers. The paper industry is currently experiencing consolidation among its
principal participants. Such consolidation may result in: (i) decreased
competition, which may lead to increased prices, interruptions, and delays in
services provided by such vendors and (ii) greater dependence on certain
vendors. Such factors could adversely affect Penton's results of operations.
Risks Associated with Trade Shows and Conferences. Obtaining desirable
dates and venues for trade show and conference events has become increasingly
competitive as the trade show industry has grown. Penton generally reserves
venues and dates; however, as is consistent with industry practice, it does not
pay for such reservations. Reservations are not binding until a contract is
signed between a facility operator and Penton, and contracts generally hold
venues and dates for only one year. Should Penton lose dates and venue for an
event, the profitability and future success of that event could be affected. In
addition, circumstances
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beyond the control of Penton, such as natural disasters, labor strikes, and
transportation shutdowns, could present financial risk to Penton's trade shows
and conferences and to Penton's results of operations.
Risks Associated with International Operations. Penton recently acquired
its first operations outside the United States. A component of Penton's growth
strategy is further expansion into international markets. Penton 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 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 Penton's future international operations and, consequently, on
Penton's results of operations.
Effect of Increases in Paper and Postage Costs. The price of paper is a
significant expense of Penton relating to its print products and direct-mail
solicitations, accounting for approximately 8% of total operating expenses in
1997. While paper prices have increased by an average of less than 1% annually
since 1989, paper prices have been volatile over the past several years. They
began to rise in 1994, rose significantly in 1995, dropped in 1996 and, to a
lesser extent, 1997. Penton does not use forward contracts and all of its paper
supply contracts provide for price adjustments on a quarterly basis to reflect
then-prevailing market prices. As a result, significant increases in paper
prices may have an adverse effect on Penton's future results of operations.
Postage for magazine distribution and direct-mail solicitations is also a
significant expense for Penton, which uses the United States Postal Service for
domestic distribution of all of its products and marketing materials. Postage
accounted for approximately 8% of total operating expenses in 1997. Postage
costs increase periodically and can be expected to increase in the future. The
United States Postal Service has announced an average increase of 4.6% for
periodical class rates, effective in January 1999.
No assurance can be given that Penton can recoup paper or postage cost
increases by passing them through to its advertisers and, accordingly, such cost
increases could have a material adverse effect on Penton's results of
operations.
EFFECT ON THE TRADING PRICES OF PITTWAY STOCK
After the Stock Distribution, Pittway Stock will continue to be listed for
trading on the NYSE. Following the Stock Distribution, the trading prices of
Pittway Stock are expected to be lower than the trading prices of Pittway Stock
prior to the Stock Distribution. After the Stock Distribution, the aggregate
trading prices of a share of Pittway Stock and a share of Common Stock may be
less than, equal to or greater than the trading price of a share of Pittway
Stock prior to the Stock Distribution.
24
<PAGE> 26
CAPITALIZATION
The following table sets forth, as of March 31, 1998, the historical
short-term borrowings and capitalization of Penton and DM Publishing and the pro
forma short-term borrowings and capitalization of Penton after giving effect to
the DM Publishing Combination as if it occurred at March 31, 1998. This table
should be read in conjunction with the Penton Consolidated Financial Statements
and the Notes thereto, the DM Publishing Financial Statements and the Notes
thereto, and the Unaudited Pro Forma Combined Financial Information, included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
COMBINED
PRO FORMA PENTON
PENTON DM PUBLISHING ADJUSTMENTS(A) PRO FORMA
------- ------------- -------------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
SHORT-TERM NOTES PAYABLE..................... $34,648 $ 90 $ 7,000 $41,738
======= ===== ======= =======
LONG-TERM CAPITAL LEASE OBLIGATIONS.......... $ -- $ 101 $ -- $ 101
EQUITY:
Preferred Stock 2,000,000 shares
authorized; none issued................. -- -- -- --
Common Stock, par value $.01 per share;
60,000,000 shares authorized; 21,200,000
shares issued and outstanding (pro
forma -- 22,739,000 shares (b))......... 212 60 (45) 227
Capital in excess of par value............. 29,630 -- 26,143 55,773
Retained earnings.......................... 42,111 (505) (7,202) 34,404
------- ----- ------- -------
Total equity....................... 71,953 (445) 18,896 90,404
------- ----- ------- -------
TOTAL LONG-TERM DEBT AND EQUITY.............. $71,953 $(344) $18,896 $90,505
======= ===== ======= =======
</TABLE>
- ---------------
(a) See Unaudited Pro Forma Combined Balance Sheet and the notes thereto.
(b) Excludes (i) shares of Common Stock that may be issued pursuant to certain
convertible notes issued in connection with the INDEX acquisition, (ii) 2.5
million shares of Common Stock reserved for issuance under the Equity
Incentive Plan, including shares issuable to Thomas L. Kemp, Penton's Chief
Executive Officer, pursuant to his employment agreement and a related waiver
with Penton, (iii) 100,000 shares of Common Stock reserved for issuance
under the Director Option Plan, and (iv) shares that may become issuable to
the DM Publishing Shareholders subsequent to the completion of the DM
Publishing Combination. See "DM Publishing Combination Agreement -- Closing
Consideration and Contingent Rights," "Risk Factors -- Factors Affecting
Common Stock -- Shares Eligible for Future Sale," "Management -- Board of
Directors" and "Executive Compensation -- Equity Incentive Plan" and
"-- Employment Agreements." Options with respect to 633,400 shares of Common
Stock under the Equity Incentive Plan and 69,000 shares of Common Stock
under the Director Option Plan have been awarded, subject to completion of
the Stock Distribution, as of the eighth trading day following the Stock
Distribution Date at an exercise price per share equal to the average
closing price of the Common Stock for the five trading day period ending
such day and Deferred Shares under the Equity Incentive Plan have been
awarded, subject to completion of the Stock Distribution, in lieu of certain
bonuses otherwise payable in cash in 1998. See "Executive
Compensation -- Employment Agreements."
25
<PAGE> 27
SELECTED HISTORICAL FINANCIAL INFORMATION
The following table summarizes certain financial data with respect to
Penton. The historical income statement data for each of the three years in the
period ended December 31, 1997 and balance sheet data as of December 31, 1996
and 1997 have been derived from Penton's audited annual financial statements and
notes thereto, which appear elsewhere in this Prospectus. The historical data as
of or for the three months ended March 31, 1998 and 1997 have been derived from
unaudited financial statements appearing elsewhere herein, which, in the opinion
of management, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the results for the interim
periods. Historical results may not be indicative of the future performance of
Penton as a separate public company. The information set forth below should be
read in conjunction with the audited and unaudited Penton historical
consolidated financial information and "Management's Discussion and Analysis of
Financial Condition and Results of Operations," included elsewhere in this
Prospectus. Historical dividends per share have not been presented because
Penton was not a public company during the periods presented.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- -------------------
1993 1994 1995 1996 1997 1997 1998(a)
--------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING RESULTS
Revenues.................... $149,991 $159,284 $179,900 $188,557 $204,931 $ 48,666 $ 52,485
Operating income (b)........ 7,063 10,290 11,947 18,499 25,297 4,857 4,665
Income from continuing
operations................ 3,920 6,062 8,625 10,956 14,874 2,718 2,340
Income from discontinued
operations................ (6) 51 (48) -- -- -- --
Cumulative effect of changes
in accounting
principles................ (190) -- -- -- -- -- --
Net income.................. 3,724 6,113 8,577 10,956 14,874 2,718 2,340
Income from continuing
operations and net income
per share, basic and
diluted (21,200,000 shares
outstanding).............. .18 .29 .40 .52 .70 .13 .11
CASH FLOWS AND OTHER DATA
Operating................... $ 8,142 $ 5,329 $ 7,423 $ 20,507 $ 23,186 $ 590 $ (1,018)
Investing................... (5,432) (5,026) (4,989) (4,722) (53,192) (14,799) (1,128)
Financing................... (2,650) (668) (1,697) (15,888) 30,854 13,916 1,459
Capital expenditures........ 6,151 7,593 4,989 4,822 5,450 759 1,128
Depreciation and
amortization.............. 5,145 5,596 5,772 5,911 6,551 1,678 2,027
EBITDA (c).................. 12,208 15,886 17,719 24,410 31,848 6,535 6,692
AT END OF PERIOD
Total assets of continuing
operations................ $101,519 $105,901 $116,494 $108,799 $156,426 $123,836 $159,094
Investment in discontinued
operations................ 4,818 5,241 -- -- -- -- --
Total assets................ 106,337 111,142 116,494 108,799 156,426 123,836 159,094
Goodwill and other
intangibles............... 22,954 22,784 21,916 21,940 71,822 36,837 71,673
Stockholder's equity........ 60,675 61,847 70,763 59,151 69,613 61,869 71,953
</TABLE>
- ---------------
(a) Operating results for the period were negatively impacted by period costs of
trade shows acquired in December 1997 for which revenues will not be
recognized until the trade shows are held in future periods. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
(b) Revenues less operating expenses. See Consolidated Statement of Income
included in Penton's Consolidated Financial Statements.
(c) Penton defines EBITDA as operating income before depreciation and
amortization. EBITDA is often used to analyze and compare companies on the
basis of operating performance and cash flow. However, EBITDA is not
adjusted for all non-cash expenses or for working capital, capital
expenditures and other investment requirements. EBITDA should not be
considered in isolation or as a substitute for measures of performance
prepared in accordance with generally accepted accounting principles. Not
all companies calculate EBITDA in the same manner, and EBITDA as presented
may not be comparable to similarly titled measures presented by other
companies.
26
<PAGE> 28
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following Unaudited Pro Forma Combined Statements of Income reflect
adjustments to Penton's historical Consolidated Statements of Income for the
year ended December 31, 1997, and the three months ended March 31, 1998, to give
effect to: (i) the acquisition of INDEX, which was completed on December 12,
1997, as if such acquisition had occurred on January 1, 1997 and had been
included on the basis of its twelve months ended November 30, 1997, (ii) the DM
Publishing Combination as if such acquisition had occurred on January 1, 1997,
(iii) the issuance of Common Stock pursuant to the DM Publishing Combination as
if such issuance had occurred on January 1, 1997, and (iv) other adjustments
required to reflect the combined results of operations of Penton as a separate
public company.
The following Unaudited Pro Forma Combined Balance Sheet as of March 31,
1998, presents the financial position of Penton assuming that the DM Publishing
Combination had been completed as of that date.
The acquisition of ISOA in December 1997 and the disposition of one
publication during 1997 have not been reflected in the Unaudited Pro Forma
Combined Financial Information as the impact of both transactions is immaterial
to such information.
The adjustments required to reflect the transactions are set forth in the
"Pro Forma Adjustments" column.
The unaudited pro forma combined financial information should be read in
conjunction with the historical Consolidated Financial Statements of Penton and
the historical Financial Statements of INDEX and of DM Publishing, included
elsewhere in this Prospectus. All purchase price allocations for the INDEX
acquisition and the DM Publishing Combination, treated as purchase transactions,
are preliminary in nature and are subject to change within the twelve months
following each acquisition based on refinements as actual data becomes
available. The pro forma information presented is for informational purposes
only and may not necessarily reflect future results of operations or financial
position or what the results of operations or financial position would have been
had the INDEX acquisition, the Stock Distribution, and the DM Publishing
Combination actually taken place at the beginning of the periods or as of the
dates specified.
27
<PAGE> 29
PENTON MEDIA, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1998
<TABLE>
<CAPTION>
COMBINED
PENTON DM PUBLISHING PRO FORMA PENTON
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
---------- ------------- ----------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
REVENUES..................................... $52,485 $2,104 $ -- $54,589
------- ------ ----- -------
OPERATING EXPENSES:
Editorial, production and circulation...... 23,322 666 -- 23,988
Selling, general and administrative........ 22,471 613 300(c) 23,384
Depreciation and amortization.............. 2,027 17 197(b) 2,241
------- ------ ----- -------
47,820 1,296 497 49,613
------- ------ ----- -------
OPERATING INCOME............................. 4,665 808 (497) 4,976
------- ------ ----- -------
OTHER INCOME (EXPENSE):
Interest expense........................... (662) (5) (114)(b) (781)
Miscellaneous, net......................... 3 10 -- 13
------- ------ ----- -------
(659) 5 (114) (768)
------- ------ ----- -------
INCOME BEFORE INCOME TAXES................... 4,006 813 (611) 4,208
------- ------ ----- -------
INCOME TAXES:
Current.................................... 1,687 -- (45)(b) 1,832
190(c)
Deferred................................... (21) -- 18(c) (3)
------- ------ ----- -------
1,666 -- 163 1,829
------- ------ ----- -------
NET INCOME................................... $ 2,340 $ 813 $(774) $ 2,379
======= ====== ===== =======
NET INCOME PER SHARE (22,739,000 SHARES
OUTSTANDING)(e)............................ $ .10
=======
</TABLE>
See Unaudited Pro Forma Combined Financial Information and accompanying Notes to
Unaudited Pro Forma Combined Financial Information.
28
<PAGE> 30
PENTON MEDIA, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
COMBINED
PENTON COMBINED
PENTON INDEX PRO FORMA AND DM PUBLISHING PRO FORMA PENTON
HISTORICAL HISTORICAL ADJUSTMENTS INDEX HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------- ----------- --------- ------------- ----------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES..................... $204,931 $8,668 $ -- $213,599 $9,358 $ -- $222,957
-------- ------ ------- -------- ------ ------- --------
OPERATING EXPENSES:
Editorial, production and
circulation.............. 94,560 3,455 -- 98,015 2,826 -- 100,841
Selling, general and
administrative........... 78,523 4,971 (103) (c) 81,354 2,894 1,119 (c) 85,367
(2,037) (c)
Depreciation and
amortization............. 6,551 26 902 (b) 7,479 75 788 (b) 8,342
-------- ------ ------- -------- ------ ------- --------
179,634 8,452 (1,238) 186,848 5,795 1,907 194,550
-------- ------ ------- -------- ------ ------- --------
OPERATING INCOME............. 25,297 216 1,238 26,751 3,563 (1,907) 28,407
-------- ------ ------- -------- ------ ------- --------
OTHER INCOME (EXPENSE):
Interest expense........... (841) -- (2,249) (b) (3,090) (21) (455) (b) (3,566)
Gain on sale of
publication.............. 1,040 -- -- 1,040 -- 1,040
Miscellaneous, net......... 10 44 -- 54 75 -- 129
-------- ------ ------- -------- ------ ------- --------
209 44 (2,249) (1,996) 54 (455) (2,397)
-------- ------ ------- -------- ------ ------- --------
INCOME BEFORE INCOME TAXES... 25,506 260 (1,011) 24,755 3,617 (2,362) 26,010
-------- ------ ------- -------- ------ ------- --------
INCOME TAXES:
Current.................... 9,754 72 (1,718) (c) 8,910 34 (179) (b) 9,628
802 (c) 863 (c)
Deferred................... 878 (23) 491 (c) 1,346 2 111 (c) 1,459
-------- ------ ------- -------- ------ ------- --------
10,632 49 (425) 10,256 36 795 11,087
-------- ------ ------- -------- ------ ------- --------
NET INCOME................... $ 14,874 $ 211 $ (586) $ 14,499 $3,581 $(3,157) $ 14,923
======== ====== ======= ======== ====== ======= ========
NET INCOME PER SHARE
(22,739,000 SHARES
OUTSTANDING)(e)............ $ .66
========
</TABLE>
See Unaudited Pro Forma Combined Financial Information and accompanying Notes to
Unaudited Pro Forma Combined Financial Information.
29
<PAGE> 31
PENTON MEDIA, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
MARCH 31, 1998
<TABLE>
<CAPTION>
COMBINED
PENTON DM PUBLISHING PRO FORMA PENTON
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
----------- ------------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash................................................ $ 1,732 $1,147 $ 3,173 (d) $ 6,052
Accounts and notes receivable, less allowance for
doubtful accounts of $2,481....................... 32,112 1,360 -- 33,472
Inventories......................................... 3,660 -- -- 3,660
Deferred tax assets................................. 2,995 -- -- 2,995
Prepayments, deposits and other..................... 5,077 77 -- 5,154
---------- ------ ------- --------
45,576 2,584 3,173 51,333
---------- ------ ------- --------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Buildings........................................... 6,168 -- -- 6,168
Machinery and equipment............................. 61,623 535 -- 62,158
---------- ------ ------- --------
67,791 535 -- 68,326
Less: accumulated depreciation...................... 41,341 329 -- 41,670
---------- ------ ------- --------
26,450 206 -- 26,656
Land................................................ 426 -- -- 426
---------- ------ ------- --------
26,876 206 -- 27,082
---------- ------ ------- --------
OTHER ASSETS:
Goodwill, less accumulated amortization of $6,863... 65,371 -- 30,726 (a) 96,097
Other intangibles, less accumulated amortization of
$5,443............................................ 6,302 -- -- 6,302
Deferred tax assets................................. 3,951 (23) -- 3,928
Due from parent company............................. 10,880 -- (10,880) (d) --
Miscellaneous....................................... 138 2 -- 140
---------- ------ ------- --------
86,642 (21) 19,846 106,467
---------- ------ ------- --------
$ 159,094 $2,769 $23,019 $184,882
========== ====== ======= ========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Notes payable....................................... $ 34,648 $ 90 $ 7,000 (a) $ 41,738
Accounts payable.................................... 8,691 28 -- 8,719
Accrued compensation and benefits................... 7,352 68 -- 7,420
Other accrued expenses.............................. 7,988 -- -- 7,988
Unearned income..................................... 7,929 50 -- 7,979
---------- ------ ------- --------
66,608 236 7,000 73,844
---------- ------ ------- --------
LONG-TERM LIABILITIES AND DEFERRED CREDITS:
Net deferred pension credits........................ 19,592 -- -- 19,592
Other............................................... 941 2,978 (2,877) (a) 1,042
---------- ------ ------- --------
20,533 2,978 (2,877) 20,634
---------- ------ ------- --------
STOCKHOLDER'S EQUITY:
Common stock........................................ 212 60 (45) (a) 227
Capital in excess of par value...................... 29,630 -- 26,143 (a) 55,773
Retained earnings................................... 42,111 (505) 505 (a) 34,404
(7,707) (d)
---------- ------ ------- --------
71,953 (445) 18,896 90,404
---------- ------ ------- --------
$ 159,094 $2,769 $23,019 $184,882
========== ====== ======= ========
</TABLE>
See Unaudited Pro Forma Combined Financial Information and accompanying Notes to
Unaudited Pro Forma Combined Financial Information.
30
<PAGE> 32
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
(a) To record the DM Publishing Combination, including the issuance of 1,539,000
shares of Common Stock and $7.0 million of notes payable. Solely for the
purpose of determining the amount of intangible assets for this pro forma
presentation, a market value of $17 per share of Common Stock was assumed.
The assumed price per share of Common Stock was based on the expected market
value per share immediately after the Stock Distribution is consummated.
Such market value was estimated through discussions with investment bankers
and through observations of price/earnings multiples of other public media
companies. Based on such assumed value, intangible assets, consisting
preliminarily of goodwill and trade names, amounted to $31.539 million. The
amount of $2.877 million was deducted from other long-term liabilities to
reflect the fact that neither the Company nor DM Publishing will be required
to satisfy the deferred compensation liability recorded by DM Publishing.
Rather, this liability is being satisfied directly by the DM Publishing
Shareholders.
Pursuant to recording the acquisition of DM Publishing, the Company has
reflected the elimination of $505,000, which represents DM Publishing's
accumulated deficit at March 31, 1998.
(b) To reflect interest and amortization expense with respect to the debt and
intangible assets resulting from the acquisition of INDEX and the DM
Publishing Combination.
(c) To eliminate fees paid to former owners of INDEX in 1997 and deferred
compensation provisions under terminated DM Publishing agreements ($2.037
million), to record incremental general and administrative costs of Penton
as a separate public company ($1.2 million in 1997 and $300,000 in 1998), to
adjust income taxes for these expenses, and to provide income taxes for DM
Publishing as if it were a wholly-owned subsidiary of Penton rather than a
Subchapter S corporation.
(d) To reflect cash required to be provided by Pittway to Penton at the time of
the Stock Distribution, pursuant to the DM Publishing Combination Agreement
as if it had occurred at March 31, 1998, and a non-cash dividend equal to
the balance of "Due from parent company."
(e) Net income per share is calculated using 22,739,000 shares, consisting of
21,200,000 shares of Common Stock outstanding and 1,539,000 shares issuable
upon completion of the DM Publishing Combination.
31
<PAGE> 33
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Set forth below is a discussion and analysis by Penton management of the
financial condition and results of operations of Penton. Such discussion and
analysis should be read in conjunction with the financial statements and the
notes thereto included elsewhere in this Prospectus.
OVERVIEW
Penton operates in three business segments: media services, printing, and
direct-mail marketing. The segments are based on Penton's internal organization
and are managed separately due to inherent differences in the nature of these
businesses.
The media services segment serves specific industries and broad markets
with integrated product offerings including trade magazines, trade shows and
conferences, directories, electronic media products (including Web sites and
CD-ROMs), custom publishing, research, databases, and information products.
Penton's publications, trade shows and conferences, and electronic media
products serve the electronics, design/engineering, manufacturing, supply
chain/aviation, mechanical systems/construction, foodservice/hospitality,
government/compliance, and management markets, and, upon completion of the DM
Publishing Combination, will also serve the convenience store/baking market.
Revenues of this segment are generated primarily from advertising, which
accounted for 76% of total revenue in 1997, 78% in 1996, and 77% in 1995. No
single advertiser comprised more than 1.4% of Penton's advertising revenue
during 1997. Penton's top 10 advertisers accounted for only 5% of total revenue
and its top 100 customers accounted for less than 18% of total revenues in 1997.
Trade show and conference revenues represented 5% of total revenues in 1997, 3%
in 1996, and 2% in 1995. The printing segment prints magazines, catalogs,
brochures, and direct-mail pieces for the media services segment and outside
commercial customers. The direct-mail marketing segment serves primarily the
pharmaceutical and business services markets with the ability to design,
produce, print, and mail direct-mail marketing campaigns. Penton management is
currently considering strategic alternatives for its direct-mail marketing
segment.
The DM Publishing Combination Agreement was signed on May 21, 1998.
In 1997, Penton acquired three trade show companies -- INDEX, ISOA, and
A/E/C, -- for a combined purchase price of $48.7 million, plus contingent
payments of up to $12.9 million based on future earnings. The INDEX contingent
consideration is comprised of two groups of contingent loan notes. First, the
Contingent Convertible Loan Notes grant the holders the excess of INDEX's
aggregate net turnover (as defined therein) over UK (POUND)5.3 million for each
of the years 1998 and 1999, up to a maximum UK (POUND)2.2 million. The second
group is the Senior Executive Contingent Loan Notes, which grant the holder an
amount equal to 40% of INDEX's operating profits over UK (POUND)1.75 million for
each of the years 1998 and 1999, up to a maximum of UK (POUND)400,000. The ISOA
contingent payment, if earned, is equal to 5.5 times the earnings before
interest, taxes, depreciation, and amortization ("EBITDA"), as defined therein,
over $1.0 million for each of the years 1998 and 1999, plus 6 times the EBITDA
over $1.0 million in 2000. The ISOA contingent payments are limited to $6.0
million. The A/E/C contingent consideration, if earned, is equal to 130% of the
EBITDA of A/E/C over $1.5 million for each of the years 1997, 1998, and 1999.
The total A/E/C contingent payment is limited to $3.25 million, of which
$655,000 was earned for the year 1997. The acquisitions were accounted for using
the purchase method of accounting and, accordingly, the results of the acquired
companies are included in Penton's Consolidated Statement of Income since their
respective dates of acquisition. Penton believes that these companies will
significantly expand the trade show and conference offerings of Penton's media
services segment. Also, in 1997, Penton sold Modern Office Technology magazine
for $1.0 million in cash.
In 1995, Penton sold Progressive Architecture magazine for $1.0 million in
cash and exchanged its Millimeter magazine, plus $0.9 million in cash, for EE
Product News magazine ("EEPN").
32
<PAGE> 34
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
1997 (UNAUDITED)
Revenues
Total revenues, after elimination of inter-segment sales, increased $3.8
million, or 8%, from $48.7 million to $52.5 million.
Media services revenues increased $3.0 million, or 7%, to $46.6 million.
Advertising revenues from Penton's publishing operations accounted for
approximately $1.5 million of the increase, primarily as a result of the
publication of Hydraulics and Pneumatics' Fluid Power Handbook and Directory,
which is published every other year. Trade show and conference revenues
increased $1.5 million. The increase was due to the strong performance of the
Wireless Symposium & Exhibition/Portable by Design Show and inclusion for the
first time of the operations of the Service Management Europe Show acquired in
December 1997 as part of INDEX.
Printing revenues increased $0.5 million, or 5%, bringing total revenue to
$9.7 million, due principally to the increase of revenues from external
customers.
Direct-mail marketing revenues increased $0.2 million, or 7%, to $2.9
million. The increase was primarily in the related printing operations,
resulting from increased volume from outside customers.
Cost of Production
Penton's total cost of production, after elimination of inter-segment
charges, grew to $23.3 million compared to $22.2 million, representing an
increase of $1.1 million, or 5%.
Media services production costs grew approximately 2%, due to the
publication of the biannual Fluid Power Handbook and Directory, which was not
published in 1997, and the addition of the Service Management Europe Show
acquired in 1997 as part of INDEX.
Cost of production for the printing segment increased approximately $0.4
million due to volume-related growth of outside business.
Direct-mail marketing cost of production increased only 3%, compared to the
7% increase in revenue, due in part to productivity improvements.
Selling, General, and Administrative
Total selling, general, and administrative expenses grew $2.6 million, or
13%, to $22.5 million.
Media services selling, general, and administrative expenses increased
approximately $2.6 million, or 14%. The increase was due to (i) sales volume
growth, (ii) added costs to support two new publications launched in the first
quarter, IW Growing Companies and Penton's Embedded Systems Development, (iii)
costs related to the biannual Fluid Power Handbook and Directory, (iv) expenses
of the Service Management Europe Show held in March 1998 for the first time
under Penton's ownership, and (v) period costs of the newly-acquired trade shows
for which revenues will not be recognized until the trade shows are held in
future periods.
Selling, general, and administrative expenses of the printing segment were
relatively flat.
Direct-mail marketing selling, general, and administrative costs increased
7%, due primarily to an increase in selling costs resulting from the growth in
revenues of its printing operations.
Depreciation and Amortization
Depreciation and amortization increased $0.3 million to $2.0 million. The
higher expense was primarily the result of the amortization of intangible assets
associated with trade shows acquired in December 1997.
Operating Income
Overall, the Company's operating income decreased $0.2 million, or 4%, to
$4.7 million from $4.9 million.
33
<PAGE> 35
Media services operating income decreased $0.3 million, or 7%. The 1998
first quarter was negatively impacted by the added period costs of trade shows
acquired in 1997, start-up costs associated with the two magazine launches, and
higher amortization expense as noted above.
Operating income of the printing segment increased $0.1 million, due to
volume-related growth in outside customer sales.
The direct-mail marketing operations recorded an operating loss of $0.2
million compared to an operating loss of $0.3 million. The improvement was
largely due to the increase in revenue of this segment's printing operations.
Interest Expense
Interest expense increased $0.5 million, due to additional borrowings to
finance the trade shows acquired in December 1997.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE YEAR ENDED DECEMBER 31, 1996
Revenues
Total revenues, after elimination of inter-segment sales, increased $16.3
million, or 9%, from $188.6 million to $204.9 million.
Media services revenues increased $14.5 million, or 9%, to a total of
$181.1 million. Revenues from publishing operations accounted for $9.1 million
of the improvement, due primarily to increased advertising revenues. Advertising
revenues grew 7%, resulting from a 2% growth in page volume and an overall
improvement of 4% in yield per page. In addition, Penton benefited from the
introduction of four publications launched during 1997. Trade show and
conference revenues increased $5.4 million or 100% to $10.8 million due to the
inclusion of a full year of operations of the A/E/C trade shows, acquired in
January 1997.
Revenues from the printing segment increased $1.1 million, or 3%, to $39.0
million. The increase in this segment was principally due to the addition of
several new third party customers, which accounted for a 19% increase in outside
revenue. The media services segment continued to be the printing segment's
principal customer, accounting for $28.6 million of its revenue compared to
$29.0 million.
Direct-mail marketing revenues increased $0.2 million, or 1%, due to a
strong performance from its related printing operation, which experienced a 25%
or $1.8 million increase in revenue from outside customers, and the continued
growth of this segment's advertising agency business. However, the increases
were offset by a decline in revenues of the direct marketing medical group. This
group's revenues declined for the second year in a row as customers continued to
shift their focus from direct marketing of pharmaceutical programs to broader
consumer-oriented mass media advertising. In 1996, management undertook a number
of initiatives to reposition and redirect its business and launched an
advertising agency group to offset the revenue decline of its direct marketing
medical group. The advertising agency group experienced a 39% or $0.4 million
increase in revenue during 1997.
Operating Expense
Operating expenses for Penton, after elimination of inter-segment charges,
increased $9.5 million, or 6%, from $170.1 million to $179.6 million.
Cost of Production
Media services cost of production increased $1.5 million, or 2%, to $80.4
million, due primarily to additional costs related to the inclusion of a full
year's operations of A/E/C, new product launches during the year, and
volume-related growth. These increases were partially offset by savings
resulting from productivity improvements and lower paper costs. As a result, the
ratio of production costs to revenues improved 3%.
Printing costs of production increased $0.6 million, or 2%, to $3.5
million, which was primarily attributable to the increase in volume of outside
sales.
Direct-mail marketing cost of production increased $0.4 million, or 5%, to
$9.3 million. The increase was primarily attributable to the growth of printing
and advertising agency group sales volume offset by a reduction
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in costs attributable to lower sales volume of the direct marketing medical
group. In addition, overall costs were negatively impacted by the expensing of
development costs associated with a physicians retraining program launched in
1996.
Selling, General, and Administrative Expense
Selling, general, and administrative costs of media services increased $5.3
million, or 8%. The increase was due principally to an increase in selling costs
resulting from the growth in revenues, inclusion of a full year's operations of
the A/E/C trade shows, and additions of staff to support new product launches.
Selling, general, and administrative expenses of the printing segment
increased $0.2 million, or 11%, primarily from selling costs associated with the
increase in sales volume.
Direct-mail marketing selling, general, and administrative costs increased
$0.4 million as a result of increased selling costs associated with higher sales
volume and an expanded number of customer presentations and related promotion
costs.
Depreciation and Amortization
Depreciation and amortization expense increased $0.6 million to $6.5
million. The higher expense was primarily the result of capital equipment
additions and increased amortization of intangible assets associated with the
A/E/C trade show, acquired in January 1997.
Operating Income
Overall, Penton's operating income increased $6.8 million, or 37%, to $25.3
million compared to $18.5 million. Operating income as a percentage of revenue
increased to 12% from 10%, reflecting the benefits achieved from increased
revenue, favorable shifts in product mix including the addition of the A/E/C
trade shows, and improved productivity.
Media services operating income increased $7.2 million, or 41%, to $24.9
million. In 1995, the Company implemented a number of programs to improve
productivity, reduce costs, and streamline operations. These efforts continued
in 1996 and into 1997, resulting in operating savings. When combined with the
favorable impact of revenue growth, productivity improvement and reduced paper
costs, operating income improved from 11% of total media services revenue to
14%.
Operating income from the printing segment improved 21% to $1.5 million.
The increase was primarily due to sales volume increases coupled with the
benefits of reduced paper costs.
Direct-mail marketing operating losses increased $0.6 million to $1.1
million from $0.5 million, which was due principally to the decrease in revenue
of the direct marketing medical group and the expensing of development costs
associated with a physicians retraining program.
Other Income (Expense)
In 1997, other income (expense) included a $1.0 million gain on the sale of
Modern Office Technology magazine offset by $0.8 million of interest expense
incurred as a result of borrowings used to finance acquisitions.
Effective Tax Rates
The effective tax rates were 41.7% and 40.7% in 1997 and 1996,
respectively. An analysis of Penton's effective tax rate appears in Note 7 to
Penton's Consolidated Financial Statements.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO THE YEAR ENDED DECEMBER 31, 1995
Revenue
Total revenues, after elimination of inter-segment sales, increased $8.7
million, or 5%, from $179.9 million to $188.6 million.
Media services revenues increased $8.3 million, or 5%, to a total of $166.6
million. Revenues from publishing operations accounted for $6.6 million of the
improvement and were primarily attributable to
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increased advertising revenue. This increase was offset by a reduction in
revenue of approximately $4.2 million due to the sale of Progressive
Architecture magazine in December 1995. Advertising revenue grew $8.3 million,
or 6%, due to a 2% gain in advertising pages and a 4% increase in yield per
page. In addition, 1996 included the revenue from Penton's biannual directory,
Hydraulics and Pneumatics' Fluid Power Handbook and Directory, which was not
published in 1995. Trade show and conference revenues increased $1.7 million, or
46%, due to the overall growth of Penton's existing trade show and conference
business as well as the introduction of the HVAC Comfortech Show.
Revenues from the printing segment increased $1.3 million, or 4%, to $37.9
million, primarily from increased demand from the media services segment.
Outside commercial sales were even.
Direct-mail marketing revenues increased $0.5 million, or 4%, to $13.2
million from $12.7 million. In 1996, the Company launched its agency media group
business, which generated revenues of approximately $1.1 million. This increase
was offset by a reduction in revenue of the direct marketing medical group of
approximately $0.6 million. Penton introduced a physician's retraining program
during 1996 which generated approximately $0.3 million in revenue from course
offerings.
Operating Expenses
Operating expenses of Penton, after elimination of inter-segment charges,
increased $2.1 million, or 1%, from $168.0 million to $170.1 million.
Cost of Production
Media services cost of production decreased $0.8 million, or 1%, to $79.0
million. The publishing operation's costs decreased $1.5 million offset by an
increase in trade show and conference production costs of $0.7 million. The
reduction of $1.5 million was due to the elimination of approximately $3.3
million of costs related to Progressive Architecture magazine, which was sold in
December 1995, partially offset by other publishing cost increases of $2.0
million in 1996, primarily attributable to sales volume increases. The increase
in trade show and conference related production costs of $0.7 million was due to
the introduction of a new event in 1996 as well as to an overall improvement of
other trade show and conference revenue.
Cost of production of the printing segment increased $1.4 million, due to
increased sales volume net of the impact of significantly lower scrap paper
sales because of softening paper costs.
Direct-mail marketing cost of production increased $1.1 million, or 15%, to
$8.9 million, principally attributable to one-time charges relating to
development costs of a newly-created physicians retraining program and also
attributable to increased volume.
Selling, General, and Administrative
Selling, general, and administrative costs increased $3.2 million, or 5%.
The increase was generally due to greater selling-related costs resulting from
higher sales activity for the year, additional staff relating to new product
launches, and a general increase in the overall cost of doing business, offset
by the elimination of costs associated with Progressive Architecture magazine,
sold in December 1995.
Depreciation and Amortization
Total depreciation and amortization expense increased $0.1 million due to
capital equipment additions.
Operating Income
Total operating income increased $6.6 million, or 55%, to $18.5 million
compared to $11.9 million, primarily as the result of increased revenue and
improved productivity.
Operating income from media services increased $8.3 million, or 88%, to
$17.7 million from $9.4 million. The improvement was attributable to overall
revenue growth, improved product mix of publications and trade show operations,
as well as the full year's benefit of productivity improvement programs
implemented in 1995.
Operating income from the printing segment declined $0.2 million due in
large part to a significant reduction in scrap paper sales.
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Direct-mail marketing operating income declined $1.5 million resulting in
an operating loss of $0.5 million compared to an operating profit of $1.0
million. This decrease was directly related to the decrease in revenue of the
direct marketing medical group, which had historically enjoyed higher margins
compared to those of the advertising agency. Operating income was further
adversely impacted by development costs associated with the start up of a
physicians retraining program. In addition, the related printing operation's
operating income decreased due to lower pass-through demand for printing
services from the direct marketing medical group.
Other Income (Expense)
Other income (expense) decreased $3.1 million. Other income (expense) in
1995 included a $1.7 million gain from the sale of Progressive Architecture
magazine and a $1.4 million gain from an insurance settlement resulting from a
municipal water main break that flooded a substantial portion of Penton's
Cleveland headquarters. Even though part of the operation was disrupted, Penton
was able to resume operations quickly with no material loss of business.
Effective Tax Rates
The effective tax rates were 40.7% and 42.8% in 1996 and 1995,
respectively. An analysis of Penton's effective tax rate appears in Note 7 to
Penton's Consolidated Financial Statements.
FOREIGN CURRENCY
Penton translates the results of its foreign operations into United States
dollars according to Statement of Financial Accounting Standards No. 52, Foreign
Currency Translation. Assets and liabilities of Penton's foreign entities are
translated using the current exchange rate at the balance sheet date. Capital
accounts are translated at historical exchange rates. Net sales and expenses of
Penton's foreign entities are translated using weighted average exchange rates
which approximate the exchange rates at the transaction dates. There were no
significant transaction gains or losses during 1997 or the three months ended
March 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Historically, Penton has generated positive cash flow from operations and
has utilized the majority of such cash flows to invest in capital assets,
finance acquisitions, reduce debt, and pay dividends to Pittway.
Penton's cash flow from (used in) operating activities was $(1.0) million,
$0.6 million, $23.2 million, $20.5 million and $7.4 million for the three months
ended March 31, 1998 and 1997 and years 1997, 1996, and 1995, respectively.
In the first quarter of 1998, Penton used cash in continuing operations,
primarily attributable to the timing of cash flows as Penton added fixed
administration and direct show expenses for its acquired trade show companies
only partially offset by related advance deposits. In each of the prior years,
cash flow from operating activities was primarily derived from earnings before
depreciation and amortization. Increases in accounts payable in 1996 and 1997 as
well as decreases in accounts receivable, inventories, and deposits in 1997
contributed to such cash flow.
For each of the years 1997, 1996, and 1995, Penton's investment activities
affecting cash flow consisted of capital expenditures and the net assets of
businesses acquired, offset by net proceeds from the sale of certain
publications. In the first three months of 1998, and in the years 1997, 1996,
and 1995, capital expenditures were $1.1 million, $5.5 million, $4.8 million,
and $5.0 million, respectively. Also, in 1997, Penton acquired the net assets of
three trade show companies for a combined purchase price of $48.7 million,
offset by the proceeds from the sale of Modern Office Technology magazine for
$1.0 million. In 1996, Penton's investment activities include the exchange of
Millimeter magazine, plus $0.9 million in cash, for EEPN magazine and the sale
of Progressive Architecture magazine for $1.0 million in cash.
In 1997, Penton incurred total short-term debt of $48.3 million to finance
the acquisitions of the three trade show companies, of which $14.0 million was
repaid during 1997.
The majority of Penton's operating cash requirements have historically been
funded by operations and by Pittway. Penton's management anticipates that the
primary source of funds to fulfill such needs in the future
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will be internally generated cash from operations and borrowings where
necessary. Penton's investments by and advances to Pittway include net after-tax
cash generated by (or used in) the operations of Penton of approximately $3.5
million in 1997, $15.9 million in 1996, and $1.7 million in 1995. Historically,
Penton has neither earned nor been charged interest on these funds.
Penton's management anticipates additional cash expenditures as a result of
being a separate public company. Such expenditures could include, but may not be
limited to, the payment of dividends, financing costs of new debt, and
administrative costs.
Penton presently is negotiating with various banks to obtain commitments to
establish unsecured, committed lines of credit. These credit lines will be used
to replace existing notes payable and to meet short-term cash needs. It is a
condition to the Stock Distribution and the DM Publishing Combination that
arrangements for such lines be finalized.
Penton's management anticipates that Penton's long-term financing needs
will be met with internally generated cash flows and financing arrangements with
lenders, if necessary.
Penton may, in the future, require additional credit facilities or
issuances of corporate debt or equity securities in connection with acquisitions
or otherwise. Any debt incurred or issued by Penton may be secured or unsecured,
have a fixed or variable rate of interest, and be subject to such terms as
management deems prudent. In addition, Penton's future operating performance and
ability to meet its financial obligations will be subject to future economic
conditions and to financial, business, and other factors, many of which will be
beyond Penton's control.
SEASONALITY
Historically, Penton has not experienced significant seasonality in its
business. Nevertheless, in 1997, Penton experienced a greater growth in the
second quarter when compared with the other three quarters of the year due
primarily to the inclusion of the A/E/C trade show held in June 1997. Due to the
addition of the ISOA and INDEX trade shows at the end of 1997, Penton
anticipates a greater growth of revenue in the second and fourth quarters
because the significant portion of the trade show and conference revenues will
be generated in the second and fourth quarters of the year.
INFLATION
Generally, while the impact of inflation on Penton's overall results of
operations has not been significant in recent years, paper prices have
fluctuated over the last few years. Paper prices began to rise in 1994,
increased significantly in 1995, dropped significantly in 1996 and, to a lesser
extent, in 1997. It is expected that paper prices will increase in 1998.
Management continually monitors the impact of inflation on its operations and
attempts to mitigate the impact through productivity and technological
improvements, cost containment programs, and by increasing selling prices over
time as allowed by market conditions. Nevertheless, there can be no assurances
that Penton can recoup cost increases by passing them on to its customers.
YEAR 2000 ISSUE
Penton continues to assess the extent of its risks related to processing
year 2000 information. All software applications that may be unable to interpret
the year 2000 have been identified and Penton has already commenced work to
modify or replace those applications. Penton believes that all necessary work to
make its systems year 2000 compliant will be completed on time. In addition, the
estimated costs to modify or replace its applications are not considered
material to Penton and should not involve a significant amount of Penton's
internal resources.
Penton is in the process of working with its vendors regarding their
progress in identifying and addressing issues related to the year 2000. Penton
is in the process of obtaining commitments from all major vendors on whose
software Penton may be dependent that they have plans in place to be compliant
before processing of information related to year 2000 would be required.
Although no assurance can be given that all of these third-party systems will be
year 2000 compliant, Penton believes that the risk is not significant.
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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.
CHANGES IN ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board (the "FASB") issued
Statement No. 133, "Accounting for Derivatives Instruments and Hedging
Activities" ("SFAS 133"). This statement establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as derivatives), and for
hedging activities. SFAS 133 requires that an entity recognize all derivatives
as either assets or liabilities in the statement of financial position and
measure those instruments at fair value. SFAS 133 is required to be adopted by
Penton in the third quarter of 1999. Adoption of this statement is not expected
to have a material impact on Penton as Penton currently has no derivative
instruments.
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BUSINESS
For purposes of the following discussion, the business of Penton includes
the business of DM Publishing, unless otherwise expressly indicated.
OVERVIEW
Founded in 1892 by John Augustus Penton, Penton is a leading business media
company. Penton's principal media platforms, including magazines, trade shows
and conferences, and electronic media products, provide proprietary information
to business users, and integrated marketing solutions to industry suppliers.
Penton's publications, trade shows and conferences, and electronic media
products serve the electronics, design/engineering, manufacturing, supply
chain/aviation, mechanical systems/construction, foodservice/hospitality,
government/compliance, and management markets, and, upon completion of the DM
Publishing Combination, will also serve the convenience store/baking market.
Penton's diverse array of products provide business-to-business marketers with
the tools to communicate effectively with their customers, and provide current
information to the markets served. Penton had total revenue of approximately
$205 million in 1997.
Widely recognized as a publisher of high-quality business and trade
magazines, Penton has, in recent years, diversified its media platforms to
include trade shows and conferences, electronic media products (including Web
sites and CD-ROMs), custom publishing, research, databases, and information
product sales. Penton also owns a printing plant, Penton Press, which prints
nearly all of Penton's publications and approximately 50 outside publishers'
magazines, and a direct-mail and marketing services business, Curtin &
Pease/Peneco.
Penton is the fifth largest specialized business magazine publisher in the
United States, according to the American Business Press, the leading association
for the business publishing industry. Penton publishes 42 national business and
trade publications with a combined circulation of over 2.7 million subscribers
worldwide. Of the 27 Penton magazines that serve measured, competitive market
segments, 17 are ranked either first or second in their markets. Some of
Penton's leading magazine brands include Air Transport World, American
Machinist, Computer-Aided Engineering, Electronic Design, IndustryWeek, Machine
Design, Microwaves & RF, New Equipment Digest, and Wireless Systems Design.
Penton's magazines accounted for approximately 74% of Penton's total revenue in
1997.
Penton has aggressively expanded its presence in the trade show and
conference business in recent years, and currently operates 63 trade shows and
conference events. Penton acquired three trade show companies in 1997: A/E/C was
acquired in January and INDEX and ISOA were acquired in December. Penton's trade
shows include the A/E/C SYSTEMS International Shows, Computers for Contractors,
Computers in Manufacturing, International Leisure Industry Week, the North
American Warehousing & Distribution Exposition & Conference, and the Wireless
Symposium & Exhibition. Conferences include the America's Best Plants Series and
the Global Leadership Forum. Trade shows and conferences accounted for
approximately 5% of Penton's total revenue in 1997. On a pro forma basis, had
INDEX and ISOA been acquired in January 1997, Penton's trade show and conference
revenue would have accounted for 12% of Penton's total revenue in 1997, and
Penton would have sold approximately 1.4 million net square feet of exhibit
space to over 5,500 exhibiting companies.
In addition to trade shows and conferences, electronic media products have
expanded Penton's service to its market segments. As business-to-business use of
the Internet has grown, Penton's product arrays have been expanded to include
World Wide Web sites that provide both information resources and market access
to advertisers. Electronic media products also include editorial content and
statistics, directories, and product selection information on CD-ROMs and
diskettes. In December of 1997, Penton signed a joint venture agreement with
Findlay Publishing of the United Kingdom to produce and market Design Selector
Global, a global database of component product information for mechanical,
electro-mechanical, and electronics engineers that will be accessible via the
Internet. Revenues from electronic media products accounted for less than 1% of
Penton's total revenue in 1997.
In addition to publications, trade shows and conferences, and electronic
media, Penton's business includes marketing and business development services
such as databases, direct-mail marketing, custom
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communications, and research services. These services provide integrated market
access to Penton's advertiser customers by facilitating the flow of information
between them and their customers.
INDUSTRY
Economic Trends
The robust United States economy has favorably affected the business media
industry in recent years. As companies grow, they use advertising in print
publications, exhibits at trade shows and conferences, and electronic media to
communicate with their customers and potential customers.
Global economic trends also influence business media. As United States
companies penetrate international markets, they seek communications partners
that can help them sell their products and services. In addition, professionals
and managers in international markets have an increasing need for business
information. As a result, business media companies are producing international
editions of their titles, launching trade shows in international venues, and
designing their electronic media products to serve global audiences.
Performance
The business media industry has benefited from these trends. According to
the 1997 Veronis Suhler & Associates Communications Industry Forecast,
business-to-business communications was the fifth fastest growing segment of the
overall communications industry for the period 1991 to 1996, growing at a
compound annual growth rate ("CAGR") of 7.4% during that period. Total spending
in business-to-business media was $16.5 billion in 1997, up from $15.2 billion
in 1996, according to this report. The report forecasts a 7.0% CAGR for business
magazines from 1997 to 2001, inclusive, and a 10.4% CAGR for trade shows and
exhibitions over the same period.
The business-to-business media industry in the United States currently
includes about 1,500 trade magazine publishing companies that publish more than
5,000 titles. In addition, this industry produces approximately 3,900 trade
shows that are operated by integrated media companies, independent show
operators and, increasingly, financial owners, and an additional 2,100
association-owned shows.
Despite an active merger and acquisition market over the past few years,
business media remains a fragmented industry with a wide array of owners.
Furthermore, there is significant organic growth of new products, such as trade
magazines, trade shows, conferences, and online services, as new markets and
technologies develop. With relatively little capital required to launch new
products, business media embrace entrepreneurial organic growth.
Advertising revenues on Internet Web sites totaled $906.0 million in 1997,
according to the Internet Advertising Bureau. Jupiter Communications forecasts
Web site advertising will grow to a volume of $1.9 billion in 1998, $3.0 billion
in 1999, and $4.36 billion in 2000.
The demand for objective, current information and analysis on topics that
are relevant in the market sectors served by business-to-business publications
has increased significantly in recent years. Marketers' need to communicate with
their customers, through advertising designed to increase sales and build brand
loyalty, has increased commensurately. Business-to-business, market-focused
media provide communications channels that connect marketers with a targeted
group of customers.
Print Publications
Publishers of controlled circulation titles, including Penton, have evolved
into broadly integrated media companies in response to major trends: (i)
marketers are increasingly pursuing integrated marketing strategies, i.e., the
use of a variety of tools for communicating with targeted business audiences;
(ii) end-users, whose professional roles are more demanding, are seeking more
information to meet their specific professional needs, as well as a variety of
effective channels for receiving information; and (iii) digital technology
continues to make rapid advances, which have fed the development of the Internet
and the creation and use of CD-ROMs and other products.
In general, magazine publishers generate the majority of their revenues
from the sale of advertising. Penton's advertising revenues, as well as those of
business magazines in general, are dependent upon general economic cycles.
Historically, advertising revenues increase during economic recoveries, and
decrease during
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both general economic downturns and regional economic recessions. Despite the
strength of the current economy, however, business publishers are experiencing
increasing pressure on advertising rates. In the event of a general economic
downturn or a recession in the United States, Penton's advertisers may reduce
their advertising budgets or intensify their attempts to negotiate lower
advertising rates. As compared to general-interest magazines, however, Penton
believes that its advertising revenues are relatively resistant to changes in
general economic conditions due to the diversity of markets served, its
reputation for high-quality, special-interest editorial content, and the fact
that many advertisers market products that are directly related to the editorial
content of the magazines in which they advertise.
In recent years, magazine publishers have sought to diversify their
revenues and expand the influence of their existing brands by developing new
revenue streams in addition to advertising. In general, magazine publishers have
sought to expand the use of their magazines' editorial content into different
media. The integrated portfolios of business-to-business media companies include
print products such as magazines and newsletters, which offer readers the
convenience of portable information while offering advertisers targeted
audiences; trade shows and conferences, which facilitate face-to-face
interaction between sellers and buyers that often results in product orders; and
electronic media, including World Wide Web sites, CD-ROMs, and customized
Internet-based information delivery services, which offer interaction with
market experts, content depth and timeliness, and the potential for making
purchases electronically. In 1997, Penton derived approximately 7% of its
revenue from its various ancillary products and services, which include
databases, electronic products, paid subscriptions, reprints, custom publishing,
and research. Penton believes its portfolio of magazines provides opportunities
to develop ancillary revenues due to the targeted nature of the magazines'
editorial content.
Trade Shows
A trade show can be described as a face-to-face version of a print
publication. Trade show attendees, like readers of print publications, receive
product information and content in the form of exhibits, conferences, and other
ancillary forums. Producers of trade shows and conferences generate revenue from
exhibit space sales, advertising, sponsorships, and conference and general
attendance fees. Trade shows and conferences allow sellers to make face-to-face
sales presentations to significant numbers of qualified buyers in a short period
of time. Trade show attendees include manufacturers and developers, sales and
distribution personnel, and large-volume end-users. Industry leaders have
consistently used trade shows to introduce new products to purchasers in the
markets they serve.
Trade shows have become an increasingly important element of overall
marketing strategy for vendors in many markets. Companies consider trade shows
one of the most effective media for generating and closing sales, second only to
direct selling. Exhibit space revenues from trade shows were approximately $4.8
billion in 1997, a 14% increase over 1996, according to Tradeshow Week ("TSW")
magazine research. In 1997, exhibit square footage rose 7%, the number of
exhibiting firms increased 5% and attendance increased 6% over 1996, according
to TSW.
Electronic Media
The proliferation of Web sites and the growing number of users combine to
make the Internet an increasingly significant advertising and brand-building
vehicle. The Internet enables marketers to deliver targeted messages because it
provides the ability to track user behavior and offers the potential for
permitting online transactions. The advertising-based business model for online
services, which is similar to those of both print and television media, involves
the payment of advertising fees to Internet content providers. These fees are
based on the demographics and purchasing habits of the audience and on the
quantity and positioning of advertisements delivered. Web sites provide a forum
where sellers can deliver product information and advertising to a targeted
customer base. Penton expects that the Internet market, like the publications
market, will continue to grow as a platform for product advertising.
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BUSINESS STRATEGY
Penton's business strategy is to grow revenues, cash flow, profitability,
and margins by being the preferred provider of integrated media services in
selected market segments. Major components of this strategy include:
- Focusing on Core Market Segments
Penton's primary strategy is to be the preferred information provider in
selected market segments by producing broad and diverse arrays of media
properties that provide integrated marketing solutions to the vendors in such
market segments. In pursuing this strategy, Penton has (i) launched or purchased
trade shows and conferences that fit strategically with, and add value to, its
magazines, (ii) added electronic media products and services to meet the
expanding information needs of its readers and information users, (iii) made
acquisitions in selected markets to strengthen its competitive position, and
(iv) disposed of magazines that were not market leaders. Penton intends to build
the strength of its core portfolio of leading information brands by enhancing
the quality of their editorial content and Penton's marketing services, and
extending its existing brands into other media. In 1997, Penton complemented its
core publications in the design/engineering market, the wireless segment of the
electronics market, and the manufacturing management market by acquiring or
expanding existing trade shows and expanding online content and Web sites.
Management believes that maintaining or achieving a leading position as a
provider of diverse integrated media services in these and other markets served
will enhance its competitive position and profitability.
- Diversifying Revenue Streams
As with most business-to-business publishing companies, Penton historically
derived nearly all of its revenues from advertising in its publications.
Penton's focus on controlled circulation business-to-business magazines limited
the opportunity to capture the increasing communications budgets its advertisers
were allocating towards marketing and promotion vehicles such as trade shows,
direct-mail, customized company magazines, and electronic media. Consequently,
Penton shifted its strategy to focus on enhancing its revenues from other
sources. Penton believes that significant opportunities exist to diversify
revenues by leveraging the editorial content and the nationally-recognized brand
names of its existing publications through trade shows and conferences,
licensing arrangements, strategic joint ventures, circulation list rentals,
affinity group marketing, and electronic media. For example, Penton's current
business relationships include (i) an agreement between Electronic Design
("ED"), a Penton publication, and CCI Asia-Pacific Ltd., a leading Hong
Kong-based business publishing company, to produce a Chinese edition of ED and
(ii) an agreement between Air Transport World ("ATW"), a Penton publication, and
CCI Asia-Pacific Ltd. to produce a Chinese edition of ATW. Penton believes that
increasing the percentage of revenue generated by trade shows and conferences,
which characteristically produce higher margins and are less vulnerable to
economic cycles than advertising, is a viable means to increasing profitability
and margins.
- Increasing Positions in Growth Markets
Penton continues to monitor trends both in the markets it currently serves
and in emerging markets in order to identify new audiences for
business-to-business information. When Penton identifies appropriate growth
opportunities, it intends to launch or acquire publications and other media
products that are attractive to advertisers, readers, and other information
users. Penton has established an emerging technology initiative to identify
media opportunities in emerging technology markets at an early stage through
either acquisition or launch.
- Leveraging Administrative Services and Reducing Costs
Management believes it can leverage its administrative and overhead
services to enhance the profitability of acquired businesses and new launches.
In addition, management continues to identify cost reduction opportunities,
including (i) using technology to re-engineer processes, including circulation,
production, and graphics; (ii) outsourcing functions in which Penton is not
cost-effective; (iii) increasing productivity; (iv) centralizing certain
departments; and (v) decentralizing functions that are more cost-effectively
conducted at the operating group level. Management believes that effective
implementation of such measures enhances Penton's competitive position and its
overall profitability.
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- Completing Strategic Acquisitions
Penton regularly evaluates potential acquisitions to expand and strengthen
its activities in selected markets. Penton believes that the acquisition of
other media businesses complements its existing services and improves its
competitive position with current and potential customers. Consistent with this
strategy, Penton acquired three trade show businesses in 1997 and has entered
into the DM Publishing Combination Agreement. The primary focus of Penton's
acquisition strategy is to strengthen current market positions and to add value
to the acquired business through existing market knowledge and core
competencies. Acquisitions of business media properties that would provide
Penton with a premier position in new attractive markets are also part of
Penton's acquisition strategy. Penton currently has no binding agreement or
arrangement relating to the acquisition of businesses or assets, other than the
DM Publishing Combination Agreement.
- Expanding Market Positions Globally
Penton intends to leverage its established brands in key overseas markets,
focusing on those markets whose size and growth potential will support its
strategy of developing broad and diverse media arrays. Management intends to
further expand internationally through overseas launches of proven United States
properties, joint ventures and licensing arrangements with local operating
partners, and selective acquisitions. Two acquisitions completed in 1997 provide
Penton with opportunities to expand internationally. INDEX, a United
Kingdom-based producer of trade shows for the information technology,
manufacturing, and leisure markets, provides Penton with a platform for
expanding its existing successful United States shows in the United Kingdom and
on the European continent. ISOA, which is experienced in producing trade shows
in Latin America, offers opportunities for international expansion in the
emerging Mexican and Latin American markets, particularly in the
heating/ventilating/air conditioning market, in which Penton already publishes
successful magazines and produces a trade show. Penton also has a cooperative
agreement with a leading Hong Kong-based business publishing company, CCI-Asia
Pacific Ltd., to provide Chinese-language editions of Electronic Design and Air
Transport World.
- Developing Electronic Media Products and Competencies
Penton intends to combine its Internet presence, which currently includes
31 Web sites, and its growing expertise in creating CD-ROMs with its broad
experience in developing high-quality editorial content in order to expand its
existing audiences of information users, to continue to develop new audiences,
and to develop new sources of advertising revenue. Penton believes that the
large existing audience for its electronic media products, combined with its
publishing experience, gives it a competitive advantage in identifying,
acquiring, and developing new electronic media products and services. In
December of 1997, Penton signed a joint venture agreement with Findlay
Publishing of the United Kingdom to produce and market Design Selector Global, a
global database of component product information for mechanical,
electro-mechanical and electronics engineers that is accessible in both CD-ROM
and Internet formats.
RECENT ACQUISITIONS AND DIVESTITURES
Penton acquired three trade show companies in 1997. A/E/C produces
conference and trade show events for computer and high-tech solutions in the
architectural, engineering, and construction industries. ISOA produces 24
industrial trade shows in the United States and Latin America that focus on the
machine tool, plant maintenance, supply chain, and heating/ventilating/air
conditioning markets. INDEX is an owner and producer of eight trade shows
serving the computer, manufacturing, and leisure markets in the United Kingdom.
Immediately following and as a condition to the Stock Distribution, Penton
will acquire DM Publishing. DM Publishing publishes three magazines in the
baking and convenience store markets: Modern Baking, Baking Management, and
Convenience Store Decisions. It also produces a number of related special
editions and directory and show issues serving the baking and convenience store
markets. See "DM Publishing Combination Agreement."
Penton's strategy to focus on core market segments led to three
dispositions in the 1990s. In 1995, Penton sold Progressive Architecture
magazine, which was a stand-alone title for Penton in the market it served. Also
in 1995, Penton exchanged its Millimeter magazine, which was a market leader but
a standalone in serving the
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<PAGE> 46
motion picture, television, and video production industry, for EEPN magazine, a
property that strengthened Penton's portfolio in the electronic engineering
market. In 1997, Penton sold Modern Office Technology magazine because the
market served did not fit Penton's strategic plans.
SOURCES OF REVENUE
A significant amount of Penton's revenues is derived from advertising
sales, with lesser amounts derived from sources such as trade shows and
conferences, ancillary products and services, printing, and direct-mail
marketing. The following table sets forth the sources and amounts of Penton's
revenue for the three fiscal years ended December 31, 1997 (dollars in
millions):
<TABLE>
<CAPTION>
SOURCE 1997 1996 1995
------ ------ ------ ------
<S> <C> <C> <C>
Advertising............................................ $156.0 $146.4 $138.1
Trade Shows and Conferences............................ 10.8 5.4 3.7
Ancillary Products & Services.......................... 14.4 14.9 16.5
Penton Press........................................... 10.5 8.9 8.9
Direct-Mail Marketing.................................. 13.2 13.0 12.7
------ ------ ------
$204.9 $188.6 $179.9
====== ====== ======
</TABLE>
Advertising Sales
Advertising revenues from Penton's publications accounted for approximately
76% of Penton's total revenues in 1997. Penton markets advertising space in each
of its publications by assuring advertisers that they will reach a valuable,
qualified audience of professionals and managers who are known to have an
interest in purchasing products or services in the market segment covered.
Penton's targeted publications enable advertisers to reach their customers and
potential customers cost effectively. Advertising rates are based on the size of
the circulation within the targeted market segment as well as on competitive
factors. Penton's publications compete for advertising on the basis of the
market's perception of the niche served by the magazine, readers' preference for
the publication's content, editorial quality, quantity, and quality of
circulation, reader response to advertisers' products and services, the
effectiveness of sales teams, customer service, and advertising rates.
Each of Penton's publications has its own advertising sales team and rate
structure, although advertisers may qualify for discounts based on spending
patterns across multiple Penton publications. Because Penton provides a single
source for advertisers to reach several market segments, Penton enables
advertisers to be more cost efficient in their advertising purchases.
Trade Shows and Conferences
Revenues from Penton's trade shows and conferences accounted for
approximately 5% of Penton's total revenues in 1997. Trade shows generate income
primarily from the fees exhibitors pay to rent booth space, which must be paid
in full before the events open. Registration fees for attendance at conference
sessions generate additional revenue. Trade shows and conferences generally
produce higher profit margins than print products and, unlike advertising
revenue, revenues generated by trade shows historically have been relatively
stable in economic downturns. Penton believes that revenues from trade shows and
conferences will continue to increase as a percentage of total revenues.
Ancillary Products and Services
Revenues from ancillary products and services, which include databases,
electronic products, paid subscriptions, reprints, custom publishing, and
research, accounted for approximately 7% of Penton's total revenues in 1997.
With the growth of electronic publishing, Penton believes there will be
increased opportunities to market editorial content from Penton's publications
in different formats, and to develop additional content for such formats. Penton
has established 31 Web sites and expects to establish several more in the
future. In addition, Penton offers several of its market-focused product and
service directories on CD-
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<PAGE> 47
ROM and diskette. Penton believes that electronic media offer opportunities to
generate additional revenues through increased advertising, sponsorship sales,
and access fees paid by users.
Penton Press
Revenues from Penton Press accounted for approximately 5% of Penton's total
revenues in 1997 after intercompany eliminations. Penton Press not only prints
nearly all of Penton's magazines, but also prints approximately 50 titles of
other publishers.
Direct-Mail Marketing
Revenues from Curtin & Pease/Peneco, Penton's direct-mail marketing
subsidiary, accounted for approximately 6% of Penton's total revenues in 1997,
of which 3% related to its direct-mail marketing operation and 3% to its related
printing business, Feather Fine. Penton plans to reduce the significance of its
direct-mail marketing and related printing operations as a revenue source.
Penton management is currently considering strategic alternatives for Curtin &
Pease/Peneco and Feather Fine.
INFORMATION PRODUCTS AND SERVICES
Publications
Magazines. Penton is the fifth largest specialized business magazine
publisher in the United States, according to the American Business Press, the
leading association for the business publishing industry. Penton publishes 42
national business and trade publications with a combined circulation of over 2.7
million subscribers worldwide. Of the 27 Penton magazines that serve measured,
competitive market segments, 17 are ranked either first or second in their
respective markets. Efficiencies of centralized circulation, fulfillment, and
other back office services enable new titles to be spun off from existing
titles, or acquired and integrated. Penton's publications serve the specialized,
professional information needs of subscribers who work in specific segments of
markets including design/engineering, electronics, manufacturing, supply
chain/aviation, mechanical systems/construction, foodservice/hospitality,
government/compliance, and management markets, and, upon completion of the DM
Publishing Combination, will also serve the convenience store/baking market.
Penton's magazines are controlled-circulation, business-to-business trade
publications that are distributed free of charge to qualified subscribers in
targeted market segments. These publications generate revenues predominantly
from the sale of advertising space. In 1997, advertising revenues from all of
Penton's magazines accounted for 74% of Penton's total revenues.
In a controlled-circulation publication, circulation is limited to
qualified subscribers who have verified their responsibility for certain
specific job functions, such as purchasing influence or purchasing authority in
the market served by the publication. The publisher selects these recipients
based on defined qualifying characteristics, thereby enabling advertisers to
reach those individuals most likely to be interested in purchasing the products
advertised. Penton surveys subscribers to its controlled-circulation
publications annually to verify their continued qualification. Circulation
information for the majority of Penton's publications is audited each year by
BPA International, a nationally recognized auditor of magazines. These audits
verify that Penton has accurately identified the number and job responsibilities
of qualified subscribers and that those subscribers are in fact eligible to
receive the relevant publication under the standards that Penton has
established.
Editorial content is written by in-house editorial staff and freelance
authors, well-known in the market segments that their magazines serve. Penton
believes that its publications have established reputations for authoritative
and reliable journalism among their readers and within the market segments they
serve. Each Penton publication has its own editorial staff, including editors,
designers, and production personnel. To preserve the editorial integrity of each
publication's news reporting and analysis, Penton seeks to maintain strict
separation between the editorial and sales staffs of each publication. Penton
believes that its reputation for objective, fair, and credible editorial content
contributes significantly to its success.
Penton's editorial staffs meet frequently with readers of their
publications to maintain a current understanding of the information needs and
interests of those readers and thereby serve them more effectively. Penton
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. Many of Penton's editors and
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<PAGE> 48
contributors are recognized as experts in their field and are regularly
contacted by the general press to comment on developments and trends in their
respective markets.
The following is a list of Penton's current magazines broken down by the
market sectors they serve:
<TABLE>
<CAPTION>
FIRST ISSUE ANNUAL
TITLE PUBLISHED CIRCULATION FREQUENCY SUBSCRIBER AUDIENCE
----- ----------- ----------- --------- -------------------
<S> <C> <C> <C> <C>
DESIGN/ENGINEERING
- -------------------------------------
A/E/C SYSTEMS The Magazine of
Computer Solutions................. 1992 30,000 6 architects, engineers and
construction executives
Computer-Aided Engineering........... 1982 55,000 12 technical managers in
manufacturing, product design,
engineering analysis
Hydraulics & Pneumatics.............. 1948 50,100 12 engineers of fluid-power
machinery and equipment
Machine Design....................... 1929 180,000 23 OEM, process and consulting
industry design engineers
Mechanical Solutions................. 1997 60,000 4 users of Autodesk Mechanical
Desktop(R) software
PT Design............................ 1959 57,000 12 motion systems design and
manufacturing engineers
PT Motion Systems Distributor........ 1987 12,000 6 motion systems distributors
ELECTRONICS
- -------------------------------------
EE Product News...................... 1941 112,000 12 OEM electronics design engineers
Communications Products.............. 1996 35,000 6 communications systems design
engineers
Electronic Design.................... 1952 165,000 26 OEM electronics engineers and
engineering managers
Electronic Design China.............. 1994 21,000 12 OEM electronics engineers and
engineering managers in China
Microwaves & RF...................... 1962 57,000 12 radio frequency and microwave
systems engineers and engineering
managers
Wireless Systems Design.............. 1994 50,000 12 wireless systems engineers and
engineering managers
Penton's Embedded Systems
Development........................ 1998 50,000 12 engineers and engineering
managers who develop
microprocessor and
microcontroller-based and
real-time systems
FOODSERVICE/HOSPITALITY
- -------------------------------------
Food Management...................... 1972 50,100 12 foodservice directors and
managers in noncommercial market
Restaurant Hospitality............... 1919 122,250 12 commercial foodservice operators
Lodging Hospitality.................. 1949 50,400 12 lodging industry development,
operations, marketing managers
CONVENIENCE STORE/BAKING
- -------------------------------------
Modern Baking*....................... 1987 27,300 12 in-store, retail and foodservice
bakers
Convenience Store Decisions*......... 1990 41,700 12 convenience store and petroleum
marketer chain management
Baking Management*................... 1997 9,050 12 management of large volume bakers
</TABLE>
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<PAGE> 49
<TABLE>
<CAPTION>
FIRST ISSUE ANNUAL
TITLE PUBLISHED CIRCULATION FREQUENCY SUBSCRIBER AUDIENCE
----- ----------- ----------- --------- -------------------
<S> <C> <C> <C> <C>
GOVERNMENT/COMPLIANCE
- -------------------------------------
Occupational Hazards................. 1938 65,000 12 managers of total risk control
programs, industrial safety
Government Product News.............. 1962 85,000 12 government purchasers and
specifiers
Government PROcurement............... 1993 14,000 4 public-sector purchasing
professionals
MANAGEMENT
- -------------------------------------
IndustryWeek......................... 1882 240,000 23 executives of global
manufacturing enterprises
IW Growing Companies................. 1998 210,000 8 management of growing
manufacturing enterprises with
fewer than 500 employees
MANUFACTURING
- -------------------------------------
American Machinist................... 1877 80,000 12 managers and engineers in durable
goods, metal products industries
Gases & Welding Distributor.......... 1957 5,000 6 distributors of welding supplies,
industrial and medical gases
Forging.............................. 1990 5,000 5 managers and engineers in various
types of forge shops
Foundry Management & Technology...... 1892 19,500 12 foundry industry managers,
engineers and research
professionals
New Equipment Digest................. 1936 207,000 12 administrative, production, plant
operations, maintenance,
engineering design purchasers
throughout industry
Welding Design & Fabrication......... 1931 40,000 12 designers and engineers in
welding and fabricating plants
33 Metalproducing.................... 1963 19,100 12 managers, engineers in
metalproducing industries
Used Equipment Directory............. 1949 75,000 12 manufacturing plants that use
industrial equipment
MECHANICAL SYSTEMS/
CONSTRUCTION
- -------------------------------------
Contracting Business................. 1944 52,000 12 heating, ventilating, air
conditioning and refrigerating
commercial and industrial
contractors
Heating/Piping/Air Conditioning...... 1929 53,000 12 HVAC mechanical systems engineers
Energy & Environmental Management.... 1995 28,500 4 building owners and facility
managers
SUPPLY CHAIN/AVIATION
- -------------------------------------
Air Transport World.................. 1964 40,100 12 airline industry management
Air Transport World China............ 1995 15,000 4 airline industry management in
China
Material Handling Engineering........ 1945 95,000 13 managers and engineers
responsible for material handling
Material Handling Business........... 1995 11,000 4 material handling distributors
and sales managers
Shipping & Receiving................. 1995 25,000 6 shipping managers of small
companies
Transportation & Distribution........ 1960 71,000 12 supply chain company management
</TABLE>
- ---------------
* To be acquired as part of the DM Publishing Combination.
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<PAGE> 50
Directories and Buyer's Guides. Penton also publishes 28 directories and
buyer's guides, which are trusted, heavily-used sources of buying information
for industry decision makers. Some of the more well-known of these publications,
and the market sectors they serve, include:
<TABLE>
<CAPTION>
TITLE MARKET SECTOR
----- -------------
<S> <C>
Fluid Power Handbook & Directory Design/Engineering
Electronic Design's VMEbus Product Directory Electronics
Microwaves & RF Product Data Directory Electronics
Annual Buyers Handbook* Foodservice/Hospitality
Sales Trend Handbook* Foodservice/Hospitality
Lodging Hospitality Almanac Foodservice/Hospitality
Casting Design & Application Reference Manufacturing
Handbook
The Secondary Market Guide Manufacturing
</TABLE>
- ---------------
* To be acquired as part of the DM Publishing Combination.
Most of the business directories Penton publishes have no competition, and
where competition does exist, Penton's publication is usually the market leader.
Competition, where present, is based on price and quality of data. Management
believes that the comprehensiveness and quality of its data and the specialized
focus of its directory publications have prevented others from launching
competing publications or competing effectively.
Other Publications. Other Penton publications include: Restaurant Show
Daily and Equipment Show Daily, tabloid-format news publications that are the
restaurant industry's primary source of daily show news, company updates and
new-product information at major industry trade shows; and show guides to the
annual Retailer's Bakery Convention/Exhibition, the baking industry's largest
event, and the National Association of Convenience Stores Show, that industry's
largest event. The latter two guides are to be acquired as part of the DM
Publishing Combination. In addition, Penton publishes Design Mart, which
presents information about new products and technology to small and medium-sized
original equipment manufacturers, and NC Shop Owner, which provides information
to small and medium-sized metalworking manufacturing businesses.
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<PAGE> 51
Trade Shows and Conferences
With the December 1997 acquisitions of INDEX and ISOA, Penton produces 63
trade shows and conferences in 10 market sectors. On a pro forma basis, had
INDEX and ISOA been acquired in January 1997, Penton's trade show and conference
revenue would have accounted for 12% of Penton's total revenue in 1997, and
Penton would have sold approximately 1.4 million net square feet of exhibit
space to over 5,500 exhibiting companies. In addition to these events, Penton
maintains licensing agreements for five trade shows.
The following is a list of Penton's trade shows and conferences broken down
by the market sectors they serve:
DESIGN/ENGINEERING
A/E/C SYSTEMS '98
A/E/C SYSTEMS Fall
A/E/C SYSTEMS Japan*
A/E/C SYSTEMS Mexico*
A/E/C SYSTEMS SMAU '98 (Milan, Italy)*
A/E/C SYSTEMS SMAUCADD (Milan, Italy)*
A/E/C SYSTEMS Singapore*
Build USA
Build USA Fall
Computer-Aided Engineering's 3D and Parametric Design Conference
Computers for Contractors '98
Computers in Manufacturing
EDM/PDM Expo
Computer-Aided Engineering's Managing Product Design Automation
Conference
Hydraulics & Pneumatics Show
International Manufacturing & Engineering Technology (IMET) Congress
M/CAD Expo
M/TECH '98
Motion Control and Sensors Show
PT Design Show
ELECTRONICS
Wireless Symposium & Exhibition, Portable by Design -- Spring
Wireless Symposium & Exhibition, Portable by Design -- Fall
FOODSERVICE/HOSPITALITY
LaBevEx**
The Vision Forum
GOVERNMENT/COMPLIANCE
Champions of Safety Conference
INFORMATION TECHNOLOGY
Service Management Europe Show
LEISURE
Fitness, Health & Sport '98
International Leisure Industry Week
Leisure Hospitality '98
Parks & Attractions '98
SALTEX Show***
MANAGEMENT
IndustryWeek's America's Best Plants
Conference -- Chicago
IndustryWeek's America's Best Plants
Conference -- Dallas
IndustryWeek's America's Best Plants
Conference -- Norfolk
IndustryWeek's America's Best Plants
Conference -- St. Louis
IndustryWeek's Best Practices from America's Best Plants Conference
IndustryWeek's Competing at the Speed of Light Conference
IndustryWeek's Global Leadership Forum
IndustryWeek's Managing for Innovation Conference
MANUFACTURING
Central Pennsylvania Industrial Show
East Tennessee Industrial & Machine Tool Show
Fluid Management Conference
Georgia Industrial & Machine Tool Show
Industrial Equipment & Maintenance (IEM) Expo
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Kentucky Industrial & Machine Tool Show
Metal Components Expo
Nevada Facilities Expo
Northern Alabama Industrial & Machine Tool Show
Northern Virginia Industrial & Facilities Maintenance Show
Oklahoma Industrial & Manufacturing Technology Expo
Pacific Coast Industrial & Machine Tool Show
Piedmont Industrial & Construction Show
Pre-Owned Production Equipment
(PPE) Show
Reno Industrial & Machine Tool Show
Tennessee Industrial & Machine Tool Show
Tidewater/Hampton Roads Industrial & Manufacturing Technology Show
Tooling Show
Tri-Cities Industrial Show
Tulsa Industrial & Machine Tool Show
USA/Mexico Industrial Expo
Virginia Industrial Show
Western Pennsylvania Industrial Show & Manufacturing Technology Expo
MECHANICAL SYSTEMS/CONSTRUCTION
Construction Maryland Show
HVAC Comfortech Show
AHR/Mexico Show**
SUPPLY CHAIN
Mastering the Supply Chain: Best Practices in Logistics Conference
Mid-South Industrial, Material Handling & Distribution Expo
North American Warehousing & Distribution Exposition & Conference
(NAWDEC)
- ---------------
* Licensed Penton event
** Joint venture
*** Produced under management contract
Attendees at Penton's trade shows and conferences are professionals and
managers from the markets Penton serves, including manufacturers, distributors,
dealers, retailers, value-added and other resellers, and large corporate
end-users. Most events include an extensive conference program, which provides a
forum for the exchange and dissemination of information germane to the
particular event's focus. In addition, most events have one or more "keynote"
sessions with speakers who are known for their market knowledge and expertise.
Trade show exhibitors pay a set price per square foot of booth space,
regardless of the exhibit hall they select or the location or size of their
booth within a given hall. Typically, a majority of each trade show's exhibitors
commit to booth space during that year's show for the next year's show. In 1997,
exhibitor space fees accounted for 53% of Penton's total trade show and
conference revenue. Penton also gains revenue from attendee fees at trade shows
and conferences. In 1997, registration fees accounted for 29%, and show
directory advertising sponsorship packages and information products accounted
for 18%, of Penton's trade show and conference revenues.
Penton's trade show and conference advertising revenue is derived
principally from five products, some combination of which is part of each event:
(i) a daily news publication distributed during the show; (ii) the program
exhibits guide; (iii) the preview, a news publication published and distributed
to pre-registrants and certain prior year attendees in advance of the show; (iv)
advertising billboards, banners, and sponsorship fees for specific show events
or specific areas of the exhibit hall; and (v) ancillary exhibitor logo products
that are sold to exhibitors to increase booth traffic and name recognition.
Electronic Media
Online Services. Penton has expanded onto the Internet by making many of its
publications, as well as other information services, available through its World
Wide Web sites. Penton's corporate Web site, launched in September 1995,
furnishes market information about all its magazines and corporate services,
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<PAGE> 53
enables readers to subscribe online, and provides links with its magazine home
pages that provide market-focused services to readers and advertisers. In
December of 1997, Penton entered into a joint venture agreement with Findlay
Publications of the United Kingdom to develop Design Selector Global, a
Web-based product that will enable design engineers who specify mechanical,
electro-mechanical and electronic components and materials to conduct
sophisticated searches for product and product distribution information. Findlay
Publications owns the global product classification system that supports Design
Selector Global, and has responsibility for the system's technology development.
Penton is responsible for content development and marketing of a United States
edition of the product.
Penton currently maintains the following Web sites:
<TABLE>
<CAPTION>
WEB SITE ADDRESS
WEB SITE RELATED BUSINESS(ES) (WWW.-)
-------- -------------------- ----------------
<S> <C> <C>
Penton Media, Inc. Penton Corporate Web site penton.com
Penton Research Services Penton Research Services pentonresearch.com
DESIGN/ENGINEERING
A/E/C SYSTEMS International A/E/C SYSTEMS Division aecsystems.com
A/E/C SYSTEMS The Magazine of A/E/C SYSTEMS The Magazine of Computer penton.com/cae/aec
Computer Solutions Solutions
CAEnet Computer-Aided Engineering penton.com/cae
Penton's Design, Engineering & 15 Penton Design/Engineering and pdem.net
Manufacturing Network Manufacturing magazines
Fluid Power Web Hydraulics & Pneumatics fpweb.com
Machine Design Online Machine Design penton.com/md
MCADexpo MCADexpo mcadexpo.com
Mechanical Solutions Mechanical Solutions penton.com/cae/mechanical
solutions
PT Design Online PT Design ptdesign.com
IMET Congress International Manufacturing & imetcongress.com
Engineering (IMET) Congress
M/TECH Show M/TECH Show mtechexpo.com
ELECTRONICS
The Circuit Board Microwaves & RF penton.com/mwrf
EEPN Online EE Product News eepn.com
Electronic Design Online Electronic Design elecdesign.com
Wireless Engineering Center Wireless Systems Design penton.com/wsd
Wireless Symposium & Exhibition Wireless Symposium & Exhibition wirelessportable.com
Portable by Design
HOSPITALITY
LH Online Lodging Hospitality lhonline.com
GOVERNMENT/COMPLIANCE
OH Interactive Occupational Hazards penton.com/oh
MANAGEMENT
The Interactive Management IndustryWeek industryweek.com
Resource
The Management Resource for Small IW Growing Companies iwgc.com
Manufacturers
</TABLE>
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<PAGE> 54
<TABLE>
<CAPTION>
WEB SITE ADDRESS
WEB SITE RELATED BUSINESS(ES) (WWW.-)
-------- -------------------- ----------------
<S> <C> <C>
MANUFACTURING
American Machinist Online American Machinist penton.com/am
Computers in Manufacturing Computers in Manufacturing cimshow.co.uk
Forging Online Forging penton.com/forging
Industrial Shows of America ISOA Division isoa.com
New Equipment Digest Innovation On New Equipment Digest newequipment.com
Line
Used Equipment Network Used Equipment Directory buyused.com
MECHANICAL SYSTEMS/
CONSTRUCTION
Contracting Business Interactive Contracting Business penton.com/cb
Energy & Environmental Management Energy & Environmental Management e-e-m.com
Online
HPAC Interactive Heating/Piping/Air Conditioning penton.com/hpac
SUPPLY CHAIN/AVIATION
ATWOnline Air Transport World atwonline.com
MHESource Material Handling Engineering mhesource.com
North American Warehousing & NAWDEC nawdec.com
Distribution Exposition &
Conference
</TABLE>
CD-ROMs and Diskettes. Penton also offers a number of its directories and
magazines on CD-ROM and floppy disk, including: HPAC Info-Disk, which features
Heating/Piping/Air Conditioning's annual directory issue; Lodging Hospitality's
'98 Almanac CD-ROM, a directory of manufacturers, products & services, and
articles from the past year of Lodging Hospitality; Fluid Power Handbook &
Directory CD-ROM, a directory of manufacturers, products, trade names, and
information on fluid power technology; CAE/AEC Compendium CD-ROM, a compendium
of the CAE and A/E/C Directories plus a CAD/CAM Planning Guide; The Inventory of
Manufacturing Equipment, which highlights survey results from American Machinist
magazine; Metalcasting Plant Census on Disk, which features Foundry Management &
Technology's on-going census of the foundry industry; ATW Statistics on
Diskette, which provides information on world airline operating and financial
performance and is available through Air Transport World; and IW's Census of
Manufacturers, an IndustryWeek-Price Waterhouse research study that provides
manufacturers' best practices and metrics, with an interactive CD-ROM allowing
manufacturing executives to measure their performance against data from the
research.
Market Access & Business Development Services
Penton generates additional revenues through a variety of marketing
services, including database rentals and research and consulting services.
Penton offers these services to advertisers to help them to reach their
customers through media in addition to print.
Specialized Advertising Services
Penton forwards reader inquiries, which provide high quality sales leads,
to its advertisers. In addition, classified and recruitment advertising sections
in Penton publications provide a cost-efficient, effective medium for reaching
prospects who are ready to buy specialized products and services and qualified
professionals seeking career opportunities.
Direct Marketing & Fulfillment
Penton uses information from its subscription lists and other available
databases to compile detailed mailing lists for rental by marketers who want to
promote their products and services through direct-mail programs. Penton has the
ability to customize its mailing list databases so that a list renter may select
specific
53
<PAGE> 55
business or demographic criteria. Penton also matches advertisers' customer
files against its subscriber databases in order to compile additional data
regarding such customers, including job function, purchase involvement, and
company size. Because its databases provide such highly targeted data, Penton
believes that they are particularly attractive to its mailing list renters.
Penton also provides copy writing, graphics, and research services for creating
direct-mail marketing programs.
Custom Communications/Promotion
Penton Custom Publishing produces a full range of communications services
for both print and electronic media, CD-ROM, and the Internet, including
newsletters, magazines, catalogs, directories, education and training materials,
and other support materials. Penton provides complete turnkey project management
as well as more limited assistance with individual aspects of a project. Penton
also markets custom reprints of advertisements, magazine articles, or special
magazine supplements that advertisers use as direct-mail pieces, sales and
training aids, product announcements, or trade show handouts. In addition,
content from Penton magazines can be licensed for use on Web sites. For example,
reviews of products and services enhance a manufacturer's and/or advertiser's
Web site when presented as unbiased industry coverage.
Research
Penton Research Services offers a full range of primary and secondary
research services. Primary research, which may be requested by an advertiser or
an industry association, develops original statistics and analysis based on a
variety of research methodologies that may include interviews, surveys, and
focus groups. Secondary research makes use of existing research developed by
other organizations, collating it to answer a specific research need.
Printing
Penton Press occupies a 138,000-square-foot company-owned facility in
Berea, Ohio, has 250 employees, and prints 51 Penton publications and
approximately 50 non-Penton titles. Total copies printed exceeded 64 million in
1997. Services provided include complete electronic and conventional pre-press
service, heatset web offset and multi-color sheetfed printing, and post-press
finishing and binding services that include sheet cutting, folding, insert
tipping, saddle-wire and perfect binding, in-line and off-line mailing, and
polybagging.
Direct-Mail Marketing
Curtin & Pease/Peneco, Penton's direct-mail marketing subsidiary, provides
direct marketing services and advertising/promotion services primarily to the
pharmaceutical, healthcare, and business services markets. Curtin & Pease/Peneco
and its printing division, Feather Fine, accounted for approximately 6% of
Penton's total revenue in 1997. Penton management is currently considering
strategic alternatives for Curtin & Pease/Peneco and Feather Fine.
PRODUCTION AND DISTRIBUTION
Penton prints nearly all of its own magazines and approximately 50 outside
titles. If additional printing capacity is needed, Penton believes that outside
printing services are readily available at competitive prices.
The principal raw material used in Penton's print publications is paper.
Penton believes that the existing arrangements providing for the supply of paper
are adequate and that, in any event, alternative sources are available. Paper
costs accounted for approximately 8% of Penton's total operating costs in 1997.
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. Penton's costs for paper, relative to revenues, can
vary from year to year due to the level of its paper demands.
All of Penton's publications are delivered by the United States Postal
Service within the continental United States. Postage costs also represent a
significant expense for Penton, accounting for approximately 8% of Penton's
total operating costs and expenses in 1997. In an attempt to contain postal
costs, Penton takes advantage of various postal discounts. Penton uses
Yellowstone International Corporation to distribute certain of its publications
internationally.
See "Risk Factors -- Effect of Increases in Paper and Postage Costs."
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<PAGE> 56
PROMOTION AND MARKETING
Penton uses a variety of promotional activities, including advertising,
direct-mail, public relations, media relations, trade shows, and Internet
marketing, to increase the awareness of and business support for its magazines,
trade shows, electronic media products, and service businesses. These
promotional activities also take place at the corporate level to build the image
of Penton. Penton is implementing a formal corporate identity program to build
greater understanding of its broadened business scope and to create stronger
awareness of the Penton brand among all stakeholder audiences.
COMPETITION
Penton competes with a wide range of companies that provide similar
products and services. Although such competition is significant and is likely to
increase in the future, Penton believes its diverse array of products and
services allows it to compete effectively in the markets it serves.
Competition in the publishing segment of Penton's business generally is at
the market sector level, with each publication having one to three direct
competitors. Competitors range in description from major, international,
multi-title publishing houses with significant resources, which may give them a
competitive advantage, to small, entrepreneurial businesses with relatively
modest financial resources.
Overall competitive factors include the market's perception of the niche
served by the magazine, readers' preference for the publication's content,
editorial quality, quantity and quality of circulation, reader response to
advertisers' products and services, the effectiveness of sales teams, customer
service, and advertising rates. Penton believes its products effectively compete
on the basis of these factors. Penton's principal sales advantages include
relevant editorial content and innovative marketing. Penton believes that its
competitive position also benefits from improvements in productivity and from
cost control programs. Penton places great emphasis on providing quality
products and services to its customers.
While Penton faces competition in the overall trade show and conference
arena, in few cases do Penton events compete directly with other events. Trade
show and conference events generally are differentiated by their market
position, geographic location/venue, and seasonality. Penton believes its events
compete effectively in each of these areas, and that the organizational
efficiency and high quality of conference content are competitive advantages
which draw exhibitor and attendee support.
The Internet media business is highly competitive. An increasing number of
companies are developing online content and services for delivery on the World
Wide Web in order to compete both for audiences and for the advertising dollars
that are currently being directed to the Internet.
TRADEMARKS AND INTELLECTUAL PROPERTY RIGHTS
Penton has developed strong brand awareness for its principal publications,
trade shows, and other products and services. Penton regards its copyrights,
trademarks, service marks, and similar intellectual property as critical to its
success and relies upon copyright and trademark laws, as well as confidentiality
agreements with its employees and others, to protect its rights. Penton pursues
the registration of its material trademarks in the United States and, depending
upon use, in certain other countries. Effective trademark and copyright
protection may not be available in every country in which Penton's publications
and services are available.
Penton may be subject to claims of alleged infringement by it or its
licensees of trademarks and other intellectual property rights of third parties
from time to time in the ordinary course of business. Penton does not believe
there are any such legal proceedings or claims that are likely to have,
individually or in the aggregate, a material adverse effect on Penton's
business, financial condition, or results of operations.
CUSTOMERS
Penton is not overly dependent upon a single customer or a few customers.
Penton has more than 5,000 advertising customers, and the top ten customers in
1997 accounted for only 5% of its total revenue. Penton's top 100 customers
accounted for less than 18% of total revenue in 1997. The Company's customers
include some of the world's largest and most dynamic companies. Penton's top ten
advertiser customers in 1997 were:
55
<PAGE> 57
Hewlett Packard, AT&T, Texas Instruments, Compaq Computer, Scientific
Components, Motorola, IBM, Siemens, Burr-Brown, and CNF Transportation.
ENVIRONMENTAL MATTERS
Penton anticipates that compliance with various laws and regulations
relating to protection of the environment will not have a material effect on its
capital expenditures, earnings, or competitive position.
EMPLOYEES
On April 30, 1998, there were approximately 1,390 persons employed by
Penton, primarily located in the United States. None of Penton's employees is
represented by a labor union, and Penton considers its relations with its
employees to be good.
PROPERTIES
Penton's principal properties and their general characteristics are as
follows:
<TABLE>
<CAPTION>
APPROXIMATE
LOCATION PRINCIPAL USE LEASE EXPIRATION SQUARE FEET
-------- ------------- ---------------- -----------
<S> <C> <C> <C>
Cleveland, Ohio General Offices 2000 186,000
Cleveland, Ohio Warehousing 2001 28,000
Berea, Ohio Printing/Warehousing Owned 138,000
New York, New York Sales Offices 2000 10,000
Dunedin, Florida General Offices 2000 13,000
Safety Harbor, Florida Warehousing 1999 18,000
Tampa, Florida Printing 2000 15,000
Tampa, Florida General Offices/ Warehousing 1999 19,000
Hasbrouck Heights, New Jersey General Offices 2001 25,000
</TABLE>
Other properties include 13 sales and/or editorial offices under leases
expiring through 2013 located in major cities throughout the United States and
in the United Kingdom. Penton believes its facilities are adequate for its
present needs.
LITIGATION
Penton is not a party to any legal proceedings other than ordinary routine
litigation incidental to its business. No legal proceedings to which Penton is a
party are material to its business or financial condition.
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<PAGE> 58
MANAGEMENT
BOARD OF DIRECTORS
The following discussion sets forth information concerning the individuals
who, pursuant to the provisions of the DM Publishing Combination Agreement, will
be serving on the Board immediately after the Stock Distribution and the DM
Publishing Combination. Such directors will be divided into three classes.
Stockholders will elect approximately 1/3 of the directors at each annual
meeting, beginning with the 1999 annual meeting.
<TABLE>
<CAPTION>
AGE AND TERM OF
NAME DIRECTORSHIP INFORMATION
---- --------------- -----------
<S> <C> <C>
William J. Friend Term as Director Mr. Friend has served as a Director of Penton
Expires 1999. since June 1998. Assistant to the
Age -- 34. President/Strategic Planning Manager of Pittway
Corporation (manufacturer and distributor of
alarm and other security products) since August
1996. National Sales Manager, Xetron (division
of Pittway) (April 1994 to July 1996) and
Engineering Product Manager, System Sensor
(division of Pittway) (August 1992 to March
1994).
Don E. Schultz Term as Director Mr. Schultz has served as a Director of Penton
Expires 1999. since June 1998. President of Agora, Inc.
Age -- 64. (integrated marketing communications consulting
firm). Professor of Integrated Marketing
Communications at the Medill School of Jour-
nalism, Northwestern University. Senior Partner,
Targetbase Marketing International and the
Targetbase Institute.
Richard B. Swank Term as Director Mr. Swank has served as a Director of Penton
Expires 1999. since June 1998. Retired. Chairman and Chief
Age -- 67. Executive Officer of Advanstar Communications,
Inc. (magazine, publishing, exhibition and
marketing services enterprise) from April 1990
to December 1994 and Director until May 1996.
Non-executive Chairman and Director, The Dialog
Corp. (U.S.A.) (an online information and data
provider) from November 1997 to present.
William C. Donohue Term as Director Mr. Donohue will become a Director of Penton
Expires 2000. upon completion of the DM Publishing
Age -- 53. Combination. President of Donohue Meehan
Publishing Company (a business publishing
company) since January 1987.
Joan W. Harris Term as Director Ms. Harris has served as a Director of Penton
Expires 2000. since June 1998. President of the Harris
Age -- 67. Foundation (a private charitable foundation).
President of the Chicago Music and Dance
Theater. Former Commissioner for Cultural
Affairs for the City of Chicago. Past
chairperson of the Illinois Arts Alliance and
former director of National Public Radio
(1990-1997).
John J. Meehan Term as Director Mr. Meehan will become a Director of Penton upon
Expires 2000. completion of the DM Publishing Combination.
Age -- 50. Executive Vice President of Donohue Meehan
Publishing Company (a business publishing
company) since January 1987.
Daniel J. Ramella Term as Director Mr. Ramella has served as a Director of Penton
Expires 2000. since July 1990. President and Chief Operating
Age -- 46. Officer of Penton (since 1990).
</TABLE>
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<PAGE> 59
<TABLE>
<CAPTION>
AGE AND TERM OF
NAME DIRECTORSHIP INFORMATION
---- --------------- -----------
<S> <C> <C>
Anthony Downs Term as Director Mr. Downs has served as a Director of Penton
Expires 2001. since June 1998. Senior Fellow (since 1977) of
Age -- 67. Brookings Institution (non-profit social policy
research center); Consultant (since 1977).
Director, Pittway Corporation (manufacturer and
distributor of alarm and other security prod-
ucts), Bedford Property Investors, Inc. (real
estate investment trust), Essex Property Trust,
Inc. (real estate investment trust), General
Growth Properties, Inc. (real estate investment
trust), Massachusetts Mutual Life Insurance
Corporation (insurance company), and National
Partnership Foundation (low-income housing
operator).
King Harris Term as Director Mr. Harris has served as a Director of Penton
Expires 2001. since May 1987 and as the non-executive Chairman
Age -- 55. of the Board since May 1998. President, Chief
Executive Officer and Director of Pittway
Corporation (manufacturer and distributor of
alarm and other security products) since 1987.
Non-executive Chairman of the Board and
Director, Aptar Group, Inc. (specialty packaging
components manufacturer) and Director, Cylink
Corporation (commercial data encryption
company).
Thomas L. Kemp Term as Director Mr. Kemp has served as a Director of Penton
Expires 2001. since September 1996. Chief Executive Officer of
Age -- 47. Penton (since September 1996); Chairman of the
Board of Penton from September 1996 to May 1998;
President and Chief Operating Officer from
January 1996 to August 1996, Executive Vice
President from 1994 to 1996, and Senior Vice
President, Business and Special Interest
division, from 1992 to 1994, of Miller Freeman,
Inc. (business magazine publisher and exhibition
manager).
Edward J. Schwartz Term as Director Mr. Schwartz has served as a Director of Penton
Expires 2001. since June 1998. Vice President of Pittway
Age -- 57. Corporation (manufacturer and distributor of
alarm and other security products) since 1989.
</TABLE>
Joan W. Harris is the aunt of King Harris. Mr. Harris is the uncle of
William J. Friend. Pursuant to the DM Publishing Combination Agreement, Messrs.
Donohue and Meehan are to be elected to serve as directors of Penton until
Penton's 2000 annual meeting.
Employees of Penton do not receive any additional compensation for serving
as members of the Board or any of its committees. Compensation of non-employee
directors consists of an annual retainer of $15,000, plus a fee of $2,000 for
each Board meeting attended in person and $500 for any teleconference Board
meeting that may be held. In addition, non-employee directors receive $500 for
each committee meeting, but only $250 for each committee meeting attended on the
same day as a Board meeting. The Chairman of each of the Audit and Compensation
Committees receives an additional $2,000 per year. In lieu of the above fees,
the non-executive Chairman of the Board receives an annual retainer of $50,000
per year.
Each director of Penton will be reimbursed by Penton for out-of-pocket
expenses incurred in attending Board and Board committee meetings (including
those occurring prior to the Stock Distribution Date).
Penton has adopted the Penton Media, Inc. 1998 Director Stock Option Plan
(the "Director Option Plan") for non-employee directors. Pursuant to the
Director Option Plan, and subject to certain limitations contained in it, the
Board may grant non-qualified options to purchase Common Stock, at an exercise
price not less than fair market value on the date of grant, to directors of
Penton who at the time of grant are not employees of Penton or any of its
subsidiaries. Each non-employee director has been awarded, subject to completion
of the Stock Distribution, 8,000 options, which will vest at the rate of 2,000
per year, and Edward Schwartz has been awarded, subject to completion of the
Stock Distribution, an additional 13,000 fully-vested options. See
"Capitalization."
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<PAGE> 60
COMMITTEES OF THE BOARD OF DIRECTORS
Executive Committee. The Executive Committee consists of Mr. Harris as
Chairman and Messrs. Kemp, Ramella, and Schwartz. When the Board is not in
session, the Executive Committee may exercise all the powers and authority of
the Board except as limited by law and Penton's Amended and Restated Certificate
of Incorporation.
Audit Committee. The Audit Committee consists of Mr. Schwartz as Chairman
and Anthony Downs and Don Schultz. The Audit Committee will review, as it deems
appropriate, and approve internal accounting and financial controls for Penton
and auditing practices and procedures to be employed in the preparation and
review of Penton's financial statements. The Audit Committee will make
recommendations to the full Board concerning the engagement of independent
public accountants to audit Penton's annual financial statements and will
arrange with such accountants the scope of the audit to be undertaken by such
accountants.
Compensation Committee. The Compensation Committee consists of Richard
Swank as Chairman and Ms. Harris, Mr. Downs, and Mr. Harris. The Compensation
Committee will review and determine the compensation of executive officers,
review and make recommendations to the Board with respect to salaries, bonuses,
and deferred compensation of other officers and executives, compensation of
directors and management succession, and make such determinations and perform
such other duties as are expressly delegated to it pursuant to the terms of any
employee benefit plan of Penton.
Investment Committee. The Investment Committee consists of Mr. Schwartz as
Chairman and Messers. Friend and Swank. The Investment Committee will provide
objectives and guidelines for the investment of funds held in trust under the
various Penton pension plans, act as the investment committee for purposes of
any 401(k) plans, and review the performance of investment managers charged with
investing Penton pension plan funds.
Nominating Committee. The Nominating Committee consists of Ms. Harris as
Chairwoman and Messrs. Harris and Schultz. The Nominating Committee, as it deems
appropriate, will make recommendations to the full Board with respect to the
size and composition of the Board and its committees and with respect to
nominees for election as directors. The Nominating Committee will consider
suggestions regarding candidates for election to the Board submitted by
stockholders in writing to Penton's Secretary.
EXECUTIVE OFFICERS
It is expected that all senior management of both Penton and DM Publishing,
who have extensive experience in the business media industry, will remain with
Penton after the Stock Distribution and the DM Publishing Combination. Messrs.
Kemp and Ramella, who will serve as the Chief Executive Officer and the
President of Penton, respectively, immediately following the Stock Distribution
and the DM Publishing Combination, have 24 and 21 years, respectively, of
experience in the industry. The various operating unit heads of the major Penton
operations who will be serving immediately following the Stock Distribution and
the DM Publishing Combination have, on average, over 25 years of such experience
in the industry.
59
<PAGE> 61
Information concerning the persons who will serve as the executive officers of
Penton immediately following the Stock Distribution and the DM Publishing
Combination is as follows:
<TABLE>
<CAPTION>
NAME TITLE AND AGE BUSINESS EXPERIENCE
---- ------------- -------------------
<S> <C> <C>
Thomas L. Kemp Chief Executive Mr. Kemp has been Penton's Chief Executive
Officer. Officer since 1996. Mr. Kemp's publishing career
Age -- 47. spans more than 24 years. He spent 22 years with
San Francisco-based Miller Freeman, Inc., and
was Miller Freeman's President and Chief
Operating Officer in 1996, when he left the
company to join Penton. From 1994 to 1996, Mr.
Kemp was Miller Freeman's Executive Vice
President and Chief Operating Officer. He also
held a series of executive, publishing
management, and sales positions with Miller
Freeman subsequent to joining the company in
1974. Mr. Kemp is a Director and Treasurer of
Business Publications Audit International and a
member of the organization's Executive
Committee. He is a Director of the Business
Press Educational Foundation, and a former
Director of American Business Press and the
Association of Medical Publishers. Mr. Kemp is a
frequent speaker at media industry conferences
and events.
Daniel J. Ramella President and Chief Mr. Ramella has served as Penton's President and
Operating Officer. Chief Operating Officer since 1990, and has
Age -- 46. worked for Penton for more than 21 years. Mr.
Ramella was Senior Vice President, Publishing
from 1989 to 1990, and Vice President,
Foodservice Group from 1987 to 1989. He was
publisher of Restaurant Hospitality magazine
from 1985 to 1987. Mr. Ramella held management
positions with Production Engineering magazine
between 1977 and 1985. Before joining Penton in
1977, he was a Senior Audit Manager for Arthur
Andersen & Co. He is a Director, Secretary, and
Executive Committee Member of American Business
Press and has served as a Director of the
Business Press Educational Foundation. He is a
former Director, Treasurer, and Executive
Committee member of Business Publications Audit
International.
Joseph G. NeCastro Chief Financial Before joining Penton in June 1998, Mr. NeCastro
Officer and Treasurer. spent 5 years with Reader's Digest Association,
Age -- 41. Inc. He was Vice President, Finance for Reader's
Digest USA from 1995 until 1998, Corporate
Controller in 1994 and 1995, and held other
corporate financial management positions with
the company in 1993 and 1994. Mr. NeCastro was
Vice President and Treasurer for U.S. News &
World Report between 1990 and 1993, and Director
of Finance from 1987 to 1990. He held senior
business development and finance positions with
MCI Communications Corporation between 1983 and
1987 before moving into the publishing industry.
</TABLE>
60
<PAGE> 62
<TABLE>
<CAPTION>
NAME TITLE AND AGE BUSINESS EXPERIENCE
---- ------------- -------------------
<S> <C> <C>
James D. Atherton Group President. Mr. Atherton is Group President of the
Age -- 62. Mechanical Systems/Construction, Electronics,
Government/ Compliance, Management, Supply
Chain/Aviation, and Industrial Shows of America
Groups. He has worked in business-to-business
publishing at Penton for 45 years. Mr. Atherton
was Group President of Penton's Inside Sales and
Electronics Groups from 1991 to 1995, and
President of the Electronics Group in 1991. From
1989 to 1991, he was Senior Vice President of
Publishing, and from 1984 to 1989, he was
Publishing Vice President of New Equipment
Digest (NED) and Material Handling Engineering
magazines. From 1981 to 1984, he was Vice
President of NED, and from 1975 to 1981, he was
NED's Publisher.
James A. Zaremba Group President. Mr. Zaremba is Group President of the Design/
Age -- 58. Engineering, Foodservice/Hospitality,
Manufacturing, and Independent Exhibitions Ltd.
Groups and A/E/C Systems. He has spent most of
his 30-year business-to-business publishing
career with Penton. From 1993 to 1995, he was
Group President of the Design/Engineering and
Custom Communications Groups, and from 1991 to
1993, he was Group President of the
Design/Engineering Group. He was Group Vice
President of the Design/Engineering Group from
1989 to 1991. From 1988 to 1989, he was
Publisher of Machine Design magazine, and from
1983 to 1988, he was Publisher of PT Design
magazine.
Preston L. Vice Senior Vice President, Mr. Vice has been Senior Vice President of
Publishing Services. Publishing Services since 1989. Mr. Vice has 19
Age -- 50. years of business-to- business publishing
experience and 28 years of accounting and
finance experience. He was Penton's Vice
President of Finance from 1982 to 1989, and
Director of Finance from 1979 to 1982. Mr. Vice
transferred to Penton from Pittway Corporation
in 1979. Previous to his tenure at Pittway he
was with Coopers & Lybrand.
Charles T. Griesemer Vice President/ Mr. Griesemer has been Vice President/Controller
Controller. of Penton since July 1998. Prior to this, he was
Age -- 46. Penton's Vice President of Finance since he
joined Penton in 1989. In the preceding 16
years, he held finance positions at the Thermos
Company, Anchor Swan Corporation Inc., Pittway
Corporation, and Coopers & Lybrand.
</TABLE>
Penton's executive officers will hold office until their successors are
appointed and qualified or until their earlier removal or resignation. However,
Messrs. Kemp and Ramella have rights to hold their respective offices pursuant
to and for the terms of their respective employment agreements referred to below
under "Executive Compensation -- Employment Agreements."
SIGNIFICANT EMPLOYEES
Other persons who will be significant employees of Penton immediately
following the Stock Distribution and the DM Publishing Combination and their
positions, ages, and prior business experience are as follows:
<TABLE>
<CAPTION>
NAME TITLE AND AGE BUSINESS EXPERIENCE
---- ------------- -------------------
<S> <C> <C>
William C. Donohue President, Donohue Mr. Donohue started his 25-year business
Meehan Publishing publishing career in 1973 selling advertising
Company. for Woodall Publishing. He was vice president
Age -- 54. and group publisher of Gorman Publishing's
Bakery Production & Marketing and Prepared Foods
magazines from 1976 to 1986 before forming
Donohue Meehan Publishing Company in 1987.
</TABLE>
61
<PAGE> 63
<TABLE>
<CAPTION>
NAME TITLE AND AGE BUSINESS EXPERIENCE
---- ------------- -------------------
<S> <C> <C>
John J. Meehan Executive Vice Mr. Meehan started his 26-year career in
President, Donohue business-to- business publishing at the former
Meehan Publishing Chilton Publishing, where he held marketing and
Company. sales management positions with the company's
Age -- 50. electronics publications from 1972 to 1977. From
1977 to 1986, he was Publisher of Gorman
Publishing's Bakery Production & Marketing and
Prepared Foods magazines. He was Group
Publishing Director for Thompson Publishing in
New York from 1986 to 1987 before forming
Donohue Meehan Publishing Company in 1987.
Russell S. Carson Vice President & Group Mr. Carson has been Vice President & Group
Publisher, New Publisher of Penton's New Equipment Digest Group
Equipment Digest since 1998. Mr. Carson has spent 33 years in
Group. business-to-business publishing. Mr. Carson was
Age -- 60. Publisher of New Equipment Digest from 1989 to
1998, Publishing Director from 1986 to 1989, and
was National Sales Manager from 1980 to 1986. He
also worked on PT Design in several capacities.
Andrew C. DeSarle Vice President, An- Mr. DeSarle's 25 years in business-to-business
cillary Product Sales and consumer publishing include roles as Vice
& Marketing. President of Special Advertising at Argus Inc.,
Age -- 48. a division of Intertec Publishing, from 1994 to
1996, and General Manager & Publisher for United
Newspapers' Want Ad Press Automotive and Want Ad
Press General Merchandise magazines, from 1991
to 1994. Mr. DeSarle's publishing career also
includes service at CMP Publications, Lebhar
Friedman Inc., Cue magazine, and Ziff-Davis
Publishing. He joined Penton in 1996.
Joseph M. DiFranco Vice President & Group Mr. DiFranco has worked in business-to-business
Publisher, publishing for 25 years. Mr. DiFranco was Group
Design/Engineering, Publisher of Machine Design ("MD") and American
Metals & Manufacturing Machinist ("AM") magazines from 1993 to 1998,
Groups. Publisher of MD from 1990 to 1993, and Publisher
Age -- 53. of AM from 1987 to 1990. He was Publisher of
Huebcor Publishing's Tooling & Production and
Metlfax magazines from 1982 to 1987. He also
held positions at the former Chilton Publishing
and at Eaton Corporation. He joined Penton in
1987.
John G. French Vice President & Group Mr. French has been Electronic Design magazine's
Publisher of Publisher since 1995. Mr. French has worked in
Electronic Design high technology publishing for 18 years. Between
Group. 1989 and 1995, he was Publisher of Microwaves &
Age -- 42. RF magazine, Publisher of the former Electronics
magazine, and National Accounts Manager of
Electronic Design. Mr. French held positions
with VNU Business Publications, CMP Pub-
lishing, Pennwell Publishing, and CW
Communications prior to joining Penton in 1989.
Robert S. Martin Vice President/ Mr. Martin was Plant Superintendent from 1975 to
General Manager, 1981, and Pre-Press Manager from 1968 to 1975.
Penton Press He has worked in the printing industry for 39
Division. years.
Age -- 61.
</TABLE>
62
<PAGE> 64
<TABLE>
<CAPTION>
NAME TITLE AND AGE BUSINESS EXPERIENCE
---- ------------- -------------------
<S> <C> <C>
Susan J. Grimm Vice President, Ms. Grimm has 18 years experience in
Publishing Systems & business-to- business publishing. Ms. Grimm was
Support Vice President of Systems from 1988 to 1991,
Services. Vice President of Data Processing from 1987 to
Age -- 53. 1988, and Director of Data Processing from 1983
to 1987. She was Manager of Systems Development
from 1982 to 1983, and started with Penton as a
Systems Planning Analyst in 1980. Ms. Grimm
worked for Ernst & Young before joining Penton.
Katherine P. Torgerson Vice President, Human Ms. Torgerson was Director of Executive
Resources & Executive Administration from 1997 to 1998, and Executive
Administration. Assistant to the Chairman and the President from
Age -- 50. 1994 to 1997. Over more than 16 years with
Penton, Ms. Torgerson has held roles in
editorial, production, marketing and promotion,
business management, corporate communications,
and executive administration.
Andrew Dedman Managing Director, Mr. Dedman has held his post with INDEX since he
Independent helped found the company in 1984. He worked for
Exhibitions Ltd. Clapp and Poliak UK (acquired by Cahners
Age -- 46. Publishing in 1983) as Group Show Director and
in sales from 1975 to 1984. Mr. Dedman has 23
years experience in trade show management.
Susan J. Donahue President, Ms. Donahue is also Vice President of Industrial
Industrial Shows Shows of America International. She has 18 years
of America. experience in the trade show management
Age -- 42. business. Ms. Donahue was ISOA's Vice President
from 1985 to 1992, and a Sales Representative
from 1980 to 1985. She joined the firm in 1980.
Charles E. Cross III President, Indus- Mr. Cross is also Vice President of ISOA. Mr.
trial Shows of America Cross has 13 years of trade show management
International. experience. From 1990 to 1992, he was Vice
Age -- 41. President of ISOA and ISOA International. He was
ISOA's Sales Manager/Show Manager from 1985 to
1990.
Robert F. Wilson President & CEO, Mr. Wilson has served as President and Chief
Curtin & Pease/ Executive Officer of Curtin & Pease/Peneco since
Peneco. 1990. Mr. Wilson was the subsidiary's President
Age -- 56. from 1987 to 1990, and Executive Vice President
from 1983 to 1986. He has 38 years of experience
in the direct-mail business.
Stephen A. Sind Vice President of Mr. Sind has 25 years of exhibition industry
Trade Show experience. From 1995 to 1998, he served as
Development President and CEO of the Center of Exhibition
Age -- 54. Industry Research ("CEIR"). Prior to joining
CEIR, Mr. Sind spent 15 years with Reed
Exhibition Companies ("REC"), a division of Reed
Elsevier. He was REC's Senior Vice President of
Corporate Planning from 1989 to 1995, Senior
Vice President of International Sales from 1988
to 1989, and Senior Vice President, Asia/Pacific
from 1983 to 1987. He worked with the U.S.
Department of Commerce, the Bureau of East West
Trade, and the U.S. Embassy in Moscow before
joining REC in 1981.
</TABLE>
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<PAGE> 65
EXECUTIVE COMPENSATION
COMPENSATION TABLES
The following table sets forth, for 1997, certain information about the
compensation paid to the Chief Executive Officer and each of the four other most
highly compensated executive officers of the Company serving at the end of 1997
(collectively, the "Named Executive Officers"). The table contains additional
information for previous years for Messrs. Kemp and Ramella, which information
previously was required to be provided by Pittway in response to a Securities
and Exchange Commission (the "Commission") filing requirement.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL -----------------------
COMPENSATION AWARDS(1)
------------------- -----------------------
RESTRICTED SECURITIES
STOCK UNDERLYING ALL OTHER
SALARY BONUS AWARD(S) OPTIONS/ COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) SAR'S(#) ($)
- ---------------------------------------- ---- -------- ----- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Thomas L. Kemp 1997 $400,000 $291,000 $ 0 10,000 $4,322(2)
Chief Executive Officer 1996 133,336 200,000 0 4,000 175
Daniel J. Ramella 1997 330,000 241,000 0 7,000 4,481(3)
President and Chief Operating Officer 1996 315,000 150,000 100,000 7,000 4,330
1995 300,000 115,000 100,000 10,500 3,012
James W. Zaremba 1997 210,000 181,510 0 2,000 5,362(4)
Group President
James D. Atherton 1997 210,000 169,880 0 2,000 5,498(5)
Group President
Jerome C. Neff(6) 1997 177,000 105,880 0 0 6,592(7)
Group President
</TABLE>
- ---------------
(1) The amounts and numbers listed represent awards under the Pittway
Corporation 1990 Stock Awards Plan.
(2) Consists of $3,800 annual matching Pittway contributions during the year to
Pittway's salary reduction plan and $522 for term life insurance provided by
Pittway during the year.
(3) Consists of $3,959 annual matching Pittway contributions during the year to
Pittway's salary reduction plan and $522 for term life insurance provided by
Pittway during the year.
(4) Consists of $4,012 annual matching Pittway contributions during the year to
Pittway's salary reduction plan and $1,350 for term life insurance provided
by Pittway during the year.
(5) Consists of $3,392 annual matching Pittway contributions during the year to
Pittway's salary reduction plan and $2,106 for term life insurance provided
by Pittway during the year.
(6) Mr. Neff retired on April 30, 1998.
(7) Consists of $3,392 annual matching Pittway contributions during the year to
Pittway's salary reduction plan and $3,200 for term life insurance provided
by Pittway during the year.
The following table contains information concerning options granted to the
Chief Executive Officer and the Named Executive Officers under the Pittway
Corporation 1990 Stock Awards Plan during 1997.
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<PAGE> 66
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES
NUMBER OF PERCENT OF OF STOCK
SECURITIES TOTAL OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM(1)
OPTIONS EMPLOYEES BASE PRICE EXPIRATION --------------------
NAME GRANTED(#) IN FISCAL YEAR(%) ($/SH) DATE 5% 10%
---- ---------- ----------------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Thomas L. Kemp 10,000 3.7 $55.00 3/19/2007 $345,892 $876,558
Daniel J. Ramella 7,000 2.6 55.00 3/19/2007 242,124 613,591
James W. Zaremba 2,000 .74 55.00 3/19/2007 69,178 175,312
James D. Atherton 2,000 .74 55.00 3/19/2007 69,178 175,312
Jerome C. Neff 0 N/A N/A N/A N/A N/A
</TABLE>
- ---------------
(1) The value, if any, one may realize upon the exercise of a stock option
depends on the excess of the then current market value per share over the
exercise price per share. There is no assurance that the values to be
realized upon exercise of the stock options listed above will be at or near
the amounts shown.
The following table sets forth information with respect to exercises of
options and stock appreciation rights ("SARs") under the Pittway Corporation
1990 Stock Awards Plan during 1997 by the Named Executive Officers and the
values of unexercised options and SARs under the Pittway Corporation 1990 Stock
Awards Plan held by them as of December 31, 1997.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED OPTIONS/SARS AT IN-THE-MONEY OPTIONS
ON VALUE FISCAL YEAR END(#)(1) AT FISCAL YEAR END ($)
EXERCISE REALIZED ---------------------------- ----------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas L. Kemp 0 $ 0 0 14,000 $ 0 $236,750
Daniel J. Ramella 0 0 16,098 24,500 845,816 704,813
James W. Zaremba 4,500 163,256 0 8,900 0 271,613
James D. Atherton 6,000 216,850 0 11,200 0 352,400
Jerome C. Neff 0 0 0 4,600 0 161,575
</TABLE>
- ---------------
(1) Prior to and in conjunction with the Stock Distribution, the exercisability
of one-third of Mr. Kemp's Pittway options and of all unexercisable Pittway
options for Messrs. Ramella, Zaremba, and Atherton has been accelerated and
all such options have been exercised. The exercisability of Mr. Neff's
Pittway options were accelerated upon his retirement on April 30, 1998.
PENTON COMPENSATION PLANS
Penton has adopted the Penton Media, Inc. 1998 Equity and Performance
Incentive Plan (the "Equity Incentive Plan"), the Penton Media, Inc. 1998
Director Stock Option Plan (the "Director Option Plan"), the Penton Media, Inc.
Retirement Savings Plan (the "Salary Reduction Plan"), the Penton Media, Inc.
Retirement Plan (the "Pension Plan"), and the Penton Media, Inc. Supplemental
Executive Retirement Plan (the "SERP"). The following summaries of the Equity
Incentive Plan, the Director Option Plan, the Salary Reduction Plan, the Pension
Plan, and the SERP are qualified by reference to the provisions of the actual
plans, copies of which have been filed with the Commission as exhibits to the
Registration Statement of which this Prospectus is a part.
EQUITY INCENTIVE PLAN
The Equity Incentive Plan permits the granting of stock options and other
awards to officers and other key employees of Penton. Stock options may be
either incentive stock options within the meaning of Section 422 of the Code
("Incentive Stock Options") or other options.
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<PAGE> 67
The purpose of the Equity Incentive Plan is to promote the long-term
financial interests of Penton and its affiliates by attracting and retaining
officers and other key employees and to provide to such persons incentives and
rewards for superior performance.
Plan Summary
General. Under the Equity Incentive Plan, the Compensation Committee is
authorized to make awards of options to purchase shares of Common Stock ("Option
Rights"), awards of Tandem Appreciation Rights and/or Free-Standing Appreciation
Rights ("Appreciation Rights"), awards of restricted shares ("Restricted
Shares"), awards of deferred shares ("Deferred Shares"), and awards of
performance shares ("Performance Shares") and performance units ("Performance
Units"). The terms applicable to awards of the various types, including those
terms that may be established by the Compensation Committee when making or
administering particular awards, are set forth in detail in the Equity Incentive
Plan.
Shares Available Under the Equity Incentive Plan. Subject to adjustment as
provided in the Equity Incentive Plan, the number of shares of Common Stock that
may be issued or transferred (i) upon the exercise of Option Rights or
Appreciation Rights, (ii) as Restricted Shares, (iii) as Deferred Shares, (iv)
in payment of Performance Shares or Performance Units that have been earned, or
(v) in payment of dividend equivalents paid with respect to awards made under
the Equity Incentive Plan may not exceed 2,500,000 in the aggregate. Such shares
of Common Stock may be shares of original issuance, treasury shares or a
combination of both. Upon the payment of any option price by the transfer to
Penton of shares of Common Stock or upon satisfaction of any withholding amount
by means of transfer or relinquishment of shares of Common Stock, only the net
number of shares of Common Stock actually issued or transferred by Penton will
be deemed to have been issued or transferred under the Equity Incentive Plan.
Eligibility. Officers and other key employees of Penton and its
subsidiaries may be selected by the Compensation Committee to receive benefits
under the Equity Incentive Plan. The Compensation Committee may also make awards
under the Equity Incentive Plan to a person who has agreed to commence serving
in any such capacity within 90 days of the date of grant.
Option Rights. The Compensation Committee may grant Option Rights, which
entitle the optionee to purchase a specified number of shares of Common Stock at
a price not less than 100% of the Market Value per Share (as defined in the
Equity Incentive Plan) on the date of grant for Incentive Stock Options and not
less than the greater of 85% of the Market Value per Share on the date of grant
or the par value of a share of Common Stock for all other Option Rights. The
option price is payable in cash, by the transfer to Penton of nonforfeitable
unrestricted shares of Common Stock owned by the optionee having a value at the
time of exercise equal to the option price, by any other legal consideration the
Compensation Committee may deem appropriate, or by a combination of such payment
methods. Any grant may provide for deferred payment of the option price from the
proceeds of sale through a bank or broker of some or all of the shares of Common
Stock to which the exercise relates. Any grant may provide for the automatic
grant of additional Option Rights to an optionee upon the exercise of Option
Rights using shares of Common Stock as payment.
Option Rights granted under the Equity Incentive Plan may be Option Rights
that are intended to qualify as Incentive Stock Options, Option Rights that are
not intended to so qualify, or combinations thereof. The Compensation Committee
may, at or after the date of grant of any Option Rights (other than Incentive
Stock Options), provide for the payment of dividend equivalents to the optionee
in cash or additional shares of Common Stock on a current, deferred, or
contingent basis or may provide that such equivalents be credited against the
option price. The Compensation Committee may condition the exercise of Option
Rights on the achievement of Management Objectives (as defined in the Equity
Incentive Plan).
No Option Right may be exercised more than ten years from the date of
grant. Each grant must specify the period of continuous employment with Penton
or any subsidiary that is necessary before the Option Rights will become
exercisable and may provide for the earlier exercise of such Option Rights in
the event of a Change of Control (as defined below) of Penton. Successive grants
may be made to the same optionee whether or not Option Rights previously granted
remain unexercised. The exercise of an Option Right cancels, on a
share-for-share basis, any Tandem Appreciation Right.
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<PAGE> 68
Appreciation Rights. Appreciation Rights provide participants an
alternative means of realizing the benefits of Option Rights. A Tandem
Appreciation Right is a right to receive from Penton up to 100 percent of the
spread between the option price and the current value of the shares of Common
Stock underlying the option. The amount is determined by the Compensation
Committee and the right is exercisable only when the related Option Right is
also exercisable, the spread is positive and the recipient surrenders the
related Option Right for cancellation. A Free-Standing Appreciation Right is the
right to receive from Penton up to 100% of the spread at the time of exercise.
When computing the spread for a Free-Standing Appreciation Right, the base price
must be equal to or greater than the market value of the underlying shares of
Common Stock on the date of grant. Successive grants may be made to the same
recipient even if that individual already has unexercised Free-Standing
Appreciation Rights. No Free-Standing Appreciation Right may be exercised more
than ten years from the date of grant.
Any grant of Appreciation Rights may specify any or all of the following:
(i) that the amount payable on exercise of an Appreciation Right may be paid by
Penton in cash, in shares of Common Stock or in any combination thereof, and the
right to elect among those alternatives may be given to the participant or
retained by the Compensation Committee, (ii) a maximum amount payable on
exercise, (iii) waiting periods before exercise, (iv) permissible exercise dates
or periods, (v) whether the Appreciation Right may be exercised only on or after
a Change of Control of Penton, (vi) whether dividend equivalents may be paid in
cash or in shares of Common Stock, and (vii) Management Objectives that must be
achieved as a condition to exercise such rights.
Restricted Shares. An award of Restricted Shares involves the immediate
transfer by Penton to a participant of ownership of a specific number of shares
of Common Stock in consideration of the performance of services. The participant
is entitled immediately to voting, dividend, and other ownership rights in such
shares, but the Compensation Committee may require that any dividends be
automatically deferred and reinvested in additional Restricted Shares. The
transfer may be made without additional consideration or in consideration of a
payment by the participant that is less than current market value, as the
Compensation Committee may determine. The Compensation Committee may condition
the award on the achievement of Management Objectives.
Restricted Shares must be subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code for a period of not less than three
years as determined by the Compensation Committee. An example would be a
provision that the Restricted Shares would be forfeited if the participant
ceased to serve Penton as an officer or key employee during a specified period
of years. In order to enforce these forfeiture provisions, the transferability
of Restricted Shares will be prohibited or restricted in a manner and to the
extent prescribed by the Compensation Committee for the period during which the
forfeiture provisions are to continue. The Compensation Committee may provide
for a shorter period during which the forfeiture provisions are to apply in the
event of a Change of Control of Penton.
Deferred Shares. An award of Deferred Shares constitutes an agreement by
Penton to deliver shares of Common Stock to the participant in the future in
consideration of the performance of services, but subject to the fulfillment of
such conditions during the deferral period as the Compensation Committee may
specify. During the deferral period, the participant has no right to transfer
any rights under his or her award, has no rights of ownership in the Deferred
Shares and no right to vote them, but the Compensation Committee may, at or
after the date of grant, authorize the payment of dividend equivalents on such
shares on a current, deferred, or contingent basis, either in cash or additional
shares of Common Stock. Awards of Deferred Shares may be made without additional
consideration or in consideration of a payment by the participant that is less
than the market value per share at the date of grant.
Deferred Shares must be subject to a deferral period, as determined by the
Compensation Committee at the date of grant, except that the Compensation
Committee may provide for the earlier termination of such period in the event of
a Change of Control of Penton.
Performance Shares and Performance Units. A Performance Share is the
equivalent of one share of Common Stock and a Performance Unit is the equivalent
of $1.00. The number of Performance Shares or Performance Units is specified by
the Compensation Committee and may be adjusted to reflect changes in
67
<PAGE> 69
compensation or other factors (unless the adjustment for certain participants
would cause an award to lose its Section 162(m) exemption).
A recipient must meet one or more Management Objectives within a specified
performance period. Such performance period may be subject to earlier
termination in the event of a Change of Control of Penton. A minimum level of
acceptable achievement may also be established by the Compensation Committee. If
by the end of the performance period the participant has achieved the specified
Management Objectives, he or she will be deemed to have fully earned the
Performance Shares or Performance Units. If the participant has not achieved the
Management Objectives, but has attained or exceeded the predetermined minimum,
he or she will be deemed to have partly earned the Performance Shares and/or
Performance Units (the amount earned to be determined in accordance with a
formula to be determined by the Compensation Committee).
To the extent earned, the Performance Shares and/or Performance Units will
be paid to the participant at the time and in the manner determined by the
Compensation Committee in cash, shares of Common Stock or in any combination
thereof (the Compensation Committee may give either the participant or the
Compensation Committee the right to choose the form of payment). Dividend
equivalents on Performance Shares may be paid in cash or additional shares of
Common Stock on a current, deferred, or contingent basis. The Compensation
Committee may specify a maximum amount payable under any grant of Performance
Shares or Performance Units.
Change of Control. "Change of Control" in the Equity Incentive Plan is
defined as any of the following:
(a) Penton is merged or consolidated or reorganized into or with another
corporation or other legal person, and as a result of such merger,
consolidation, or reorganization less than a majority of the combined voting
power of the then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by the holders of
securities entitled to vote generally in the election of Penton's directors (the
"Directors") immediately prior to such transaction;
(b) Penton sells or otherwise transfers all or substantially all of its
assets to any other corporation or other legal person, and less than a majority
of the combined voting power of the then-outstanding securities of such
corporation or person immediately after such sale or transfer is held in the
aggregate by the holders of shares of Common Stock immediately prior to such
sale or transfer;
(c) There is a report filed on Schedule 13D or Schedule 14D-1 (or any
successor schedule, form or report), each as promulgated pursuant to the
Securities Exchange Act of 1934 (the "Exchange Act"), disclosing that any person
(as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act) has become the beneficial owner (as the term "beneficial owner" is
defined under Rule 13d-3 or any successor rule or regulation promulgated under
the Exchange Act) of securities representing 20% or more of the Voting Power (as
the term is defined in the Equity Incentive Plan);
(d) Penton files a report or proxy statement with the Commission pursuant
to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any
successor schedule, form or report or item therein) that a Change of Control of
Penton has or may have occurred or will or may occur in the future pursuant to
any then-existing contract or transaction; or
(e) If during any period of two consecutive years, individuals who at the
beginning of any such period constitute the Directors cease for any reason to
constitute at least a majority thereof, unless the election, or the nomination
for election by Penton's stockholders, of each Director first elected during
such period was approved by a vote of at least two-thirds of the Directors then
still in office who were Directors at the beginning of any such period.
Notwithstanding the foregoing provisions, a "Change of Control" shall not
be deemed to have occurred for purposes of the Equity Incentive Plan (i) solely
because (A) Penton; (B) a Subsidiary; (C) the Harris Group; or (D) any
Penton-sponsored employee stock ownership plan or other employee benefit plan of
Penton either files or becomes obligated to file a report or proxy statement
under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A
(or any successor schedule, form or report or item therein) under the Exchange
Act, disclosing beneficial ownership by it of shares, whether in excess of 20%
of the Voting Power or otherwise, or because Penton reports that a Change of
Control of Penton has or may have
68
<PAGE> 70
occurred or will or may occur in the future by reason of such beneficial
ownership or (ii) solely because of a Change of Control of any subsidiary of
Penton. For purposes of the preceding sentence, the "Harris Group" shall mean
Messrs. Irving B. Harris, Neison Harris, King Harris, William W. Harris, and
Sidney Barrows, and their respective spouses, descendants and spouses of
descendants, trustees of trusts established for the benefit of such persons
(acting in their capacity as trustees of such trusts) and executors of estates
of such persons (acting in their capacity as executors of such estates), and
each person of which any of the foregoing owns (i) more than fifty percent (50%)
of the voting stock or other voting interests and (ii) stock or other interests
representing more than fifty percent (50%) of the total value of the stock or
other interests of such person. For purposes of the preceding sentence, the term
"spouses" includes widows and widowers until first remarried.
Administration and Amendments. The Equity Incentive Plan is administered
by a committee of the Board (or subcommittee thereof) consisting of not less
than two Directors, initially the Compensation Committee. The members of the
Committee shall be "Non-Employee Directors" within the meaning of Rule 16b-3
under the Exchange Act and "outside directors" within the meaning of Section
162(m) of the Code.
The Compensation Committee may, with the concurrence of the affected
optionee, cancel any agreement evidencing Option Rights or any other award
granted under the Equity Incentive Plan. In the event of such cancellation, the
Compensation Committee may authorize the granting of new Option Rights or other
such awards under the Equity Incentive plan (which may or may not cover the same
number of shares of Common Stock that had been the subject of the prior award)
in such manner, at such option price and subject to such other terms, conditions
and discretions as would have been applicable under the Equity Incentive Plan
had the canceled Option Rights or other awards not been granted.
The Compensation Committee's interpretation of the Equity Incentive Plan
and related agreements and documents is final and conclusive. The Equity
Incentive Plan may be amended from time to time by the Compensation Committee.
However, any amendment which must be approved by the stockholders of Penton in
order to comply with applicable law or the rules of any national securities
exchange upon which the shares of Common Stock are traded or quoted will not be
effective unless and until such approval has been obtained in compliance with
such applicable law or rules. Presentation of the Equity Incentive Plan or any
amendment thereof for stockholder approval is not to be construed to limit
Penton's authority to offer similar or dissimilar benefits through plans that
are not subject to stockholder approval.
The Compensation Committee may require participants, or permit participants
to elect, to defer issuance of shares or the settlement of cash awards and may
provide for payment of interest or dividend equivalents on the deferred amounts.
The Compensation Committee may also condition any award on the surrender or
deferral by a participant of his or her right to receive a cash bonus or other
compensation.
Termination. No grant under the Equity Incentive Plan may be made more
than 10 years after the Equity Incentive Plan is approved by the stockholders,
but all grants made on or before the 10th anniversary will continue in effect
after that date subject the terms of those grants and the Equity Incentive Plan.
Plan Benefits
Owing to the discretion to be exercised by the Committee in administering
the Equity Incentive Plan, it is not possible to determine in advance how the
several types of awards authorized under the Equity Incentive Plan will be
allocated among eligible participants. However, employees have been awarded
options and Deferred Shares in connection with, and subject to completion of,
the Stock Distribution. See "Capitalization."
DIRECTOR OPTION PLAN
The Director Option Plan permits the granting of stock options to directors
of Penton who at the time of the grant are not employees of Penton
("Non-Employee Directors"). The purpose of the Director Option Plan is to
promote the long-term financial interests of Penton by (i) providing an
incentive for Non-Employee Directors to maximize the long-term value of Common
Stock and otherwise act in the best interest of Penton's stockholders, (ii)
providing Non-Employee Directors with the opportunity to acquire a greater stake
in the future of Penton through stock ownership, and (iii) attracting and
retaining highly qualified Non-Employee Directors.
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<PAGE> 71
Plan Summary
The Director Option Plan permits the granting of stock options that are
non-qualified options for purposes of the Code.
Administration. The Director Option Plan is administered by the Board.
Subject to certain limitations, the Director Option Plan empowers the Board,
among other things: to award options to directors in such forms and amounts as
it determines; to interpret the Director Option Plan; to adopt, amend and
rescind guidelines, rules and regulations relating to the Director Option Plan;
and to make all determinations deemed necessary or advisable for the Director
Option Plan's administration.
Shares Subject to the Director Option Plan; Adjustment. The maximum number
of shares of Common Stock which may be issued pursuant to the Director Option
Plan is 100,000 shares. If options expire unexercised or are canceled,
terminated or forfeited in any manner without the issuance of shares, such
shares are again available under the Director Option Plan. Shares issued
pursuant to the Director Option Plan may be authorized and unissued shares,
treasury shares or a combination thereof.
The maximum number of shares subject to the Director Option Plan, and the
shares and option prices under outstanding options, are subject to adjustment in
the event of certain Organic Changes (as defined in the Director Option Plan)
and/or to prevent dilution or enlargement of option rights.
Required Option Provisions. The option price may not be less than 100% of
the fair market value of the shares of Common Stock on the date of grant or less
than the par value of such shares of Common Stock. The term of an option cannot
exceed ten years from the date of grant. Although options generally may be
exercised at such time or times as the Board determines at or subsequent to
grant, options may only be exercised during "window periods" following the dates
of release for publication of Penton's quarter or annual summary statements of
sales and earnings and generally may not be exercised during the six months
subsequent to grant. In the event a Non-Employee Director ceases to be a member
of the Board for any reason, each option previously granted to such Non-Employee
Director will cease to be exercisable on the fifth anniversary of the date of
termination or, if earlier, on its scheduled date of expiration. The option
price may be paid, to the extent permitted by the Board, in cash using shares of
Common Stock already owned by the optionee valued at its market price on the
date of exercise. The Board may permit the participant to elect to pay the
option price by authorizing a third party to sell the shares acquired upon
exercise (or a sufficient portion thereof) and remit to Penton sale proceeds
sufficient to pay the option price and any withholding or other tax resulting
from exercise. Options will not be transferable except by will or the laws of
descent and distribution, and during a participant's lifetime will be
exercisable only by the participant or his or her legal representative. For
purposes of the Director Option Plan, the market value of the shares of Common
Stock on any date will be its closing price on that date (or, if that date is
not a trading date for such stock, on the next preceding trading date for such
stock) on the NYSE Composite Transactions list, as subsequently reported in The
Wall Street Journal.
Withholding. The Board has the power to withhold, or require a participant
to remit to Penton, an amount sufficient to cover any withholding and other
taxes due with respect to the participant's exercise of an option. If so
permitted by the Board, a participant may elect to satisfy such taxes by having
shares issuable under the Director Option Plan withheld or by delivering other
shares to Penton.
Termination and Amendment. The Board may terminate the Director Option
Plan at any time, and may from time to time amend the Director Option Plan and
any option outstanding thereunder; provided that no such action shall adversely
affect any outstanding option without the consent of the participant who holds
it. No such amendment to the Director Option Plan may be made without
stockholder approval to the extent such approval is required by law, regulation
or the rules of any exchange upon which the shares of Common Stock are listed.
Plan Benefits
Owing to the discretion to be exercised by the Board in administering the
Director Option Plan, it is not possible to determine in advance how options
will be awarded to directors under the Director Option Plan. However, in
connection with, and subject to completion of, the Stock Distribution, each
Non-Employee Director has been awarded 8,000 options, which will vest at the
rate of 2,000 per year, and Mr. Schwartz has been awarded an additional 13,000
fully-vested options. See "Management -- Board of Directors."
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<PAGE> 72
EMPLOYEE RETIREMENT AND SAVINGS PLANS
The Salary Reduction Plan, the Pension Plan, and the SERP are similar to
plans currently maintained by Pittway and its subsidiaries. Assets attributable
to employees of Penton's operating units will be transferred from the
corresponding Pittway plans and credit will be given to such employees under
Penton's plans for periods during which they were employed by Pittway, its
predecessors and their subsidiaries.
Salary Reduction Plan
Substantially all employees of Penton's United States operations will be
eligible to participate in the Salary Reduction Plan. Under the Plan, eligible
employees may elect to have a portion of their "earnings" (total cash
compensation less certain items) contributed to the Plan by their employers and
their employers will match such contributions with specified percentages
thereof. The percentages may vary between certain groups of covered employees
and will be determined from time to time by their employers. For 1997, such
matching percentages under the similar Pittway plan ranged from .5% to 3% of
eligible covered employees' "earnings." Contributions and matches will be
invested in one or more investment funds selected by the employee from among
those available under the Plan. Penton anticipates that such funds may
eventually include a fund which invests solely in Common Stock. Salary reduction
contributions and employer matching contributions will vest immediately. Vested
contributions (after any earnings or losses from the investment thereof) will be
distributed in a lump sum following termination of employment but account
balances may, under certain circumstances and subject to certain conditions, be
withdrawn or borrowed earlier.
Retirement Plans
The Pension Plan is fully paid for by Penton, and employees become fully
vested after five years of service. The annual benefit payable to an employee
under the Pension Plan upon retirement, computed as a straight life annuity
amount, equals the sum of the separate amounts the employee accrues for each of
his years of service under the Pension Plan plus certain increases put into
effect prior to 1998. Such separate amounts are determined as follows: for each
year through 1988, 1.2% of such year's compensation up to the Social Security
wage base for such year and 1.85% (2.0% for years after 1986) of such year's
compensation above such wage base; for each year after 1988 through the year in
which the employee reaches thirty-five years of service, 1.2% of such year's
"covered compensation" and 1.85% of such year's compensation above such "covered
compensation"; and for each year thereafter, 1.2% of such year's compensation.
Years of service and compensation with Pittway will be taken into account under
the Pension Plan, upon the completion of a transfer of assets and liabilities
attributable to Penton employees from the Pittway retirement plan to the Pension
Plan. The employee's compensation under the Pension Plan for any year includes
all salary (before any election under Pittway's or Penton's salary reduction
plan or cafeteria plan), commissions and overtime pay and, beginning in 1989,
bonuses; subject to such year's limit applicable to tax-qualified retirement
plans ($160,000 for 1998 and, currently, for each year thereafter). The
employee's "covered compensation" under the Pension Plan for any year is
generally the average, computed such year, of the Social Security wage bases for
each of the thirty-five years preceding the employee's Social Security
retirement age, assuming that such year's Social Security wage base will not
change in the future. Normal retirement age under the Pension Plan is age 65,
and reduced benefits are available as early as age 55. Benefits are not subject
to reduction for Social Security benefits or other offset amounts. Estimated
annual benefits payable under the Pension Plan upon retirement at normal
retirement age for the following persons (assuming 1998 and future compensation
at the $160,000 limit currently applicable, that covered compensation remains
constant and the completion of the transfer of assets and liabilities from the
Pittway retirement plan to the Pension Plan; but without regard to the formula
limitation on annual benefits imposed on tax-qualified retirement plans,
currently $130,000) are: Mr. Kemp, $60,024; Mr. Ramella, $87,921; Mr. Zaremba,
$60,176; Mr. Atherton, $47,885; and Mr. Neff, $51,234.
SERP
Messrs. Kemp and Ramella participate in Penton's supplemental executive
retirement plan, which is not tax-qualified. The annual benefit payable to a
participant under the plan at age 65, computed as a straight life annuity
amount, equals the sum of the separate amounts the participant accrues for each
of his years of service after September 3, 1996 and January 1, 1996,
respectively. The separate amount for each such year is 1.85% of that portion of
the participant's salary and annual discretionary cash bonus, if any, for such
year (before any
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<PAGE> 73
election under Pittway's or Penton's salary reduction plan, and including any
portion of such bonus taken in the form of performance shares awards) in excess
of $150,000 (or any higher limit applicable that year to tax-qualified
retirement plans) but less than $300,000. Benefits are not subject to reduction
for Social Security benefits or other offset amounts. Accrued benefits are
subject to forfeiture in certain events. Estimated annual benefits payable under
the plan upon retirement at age 65 (assuming 1998 and future annual salary and
discretionary cash bonus of not less than $300,000 for each of them and that the
$160,000 limit applicable in 1998 remains constant) are: Mr. Kemp, $53,280 and
Mr. Ramella, $52,232.
EMPLOYMENT AGREEMENTS
Employment agreements between Penton and each of Messrs. Kemp and Ramella
provide for minimum annual salaries of $400,000 and $330,000, respectively,
supplementary insurance coverage and participation in Penton's supplemental
executive retirement plan. Mr. Kemp's agreement also provides for the payment of
accrued but unvested pension plan and salary reduction plan benefits in the
event of termination of employment prior to full vesting. The agreements are for
terms currently expiring September 2, 1999 and December 31, 2000, respectively.
Each agreement renews automatically at the end of each contract year for an
additional year (or until age 65, if earlier) unless either party thereto elects
otherwise, but may be terminated by the executive officer on specified advance
notice (with forfeiture of supplemental retirement benefits). Each agreement
includes non-competition, non-solicitation and confidentiality obligations on
the part of the executive officer which survive its termination.
Under the terms of his employment agreement, Mr. Kemp is entitled to
surrender to Pittway for cancellation immediately prior to the Stock
Distribution all non-qualified options under the Pittway 1990 Stock Awards Plan
held by him and to receive from Penton at the close of business on the Stock
Distribution Date non-qualified options under the Equity Incentive Plan having
an exercise price equal to the then fair market value of the Common Stock and
having exercisability provisions corresponding to and an aggregate value equal
to that of the surrendered Pittway options. Mr. Kemp has exercised one-third of
his options prior to the date hereof and intends to surrender his remaining
options under the Pittway 1990 Stock Awards Plan for a number of options under
the Equity Incentive Plan equal to the value of the options surrendered. In
addition, Mr. Kemp's employment agreement provides that he is to receive, at the
close of business on the Stock Distribution Date, a non-qualified option under
the Equity Incentive Plan having an exercise price equal to the then fair market
value of the Common Stock and a value of $400,000. Mr. Kemp has waived this
right in consideration for receiving, in connection with, and subject to
completion of, the Stock Distribution, an option to purchase 60,000 shares of
Common Stock at an exercise price per share equal to the average closing price
of the Common Stock for the five trading day period ending after the Stock
Distribution.
In lieu of portions of bonuses otherwise payable in cash in 1998, Messrs.
Kemp and Ramella have been awarded, subject to completion of the Stock
Distribution, Deferred Shares under the Equity Incentive Plan having three-year
deferral periods worth $60,000 and $50,000, respectively.
CERTAIN TRANSACTIONS
Each of the DM Publishing Shareholders, as such, has certain contingent
rights to additional cash (and/or, under certain circumstances, additional
shares of Common Stock) and registration rights and indemnification rights from
Penton pursuant to the DM Publishing Combination Agreement. See "DM Publishing
Combination Agreement -- Closing Considerations and Contingent Rights."
DM Publishing leases equipment from Donohue Meehan Equipment Leasing, an
Illinois partnership, which is owned by the DM Publishing Shareholders. The
total balances on these leases as of December 31, 1997, was $270,928. Penton
believes that the lease terms are no less favorable to DM Publishing than those
obtainable in an arm's-length transaction with an independent third party. See
DM Publishing's Financial Statements.
Immediately following the Stock Distribution Date, two of the 11 persons
who are directors of Penton will also be directors of Pittway, and Penton and
Pittway will have certain limited ongoing relationships after the Stock
Distribution. See "The Stock Distribution -- Relationship between Penton and
Pittway after the Stock Distribution" and Penton's Consolidated Financial
Statements.
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<PAGE> 74
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth information concerning the Common Stock
projected to be beneficially owned immediately after the Stock Distribution and
the issuance of shares of Common Stock at the closing of the DM Publishing
Combination by (a) persons projected by Penton to be the beneficial owners of
more than 5% of the outstanding shares of Common Stock, (b) each of the
directors of Penton, (c) each of the Named Executive Officers of Penton and (d)
all directors and executive officers of Penton as a group. The projections are
based upon the numbers of shares of Pittway Stock held on May 31, 1998 (to the
extent known to Pittway), as adjusted to reflect the Stock Distribution and the
shares of Common Stock to be issued at the closing of the DM Publishing
Combination. See "The Stock Distribution -- Manner of the Stock Distribution."
Except where otherwise indicated, the mailing address of each of the
stockholders named in the table is: c/o Penton Media, Inc., 1100 Superior
Avenue, Cleveland, Ohio 44114.
<TABLE>
<CAPTION>
PERCENTAGE OF
PROJECTED PROJECTED
NAME NUMBER OF SHARES(1) TOTAL SHARES(2)
---- ------------------- ---------------
<S> <C> <C>
William Harris Investors, Inc.(3)(4)........................ 3,079,774 13.54%
2 North LaSalle Street
Suite 400
Chicago, Illinois 60602
Mario J. Gabelli, et al(5).................................. 2,694,718 11.82
One Corporate Center
Rye, New York 10580
Janus Capital Corporation(6)................................ 1,893,611 8.33
100 Fillmore Street, Suite 300
Denver, Colorado 80206
Irving B. Harris(3)(7)...................................... 3,079,774 13.54
2 North LaSalle Street
Suite 400
Chicago, Illinois 60602
Current Harris Group(3)..................................... 5,479,130 23.99
Joan W. Harris(3)(8)........................................ 3,000 *
King Harris(3)(9)(10)....................................... 1,401,893 6.14
William J. Friend(3)(10)(11)................................ 71,723 *
Edward J. Schwartz(12)...................................... 23,001 *
Anthony Downs(13)........................................... 11,839 *
Thomas L. Kemp(10).......................................... 5,072 *
Daniel J. Ramella(10)(14)................................... 71,694 *
William C. Donohue.......................................... 769,500 3.38
John J. Meehan.............................................. 769,500 3.38
Richard B. Swank............................................ 0 *
Don E. Schultz.............................................. 0 *
James W. Zaremba............................................ 9,254 *
James D. Atherton........................................... 0 *
Jerome C. Neff(10)(15)...................................... 20,297 *
All Directors and Executive Officers........................ 3,149,397 13.78
as a Group (16 persons)(10)(16)
</TABLE>
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<PAGE> 75
- ---------------
* Less than one percent.
(1) Except as otherwise indicated below, beneficial ownership means the sole
power to vote and dispose of shares.
(2) Calculated using 22,739,000 shares as the total projected outstanding
shares.
(3) The information as to the Current Harris Group (as defined below), Irving B.
Harris, Joan W. Harris, King Harris, and William J. Friend is derived in
part from statements with respect to Pittway Stock, as amended January 15,
1990, filed with the Commission pursuant to Section 13(d) of the Exchange
Act and statements with respect to Pittway Stock, as amended November 15,
1991, filed with the Commission pursuant to such Section. Such statements
were filed on behalf of such named persons as well as those other persons
and entities who are currently members of the "Harris Group" beneficially
owning, directly or indirectly, shares of Pittway Stock (the "Current Harris
Group"). Such statements disclose that, because of the relationships among
members of the Current Harris Group, such persons may be deemed to be a
group within the meaning of Section 13(d) of the Exchange Act and the rules
and regulations thereunder. The "Harris Group" means Messrs. Irving B.
Harris, Neison Harris, King Harris, William W. Harris, and Sidney Barrows,
and their respective spouses, descendants and spouses of descendants,
trustees of trusts established for the benefit of such persons, and
executors of estates of such persons. Joan W. Harris is the spouse of Irving
B. Harris and the aunt of King Harris. King Harris is the uncle of William
J. Friend. The aggregate number of outstanding shares which may be deemed to
be beneficially owned by the Current Harris Group includes all the shares
shown in this table for William Harris Investors, Inc. ("WHI"), Irving B.
Harris, Joan W. Harris, King Harris, and William J. Friend. The total
excludes duplication of shares within such group.
(4) The information as to WHI is derived in part from two statements with
respect to Pittway Stock, as amended February 12, 1998, filed with the
Commission pursuant to Section 13(g) of the Exchange Act. Such statements,
together with advice furnished to Penton separately by WHI, disclose that
(i) WHI, an investment adviser registered under the Investment Advisers Act
of 1940, holds all its shares of Pittway Stock on behalf, and in terminable
discretionary accounts, of Joan W. Harris and certain other members of the
Harris Group, (ii) WHI shares voting power with such persons, and has sole
dispositive power, with respect to all such shares, (iii) Irving B. Harris
and his children are the sole voting stockholders of WHI, and (iv) Irving B.
Harris is the Chairman of WHI.
(5) The information as to Mario J. Gabelli and entities controlled directly or
indirectly by Mr. Gabelli is derived from statements with respect to Pittway
Stock, as amended November 3, 1997 and July 10, 1998, filed with the
Commission pursuant to Section 13(d) of the Exchange Act. Such statements
disclose that (i) Mr. Gabelli is the chief investment officer for most of
the entities signing such statements and is deemed to have beneficial
ownership of the shares beneficially owned by all such entities, (ii) Mr.
Gabelli and such entities do not admit that they constitute a group within
the meaning of Section 13(d) of the Exchange Act and the rules and
regulations thereunder, and (iii) with respect to Pittway Stock, Mr. Gabelli
and such entities have the sole power to vote and dispose of all the shares
of which they are beneficial owners (unless the aggregate voting interest of
all such entities exceeds 25% of Pittway's total voting interest or other
special circumstances exist, in which case the proxy voting committees of
certain of such entities would have the sole power to vote certain of
426,700 shares of Pittway Common Stock and 374,500 shares of Pittway Class A
Stock -- equivalent in total to 801,200 shares of Common Stock) except 6,450
shares of Pittway Common Stock and 42,733 shares of Pittway Class A
Stock -- equivalent in total to 49,183 shares of Common Stock -- as to which
they have no voting power.
(6) The information as to Janus Capital Corporation ("Janus") is derived from a
statement with respect to Pittway Stock, as amended March 10, 1998, filed
with the Commission pursuant to Section 13(g) of the Exchange Act. Such
statement discloses that (i) Thomas H. Bailey is President and Chairman of
the Board of Janus, owns approximately 12.2% of Janus and may be deemed to
exercise control over Janus, (ii) Janus is deemed to have beneficial
ownership of all its shares of Pittway Stock, (iii) Janus and Mr. Bailey
share voting and dispositive power with respect to such shares, (iv) all
such shares are held by managed portfolios to which Janus is an investment
advisor or sub-advisor, and (v) Mr. Bailey disclaims beneficial ownership of
such shares.
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<PAGE> 76
(7) Consists of the shares to be held by WHI (of which Irving B. Harris is a
controlling stockholder), certain of which are held by WHI for the account
of Mr. Harris or would otherwise be deemed beneficially owned by him without
regard to WHI. As set forth in note (4), the voting power of the shares held
by WHI is shared by WHI with the respective persons for whose account they
are held and WHI has sole dispositive power with respect to such shares.
(8) Consists of 3,000 shares to be held by WHI for the account of Joan W.
Harris. As set forth in note (4), the voting power of the shares held by WHI
is shared by WHI with the respective persons for whose account they are held
and WHI has sole dispositive power with respective to such shares.
(9) Mr. King Harris will share the power to vote and dispose of 1,216,072 of
such shares. Includes 103,161 shares which Mr. Harris will receive in the
Stock Distribution in the event he exercises, prior to the Record Date,
options for shares of Pittway Class A Stock held by him that are or will
then be exercisable.
(10) Includes shares to be issued in the Stock Distribution with respect to
shares of Pittway Class A Stock beneficially owned as of March 31, 1998,
through participation in the Pittway Profit Sharing Plan. See "Stock
Distribution -- Manner of the Stock Distribution" and " -- Pittway Stock
Held under or Issuable pursuant to Pittway Employee Plans."
(11) Mr. Friend will share the power to vote and dispose of 70,826 of such
shares.
(12) Mr. Schwartz will share the power to vote and dispose of 4,903 such shares.
Includes 12,954 shares which Mr. Schwartz will receive in the Stock
Distribution in the event he exercises, prior to the Record Date, options
for shares of Pittway Class A Stock held by him that are or will then be
exercisable.
(13) Includes 1,000 shares which Mr. Downs will receive in the Stock
Distribution in the event he exercises, prior to the Record Date, options
for shares of Pittway Class A Stock held by him that are or will then be
exercisable.
(14) Mr. Ramella will share power to vote and dispose of 71,694 of such shares.
(15) Mr. Neff retired on April 30, 1998.
(16) Includes 1,219,511 shares as to which voting power will be shared other
than with directors and officers of Penton and 117,115 shares to be
received in the Stock Distribution in the event they exercise, prior to the
Record Date, options for shares of Pittway Class A Stock held by them that
are or will then be exercisable.
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<PAGE> 77
DESCRIPTION OF CAPITAL STOCK
The Restated Certificate of Incorporation (the "Certificate of
Incorporation") of Penton provides among other things that its authorized
capital stock consists of 60 million shares of Common Stock and 2 million shares
of Preferred Stock, par value $.01 per share ("Preferred Stock").
COMMON STOCK
Penton is authorized to issue up to 60 million shares of Common Stock
without stockholder approval (except as may be required by applicable stock
exchange regulations). Holders of Common Stock have one vote for each share and
share ratably in all dividends, subject to the rights of the Preferred Stock
holders, if any. All of the shares of Common Stock to be distributed in the
Stock Distribution will be fully paid and non-assessable. Following the Stock
Distribution and the issuance of shares at the closing of the DM Publishing
Combination, there will be approximately 22,739,000 shares of Common Stock
outstanding. At that time, Penton will be committed to issue certain options
under its Equity Incentive Plan and will have outstanding certain debt
obligations convertible into Common Stock. See "Capitalization."
PREFERRED STOCK
Penton is authorized to issue up to 2 million shares of Preferred Stock
without stockholder approval, unless such approval is required by the NYSE. The
NYSE requires stockholder approval prior to the issuance of securities as a
prerequisite to listing when (i) the securities are convertible into Common
Stock with a voting power equal to or in excess of 20% of the voting power
outstanding before such issuance or (ii) the issuance of the securities will
result in a change of control. The Board may provide for the issuance of shares
of Preferred Stock or provide for the issuance of shares of Preferred Stock in
one or more series, establish from time to time the number of shares to be
included in each such series and fix the designations, voting powers, rights and
qualifications, limitations, or restrictions of the shares of Preferred Stock of
each such series.
LISTING AND TRADING OF COMMON STOCK
Application has been made to list the Common Stock on the NYSE. Prior to
the date hereof, there has been no trading market for the Common Stock. In view
of the contingent nature of the Stock Distribution, trading is not expected to
commence until the Stock Distribution Date. See "Introduction." Penton is unable
to predict the extent of the market for the Common Stock or the prices at which
the shares will trade.
Shares of Common Stock distributed in the Stock Distribution will be freely
transferable, except for shares received by persons who may be deemed to be
"affiliates" of Penton under the Securities Act and shares received with respect
to shares of Pittway Stock that are "restricted stock" for purposes of
Securities Act Rule 144. Persons who may be deemed to be affiliates of Penton
after the Stock Distribution generally include individuals or entities that
control, are controlled by, or are under common control with Penton and may
include certain officers and directors of Penton as well as principal
stockholders of Penton. Persons who are affiliates of Penton will be permitted
to sell their shares of Common Stock distributed in the Stock Distribution only
pursuant to an effective registration statement under the Securities Act or an
exemption from the registration requirements of the Securities Act (such as Rule
144).
DIVIDENDS ON COMMON STOCK
The dividend policy of Penton will be determined by the Board. It is
expected that Penton will pay initial quarterly dividends in an amount of $.03
per share. The future payment of dividends will depend on business decisions
that will be made by the Board from time to time based upon the results of
operations and financial condition of Penton and such other business
considerations as the Board considers relevant.
STOCK DISTRIBUTION AGENT, TRANSFER AGENT AND REGISTRAR
Harris Trust and Savings Bank will act as the Stock Distribution Agent for
the Stock Distribution, and will act as the Transfer Agent and Registrar for the
Common Stock after the Stock Distribution is completed.
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<PAGE> 78
ANTI-TAKEOVER EFFECTS
Penton's Certificate of Incorporation contains several provisions that may
make the acquisition of control of Penton by means of a tender offer, open
market purchase, proxy fight, or otherwise more difficult. Penton's Amended and
Restated Bylaws (the "Bylaws") also contain provisions that could have an
anti-takeover effect.
These provisions of the Certificate of Incorporation and the Bylaws are
designed to encourage persons seeking to acquire control of Penton to negotiate
the terms with the Board. Penton believes that, as a general rule, the interest
of Penton's stockholders would be served best if any change in control results
from negotiations with the Board based upon careful consideration of the
proposed terms, such as the price to be paid to stockholders, the form of
consideration to be paid and the anticipated tax effects of the transaction.
However, the provisions could have the effect of discouraging a prospective
acquirer from making a tender offer or otherwise attempting to obtain control of
Penton. To the extent that these provisions discourage takeover attempts, they
could deprive stockholders of opportunities to realize takeover premiums for
their shares. Moreover, these provisions could discourage accumulations of large
blocks of Common Stock, thus depriving stockholders of any advantages which
large accumulations of stock might provide.
Set forth below is a summary of the relevant provisions of the Certificate
of Incorporation and the Bylaws and certain applicable sections of the General
Corporation Law of the State of Delaware (the "DGCL"). Such summary does not
purport to be complete and is subject to, and is qualified in its entirety by
reference to, all of the provisions of the Certificate of Incorporation and the
Bylaws. Copies of the Certificate of Incorporation and the Bylaws are filed as
exhibits to the Registration Statement of which this Prospectus is a part.
BUSINESS COMBINATIONS
Penton is governed by Section 203 of the DGCL. Section 203, subject to
certain exceptions, prohibits a Delaware corporation from engaging in any
business combination with any interested stockholder for a period of three years
following the time that such stockholder became an interested stockholder,
unless: (i) prior to such time, the board of directors of the corporation
approved either the business combination or the transaction which resulted in
the stockholder becoming an interested stockholder; (ii) upon consummation of
the transaction that resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced, excluding
for purposes of determining the number of shares outstanding those owned (x) by
persons who are directors and also officers and (y) by employee stock plans in
which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer; or (iii) at or subsequent to such time, the business combination is
approved by the board of directors and authorized at an annual or special
meeting of stockholders, and not by written consent, by the affirmative vote of
at least 66 2/3% of the outstanding voting stock which is not owned by the
interested stockholder. The application of Section 203 may limit the ability of
stockholders to approve a transaction that they may deem to be in their best
interests.
In general, Section 203 defines "business combination" to include: (i) any
merger or consolidation involving the corporation and the interested
stockholder; (ii) any sale, lease, exchange, mortgage, pledge, transfer, or
other disposition of 10% or more of the assets of the corporation to or with the
interested stockholder; (iii) subject to certain exceptions, any transaction
which results in the issuance or transfer by the corporation of any stock of the
corporation to the interested stockholder; (iv) any transaction involving the
corporation which has the effect of increasing the proportionate share of the
stock of any class or series of the corporation beneficially owned by the
interested stockholder; or (v) the receipt by the interested stockholder of the
benefit of any loans, advances, guarantees, pledges or other financial benefits
provided by or through the corporation. In general, Section 203 defines an
"interested stockholder" as any entity or person beneficially owning 15% or more
of the outstanding voting stock of the corporation or any entity or person
associated with, affiliated with or controlling or controlled by such entity or
person.
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CLASSIFIED BOARD OF DIRECTORS
The Certificate of Incorporation provides for the Board to be divided into
three classes of directors, as nearly equal in number as possible, serving
staggered terms. Approximately 1/3 of the Board is to be elected each year. See
"Management -- Board of Directors." Under Section 141 of the DGCL, directors
serving on a classified board can only be removed for cause. The provision for a
classified board may be amended, altered or repealed only upon the affirmative
vote of the holder of 66 2/3% of the outstanding shares of Penton's voting
stock.
The provision for a classified board could prevent a party who acquires
control of a majority of the outstanding voting stock from obtaining control of
the Board until the second annual stockholders meeting following the date the
acquirer obtains the controlling stock interest. The classified board provision
could have the effect of discouraging a potential acquirer from making a tender
offer or otherwise attempting to obtain control of Penton and could increase the
likelihood that incumbent directors will retain their positions.
Penton believes that a classified board will help to assure the continuity
and stability of the Board and Penton's business strategies and policies as
determined by the Board, because a majority of the directors will eventually
have prior experience as directors of Penton.
The classified board provision should also help to ensure that the Board,
if confronted with an unsolicited proposal from a third party that has acquired
a block of the voting stock of Penton, will have sufficient time to review the
proposal and appropriate alternatives and to seek the best available result for
all stockholders.
NUMBER OF DIRECTORS; REMOVAL; VACANCIES
The Certificate of Incorporation and the Bylaws provide that the number of
directors shall be set by resolution of the Board adopted by the affirmative
vote of a majority of the Board; provided that under no circumstance will the
number of directors exceed 13.
Pursuant to the Certificate of Incorporation, each director will serve
until his or her successor is duly elected and qualified, unless he or she
resigns, dies, becomes disqualified, or is removed. The Certificate of
Incorporation also provides that, subject to the rights of the holders of any
series of Preferred Stock, directors may be removed at any time, but only for
cause.
The Certificate of Incorporation further provides that generally vacancies
or newly created directorships in the Board may only be filled by a resolution
approved by a majority of the Board and any director so chosen will hold office
until the next election of the class for which such director was chosen.
The provisions regarding the maximum size of the Board may not be amended,
altered, changed or repealed in any respect without the affirmative vote of
66 2/3% of the outstanding voting stock of Penton, prevent stockholders from
creating additional directorships.
STOCKHOLDER ACTION; SPECIAL MEETINGS
The Certificate of Incorporation provides that stockholder action can be
taken only at an annual or special meeting of stockholders and cannot be taken
by written consent in lieu of a meeting. The Certificate of Incorporation and
the Bylaws provide that, except as otherwise required by law, special meetings
of the stockholders can only be called pursuant to a resolution adopted by a
majority of the Board. Stockholders are not permitted to call a special meeting
or to require the Board to call a special meeting. Such provisions may not be
amended, altered, changed or repealed in any respect without the affirmative
vote of 66 2/3% of the outstanding voting stock of Penton.
STOCKHOLDER PROPOSALS AND NOMINATIONS
The Bylaws establish an advance notice procedure for stockholder proposals
to be brought before an annual or special meeting of stockholders of Penton,
including proposed nominations of persons for election to the Board.
Stockholders at an annual or special meeting may only consider proposals or
nominations brought before the meeting by Penton, by or at the direction of the
Board or by a stockholder who was a stockholder of record on the record date for
the meeting, who is entitled to vote at the meeting and who has given to
Penton's Secretary timely written notice, in proper form, of the stockholder's
intention to bring that business before the
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meeting. Such provisions may not be amended, altered, changed or repealed in any
respect without the affirmative vote of 66 2/3% of the outstanding voting stock
of Penton.
To be timely, notice by stockholders of nominations or proposals to be
brought before the 1999 annual meeting of stockholders, or before any special
meeting of stockholders, must be delivered to the Secretary of Penton not
earlier than the 90th day prior to such meeting and not later than the 60th day
prior to such meeting or the 10th day following the day on which public
announcement of the date of such meeting is first made. Notice by stockholders
of nominations or proposals to be brought before any subsequent annual meeting
must be received by the Secretary not less than 60 days nor more than 90 days
prior to the first anniversary of the preceding year's annual meeting of
stockholders or if the date of the annual meeting is more than 30 days prior to
or more than 60 days after the preceding anniversary date, notice by the
stockholder will be timely if received not earlier than the 90th day prior to
such annual meeting and not later than the close of business on the later of (i)
the 60th day prior to such annual meeting or (ii) the 10th day following public
announcement of such meeting.
Each notice by stockholders must set forth (i) the name and address of the
stockholder who intends to make the nomination or proposal and of any beneficial
owner on whose behalf the nomination or proposal is made and (ii) the class and
number of shares of Common Stock that are owned beneficially and of record by
such stockholder and beneficial owner, if any. In the case of a stockholder
proposal, the notice must also set forth a brief description of the business
desired to be brought before the meeting, the reasons for conducting such
business at the meeting and any material interest of such stockholder or
beneficial owner, if any, in that proposed business. In the case of nomination
of any person for election as a director, the notice must also set forth any
information regarding the nominee proposed by the stockholder that would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Commission and the consent, if so required, of the nominee to be named in
a proxy statement as a candidate for election and to serve as a director of
Penton if elected.
Although the Bylaws do not give the Board the power to approve or
disapprove stockholder nominations of candidates or proposals regarding other
business to be conducted at a special or annual meeting, the Bylaws may have the
effect of precluding the conduct of certain business at a meeting if the proper
procedures are not followed or may discourage or defer a potential acquirer from
conducting a solicitation of proxies to elect its own slate of directors or
otherwise attempting to obtain control of Penton.
AMENDMENT OF BYLAWS
The Bylaws may be amended, altered or repealed by the affirmative vote of
the holders of at least 66 2/3% of the voting power of the then outstanding
shares of Penton's voting stock or by the affirmative vote of a majority of the
Board. The percentage required for a vote by stockholders may make it more
difficult to change the Bylaws for the purpose of gaining control over Penton.
79
<PAGE> 81
LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF
OFFICERS AND DIRECTORS
ELIMINATION OF LIABILITY IN CERTAIN CIRCUMSTANCES
The Certificate of Incorporation provides that, to the fullest extent
permitted by the DGCL as the same exists or may hereafter be amended, no
director of Penton shall be liable to it or its stockholders for monetary
damages for breach of fiduciary duty as a director. Any repeal or modification
of this provision will not adversely affect any right or protection of a
director of Penton existing at the time of such repeal or modification.
INDEMNIFICATION AND INSURANCE
Section 145 of the DGCL contains provisions permitting (and, in some
situations, requiring) Delaware corporations such as Penton to provide
indemnification to their officers and directors for losses and litigation
expense incurred in connection with, among other things, their service to the
corporation in those capacities. The Certificate of Incorporation contains
provisions requiring indemnification by Penton of its directors, officers, and
employees to the fullest extent permitted by law. Among other things, these
provisions provide that Penton is required to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
or investigative (including any action by or in the right of Penton) (a
"Proceeding") by reason of the fact that such person is or was a director,
officer, or employee of Penton, or is or was serving at the request of Penton as
a director, officer, or employee of another corporation, partnership, joint
venture, trust, or other enterprise (including service with respect to any
employee benefit plan) against expenses (including attorneys' fees), judgments,
fines, ERISA excise taxes, penalties, and amounts paid in settlement actually
and reasonably incurred by such person in connection with such Proceeding to the
fullest extent permitted by the DGCL, as the same exists or may be amended (but,
in the case of any such amendment, only to the extent that such amendment
permits Penton to provide broader indemnification rights than such law permitted
Penton to provide prior to such amendment). These provisions also provide for
the advance payment of fees and expenses reasonably incurred by the director,
officer, or employee in defense of any such Proceeding, subject to reimbursement
by the director, officer, or employee if it is ultimately determined that such
director, officer, or employee is not entitled to be indemnified by Penton.
Penton anticipates that it will enter into agreements with its directors
providing contractually for indemnification consistent with the Certificate of
Incorporation and Bylaws. In addition, the Certificate of Incorporation
authorizes Penton to purchase insurance for its directors, officers, and
employees insuring them against certain risks as to which Penton may be unable
lawfully to indemnify them. Penton intends to obtain this insurance coverage for
its directors, officers, and employees as well as insurance coverage to
reimburse Penton for potential costs of its corporate indemnification of
directors, officers, and employees. In connection with any liabilities resulting
from filing the Registration Statement, of which this Prospectus forms a part,
Penton has agreed to indemnify Messrs. Donohue and Meehan to the same extent as
the Board members.
1999 ANNUAL STOCKHOLDERS MEETING
On June 1, 1998, Pittway, which was then and is currently the sole
stockholder of Penton, elected the current members of the Board (and elected
each of the DM Publishing Shareholders as members of the Board contingent upon
the Stock Distribution and the DM Publishing Combination). The first annual
meeting of Penton's stockholders after the Stock Distribution is expected to be
in May 1999.
Penton's Bylaws establish an advance notice procedure for stockholder
proposals to be brought before annual meetings, including proposed nominations
of persons for election to the Board. See "Anti-Takeover Effects -- Stockholder
Proposals and Nominations."
LEGAL MATTERS
The validity of the Common Stock to be distributed in the Stock
Distribution will be passed upon by Jones, Day, Reavis & Pogue, Cleveland, Ohio,
counsel for Penton.
80
<PAGE> 82
EXPERTS
The financial statements of Penton as of December 31, 1997 and 1996 and for
each of the three years in the period ended December 31, 1997 included in this
Prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The financial statements of DM Publishing as of December 31, 1997 and for
the year then ended included in this Prospectus have been so included in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
The financial statements of INDEX as of November 30, 1997 and for the
twelve months then ended included in this Prospectus have been so included in
reliance on the reports of Horwath Clark Whitehill, chartered accountants, given
on the authority of said firm as experts in auditing and accounting.
AVAILABLE INFORMATION
Penton has filed with the Commission a Registration Statement on Form S-1
(the "Registration Statement") under the Securities Act with respect to the
Common Stock. This Prospectus does not contain all of the information set forth
in the Registration Statement and the exhibits and schedules thereto. For
further information, reference is made to the Registration Statement, including
the exhibits and schedules thereto. Following the Stock Distribution, Penton
will be subject to the reporting requirements of the Exchange Act and, in
accordance therewith, will file reports, proxy statements and other information
with the Commission. Copies of the Registration Statement (including the
exhibits and schedules thereto) can be, and copies of the reports, proxy
statements and other information filed by Penton with the Commission following
the Stock Distribution can in the future be, inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Commission's regional offices at
7 World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. After being filed,
copies of such material can be obtained at prescribed rates from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549. Following the Stock Distribution, such materials and other information
concerning Penton will also be filed electronically with the Commission and will
be accessible via the World Wide Web at http://www.sec.gov. Following the
listing of Common Stock on the NYSE, Penton will be required to file with the
exchange copies of such reports, proxy statements and other information which
then can be inspected at the offices of such exchange at 20 Broad Street, New
York, New York 10005. See "Description of Capital Stock -- Listing and Trading
of Common Stock."
81
<PAGE> 83
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
PENTON MEDIA, INC.
Report of Independent Accountants...................... F-3
Consolidated Statement of Income for the three months
ended March 31, 1998 and 1997 and the years ended
December 31, 1997, 1996 and 1995...................... F-4
Consolidated Balance Sheet at March 31, 1998 and
December 31, 1997 and 1996............................ F-5
Consolidated Statement of Cash Flows for the three
months ended March 31, 1998 and 1997 and the years
ended December 31, 1997, 1996 and 1995................ F-6
Consolidated Statement of Stockholder's Equity for the
three months ended March 31, 1998 and the years ended
December 31, 1997, 1996 and 1995...................... F-7
Summary of Accounting Policies......................... F-8
Notes to Consolidated Financial Statements............. F-10
DONOHUE MEEHAN PUBLISHING COMPANY
Report of Independent Accountants...................... F-17
Statement of Income and Accumulated Deficit for the
three months ended March 31, 1998 and the year ended
December 31, 1997..................................... F-18
Balance Sheet at March 31, 1998 and December 31,
1997.................................................. F-19
Statement of Cash Flows for the three months ended
March 31, 1998 and the year ended December 31, 1997... F-20
Notes to Financial Statements.......................... F-21
INDEPENDENT EXHIBITIONS LIMITED
Director's Report for the twelve months ended November
30, 1997.............................................. F-23
Statement of Director's Responsibilities............... F-24
Report of the Auditors................................. F-25
Profit and Loss Account for the twelve months ended
November 30, 1997..................................... F-26
Balance Sheet at November 30, 1997..................... F-27
Notes to the Financial Statements...................... F-28
SERVICE EXHIBITIONS LIMITED
Director's Report for the twelve months ended November
30, 1997.............................................. F-33
Statement of Director's Responsibilities............... F-34
Report of the Auditors................................. F-35
Profit and Loss Account for the twelve months ended
November 30, 1997..................................... F-36
Balance Sheet at November 30, 1997..................... F-37
Notes to the Financial Statements...................... F-38
</TABLE>
F-1
<PAGE> 84
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
EQUITY INFORMATION EXCHANGE LIMITED
Director's Report for the twelve months ended November
30, 1997.............................................. F-41
Statement of Director's Responsibilities............... F-42
Report of the Auditors................................. F-43
Profit and Loss Account for the twelve months ended
November 30, 1997..................................... F-44
Balance Sheet at November 30, 1997..................... F-45
Notes to the Financial Statements...................... F-46
</TABLE>
F-2
<PAGE> 85
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDER OF PENTON MEDIA, INC.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of cash flows and of stockholder's equity
present fairly, in all material respects, the financial position of Penton
Media, Inc. (formerly Penton Publishing, Inc., and a wholly-owned subsidiary of
Pittway Corporation) and its subsidiaries at December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
Penton Media Inc.'s management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
Cleveland, Ohio
June 8, 1998
F-3
<PAGE> 86
PENTON MEDIA, INC.
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
(UNAUDITED) YEARS ENDED DECEMBER 31,
------------------- ------------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
REVENUES.................................... $52,485 $48,666 $204,931 $188,557 $179,900
------- ------- -------- -------- --------
OPERATING EXPENSES:
Editorial, production and circulation..... 23,322 22,212 94,560 91,581 92,859
Selling, general and administrative....... 22,471 19,919 78,523 72,566 69,322
Depreciation and amortization............. 2,027 1,678 6,551 5,911 5,772
------- ------- -------- -------- --------
47,820 43,809 179,634 170,058 167,953
------- ------- -------- -------- --------
Operating income............................ 4,665 4,857 25,297 18,499 11,947
------- ------- -------- -------- --------
OTHER INCOME (EXPENSE):
Interest expense.......................... (662) (208) (841) (34) (85)
Gain on sale of publications.............. -- -- 1,040 -- 1,700
Gain on insurance settlement.............. -- -- -- -- 1,431
Miscellaneous, net........................ 3 3 10 17 83
------- ------- -------- -------- --------
(659) (205) 209 (17) 3,129
------- ------- -------- -------- --------
Income from continuing operations before
income taxes.............................. 4,006 4,652 25,506 18,482 15,076
------- ------- -------- -------- --------
INCOME TAXES:
Current................................... 1,687 1,761 9,754 6,733 5,702
Deferred.................................. (21) 173 878 793 749
------- ------- -------- -------- --------
1,666 1,934 10,632 7,526 6,451
------- ------- -------- -------- --------
Income from continuing operations........... 2,340 2,718 14,874 10,956 8,625
------- ------- -------- -------- --------
Loss from discontinued operations, net of
income tax credit of $30.................. -- -- -- -- (48)
------- ------- -------- -------- --------
NET INCOME.................................. $ 2,340 $ 2,718 $ 14,874 $ 10,956 $ 8,577
======= ======= ======== ======== ========
INCOME FROM CONTINUING OPERATIONS AND NET
INCOME PER SHARE BASIC AND DILUTED
(21,200,000 SHARES OUTSTANDING)........... $ .11 $ .13 $ .70 $ .52 $ .40
</TABLE>
See Summary of Accounting Policies and Notes to Consolidated Financial
Statements.
F-4
<PAGE> 87
PENTON MEDIA, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, 1998 -------------------------
(UNAUDITED) 1997 1996
--------------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 1,732 $ 2,419 $ 1,571
Accounts and notes receivable, less allowance for doubtful
accounts of $2,368 in 1998, $2,406 in 1997 and $2,069 in
1996.................................................... 32,112 29,363 30,985
Inventories............................................... 3,660 2,429 3,360
Deferred tax assets....................................... 2,995 2,851 2,608
Prepayments, deposits and other........................... 5,077 3,886 3,318
-------- -------- --------
45,576 40,948 41,842
-------- -------- --------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Buildings................................................. 6,168 6,168 6,163
Machinery and equipment................................... 61,623 60,493 54,938
-------- -------- --------
67,791 66,661 61,101
Less: accumulated depreciation............................ 41,341 39,845 34,809
-------- -------- --------
26,450 26,816 26,292
-------- -------- --------
Land...................................................... 426 426 426
-------- -------- --------
26,876 27,242 26,718
-------- -------- --------
OTHER ASSETS:
Goodwill, less accumulated amortization of $6,666 in 1998,
$6,192 in 1997 and $5,134 in 1996....................... 65,371 65,460 19,735
Other intangibles, less accumulated amortization of $5,443
in 1998, $5,382 in 1997 and $5,177 in 1996.............. 6,302 6,362 2,205
Deferred tax assets....................................... 3,951 4,067 5,102
Due from parent company................................... 10,880 12,212 13,136
Miscellaneous............................................. 138 135 61
-------- -------- --------
86,642 88,236 40,239
-------- -------- --------
$159,094 $156,426 $108,799
======== ======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Notes payable............................................. $ 34,648 $ 34,170 $ --
Accounts payable.......................................... 8,691 9,427 7,405
Accrued compensation and benefits......................... 7,352 9,081 8,833
Other accrued expenses.................................... 7,988 8,383 7,703
Unearned income, principally trade show and conference
deposits................................................ 7,929 5,203 3,538
-------- -------- --------
66,608 66,264 27,479
-------- -------- --------
LONG-TERM LIABILITIES AND DEFERRED CREDITS:
Net deferred pension credits.............................. 19,592 19,592 21,092
Other..................................................... 941 957 1,077
-------- -------- --------
20,533 20,549 22,169
-------- -------- --------
STOCKHOLDER'S EQUITY:
Preferred stock, 2,000,000 shares authorized; none
issued..................................................
Common stock, $.01 par value, 60,000,000 shares
authorized; 21,200,000 shares issued and outstanding.... 212 212 212
Capital in excess of par value............................ 29,630 29,630 29,630
Retained earnings......................................... 42,111 39,771 29,309
-------- -------- --------
71,953 69,613 59,151
-------- -------- --------
$159,094 $156,426 $108,799
======== ======== ========
</TABLE>
See Summary of Accounting Policies and Notes to Consolidated Financial
Statements.
F-5
<PAGE> 88
PENTON MEDIA, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
(UNAUDITED) YEARS ENDED DECEMBER 31,
------------------ -----------------------------
1998 1997 1997 1996 1995
------- -------- -------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM CONTINUING OPERATING
ACTIVITIES:
Income from continuing operations........... $ 2,340 $ 2,718 $ 14,874 $ 10,956 $ 8,625
Adjustments to reconcile income from
continuing operations to net cash
provided by operating activities:
Depreciation and amortization............ 2,027 1,678 6,551 5,911 5,772
Deferred income taxes.................... (21) 173 878 793 749
Retirement and deferred compensation
plans.................................. -- (500) (2,000) (2,032) (1,198)
Provision for losses on accounts
receivable............................. 168 217 662 948 870
Gain on sale of publications............. -- -- (1,040) -- (1,700)
Gain on insurance settlement............. -- -- -- -- (1,431)
Change in assets and liabilities,
excluding effects from acquisitions and
dispositions:
(Increase) decrease in accounts and
notes receivable.................... (2,915) (1,032) 1,261 (2,313) (3,991)
(Increase) decrease in inventories..... (1,231) 214 931 37 210
(Increase) decrease in prepayments and
deposits............................ (1,176) (211) 630 94 1,024
(Decrease) increase in accounts payable
and accrued expenses................ (2,872) (1,838) 1,584 5,952 (1,246)
Increase (decrease) in unearned
income.............................. 2,696 (781) (552) 687 (563)
Other changes, net....................... (34) (48) (593) (526) 302
------- -------- -------- -------- -------
Net cash (used) provided by continuing
operations.................................. (1,018) 590 23,186 20,507 7,423
------- -------- -------- -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures........................ (1,128) (759) (5,450) (4,822) (4,989)
Net assets of businesses acquired, net of
cash..................................... -- (14,040) (48,733) (900) --
Proceeds from sale of publications.......... -- -- 991 1,000 --
------- -------- -------- -------- -------
Net cash used by investing activities......... (1,128) (14,799) (53,192) (4,722) (4,989)
------- -------- -------- -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in notes payable................... 114 14,000 48,342 -- --
Repayments of notes payable................. -- -- (14,000) -- --
Dividends to parent company................. -- -- (4,412) (22,567) (1,278)
Advances from (to) parent company........... 1,345 (84) 924 6,679 (419)
------- -------- -------- -------- -------
Net cash provided (used) by financing
activities.................................. 1,459 13,916 30,854 (15,888) (1,697)
------- -------- -------- -------- -------
NET (DECREASE) INCREASE IN CASH............... (687) (293) 848 (103) 737
CASH AT BEGINNING OF PERIOD................... 2,419 1,571 1,571 1,674 937
------- -------- -------- -------- -------
CASH AT END OF PERIOD......................... $ 1,732 $ 1,278 $ 2,419 $ 1,571 $ 1,674
======= ======== ======== ======== =======
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid............................... $ 841 $ 35 $ 35
Income taxes paid........................... $ 10,759 $ 8,823 $ 6,033
</TABLE>
See Summary of Accounting Policies and Notes to Consolidated Financial
Statements.
F-6
<PAGE> 89
PENTON MEDIA, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998 AND
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
---------------------------------------------
CAPITAL IN
COMMON STOCK EXCESS OF
------------------- PAR RETAINED
SHARES PAR VALUE VALUE EARNINGS
------ --------- ---------- --------
(SHARES AND DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE -- DECEMBER 31, 1994...................... 21,200 $212 $29,630 $33,621
Net income...................................... 8,577
Dividends....................................... (1,278)
------ ---- ------- -------
BALANCE -- DECEMBER 31, 1995...................... 21,200 212 29,630 40,920
------ ---- ------- -------
Net income...................................... 10,956
Dividends....................................... (22,567)
------ ---- ------- -------
BALANCE -- DECEMBER 31, 1996...................... 21,200 212 29,630 29,309
------ ---- ------- -------
Net income...................................... 14,874
Dividends....................................... (4,412)
------ ---- ------- -------
BALANCE -- DECEMBER 31, 1997...................... 21,200 212 29,630 39,771
------ ---- ------- -------
Net income (unaudited) 2,340
------ ---- ------- -------
BALANCE -- MARCH 31, 1998 (UNAUDITED)............. 21,200 $212 $29,630 $42,111
====== ==== ======= =======
</TABLE>
See Summary of Accounting Policies and Notes to Consolidated Financial
Statements.
F-7
<PAGE> 90
SUMMARY OF ACCOUNTING POLICIES
(Dollars in thousands, except per share data)
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Penton Media,
Inc. (formerly known as Penton Publishing, Inc.) and its subsidiaries ("Penton"
or the "Company"). The Company, a wholly owned subsidiary of Pittway Corporation
("Pittway" or "Parent Company"), produces national business magazines and
related products, trade shows and conferences domestically and in the United
Kingdom, and direct mail marketing programs. The common stock of the Company is
expected to be distributed by Pittway to its stockholders ("Stock Distribution")
in connection with the pending acquisition described in Note 1.
The accompanying financial statements for 1995 reflect two former
subsidiaries, Pittway Real Estate, Inc. ("PREI"), a real estate development
company, and Penton Learning Systems, Inc. ("PLS"), a seminar business, as
discontinued operations. The stock of PREI was distributed to Pittway in
November 1995. The stock of PLS was sold to its 49% minority shareholders in
July 1995 at book value.
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.
INTERIM FINANCIAL STATEMENTS
The accompanying unaudited interim consolidated financial statements have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted.
In the opinion of management, the interim consolidated financial statements
reflect all adjustments necessary for a fair presentation of the interim
periods. The results of operations for the interim periods are not necessarily
indicative of the results of operations to be expected for the full year.
INVENTORIES
Inventories are stated at the lower of cost or market. Costs included in
inventories are raw materials, direct labor and manufacturing overhead. Cost of
substantially all of the paper and ink stock is determined by using the last-in,
first-out (LIFO) method, while the remaining inventories are valued primarily
using the average cost method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost and are depreciated over
the estimated useful lives of the assets using the straight-line method for
financial reporting purposes. The useful lives are 3 to 15 years for machinery
and equipment and up to 40 years for buildings. Leasehold improvements are
amortized over the shorter of the lease term or the remaining useful life of the
related assets. Maintenance and repairs are charged to expense as incurred;
renewals and improvements which extend the life of the asset are capitalized.
Depreciation expense amounted to $5,288, $5,023 and $4,748 in 1997, 1996 and
1995, respectively.
INTANGIBLE ASSETS
Goodwill and other intangible assets, which primarily consist of exhibitor
lists, customer mailing lists, trademarks and trade names, are capitalized and
amortized over their estimated useful lives of up to 40 years. The carrying
value of goodwill and other intangible assets is periodically reviewed by the
Company and impairment is recognized when the projected, undiscounted net pretax
cashflows derived from such intangible assets are less than their carrying
value.
F-8
<PAGE> 91
SUMMARY OF ACCOUNTING POLICIES
(Dollars in thousands, except per share data)
STOCKHOLDER'S EQUITY
Pursuant to the Combination Agreement (See Note 1), the Company amended its
Certificate of Incorporation on June 4, 1998, to authorize capital stock
consisting of 60 million shares of Common Stock, par value $.01 per share, and 2
million shares of Preferred Stock, par value $.01 per share. Immediately
thereafter, the Company issued 21,200,000 shares of Common Stock in replacement
of the 100 shares of $1 par value stock previously outstanding. An amount of
$212 has been transferred from Capital in excess of par value to Common Stock.
The financial statements and related notes have been restated to reflect this
recapitalization retroactively.
REVENUE RECOGNITION
Advertising revenues from the Company's trade magazines are recognized in
the month the publications are mailed. Revenues from trade shows and conferences
are recognized in the month the events are held. Licensing revenues are
recognized on a straight-line basis over the term of the license agreement.
ADVERTISING AND PROMOTION EXPENSES
Advertising and promotion costs are primarily expensed as incurred. These
costs amounted to $8,420, $9,330 and $9,954 in 1997, 1996 and 1995,
respectively.
INCOME TAXES
For 1997 and in prior years, the results of the Company were included in
Pittway's consolidated U.S. federal income tax returns. The provision for income
taxes included in the consolidated statements of income represents an allocated
share of Pittway's tax expense. The allocated share approximates the tax expense
that would have been incurred on a separate return basis. The liability for
income taxes currently payable is recorded by Pittway. Deferred income tax
assets and liabilities are recorded by the Company at the current statutory tax
rate.
Pursuant to the Combination Agreement, the Company is required to indemnify
Pittway for any additional federal, state, local and foreign income tax
liabilities with respect to all periods prior to and including the date of the
Stock Distribution. All consolidated federal income tax returns of Pittway have
been audited by the Internal Revenue Service through 1992.
TRANSLATION OF FOREIGN CURRENCIES
The functional currency of the Company's foreign operations acquired in
December 1997 is the local currency. Accordingly, assets and liabilities of
foreign operations are translated to U.S. dollars at the rates of exchange on
the balance sheet date; income and expense are translated at the average rates
of exchange prevailing during the year. There were no transaction gains or
losses in 1997.
NET INCOME PER SHARE
Net income per share reflects net income divided by the historical number
of shares outstanding, as restated.
F-9
<PAGE> 92
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
NOTE 1 -- PENDING ACQUISITION AND SPIN-OFF FROM PITTWAY
The Company has entered into an agreement (the "Combination Agreement") to
acquire Donohue Meehan Publishing Company ("DM Publishing") for $7 million in
cash, 6.767% of the Company's stock to be outstanding immediately after the
acquisition and up to an additional $4 million in cash based on DM Publishing's
pre-tax income for the years 1998 and 1999. The Company also has agreed to make
a contingent cash payment to the extent, if any, that the shares issued in the
acquisition have an average aggregate market value of less than $29 million
during either of two 30-day periods in the year 2000. The contingent payment is
subject to certain limitations as to any of such shares sold prior to the
payment. A portion of the contingent payment may be made with Common Stock
rather than cash under certain conditions.
Pittway intends to distribute 100% of the Company's Common Stock on a share
for share basis to holders of Pittway stock. The distribution to Pittway
stockholders is contingent upon the closing immediately thereafter of the
aforementioned acquisition by Penton of DM Publishing.
NOTE 2 -- RELATIONSHIP AND TRANSACTIONS WITH PITTWAY
The Combination Agreement provides for Pittway to assist Penton in
preparing its tax returns for 1998 and to assist in other tax matters for fees
to be negotiated.
Included in the consolidated statement of income is an allocation of
corporate expenses related to services provided for the Company by Pittway. This
allocation was based on an estimate of the incremental corporate expenses
related to the Company's operations for the periods presented and, in the
opinion of management, has been made on a reasonable basis. However, the
allocation is not necessarily indicative of the level of expenses which might
have been incurred had the Company been a separate company. The aggregate
allocated costs totaled $386, $314 and $310 for the years ended 1997, 1996 and
1995, respectively. The Company's employees also participate in Pittway's
pension plan (see Note 9). Certain of the Company's employees participate in
Pittway's 1990 Stock Awards Plan, for which Pittway has allocated costs to the
Company totaling $1,041, $1,122 and $1,456 in 1997, 1996 and 1995, respectively.
Other transactions between the Company and Pittway, consisting principally
of taxes and other reimbursable expenses paid by Pittway, have been reflected in
the historical financial statements as though on a stand-alone basis, except
that no interest income or expense has been allocated on intercompany balances.
Pittway utilizes a centralized cash management system. Under this system,
cash generated by Penton in excess of its cash requirements (including cash
requirements for Penton's income taxes and other reimbursable expenses paid by
Pittway) is transferred to Pittway and reflected as "Due from parent company" in
the balance sheet. This account is reduced by dividends declared by the Company.
As provided in the DM Publishing Combination Agreement, cash totaling the
aggregate amount of outstanding checks and trade show deposits, net of deferred
costs incurred with respect to trade shows, will be retained by Penton with any
excess cash distributed to Pittway. If cash balances are less than this amount,
Pittway will remit the difference to Penton. A final dividend will be declared
to Pittway to settle the "Due from parent company" account.
NOTE 3 -- ACQUISITIONS AND DISPOSITIONS
During 1997, the Company acquired one foreign and two domestic trade show
companies for $45,602 cash and $2,476 of notes payable to the sellers. The
acquisitions also include future contingent payments up to $13,542 tied to
future earnings of the acquired companies through the year 2000, of which $655
was earned in 1997. The excess of the aggregate purchase price over the fair
market value of net assets acquired of $46,531, excluding $4,218 of other
intangibles amortizable over 15 years, is being amortized over 40 years. In 1997
the Company also sold one publication for $991 cash, and the assumption of
certain liabilities.
During 1995, the Company sold a publication for $1,000 cash, received in
January 1996, and the assumption of $1,339 of deferred subscription revenues.
F-10
<PAGE> 93
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
All the aforementioned acquisitions were accounted for as purchase
transactions. These operations have been included in the consolidated financial
statements from their respective dates of acquisition or to the dates of
disposition.
The following unaudited pro forma information presents the combined results
of operations of the Company and the acquired businesses, as if the acquisitions
had occurred at the beginning of each of the years ended 1997 and 1996 and the
quarterly period ended March 31, 1997, respectively: Net sales -- $220,936,
$208,191 and $49,652; net income -$15,183, $11,317 and $1,894. The pro forma
amounts give effect to certain adjustments, including the amortization of
intangibles, foreign currency translation, increased interest expense and income
tax effects. This pro forma information does not necessarily reflect the results
of operations as they would have been if the businesses had constituted a single
entity during such periods and is not necessarily indicative of results which
may be obtained in the future.
NOTE 4 -- GAIN ON INSURANCE SETTLEMENT
In 1995 the Company recorded a $1,431 pretax gain in connection with an
insurance settlement resulting from a municipal water main which broke in
January of 1995 and flooded a substantial portion of the Company's Cleveland
headquarters. The gain primarily results from replacement of equipment at
current market value in excess of net book value of damaged assets. The total
proceeds from the insurance settlement, which included reimbursement for other
expenses incurred, were received over a two-year period.
NOTE 5 -- INVENTORIES
The LIFO reserve balances of $613, $462 and $368 at March 31,1998
(unaudited) and December 31, 1997 and 1996, respectively, represent the excess
of current replacement cost over the LIFO value of inventory which consists
principally of raw materials.
NOTE 6 -- NOTES PAYABLE
The Company's short-term notes payable at December 31, 1997 include $29,170
of foreign indebtedness, denominated in British pounds and bearing interest at
8.1%, and $5,000 of domestic indebtedness at 6%. Pittway has guaranteed $26,694
of the foreign debt, which the Company is required to refinance without the
guarantee prior to the Stock Distribution. The foreign debt includes $2,476 due
in December 1998 which the holder may convert into Common Stock at fair market
value. The domestic note is an allocated portion of Pittway's notes payable
representing cash required for an acquisition completed in December 1997. There
are no compensating balance or commitment fee requirements associated with these
short-term borrowings.
NOTE 7 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of accounts and notes receivable, accounts payable,
accrued expenses and notes payable approximates fair value because of the short
maturity of these instruments.
F-11
<PAGE> 94
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 -- INCOME TAXES
The provision for income taxes consists of:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Current -
Federal........................................... $ 8,124 $ 5,541 $ 4,795
State and local................................... 1,630 1,192 907
------- ------- -------
9,754 6,733 5,702
------- ------- -------
Deferred -
Federal........................................... 851 711 672
State and local................................... 98 82 77
Foreign........................................... (71) -- --
------- ------- -------
878 793 749
------- ------- -------
$10,632 $ 7,526 $ 6,451
======= ======= =======
</TABLE>
The difference between the actual income tax provision and the tax
provision computed by applying the statutory federal income tax rate of 35% to
income before income taxes is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Income tax at statutory rate........................ $ 8,927 $ 6,469 $ 5,277
Tax effect of -
State income taxes, net of federal benefit........ 1,123 818 649
Nondeductible expenses............................ 582 513 525
Other items, net.................................. -- (274) --
------- ------- -------
Actual income tax provision......................... $10,632 $ 7,526 $ 6,451
======= ======= =======
Effective income tax rate........................... 41.7% 40.7% 42.8%
======= ======= =======
</TABLE>
The components of deferred tax assets and liabilities at December 31, 1997
and 1996 are comprised of the following:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Deferred tax assets -
Deferred pension credits............................. $ 7,651 $ 8,231
Accrued vacation..................................... 1,159 1,025
Bad debts............................................ 805 808
Deferred compensation................................ -- 311
Other................................................ 1,107 1,128
------- -------
Total deferred tax assets......................... 10,722 11,503
------- -------
Deferred tax liabilities -
Depreciation......................................... (3,640) (3,793)
Other................................................ (164) --
------- -------
Total deferred tax liabilities.................... (3,804) (3,793)
------- -------
Net deferred tax asset................................. $ 6,918 $ 7,710
======= =======
</TABLE>
These balances are allocated between "Current assets" and "Other assets" in
the accompanying balance sheet.
F-12
<PAGE> 95
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9 -- RETIREMENT PLAN
The Company participates in Pittway's noncontributory salaried retirement
plan (the "Plan") covering substantially all current and former domestic
employees. Benefits are based on years of service and annual compensation as
defined by the Plan. Prior to 1995, Pittway allocated net pension plan income
credits to the Company based upon the assets of a previously separate Company
plan, which was merged into the Pittway plan in 1991. At the time the plans were
merged, the amount of the Company's plan assets exceeded its projected benefit
obligation and, by 1995, such excess ("Funding Excess") had increased and had
become substantially disproportionate to the Funding Excess for the remainder of
the Pittway plan. As a result, for the years 1995 through 1997 Pittway limited
the allocation of net pension income credits to the Company to $1,500 per year.
As provided in the Combination Agreement, Pittway has agreed to transfer
$45,000 of its plan assets ("Allocated Assets"), including approximately $10,461
of Funding Excess, as of December 31, 1997 to a new plan to be adopted by the
Company after the Stock Distribution. From December 31, 1997 to the actual
transfer date, the Allocated Assets will be increased or decreased by a pro rata
share of the return on Pittway plan assets and decreased by the amount of
benefit payments made to retired Company employees. The amount of Allocated
Assets was determined by Pittway as the estimated proportion of total Pittway
plan assets that would result in the elimination of the Funding Excess for the
Company in the same future year as such elimination for the remainder of the
Pittway plan based on historical rates of service cost increases and return on
plan assets.
The "Net deferred pension credits" in the Consolidated Balance Sheet at
December 31, 1997 include deferred investment gains of $29,500 which Pittway
allocated to the Company on a basis consistent with the above-mentioned
limitation on previous net pension plan income credits.
The components of net pension income for the Company's portion of the Plan
consist of:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Service cost........................................ $ 1,767 $ 1,672 $ 1,588
Interest cost....................................... 2,226 2,173 2,110
Amortization of unrecognized transition asset....... (841) (841) (841)
Amortization of prior service cost.................. 357 357 357
Recognized net investment earnings and actuarial
gains............................................. (5,009) (4,861) (4,714)
------- ------- -------
Net pension income.................................. $(1,500) $(1,500) $(1,500)
======= ======= =======
</TABLE>
F-13
<PAGE> 96
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The reconciliation of the funded status of the Company's portion of the
Plan follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Change in Benefit Obligation -
Projected benefit obligation at January 1.......... $ 32,150 $ 31,460
Service cost....................................... 1,767 1,672
Interest cost...................................... 2,226 2,173
Actuarial loss..................................... 669 1,115
Benefits paid...................................... (2,273) (4,270)
-------- --------
Projected benefit obligation at December 31........ $ 34,539 $ 32,150
======== ========
Fair value of Allocated Assets at December 31........ $ 45,000 $ 40,762
======== ========
Funded Status of the Company's portion of the Plan -
Funding Excess..................................... $ 10,461 $ 8,612
Unrecognized net gain.............................. (29,500) (28,667)
Unrecognized prior service cost.................... 1,969 2,326
Unamortized transition net asset................... (2,522) (3,363)
-------- --------
Net deferred pension credits....................... $(19,592) $(21,092)
======== ========
Assumptions as of December 31 -
Discount rate...................................... 7% 7%
Expected return on plan assets..................... 7% 7%
Rate of compensation increase...................... 5% 5%
</TABLE>
NOTE 10 -- LEASE COMMITMENTS
The Company leases certain office space and equipment under noncancelable
operating leases expiring at various dates through the year 2003. Some of the
leases contain renewal options and certain equipment leases include options to
purchase during or at the end of the lease term. Minimum annual rental
commitments under all noncancelable leases for the next five years beginning
with 1998 are $6,994, $6,532, $5,865, $580, $381 and an aggregate of $105
thereafter. Total rent expense (including taxes, insurance and maintenance when
included in the rent) amounted to $6,575, $6,329 and $6,644 in 1997, 1996 and
1995, respectively.
NOTE 11 -- CONTINGENCIES
The Company in the normal course of business is subject to a number of
lawsuits and claims, both actual and potential in nature. While management
believes that resolution of existing claims and lawsuits will not have a
material adverse effect on the Company's financial statements, management is
unable to estimate the magnitude of financial impact of claims and lawsuits
which may be filed in the future.
NOTE 12 -- SEGMENT INFORMATION
The Company has three reportable segments: media services, printing and
direct-mail marketing. The segments are based on the Company's internal
organization and are managed separately due to inherent differences in the
nature of these business. Within the media services segment, operating segments
serving differing industries were combined due to the similarity of their
economic characteristics and other factors.
The media services segment serves specific industries and broad markets
with integrated product offerings including trade magazines, trade shows and
conferences, directories, name lists and a variety of other products and
services. Revenues of this segment are generated primarily from magazine
advertising. The printing segment prints magazines, catalogs, brochures and
direct-mail pieces for the media services segment and outside commercial
customers. The direct-mail marketing segment serves primarily the pharmaceutical
and business services markets with the ability to design, produce, print and
mail direct mail-marketing campaigns.
F-14
<PAGE> 97
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Inter-segment revenues are made at approximate arm's-length prices. The
Company evaluates performance based on operating income. Segment assets are
those assets that are specifically identified with the reportable segments in
which operations are conducted. Non-current assets at December 31, 1997 include
$29,968 identified with operations in the United Kingdom, substantially all of
which are intangible assets, with the remaining assets identified with domestic
operations. Non-current assets at December 31, 1996 and 1995 are domestic.
Export sales were not material and no single customer accounted for ten percent
of sales.
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- ------------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total segment revenues:
Media Services............................ $46,630 $43,582 $181,109 $166,631 $158,314
Printing.................................. 9,694 9,183 39,092 37,933 36,637
Direct-Mail Marketing..................... 2,866 2,667 13,370 13,173 12,668
------- ------- -------- -------- --------
59,190 55,432 233,571 217,737 207,619
Less Inter-segment revenues:
Printing.................................. 6,705 6,751 28,566 29,064 27,719
Direct-Mail Marketing..................... -- 15 74 116 --
------- ------- -------- -------- --------
$52,485 $48,666 $204,931 $188,557 $179,900
======= ======= ======== ======== ========
Operating Income:
Media Services............................ $ 4,495 $ 4,829 $ 24,854 $ 17,681 $ 9,428
Printing.................................. 416 292 1,534 1,270 1,512
Direct-Mail Marketing..................... (246) (264) (1,091) (452) 1,007
------- ------- -------- -------- --------
$ 4,665 $ 4,857 $ 25,297 $ 18,499 $ 11,947
======= ======= ======== ======== ========
Depreciation and Amortization:
Media Services............................ $ 3,903 $ 3,335 $ 3,302
Printing.................................. 2,229 2,145 2,085
Direct-Mail Marketing..................... 419 431 385
-------- -------- --------
$ 6,551 $ 5,911 $ 5,772
======== ======== ========
Total assets:
Media Services............................ $130,123 $ 79,652 $ 87,871
Printing.................................. 17,823 18,681 19,735
Direct-Mail Marketing..................... 8,480 10,466 8,888
-------- -------- --------
$156,426 $108,799 $116,494
======== ======== ========
Capital expenditures:
Media Services............................ $ 3,741 $ 3,339 $ 2,986
Printing.................................. 1,406 948 876
Direct-Mail Marketing..................... 303 535 1,127
-------- -------- --------
$ 5,450 $ 4,822 $ 4,989
======== ======== ========
</TABLE>
F-15
<PAGE> 98
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13 -- QUARTERLY RESULTS (UNAUDITED)
Quarterly results of operations for the years ended December 31, 1997 and
1996 are shown below:
<TABLE>
<CAPTION>
1997 QUARTERS
---------------------------------------- TOTAL
FIRST SECOND THIRD FOURTH FOR YEAR
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Revenues.............................. $48,666 $54,054 $50,729 $51,482 $204,931
Operating Income...................... 4,857 8,545 5,708 6,187 25,297
Net Income............................ 2,718 4,875 3,218 4,063(a) 14,874
Basic and diluted net income per
share............................... .13 .23 .15 .19 .70
</TABLE>
<TABLE>
<CAPTION>
1996 QUARTERS
---------------------------------------- TOTAL
FIRST SECOND THIRD FOURTH FOR YEAR
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Revenues.............................. $45,233 $48,382 $46,437 $48,505 $188,557
Operating Income...................... 3,256 6,022 3,508 5,713 18,499
Net Income............................ 1,928 3,568 2,075 3,385 10,956
Basic and diluted net income per
share............................... .09 .17 .10 .16 .52
</TABLE>
(a) Includes $634 after-tax gain, or $.03 per share (basic and diluted), on sale
of a magazine.
F-16
<PAGE> 99
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of
Donohue Meehan Publishing Company
In our opinion, the accompanying balance sheet and the related statements of
income and accumulated deficit and of cash flows present fairly, in all material
respects, the financial position of Donohue Meehan Publishing Company at
December 31, 1997, and the results of its operations and its cash flows for the
year in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
/s/ Price Waterhouse LLP
Cleveland, Ohio
April 3, 1998, except for Note 7 which
is dated as of May 21, 1998
F-17
<PAGE> 100
DONOHUE MEEHAN PUBLISHING COMPANY
STATEMENTS OF INCOME AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, 1998 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1997
-------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
REVENUES.................................................... $2,104 $ 9,358
------ -------
OPERATING EXPENSES:
Editorial, production and circulation..................... 666 2,826
Selling................................................... 455 2,146
General and administrative................................ 158 748
Depreciation.............................................. 17 75
------ -------
1,296 5,795
------ -------
Operating income............................................ 808 3,563
OTHER INCOME (EXPENSE):
Interest expense.......................................... (5) (21)
Interest income........................................... 10 75
------ -------
5 54
------ -------
Income before taxes......................................... 813 3,617
Provision for state income taxes (Note 1)................... -- 36
------ -------
NET INCOME.................................................. 813 3,581
Shareholder distributions................................... -- (3,617)
Accumulated deficit at beginning of period.................. (1,318) (1,282)
------ -------
Accumulated deficit at end of period........................ ($ 505) ($1,318)
====== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-18
<PAGE> 101
DONOHUE MEEHAN PUBLISHING COMPANY
BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31,
1998 DECEMBER 31
(UNAUDITED) 1997
----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $1,147 $ 19
Accounts receivable, less allowance for doubtful accounts
of $113 in 1998 and 1997............................... 1,360 1,898
Prepaid expenses.......................................... 77 46
------ -------
2,584 1,963
PROPERTY, PLANT AND EQUIPMENT:
Furniture and equipment................................... 404 404
Automobiles............................................... 131 131
Accumulated depreciation.................................. (329) (312)
------ -------
206 223
------ -------
Other assets................................................ 2 2
------ -------
$2,792 $ 2,188
====== =======
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 28 $ 92
Accrued expenses.......................................... 50 54
Lease obligations, current portion........................ 90 90
Retirement plan payable................................... 68 194
Deferred income tax....................................... 23 23
------ -------
259 453
------ -------
LONG-TERM LIABILITIES
Lease obligations......................................... 101 116
Deferred compensation..................................... 2,877 2,877
------ -------
2,978 2,993
------ -------
3,237 3,446
------ -------
SHAREHOLDER'S EQUITY (DEFICIT):
Common stock -- 700 shares Series A issued and
outstanding, no par value.............................. 60 60
Accumulated deficit....................................... (505) (1,318)
------ -------
(445) (1,258)
------ -------
$2,792 $ 2,188
====== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-19
<PAGE> 102
DONOHUE MEEHAN PUBLISHING COMPANY
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1998 1997
(UNAUDITED)- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 813 $ 3,581
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 17 75
Deferred income tax provision.......................... -- 2
Deferred compensation.................................. -- 81
Changes in assets and liabilities:
Decrease (increase) in accounts receivable............. 538 (182)
(Increase) decrease in prepaid expenses................ (31) 11
(Decrease) increase in accounts payable................ (64) 11
(Decrease) increase in accrued expenses................ (4) 8
(Decrease) increase in retirement plan payable......... (126) 30
------ -------
Net cash provided by operating activities................. 1,143 3,617
CASH FLOWS FROM FINANCING ACTIVITIES:
Lease payments............................................ (15) (58)
Distributions made to shareholders........................ -- (3,617)
------ -------
Net cash used by financing activities..................... (15) (3,675)
------ -------
NET INCREASE (DECREASE) IN CASH............................. 1,128 (58)
CASH AT BEGINNING OF YEAR................................... 19 77
------ -------
CASH AT END OF YEAR......................................... $1,147 $ 19
====== =======
Supplemental cash flow information:
State income taxes paid................................... $ -- $ 34
====== =======
Interest.................................................. $ 5 $ 20
====== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-20
<PAGE> 103
DONOHUE MEEHAN PUBLISHING COMPANY
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
NOTE 1 -- NATURE OF BUSINESS:
Donohue Meehan Publishing Company ("the Company") is a publisher of
magazines in the retail baking market (Modern Baking and Baking Management) and
in the convenience store industry (Convenience Store). The Company's principal
revenues are derived from magazine advertising. The Company has offices located
in Chicago, Illinois and Philadelphia, Pennsylvania.
The Company was incorporated on January 5, 1987 and elected "S" Corporation
tax status. Accordingly, the Company is not liable for federal income taxes. The
state of Illinois imposes a replacement income tax on "S" Corporations. The
state of Pennsylvania accepts the "S" Corporation status for corporations and
does not impose a corporate income tax, however, Pennsylvania does impose a
Capital Stock Foreign Franchise Tax.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
USE OF ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires the use of estimates by management
regarding the reported amounts of assets and liabilities as well as the revenues
and expenses recognized during the reporting period. Actual results could differ
from these estimates.
CASH
The Company considers all short-term securities purchased with an original
maturity of three months or less to be cash equivalents.
REVENUE RECOGNITION
Revenues from advertising are recognized as earned during the period when
the corresponding issue containing the advertisements is mailed.
PLANT PROPERTY AND EQUIPMENT
Furniture and equipment are recorded at cost and are depreciated over the
estimated useful lives of the assets principally using accelerated methods.
Leased property meeting certain criteria is capitalized and the present value of
the related lease payment is recorded as a liability. Depreciation for these
assets is computed over the lease term using the straight-line method. Lease
terms are 3 years for equipment and 5 years for automobiles.
STATE INCOME TAXES
The company records state income taxes in accordance with Statement of
Financial Accounting Standards (SFAS) No. 109 "Accounting for Income Taxes."
This standard requires the recognition of deferred tax assets and liabilities
for the expected future tax consequences of events that have been recognized in
the Company's financial statements or tax returns.
The state income tax provision consisted of the following:
<TABLE>
<S> <C>
Current..................................................... $34
Deferred.................................................... 2
---
$36
===
</TABLE>
The year-end deferred income tax liability consists of the difference
between accrual basis profits and cash basis profits recorded at the effective
state income tax rate.
F-21
<PAGE> 104
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 -- RETIREMENT PLAN:
In 1988 the company established a profit sharing plan for its eligible
employees in order to provide for their future retirement. The amount of the
Company's contribution to the Plan is determined annually by the Company's Board
of Directors.
The Board of Directors declared a $194 plan contribution for 1997 to be
paid in 1998. This amount has been recorded as a liability at December 31, 1997.
NOTE 4 -- RELATED PARTY TRANSACTIONS:
The Company leases various computers, automobiles and office equipment
under capital leases from Donohue-Meehan Equipment Leasing, an Illinois
partnership under common ownership with the Company.
Capitalized leases at December 31, 1997, consisted of computers and office
equipment ($185) and automobiles ($131).
During 1997, $78 was paid pursuant to these leases. Additionally, the
Company acquired in non-cash transactions, $173 of assets by capital lease in
1997. Future minimum annual lease payments under capital leases are as follows:
<TABLE>
<S> <C>
1998........................................................ $ 90
1999........................................................ 74
2000........................................................ 50
2001........................................................ 37
2002........................................................ 20
----
271
Less interest expense....................................... 65
----
Present value of minimum lease payments..................... $206
====
</TABLE>
NOTE 5 -- OPERATING LEASES:
Future minimum annual rental payments under the noncancelable operating
leases for office facilities are as follows: 1998 -- $66; 1999 -- $67;
2000 -- $67; and 2001 -- $25.
NOTE 6 -- DEFERRED COMPENSATION:
The Company has entered into certain agreements with key employees in which
the Company is obligated to pay the employees a specified amount upon death or
disability of the employer or upon sale of the Company. The compensation is
based on specified percentages as set forth in each employee's deferred
compensation agreement applied against the fair market value of the Company and
results in a charge to results of operations of $81 in 1997.
NOTE 7 -- SUBSEQUENT EVENT:
On May 21, 1998, the Company and its shareholders entered into an Agreement
whereby, upon the spin-off of Penton Media, Inc. ("Penton") (formerly Penton
Publishing, Inc.) from Pittway Corporation, the Company will be merged into a
wholly-owned subsidiary of Penton.
Upon completion of the merger, the Company's shareholders will receive (i)
common stock of Penton immediately following the spin-off from Pittway and the
merger, (ii) cash, (iii) the right to receive additional cash if certain
profitability levels are achieved during 1998 and/or 1999, and (iv) the right to
receive additional cash (or, in certain circumstances, additional common stock
of Penton) if the market price of Penton's common stock during either of two
reference periods in the year 2000 is less than a specified amount.
F-22
<PAGE> 105
INDEPENDENT EXHIBITIONS LIMITED
DIRECTOR'S REPORT
FOR THE TWELVE MONTHS ENDED 30 NOVEMBER 1997
The directors present their report together with the financial statements
for the twelve months ended 30 November 1997.
PRINCIPAL ACTIVITY
The principal activity of the company continues to be the organisation of
exhibitions and conferences.
BUSINESS REVIEW AND FUTURE DEVELOPMENTS
The business of the company has continued to develop in the light of
prevailing trading conditions and the position at 30 November 1997 is reflected
in the company's financial statements for the twelve months then ended. The
present intention is to continue the existing development of the company.
In December 1997, the company's entire issued share capital was acquired by
Penton Media Limited. Penton Media Limited has confirmed that it will provide
such financial support as is necessary to allow the company to trade and to meet
its liabilities as they fall due.
RESULTS
The results for the twelve month period are set out in the Profit and Loss
Account on page F-26. The director recommends the payment of a dividend of
L117,531.
DIRECTORS AND THEIR INTEREST IN THE COMPANY
The director who served during the period was RJ Findlay. The director has
an interest in the share capital of the company at the beginning and end of the
period, through his interest in the shares of Findlay Publications Holdings
Limited. His interest in that company's share capital is disclosed in its
financial statements.
RJ Findlay resigned as a director of the company on 12 December 1997.
The following were appointed Directors of the company on 12 December 1997.
DJ Ramella
TL Kemp
PL Vice
A Dedman
By Order of the Board
/s/ J. Wood
Company Secretary
F-23
<PAGE> 106
INDEPENDENT EXHIBITIONS LIMITED
STATEMENT OF DIRECTOR'S RESPONSIBILITIES
It is the purpose of this statement to distinguish the directors'
responsibilities for the financial statements from those of the auditors, as
stated in their report.
The directors have prepared financial statements which give a true and fair
view of the company's state of affairs at 30 November 1997 and of its profit or
loss for the twelve month period. In preparing those financial statements the
directors have been required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable and prudent;
- state whether applicable accounting standards have been followed, subject
to any material departures disclosed and explained in the financial
statements;
- prepare the financial statements on the going concern basis unless it is
inappropriate to assume that the company will continue in business.
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
company. The directors are also responsible for safeguarding the assets of the
company and hence for taking reasonable steps for the prevention and detection
of fraud or other irregularities.
F-24
<PAGE> 107
REPORT OF THE AUDITORS
TO THE DIRECTORS OF
INDEPENDENT EXHIBITIONS LIMITED
We have audited the financial statements for the twelve months ended 30
November 1997 on pages F-26 to F-32 which have been prepared under the
accounting policies set out on page F-28.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
As described on page F-24 the company's directors are responsible for the
preparation of financial statements. It is our responsibility to form an
independent opinion, based on our audit, on those financial statements and to
report our opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements. It
also includes an assessment of the significant estimates and judgements made by
the director in the preparation of the financial statements, and of whether the
accounting policies are appropriate to the company's circumstances, consistently
applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of the information in the financial statements.
UNQUALIFIED OPINION
In our opinion, the financial statements give a true and fair view of the
state of the company's affairs at 30 November 1997 and of its profit for the
twelve months then ended.
/s/ Horwath Clark Whitehill
Chartered Accountants
and Registered Auditors
June 10, 1998
London, England
F-25
<PAGE> 108
INDEPENDENT EXHIBITIONS LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE TWELVE MONTHS ENDED 30 NOVEMBER 1997
<TABLE>
<CAPTION>
1997
NOTES L
----- ---------
<S> <C> <C>
TURNOVER.................................................... 1(ii) 2,607,480
Cost of Sales............................................... 1,076,330
---------
GROSS PROFIT................................................ 1,531,150
Administrative expenses..................................... 1,497,617
---------
OPERATING PROFIT............................................ 33,533
Interest receivable and similar income...................... 26,869
---------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION............... 2 60,402
Tax on profit on ordinary activities........................ 4 15,517
---------
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION................ 44,885
Dividends................................................... (117,531)
---------
RETAINED LOSS FOR THE PERIOD................................ (72,646)
Profit and loss account brought forward..................... 18,014
---------
PROFIT AND LOSS ACCOUNT CARRIED FORWARD..................... (54,632)
=========
</TABLE>
The profit and loss account contains all the gains and losses recognised in
the twelve months and is the only movement in shareholders' funds.
The notes to the financial statements form part of these financial statements.
F-26
<PAGE> 109
INDEPENDENT EXHIBITIONS LIMITED
BALANCE SHEET
30 NOVEMBER 1997
<TABLE>
<CAPTION>
1997
NOTES (pound) (pound)
----- --------- -------
<S> <C> <C> <C>
FIXED ASSETS
Tangible assets............................................. 5 44,628
CURRENT ASSETS
Debtors..................................................... 6 1,242,951
Cash at bank................................................ 2,056,046
---------
3,298,997
CREDITORS: amounts falling due within one year.............. 7 3,361,454
---------
NET CURRENT LIABILITIES..................................... (62,457)
-------
TOTAL ASSETS LESS CURRENT LIABILITIES....................... (17,829)
PROVISIONS FOR LIABILITIES AND CHARGES...................... 8 34,363
-------
NET LIABILITIES............................................. (52,192)
=======
FINANCED BY:
CAPITAL AND RESERVES
Called up share capital..................................... 9 105
Share premium............................................... 2,335
Profit and loss account..................................... (54,632)
-------
SHAREHOLDERS' DEFICIT....................................... (52,192)
-------
</TABLE>
Approved by the Board on
June 10, 1998
and signed on its behalf:
/s/ A. Dedman -- Director
The notes to the financial statements form part of these financial statements.
F-27
<PAGE> 110
INDEPENDENT EXHIBITIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE TWELVE MONTHS ENDED 30 NOVEMBER 1997
1. ACCOUNTING POLICIES
(i) BASIS OF ACCOUNTING
The financial statements have been prepared under the historical cost
convention and in accordance with applicable accounting standards.
(ii) TURNOVER
Turnover represents the invoiced value of services supplied and is
stated net of value added tax. The turnover is attributable to the
principal activity of the company of organising exhibitions and
conferences.
(iii)DEFERRED TAXATION
Deferred taxation is accounted for using the liability method on all
material timing differences to the extent that it is probable that
liabilities or assets will crystallise.
(iv) FIXED ASSETS AND DEPRECIATION
Fixed assets are included at cost. Depreciation is provided on all
tangible fixed assets to write off the cost over their expected life by
equal annual instalments.
The rates applied are:
Fixtures and fittings - 10% to 50%
Motorcars - 25%
(v) PENSION COSTS
The costs of providing pensions for employees are charged in the profit
and loss account in accordance with the recommendations of qualified
actuaries. Any funding surpluses or deficits that may arise from time to
time are amortised over the average remaining working life of employees.
2. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
<TABLE>
<CAPTION>
1997
(pound)
------
<S> <C>
This is stated after charging:
Auditors' remuneration.................................... 5,250
Depreciation.............................................. 16,074
------
</TABLE>
F-28
<PAGE> 111
INDEPENDENT EXHIBITIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE TWELVE MONTHS ENDED 30 NOVEMBER 1997
3. STAFF COSTS
<TABLE>
<CAPTION>
1997
(pound)
-------
<S> <C>
Wages and salaries.......................................... 477,650
Social security costs....................................... 41,666
Other pension costs......................................... 21,730
-------
541,046
=======
NO.
The average number of employees during the year was......... 14
=======
</TABLE>
4. TAX ON PROFIT ON ORDINARY ACTIVITIES
<TABLE>
<CAPTION>
1997
(pound)
------
<S> <C>
Corporation tax based on profits for the year at 23.5%
(1996: 24%)............................................... 22,750
Under/(over) provision in previous years.................... 67
Deferred taxation........................................... (7,300)
------
15,517
======
</TABLE>
5. FIXED ASSETS
<TABLE>
<CAPTION>
FIXTURES
AND
FITTINGS
(pound)
--------
<S> <C>
COST
At 1 December 1996........................................ 71,273
ADDITIONS................................................. 14,525
------
AT 30 NOVEMBER 1997......................................... 85,798
------
DEPRECIATION
At 1 December 1996........................................ 25,096
CHARGE FOR THE YEAR....................................... 16,074
------
AT 30 NOVEMBER 1997......................................... 41,170
------
NET BOOK VALUE
AT 30 NOVEMBER 1997......................................... 44,628
------
</TABLE>
6. DEBTORS
<TABLE>
<CAPTION>
1997
(pound)
---------
<S> <C>
Trade debtors............................................... 836,084
Other debtors............................................... 345,316
Prepayments and accrued income.............................. 61,551
---------
1,242,951
=========
</TABLE>
F-29
<PAGE> 112
INDEPENDENT EXHIBITIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE TWELVE MONTHS ENDED 30 NOVEMBER 1997
7. CREDITORS
Amounts falling due within one year:
<TABLE>
<CAPTION>
1997
(pound)
---------
<S> <C>
Trade creditors........................................ 956,982
Corporation tax........................................ 59,998
Other taxes and social security........................ 42,046
Other creditors........................................ 2,106,166
Proposed dividend...................................... 117,531
Accruals and deferred income........................... 78,731
---------
3,361,454
=========
</TABLE>
8. PROVISIONS FOR LIABILITIES AND CHARGES
<TABLE>
<S> <C>
Pension provision........................................... 49,113
Less deferred tax........................................... (14,750)
---------
34,363
=========
A) DEFERRED TAXATION
At 1 December 1996................................ (7,450)
Movement in provision............................. (7,300)
---------
(14,750)
=========
</TABLE>
Full recognition has been made in respect of the company's deferred
taxation asset which consists of timing differences arising from:
<TABLE>
<CAPTION>
1997
(pound)
---------
<S> <C>
Capital allowances................................ 1,300
Tax relief on pension provision................... (16,050)
---------
(14,750)
=========
</TABLE>
b) PENSION PROVISION
Employees of the company are eligible for membership of the Findlay
Publications Pension and Death Benefit Scheme. The scheme is a defined
benefit pension scheme, the assets of which are held in a separate
trustee administered fund. The total pension costs to all participating
companies are assessed on the advice of qualified actuaries using the
attained age method. The latest actuarial assessment of the scheme was
at 1 March 1996.
The significant actuarial assumptions used in the assessment were that
future investment return would be 9% per annum and future salary and
wage increases would average 8% per annum. At the date of the latest
actuarial assessment the actuarial value of the assets in the scheme was
sufficient to cover 117% of the benefits that had accrued to members,
after allowing for expected future increases in earnings.
The surplus funding of the scheme has enabled participating companies,
in accordance with the advice from the actuary, to make reduced
contributions which results in the creation of the pension provision in
compliance with Statement of Standard Accounting Practice No. 24.
F-30
<PAGE> 113
INDEPENDENT EXHIBITIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE TWELVE MONTHS ENDED 30 NOVEMBER 1997
Following the sale of the company in December 1997, new pension
arrangements are to be put in place and the actuary has been requested
to calculate the value of members benefits to be transferred into a new
pension arrangement.
9. SHARE CAPITAL
<TABLE>
<CAPTION>
1997
(pound)
-----
<S> <C>
Authorised
10,000 Ordinary shares of 10p each.......................... 1,000
-----
Allotted, called up and fully paid
1,052 Ordinary shares of 10p each........................... 105
-----
</TABLE>
10. RELATED PARTY TRANSACTIONS
At 30 November 1997, the following companies are deemed to be related
parties by virtue of the beneficial interest held in their share capital by the
director and/or key management of the company:
Findlay Publications Limited
Richard Copley-Smith Limited
Service Exhibitions Limited*
Equity Information Exchange Limited*
* The company acts as agent for these related parties.
During the twelve month period the following amounts were paid to related
parties for services detailed:
<TABLE>
<CAPTION>
(pound)
-------
<S> <C> <C>
Findlay Publications Limited -Management 61,000
charges.............
-Circulation 28,000
charges.............
-Consultancy 316,720
charges.............
Richard Copley-Smith Limited -Consultancy 316,720
charges.............
</TABLE>
As at 30 November 1997, the following amounts were outstanding with related
parties:
<TABLE>
<S> <C> <C>
Creditors - Findlay Publications Limited........... 160,797
Creditors - Equity Information Exchange Limited.... 635,325
Creditors - Service Exhibitions Limited............ 623,682
</TABLE>
11. SUMMARY OF DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES.
a) DIVIDENDS
In accordance with UK GAAP the profit and loss account for the twelve
months to 30 November 1997 has been charged with the dividend proposed
for the period. Under US GAAP dividends are charged to retained reserves
only when declared.
b) DEFERRED TAXATION
Deferred corporation tax has, in accordance with UK GAAP, been provided
under the liability method to the extent that it is probable that a
liability will crystallise in the foreseeable future. Under US GAAP the
liability method is required by FAS109, however full provision is
required for all differences. In the financial statements for the twelve
months to 30 November 1997 this does not give rise to a difference as
full provision has been made for all timing differences.
F-31
<PAGE> 114
INDEPENDENT EXHIBITIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE TWELVE MONTHS ENDED 30 NOVEMBER 1997
c) PENSION COSTS
Pension costs have been assessed in accordance with the advice of an
independent actuary and are based on the actuarial valuation of the
scheme as at 1 March 1996 and have been accounted for in accordance with
UK SSAP24. This surplus that has arisen in the scheme is being released
over the remaining service lives of employees.
Under US GAAP pension costs are accounted for in accordance with FAS87
which recommends the use of the projected unit credit method for
calculating the cost to an accounting period.
A full valuation and recalculation of the pension costs under US GAAP
has not been prepared. However, the difference in cost charged to the
profit and loss account for the twelve months to 30 November 1997 is not
considered to be material.
F-32
<PAGE> 115
SERVICE EXHIBITIONS LIMITED
DIRECTOR'S REPORT
FOR THE TWELVE MONTHS ENDED 30 NOVEMBER 1997
The directors present their report together with the financial statements
for the twelve months ended 30 November 1997.
PRINCIPAL ACTIVITY
The principal activity of the company continues to be the organisation of
exhibitions and conferences for those involved in the service management
profession.
BUSINESS REVIEW AND FUTURE DEVELOPMENTS
The business of the company has continued to develop the business in the
light of prevailing trading conditions and the position at 30 November 1997 is
reflected in the company's accounts for the twelve months then ended. The
present intention is to continue the development of the existing business of the
company.
In December 1997 the company's entire issued share capital was acquired by
Penton Media Limited. Penton Media Limited has confirmed that it will provide
such financial support as is necessary to allow the company to continue to trade
and meet its liabilities as they fall due.
RESULTS
The results for the twelve month period are set out in the Profit and Loss
Account on page F-36. The director recommends the payment of a final dividend of
L82,448.
DIRECTORS AND THEIR INTEREST IN THE COMPANY
The director who served during the period was RJ Findlay. His interest in
the share capital of the company was 450 L1 ordinary shares throughout the
period.
RJ Findlay resigned as a director on 12 December 1997.
The following were appointed directors on 12 December 1997.
DJ Ramella
TL Kemp
PL Vice
A Dedman
By Order of the Board
/s/ J. Wood
Company Secretary
F-33
<PAGE> 116
SERVICE EXHIBITIONS LIMITED
STATEMENT OF DIRECTOR'S RESPONSIBILITIES
It is the purpose of this statement to distinguish the director's
responsibilities for the financial statement from those of the auditors, as
stated in their report.
The directors have prepared financial statements which give a true and fair
view of the company's state of affairs at 30 November 1997 and of its profit or
loss for the twelve month period. In preparing the financial statements the
directors have been required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable and prudent;
- state whether applicable accounting standards have been followed, subject
to any material departures disclosed and explained in the financial
statements;
- prepare the financial statements on the going concern basis unless it is
inappropriate to assume that the company will continue in business.
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
company. The directors are also responsible for safeguarding the assets of the
company and hence for taking reasonable steps for the prevention and detection
of fraud or other irregularities.
F-34
<PAGE> 117
REPORT OF THE AUDITORS
TO THE DIRECTORS OF
SERVICE EXHIBITIONS LIMITED
We have audited the financial statements on pages F-36 to F-40 which have
been prepared under the accounting policies set out on page F-38.
RESPECTIVE RESPONSIBILITIES OF DIRECTOR AND AUDITORS
As described on page F-34 the company's director is responsible for the
preparation of financial statements. It is our responsibility to form an
independent opinion, based on our audit, on those financial statements and to
report our opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements. It
also includes an assessment of the significant estimates and judgements made by
the director in the preparation of the financial statements, and of whether the
accounting policies are appropriate to the company's circumstances, consistently
applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of the information in the financial statements.
UNQUALIFIED OPINION
In our opinion, the financial statements give a true and fair view of the
state of the company's affairs at 30 November 1997 and of its profit for the
twelve months then ended.
/s/ Horwath Clark Whitehill
Chartered Accountants
and Registered Auditors
June 10, 1998
London, England
F-35
<PAGE> 118
SERVICE EXHIBITIONS LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE TWELVE MONTHS ENDED 30 NOVEMBER 1997
<TABLE>
<CAPTION>
1997
NOTES (pound)
----- ---------
<S> <C> <C>
TURNOVER.................................................... 1(ii) 531,433
Cost of Sales............................................... 181,664
---------
GROSS PROFIT................................................ 349,769
Administrative expenses..................................... 296,106
---------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION............... 2 53,663
Tax on profit on ordinary activities........................ 4 12,955
---------
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION................ 40,708
Dividends................................................... (82,448)
---------
RETAINED LOSS FOR THE PERIOD................................ (41,740)
Profit and loss account brought forward..................... 18,077
---------
PROFIT AND LOSS ACCOUNT CARRIED FORWARD..................... (23,663)
=========
</TABLE>
The profit and loss account contains all the gains and losses recognised in
the twelve months and is the only movement in shareholders' funds.
The notes to the financial statements form part of these financial statements.
F-36
<PAGE> 119
SERVICE EXHIBITIONS LIMITED
BALANCE SHEET
30 NOVEMBER 1997
<TABLE>
<CAPTION>
1997
NOTES (pound)
----- -------
<S> <C> <C>
CURRENT ASSETS
Debtors..................................................... 5 667,971
CREDITORS: amounts falling due within one year.............. 6 690,634
-------
NET LIABILITIES............................................. (22,663)
=======
CAPITAL AND RESERVES
Called up share capital..................................... 7 1,000
Profit and loss account..................................... (23,663)
-------
SHAREHOLDERS' DEFICIT....................................... (22,663)
=======
</TABLE>
Approved by the Board
on June 10, 1998,
and signed on its behalf:
/s/ A. Dedman -- Director
The notes to the financial statements form part of these financial statements.
F-37
<PAGE> 120
SERVICE EXHIBITIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE TWELVE MONTHS ENDED 30 NOVEMBER 1997
1. ACCOUNTING POLICIES
(I) BASIS OF ACCOUNTING
The financial statements have been prepared under the historical cost
convention and in accordance with applicable accounting standards.
(II) TURNOVER
Turnover represents the amount invoiced to customers for attendance at
exhibitions and conferences, and is stated net of value added tax.
(III) DEFERRED TAXATION
Deferred taxation is accounted for using the liability method on all
material timing differences to the extent that it is probable that liabilities
or assets will crystallise.
<TABLE>
<CAPTION>
1997
(pound)
------
<S> <C>
2. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
This is stated after charging:
Auditors' remuneration...................................... 2,500
------
3. STAFF COSTS
Wages and salaries.......................................... 45,070
Social security costs....................................... 4,380
------
49,450
======
</TABLE>
<TABLE>
<CAPTION>
NO.
------
<S> <C>
The average number of employees during the year was......... 3
------
</TABLE>
F-38
<PAGE> 121
SERVICE EXHIBITIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE TWELVE MONTHS ENDED 30 NOVEMBER 1997
<TABLE>
<CAPTION>
1997
(pound)
------
<S> <C>
4. TAX ON PROFIT ON ORDINARY ACTIVITIES
Corporation tax based on profits for the year at 23.5%
(1996: 24%)............................................... 13,000
Over provision in respect of previous years................. (45)
------
12,955
======
</TABLE>
<TABLE>
<CAPTION>
1997
(pound)
-------
<S> <C>
5. DEBTORS
Other debtors............................................... 663,295
Prepayments and accrued income.............................. 4,676
-------
667,971
=======
6. CREDITORS
Amounts falling due within one year:
Corporation tax............................................. 31,068
Other taxes and social security costs....................... 4,440
Other creditors............................................. 87,133
Proposed dividends.......................................... 82,448
Accruals and deferred income................................ 485,545
-------
690,634
=======
7. SHARE CAPITAL
Authorised
Ordinary shares of (pound) 1 each........................... 1,000
-------
Allotted, called up and fully paid
Ordinary shares of (pound) 1 each........................... 1,000
=======
</TABLE>
8. RELATED PARTY TRANSACTIONS
At 30 November 1997, the following companies are deemed to be related
parties by virtue of the beneficial interest held in their share capital by the
director and/or key management of the company:
Findlay Publications Investments Limited
Findlay Publications Limited
Richard Copley-Smith Limited
Independent Exhibitions Limited*
- ---------------
* Independent Exhibitions Limited acts as agent for the company.
F-39
<PAGE> 122
SERVICE EXHIBITIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE TWELVE MONTHS ENDED 30 NOVEMBER 1997
During the year the following amounts were paid to related parties for
services detailed:
<TABLE>
<CAPTION>
(pound)
-------
<S> <C>
Findlay Publications Limited -- Management charges..... 10,301
Findlay Publications Investments Limited -- Consultancy
charges............................................... 67,500
Richard Copley-Smith Limited -- Consultancy charges.... 67,500
As at 30 November 1997, the following amounts were
outstanding with related parties:
Debtors -- Independent Exhibitions Limited............. 623,682
</TABLE>
9. SUMMARY OF DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES
(A) DIVIDENDS
In accordance with UK GAAP the profit and loss account for the twelve
months to 30 November 1997 has been charged with the dividend proposed
for the period. Under US GAAP dividends are charged to retained reserves
only when declared.
(B) DEFERRED TAXATION
Deferred corporation tax has in accordance with UK GAAP been provided
under the liability method to the extent that it is probably that a
liability will crystallise in the foreseeable future. Under US GAAP the
liability method is required by FAS109, however full provision is
required for all differences. In the financial statements for the twelve
months to 30 November 1997 this does not give rise to a difference as
full provision has been made for all timing differences.
F-40
<PAGE> 123
EQUITY INFORMATION EXCHANGE LIMITED
DIRECTORS' REPORT
FOR THE TWELVE MONTHS ENDED 30 NOVEMBER 1997
The directors have pleasure in presenting their report and the financial
statements for the twelve months ended 30 November 1997.
PRINCIPAL ACTIVITY
The principal activity of the company continues to be the organisation of
exhibitions.
BUSINESS REVIEW AND FUTURE DEVELOPMENTS
The directors have continued to develop the business in the light of
prevailing trading conditions and the position at 30 November 1997 is reflected
in the company's accounts for the year then ended. The present intention is to
continue the development of the existing business of the company.
In December 1997 the company's entire issued share capital was acquired by
Penton Media Limited. Penton Media Limited has confirmed that it will provide
such financial support as is necessary to allow the company to trade and to meet
its liabilities as they fall due.
RESULTS AND DIVIDENDS
The results for the twelve month period are set out in the profit and loss
account on page F-44. The directors recommend the payment of a dividend of
L153,295.
DIRECTORS AND THEIR INTERESTS IN THE COMPANY
The directors who served during the period and their interests in the share
capital of the Company were as follows:
<TABLE>
<CAPTION>
(pound) 1 ORDINARY SHARES
-----------------------------------
30 NOVEMBER 1997 30 NOVEMBER 1996
---------------- ----------------
<S> <C> <C>
RS Copley-Smith............................................. 222 222
RJ Findlay.................................................. 435 435
</TABLE>
RS Copley-Smith and RJ Findlay resigned as directors on 12 December 1997.
The following were appointed directors on 12 December 1997.
DJ Ramella
TL Kemp
PL Vice
A Dedman
By Order of the Board
/s/ J. Wood
Company Secretary
F-41
<PAGE> 124
EQUITY INFORMATION EXCHANGE LIMITED
STATEMENT OF DIRECTORS' RESPONSIBILITIES
It is the purpose of this statement to distinguish the directors'
responsibilities for the financial statements from those of the auditors, as
stated in their report.
The directors have prepared financial statements which give a true and fair
view of the company's state of affairs at 30 November 1997 and of its profit or
loss for the twelve month period. In preparing the financial statements the
directors have been required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable and prudent;
- state whether applicable accounting standards have been followed, subject
to any material departures disclosed and explained in the financial
statements;
- prepare the financial statements on the going concern basis unless it is
inappropriate to assume that the company will continue in business.
The directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
company. The directors are also responsible for safeguarding the assets of the
company and hence for taking reasonable steps for the prevention and detection
of fraud or other irregularities.
F-42
<PAGE> 125
REPORT OF THE AUDITORS
TO THE DIRECTORS OF
EQUITY INFORMATION EXCHANGE LIMITED
We have audited the financial statements for the twelve months ended 30
November 1997 on pages F-44 to F-49 which have been prepared under the
accounting policies set out on page F-46.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
As described on page F-42 the company's directors are responsible for the
preparation of financial statements. It is our responsibility to form an
independent opinion, based on our audit, on those financial statements and to
report our opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements. It
also includes an assessment of the significant estimates and judgements made by
the directors in the preparation of the financial statements, and of whether the
accounting policies are appropriate to the company's circumstances, consistently
applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of the information in the financial statements.
UNQUALIFIED OPINION
In our opinion, the financial statements give a true and fair view of the
state of the company's affairs at 30 November 1997 and of its profit for the
twelve months then ended.
/s/ Horwath Clark Whitehill
Chartered Accountants
and Registered Auditors
June 10, 1998
London, England
F-43
<PAGE> 126
EQUITY INFORMATION EXCHANGE LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE TWELVE MONTHS ENDED 30 NOVEMBER 1997
<TABLE>
<CAPTION>
1997
NOTES (pound)
----- ---------
<S> <C> <C>
TURNOVER.................................................... 1(ii) 2,159,136
Cost of Sales............................................... 854,272
---------
GROSS PROFIT................................................ 1,304,864
Administrative expenses..................................... 1,260,533
---------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION............... 2 44,331
Tax on profit on ordinary activities........................ 4 901
---------
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION................ 43,430
Dividends................................................... (153,295)
---------
RETAINED PROFIT FOR THE PERIOD.............................. (109,865)
Profit and loss account brought forward..................... 239
---------
PROFIT AND LOSS ACCOUNT CARRIED FORWARD..................... (109,626)
=========
</TABLE>
The profit and loss account contains all the gains and losses recognised in
the twelve months and is the only movement in shareholders' funds.
The notes form part of these financial statements.
F-44
<PAGE> 127
EQUITY INFORMATION EXCHANGE LIMITED
BALANCE SHEET
30 NOVEMBER 1997
<TABLE>
<CAPTION>
1997
NOTES (pound)
----- --------
<S> <C> <C>
CURRENT ASSETS
Debtors..................................................... 5 691,608
CREDITORS: amounts falling due within one year.............. 6 780,003
--------
NET CURRENT LIABILITIES..................................... (88,395)
PROVISIONS FOR LIABILITIES AND CHARGES...................... 7 19,581
--------
NET LIABILITIES............................................. (107,976)
========
CAPITAL AND RESERVES
Called up share capital..................................... 8 1,026
Share premium............................................... 624
Profit and loss account..................................... (109,626)
--------
SHAREHOLDERS' DEFICIT....................................... (107,976)
--------
</TABLE>
Approved by the Board on
June 10, 1998
and signed on its behalf:
/s/ A. Dedman - Director
The notes to the financial statements form part of these financial statements.
F-45
<PAGE> 128
EQUITY INFORMATION EXCHANGE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE TWELVE MONTHS ENDED 30 NOVEMBER 1997
1. ACCOUNTING POLICIES
(I) BASIS OF ACCOUNTING
The financial statements have been prepared under the historical cost
convention and in accordance with applicable accounting standards.
(II) TURNOVER
Turnover represents the invoiced value of services supplied and is stated
net of value added tax. The turnover is attributable to one activity, the
principal activity of the company.
(III) DEFERRED TAXATION
Deferred taxation is accounted for using the liability method on all
material timing differences to the extent that it is probable that liabilities
or assets will crystallise.
(IV) PENSION COSTS
The costs of providing pensions for employees are charged in the profit and
loss account in accordance with the recommendations of qualified actuaries. Any
funding surpluses or deficits that may arise from time to time are amortised
over the average remaining working life of employees.
2. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
<TABLE>
<CAPTION>
1997
(pound)
-------
<S> <C>
This is stated after charging:
Auditors' remuneration...................................... 4,300
</TABLE>
3. STAFF COSTS
<TABLE>
<S> <C>
Wages and salaries.......................................... 195,803
Social security costs....................................... 17,277
Other pension costs......................................... --
-------
213,080
=======
NO.
The average number of employees in the year was............. 7
=======
</TABLE>
4. TAX ON PROFIT ON ORDINARY ACTIVITIES
<TABLE>
<CAPTION>
1997
(pound)
-------
<S> <C>
Corporation tax based on profits for the year at 23.5%
(1996: 24%)............................................... 13,000
Overprovision in respect of previous years.................. (7,999)
Deferred taxation........................................... (4,100)
-------
901
=======
</TABLE>
F-46
<PAGE> 129
EQUITY INFORMATION EXCHANGE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE TWELVE MONTHS ENDED 30 NOVEMBER 1997
5. DEBTORS
<TABLE>
<S> <C>
Other debtors............................................... 674,267
Prepayments and accrued income.............................. 17,341
-------
691,608
=======
</TABLE>
6. CREDITORS
Amounts falling due within one year:
<TABLE>
<S> <C>
Other creditors............................................. 263,880
Corporation tax............................................. 42,749
Other taxes and social security costs....................... 32,505
Proposed dividend........................................... 153,295
Accruals and deferred income................................ 287,574
-------
780,003
=======
</TABLE>
7. PROVISIONS FOR LIABILITIES AND CHARGES
<TABLE>
<S> <C>
Pension provision........................................... 29,081
Less deferred tax........................................... (9,500)
-------
19,581
-------
(a) DEFERRED TAXATION
At 1 December 1996.......................................... (5,400)
Movement in provision....................................... (4,100)
-------
At 30 November 1997......................................... (9,500)
=======
</TABLE>
Full recognition has been made in respect of the company's deferred taxation
asset which consists entirely of timing differences arising from the tax
relief on the pension provision.
(b) PENSION PROVISION
Employees of the company are eligible for membership of the Findlay
Publications Pension and Death Benefit Scheme. The scheme is a defined
benefit pension scheme, the assets of which are held in a separate
trustee administered fund. The total pension costs to all participating
companies are assessed on the advice of qualified actuaries using the
attained age method. The latest actuarial assessment of the scheme was
at 1 March 1996.
The significant actuarial assumptions used in the assessment were that
future investment return would be 9% per annum and future salary and
wage increases would average 8% per annum. At the date of the latest
actuarial assessment the actuarial value of the assets in the scheme was
sufficient to cover 117% of the benefits that had accrued to members,
after allowing for expected future increases in earnings.
The surplus funding of the scheme has enabled participating companies,
in accordance with the advice from the actuary, to make reduced
contributions which results in the creation of the pension provision in
compliance with Statement of Standard Accounting Practice No. 24.
F-47
<PAGE> 130
EQUITY INFORMATION EXCHANGE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE TWELVE MONTHS ENDED 30 NOVEMBER 1997
Following the sale of the company in December 1997, new pension
arrangements are to be put in place and the actuary has been requested
to calculate the value of members benefits to be transferred into a new
pension arrangement.
8. SHARE CAPITAL
<TABLE>
<CAPTION>
1997
(pound)
-------
<S> <C>
Authorised
Ordinary shares of (pound) 1 each........................... 100,000
-------
Allotted, called up and fully paid
Ordinary shares of (pound) 1 each......................... 1,026
=======
</TABLE>
9. RELATED PARTY TRANSACTIONS
The following companies are deemed to be related parties by virtue of the
beneficial interest held in their share capital by the director and/or key
management of the company:
Findlay Publications Investments Limited
Findlay Publications Limited
Richard Copley-Smith Limited
Service Exhibitions Limited
Independent Exhibitions Limited*
-----------------------
* Independent Exhibitions Limited acts as agent for the company.
During the twelve month period the following amounts were paid to related
parties for services detailed:
<TABLE>
<CAPTION>
(pound)
-------
<S> <C>
Findlay Publications Limited -- Management charges........ 76,500
-- Circulation charges.... 21,370
Findlay Publications Investments Limited -- Consultancy
charges................................................ 233,187
Richard Copley-Smith Limited -- Consultancy charges....... 233,187
As at 30 November 1997, the following amounts were
outstanding with related parties:
Debtors -- Independent Exhibitions Limited................ 635,325
</TABLE>
10. SUMMARY OF DIFFERENCES BETWEEN UNITED KINGDOM AND UNITED STATES GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES
a) DIVIDENDS
In accordance with UK GAAP the profit and loss account for the twelve
months to 30 November 1997 has been charged with the dividend proposed
for the period. Under US GAAP dividends are charged to retained reserves
only when declared.
b) DEFERRED TAXATION
Deferred corporation tax has, in accordance with UK GAAP, been provided
under the liability method to the extent that it is probable that a
liability will crystallise in the foreseeable future. Under US GAAP the
liability method is required by FAS109, however full provision is
required for all
F-48
<PAGE> 131
EQUITY INFORMATION EXCHANGE LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE TWELVE MONTHS ENDED 30 NOVEMBER 1997
differences. In the financial statements for the twelve months to 30
November 1997 this does not give rise to a difference as full provision
has been made for all timing differences.
C) PENSION COSTS
Pension costs have been assessed in accordance with the advice of an
independent actuary and are based on the actuarial valuation of the
scheme as at 1 March 1996 and have been accounted for in accordance with
UK SSAP24. This surplus that has arisen in the scheme is being released
over the remaining service lives of employees.
Under US GAAP pension costs are accounted for in accordance with FAS87
which recommends the use of the projected unit credit method for
calculating the cost to an accounting period.
A full valuation and recalculation of the pension costs under US GAAP
has not been prepared. However, the difference in cost charged to the
profit and loss account for the twelve months to 30 November 1997 is not
considered to be material.
F-49
<PAGE> 132
- ------------------------------------------------------
- ------------------------------------------------------
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION
NOT CONTAINED IN THIS PROSPECTUS, AND ANY INFORMATION OR REPRESENTATION NOT
CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY PENTON OR
BY PITTWAY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES NOR DOES IT CONSTITUTE AN OFFER
TO ANY PERSON IN ANY JURISDICTION WHERE SUCH AN OFFER WOULD BE UNLAWFUL. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR THE STOCK DISTRIBUTION SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF PENTON SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary of Certain Information............. 3
Forward-Looking Statements................. 6
Introduction............................... 8
The Stock Distribution..................... 10
DM Publishing Combination Agreement........ 13
Risk Factors............................... 21
Capitalization............................. 25
Selected Historical Financial
Information.............................. 26
Unaudited Pro Forma Combined Financial
Information.............................. 27
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 32
Business................................... 40
Management................................. 57
Executive Compensation..................... 64
Certain Transactions....................... 72
Stock Ownership of Certain Beneficial
Owners and Executive Officers and
Directors................................ 73
Description of Capital Stock............... 76
Anti-Takeover Effects...................... 77
Limitations on Liability and
Indemnification of Officers and
Directors................................ 80
1999 Annual Stockholders Meeting........... 80
Legal Matters.............................. 80
Experts.................................... 81
Available Information...................... 81
Index to Financial Statements.............. F-1
</TABLE>
------------------------
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
PENTON MEDIA, INC.
PENTON MEDIA, INC. LOGO
COMMON STOCK
DISTRIBUTED TO STOCKHOLDERS
OF PITTWAY CORPORATION
---------------------------
PROSPECTUS
---------------------------
, 1998
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 133
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate (except for the Commission registration fee)
of the fees and expenses payable by the Registrant in connection with the
issuance and distribution in the Stock Distribution of Common Stock:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee....... $ 21,226
NYSE Original Listing Fee................................. 150,000
Printing and engraving costs.............................. 170,000
Legal fees and expenses................................... 235,000
Accountants fees and expenses............................. 95,000
Blue Sky fees and expenses................................ 5,000
Investment Banking fees and expenses...................... 500,000
Insurance premium......................................... 200,000
Miscellaneous............................................. 23,774
----------
Total............................................. $1,400,000
==========
</TABLE>
- ---------------
* To be filed by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
ELIMINATION OF LIABILITY IN CERTAIN CIRCUMSTANCES
The Certificate of Incorporation provides that, to the fullest extent
permitted by the DGCL as the same exists or may hereafter be amended, no
director of Penton shall be liable to it or its stockholders for monetary
damages for breach of fiduciary duty as a director. Any repeal or modification
of this provision will not adversely affect any right or protection of a
director of Penton existing at the time of such repeal or modification.
INDEMNIFICATION AND INSURANCE
Section 145 of the DGCL contains provisions permitting (and, in some
situations, requiring) Delaware corporations such as Penton to provide
indemnification to their officers and directors for losses and litigation
expense incurred in connection with, among other things, their service to the
corporation in those capacities. The Certificate of Incorporation contains
provisions requiring indemnification by Penton of its directors, officers, and
employees to the fullest extent permitted by law. Among other things, these
provisions provide that Penton is required to indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
or investigative (including any action by or in the right of Penton) (a
"Proceeding") by reason of the fact that such person is or was a director,
officer, or employee of Penton, or is or was serving at the request of Penton as
a director, officer or employee of another corporation, partnership, joint
venture, trust, or other enterprise (including service with respect to any
employee benefit plan) against expenses (including attorneys' fees), judgments,
fines, ERISA excise taxes, penalties, and amounts paid in settlement actually
and reasonably incurred by such person in connection with such Proceeding to the
fullest extent permitted by the DGCL, as the same exists or may be amended (but,
in the case of any such amendment, only to the extent that such amendment
permits Penton to provide broader indemnification rights than such law permitted
Penton to provide prior to such amendment). These provisions also provide for
the advance payment of fees and expenses reasonably incurred by the director,
officer, or employee in defense of any such Proceeding, subject to reimbursement
by the director, officer, or employee if it is ultimately determined that such
director, officer, or employee is not entitled to be indemnified by Penton.
Penton anticipates that it will enter into agreements with its directors
providing contractually for indemnification consistent with the Certificate of
Incorporation
II-1
<PAGE> 134
and Bylaws. In addition, the Certificate of Incorporation authorizes Penton to
purchase insurance for its directors, officers, and employees insuring them
against certain risks as to which Penton may be unable lawfully to indemnify
them. Penton intends to obtain this insurance coverage for its directors,
officers and employees as well as insurance coverage to reimburse Penton for
potential costs of its corporate indemnification of directors, officers and
employees. In connection with any liabilities resulting from filing the
Registration Statement of which this Prospectus forms a part, Penton has agreed
to indemnify Messrs. Donohue and Meehan to the same extent as the Board members.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On December 12, 1997, Penton Media Limited, a United Kingdom subsidiary of
the Registrant, acquired the outstanding stock of Independent Exhibitions
Limited and two affiliates under common control with it, all United Kingdom
corporations, from their stockholders for UK L16,505,637, UK L1,500,000
convertible loan note and UK L2,200,000 of contingent convertible loan notes.
The Registrant agreed that any or all of the principal of each of such notes
could be exchanged for Penton common stock (at its average market price during
the 30 trading days immediately following notice of exercise of the exchange
right) if at the time of exchange such common stock were listed and admitted to
trading on the New York Stock Exchange or on any other principal securities
exchange in the United States or were quoted in the over-the-counter market as
reported by NASDAQ. In agreeing to such exchange rights, the Registrant relied
upon the exemption from registration provided by Regulation S under the
Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- ------------------------------------------------------------
<C> <S>
2.1* Combination Agreement, dated May 21, 1998, by and among
Penton Media, Inc., D-M Acquisition Corp., Pittway
Corporation, Donohue Meehan Publishing Company, William C.
Donohue, and John J. Meehan.
3.1* Restated Certificate of Incorporation
3.2* Amended and Restated Bylaws
5.1** Opinion of Jones, Day, Reavis & Pogue regarding legality
8.1* Internal Revenue Service Revenue Ruling
10.1* Credit Facility, dated December 12, 1997, between Penton
Media, Ltd. and the Bank of America
10.2(a)* Employment Agreement, dated July 25, 1996, between the
Registrant and Thomas L. Kemp
10.2(b)*** Waiver and Release, dated July 21, 1998, between the
Registrant and Thomas L. Kemp
10.3* Employment Agreement, dated January 1, 1997, between the
Registrant and Daniel J. Ramella
10.4* Form of Employment Agreement between the Registrant and
William C. Donohue
10.5* Form of Employment Agreement between the Registrant and John
J. Meehan
10.6*** Penton Media, Inc. 1998 Equity and Performance Incentive
Plan
10.7*** Penton Media, Inc. 1998 Director Stock Option Plan
10.8*** Penton Media, Inc. Retirement Savings Plan
10.9*** Penton Media, Inc. Retirement Plan
10.10*** Penton Media, Inc. Supplemental Executive Retirement Plan
</TABLE>
II-2
<PAGE> 135
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- ------------------------------------------------------------
<C> <S>
21.1* Subsidiaries of Penton Media, Inc.
23.1*** Consent of PricewaterhouseCoopers LLP with respect to the
Consolidated Financial Statements of Penton Media, Inc.
23.2*** Consent of PricewaterhouseCoopers LLP with respect to the
Financial Statements of Donohue Meehan Publishing Company
23.3*** Consent of Horwath Clark Whitehill with respect to the
Financial Statements of Independent Exhibitions Limited,
Service Exhibitions Limited and Equity Information Exchange
Limited
23.4** Consent of Jones, Day, Reavis & Pogue (included in Exhibit
5.1)
24.1* Powers of Attorney
27.1*** Financial Data Schedule
99.1* Consent of William C. Donohue to be a Director of Penton
Media, Inc.
99.2* Consent of John J. Meehan to be a Director of Penton Media,
Inc.
</TABLE>
- ---------------
* Filed on June 15, 1998.
** To be filed by amendment.
*** Filed herewith.
ITEM 17. UNDERTAKINGS.
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.
II-3
<PAGE> 136
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Cleveland, Ohio, on the 23rd day of July, 1998.
PENTON MEDIA, INC.
By /s/ THOMAS L. KEMP
---------------------------------------
Thomas L. Kemp, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment to the Registration Statement has been signed on July 23, 1998 by
the following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
* Chief Executive Officer and Director
- -------------------------------------------- (Principal Executive Officer)
Thomas L. Kemp
/s/ JOSEPH NECASTRO Chief Financial Officer
- -------------------------------------------- (Principal Financial Officer)
Joseph NeCastro
* Vice President, Finance
- -------------------------------------------- (Controller or Principal Accounting Officer)
Charles T. Griesemer
* Director
- --------------------------------------------
Anthony Downs
* Director
- --------------------------------------------
William J. Friend
* Director
- --------------------------------------------
Joan W. Harris
* Director
- --------------------------------------------
King Harris
* Director
- --------------------------------------------
Daniel J. Ramella
* Director
- --------------------------------------------
Edward J. Schwartz
Director
- --------------------------------------------
Don E. Schultz
* Director
- --------------------------------------------
Richard B. Swank
</TABLE>
- ---------------
* Preston L. Vice, by signing his name hereto, does hereby execute this
Amendment to the Registration Statement on behalf of the directors and
officers of the Registrant indicated above by asterisks, pursuant to powers of
attorney duly executed by such directors and officers.
By: /s/ PRESTON L. VICE
---------------------------------------
Preston L. Vice
Attorney-in-Fact
II-4
<PAGE> 137
PENTON MEDIA, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
ADDITIONS
---------------------
BALANCE AT CHARGE TO DEDUCTIONS BALANCE
BEGINNING COSTS AND FROM AT END OF
OF PERIOD EXPENSES OTHER(A) RESERVE(B) PERIOD
---------- --------- -------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
1997
Allowance for doubtful accounts........ $2,069 $662 $344 $669 $2,406
1996
Allowance for doubtful accounts........ $1,997 $948 $876 $2,069
1995
Allowance for doubtful accounts........ $1,993 $870 $866 $1,997
</TABLE>
- ---------------
(A) Valuation allowance of company acquired during the year.
(B) Write-off of accounts considered uncollectible, net of recoveries.
S-1
<PAGE> 138
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- ------------------------------------------------------------
<C> <S>
2.1* Combination Agreement, dated May 21, 1998, by and among
Penton Media, Inc., DM Acquisition Corp., Pittway
Corporation, Donohue Meehan Publishing Company, William C.
Donohue, and John J. Meehan. The Registrant agrees to
furnish supplementally a copy of any omitted schedule to the
Commission upon request.
3.1* Restated Certificate of Incorporation
3.2* Amended and Restated Bylaws
5.1** Opinion of Jones, Day, Reavis & Pogue regarding legality
8.1* Internal Revenue Service Revenue Ruling
10.1* Credit Facility dated December 12, 1997, between Penton
Media Ltd. and Bank of America
10.2(a)* Employment Agreement, dated July 25, 1996, between the
Registrant and Thomas L. Kemp
10.2(b)*** Waiver and Release, dated July 21, 1998, between the
Registrant and Thomas L. Kemp
10.3* Employment Agreement, dated January 1, 1997, between the
Registrant and Daniel J. Ramella
10.4* Form of Employment Agreement between the Registrant and
William C. Donohue
10.5* Form of Employment Agreement between the Registrant and John
J. Meehan
10.6*** Penton Media, Inc. 1998 Equity and Performance Incentive
Plan
10.7*** Penton Media, Inc. 1998 Director Stock Option Plan
10.8*** Penton Media, Inc. Retirement Savings Plan
10.9*** Penton Media, Inc. Retirement Plan
10.10*** Penton Media, Inc. Supplemental Executive Retirement Plan
21.1* Subsidiaries of Penton Media, Inc.
23.1*** Consent of PricewaterhouseCoopers LLP with respect to the
Consolidated Financial Statements of Penton Media, Inc.
23.2*** Consent of PricewaterhouseCoopers LLP with respect to the
Consolidated Financial Statements of Donohue Meehan
Publishing Company
23.3*** Consent of Horwath Clark Whitehill with respect to the
Financial Statements of Independent Exhibitions Limited,
Service Exhibitions Limited and Equity Information Exchange
Limited
23.4** Consent of Jones, Day, Reavis & Pogue (included in Exhibit
5.1)
24.1* Power of Attorney
27.1*** Financial Data Schedule
99.1* Consent of William C. Donohue to be a Director of Penton
Media, Inc.
99.2* Consent of John J. Meehan to be a Director of Penton Media,
Inc.
</TABLE>
- ---------------
* Filed on June 15, 1998.
** To be filed by amendment.
*** Filed herewith.
<PAGE> 1
Exhibit 10.2(b)
WAIVER AND RELEASE
------------------
WAIVER AND RELEASE, dated as of July 21, 1998 (this
"Agreement"), between PENTON MEDIA, INC., a Delaware corporation ("Penton"), and
THOMAS L. KEMP (the "Executive").
WHEREAS, Pittway Corporation, which currently owns all of the
outstanding capital stock of Penton, has proposed to spinoff Penton to its
stockholders, thereby making Penton a public company (the "Spinoff");
WHEREAS, in contemplation of the Spinoff, Penton has adopted
the Penton Media, Inc. Equity and Performance Incentive Plan (the "Equity
Incentive Plan"), which, among other things, provides for the granting to Penton
employees of options to purchase common stock, par value $0.01 per share, (the
"Common Stock"), of Penton;
WHEREAS, Penton and the Executive are parties to an
Employment Agreement, dated as of July 25, 1996 (the "Employment Agreement"),
pursuant to Paragraph 3(c)(iv)(A) of which the Executive would be entitled to
receive, upon consummation of the Spinoff, a grant of options to purchase Common
Stock;
WHEREAS, Paragraph 19 of the Employment Agreement permits the
parties thereto to waive the provisions thereof with the prior written consent
of Penton and the Executive;
WHEREAS, Penton and the Executive have determined it is in
their mutual best interests for the Executive to waive Paragraph 3(c)(iv)(A) of
the Employment Agreement and release Penton of its obligations thereunder in
consideration for the grant of options to the Executive under the Equity
Incentive Plan on the date of the Spinoff; and
WHEREAS, Penton, through a resolution passed by the
Compensation Committee of Penton's Board of Directors, has granted the
Executive, conditioned upon consummation of the Spinoff, an option to purchase
60,000 shares of Common Stock under the Equity Incentive Plan (the "Option
Grant").
NOW THEREFORE, in consideration of the foregoing and for good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by Penton and the Executive, Penton and the Executive hereby agree
as follows:
Effective upon consummation of the Spinoff and issuance of
the Option Grant, the Executive hereby waives his right to receive options
pursuant to Paragraph 3(c)(iv)(A) of the Employment Agreement and releases
Penton of its obligations under such paragraph.
<PAGE> 2
IN WITNESS WHEREOF, Penton and the Executive have duly
executed this Agreement as of this 21st day of July, 1998.
/s/ THOMAS KEMP
-------------------------------------
Thomas Kemp
PENTON MEDIA, INC.
By: /s/ PRESTON L. VICE
-------------------------------------
Name: Preston L. Vice
Title: Senior Vice President
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<PAGE> 1
Exhibit 10.6
PENTON MEDIA, INC.
1998 EQUITY AND PERFORMANCE INCENTIVE PLAN
1. PURPOSE. The purpose of the Penton Media, Inc. 1998 Equity
and Performance Incentive Plan is to attract and retain officers and other
employees for Penton Media, Inc., a Delaware corporation, and its Subsidiaries
and to provide to such persons incentives and rewards for superior performance.
2. DEFINITIONS. As used in this Plan,
"Appreciation Right" means a right granted pursuant to Section
5 of this Plan, and shall include both Tandem Appreciation Rights and
Free-Standing Appreciation Rights.
"Base Price" means the price to be used as the basis for
determining the Spread upon the exercise of a Free-Standing Appreciation Right
and a Tandem Appreciation Right.
"Board" means the Board of Directors of the Company and, to
the extent of any delegation by the Board to a committee (or subcommittee
thereof) pursuant to Section 15 of this Plan, such committee (or subcommittee).
"Change of Control" shall have the meaning provided in Section
11 of this Plan.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Common Stock" means the Common Stock, par value $.01 per
share, of the Company or any security into which such Common Stock may be
changed by reason of any transaction or event of the type referred to in Section
10 of this Plan.
"Company" means Penton Media, Inc., a Delaware corporation.
"Covered Employee" means a Participant who is, or is
determined by the Board to be likely to become, a "covered employee" within the
meaning of Section 162(m) of the Code (or any successor provision).
"Date of Grant" means the date specified by the Board on which
a grant of Option Rights, Appreciation Rights, Performance Shares or Performance
Units or a grant or sale of Restricted Shares or Deferred Shares shall become
effective (which date shall not be earlier than the date on which the Board
takes action with respect thereto).
"Deferral Period" means the period of time during which
Deferred Shares are subject to deferral limitations under Section 7 of this
Plan.
<PAGE> 2
"Deferred Shares" means an award made pursuant to Section 7 of
this Plan of the right to receive shares of Common Stock at the end of a
specified Deferral Period.
"Director" means a member of the Board of Directors of the
Company.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder, as such law, rules and
regulations may be amended from time to time.
"Free-Standing Appreciation Right" means an Appreciation Right
granted pursuant to Section 5 of this Plan that is not granted in tandem with an
Option Right.
"Incentive Stock Options" means Option Rights that are
intended to qualify as "incentive stock options" under Section 422 of the Code
or any successor provision.
"Management Objectives" means the measurable performance
objective or objectives established pursuant to this Plan for Participants who
have received grants of Performance Shares or Performance Units or, when so
determined by the Board, Option Rights, Appreciation Rights, Restricted Shares
and dividend credits pursuant to this Plan. Management Objectives may be
described in terms of Company-wide objectives or objectives that are related to
the performance of the individual Participant or of the Subsidiary, division,
department, region or function within the Company or Subsidiary in which the
Participant is employed. The Management Objectives may be made relative to the
performance of other corporations. The Management Objectives applicable to any
award to a Covered Employee shall be based on specified levels of or growth in
one or more of the following criteria:
1. cash flow/net assets ratio;
2. debt/capital ratio;
3. return on total capital;
4. return on equity;
5. earnings per share growth;
6. revenue growth; and
7. total return to shareholders.
If the Board determines that a change in the business,
operations, corporate structure or capital structure of the Company, or the
manner in which it conducts its business, or other events or circumstances
render the Management Objectives unsuitable, the Board may in its discretion
modify such Management Objectives or the related minimum acceptable level of
achievement, in whole or in part, as the Board deems appropriate and equitable,
except in the case of a Covered Employee where such action would result in the
loss of the otherwise available exemption of the award under Section 162(m) of
the Code. In such case, the Board shall not make any modification of the
Management Objectives or minimum acceptable level of achievement.
"Market Value per Share" means, as of any particular date, the
fair market value of the shares of Common Stock as determined by the Board.
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<PAGE> 3
"Optionee" means the optionee named in an agreement evidencing
an outstanding Option Right.
"Option Price" means the purchase price payable on exercise of
an Option Right.
"Option Right" means the right to purchase shares of Common
Stock upon exercise of an option granted pursuant to Section 4 of this Plan.
"Participant" means a person who is selected by the Board to
receive benefits under this Plan and who is at the time an officer, or other
employee of the Company or any one or more of its Subsidiaries, or who has
agreed to commence serving in any of such capacities within 90 days of the Date
of Grant.
"Performance Period" means, in respect of a Performance Share
or Performance Unit, a period of time established pursuant to Section 8 of this
Plan within which the Management Objectives relating to such Performance Share
or Performance Unit are to be achieved.
"Performance Share" means a bookkeeping entry that records the
equivalent of one share of Common Stock awarded pursuant to Section 8 of this
Plan.
"Performance Unit" means a bookkeeping entry that records a
unit equivalent to $1.00 awarded pursuant to Section 8 of this Plan.
"Plan" means this Penton Media, Inc. 1998 Equity and
Performance Incentive Plan.
"Reload Option Rights" means additional Option Rights granted
automatically to an Optionee upon the exercise of Option Rights pursuant to
Section 4(g) of this Plan.
"Restricted Shares" means shares of Common Stock granted or
sold pursuant to Section 6 of this Plan as to which neither the substantial risk
of forfeiture nor the prohibition on transfers referred to in such Section 6 has
expired.
"Rule 16b-3" means Rule 16b-3 under the Exchange Act (or any
successor rule to the same effect) as in effect from time to time.
"Spread" means the excess of the Market Value per Share on the
date when an Appreciation Right is exercised, or on the date when Option Rights
are surrendered in payment of the Option Price of other Option Rights, over the
Option Price or Base Price provided for in the related Option Right or
Free-Standing Appreciation Right, respectively.
"Subsidiary" means a corporation, company or other entity (i)
more than 50 percent of whose outstanding shares or securities (representing the
right to vote for the election of directors or other managing authority) are, or
(ii) which does not have outstanding shares or securities (as may be the case in
a partnership, joint venture or unincorporated association), but more than 50
percent of whose ownership interest representing the right generally to make
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<PAGE> 4
decisions for such other entity is, now or hereafter, owned or controlled,
directly or indirectly, by the Company except that for purposes of determining
whether any person may be a Participant for purposes of any grant of Incentive
Stock Options, "Subsidiary" means any corporation in which at the time the
Company owns or controls, directly or indirectly, more than 50 percent of the
total combined voting power represented by all classes of stock issued by such
corporation.
"Tandem Appreciation Right" means an Appreciation Right
granted pursuant to Section 5 of this Plan that is granted in tandem with an
Option Right.
"Voting Power" means at any time, the total votes relating to
the then-outstanding securities entitled to vote generally in the election of
Directors.
3. SHARES AVAILABLE UNDER THIS PLAN. (a) Subject to adjustment as
provided in Section 3(b) and Section 10 of this Plan, the number of shares of
Common Stock that may be issued or transferred (i) upon the exercise of Option
Rights or Appreciation Rights, (ii) as Restricted Shares and released from
substantial risks of forfeiture thereof, (iii) as Deferred Shares, (iv) in
payment of Performance Shares or Performance Units that have been earned or (v)
in payment of dividend equivalents paid with respect to awards made under this
Plan shall not exceed in the aggregate 2,500,000 shares of Common Stock, plus
any shares described in Section 3(b). Such shares may be shares of original
issuance or treasury shares or a combination of the foregoing.
(b) The number of shares available in Section 3(a) above shall
be adjusted to account for shares relating to awards that expire, are forfeited
or are transferred, surrendered or relinquished upon the payment of any Option
Price by the transfer to the Company of shares of Common Stock or upon
satisfaction of any withholding amount. Upon payment in cash of the benefit
provided by any award granted under this Plan, any shares that were covered by
that award shall again be available for issue or transfer hereunder.
(c) Notwithstanding anything in this Section 3, or elsewhere
in this Plan, to the contrary and subject to adjustment as provided in Section
10 of this Plan, (i) the aggregate number of shares of Common Stock actually
issued or transferred by the Company upon the exercise of Incentive Stock
Options shall not exceed 2,500,000 shares of Common Stock; (ii) no Participant
shall be granted Option Rights and Appreciation Rights, in the aggregate, for
more than 200,000 shares of Common Stock during any period of 1 year; and (iii)
the number of shares issued as Restricted Shares shall not in the aggregate
exceed 200,000 shares of Common Stock.
(d) Notwithstanding any other provision of this Plan to the
contrary, in no event shall any Participant in any calendar year receive an
award of Performance Shares or Performance Units having an aggregate maximum
value as of their respective Dates of Grant in excess of $1,000,000.
4. OPTION RIGHTS. The Board may, from time to time and upon such terms
and conditions as it may determine, authorize the granting to Participants of
options to purchase
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<PAGE> 5
shares of Common Stock. Each such grant may utilize any or all of the
authorizations, and shall be subject to all of the requirements contained in the
following provisions:
(a) Each grant shall specify the number of shares of Common
Stock to which it pertains subject to the limitations set forth in Section 3 of
this plan.
(b) Each grant shall specify an Option Price per share. The
Option Price of an Incentive Stock Option may not be less than 100% of the
Market Value per Share on the Date of Grant as set by the Board on such date.
The Option Price of all other Option Rights may not be less than 85% of the
Market Value per Share on the Date of Grant as set by the Board on such date and
may not be less that the par value of a share of Common Stock.
(c) Each grant shall specify whether the Option Price shall be
payable (i) in cash or by check acceptable to the Company, (ii) by the actual or
constructive transfer to the Company of shares of Common Stock owned by the
Optionee for at least 6 months (or other consideration authorized pursuant to
Section 4(d)) having a value at the time of exercise equal to the total Option
Price, or (iii) by a combination of such methods of payment.
(d) The Board may determine, at or after the Date of Grant,
that payment of the Option Price of any Option Right (other than an Incentive
Stock Option) may also be made in whole or in part in the form of Restricted
Shares or other shares of Common Stock that are forfeitable or subject to
restrictions on transfer, Deferred Shares, Performance Shares (based, in each
case, on the Market Value per Share on the date of exercise), other Option
Rights (based on the Spread on the date of exercise) or Performance Units.
Unless otherwise determined by the Board at or after the Date of Grant, whenever
any Option Price is paid in whole or in part by means of any of the forms of
consideration specified in this Section 4(d), the shares of Common Stock
received upon the exercise of the Option Rights shall be subject to such risks
of forfeiture or restrictions on transfer as may correspond to any that apply to
the consideration surrendered, but only to the extent, determined with respect
to the consideration surrendered, of (i) the number of shares or Performance
Shares, (ii) the Spread of any unexercisable portion of Option Rights, or (iii)
the stated value of Performance Units.
(e) Any grant may provide for deferred payment of the Option
Price from the proceeds of sale through a broker on a date satisfactory to the
Company of some or all of the shares to which such exercise relates.
(f) Any grant may provide for payment of the Option Price, at
the election of the Optionee, in installments, with or without interest, upon
terms determined by the Board.
(g) Any grant may, at or after the Date of Grant, provide for
the automatic grant of Reload Option Rights to an Optionee upon the exercise of
Option Rights (including Reload Option Rights) using shares of Common Stock or
other consideration specified in Section 4(d). Reload Option Rights shall cover
up to the number of shares of Common Stock, Deferred Shares, Option Rights or
Performance Shares (or the number of shares of Common Stock having a value equal
to the value of any Performance Units) surrendered to the Company upon any such
exercise in payment of the Option Price or to meet any withholding obligations.
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<PAGE> 6
Reload Options may have an Option Price that is no less than that which
represents the same percentage of the Market Value per Share at the time of
exercise of the Option Rights that the share Option Price represented of the
Market Value per Share at the time the Option Rights being exercised were
granted and shall be on such other terms as may be specified by the Directors,
which may be the same as or different from those of the original Option Rights.
(h) Successive grants may be made to the same Participant
whether or not any Option Rights previously granted to such Participant remain
unexercised.
(i) Each grant shall specify the period or periods of
continuous service by the Optionee with the Company or any Subsidiary that is
necessary before the Option Rights or installments thereof will become
exercisable and may provide for the earlier exercise of such Option Rights in
the event of a Change of Control.
(j) Any grant of Option Rights may specify Management
Objectives that must be achieved as a condition to the exercise of such rights.
(k) Option Rights granted under this Plan may be (i) options,
including, without limitation, Incentive Stock Options, that are intended to
qualify under particular provisions of the Code, (ii) options that are not
intended so to qualify, or (iii) combinations of the foregoing.
(l) The Board may, at or after the Date of Grant of any Option
Rights (other than Incentive Stock Options), provide for the payment of dividend
equivalents to the Optionee on either a current or deferred or contingent basis
or may provide that such equivalents shall be credited against the Option Price.
(m) The exercise of an Option Right shall result in the
cancellation on a share-for-share basis of any Tandem Appreciation Right
authorized under Section 5 of this Plan.
(n) No Option Right shall be exercisable more than 10 years
from the Date of Grant.
(o) Each grant of Option Rights shall be evidenced by an
agreement executed on behalf of the Company by an officer and delivered to the
Optionee and containing such terms and provisions, consistent with this Plan, as
the Board may approve.
5. APPRECIATION RIGHTS. (a) The Board may authorize the granting (i) to
any Optionee, of Tandem Appreciation Rights in respect of Option Rights granted
hereunder, and (ii) to any Participant, of Free-Standing Appreciation Rights. A
Tandem Appreciation Right shall be a right of the Optionee, exercisable by
surrender of the related Option Right, to receive from the Company an amount
determined by the Board, which shall be expressed as a percentage of the Spread
(not exceeding 100 percent) at the time of exercise. Tandem Appreciation Rights
may be granted at any time prior to the exercise or termination of the related
Option Rights; provided, however, that a Tandem Appreciation Right awarded in
relation to an Incentive Stock Option
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<PAGE> 7
must be granted concurrently with such Incentive Stock Option. A Free-Standing
Appreciation Right shall be a right of the Participant to receive from the
Company an amount determined by the Board, which shall be expressed as a
percentage of the Spread (not exceeding 100 percent) at the time of exercise.
(b) Each grant of Appreciation Rights may utilize any or all
of the authorizations, and shall be subject to all of the requirements,
contained in the following provisions:
(i) Any grant may specify that the amount payable on
exercise of an Appreciation Right may be paid by the Company in cash,
in shares of Common Stock or in any combination thereof and may either
grant to the Participant or retain in the Board the right to elect
among those alternatives.
(ii) Any grant may specify that the amount payable on
exercise of an Appreciation Right may not exceed a maximum specified by
the Board at the Date of Grant.
(iii) Any grant may specify waiting periods before
exercise and permissible exercise dates or periods.
(iv) Any grant may specify that such Appreciation
Right may be exercised only in the event of, or earlier in the event
of, a Change of Control.
(v) Any grant may provide for the payment to the
Participant of dividend equivalents thereon in cash or shares of Common
Stock on a current, deferred or contingent basis.
(vi) Any grant of Appreciation Rights may specify
Management Objectives that must be achieved as a condition of the
exercise of such Rights.
(vii) Each grant of Appreciation Rights shall be
evidenced by an agreement executed on behalf of the Company by an
officer and delivered to and accepted by the Participant, which
agreement shall describe such Appreciation Rights, identify the related
Option Rights (if applicable), state that such Appreciation Rights are
subject to all the terms and conditions of this Plan, and contain such
other terms and provisions, consistent with this Plan, as the Board may
approve.
(c) Any grant of Tandem Appreciation Rights shall provide that
such Rights may be exercised only at a time when the related Option Right is
also exercisable and at a time when the Spread is positive, and by surrender of
the related Option Right for cancellation.
(d) Regarding Free-standing Appreciation Rights only:
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<PAGE> 8
(i) Each grant shall specify in respect of each
Free-standing Appreciation Right a Base Price, which shall be
equal to or greater or less than the Market Value per Share on
the Date of Grant;
(ii) Successive grants may be made to the same
Participant regardless of whether any Free-standing
Appreciation Rights previously granted to the Participant
remain unexercised; and
(iii) No Free-standing Appreciation Right granted
under this Plan may be exercised more than 10 years from the
Date of Grant.
6. RESTRICTED SHARES. The Board may also authorize the grant or sale of
Restricted Shares to Participants. Each such grant or sale may utilize any or
all of the authorizations, and shall be subject to all of the requirements,
contained in the following provisions:
(a) Each such grant or sale shall constitute an immediate
transfer of the ownership of shares of Common Stock to the Participant in
consideration of the performance of services, entitling such Participant to
voting, dividend and other ownership rights, but subject to the substantial risk
of forfeiture and restrictions on transfer hereinafter referred to.
(b) Each such grant or sale may be made without additional
consideration or in consideration of a payment by such Participant that is less
than Market Value per Share at the Date of Grant.
(c) Each such grant or sale shall provide that the Restricted
Shares covered by such grant or sale shall be subject to a "substantial risk of
forfeiture" within the meaning of Section 83 of the Code for a period to be
determined by the Board at the Date of Grant and may provide for the lapse of
such substantial risk of forfeiture in the event of a Change in Control.
(d) Each such grant or sale shall provide that during the
period for which such substantial risk of forfeiture is to continue, the
transferability of the Restricted Shares shall be prohibited or restricted in
the manner and to the extent prescribed by the Board at the Date of Grant (which
restrictions may include, without limitation, rights of repurchase or first
refusal in the Company or provisions subjecting the Restricted Shares to a
continuing substantial risk of forfeiture in the hands of any transferee).
(e) Any grant of Restricted Shares may specify Management
Objectives that, if achieved, will result in termination or early termination of
the restrictions applicable to such shares. Each grant may specify in respect of
such Management Objectives a minimum acceptable level of achievement and may set
forth a formula for determining the number of Restricted Shares on which
restrictions will terminate if performance is at or above the minimum level, but
falls short of full achievement of the specified Management Objectives.
(f) Any such grant or sale of Restricted Shares may require
that any or all dividends or other distributions paid thereon during the period
of such restrictions be
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<PAGE> 9
automatically deferred and reinvested in additional Restricted Shares, which may
be subject to the same restrictions as the underlying award.
(g) Each grant or sale of Restricted Shares shall be evidenced
by an agreement executed on behalf of the Company by any officer and delivered
to and accepted by the Participant and shall contain such terms and provisions,
consistent with this Plan, as the Board may approve. Unless otherwise directed
by the Board, all certificates representing Restricted Shares shall be held in
custody by the Company until all restrictions thereon shall have lapsed,
together with a stock power or powers executed by the Participant in whose name
such certificates are registered, endorsed in blank and covering such Shares.
7. DEFERRED SHARES. The Board may also authorize the granting or sale
of Deferred Shares to Participants. Each such grant or sale may utilize any or
all of the authorizations, and shall be subject to all of the requirements,
contained in the following provisions:
(a) Each such grant or sale shall constitute the agreement by
the Company to deliver shares of Common Stock to the Participant in the future
in consideration of the performance of services, but subject to the fulfillment
of such conditions during the Deferral Period as the Board may specify.
(b) Each such grant or sale may be made without additional
consideration or in consideration of a payment by such Participant that is less
than the Market Value per Share at the Date of Grant.
(c) Each such grant or sale shall be subject to a Deferral
Period, as determined by the Board at the Date of Grant, and may provide for the
lapse or other modification of such Deferral Period in the event of a Change in
Control.
(d) During the Deferral Period, the Participant shall have no
right to transfer any rights under his or her award and shall have no rights of
ownership in the Deferred Shares and shall have no right to vote them, but the
Board may, at or after the Date of Grant, authorize the payment of dividend
equivalents on such Shares on either a current or deferred or contingent basis,
either in cash or in additional shares of Common Stock.
(e) Each grant or sale of Deferred Shares shall be evidenced
by an agreement executed on behalf of the Company by any officer and delivered
to and accepted by the Participant and shall contain such terms and provisions,
consistent with this Plan, as the Board may approve.
8. PERFORMANCE SHARES AND PERFORMANCE UNITS. The Board may also
authorize the granting of Performance Shares and Performance Units that will
become payable to a Participant upon achievement of specified Management
Objectives. Each such grant may utilize any or all of the authorizations, and
shall be subject to all of the requirements, contained in the following
provisions:
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<PAGE> 10
(a) Each grant shall specify the number of Performance Shares
or Performance Units to which it pertains, which number may be subject to
adjustment to reflect changes in compensation or other factors; provided,
however, that no such adjustment shall be made in the case of a Covered Employee
where such action would result in the loss of the otherwise available exemption
of the award under Section 162(m) of the Code.
(b) The Performance Period with respect to each Performance
Share or Performance Unit shall be such period of time (not less than 3 years,
except in the event of a Change of Control, if the Board shall so determine;
provided, however, that no such acceleration determination shall be made in the
case of a Covered Employee where such action would result in the loss of the
otherwise available exemption of the award under Section 162(m) of the Code)
commencing with the Date of Grant (as shall be determined by the Board at the
time of grant).
(c) Any grant of Performance Shares or Performance Units shall
specify Management Objectives which, if achieved, will result in payment or
early payment of the award, and each grant may specify in respect of such
specified Management Objectives a minimum acceptable level of achievement and
shall set forth a formula for determining the number of Performance Shares or
Performance Units that will be earned if performance is at or above the minimum
level, but falls short of full achievement of the specified Management
Objectives. The grant of Performance Shares or Performance Units shall specify
that, before the Performance Shares or Performance Units shall be earned and
paid, the Board must certify that the Management Objectives have been satisfied.
(d) Each grant shall specify the time and manner of payment of
Performance Shares or Performance Units that have been earned. Any grant may
specify that the amount payable with respect thereto may be paid by the Company
in cash, in shares of Common Stock or in any combination thereof and may either
grant to the Participant or retain in the Board the right to elect among those
alternatives.
(e) Any grant of Performance Shares may specify that the
amount payable with respect thereto may not exceed a maximum specified by the
Board at the Date of Grant. Any grant of Performance Units may specify that the
amount payable or the number of shares of Common Stock issued with respect
thereto may not exceed maximums specified by the Board at the Date of Grant.
(f) The Board may, at or after the Date of Grant of
Performance Shares, provide for the payment of dividend equivalents to the
holder thereof on either a current or deferred or contingent basis, either in
cash or in additional shares of Common Stock.
(g) Each grant of Performance Shares or Performance Units
shall be evidenced by an agreement executed on behalf of the Company by any
officer and delivered to and accepted by the Participant, which agreement shall
state that such Performance Shares or Performance Units are subject to all the
terms and conditions of this Plan, and contain such other terms and provisions,
consistent with this Plan, as the Board may approve.
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9. TRANSFERABILITY. (a) Except as otherwise determined by the Board, no
Option Right, Appreciation Right or other derivative security granted under this
Plan shall be transferable by a Participant other than by will or the laws of
descent and distribution. Except as otherwise determined by the Board, Option
Rights and Appreciation Rights shall be exercisable during the Optionee's
lifetime only by him or her or by his or her guardian or legal representative.
(b) The Board may specify at the Date of Grant that part or
all of the shares of Common Stock that are (i) to be issued or transferred by
the Company upon the exercise of Option Rights or Appreciation Rights, upon the
termination of the Deferral Period applicable to Deferred Shares or upon payment
under any grant of Performance Shares or Performance Units or (ii) no longer
subject to the substantial risk of forfeiture and restrictions on transfer
referred to in Section 6 of this Plan, shall be subject to further restrictions
on transfer.
10. ADJUSTMENTS. The Board may make or provide for such adjustments in
the numbers of shares of Common Stock covered by outstanding Option Rights,
Appreciation Rights, Deferred Shares, and Performance Shares granted hereunder,
in the Option Price and Base Price provided in outstanding Appreciation Rights,
and in the kind of shares covered thereby, as the Board, in its sole discretion,
exercised in good faith, may determine is equitably required to prevent dilution
or enlargement of the rights of Participants or Optionees that otherwise would
result from (a) any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Company, or (b)
any merger, consolidation, spin-off, split- off, spin-out, split-up,
reorganization, partial or complete liquidation or other distribution of assets,
issuance of rights or warrants to purchase securities, or (c) any other
corporate transaction or event having an effect similar to any of the foregoing.
Moreover, in the event of any such transaction or event, the Board, in its
discretion, may provide in substitution for any or all outstanding awards under
this Plan such alternative consideration as it, in good faith, may determine to
be equitable in the circumstances and may require in connection therewith the
surrender of all awards so replaced. The Board may also make or provide for such
adjustments in the numbers of shares specified in Section 3 of this Plan as the
Board in its sole discretion, exercised in good faith, may determine is
appropriate to reflect any transaction or event described in this Section 10;
provided, however, that any such adjustment to the number specified in Section
3(c)(i) shall be made only if and to the extent that such adjustment would not
cause any Option intended to qualify as an Incentive Stock Option to fail so to
qualify.
11. CHANGE OF CONTROL. For purposes of this Plan, a "Change of Control"
shall mean if at any time any of the following events shall have occurred:
(a) The Company is merged or consolidated or reorganized into
or with another corporation or other legal person, and as a result of such
merger, consolidation or reorganization less than a majority of the combined
voting power of the then-outstanding securities of such corporation or person
immediately after such transaction are held in the aggregate by the holders of
securities entitled to vote generally in the election of Directors immediately
prior to such transaction;
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(b) The Company sells or otherwise transfers all or
substantially all of its assets to any other corporation or other legal person,
and less than a majority of the combined voting power of the then-outstanding
securities of such corporation or person immediately after such sale or transfer
is held in the aggregate by the holders of shares of Common Stock immediately
prior to such sale or transfer;
(c) There is a report filed on Schedule 13D or Schedule 14D-1
(or any successor schedule, form or report), each as promulgated pursuant to the
Exchange Act, disclosing that any person (as the term "person" is used in
Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the
beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or
any successor rule or regulation promulgated under the Exchange Act) of
securities representing 20% or more of the Voting Power;
(d) The Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange Act disclosing in
response to Form 8-K or Schedule 14A (or any successor schedule, form or report
or item therein) that a change of control of the Company has or may have
occurred or will or may occur in the future pursuant to any then-existing
contract or transaction; or
(e) If during any period of two consecutive years, individuals
who at the beginning of any such period constitute the Directors cease for any
reason to constitute at least a majority thereof, unless the election, or the
nomination for election by the Company's shareholders, of each Director first
elected during such period was approved by a vote of at least two-thirds of the
Directors then still in office who were Directors at the beginning of any such
period.
Notwithstanding the foregoing provisions of Section 11(c) and
(d) above, unless otherwise determined in a specific case by majority vote of
the Board, a "Change of Control" shall not be deemed to have occurred for
purposes of this Plan (i) solely because (A) the Company; (B) a Subsidiary; (C)
the Harris Group; or (D) any Company-sponsored employee stock ownership plan or
any other employee benefit plan of the Company or any Subsidiary either files or
becomes obligated to file a report or proxy statement under or in response to
Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor
schedule, form or report or item therein) under the Exchange Act, disclosing
beneficial ownership by it of shares, whether in excess of 20% of the Voting
Power or otherwise, or because the Company reports that a change of control of
the Company has or may have occurred or will or may occur in the future by
reason of such beneficial ownership or (ii) solely because of a change of
control of any Subsidiary. For purposes of the preceding sentence, the "Harris
Group" shall mean Messrs. Irving B. Harris, Neison Harris, King Harris, William
W. Harris and Sidney Barrows, and their respective spouses, descendants and
spouses of descendants, trustees of trusts established for the benefit of such
persons (acting in their capacity as trustees of such trusts), and executors of
estates of such persons (acting in their capacity as executors of such estates),
and each person of which any of the foregoing owns (i) more than fifty percent
(50%) of the voting stock or other voting interests and (ii) stock or other
interests representing more than fifty percent (50%) of the total value of the
stock or other interests of such person. For purposes of the preceding sentence,
the term "spouses" includes widows and widowers until first remarried.
12
<PAGE> 13
12. FRACTIONAL SHARES. The Company shall not be required to issue any
fractional shares of Common Stock pursuant to this Plan. The Board may provide
for the elimination of fractions or for the settlement of fractions in cash.
13. WITHHOLDING TAXES. To the extent that the Company is required to
withhold federal, state, local or foreign taxes in connection with any payment
made or benefit realized by a Participant or other person under this Plan, and
the amounts available to the Company for such withholding are insufficient, it
shall be a condition to the receipt of such payment or the realization of such
benefit that the Participant or such other person make arrangements satisfactory
to the Company for payment of the balance of such taxes required to be withheld,
which arrangements (in the discretion of the Board) may include relinquishment
of a portion of such benefit. The Company and a Participant or such other person
may also make similar arrangements with respect to the payment of any taxes with
respect to which withholding is not required.
14. FOREIGN EMPLOYEES. In order to facilitate the making of any grant
or combination of grants under this Plan, the Board may provide for such special
terms for awards to Participants who are foreign nationals or who are employed
by the Company or any Subsidiary outside of the United States of America as the
Board may consider necessary or appropriate to accommodate differences in local
law, tax policy or custom. Moreover, the Board may approve such supplements to
or amendments, restatements or alternative versions of this Plan as it may
consider necessary or appropriate for such purposes, without thereby affecting
the terms of this Plan as in effect for any other purpose, and the Secretary or
other appropriate officer of the Company may certify any such document as having
been approved and adopted in the same manner as this Plan. No such special
terms, supplements, amendments or restatements, however, shall include any
provisions that are inconsistent with the terms of this Plan as then in effect
unless this Plan could have been amended to eliminate such inconsistency without
further approval by the shareholders of the Company.
15. ADMINISTRATION OF THIS PLAN. (a) This Plan shall be administered by
the Board, which may from time to time delegate all or any part of its authority
under this Plan to a committee of the Board (or subcommittee thereof) consisting
of not less than two Directors appointed by the Board. The members of the
committee shall be "Non-Employee Directors" within the meaning of Rule 16b-3 and
"outside directors" within the meaning of Section 162(m) of the Code. A majority
of the committee (or subcommittee) shall constitute a quorum, and the action of
the members of the committee (or subcommittee) present at any meeting at which a
quorum is present, or acts unanimously approved in writing, shall be the acts of
the committee (or subcommittee). To the extent of any such delegation,
references in this Plan to the Board shall be deemed to be references to any
such committee or subcommittee.
(b) The interpretation and construction by the Board of any
provision of this Plan or of any agreement, notification or document evidencing
the grant of Option Rights,
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<PAGE> 14
Appreciation Rights, Restricted Shares, Deferred Shares, Performance Shares or
Performance Units and any determination by the Board pursuant to any provision
of this Plan or of any such agreement, notification or document shall be final
and conclusive. No member of the Board shall be liable for any such action or
determination made in good faith.
16. AMENDMENTS, ETC. (a) The Board may at any time and from time to
time amend this Plan in whole or in part; provided, however, that any amendment
which must be approved by the shareholders of the Company in order to comply
with applicable law or the rules of the New York Stock Exchange or, if the
shares of Common Stock are not traded on the New York Stock Exchange, the
principal national securities exchange upon which the shares of Common Stock are
traded or quoted, shall not be effective unless and until such approval has been
obtained. Presentation of this Plan or any amendment hereof for shareholder
approval shall not be construed to limit the Company's authority to offer
similar or dissimilar benefits under other plans without shareholder approval.
(b) The Board may, with the concurrence of the affected
Participant, cancel any agreement evidencing Option Rights or any other award
granted under this Plan. In the event of such cancellation, the Board may
authorize the granting of new Option Rights or other such awards under this Plan
(which may or may not cover the same number of shares of Common Stock that had
been the subject of the prior award) in such manner, at such Option Price and
subject to such other terms, conditions and discretions as would have been
applicable under this Plan had the canceled Option Rights or other awards not
been granted.
(c) The Board also may permit Participants to elect to defer
the issuance of shares of Common Stock or the settlement of awards in cash under
this Plan pursuant to such rules, procedures or programs as it may establish for
purposes of this Plan. The Board also may provide that deferred issuances and
settlements include the payment or crediting of dividend equivalents or interest
on the deferral amounts.
(d) The Board may condition the grant of any award or
combination of awards authorized under this Plan on the surrender or deferral by
the Participant of his or her right to receive a cash bonus or other
compensation otherwise payable by the Company or a Subsidiary to the
Participant.
(e) In case of termination of employment by reason of death,
disability or normal or early retirement, or in the case of hardship or other
special circumstances, of a Participant who holds an Option Right or
Appreciation Right not immediately exercisable in full, or any Restricted Shares
as to which the substantial risk of forfeiture or the prohibition or restriction
on transfer has not lapsed, or any Deferred Shares as to which the Deferral
Period has not been completed, or any Performance Shares or Performance Units
which have not been fully earned, or who holds shares of Common Stock subject to
any transfer restriction imposed pursuant to Section 9(b) of this Plan, the
Board may, in its sole discretion, accelerate the time at which such Option
Right or Appreciation Right may be exercised or the time at which such
substantial risk of forfeiture or prohibition or restriction on transfer will
lapse or the time when such Deferral Period will end or the time at which such
Performance Shares or Performance Units
14
<PAGE> 15
will be deemed to have been fully earned or the time when such transfer
restriction will terminate or may waive any other limitation or requirement
under any such award.
(f) This Plan shall not confer upon any Participant any right
with respect to continuance of employment or other service with the Company or
any Subsidiary, nor shall it interfere in any way with any right the Company or
any Subsidiary would otherwise have to terminate such Participant's employment
or other service at any time.
(g) To the extent that any provision of this Plan would
prevent any Option Right that was intended to qualify as an Incentive Stock
Option from qualifying as such, that provision shall be null and void with
respect to such Option Right. Such provision, however, shall remain in effect
for other Option Rights and there shall be no further effect on any provision of
this Plan.
17. TERMINATION. No grant shall be made under this Plan more than 10
years after the date on which this Plan is first approved by the shareholders of
the Company, but all grants made on or prior to such date shall continue in
effect thereafter subject to the terms thereof and of this Plan.
15
<PAGE> 16
PENTON MEDIA, INC.
FORM OF NONQUALIFIED STOCK OPTION AGREEMENT
This AGREEMENT (this "Agreement") is made as of ____________ (the "Date
of Grant") by and between Penton Media, Inc. a Delaware corporation (the
"Company"), and __________________ (the "Optionee").
1. GRANT OF STOCK OPTION. Subject to and upon the terms, conditions, and
restrictions set forth in this Agreement and in the Company's 1998
Equity and Performance Incentive Plan (the "Plan"), the Company hereby
grants to the Optionee as of the Date of Grant a stock option (the
"Option") to purchase _____________ shares of Common Stock (the
"Optioned Shares"). The Option may be exercised from time to time in
accordance with the terms of this Agreement. The price at which the
Optioned Shares may be purchased pursuant to the Option shall be
_____________ per share subject to adjustment as hereinafter provided
(the "Option Price"). The Option is intended to be a nonqualified stock
option and shall not be treated as an "incentive stock option" within
the meaning of that term under Section 422 of the Code, or any
successor provision thereto.
2. TERM OF OPTION. The term of the Option shall commence on the Date of
Grant and, unless earlier terminated in accordance with Section 6
hereof, shall expire ten (10) years from the Date of Grant.
3. RIGHT TO EXERCISE. Subject to the expiration or earlier termination of
the Option, on each anniversary of the Date of Grant the number of
Optioned Shares equal to [__________ percent (__%)] multiplied by the
initial number of Optioned Shares specified in this Agreement shall
become exercisable on a cumulative basis until the Option is fully
exercisable. To the extent the Option is exercisable, it may be
exercised in whole or in part[, but may not be exercised for less than
__________ (_____) Optioned Shares unless such lesser number of
Optioned Shares represents all of the remaining balance then
exercisable]. In no event shall the Optionee be entitled to acquire a
fraction of one Optioned Share pursuant to the Option. The Optionee
shall be entitled to the privileges of ownership with respect to
Optioned Shares purchased and delivered to the Optionee upon the
exercise of all or part of the Option.
4. OPTION NONTRANSFERABLE. The Option granted hereby shall be neither
transferable nor assignable by the Optionee other than by will or by
the laws of descent and distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee, or in the event of his
or her legal incapacity, by his or her guardian or legal representative
acting on behalf of the Optionee in a fiduciary capacity under state
law and court supervision.
5. NOTICE OF EXERCISE; PAYMENT. To the extent then exercisable, the Option
may be exercised by written notice to the Company stating the number of
Optioned Shares for which the Option is being exercised and the
intended manner of payment. Payment equal to the aggregate Option Price
of the Optioned Shares for which the Option is being
<PAGE> 17
exercised shall be tendered in full with the notice of exercise to the
Company in cash in the form of currency or check or other cash
equivalent acceptable to the Company. The Optionee may also tender the
Option Price by (a) the actual or constructive transfer to the Company
of nonforfeitable, nonrestricted shares of Common Stock that have been
owned by the Optionee for (i) more than one year prior to the date of
exercise and for more than two years from the date on which the option
was granted, if they were originally acquired by the Optionee pursuant
to the exercise of an incentive stock option, within the meaning of
Section 422 of the Code or (ii) more than six months prior to the date
of exercise, if they were originally acquired by the Optionee other
than pursuant to the exercise of an incentive stock option, or (b) by
any combination of the foregoing methods of payment, including a
partial tender in cash and a partial tender in nonforfeitable,
nonrestricted shares of Common Stock. Nonforfeitable, nonrestricted
shares of Common Stock that are transferred by the Optionee in payment
of all or any part of the Option Price shall be valued on the basis of
their Market Value per Share. The requirement of payment in cash shall
be deemed satisfied if the Optionee makes arrangements that are
satisfactory to the Company with a broker that is a member of the
National Association of Securities Dealers, Inc. to sell on the
exercise date a sufficient number of Optioned Shares that are being
purchased pursuant to the exercise, so that the net proceeds of the
sale transaction will at least equal the amount of the aggregate Option
Price plus payment of any applicable withholding taxes, and pursuant to
which the broker undertakes to deliver to the Company the amount of the
aggregate Option Price plus payment of any applicable withholding taxes
on a date satisfactory to the Company, but not later than the date on
which the sale transaction will settle in the ordinary course of
business. As a further condition precedent to the exercise of the
Option, the Optionee shall comply with all regulations and requirements
of any regulatory authority having control of, or supervision over, the
issuance of shares of Common Stock and in connection therewith shall
execute any documents that the Board shall in its sole discretion deem
necessary or advisable. The date of the Optionee's written notice shall
be the exercise date.
6. TERMINATION OF AGREEMENT. This Agreement and the Option granted hereby
shall terminate automatically and without further notice on the
earliest of the following dates:
(a) One (1) year after the Optionee's death or permanent and
total disability, if the Optionee dies or becomes permanently and totally
disabled while in the employ of the Company or any Subsidiary or during the
30-day period specified in Section 6(c);
(b) One (1) year after the Optionee's retirement under a
retirement plan of the Company or any Subsidiary at or after the earliest
voluntary retirement age provided for in such retirement plan or retirement at
any earlier age with the consent of the Board;
(c) Except as provided on a case-by-case basis, thirty (30)
calendar days after the Optionee ceases to be an employee of the Company and the
Subsidiaries for any reason other than as described in Section 6(a) or 6(b)
hereof; or
(d) Ten (10) years from the Date of Grant.
2
<PAGE> 18
In the event that the Optionee's employment is terminated for cause, this
Agreement shall terminate at the time of such termination notwithstanding any
other provision of this Agreement. For purposes of this provision, "cause" shall
mean the Optionee shall have committed prior to termination of employment any of
the following acts:
(i) an intentional act of fraud, embezzlement, theft, or
any other material violation of law in connection
with the Optionee's duties or in the course of the
Optionee's employment;
(ii) intentional wrongful damage to material assets of the
Company or any Subsidiary;
(iii) intentional wrongful disclosure of material
confidential information of the Company or any
Subsidiary;
(iv) intentional wrongful engagement in any competitive
activity that would constitute a material breach of
the duty of loyalty to the Company or any Subsidiary;
or
(v) intentional breach of any stated material employment
policy of the Company or any Subsidiary.
This Agreement shall not be exercisable for any number of Optioned Shares in
excess of the number of Optioned Shares for which this Agreement is then
exercisable, pursuant to Sections 3 and 7 hereof, on the date of termination of
employment. For the purposes of this Agreement, the continuous employment of the
Optionee with the Company shall not be deemed to have been interrupted, and the
Optionee shall not be deemed to have ceased to be an employee of the Company, by
reason of the transfer of his or her employment among the Company and the
Subsidiaries or a leave of absence approved by the Board.
7. ACCELERATION OF OPTION. The Option granted hereby shall become
immediately exercisable in full in the event of (i) a Change of
Control, (ii) the Optionee's permanent and total disability if the
Optionee becomes permanently and totally disabled while an employee of
the Company or any Subsidiary, or (iii) the death of the Optionee if
such death occurs while the Optionee is employed by the Company or any
Subsidiary.
8. NO EMPLOYMENT CONTRACT. Nothing contained in this Agreement shall
confer upon the Optionee any right with respect to continuance of
employment by the Company or any Subsidiary, nor limit or affect in any
manner the right of the Company or any Subsidiary to terminate the
employment or adjust the compensation of the Optionee.
9. TAXES AND WITHHOLDING. To the extent that the Company shall be required
to withhold any federal, state, local or foreign taxes in connection
with the exercise of the Option, and the amounts available to the
Company for such withholding are insufficient, it shall be a condition
to the exercise of the Option that the Optionee shall pay such taxes or
make provisions that are satisfactory to the Company for the payment
thereof. The
3
<PAGE> 19
Optionee may elect to satisfy all or any part of any such withholding
obligation by (a) surrendering to the Company a portion of the Optioned
Shares that are issued or transferred to the Optionee upon the exercise
of the Option, and the Optioned Shares so surrendered by the Optionee
shall be credited against any such withholding obligation at the Market
Value per Share of such shares on the date of such surrender or (b)
utilizing the broker assistance arrangement provided in Section 5.
10. COMPLIANCE WITH LAW. The Company shall make reasonable efforts to
comply with all applicable federal and state securities laws; provided,
however, notwithstanding any other provision of this Agreement, the
Option shall not be exercisable if the exercise thereof would result in
a violation of any such law.
11. ADJUSTMENTS. The Board may make or provide for such adjustments in the
number of Optioned Shares covered by the Option, in the Option Price
applicable to the Option, and in the kind of shares covered thereby, as
the Board, in its sole discretion, exercised in good faith, may
determine is equitably required to prevent dilution or enlargement of
the Optionee's rights that otherwise would result from (a) any stock
dividend, stock split, combination of shares, recapitalization, or
other change in the capital structure of the Company, (b) any merger,
consolidation, spin-off, split-off, spin-out, split-up,
reorganization, partial or complete liquidation, or other distribution
of assets or issuance of rights or warrants to purchase securities, or
(c) any other corporate transaction or event having an effect similar
to any of the foregoing. In the event of any such transaction or event,
the Board, in its discretion, may provide in substitution for the
Option such alternative consideration as it may determine to be
equitable in the circumstances and may require in connection therewith
the surrender of the Option.
12. AVAILABILITY OF COMMON STOCK. The Company shall at all times until the
expiration of the Option reserve and keep available, either in its
treasury or out of its authorized but unissued shares of Common Stock,
the full number of Optioned Shares deliverable upon the exercise of the
Option.
13. AMENDMENTS. Any amendment to the Plan shall be deemed to be an
amendment to this Agreement to the extent that the amendment is
applicable hereto; provided, however, that no amendment shall adversely
affect the rights of the Optionee under this Agreement without the
Optionee's consent.
14. SEVERABILITY. In the event that one or more of the provisions of this
Agreement shall be invalidated for any reason by a court of competent
jurisdiction, any provision so invalidated shall be deemed to be
separable from the other provisions hereof, and the remaining
provisions hereof shall continue to be valid and fully enforceable.
15. RELATION TO PLAN. This Agreement is subject to the terms and conditions
of the Plan. In the event of any inconsistency between the provisions
of this Agreement and the Plan, the Plan shall govern. Capitalized
terms used herein without definition shall have the meanings assigned
to them in the Plan. The Board acting pursuant to the Plan, as
constituted from time to time, shall, except as expressly provided
otherwise herein, have
4
<PAGE> 20
the right to determine any questions which arise in connection with the
Option or its exercise.
16. SUCCESSORS AND ASSIGNS. Without limiting Section 4 hereof, the
provisions of this Agreement shall inure to the benefit of, and be
binding upon, the successors, administrators, heirs, legal
representatives and assigns of the Optionee, and the successors and
assigns of the Company.
17. GOVERNING LAW. The interpretation, performance, and enforcement of this
Agreement shall be governed by the laws of the State of Ohio, without
giving effect to the principles of conflict of laws thereof.
18. NOTICES. Any notice to the Company provided for herein shall be in
writing to the Company and any notice to the Optionee shall be
addressed to the Optionee at his or her address on file with the
Company. Except as otherwise provided herein, any written notice shall
be deemed to be duly given if and when delivered personally or
deposited in the United States mail, first class certified or
registered mail, postage and fees prepaid, return receipt requested,
and addressed as aforesaid. Any party may change the address to which
notices are to be given hereunder by written notice to the other party
as herein specified (provided that for this purpose any mailed notice
shall be deemed given on the third business day following deposit of
the same in the United States mail).
5
<PAGE> 21
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behalf by its duly authorized officer and Optionee has also
executed this Agreement in duplicate, as of the day and year first above
written.
PENTON MEDIA, INC.
By:
-----------------------------
The undersigned Optionee hereby acknowledges receipt of an executed original of
this Stock Option Agreement.
----------------------------
Optionee
6
<PAGE> 1
Exhibit 10.7
PENTON MEDIA, INC.
1998 DIRECTOR STOCK OPTION PLAN
1. PURPOSE. The purpose of the Penton Media, Inc. 1998 Director Stock
Option Plan (the "Plan") is to promote the long-term financial interests of
Penton Media, Inc., a Delaware corporation (the "Company"), and its subsidiaries
by:
(a) providing an incentive for all non-employee members of the Board of
Directors (the "Non-Employee Directors") to maximize the long-term value of the
Company's Common Stock and otherwise act in the best interest of the Company's
stockholders;
(b) providing Non-Employee Directors with the opportunity to acquire a
greater stake in the future of the Company and its subsidiaries through stock
ownership; and
(c) attracting and retaining highly qualified Non-Employee Directors.
2. DEFINITIONS. The following words and phrases have the respective
meanings indicated below unless a different meaning is plainly implied by the
context.
(a) "Board of Directors" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" means Common Stock, par value $.01 per share, of the
Company.
(d) "Eligible Director" means any present or future member of the Board
of Directors who, on the date of an award pursuant to the Plan, (1) is a member
of the Board of Directors, and (2) is not an employee of the Company or any of
its subsidiaries.
(e) "Market Value" of Common Stock on any date means, for Options
granted during the first twenty days on which the Common Stock is traded on the
New York Stock Exchange, the fair market value of the shares of Common Stock as
determined by the Board of Directors, and, for any subsequent grant of Options,
on any date, means the most recently reported closing price of such Common Stock
on that date on the New York Stock Exchange Composite Transactions list, as
reported in THE WALL STREET JOURNAL.
(f) "Option" means a right awarded to a Participant pursuant to the
Plan to purchase a designated number of shares of Common Stock at a stated price
for a stated period of time.
(g) "Participant" means an Eligible Director who has been awarded an
Option.
3. LIMITATION OF AGGREGATE SHARES. Subject to adjustment as provided in
paragraph 5(d), the number of shares of Common Stock which may be issued upon
the exercise of Options
<PAGE> 2
shall not exceed, in the aggregate, 100,000 shares; it being understood that to
the extent any Options expire unexercised or are cancelled, terminated or
forfeited in any manner without the issuance of shares of Common Stock
thereunder, such shares shall again be available under the Plan. Such 100,000
shares of Common Stock may be authorized and unissued shares, treasury shares,
or a combination thereof, as the Board of Directors shall determine.
4. OPTIONS. The Board of Directors may grant Options to Eligible
Directors in accordance with this paragraph 4 and the other provisions of the
Plan.
(a) PROVISIONS.
(i) Options shall not qualify as incentive stock options within the
meaning of Section 422 of the Code or any successor provision.
(ii) Options shall have such terms, not to exceed ten years from the
date of grant, as the Board of Directors shall determine at grant.
(iii) The Option price per share of Common Stock shall be 100% of the
Market Value on the date of grant and not less than the par value of a share of
Common Stock.
(iv) Options shall be exercisable at such time or times as the Board of
Directors shall determine at or subsequent to grant; provided that, except in
the event of death or disability of the Participant, no Option may be exercised
until the Eligible Director has served on the Board of Directors for at least
six months after it is awarded; further provided that an Option may be exercised
only during a period beginning on the third business day following the date of
release of the Company's quarterly or annual summary statement of sales and
earnings and ending on the twelfth business day following such date; and further
provided that in the event of termination of service of a Participant as a
member of the Board of Directors for any reason (including without limitation
expiration of term without re-election, resignation, retirement, disability or
death), each Option granted to the Participant shall cease to be exercisable not
later than the fifth anniversary of the date of termination or, if earlier, on
the scheduled date of expiration of such Option.
(b) EXERCISE. Shares shall be issued to a Participant pursuant to the
exercise of an Option only upon receipt by the Company from the Participant of
written notice of exercise, specifying the number of shares with respect to
which the Option is being exercised, accompanied by payment in full in cash
(including check, bank draft or money order) or, to the extent permitted by the
Board of Directors, by a single exchange of shares of Common Stock already owned
by the Participant for at least six months in an amount equal to the aggregate
Option price for the shares of Common Stock subject to the Option or portion
thereof being exercised or by a combination of such methods; provided that the
Board of Directors may permit the Participant to elect to pay such aggregate
Option price by authorizing a third party to sell the shares of Common Stock
acquired upon exercise (or a sufficient portion thereof) and thereafter remit to
the Company sale proceeds sufficient to pay such aggregate Option price and any
withholding or other tax resulting from exercise. The value of already owned
shares of Common Stock exchanged in full or partial payment for the shares
purchased upon the exercise of an Option shall be equal to the aggregate Market
Value of such already owned shares on the date of the exercise of such Option.
2
<PAGE> 3
(c) SURRENDER. If so provided by the Board of Directors at or
subsequent to the time of grant, an Option may be surrendered to the Company on
such terms and conditions, and for such consideration, as the Board of Directors
shall determine.
(d) FORM. The form of each Option (and of the documentation evidencing
each Option) shall be determined by the Board of Directors.
5. MISCELLANEOUS PROVISIONS.
(a) ADMINISTRATION. The Plan shall be administered by the Board of
Directors. Subject to the limitations of the Plan, the Board of Directors shall
have the sole and complete authority: (i) to select Participants, (ii) to award
Options in such forms and amounts as it shall determine, (iii) to impose such
limitations, restrictions and conditions upon such Options as it shall deem
appropriate, (iv) to interpret the Plan and to adopt, amend and rescind
administrative guidelines and other rules and regulations relating to the Plan,
(v) to correct any defect or omission or to reconcile any inconsistency in the
Plan or in any Options and (vi) to make all other determinations and to take all
other actions necessary or advisable for the implementation and administration
of the Plan. The Board of Directors' determinations on matters within its
authority shall be conclusive and binding upon the Company and all other
persons. All expenses associated with the Plan shall be borne by the Company.
(b) NON-TRANSFERABILITY. Except as otherwise determined by the Board of
Directors, no Option, and no interest therein, shall be transferable by a
Participant otherwise than by will or the laws of descent and distribution, and
all Options shall be exercisable during a Participant's lifetime only by the
Participant or the Participant's legal representative. Any purported transfer
contrary to this provision will nullify the Option.
(c) ADJUSTMENT. The Board of Directors may make or provide for such
adjustments in the numbers of shares of Common Stock covered by outstanding
Options granted hereunder as the Board of Directors, in its sole discretion,
exercised in good faith, may determine is equitably required to prevent dilution
or enlargement of the rights of Participants that otherwise would result from
(a) any stock dividend, stock split, combination of shares, recapitalization or
other change in the capital structure of the Company, or (b) any merger,
consolidation, spin-off, split-off, spin-out, split-up, reorganization, partial
or complete liquidation or other distribution of assets, issuance of rights or
warrants to purchase securities, or (c) any other corporate transaction or event
having an effect similar to any of the foregoing. Moreover, in the event of any
such transaction or event, the Board of Directors, in its discretion, may
provide in substitution for any or all outstanding awards under the Plan such
alternative consideration as it, in good faith, may determine to be equitable in
the circumstances and may require in connection therewith the surrender of all
awards so replaced. The Board may also make or provide for such adjustments in
the numbers of shares specified in Section 3 of the Plan as the Board in its
sole discretion, exercised in good faith, may determine is appropriate to
reflect any transaction or event described in this Section 5(c).
(d) TAX WITHHOLDING. The Board of Directors shall have the power to
withhold, or to require a Participant to remit to the Company, an amount
sufficient to satisfy any withholding or
3
<PAGE> 4
other tax due with respect to the Participant's exercise of an Option. Subject
to the consent of the Board of Directors, a Participant may make an irrevocable
election to have shares of Common Stock otherwise issuable under an Option
withheld, tender back to the Company shares of Common Stock received pursuant to
an Option or deliver to the Company shares of Common Stock already owned by the
Participant having a Market Value sufficient to satisfy all or part of the
Participant's estimated tax obligations associated with the transaction. Such
election must be made by a Participant prior to the date on which the relevant
tax obligation arises. The Board of Directors may disapprove of any election and
may limit, suspend or terminate the right to make such elections.
(e) TERMINATION; AMENDMENTS. The Board of Directors may terminate the
Plan at any time. The Board of Directors may amend the Plan at any time or from
time to time; provided that no such amendment shall be made without stockholder
approval to the extent such approval is required by law, regulation or the rules
of any exchange upon which the Common Stock is listed.
The Board of Directors may amend an outstanding Option in any
manner to the extent that the Board of Directors would have had the authority
under the Plan to initially grant the Option as so amended.
No termination or amendment of the Plan or amendment of any
outstanding Option shall adversely affect any outstanding Option without the
consent of the Participant who holds it.
(f) RIGHTS OF PARTICIPANTS. Nothing in the Plan shall confer on any
Eligible Director any right to continue to serve as a member of the Board of
Directors or affect in any way the right of the Company to terminate such
service at any time. No Eligible Director shall have a right to be selected as a
Participant, or, having been so selected, to be selected again as a Participant.
(g) EFFECTIVE DATE. The effective date of the Plan shall be June 8,
1998, the date of its adoption by the Board of Directors.
4
<PAGE> 5
PENTON MEDIA, INC.
FORM OF NONQUALIFIED DIRECTOR STOCK OPTION AGREEMENT
WHEREAS, _______________________ (hereinafter called the
"Optionee") is a director of Penton Media, Inc. (hereinafter called the
"Company") who (1) is a member of the Board of Directors of the Company (the
"Board"), and (2) is not an employee of the Company or any of its subsidiaries
("Eligible Director");
WHEREAS, the execution of a Stock Option Agreement in the form
hereof has been duly authorized by a resolution of the Board duly adopted on
_________, ____, and incorporated herein by reference; and
WHEREAS, the Company's 1998 Director Stock Option Plan (the
"Plan") authorizes the Board to grant to Eligible Directors options to purchase
shares of Common Stock.
NOW THEREFORE, this Agreement shall evidence and confirm the
Company's grant to the Optionee of an option to purchase _____ shares of Common
Stock, at the price of $_____ per share ("Option Price"), and the Company's
agreement to cause certificates for any shares purchased hereunder to be
delivered to the Optionee upon receipt of the purchase price, all subject,
however, to the terms and conditions of the Plan and the terms and conditions
hereinafter set forth. The Option Price shall be payable (i) in cash, (ii) by
the transfer to the Company by the Optionee of nonforfeitable, unrestricted
shares of Common Stock held by the Optionee for more than six months and having
a Market Value at the time of exercise of this option equal to the total Option
Price of the shares of Common Stock which are the subject of such exercise, or
(iii) by a combination of such methods of payment.
1. This option (unless terminated as hereinafter provided)
shall be exercisable in full after the Optionee shall have been a director of
the Company for a period of _______ year[s] from the date hereof.
Notwithstanding the foregoing, this option shall become immediately exercisable
in full by the optionee or his or her legal representative if the Optionee
should die or become disabled while serving as a director of the Company or in
the event of a Change of Control. If the Optionee subsequently becomes an
employee of the Company while remaining a member of the Board of Directors, this
option shall not be affected thereby. To the extent exercisable, and subject to
paragraph 4(a)(iv) of the Plan, this option may be exercised in whole or in part
from time to time.
2. This option shall terminate on the earlier of the
following dates:
(A) Five years after termination of the Optionee's
service as a member of the Board for any reason
(including without limitation expiration of term
without re-election, resignation, retirement,
disability or death).
(B) Ten years from the date on which this option was granted.
<PAGE> 6
Neither the Plan, nor the granting of this option nor any other action taken
pursuant to the Plan, shall constitute or be evidence of any agreement or
understanding, express or implied, that the Optionee has a right to continue as
a director for any period of time, or at any particular rate of compensation.
3. This option shall not be transferable by the Optionee
except by will or the laws of descent and distribution, and this option shall be
exercisable during the lifetime of the Optionee only by the Optionee or, in the
event of the Optionee's legal incapacity to do so, by the Optionee's guardian or
legal representative acting on behalf of the Optionee in a fiduciary capacity
under state law and court supervision.
4. The Company shall make reasonable efforts to comply with
all applicable federal and state securities laws; provided, however,
notwithstanding any other provision of this Agreement, this option shall not be
exercisable if the exercise thereof would result in a violation of any such law.
5. This option shall not be exercisable if at the time of
exercise such exercise would require registration under the Securities Act of
1933, as amended, or any similar federal securities law then in effect, of the
shares of Common Stock or other securities to be purchased hereunder and such
registration shall not then be effective. The Company hereby agrees to make
reasonable efforts to effect any such required registration.
6. The Board shall make such adjustments in the Option Price
and in the number or kind of shares of Common Stock or other securities covered
by this option as the Board in its sole discretion, exercised in good faith, may
determine is equitably required to prevent dilution or enlargement of the rights
of the Optionee that otherwise would result from (a) any stock dividend, stock
split, combination of shares, recapitalization or other change in the capital
structure of the Company, or (b) any merger, consolidation, reorganization,
partial or complete liquidation, or (c) any other corporate transaction or event
having an effect similar to any of the foregoing.
7. This option is intended to be a nonqualified stock option,
and will not be treated as an "incentive stock option" as that term is defined
in Section 422 of the Internal Revenue Code.
8. Capitalized terms used herein without definition shall have
the meanings assigned to them in the Plan.
2
<PAGE> 7
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed on its behalf by its duly authorized officer and Optionee has also
executed this Agreement in duplicate, as of this _____ day of___ , 199__.
PENTON MEDIA, INC.
By
---------------------
The undersigned Optionee hereby acknowledges receipt of an executed original of
this Stock Option Agreement.
-------------------------
Optionee
3
<PAGE> 1
Exhibit 10.8
PENTON MEDIA, INC.
------------------
RETIREMENT SAVINGS PLAN
-----------------------
<PAGE> 2
PENTON MEDIA, INC.
RETIREMENT SAVINGS PLAN
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 1 .......................................................................................................... 1
Introduction.............................................................................................. 1
Purpose of the Plan, Effective Date.............................................................. 1
Plan Administrator, Plan Year.................................................................... 1
The Employers.................................................................................... 1
ARTICLE 2 .......................................................................................................... 2
Plan Participants......................................................................................... 2
Eligibility...................................................................................... 2
Cessation of Active Participation................................................................ 2
Resumption of Active Participation............................................................... 2
Notice of Participation.......................................................................... 3
Leave of Absence................................................................................. 3
Military Service................................................................................. 3
ARTICLE 3 .......................................................................................................... 4
Employers' Contributions.................................................................................. 4
Employers' Contributions......................................................................... 4
Payment of Employers' Contributions.............................................................. 4
Deduction Limitation............................................................................. 4
Verification of Employers' Contributions......................................................... 4
Earnings ........................................................................................ 4
ARTICLE 4 ........................................................................................................... 6
Participant Elected Salary Reduction Contributions
and Additional Participant Contributions................................................................... 6
Participant Elected Salary Reduction Contributions................................................ 6
Distribution of Excess Salary Reduction Contributions............................................. 7
Highly Compensated Employee....................................................................... 7
Limitations on Elective Contributions............................................................. 7
Participant Contributions........................................................................ 10
Limitation on Participant and Matching Contributions............................................. 11
Multiple Use Limitation.......................................................................... 14
Payment of Participant Contributions............................................................. 15
Changes in Participant Contributions............................................................. 15
Rollover Contributions........................................................................... 16
</TABLE>
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<PAGE> 3
<TABLE>
<CAPTION>
PAGE
<S> <C>
Transferred Benefits............................................................................. 16
Distribution Restrictions........................................................................ 17
Restricted Participation With Respect To Rollover Contributions and
Transferred Benefits.................................................................... 18
ARTICLE 5 .......................................................................................................... 20
Plan Accounting, Investment Funds and Company Shares...................................................... 20
Separate Participant Accounts.................................................................... 20
Accounting Dates................................................................................. 21
Date of Crediting Contributions and Remainders................................................... 21
Investment Funds................................................................................. 21
Investments in Company Shares.................................................................... 22
Investment Elections............................................................................. 22
Charging Payments and Distributions.............................................................. 23
Quarterly Adjustment of Participants' Accounts................................................... 23
Statement of Accounts............................................................................ 24
Allocation of Company Shares..................................................................... 24
Additional Accounting Rules...................................................................... 25
Voting of Company Shares......................................................................... 25
ARTICLE 6 .......................................................................................................... 27
Payment of Account Balances............................................................................... 27
Benefit Payment.................................................................................. 27
Selection of Time and Manner of Benefit Payment.................................................. 28
Designated Beneficiaries......................................................................... 28
Payments to Substitute Beneficiaries............................................................. 29
Payment With Respect to Incapacitated Participants or Beneficiaries.............................. 30
Direct Rollover of Distributions................................................................. 30
ARTICLE 7 .......................................................................................................... 32
Withdrawals and Loans During Employment,
Voluntary Insurance Coverage.............................................................................. 32
Withdrawal of Participant Contributions.......................................................... 32
Age 59-1/2 and Hardship Withdrawals.............................................................. 32
Loans to Participants............................................................................ 33
No Representation Regarding Tax Effect of Withdrawals or Loans................................... 33
ARTICLE 8 .......................................................................................................... 34
Maximum Contributions..................................................................................... 34
Contribution Limitations......................................................................... 34
Participant Covered by Defined Contribution Plan Only............................................ 34
Participant Covered by Defined Contribution Plan and Defined Benefit Plan........................ 36
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 9 .......................................................................................................... 38
General Provisions........................................................................................ 38
Examination of Plan Documents.................................................................... 38
Notices ........................................................................................ 38
Nonalienation of Plan Benefits................................................................... 38
No Employment or Benefit Guaranty................................................................ 38
Litigation....................................................................................... 39
Evidence ........................................................................................ 39
Gender and Number................................................................................ 39
Waiver of Notice................................................................................. 39
Applicable Law................................................................................... 40
Severability..................................................................................... 40
Fiduciary Responsibilities....................................................................... 40
Funding of Plan Benefits......................................................................... 40
Supplements...................................................................................... 41
ARTICLE 10.......................................................................................................... 42
Relating to Plan Administration........................................................................... 42
Plan Administrator's Duties...................................................................... 42
Action by Plan Administrator..................................................................... 43
Information Required for Plan Administration..................................................... 43
Decision of Plan Administrator Final............................................................. 44
Review of Benefit Determinations................................................................. 44
Uniform Rules.................................................................................... 44
Plan Administrator's Expenses.................................................................... 44
Interested Plan Administrator.................................................................... 44
Resignation or Removal of Plan Administrative Committee Members.................................. 44
Indemnification.................................................................................. 45
ARTICLE 11.......................................................................................................... 46
Relating to the Employers................................................................................. 46
Action by Employers.............................................................................. 46
Additional Employers, the Penton Companies....................................................... 46
Restrictions as to Reversion of Trust Fund to Employers.......................................... 47
ARTICLE 12.......................................................................................................... 48
Amendment and Termination................................................................................. 48
Amendment........................................................................................ 48
Termination...................................................................................... 48
Vesting and Distribution on Termination.......................................................... 48
Plan Merger...................................................................................... 49
Notice of Amendment, Termination or Plan Merger.................................................. 49
</TABLE>
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<PAGE> 5
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 13.......................................................................................................... 50
Top-Heavy Plan Rules...................................................................................... 50
Key Employees.................................................................................... 50
Top-Heavy Plan................................................................................... 51
Aggregation Groups............................................................................... 51
Special Minimum Contributions.................................................................... 52
SUPPLEMENT A....................................................................................................... A-1
Purpose, Use of Terms................................................................................... A-1
Loan Administration..................................................................................... A-1
Limitations on Plan Loans............................................................................... A-1
Loan Payment............................................................................................ A-2
Default ............................................................................................... A-2
Amendment............................................................................................... A-3
</TABLE>
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<PAGE> 6
PENTON MEDIA, INC.
------------------
RETIREMENT SAVINGS PLAN
-----------------------
ARTICLE 1
---------
INTRODUCTION
------------
1.1 PURPOSE OF THE PLAN, EFFECTIVE DATE. This Penton Media,
Inc. Retirement Savings Plan (the "plan") is established effective as of
September 1, 1998 (the "effective date"). The purpose of the plan is to enable
eligible employees of Penton Media, Inc. (the "company") and eligible employees
of the company's subsidiaries and other related companies which hereafter adopt
the plan with the company's consent to accumulate funds and share in the profits
of the company and its subsidiaries and other related companies, and thereby
assist such employees in providing for their future security. The plan
represents a continuation of the Pittway Corporation Blue Chip Profit Sharing
and Savings Plan (the "Pittway plan") as to employees or former employees of the
company and its current or former subsidiaries (other than Saddlebrook Resorts,
Inc., Saddlebrook International Tennis, Inc., C&A Investments, Inc. and Pittway
Real Estate, Inc.) ("transferred participants"). The Combination Agreement dated
May 21, 1998, among the company, Pittway Corporation and other parties provides
for a transfer of assets and liabilities attributable to transferred
participants from the Pittway plan to this plan.
1.2 PLAN ADMINISTRATOR, PLAN YEAR. The plan is administered
by a plan committee (the "plan administrator") consisting of not less than three
persons appointed by the company to carry out the administration of the plan.
The plan is administered on the basis of a plan year (the "plan year") which
begins each year on January 1 and ends on the next following December 31. For
purposes of the 1998 plan year, the plan year shall begin on the effective date
and end on December 31, 1998. Article 10 describes certain powers, duties and
responsibilities of the plan administrator with respect to the administration of
the plan.
1.3 THE EMPLOYERS. With the consent of the company, the plan
may hereafter be adopted in accordance with the provisions of section 11.2 by
any subsidiary of the company or any related company for the benefit of its
eligible employees. The company and its subsidiaries and related companies that
have heretofore adopted or hereafter adopt the plan are referred to herein
collectively as the "employers" and individually as an "employer".
-1-
<PAGE> 7
ARTICLE 2
---------
PLAN PARTICIPANTS
-----------------
2.1 ELIGIBILITY. Each employee of an employer on the
effective date who was a participant in the Pittway plan immediately prior to
the effective date will continue as a participant in the plan on and after that
date, subject to the conditions and limitations of the plan. Each other employee
of an employer will become a participant in the plan on the first day of the
month that is at least 30 days after the effective date or on the first day of
the month that is at least 30 days after the date on which the employee begins
employment with an employer, provided that he is a "covered employee" (that is,
he is a member of a group of employees of an employer to which the plan has been
and continues to be extended either by his employer unilaterally or by
collective bargaining).
2.2 CESSATION OF ACTIVE PARTICIPATION. Once a covered
employee of an employer has become an active participant in the plan in
accordance with section 2.1 above, such employee shall remain a participant in
the plan until the date that the participant's entire account balances under the
plan have been distributed to him or on his behalf in accordance with the plan.
During a period of employment with an employer while a participant is a covered
employee and while he has elected (or is deemed to have elected) to have
contributions made to the plan in accordance with section 4.1, a participant
shall be considered for all purposes of the plan to be an "active participant."
During all other periods of participation a participant shall be considered an
"inactive participant." Only those participants who are active participants with
respect to a pay period are entitled to make participant contributions for that
pay period or share in employer contributions with respect to their earnings (as
defined in section 3.5 below) for that pay period. Beneficiaries of deceased
participants will be treated as inactive participants for purposes of the plan
(provided that such beneficiaries may not designate additional beneficiaries in
accordance with section 6.3 and, accordingly, any unpaid benefits remaining upon
the death of a designated beneficiary of a deceased participant shall be
distributed in accordance with the provisions of section 6.4).
2.3 RESUMPTION OF ACTIVE PARTICIPATION. Any employee of an
employer who was previously an active participant in the plan and who again
becomes a covered employee will be eligible to elect to again become an active
participant effective as of the first day of the month
-2-
<PAGE> 8
that is at least 30 days after the date on which the employee again begins
employment with an employer.
2.4 NOTICE OF PARTICIPATION. Each employee will be notified
of the date he becomes a plan participant and each participant and other person
receiving benefits under the plan will be furnished with a copy of a summary
plan description.
2.5 LEAVE OF ABSENCE. A "leave of absence" as used in
the plan means:
(a) A leave of absence required by law or granted by a
Penton Company (as defined in section 11.2 below) on account of
service in military or governmental branches described in any
applicable statute granting reemployment rights to employees who
enter such branches, or any other military or governmental
branch designated by the company.
(b) A leave of absence for any period the employee is
absent from work by reason of the employee's pregnancy, the
birth of a child of the employee, the placement of a child with
the employee in connection with the adoption of the child by the
employee or the caring for the child for a period beginning
immediately after such birth or placement.
(c) Any other absence from active employment with an
employer that is approved by it and not treated by it as a
termination of employment.
Leaves of absence granted by an employer will be governed by rules uniformly
applied to all employees of the employer similarly situated.
2.6 MILITARY SERVICE. Notwithstanding any provisions of this
plan to the contrary, contributions, benefits and service credit with respect to
qualified military service will be provided in accordance with Section 414(u) of
the Internal Revenue Code of 1986, as amended (the "Code"). "Qualified military
service" means any service in the uniformed services (as defined in chapter 43
of title 38 of the United States Code) by any individual if such individual is
entitled to reemployment rights under such chapter with respect to such service.
-3-
<PAGE> 9
ARTICLE 3
---------
EMPLOYERS' CONTRIBUTIONS
------------------------
3.1 EMPLOYERS' CONTRIBUTIONS. Subject to the conditions and
limitations of this Article 3 and Article 9, for each pay period of an employer
that employer will make a contribution under the plan for each active
participant employed by it during that pay period in an amount equal to the sum
of the following:
(a) A specified percentage (the "employer matching
contribution") of the basic salary reduction contribution (as
defined in section 4.1 below) elected by the participant for
that pay period, which percentage shall be determined from
time to time by resolution of the Board of Directors of the
employer and communicated to the participant as applicable to
him for all pay periods ending in a plan year; and
(b) 100 percent of the salary reduction contribution
(as defined in section 4.1 below, including the participant's
basic salary reduction contribution) elected by the
participant for that pay period.
3.2 PAYMENT OF EMPLOYERS' CONTRIBUTIONS. Each employer's
contribution under the plan to be made in accordance with section 3.1 above for
any pay period shall be paid to the trust fund (as described in section 9.12)
implementing the plan, without interest, as soon as practicable after the end of
that pay period, but in any event within 30 days after the end of the plan year
in which such pay period ends.
3.3 DEDUCTION LIMITATION. Each employer's aggregate
contributions under the plan for any plan year in no event shall exceed an
amount equal to the maximum amount deductible on account thereof by that
employer for its fiscal year coinciding with that plan year as an expense for
purposes of federal taxes on income.
3.4 VERIFICATION OF EMPLOYERS' CONTRIBUTIONS. The certificate
of an independent accountant selected by the company as to the correctness of
any amounts or calculations relating to the employers' contributions under the
plan for any plan year shall be conclusive on all persons.
3.5 EARNINGS. For purposes of the plan, a participant's
"earnings" means his total compensation for services rendered to the employers
as a covered employee, including overtime, bonuses, commissions and incentive
compensation, but excluding:
-4-
<PAGE> 10
(a) Any amounts contributed by the employer for the
participant's benefit to this plan or any other profit
sharing, pension, stock bonus or other retirement or benefit
plan maintained by the employer; provided that any amounts
contributed under a salary reduction arrangement under
Sections 125 or 401(k) of the Code shall be included in
compensation;
(b) Any reimbursements for medical, dental or travel
expenses, automobile allowances, reallocation allowances,
educational assistance allowances or other special allowances
and awards;
(c) Any income realized for federal income tax
purposes as a result of (i) group life insurance, (ii) the
personal use of an employer owned automobile, (iii) the grant
or exercise of an option or options to acquire shares of
stock of any Penton Company, the receipt of a cash
appreciation payment related to shares of stock of any Penton
Company (whether or not related to or in lieu of the exercise
of such an option or options), the disposition of shares
acquired on exercise of such an option, or (iv) the transfer
of restricted shares of stock or restricted property of a
Penton Company, or the removal of any such restrictions;
(d) Any compensation received while on a leave of
absence from active work and any severance pay paid as a
result of the participant's termination of employment;
(e) Any compensation paid or payable to the
participant, or to any governmental body or agency on account
of the participant, under the terms of any state, federal or
foreign law requiring the payment of such compensation
because of the participant's voluntary or involuntary
termination of employment with any Penton Company; and
(f) Any compensation paid or payable to the
participant which is in excess of the maximum amount which
may be considered pursuant to Section 401(a)(17) of the Code
(or such other amount as may be determined from time to time
by the Secretary of Treasury or his delegate or by law).
-5-
<PAGE> 11
ARTICLE 4
---------
PARTICIPANT ELECTED SALARY REDUCTION CONTRIBUTIONS
--------------------------------------------------
AND ADDITIONAL PARTICIPANT CONTRIBUTIONS
----------------------------------------
4.1 PARTICIPANT ELECTED SALARY REDUCTION CONTRIBUTIONS. For
each pay period each participant may elect to reduce his compensation from his
employer by an amount equal to not less than one percent nor more than 15
percent of his earnings for such pay periods and his employer shall in
accordance with subsection 3.1(b) above contribute the amount of each such
reduction for a pay period to the plan on his behalf as a "salary reduction
contribution". Salary reduction contributions elected and made on behalf of a
participant for a pay period which are not in excess of six percent (or such
other percentage as is established by an employer from time to time as
applicable to any specific group of its covered employees) of his earnings for
such pay period shall be considered the participant's "basic salary reduction
contributions" which are eligible for the matching employer contribution
provided in subsection 3.1(a). Each participant shall initially elect his rate
of salary reduction contributions, if any, by filing a written election with the
plan administrator on such forms, in such manner and at such time as the plan
administrator shall require, which forms shall evidence such employee's
agreement (until subsequently modified by him as permitted below) to have
contributions made on his behalf pursuant to subsection 3.1(b) and his
authorization of his employer to reduce his compensation accordingly. If a
transferred participant who becomes a participant in the plan on the effective
date had a salary reduction election in effect under the Pittway plan
immediately preceding the effective date, such election shall be deemed to be
such participant's initial election under this plan and shall continue in effect
until changed. Notwithstanding the preceding provisions of this Section, in the
event that a participant does not make an initial election (at the time he
becomes a participant in the plan) to make salary reduction contributions
pursuant to the preceding provisions of this Section, and does not specifically
decline in writing (on such form, in such manner and at such time as the plan
administrator shall require) to make salary reduction contributions, such
participant shall be deemed to have made an initial election to have salary
reduction contributions made on his behalf in accordance with this Section at
the rate of three percent of his earnings. A participant may elect to
discontinue making salary reduction contributions as of the beginning of any pay
period or change the rate of or resume his salary reduction contributions
(within the limits specified above)
-6-
<PAGE> 12
as of the beginning of the first pay period ending on or after any January 1,
April 1, July 1 or October 1 by filing a superseding written election with the
plan administrator on a form provided by it at least 30 days before such date
(or by such other date as the plan administrator may require).
4.2 DISTRIBUTION OF EXCESS SALARY REDUCTION CONTRIBUTIONS. If,
not later than the March 1 next following the end of a calendar year, a
participant notifies the plan administrator that the participant has made salary
reduction contributions to this plan and one or more other plans (whether
maintained by a Penton Company or an unrelated company) in excess of $10,000 (or
such other maximum amount as may be permitted by law for such calendar year)
during such calendar year, and further notifies the plan administrator of the
amount of such excess allocated to this plan, such excess amount shall be paid
to such participant (along with any income or loss allocable thereto as
determined pursuant to the method set forth in section 4.4(d)) as soon as
practicable following such notification, but in any event by the April 15
following the calendar year with respect to which such excess salary reduction
contributions were made. A participant is deemed to notify the plan
administrator of such excess that arises by taking into account only those
salary reduction contributions made to this plan and any other plans of the
Penton Companies.
4.3 HIGHLY COMPENSATED EMPLOYEE. The term "highly compensated
employee" means for a particular plan year, any employee who (i) during the
current or preceding Plan Year, was at any time a 5-percent owner (as such term
is defined in Section 416(i)(1) of the Code), or (ii) for the preceding plan
year, received compensation from the Penton Companies in excess of the amount in
effect for such plan year under Section 414(q)(1)(B) of the Code. The term
"highly compensated employee" includes a former employee whose termination of
employment occurred prior to the plan year and who was a highly compensated
employee for the plan year in which his termination of employment occurred or
for any plan years ending on or after his 55th birthday. For purposes of this
Section, the term "compensation" has the meaning given such term by Section
415(c)(3) of the Code.
4.4 LIMITATIONS ON ELECTIVE CONTRIBUTIONS. Elective contributions
shall be subject to the following nondiscrimination standards and shall be
adjusted, as provided below, to the extent necessary to comply with the
limitations set forth in Section 401(k) of the Code and the
-7-
<PAGE> 13
regulations thereunder. For purposes of this section, the term "elective
contribution" shall mean any employer contribution made to the plan that (i) is
subject to a cash or deferred arrangement (as defined in Section
1.401(k)-1(a)(3) of the Treasury regulations) and (ii) is immediately
nonforfeitable. Salary reduction contributions are "elective contributions" for
purposes of this section 4.4. The employer shall maintain records demonstrating
compliance with this section.
(a) ACTUAL DEFERRAL PERCENTAGE LIMITATION. In any plan
year, the actual deferral percentage for the group of
participants who are highly compensated employees may not exceed
the greater of the following:
(i) the actual deferral percentage for the preceding
plan year of the group of participants who are not highly
compensated employees (the "non-highly compensated
group") multiplied by 1.25, or
(ii) the lesser of the actual deferral percentage for
the preceding plan year for the non-highly compensated
group multiplied by two or the actual deferral percentage
for the preceding plan year of the non-highly compensated
group plus two percentage points.
(b) ACTUAL DEFERRAL PERCENTAGE. The actual deferral
percentage for a specified group of participants for any plan
year shall be the average of the ratios (computed, to the nearest
one-hundredth of one percent, separately for each participant in
such group) of the elective contributions, and amounts treated as
elective contributions (including excess elective contributions
of highly compensated employees), for such participant for such
year to the participant's compensation (as defined at Section
414(s) of the Code, as modified by Section 414(s)(2) thereof)
taken into account for such plan year during which the
participant was an eligible employee. For purposes of this
section the following additional rules shall apply:
(i) An elective contribution shall be taken into
account only if it relates to compensation that either
(A) would have been received by the participant in the
plan year but for the deferral election or (B) is
attributable to services performed by the participant in
the plan year and would have been received by the
participant within 2 1/2 months after the close of the
plan year but for the deferral election. An elective
contribution that does not meet the foregoing
requirements will not be tested under Section 401(k) of
the Code but must separately satisfy Section 401(a)(4) of
the Code for the plan year of allocation as if it was the
only nonelective employer contribution for the year.
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<PAGE> 14
(ii) In the event this plan satisfies the requirement
of Sections 401(k), 401(a)(4) or 410(b) of the Code only
if aggregated with one or more other plans, or if one or
more other plans satisfy the requirements of such
sections of the Code only if aggregated with this plan,
then this section shall be applied by determining the
actual deferral percentage of employees as if all such
plans were a single plan. In accordance with applicable
Treasury regulations, plans of the employers may be
aggregated in order to satisfy Section 401(k) of the Code
but only if such plans as aggregated satisfy the
requirement of Section 410(b) of the Code and provided
that each plan has the same plan year.
(iii) Except as provided in applicable Treasury
regulations, the actual deferral percentage of a highly
compensated employee will be determined by treating all
cash or deferred arrangements of the employer (or an
entity that is required to be aggregated with the
employer under Sections 414(b), (c), (m) or (o) of the
Code) under which the highly compensated employee is
eligible as a single arrangement. If the cash or deferral
arrangements have different plan years, all such
arrangements ending with or within the same calendar year
will be treated as a single arrangement. Notwithstanding
the foregoing, certain plans shall be treated as separate
if mandatorily disaggregated under applicable Treasury
regulations issued pursuant to Section 401(k) of the
Code.
(iv) At the discretion of the plan administrator, and
in accordance with applicable Treasury regulations, any
employer contributions or matching contributions
credited on a participant's behalf in the plan year which
meet the withdrawal restrictions and vesting requirements
of Sections 401(k)(2)(B) and (C) of the Code ("qualified
nonelective contributions" and "qualified matching con
tributions," respectively) may be added to the
participant's elective contributions in computing the
participant's actual deferral percentage; provided, that
the employer contributions and matching contributions
made to the plan for such year satisfy the requirements
of Section 401(a)(4) of the Code with and without the
inclusion of the qualified nonelective contributions and
qualified matching contributions used to satisfy this
section. Qualified nonelective contributions and
qualified matching contributions which are used to
satisfy this section cannot be taken into account to
satisfy the requirement of section 4.6.
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<PAGE> 15
(v) Elective contributions treated as matching
contributions under section 4.6 shall not be included in
the determination of a participant's actual deferral
percentage.
(c) EXCESS CONTRIBUTIONS. In the event that excess
contributions (as defined below) are made for any plan year, such
excess contributions (and any income or loss allocable thereto)
shall be distributed, as provided in subsection (d) below, to
highly compensated employees on the basis of the dollar amount of
contributions made by, or on behalf of, each of such employees.
The term "excess contributions" means for any plan year, the
excess of (i) the aggregate amount of elective contributions
actually paid to the plan on behalf of highly compensated
employees for such plan year, over (ii) the maximum amount of
such elective contributions permitted for such plan year under
subsection (a) above (determined by reducing elective
contributions made on behalf of highly compensated employees in
order of the actual deferral percentages beginning with the
highest of such percentages).
(d) DISTRIBUTION OF EXCESS CONTRIBUTIONS. The plan
administrator shall distribute the amount of the excess
contributions (determined in accordance with subsection (c)
above), plus the income (or minus the loss) allocable thereto, as
soon as practicable following the determination of such excess
but in any event by the last day of the plan year following the
end of the plan year in which the excess contributions were made.
Under Section 4979 of the Code, a ten-percent tax is imposed on
the employer for any such excess contributions which are
distributed more than 2 1/2 months after the last day of the plan
year in which the excess contributions were made. A distribution
of the excess contributions may be made without regard to any
notice or consent otherwise required under the plan. The income
or loss allocable to such excess contributions shall be
determined by multiplying the income or loss allocable to the
elective contributions (and, if applicable, amounts treated as
elective contributions for purposes of the participant's deferral
percentage) for the plan year by a fraction. The numerator of the
fraction is the excess contributions for the plan year. The
denominator is equal to (i) the total account balance of the
participant attributable to elective contributions (and amounts
treated as such for purposes of the actual deferral percentage)
as of the beginning of the plan year, plus (ii) the participant's
elective contributions (and amounts treated as such for purposes
of the actual deferral percentage) for the plan year. The amount
of excess contributions distributed under this subsection for a
plan year shall be reduced by any excess deferrals previously
distributed for the employee's taxable year ending with or within
the plan year. Excess contributions shall be treated as annual
additions for purposes of Section 415 of the Code.
4.5 PARTICIPANT CONTRIBUTIONS. Effective as of such date as
the committee determines to make the provisions of this section available to
participants, in addition to salary
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<PAGE> 16
reduction contributions permitted under section 4.1, if a participant so desires
he may elect to make contributions under the plan for any plan year, beginning
with the plan year in which he becomes a participant; provided that the total of
his contributions for all plan years beginning with the plan year in which he
becomes a participant may not exceed 10 percent of his earnings for all such
years. Each such election made by a participant must be in writing and filed
with the plan administrator at least 30 days in advance of the beginning of the
pay period for which it is effective. All participant contributions made on or
after the effective date (excluding rollover contributions and transferred
benefits) shall be credited to the participant's nondeductible contributions
account.
4.6 LIMITATION ON PARTICIPANT AND MATCHING CONTRIBUTIONS.
Participant and matching contributions shall be subject to the following
nondiscrimination standards and such amounts shall be adjusted, as provided
below, to the extent necessary to comply with the limitations set forth in
Section 401(m) of the Code and the regulations thereunder. The term "employee
contributions" shall include any mandatory or voluntary contribution to the plan
that is treated as an after-tax employee contribution and is allocated to a
separate account to which earnings and losses are allocated. The term "matching
contributions" means any employer contribution made to the plan on account of an
elective contribution or employee contribution, and any forfeitures that are
allocated to the participant on the basis of employee contributions, matching
contributions or elective contributions. The employer shall maintain records
demonstrating compliance with this section.
(a) CONTRIBUTION PERCENTAGE LIMITATIONS. In any plan
year, the contribution percentage for the group of participants
who are highly compensated employees may not exceed the greater
of the following:
(i) the actual contribution percentage for the
preceding plan year of the group of participants who are
not highly compensated employees (the "non-highly
compensated group") multiplied by 1.25, or
(ii) the lesser of the contribution percentage for
the preceding plan year for the non-highly compensated
group multiplied by two or the contribution percentage
for the preceding plan year of the non-highly compensated
group plus two percentage points.
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<PAGE> 17
(b) CONTRIBUTION PERCENTAGE. The contribution percentage
of a specified group of participants shall be the average of the
contribution percentages (computed separately, to the nearest
one-hundredth of one percent) for each participant in the group.
The contribution percentage for each participant shall equal the
sum of the employee and matching contributions allocated to the
participant's account for the plan year (excluding qualified
matching contributions which are used to satisfy the actual
deferral percentage limitation in accordance with section 4.4)
and the qualified non-elective and elective contributions treated
as matching contributions for the plan year, divided by the
participant's compensation (as defined in Section 414(s) of the
Code, as modified by Section 414(s)(2) thereof) taken into
account for such plan year during which the participant was an
eligible employee. For purposes of this section, the following
additional rules shall apply:
(i) A matching contribution will be taken into
account for purposes of this section for a given plan
year only if (A) it is made on account of the
participant's elective or employee contributions for that
plan year, (B) it is allocated to the participant's
account during that plan year and (C) it is paid to the
trust by the end of the twelfth month following the close
of that plan year. A matching contribution that does not
meet the foregoing requirements will not be tested under
Section 401(m) of the Code but must separately satisfy
Section 401(a)(4) of the Code for the plan year of
allocation as if it were the only employer allocation for
that plan year. An employee contribution will be taken
into account for purposes of this section only if such
contribution is paid to the trust during the plan year or
paid to an agent of the plan and transmitted to the trust
within a reasonable period after the end of the plan
year.
(ii) In the event this plan satisfies the requirement
of Sections 401(m), 401(a)(4) or 410(b) of the Code only
if aggregated with one or more other plans, or if one or
more other plans satisfy the requirements of such
sections of the Code only if aggregated with this plan,
then this section shall be applied by determining the
contribution percentage of employees as if all such plans
were a single plan. In accordance with applicable
Treasury regulations, plans of the employers may be
aggregated in order to satisfy Section 401(m) of the Code
but only if such plans as aggregated satisfy the
requirement of Section 410(b) of the Code and provided
that each plan has the same plan year.
(iii) Except as provided in applicable Treasury
regulations, the contribution percentage of a highly
compensated employee who is eligible to participate in
more than one plan of the
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<PAGE> 18
employer in which employee or matching contributions are
made will be determined by treating all the plans of the
employer (or an entity that is required to be aggregated
with the employer under Sections 414(b), (c), (m) or (o)
of the Code) in which the highly compensated employee is
eligible as a single plan. If the highly compensated
employee participates in two or more plans that have
different plan years, all such plans ending with or
within the same calendar year will be treated as a single
plan. Notwithstanding the foregoing, certain plans shall
be treated as separate if mandatorily disaggregated under
applicable Treasury regulations issued pursuant to
Section 401(m) of the Code.
(iv) At the discretion of the plan administrator, and
in accordance with applicable Treasury regulations, any
qualified non-elective contributions (as defined in
Section 1.401(k)-1(g)(13)(ii)) of the Treasury
regulations and elective contributions made for such plan
year may be taken into account in computing the
participant's contribution percentage; provided, that the
qualified nonelective contributions satisfy the
requirements of Section 401(a)(4) of the Code both with
and without inclusion of such contributions used to
satisfy the requirements of this section, and provided
further, that the elective contributions satisfy the re-
quirements of section 401(k)(3) of the Code both with and
without the inclusion of contributions used to satisfy
the requirements of this section. Elective contributions
and qualified nonelective contributions which are used to
satisfy this section cannot be taken into account to
satisfy the requirement of section 4.4.
(v) Matching contributions treated as elective
contributions under section 4.4 shall not be included in
the determination of a participant's contribution
percentage.
(c) EXCESS AGGREGATE CONTRIBUTIONS. In the event that
excess aggregate contributions (as defined below) are made for
any plan year, such excess aggregate contributions (and any
income or loss allocable thereto) shall be distributed (or
forfeited, if forfeitable), as provided in subsection (d) below,
to highly compensated employees on the basis of the dollar amount
of contributions made by, or on behalf of, each of such
employees. The term "excess aggregate contributions" means for
any plan year, the excess of (i) the aggregate amount of employee
and matching contributions actually paid to the plan on behalf of
highly compensated employees for such plan year, over (ii) the
maximum amount of such contributions permitted for such plan year
under subsection (a) above (determined by reducing contributions
made on behalf of highly compensated employees in order of their
contribution percentages beginning with the highest of such
percentages). The determination of excess aggregate contributions
will be made
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<PAGE> 19
after first determining the excess deferral amount and the
excess contribution amount.
(d) DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS.
Except as provided below, the plan administrator shall distribute
the amount of the excess aggregate contributions (determined in
accordance with subsection (c) above), plus the income (or minus
the loss) allocable thereto, as soon as practicable following the
determination of such excess but in any event by the last day of
the plan year following the end of the plan year for which such
contributions were made. Under Section 4979 of the Code, a
ten-percent tax is imposed on the employer for any such excess
aggregate contributions which are distributed after more than 2
1/2 months after the last day of the plan year for which such
contributions were made. In the event the participant is not
fully vested in the excess aggregate contribution, the non-vested
portion of such excess aggregate contribution shall be forfeited
by the participant and shall become a remainder, and shall be
allocated among the participants who had matching contributions
credited on their behalf during the plan year, other than those
participants whose matching contributions were distributable (or
forfeitable) by reason of subsection (c) above. Such allocation
shall be in accordance with the ratio each such participant's
matching contributions for the plan year bears to the total
amount of matching contributions made by all the participants,
other than those participants whose matching contributions were
distributable (or forfeitable) by reason of subsection (c) above.
A distribution of the excess aggregate contribution may be made
without regard to any notice or consent otherwise required by the
plan. Excess aggregate contributions, including forfeited
matching contributions, are treated as employer contributions for
purposes of Sections 404 and 415 of the Code. The income or loss
allocable to such excess aggregate contributions shall be
determined by multiplying the income or loss allocable to the
participant's employee and matching contributions (and amounts,
if any, treated as such for purposes of the contribution
percentage, but excluding such matching contributions used in the
actual deferral percentage test for the plan year) by a fraction.
The numerator of the fraction is the excess aggregate
contributions for the plan year. The denominator is equal to (i)
the total account balance of the participant attributed to
employee and matching contributions as of the beginning of the
plan year, plus (ii) the employee and matching contributions (and
amounts, if any, treated as such for purposes of the contribution
percentage, but excluding such matching contributions used in the
actual deferral percentage test for the plan year).
4.7 MULTIPLE USE LIMITATION. Notwithstanding the limitations
required by sections 4.4 and 4.6, a participant's elective contributions,
employee contributions and matching contributions may be limited under this
section in order to prevent "multiple use" under Sections 401(k) and 401(m) of
the Code, as set forth below. The multiple use limitation shall apply if the sum
of the actual deferral percentage and contribution percentage for the group of
highly
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<PAGE> 20
compensated employees (determined after any corrections required under section
4.4 or 4.6) exceeds the "aggregate limit". The aggregate limit shall be the
greater of (i) and (ii) below:
(i) the sum of (A) 1.25 times the greater of the
actual deferral percentage or the contribution percentage
for the preceding plan year for nonhighly compensated
employees and (B) two percentage points plus the lesser
of the actual deferral percentage or the contribution
percentage for the preceding plan year for non-highly
compensated employees (which amount shall not exceed
twice the lesser of such percentages),
(ii) the sum of (A) 1.25 times the lesser of the
actual deferral percentage or the contribution percentage
for the preceding plan year for nonhighly compensated
employees and (B) two percentage points plus the greater
of the actual deferral percentage or the contribution
percentage for the preceding plan year for non-highly
compensated employees (which amount shall not exceed
twice the greater of such percentages).
The application of the multiple use limitation shall be made in
accordance with Treasury regulations issued under Section 401(m)(9) of the Code.
If the multiple use limitation applies, then the actual deferral percentage or
contribution percentage of the highly compensated employees shall be reduced (in
the manner described in sections 4.4 or 4.6) until such limit shall be
satisfied. Alternatively, the employer may satisfy the multiple use limitation
by making qualified nonelective contributions to plan participants in accordance
with applicable Treasury regulations.
4.8 PAYMENT OF PARTICIPANT CONTRIBUTIONS. A participant's
contributions may be made by regular payroll deductions (in multiples of one
percent) or in any other way approved by the plan administrator; provided that
all contributions for a plan year must be made within 30 days of the end of that
plan year. Participant contributions will be paid to the trust fund as soon as
practicable after the date made or deducted.
4.9 CHANGES IN PARTICIPANT CONTRIBUTIONS. A participant may elect
to discontinue making contributions as of the beginning of any pay period or
change the rate of or resume his contributions (within the limits specified
above) as of the beginning of the first pay period ending on or after any
January 1, April 1, July 1 or October 1. Each such election must be in writing
and filed with the plan administrator at least 30 days in advance of the
beginning of the
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<PAGE> 21
pay period as of which it is to take effect (or by such other date as the plan
administrator may require).
4.10 ROLLOVER CONTRIBUTIONS. The plan administrator may, in
accordance with Section 402(c) of the Code, permit any employee of an employer
to make a qualifying rollover contribution to the plan. A "qualifying rollover
contribution" means the contribution to the plan by an employee of a portion or
all of an eligible rollover distribution (as defined in Section 402(f)(2)(A) or
as referred to in Section 401(a)(31)(c) of the Code). A qualifying rollover
contribution to be made by an employee must be made to the trust, in care of the
plan administrator, by not later than the sixtieth day following the day upon
which the employee received the distribution with respect to which the
qualifying rollover contribution is to be made. The plan administrator shall
refuse to permit the contribution to the plan of property other than money (and
shall require instead that the property be sold and the proceeds contributed).
If an employee makes a qualifying rollover contribution on a date other than an
accounting date (as defined in section 5.2 below), a segregated account shall be
established on such date on his behalf until the next accounting date under the
plan to reflect the income, losses, appreciation and depreciation attributable
thereto until such accounting date. A participant's qualifying rollover
contribution shall be credited to the participant's rollover account (as defined
in subsection 5.1(c) below) as of the accounting date coincident with or next
following the date the contribution is made.
4.11 TRANSFERRED BENEFITS. If a covered employee had previously
participated in any other qualified pension, profit sharing, stock bonus or
other retirement or employee benefit plan and such other plan permits the
transfer to this plan of the vested portion of the covered employee's benefits
under such other plan, and if so directed by the plan administrator in its
discretion, the trustee of the trust fund shall accept a transfer of cash to
this plan equal to the vested benefits of such employee under such other plan
which are being transferred to this plan. If the date on which such transfer is
received by the trustee is not an accounting date, a segregated account shall be
established on such date on behalf of the covered employee until the next
accounting date under the plan to reflect the income, losses, appreciation and
depreciation attributable thereto until such accounting date. The portion of a
participant's transferred benefits (as adjusted to reflect the investment
experience of a segregated account, if initially credited to a segregated
account) attributable to his deductible employee contributions under such other
plan
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<PAGE> 22
shall be credited to his rollover contributions account, the portion of
transferred benefits attributable to his nondeductible contributions under such
other plan shall be credited to his nondeductible contributions account as of
the accounting date coincident with or next following the date the transfer is
made.
4.12 DISTRIBUTION RESTRICTIONS. Notwithstanding any other
provision of this plan, any benefits transferred to this plan in accordance with
the provisions of section 4.10 from any defined benefit plan or defined
contribution plan which is subject to the minimum funding standards of Section
412 of the Code shall be distributed as follows:
(a) If the participant is married on his annuity starting
date, such participant's account balances shall be applied for
the purchase of a qualified joint and survivor annuity, unless
the participant has elected to waive the qualified joint and
survivor annuity form of benefit during the applicable election
period or during such other period as the plan administrator in
its discretion may permit. The term "qualified joint and survivor
annuity" means an annuity payable for the life of a participant
with a survivor annuity payable for the life of the participant's
spouse which is not less than 50 percent of the amount of the
annuity payable during the joint life of the participant and his
spouse which may be purchased with the participant's account
balances.
(b) If the participant dies before his annuity starting
date and if he has a surviving spouse, a qualified preretirement
survivor annuity will be provided to the surviving spouse of such
participant unless such spouse consents or elects otherwise. The
term "qualified preretirement survivor annuity" means an annuity
for the life of the surviving spouse which is purchased with 50
percent of the account balances of the participant as of his date
of death. The first such annuity payment to the surviving spouse
shall not be later than the month in which the participant would
have attained age 55 years. The participant may elect to waive
the qualified preretirement survivor annuity during the
applicable election period or during such other period as the
plan administrator in its discretion may permit. For purposes of
this subsection, a participant's "surviving spouse" shall be the
spouse of the participant, if any, to whom the participant was
married throughout the one year period ending on the date of the
participant's death. In the event that a participant's surviving
spouse is entitled to a qualified preretirement survivor annuity
hereunder, the amount of the participant's account balances which
are not applied to the purchase of the qualified preretirement
survivor annuity shall be distributed in accordance with Article
6 of the plan. Notwithstanding the foregoing, the participant's
surviving spouse may at any time consent to have all of the
participant's benefits paid in accordance with his election filed
under Article 6.
(c) The plan administrator shall provide each participant
within a reasonable period of time before his annuity starting
date and, at least once during
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<PAGE> 23
the three plan years commencing with the plan year in which the
participant attains age 32 years, a written explanation of (i)
the terms and conditions of the qualified joint and survivor
annuity and the qualified preretirement survivor annuity, (ii)
the participant's right to make an election to waive each such
annuity form of benefit payments and the effect of such election,
(iii) the participant's right to revoke an election to waive such
annuity forms of benefit payments and the effect of such
revocation, and (iv) the rights of the participant's spouse under
this section.
(d) For purposes of subsection (a) above, the "applicable
election period" means the 90-day period ending on the annuity
starting date. For purposes of subsection (b) above, the term
"applicable election period" means the period which begins on the
first day of the plan year in which the participant attains age
35 years and ends on the date of the participant's death;
provided that in the case of a participant who has terminated his
employment with the Penton Companies, the applicable election
period shall not begin later than the date of his termination of
employment.
(e) The participant's election to waive the qualified
joint and survivor annuity or the qualified preretirement
survivor annuity shall not take effect unless (i) the spouse of
the participant consents in writing to such election, the
spouse's consent acknowledges the effect of such election and
such consent is witnessed by a plan representative or a notary
public, or (ii) it is established to the satisfaction of the plan
administrator that a required consent may not be obtained because
the participant is not married, because the spouse cannot be
located, or because such other circumstances of the Secretary of
the Treasury may by regulations prescribe. Any consent by a
spouse required under the preceding sentence shall be effective
only with respect to such spouse. The participant may revoke any
election to waive the qualified form of benefits at any time
during the applicable election period or during such other period
as the plan administrator may permit. If the participant has
filed an election meeting the requirements of this section or if
it is determined to the satisfaction of the plan administrator
that a participant has no spouse, then the plan administrator
shall distribute the participant's account balances under the
terms of Article 6 of the plan.
(f) For purposes of this section, the term "annuity
starting date" means the first day of the first period for which
an amount is received under this plan as an annuity.
(g) If the amount which is to be applied for the purchase
of an annuity under this section is not in excess of $5,000, then
the plan administrator may pay the participant or his surviving
spouse such amount in the form of a single sum distribution, in
lieu of paying such benefits in the form of an annuity.
4.13 RESTRICTED PARTICIPATION WITH RESPECT TO ROLLOVER
CONTRIBUTIONS AND TRANSFERRED BENEFITS. For purposes of the plan, a participant
with respect to whom a qualifying
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<PAGE> 24
rollover contribution or a transfer of benefits is made in accordance with
section 4.10 or 4.11, respectively, shall not be eligible to make salary
reduction or participant contributions or have matching employer contributions
made on his behalf before becoming a participant for all purposes of the plan in
accordance with section 2.1.
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<PAGE> 25
ARTICLE 5
---------
PLAN ACCOUNTING, INVESTMENT FUNDS AND COMPANY SHARES
----------------------------------------------------
5.1 SEPARATE PARTICIPANT ACCOUNTS. The plan administrator will
establish and maintain the following separate accounts with respect to plan
participants:
(a) An "employer contributions account" will be
maintained in the name of each participant for whom employer
contributions (other than salary reduction contributions) are
made which will reflect the employer's contributions (excluding
salary reduction contributions) made on his behalf to this plan
and the income, losses, appreciation and depreciation
attributable thereto.
(b) A "salary reduction contributions account" will be
maintained in the name of each participant who elects to have
salary reduction contributions made on his behalf which will
reflect the salary reduction contributions made on his behalf to
this plan and the income, losses, appreciation and depreciation
attributable thereto.
(c) A "nondeductible contributions account" will be
maintained in the name of each participant who elects to make
such contributions which will reflect his nondeductible
contributions made to this plan and the portion of his
transferred benefits from another plan attributable to his
nondeductible contributions to that plan, if any, and the income,
losses, appreciation and depreciation attributable thereto.
(d) A "rollover contributions account" will be maintained
in the name of each participant who elected to make such
contributions prior to the effective date which will reflect his
qualifying rollover contributions made to this plan and the
portions of his transferred benefits from another plan
attributable to his deductible contributions to that plan, if
any, and the income, losses, appreciation and depreciation
attributable thereto.
The plan administrator also may maintain such other accounts in the names of
participants as it considers desirable. Unless the context indicates otherwise,
reference in the plan to a participant's accounts or account balances shall
refer to all accounts maintained in his name under the plan. The maintenance of
separate accounts as provided above shall not require any physical segregation
of the trust fund with respect to such accounts. Participants shall at all times
have 100 percent vested and nonforfeitable interests in their salary reduction
contributions accounts, nondeductible contributions accounts, rollover
contributions accounts and employer contributions accounts under the plan.
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<PAGE> 26
5.2 ACCOUNTING DATES. An "accounting date" is each March 31, June
30, September 30, and December 31, the date of the termination or any partial
termination of the plan and any other date designated as such by the plan
administrator. The three month period (or shorter period in the case of a
special accounting date) ending on each accounting date is sometimes referred to
herein as an "accounting period."
5.3 DATE OF CREDITING CONTRIBUTIONS AND REMAINDERS. All employer
contributions and participant contributions made for any pay period ending
during an accounting period will be considered to have been made in cash and
will be credited to the proper participants' accounts on the accounting date
which ends that accounting period, regardless of when such contributions are
actually paid to the trust fund; provided that if the trustee or an investment
manager with respect to an investment fund (as described in section 5.4)
maintains participants' accounts and credits contributions received more
frequently than quarterly, contributions invested in that investment fund will
be considered made and will be credited as provided in accordance with the
accounting rules in effect with respect to that investment fund. Each remainder
shall be applied, as of the last day of the plan year in which the participant
with respect to whom the remainder arose terminated his employment, to reduce
the employer contribution otherwise required of the terminated participant's
employer for the pay period in which such last day of the plan year occurs (and
succeeding pay periods, if necessary) and shall be credited as an employer
contribution for such pay period. Notwithstanding anything in this section 5.3
to the contrary, remainders arising as a result of the reduction pursuant to
section 4.6 of employer contributions made on behalf of highly compensated
employees shall be allocated as of the last day of the plan year with respect to
which the remainder arose to the employer contributions accounts of participants
whose employer contributions were not reduced under section 4.6.
5.4 INVESTMENT FUNDS. From time to time the investment committee
appointed by the company with respect to the trust fund may cause one or more
investment funds (the "investment funds") to be established within the trust
fund for the investment of participants' accounts. The continued availability of
any investment fund is necessarily conditioned upon the terms and conditions of
the applicable investment management agreements and the continued availability
of investment funds established cannot be assured on the same terms and
conditions as
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<PAGE> 27
may apply from time to time. It is contemplated that, as of the effective date,
there will be established a "Company Stock Fund" which normally shall be
invested and reinvested primarily in shares of common stock of the company
("company shares") which qualify as "qualifying employer securities" under
Section 407(d)(5) of the Employee Retirement Income Security Act of 1974, as
amended. Any investment fund may be partially or entirely invested in any
common, commingled or collective trust fund, pooled investment fund or mutual
fund which is invested in property of the kind specified for that investment
fund.
5.5 INVESTMENTS IN COMPANY SHARES. Participants may elect to have
a portion or all of their accounts invested by the trustee in the Company Stock
Fund. For this purpose it is intended that the plan be considered an "eligible
individual account plan" which explicitly provides for the acquisition and
holding of "qualifying employer securities" (as those terms are defined in
Sections 407(d)(3) and 407(d)(5) of the Employee Retirement Income Security Act
of 1974, as amended) and that the trustee may invest up to 100 percent of the
trust fund held by it in company shares, to the extent elected by participants
and to the extent that such company shares are available at a price and on terms
which the trustee considers in the best interests of participants. Company
shares may be acquired by the trustee through purchases on the open market,
private purchases, purchases from the employers (including purchases from the
company of treasury shares or authorized by unissued shares), or otherwise.
Except as respects company shares purchased on the open market, no purchase of
company shares shall be made at a price in excess of the closing price on the
New York Stock Exchange for company shares on the business day on which company
shares were last traded next preceding the date of purchase.
5.6 INVESTMENT ELECTIONS. As of any date, each participant may
elect, by giving notice to the plan administrator (or plan record keeper, to the
extent so permitted by the plan administrator) in advance, in accordance with
uniform rules established by the plan administrator and, if so required by the
plan administrator (or plan record keeper, as applicable), (i) to have his
account balances as of that date (after all adjustments as of that date have
been made) invested in accordance with his election entirely in one of the
investment funds or partially in each of two or more of the investment funds or
(ii) to have future employee and employer contributions made by him or on his
behalf (prior to any subsequent election he may make) invested in accordance
with his election entirely in one of the investment funds or partially in each
of two or more of the
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investment funds. During any period for which a participant has not made either
or both of the above elections, he will be considered to have elected to have
his account balances or his future contributions, or both, as the case may be,
invested in one or more of the investment funds as designated by the investment
committee in a uniform and consistent manner. The plan administrator shall from
time to time notify each trustee or insurance company with custody of an
investment fund of the aggregate amounts to be invested in each investment fund
in accordance with participants' elections.
5.7 CHARGING PAYMENTS AND DISTRIBUTIONS. All payments,
withdrawals or other distributions made to or on behalf of a participant or his
beneficiary will be charged to the participant's accounts when made and (unless
otherwise directed by the participant or beneficiary) will be charged to the
investment funds in which the participant's accounts are invested in such manner
or pursuant to such procedures as shall be prescribed by the committee.
5.8 QUARTERLY ADJUSTMENT OF PARTICIPANTS' ACCOUNTS. As of each
accounting date, the plan administrator shall adjust the account balances of
plan participants to reflect payments and withdrawals of benefits, adjustments
in the values of the investment funds and employers' and participants'
contributions, as follows:
(a) First, all payments, withdrawals and transfers of
benefits made since the last preceding accounting date that have
not been charged previously shall be charged to the proper
accounts;
(b) Next, the accounts of each participant shall be
credited with his pro rata share of any increase, or charged with
his pro rata share of any decrease, since the next preceding
accounting date in the value of the adjusted net worth (as
defined below) of each investment fund in the trust fund in which
he has an interest as of that date (after taking into account any
charges in accordance with subsection (a) next above); provided
that if contributions invested in any particular investment fund
are credited more frequently than quarterly, each participant's
accounts will be credited with increases or decreases in the
adjusted net worth of that investment fund in accordance with the
accounting rules in effect with respect to that investment fund;
(c) Next, the employers' contributions (excluding salary
reduction contributions) and remainders, if any, that are to be
credited as of that date shall be credited to the proper
participants' employer contributions accounts;
(d) Next, the employers' salary reduction contributions
shall be credited to the proper participants' salary reduction
contributions accounts; and
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(e) Finally, participants' contributions (including
rollover contributions and transferred benefits), if any, that
are to be credited as of that date shall be credited to the
proper participants' rollover contributions accounts and
nondeductible contributions accounts.
The "adjusted net worth" of an investment fund as of any date means the then net
worth of the investment fund as determined by the trustee or insurance company
with custody of that investment fund in accordance with the provisions of the
applicable agreement with the trustee or insurance company (with unallocated
company shares in the Company Stock Fund being valued as provided in section
5.10 and with previously allocated company shares and company shares resulting
from stock dividends on or split ups of such previously allocated company shares
being disregarded), less an amount equal to the sum of any employers'
contributions and participants' contributions (including rollover contributions
and transferred benefits) held in that fund but not yet credited to the accounts
of participants.
5.9 STATEMENT OF ACCOUNTS. As soon as practicable after the last
day of each plan year, and at such other times as the plan administrator
considers desirable, each participant will be furnished with a statement
reflecting the condition of his accounts as of that date. No participant, except
a member of the plan administrative committee, shall have the right to inspect
the records reflecting the accounts of any other participant.
5.10 ALLOCATION OF COMPANY SHARES. As of each accounting date,
all unallocated company shares then held under the Company Stock Fund shall be
considered as purchased for the accounts of participants who have elected to
invest in the Company Stock Fund to the extent their respective accounts can be
charged therefor on the basis of the average purchase price paid for such
shares, and such company shares shall be so allocated to participants' accounts
and their accounts charged therefor. For purposes of allocating company shares
and charging accounts therefor, the average purchase price of company shares to
be charged to participants' accounts shall be determined by dividing the total
purchase price paid for all company shares purchased by the trustee since the
preceding accounting date by the total number of unallocated company shares
(excluding company shares resulting from stock dividends on or split ups of
allocated company shares). In applying the provisions of the next preceding
sentence, any unallocated company shares which have been contributed by the
employers as a part of the employers' contribution shall be deemed to have been
purchased by the trustee for an amount equal to the fair market value of
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such shares when they were contributed and any unallocated company shares to be
allocated as of an accounting date shall include company shares resulting from
trades which have been executed but not settled by that accounting date.
5.11 ADDITIONAL ACCOUNTING RULES. The following additional
accounting rules apply to participants who have elected to invest in the Company
Stock Fund and have had company shares credited to their accounts:
(a) As of each accounting date, uncredited cash dividends
attributable to company shares previously allocated to a
participant's accounts shall be credited to his accounts.
(b) As of each accounting date, uncredited whole and
fractional company shares resulting from stock dividends or split
ups attributable to company shares previously allocated to a
participant's accounts shall be credited to such accounts.
(c) If rights or warrants are issued with respect to any
company shares held by the trustee, such rights or warrants shall
be sold by the trustee and the proceeds thereof shall be
appropriately reflected in participants' accounts in accordance
with rules established by the committee and uniformly applied.
5.12 VOTING OF COMPANY SHARES. The trustee shall furnish to each
participant who has company shares credited to his accounts notice of the date
and purpose of each meeting of the stockholders of the company at which such
company shares are entitled to be voted. The trustee shall request from each
such participant instructions as to the voting at that meeting of company shares
credited to his accounts. If the participant furnishes such instructions to the
trustee within the time specified in the notification given to him, the trustee
shall vote such company shares in accordance with the participant's
instructions. All company shares credited to accounts as to which the trustee
does not receive voting instructions as specified above, and all unallocated
company shares held by the trustee, shall be voted by the trustee
proportionately in the same manner as it votes company shares to which the
trustee had received voting instructions as specified above. Similarly, the
trustee shall furnish to each participant who has company shares credited to his
accounts notice of any tender offer for, or a request or invitation for tenders
of, company shares made to the trustee. The trustee shall request from each such
participant instructions as to the tendering of company shares credited to his
accounts and for this purpose the trustee shall provide participants with a
reasonable period of time in which they may consider
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any such tender offer for or request or invitation for tenders of, company
shares made to the trustee. The trustee shall tender the company shares as to
which the trustee has received instructions to tender from participants within
the time specified by the trustee. Company shares credited to accounts as to
which the trustee has not received instructions from participants shall not be
tendered. As to all unallocated company shares held by the trustee, the trustee
shall tender the same proportion thereof as the company shares as to which the
trustee has received instructions from participants to tender bear to all
company shares with respect to which the trustee has received instructions from
participants to tender and not to tender. In carrying out its responsibilities
hereunder the trustee may rely on information furnished to it by the committee,
including the names and current addresses of participants, the number of company
shares credited to their accounts, and the number of shares held by the trustee
that have not yet been allocated.
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ARTICLE 6
---------
PAYMENT OF ACCOUNT BALANCES
---------------------------
6.1 BENEFIT PAYMENT. Upon the termination of a participant's
employment with the Penton Companies or upon the death of a participant, he
shall have a 100% vested and nonforfeitable interest in the balances of all of
his accounts, including his employer contributions account, and the balances in
all of his accounts, as of the accounting date coincident with or next following
the date of his termination of employment or death (after all adjustments
required under the plan as of that date have been made, but subject to any
further adjustments required under the plan prior to the complete distribution
of his accounts), along with any contributions made by him previously but not
credited to his accounts, shall be distributable to him, or in the event of his
death to his beneficiary in accordance with this Section 6.1. A participant's
account balances shall be paid to or for the benefit of the participant or his
beneficiary following his termination of employment or death by (i) payment in a
lump sum, (ii) payment in a series of substantially equal monthly, quarterly or
annual installments over a period of time not exceeding the lesser of (A) 30
years, or (B) the life expectancy of the participant or, if the participant has
designated a beneficiary who is an individual, the joint life and last survivor
expectancy of the participant and his designated beneficiary (as determined by
the plan administrator in accordance with the actuarial tables adopted by it for
this purpose), or (iii) a combination of such lump sum and installment payments.
Payments may be made in cash or property, or partly in each, provided that
property is distributed at its fair market value as of the date of distribution
as determined by the trustee. Notwithstanding the foregoing, if distribution of
a participant's accounts has not commenced prior to his death, the participant's
accounts shall be distributed within five years of the date of his death or as
follows:
(a) If the participant's accounts are payable to or for
the benefit of a designated beneficiary who is an individual and
such accounts are distributed over a period beginning not later
than one year after the participant's death (or such later date
as the Secretary of the Treasury may by regulations prescribe),
then such accounts may be distributed to such designated
beneficiary over a period not exceeding the lesser of 30 years or
the beneficiary's life expectancy.
(b) If the participant's designated beneficiary is his
surviving spouse, distribution of the participant's accounts to
such surviving spouse need not begin until the date the
participant would have attained age 70-1/2 years. If the
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surviving spouse dies before distributions to such spouse begin,
distribution of the participant's accounts pursuant to this
section 6.1 shall be made as if the surviving spouse were the
employee.
6.2 SELECTION OF TIME AND MANNER OF BENEFIT PAYMENT. A
participant may elect the method of distribution of his benefits and, if he so
desires, may direct how his benefits are to be paid to his beneficiaries. The
plan administrator shall select the method of distributing a participant's
benefits to him or his beneficiary if a participant has not filed a direction
with the plan administrator. Unless the participant or the plan administrator
elects to defer payment, payment of a participant's benefits normally will be
made, or installment payments normally will commence, within a reasonable period
of time after a participant's termination of employment, but not later than 60
days after the end of the plan year in which occurs the later of the
participant's termination of employment or his attainment of age 65 years;
provided that payment of his account balances must commence no later than April
1 of the calendar year following the calendar year in which he attains 70-1/2
years. In addition, notwithstanding anything in this Article 6 to the contrary,
no amount attributable to the employers' contributions made on behalf of a
participant while such participant was a five percent owner shall be distributed
to such participant before he attains age 59-1/2 years unless such distribution
is a result of the participant's disability within the meaning of Section
72(m)(7) of the Code. The participant and, if the participant is married at his
benefit commencement date, the participant's spouse must consent in writing to
the distribution of any part of the participant's benefits under the plan if (i)
the lump sum actuarially equivalent value of the participant's benefits is
greater than $5,000 and (ii) distribution is to commence before the participant
attains (or would have attained) age 65 years. No consent is required before the
commencement of the distribution of benefits if (i) the lump sum actuarially
equivalent value of the participant's benefits is not greater than $5,000, or
(ii) distribution commences after the participant attains (or would have
attained) age 65 years. Written consent of the participant and the participant's
spouse to the distribution must be filed with the plan administrator not more
than 90 days before the benefit commencement date.
6.3 DESIGNATED BENEFICIARIES. A participant may from time to time
designate a beneficiary or beneficiaries to whom the participant's benefits will
be distributed in the event of the participant's death prior to complete payment
of his benefits under the plan. A participant may designate contingent or
successive beneficiaries and may name individuals, legal persons or
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<PAGE> 34
entities, trusts, estates, trustees or other legal representatives as
beneficiaries. Notwithstanding the foregoing or any beneficiary designation
filed by a participant, if a participant is married at the date of his death,
the participant's surviving spouse will be his designated beneficiary for all
purposes of the plan unless the surviving spouse consents in writing to the
participant's designation of another beneficiary. Beneficiary designations must
be completed and filed with the plan administrator during the participant's
lifetime. A beneficiary designation properly completed and filed will cancel all
such designations filed earlier. The consent of a surviving spouse to the
participant's designation of another beneficiary must be in writing, must
acknowledge the effect of such designation, and must be witnessed by a plan
representative or a notary public.
6.4 PAYMENTS TO SUBSTITUTE BENEFICIARIES. If a participant fails
to designate a beneficiary before his death or if the beneficiary designated by
a participant dies before the date of the participant's death or before complete
payment of the participant's benefits, the plan administrator in its discretion
may direct the trustee to pay the participant's benefits to either one or more
of the participant's relatives by blood, adoption or marriage, in such
proportions as the plan administrator determines, or to the legal representative
or representatives of the estate of the last to die of the participant and his
designated beneficiary. Each participant and other person entitled to benefits
under the plan must from time to time file with the plan administrator in
writing his current post office address. Neither the employers nor the plan
administrator is required to search for or locate any participant or other
person entitled to benefits under the plan. If the plan administrator notifies a
person entitled to benefits under the plan that he is entitled to a payment at
his last post office address filed with the plan administrator and the
participant or other person entitled to benefits fails to claim his benefits or
make his whereabouts known to the plan administrator within three years after
the notification, his benefits will be disposed of, to the extent permitted by
federal law, as follows:
(a) If the whereabouts of the participant then is unknown
to the plan administrator, but the whereabouts of the
participant's designated beneficiary then is known to the plan
administrator, payment may be made to such designated
beneficiary.
(b) If the whereabouts of the participant and his
designated beneficiaries then is unknown to the plan
administrator, but the whereabouts of one or more relatives by
blood, adoption or marriage of the participant is known to
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the plan administrator, payment may be made to any one or more of
such relatives and in such proportions as the plan administrator
determines.
6.5 PAYMENT WITH RESPECT TO INCAPACITATED PARTICIPANTS OR
BENEFICIARIES. If any person entitled to benefits under the plan is under a
legal disability or, in the plan administrator's opinion, is incapacitated in
any way so as to be unable to manage his financial affairs, the plan
administrator may direct the payment of such benefits to such person's legal
representative, or to a relative or friend of such person for such person's
benefit, or the plan administrator may direct the application of such benefits
for the benefit of such person in any manner which the plan administrator may
select that is permitted by federal law and is consistent with the plan. Any
payments made in accordance with the foregoing provisions of this section shall
be a full and complete discharge of any liability for such payments.
6.6 DIRECT ROLLOVER OF DISTRIBUTIONS. (a) Notwithstanding any
provision of the plan to the contrary that would otherwise limit a distributee's
election under this Section, a distributee may elect, at the time and in the
manner prescribed by the plan administrator, to have any portion of an eligible
rollover distribution paid directly to an eligible retirement plan specified by
the distributee in a direct rollover.
(b) An "eligible rollover distribution" is any distribution of
all or any portion of the balance to the credit of the distributee, except that
an eligible rollover distribution does not include: any distribution that is one
of a series of substantially equal periodic payments (not less frequently than
annually) made for the life (or life expectancy) of the distributee or the joint
lives (or joint life expectancies) of the distributee and the distributee's
designated beneficiary, or for a specified period of ten years or more; any
distribution to the extent such distribution is required under Section 401(a)(9)
of the Code; and the portion of any distribution that is not includible in gross
income (determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
(c) An "eligible retirement plan" is an individual retirement
account described in Section 408(a) of the Code, an individual retirement
annuity described in Section 408(b) of the Code, an annuity plan described in
Section 403(a) of the Code, or a qualified trust described in Section 401(a) of
the Code, that accepts the distributee's eligible rollover distribution.
However,
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in the case of an eligible rollover distribution to the surviving spouse, an
eligible retirement plan is an individual retirement account or individual
retirement annuity.
(d) A "distributee" includes an employee or former employee. In
addition, the employee's or former employee's surviving spouse and the
employee's or former employee's spouse or former spouse who is the alternate
payee under a qualified domestic relations order, as defined in Section 414(p)
of the Code, are distributees with regard to the interest of the spouse or
former spouse.
(e) A "direct rollover" is a payment by the plan to the eligible
retirement plan specified by the distributee."
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ARTICLE 7
---------
WITHDRAWALS AND LOANS DURING EMPLOYMENT,
----------------------------------------
VOLUNTARY INSURANCE COVERAGE
----------------------------
7.1 WITHDRAWAL OF PARTICIPANT CONTRIBUTIONS. A participant may
withdraw not more than his total unwithdrawn contributions which have been
credited to his nondeductible contributions account (but not in excess of the
then balance in such account) by filing a written request with the plan
administrator at least 30 days in advance.
7.2 AGE 59-1/2 AND HARDSHIP WITHDRAWALS. A participant who has
attained age 59-1/2 years or who is experiencing a financial hardship may
request a withdrawal of all or any portion of his accounts except his employer
contributions account (and except earnings attributable after January 1, 1989 to
his salary reduction contributions) by filing a written request with the plan
administrator at least 30 days in advance. The plan administrator will have
discretion to grant or deny any such requests for hardship withdrawals, subject
to the following:
(a) Each request for financial hardship must describe the
hardship for which the withdrawal is requested.
(b) A withdrawal shall be considered on account of
financial hardship if it is necessary in light of the
participant's immediate and heavy financial need as described in
(i) below and it is necessary to satisfy such financial need, as
described in (ii) below.
(i) A withdrawal will be on account of immediate
and heavy financial need only if it is on account of (A)
medical expenses incurred by the participant or the
participant's spouse or dependents; (B) the purchase
(excluding mortgage payments) or major improvement of a
principal residence for the participant; (C) payment of
tuition of post-secondary education for the participant
or the participant's spouse, children or dependents; (D)
the need to prevent the eviction of the participant from
the participant's principal residence or the foreclosure
on the mortgage of the participant's principal residence;
or (E) such other purpose deemed by the Commissioner of
the Internal Revenue Service to constitute immediate and
heavy financial need.
(ii) A withdrawal will be necessary to satisfy the
financial need described in (i) above only if (A) the
withdrawal does not exceed the amount necessary to meet
such financial needs; and (B) the participant has
obtained all distributions, other than hardship
withdrawals, currently available under all plans
maintained by the employers.
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<PAGE> 38
7.3 LOANS TO PARTICIPANTS. While it is the primary purpose of the
plan to provide funds for participants when they leave the Penton Companies, it
is recognized under some circumstances it would be in the best interests of
participants to permit loans to be made to them. Accordingly, the plan
administrator may direct that a loan be made to a participant for such purposes
as would qualify as financial hardships under section 7.2 and such other
financial hardships as the plan administrator in its discretion may approve,
subject to the provisions of Supplement A to the plan.
7.4 NO REPRESENTATION REGARDING TAX EFFECT OF WITHDRAWALS OR
LOANS. All withdrawals are made on a pro rata basis among the applicable
investment funds unless otherwise specified in writing by the participant.
Neither the employers, the plan administrator, the trustee nor any other person
shall be construed as representing the tax effects of any withdrawals or loans
in accordance with this Article. It shall be the responsibility of participants
requesting withdrawals or loans to consider the tax effects of such withdrawals
or loans requested by such participant.
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ARTICLE 8
---------
MAXIMUM CONTRIBUTIONS
---------------------
8.1 CONTRIBUTION LIMITATIONS. Section 415 of the Code imposes
certain limitations on the amount of contributions that may be allocated to a
participant under a defined contribution plan (as defined in Section 414(i) of
the Code) maintained by his employer. If a participant in a defined contribution
plan maintained by his employer also is a participant in a defined benefit plan
(as defined in Section 414(j) of the Code) maintained by his employer, Section
415 of the Code imposes certain combined limitations as to the aggregate amount
of contributions and benefits that may be provided for the participant under
both types of plans. This plan is a defined contribution plan and, therefore,
each participant in the plan shall be subject to the maximum contribution and
benefit limitations set forth in section 8.2 or section 8.3, whichever applies,
irrespective of any other provisions of the plan. For purposes of Section 415 of
the Code and this Article 9, the "limitation year" with respect to this plan is
the plan year, and a participant's "total compensation" means, with respect to
any plan year, the total compensation paid to the participant during that year
for services rendered to the Penton Companies as an employee that is subject to
withholding for federal income tax purposes (before taking into account any
withholding exemptions), plus the amount of any salary reduction contributions
made pursuant to this plan or any other plan that satisfies the requirements of
Section 401(k) or 125 of the Code, but excluding any noncash compensation and
any compensation deferred beyond the participant's termination of employment. In
applying the limitations set forth in sections 8.2 and 8.3, reference to the
plan shall mean the plan and all other defined contribution plans (whether or
not terminated) maintained by the Penton Companies ("related defined
contribution plans") and reference to a defined benefit plan maintained by the
Penton Companies shall mean that plan and all other defined benefit plans
(whether or not terminated) ("related defined benefit plans") maintained by the
Penton Companies.
8.2 PARTICIPANT COVERED BY DEFINED CONTRIBUTION PLAN ONLY. If a
participant in the plan is not covered by a defined benefit plan maintained by
the Penton Companies, the annual addition (as defined below) which is allocated
to his accounts under this plan and under any related defined contribution plans
maintained by the Penton Companies shall not exceed the lesser of $30,000 (or,
if greater, one-fourth of the defined benefit dollar limitation set forth in
Section
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<PAGE> 40
415(b)(1) of the Code, as adjusted pursuant to Section 415(d) thereof for such
year), (the "defined contribution dollar limitation") or 25 percent of the
participant's total compensation for such limitation year. In applying the
preceding limitation, the annual addition to a participant's accounts under any
such related defined contribution plan will be limited before the annual
addition to his account under this plan is limited. Any excess contributions
resulting from the allocation of forfeitures, a reasonable error in estimating a
participant's annual earnings or such other limited facts and circumstances as
the Commissioner of the Internal Revenue Service may prescribe and not allocable
to a participant's accounts under the plan by reason of the limitations on
additions under Section 415 of the Code shall be disposed of as follows:
(a) Any nondeductible voluntary contributions to the
extent they would reduce the excess amount shall be returned to
the participant;
(b) If after the application of subsection (a) above an
excess amount still exists, any elective contributions described
in subsection 3.1(b) elected by a participant in accordance with
section 3.1 which cannot be credited to a participant's accounts
because of the limitations of this section 8.2 or section 8.3
shall be returned to the participant along with earnings accrued
thereon;
(c) If after the application of subsections (a) and (b)
above an excess amount still exists, and if the participant is
covered by the plan at the end of the limitation year, the excess
amount shall be used to reduce employer contributions for such
participant in the next limitation year, and each succeeding year
if necessary; and
(d) If after the application of subsections (a) and (b)
above an excess amount still exists and the participant is not
covered by the plan at the end of the limitation year, the excess
amount shall be held unallocated in a suspense account and the
suspense account shall be applied to reduce future employer
contributions for all remaining participants in the next
limitation year, and each succeeding limitation year if
necessary.
A participant's "annual addition" for any plan year means the sum
for that year of the following:
(i) EMPLOYER CONTRIBUTIONS. Employer contributions
(including elective contributions) credited to the participant's
accounts under this plan and under any related defined
contribution plans;
(ii) FORFEITURES. Forfeitures credited to the
participant's accounts under this plan or under any related
defined contribution plans;
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<PAGE> 41
(iii) PARTICIPANT VOLUNTARY CONTRIBUTIONS. The amount
of the participant's voluntary contributions to any related
defined contribution or defined benefit plan (determined without
regard to rollover contributions, if any); and
(iv) CERTAIN MEDICAL EXPENSES FOR KEY EMPLOYEES. The
amounts attributable to medical benefits allocated to an account
of a key employee, as described in Section 419A(d) of the Code.
8.3 PARTICIPANT COVERED BY DEFINED CONTRIBUTION PLAN AND DEFINED
BENEFIT PLAN. Prior to January 1, 2000, if a participant in the plan also is a
participant in a defined benefit plan maintained by the Penton Companies, the
contributions made on behalf of the participant and the benefits payable to the
participant shall be determined in a manner consistent with Section 415 of the
Code, as follows:
(a) DEFINED CONTRIBUTION FRACTION. A fraction shall be
determined, the numerator of which shall be the participant's
annual additions under all related defined contribution plans for
each limitation year (determined in accordance with the plan
provisions as in effect for such year), and the denominator of
which shall be the aggregate of the "defined contribution
limitation amounts" in effect for each year of the participant's
employment by the Penton Companies. The "defined contribution
limitation amount" for any limitation year shall be the lesser of
(i) 1.25 multiplied by the dollar limitation in effect under
Section 415(c)(1)(A) of the Code for such year, provided that in
any year in which the plan would be a top-heavy plan if 90
percent were substituted for 60 percent in section 13.2, 1.0
shall be substituted for 1.25, or (ii) 1.4 multiplied by 25
percent of the participant's total compensation for such year.
The "defined contribution limitation amount", for any year shall
be the lesser of (i) 1.25 multiplied by the dollar limitation in
effect under Section 415(c)(l)(A) of the Code for such year,
provided that in any year in which the plan would be a top-heavy
plan if 90 percent were substituted for 60 percent in section
13.2, 1.0 shall be substituted for 1.25, or (ii) 1.4 multiplied
by 25 percent of the participant's total compensation for such
year. The numerator of this fraction shall be adjusted in
accordance with applicable regulations to preserve the
participant's benefits accrued as of the close of the last
limitation year beginning before December 31, 1986.
(b) DEFINED BENEFIT FRACTION. A fraction shall also be
determined, the numerator of which shall be the benefits accrued
or payable to or for such participant under the related defined
benefit plans as of the end of the limitation year, and the
denominator of which shall be the "defined benefit limitation
amount" in effect for that year. The "defined benefit limitation
amount" for any limitation year shall be the lesser of (i) 1.25
multiplied by the dollar limitation in effect under Section
415(b)(1)(A) of the Code for such year, provided that in any year
in which the plan would be a top-heavy plan if 90 percent were
substituted for 60 percent in
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section 13.2, 1.0 shall be substituted for 1.25, or (ii) 1.4
multiplied by 100 percent of the participant's average annual
total compensation for the three consecutive plan years during
which the participant actively participated in such a plan and in
which the participant's aggregate total compensation was the
greatest; provided that such amount shall be appropriately
adjusted if necessary as provided in Section 415(b) of the Code.
(c) COMBINED LIMITATION. The contributions under this
plan and under any related defined contribution plans and the
benefits under all related defined benefit plans will be adjusted
to the extent necessary (by first adjusting the benefits and
contributions under such other plans) so that the sum of the
fractions determined with respect to any participant in
accordance with subsections (a) and (b) above will not exceed 1.0
(or such other applicable maximum amount permitted by law).
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ARTICLE 9
---------
GENERAL PROVISIONS
------------------
9.1 EXAMINATION OF PLAN DOCUMENTS. Copies of the plan and any
amendments thereto will be on file at the principal office of each employer
where they may be examined by any participant or any other person entitled to
benefits under the plan.
9.2 NOTICES. Any notice or document relating to the plan required
to be given to or filed with the plan administrator or any employer shall be
considered as given or filed if delivered or mailed by registered or certified
mail, postage prepaid, to the plan administrator, in care of the company, at
1100 Superior Avenue, Cleveland, Ohio 44114.
9.3 NONALIENATION OF PLAN BENEFITS. The rights or interests of
any participant or any participant's beneficiaries to any benefits or future
payments under the plan shall not be subject to attachment or garnishment or
other legal process by any creditor of any such participant or beneficiary, nor
shall any such participant or beneficiary have any right to alienate,
anticipate, commute, pledge, encumber or assign any of the benefits or rights
which he may expect to receive (contingently or otherwise) under the plan,
except as may be required by the tax withholding provisions of the Code or of a
state's income tax act or pursuant to a qualified domestic relations order (as
defined in Section 414(p) of the Code); provided that all such amounts are only
payable under the plan in the form of an immediate single sum payment.
9.4 NO EMPLOYMENT OR BENEFIT GUARANTY. None of the establishment
of the plan, any modification thereof, the creation of any fund or account, or
the payment of any benefits shall be construed as giving to any participant or
other person any legal or equitable right against the employers, the plan
administrator or any trustee except as provided herein. Under no circumstances
shall the maintenance of this plan constitute a contract of employment or shall
the terms of employment of any participant be modified or in any way affected
hereby. Accordingly, participation in the plan will not give any participant a
right to be retained in the employ of any employer. Neither the plan
administrator nor any employer in any way guarantees any assets of the plan from
loss or depreciation or any payment to any person. The liability of the plan
administrator or any employer as to any payment or distribution of benefits
under the plan is limited to the available assets of the trust fund.
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<PAGE> 44
9.5 LITIGATION. In any action or proceeding regarding any plan
assets, any plan benefits or the administration of the plan, employees or former
employees of the employers, their beneficiaries and any other persons claiming
to have an interest in the plan shall not be necessary parties and shall not be
entitled to any notice of process. Any final judgment which is not appealed or
appealable and which may be entered in any such action or proceeding shall be
binding and conclusive on the parties hereto and on all persons having or
claiming to have any interest in the plan. To the extent permitted by law, if a
legal action is begun against the plan administrator, an employer, or any
trustee by or on behalf of any person and such action results adversely to such
person, or if a legal action arises because of conflicting claims to a
participant's or other person's benefits, the cost of the employers, the plan
administrator, or the trustee of defending the action will be charged to the
sums, if any, which were involved in the action or were payable to the
participant or the other person concerned. Acceptance of participation in the
plan shall constitute a release of the Penton Companies, the plan administrator,
any trustee and their agents from any and all liability and obligation not
involving willful misconduct or gross neglect to the extent permitted by
applicable law. Notwithstanding any other provisions of the plan, if the plan
administrator is required by a final court order to distribute the benefits of a
participant other than in a manner required under the plan, then the plan
administrator shall cause the participant's benefits to be distributed in a
manner consistent with such final court order. However, the plan administrator
shall not be required to comply with the requirements of a final court order in
an action in which the plan administrator, a trustee, the plan or the trust was
not a party, except to the extent such a final court order is a qualified
domestic relations order requiring an immediate single sum payment.
9.6 EVIDENCE. Evidence required of anyone under the plan shall be
signed, made or presented by the proper party or parties and may be by
certificate, affidavit, document or other information which the person acting
thereon considers pertinent and reliable.
9.7 GENDER AND NUMBER. Words denoting the masculine gender shall
include the feminine and neuter genders, the singular shall include the plural
and the plural shall include the singular wherever required by the context.
9.8 WAIVER OF NOTICE. Any notice required under the plan may be
waived by the person entitled to notice.
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<PAGE> 45
9.9 APPLICABLE LAW. The plan shall be construed in accordance
with the provisions of the Employee Retirement Income Security Act of 1974, as
amended, and other applicable federal laws and, to the extent not inconsistent
with such laws, with the laws of the state of Illinois.
9.10 SEVERABILITY. If any provisions of the plan shall be held
illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining provisions of the plan, and the plan shall be construed and
enforced as if such illegal and invalid provisions had never been set forth in
the plan.
9.11 FIDUCIARY RESPONSIBILITIES. It is specifically intended that
all provisions of the plan shall be applied so that all fiduciaries with respect
to the plan shall be required to meet the prudence and other requirements and
responsibilities of applicable law to the extent such requirements of
responsibilities apply to them. No provisions of the plan are intended to
relieve a fiduciary from any responsibility, obligation, duty or liability
imposed by applicable law. In general, a fiduciary shall discharge his duties
with respect to the plan solely in the interests of participants and other
persons entitled to benefits under the plan and with the care, skill, prudence,
and diligence under the circumstances then prevailing that a prudent man acting
in a like capacity and familiar with such matters would use in the conduct of an
enterprise of like character and with like aims.
9.12 FUNDING OF PLAN BENEFITS. A "trust fund" will be maintained
in order to implement and carry out the provisions of the plan. The trust fund
from time to time shall consist of one or more funds established through one or
more trust agreements or through a combination of insurance contracts and trust
agreements, as determined by the company. Such funds shall be maintained for the
purpose of receiving and holding contributions to the plan and the interest and
other income thereon and paying benefits provided under the plan. The company
shall determine the form and terms of each insurance contract and trust
agreement and from time to time may direct the transfer of amounts held in any
such fund to any such other fund in accordance with the provisions of the
applicable trust agreements or insurance contracts. Subject to applicable law,
benefits provided through any insurance contract will be paid in accordance with
its terms and conditions.
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<PAGE> 46
9.13 SUPPLEMENTS. From time to time supplements may by amendment
be attached to and form a part of this plan. Such supplements may modify or
supplement the provisions of the plan as they apply to particular groups of
employees or groups of participants, shall specify the persons affected by such
supplements and shall supersede the other provisions of the plan to the extent
necessary to eliminate inconsistencies between the plan provisions and the
provisions of such supplements.
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<PAGE> 47
ARTICLE 10
----------
RELATING TO PLAN ADMINISTRATION
-------------------------------
10.1 PLAN ADMINISTRATOR'S DUTIES. As provided in section 1.2, a
committee appointed by the company is responsible for the administration of the
plan. Except as otherwise specifically provided and in addition to the powers,
rights and duties specifically given to the plan administrator elsewhere in the
plan, the plan administrator shall have the following powers, rights and duties:
(a) To construe and interpret the plan, to decide all
questions of plan eligibility, to make findings of fact, to
determine the amount, manner and time of payment of any benefits
under the plan, and to remedy ambiguities, inconsistencies or
omissions.
(b) To adopt such rules of procedure as may be necessary
for the efficient administration of the plan and as are
consistent with its terms and such rules.
(c) To make determination as to the right of any person
to a benefit, to afford any person dissatisfied with such
determination the right to a hearing thereon, and to direct
payments or distributions from the trust fund in accordance with
the provision of the plan.
(d) To furnish the employers with such information as may
be required by them for tax or other purposes in connection with
the plan.
(e) To enroll participants in the plan, distribute and
receive plan administration forms and comply with all applicable
governmental reporting and disclosure requirements.
(f) To employ agents, attorneys, accountants, actuaries
or other persons (who also may be employed by the employers, the
trustee, or any investment manager or managers) and to allocate
or delegate to them such powers, rights and duties as the plan
administrator considers necessary or advisable to properly carry
out the administration of the plan, provided that any such
allocation or delegation and the acceptance thereof must be in
writing.
(g) To administer loans under the plan.
(h) To amend Supplement A to the plan.
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<PAGE> 48
10.2 ACTION BY PLAN ADMINISTRATOR. During a period in which two
or more plan administrative committee members are acting, any action by the plan
administrator will be subject to the following provisions:
(a) The committee may act by meeting or by document
signed without meeting, and documents may be signed through the
use of a single document or concurrent documents.
(b) A committee member by writing may delegate part or
all of his rights, powers, duties and discretions to any other
committee member, with such other committee member's consent.
(c) The committee shall act by a majority decision, which
action shall be as effective as if such action had been taken by
all members of the committee; provided that by majority action
one or more committee members or other persons may be authorized
to act with respect to particular matters on behalf of all
committee members.
(d) If there is an equal division among the committee
members with respect to any questions, a disinterested party may
be selected by a majority vote to decide the matter. Any decision
by such disinterested party will be binding.
(e) The certificate of the secretary of the committee or
the majority of the committee members that the committee has
taken or authorized any action shall be conclusive in favor or
any person relying on such certificate.
(f) Except as required by law no member of the committee
shall be liable or responsible for an act or omission of other
committee members in which the former has not concurred.
10.3 INFORMATION REQUIRED FOR PLAN ADMINISTRATION. The employers
shall furnish the plan administrator with such data and information as it
considers necessary or desirable to perform its duties with respect to plan
administration. The records of an employer as to an employee's or participant's
period or periods of employment, termination of employment and reason therefor,
leaves of absence, reemployment and compensation will be conclusive on all
persons unless determined to the plan administrator's satisfaction to be
incorrect. Participants and other persons entitled to benefits under the plan
also shall furnish the plan administrator with such evidence, data or
information as the plan administrator considers necessary or desirable for the
plan administrator to perform its duties with respect to plan administration.
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<PAGE> 49
10.4 DECISION OF PLAN ADMINISTRATOR FINAL. Subject to applicable
law and the provisions of section 10.5, any interpretation of the provisions of
the plan and any decision on any matter within the discretion of the plan
administrator made by the plan administrator in good faith shall be binding on
all persons. A misstatement or other mistake of fact shall be corrected when it
becomes known and the plan administrator shall make such adjustment on account
thereof as the plan administrator considers equitable and practicable.
10.5 REVIEW OF BENEFIT DETERMINATIONS. If a claim for benefits
made by a participant or his beneficiary is denied, the plan administrator shall
within 90 days (or 180 days if special circumstances require an extension of
time) after the claim is made furnish the person making the claim with a written
notice specifying the reasons for the denial. Such notice shall also refer to
the pertinent plan provisions on which the denial is based, describe any
additional material or information necessary for properly completing the claim
and explain why such material or information is necessary, and explain the
plan's claim review procedures. If requested in writing, the plan administrator
shall afford each claimant whose claim has been denied a full and fair review of
the plan administrator's decision and, within 60 days (120 days if special
circumstances require additional time) of the request for reconsideration of the
denied claim, the plan administrator shall notify the claimant in writing of the
plan administrator's final decision.
10.6 UNIFORM RULES. The plan administrator shall perform its
duties with respect to plan administration on a reasonable and nondiscriminatory
basis and shall apply uniform rules to all participants similarly situated.
10.7 PLAN ADMINISTRATOR'S EXPENSES. All costs, charges and
expenses reasonably incurred by the plan administrator will be paid by the
employers in such proportions as the company shall direct; provided that no
compensation will be paid to a committee member as such.
10.8 INTERESTED PLAN ADMINISTRATOR. If a member of the plan
administrative committee is also a participant in the plan, he may not decide or
determine any matter or questions concerning his benefits unless such decision
or determination could be made by him under the plan if he were not a committee
member.
10.9 RESIGNATION OR REMOVAL OF PLAN ADMINISTRATIVE COMMITTEE
MEMBERS. A member of the committee may be removed by the company at any time by
10 days' prior notice to him and the other members of the committee. A member of
the committee may resign at any time
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by giving 10 days' prior written notice to the company and the other members of
the committee. The company may fill any vacancy in the membership of the
committee; provided, however, that if a vacancy reduces the membership of the
committee to less than three, such vacancy shall be filled as soon as
practicable. The company shall give prompt written notice thereof to the other
members of the committee. Until any such vacancy is filled, the remaining
members may exercise all of the powers, rights and duties conferred on the plan
administrator.
10.10 INDEMNIFICATION. To the extent permitted by law, no person
(including the employers, a trustee, any present or former plan administrative
committee member, and any present or former director, officer or employee of any
employer) shall be personally liable for any act done or omitted to be done in
good faith in the administration of the plan or the investment of the trust
fund. To the extent permitted by law, each present or former director, officer
or employee of any employer to whom the plan administrator or an employer has
delegated any portion of its responsibilities under the plan and each present or
former plan administrative committee member shall be indemnified and saved
harmless by the employers (to the extent not indemnified or saved harmless under
any liability insurance or other indemnification arrangement with respect to the
plan) from and against any and all claims of liability to which they are
subjected by reason of any act done or omitted to be done in good faith in
connection with the administration of the plan or the investment of the trust
fund, including all expenses reasonably incurred in their defense if the
employers fail to provide such defense.
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ARTICLE 11
----------
RELATING TO THE EMPLOYERS
-------------------------
11.1 ACTION BY EMPLOYERS. Any action required or permitted of an
employer under the plan shall be by resolution of its Board of Directors or by a
duly authorized committee of its Board of Directors, or by a person or persons
authorized by resolution of its Board of Directors or such committee.
11.2 ADDITIONAL EMPLOYERS, THE PENTON COMPANIES. Pursuant to the
terms of the plan as heretofore in effect, certain subsidiaries of Penton have
adopted the plan and become employers hereunder, to wit: (i) D-M Acquisition
Corp. and (ii) Curtin & Pease/Peneco, Inc. Subject to any applicable collective
bargaining agreement, any subsidiary or other related company that is not an
employer may hereafter adopt the plan and become an employer hereunder by filing
with the trustee and the plan administrator a certified copy of a resolution of
the Board of Directors of the subsidiary or other related company providing for
its adoption of the plan and a certified copy of a resolution of the Board of
Directors of the company consenting to such adoption. For this purpose, a
"subsidiary" means any corporation 50 percent or more of the voting stock of
which is directly or indirectly owned by the company and a "related company"
means any corporation which directly or indirectly owns 50 percent or more of
the voting stock of the company and any corporation (other than the company and
its subsidiaries) 50 percent or more of the voting stock of which is directly or
indirectly owned by any corporation which directly or indirectly owns 50 percent
or more of the voting stock of the company. The term "Penton Companies" includes
the employers and all subsidiaries and related companies that have not adopted
the plan (and each such corporation is sometimes referred to herein individually
as a "Penton Company"). Any corporation which is not an employer under the plan
and which does not qualify as a subsidiary or related company but is either (i)
a member of a controlled group of corporations (within the meaning of Section
1563(a) of the Code, determined without regard to Sections 1563(a)(4) and
1563(e)(3)(C) thereof) which contains an employer under the plan, or (ii) a
member of an affiliated service group (as defined in Section 414(m) of the Code)
which contains an employer under the plan shall, for purposes of the plan, be
considered as a subsidiary or related company that has not adopted the plan and,
therefore, as a Penton Company for purposes of certain determinations as to
employment with the Penton Companies.
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11.3 RESTRICTIONS AS TO REVERSION OF TRUST FUND TO EMPLOYERS. The
employers shall have no right, title or interest in the assets of the plan, nor
will any part of the assets of the plan at any time revert or be repaid to an
employer, directly or indirectly, except as follows:
(a) If the Internal Revenue Service initially determines
that the plan, as applied to any employer, does not meet the
requirements of a "qualified plan" under Section 401(a) of the
Code, the assets of the plan attributable to contributions made
by that employer under the plan shall be returned to that
employer within one year of the date of denial of qualification
of the plan as applied to that employer.
(b) If a contribution or a portion of a contribution is
made by an employer as a result of a mistake of fact, such
contribution or portion of a contribution shall not be considered
to have been contributed under the plan by that employer and,
after having been reduced by any losses of the trust fund
allocable thereto, shall be returned to that employer within one
year of the date the amount is contributed under the plan.
(c) Each contribution made by an employer is conditioned
upon the continued qualification of the plan and the
deductibility of such contribution as an expense for federal
income tax purposes and, therefore, to the extent that a
contribution is made by an employer under the plan for a period
for which the plan is not a qualified plan or the deduction for a
contribution made by the employer is disallowed, then such
contribution or portion of a contribution, after having been
reduced by any losses of the trust fund allocable thereto, shall
be returned to that employer within one year of the date of
determination of the nonqualified status of the plan or the date
of disallowance of the deduction.
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ARTICLE 12
----------
AMENDMENT AND TERMINATION
-------------------------
12.1 AMENDMENT. While the employers expect and intend to continue
the plan, the company must necessarily reserve and hereby does reserve the
right, subject to section 11.3, to amend the plan from time to time, except that
(i) the duties and liabilities of the plan administrator cannot be changed
substantially without its consent, (ii) the plan administrator shall have the
power to amend Supplement A to the plan, and (iii) no amendment shall reduce the
value of a participant's benefits to less than the amount he would be entitled
to receive if he had resigned from the employ of all of the Penton Companies on
the day of the amendment.
12.2 TERMINATION. The plan will terminate as to all employers on
any date specified by the company, and as to any employer on any date specified
by that employer if 10 days' advance written notice of the termination is given
to the plan administrator and any other employers. The plan also will terminate
as to an individual employer on the first to occur of the date that employer is
judicially declared bankrupt or insolvent, the date that employer ceases to
qualify as a subsidiary or related company, or the dissolution, merger,
consolidation or reorganization of that employer, or the sale by that employer
of all or substantially all of its assets, except that in any such event
arrangements may be made with the consent of the company whereby the plan will
be continued by any successor to that employer or any purchaser of all or
substantially all of its assets without a termination thereof, in which case the
successor or purchaser will be substituted for that employer under the plan;
provided that if any employer is merged, dissolved or in any way reorganized
into, or consolidated with, any other employer, the plan as applied to the
former employer will automatically continue in effect without a termination
thereof. Notwithstanding the foregoing, if any of the events described above
should occur but some or all of the participants employed by an employer are
transferred to employment with one or more of the other employers coincident
with or immediately after the occurrence of such event, the plan as applied to
those participants will automatically continue in effect without a termination
thereof.
12.3 VESTING AND DISTRIBUTION ON TERMINATION. On termination or
partial termination of the plan, the date of termination will be a "special
accounting date" and, after all adjustments then required have been made, each
affected participant will have a 100 percent
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<PAGE> 54
vested and nonforfeitable interest in all of his accounts, including his
employer contributions account. If a participant remains an employee of the
Penton Companies following the termination of the plan, his benefits shall
remain in the trust fund until his termination of employment with all of the
Penton Companies and then shall be paid to him in accordance with the provisions
of section 6.1.
12.4 PLAN MERGER. In no event shall there by any merger or
consolidation of the plan with, or transfer of assets or liabilities to, any
other plan unless each participant in the plan would (if the plan then
terminated) receive a benefit immediately after the merger, consolidation or
transfer which is equal to or greater than the benefit the participant would
have been entitled to receive immediately before the merger, consolidation or
transfer (if the plan had then terminated).
12.5 NOTICE OF AMENDMENT, TERMINATION OR PLAN MERGER.
Participants affected thereby will be notified of an amendment, termination,
merger or consolidation of the plan within a reasonable time.
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<PAGE> 55
ARTICLE 13
----------
TOP-HEAVY PLAN RULES
--------------------
13.1 KEY EMPLOYEES. An employee or former employee shall be a
"key employee" for any plan year if during such plan year or during any of the
four preceding plan years the employee is:
(a) an officer of an employer having an annual
compensation greater than 150 percent of the amount in effect
under Section 415(c)(1)(A) of the Code for any such plan year;
(b) one of the ten employees of an employer having annual
compensation from the employer of more than the limitation in
effect under Section 415(c)(1)(A) of the Code and owning (or
considered as owning within the meaning of Section 318 of the
Code) the largest interests in the employer;
(c) any person who owns (or is considered as owning
within the meaning of Section 318 of the Code) more than five
percent of the outstanding stock of an employer or stock
possessing more than five percent of the total combined voting
power of all an employer's stock; or
(d) any person having annual compensation in excess of
$150,000 who owns (or is considered as owning within the meaning
of Section 318 of the Code) more than one percent of the
outstanding stock of an employer or stock possessing more than
one percent of the total combined voting power of all an
employer's stock.
For purposes of subsection (a) above, if the number of officers exceeds 50, only
the 50 officers with the highest compensation shall be considered key employees
and if the number of officers is less than 50, the number of officers considered
key employees shall not exceed the greater of three such officers or ten percent
of all employees. For purposes of subsections (c) and (d) above, Section
318(a)(2)(C) of the Code shall be applied by substituting "five percent" for the
reference to "50 percent" therein and the rules of Section 414(b), (c) and (m)
of the Code shall not apply for determining ownership in an employer. For
purposes of this Article 13, the term "employer" includes the Penton Companies,
all corporations which are members of a controlled group of corporations which
includes an employer under Section 414(b) of the Code, all trades or businesses
(whether or not incorporated) which are under common control with an employer
under Section 414(c) of the Code and any service or other organization which is
a member of an
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affiliated service group with an employer under Section 414(m) of the Code. In
addition, for purposes of this Article 14 the beneficiary of a key employee
shall be considered a key employee.
13.2 TOP-HEAVY PLAN. The plan will be considered a "top-heavy
plan" for any plan year if as of the last day of the preceding plan year (but
the last day of the initial plan year in the case of that year) (the
"determination date") the sum of (i) the aggregate of the accounts of all key
employees under the plan and all other defined contribution plans in an
aggregation group of plans as described in section 14.3 below, and (ii) the
present value (using the 1984 unisex pension mortality table and interest at a
rate of six percent per annum) of the aggregate cumulative accrued benefits for
key employees under all defined benefit plans in an aggregation group of plans,
exceeds 60 percent of such sum determined for all participants under all such
plans, excluding participants who are former key employees. There shall be
included in the determination of a participant's accounts and accrued benefit
under such plans any amounts distributed to him during the preceding five year
period. Notwithstanding the foregoing, if any individual has not received any
compensation from the employers (other than benefits under the plan) at any time
during the five-year period ending on the determination date, any account of
such individual (and the accrued benefit for such individual) shall not be
included for purposes of this section. Furthermore, a rollover contribution
initiated by a participant and made to any plan in an aggregation group of plans
shall not be taken into account for purposes of determining whether the plan is
a top-heavy plan.
13.3 AGGREGATION GROUPS. All plans in a required aggregation
group of plans shall be considered to be top-heavy plans if either the required
or permissive aggregation group of plans is determined to be top-heavy under
section 13.2 above. If the required or permissive aggregation group of plans is
not a top-heavy group, no plans in the group shall be considered to be top-heavy
plans. A "required aggregation group of plans" shall include each plan in which
a key employee participates and any other plan which enables any plan in which a
key employee participates to meet the coverage and nondiscrimination
requirements of Sections 401(a)(4) or 410 of the Code. A "permissive aggregation
group of plans" shall include all plans in the required aggregation group plus
any other plans which satisfy the requirements of Sections 401(a)(4) and 410 of
the Code when considered together with the required aggregation group of plans.
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13.4 SPECIAL MINIMUM CONTRIBUTIONS. Notwithstanding the
provisions of subsection 3.1(a), the amount contributed by each employer in
accordance with subsection 3.1(a) for each participant (whether active or
inactive) for each plan year for which the plan is considered a top-heavy plan
shall not be less than the lesser of (i) four percent of the participant's
earnings for that year, or (ii) the highest percentage of earnings contribution
(disregarding earnings in excess of the maximum compensation that can be
considered for such purpose as set forth in Section 401(a)(17) of the Code or
such other maximum amount as may be permitted from time to time by the Secretary
of the Treasury or his delegate or by law) contributed by the employer in
accordance with subsection 3.1(a) for such plan year on behalf of a key
employee; provided, however, that in the case of an employee covered under this
plan and a defined benefit plan maintained by the Penton Companies, for each
plan year for which this plan and such defined benefit plan are considered
top-heavy plans, if such employee receives the top-heavy minimum contribution
specified in such defined benefit plan, such employee need not receive the
minimum contribution specified in this section.
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SUPPLEMENT A
------------
TO
--
PENTON MEDIA, INC.
------------------
RETIREMENT SAVINGS PLAN
-----------------------
A-1 PURPOSE, USE OF TERMS. The purpose of this Supplement A
is to set forth rules of procedure applicable to plan loans. Loans shall be made
available to participants on and after the date designated by the plan
administrator.
A-2 LOAN ADMINISTRATION. Plan loans shall be administered
by the plan administrator.
A-3 LIMITATIONS ON PLAN LOANS. Plan loans are subject to
the following limitations:
(a) Each request for a loan under this section must
be by written application to the plan administrator supported
by such evidence as it may request. No loan will be made to a
participant unless the plan administrator believes the loan
is reasonably necessary for the purpose intended.
(b) The minimum principal amount of any loan shall
be $1,000. Each loan must be evidenced by a note in a form
furnished by the plan administrator and must be secured by a
pledge of up to 50 percent of the participant's vested
accounts as of the accounting date immediately preceding the
date as of which the loan is made. The plan administrator
will not accept any other collateral as security for the
loan.
(c) Each loan will bear interest at a reasonable
rate established by the plan administrator in a uniform and
nondiscriminatory manner (which rate shall be the prevailing
rate charged by persons in the business of making loans under
similar circumstances and which rate shall not be greater
than the maximum rate permitted by law), and must be
amortized in level payments, made not less frequently than
quarterly, over the life of the loan. The plan administrator
shall monitor the prevailing interest rates charged by
national banking institutions on loans and shall, in
accordance therewith, establish a reasonable rate of interest
on loans from the plan. As of the effective date of this
Supplement A, the interest rate shall be the prime interest
rate charged by the plan's bank trustee plus one percentage
point.
(d) The principal amount of each loan, when added to
any other outstanding loan balances of a participant under
the plan and all other plans of the Penton Companies, may not
exceed the greater of (i) the lesser of $10,000 or 50 percent
of the participant's vested account balances (as of the
accounting date immediately preceding the date as of which
the loan is made), or (ii) the lesser of $50,000 reduced by
the excess, if any, of the highest outstanding balance of
loans from the plan during the one-year period ending on the
day before the date on
<PAGE> 59
which such loan is made over the outstanding balance of loans
from the plan on the date on which such loan is made or 50
percent of the participant's vested account balances.
(e) Each loan will be for a term not exceeding five
years.
(f) Each note evidencing a loan to a participant
shall be held on the participant's behalf and shall be
considered an investment of his accounts. Accordingly,
principal and interest payments on the note shall be credited
to such accounts on the participant's behalf and invested in
the Money Market Fund.
(g) If the loan is to be secured by a pledge of the
participant's accounts which are transferred from a defined
benefit plan or a defined contribution plan which is subject
to the funding standards of Section 412 of the Code, in the
event the participant is married on the date the loan
application is submitted to the plan administrator, the loan
will not be made unless (i) the spouse of the participant
consents in writing to the loan, the spouse's consent
acknowledges the effect of the loan and the consent is
witnessed by a plan representative or a notary public, or
(ii) it is established to the satisfaction of the plan
administrator that a required consent may not be obtained
because the spouse cannot be located, or because of such
other circumstances as the Secretary of the Treasury may
prescribe by regulations.
A-4 LOAN PAYMENT. Payment of loans shall generally be made by
payroll deduction. If for any reason, however, a participant is unable to make
such payments by payroll deduction, the participant shall make loan payments (a)
by personal check payable to the plan trustee and delivered to the plan
administrator in care of Penton Media, Inc., 1100 Superior Avenue, Cleveland,
Ohio 44114 due no later than the payday on which the installment payment becomes
due, or (b) by any other method that the plan administrator and the participant
mutually agree upon.
A-5 DEFAULT. Upon default, the plan may foreclose on the loan
at the earliest opportunity permitted by law and the loan will be treated as a
taxable distribution at such time. During the period, if any, between the date
of the event constituting default and the date of foreclosure, interest on the
loan will continue to accrue and shall be charged to the participant's account.
The distribution of a participant's canceled note to him (or to his beneficiary
in the event of his death) shall be considered as a payment for purposes of the
plan. The following events will constitute default on a loan:
(a) the failure to make an installment payment on
the payday on which it becomes due;
<PAGE> 60
(b) any other person (other than the plan trustee)
acquires an interest in the participant's account;
(c) the participant dies or becomes legally incompetent;
(d) (effective for loans made on or after January 1,
1995) the participant voluntarily or involuntarily
enters into bankruptcy proceedings; or
(e) the participant's employment with the Penton
Companies (as such term is defined in the plan) is
terminated for any reason, including retirement,
disability, resignation or discharge.
In the event of (e) above, there shall be no default if the participant
continues to be a "party in interest" (as defined in section 3(14) of the
Employee Retirement Income Security Act of 1974, as amended) following his
termination of employment. Such party in interest shall continue to be subject
to the terms of his loan as in effect as of the date of his termination of
employment. In the event of (c) or (e) (with respect to a non-party in interest)
above, there shall be no default if, immediately upon the occurrence of (c) or
(e), the participant (or his estate or legal representative, as the case may be)
pays the remaining balance of the loan together with accrued interest thereon.
Finally, in the event of (c) above, unless the participant's estate or legal
representative immediately pays the remaining balance of the loan with accrued
interest thereon, the unpaid loan balance will be deemed to have been
distributed to the participant or his estate, as the case may be.
A-6 AMENDMENT. The plan administrator has the power to amend
this Supplement A.
<PAGE> 1
Exhibit 10.9
PENTON MEDIA, INC.
RETIREMENT PLAN
<PAGE> 2
PENTON MEDIA, INC. RETIREMENT PLAN
Table of Contents
PAGE
----
ARTICLE 1.................................................................. 1
Introduction...................................................... 1
Purpose of the Plan, Effective Date...................... 1
Plan Administrator, Plan Year............................ 1
The Employers............................................ 2
Preservation of Benefits Under Predecessor Plans......... 2
Supplements ............................................. 3
ARTICLE 2.................................................................. 4
Plan Participants................................................. 4
Eligibility ............................................. 4
Eligibility Service...................................... 5
Hours of Service......................................... 5
Leave of Absence......................................... 6
Notice of Participation.................................. 7
U.S. Foreign Service Employees........................... 7
ARTICLE 3.................................................................. 8
Retirement Dates, Employment Termination Date..................... 8
Normal Retirement Date................................... 8
Deferred Retirement Date................................. 8
Early Retirement Date.................................... 8
Disability Retirement Date............................... 8
Retirement Date.......................................... 8
Employment Termination Date.............................. 8
Retirement or Termination While on Leave of Absence...... 8
ARTICLE 4.................................................................. 9
Benefit Determination Factors..................................... 9
General ............................................. 9
Years of Service......................................... 9
Special Rules as to Determinations of Service............ 9
Earnings ............................................. 10
Determination of Bases of Benefits....................... 11
Military Service......................................... 11
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<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 5.................................................................................................. 12
Retirement Income................................................................................. 12
Normal or Deferred Retirement............................................................ 12
Early Retirement......................................................................... 13
Form of Payment.......................................................................... 14
ARTICLE 6.................................................................................................. 14
Disability Benefit; Deferred Vested Benefit....................................................... 14
Disability Benefit....................................................................... 14
Disability ............................................................................. 16
Monthly Deferred Vested Benefit.......................................................... 16
Early Commencement of Deferred Vested Benefit............................................ 17
Annuity Commencement Date................................................................ 17
Form of Payment.......................................................................... 17
ARTICLE 7.................................................................................................. 17
Payment of Retirement Income and Other Benefits................................................... 17
Normal Form of Payment of Benefits....................................................... 17
Optional Forms of Payment of Benefits.................................................... 19
Rules as to Wavier of Normal Form of Benefit, Election and
Discontinuance of Optional Forms of Payment of Benefits and
Spousal Consents............................................................. 20
Pre-Retirement Spouse's Benefit.......................................................... 21
Special Pre-Retirement Lump Sum Death Benefit............................................ 22
Special Payment Limitations.............................................................. 23
Payment of Small Amounts................................................................. 24
Payment by Annuity Purchase.............................................................. 24
Direct Rollover of Eligible Rollover Distributions....................................... 24
Designated Beneficiaries................................................................. 25
Missing Persons.......................................................................... 26
Payment with Respect to Incapacitated Participants or Beneficiaries...................... 26
ARTICLE 8.................................................................................................. 27
Reemployment...................................................................................... 27
Rehired Employee......................................................................... 27
Rehired Participant...................................................................... 27
One-Year Break in Service, Five-Year Break in Service, Break-in Service
Period....................................................................... 29
Redetermination of Benefits.............................................................. 29
ARTICLE 9.................................................................................................. 30
Maximum Benefits.................................................................................. 30
Benefit Limitations...................................................................... 30
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
Total Compensation............................................................................ 30
Participant Covered by Defined Benefit Plan................................................... 30
Participant Covered by Defined Benefit Plan and Defined Contribution Plan..................... 32
Combining of Plans............................................................................ 33
ARTICLE 10...................................................................................................... 33
Plan Administrator..................................................................................... 33
Plan Administrator's Duties................................................................... 33
Action by Plan Administrator.................................................................. 34
Information Required for Plan Administration.................................................. 35
Decision of Plan Administrator Final.......................................................... 35
Review of Benefit Determinations.............................................................. 35
Uniform Rules................................................................................. 36
Plan Administrator's Expenses................................................................. 36
Interested Plan Administrator................................................................. 36
Resignation or Removal of Plan Administrative Committee Members............................... 36
Indemnification............................................................................... 36
ARTICLE 11...................................................................................................... 37
Relating to the Employers.............................................................................. 37
Action by Employers........................................................................... 37
Additional Employers.......................................................................... 37
Restrictions on Reversions.................................................................... 37
ARTICLE 12...................................................................................................... 38
Amendment, Termination or Plan Merger.................................................................. 38
Amendment .................................................................................. 38
Termination .................................................................................. 38
Plan Merger .................................................................................. 39
Continuation by a Successor or Purchaser...................................................... 39
Notice to Participants of Amendments, Terminations or Plan Mergers............................ 40
Vesting and Distribution on Termination....................................................... 40
ARTICLE 13...................................................................................................... 40
Funding of Plan Benefits............................................................................... 40
Employer Contributions........................................................................ 40
Pension Fund.................................................................................. 41
Application of Forfeited Benefits............................................................. 41
ARTICLE 14...................................................................................................... 41
Allocation and Distribution on Termination............................................................. 41
ARTICLE 15...................................................................................................... 42
Restrictions on Benefits............................................................................... 42
</TABLE>
- iii -
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C> <C>
Pre-Termination Restrictions..................................... 42
Restriction of Benefits.......................................... 42
ARTICLE 16......................................................................... 43
General Provisions........................................................ 43
Examination of Plan Documents.................................... 43
Notices ..................................................... 43
Nonalienation of Plan Benefits................................... 43
No Employment Guarantee.......................................... 43
Participant Litigation........................................... 44
Actuarial Equivalent............................................. 45
Successors ..................................................... 45
Adequacy of Evidence............................................. 45
Gender and Number................................................ 45
Waiver of Notice................................................. 46
Applicable Law................................................... 46
Severability..................................................... 46
Fiduciary Responsibilities....................................... 46
ARTICLE 17......................................................................... 46
Top-Heavy Plan............................................................ 46
Top-Heavy Plan Determination..................................... 46
Special Top-Heavy Plan Vesting Schedule.......................... 48
Top-Heavy Minimum Benefits....................................... 49
SUPPLEMENT A..................................................................... A-1
SUPPLEMENT B..................................................................... B-1
</TABLE>
- iv -
<PAGE> 6
PENTON MEDIA, INC. RETIREMENT PLAN
Index of Defined Terms
TERMS PAGE
- ----- ----
$7,500 limitation ..........................................................30
Annualized covered compensation.............................................13
Annuity commencement date...................................................17
Break-in service period.....................................................29
Company ...........................................................1
Covered compensation........................................................12
Covered employee ...........................................................4
Current accrued benefit.....................................................32
Deferred retirement date.....................................................8
Defined benefit limitation amount...........................................32
Defined contribution limitation amount......................................32
Determination date..........................................................47
Direct rollover ..........................................................25
Disability retirement date...................................................8
Distributee ..........................................................25
Early retirement date........................................................8
Earnings ..........................................................10
Effective date ...........................................................1
Eligible retirement plan....................................................25
Eligible rollover distribution..............................................24
Eligible spouse ..........................................................22
Employer ...........................................................2
Employers ...........................................................2
Employment termination date..................................................8
ERISA ..........................................................42
Five-percent owner..........................................................47
Five-year break in service..................................................29
Foreign subsidiary...........................................................7
Hour of service ...........................................................5
Key employee ..........................................................46
Leave of absence ...........................................................6
Limitation year ..........................................................30
Non-key employee ..........................................................47
Normal retirement age........................................................8
Normal retirement date.......................................................8
One-year break in service...................................................29
Pension fund ..........................................................41
Permissive aggregation group of plans.......................................48
- v -
<PAGE> 7
PAGE
----
Penton Companies .......................................................2
Penton Company .......................................................2
Plan .......................................................1
Plan administrator.......................................................1
Plan year .......................................................2
Predecessor company......................................................9
Predecessor plan .......................................................3
Qualified joint and survivor annuity....................................17
Qualified military service............................................. 11
Qualified plan ......................................................37
Related company .......................................................2
Required aggregation group of plans.....................................48
Restricted employee.....................................................43
Retirement date .......................................................8
Social Security retirement age..........................................31
Subsidiary .......................................................2
Top-heavy ..................................................32, 46
Top-heavy plan ..................................................47, 48
Total and permanent disability..........................................16
Total compensation......................................................30
Transferred particiapnts................................................ 1
U.S. foreign service employee............................................7
Year of service .......................................................9
- vi -
<PAGE> 8
PENTON MEDIA, INC. RETIREMENT PLAN
ARTICLE 1
INTRODUCTION
1.1 Purpose of the Plan, Effective Date. This Penton Media,
Inc. Retirement Plan (the "plan"), was established effective as of ________ __,
1998 (the "effective date") by Penton Media, Inc. (the "company") for the
purpose of providing retirement and other benefits for its eligible employees
and for eligible employees of its subsidiaries and other related companies which
adopt the plan with the consent of the company. The plan represents a
continuation of the Pittway Corporation Retirement Plan (the "Pittway plan") as
to employees or former employees of the company and its current or former
subsidiaries (other than Saddlebrook Resorts, Inc., Saddlebrook International
Tennis, Inc., C & A Investments, Inc. and Pittway Real Estate, Inc)
("transferred participants"). The Combination Agreement dated May 21, 1998,
among the company, Pittway Corporation and other parties (the "Combination
Agreement") provides for a transfer of assets and liabilities attributable to
transferred participants from the Pittway plan to this plan effective as of the
effective date. Subject to the completion of such transfer, all benefit
liabilities with respect to transferred participants attributable to their
covered employment with Pittway Corporation and the employers under the Pittway
plan and attributable to their covered employment under this plan, if any, shall
be provided under this plan, provided that, until the completion of such
transfer, any benefits owed to a transferred participant under this plan shall
be offset by benefits owed to such transferred participant under the Pittway
plan. Benefits provided hereunder as a result of the transfer of assets and
liabilities from the Pittway plan to this plan with respect to periods of
employment prior to the effective date, except as otherwise provided herein,
continue to be governed by the terms of the Pittway plan in effect on the
relevant date. The plan shall be deemed to have become effective on the
effective date following the Distribution described in the Combination
Agreement.
1.2 Plan Administrator, Plan Year. The plan is administered by
a plan committee (the "plan administrator") consisting of not less than three
persons appointed by the company to carry out the administration of the plan.
The plan is administered on the basis of a
- 1 -
<PAGE> 9
plan year (the "plan year") which coincides with the calendar year. Article 10
describes certain specific powers, duties and responsibilities of the plan
administrator with respect to the administration of the plan. For purposes of
the 1998 plan year, the plan year shall begin on the effective date and end on
December 31, 1998.
1.3 The Employers. With the consent of the company, the plan
may be adopted in accordance with the provisions of section 11.2 by any
subsidiary of the company or any related company for the benefit of its eligible
employees. The plan is maintained by the company and the related companies that
are set forth in Supplement A to the plan. The company and its subsidiaries and
related companies that adopt the plan are referred to herein collectively as the
"employers" and individually as an "employer." A "subsidiary" means any
corporation 50 percent or more of the voting stock of which is directly or
indirectly owned by the company and a "related company" means any corporation
which directly or indirectly owns 50 percent or more of the voting stock of the
company and any corporation (other than the company and its subsidiaries) 50
percent or more of the voting stock of which is directly or indirectly owned by
any corporation which directly or indirectly owns 50 percent or more of the
voting stock of the company. The term "Penton Companies" includes the employers
and all subsidiaries and related companies that have not adopted the plan (and
each such corporation is sometimes referred to herein individually as a "Penton
Company"). In addition, although only covered employees of an employer that has
adopted the plan may participate in the plan, when determining a participant's
years of service under plan sections 4.3(d), 6.3 or 17.2 or Article 8 solely for
purposes of determining his vested and nonforfeitable interest in his plan
benefits, employment with certain entities that have not adopted the plan will
be taken into account, such that for these purposes, the terms "Penton
Companies" and "employers" shall include any corporation, trade, business or
other separate organization required to be aggregated with the company or other
employer that has adopted the plan under Sections 414(b), (c), (m) or (o) of the
Internal Revenue Code of 1986, as amended (the "Code"), or the regulations
thereunder.
1.4 Preservation of Benefits Under Predecessor Plans. Any
other pension plan maintained by an employer may be continued in effect by its
merger into this plan with the consent of the company. If appropriate, special
provisions relating to employees covered under any such
- 2 -
<PAGE> 10
pension plan when it is merged into this plan may be set forth in a supplement
of certification of eligibility which, by amendment, will be attached to and
form a part of this plan. Any pension plan which is merged into this plan, and
the Pittway plan as to transferred participants, may be referred to below as a
"predecessor plan." As to employees who participate in the plan on the effective
date of any merger of all or a portion of a predecessor plan into the plan, it
is intended that the benefits they earned under the predecessor plan up to the
effective date of its merger into this plan shall be preserved unless limited by
Article 9. If the plan administrator determines that any such benefits have not
been provided for under the terms and provisions of the plan as in effect on and
after the effective date of such merger of all or a portion of a predecessor
plan into the plan, the plan administrator shall direct the payment of such
benefits under the plan to the participant or other person entitled to them.
1.5 Supplements. In addition to the supplements described in
section 1.4, from time to time supplements or other certifications of
eligibility may by amendment be attached to and form a part of this plan. The
provisions of any such supplements shall be given the same effect that such
provisions would have if they were incorporated in the basic text of the plan.
Supplements may modify the provisions of the plan as they apply to particular
groups of participants. Supplements will specify the persons affected by such
supplements or exhibits and shall supersede the other provisions of the plan to
the extent necessary to eliminate inconsistencies between the plan provisions
and the provisions of such supplements. The terms used in such supplements shall
have the same meanings as those terms have for all other purposes under the plan
and all provisions of the plan not inconsistent with such supplements will
continue to apply to the persons affected by such supplements.
- 3 -
<PAGE> 11
ARTICLE 2
Plan Participants
2.1 Eligibility. Each employee of an employer on the effective
date who was a participant in the Pittway plan immediately prior to the
effective date will be a participant in the plan on and after the effective
date, subject to the conditions and limitations of the plan. Each other employee
of an employer will become a participant in the plan on the effective date or on
any January 1 thereafter if such employee meets all of the following
requirements:
(a) The employee is a "covered employee" (as defined
below),
(b) The employee has been employed by an employer for
at least three full calendar months; provided, however, that
he completes one year of eligibility service (as defined in
section 2.2) following such January 1.
A "covered employee" shall mean any employee of an employer to which the plan
has been and continues to be extended excluding (i) any employee who is included
in a unit of employees covered by a negotiated bargaining agreement which does
not provide for such employee's participation in the plan, provided that there
is evidence that retirement benefits were the subject of good faith bargaining;
(ii) any non-resident alien with no U.S. source income; (iii) seasonal or
temporary employees whose services for the employers are performed solely from
their homes; and (iv) any leased employee (as defined below)
A "leased employee" shall mean any person who, pursuant to an
agreement between an employer and any other person ("leasing organization"), has
performed services for the employer on a substantially full-time basis for a
period of at least one year, and such services are performed under the primary
direction or control of the employer. Contributions or benefits provided a
leased employee by the leasing organization which are attributable to services
performed for an employer will be treated as provided by the employer. A leased
employee will not be considered an employee of an employer, however, if (1)
leased employees do not constitute more than 20 percent of the employer's
nonhighly compensated work force (within the meaning of Section
414(n)(5)(C)(ii)) of the Code, and (2) such leased employee is covered by a
money purchase pension plan maintained by the leasing organization that provides
(i) a nonintegrated
- 4 -
<PAGE> 12
employer contribution rate of at least 10 percent of the leased employee's
compensation, (ii) immediate participation and (iii) full and immediate vesting.
2.2 Eligibility Service. An employee of an employer shall be
credited with one year of eligibility service if he completes 1,000 or more
hours of service (as defined in section 2.3) during the twelve-consecutive-month
period commencing on his date of hire by the employers or any plan year
following his date of hire. An employee's date of hire shall be the date on
which the employee first completes an hour of service with the employers or with
an employer under the Pittway Plan.
2.3 Hours of Service. An "hour of service" means:
(a) Each hour for which an employee is directly or
indirectly compensated or entitled to be compensated for his
performance of duties for the Penton Companies as an employee
(with each overtime hour being taken into account as if it
were a normal work hour).
(b) Each hour for which an employee is directly or
indirectly compensated or entitled to be compensated by the
Penton Companies with respect to a period of time during which
no duties are performed (irrespective of whether the
employment relationship has terminated) due to vacation,
holiday, illness, incapacitation (including disability),
military duty or leave of absence (as defined in section 2.4);
provided, however, that not more than 501 hours of service
shall be credited to an employee on account of any single
continuous period during which he performs no duties (i) if
his compensation for such period is in the form of payments
made or due under a plan maintained solely for the purpose of
complying with applicable worker's compensation, unemployment
compensation or state disability insurance laws, (ii) if his
compensation for such period constitutes reimbursement for
medical or medically related expenses incurred by the
employee, or (iii) if his compensation for such period is paid
to the employee while on a maternity or paternity leave of
absence (as described in subsection 2.4(b) below).
(c) Each other hour required by federal law to be
counted as an "hour of service," including each such hour for
which back pay, irrespective of mitigation of damages, is
either awarded or agreed to by the Penton Companies; provided,
however, that not more than 501 hours of service shall be
credited for payments of back pay, to the extent that such
back pay is awarded for a period of time during which the
employee did not or would not have performed duties as an
employee.
(d) Each hour for which an employee is on a maternity
or paternity leave of absence in accordance with subsection
2.4(b), but only for purposes of preventing the employee from
incurring a one-year break in service (as defined in
- 5 -
<PAGE> 13
section 8.3) and only if the employee timely furnishes to the
plan administrator such information as it may reasonably
require to establish that his absence from work was due to a
maternity or paternity leave of absence as defined in
subsection 2.4(b) and the number of days for which there was
an absence; provided, however, that not more than 501 hours of
service shall be credited by reason of a maternity or
paternity leave of absence.
Compensated hours described in subsection (b) above shall be determined by
multiplying the number of scheduled work days during the applicable period for
which the employee is compensated by the number of hours in the average
scheduled work day (based on the scheduled work week for his job classification
then in effect, provided, however, that in the case of an employee without a
regular work schedule, such hours shall be computed on the basis of a 40-hour
work week). Hours described in subsection (d) next above for employees on
maternity or paternity leave of absence shall be determined in the same manner
as compensated hours described in subsection (b) next above. In determining
hours of service, hours shall be credited for the period in which such duties
were performed (regardless of when payment is due) or for which such
compensation was paid and for this purpose the rules for crediting hours of
service set forth in section 2530.200b-2 of the Department of Labor regulations
are hereby incorporated by reference; provided that hours of service credited
under subsection (d) next above for a maternity or paternity leave of absence
shall be credited to the year in which such leave begins if such hours are
required to prevent a one-year break in service from occurring in such year, or
if not so required in that year, such hours shall be credited in the immediately
following year. In construing the foregoing provisions of this section,
ambiguities shall be resolved in favor of crediting employees with hours of
service. A transferred participant and any other employee of the Penton
Companies as of the effective date also shall be credited with the same number
of hours of service as were credited to such individual under the Pittway plan
as of the effective date.
2.4 Leave of Absence. A "leave of absence" as used in
the plan means:
(a) A leave of absence required by law or
granted by an employer on account of service in military or
governmental branches described in any applicable statute
granting reemployment rights to employees who enter such
branches, or any other military or governmental branch
designated by the employer.
(b) A leave of absence for any period the
employee is absent from work by reason of the employee's
pregnancy, the birth of the child of the employee, the
- 6 -
<PAGE> 14
placement of a child with the employee in connection with the
adoption of the child by the employee or the caring for the
child for a period beginning immediately after such birth or
placement.
(c) A leave of absence resulting from the
participant's disability (as defined in section 6.2) which is
incurred while he is a covered employee of an employer and any
other absence from active employment with an employer that is
approved by such employer and not treated by it as a
termination of employment.
Leaves of absence granted by an employer will be governed by rules uniformly
applied to all employees of that employer similarly situated.
2.5 Notice of Participation. Each employee will be
notified of the date he becomes a plan participant. Each participant and other
person receiving benefits under the plan will be furnished with a copy of a
summary plan description.
2.6 U.S. Foreign Service Employees. It is intended that
a U.S. foreign service employee (as defined below) may become or remain eligible
to participate in the plan to the same extent as if the employee were employed
by the company. A "U.S. foreign service employee" means a person (i) who is a
citizen of the United States, (ii) who is employed by a subsidiary of the
company incorporated outside the United States that qualifies as a "foreign
subsidiary" as defined in section 406 of the Code, and as to which an employer
has entered into an agreement under section 3121(l) of the Code, and (iii) for
whom contributions under a funded plan of deferred compensation (whether or not
a plan described in section 401(a), 403(a) or 405(a) of the Code) are not
provided by any other person with respect to remuneration paid to such
individual by that subsidiary.
- 7 -
<PAGE> 15
ARTICLE 3
Retirement Dates, Employment Termination Date
3.1 Normal Retirement Date. A participant's "normal
retirement date" will be the first day of the calendar month coincident with or
next following the date the participant attains age 65 years (but age 60 years
in the case of each employee employed by the employers as an aircraft pilot)
("normal retirement age").
3.2 Deferred Retirement Date. A participant's "deferred
retirement date" will be the first day of the calendar month coincident with or
next following the date of such participant's retirement from the employ of all
of the Penton Companies (as defined in section 1.3) after his normal retirement
date.
3.3 Early Retirement Date. A participant's "early
retirement date" will be the first day of the calendar month coincident with or
next following the date of his retirement from the employ of all of the Penton
Companies before his normal retirement date, but after he has both attained age
55 years and completed 10 years of service.
3.4 Disability Retirement Date. A participant's
"disability retirement date" will be the first day of the calendar month
coincident with or next following the date such participant's employment with
all of the Penton Companies terminates on account of his total and permanent
disability (as defined in section 6.2) prior to his normal retirement.
3.5 Retirement Date. Reference to the "retirement date"
of a participant who retires under the plan means his normal retirement date, if
his retirement from the employ of all of the Penton Companies occurs on that
date, but otherwise means his deferred retirement date or his early retirement
date, whichever applies in his case.
3.6 Employment Termination Date. Reference to the
"employment termination date" of a participant whose employment terminates
before he qualifies for retirement on a retirement date means the date his
employment with all of the Penton Companies ceases.
3.7 Retirement or Termination While on Leave of Absence.
A participant who is otherwise eligible to retire under the plan or who will be
entitled to deferred vested benefits under the plan upon his termination of
employment with the Penton Companies may retire or
- 8 -
<PAGE> 16
terminate employment without returning to active employment with the Penton
Companies if he is absent from work because of a leave of absence (as defined in
section 2.4).
ARTICLE 4
Benefit Determination Factors
4.1 General. A participant's eligibility for, and amount
of, benefits payable under the plan will be based on his years of service,
earnings, covered compensation and annualized covered compensation as determined
in accordance with the provisions of this Article 4, Article 8 and any
applicable supplement to the plan. Years of service, earnings, covered
compensation and annualized covered compensation credited to a transferred
participant under the Pittway plan shall be credited to such transferred
participant under this plan.
4.2 Years of Service. Subject to the provisions of
section 4.3 and Article 8, a participant will be granted one "year of service"
for each calendar year during which such participant completes 1,000 or more
hours of service.
4.3 Special Rules as to Determinations of Service.
Subject to the final sentence of Section 4.1, determinations of years of service
and hours of service shall be subject to the provisions of Article 8 and the
following provisions:
(a) If a participant had a period or periods of
employment with a Penton Company that has not adopted the
plan, with a Penton Company before it adopted the plan or with
a predecessor company to a Penton Company, such period or
periods of employment will be considered as employment with
the Penton Companies in determining his hours of service under
section 2.1 but will not be considered as employment with the
Penton Companies and will be disregarded in determining his
years of service under section 4.2 unless and to the extent
otherwise required by law or specified by the company;
provided that this subsection shall not be applied so as to
allow an employee to become a participant prior to his actual
employment by an employer and prior to his becoming a covered
employee. A "predecessor company" means any other corporation
or other entity the stock, assets or business of which was
acquired by a Penton Company prior to the effective date or is
acquired by a Penton Company on or after the effective date,
whether by merger, consolidation, purchase of assets or
otherwise, and any predecessor thereto designated by the
company.
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(b) A period of concurrent employment with two or
more Penton Companies will be considered as employment with
only one of them during that period.
(c) A leave of absence (as defined in section 2.4)
will not interrupt continuity of employment for purposes of
the plan, but hours of service shall be credited with respect
to a paid or unpaid leave of absence only as provided in
section 2.3.
(d) Separate periods of an employee's employment
shall be aggregated for purposes of determining his years of
service; provided, however, that if an employee terminates his
employment with the employers before he is either eligible to
retire on a retirement date or entitled to a deferred vested
benefit under section 6.3 and he is reemployed by an employer
after he has incurred five consecutive one-year breaks in
service (as defined in section 8.3) and his number of
consecutive one-year breaks in service exceeds his prior years
of service, his prior years of service shall be disregarded.
4.4 Earnings. Subject to the final sentence of Section
4.1, for purposes of the plan, a participant's "earnings" means his total,
regular cash compensation paid during the plan year for services rendered to the
employers as a covered employee, including overtime, bonuses, commissions,
incentive compensation, unused vacation pay, and income realized for federal
income tax purposes as a result of the grant or exercise of an option or options
to acquire shares of stock of any Penton Company, the receipt of a cash
appreciation payment in lieu of such an option or options, and the disposition
of shares acquired by the exercise of such an option, but excluding:
(a) Any noncash compensation, including any amounts
contributed by the employers for the participant's benefit
under this plan or any other retirement or benefit plan,
arrangement, or policy maintained by the employers; provided,
however, any salary reduction amounts elected by the
participant and credited to a cafeteria plan (as defined in
section 125(c) of the Code) or a qualified cash or deferred
arrangement (as defined in section 401(k) of the Code) shall
be included in his compensation;
(b) Any reimbursements for medical, dental, or travel
expenses, automobile allowances, relocation allowances,
educational assistance allowances, awards and other special
allowances;
(c) Any income realized for federal income tax
purposes as a result of (i) group life insurance, (ii) the
personal use of an employer owned automobile, or
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<PAGE> 18
(iii) the transfer of restricted shares of stock or restricted
property of a Penton Company, or the removal of any such
restrictions;
(d) Any severance pay paid as a result of the
participant's termination of employment;
(e) Any compensation paid or payable to the
participant, or to any governmental body or agency on account
of the participant, under the terms of any state, federal or
foreign law requiring the payment of such compensation because
of the participant's voluntary or involuntary termination of
employment with any Penton Company.
(f) Any compensation paid or payable to the
participant which is in excess of $150,000 as adjusted by the
Commissioner of Internal Revenue for increases in the cost of
living in accordance with Section 401(a)(17)(B) of the Code.
The cost-of-living adjustment in effect for a calendar year
applies to any period, not exceeding 12 months, over which
compensation is determined (determination period) beginning in
such calendar year. If a determination period consists of
fewer than 12 months, the annual compensation limit will be
multiplied by a fraction, the numerator of which is the number
of months in the determination period, and the denominator of
which is 12. Any reference in this plan to the limitation
under section 401 (a)(17) of the Code shall mean the annual
compensation limit set forth in this provision. If
compensation for any prior determination period is taken into
account in determining an employee's benefits accruing in the
current plan year, the compensation for that prior
determination period is subject to the annual compensation
limit in effect for that prior determination period.
4.5 Determination of Bases of Benefits. A participant's
hours of service, years of service, earnings, and any other factor relating to
benefits payable to him under the plan shall be determined by the plan
administrator pursuant to the foregoing provisions of this Article 4, Article 9
and any supplement to the plan on the basis of the records of the employers and
on the basis of reasonable estimates where such records are not sufficient to
provide all required data and information.
4.6 Military Service. Notwithstanding any provisions of
this plan to the contrary, contributions, benefits and service credit with
respect to qualified military service will be provided in accordance with
Section 414(u) of the Code. "Qualified military service" means any service in
the uniformed services (as defined in chapter 43 of title 38 of the United
States Code)
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<PAGE> 19
by any individual if such individual is entitled to reemployment rights under
such chapter with respect to such service.
ARTICLE 5
Retirement Income
5.1 Normal or Deferred Retirement. Subject to the
conditions and limitations of the plan, if a participant retires on his normal
retirement date or a deferred retirement date he will be entitled to a monthly
retirement income payable for the life of the participant commencing on his
retirement date in an amount equal to one-twelfth of the sum of the
participant's accrued benefits for each plan year that he participated in the
plan. Subject to the conditions and limitations of this section 5.1, each plan
year up to 35 years of plan participation, the participant's accrued benefit
shall equal (a) plus (b) below:
(a) 1.2 percent of his earnings for such plan year up
to covered compensation (as defined below).
(b) 1.85 percent of his earnings for such plan year
in excess of covered compensation.
For purposes of this section 5.1, a participant's "covered compensation" is
equal to the average of the Social Security taxable wage bases in effect for
each calendar year (under Table II of the tables issued each year by the Social
Security Administration) during the 35-year period ending with the last day of
the calendar year in which the participant attains (or will attain) Social
Security retirement age (as defined in Section 415(b)(8) of the Code). If the
participant's employment terminates prior to his Social Security retirement age,
then for purposes of determining the participant's covered compensation amount
it shall be assumed that the taxable wage base for the plan year of the
determination shall continue in effect for each subsequent plan year. If the
participant's employment terminates after his Social Security retirement age,
then a participant's covered compensation for a plan year shall be equal to the
covered compensation as determined for the plan year during which he attained
his Social Security retirement age. For each plan year, a participant's
applicable "covered compensation" shall be based on the applicable Social
Security wage base for individuals born in the year of the participant's birth
as set forth in
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<PAGE> 20
the foregoing Table II. With respect to a participant who has completed more
than 35 years of plan participation, each plan year of plan participation that
exceeds 35 such years, the participant's accrued benefit for such plan year
shall be an amount equal to:
1.2 percent of his earnings for such plan year.
A participant's accrued benefit with respect to the plan year in which his
retirement date or employment termination date occurs shall be based on (X) his
actual earnings for such plan year but annualized as though his retirement date
or employment termination date had occurred on the last day of such plan year,
(Y) the amount of such annualized earnings that would constitute the
participant's covered compensation for such plan year had the participant
actually earned such annualized amount (the "annualized covered compensation"),
and (Z) the excess of the participant's annualized earnings over his annualized
covered compensation for such plan year. The participant's accrued benefit for
such plan year shall be an amount equal to the sum of (i) plus (ii) with such
sum multiplied by (iii), where (i), (ii), and (iii) are as follows:
(i) 1.2 percent of annualized earnings up to
annualized covered compensation.
(ii) 1.85 percent of annualized earnings in
excess of annualized covered compensation.
(iii) A fraction the numerator of which is the
number of full months of service the
participant completed in the plan year in
which his retirement date or employment
termination date occurs and the denominator
of which is 12.
With respect to a participant who has completed 35 or more years of plan
participation, the foregoing computation of his accrued benefit for his final
plan year of participation shall be based on 1.2 percent of his annualized
earnings multiplied by the fraction set forth in (iii) above. A participant's
right to his normal retirement benefit shall be nonforfeitable and fully vested
when he attains normal retirement age or when his employment with the employers
terminates by reason of his total and permanent disability (as defined in
Section 6.2).
5.2 Early Retirement. Subject to the conditions and
limitations of the plan, if a participant retires on an early retirement date he
will be entitled to a monthly retirement income commencing on his normal
retirement date and payable in the normal form in an amount equal to
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his retirement benefit on his early retirement date as determined under section
5.1. However, in lieu of receiving a monthly retirement income commencing on his
normal retirement date, the participant may elect (by filing a written election
with the plan administrator in advance) to receive a monthly retirement income
commencing at his early retirement date, or on the first day of any calendar
month thereafter that occurs before his normal retirement date. If such monthly
retirement income is to commence prior to the date the participant attains his
normal retirement age, the amount of such monthly retirement income that he
would otherwise be entitled to on his normal retirement date shall be reduced by
1/180 for each of the first 60 months and 1/360 for each of the next 60 months
by which the commencement of the payment of the retirement income precedes his
normal retirement age.
5.3 Form of Payment. If a participant becomes entitled to
receive a retirement income benefit under the foregoing provisions of this
Article 5, payment of such benefit shall be made in accordance with, and subject
to, the applicable provisions of Article 7.
ARTICLE 6
Disability Benefit; Deferred Vested Benefit
6.1 Disability Benefit. Subject to the conditions and
limitations of the plan, if a participant's employment with all of the Penton
Companies is terminated before he becomes eligible for early or normal
retirement because of his total and permanent disability (as defined in section
6.2), he will be entitled to a monthly disability benefit commencing on his
disability retirement date regardless of whether he has completed five years of
service as of such date. The amount of his monthly disability benefit will be
computed in accordance with the benefit formula in section 5.1 above (as in
effect as of his disability retirement date) as of his disability retirement
date but shall be actuarially reduced to account for commencement on his
disability retirement date. In lieu of receiving his monthly disability benefit
commencing on his disability retirement date, a participant may elect (by filing
a written election with the plan administrator in advance) to receive his
monthly disability benefit commencing on the first day of any calendar month
commencing on or after his disability retirement date that occurs before his
normal retirement date, subject to actuarial reduction. Notwithstanding anything
in this section 6.1 or the plan to
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<PAGE> 22
the contrary, no monthly disability benefit shall be payable for any month for
which the participant receives long-term disability benefits under a disability
benefit program maintained by his employer. The participant's monthly disability
benefit will be payable only to him, on a life annuity basis, pursuant to the
applicable provisions of Article 7, subject to the following:
(a) If the participant recovers from his disability
prior to his normal retirement date, if he should no longer be
entitled to disability insurance benefits under the Social
Security Act or if he should refuse to submit evidence to the
plan administrator of his disability, his entitlement to his
monthly disability benefit shall cease. Unless he then is
reemployed by an employer, he shall be deemed to have
terminated employment on his actual employment termination
date for a reason other than disability. His eligibility for,
and the amount of, benefits payable to him under the plan
after his recovery from his disability shall be determined in
accordance with section 6.3 and the benefit formula in section
5.1 (as in effect as of his actual employment termination date
and as if such date were a retirement date) as of his actual
employment termination date and his accrued benefits under the
plan shall be reduced by the actuarial value of the disability
benefits he previously received under the plan.
(b) If the participant does not recover from his
disability prior to his normal retirement age and is not
married as of his normal retirement age, his monthly
disability benefit shall be payable to him on a life annuity
basis until his attainment of normal retirement age and his
normal retirement benefit (as actuarially reduced to account
for his benefits having commenced prior to his normal
retirement date) shall continue to be payable to him in the
form of a life annuity thereafter (unless the participant
rejects the life annuity form of benefit in accordance with
the provisions of sections 7.1 and 7.3).
(c) If the participant has completed 10 years of
service but has not attained age 55 years as of his disability
retirement date, does not recover from his disability prior to
his attainment of age 55 years, and is married as of the date
he attains age 55 years, his monthly disability benefit (as
actuarially reduced to account for his benefits having
commenced prior to his normal retirement date) shall be
payable to him on a life annuity basis until his attainment of
age 55 years and shall be payable in the form of a qualified
joint and survivor annuity thereafter (unless the participant
and his spouse reject the qualified joint and survivor annuity
form of benefit in accordance with the provisions of sections
7.1 and 7.3). If such a participant dies prior to his
attainment of age 55 years and he has an eligible spouse (as
defined in Section 7.4) as of the date of his death, his
surviving eligible spouse shall be eligible for a
pre-retirement spouse's benefit as set forth in section 7.4.
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<PAGE> 23
(d) If the participant has completed five but less
than 10 years of service as of his disability retirement date,
does not recover from his disability prior to his attainment
of normal retirement age, and is married as of the date he
attains his normal retirement age, his monthly disability
benefit (as actuarially reduced to account for his benefits
having commenced prior to his normal retirement date) shall be
payable to him on a life annuity basis until his attainment of
normal retirement age and his normal retirement benefit shall
be payable in the form of a qualified joint and survivor
annuity thereafter (unless the participant and his spouse
reject the qualified joint and survivor annuity form of
benefit in accordance with the provisions of sections 7.1 and
7.3). If such a participant dies prior to his attainment of
normal retirement age and he has an eligible spouse (as
defined in section 7.4) as of the date of his death, his
surviving eligible spouse shall be eligible for a
pre-retirement spouse's benefit as set forth in Section 7.4.
6.2 Disability. A participant shall be considered to have
incurred a "total and permanent disability" for purposes of the plan if he
qualifies for and is receiving disability benefits under the Social Security Act
or he qualifies for and is receiving long-term disability benefits under any
disability benefit program maintained by his employer. For the purpose of
determining whether a participant has incurred a total and permanent disability
or has recovered from a total and permanent disability, the plan administrator
from time to time may require that a participant either verify that he currently
qualifies for and is receiving disability benefits under the Social Security Act
or submit to medical examinations at any reasonable time (but not more
frequently than twice in a twelve-month period) prior to his normal retirement
date. The plan administrator's determination of the existence of a disability
and of the medical evidence necessary and appropriate to determine its existence
shall be conclusive.
6.3 Monthly Deferred Vested Benefit. Subject to the
conditions and limitations of the plan, if a participant resigns or is dismissed
from the employ of all of the employers before he qualifies for retirement under
the plan after he has completed five or more years of service, or if his
employment with the employers terminates by reason of his disability (as defined
in section 6.2), he will be eligible to receive a monthly deferred vested
benefit for life commencing on his normal retirement date. The amount of his
monthly deferred vested benefit will be computed in accordance with the benefit
formula described in section 5.1 (as in effect as of his employment termination
date as if such date were a retirement date) as of his employment termination
date.
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<PAGE> 24
6.4 Early Commencement of Deferred Vested Benefit. A
participant who is entitled to a monthly deferred vested benefit may elect (by
filing a written election with the plan administrator in advance) to receive, in
lieu of a monthly deferred vested benefit commencing at his normal retirement
date, a monthly deferred vested benefit commencing on or after the first day of
any month on or after the date the participant attains age 55 and has completed
10 years of service and prior to his normal retirement date. If a participant
elects early commencement of his monthly deferred vested benefit the amount of
such monthly deferred vested benefit shall be determined by reducing the amount
of monthly deferred vested benefit to which the participant is otherwise
entitled commencing on his normal retirement date by 1/180 for each of the first
60 months and 1/360 for each of the next 60 months by which the commencement of
his benefits precedes his normal retirement date.
6.5 Annuity Commencement Date. A participant's "annuity
commencement date" means the date as of which the initial payment of the
retirement income or deferred vested benefit to which he is entitled under the
plan is payable.
6.6 Form of Payment. If a participant becomes entitled to
receive a deferred vested retirement income benefit under the foregoing
provisions of this Article 6, payment of such benefit shall be made in
accordance with, and subject to, the applicable provisions of Article 7.
ARTICLE 7
Payment of Retirement Income and Other Benefits
7.1 Normal Form of Payment of Benefits. Except as
otherwise specifically provided, payment of participants' monthly retirement
income or deferred vested benefits under Articles 5 and 6 shall be made to them,
and payment of monthly benefits shall be made to their spouses, if eligible for
such benefits, as follows:
(a) Qualified Joint and Survivor Annuity. If a
participant retires on a normal, early or deferred retirement
date under the plan, or if a participant's employment
terminates before retirement under the plan and he is entitled
to a deferred vested benefit, and if the participant has an
eligible spouse (as defined in section 7.4) immediately
preceding his annuity commencement date, payment of his
monthly benefit shall be in the form of a "qualified joint and
survivor annuity" unless he had elected in lieu thereof to
receive payment either in the form of a life annuity under
subsection (b) next below or under a benefit option described
in
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section 7.2 (and such option is in effect on his annuity
commencement date). Such qualified joint and survivor annuity
shall consist of a monthly benefit continuing during the
participant's lifetime and if the participant's eligible
spouse is living at the time of the participant's death,
payment of 50 percent of such monthly benefit shall be made to
his eligible spouse until the eligible spouse's death occurs.
The amount of such monthly benefit under this subsection shall
be calculated so that it is the actuarial equivalent of the
retirement or deferred vested benefit to which the participant
is otherwise entitled. If a participant who has five or more
years of service who retired on a normal or early retirement
date dies prior to his annuity commencement date, or if a
participant who has continued employment after he has attained
normal retirement age dies before his retirement date, and if
such participant has an eligible spouse at the time of his
death, then, unless the participant had elected that benefits
not be paid to his eligible spouse under this subsection,
benefits shall be payable to the participant's eligible spouse
in accordance with the foregoing provisions of this subsection
as if the participant's annuity commencement date had occurred
immediately prior to the date of his death.
(b) Life Annuity. A participant shall receive payment
of his monthly benefit during his lifetime on a life annuity
basis if he is not eligible for a qualified joint and survivor
annuity under subsection (a) next above, or, if he is eligible
for a qualified joint and survivor annuity under (a) above,
and prior to his annuity commencement date he had elected not
to receive payment in the form of a qualified joint and
survivor annuity or any of the optional forms of payment of
benefits described in section 7.2.
(c) Written Explanation of Qualified Joint and
Survivor Annuity: The plan administrator shall provide to each
participant, not more than 90 days nor less than 7 days before
the participant's annuity starting date, a written explanation
of (i) the terms and conditions of the qualified joint and
survivor annuity, (ii) the participant's right to make, and
the effect of, an election to waive the qualified joint and
survivor annuity, (iii) the rights of a participant's spouse
under this section, (iv) the right to make, and the effect of,
a revocation of an election to waive the qualified joint and
survivor annuity and (v) a general description of the
eligibility features and relative values of a qualified joint
and survivor annuity, single life annuity and the other
optional forms of benefit under the plan. Each participant
shall have an election period beginning not more than 90 days
before his annuity commencement date and ending on the annuity
commencement date. An election made by the participant under
subsection (a) next above may be revoked by the participant,
and a new election made at any time during the election
period, providing that such a new election meets the
requirements of section 7.3.
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<PAGE> 26
7.2 Optional Forms of Payment of Benefits. In lieu of the
normal form and amount of monthly benefit specified in section 7.1, and subject
to the provisions of section 7.3, a participant before his retirement date
(excluding a participant entitled to a monthly disability benefit) may elect a
retirement income or deferred vested benefit of actuarially equivalent value in
one of the following forms:
(a) Five, Ten or Fifteen Year Certain Option. A
monthly benefit payable to the participant during his lifetime
and, if the participant dies within a period of five, ten or
fifteen years (as selected by the participant) from his
annuity commencement date, a continuing monthly payment of the
same amount to a person or persons designated by the
participant for the balance of such five, ten or fifteen year
period; provided, however, that the ten or fifteen years
option shall not be available if the life expectancy of the
participant or the joint and survivor life expectancy of the
participant and his beneficiary is less than the applicable
five, ten or fifteen years on his annuity commencement date.
(b) Joint and Survivor Annuity. A monthly benefit
payable to the participant during his lifetime and, if another
person he had designated is living at the time of his death,
payment of 100 percent, 66-2/3 percent or 50 percent of that
amount to such other person as long as such other person
lives; provided, however that if the participant designates
someone other than his spouse, the option shall be designed so
that the lump sum actuarially equivalent value of the monthly
benefit payable to the participant under the option over his
life expectancy shall be greater than 50 percent of the lump
sum actuarially equivalent value of the monthly benefit that
otherwise would be payable to the participant on a life
annuity basis.
(c) Level Benefit Option. If payment of a
participant's monthly benefit begins before he commences
receiving Old Age Insurance Benefits under the Social Security
Act, a larger monthly retirement income or deferred vested
benefit payable to him until the first to occur of his death
or the earliest date on which he becomes eligible to apply for
and receive Old Age Insurance Benefits under the Social
Security Act, and, where the full actuarial equivalent of the
normal form of the participant's monthly benefit has not been
provided under the option, with a continuance of a smaller
amount of monthly benefit after such date until the
participant's death.
(d) Lump Sum Option. A single lump sum payment of the
actuarially equivalent present value of the participant's
monthly retirement benefit.
(e) Full Cash Refund Option. A monthly benefit
payable to the participant during his lifetime and, if the
participant dies before he has received payments equal to the
actuarial value of his pension at the earlier of his normal
retirement
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<PAGE> 27
date or annuity commencement date, then the excess of such
amount over the amount received by the participant shall be
paid in a lump sum or life annuity to a person or persons
designated by the participant.
Elections under this section shall be in writing on forms prescribed by and
filed with the plan administrator.
7.3 Rules as to Wavier of Normal Form of Benefit,
Election and Discontinuance of Optional Forms of Payment of Benefits and Spousal
Consents. A participant's waiver of a normal form of benefit and election of an
optional form of monthly benefit specified in section 7.2 and an eligible
spouse's consent of the participant's waiver and election shall be subject to
the following rules, to the extent appropriate:
(a) A waiver of the normal form of benefit and
election of an optional form of benefit must be in writing,
signed by the participant, and approved by the company. If
payment of the participant's monthly benefit otherwise would
be required pursuant to subsection 7.1(a), the election of an
optional form of benefit will not be valid unless (i) it also
contains the participant's waiver of his right to receive
payment in the form of a qualified joint and survivor annuity
and (ii) the participant's eligible spouse consents, in
writing, to the participant's waiver of the normal form of
benefit, to the optional form of benefit or the plan
administrator determines that a consent cannot be obtained
because the participant is not married or because the eligible
spouse cannot be located or because of such other
circumstances as the Secretary of the Treasury may, by
regulation, prescribe. An eligible spouse's consent is
irrevocable and must be witnessed by a notary public or a plan
representative.
(b) A participant may waive the normal form of
benefit and elect an optional form of benefit, and an eligible
spouse may consent to such a waiver and election, at any time
during the applicable election period. The applicable election
period shall commence on the date which is 90 days prior to
the participant's annuity commencement date and shall end on
the participant's annuity commencement date.
(c) A participant who has elected an option may
revoke it or change it to another option at any time prior to
the participant's annuity commencement date by filing, with
the plan administrator, a superseding election, in accordance
with the foregoing provision of this section 7.3. A revocation
or change of an option may be made without the consent of the
person or persons the participant has designated in the
option. Notwithstanding the immediately preceding provision, a
participant's eligible spouse must consent, in accordance with
the foregoing provision of this section 7.3, to a change of an
optional form of benefit.
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<PAGE> 28
(d) If a participant who had elected an option dies
before he attains age 65 and before his annuity commencement
date, such option automatically will be canceled and no
benefits will be paid to any person (or any person's estate)
under such option. If a participant dies after attaining age
65, but before his benefit commencement date, such option will
continue in effect as if the participant retired immediately
prior to his death.
(e) If the beneficiary designated by a participant in
his election of an option dies before the participant's
annuity commencement date, the option automatically will be
canceled and the participant's monthly benefit will be paid to
him in the normal form unless a new election can be and is
made by the participant pursuant to the foregoing provisions
of this section.
(f) If after a participant has commenced receiving
monthly benefits under subsections 7.2(a) or (e), but prior to
the participant's death, the person or persons designated by
the participant under that subsection die, the option shall
remain in effect and, unless the participant designates
another beneficiary to receive any benefits payable under that
option after his death, such benefits shall be payable to the
participant's estate. If after a participant has commenced
receiving monthly benefits under subsection 7.2(b), but prior
to the participant's death the beneficiary designated as the
joint annuitant by the participant under that subsection dies,
the option shall remain in effect but no benefits shall become
payable to any person (or any person's estate) upon the
participant's death.
7.4 Pre-Retirement Spouse's Benefit. If a participant who
has completed five or more years of service dies before his annuity commencement
date and if he has an eligible spouse at the time of his death, his eligible
spouse shall be entitled to receive a monthly benefit for life. The monthly
benefit payable to the participant's eligible spouse for life shall be an amount
equal to 50 percent of the amount of monthly retirement income or monthly
deferred vested benefit that would have been payable to the participant under
subsection 7.1(a) in the form of the qualified joint and survivor annuity
described therein if he had terminated employment as of the date of his death
(if he had not already so terminated his employment) and his annuity
commencement date was to occur on the first day of the calendar month coincident
with or next following the later of the date of his death or the date the
participant would have attained normal retirement age with the qualified joint
and survivor annuity in effect for him. The first payment to a participant's
eligible spouse under this section shall be made as of the first day of the
calendar month coincident with or next following the later of the date of the
participant's death or the date
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<PAGE> 29
the participant would have attained age 65 years, and the final payment shall be
made as of the first day of the calendar month during which the eligible
spouse's death occurs. In lieu of receiving a monthly benefit commencing on the
participant's normal retirement date, an eligible spouse of a participant who
had completed 10 years of service as of the date of his death may elect (by
filing a written election with the plan administrator in advance) to receive a
monthly benefit for life commencing on the first day of the calendar month
coincident with or next following the later of the date of the participant's
death or the date the participant would have been eligible for early retirement,
or on the first day of any calendar month thereafter that occurs prior to the
participant's normal retirement date. If such monthly benefit is to commence
prior to the participant's normal retirement date, the amount of such monthly
benefit shall be determined by reducing the amount of monthly benefit to which
the eligible spouse would otherwise be entitled commencing on the participant's
normal retirement date by 1/180 for each of the first 60 months and 1/360 for
each of the next 60 months by which the commencement of the monthly benefit
precedes the participant's normal retirement date. Notwithstanding anything in
this section 7.4 or the plan to the contrary, if a participant who has completed
five or more years of service continues in the employ of the employers after he
has attained age 65 years and the participant is married, the participant may
elect prior to his retirement (in writing on a form prescribed by and filed with
the plan administrator prior to the participant's death) to have the lump sum
actuarially equivalent present value of his monthly retirement benefit paid to
his eligible spouse, if any, as soon as practicable after his death provided
that he dies prior to his annuity commencement date and his spouse consents in
writing to such immediate lump sum payment in accordance with the spousal
consent rules described in section 7.3(a). The spouse of a participant will be
considered as an "eligible spouse" as of any date only if at least twelve months
prior thereto the participant and spouse are married in a religious or civil
ceremony recognized under the laws of the state where the marriage was
contracted and the marriage remains legally effective.
7.5 Special Pre-Retirement Lump Sum Death Benefit. A
participant who continues in the employ of the Penton Companies after his
attainment of normal retirement age may elect the lump sum benefit payment
described in section 7.2(d) as a pre-retirement death benefit to his designated
beneficiary. If a participant elects a lump sum pre-retirement death
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benefit under this section, dies prior to his employment termination date or
retirement date and has not revoked his election as of the date of his death,
payment of the lump sum shall be made to the participant's designated
beneficiary; provided, however, that if the participant has an eligible spouse
as of the date of the participant's death, the eligible spouse shall receive the
pre-retirement spouse's benefit described in section 7.4 and the participant's
election of a lump sum pre-retirement death benefit described in this section
shall be cancelled unless the participant's eligible spouse consents (within the
90-day period ending on the benefit commencement date in accordance with the
procedures described in section 7.3) to the payment of such lump sum benefit to
the participant's designated beneficiary in lieu of the pre-retirement spouse's
benefit. Any election made under this section 7.5 shall be cancelled upon the
participant's employment termination provided the participant's employment
terminates by reason other than his death.
7.6 Special Payment Limitations. Notwithstanding
anything in this plan to the contrary,
(a) As provided in section 401(a)(9) of the Code, (i)
in the case of a participant who (A) is a five-percent owner
or (B) attains age 70 1/2 prior to January 1, 1999, the
payment of such participant's benefits shall in no event
commence later than April 1 of the calendar year following the
calendar year in which the participant attains age 70 1/2 and
(ii) in the case of any other participant, the payment of such
participant's benefit shall in no event commence later than
April 1 of the calendar year following the later of the
calendar year in which the participant attains age 70 1/2 or
the calendar year in which the participant terminates
employment with the employers;
(b) If the actuarial present value of a participant's
vested accrued benefits exceeds, or at any time exceeded,
$5,000, no amount shall be distributable to the participant
prior to the date the participant attains normal retirement
age without the participant's written consent and, if the
participant's benefit is to be distributed in any form other
than a qualified joint and survivor annuity, the written
consent of the participant's eligible spouse;
(c) Payment of benefits under the plan to a
participant shall commence not later than the 60th day after
the end of the plan year in which occurs the latest of the
participant's termination of employment with the employer, the
participant's attainment of normal retirement age, or the
tenth anniversary of the year in which the participant
commenced participation in the plan; and
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(d) If a participant continues in the employ of the
Penton Companies after his normal retirement date, the payment
of his accrued monthly retirement income shall be suspended
only for those calendar months within the period of his
continued employment during which he receives compensation for
at least 40 hours of service as long as proper notification of
such suspension of benefits has previously been distributed to
such participant.
7.7 Payment of Small Amounts. If the lump sum actuarially
equivalent value of the monthly benefit payable to or with respect to a
participant under the plan does not exceed $5,000 as of the participant's
employment termination date, then, in lieu of payment of such monthly benefits,
the plan administrator shall direct that an amount equal to the lump sum
actuarially equivalent value of such monthly benefits be paid to the participant
(or, in the event of the participant's death, to the participant's beneficiary)
in a lump sum as soon as practicable thereafter; and for this purpose, if the
value of the participant's vested and nonforfeitable benefit under the plan as
of the participant's employment termination date is zero, the participant shall
be deemed to have received a total distribution of such vested and
nonforfeitable benefit as of such date. For purposes of determining the lump sum
amount under this section, the interest rate used in determining actuarial
equivalence shall not be greater than the interest rate which would be used as
of the date of a distribution under this section by the Pension Benefit Guaranty
Corporation ("PBGC") for purposes of determining the present value of a lump sum
distribution under a plan which terminates on such date.
7.8 Payment by Annuity Purchase. The purchase for a
participant, contingent annuitant or beneficiary and distribution to that person
of an annuity contract or annuity certificate to provide such person's benefits
shall constitute the complete payment of that person's benefits under the plan.
7.9 Direct Rollover of Eligible Rollover Distributions.
Notwithstanding any provision of the plan to the contrary that would otherwise
limit a distributee's election under this Article 7, a distributee may elect, at
the time and in the manner prescribed by the plan administrator, to have any
portion of an eligible rollover distribution paid directly to an eligible
retirement plan specified by the distributee in a direct rollover.
An "eligible rollover distribution" is any distribution of all
or any portion of the balance to the credit of the distributee, except that an
eligible rollover distribution does not
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include: any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or joint life expectancies)
of the distributee and the distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to the extent such
distribution that is not includable in gross income (determined without regard
to the exclusion for net unrealized appreciation with respect to employer
securities).
An "eligible retirement plan" is an individual retirement
account described in section 408(a) of the Code, an individual retirement
annuity described in section 408(b) of the Code, an annuity plan described in
section 403(a) of the Code, or a qualified trust described in section 401(a) of
the Code, that accepts the distributee's eligible rollover distribution.
However, in the case of an eligible rollover distribution to the surviving
spouse, an eligible retirement plan is an individual retirement account or
individual retirement annuity.
A "distributee" includes an employee or former employee. In
addition, the employee's or former employee's surviving spouse and the
employee's or former employee's spouse or former spouse who is the alternate
payee under a qualified domestic relations order, as defined in section 414(p)
of the Code, are distributees with regard to the interest of the spouse or
former spouse.
A "direct rollover" is a payment by the plan to the eligible
retirement plan specified by the distributee.
7.10 Designated Beneficiaries. A participant may from time
to time designate a beneficiary or beneficiaries on a form provided by the plan
administrator, to whom the participant's benefit will be distributed following
the participant's death. A participant may designate contingent or successive
beneficiaries and may name individuals, legal persons or entities, trusts,
estates, trustees or other legal representatives as beneficiaries. Beneficiary
designations must be completed and filed with the plan administrator during the
participant's lifetime, and, if the participant has an eligible spouse at the
date of the participant's death, the participant's surviving spouse will be the
participant's designated beneficiary unless the surviving spouse has consented
or consents in writing to the participant's designation of another beneficiary
in accordance with section 7.3. The consent of the spouse shall not be required
to the
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<PAGE> 33
participant's designation of a beneficiary upon proof satisfactory to the plan
administrator that the participant is not married, the spouse of the participant
cannot be located, or the consent of the spouse cannot be obtained under such
circumstances as may be prescribed in regulation issued by the Secretary of
Treasury or its delegate. A beneficiary designation properly completed and filed
will cancel all such designations filed earlier.
7.11 Missing Persons. Each participant and each other
person entitled to benefits under the plan must file with the plan administrator
from time to time in writing his post office address and each change of post
office address. Any communication, statement or notice addressed to a
participant or a person entitled to benefits at his last post office address as
shown on the employers' records will be binding on the participant and any
person entitled to benefits for all purposes of the plan. None of the employers
or the plan administrator are required to search for or locate any participant
or other person entitled to benefits under the plan. If the plan administrator
notifies a participant or any other person that he is entitled to a distribution
and also notifies him of the provisions of this section, and the participant or
person entitled to benefits fails to claim his benefits under the plan or make
his whereabouts known to the plan administrator within five years after the
notification, the benefits under the plan of the participant or other person may
be disposed of, to the extent permitted by federal law, as follows:
(a) If the whereabouts of the participant is unknown
and the whereabouts of a person entitled to receive the
participant's benefits under the plan then is known to the
plan administrator, distribution may be made to such other
person.
(b) If the whereabouts of the participant and any
person entitled to his benefits then is unknown to the plan
administrator, but the whereabouts of one or more relatives by
blood, adoption or marriage of the participant is known to the
plan administrator, distribution may be made to any one or
more of such relatives and in such proportions as the plan
administrator determines.
7.12 Payment with Respect to Incapacitated Participants or
Beneficiaries. If any person entitled to benefits under the plan is under a
legal disability or, in the plan administrator's opinion, is incapacitated in
any way so as to be unable to manage his financial affairs, the plan
administrator may direct the payment of such benefits to such person's legal
representative or to a relative or friend of such person for such person's
benefit, or the plan administrator may direct the
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<PAGE> 34
application of such benefit for the benefit of such person in any manner which
the plan administrator may select that is permitted by federal law and is
consistent with the plan. Any payments made in accordance with the foregoing
provisions of this section shall be a full and complete discharge of any
liability for such payments.
ARTICLE 8
Reemployment
8.1 Rehired Employee. If a former employee of a Penton
Company who had not previously become a participant in the plan is reemployed by
an employer and becomes a covered employee before his retirement date, the
following provisions shall apply in his case, notwithstanding any other
provisions of the plan:
(a) If he is reemployed by a Penton Company before he
has incurred a one-year break in service (as defined in
subsection 8.3), his employment with the employers shall be
deemed to have continued without interruption for purposes of
determining his eligibility to become a participant and his
years of service and he shall become a participant during his
period of reemployment when he meets the eligibility
requirements of section 2.1.
(b) If he is reemployed by a Penton Company after he
has incurred a one-year break in service, he will become a
participant immediately following the twelve consecutive month
period commencing on the date of his reemployment, provided he
meets all of the eligibility requirements of section 2.1.
(c) If he is reemployed by a Penton Company after he
has incurred a one-year break in service and if he becomes a
participant in the plan pursuant to subsection (b) next above,
then:
(i) If subparagraph (ii) next below does not
apply in his case, his prior years of service shall
be added to his years of service earned after his
reemployment.
(ii) If at the time of his prior termination of
employment with the employers he had no vested
interest in the plan and if he incurred five
consecutive one-year breaks in service, his prior
years of service shall not be reinstated and shall be
disregarded for purposes of the plan.
8.2 Rehired Participant. If a former participant or a
participant whose employment with the employers had terminated but who has not
received all benefits due him
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under the plan is reemployed by a Penton Company but he does not again become a
covered employee before his retirement date, payment of his benefits, if any,
shall be suspended for each calendar month within the period of his reemployment
during which he receives compensation for at least 40 hours of service, but
shall be resumed when such period of reemployment ends. However, if his death
occurs during the period of his reemployment and if immediately prior to his
reemployment his benefits were being paid in the form of the qualified joint
survivor annuity described in subsection 7.1(a), in the form of a joint and
survivor annuity described in subsection 7.2(b), in the form of a period certain
option described in subsection 7.2(a), or in the full cash refund form described
in subsection 7.2(e) benefits that would have been payable under the plan to his
spouse under the qualified joint and survivor annuity or to his spouse or any
other person he had designated under the joint and survivor annuity option, the
period certain option, or the full cash refund option, whichever applies, if he
had not been reemployed and his benefits had not been suspended shall become
payable under the plan. If a former participant, or a participant whose
employment with the Penton Companies had terminated but who has not received all
benefits due him under the plan, is reemployed by a Penton Company and again
becomes a participant before his retirement date, payment of his benefits, if
any, shall be suspended for each calendar month which commences during the
period of his reemployment. The following provisions shall apply in the case of
such a participant or former participant, notwithstanding any other provisions
of the plan:
(a) He shall become an active participant on the date
he again becomes a covered employee of an employer.
(b) If he is reemployed and becomes an active
participant before he has incurred a one-year break in
service, his prior years of service shall be added to his
years of service earned after his reemployment and his prior
years of service shall be added to his years of service earned
after his reemployment.
(c) If he is reemployed and becomes an active
participant after he has incurred a one-year break in service,
his prior years of service shall be added to his years of
service earned after his reemployment, except as follows:
(i) If at the time of his prior termination
of employment with the employers he had less than
five years of service and thus was not entitled to a
monthly retirement income or deferred vested benefit
at the
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time of his prior termination of employment, and if
his break in service period exceeds his prior years
of service, his prior years of service shall not be
reinstated and shall be disregarded for purposes of
the plan; and
(ii) If subparagraph (i) above does not
apply in his case but as a result of his prior
termination of employment he has received his entire
benefit due under the plan in the form of a lump sum
payment, his prior years of service shall not be
reinstated and shall be disregarded for purposes of
the plan.
8.3 One-Year Break in Service, Five-Year Break in
Service, Break-in Service Period. For purposes of the plan, a "one-year break in
service" means any plan year in which a terminated employee or participant does
not complete more than 500 hours of service. A "five-year break in service"
means a period of five consecutive one-year breaks in service. A "break-in
service period" means the total number of an employee's or participant's
consecutive one-year breaks in service after his employment termination or
retirement date.
8.4 Redetermination of Benefits. If a former employee who
is reemployed by a Penton Company and who had previously participated in the
plan again becomes an active participant in accordance with subsection 8.2(a),
no benefits shall be payable to him under the plan during the period of his
reemployment if he was not receiving benefits at the time of his reemployment
and, if he was receiving benefits at the time of his reemployment, payment of
his benefits shall be suspended for any calendar month within the period of his
reemployment during which he receives compensation for at least 40 hours of
service. Benefits payable to or with respect to a participant under the plan
after his period of reemployment ends shall be redetermined in accordance with
the provisions of the plan as then in effect. However, if the years of service
he was entitled to at the time of his initial termination of employment have
been added to the years of service earned after his reemployment pursuant to
section 8.2, such benefits shall be reduced by the actuarial equivalent of the
benefits, if any, previously paid to him under the plan. In no event shall his
redetermined benefits be less than the benefits he was receiving or entitled to
receive under the plan immediately prior to his reemployment.
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ARTICLE 9
Maximum Benefits
9.1 Benefit Limitations. Section 415 of the Code imposes
certain limitations on the amount of benefits that may be provided for a
participant under a defined benefit plan (as defined in section 414(j) of the
Code) maintained by his employer. If a participant in a defined benefit plan
maintained by his employer also is a participant in a defined contribution plan
(as defined in section 414(i) of the Code) maintained by his employer, section
415 imposes certain combined limitations as to the amount of benefits that may
be provided for the participant under both types of plans. This plan is a
defined benefit plan and, therefore, each participant in the plan shall be
subject to the maximum benefit limitations set forth in section 9.3 or 9.4,
whichever applies, irrespective of any other provisions of the plan. For
purposes of section 415 of the Code, the employers' "limitation year" is the
plan year.
9.2 Total Compensation. For purposes of this Article 9, a
participant's "total compensation" means, with respect to any plan year, the
total compensation paid to the participant during that year for services
rendered to the Penton Companies as an employee that is subject to withholding
for federal income tax purposes (before taking into account any withholding
exemptions) and amounts contributed by an employee pursuant to a salary
reduction agreement as defined in section 414(s)(3) of the Code, but excluding
any noncash compensation and any compensation deferred beyond the participant's
retirement date or employment termination date.
9.3 Participant Covered by Defined Benefit Plan. If a
participant in the plan is not covered by a defined contribution plan maintained
by the employers, the participant's monthly retirement income or deferred vested
benefit payable under the plan (disregarding for this purpose that portion of
any joint and survivor annuity which constitutes a qualified joint and survivor
annuity under section 417(b) of the Code) may not exceed an amount that is
actuarially equivalent to a monthly benefit, commencing for life only, equal to
the lesser of (1) $7,500 (or such other maximum amount effective no sooner than
January 1 of any plan year as may be permitted from time to time by the
Secretary of the Treasury or his delegate or by law) (the "$7,500 limitation")
or (2) 1/12 of 100 percent of the participant's average annual total
compensation during that
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<PAGE> 38
period of three consecutive plan years during which he actively participated in
the plan and in which his aggregate total compensation was the greatest (or
during his entire period of participation if less than three such years). The
foregoing limitation is subject to the following:
(a) Adjustment of Limitation for Years of
Participation or Service. In the case of a participant with
less than ten years of participation, the limitation described
in (1) of the first sentence of this section shall be
multiplied by a fraction, the numerator of which shall be the
participant's number of years (or part thereof) of
participation in the plan, and the denominator of which shall
be ten. In the case of a participant with less than ten years
of service the limitations described in (2) of the first
sentence of this section and section 415(b)(4) of the Code
shall be multiplied by a fraction, the numerator of which
shall be the participant's number of years of service (or part
thereof), and the denominator of which shall be ten. In no
event shall the adjustments provided in this subsection (a)
reduce the limitations described in subsection (1) of the
first sentence of this section and section 415(b)(4) of the
Code to an amount less than one-tenth of the applicable
limitation (determined without regard to this subsection).
(b) Adjustment of Limitation for Early or Deferred
Retirement. If the benefit payable under the plan to a
participant commences after his attainment of the Social
Security retirement age, the limitation described in (1) of
the first sentence of this section shall be adjusted in
accordance with Treasury regulations so that it equals the
actuarial equivalent of the maximum benefit payable at the
Social Security retirement age, based on an interest rate
assumption of five percent (5%) per year. If the benefit
payable under the plan to a participant commences prior to his
attainment of the Social Security retirement age, the
limitation described in (1) of the first sentence of this
section shall be adjusted in accordance with Treasury
regulations so that it equals the actuarial equivalent of such
benefit commencing at the Social Security retirement age. The
adjustment provided in the preceding sentence shall be made in
such manner as the Secretary of the Treasury may prescribe
which is consistent with the reduction for old-age insurance
benefits commencing before the Social Security retirement age
under the Social Security Act.
(c) Social Security Retirement Age Defined. The term
"Social Security retirement age" shall mean the age used as
the retirement age for the participant under section 216(1) of
the Social Security Act, except that such section shall be
applied without regard to the age increase factor, and as if
the early retirement age under section 216(1)(2) of such Act
were 62.
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<PAGE> 39
(d) Preservation of Current Accrued Benefit. If the
current accrued benefit of an employee who is a participant as
of the effective date exceeds the limitations of section 415
of the Code (as modified by paragraphs (b) and (c) of this
section), then, for purposes of sections 415(b) and 415(e) of
the Code, the defined benefit dollar limitation with respect
to such participant shall be equal to his current accrued
benefit. The term "current accrued benefit" means a
participant's accrued benefit under the plan, determined as if
the participant had separated from service on December 31,
1988, when expressed as an annual benefit within the meaning
of section 415(b)(2) of the Code (without regard to any cost
of living adjustment occurring after May 5, 1986).
9.4 Participant Covered by Defined Benefit Plan and
Defined Contribution Plan. Effective prior to January 1, 2000, if a participant
in the plan also is a participant in a defined contribution plan maintained by
the employers, the benefit payable to the participant under this plan and the
contributions made on behalf of the participant under such defined contribution
plan shall be determined in a manner consistent with section 415 of the Code, as
follows:
(a) A fraction shall be determined which will equal
the benefits accrued or payable to or for such participant
under the plan as of the end of the plan year divided by the
"defined benefit limitation amount" in effect for that year.
The "defined benefit limitation amount" for any plan year
shall be the lesser of (i) 1.25 multiplied by the dollar
limitation in effect under section 415(b)(1)(A) of the Code
for such year, provided that in any year in which the plan
would be a "top-heavy" plan if 90 percent were substituted for
60 percent in subsection 17.1(b), 1.0 shall be substituted for
1.25, or (ii) 1.4 multiplied by 100 percent of the
participant's average annual total compensation for the three
consecutive plan years during which he actively participated
in the plan and in which his aggregate total compensation was
the greatest; provided that such amount shall be appropriately
adjusted if necessary as provided in section 415(b) of the
Code.
(b) A fraction shall also be determined indicating
the ratio of the participant's annual additions (as defined in
section 415(c)(2) of the Code) under the defined contribution
plans of the employers for each plan year to the aggregate of
the "defined contribution limitation amount" in effect for
each year of the participant's employment by the employers.
The "defined contribution limitation amount," for any year
shall be the lesser of (i) 1.25 multiplied by the dollar
limitation in effect under section 415(c)(1)(A) of the Code
for such year, provided that in any year in which the plan
would be a top-heavy plan if 90 percent were substituted for
60 percent in subsection 17.1(b), 1.0 shall be substituted for
1.25, or (ii) 1.4
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multiplied by 25 percent of the participant's total
compensation for such year.
(c) The benefits under this plan shall be reduced
(before any reductions are made in contributions under the
defined contribution plans of the employers) so that the sum
of the fractions determined with respect to any participant in
accordance with subsections 9.4(a) and (b) above will not
exceed 1.0 (or such other applicable maximum amount permitted
by law).
9.5 Combining of Plans. In applying the limitations set
forth in sections 9.3 and 9.4 reference to the plan shall mean the plan and all
other defined benefit plans (whether or not terminated) maintained by the
employers, reference to a defined contribution plan maintained by the employers
shall mean that plan and all other defined contribution plans (whether or not
terminated) maintained by the employers.
ARTICLE 10
Plan Administrator
10.1 Plan Administrator's Duties. As provided in section
1.2, a committee appointed by the company is responsible for the administration
of the plan. Except as otherwise specifically provided and in addition to the
powers, rights and duties specifically given to the plan administrator elsewhere
in the plan, the plan administrator shall have the following powers, rights and
duties:
(a) To construe and interpret the plan, to decide all
questions of plan eligibility, to determine the amount, manner
and time of payment of any benefits under the plan, to make
findings of fact and to remedy ambiguities, inconsistencies or
omissions.
(b) To adopt such rules of procedure as may be
necessary for the efficient administration of the plan and as
are consistent with the plan, and to enforce the plan in
accordance with its terms and such rules.
(c) To make determinations as to the right of any
person to a benefit, to afford any person dissatisfied with
such determination the right to a hearing thereon, and to
direct payments or distributions from the trust in accordance
with the provisions of the plan.
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<PAGE> 41
(d) To furnish the employers with such information as
may be required by them for tax or other purposes in
connection with the plan.
(e) To enroll participants in the plan, to distribute
and receive plan administration forms, and to comply with all
applicable governmental reporting and disclosure requirements.
(f) To employ agents, attorneys, accountants,
actuaries or other persons (who also may be employed by the
employers, the trustees, or any investment manager or
managers) and to allocate or delegate to them such powers,
rights and duties as the plan administrator considers
necessary or advisable to properly carry out the
administration of the plan (including but not limited to the
preparation of recommendations of actuarial assumptions which
shall be reviewed by the plan administrator), provided that
any such allocation or delegation and the acceptance thereof
must be in writing.
(g) To report to the directors of the company or to
such person or persons as the directors of the company
designate as to the administration of the plan, any
significant problems which have developed in connection with
the administration of the plan and any recommendations which
the plan administrator may have as to the amendment of the
plan or the modification of plan administration.
10.2 Action by Plan Administrator. During a period in
which two or more plan administrative committee members are acting, any action
by the plan administrator will be subject to the following provisions:
(a) The committee may act by meeting (including a
meeting from different locations by telephone conference) or
by document signed without meeting, and documents may be
signed through the use of a single document or concurrent
documents.
(b) A committee member by writing may delegate part
or all of his rights, powers, duties and discretions to any
other committee member, with such other committee member's
consent.
(c) The committee shall act by a majority decision,
which action shall be as effective as if such action had been
taken by all members of the committee; provided that by
majority action one or more committee members or other persons
may be authorized to act with respect to particular matters on
behalf of all committee members.
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<PAGE> 42
(d) If there is an equal division among the committee
members with respect to any questions, a disinterested party
may be selected by a majority vote to decide the matter. Any
decision by such disinterested party will be binding.
(e) The certificate of the secretary of the committee
or the majority of the committee members that the committee
has taken or authorized any action shall be conclusive in
favor of any person relying on such certificate.
(f) Except as required by law, no member of the
committee shall be liable or responsible for an act or
omission of other committee members in which the former has
not concurred.
10.3 Information Required for Plan Administration. The
employers shall furnish the plan administrator with such data and information as
the plan administrator considers necessary or desirable to perform its duties
with respect to plan administration. The records of an employer as to an
employee's or participant's period or periods of employment, termination of
employment and the reason therefor, leaves of absence, reemployment, and
compensation will be conclusive on all persons unless determined to the plan
administrator's satisfaction to be incorrect. Participants and other persons
entitled to benefits under the plan also shall furnish the plan administrator
with such evidence, data or information as the plan administrator considers
necessary or desirable for the plan administrator to perform his duties with
respect to plan administration.
10.4 Decision of Plan Administrator Final. Subject to
applicable law and the provision of section 10.5, any interpretation of the
provisions of the plan and any decision on any matter within the discretion of
the plan administrator made by the plan administrator in good faith shall be
binding on all persons. A misstatement or other mistake of fact shall be
corrected when it becomes known, and the plan administrator shall make such
adjustment on account thereof as the plan administrator considers equitable and
practicable.
10.5 Review of Benefit Determinations. If a claim for
benefits made by a participant or his beneficiary is denied, the plan
administrator shall, within 90 days (or 180 days if special circumstances
require an extension of time) after the claim is made, furnish the person making
the claim with a written notice specifying the reasons for the denial. Such
notice shall also refer to the pertinent plan provisions on which the denial is
based, describe any additional material
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or information necessary for properly completing the claim and explain why such
material or information is necessary, and explain the plan's claim review
procedures. If requested in writing, the plan administrator shall afford each
claimant whose claim has been denied a full and fair review of the plan
administrator's decision and, within 60 days (120 days if special circumstances
require additional time) of the request for reconsideration of the denied claim,
the plan administrator shall notify the claimant in writing of the plan
administrator's final decision.
10.6 Uniform Rules. The plan administrator shall perform
his duties with respect to plan administration on a reasonable and
nondiscriminatory basis and shall apply uniform rules to all participants
similarly situated.
10.7 Plan Administrator's Expenses. All costs, charges and
expenses reasonably incurred by the plan administrator will be paid by the plan
to the extent not paid by the employers in such portions as the company shall
direct; provided no compensation will be paid to a committee member as such.
10.8 Interested Plan Administrator. If a member of the
plan committee is also a participant in the plan, he may not decide or determine
any matter or question concerning his benefits unless such decision or
determination could be made by him under the plan if he were not a committee
member.
10.9 Resignation or Removal of Plan Administrative
Committee Members. A member of the committee may be removed by the company at
any time by ten days' prior notice to him and the other members of the
committee. A member of the committee may resign at any time by giving ten days'
prior written notice to the company and the other members of the committee. The
company may fill any vacancy in the membership of the committee; provided,
however, that if a vacancy reduces the membership of the committee to less than
three, such vacancy shall be filled as soon as practicable. The company shall
give prompt written notice thereof to the other members of the committee. Until
any such vacancy is filled, the remaining members may exercise all of the
powers, rights and duties conferred on the plan administrator.
10.10 Indemnification. To the extent permitted by law, no
person (including a trustee, any present or former plan administrative committee
member, and any present or former director, officer or employee of any employer)
shall be personally liable for any act done or
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omitted to be done in good faith in the administration of the plan or the
investment of the pension fund. To the extent permitted by law, each present or
former director, officer or employee of any employer to whom the plan
administrator or an employer has delegated any portion of its responsibilities
under the plan and each present or former plan administrative committee member
shall be indemnified and saved harmless by the employers (to the extent not
indemnified or saved harmless under any liability insurance or other
indemnification arrangement with respect to the plan) from and against any and
all claims of liability to which they are subjected by reason of any act done or
omitted to be done in good faith in connection with the administration of the
plan or the investment of the trust fund, including all expenses reasonably
incurred in their defense if the employers fail to provide such defense.
ARTICLE 11
Relating to the Employers
11.1 Action by Employers. Any action required or permitted
of an employer under the plan shall be by resolution of its board of directors
or by a duly authorized committee of its board of directors, or by a person or
persons authorized by resolution of its board of directors or such committee.
11.2 Additional Employers. Any subsidiary or other related
company that is not an employer may adopt the plan and become an employer
thereunder by filing with the trustees and the plan administrator a certified
copy of a resolution of the board of directors of the subsidiary or other
related company providing for its adoption of the plan and a certified copy of a
resolution of the directors of the company consenting to such adoption.
11.3 Restrictions on Reversions. The employers shall have
no right, title or interest in the assets of the plan, nor will any part of the
assets of the plan at any time revert or be repaid to an employer, directly or
indirectly, except as follows:
(a) If the Internal Revenue Service initially
determines that the plan, as applied to any employer, does not
meet the requirements of a "qualified plan" under section
401(a) of the Code, the assets of the plan attributable to
contributions made by that employer under the plan shall be
returned to that employer within one year of the date of
denial of qualification of the plan as applied to that
employer.
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(b) If a contribution or a portion of a contribution
is made by an employer as a result of a mistake of fact, such
contribution or portion of a contribution shall not be
considered to have been contributed under the plan by that
employer and, after having been reduced by any losses of the
trust fund allocable thereto, shall be returned to that
employer within one year of the date the amount is contributed
under the plan.
(c) Each contribution made by an employer is
conditioned upon the deductibility of such contribution as an
expense for federal income tax purposes and, therefore, to the
extent that a contribution is made by an employer under the
plan for a period for which the deduction for a contribution
made by the employer is disallowed, then such contribution or
portion of a contribution, after having been reduced by any
losses of the pension fund allocable thereto, shall be
returned to that employer within one year of the date of
disallowance of the deduction.
(d) If after all fixed and contingent liabilities or
obligations to persons entitled to benefits under the plan
shall have been paid or provided for in full any plan assets
remain because of erroneous actuarial computation, such assets
shall be returned to the company.
ARTICLE 12
Amendment, Termination or Plan Merger
12.1 Amendment. While the employers expect and intend to
continue the plan, the company must necessarily reserve and hereby does reserve
the right, subject to section 11.3, to amend the plan from time to time, except
as follows:
(a) The duties and liabilities of the plan
administrator cannot be changed substantially without the
consent of the plan administrator; and
(b) No amendment shall reduce the value of a
participant's benefits to less than the amount he would be
entitled to receive if he had resigned from the employ of all
of the employers on the day of the amendment.
The foregoing provisions of this section shall be subject to any applicable
collective bargaining agreements, provided that the company may amend the plan
at any time to the extent necessary in order that the plan shall meet the
requirements of a "qualified plan" under section 401(a) of the Code and any
other requirements of applicable law.
12.2 Termination. The plan will terminate as to all
employers on any date specified by the company, and as to any employer on any
date specified by the that employer, if 10
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days' advance written notice of the termination is given to the plan
administrator and any other employers. The plan will terminate as to an
individual employer on the first to occur of the following:
(a) The date that employer is judicially
declared bankrupt or insolvent.
(b) The dissolution, merger, consolidation or
reorganization of that employer, or the sale by that employer
of all or substantially all of its assets, except that:
(i) In any such event arrangements may be
made with the consent of the company whereby the plan
will be continued by any successor to that employer
or any purchaser of all or substantially all of its
assets without a termination thereof, in which case
the successor or purchaser will be substituted for
that employer under the plan; and
(ii) If any employer is merged, dissolved or
in any way reorganized into, or consolidated with,
any other employer, the plan as applied to the former
employer will automatically continue in effect
without a termination thereof.
Notwithstanding the foregoing, if any of the events described above should occur
but some or all of the participants employed by an employer are transferred to
employment with one or more of the other employers coincident with or
immediately after the occurrence of such event, the plan as applied to those
participants will automatically continue in effect without a termination
thereof. The foregoing provisions of this section shall be subject to any
applicable collective bargaining agreements.
12.3 Plan Merger. In no event shall there be any merger or
consolidation of the plan with, or transfer of assets or liabilities to, any
other plan unless each participant in the plan would (if the plan then
terminated) received a benefit immediately after the merger, consolidation or
transfer which is equal to or greater than the benefit the participant would
have been entitled to receive immediately before the merger, consolidation or
transfer (if the plan had then terminated).
12.4 Continuation by a Successor or Purchaser.
Notwithstanding section 12.2, the plan and the trust shall not terminate in the
event of dissolution, merger, consolidation or reorganization of an employer or
sale by an employer of its entire assets or substantially all of its assets if
arrangements are made in writing between the employer and any successor to the
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employer or purchaser of all or substantially all of its assets whereby such
successor or purchaser will continue the plan and the trust. If such
arrangements are made, then such successor or purchaser shall be substituted for
the employer under the plan and the trust agreement.
12.5 Notice to Participants of Amendments, Terminations or
Plan Mergers. Participants affected thereby shall be notified by the company
within a reasonable time following any amendment, termination, plan merger, or
consolidation.
12.6 Vesting and Distribution on Termination. On
termination or partial termination of the plan as respects all employers (and,
at the discretion of the company, on a termination or partial termination of the
plan as respects any employer that does not result in the termination or partial
termination of the plan as respects all employers), the rights of all affected
employees to benefits accrued to the date of such termination shall be
nonforfeitable, but in such event such affected employees and other participants
and other persons entitled to benefits under the plan who are affected by such
event shall have no recourse towards the satisfaction of their nonforfeitable
benefits from other than the assets allocable to them under Article 14 or the
PBGC. Notwithstanding the above, the benefits provided upon plan termination to
any highly compensated employee (or any highly compensated former employee)
shall be limited to a benefit that is nondiscriminatory within the meaning of
section 401(a)(4) of the Code. For purposes of this Article 12, whether an
employee is highly compensated will be determined in accordance with section
414(q) of the Code and regulations thereunder.
ARTICLE 13
Funding of Plan Benefits
13.1 Employer Contributions. Subject to the provisions of
Article 14, the employers expect and intend to make contributions under the plan
from time to time of such amounts as are required under accepted actuarial
principles to maintain the plan in a sound condition and to meet all applicable
funding requirements imposed by federal law. The method of valuation used to
calculate the cost of the plan for purposes of this section and the actuarial
assumptions applied in regard to such method of valuation shall be determined
from time to time by the company, subject to applicable law.
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<PAGE> 48
13.2 Pension Fund. A "pension fund" will be maintained in
order to implement and carry out the provisions of the plan and to fund benefits
payable under the plan. The pension fund from time to time shall consist of one
or more funds established through one or more insurance contracts or trust
agreements, or through a combination of insurance contracts and trust
agreements, as determined by the company. Such fund or funds shall be maintained
for the purposes of receiving and holding contributions to the plan and interest
and other income thereon and paying benefits provided under the plan. The
company shall determine the form and terms of each insurance contract and trust
agreement and from time to time may direct the transfer of amounts held in any
such fund to any other such fund in accordance with the provisions of the
applicable trust agreements or insurance contracts. Subject to applicable law,
benefits provided through any insurance contract will be paid in accordance with
its terms and conditions.
13.3 Application of Forfeited Benefits. Benefits that
would have been payable to a participant if his employment with the employers
had not terminated before he was eligible to receive a monthly retirement income
or deferred vested benefits, and benefits that would have been payable to the
participant or any other person but for the participant's death, shall not be
applied to increase the benefits of any other participants or other persons.
However, the limitation contained in the next preceding sentence shall not in
any way limit the right reserved to the company under section 12.1 to amend the
plan to provide for increases or decreases in the amount of benefits or to
modify the form of any benefits payable under the plan.
ARTICLE 14
Allocation and Distribution on Termination
On termination or partial termination of the plan as respects
all employers (and, at the discretion of the company, on a termination or
partial termination of the plan as respects any employer that does not result in
the termination or partial termination of the plan as respects all employers),
the plan administrator will direct the allocation and distribution of plan
assets allocable to participants employed by that employer with respect to whom
the plan is terminated, to retired or terminated participants, and to spouses
and other persons entitled to benefits under the plan as joint annuitants, to
the extent their benefits are attributable to employment with that
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<PAGE> 49
employer. After payment of any expenses of administration and liquidation
allocable to such plan assets, such plan assets remaining shall be allocated and
distributed to such participants and other persons to provide their benefits
accrued to the date of plan termination, to the extent of the sufficiency of the
plan assets, in accordance with the provisions of section 4044 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
ARTICLE 15
Restrictions on Benefits
15.1 Pre-Termination Restrictions. In the event of the
termination of the plan, as provided in section 12.2, the benefit of any
highly-compensated employee (and any highly compensated former employee) will be
limited to a benefit that is nondiscriminatory under section 401(a)(4) of the
Code. For purposes of this Article 15, whether an employee is highly compensated
will be determined in accordance with section 414(q) of the Code and regulations
thereunder.
15.2 Restriction of Benefits. Annual payments to a
"restricted employee" are restricted to an amount equal in each year to the
payments that would be made on behalf of the employee under (i) a straight life
annuity that is the actuarial equivalent of the accrued benefit and other
benefits to which the employee is entitled under the plan (other than a Social
Security supplement), and (ii) the amount of the payments that the employee is
entitled to receive under a Social Security supplement; provided, however, that
the foregoing restrictions on annual payments to a restricted employee shall not
apply if any one of the following requirements is satisfied:
(a) The value of plan assets remaining after payment
of all benefits payable to the restricted employee equals or
exceeds 110 percent of the value of current liabilities, as
defined in section 412(l)(7) of the Code;
(b) The value of the benefits payable to the
restricted employee from the plan is less than one percent of
the value of current liabilities of the plan as determined
before distribution to such restricted employee; or
(c) The value of the benefits payable to the
restricted employee from the plan does not exceed the amount
described in section 411(a)(11)(A) of the Code.
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<PAGE> 50
For purposes of this Article 15, a "restricted employee" is an employee who is a
highly compensated employee or highly compensated former employee; provided
that, in any plan year, no more than 25 employees will be restricted employees,
and those employees who are restricted employees will be those highly
compensated employees and highly compensated former employees with the greatest
compensation in the current or any prior plan year. The value of benefits
payable to a restricted employee and the current liabilities of the plan shall
be determined in accordance with Treasury Regulation section 1.401(a)(4)-5 or
any substitute therefor.
ARTICLE 16
General Provisions
16.1 Examination of Plan Documents. Copies of the plan and
any amendments thereto will be on file at the principal office of each employer
where they may be examined by any participant or any other person entitled to
benefits under the plan.
16.2 Notices. A notice mailed to a participant or
beneficiary at his last address filed with the plan administrator in care of the
company will be binding on the participant or beneficiary for all purposes of
the plan. Any notice or document relating to the plan required to be given to or
filed with the plan administrator or any employer shall be considered as given
or filed if delivered or mailed by registered or certified mail, postage
prepaid, to the plan administrator, in care of Penton Media, Inc., 1100 Superior
Avenue, Cleveland, Ohio 44114.
16.3 Nonalienation of Plan Benefits. The rights or
interests of any participant or any participant's beneficiaries to any benefits
or future payments hereunder shall not be subject to attachment or garnishment
or other legal process by any creditor of any such participant or beneficiary,
nor shall any such participant or beneficiary have any right to alienate,
anticipate, commute, pledge, encumber or assign any of the benefits or rights
which he may expect to receive, contingently or otherwise under this plan except
as may be required by the tax withholding provisions of the Code or of a state's
income tax act or pursuant to a qualified domestic relations order, as defined
in section 414(p) of the Code.
16.4 No Employment Guarantee. None of the establishment of
the plan, modification thereof, the creation of any fund or account, or the
payment of any benefits shall be
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construed as giving to any participant or other person any legal or equitable
right against the employers, the plan administrator or any trustee except as
herein provided. Under no circumstances shall the terms of employment of any
participant be modified or in any way affected hereby. The maintenance of this
plan shall not constitute a contract of employment, and participation in the
plan will not give any participant a right to be retained in the employ of the
employers. None of the employers, the plan administrator or the trustees in any
way guarantees any assets of the plan from loss or depreciation or any payment
to any person. The liability of the plan administrator or any employer as to any
payment or distribution of benefits under the plan is limited to the available
assets of the trust fund.
16.5 Participant Litigation. In any action or proceeding
regarding the plan assets (or any property constituting a portion or all
thereof), any plan benefit, or regarding the administration of the plan,
employees or former employees of the employers or their beneficiaries or any
other persons having or claiming to have an interest in this plan shall not be
necessary parties and shall not be entitled to any notice or process. Any final
judgment which is not appealed or appealable and may be entered in any such
action or proceeding shall be binding and conclusive on the parties hereto and
all persons having or claiming to have any interest in this plan. To the extent
permitted by law, if a legal action is begun against the employers, the plan
administrator or the trustees by or on behalf of any person, and such action
results adversely to such person, or if a legal action arises because of
conflicting claims to a participant's or other person's benefits, the costs to
the employers, the plan administrator or the trustees of defending the action
will be charged to the sums, if any, which were involved in the action or were
payable to the participant or other person concerned. To the extent permitted by
applicable law, acceptance of participation in this plan shall constitute a
release of the employers, the plan administrator and the trustees and their
agents from any and all liability and obligation not involving willful
misconduct or gross neglect. Notwithstanding any other provisions of the plan,
if the plan administrator is required by a final court order to distribute the
benefits of a participant other than in a manner required under the plan, then
the plan administrator shall cause the participant's benefits to be distributed
in a manner consistent with such final court order. The plan administrator shall
not be required to comply with the requirements of a final court order in an
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action in which the plan administrator, the trustees, the plan or the trust was
not a party, except to the extent that such final court order is qualified
domestic relations order (as defined in section 414(p) of the Code).
16.6 Actuarial Equivalent. A benefit shall be actuarially
equivalent to any other benefit if the actuarial reserve required to provide the
same is equal to the actuarial reserve required to provide such other benefit,
computed on the basis of the actuarial rates, tables and procedures adopted by
the company for this purpose as reflected in Supplement B which is attached to
and forms a part of the plan. No adjustment to a determination of an actuarially
equivalent value or amount shall be made solely because such tables, rates and
procedures are changed subsequent to a determination. If the actuarial rates or
factors applicable under the plan to the calculation of benefits in the joint
and survivor form or any optional form of payment are changed, the plan
administrator shall thereafter maintain a record of each participant's accrued
benefit as of the date of such change and the amount of such joint and survivor
or any such optional form of payment to which such participant was eligible
immediately prior to such change. Thereafter, if such participant's benefits are
payable in the joint and survivor or in any such optional form, then such
benefits shall not be less than the benefits to which the participant would have
been entitled had the participant terminated employment on the date of such
change and received his benefits in such form.
16.7 Successors. The plan and the trust will be binding on
all persons entitled to benefits hereunder and their respective heirs and legal
representatives, and on the plan administrator and the trustees and their
successors.
16.8 Adequacy of Evidence. Evidence which is required of
anyone under the plan shall be executed or presented by the proper individuals
or parties and may be in the form of certificates, affidavits, documents or
other information which the plan administrator, the trustees, the employers or
other persons acting on such evidence considers pertinent and reliable.
16.9 Gender and Number. Words denoting the masculine
gender shall include the feminine and neuter genders and the singular shall
include the plural and the plural shall include the singular wherever required
by the context.
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16.10 Waiver of Notice. Any notice required under the plan
may be waived by the person entitled to notice.
16.11 Applicable Law. The plan and the trust shall be
construed in accordance with the provisions of ERISA and other applicable
federal laws. To the extent not inconsistent with such laws, this plan shall be
construed in accordance with the laws of the state of Ohio.
16.12 Severability. If any provision of the plan shall be
held illegal or invalid for any reasons such illegal or invalid provision shall
not affect the remaining provisions of the plan, and the plan shall be construed
and enforced as if such illegal or invalid provisions had never been contained
in the plan.
16.13 Fiduciary Responsibilities. It is specifically
intended that all provisions of the plan shall be applied so that all
fiduciaries with respect to the plan shall be required to meet the prudence and
other requirements and responsibilities of applicable law to the extent such
requirements of responsibilities apply to them. No provisions of the plan are
intended to relieve a fiduciary from any responsibility, obligation, duty or
liability imposed by applicable law. In general, a fiduciary shall discharge his
duties with respect to the plan solely in the interests of participants and
other persons entitled to benefits under the plan and with the care, skill,
prudence, and diligence under the circumstances then prevailing that a prudent
man acting in a like capacity and familiar with such matters would use in the
conduct of an enterprise of like character and with like aims.
ARTICLE 17
Top-Heavy Plan
17.1 Top-Heavy Plan Determination. For purposes of
determining whether the plan is "top-heavy" for any plan year, the following
shall apply:
(a) Key Employees. An employee or former
employee shall be a "key employee" for any plan year if during
such plan year or during any of the four preceding plan years
he is:
(i) An officer of his employer whose
compensation exceeds 50 percent of the dollar limit
as defined in section 415(b)(1)(A) of the Code; or
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(ii) One of the ten employees of his
employer having annual compensation from his employer
of more than the defined contribution dollar
limitation as defined in section 415(c)(1)(A) of the
Code and owning (or considered as owning within the
meaning of section 318 of the Code) the largest
interests in the employer; or
(iii) Any person who owns (or is considered
as owning within the meaning of section 318 of the
Code) more than five percent of the outstanding stock
of an employer or stock possessing more than five
percent of the total combined voting power of all of
an employer's stock (a "five-percent owner"); or
(iv) Any person having annual compensation
in excess of $150,000 who owns (or is considered as
owning within the meaning of section 318 of the Code)
more than one percent of the outstanding stock of an
employer or stock possessing more than one percent of
the total combined voting power of all of an
employer's stock.
For purposes of subparagraph (i) above, if the number of
officers exceeds 50, only the 50 officers with the highest
compensation shall be considered key employees; and if the
number of officers is less than 50, the number of officers
considered key employees shall not exceed the greater of
three, or ten percent of all employees. For purposes of
subparagraphs (iii) and (iv) above, section 318(a)(2)(C) of
the Code shall be applied by substituting "five percent" for
the reference to "50 percent" therein and the rules of section
414(b), (c) and (m) of the Code shall not apply for
determining ownership in the employer. In addition, the
beneficiary of a key employee shall be deemed to be a key
employee. A "non-key employee" is any person who is not a key
employee or a beneficiary of such person, including any
employee who is a former key employee.
(b) Top Heavy Plan. The plan will be considered
a "top-heavy plan" for any plan year if, as of the last day of
the preceding plan year, (the last day of the initial plan
year, in case of that year) (the "determination date") the sum
of (i) the aggregate of the accounts of all key employees
under all defined contribution plans in an aggregation group
of plans as described in subsection (c) below and (ii) the
present value of the aggregate accrued benefits for key
employees under the plan and all other defined benefit plan in
an aggregation group of plans exceeds 60 percent of such sum
determined for all participants under all such plans,
excluding participants who are former key employees. There
shall be included in the determination of a participant's
accounts and accrued benefit under such plans any amounts
distributed to him during the preceding five-year period.
However, a rollover contribution initiated by a participant
and made after December 31, 1983 to any plan in an aggregation
group of plans shall not be
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<PAGE> 55
taken into account for purposes of determining whether the
plan is a top-heavy plan. Notwithstanding the foregoing, if an
individual has not been an employee of the employers at any
time during the five-year period ending on the last day of the
preceding plan year, any account balance or accrued benefits
of such individual shall be excluded from the determination
made under this subsection.
(c) Aggregation Groups. For purposes of this
subsection and Article 9, all Penton Companies shall be
included in the term "employer." All employer plans in a
required aggregation group of plans shall be considered to be
top-heavy plans if either the required or permissible
aggregation group of plans is determined to be top-heavy under
subsection (b) above. If the required or permissive
aggregation group of plans is not a top-heavy group, no
employer plans in the group shall be considered to be
top-heavy plans. A "required aggregation group of plans" shall
include each employer plan (whether or not terminated) in
which a key employee participates and any other employer plan
which enables any plan in which a key employee participates to
meet the coverage and nondiscrimination requirements of
sections 401(a)(4) or 410 of the Code. A "permissive
aggregation group of plans" shall include all plans in the
required aggregation group plus any other employer plans which
satisfy the requirements of sections 401(a)(4) and 410 of the
Code when considered together with the required aggregation
group of plans.
17.2 Special Top-Heavy Plan Vesting Schedule.
Notwithstanding the foregoing provisions, a participant who is employed by an
employer when the plan is considered a "top-heavy plan" (as defined in
subsection 17.1(b)) shall be eligible to receive the portion of his benefit
commencing on his normal retirement date equal to the vested percentage
determined in accordance with the following schedule based on the participant's
years of service:
If the Participant's His Vested and
Number of Years of Nonforfeitable
Service Equals: Interest Shall Be:
--------------- ------------------
Less than 1 0%
1 but less than 2 20%
2 but less than 3 40%
3 but less than 4 60%
4 but less than 5 80%
5 or more 100%
If the plan becomes a top-heavy plan and subsequently ceases to be a top-heavy
plan, the retirement benefits of a participant who has previously become vested
under this special vesting schedule shall again be his benefit calculated under
section 5.1; provided, however:
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<PAGE> 56
(a) A participant with less than five years of
service on the date the plan ceases to be a top-heavy plan
shall retain his vested interest as determined under the
special vesting schedule in his accrued retirement benefit as
of such date.
(b) A participant with five or more years of service
on the date the plan ceases to be a top-heavy plan shall be
entitled to continue under the special vesting schedule if, at
termination of employment, it would produce a larger deferred
vested benefit for such participant.
17.3 Top-Heavy Minimum Benefits. Notwithstanding the
provisions of Article 5 and this Article 17, a participant's normal or deferred
retirement benefit (or, if applicable, his monthly deferred vested benefit
commencing on his normal retirement date) shall not be less than an amount equal
to 3.0 percent of his final average earnings (as defined below) multiplied by
the aggregate of his number of years of service (not in excess of 10 such years)
in all plan years for which the plan is considered a top-heavy plan. For this
purpose, a participant's "final average earnings" shall be the monthly average
of the total earnings (including bonuses) paid to the participant during the
five consecutive calendar year period for which his earnings were highest within
his period of employment as a covered employee.
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<PAGE> 57
SUPPLEMENT A
TO
PENTON MEDIA, INC. RETIREMENT PLAN
A-1 Purpose, Use of Terms. The purpose of this Supplement A is
to set forth (i) the employers to whom the company has extended and who have
adopted the plan and (ii) the periods of employment with a Penton Company that
has not adopted the plan, a Penton Company before it adopted the plan or a
predecessor company which will be taken into account in determining years of
service under the plan pursuant to subsection 4.3(a). Except where the context
indicates to the contrary, terms used and defined in the plan shall have the
same respective meanings for purposes of this Supplement.
A-2 Adopting Employers.
Employer Date of Adoption
-------- ----------------
D-M Acquisition Corp. The effective date
Curtin & Pease/Peneco, Inc. The effective date
A-3 Employment with Predecessor Companies. Employment with the
following entities shall be disregarded in determining a participant's years of
service under sections 5.1 and 6.3 of the plan before the dates indicated:
None as of the effective date.
-A1-
<PAGE> 58
SUPPLEMENT B
TO
PENTON MEDIA, INC. RETIREMENT PLAN
B-1 Purpose, Use of Terms. The purpose of this Supplement B is
to set forth the actuarial assumptions referred to in section 16.6 of the plan.
Except where the context indicates to the contrary, terms used and defined in
the plan shall have the same respective meanings for purposes of this
Supplement.
B-2 Actuarial Assumptions. Until the actuarial assumptions are
modified by the company, actuarial equivalence shall be determined during any
plan year on the basis of the 1971 Group Annuity Mortality Table for Males set
back one year of age for participants and five years of age for beneficiaries
under the qualified joint and survivor and optional joint and survivor forms of
benefit and a 6 percent interest rate assumption. In addition, for purposes of
computing the lump sum actuarially equivalent value of the monthly benefit
payable (or with respect to) to a participant, the lump sum actuarially
equivalent value shall be determined by using an interest rate equal to 7
percent. Notwithstanding anything in this Supplement B or the plan to the
contrary, in no event will the lump sum actuarially equivalent value of a
monthly benefit payable to (or with respect to) a participant be less than the
greatest of (a) the lump sum actuarially equivalent value determined using the
interest rate which would be used (as of the calendar month in which the date of
the distribution occurs) by the PBGC for purposes of determining the lump sum
actuarially equivalent value of a lump sum distribution on plan termination, or
(b) the lump sum actuarially equivalent value of the participant's accrued
benefit, if any, under the plan as of December 31, 1986, determined using a 6
percent interest rate assumption.
-B1-
<PAGE> 1
Exhibit 10.10
PENTON MEDIA, INC.
------------------
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
--------------------------------------
SECTION 1
---------
INTRODUCTION
------------
1.1 THE PLAN AND ITS EFFECTIVE DATE. This Penton Media, Inc. Supplemental
Executive Retirement Plan (the "plan") has been established by Penton Media,
Inc. (the "company"), effective __________, 1998 (the "effective date").
1.2 PURPOSE. The company maintains the Penton Media, Inc. Retirement Plan (as
the same may hereafter be amended, the "retirement plan"), which is intended to
meet the requirements of a "qualified plan" under the Internal Revenue Code of
1986, as amended (the "Code"). While the Code places limitations on the maximum
benefits which may be paid from a qualified plan and the maximum amount of an
employee's compensation that may be taken into account for determining benefits
payable under a qualified plan, the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), permits the payment under an "unfunded plan" of
benefits which may not be paid under a qualified plan because of such
limitations. The purpose of the plan is to provide certain key employees of the
company and its subsidiaries with certain benefits which may not be provided
under the retirement plan because of the maximum compensation limitation of the
Code.
SECTION 2
---------
ELIGIBILITY AND BENEFITS
------------------------
2.1 ELIGIBILITY. Each key employee of the company or a subsidiary of the company
(a "participant") who participates in the retirement plan and who is a party to
an employment agreement with the company or a subsidiary of the company
substantially in the form attached hereto as Exhibit 1 (as the same may
hereafter be amended, his "Employment Agreement") that provides for his
participation in the plan or in the Pittway Corporation Supplemental Executive
Retirement Plan shall participate in the plan, subject to the conditions and
limitations of the plan. It is expressly understood that variations among the
participants' Employment Agreements may result in differences in the numbered
paragraphs thereof in which corresponding provisions appear (for example, the
non-competition provisions which are in paragraph 10 of Exhibit 1 attached
hereto, or variations thereof, may be in paragraph 10 of certain of the
Employment Agreements but in paragraph 9 of others). Accordingly, each reference
in the plan to a particular numbered paragraph of a participant's Employment
Agreement shall be deemed to be a reference to the paragraph thereof, if any,
which corresponds to the identically numbered paragraph of Exhibit 1.
2.2 ACCRUED BENEFIT. For 1995 and for each full calendar year and any final
fraction of a calendar year of a participant's Employment Period (as such term
is defined in such participant's Employment
<PAGE> 2
Agreement), the participant shall accrue a benefit under the plan equal to 1.85
percent of that portion of his earnings (as defined in section 2.3 below) for
such year or fraction that is in excess of the "maximum dollar limitation" (as
defined below) for such year or fraction and is less than $300,000. For purposes
of the plan, "maximum dollar limitation" means, for any year or fraction of a
year, the greater of $150,000 or the dollar amount of any higher maximum
limitation on annual compensation taken into account under a qualified plan for
such year or fraction of a year determined by the Secretary of Treasury or his
delegate or by law under section 401(a) (17) of the Code; it being understood
that annual compensation for purposes of such limitation is computed differently
from "earnings" for purposes of the plan. A participant's accrued benefits under
the plan shall be referred to hereinafter as the participant's "supplemental
retirement benefits."
2.3 EARNINGS. For purposes of the plan, a participant's "earnings" for any year
or fraction means his total, regular cash compensation paid for such year or
fraction for services rendered to any Penton Company (as such term is defined in
the retirement plan) or, prior to the effective date, to the Pittway Companies
(as such term is defined in the Pittway Corporation Retirement Plan) during such
year or fraction, consisting solely of his salary and his annual discretionary
cash bonus, if any, for such year. It is expressly understood that a
participant's "earnings" do not include any other compensation, including,
without limitation, any of the following:
(a) Long-term incentive compensation;
(b) Unused vacation pay;
(c) Special cash bonuses;
(d) Any income realized for Federal income tax purposes as a
result of the grant or exercise of an option or options to
acquire shares of common stock of a Pittway Company or the
company, the receipt or exercise of any stock appreciation
right or payment, or the disposition of shares acquired by the
exercise of such an option or right;
(e) Any noncash compensation, including any amounts contributed by
the participant's employer(s) for his benefit under the
retirement plan or any other retirement or benefit plan,
arrangement, or policy maintained by his employer(s);
(f) Any reimbursements for medical, dental or travel expenses,
automobile allowances, relocation allowances, educational
assistance allowances, awards and other special allowances;
(g) Any income realized for Federal income tax purpose as a result
of (i) group life insurance, (ii) the personal use of an
employer-owned automobile, or (iii) the transfer of restricted
shares of stock or restricted property of a Pittway Company or
the company, or the removal of any such restrictions;
(h) Any severance pay paid as a result of the participant's
termination of employment (it being expressly understood that
any amount(s) taken into account pursuant to the
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<PAGE> 3
final sentence of section 2.8 below shall not be deemed
severance pay for purposes hereof); or
(i) Any compensation paid or payable to the participant, or to any
governmental body or agency on account of the participant,
under the terms of any state, Federal or foreign law requiring
the payment of such compensation because of the participant's
voluntary or involuntary termination of employment with the
company .
Notwithstanding the foregoing, a participant's "earnings" do include (i) any
salary reduction amount elected by the participant and credited to a cafeteria
plan (as defined in section 125(c) of the Code) or a qualified cash or deferred
arrangement (as defined in section 401(k) of the Code) and (ii) the initial
value ascribed to any performance shares award the participant elects to receive
in lieu of a portion of his annual discretionary cash bonus.
2.4 PAYMENT OF BENEFITS. Each participant's Employment Agreement provides that
in no event shall his Employment Period be extended beyond his 65th birthday
except by mutual agreement of the participant and his employer. Subject to the
conditions and limitations of the plan, upon a participant's attainment of age
65 years, he shall be entitled to a monthly benefit payable for his life
commencing upon his attainment of age 65 years in an amount equal to one-twelfth
(1/12) of the sum of the participant's accrued supplemental retirement benefits.
A participant's supplemental retirement benefits shall be paid to him in the
form described below that applies to the participant; provided, however, that in
lieu of payment in the normal form described below, the participant may
irrevocably elect, within thirty (30) days after his commencement of
participation in the plan, to receive his supplemental retirement benefits in a
single lump sum as soon as practicable after his attainment of age 65 years. A
participant's "supplemental retirement benefit commencement date" means the date
as of which the initial payment (or, in the case of a single lump sum, full
payment) of the supplemental retirement benefits to which the participant is
entitled is payable. Subject to the conditions and limitations of the plan, a
participant's supplemental retirement benefit commencement date shall normally
be the first day of the calendar month coincident with or next following the
participant's attainment of age 65 years. Notwithstanding the immediately
preceding sentence, if a participant's Employment Period under his Employment
Agreement terminates prior to his attainment of age 65 years and he is eligible,
and elects, to receive early retirement benefits under the retirement plan, and
if the participant requests a supplemental retirement benefit commencement date
prior to his attainment of age 65 years, then with (but only with) the consent
of the committee (as defined in section 3.1 below), the participant's
supplemental retirement benefit commencement date shall be such earlier date, if
any, selected by the committee. Supplemental retirement benefits that are paid
in a lump sum, or commence, before the participant's attainment of age 65 years,
if any, shall be subject to actuarial reduction in accordance with section 2.5
below.
(a) LIFE ANNUITY. If a participant does not have a spouse (as
defined in section 2.7 below) on his supplemental retirement
benefit commencement date, and if he has not elected pursuant
to the preceding provisions of this section 2.4 to receive his
supplemental retirement benefits in a single lump sum, payment
of his supplemental retirement benefits shall be during his
lifetime on a life annuity basis.
-3-
<PAGE> 4
(b) JOINT AND SURVIVOR ANNUITY. If a participant has a spouse (as
defined in section 2.7 below) on his supplemental retirement
benefit commencement date, payment of his supplemental
retirement benefits shall be in the form of a joint and 50
percent survivor annuity unless the participant has
theretofore elected pursuant to the preceding provisions of
this section 2.4 to have his benefits provided in a single
lump sum.
Such joint and 50 percent survivor annuity shall consist of a
reduced monthly benefit continuing during the participant's
lifetime, and if such spouse is living at the time of the
participant's death, payment of 50 percent of such monthly
benefit shall be made to such spouse until such spouse's death
occurs. The amount of the participant's and such spouse's
benefits under this subsection shall be calculated so that it
is the actuarial equivalent of the supplemental retirement
benefits to which the participant would otherwise be entitled
under the plan. If such spouse predeceases the participant, or
if the participant and such spouse cease to be married after
the participant's supplemental retirement benefit commencement
date, there shall be no adjustment to the participant's
monthly payments and no supplemental retirement benefits shall
be payable to any person after the participant' s death.
2.5 ACTUARIAL EQUIVALENT. A benefit shall be actuarially equivalent to another
benefit if the actuarial reserve required to provide such benefit is equal to
the actuarial reserve required to provide such other benefit, computed on the
basis of the same actuarial assumptions, interest rates, tables, methods and
procedures, including reduction factors for commencement of payments prior to
attainment of age 65 years, that are used for purposes of the retirement plan as
in effect on the applicable date that a benefit payment amount is determined.
2.6 PRE-RETIREMENT SURVIVING SPOUSE BENEFIT. If a participant dies prior to his
supplemental retirement benefit commencement date, no supplemental retirement
benefits under the plan shall be paid or payable with respect to the
participant; provided, however, that if the participant has a spouse (as defined
in section 2.7 below) at the time of his death, such spouse shall be entitled to
receive a monthly benefit for such spouse's lifetime equal to 50 percent of the
amount of monthly benefit that would have been payable to the participant in the
form of a joint and 50 percent survivor annuity if he had terminated employment
as of the date of his death with entitlement to supplemental retirement benefits
under the plan and the committee (as defined in section 3.1 below) had permitted
his supplemental retirement benefit commencement date to occur on the first day
of the calendar month coincident with or next following the date of his death,
taking into account actuarial reduction for commencement prior to the
participant's attainment of age 65 years. The first payment to the spouse shall
be made as of the first day of the calendar month coincident with or next
following the date of the participant's death and the final payment shall be
made as of the first day of the calendar month during which the spouse's death
occurs. If, prior to the participant's death, the participant had elected
pursuant to section 2.4 above to receive his supplemental retirement benefits in
a single lump sum, in lieu of the monthly payments described above, such spouse
shall be entitled to receive a single lump sum equal to 50 percent of the lump
sum value of the participant's supplemental retirement benefits as of the date
of his death, taking into account actuarial factors for payment prior to the
participant's attainment of age 65 years. Such lump sum payment shall be made to
such spouse as soon as practicable following the participant's death.
-4-
<PAGE> 5
2.7 SPOUSE. For purposes of the plan, a person will be considered the "spouse"
of a participant as of any date if and only if such person and the participant
have been married in a religious or civil ceremony recognized under the laws of
the state where the marriage was contracted and the marriage remains legally
effective. Any person who is not, or who has ceased to be, a participant's
"spouse" on the participant's supplemental retirement benefit commencement date
(or, in the event of the participant's death prior to his supplemental
retirement benefit commencement date, the date of his death) shall not be
considered the participant's "spouse" for purposes of the plan.
2.8 FORFEITURE; EARLY TERMINATION OF EMPLOYMENT PERIOD. If the participant's
Employment Period ends early pursuant to paragraph 5 of his Employment Agreement
on account of a Termination for Cause or a Termination by Executive with Advance
Notice (as such terms are defined, respectively, in his Employment Agreement),
or if after the participant's Employment Period ends (whether or not early and
regardless of the reason) the participant breaches any of his agreements in
paragraph 7, 9 or 10 of his Employment Agreement, the participant shall forfeit
all of his supplemental retirement benefits, if any, under the plan, no benefit
under the plan shall thereafter be payable to or with respect to the participant
or his spouse, and any benefit under the plan theretofore paid to or with
respect to the participant or his spouse must be repaid to the company by the
participant or his spouse promptly upon demand. If the participant's Employment
Period ends early pursuant to paragraph 5 of his Employment Agreement on account
of a Termination without Cause or a Termination by Executive for Good Reason (as
such terms are defined, respectively, in his Employment Agreement), the
participant's supplemental retirement benefits under the plan shall be the
supplemental retirement benefits the participant would have been entitled to
under the plan had his Employment Period remained in effect until the earlier of
the date on which (without any extension thereof) such Employment Period was
then scheduled to end pursuant to his Employment Agreement or the date of his
death and had the participant's salary in effect as of the last day of his
Employment Period (or, if greater, his Executive's Reference Salary (as such
term is defined in his Employment Agreement)) continued until the earlier of
such dates and been paid at the times such salary would have been paid, and had
the participant received no further annual cash bonus.
2.9 FUNDING. The plan is intended to be non-qualified for purposes of the Code
and unfunded for purposes of the Code and ERISA. Benefits payable under the plan
to a participant and/or his spouse, as the case may be, shall be paid directly
by the company . The company shall not be required to segregate on its books or
otherwise any amount to be used for payment of supplemental retirement benefits
under the plan. Each participant and spouse is solely an unsecured creditor of
the company with respect to any benefit payable with respect to a participant
hereunder.
SECTION 3
---------
GENERAL PROVISIONS
------------------
3.1 COMMITTEE. The plan shall be administered by the plan administrative
committee of the retirement plan (the "committee"). The committee shall have, to
the extent appropriate, the same powers,, rights, duties and obligations with
respect to the plan as it has with respect to the retirement plan. Each
determination provided for in the plan shall be made by the committee under such
procedure as may from time to time be prescribed by the committee and shall be
made in the absolute discretion of the committee. Any determination so made
shall be conclusive.
-5-
<PAGE> 6
3.2 EMPLOYMENT RIGHTS. Neither the establishment of, nor participation in, the
plan shall be construed to give any participant the right to be retained in the
service of the Penton Companies or to any benefits not specifically provided by
the plan.
3.3 TAXES AND WITHHOLDING. Each participant (or his spouse, as applicable) shall
be responsible for any taxes imposed on him (or his spouse) ("taxes") by reason
of the establishment of, or his participation in, the plan, including, without
limitation, any Federal, state and/or local income or employment taxes imposed
on benefits or potential benefits under the plan (or on the value thereof) in
advance of the participant's receipt of such benefits or potential benefits. The
company or a subsidiary of the company may deduct any taxes from payroll or
other payments due the participant or his spouse. The committee shall deduct
from all payments under the plan any taxes required to be withheld, including,
without limitation, any Federal, state and/or local income or employment taxes.
In the event that such deductions and/or withholdings are not sufficient to pay
the taxes, the participant (or his spouse) shall promptly remit the deficit to
the company upon its request.
3.4 INTERESTS NOT TRANSFERABLE. Except as to withholding of any tax under the
laws of the United States or any state, the interests of participants and their
spouses under the plan are not subject to the claims of their creditors and may
not be voluntarily or involuntarily transferred, assigned, alienated or
encumbered. No participant shall have any right to any benefit payments
hereunder prior to his termination of employment with the Penton Companies.
3.5 PAYMENT WITH RESPECT TO INCAPACITATED PARTICIPANTS OR BENEFICIARIES. If any
person entitled to benefits under the plan is under a legal disability or in the
committee's opinion is incapacitated in any way so as to be unable to manage his
financial affairs, the committee may direct the payment of such benefit to such
person's legal representative or to a relative or friend of such person for such
person's benefit, or the committee may direct the application of such benefits
for the benefit of such person in any manner which the committee may select that
is consistent with the plan. Any payments made in accordance with the foregoing
provisions of this section shall be a full and complete discharge of any
liability for such payments.
3.6 LIMITATION OF LIABILITY. To the extent permitted by law, no person
(including the company, any subsidiary of the company, the Board of Directors of
the company (the "Board"), the board of directors of any subsidiary of the
company, the committee, any present or former member of the Board or of the
board of directors of any subsidiary of the company or of the committee, and any
present or former officer of the company or of any subsidiary of the company)
shall be personally liable for any act done or omitted to be done in good faith
in the administration of the plan.
3.7 CONTROLLING LAW. The plan shall be construed in accordance with the
provisions of ERISA and other Federal laws, to the extent such provisions are
applicable to the plan. To the extent not inconsistent therewith, the plan shall
be construed in accordance with the laws of the State of Ohio.
3.8 GENDER AND NUMBER. Where the context admits, words in the masculine gender
shall include the feminine and neuter genders, the plural shall include the
singular and the singular shall include the plural.
-6-
<PAGE> 7
3.9 ACTION BY THE COMPANY. Any action required of or permitted by the company
under the plan, including action by the company to amend the plan, shall be by
resolution of the Board or by a duly authorized committee of the Board or by a
person or persons authorized by resolution of the Board or such committee. The
procedure for amending the plan is that the plan shall be amended by the company
taking appropriate corporate action to effectuate any amendment considered by it
to be advisable to be made. Appropriate corporate action includes action by
resolution of the Board, by a committee authorized by the Board, or by a person
or persons authorized by the Board or such committee, as provided above.
3.10 SUCCESSOR TO THE COMPANY. The term "company" as used in the plan shall
include any successor to the company by reason of merger, consolidation, the
purchase of all or substantially all of the company's assets or otherwise.
3.11 MISCELLANEOUS. The plan shall be binding upon and inure to the benefit of
the parties, their legal representatives, successors and assigns, and all
persons entitled to benefits hereunder. Any notice given in connection with the
plan shall be in writing and shall be delivered in person or by registered mail,
return receipt requested. Any notice given by registered mail shall be deemed to
have been given upon the date of delivery indicated on the registered mail
return receipt, if correctly addressed.
SECTION 4
---------
AMENDMENT AND TERMINATION
-------------------------
While the company expects to continue the plan, it must necessarily reserve, and
hereby does reserve, the right, either in general or as to one or more
particular participants, to amend the plan from time to time or to terminate the
plan at any time; provided (i) that no amendment of the plan with respect to a
participant that reduces or eliminates any benefits such participant has accrued
as of the effective date of such amendment shall be effective unless such
participant consents to such amendment; and (ii) no amendment of the plan with
respect to a participant whose Employment Period under his Employment Agreement
has not yet ended that adversely affects such participant, or termination of the
plan with respect to such a participant, by the company on any date shall be
effective prior to the date on which (without any extension thereof) such
participant's Employment Period is then scheduled to end pursuant to his
Employment Agreement unless the participant consents to such amendment or
termination.
-7-
<PAGE> 8
IN WITNESS WHEREOF, this plan has been executed on behalf of the
company by its duly authorized officers as of the day and year first above
written.
PENTON MEDIA, INC.
By
-----------------------------------
Its
-------------------------------
Date
------------------------------
ATTEST
By
------------------------------
Its
--------------------------
Date
-------------------------
-8-
<PAGE> 9
Exhibit 1
---------
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made as of __________, between Penton Media, Inc., a
Delaware corporation (the "COMPANY"), and _____________ ("EXECUTIVE").
In consideration of the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT. The Company shall employ Executive, and
Executive accepts continued employment with the Company, upon the terms and
conditions set forth in this Agreement for the period beginning on the date
hereof and ending as provided in paragraph 5 hereof (the "EMPLOYMENT PERIOD").
2. POSITION AND DUTIES.
(a) During the Employment Period, Executive shall serve as the
__________ of the _________ Group of the Company or any successor to such Group,
in each case as constituted from time to time (the "GROUP"), and shall have the
normal duties, responsibilities and authority of an executive serving in such
position, subject to the power of the Board of Directors of the Company (the
"BOARD") or the President of the Company to expand or limit such duties,
responsibilities and authority, either generally or in specific instances.
Executive shall have the title _____________ of the Group, subject to the power
of the Board to change such title from time to time. During the Employment
Period, Executive shall also serve as a director of the Company for so long as
the Board nominates him to that position and he is elected to it, and as a
___________ of the Company for so long as the Board elects or appoints him to
that position and as a director of any affiliate of the Company designated by
the Board for so long as the Board causes him to be elected to such position.
(b) Executive shall report to the President of the Company.
(c) During the Employment Period, Executive shall devote his
best efforts and his full business time and attention (except for permitted
vacation periods, reasonable periods of illness or other incapacity, and,
provided such activities do not exceed those in which Executive has engaged in
the past, participation in charitable and civic endeavors and management of
Executive's personal investments and business interests) to the business and
affairs of the Company, or any subsidiary or affiliate of the Company. Executive
shall perform his duties and responsibilities to the best of his abilities in a
diligent, trustworthy, businesslike and efficient manner.
(d) Executive shall perform his duties and responsibilities
principally in the _________ area, and shall not be required to travel outside
that area any more extensively than he has done in the past in the ordinary
course of the business of the Company.
<PAGE> 10
3. SALARY AND BENEFITS.
(a) SALARY. The Company agrees to pay Executive a salary
during the Employment Period in monthly installments.
(b) Executive's initial salary shall be $_______ per annum.
(c) Executive's salary may be increased by the Board from time
to time.
(d) The Board may, in its sole discretion, award a bonus to
Executive for any calendar year during the Employment Period.
(e) The Company shall reimburse Executive for all reasonable
expenses incurred by him in the course of performing his duties under this
Agreement which are consistent with the Company's policies in effect from time
to time with respect to travel, entertainment and other business expenses,
subject to the Company's requirements with respect to reporting and
documentation of such expenses.
(f) In addition to the salary, and any bonus(es) payable to
Executive pursuant to this paragraph 2, Executive shall be entitled during the
Employment Period to participate, on the same basis as other executives of the
Company (but subject to variations among executives resulting from differences
in the levels of benefits made available to employees at particular business
units under the Company's 401(k) plan or any other plan of the Company), in the
Company's Standard Executive Benefits Package. The Company's "STANDARD EXECUTIVE
BENEFITS PACKAGE" means those benefits (including insurance, vacation, company
car or car allowance and/or other benefits) for which substantially all of the
executives of the Company are from time to time generally eligible, as
determined from time to time by the Board.
(g) In addition to participation in the Company's Standard
Executive Benefits Package pursuant to this paragraph 2, Executive shall be
entitled during the Employment Period to:
(i) additional term life insurance coverage in an amount
equal to Executive's salary; but only if and so long
as such additional coverage is available at standard
rates from the insurer providing term life insurance
coverage under the Standard Executive Benefits
Package or from a comparable insurer acceptable to
the Company;
(ii) supplementary long-term disability coverage in an
amount which will increase maximum covered annual
compensation to $330,000 and the maximum monthly
payments to $18,333; but only if and so long as such
supplementary coverage is available at standard rates
from the insurer providing long-term disability
coverage under the Standard Executive Benefits
Package or a comparable insurer acceptable to the
Company; and
(iii) participation in the Penton Media, Inc. Supplemental
Executive Retirement Plan (the "SERP"), a copy of
which, as currently in effect, is attached hereto as
Exhibit A.
4. ADJUSTMENTS. Notwithstanding any other provision of this
Agreement, it is expressly understood and agreed that if there is a significant
reduction in the level of the business to which Executive's
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<PAGE> 11
duties under this Agreement relate, or if all or any significant part of such
business is disposed of by the Company and/or its subsidiaries or affiliates
during the Employment Period but Executive thereafter remains an employee of the
Company, the Board may make adjustments in Executive's duties, responsibility
and authority, and in Executive's compensation, as the Board deems appropriate
to reflect such reduction or disposition.
5. EMPLOYMENT PERIOD.
(a) Except as hereinafter provided, the Employment Period
shall continue until, and shall end upon, the third anniversary of the date
hereof.
(b) On each anniversary of the date hereof which precedes
Executive's sixty-fifth birthday by more than two years, unless the Employment
Period shall have ended early pursuant to (c) below or either party shall have
given the other party written notice that the extension provision in this
sentence shall no longer apply, the Employment Period shall be extended for an
additional calendar year (unless Executive's sixty-fifth birthday occurs during
such additional calendar year, in which event the Employment Period shall be
extended only until such birthday). In no event shall the Employment Period be
extended beyond the Executive's sixty-fifth birthday except by mutual written
agreement of the Company and Executive.
(c) Notwithstanding (a) and (b) above, the Employment Period
shall end early upon the first to occur of any of the following events:
(i) Executive's death;
(ii) Executive's retirement upon or after reaching age 65
("RETIREMENT");
(iii) the Company's termination of Executive's employment
on account of Executive's having become unable (as
determined by the Board in good faith) to regularly
perform his duties hereunder by reason of illness or
incapacity for a period of more than six (6)
consecutive months ("TERMINATION FOR DISABILITY");
(iv) the Company's termination of Executive's employment
for Cause ("TERMINATION FOR CAUSE");
(v) the Company's termination of Executive's employment
other than a Termination for Disability or a
Termination for Cause ("TERMINATION WITHOUT CAUSE");
(vi) Executive's termination of Executive's employment for
Good Reason by means of advance written notice to the
Company at least thirty (30) days prior to the
effective date of such termination identifying such
termination as a Termination by Executive for Good
Reason and identifying the Good Reason ("TERMINATION
BY EXECUTIVE FOR GOOD REASON") (it being expressly
understood that Executive's giving notice that the
extension provision in the first sentence of
paragraph 5(b) hereof shall no longer apply shall not
constitute a "TERMINATION BY EXECUTIVE FOR GOOD
REASON"); or
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<PAGE> 12
(vii) Executive's termination of Executive's employment for
any reason other than Good Reason, by means of
advance written notice to the Company at least one
hundred eighty (180) days prior to the effective date
of such termination identifying such termination as a
Termination by Executive with Advance Notice
("TERMINATION BY EXECUTIVE WITH ADVANCE NOTICE") (it
being expressly understood that Executive's giving
notice that the extension provision in the first
sentence of paragraph 5(b) hereof shall no longer
apply shall not constitute a "TERMINATION BY
EXECUTIVE WITH ADVANCE NOTICE").
(d) For purposes of this Agreement, "CAUSE" shall mean:
(i) the commission by Executive of a felony or a crime
involving moral turpitude;
(ii) the commission by Executive of a fraud;
(iii) the commission by Executive of any act involving
dishonesty or disloyalty with respect to the Company
or any of its subsidiaries or affiliates;
(iv) conduct by Executive tending to bring the Company or
any of its subsidiaries or affiliates into
substantial public disgrace or disrepute;
(v) gross negligence or willful misconduct by Executive
with respect to the Company or any of its
subsidiaries or affiliates;
(vi) repudiation of this Agreement by Executive or
Executive's abandonment of his employment with the
Company (it being expressly understood that a
Termination by Executive for Good Reason or a
Termination by Executive with Advance Notice shall
not constitute such a repudiation or abandonment);
(vii) breach by Executive of any of the agreements in
paragraph 10 hereof; or
(viii) any other breach by Executive of this Agreement which
is material and which is not cured within thirty (30)
days after written notice thereof to Executive from
the Company.
(e) For purposes of this Agreement, "GOOD REASON" shall
mean:
(i) a reduction by the Company in Executive's salary to
an amount less than "EXECUTIVE'S REFERENCE SALARY"
(i.e., Executive's initial salary or, in the event
the Employment Period has been extended pursuant to
paragraph 5(b) hereof, Executive's salary on the date
on which the most recent such extension occurred); or
(ii) any breach by the Company of this Agreement which is
material and which is not cured within thirty (30)
days after written notice thereof to the Company from
Executive.
-4-
<PAGE> 13
6. POST-EMPLOYMENT PERIOD PAYMENTS.
(a) If the Employment Period ends on the date on which
(without any extension thereof) it is then scheduled to end pursuant to
paragraph 5 hereof, or if the Employment Period ends early pursuant to paragraph
5 hereof for any reason, Executive shall cease to have any rights to salary,
bonus (if any), or benefits other than: (i) any salary which has accrued but is
unpaid, any reimbursable expenses which have been incurred but are unpaid, and
any unexpired vacation days which have accrued under the Company's vacation
policy but are unused, as of the end of the Employment Period, (ii) (but only to
the extent provided in any option theretofore granted to Executive or in the
SERP or any other benefit plan in which Executive has participated as an
employee of the Company) any option rights or plan benefits which by their terms
extend beyond termination of Executive's employment, (iii) any benefits to which
Executive is entitled under the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended ("COBRA"), and (iv) any other amounts(s) payable pursuant to
the succeeding provisions of this paragraph 6.
(b) If the Employment Period ends pursuant to paragraph 5
hereof on Executive's sixty-fifth birthday, or if the Employment Period ends
early pursuant to paragraph 5 hereof on account of Executive's death, Retirement
or Termination for Disability, the Company shall make no further payments to
Executive except as contemplated in (a) (i), (ii) and (iii) above.
(c) If the Employment Period ends early pursuant to paragraph
5 hereof on account of Termination for Cause, the Company shall pay Executive an
amount equal to that Executive would have received as salary (based on
Executive's salary then in effect) had the Employment Period remained in effect
until the later of the effective date of the Company's termination of
Executive's employment or the date thirty days after the Company's notice to
Executive of such termination.
(d) If the Employment Period ends early pursuant to paragraph
5 hereof on account of a Termination without Cause or a Termination by Executive
for Good Reason, the Company shall pay to Executive amounts equal to the amounts
Executive would have received as salary (based on Executive's salary then in
effect or, if greater, Executive's Reference Salary) had the Employment Period
remained in effect until the date on which (without any extension thereof) it
was then scheduled to end, at the times such amounts would have been paid (in
the event Executive is entitled during the payment period to any payments under
any disability benefit plan or the like in which Executive has participated as
an employee of the Company, less such payments); PROVIDED, HOWEVER, that in the
event of Executive's death during the payment period, the Company shall pay any
subsequent such amounts to Executive's estate (or such person or persons as
Executive may designate in a written instrument signed by him and delivered to
the Company prior to his death) either (i) amounts during the remainder of the
payment period equal to one-half of the of the amounts which would have been
paid to Executive but for his death or, (ii) if so elected by the payee(s) by
written notice to the Company within the period of sixty (60) days after the
date of Executive's death, a lump sum amount equivalent to the discounted
present value of such reduced amounts, discounted at the publicly announced
reference rate for commercial lending of Bank of America Illinois in effect at
the date of notice to the Company of such election, with said amount to be paid
on a date no later than thirty (30) days following the date of notice to the
Company of such election. In addition, the Company shall reimburse Executive
(net after taxes on the receipt of such reimbursement) for any premiums paid by
Executive for health insurance provided to Executive (for Executive and his
dependents) by the Company subsequent to the end of the Employment Period
pursuant to the requirements of COBRA as in effect on
-5-
<PAGE> 14
the date of this Agreement. It is expressly understood that the Company's
payment obligations under this (d) shall cease in the event Executive breaches
any of his agreements in paragraph 7, 9 or 10 hereof.
(e) If the Employment Period ends early pursuant to paragraph
5 hereof on account of a Termination by Executive with Advance Notice, the
Company shall make no further payments to Executive except as contemplated in
(a) (i), (ii) and (iii) above.
7. INVENTIONS AND OTHER INTELLECTUAL PROPERTY. Executive
agrees that all inventions, innovations, improvements, developments, methods,
designs, analyses, drawings, reports, trademarks, slogans, product or other
designs, advertising or marketing programs, and all similar or related
information which relate to the Company's or any of its subsidiaries' or
affiliates' actual or anticipated business, research and development or existing
or future products or services and which are (or were prior to the date of this
Agreement) conceived, developed or made by Executive, whether alone or jointly
with others, while employed by the Company or any such subsidiary or affiliate
or any predecessor thereof ("WORK PRODUCT") belong to the Company or such
subsidiary or affiliate. Executive will promptly disclose such Work Product to
the President of the Company and perform all actions reasonably requested by the
President of the Company (whether during or after the Employment Period) to
establish and confirm such ownership (including, without limitation,
assignments, consents, powers of attorney and other instruments).
8. LIMITATION/ILLINOIS DISCLOSURE. Paragraph 7 of this
Agreement regarding the ownership of inventions and other intellectual property
does not apply to the extent application thereof is prohibited by any law the
benefits of which cannot be waived by Executive. Executive hereby waives the
benefits of any such law to the maximum extent permitted by law. In accordance
with Section 2872 of the Illinois Employee Patent Act, Ill. Rev. Stat. Chap.
140, ss. 301 ET. SEQ. (1983), Executive is hereby advised that in the event and
to the extent such Act is applicable to Executive, paragraph 7 of this Agreement
regarding the ownership of inventions and other intellectual property does not
apply to any invention for which no equipment, supplies, facilities or trade
secret information of the Company or any of its subsidiaries or affiliates was
used and which was developed entirely on Executive's own time, unless (i) the
invention relates to the business of the Company or any of its subsidiaries or
affiliates or to the Company's or any of its subsidiaries' or affiliates' actual
or demonstrably anticipated research or development or (ii) the invention
results from any work performed by Executive for the Company or any of its
subsidiaries or affiliates.
9. CONFIDENTIAL INFORMATION. Executive acknowledges that the
information, observations and data obtained by him while employed by the Company
pursuant to this Agreement concerning the business or affairs of the Company or
any of its subsidiaries or affiliates or any predecessor thereof (unless and
except to the extent the foregoing become generally known to and available for
use by the public other than as a result of Executive's acts or omissions to
act, "CONFIDENTIAL INFORMATION") are the property of the Company or such
subsidiary or affiliate. Therefore, Executive agrees that he shall not disclose
any Confidential Information without the prior written consent of the President
of the Company unless and except to the extent that such disclosure is (i) made
in the ordinary course of Executive's performance of his duties under this
Agreement or (ii) required by any subpoena or other legal process (in which
event Executive will give the Company prompt notice of such subpoena or other
legal process in order to permit the Company to seek appropriate protective
orders), and that he shall not use any Confidential Information for his own
account without the prior written consent of the President of the Company.
Executive shall deliver to the Company at the termination of the Employment
Period, or at any other time the Company may request, all memoranda, notes,
plans, records, reports, computer tapes and
-6-
<PAGE> 15
software and other documents and data (and copies thereof) relating to the
Confidential Information, work product or the business of the Company or any of
its subsidiaries or affiliates which he may then possess or have under his
control.
10. NON-COMPETE, NON-SOLICITATION.
(a) Executive acknowledges that in the course of his
employment with the Company pursuant to this Agreement he will become familiar
with trade secrets and customer lists of and other confidential information
concerning the Company and its subsidiaries and affiliates and predecessors
thereof and that his services will be of special, unique and extraordinary value
to the Company.
(b) Executive agrees (i) that during the Employment Period he
shall not in any manner, directly or indirectly, through any person, firm or
corporation, alone or as a member of a partnership or as an officer, director,
stockholder, investor or employee of or in any other corporation or enterprise
or otherwise, engage or be engaged in, or assist any other person, firm,
corporation or enterprise in engaging or being engaged in, any business then
actively being conducted by the Company or any of its subsidiaries or
affiliates, and (ii) that for two years after the Employment Period he shall not
in any manner, directly or indirectly, through any person, firm or corporation,
alone or as a member of a partnership or as an officer, director, stockholder,
investor or employee of or in any other corporation or enterprise or otherwise,
assist _______________ or any subsidiary or affiliate of _____________, or any
successor or assign of ____________, in engaging or being engaged in the
business activity of publishing a magazine or electronic media product that
directly competes with any magazine or electronic media product then being
published by, conducting a trade show that directly competes with any trade show
then being conducted by, or creating or disseminating any other product that
competes directly with any product then being created or disseminated by, the
Company or any of its subsidiaries or affiliates.
(c) Executive further agrees that during the Employment Period
and for two years thereafter he shall not in any manner, directly or indirectly,
induce or attempt to induce any employee of the Company or of any of its
subsidiaries or affiliates to quit or abandon his employ.
(d) Nothing in this paragraph 9 shall prohibit Executive from
being: (i) a stockholder in a mutual fund or a diversified investment company or
(ii) a passive owner of not more than 2% of the outstanding stock of any class
of a corporation which is publicly traded, so long as Executive has no active
participation in the business of such corporation.
(e) If, at the time of enforcement of this paragraph, a court
holds that the restrictions stated herein are unreasonable under circumstances
then existing, the parties hereto agree that the maximum period, scope or
geographical area reasonable under such circumstances shall be substituted for
the stated period, scope or area and that the court shall be allowed to revise
the restrictions contained herein to cover the maximum period, scope and area
permitted by law.
11. ENFORCEMENT. Because Executive's services are unique and
because Executive has access to Confidential Information and work product, the
parties hereto agree that the Company would be damaged irreparably in the event
any of the provisions of paragraph 8 hereof were not performed in accordance
with their specific terms or were otherwise breached and that money damages
would be an inadequate remedy for any such non-performance or breach. Therefore,
the Company or its successors or
-7-
<PAGE> 16
assigns shall be entitled, in addition to other rights and remedies existing in
their favor, to an injunction or injunctions to prevent any breach or threatened
breach of any of such provisions and to enforce such provisions specifically
(without posting a bond or other security).
12. EXECUTIVE REPRESENTATIONS. Executive represents and
warrants to the Company that (i) the execution, delivery and performance of this
Agreement by Executive does not and will not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgment or
decree to which Executive is a party or by which he is bound, (ii) Executive is
not a party to or bound by any employment agreement, noncompete agreement or
confidentiality agreement with any other person or entity, and (iii) upon the
execution and delivery of this Agreement by the Company, this Agreement shall be
the valid and binding obligation of Executive, enforceable in accordance with
its terms.
13. SURVIVAL. Paragraphs 7, 9 and 10 hereof shall survive and
continue in full force in accordance with their terms notwithstanding any
termination of the Employment Period.
14. NOTICES. Any notice provided for in this Agreement shall
be in writing and shall be either personally delivered, or mailed by first class
mail, return receipt requested, to the recipient at the address below indicated:
NOTICES TO EXECUTIVE:
---------------------
--------------------
--------------------
--------------------
NOTICES TO THE COMPANY:
-----------------------
Mr. Thomas L. Kemp
Chairman and Chief Executive Officer
Penton Media, Inc.
1100 Superior Avenue
Cleveland, Ohio 44114
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or mailed.
15. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
16. PAYMENT OF CERTAIN COSTS AND EXPENSES. In the event that
there is a Change of Control of the Company, if the Company thereafter
wrongfully withholds from Executive any amount
-8-
<PAGE> 17
payable to Executive pursuant to this Agreement or the SERP and Executive
obtains a final judgment against the Company for such amount, the Company shall
reimburse Executive for any costs and expenses (including without limitation
attorneys' fees) reasonably incurred by Executive in obtaining such judgment and
shall pay Executive interest on the amount of each such cost or expense from the
date of payment thereof by Executive to the date of reimbursement by the Company
at a floating rate per annum equal to the publicly announced reference rate for
commercial lending of Bank of America Illinois in effect from time to time. For
purposes of the foregoing, a "CHANGE OF CONTROL OF THE COMPANY" will be deemed
to have occurred if but only if, for purposes of Section 13(d) of the Securities
Exchange Act of 1934, as amended, a person or group other than (i) Pittway, or
(ii) one or more members of the Harris Group (as currently defined in Pittway's
Restated Certificate of Incorporation, as amended) becomes the beneficial owner
of stock of the Company possessing a majority of the voting power under ordinary
circumstances with respect to the election of directors.
17. COMPLETE AGREEMENT. This Agreement embodies the complete
agreement and understanding between the parties with respect to the subject
matter hereof and effective as of its date supersedes and preempts any prior
understandings, agreements or representations by or between the parties, written
or oral, which may have related to the subject matter hereof in any way.
18. COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which shall be deemed to be an original and both of which
taken together shall constitute one and the same agreement.
19. SUCCESSORS AND ASSIGNS. This Agreement shall bind and
inure to the benefit of and be enforceable by Executive, the Company and their
respective heirs, executors, personal representatives, successors and assigns,
except that neither party may assign any of his or its rights or delegate any of
his or its obligations hereunder without the prior written consent of the other
party. Executive hereby consents to the assignment by the Company of all of its
rights and obligations hereunder to: (i) Pittway or any subsidiary or affiliate
thereof in the event all or any substantial part of the business to which
Executive's duties under this Agreement relate are transferred thereto and (ii)
any successor to the Company by merger or consolidation or purchase of all or
substantially all of the Company's assets; in each case provided such transferee
or successor assumes the liabilities of the Company hereunder.
20. CHOICE OF LAW. This Agreement shall be governed by the
internal law, and not the laws of conflicts, of the State of Ohio.
21. AMENDMENT AND WAIVER. The provisions of this Agreement may
be amended or waived only with the prior written consent of the Company and
Executive, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall affect the validity, binding effect or
enforceability of this Agreement.
* * * *
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<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
PENTON MEDIA, INC.
By
-----------------------------------
Its
----------------------------------
-------------------------------------
EXECUTIVE
The undersigned hereby agrees that in the event the Company
defaults, at any time when the Company is a majority-owned subsidiary of the
undersigned, in the payment of any amount payable to Executive pursuant to the
terms of the foregoing Employment Agreement, the undersigned, promptly following
receipt of demand therefor from Executive, shall pay Executive an amount equal
to the defaulted amount in return for an assignment to the undersigned by
Executive of his claim against the Company for the defaulted amount.
PENTON MEDIA, INC.
By
-----------------------------------
Its
----------------------------------
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement No. 333-56877 on Form S-1 of our report dated June 8,
1998, relating to the financial statements of Penton Media, Inc., which appears
in such Prospectus. We also consent to the application of such report to the
Financial Statement Schedule for the three years ended December 31, 1997 listed
under Item 16(b) of this Registration Statement No. 333-56877 when such schedule
is read in conjunction with the financial statements referred to in our report.
The audits referred to in such report also included this schedule. We also
consent to the reference to us under the heading "Experts" in such Prospectus.
/s/ PricewaterhouseCoopers
Cleveland, Ohio
July 23, 1998
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement No. 333-56877 on Form S-1 of our report dated April 3,
1998, except for Note 7 which is dated as of May 21, 1998, relating to the
financial statements of Donohue Meehan Publishing Company, which appears in such
Prospectus. We also consent to the reference to us under the heading "Experts"
in such Prospectus.
/s/ PricewaterhouseCoopers
Cleveland, Ohio
July 23, 1998
<PAGE> 1
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement No. 333-56877 on Form S-1 of our reports dated June 10,
1998, relating to the financial statements for the twelve months ending 30th
November 1997 of Independent Exhibitions Limited, Service Exhibitions Limited
and Equity Information Exchange Limited, respectively, which appears in such
Prospectus. We also consent to the reference to us under the heading "Experts"
in such Prospectus.
/s/ Horwath Clark Whitehill
London, England
July 23, 1998
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