<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY
[X] Definitive Proxy Statement (AS PERMITTED BY RULE 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12.
</TABLE>
PENTON MEDIA, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: ............
(2) Aggregate number of securities to which transaction applies: ...............
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined): ...............................
(4) Proposed maximum aggregate value of transaction: ...........................
(5) Total fee paid: ............................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ....................................................
(2) Form, Schedule or Registration Statement No.: ..............................
(3) Filing Party: ..............................................................
(4) Date Filed: ................................................................
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
PENTON LOGO
Penton Media, Inc.
1100 Superior Avenue
Cleveland, Ohio 44114-2543
- -------------------------------------------------
NOTICE OF ANNUAL MEETING
OF STOCKHOLDERS TO BE HELD
ON MAY 7, 1999
- -------------------------------------------------
TO THE STOCKHOLDERS:
The annual meeting of stockholders of Penton Media, Inc. will be held on May 7,
1999, at 2:00 P.M., local time, at the Marriott Hotel, Key Center, 127 Public
Square, Cleveland, Ohio, for the following purposes:
1. To elect three directors to the Board of Directors for a three-year term
expiring in 2002.
2. To act upon a proposal of the Board of Directors to approve Penton's 1998
Equity and Performance Incentive Plan.
3. To act upon a proposal of the Board of Directors to approve an amendment to
Penton's 1998 Director Stock Option Plan.
4. To approve the appointment of the independent certified accountants of Penton
for the fiscal year ending December 31, 1999.
5. To transact such other business as may properly be brought before the
meeting.
The annual meeting may be postponed or adjourned from time to time without any
notice other than announcement at the meeting, and any and all business for
which notice is hereby given may be transacted at any such postponed or
adjourned meeting.
The Board of Directors has fixed the close of business on March 25, 1999, as the
record date for determination of stockholders entitled to notice of and to vote
at the meeting.
A list of stockholders entitled to vote at the annual meeting will be available
for examination by any stockholder, for any purpose germane to the meeting,
during ordinary business hours at Penton's principal executive offices, 1100
Superior Avenue, Cleveland, Ohio 44114-2543 during the ten days preceding the
meeting.
Stockholders are requested to complete and sign the enclosed proxy, which is
solicited by the Board of Directors, and promptly return it in the accompanying
envelope, whether or not they plan to attend the annual meeting.
By Order of the Board of Directors
/s/ Preston L. Vice
------------------------------
PRESTON L. VICE
Secretary
Cleveland, Ohio
April 6, 1999
<PAGE> 3
PENTON LOGO
Penton Media, Inc.
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation by the
Board of Directors of Penton Media, Inc. of proxies for use at the annual
meeting of stockholders to be held on May 7, 1999, and at any postponement or
adjournment thereof. All shares of common stock entitled to vote at the annual
meeting that are represented by properly executed proxies will, unless such
proxies have been revoked, be voted in accordance with the instructions given in
such proxies or, if no contrary instructions are given therein, will be voted
FOR the election of directors as described under "Election of Directors," will
be voted FOR the proposal of the Board of Directors to adopt Penton's 1998
Equity and Performance Incentive Plan (the "Equity Incentive Plan"), will be
voted FOR the proposal of the Board of Directors to approve an amendment to
Penton's 1998 Director Stock Option Plan (the "Director Option Plan"), will be
voted FOR the proposal of the Board of Directors to appoint the independent
certified accountants of Penton for the fiscal year ending December 31, 1999,
and, as to any other matters that may properly be presented to the meeting, will
be voted as described under "Other Matters." Any stockholder who has given a
proxy with respect to any matter may revoke it at any time prior to the closing
of the polls as to that matter at the annual meeting by delivering a notice of
revocation or a duly executed proxy bearing a later date to the Secretary of
Penton, or by attending the annual meeting and voting in person.
Proxy statements and proxies are first being mailed to stockholders on or about
April 6, 1999. The mailing address of the principal executive offices of Penton
is 1100 Superior Avenue, Cleveland, Ohio 44114-2543.
Penton had outstanding on March 25, 1999, the record date for the annual
meeting, 22,781,713 shares of common stock. Penton's stock is traded on The New
York Stock Exchange.
Pursuant to Penton's Amended and Restated Certificate of Incorporation, with
respect to all matters voted upon by the stockholders of Penton, the
stockholders are entitled to one vote per share of common stock.
Under Penton's Bylaws, the presence at the annual meeting, in person or by
proxy, of the holders of shares of common stock of Penton entitled to cast at
least a majority of the votes which the outstanding common stock entitled to
vote at the annual meeting is entitled to cast on a particular matter will
constitute a quorum entitled to take action with respect to that vote on that
matter. Abstentions and broker "non-votes" are counted as present and entitled
to vote for purposes of determining a quorum. A broker "non-vote" occurs when a
nominee holding common stock for a beneficial owner does not vote on a
particular proposal because the nominee does not have discretionary voting power
with respect to that item and has not received instructions from the beneficial
owner.
A plurality of the votes duly cast is required for the election of directors
(i.e. the nominees receiving the greatest number of votes will be elected).
Abstentions and broker "non-votes" are not counted for purposes of the election
of directors.
The affirmative vote by the holders of the majority of the common stock present
in person or represented by proxy and entitled to vote on the matter is required
to approve any other matter to be acted upon at the annual meeting. An
abstention is counted as a vote against and a broker "non-vote" is not counted
for purposes of approving other matters to be acted upon at the annual meeting.
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial
ownership of Penton's common stock as of March 25, 1999, by (a) the persons
known by Penton to be the beneficial owners of more than 5% of the outstanding
shares of common stock, (b) each director, and nominee for director, of Penton,
(c) each of the executive officers of Penton listed in the Summary Compensation
Table, and (d) all directors, nominees and executive officers of Penton as a
group. The information set forth in the table as to directors, nominees and
executive officers is based upon information furnished to Penton by them in
connection with the preparation of this Proxy Statement. 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 44114-2543.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SHARES OF OUTSTANDING
COMMON SHARES OF
NAME STOCK(1) COMMON STOCK(2)
---- ---------- ---------------
<S> <C> <C>
William Harris Investors, Inc.(3)........................... 2,948,514 12.94%
2 North LaSalle Street
Suite 400
Chicago, Illinois 60602
Mario J. Gabelli, et al(4).................................. 4,311,203 18.92
One Corporate Center
Rye, New York 10580
Janus Capital Corporation(5)................................ 1,583,489 6.95
100 Fillmore Street, Suite 300
Denver, Colorado 80206
Current Harris Group(6)..................................... 5,138,673 22.56
Joan W. Harris(6)(7)........................................ 3,000 *
King Harris(6)(8)........................................... 1,301,572 5.71
William J. Friend(6)(9)..................................... 71,755 *
Edward J. Schwartz.......................................... 18,144 *
Anthony Downs............................................... 10,839 *
Thomas L. Kemp.............................................. 5,835 *
Daniel J. Ramella(10)....................................... 59,548 *
William C. Donohue.......................................... 770,819 3.38
John J. Meehan.............................................. 770,819 3.38
Richard B. Swank............................................ 2,500 *
Don E. Schultz.............................................. 0 *
James W. Zaremba............................................ 15,895 *
James D. Atherton........................................... 4 *
Preston L. Vice............................................. 12,383 *
All Directors and Executive Officers as a Group (17 2,974,574 13.05
persons)(11)..............................................
</TABLE>
- ---------------
* 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 22,781,713 shares as the number of outstanding shares.
(3) The information as to William Harris Investors, Inc. ("WHI") is derived
from Schedule 13G as filed with the Commission on February 18, 1999, and
information furnished to Penton separately by WHI. Such statements disclose
that (i) WHI, an investment adviser registered under the Investment
Advisers Act of 1940, holds all its shares of Penton common 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
2
<PAGE> 5
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.
(4) The information as to Mario J. Gabelli and entities controlled directly or
indirectly by Mr. Gabelli is derived from Schedule 13D/A as filed with the
Commission on March 17, 1999. Such statement discloses 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 Penton common 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 Penton'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 shares of Penton
common stock except 99,683 shares of Penton's common stock as to which they
have no voting power.
(5) The information as to Janus Capital Corporation ("Janus") is derived from
Schedule 13G as filed with the Commission on February 12, 1999. 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 Penton common 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.
(6) The information as to the Current Harris Group (as defined below), Joan W.
Harris, King Harris, and William J. Friend is derived in part from Schedule
13D as filed with the Commission on August 12, 1998, and statements
required to be filed by such named persons pursuant to Section 16(a) of the
Exchange Act. 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
Penton common 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 June 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 WHI,
Joan W. Harris, King Harris, and William J. Friend. The total excludes
duplication of shares within such group.
(7) Consists of 3,000 shares held by WHI for the account of Joan W. Harris. As
set forth in note (3), 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) Mr. King Harris shares the power to vote and dispose of 949,266 such
shares.
(9) Mr. Friend shares the power to vote and dispose of 70,826 such shares.
(10) Mr. Ramella shares the power to vote and dispose of 58,886 such shares.
(11) Includes 878,440 shares as to which voting power is shared other than with
directors and officers of Penton.
On August 7, 1998, Pittway Corporation, the then sole stockholder of Penton,
distributed 100% of the outstanding common stock of Penton on the basis of one
share of common stock for each share of
3
<PAGE> 6
Pittway common stock outstanding and one share of common stock for each share of
Pittway class A stock outstanding (the "Stock Distribution"). As a result of the
Stock Distribution, Penton Media, Inc. became an independent publicly-traded
company.
ELECTION OF DIRECTORS
Three directors are to be elected to serve a three-year term expiring in 2002
and until their respective successors have been elected. Nominees for election
this year are: William J. Friend, Don E. Schultz, and Richard B. Swank. The
directors to be elected will be elected by a plurality of the votes cast FOR
directors. Except to the extent that stockholders indicate otherwise on their
proxies solicited by Penton's Board of Directors, the holders of such proxies
intend to vote such proxies for the election as directors of the persons named
in the following table as nominees for election, provided that if any of the
nominees for election shall be unable or shall fail to act as such by virtue of
an unexpected occurrence, such proxies will be voted for such other person or
persons as shall be determined by the holders of such proxies in their
discretion or, so long as such action does not conflict with the provisions of
Penton's Restated Certificate of Incorporation, as amended, the Board of
Directors may, in its discretion, reduce the number of directors to be elected.
THE BOARD RECOMMENDS A VOTE FOR THE NOMINEES.
NOMINEES FOR DIRECTOR FOR A THREE-YEAR TERM ENDING 2002:
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION
NOMINEE SINCE AGE AND DIRECTORSHIPS
------- -------- --- --------------------
<S> <C> <C> <C>
William J. Friend(I) 1998 35 Assistant to the 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) from
April 1994 to July 1996 and Engineering
Product Manager, System Sensor (division of
Pittway) from August 1992 to March 1994.
Don E. Schultz(A)(N) 1998 65 President of Agora, Inc. (integrated
marketing communications consulting firm).
Professor of Integrated Marketing
Communications at the Medill School of
Journalism, Northwestern University. Senior
Partner, Targetbase Marketing International
and the Targetbase Institute. Director,
Insignia Systems, Inc.
Richard B. Swank(C)(I) 1998 67 Retired. Director, The Dialog Corporation Plc
(an online information and data provider)
from November 1997 to present. Chairman and
Chief Executive Officer of Advanstar
Communications, Inc. (magazine, publishing,
exhibition and marketing services enterprise)
from April 1990 to December 1994 and Director
until May 1996.
</TABLE>
DIRECTORS CONTINUING IN OFFICE UNTIL 2000:
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION
NAME SINCE AGE AND DIRECTORSHIPS
---- -------- --- --------------------
<S> <C> <C> <C>
William C. Donohue 1998 54 President of Donohue Meehan Publishing
Company (business publishing company and a
subsidiary of Penton) since January 1987.
</TABLE>
4
<PAGE> 7
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION
NAME SINCE AGE AND DIRECTORSHIPS
---- -------- --- --------------------
<S> <C> <C> <C>
Joan W. Harris(C)(N) 1998 68 President of the Harris Foundation (a private
charitable foundation) since January 1993.
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 1998 51 Executive Vice President of Donohue Meehan
Publishing Company (a business publishing
company and a subsidiary of Penton) since
January 1987.
Daniel J. Ramella(E) 1990 47 President and Chief Operating Officer of
Penton since 1990.
</TABLE>
DIRECTORS CONTINUING IN OFFICE UNTIL 2001:
<TABLE>
<CAPTION>
DIRECTOR PRINCIPAL OCCUPATION
NAME SINCE AGE AND DIRECTORSHIPS
---- -------- --- --------------------
<S> <C> <C> <C>
Anthony Downs(A)(C) 1998 68 Senior Fellow of Brookings Institution
(non-profit social policy research center)
since 1977; Consultant since 1977. Director,
Pittway Corporation (manufacturer and
distributor of alarm and other security
products), 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(C)(E)(N) 1987 55 Non-executive Chairman 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).
Thomas L. Kemp(E) 1996 47 Chief Executive Officer of 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(A)(E)(I) 1998 57 Vice President of Pittway Corporation
(manufacturer and distributor of alarm and
other security products) since 1989.
</TABLE>
5
<PAGE> 8
- ---------------
(A) Member of Audit Committee
(C) Member of Compensation Committee
(E) Member of Executive Committee
(I) Member of Investment Committee
(N) Member of Nominating Committee
Joan W. Harris is the aunt of King Harris. Mr. Harris is the uncle of William J.
Friend. Pursuant to the agreement by which Penton acquired Donohue Meehan
Publishing Company, William C. Donohue and John J. Meehan were elected to serve
as directors of Penton until Penton's 2000 annual meeting. This agreement also
provided that, in addition to Messrs. Donohue and Meehan, Messrs. Harris, Thomas
L. Kemp and Daniel J. Ramella and six other members to be designated by Pittway
Corporation would constitute Penton's Board of Directors after the Stock
Distribution and that the number of directors would not exceed fifteen before
December 31, 1999.
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
Penton's Board of Directors has an Audit Committee, a Compensation Committee, an
Executive Committee, an Investment Committee and a Nominating Committee.
Executive Committee. The Executive Committee consists of Mr. Harris as Chairman
and Messrs. Kemp, Ramella and Edward J. 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. The Executive Committee held three meetings in fiscal 1998.
Audit Committee. The Audit Committee consists of Mr. Schwartz as Chairman and
Anthony Downs and Don Schultz. The Audit Committee reviews, as it deems
appropriate, and approves 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 makes
recommendations to the full Board concerning the engagement of independent
public accountants to audit Penton's annual financial statements and arranges
with such accountants the scope of the audit to be undertaken by such
accountants. The Audit Committee held one meeting in fiscal 1998.
Compensation Committee. The Compensation Committee consists of Richard Swank as
Chairman and Ms. Harris, Mr. Downs, and Mr. Harris. The Compensation Committee
reviews and determines the compensation of executive officers, reviews and makes
recommendations to the Board with respect to salaries, bonuses, and deferred
compensation of other officers and executives, compensation of directors and
management succession, and makes such determinations and performs such other
duties as are expressly delegated to it pursuant to the terms of any employee
benefit plan of Penton. The Compensation Committee held three meetings in fiscal
1998.
Investment Committee. The Investment Committee consists of Mr. Schwartz as
Chairman and Messrs. Friend and Swank. The Investment Committee provides
objectives and guidelines for the investment of funds held in trust under the
various Penton pension plans, acts as the investment committee for purposes of
any 401(k) plans, and reviews the performance of investment managers charged
with investing Penton pension plan funds. The Investment Committee held one
meeting in fiscal 1998.
Nominating Committee. The Nominating Committee consists of Ms. Harris as
Chairwoman and Messrs. Harris and Schultz. The Nominating Committee, as it deems
appropriate, makes 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 considers suggestions regarding
candidates for election to the Board submitted by stockholders in writing to
Penton's Secretary. The Nominating Committee did not meet in fiscal 1998.
6
<PAGE> 9
With regard to the 2000 annual meeting of stockholders, any such suggestion must
be received by the Secretary no later than the date by which stockholder
proposals for such annual meeting must be received as described below under the
heading "Stockholder Proposals for the 2000 Annual Meeting."
The Board of Directors of Penton met five times during 1998. All of the
directors attended at least seventy-five percent of the total meetings held by
the Board of Directors and by the committees on which they served in 1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Compensation Committee was or has been an officer or
employee of Penton or engaged in transactions with Penton (other than in his
capacity as director). None of Penton's executive officers serves as a director
or member of the compensation committee of another entity, one of whose
executive officers serves as a member of the Compensation Committee or a
director of Penton.
EXECUTIVE OFFICERS
All officers of Penton are elected each year by the Board of Directors at its
annual organization meeting. In addition to Messrs. Kemp and Ramella,
information with respect to whom is set forth above, the executive officers of
Penton include the following:
James D. Atherton, 63, Group President of Penton since prior to 1994.
Charles T. Griesemer, 47, Vice President/Controller of Penton since July 1998.
Vice President of Finance since prior to 1994.
Joseph G. NeCastro, 42, Chief Financial Officer and Treasurer of Penton since
June 1998. Before joining Penton, Mr. NeCastro spent five years with Reader's
Digest Association, Inc. He was Vice President, Finance for Reader's Digest USA
from 1995 until 1998 and Corporate Controller in 1994 and 1995.
David B. Nussbaum, 41, Executive Vice President and Group President of Penton
since September 1998. Before joining Penton, Mr. Nussbaum was Senior Vice
President from 1995 to August 1998 and Vice President from 1994 to 1995 of
Miller Freeman Inc.
Preston L. Vice, 50, Senior Vice President and Secretary of Penton since July
1998. Senior Vice President since prior to 1994.
James W. Zaremba, 58, Group President of Penton since prior to 1994.
COMPENSATION
BOARD COMPENSATION
Compensation of non-employee directors consists of an annual retainer of
$15,000, plus $2,000 for each Board meeting attended in person, $500 for each
Board meeting attended by telephone and $500 for each committee meeting
attended, except that $250 is paid for attending a committee meeting held on the
same day as a Board meeting. The Chairman of each of the Audit and Compensation
Committees is paid 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. Employee directors are not separately compensated for serving as
directors.
Each director of Penton will be reimbursed by Penton for out-of-pocket expenses
incurred in attending Board and Board committee meetings.
Penton has adopted 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
7
<PAGE> 10
directors of Penton who at the time of grant are not employees of Penton or any
of its subsidiaries. On June 8, 1998, each non-employee director was awarded an
option to purchase 8,000 shares of common stock, which will vest at the rate of
2,000 per year. In addition, Mr. Schwartz was awarded an option to purchase
13,000 shares of common stock on June 8, 1998, which vested on December 8, 1998.
The Board wishes to continue to promote the long-term financial interests of
Penton through the grant of stock options to non-employee directors, while
providing more flexibility in the types of share awards authorized for grant
under the Director Option Plan. In order to achieve these objectives, the Board
has amended, subject to stockholder approval, the Director Option Plan. See
"Proposal to Approve an Amendment to the Penton Media, Inc. 1998 Director Stock
Option Plan" for further details.
SUMMARY COMPENSATION TABLE
The following table sets forth compensation information for the Chief Executive
Officer of Penton (who served as such throughout 1998) and for each of Penton's
four most highly compensated other executive officers during 1998 who were
serving at the end of 1998.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
-----------------------
ANNUAL SECURITIES
COMPENSATION RESTRICTED UNDERLYING
------------------- STOCK OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS (#)(1) COMPENSATION
- --------------------------- ---- -------- -------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Thomas L. Kemp, 1998 $450,000 $320,500 $60,000(2) 60,000(3) 8,930(4)
Chief Executive Officer 1997 400,000 291,000 0 10,000 4,322
1996 133,336 200,000 0 4,000 175
Daniel J. Ramella, 1998 350,000 229,000 50,000(2) 46,000 6,540(5)
President and Chief 1997 330,000 241,000 0 7,000 4,481
Operating Officer 1996 315,000 150,000 100,000(1) 7,000 4,330
James W. Zaremba, 1998 238,327 166,680 0 25,000 5,100(6)
Group President 1997 210,000 181,510 0 2,000 5,362
James D. Atherton, 1998 238,327 126,252 0 25,000 5,856(7)
Group President 1997 210,000 169,880 0 2,000 5,498
Preston L. Vice, 1998 160,000 112,739 0 20,000 6,528(8)
Sr. Vice President/Secretary
</TABLE>
- ---------------
(1) The amounts and numbers listed for 1996 and 1997 represent awards under the
Pittway Corporation 1990 Stock Performance Awards Plan.
(2) Deferred Shares awarded in lieu of bonuses that would otherwise have been
paid in cash: Mr. Kemp, 3,698 shares; Mr. Ramella, 3,082 shares, each having
three year deferral periods, subject to acceleration in the event of death,
permanent disability, retirement upon or after reaching age sixty-five or
upon a change of control of Penton. This number is valued as of the date of
grant. As of December 31, 1998, the value of the Deferred Shares awards to
Messrs. Kemp and Ramella in 1998 were $74,885 and $62,411, respectively. The
Deferred Shares awarded to Messrs. Kemp and Ramella in 1998 do not provide
for dividend equivalents or voting rights. As of December 31, 1998, these
were the only Deferred Shares awarded to Messrs. Kemp and Ramella. For
information concerning awards granted since December 31, 1998, see "New Plan
Benefits Table."
(3) In addition, in accordance with the terms of his employment agreement, Mr.
Kemp converted unexercised options to purchase Pittway stock into 47,655
options to purchase Penton common stock as described under "Employment
Agreements."
(4) Consists of $4,800 annual matching contributions during the year to
Pittway's salary reduction plan and $4,130 for term life insurance provided
by Penton during the year.
8
<PAGE> 11
(5) Consists of $4,800 annual matching contributions during the year to
Pittway's salary reduction plan and $1,740 for term life insurance provided
by Penton during the year.
(6) Consists of $3,750 annual matching contributions during the year to
Pittway's salary reduction plan and $1,350 for term life insurance provided
by Penton during the year.
(7) Consists of $3,750 annual matching contributions during the year to
Pittway's salary reduction plan and $2,106 for term life insurance provided
by Penton during the year.
(8) Consists of $4,800 annual matching contributions during the year to
Pittway's salary reduction plan and $1,728 for term life insurance provided
by Penton during the year.
STOCK OPTION GRANTS DURING YEAR
The following table sets forth information with respect to stock options granted
during 1998 to executive officers named in the Summary Compensation Table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTION EXERCISE PRICE APPRECIATION
UNDERLYING GRANTED TO OF BASE FOR OPTION TERM(1)
OPTION(S) EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
---- ----------- ------------ -------- ------------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Thomas L. Kemp(2) (3) 60,000 9.4 $16.225 8/7/08 $612,300 $1,551,300
Daniel J. Ramella(2) 46,000 7.2 16.225 8/7/08 469,430 1,189,330
James D. Atherton(2) 25,000 3.9 16.225 8/7/08 255,125 646,375
James W. Zaremba(2) 25,000 3.9 16.225 8/7/08 255,125 646,375
Preston L. Vice(2) 20,000 3.1 16.225 8/7/08 204,100 517,100
</TABLE>
- ---------------
(1) The assumed annual rates of appreciation in the price of common stock are in
accordance with rules of the Securities and Exchange Commission and are not
predictions of future market prices of the common stock nor of the actual
values the named executive officers will realize. In order for such annual
rates of appreciation to be realized over the 10-year term of the options,
the market price of the common stock would have to increase to $26.43 per
share (5%) or $42.08 per share (10%) during that term. In such event, and
assuming corresponding annual rates of increase for the market price of
common stock, the market value of all currently outstanding shares of common
stock would have increased by approximately $232,500,000 (5%) or
$589,000,000 (10%) during that 10-year term.
(2) Consists of non-qualified options to purchase common stock granted under the
Equity Incentive Plan at an exercise price equal to the average closing
price of the common stock for the five trading day period ending on the
eighth trading day after the Stock Distribution. Each option becomes fully
exercisable on the third anniversary of the date of grant, subject to full
or partial acceleration in the event of earlier termination of employment
(full acceleration if earlier termination is on account of death, permanent
disability, retirement upon or after reaching age sixty-five or upon a
change of control of Penton; partial acceleration in increments of 33 1/3%
each year commencing one year after the date of grant if termination is for
any other reason other than for "cause").
(3) In addition, in accordance with the terms of his employment agreement, Mr.
Kemp converted unexercised options to purchase Pittway stock into 47,655
options to purchase Penton common stock as described under "Employment
Agreements."
9
<PAGE> 12
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth information with respect to exercises of options
during 1998 by the executive officers named in the Summary Compensation Table
and the values of unexercised options held by them as of December 31, 1998.
AGGREGATED OPTION EXERCISES IN 1998 AND YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED VALUE OPTIONS AT YEAR-END (#) AT YEAR-END ($)
ON EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas L. Kemp 0 0 0 107,655 0 433,311
Daniel J. Ramella 0 0 0 46,000 0 185,150
James D. Atherton 0 0 0 25,000 0 100,625
James W. Zaremba 0 0 0 25,000 0 100,625
Preston L. Vice 0 0 0 20,000 0 80,500
</TABLE>
EMPLOYMENT AGREEMENTS
During 1998, employment agreements between Penton and each of Messrs. Kemp and
Ramella provided 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 provided for
the payment of accrued but unvested pension plan and defined contribution plan
benefits in the event of termination of employment prior to full vesting. The
agreements were for terms expiring September 2, 1999 and December 31, 2000,
respectively. Each agreement provided for an automatic renewal at the end of
each contract year for an additional year (or until age 65, if earlier) unless
either party thereto elected otherwise, but could be terminated by the executive
officer on specified advance notice (with forfeiture of supplemental retirement
benefits). Each agreement included 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 was entitled to surrender
to Pittway for cancellation immediately prior to the Stock Distribution all
non-qualified options to purchase Pittway stock 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 to purchase common stock 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 options to purchase
Pittway stock. Mr. Kemp exercised one-third of his options to purchase Pittway
stock prior to the Stock Distribution date and surrendered his remaining options
to purchase Pittway stock for 47,655 options to purchase common stock under the
Equity Incentive Plan. Such number of options to purchase common stock had a
value equal to the value of the options to purchase Pittway stock Mr. Kemp
surrendered. In addition, Mr. Kemp's employment agreement provided that he was
to receive, at the close of business on the Stock Distribution date, a
non-qualified option to purchase common stock 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 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 on the eighth trading day after the Stock
Distribution.
In lieu of portions of bonuses otherwise payable in cash in 1998, Messrs. Kemp
and Ramella were awarded, subject to completion of the Stock Distribution, 3,698
and 3,082 Deferred Shares, respectively, under the Equity Incentive Plan, each
having three-year deferral periods, subject to acceleration
10
<PAGE> 13
in the event of death, permanent disability, retirement upon or after reaching
age sixty-five or upon a change of control of Penton.
In 1999, the Compensation Committee approved restated employment agreements with
each of Messrs. Kemp and Ramella and approved initial employment agreements with
each of Messrs. Atherton and Zaremba. The agreements provide for minimum annual
salaries of $470,000, $365,000, $265,000 and $265,000, respectively, and in the
case of Messrs. Kemp and Ramella, supplementary insurance coverage and
participation in Penton's supplemental executive retirement plan. The agreements
are for terms currently expiring December 31, 2001 in the case of Messrs. Kemp
and Ramella, and December 31, 2000 in the case of Messrs. Atherton and Zaremba,
and renew automatically at the end of each year for an additional year (or until
age 65, if earlier) unless either party thereto elects otherwise, but may be
terminated by the executive party thereto on 120 days notice. The agreements
include non-competition, non-solicitation and confidentiality obligations on the
part of each Executive, which survive its termination.
The agreements also provide that in the event the Executive's employment is
terminated by Penton (other than for "cause" (as defined in the agreements) or
by reason of his death, disability or retirement) or by the Executive for "good
reason" (as defined in the agreements and as described below) during the two
years following a "change in control," the Executive will be entitled to receive
certain severance benefits. In the case of Messrs. Kemp and Ramella, each such
Executive is entitled to receive (a) any accrued but unpaid salary and expense
reimbursement; (b) salary (as in effect at the time of termination or, if
higher, as in effect as of the most recent extension of the employment period)
for a period of three years following the date of his termination after a change
in control (payable, at the Executive's option, in a lump sum); (c) target bonus
for the year in which the termination occurs or, if higher, the Executive's
target bonus for the preceding year or the year in which the change in control
occurs; and (d) if the Executive's employment is terminated after July 1 of the
then-current year, a pro-rated portion of the Executive's target bonus for the
year in which the termination occurs or, if higher, a pro-rated portion of the
Executive's target bonus for the preceding year or the year in which the change
in control occurs. In the case of Messrs Atherton and Zaremba, each such
Executive is entitled to receive (a) any accrued but unpaid salary and expense
reimbursement; and (b) two times his salary (as in effect at the time of
termination or, if higher, as in effect as of the most recent extension of the
employment period) and target bonus for the year in which the termination occurs
or, if higher the Executive's target bonus for the preceding year or the year in
which the change in control occurs (payable, at the Executive's option, in a
lump sum). All Executives party to such agreements are also entitled to the
continuation of certain additional benefits (e.g., medical insurance).
Benefits under these agreements are subject to an overall limitation which
assures that payments will not constitute "excess golden parachute payments"
under federal income tax law.
The transactions that are deemed to result in a change in control for the
purposes of these agreements include: (a) any person (with certain exceptions as
described in the agreements) becoming the beneficial owner of 40% or more of the
voting stock of Penton; (b) individuals who, as of the date of the agreements,
constitute the board of directors (the "Incumbent Board") cease for any reason
(other than death or disability) to constitute at least a majority of the board
of directors (provided that any individual who becomes a director subsequent to
the date of the agreements whose appointment or election is approved by a
majority of the Incumbent Board is considered to be a member of the Incumbent
Board); (c) a merger or consolidation with, or sale of all of or substantially
all of Penton's assets to another corporation, as a result of which less than a
majority of the voting shares of the surviving entity are owned by former
shareholders of Penton; and (d) approval by the shareholders of Penton of a
complete liquidation or dissolution of Penton. "Good reason" for termination of
employment by the Executive includes reduction in salary, the failure by Penton
to extend the Executive's employment under the agreement or a breach by Penton
of the terms of the agreement.
The Compensation Committee felt it appropriate to improve the existing
employment contract with Messrs. Kemp and Ramella and to enter into formal
contracts for employment with Messrs. Atherton
11
<PAGE> 14
and Zaremba in order to encourage them to continue their services and provide
the long-term benefits of their leadership. The provisions relating to a change
in control are to retain the executives and provide for continuity of management
in the event of any actual or threatened change in the control of Penton.
PLANS AND ARRANGEMENTS
EMPLOYEE RETIREMENT AND SAVINGS PLANS
Retirement Plan
Participants in the Penton Media, Inc. Retirement Plan (the "Retirement Plan")
consist of a majority of the full-time employees of Penton and its subsidiaries
in the United States, including the executive officers. The Retirement 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 Retirement 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 Retirement Plan. 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 are taken into account under the
Retirement Plan. The employee's compensation under the Retirement 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 Retirement Plan for any year is
generally the average, computed as of 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 Retirement 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 Retirement Plan upon retirement at normal
retirement age for the following persons (assuming 1998 and future compensation
at the $160,000 limit currently applicable, and that covered compensation
remains constant) are: Mr. Kemp, $49,733; Mr. Ramella, $87,528; Mr. Zaremba,
$58,841; Mr. Atherton, $53,495; and Mr. Vice, $74,786.
Supplemental Executive Retirement Plan
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. Years of service and compensation with Pittway are taken into
account. 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 election under Pittway's or Penton's salary reduction plan, and
including any portion of such bonus taken in the form of Deferred Shares Awards)
in excess of $160,000 (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 for Messrs. Kemp and Ramella (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 currently applicable remains
constant) are: Mr. Kemp, $51,334; and Mr. Ramella, $54,730.
12
<PAGE> 15
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This Compensation Committee report shall not be deemed incorporated by reference
by any general statement incorporating by reference this Proxy Statement into
any filing under the Securities Act of 1933 or under the Exchange Act, except to
the extent that Penton specifically incorporates this information by reference,
and shall not otherwise be deemed filed under those Acts.
The Compensation Committee of the Board of Directors is responsible for
establishing and administering an executive compensation program for Penton,
determining the compensation of the Chief Executive Officer of Penton and
approving the compensation proposed by the Chief Executive Officer for all other
executive officers of Penton. Actions regarding compensation for 1998 were
approved by the Compensation Committee of Pittway Corporation prior to the Stock
Distribution. Penton's Compensation Committee intends to follow the compensation
policies discussed below.
The Compensation Committee, comprised of four non-employee directors, has
prepared this report to summarize Penton's policies and practices with regard to
executive compensation.
OBJECTIVES
Penton's basic objectives for executive compensation are to recruit and keep top
quality executive leadership focused on attaining long-term corporate goals and
increasing stockholder value.
ELEMENTS OF COMPENSATION
Total compensation has three components: (1) base salary; (2) short-term
incentive (generally cash bonus); and (3) long-term incentive (generally stock
options).
BASE SALARY
Base salaries for executive officers are set within ranges that are reasonable,
considering comparable positions in companies similar to Penton in industry and
region. Base salaries are also intended to be equitable and high enough to keep
qualified executives from being overdependent on cash bonuses.
SHORT-TERM INCENTIVES
Annual cash bonuses are based on Penton's attainment of its earnings objectives.
Generally, all cash bonuses are tied to individual and group performance based
on goals established at the start of the year and are available in
proportionately greater amounts to those who can most influence corporate
earnings.
LONG-TERM INCENTIVES
Long-term incentives consisting of stock options and other equity-based awards
are intended to motivate executives to make and execute plans that improve
stockholders' value over the long-term.
CHIEF EXECUTIVE OFFICER COMPENSATION
At the start of the 1998 fiscal year, the Compensation Committee of Pittway
Corporation increased Mr. Kemp's salary to $450,000. On the Stock Distribution
date, Mr. Kemp was granted an option to purchase 60,000 shares of Penton common
stock and, pursuant to the terms of his employment agreement, Mr. Kemp
surrendered his remaining options to purchase shares of Pittway stock under the
Pittway 1990 Stock Awards Plan and received options to purchase an additional
47,655 shares of Penton's common stock under the Equity Incentive Plan. In
addition, in lieu of a $60,000 cash bonus, Mr. Kemp received 3,698 Deferred
Shares having a three year deferral period, subject to full or partial
acceleration in the event of earlier termination of employment (full
acceleration if earlier termination is on account of death, permanent
disability, retirement upon or after reaching age sixty-five or upon a change of
control of Penton). At the conclusion of the 1998 fiscal year, in accordance
with Penton's
13
<PAGE> 16
emphasis on variable compensation linked to earnings performance and Penton's
intent to motivate long-term improvement in shareholder value, the Compensation
Committee awarded Mr. Kemp a $320,500 cash bonus, an option to purchase 37,000
shares of Penton's common stock and 4,969 Deferred Shares having a value on the
date of grant of $100,000.
This report is submitted on behalf of the Compensation Committee:
Richard B. Swank, Chairman
Anthony Downs
Joan W. Harris
King Harris
PERFORMANCE GRAPH
The following graph reflects a comparison of the cumulative total stockholder
return on the common stock with the Russell 2000 Market Index and an index of
peer companies, respectively, for the period commencing August 10, 1998 (the
initial trading date for the common stock) through December 31, 1998. The peer
group consists of CMP Media, Inc., Elsevier NV, Meredith Corporation, Inc.,
Playboy Enterprises, Inc. (Class B), Primedia, Inc., Reader's Digest
Association, Inc., Reed International Plc, Scholastic Corporation, United News &
Media Plc and Ziff-Davis, Inc. The graph assumes that the value of the
investment in the common stock and each index was $100 at August 10, 1998, and
all dividends were reinvested. The comparisons in this graph are required by the
Securities and Exchange Commission and, therefore, are not intended to forecast
or be necessarily indicative of the actual future return on the common stock.
graph
<TABLE>
<CAPTION>
PENTON MEDIA RUSSELL 2000 INDEX PEER GROUP
------------ ------------------ ----------
<S> <C> <C> <C>
8/10/98 100 100 100
9/30/98 84.81 86.89 90.99
10/31/98 92.52 90.43 92.51
11/30/98 106.77 95.06 92.57
12/31/98 125.12 100.79 93.78
</TABLE>
14
<PAGE> 17
PROPOSAL TO APPROVE THE PENTON MEDIA, INC. 1998 EQUITY AND PERFORMANCE 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 ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986 (the "Code"), or other options.
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.
Approximately 90 officers and key employees of Penton and its subsidiaries are
eligible to receive awards under the Equity Incentive Plan. Non-employee
directors are ineligible for awards.
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 (subject to
adjustment as described below). 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.
Subject to adjustment as described below, (i) the aggregate number of shares of
common stock actually issued or transferred by Penton upon the exercise of ISOs
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 one year; and (iii) the
number of shares issued as Restricted Shares shall not in the aggregate exceed
200,000 shares of common stock. No participant may receive an award of
Performance Shares or Performance Units having an aggregate maximum value as of
the date of grant in excess of $1,000,000.
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 ISOs 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
15
<PAGE> 18
deferred payment of the option price from the proceeds of sale through a 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 ISOs, 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 ISOs), 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.
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 to be 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
16
<PAGE> 19
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 compensation or
other factors (unless the adjustment for certain participants would cause an
award to lose its Section 162(m) of the Code 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;
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<PAGE> 20
(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 (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.
However, a "Change of Control" will 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 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.
Adjustments. The maximum number of shares that may be issued and delivered under
the Equity Incentive Plan, the number of shares covered by outstanding Option
Rights and Appreciation Rights, and the prices per share applicable thereto, are
subject to adjustment in the event of stock dividends, stock splits,
combinations of shares, recapitalizations, mergers, consolidations, spin-offs,
reorganizations, liquidations, issuances of rights or warrants, and similar
events. The Compensation Committee, in its discretion, may provide in
substitution for any or all outstanding awards under the Equity Incentive Plan
such alternative consideration as it, in good faith, may determine to be
equitable in the circumstances to prevent dilution or enlargement of the rights
of participants caused by any transaction or event described above and may
require the surrender of all awards so replaced.
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 Compensation
Committee are required to 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
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<PAGE> 21
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.
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 Stock Distribution date, but all grants made on or before the
10th anniversary of the Stock Distribution date 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 Compensation 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.
AWARDS HERETOFORE GRANTED UNDER THE EQUITY INCENTIVE PLAN
NEW PLAN BENEFITS TABLE
As of March 31, 1999, awards under the Equity Incentive Plan had been made as
follows:
<TABLE>
<CAPTION>
STOCK DEFERRED SHARES
OPTIONS AWARDED
GRANTED ----------------------
GRANT/AWARD ------- VALUE
NAME AND POSITION YEAR NUMBER NUMBER ($)(1)
----------------- ----------- ------- ------ -----------
<S> <C> <C> <C> <C>
Thomas L. Kemp, 1998 60,000(2) 3,698(3) 60,000
Chief Executive Officer 1999 37,000 4,969 100,000
Daniel J. Ramella, 1998 46,000 3,082(3) 50,000
President/Chief Operating Officer 1999 25,000 3,727 75,000
James D. Atherton, 1998 25,000 0 0
Group President 1999 13,500 0 0
James W. Zaremba, 1998 25,000 0 0
Group President 1999 13,500 0 0
Preston L. Vice, 1998 20,000 0 0
Sr. Vice President/Secretary 1999 10,000 0 0
All Current Named Executive Officers 1998 176,000(2) 6,780 110,000
of Penton as a Group 1999 99,000 8,696 175,000
All Other Recipients 1998 459,900 7,619(3) 100,000
1999 250,500 0 0
</TABLE>
- ---------------
(1) Reflects the value on the date of award.
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<PAGE> 22
(2) In addition, in accordance with the terms of his employment agreement, Mr.
Kemp converted unexercised options to purchase Pittway stock to 47,655
options to purchase Penton common stock as described under "Employment
Agreements."
(3) In lieu of portions of bonuses otherwise payable in cash in 1998.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is intended only as a brief summary of the federal
income tax consequences of Option Rights, Appreciation Rights, Restricted
Shares, Deferred Shares, Performance Shares and Performance Units and
supplemental cash payments. The summary is not intended to be complete and does
not describe state or local tax consequences. The laws governing the tax aspects
of awards are highly technical and such laws are subject to change in the
future, and any such change could be retroactive and affect the validity of the
following discussion.
TAX CONSEQUENCES TO PARTICIPANTS
Non-Qualified Option Rights. The holder of a non-qualified Option Right does not
recognize taxable income upon the grant thereof, nor is Penton entitled to a
deduction in respect of such grant. Upon the exercise of a non-qualified Option
Right as to any shares, the excess of the fair market value of such shares on
the date of exercise over their option price (the "spread") constitutes
compensation taxable to the optionee as ordinary income.
Upon an optionee's sale of shares acquired pursuant to the exercise of a
non-qualified Option Right, the difference between the selling price and the tax
basis of the shares (generally the fair market value of such shares on the date
of exercise) is a capital gain or loss. Penton is not entitled to a deduction as
a result of such a sale.
ISOs. The holder of an ISO does not recognize taxable income upon the grant or
exercise thereof. However, the spread at exercise constitutes an item includible
in alternative minimum taxable income and may subject the optionee to, or
increase the optionee's liability for, alternative minimum tax. Such alternative
minimum tax or increase therein may be payable even though the optionee receives
no cash upon the exercise of his or her ISO with which to pay such tax or
increase.
Upon an optionee's disposition of shares acquired pursuant to the exercise of an
ISO, if the shares have been held for at least one year and if at least two
years have elapsed since the date of grant (i.e., if the "ISO Holding Period"
has expired), the difference between the selling price and the tax basis of such
shares (such basis generally being the option price of such shares) is a capital
gain or loss to the optionee. Penton is not entitled to a deduction as a result
of such a sale.
If option shares are disposed of before the expiration of the ISO Holding Period
(a "disqualifying disposition"), then (i) if the selling price exceeds the fair
market value of the shares on the date of exercise, the excess of such fair
market value over the tax basis of the shares is taxable to the optionee as
ordinary income, and the excess of the selling price over such fair market value
is taxable to the optionee as a capital gain, (ii) if the selling price exceeds
the tax basis of the shares but does not exceed the fair market value of the
shares on the date of exercise, the excess of the selling price over the tax
basis of the shares is taxable to the optionee as ordinary income, and (iii) if
the selling price is less than the tax basis of the shares, the difference is a
capital loss to the optionee. If, however, the disposition is a sale to a
related party (as defined in Section 267(b) of the Code to include, for example,
a member of the optionee's family or a corporation of which the optionee owns a
majority of the equity interest) or a gift, then the excess of the fair market
value of the shares on the date of exercise over the tax basis of the shares is
taxable to the optionee as ordinary income.
Use of Stock To Pay Option Price. The general statements as to tax basis in the
previous paragraphs relating to the disposition of stock received on the
exercise of Option Rights apply in the event the
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<PAGE> 23
optionee pays cash for the option shares. If, however, the optionee pays for the
option shares in whole or in part by delivering previously-owned common stock
("old" shares), the tax basis for the option shares, and thus the consequences
of a disposition, differs.
If an optionee delivers old shares (other than old shares acquired upon the
exercise of an ISO which were not held for the ISO Holding Period) in payment of
all or part of the exercise price of a non-qualified Option Right, the optionee
does not recognize a gain or loss as a result of such delivery. The optionee's
tax basis in, and holding period for, the option shares is determined as
follows: as to option shares equal in number to the old shares delivered, the
basis in and holding period for the old shares carry over on a share-for-share
basis; as to each remaining share, its basis is the fair market value on the
date of exercise and its holding period begins on that date. Any capital gain or
loss on the sale of a particular option share is measured based on the
difference between the selling price and the optionee's actual tax basis for
such share.
If an optionee delivers old shares (other than old shares acquired upon exercise
of an ISO which were not held for the ISO Holding Period) in payment of all or
part of the exercise price of an ISO, the optionee does not recognize a gain or
loss as a result of such delivery. The optionee's tax basis in and holding
period for the option shares is determined as follows: as to option shares equal
in number to the old shares delivered, the basis in and the holding period for
the old shares carries over on a share-for-share basis; as to each remaining
share, its basis equals the exercise price paid in cash (if any). Thus, in the
event option shares are acquired solely through the delivery of old shares
(i.e., none of the exercise price is paid with cash), the basis of each
remaining share is zero. Any capital gain or loss on the sale of a particular
option share is measured based on the difference between the selling price and
the optionee's actual tax basis for such share. Pursuant to proposed
regulations, if an ISO is exercised using old shares, a later disqualifying
disposition of the shares received is deemed to have been a disposition of the
shares having the lowest tax basis first.
If an optionee pays the exercise price of an Option Right in whole or in part
with old shares that were acquired upon the exercise of an ISO and that have not
been held for the ISO Holding Period, the optionee generally recognizes ordinary
income under the rules applicable to disqualifying dispositions. The optionee's
tax basis in the option shares which reflect a carry-over basis from the old
shares surrendered is increased by the amount of ordinary income the optionee
recognizes.
Appreciation Rights. The holder of an Appreciation Right does not recognize
taxable income upon the grant thereof. Upon the exercise of an Appreciation
Right, the holder generally recognizes ordinary income equal to the amount of
any cash and the fair market value (measured on the date of exercise) of any
common stock received.
Upon a holder's sale of any shares received pursuant to the exercise of an
Appreciation Right, the difference between the selling price and the tax basis
of the shares (generally the fair market value of such shares on the date of
exercise) is a capital gain or loss.
Restricted Shares. A participant who is granted Restricted Shares may, if the
restrictions constitute a "substantial risk of forfeiture" as defined in Section
83 of the Code, make an election under Section 83(b) of the Code (a "Section
83(b) election") to have the grant taxed as compensation income at the date of
grant in an amount equal to the fair market value on the date of grant of the
shares subject to such award less any amount paid by the participant for the
shares. The restrictions on Restricted Shares will constitute a "substantial
risk of forfeiture" if, for example, a sale thereof would subject the
participant to suit under Section 16(b) of the Securities Exchange Act. If the
participant is not permitted to make, or is permitted to make but does not make,
a timely Section 83(b) election, the grant is generally taxed to him or her as
compensation income at the date(s) that the restrictions imposed on the shares
expire, in an amount on each such date equal to the fair market value on such
date of the shares as to which the restrictions expire less any amount paid by
the participant for the shares. Unless a participant is permitted to make, and
makes, a timely Section 83(b) election, any dividends paid on the shares subject
to the award while such shares remain subject to the restrictions are
compensation income to the participant.
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<PAGE> 24
Upon a participant's sale of shares received pursuant to a grant of Restricted
Shares, the difference between the selling price and the tax basis of the shares
(generally, if a timely Section 83(b) election is made, the fair market value of
the shares on the date of grant or, if a timely Section 83(b) election is not
made, the fair market value of the shares on the date(s) on which the
restrictions on the shares expire) is a capital gain or loss. A participant's
holding period begins on the date of grant if a timely Section 83(b) election is
made or on the date(s) on which the restrictions on the shares expire if no
timely Section 83(b) election is made.
Deferred Shares. No income generally will be recognized upon the award of
Deferred Shares. The recipient of a Deferred Share award generally will be
subject to tax at ordinary income rates on the fair market value of unrestricted
Common Stock on the date that such shares are transferred to the participant
under the award (reduced by any amount paid by the participant for such Deferred
Shares), and the capital gains/loss holding period for such shares will also
commence on such date.
Performance Shares and Performance Units. No income generally will be recognized
upon the grant of Performance Shares or Performance Units. Upon payment in
respect of the earn-out of Performance Shares or Performance Units, the
recipient generally will be required to include as taxable ordinary income in
the year of receipt an amount equal to the amount of cash received and the fair
market value of any nonrestricted Common Stock received.
Supplemental Cash Payments. The amount of any supplemental cash payment to a
participant who exercises a non-qualified Option Right or Appreciation Right
constitutes compensation taxable to the participant as ordinary income, and
Penton should be entitled to a deduction for the year of payment in an amount
equal to such compensation.
The supplemental cash payment to the participant is intended to provide the
participant with sufficient funds to pay the federal income tax arising both
from the exercise of the Option Right or Appreciation Right and the receipt of
such payment. Penton's cash outlay to the participant should be offset to some
extent by Penton's tax savings arising from the deductions to which Penton is
entitled because of the exercise of the Option Right or Appreciation Right and
the making of such payment. The extent of offset depends on the relative income
tax rates applicable to corporations and individuals at the time of exercise.
Surrender. The amount paid to a participant upon surrender of an award is
compensation taxable to the participant as ordinary income. Penton should be
entitled to a deduction for the year of payment in an amount equal to such
compensation.
Accelerated Benefits. In the event that a participant's benefits with respect to
an award pursuant to the Plan are accelerated as the result of a change in the
ownership of Penton or a substantial portion of Penton's assets, then pursuant
to Sections 280G and 4999 of the Code (which deal with the treatment of "excess
parachute payments") Penton may not be entitled to a deduction for some or all
of the accelerated benefits (and potentially for certain other amounts payable
to the participant) and the participant may be subject, in addition to the
federal income taxes otherwise payable with respect to the award, to a 20%
excise tax on the non-deductible portion of the accelerated benefits (or
amounts).
Withholding. If shares issuable under the Plan are withheld to satisfy
withholding or other taxes, the tax consequences are the same as if such shares
were issued to the participant and then sold by the participant to Penton for
fair market value.
Any shares of previously-owned common stock delivered by a participant in
satisfaction of withholding or other taxes should be treated as sold by the
participant to Penton on the date of delivery for fair market value. The
difference between the fair market value of such shares on the date of delivery
and the tax basis of the shares should be a capital gain or loss. Penton is not
entitled to a deduction as a result of such a sale. Different tax consequences
may result if the shares delivered by the participant were acquired upon the
exercise of an ISO and have not been held for the ISO Holding Period.
22
<PAGE> 25
Other Awards. Because other awards may take many other forms, as determined by
the Compensation Committee, it is not possible to describe generally what their
tax treatment will be.
TAX CONSEQUENCES TO PENTON OR A SUBSIDIARY
To the extent that a participant recognizes ordinary income in the circumstances
described above, Penton, or the subsidiary for which the participant performs
services, will be entitled to a corresponding deduction provided that, among
other things, the income meets the test of reasonableness, is an ordinary and
necessary business expense, is not an "excess parachute payment" within the
meaning of Section 280G of the Code, and is not disallowed by the $1,000,000
limitation on certain executive compensation under Section 162(m) of the Code.
The Plan is designed to permit (but not require) the Compensation Committee to
grant awards that will qualify as performance-based compensation that is
excluded from the limitation in Section 162(m) of the Code.
VOTE REQUIRED FOR APPROVAL
The vote required to approve the Equity Incentive Plan is the affirmative vote
by the holders of a majority of the common stock present in person or
represented by proxy at the annual meeting and entitled to vote on this matter.
If the Equity Incentive Plan is not approved, no prospective awards will be made
under the Equity Incentive Plan.
THE BOARD RECOMMENDS A VOTE FOR THE APPROVAL OF THE EQUITY INCENTIVE PLAN.
PROPOSAL TO APPROVE AN AMENDMENT TO THE PENTON MEDIA, INC. 1998 DIRECTOR STOCK
OPTION PLAN.
In 1998, the Board adopted, and Pittway, as the sole stockholder approved, the
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 non-employee
directors of Penton. 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. The Board wishes to continue to promote
the long-term financial interests of Penton through the grant of stock options,
while providing more flexibility in the types of share award authorized for
grant under the Director Option Plan. The goal of providing more flexible
benefits is to allow non-employee directors to receive all or a portion of the
cash compensation to which they are otherwise entitled in the form of awards of
Restricted Shares or Deferred Shares. In order to achieve these objectives, the
Board has amended, subject to stockholder approval, the Director Option Plan.
Plan Summary. The amended Director Option Plan continues to permit the grant of
stock options that are non-qualified options for purposes of the Code while, in
addition, authorizing the grant of Restricted Shares and the grant of Deferred
Shares.
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 non-employee directors in such forms and amounts as
it determines; to award Restricted Shares to non-employee directors in such
forms and amounts as it determines; to award Deferred Shares to non-employee
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. Such maximum number of shares of common stock includes awards
previously made under the Director Option Plan (See "New Plan Benefits Table,"
below). If options, Restricted Shares or Deferred Shares are can-
23
<PAGE> 26
celed, 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 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 quarterly 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 previously 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.
Restricted Shares. An award of Restricted Shares involves the immediate transfer
by Penton to a non-employee director of ownership of a specific number of shares
of common stock in consideration of the performance of services. The
non-employee director is entitled immediately to voting, dividend, and other
ownership rights in such shares, but the Board 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 non-employee director that is less than current market value, as
the Board may determine.
Restricted Shares must 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. An example would be a provision that the Restricted Shares would be
forfeited if the participant ceased to serve Penton as a non-employee director
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 Board for the period
during which the forfeiture provisions are to continue.
Deferred Shares. An award of Deferred Shares constitutes an agreement by Penton
to deliver shares of common stock to the non-employee director in the future in
consideration of the past or future performance of services, but subject to the
fulfillment of such conditions during the deferral period as the Board may
specify. During the deferral period, the non-employee director 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 Board 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 Board at the date of grant.
Withholding. The Board has the power to withhold, or require a non-employee
director to remit to Penton, an amount sufficient to cover any withholding and
other taxes due with respect to the non-
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<PAGE> 27
employee director's exercise of an option. If so permitted by the Board, a
non-employee director 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, Restricted Share or
Deferred Share outstanding thereunder, provided that no such action shall
adversely affect any outstanding option, Restricted Share or Deferred Share
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 the types
of awards authorized under the Director Option Plan will be allocated among
eligible participants.
AWARDS HERETOFORE GRANTED UNDER THE DIRECTOR OPTION PLAN
NEW PLAN BENEFITS TABLE
As of March 31, 1999, awards under the Director Option Plan had been made as
follows:
<TABLE>
<CAPTION>
STOCK
OPTIONS
GRANTED
GRANT/AWARD --------
NAME AND POSITION YEAR NUMBER
----------------- ----------- --------
<S> <C> <C>
Non-Employee Directors As A Group(1) 1998 69,000
1999 0
</TABLE>
- ---------------
(1) The Non-Employee Director Group consists of 7 non-employee directors. The
table above reflects the award on June 8, 1998, of an option to purchase
8,000 shares of common stock to each of the 7 non-employee directors, which
will vest at the rate of 2,000 per year. In addition, Mr. Schwartz was
awarded an option to purchase 13,000 shares of common stock on June 8, 1998,
which vested on December 8, 1998.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is intended only as a brief summary of the federal
income tax consequences of stock options, Restricted Shares and Deferred Shares.
The summary is not intended to be complete and does not describe state or local
tax consequences. The laws governing the tax aspects of awards are highly
technical and such laws are subject to change in the future, and any such change
could be retroactive and affect the validity of the following discussion.
TAX CONSEQUENCES TO PARTICIPANTS
Options. The holder of a non-qualified option does not recognize taxable income
upon the grant thereof, nor is Penton entitled to a deduction in respect of such
grant. Upon the exercise of a non-qualified option as to any shares, the spread
constitutes compensation taxable to the optionee as ordinary income.
Upon an optionee's sale of shares acquired pursuant to the exercise of a
non-qualified option, the difference between the selling price and the tax basis
of the shares (generally the fair market value of such shares on the date of
exercise) is a capital gain or loss. Penton is not entitled to a deduction as a
result of such a sale.
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<PAGE> 28
Restricted Shares. A non-employee director who is granted Restricted Shares may,
if the restrictions on it constitute a "substantial risk of forfeiture" as
defined in Section 83 of the Code, make an election under Section 83(b) of the
Code (a "Section 83(b) election") to have the grant taxed as compensation income
at the date of grant in an amount equal to the fair market value on the date of
grant of the shares subject to such award less any amount paid by the
participant for the shares. The restrictions on Restricted Shares will
constitute a "substantial risk of forfeiture" if, for example, a sale thereof
would subject the participant to suit under Section 16(b) of the Securities
Exchange Act. If the non-employee director is not permitted to make, or is
permitted to make but does not make, a timely Section 83(b) election, the grant
is generally taxed to him or her as compensation income at the date(s) that the
restrictions imposed on the shares expire, in an amount on each such date equal
to the fair market value on such date of the shares as to which the restrictions
expire less any amount paid by the non-employee director for the shares. Unless
a non-employee director is permitted to make, and makes, a timely Section 83(b)
election, any dividends paid on the shares subject to the award while such
shares remain subject to the restrictions are compensation income to the
non-employee director.
Upon a non-employee director's sale of shares received pursuant to a grant of
Restricted Shares, the difference between the selling price and the tax basis of
the shares (generally, if a timely Section 83(b) election is made, the fair
market value of the shares on the date of grant or, if a timely Section 83(b)
election is not made, the fair market value of the shares on the date(s) on
which the restrictions on the shares expire) is a capital gain or loss. A
non-employee director's holding period begins on the date of grant if a timely
Section 83(b) election is made or on the date(s) on which the restrictions on
the shares expire if no timely Section 83(b) election is made.
Deferred Shares. No income generally will be recognized upon the award of
Deferred Shares. The recipient of a Deferred Share award generally will be
subject to tax at ordinary income rates on the fair market value of unrestricted
Common Stock on the date that such shares are transferred to the participant
under the award (reduced by any amount paid by the participant for such Deferred
Shares), and the capital gains/loss holding period for such shares will also
commence on such date.
TAX CONSEQUENCES TO PENTON OR A SUBSIDIARY
To the extent that a non-employee director recognizes ordinary income in the
circumstances described above, Penton will be entitled to a corresponding
deduction provided that, among other things, the income meets the test of
reasonableness, is an ordinary and necessary business expense and is not an
"excess parachute payment" within the meaning of Section 280G of the Code.
THE BOARD RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT TO THE DIRECTOR
OPTION PLAN.
PROPOSAL TO APPROVE THE APPOINTMENT OF THE INDEPENDENT CERTIFIED ACCOUNTANTS OF
PENTON FOR THE FISCAL YEAR ENDING DECEMBER 31, 1999.
PricewaterhouseCoopers LLP, who served as auditors for the year ended December
31, 1998, have been selected by the Board, upon recommendation of the Audit
Committee, to audit the consolidated financial statements of Penton for the year
ending December 31, 1999. It is expected that one or more representatives of
PricewaterhouseCoopers LLP will attend the annual meeting, with the opportunity
to make a statement if they should so desire and will be available to respond to
appropriate questions.
THE BOARD RECOMMENDS A VOTE FOR THE APPROVAL OF THE APPOINTMENT OF THE
INDEPENDENT CERTIFIED ACCOUNTANTS.
CERTAIN TRANSACTIONS
In connection with the Stock Distribution and the acquisition by Penton of
Donohue Meehan Publishing Company (the "Spinoff Transactions"), each of Penton,
Pittway Corporation and Messrs. Donohue and Meehan has agreed to indemnify the
others (except that Pittway has no indemnity obligation to Messrs. Donahue and
Meehan) with respect to various matters related to the Spinoff Transactions.
With respect to the indemnities between Penton and Messrs. Donohue and Meehan,
no obligation will arise
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<PAGE> 29
until the aggregate liability exceeds $500,000, and then only to the extent such
liability exceeds $500,000.
In connection with the Stock Distribution, Pittway has agreed to provide
assistance to Penton in connection with the preparation of Penton's tax returns
for periods ending on or prior to December 31, 1998, and in connection with
Penton's other tax matters for such periods as reasonably requested by Penton.
Penton and Pittway have agreed to negotiate on an arm's-length basis an
appropriate fee for such assistance. In no event will Pittway be required to
provide assistance in any tax year for which fees in excess of $60,000 would be
payable.
In connection with the acquisition by Penton of Donohue Meehan Publishing
Company, each of Messrs. Donohue and Meehan received 770,819 shares of Penton's
common stock. Each of Messrs. Donohue and Meehan has certain contingent rights
to additional cash (and/or, under certain circumstances, additional shares of
common stock) and to have such shares of common stock registered for sale under
the federal securities laws.
Donohue Meehan Publishing Company leases equipment from Donohue Meehan Equipment
Leasing, an Illinois partnership, which is owned by Messrs. Donohue and Meehan.
The total balances on these leases as of December 31, 1998, was approximately
$170,000. Penton believes that the lease terms are no less favorable to Donohue
Meehan Publishing Company than those obtainable in an arm's-length transaction
with an independent third party.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on a review of reports of ownership, reports of changes of
ownership and written representations under Section 16(a) of the Securities
Exchange Act of 1934 which were furnished to Penton during or with respect to
1998 by persons who were, at any time during 1998, directors or officers of
Penton or beneficial owners of more than 10% of the outstanding shares of common
stock, no such person failed to file on a timely basis any report required by
such section during 1998, other than Richard B. Swank, who did not timely report
his purchase of 2,500 shares of common stock on December 4, 1998, and David B.
Nussbaum, whose Form 3, which was timely filed, did not reflect the stock
options that had been granted to him. A Form 4 was filed in February 1999 to
reflect Mr. Swank's purchase and an amended Form 3 was filed in January 1999 to
reflect Mr. Nussbaum's stock options.
ANNUAL REPORT
Penton's annual report for the year ended December 31, 1998, is enclosed with
this proxy statement. Stockholders are referred to the report for financial and
other information about Penton, but such report is not incorporated in this
proxy statement and is not to be deemed a part of the proxy soliciting material.
STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
Stockholders who intend to have a proposal considered for inclusion in Penton's
proxy materials for presentation at the 2000 annual stockholders meeting must
submit the proposal to Penton no later than December 7, 1999. Stockholders who
intend to present a proposal at the 2000 annual meeting without inclusion of
such proposal in Penton's proxy materials are required to provide notice of such
proposal to Penton in accordance with the advance notice procedures for
stockholder proposals set forth in Penton's Bylaws and summarized below. Penton
reserves the right to reject, rule out of order, or take other appropriate
action with respect to any proposal that does not comply with these and other
applicable requirements.
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 of Directors.
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 of Directors or by a stockholder who was a stockholder of record on the
record date for the meeting, who
27
<PAGE> 30
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 meeting.
To be timely, notice by stockholders of nominations or proposals to be brought
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 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 Securities and Exchange 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.
PROXY SOLICITATION
Proxies will be solicited by mail. Proxies may also be solicited by directors,
officers and a small number of regular employees of Penton personally or by
mail, telephone or telegraph, but such persons will not be specially compensated
for such services. Brokerage houses, custodians, nominees and fiduciaries will
be requested to forward the soliciting material to the beneficial owners of
stock held of record by such persons, and Penton will reimburse them for their
expenses in doing so.
The entire cost of solicitation will be borne by Penton.
OTHER MATTERS
The management of Penton does not intend to present, and does not have any
reason to believe that others will present, any item of business at the annual
meeting other than those specifically set forth in the notice of the meeting.
However, if other matters are properly presented for a vote, the proxies will be
voted for such matters in accordance with the judgment of the persons acting
under the proxies.
By Order of the Board of Directors
/s/ Preston L. Vice
---------------------------
PRESTON L. VICE
Secretary
Cleveland, Ohio
April 6, 1999
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<PAGE> 31
APPENDIX A
PENTON MEDIA, INC.
1998 EQUITY AND PERFORMANCE INCENTIVE PLAN
(EFFECTIVE AUGUST 7, 1998)
------------------------
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.
"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-
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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.
"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.
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"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
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 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.
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(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 than 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. 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.
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(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 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.
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(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:
(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 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.
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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:
(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
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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.
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
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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;
(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. 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
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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, 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
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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 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.
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APPENDIX B
PENTON MEDIA, INC.
1998 DIRECTOR STOCK OPTION PLAN
(AS AMENDED AND RESTATED EFFECTIVE AS OF MARCH 12, 1999)
------------------------
1. Purpose. The purpose of the Penton Media, Inc. 1998 Director Stock
Option Plan (As Amended and Restated Effective as of March 12, 1999) (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;
(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) "Deferral Period" means the period of time during which Deferred Shares
are subject to deferral limitations under Section 5 of this Plan.
(e) "Deferred Shares" means an award made pursuant to Section 5 of this
Plan of the right to receive shares of Common Stock at the end of a specified
Deferral Period.
(f) "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.
(g) "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
subsequently reported in THE WALL STREET JOURNAL.
(h) "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.
(i) "Participant" means an Eligible Director who has been awarded an
Option, Restricted Shares or Deferred Shares.
(j) "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.
3. Limitation of Aggregate Shares. Subject to adjustment as provided in
paragraph 6(c), the number of shares of Common Stock which may be issued (a)
upon the exercise of Options, (b) as Restricted Shares and released from
substantial risks of forfeiture thereof, or (c) pursuant to Deferred Share
awards shall not exceed, in the aggregate, 100,000 shares; it being understood
that to the extent
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any Options expire unexercised or any Options, Restricted Shares or Deferred
Shares 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 fifteenth
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.
(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.
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5. Restricted Shares. The Board of Directors may also authorize the grant
or sale of Restricted Shares to Eligible Directors. 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 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 of Directors at the date of grant.
(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 of Directors 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 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 automatically deferred and reinvested in additional
Restricted Shares, which may be subject to the same restrictions as the
underlying award.
(f) 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 of Directors may
approve. Unless otherwise directed by the Board of Directors, 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.
6. Deferred Shares. The Board of Directors may also authorize the granting
or sale of Deferred Shares to Eligible Directors. 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 of
Directors 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 of Directors at the date of grant.
(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 of Directors 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
B-3
<PAGE> 45
contain such terms and provisions, consistent with this Plan, as the Board
of Directors may approve.
7. Other Awards. The Board of Directors may permit Eligible Directors to
elect to receive grants of Options, Restricted Shares or Deferred Shares in lieu
of the payment of all or a portion of such Eligible Director's compensation in
cash, on such terms as are deemed appropriate by the Board of Directors.
8. 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, Restricted Shares or Deferred Shares in such forms and amounts as it
shall determine, (iii) to impose such limitations, restrictions and conditions
upon such Options, Restricted Shares or Deferred Shares 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, Restricted Shares or Deferred Shares 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, Restricted Share award or Deferred Share award, 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, Restricted Share award or Deferred Share award.
(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, Restricted Share awards or Deferred Share awards 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 of
Directors may also make or provide for such adjustments in the numbers of shares
specified in Section 3 of the Plan as the Board of Directors in its sole
discretion, exercised in good faith, may determine is appropriate to reflect any
transaction or event described in this Section 6(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 other tax due with respect to the
Participant's exercise of an Option, the lapse of the substantial risk of
forfeiture of Restricted Shares or the delivery of Deferred Shares to a
Participant. Subject to the consent of the Board of Directors, a Participant may
make an irrevocable election to have withheld shares of Common Stock otherwise
issuable under an Option or a Restricted Shares award or deliverable with
respect to a Deferred Shares award, tender back to the Company shares of Common
Stock received pursuant to an Option, a Restricted Share award or a Deferred
Share award 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
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<PAGE> 46
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, Restricted Share
award or Deferred Share award in any manner to the extent that the Board of
Directors would have had the authority under the Plan to initially grant the
Option, Restricted Share award or Deferred Share award as so amended.
No termination or amendment of the Plan or amendment of any outstanding
Option, Restricted Share award or Deferred Share award shall adversely affect
any outstanding Option, Restricted Share award or Deferred Share award 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 original effective date of the Plan shall be August
7, 1998. The effective date of the amendment and restatement of the Plan shall
be March 12, 1999.
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<PAGE> 47
PROXY PROXY
PENTON MEDIA, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 7, 1999
Thomas L. Kemp, Joseph G. NeCastro and Preston L. Vice (each with full
power of substitution) are hereby authorized to vote all the shares of
Common Stock which the undersigned would be entitled to vote if
personally present at the annual meeting of stockholders of Penton
Media, Inc. to be held on May 7, 1999, and at any adjournment thereof,
as follows on the reverse side and below. THE SHARES REPRESENTED BY
THIS PROXY WILL BE VOTED AS DIRECTED ON THE REVERSE SIDE, BUT IF NO
DIRECTION IS GIVEN, THE SHARES WILL BE VOTED FOR THE ELECTION AS
DIRECTORS OF THE NAMED NOMINEES AND FOR EACH OF ITEMS 2 - 4,
INCLUSIVE.
YOUR VOTE IS IMPORTANT! PLEASE MARK, SIGN AND DATE THIS PROXY ON THE
REVERSE SIDE AND RETURN IT PROMPTLY IN THE ACCOMPANYING ENVELOPE.
(Continued and to be signed on reverse side.)
................................................................................
<PAGE> 48
PENTON MEDIA, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [ ]
<TABLE>
<CAPTION>
FOR WITHHOLD FOR ALL
ALL ALL EXCEPT:
<S> <C> <C> <C>
1. ELECT DIRECTORS -- [ ] [ ] [ ]
Nominees: W. Friend, D. Schultz, R. Swank
- -------------------------------------------
(Except nominee(s) written above)
FOR AGAINST ABSTAIN
2. Approve the 1998 Equity and Performance
Incentive Plan. [ ] [ ] [ ]
FOR AGAINST ABSTAIN
3. Approve an amendment to the 1998
Director Stock Option Plan. [ ] [ ] [ ]
FOR AGAINST ABSTAIN
4. Approve the appointment of independent
accountants for fiscal year 1999. [ ] [ ] [ ]
5. Transact such other business as may properly
be brought before the meeting.
</TABLE>
The undersigned acknowledges receipt of
the Notice of Annual Meeting of
Stockholders and of the Proxy Statement.
Date:------------------- , 1999
NOTE: Please sign exactly as your name appears. Joint owners should each
sign personally. Where applicable, indicate your official position or
representation capacity.
Signature(s)
------------------------------------------------------------
................................................................................
[ARROW] FOLD AND DETACH HERE [ARROW]
YOUR VOTE IS IMPORTANT
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY FORM PROMPTLY
USING THE ENCLOSED ENVELOPE.
