<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549-1004
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
COMMISSION FILE NUMBER 1-14337
PENTON MEDIA, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 36-2875386
- ------------------ -------------------
(State of Incorporation) (I.R.S. Employer
Identification No.)
1100 SUPERIOR AVENUE, CLEVELAND, OHIO 44114
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(Address of Principal Executive Offices) (Zip Code)
216-696-7000
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(Registrant's Telephone Number, Including Area Code)
SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- ------------------- -----------------------------------------
Common Stock, $.01 par value New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ]
Aggregate market value of common stock held by non-affiliates as of March 25,
1999 at a closing price of $21.81 per share as reported by the New York Stock
Exchange was approximately $254,648,413. Shares of common stock held by each
officer and director, their respective spouses, and by each person who owns or
may be deemed to own 10% or more of the outstanding common stock have been
excluded because such persons may be deemed to be affiliates. This determination
of affiliate status is not necessarily a conclusive determination for other
purposes.
22,781,713 common shares outstanding as of March 25, 1999
<PAGE> 2
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the annual meeting of
stockholders to be held on May 7, 1999 are incorporated by reference into Part
III of this report.
PENTON MEDIA, INC.
INDEX TO
ANNUAL REPORT ON FORM 10-K
For The Year Ended December 31, 1998
PART I
Item 1. Business.
Item 2. Properties.
Item 3. Legal Proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 4A. Executive Officers of the Registrant.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters.
Item 6. Selected Financial Data.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Item 8. Financial Statements and Supplemental Data.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Item 11. Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Item 13. Certain Relationships and Related Transactions.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
<PAGE> 3
PART I
Item 1. BUSINESS.
Recent Developments
On August 7, 1998, Pittway Corporation completed the tax-free spinoff of
Penton Media, Inc. (the "Company") in a one-for-one distribution of our common
stock for each share of Pittway Corporation stock outstanding, regardless of
class. Immediately following the distribution, we acquired Donohue Meehan
Publishing Company ("DM Publishing"). DM Publishing published three magazines
in the baking and convenience store markets: Modern Baking, Baking Management
and Convenience Store Decisions. It also produced a number of related special
editions and directory and show issues serving the baking and convenience store
markets.
Prior to the spin-off and our acquisition of DM Publishing we acquired the
following three trade show companies in 1997 for a combined purchase price of
$48.1 million plus contingent payments of up to $13.5 million based on future
earnings:
- SYSTEM International ("A/E/C"), which produces conference and
trade show events for computer and high-tech solutions in the
architectural, engineering, and construction industries;
- Industrial Shows of America ("ISOA"), which produces 24 industrial
trade shows in the United States and Latin America that focus on
the machine tool, plant maintenance, supply chain and
heating/ventilating/air conditioning markets; and
- Independent Exhibitions Limited, Equity Information Exchange
Limited and Service Exhibitions Limited (collectively referred to
herein as "INDEX"), which is an owner and producer of eight trade
shows serving the computer, manufacturing and leisure markets in
the United Kingdom.
Our strategy to focus on core market segments led to three dispositions
in the 1990s. In 1995, we sold Progressive Architecture magazine, which was a
stand-alone title for our Company in the market it served. Also, in 1995, we
exchanged our Millimeter magazine, a market leader but a stand-alone in serving
the motion picture, television and video production industry, for EEPN magazine,
a property that strengthened our portfolio in the electronic engineering
market. In 1997, we sold Managing Office Technology magazine because the market
served did not fit our strategic plans.
On October 7, 1998, along with our wholly owned subsidiary, Internet
World Media, Inc., we entered into a merger agreement with Mecklermedia
Corporation ("Mecklermedia") and Alan M. Meckler, its controlling stockholder,
pursuant to which Internet World Media, Inc. launched a tender offer for the
outstanding common stock of Mecklermedia for $29.00 per share. Following the
tender offer, Internet World Media, Inc. merged with and into Mecklermedia, with
Mecklermedia continuing as the surviving corporation. The transaction value of
the tender offer and the merger was approximately $273.8 million.
Mecklermedia provides information through the Internet through its:
- Internet World trade shows and conferences;
- publication of Internet World, a weekly
business-to-business controlled circulation newspaper;
- Boardwatch magazine;
- ISP Directory; and
- ISPCON Trade shows.
In May 1998, Mecklermedia acquired all of the outstanding capital stock
of Boardwatch, Inc. and One, Inc. Boardwatch is the publisher of the monthly
trade magazine Boardwatch and One, Inc. is the producer of the ISPCON trade
shows.
Domestic and Foreign Revenues and Assets
Domestic sales of our products and services comprised 97.7%, 96.9% and
92.3% of total revenues for the fiscal years ended December 31, 1996, 1997 and
1998, respectively. Foreign sales totaled 2.9%, 3.1% and 7.7% of our revenues
for the fiscal years ended December 31, 1996, 1997 and 1998, respectively. In
1998, 77% of these foreign sales were to customers in the United Kingdom.
Substantially all of the United Kingdom sales were made by INDEX, a subsidiary
of Penton located in the United Kingdom.
We intend to further expand into international markets. We have limited
experience in developing localized versions of our publications and trade shows
and conferences and in marketing and distributing them internationally. In
addition, the following risks in international markets could have a material
adverse effect on our future international operations and, consequently, on our
business, results of operations and financial condition:
- the uncertainty of product acceptance by different cultures;
- the risks of divergent business expectations or cultural
incompatibility inherent in establishing joint ventures with
foreign partners;
- difficulties in staffing and managing multi-national operations;
- currency fluctuations;
- general economic and political uncertainties and potential for
social unrest;
- limitations on our ability to enforce legal rights and remedies;
- state-imposed restrictions on the repatriation of funds; and
- potentially adverse tax consequences.
See Note 15 of the Notes to Consolidated Financial Statements included
herein for a description of the Company's assets located in the United States
and in the United Kingdom.
OVERVIEW
Established in 1892, we are a producer of proprietary business
information to professionals in ten industry sectors. We provide integrated
marketing solutions to suppliers in these industries through three principal
media products:
- business and trade magazines;
- trade shows and conferences; and
- electronic media, including Web sites.
We publish 50 trade magazines, produce 118 trade shows and conferences and
maintain 42 Web sites and other electronic media products serving the following
ten industries:
<TABLE>
<S> <C> <C>
- Internet/Information Technology - Management
- Design/Engineering - Supply Chain/Aviation
- Electronics - Government/Compliance
- Manufacturing - Mechanical Systems/Construction
- Food/Hospitality - Leisure
</TABLE>
PRODUCTS AND SERVICES
We serve specific industry sectors with our business publications, our
trade shows and conferences and our electronic media products.
In Print: Publications
Trade Magazines. We publish specialized trade magazines in the United
States. According to Advertising Age's annual ranking of magazines in the United
States, Penton publishes two of the ten largest business-to-business magazines,
based on advertising revenues. Our publications are widely recognized for the
quality of our editorial content. Since 1990, our magazines have won nearly 600
editorial awards.
We publish 50 trade magazines with a combined circulation of over 3.2
million subscribers worldwide. Our magazines are primarily
controlled-circulation. They are distributed free-of-charge to qualified
subscribers in our targeted industries.
Our publications generate revenues primarily from the sale of advertising
space. Subscribers to controlled-circulation publications qualify to receive our
magazines by verifying their responsibility for specific job functions,
including purchasing authority. We survey subscribers to our
controlled-circulation magazines annually to verify their continued
qualification.
Circulation information for the majority of our publications is audited
each year by BPA International, an independent auditor of magazine circulation.
These audits verify that we have accurately identified the number and job
responsibilities of qualified subscribers and that those subscribers are,
eligible to receive the relevant publication according to our established
criteria.
Each of our publications has its own advertising sales team and rate
structure. Some advertisers may qualify for discounts based on advertising in
multiple publications. We enable marketers to be more cost efficient in their
advertising purchases by providing a single source for integrated products.
In addition, each of our publications has its own editorial staff,
including writers, designers and production personnel. To preserve the editorial
integrity of each publication's news reporting and analysis, we seek to maintain
separation between the editorial and sales staffs of each publication. We
believe that our reputation for objective, fair and credible editorial content
contributes significantly to our success. Fifteen of our publications have
served their industries for over 50 years.
Our editorial staffs meet frequently with readers of their publications to
maintain a current understanding of the information needs and interests of those
readers in an effort to serve them more effectively. We devote considerable
resources to the study of trends in our industries and strive to make our
publications the most widely used among our targeted audiences. Many of our
editors and contributors are recognized as experts in their fields and are
regularly contacted by the general press to comment on developments and trends
in their respective markets.
Directories and Buyer's Guides. We also publish 32 directories and buyer's
guides, which are respected sources of buying information for industry decision
makers. Most of the business directories we publish have limited competition.
IN PERSON: TRADE SHOWS AND CONFERENCES
We produce 118 trade shows and conferences in our ten industry sectors. In
addition to these events, we maintain licensing agreements for 3 trade shows and
we produce 4 trade shows under management contracts.
In the early 1990s, we entered the trade show and conference business and
have more recently expanded our presence through acquisitions. For example, the
acquisition of Mecklermedia in 1998 added the ISPCON and Internet World trade
shows to our portfolio. In addition, we recently expanded our global presence.
In 1997, we acquired INDEX, a United Kingdom-based producer of trade shows, and
ISOA, which is experienced in producing trade shows in Latin America.
Attendees at our trade shows and conferences are professionals and managers
in the industries we serve. Most trade shows include an extensive conference
program, which provides a forum for the exchange and dissemination of
information relevant to the particular event's focus. In addition, most trade
shows have one or more "keynote" sessions with speakers who are known for their
industry knowledge and expertise.
Trade show exhibitors pay a set price per square foot of booth space.
Typically, a majority of each trade show's exhibitors commit to booth space
during that year's show for the following year. In addition, Penton receives
revenues from attendee fees at trade shows and conferences
ONLINE: ELECTRONIC MEDIA
Our presence in print and trade show media enables us to market our Web
sites in the industries that we serve. We believe the growth of
electronic publishing will provide opportunities to market existing and develop
new editorial content from our publications in different formats. We currently
maintain 42 Web sites.
OTHER
We also provide ancillary information services that complement our
principal business media platforms. These services include:
- Market Access & Business Development Services. We provide a variety
of marketing services, including database rentals and research
services. We use information from our subscription lists and other
available databases to compile detailed mailing lists for rental by
marketers who want to promote their products and services through
direct mail programs. We offer these services to our customers to
help them reach their targeted audience.
- Specialized Advertising Services. We collect and forward reader
inquiries to our advertisers. In addition, classified and
recruitment advertising sections in our publications provide a
cost-efficient medium for reaching prospects who are ready to buy
specialized products and services. Also recruitment advertising
provides an effective way to reach qualified professionals seeking
career opportunities.
- Custom Communications/Promotion. Penton Custom Publishing produces a
full range of client-specific communications services for print,
electronic media and the Internet, including newsletters, magazines,
catalogs, directories, education and training materials, and other
support materials.
- Research. Penton Research Services offers a full range of primary
and secondary research services for advertisers and industry
associates. Primary research is used to develop original statistics
and analysis based on a variety of research methodologies that may
include interviews, surveys and focus groups. Secondary research
makes use of existing research developed by other organizations,
collating it to answer a specific research need.
CUSTOMERS
We have more than 5,000 customers and our top ten customers in 1998
accounted for only 5.3% of our total revenue.
COMPETITION
We experience intense competition for our products and services. We compete
with several much larger international firms that operate in many markets and
have broad product offerings in publishing, trade shows and conferences. We
compete for readers and advertisers in the publishing marketplace. We also
compete for trade show and exhibition expenditures, sponsorships and show
attendees in the trade show and conference marketplace. Because our industry is
relatively easy to enter, we anticipate that additional competitors may enter
these markets and intensify competition.
Our publications compete on the basis of:
- advertisers' perception of the target audience served by the magazine;
- readers' preference for the publication's content;
- reader's acceptance of the publication's authoritative position in its
markets;
- editorial quality;
- quantity and quality of circulation;
- readers' response to advertisers' products and services;
- the strength of complementary products serving the same niche; and
- the effectiveness of sales and customer service and advertising rates.
Our trade shows and conferences compete on the basis of:
- the availability of alternative venues,
- the ability to define events for particular market segments and/or with
different strategic positioning,
- the range of competition for exposition dollars, sponsorships and show
and conference attendees.
In addition, in our trade show and conference business, we compete with
many industry associations and, in several countries, the trade show and
conference hall owner and operator may also be a competitor.
PRODUCTION AND DISTRIBUTION
We print nearly all of our own magazines and about 50 outside titles at our
printing facility in Berea, Ohio. If additional printing capacity is needed, we
believe that outside printing services are readily available at competitive
prices.
The principal raw material used in our print publications is paper. We
believe that the existing arrangements providing for the supply of paper are
adequate and that, in any event, alternative sources are available. Paper costs
accounted for about 8.1% of our total operating costs for the year ended
December 31, 1998. Paper prices are affected by a variety of factors, including
demand, capacity, pulp supply and general economic conditions.
Substantially all of our publications and direct mail promotions are
delivered by the United States Postal Service within the continental United
States. Postage costs also represent a significant expense, accounting for about
6.8% of our total operating costs and expenses for the year ended December 31,
1998.
We recently announced that we were seeking to explore strategic
alternatives for our printing facility.
TRADEMARKS AND INTELLECTUAL PROPERTY RIGHTS
We regard our copyrights, trademarks, service marks and similar
intellectual property as critical to our success and rely upon copyright and
trademark laws, as well as confidentiality agreements with our employees and
others, to protect our rights. We pursue the registration of our material
trademarks in the United States and, depending upon use, in other countries.
Effective trademark and copyright protection may not be available in every
country in which our publications and services are available.
We may be subject to claims of alleged infringement of our trademarks or
our licensees of trademarks and other intellectual property rights of third
parties from time to time in the ordinary course of business. We do not believe
that these legal proceedings or claims are likely to have, individually or in
the aggregate, a material adverse effect on our business, financial condition or
results of operations.
SEASONALITY
For a discussion of seasonality, see Item 7 of this Annual Report on Form
10-K "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Seasonality."
ENVIRONMENTAL MATTERS
We anticipate that compliance with various laws and regulations relating to
protection of the environment will not have a material effect on our capital
expenditures, earnings or competitive position.
LEGAL PROCEEDINGS
A former shareholder of Mecklermedia, Ariff Alidina, filed suit against us
in the Federal District Court in the Southern District of New York for an
unspecified amount, as well as other relief. The plaintiff claims that we
violated the federal securities laws by selling Mr. Meckler an 80.1% interest in
internet.com for what the plaintiff alleges was a below-market price, thereby
giving to Mr. Meckler more consideration for his common stock in Mecklermedia
than was paid to other stockholders of Mecklermedia. We intend to vigorously
defend this suit and we have filed a motion to dismiss the lawsuit, which is
pending.
EMPLOYEES
On December 31, 1998, we employed about 1,455 persons, primarily located in
the United States. None of our employees is represented by a labor union, and we
consider our relations with our employees to be good.
<PAGE> 4
Item 2. PROPERTIES.
The Company's principal properties and their general characteristics are as
follows:
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LEASE APPROXIMATE
LOCATION PRINCIPAL USE EXPIRATION SQUARE FEET
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<S> <C> <C> <C>
Cleveland, Ohio General Offices 2000 186,000
Cleveland, Ohio Warehousing 2001 28,000
Berea, Ohio Printing/Warehousing Owned 138,000
New York, New York Sales Offices 2000 10,000
Dunedin, Florida General Offices 2000 13,000
Safety Harbor, Florida Warehousing 1999 18,000
Tampa, Florida Printing 2000 15,000
Tampa, Florida General Offices/Warehousing 1999 19,000
Hasbrouck Heights, General Offices 2001 25,000
New Jersey
Westport, Connecticut General Offices 1999 18,700
</TABLE>
Other smaller properties include 17 sales and/or editorial offices under
leases expiring through 2013 located in major cities throughout the United
States and in the United Kingdom. We believe our facilities are adequate for our
present needs.
Item 3. LEGAL PROCEEDINGS.
In connection with the acquisition of Mecklermedia Corporation, on December
1, 1998, a lawsuit was brought against the Company by Ariff Alidina (the
"Plaintiff") a former shareholder of Mecklermedia, in Federal District Court in
the Southern District of New York for an unspecified amount, as well as other
relief. The Plaintiff has claimed that the Company violated the federal
securities laws by selling Mr. Meckler, a beneficial owner of approximately 26%
of the shares of Mecklermedia, an 80.1% interest in internet.com for what the
Plaintiff alleges was a below-market price, thereby giving to Mr. Meckler more
consideration for his common stock in Mecklermedia than was paid to other
stockholders of Mecklermedia. The Company intends to vigorously defend this suit
and has filed a motion to dismiss the lawsuit, which is pending.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders during the fourth
quarter of fiscal 1998.
Item 4A. EXECUTIVE OFFICERS OF THE REGISTRANT.
The information under Item 4A is furnished pursuant to Instruction 3 of Item
401(b)(3) of Regulation S-K.
Thomas L. Kemp has served as a Director and as Chief Executive Officer of
the Company since September 1996. Mr. Kemp also served as Chairman of the Board
of the Company from September 1996 to May 1998. Mr. Kemp's publishing career
spans more than 24 years. He spent 22 years with San Francisco based Miller
Freeman, Inc., and was Miller Freeman's President and Chief Operating Officer in
1996, when he left to join our Company. From 1994 to 1996, Mr. Kemp was
Miller Freeman's Executive Vice President and Chief Operating Officer. He also
held a series of executive, publishing management and sales positions with
Miller Freeman subsequent to joining that company in 1974. Mr. Kemp is a
Director and Treasurer of Business Publications Audit International. He is a
Director of the Business Press Educational Foundation and a former Director of
American Business Press and the Association of Medical Publishers. Mr. Kemp is a
frequent speaker at media industry conferences and events. In 1998, Mr. Kemp was
named Business Publishing's "Person of the Year" by MIN magazine.
Daniel J. Ramella has served as a Director of the Company since July 1990.
He has served as President and Chief Operating Officer since 1990, and has
worked for the Company for more than 21 years. Mr. Ramella was Senior Vice
President, Publishing from 1989 to 1990, and Vice President, Foodservice Group
from 1987 to 1989. He was publisher of Restaurant Hospitality magazine from 1985
to 1987. Mr. Ramella held management positions with Production Engineering
magazine between 1977 and 1985. Before joining the Company in 1977, he was a
Senior Audit Manager for Arthur Andersen & Co. He is a Director, Secretary and
Executive Committee Member of American Business Press and has served as a
Director of the Business Press Educational Foundation. He is a former Director,
Treasurer and Executive Committee member of Business Publications Audit
International.
Joseph G. NeCastro has served as Chief Financial Officer and Treasurer of
the Company since June 1998. Before joining the Company, 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, Corporate Controller in 1994 and 1995,
and held other corporate financial management positions with that company in
1993 and 1994. Mr. NeCastro was Vice President and Treasurer for U.S. News &
World Report between 1990 and 1993, and Director of Finance from 1987 to 1990.
He held senior business development and finance positions with MCI
Communications Corporation between 1983 and 1987 before moving into the
publishing industry.
James D. Atherton is Group President of the Mechanical Systems/
Construction Government/Compliance, Management, Supply Chain/Aviation,
Industrial Shows of America Groups and Ancillary Products Groups. He has worked
in business publishing at the Company for 45 years. Mr. Atherton was Group
President of the Company's Inside Sales and Electronics Groups from 1991 to
1995, and President of the Electronics Group in 1991. From 1989 to 1991, he was
Senior Vice President of Publishing, and from 1984 to 1989, he was Publishing
Vice President of New Equipment Digest and Material Handling Engineering
magazines. From 1981 to 1984, he was Vice President of New Equipment Digest, and
from 1975 to 1981, he was publisher of that magazine.
David B. Nussbaum has served as Executive Vice President and Group
president of the Company since September 1998. He oversees the Electronics, Used
Equipment and Internet Groups, as well as the Independent Exhibitions, Ltd.
subsidiary. Before joining the Company, Mr. Nussbaum served as Senior Vice
President of the New York Division of Miller Freeman, Inc. from 1995 to August
1998 and as Vice President from 1994 to 1995.
James W. Zaremba is Group President of the Design/Engineering,
Foodservice/Hospitality and Manufacturing Groups and A/E/C SYSTEMS. He has
spent most of his 30-year trade publishing career with the Company. From 1993 to
1995, he was Group President of the Design/Engineering and Custom Communications
Groups, and from 1991 to 1993, he was Group President of the Design/Engineering
Group. He was Group Vice President of the Design/Engineering Group from 1989 to
1991. From 1988 to 1989, he was Publisher of Machine Design magazine, and from
1983 to 1988, he was Publisher of PT Design magazine.
Preston L. Vice has served as Secretary of the Company since July 1998 and
as Senior Vice President of Publishing Services since 1989. Mr. Vice has 19
years of trade publishing experience and 28 years of accounting and finance
experience. He was the Company's Vice President of Finance from 1982 to 1989,
and Director of Finance from 1979 to 1982. Mr. Vice transferred to the Company
from Pittway Corporation in 1979. Previous to his tenure at Pittway he was with
Coopers & Lybrand.
Charles T. Griesemer has served as Vice President/Controller of the Company
since July 1998 and as Vice President of Finance since he joined the Company in
1989. In the preceding 16 years, he held finance positions at Thermos Company,
Anchor Swan Corporation Inc., Pittway Corporation and Coopers & Lybrand.
<PAGE> 5
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS.
Our common stock is traded on the New York Stock Exchange under the symbol
PME. Our common stock commenced trading on August 10, 1998 after we completed
our spinoff from Pittway Corporation. The following table sets forth, for the
periods indicated, the high and low sales prices for the common stock as
reported on the New York Stock Exchange.
<TABLE>
<CAPTION>
PRICE RANGE OF
COMMON STOCK
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HIGH LOW
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<S> <C> <C>
Year Ended December 31, 1998:
Third Quarter (from August 10, 1998)...................... $17 $12 7/8
Fourth Quarter............................................ $20 1/4 $12 1/2
</TABLE>
On March 25, 1999, the reported last sale price of the Common Stock on the
New York Stock Exchange was $21.81 per share. The Company has approximately 820
holders of the common stock, as calculated by using the number of record holders
on March 25, 1999.
Our dividend policy is determined by our Board of Directors.
We currently pay quarterly dividends in an amount of $0.03 per share. Any
decision to pay dividends in the future will depend on business decisions that
will be made by our Board of Directors from time to time based upon the results
of our operations and financial condition and such other matters as our Board of
Directors considers relevant.
Item 6. SELECTED FINANCIAL DATA.
The following table summarizes limited financial data with respect to the
Company. The historical income statement data for each of the three years in the
period ended December 31, 1998 and balance sheet data as of December 31, 1997
and 1998 have been derived from the Company's audited annual financial
statements and related notes. The information set forth below should be read in
conjunction with our consolidated financial statements and related notes and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere herein. As you read the following, you should
consider that:
- The Company defines EBITDA as operating income before depreciation and
amortization. EBITDA is often used to analyze and compare companies on
the basis of operating performance and cash flow. However, EBITDA is not
adjusted for all non-cash expenses or for working capital, capital
expenditures and other investment requirements. EBITDA should not be
considered in isolation or as a substitute for measures of performance
prepared in accordance with generally accepted accounting principles. Not
all companies calculate EBITDA in the same manner, and EBITDA as
presented may not be comparable to similarly titled measures presented by
other companies.
CONSOLIDATED COMPARATIVE SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(Dollars in thousands, except per share data) 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA
Revenues $ 233,118 $ 204,931 $ 188,557 $ 179,900 $ 159,284
Operating income 26,719 25,297 18,499 11,947 10,290
Income from continuing operations 10,890 14,874 10,956 8,625 6,062
Income from discontinued operations -- -- -- (48) 51
Net income 10,890 14,874 10,956 8,577 6,113
Income from continuing operations
and net income per share, basic and diluted .50 .70 .52 .40 .29
CASH FLOWS AND OTHER DATA
Cash flows
Operating $ 25,749 $ 23,186 $ 20,507 $ 7,423 $ 5,329
Investing, including capital
expenditures (271,157) (53,192) (4,722) (4,989) (5,026)
Financing 246,993 30,854 (15,888) (1,697) (668)
Capital expenditures, excluding
businesses acquired 5,775 5,450 4,822 4,989 7,593
Depreciation and amortization 10,720 6,551 5,911 5,772 5,596
EBITDA 37,439 31,848 24,410 17,719 15,886
BALANCE SHEET DATA AT PERIOD END
Total assets of continuing operations $ 479,301 $ 156,426 $ 108,799 $ 116,494 $ 105,901
Investment in discontinued operations -- -- -- -- 5,241
Total assets 479,301 156,426 108,799 116,494 111,142
Goodwill and other intangibles 387,612 71,822 21,940 21,916 22,784
Stockholders' equity 87,489 69,613 59,151 70,763 61,847
</TABLE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Set forth below is a discussion and analysis of the Company's financial
condition and results of operations. Such discussion and analysis should be read
in conjunction with the financial statements and the related notes appearing
elsewhere herein.
OVERVIEW
We are a leading business media company operating in three business
segments: media services, printing and direct mail marketing. Our media services
segment serves specific targeted industries with integrated product
offerings, including, trade magazines, trade shows and conferences, directories,
electronic media products (including Web sites), custom publishing, research,
databases and information products.
Trade magazine revenues are generated primarily from advertising, which
accounted for 70.0% of total revenue in 1998, 76.0% in 1997 and 78.0% in 1996.
No single advertiser comprised more than 1.2% of our advertising revenue during
1998. The Company's top 10 advertisers accounted for 5.3% of total revenue and
its top 25 customers accounted for less than 8.7% of total revenues in 1998.
Trade show and conference revenues represented 12% of total revenues in 1998,
5.0% in 1997 and 3.0% in 1996. Trade show and conference revenues are derived
from exhibition and meeting space sales, registration fees, and ancillary
services which are recognized at the time of the show. Trade show exhibition
space sales are contracted and partial payment is received as far as one year in
advance of the show, although some refunds may occur prior to the show due to
cancellations. For example, 66% of budgeted exhibit space at our 1999 Internet
World Fall Show was reserved prior to the end of last year's show. Companies
that exhibit at trade shows pay on the basis of the space that their exhibit
occupies. Revenue and related direct event expenses are recognized in the month
in which the event is held. Cash is collected in advance of a trade show or
conference and is recorded on our balance sheet as deferred revenue. We expect
the percentage of total revenues from trade shows and conferences to increase as
a result of the acquisition of Mecklermedia.
The printing segment prints magazines, catalogs, brochures and direct mail
pieces for the media services segment and outside commercial customers. The
direct mail segment serves primarily the pharmaceutical and business services
markets with the ability to design, produce, print and mail direct mail
campaigns. The Company has announced it is exploring strategic alternatives for
both its printing segment and direct mail segment.
The Company was spun off from Pittway Corporation in August 1998. On November
24, 1998, the Company acquired Mecklermedia, a provider of information about the
Internet through various business media products, for $273.8 million. On August
7, 1998, the Company acquired Donohue Meehan Publishing for $7.0 million in
cash, 1,541,638 shares of the Company's common stock and a contingent payment of
up to $4.0 million based on future earnings of Donohue Meehan Publishing.
Donohue Meehan Publishing publishes three magazines in the baking and
convenience store markets: Modern Baking, Baking Management and Convenience
Store Decisions. It also produces a number of related special editions and
directory and show issues serving the baking and convenience store markets. In
1997, Penton acquired three trade show companies -- Independent Exhibitions,
Ltd., Industrial Shows of America and A/E/C SYSTEMS International -- for a
combined purchase price of $48.1 million, plus contingent payments of up to
$13.5 million based on future earnings. All of these acquisitions were accounted
for using the purchase method of accounting and, accordingly, the results of the
acquired companies are included in the Company's consolidated statement of
income since their respective dates of acquisition.
RESULTS OF OPERATIONS
The following table sets forth income statement data of the Company
expressed as a percentage of revenues for the periods indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Revenues.................................................... 100.0% 100.0% 100.0%
Operating expenses:
Editorial, production and circulation..................... 48.6% 46.1% 43.7%
Selling, general and administrative....................... 38.5% 38.3% 40.3%
Depreciation and amortization............................. 3.1% 3.2% 4.6%
----- ----- -----
90.2% 87.7% 88.5%
----- ----- -----
Operating income............................................ 9.8% 12.3% 11.5%
----- ----- -----
Other income (expenses):
Interest expense.......................................... -- (0.4)% (2.4)%
Gain on sale of publications.............................. -- 0.5% --
Writedown on impairment assets............................ -- -- (0.4)%
----- ----- -----
0.0% 0.1 (2.8)%
----- ----- -----
Income before income taxes.................................. 9.8% 12.4% 8.6%
Income taxes:
Current................................................... 3.6% 4.8% 6.1%
Deferred.................................................. 0.4% 0.3% (2.2)
----- ----- -----
4.0% 5.1% 4.0%
----- ----- -----
Net income.................................................. 5.8% 7.3% 4.7%
===== ===== =====
</TABLE>
1998 COMPARED TO 1997
Revenues
Total revenues, after elimination of intersegment sales, increased $28.2
million, or 13.8%, from $204.9 million to $233.1 million.
Media services revenues increased $26.5 million, or 14.6%, to $207.7 million.
Advertising revenues from the Company's publishing operations accounted for $7.1
million of the increase, due primarily to the following: (1) the Donohue Meehan
Publishing Company acquisition in August 1998; (2) two new publications launched
in the first quarter, IW Growing Companies and Embedded Systems Development; (3)
the publication of Hydraulics and Pneumatics' Fluid Power Handbook and
Directory, which is published every other year; and (4) higher pricing on other
advertising business. Trade show and conference revenues increased $17.2 million
to $28.0 million in 1998. About $12.0 million of the increase in 1998 was due to
the first-time inclusion of the operations of Independent Exhibitions, Ltd. and
about $5.0 million of this increase was due to Industrial Shows of America. Both
Independent Exhibitions and Industrial Shows of America were acquired in
December 1997. In addition, 1998 includes an increase in the Wireless
Symposium/Portable by Design Conference and Exhibition and approximately $0.8
million related to the addition of Mecklermedia in November 1998. The remaining
increase in media services revenues of $2.1 million relates to other
initiatives.
Printing revenues from external customers increased $1.2 million, or 12.1%,
to $11.6 million. Intercompany sales decreased $0.3 million, or 1.2%, bringing
total segment revenues to $39.8 million.
Direct mail revenues increased $0.5 million, or 3.6%, to $13.8 million. The
increase was primarily in the segment's printing operations.
<PAGE> 6
Operating Expense.
Operating expenses for the Company, after elimination of intersegment
charges, increased $26.8 million, or 14.9%, from $179.6 million in 1997 to
$206.4 million in 1998. As a percentage of revenues, operating costs increased
from 87.6% in 1997 to 88.5% in 1998. The increase in percentage was due
primarily to the increase in depreciation and amortization related to
acquisitions, period costs related to Mecklermedia Corporation and one-time
spin-off and start-up costs. These increases were offset partially by the first
full year of operations of Independent Exhibitions, Ltd. and Industrial Shows of
America.
Editorial, Production and Circulation. Total editorial, production and
circulation expenses, after elimination of intersegment charges, grew to $101.8
million in 1998 compared with $94.6 million in 1997, representing an increase of
$7.2 million, or 7.6%. As a percentage of revenues, editorial, production and
circulation expenses decreased from 46.1% in 1997 to 43.7% in 1998. The decrease
is due largely to the acquisition of Donohue Meehan Publishing in 1998 and to
production improvements.
Media services editorial, production and circulation expenses grew $5.7
million, or 6.9%, due to the inclusion of the Independent Exhibitions and
Industrial Shows of America trade shows acquired in late 1997, which accounted
for $4.7 million of the total production expenses increase. Other expense
increases relate to the acquisition of Donohue Meehan Publishing Company in
August 1998, the acquisition of Mecklermedia Corporation in November 1998 and
the publication of the biennial Fluid Power Handbook and Directory, which was
not published in 1997.
Editorial, production and circulation expense for the printing segment
increased $1.8 million due to volume-related growth of the total business.
Editorial, production and circulation expenses for the direct mail segment
decreased $0.3 million or 3.1% compared with a 3.6% increase in revenue. The
decrease is due largely to productivity improvements.
Selling, General and Administrative. Total selling, general and
administrative expenses grew $15.4 million, or 19.5%, to $93.9 million. As a
percentage of revenues, selling, general and administrative expenses increased
from 38.3% in 1997 to 40.3% in 1998. The increase is due primarily to period
costs related to the acquisition of Mecklermedia Corporation and one-time
spin-off costs.
Media services selling, general and administrative expenses increased $15.5
million, or 21.6%. The increase was due to: (1) expenses of the Independent
Exhibitions, Ltd. and Industrial Shows of America trade shows held in 1998,
which amounted to $4.9 million and $3.7 million; (2) period costs of the newly
acquired Mecklermedia Corporation trade shows (for which revenues will not be
recognized until those trade shows are held in future periods) in the amount of
$1.7 million; (3) costs related to launching two new publications in the first
quarter, IW Growing Companies and Embedded Systems Development; (4) the Donohue
Meehan Publishing Company acquisition in August 1998; (5) one-time spin-off
costs of about $0.4 million; (6) costs related to the biennial Fluid Power
Handbook and Directory; (7) sales volume growth; and (8) higher charges related
to Pittway stock appreciation rights held by the Company's employees, which will
not recur. Total costs charged to the Company by Pittway for both 1998 and 1997
were $1.4 million.
Selling, general and administrative expenses of the printing segment were
level with the prior year.
Direct mail selling, general and administrative expenses decreased $0.2
million, or 4%, due primarily to cost-cutting measures implemented in 1998.
Depreciation and Amortization. Depreciation and amortization increased
$4.2 million to $10.7 million. The higher expense was the result primarily of
the amortization of intangible assets associated with the trade shows acquired
in December 1997, the Donohue Meehan Publishing Company acquisition in August
1998, the Mecklermedia Corporation acquisition in November 1998 and, beginning
with the fourth quarter of 1998, the change in Penton's goodwill amortization
policy for acquired trade shows from 40 years to 20 years, which accounted for
$0.3 million of additional amortization in 1998. While this change will
negatively impact the reported earnings per share, it will have no impact on
either EBITDA or after-tax cash flow. The anticipated annual charges for
intangibles related to the Mecklermedia Corporation acquisition in 1999 and
future years is $14.5 million.
Operating Income. Overall, the Company's operating income increased $1.4
million, or 5.6%, to $26.7 million from $25.3 million in the prior year.
Operating income as a percentage of revenue decreased from 12.3% to 11.5%, due
primarily to the increase in depreciation and amortization associated with
Penton's acquisitions.
Media services operating income increased $1.5 million, or 5.5%. This
comprised an increase in publishing of 10.6% to $24.9 million, and a decrease in
trade shows and conferences from $2.5 million to $1.3 million. The increase in
publishing was the result primarily of the acquisition of Donohue Meehan
Publishing Company in 1998. The increase was offset by start-up costs associated
with two magazine launches in 1998, and one-time costs incurred from the
spinoff from Pittway. The decrease in trade shows and conferences was primarily
the result of period costs of the Mecklermedia Corporation acquisition (since
all of 1998's shows occurred prior to the acquisition), higher amortization
expense resulting from acquisitions and the change in Penton's amortization
policy noted above.
Operating income of the printing segment decreased $0.7 million, to $0.8
million.
The direct mail segment recorded an operating loss of $0.3 million compared
with the prior year's operating loss of $1.1 million. The improvement was due
largely to the increase in revenue of this segment's printing operations and
lower production costs.
Interest Expense. Interest expense increased $4.7 million to $5.6 million
due to additional borrowings used to finance the two trade show company
acquisitions in December 1997, the Donohue Meehan Publishing Company acquisition
in August 1998 and the Mecklermedia Corporation acquisition in November 1998.
Other. In 1998, the Company wrote down the carrying value of various
intangible assets by $1.0 million. In 1997, Penton recognized a $1.0 million
gain on the sale of Managing Office Technology magazine.
Effective Tax Rates. The effective tax rates were 45.9% in 1998 and 41.7%
in 1997. The Company's acquisition of Donohue Meehan Publishing Company in
August 1998 and Mecklermedia Corporation in November 1998 resulted in the
recording of goodwill. The amortization of such goodwill is recognized for
financial statement purposes, but is not deductible for tax purposes due to the
structure of the purchase transactions. Accordingly, the company's effective tax
rate has increased in 1998 and is expected to increase in 1999 as well, due to
the full year effect of the acquisitions.
1997 COMPARED TO 1996
Revenues
Total revenues, after elimination of intersegment sales, increased $16.3
million, or 8.7%, from $188.6 million to $204.9 million.
Media services revenues increased $14.5 million, or 8.7%, to $181.1
million. Revenues from publishing operations accounted for $9.1 million of the
improvement, due primarily to increased advertising revenues. Advertising
revenues grew 7.1%, resulting from a 1.9% growth in page volume and an overall
improvement of 4% in yield per advertising page. In addition, the Company
benefitted from the introduction of four publications launched during 1997.
Trade show and conference revenues increased $5.4 million or 100% to $10.8
million due to the inclusion of a full year of operations of the A/E/C SYSTEMS
International trade shows, acquired in January 1997.
<PAGE> 7
Revenues from the printing segment increased $1.2 million, or 3.1%, to
$39.0 million. The increase in this segment was due principally to the addition
of several new third-party customers, which accounted for a 19% increase in
outside revenue. The media services segment continued to be the printing
segment's principal customer, accounting for $28.6 million of its revenue in
1997 compared to $29.0 million in 1996.
Direct mail revenues increased $0.2 million, or 1.5%, due to strong
performance from the related printing operation, which experienced a 25%, or
$1.8 million, increase in revenue from outside customers, and growth in its
advertising agency business. However, the increases were offset by a decline in
revenues of the direct marketing medical group. This group's revenues declined
for the second consecutive year as pharmaceutical company customers continued to
shift their focus from direct marketing of pharmaceuticals to consumer oriented
mass media advertising.
Operating Expenses. Operating expenses, after elimination of intersegment
charges, increased $9.5 million, or 5.6%, from $170.1 million to $179.6 million.
As a percentage of revenues, operation costs decreased from 90.2% in 1996 to
87.7% in 1997. The improvement was due primarily to productivity improvements,
cost cutting measures and the acquisition of A/E/C SYSTEMS International in
January 1997.
Editorial, Production and Circulation. Total editorial, production and
circulation expense, after elimination of intersegment charges, grew to $94.6
million in 1997 compared with $91.6 million in 1996, representing an increase of
$3.0 million, or 3.2%. As a percent of revenues, editorial, production and
circulation expenses decreased from 48.5% in 1996 to 46.1% in 1997. The decrease
was due primarily to the higher margins of the A/E/C SYSTEMS International trade
shows and lower paper expenses.
Media services editorial, production and circulation expense increased $1.5
million, or 1.8%, to $80.4 million, due primarily to additional expenses related
to the inclusion of a full year's operations of A/E/C SYSTEMS International, new
product launches during the year and volume-related growth. These increases were
offset partially by savings resulting from productivity improvements and lower
paper expenses.
Editorial, production and circulation expense for the printing segment
increased $0.6 million, or 2%, to $3.5 million, which was attributable primarily
to the increase in volume of outside sales.
Editorial, production and circulation expense for the direct mail segment
increased $0.4 million, or 4.5%, to $9.3 million. The increase was attributable
primarily to the growth of printing and advertising agency group sales volume,
offset by a reduction in expenses attributable to lower sales volume of the
direct marketing medical group.
Selling, General and Administrative Expense. Selling, general and
administrative costs of media services increased $5.3 million, or 8%. The
increase was due principally to an increase in selling expenses resulting from
the growth in revenue, inclusion of a full year's operations of the A/E/C
SYSTEMS International trade shows, and the addition of staff to support new
product launches.
Selling, general and administrative expenses of the printing segment
increased $0.2 million, or 11%, primarily from selling expenses associated with
the increase in sales volume.
Direct mail selling, general and administrative expenses increased $0.4
million as a result of increased selling costs associated with higher sales
volume and an expanded number of customer presentations and related promotion
costs.
Depreciation and Amortization. Depreciation and amortization increased
$0.6 million to $6.5 million. The higher expense was the result primarily of
capital equipment additions and increased amortization of intangible assets
associated with the A/E/C SYSTEMS International trade shows acquired in January
1997.
Operating Income.
Overall, the Company's operating income increased $6.8 million, or 36.7%,
to $25.3 million compared with $18.5 million. Operating income as a percentage
of revenue increased to 12.3% from 9.8%, reflecting the benefits achieved from
increased revenue; favorable shifts in product mix, including the addition of
the A/E/C SYSTEMS International trade shows; and improved productivity.
Media services operating income increased $7.2 million, or 40.6%, to $24.9
million. In 1995, Penton implemented a number of programs to improve
productivity, reduce costs and streamline operations. These efforts continued in
1997, resulting in operating savings. Combined with the favorable impact of
revenue growth, productivity improvement and reduced paper costs, operating
income improved from 10.6% of total media services revenue to 13.7%.
Operating income from the printing segment improved 20.3% to $1.5 million.
The increase was due primarily to higher sales volume coupled with the benefits
of reduced paper costs.
Direct mail operating losses increased $0.6 million to $1.1 million from
$0.5 million, due principally to the decrease in revenue of the direct marketing
medical group and development costs associated with a physicians retraining
program.
Other Income (Expense)
In 1997, other income (expense) included a $1.0 million gain on the sale of
Managing Office Technology magazine, offset by $0.8 million of interest expense
incurred as a result of borrowings used to finance acquisitions.
Effective Tax Rates
The effective tax rates were 41.7% and 40.7% in 1997 and 1996,
respectively. An analysis of Penton's effective tax rate appears in the
Company's consolidated financial statements.
LIQUIDITY AND CAPITAL RESOURCES
Historically, cash flow generated by the Company's operations has been used
to invest in capital assets, finance acquisitions and reduce debt. Prior to the
spinoff's excess cash was used to pay dividends to Pittway Corporation, its
former parent company.
Cash flow provided by operations in 1998 was $25.7 million, up $2.5 million
from $23.2 million in 1997. The increase in 1998 was due primarily to an
increase in unearned income (primarily advance deposits related to
fourth-quarter trade shows), accounts payable and accrued expenses. Partially
offsetting this increase were lower net income, increases in accounts
receivable, prepayments and deposits.
Cash from operating activities was used for capital expenditures; to make
cash distributions to Pittway, including final settlement of intercompany
balances existing at the spin-off date; and to pay dividends to the Company's
stockholders. Capital expenditures for 1996 were $4.8 million, 1997 were $5.5
million and 1998 were $5.8 million. We anticipate that our total capital
expenditures for 1999 will be about $6.5 million, which will be used primarily
to upgrade Penton's information technology systems. We plan to fund these
expenditures from cash flow from operations, and, if necessary, borrowings under
our credit facilities.
On August 7, 1998, the Company entered into a five-year, $75.0 million
unsecured revolving credit agreement. The Company's short-term notes payable
were refinanced with this facility, which was also utilized to finance the cash
portion of the acquisition price of Donohue Meehan Publishing Company. On
November 24, 1998, the Company entered into a credit agreement with several
banks under which it may borrow up to $325.0 million.
<PAGE> 8
The agreement provides for a revolving loan facility of up to $25.0
million, a long-term loan of $175.0 million (Term Loan A) and a long-term loan
of $125.0 million (Term Loan B). The proceeds of this credit agreement were used
to repay Penton's debt outstanding under the $75.0 million revolving credit
facility obtained at the spin-off date and to purchase Mecklermedia Corporation.
At December 31, 1998, $306.0 million was outstanding under the credit agreement.
The Company and the banks intend to amend this agreement to enable the Company
to borrow an additional $15.0 million as part of the Term Loan B facility to be
effective in April 1999.
The Term Loans under this credit facility amortize quarterly. The Company
must repay Term Loan A in aggregate annual amounts of $10 million in each of
1999 and 2000, $20 million 2001, $25 million in 2002, $30 million in 2003, and
$40 million in 2004, with the balance payable in 2005. The Company must repay
Term Loan B in aggregate annual amounts of $1.25 million in each of 1999 through
2005, with the balance payable in 2006.
The interest rate for borrowings under the Revolving Credit Facility and
Term Loan A is, at the option of the Company, LIBOR plus 2.75% or the Base Rate
plus 1.75%. After late May 1999, the interest rate for borrowings under the
Revolving Credit Facility and Term Loan A will become variable, ranging from
LIBOR plus 2.25% to 3.00% or the Base Rate plus 1.25% to 2.00%, depending on the
Company's debt to EBITDA ratio. The interest rate for Term Loan B is, at the
option of the Company, LIBOR plus 3.50% or the Base Rate plus 2.50%.
The Company must pay quarterly fees for letters of credit issued under the
Credit Agreement. Currently, the Company must pay (i) a 0.25% per annum fee to
the issuing bank and (ii) a 2.75% per annum fee shared by all lenders, both of
which are based on the amount available for drawing under outstanding letters of
credit. After late May 1999, the latter fee will become variable, and will range
from 2.25% to 3.00% depending on the Company's debt to EBITDA ratio.
All existing (and future) domestic subsidiaries of the Company (the
"Guarantors") have guaranteed (or will guaranty) indebtedness incurred under the
Credit Agreement.
The credit facility contains customary and appropriate representations and
warranties, including those relating to due organization and authorization,
enforceability, financial condition, no material adverse changes, title to
properties, liens, litigation, payment of taxes, no material adverse agreements,
employee benefit liabilities, environmental liabilities, perfection and priority
of liens securing debt incurred under the Credit Agreement, and full disclosure.
The credit facility also contains customary affirmative and negative
covenants, including but not limited to furnishing information and limitations
on other indebtedness, liens, investments, guarantees, restricted payments,
mergers and acquisitions, sales of assets, capital expenditures, leases,
affiliate transactions, and conduct of business. The facility also contains
customary financial covenants, including those relating to: minimum interest
coverage, minimum fixed charge coverage, minimum EBITDA and maximum leverage.
Events of default under the credit facility include events of default
relating to: (a) nonpayment of interest, principal or fees payable under the
credit facility; (b) nonperformance of covenants; (c) cross-default to other
material agreements and debt of the company and its subsidiaries; (d) bankruptcy
or insolvency; (e) judgments in excess of specified amounts; (f) impairment of
security interests in collateral; (g) invalidity of guarantees; (h) materially
inaccurate or false representations or warranties and (i) change of control.
Based upon current and anticipated levels of operations, we believe that
our cash on hand and cash flow from operations, combined with borrowings
available under our credit facilities, will be sufficient to enable us to meet
our current and anticipated cash operating requirements, including scheduled
interest and principal payments, capital expenditures and working capital needs.
However, actual capital requirements may change, particularly as a result of any
acquisitions which we may make. Our ability to meet current and anticipated
operating requirements will be dependent upon our future performance which, in
turn, will be subject to general economic conditions and to financial, business
and other factors, including factors beyond our control. Depending on the
nature, size and timing of future acquisitions, we may be required to raise
additional capital through additional financing arrangements or the issuance of
private or public debt or equity securities of the Company. We cannot assure you
that such additional financing will be available on acceptable terms.
Substantially all of our debt bears interest at floating rates. Therefore, our
liquidity and financial condition is and will continue to be affected by changes
in prevailing interest rates.
FOREIGN CURRENCY
The functional currency of the Company's foreign operations acquired in
December 1997 is the local currency. Accordingly, assets and liabilities of
foreign operations are translated to United States dollars at the rates of
exchange in effect on the balance sheet date; income and expense are translated
at the average rates of exchange prevailing during the year. There were no
significant foreign currency transaction gains or losses during 1998 or 1997.
SEASONALITY
Historically, the Company has not experienced significant seasonality in
its business. The introduction of trade shows and conferences into the Company's
product mix through the acquisitions of Independent Exhibitions, Ltd. and
Industrial Shows of America in late 1997, and the acquisition of Mecklermedia
Corporation in November 1998, has changed the seasonal pattern of revenue and
profit, as all three companies have pronounced seasonal patterns in their
businesses. The majority of the trade shows owned by Industrial Shows of America
and Mecklermedia Corporation are held in the second and fourth quarters and,
accordingly, the majority of their revenue is recognized in these quarters.
Further, the majority of the Independent Exhibitions, Ltd. shows historically
have been held in the fourth quarter. Accordingly, the Company anticipates that
these acquisitions will have a positive impact on revenue and profit for these
quarters.
The Company may also experience seasonality fluctuations as trade shows and
conferences held in one period in the current year may be held in a different
period in future years.
INFLATION
The impact of inflation on the Company's results of operations has not been
significant in recent years.
ACCOUNTING CHANGES
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). The Company is required to
adopt this statement in the first quarter of 2000. Management does not believe
this statement will have a material impact on the Company's business, results of
operations or financial condition.
EURO CONVERSION
On January 1, 1999, eleven of the 15 participating countries that are
members of the European Union established a new uniform currency known as the
"Euro." The currency existing prior to such date in the participating countries
will be phased out during the transition period commencing January 1, 1999 and
ending January 1, 2002. During such transition period both the Euro and the
existing currency will be available in the participating countries. Although the
Company generates revenues in some of the participating countries, management
does not anticipate that the introduction and use of the Euro will materially
affect Penton's business, results of operations or financial condition.
<PAGE> 9
YEAR 2000
General
The year 2000 issue is the result of computer programs that were written
using two digits rather than four to define the applicable year. If our computer
programs with date-sensitive functions are not year 2000 compliant, they may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices or engage in similar normal business activities.
Our year 2000 project is proceeding as scheduled. Some of our systems and
related software are already year 2000 compliant, and our project is designed to
bring the remaining software and systems into year 2000 compliance in time to
minimize any significant detrimental effects on operations. Our project covers
information systems infrastructure, financial and administrative systems,
production and circulation operating systems and significant vendors and
customers.
Project
The first component of our project is to identify the internal business
systems and non-information-technology systems of Penton and our operating
subsidiaries that are susceptible to system failures or processing errors as a
result of the year 2000 issue. This effort is substantially complete with all
business systems identified and priorities established for repair or
replacement. Those systems considered most critical to continuing operations are
being given the highest priority.
The second component of our project involves the actual remediation and
replacement of the various business systems. Our company and our operating
subsidiaries are using both internal and external resources to complete this
process. Systems ranked highest in priority have either been remediated or
replaced or scheduled for remediation or replacement including the replacement
of the primary general ledger and accounts payable systems with programs from a
national software vendor. Our objective is to complete substantially all
remediation and replacement of internal systems by July 1999, and to complete
final testing and certification for readiness by the end of the third quarter of
1999.
As part of the second component of our project, significant service
providers, vendors, suppliers and customers that are believed to be critical to
our business operations after January 1, 2000, have been identified and steps
are being taken in an attempt to reasonably ascertain their state of year 2000
readiness through questionnaires, inquiries and other available means. This
process is progressing according to plan.
<PAGE> 10
Costs
It is currently estimated that the aggregate incremental cost of our
efforts will range from $0.3 million to $0.8 million, of which about $0.2
million has been spent. These costs are being expensed as they are incurred and
are being funded through operating cash flow. These amounts do not include any
costs associated with the implementation of contingency plans, which are in the
process of being developed to supplement our existing disaster recovery plan.
The costs associated with the replacement of computerized systems, hardware or
equipment is currently estimated to be about $0.5 million, substantially all of
which would be capitalized, and is not included in the above estimates.
Risks
The failure to correct a material year 2000 problem could result in an
interruption in, or a failure of, our normal business activities or operations.
These failures could materially and adversely affect our results of operations,
liquidity and financial condition. Due to the general uncertainty inherent in
the year 2000 problem, resulting in part from the uncertainty of the year 2000
readiness of third-party suppliers and customers, we are unable to determine at
this time whether the consequences of year 2000 failures will have a material
impact on our results of operations, liquidity or financial condition. Our Year
2000 project is expected to significantly reduce our level of uncertainty about
the year 2000 problem and, in particular, about the year 2000 compliance and
readiness of its material external agents. We believe that, with the
implementation of new business systems and completion of our project as
scheduled, the possibility of significant interruptions of normal operations
should be reduced.
Our project readiness program is an ongoing process and the estimates of
costs and completion dates for various components of our project readiness
program described above are subject to change. Based on the company's assessment
and evaluation of its year 2000 readiness, it believes that the most reasonably
likely worst case scenario includes a temporary shut-down of Penton's press. We
estimate that a one-month stoppage of our publishing operations could lead to a
loss of operating income of about $9.4 million.
<PAGE> 11
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company's major market risk exposure is due primarily to possible
fluctuations in interest rates as they relate to its variable rate debt. The
Company currently has a credit agreement with three components as follows: (1)
$25 million revolving credit facility which has an interest rate, at the option
of the Company, of LIBOR plus 2.75% or the Base Rate plus 1.75%; (2) $175.0
million Term Loan A with the same interest rate as the revolving credit
facility; and (3) $125.0 million Term Loan B which has an interest rate, at the
option of the Company, of LIBOR plus 3.50% or the Base Rate plus 2.50%.
The Company does not enter into derivative financial investments for
trading or speculation purposes. Overall, the Company believes that its market
risk exposure is not material to the Company's financial position, liquidity or
results of operations.
<PAGE> 12
PENTON MEDIA, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULE
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA.
Financial Statements:
Report of Independent Accountants...............................
Consolidated Statements of Income for the years
ended December 31, 1998, 1997 and 1996.......................
Consolidated Balance Sheets at December 31, 1998 and 1997.......
Consolidated Statements of Cash Flows for the years
ended December 31, 1998, 1997 and 1996.......................
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1998, 1997 and 1996.................
Notes to Consolidated Financial Statements......................
Financial Statement Schedules:
Consolidated Financial Statement Schedule II
Valuation and Qualifying Accounts............................
All other schedules have been omitted because the required information is not
present, or is not present in amounts sufficient to require submission of the
schedule, or because the information required is included in the consolidated
financial statements or notes thereto.
<PAGE> 13
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Penton Media, Inc.
In our opinion, the consolidated financial statements and financial statement
schedule as listed in the accompanying index present fairly, in all material
respects, the financial position of Penton Media, Inc. (formerly Penton
Publishing, Inc. and, prior to August 7, 1998, a wholly owned subsidiary of
Pittway Corporation) and its subsidiaries at December 31, 1998, and 1997, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1998, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
Penton Media, Inc.'s management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers, LLP
Cleveland, Ohio
February 10, 1999
<PAGE> 14
PENTON MEDIA INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the years ended December 31,
(Dollars in thousands, except per share amounts) 1998 1997 1996
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $ 233,118 $ 204,931 $ 188,557
-----------------------------------
Operating Expenses:
Editorial, production and circulation 101,793 94,560 91,581
Selling, general and administrative 93,886 78,523 72,566
Depreciation and amortization 10,720 6,551 5,911
-----------------------------------
206,399 179,634 170,058
-----------------------------------
Operating income 26,719 25,297 18,499
-----------------------------------
Other income (expense):
Interest expense (5,558) (841) (34)
Gain on sale of publications -- 1,040 --
Writedown on impairment of assets (1,000) -- --
Miscellaneous, net (28) 10 17
-----------------------------------
(6,586) 209 (17)
-----------------------------------
Income before income taxes 20,133 25,506 18,482
-----------------------------------
Income Taxes:
Current 14,336 9,754 6,733
Deferred (5,093) 878 793
-----------------------------------
9,243 10,632 7,526
-----------------------------------
Net income $ 10,890 $ 14,874 $ 10,956
-----------------------------------
Per share data:
Earnings per common share - basic and diluted:
Net income $ .50 $ .70 $ .52
===================================
Average number of shares outstanding 21,882 21,240 21,240
===================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 15
PENTON MEDIA, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
(Dollars in thousands) 1998 1997
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 3,953 $ 2,419
Accounts and notes receivable, less allowance for doubtful accounts
of $4,899 and $2,406 in 1998 and 1997, respectively 37,956 29,363
Inventories 2,361 2,429
Deferred tax assets 5,797 2,851
Prepayments, deposits and other 8,086 3,886
----------------------
58,153 40,948
----------------------
Property, plant and equipment, at cost:
Buildings 6,170 6,168
Machinery and equipment 69,730 60,493
----------------------
75,900 66,661
Less: accumulated depreciation 47,395 39,845
----------------------
28,505 26,816
----------------------
Land 426 426
----------------------
28,931 27,242
----------------------
Other assets:
Goodwill, less accumulated amortization of
$10,129 and $6,192 in 1998 and 1997, respectively 340,706 65,460
Other intangibles, less accumulated amortization of
$7,828 and $5,443 in 1998 and 1997, respectively 46,906 6,362
Deferred tax assets -- 4,067
Investment in joint venture 4,472 --
Due from parent company -- 12,212
Other 133 135
----------------------
392,217 88,236
----------------------
$ 479,301 $ 156,426
======================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Senior debt facility $ 11,250 $ --
Revolving credit facility 6,000 --
Notes payable 1,000 34,170
Accounts payable 10,823 9,427
Income taxes payable 8,059 --
Accrued compensation and benefits 9,644 9,081
Other accrued expenses 17,522 8,383
Unearned income, principally trade show and conference deposits 14,564 5,203
----------------------
78,862 66,264
----------------------
Long-term liabilities and deferred credits:
Senior debt facility 288,750 --
Net deferred pension credits 18,007 19,592
Deferred taxes 5,313 --
Other 880 957
----------------------
312,950 20,549
----------------------
Stockholders' equity:
Preferred stock, 2,000,000 shares authorized; none issued
Common stock, $.01 par value, 60,000,000 shares authorized; 22,781,713 and 21,240,000 -- --
shares issued and outstanding at December 31, 1998, and 1997, respectively 228 212
Capital in excess of par value 55,050 29,630
Retained earnings 32,262 39,771
Other comprehensive income (51) --
----------------------
87,489 69,613
----------------------
$ 479,301 $ 156,426
======================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 16
PENTON MEDIA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended December 31,
(Dollars in thousands) 1998 1997 1996
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 10,890 $ 14,874 $ 10,956
Adjustments to reconcile income from operations to
net cash provided by operating activities:
Depreciation and amortization 10,720 6,551 5,911
Deferred income taxes (5,093) 878 793
Retirement and deferred compensation plans (1,584) (2,000) (2,032)
Provision for losses on accounts receivable 282 662 948
Writedown on impairment of assets 1,000 -- --
Gain on sale of publications -- (1,040) --
Changes in assets and liabilities, excluding
effects from acquisitions and dispositions:
Accounts and notes receivable (1,960) 1,261 (2,313)
Inventories 284 931 37
Prepayments and deposits (1,481) 630 94
Accounts payable and accrued expenses 10,170 1,584 5,952
Unearned income 2,421 (552) 687
Other changes, net 100 (593) (526)
-----------------------------------
Net cash provided by continuing operations 25,749 23,186 20,507
-----------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, excluding businesses acquired (5,775) (5,450) (4,822)
Net assets of businesses acquired, net of cash (283,382) (48,733) (900)
Proceeds from sale of Internet.com 18,000 -- --
Proceeds from sale of publications -- 991 1,000
-----------------------------------
Net cash used by investing activities (271,157) (53,192) (4,722)
-----------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from senior debt facility 300,000 -- --
Proceeds from revolving credit facility 6,000 -- --
Payment of financing costs (14,754) -- --
Increase in notes payable -- 48,342 --
Prepayments of notes payable (38,066) (14,000) --
Dividends to parent company (4,820) (4,412) (22,567)
Dividends to shareholders (1,367) -- --
Advances from parent company -- 924 6,679
-----------------------------------
Net cash provided (used) by financing activities 246,993 30,854 (15,888)
-----------------------------------
Effect of exchange rate (51) -- --
-----------------------------------
Net (decrease) increase in cash 1,534 848 (103)
Cash at beginning of period 2,419 1,571 1,674
-----------------------------------
Cash at end of period $ 3,953 $ 2,419 $ 1,571
===================================
Supplemental cash flow disclosure:
Interest paid $ 5,545 $ 841 $ 35
===================================
Income taxes paid $ 10,026 $ 10,759 $ 8,823
===================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 17
PENTON MEDIA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CAPITAL IN OTHER
(Dollars in thousands, PREFERRED COMMON STOCK EXCESS OF COMPREHENSIVE RETAINED
except per share data) SHARES SHARES PAR VALUE PAR VALUE INCOME EARNINGS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1995 -- 21,240 $ 212 $29,630 $ -- $40,920
---------------------------------------------------------------------------
Net income 10,956
Dividends (22,567)
---------------------------------------------------------------------------
Balance - December 31, 1996 -- 21,240 212 29,630 -- 29,309
---------------------------------------------------------------------------
Net income 14,874
Dividends (4,412)
---------------------------------------------------------------------------
Balance - December 31, 1997 -- 21,240 212 29,630 -- 39,771
---------------------------------------------------------------------------
Net income 10,890
Dividends (1,367)
Issuance of common stock
with Donohue/Meehan
Publishing combination 1,542 16 25,420
Dividend to Pittway (17,032)
Cumulative foreign
currency translation (51)
---------------------------------------------------------------------------
Balance - December 31, 1998 -- 22,782 $ 228 $55,050 $ (51) $32,262
===========================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE> 18
PENTON MEDIA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Penton Media, Inc., formerly known as Penton Publishing, Inc. ("Penton" or the
"Company") is a business media company that publishes magazines and electronic
media, produces trade shows and conferences, and provides marketing and business
development products and services, including direct mail lists, research and
custom publishing. Penton serves the design/engineering; electronics;
Internet/IT; food/hospitality; government/compliance; leisure; management;
manufacturing; mechanical systems/construction; and supply chain/aviation
markets.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Penton and its
subsidiaries. All significant intercompany accounts and transactions have been
eliminated.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market. Costs included in
inventories are raw materials, direct labor and manufacturing overhead. Cost of
substantially all of the paper and ink stock is determined by using the last-in,
first-out (LIFO) method, while the remaining inventories are valued primarily
using the average cost method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. The Company records
depreciation, using the straight-line method, in amounts sufficient to write off
the cost of depreciable assets over the following estimated useful lives:
Computer equipment 3-5 years
Furniture, fixtures and equipment 3-10 years
Buildings 18-40 years
Leasehold improvements Estimated useful lives
or lease term,
whichever is shorter
Depreciation expense amounted to approximately $6.2 million, $5.3 million
and $5.0 million for the years ended December 31, 1998, 1997 and 1996,
respectively.
Maintenance and repair expenditures are charged to appropriate expense
accounts in the period incurred; replacements, renewals and betterments are
capitalized. Upon sale or other disposition of property, the cost and
accumulated depreciation of such properties are eliminated from the accounts and
the gains or losses thereon are reflected in results of operations.
INTANGIBLE ASSETS
Goodwill, trademarks and trade names acquired in purchase transactions are
amortized using the straight-line method over periods ranging from 20 to 40
years.
Other intangibles acquired in purchase transactions or developed
internally, consisting of non-compete agreements, customer mailing lists,
exhibitor lists, and patents and copyrights, are being amortized using the
straight-line method over their estimated useful lives ranging from 3 to 15
years.
Amortization expense amounted to approximately $4.6 million, $1.3 million
and $0.9 million for the years ended December 31, 1998, 1997 and 1996,
respectively.
When conditions warrant, the Company reviews the carrying value of its
intangible assets and property and equipment to determine whether an impairment
may exist. The Company considers relevant cash flow, estimated future operating
trends and other available information in assessing whether the carrying value
of these assets can be recovered. In December 1998, the Company wrote down the
carrying value of various intangible assets by $1.0 million, determined using
the expected future cash flows generated from, and market value of, the various
ventures.
DEFERRED FINANCING COSTS
Costs incurred in obtaining long-term financing are included in other intangible
assets in the accompanying balance sheet and are amortized over the terms of the
related debt agreements; such amortization is reflected as amortization expense
in the consolidated statements of income.
REVENUE RECOGNITION
Advertising revenues from the Company's trade magazines are recognized in the
month the publications are mailed. Revenues from trade shows and conferences are
recognized in the month the events are held. Licensing revenues are recognized
on a straight-line basis over the term of the license agreements.
ADVERTISING AND PROMOTION EXPENSES
Advertising and promotion costs are expensed primarily as incurred. These costs
amounted to $12.4 million, $8.4 million and $9.3 million in 1998, 1997 and 1996,
respectively.
<PAGE> 19
PENTON MEDIA, INC.
INCOME TAXES
The Company accounts for income taxes in accordance with the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 requires an asset and liability approach, which
requires the recognition of deferred tax assets and deferred tax liabilities for
the expected future tax consequences of temporary differences between the
carrying amounts and the tax bases of assets and liabilities. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized.
For periods prior to and including the date of the spinoff (see Note 2),
the results of the Company were included in Pittway Corporation's consolidated
U.S. federal income tax returns. The provision for income taxes included in the
consolidated statements of income represented an allocated share of Pittway's
tax expense. The allocated share approximated the tax expense that would have
been incurred on a separate return basis. The liability for income taxes payable
at December 31, 1997, was recorded by Pittway.
Pursuant to the Combination Agreement (see Note 2), the Company is required
to indemnify Pittway for any additional federal, state, local and foreign income
tax liabilities with respect to all periods prior to and including the date of
the spinoff. All consolidated federal income tax returns of Pittway have been
audited by the Internal Revenue Service through 1995.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
TRANSLATION OF FOREIGN CURRENCIES
The functional currency of the Company's foreign operations is the local
currency. Accordingly, assets and liabilities of foreign operations are
translated to U.S. dollars at the rates of exchange in effect on the balance
sheet at December 31, 1998; income and expense are translated at the average
rates of exchange prevailing during the year. There were no transaction gains or
losses in 1998 and 1997.
NET INCOME PER SHARE
The weighted average number of common shares outstanding is adjusted for common
stock equivalents when they are dilutive.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1997 and 1996 financial
statements to conform to the 1998 presentation.
CHANGE IN ACCOUNTING ESTIMATE
Effective October 1, 1998, the Company changed its estimated useful life on
goodwill associated with trade show acquisitions from 40 to 20 years. The change
decreased 1998 net income by $0.3 million, or $0.01 per share. The estimated
effect of the change on future years will be to decrease income by $1.2 million.
The change was made to better reflect the estimated useful life of goodwill and
to be consistent with prevalent industry practice.
NEW ACCOUNTING STANDARDS
The Company does not believe any recently issued accounting standards will have
a material impact on its financial condition or results of operations.
NOTE 2 - SPINOFF FROM PITTWAY AND
SUBSEQUENT ACQUISITION
Prior to August 7, 1998, Penton was a wholly owned subsidiary of Pittway
Corporation. On August 7, 1998, Pittway distributed 100% of the Company's common
stock on a share-for-share basis to holders of Pittway stock.
Immediately after the spinoff, the Company entered into an agreement (the
"Combination Agreement") and completed the acquisition of Donohue/Meehan
Publishing Company ("DM Publishing"). DM Publishing was acquired for $7.0
million in cash, 6.767% (1,541,638 shares) of the Company's stock to be
outstanding immediately after the acquisition and up to an additional $4.0
million in cash based on DM Publishing's pre-tax income for the years 1998 and
1999, of which $2.0 million was earned in 1998. The Company also has agreed to
make a contingent cash payment to the extent, if any, that the shares issued in
the acquisition have an average aggregate market value of less than $29.0
million during either of two 30-day periods in the year 2000. The contingent
payment is subject to certain limitations as to any of such shares sold prior to
the payment. A portion of the contingent payment may be made with common stock
rather than cash under certain conditions.
The transaction was accounted for as a purchase and, accordingly, the
operating results of DM Publishing have been included in the Company's
consolidated financial statements since the date of acquisition. The excess of
the aggregate purchase price over the fair market value of net assets acquired
of approximately $32.4 million is being amortized over 40 years.
<PAGE> 20
PENTON MEDIA, INC.
NOTE 3 - ACQUISITIONS AND DISPOSITIONS
In addition to the acquisition of DM Publishing, the Company, pursuant to an
Agreement and Plan of Merger, completed its cash tender offer for all of the
outstanding shares of Mecklermedia Corporation ("Mecklermedia") on November 24,
1998. In connection with the acquisition, each Mecklermedia shareholder received
$29.00 in cash for each share of common stock owned. The total value of the
transaction was $273.8 million, and it was funded with the net proceeds
available from the credit agreement dated November 24, 1998 (see Note 6). The
transaction was accounted for as a purchase and, accordingly, the operating
results of Mecklermedia have been included in the Company's consolidated
financial statements since the date of acquisition. The excess of the aggregate
purchase price over the fair market value of net assets acquired of
approximately $242.5 million is being amortized over 20 years.
During 1997, the Company acquired one foreign and two domestic trade show
companies for $45.6 million in cash and $2.5 million of notes payable to the
sellers. The acquisitions also include future contingent payments up to $13.5
million tied to future earnings of the acquired companies through the year 2000,
of which $2.4 million and $0.7 million were earned in 1998 and 1997,
respectively.
In 1997, the Company also sold one publication for $1.0 million and the
assumption of certain liabilities.
All the aforementioned acquisitions were accounted for as purchase
transactions. These operations have been included in the consolidated financial
statements from their respective dates of acquisition or to the dates of
disposition.
The following unaudited supplemental pro forma information is presented to
reflect the effects of the issuance of common stock pursuant to the spinoff from
Pittway and the DM Publishing acquisition, the Mecklermedia acquisition, and the
1997 acquisitions and dispositions, as if all such transactions had occurred on
January 1, 1997.
The pro forma financial information is presented for informational purposes
only, and may not be indicative of what actual results of operations would have
been had the acquisitions occurred as indicated; nor does it purport to
represent the results of the operations for future periods. (Dollars in
thousands.)
<TABLE>
<CAPTION>
For the years ended December 31,
(unaudited)
- --------------------------------------------------------------
1998 1997
------------------------
<S> <C> <C>
Pro forma revenues $ 303,834 $ 276,671
Pro forma operating income 32,540 15,591
Pro forma net income applicable
to common shareholders 108 (3,288)
Pro forma net income applicable
to common shareholders:
Basic and diluted $ 0.00 $ (0.15)
========================
</TABLE>
NOTE 4 - INVENTORIES
The LIFO reserve balances of $0.4 million and $0.5 million at December 31, 1998,
and 1997, respectively, represent the excess of current replacement cost over
the LIFO value of inventory, which consists principally of raw materials.
NOTE 5 - EQUITY INVESTMENTS IN JOINT VENTURES
Penton, in November 1998, entered into a joint venture agreement with Alan M.
Meckler, Mecklermedia's founder, with respect to the limited liability company
Internet.com. Internet.com is a network of Web sites that provides news,
analysis and information resources for Internet professionals. Penton sold an
80.1% equity interest in Internet.com to Mr. Meckler for $18.0 million,
retaining 19.9% of the equity and warrants to acquire up to a 29.9% interest. At
December 31, 1998, the Company's investment in Internet.com was $4.5 million.
Internet.com and Penton also entered into various agreements relating to the
exchange of services between the two companies.
NOTE 6 - DEBT
CREDIT AGREEMENT
On November 24, 1998, the Company entered into a credit agreement with
several banks under which it may borrow up to $325.0 million. The agreement
provides for a revolving loan facility of up to $25.0 million, a long-term loan
of $175.0 million (Term A Loan) and a long-term loan of $125.0 million (Term B
Loan). The proceeds of the new facility were used to repay the Company's debt
outstanding under a $75.0 million revolving credit facility obtained at the
spinoff date and to purchase Mecklermedia.
The credit facility is collateralized by receivables, inventories,
equipment and certain real and personal property. Under the terms of the
agreement, the Company is required to maintain certain financial ratios and
other financial conditions. The agreement also prohibits the Company from
incurring certain additional indebtedness; limits certain investments, advances
or loans; and restricts substantial asset sales, capital expenditures and cash
dividends. At December 31, 1998, the Company was in compliance with all loan
covenants.
The revolving loan facility includes a revolving loan and a swing loan. The
revolving loan requires payment of interest (only) at a Base Rate (determined as
the higher of the Prime Rate or the Federal Funds Effective Rate plus 1/2 of 1%)
or an Adjusted Eurodollar Rate, at the Company's option, plus a rate margin
ranging from 1.25% to 3.0% based on the Company's consolidated leverage ratio,
as defined. At December 31, 1998, the rate on the revolving loan was 9.5%.
<PAGE> 21
PENTON MEDIA, INC.
The swing loan, which permits borrowings up to $5.0 million, requires
payment of interest (only) at the Base Rate plus a Base Rate margin ranging from
1.25% to 2.00% based on the Company's consolidated leverage ratio, as defined,
less the applicable commitment fee percentage per annum. At December 31, 1998,
no amounts were drawn on the swing loan facility.
The Company has agreed to pay a commitment fee of 0.50% on the unused
portion of the revolving loan facility commitment. At December 31, 1998, $19
million was available under the facility.
The Term A Loan bears interest at the Base Rate or at an Adjusted
Eurodollar Rate, at the Company's option, plus a rate margin ranging from 1.25%
to 3.0% based on the Company's consolidated leverage ratio, as defined. Interest
is payable monthly; at December 31, 1998, the rate in effect was 7.79%. The
loan, which requires quarterly principal payments of $2.5 million starting in
March 1999, will mature on June 30, 2005. At December 31, 1998, $175.0 million
was outstanding under the Term A Loan.
The Term B Loan bears interest at the Base Rate plus 2.5% or at the
Adjusted Eurodollar Rate plus 3.5%, at the Company's option. Interest is payable
monthly; at December 31, 1998, the rate in effect was 8.54%. The loan, which
requires quarterly principal payments of $0.3 million starting on March 31,
1999, and a balloon payment at maturity, will mature on May 31, 2005. At
December 31, 1998, $125.0 million was outstanding under the Term B Loan.
As of December 31, 1998, the scheduled principal payments of the Term A
Loan and Term B Loan for the next five years and thereafter are as follows (in
thousands):
<TABLE>
<CAPTION>
Year Amount
-------------------------
<S> <C>
1999 $ 11,250
2000 11,250
2001 21,250
2002 26,250
2003 31,250
Thereafter 198,750
-------------------------
$ 300,000
=========
</TABLE>
The credit agreement requires the Company to hedge not less than 50% of the
Term A Loan outstanding with a fixed interest rate agreement for a term of not
less than two years.
NOTE PAYABLE
The short-term note payable at December 31, 1998, of $1.0 million represented
foreign indebtedness, was denominated in British pounds and bore interest at the
Company's foreign borrowing rate (8.2% at December 31, 1998). The note, plus
accrued interest, was paid off in early January 1999.
The Company's short-term notes payable at December 31, 1997, included $29.2
million of foreign indebtedness denominated in British pounds and bearing
interest at 8.1%, and $5.0 million of domestic indebtedness at 6%. Concurrent
with the spinoff from Pittway, $27.8 million of foreign debt, including accrued
interest and the $5.0 million domestic debt, was refinanced with the $75.0
million revolving credit facility.
There are no compensating balance or commitment fee requirements associated
with these short-term borrowings.
NOTE 7 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of accounts and notes receivable, accounts payable,
accrued expenses and notes payable approximates fair value because of the short
maturity of these instruments.
The carrying amount of the Company's borrowing under its senior debt
facility and revolving credit facility approximates fair value because such
borrowings are at variable rates. The Company may, from time to time, enter into
interest rate hedge agreements to manage interest costs and risks associated
with changing interest rates.
<PAGE> 22
PENTON MEDIA, INC.
NOTE 8 - INCOME TAXES
(In thousands)
<TABLE>
<CAPTION>
Source of income (loss) before tax expense: 1998 1997 1996
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. domestic $ 19,864 $ 25,759 $ 18,482
Foreign 269 (253) --
--------------------------------------
$ 20,133 $ 25,506 $ 18,482
======================================
Provision for income taxes: 1998 1997 1996
- ---------------------------------------------------------------------------------------
Current -
Federal $ 11,214 $ 8,124 $ 5,541
State and local 2,389 1,630 1,192
Foreign 733 -- --
--------------------------------------
14,336 9,754 6,733
--------------------------------------
Deferred -
Federal (4,348) 851 711
State and local (816) 98 82
Foreign 71 (71) --
--------------------------------------
(5,093) 878 793
--------------------------------------
$ 9,243 $ 10,632 $ 7,526
======================================
The difference between the actual income tax
provision and the tax provision computed by
applying the statutory federal income tax rate
of 35% to income before income taxes is as
follows: 1998 1997 1996
- ---------------------------------------------------------------------------------------
Income tax at statutory rate $ 7,047 $ 8,927 $ 6,469
Tax effect of:
State income taxes, net of federal benefit 1,023 1,123 818
Non-deductible expenses, principally goodwill
amortization 1,173 582 513
Other items, net -- -- (274)
--------------------------------------
Actual income tax provision $ 9,243 $10,632 $ 7,526
======================================
Effective income tax rate 45.9% 41.7% 40.7%
======================================
</TABLE>
<TABLE>
<CAPTION>
The components of deferred tax assets and liabilities at
December 31, 1998, and 1997 follow: 1998 1997
- ---------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets -
Deferred pension credits $ 7,087 $ 7,651
Accrued vacation 1,335 1,159
Bad debts 2,541 805
Reserves recorded for financial reporting purposes 1,735 826
Inventory capitalization 164 29
Other 379 252
-----------------------
Total deferred tax assets 13,241 10,722
-----------------------
Deferred tax liabilities -
Depreciation (3,312) (3,640)
Amortization (9,249) (164)
Trade show expenses (196) --
-----------------------
Total deferred tax liabilities (12,757) (3,804)
-----------------------
Net deferred tax asset $ 484 $ 6,918
=======================
</TABLE>
These balances are allocated between "Current assets" and "Other assets" or
"Long-term liabilities" in the accompanying balance sheet.
<PAGE> 23
PENTON MEDIA, INC.
NOTE 9 - RETIREMENT PLAN
The Company has various non-contributory retirement plans covering substantially
all current and former domestic employees. Retirement benefits for employees in
foreign countries are generally provided by national statutory programs.
Benefits for domestic employees are based on years of service and annual
compensation as defined by each plan. All employees received credit for their
years of service in the Pittway plan. Prior to 1995, Pittway allocated net
pension plan income credits to the Company based upon the assets of a previously
separate Company plan, which was merged into the Pittway plan in 1991. At the
time the plans were merged, the amount of the Company's plan assets exceeded its
projected benefit obligation and, by 1995, such excess ("Funding Excess") had
increased and had become substantially disproportionate to the Funding Excess
for the remainder of the Pittway plan. As a result, for the years 1996 and 1997,
Pittway limited the allocation of net pension income credits to the Company to
$1.5 million per year.
As provided in the Combination Agreement, Pittway transferred $45.0 million
of its plan assets ("Allocated Assets"), including approximately $10.5 million
of Funding Excess as of December 31, 1997, to the new Penton plan. The amount of
Allocated Assets was determined by Pittway as the estimated proportion of total
Pittway plan assets that would result in the elimination of the Funding Excess
for the Company in the same future year as such elimination for the remainder of
the Pittway plan based on historical rates of service cost increases and return
on plan assets.
The "Net deferred pension credits" in the consolidated balance sheet at
December 31, 1997, includes deferred investment gains of $29.5 million, which
Pittway allocated to the Company on a basis consistent with the above-mentioned
limitation on previous net pension plan income credits.
The reconciliation of the funded status of the Company's portion of the
plan follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
- ---------------------------------------------------------------
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation, January 1 $ 34,539 $ 32,150
Service cost 1,684 1,767
Interest cost 2,488 2,226
Benefits paid (3,944) (2,273)
Actuarial loss 7,603 669
---------------------
Benefit obligation, December 31 $ 42,370 $ 34,539
=====================
</TABLE>
<TABLE>
<S> <C> <C>
CHANGE IN PLAN ASSETS
Fair value of plan assets, January 1 $ 45,000 $ 39,473
Actual return on plan assets (3,256) 7,800
Benefits paid (3,944) (2,273)
Fair value of plan assets, ---------------------
December 31 $ 37,800 $ 45,000
=====================
FUNDED STATUS OF THE PLAN
Projected benefit obligation
(in excess of) less than fair value
of assets as of December 31 $ (4,570) $ 10,461
Unrecognized actuarial (gain) loss (13,368) (29,500)
Unrecognized prior service cost 1,612 1,969
Unamortized net transition asset (1,681) (2,522)
---------------------
Net deferred pension credits $(18,007) $(19,592)
=====================
AMOUNTS RECOGNIZED IN THE STATEMENT
OF FINANCIAL POSITION
Prepaid benefit cost $ -- $ --
Accrued benefit liability (18,007) (19,592)
Additional minimum liability -- --
Intangible assets -- --
Accumulated other comprehensive
income -- --
---------------------
Net amount recognized at end
of year $(18,007) $(19,592)
=====================
ASSUMPTIONS AS OF DECEMBER 31
Discount rate 7% 7%
Expected return on plan assets 9% 7%
Weighted-average salary increase rate 5% 5%
</TABLE>
<PAGE> 24
<TABLE>
<CAPTION>
COMPONENTS OF NET PERIODIC PENSION COST
1998 1997 1996
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
Net periodic cost
Service cost $ 1,684 $ 1,767 $ 1,672
Interest cost 2,488 2,226 2,173
Expected return on assets (3,065) (2,684) (2,555)
Amortization of:
Transition asset (841) (841) (841)
Prior service cost 357 357 357
Actuarial (gain) loss (2,207) (2,325) (2,306)
----------------------------------
Net pension income $ (1,584) $ (1,500) $ (1,500)
==================================
ASSUMPTIONS
Discount rate 7% 7% 7%
Expected return on plan assets 7% 7% 7%
Weighted-average salary
increase rate 5% 5% 5%
</TABLE>
<PAGE> 25
PENTON MEDIA, INC.
NOTE 10 - BENEFIT PLANS
STOCK OPTION AND OTHER EQUITY-BASED PLANS
Effective August 1998, the Company established a stock option plan under which
the Company may issue qualified incentive stock options to key employees,
including officers, up to an aggregate of 2,500,000 shares of common stock.
Awards may be issued in the form of options to purchase shares of common stock,
stock appreciation rights ("SARs"), restricted shares, deferred shares,
performance shares and performance units. In 1998, 700,452 shares were granted
under the Equity and Incentive Plan, of which 686,055 were stock options and
14,397 were deferred shares. Options granted under the plan generally become
exercisable in the year after the date of grant as to one-third of the optioned
shares, with the remaining options being exercisable over the following two-year
period. Included in the stock options issued during 1998 are 47,655
non-qualified shares, which represent the conversion of the Chief Executive
Officer's non-qualified Pittway options for an equal value of Penton options.
These options vest 50% in 1999 and 50% in 2000. As of December 31, 1998, no
shares were exercisable. The option price of all options granted was $16.23.
As noted above, 14,397 deferred shares were issued in 1998. These shares
become vested between one and three years. The Board of Directors of the Company
may 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. At December 31, 1998, no such authorization had been made.
In addition to the stock option plan described above, the Company granted
options for a total of 69,000 shares to its directors who are not employees of
the Company. Such options were granted at the fair market value on the date of
grant. Options with respect to 13,000 shares were exercisable immediately after
grant, and options with respect to the remaining 56,000 shares become
exercisable one year after the date of grant as to one-fourth of the 56,000
shares, with the remaining options being exercisable over the following
three-year period. The option price at the date of grant was $16.23.
The following table reflects the stock option activity described above (in
thousands):
<TABLE>
<CAPTION>
NUMBER OF OPTIONS
EMPLOYEES DIRECTORS PRICE
--------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, December 31, 1997 -- -- --
Granted 686 69 $ 16.23
Exercised -- -- --
Canceled (5) -- $ 16.23
------------------
Balance, December 31, 1998 681 69
==================
</TABLE>
The following table summarizes information about stock options at December
31, 1998 (in thousands).
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
--------------------------------------------------------------------------
Weighted-
average Weighted- Weighted-
remaining average average
Exercise Options contractual exercise Options exercise
price outstanding life price exercisable price
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$16.23 750 9.9 years $16.23 13 $16.23
==========================================================================
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model, with the following assumptions used for
grants in 1998: risk-free interest rate of 5.4%; expected lives ranging from 8.0
to 10.0 years; expected dividend rate of 0.3%; and expected volatility of 70.6%.
The Company applies Accounting Principles Board Opinion No. 25 in
accounting for its stock option plans. Accordingly, no compensation expense has
been recognized for its stock option plans. If compensation expense had been
determined in accordance with Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation," net income would have been
reduced by $0.9 million in 1998 and basic and diluted earnings per share would
have been reduced by $0.04.
401(k) PLAN
Effective September 1, 1998, the Company adopted a 401(k) defined contribution
plan ("Plan") covering substantially all of the officers and employees of the
Company. The Combination Agreement provided for a transfer of assets and
liabilities attributable to Penton employees in the Pittway 401(k) plan to be
transferred to this Plan. The Plan permits participants to defer up to a maximum
of 15% of their compensation. The Company will match 50% of an employee's
contributions up to a maximum of 6% of an employee's annual compensation. The
employees' contribution and the Company's matching contribution vest
immediately. The Company's contribution to the Plan for the year ended December
31, 1998, was $0.4 million. The 401(k) plan was fully funded at December 31,
1998.
SERP
Two executive officers participate in the Company's supplemental executive
retirement plan, which is not tax-qualified. At December 31, 1998, the estimated
annual benefit payable under the plan upon retirement at age 65 was $0.1 million
for both participants, assuming a life expectancy of 80 years and a discount
rate of 7%. At December 31, 1998, $0.03 million was accrued related to this
future obligation, and $0.02 million of expense was recognized in 1998,
representing service costs and interest.
<PAGE> 26
PENTON MEDIA, INC.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
The Company leases certain office space and equipment under non-cancelable
operating leases. Some of the leases contain renewal options and certain
equipment leases include options to purchase during or at the end of the lease
term. The following is a schedule of approximate future annual minimum rental
payments required under operating leases that have initial or remaining
non-cancelable lease terms in excess of one year as of December 31, 1998 (in
thousands).
<TABLE>
<CAPTION>
FISCAL YEAR AMOUNT
------------------------
<S> <C>
1999 $ 7,696
2000 3,899
2001 1,654
2002 809
2003 286
------------------------
Total $ 14,344
=========
</TABLE>
For the years ended December 31, 1998, 1997 and 1996, the total rent
expense (including taxes, insurance and maintenance when included in the rent)
incurred by the Company was approximately $6.5 million, $6.6 million and $6.3
million, respectively.
The Company has employment agreements with six key employees for terms of
two years, and the ability to extend for additional one-year periods.
In connection with the acquisition of Mecklermedia, a lawsuit was brought
against the Company by a former shareholder of Mecklermedia for an unspecified
amount, as well as other relief. The plaintiff is claiming that the Company
violated the federal securities laws by selling Mr. Meckler an 80.1% interest in
Internet.com for what the plaintiff alleges was a below-market price, thereby
giving to Mr. Meckler more consideration for his common stock in Mecklermedia
than was paid to the other stockholders of Mecklermedia. The Company believes
that the allegations are without merit and has filed a motion to dismiss the
lawsuit, which is pending.
The Company in the normal course of business is subject to a number of
lawsuits and claims, both actual and potential in nature. While management
believes that resolution of existing claims and lawsuits will not have a
material adverse effect on the Company's financial statements, management is
unable to estimate the magnitude of financial impact of claims and lawsuits that
may be filed in the future.
NOTE 12 - RELATED PARTY TRANSACTIONS
The Combination Agreement provides for Pittway to assist Penton in preparing its
tax returns for 1998 and to assist in other tax matters for fees to be
negotiated.
Included in the consolidated statements of income is an allocation of
corporate expenses related to services provided for the Company by Pittway. This
allocation was based on an estimate of the incremental corporate expenses
related to the Company's operations for the periods presented and, in the
opinion of management, has been made on a reasonable basis. However, the
allocation is not necessarily indicative of the level of expenses that might
have been incurred had the Company been a separate company. The aggregate
allocated costs totaled $0.3 million, $0.4 million and $0.3 million for the
years ended 1998, 1997 and 1996, respectively. The Company's employees also
participated in Pittway's pension plan (see Note 9). Certain of the Company's
employees participated in Pittway's 1990 Stock Awards Plan, for which Pittway
has allocated costs to the Company totaling $1.2 million, $1.0 million and $1.1
million in 1998, 1997 and 1996, respectively.
Other transactions between the Company and Pittway, consisting principally
of taxes and other reimbursable expenses paid by Pittway, have been reflected in
the historical financial statements as though on a stand-alone basis, except
that no interest income or expense has been allocated on intercompany balances.
Pittway utilized a centralized cash management system. Under this system,
cash generated by Penton in excess of its cash requirements (including cash
requirements for Penton's income taxes and other reimbursable expenses paid by
Pittway) was transferred to Pittway and reflected as "Due from parent company"
in the balance sheet. This account was reduced by dividends declared by the
Company. In August 1998, a final non-cash dividend of $12.2 million was made to
Pittway to settle the "Due from parent company" account.
NOTE 13 - CAPITAL STOCK
Pursuant to the spinoff (see Note 2), the Company amended its certificate of
incorporation on June 4, 1998, to authorize capital stock consisting of 60
million shares of common stock, par value $0.01 per share, and 2 million shares
of preferred stock, par value $0.01 per share. Immediately thereafter, the
Company recapitalized the 1,000 shares of $1 par value common stock outstanding
into 21,240,000 shares of common stock. An amount of $211 was transferred from
capital in excess of par value to common stock. The financial statements and
related notes have been restated to reflect this recapitalization retroactively.
In connection with the DM Publishing acquisition (see Note 2), 1,541,638
shares were issued as partial consideration.
<PAGE> 27
PENTON MEDIA, INC.
NOTE 14 - EARNINGS PER SHARE
Effective December 31, 1997, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"), which
requires the replacement of primary and fully diluted earnings per share with
basic and diluted earnings per share, respectively. SFAS 128 also requires
restatement of previously reported earnings per share information for certain
periods presented in the accompanying statement of income to ensure consistency
with currently reported amounts.
Computations of basic and diluted earnings per share for the years ended
December 31, 1998, 1997 and 1996 are shown in Table 1.
Options to purchase 750,055 shares of common stock at $16.23 per share were
outstanding at December 31, 1998, but were not included in the computation of
diluted earnings per share because the average market value of the options was
below the exercise price.
<TABLE>
<CAPTION>
TABLE 1 (In thousands, except per share amounts) YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------------
Income Shares Per share
(numerator) (denominator) amount
--------------------------------------
<S> <C> <C> <C>
Basic earnings per share
Net income available to common stockholders $10,890 21,882 $ 0.50
Effect of dilutive securities:
Stock options and warrants -- --
----------------------------------
Diluted earnings per share
Net income available to common stockholders $10,890 21,882 $ 0.50
==================================
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------------
Income Shares Per share
(numerator) (denominator) amount
-------------------------------------
<S> <C> <C> <C>
Basic earnings per share
Net income available to common stockholders $14,874 21,240 $ 0.70
Effect of dilutive securities:
Stock options and warrants -- --
----------------------------------
Diluted earnings per share
Net income available to common stockholders $14,874 21,240 $ 0.70
==================================
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-------------------------------------
Income Shares Per share
(numerator) (denominator) amount
-------------------------------------
<S> <C> <C> <C>
Basic earnings per share
Net income available to common stockholders $10,956 21,240 $ 0.52
Effect of dilutive securities:
Stock options and warrants -- --
----------------------------------
Diluted earnings per share
Net income available to common stockholders $10,956 21,240 $ 0.52
==================================
</TABLE>
NOTE 15 - SEGMENT INFORMATION
As indicated in Table 2 below, the Company has three reportable segments:
Media Services, Printing and Direct Mail. The segments are based on the
Company's internal organization and are managed separately due to inherent
differences in the nature of these businesses. Within the Media Services
segment, operating segments serving differing industries were combined due to
the similarity of their economic characteristics and other factors.
The Media Services segment serves specific industries and broad markets
with integrated product offerings including trade magazines, trade shows and
conferences, directories, direct mail lists and a variety of other products and
services. Revenues of this segment are generated primarily from magazine
advertising and trade show booth rentals. The Printing segment prints magazines,
catalogs, brochures and direct mail pieces for the Media Services segment and
outside commercial customers. The Direct
<PAGE> 28
PENTON MEDIA, INC.
Mail segment serves primarily the pharmaceutical and business services markets
with the ability to design, produce, print and mail direct mail marketing
campaigns. The $1.0 million impairment charge relates principally to this
segment.
Intersegment revenues are made at approximate arm's-length prices. The
Company evaluates performance based on operating income. Segment assets are
those assets that are specifically identified with the reportable segments in
which operations are conducted. Non-current assets at December 31, 1998, and
1997 included $31.7 million and $30.0 million, respectively, identified with
operations in the United Kingdom, substantially all of which are intangible
assets, with the remaining assets identified with domestic operations.
Non-current assets at December 31, 1996, were domestic. Export sales were not
material and no single customer accounted for 10% or more of sales.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
TABLE 2 (In thousands) 1998 1997 1996
-----------------------------------------------------------------------------
<S> <C> <C> <C>
Total segment revenues:
Media Services $ 207,682 $ 181,109 $ 166,631
Printing 39,883 39,092 37,933
Direct Mail 13,779 13,370 13,173
-----------------------------------------
261,344 233,571 217,737
Less intersegment revenues:
Printing 28,226 28,566 29,064
Direct Mail -- 74 116
-----------------------------------------
$ 233,118 $ 204,931 $ 188,557
=========================================
Operating income:
Media Services $ 26,217 $ 24,854 $ 17,681
Printing 820 1,534 1,270
Direct Mail (318) (1,091) (452)
-----------------------------------------
$ 26,719 $ 25,297 $ 18,499
=========================================
Depreciation and amortization:
Media Services $ 7,792 $ 3,903 $ 3,335
Printing 2,324 2,229 2,145
Direct Mail 604 419 431
-----------------------------------------
$ 10,720 $ 6,551 $ 5,911
=========================================
Total assets:
Media Services $ 455,944 $ 130,123 $ 79,652
Printing 16,373 17,823 18,681
Direct Mail 6,984 8,480 10,466
-----------------------------------------
$ 479,301 $ 156,426 $ 108,799
=========================================
Capital expenditures:
Media Services $ 3,996 $ 3,741 $ 3,339
Printing 1,396 1,406 948
Direct Mail 383 303 535
-----------------------------------------
$ 5,775 $ 5,450 $ 4,822
=========================================
</TABLE>
NOTE 16 - SUPPLEMENTAL DISCLOSURE OF NON-
CASH INVESTING AND FINANCING ACTIVITIES
In connection with the DM Publishing acquisition, 1,541,638 shares of common
stock were issued as consideration for the acquisition.
In August 1998, a final non-cash dividend of $12.2 million was made to
Pittway to settle the "Due from parent company" account.
The foregoing transactions did not provide or use cash and, accordingly,
are not reflected in the statement of cash flows.
NOTE 17 - QUARTERLY RESULTS (UNAUDITED)
Quarterly results of operations for the years ended December 31, 1998, and 1997
are as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1998 QUARTERS TOTAL
FIRST SECOND THIRD FOURTH FOR YEAR
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 52,485 $ 59,186 $ 52,800 $ 68,647 $233,118
Operating income 4,665 6,909 4,739 10,406 26,719
Net income 2,340 3,681 2,248 2,621(a) 10,890
Basic and diluted net income per share .11 .17 .10 .12 .50
</TABLE>
<TABLE>
<CAPTION>
1997 QUARTERS TOTAL
FIRST SECOND THIRD FOURTH FOR YEAR
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 48,666 $ 54,054 $ 50,729 $ 51,482 $204,931
Operating income 4,857 8,545 5,708 6,187 25,297
Net income 2,718 4,875 3,218 4,063(b) 14,874
Basic and diluted net income per share .13 .23 .15 .19 .70
</TABLE>
(a) Includes $0.6 million after-tax writedown, or $0.03 per share, on impairment
of assets
(b) Includes $0.6 million after-tax gain, or $0.03 per share, on sale of a
magazine
<PAGE> 29
PENTON MEDIA, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 and 1996
(Dollars in Thousands)
<TABLE>
<CAPTION>
Balance at
Beginning Charge to
OF YEAR EXPENSES
------- --------
<S> <C> <C>
1998
Allowance for doubtful accounts $2,406 $282
1997
Allowance for doubtful accounts $2,069 $662
1996
Allowance for doubtful accounts $1,976 $948
</TABLE>
<PAGE> 30
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
Information required to be furnished in this part of the Form 10-K has been
omitted because the Registrant will file with the Securities and Exchange
Commission a definitive proxy statement pursuant to Regulation 14A under the
Securities Exchange Act of 1934 not later than April 30, 1999.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information set forth under the headings "Election of Directors",
"Executive Officers" and "Section 16(a) Beneficial Ownership Reporting
Compliance" in the Registrant's Proxy Statement for the annual meeting of
stockholders to be held on May 7, 1999 is incorporated by reference.
Item 11. EXECUTIVE COMPENSATION.
The information set forth under the headings "Compensation", in the
Registrant's Proxy Statement for the annual meeting of stockholders to be held
on May 7, 1999 is incorporated by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information set forth under the heading "Security Ownership of Certain
Beneficial Owners and Management" in the Registrant's Proxy Statement for the
annual meeting of stockholders to be held on May 7, 1999 is incorporated herein
by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
<PAGE> 31
The information set forth under the headings "Certain Transactions" in the
Registrant's Proxy Statement for the annual meeting of stockholders to be held
on May 7, 1999 is incorporated herein by reference.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report.
1. Financial Statements: The following documents are filed as part of this
report.
Report of Independent Accountants.
Consolidated Balance Sheets as of December 31, 1998 and 1997.
Consolidated Statements of Income for the years ended December 31,
1998, 1997 and 1996.
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1998, 1997 and 1996.
Consolidated Statements of Cash Flows for the years ended December 31,
1998, 1997, and 1996.
Notes to Consolidated Financial Statements.
2. Financial Statement Schedules: The following financial statement schedule
of Penton Media Inc. is filed as part of this Report and should be read
in conjunction with the Consolidated Financial Statements of Penton Media
Inc.
Schedule
--------
II Valuation and Qualifying Accounts
Schedules not listed above have been omitted
because they are not applicable or are not
required or the information required to be set
forth therein is included in the Consolidated
Financial Statements or Notes thereto.
(b) Reports on Form 8-K were filed on October 16, 1998 and December 9, 1998 in
which information regarding Items 5 and 7 of Form 8-K was reported.
(c) Exhibits: The Exhibits listed on the accompanying Index to Exhibits
immediately following the financial statement schedules are filed as
part of, or incorporated by reference into, this Report.
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT
- ----------- -----------------------
<S> <C>
2.1 Combination Agreement, dated May 21, 1998, by and
among Penton Media, Inc., D-M Acquisition Corp.,
Pittway Corporation, Donohue Meehan Publishing
Company, William C. Donohue, and John J. Meehan
(filed as Exhibit 2.1 to the Company's Registration
Statement No. 333-56877 and incorporated herein by
reference).
2.2 Agreement and Plan of Merger, dated as of October 7,
1998, by and among Penton Media, Inc., Internet
World Media, Inc., Mecklermedia Corporation and
Alan M. Meckler (filed as Exhibit 2.1 to the
Company's Form 8-K on October 15, 1998 and
incorporated herein by reference).
3.1 Restated Certificate of Incorporation of
the Company (filed as Exhibit 3.1 to the
Company's Registration Statement No. 333-56877
and incorporated herein by reference).
3.2 Amended and Restated Bylaws of the Company (filed
as Exhibit 3.2 to the Company's Registration
Statement No. 333-56877 and incorporated herein
by reference).
4. Penton Media, Inc. Retirement Savings Plan (filed as
Exhibit 4.3 to the Company's Form S-8 on August 27,
1998 and incorporated herein by reference).
10.1 Credit Facility, dated December 12, 1997, between
Penton Media Ltd. and Bank of America (filed as
Exhibit 10. to the Company's Registration Statement
No. 333-56877 and incorporated herein by reference).
10.2 Credit Agreement, dated August 7, 1998, among
Penton Media, Inc., Penton Media Ltd., as borrower,
the lenders from time to time party thereto, Key
Corporate Capital, Inc. as co-agent, and First
Union, as administrative agent (filed as Exhibit
10.1 to the Company's Form 10-Q on November 16,
1998 and incorporated herein by reference).
10.3 Credit Agreement, dated November 24, 1998, among
Penton Media, Inc. as borrower, the lenders listed
therein, as lenders, DLJ Capital Funding, Inc., as
syndication agent, The Bank of New York and Key
Corporate Capital, Inc., as co-documentation agents,
and First Union National Bank, as administrative
agent (filed as Exhibit 99.1 to the Company Form 8-K
on December 9, 1998 and incorporated herein by
reference).
10.4(a) Employment Agreement, dated July 25, 1996, between
Penton Media, Inc. and Thomas L. Kemp (filed as
Exhibit 10.2(a) to the Company's Registration
Statement No. 333-56877 and incorporated herein by
reference).
10.4(b) Waiver and Release, dated July 21, 1998, between
Penton Media, Inc. and Thomas L. Kemp (filed as
Exhibit 10.2(b) to the Company's Registration
Statement No. 333-56877 and incorporated herein by
reference).
10.5 Employment Agreement, dated January 1997, between
Penton Media, Inc. and Daniel J. Ramella (filed as
Exhibit 10.3 to the Company's Registration Statement
No. 333-56877 and incorporated herein by reference).
10.6 Employment Agreement, dated August 7, 1998, between
Penton Media, Inc. and William C. Donohue (filed as
Exhibit 10.2 to the Company's Form 10-Q on November
16, 1998 and incorporated herein by reference).
10.7 Employment Agreement, dated August 7, 1998, between
Penton Media, Inc. and John J. Meehan (filed as
Exhibit 10.3 to the Company's Form 10-Q on November
16, 1998 and incorporated herein by reference).
10.8 Employment Agreement, dated July 16, 1998 between
Penton Media, Inc. and David Nussbaum (filed as
Exhibit 10.4 to the Company's Form 10-Q on November
16, 1998 and incorporated herein by reference).
10.9 Penton Media, Inc. 1998 Equity and Performance
Incentive Plan (filed as Exhibit 10.6 to the
Company's Registration Statement No. 333-56877
and incorporated herein by reference).
10.10 Penton Media, Inc. Director Stock Option Plan (filed
as Exhibit 10.7 to the Company's Registration
Statement No. 333-56877 and incorporated herein by
reference).
10.11 Penton Media, Inc. Retirement Plan (filed as Exhibit
10.9 to the Company's Registration Statement
No. 333-58677 and incorporated herein by reference).
10.12 Penton Media, Inc. Supplemental Executive Retirement
Plan (filed as Exhibit 10.10 to the Company's
Registration Statement No. 333-58677 and
incorporated herein by reference).
10.13 Restated Employment Agreement, dated February 5,
1999, between Penton Media, Inc. and Thomas Kemp
filed herewith.
10.14 Restated Employment Agreement, dated February 10,
1999 between Penton Media, Inc. and Daniel J. Ramella
filed herewith.
10.15 Employment Agreement, dated February 12, 1999,
between Penton Media, Inc. and James D. Atherton
filed herewith.
10.16 Employment Agreement, dated February 14, 1999,
between Penton Media, Inc. and James W. Zaremba
filed herewith.
21. Subsidiaries of Penton Media, Inc. (filed as Exhibit
21.1 to the Company's Registration Statement
No. 333-56877 and incorporated herein by reference).
23. Consent of the Independent Accountants.
24. Powers of Attorney.
27. Financial Data Schedule filed herewith.
99. Tender, Voting and Option Agreement, dated
October 7, 1998, among Penton Media, Inc.
Internet World Media, Inc., Meklermedia
Corporation and Alan M. Meckler (filed as
Exhibit 99.1 to the Company's Form 8-K
on October 15, 1998 and incorporated herein
by reference).
</TABLE>
<PAGE> 32
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Penton Media, Inc.
By: /s/ Joseph G. NeCastro
-------------------------------
Name: Joseph G. NeCastro
Title: Chief Financial Officer
Dated: March 31, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated in March 31, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------- -----
<S> <C>
/s/ *
- ---------------------------------------
Thomas L. Kemp Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Joseph G. NeCastro
- ---------------------------------------
Joseph G. NeCastro Chief Financial Officer
(Principal Financial Officer)
/s/ *
- ---------------------------------------
Charles T. Griesemer Vice President/Controller
(Controller or Principal Accounting Officer)
/s/ *
- ---------------------------------------
Anthony Downs Director
/s/ *
- ---------------------------------------
William J. Friend Director
/s/ *
- ---------------------------------------
Joan W. Harris Director
/s/ *
- ---------------------------------------
King W. Harris Director
/s/ *
- ---------------------------------------
Daniel J. Ramella Director
/s/ *
- ---------------------------------------
Edward J. Schwartz Director
/s/ *
- ---------------------------------------
Don E. Schultz Director
/s/ *
- ---------------------------------------
Richard B. Swank Director
/s/ *
- ---------------------------------------
William C. Donohue Director
/s/ *
- ---------------------------------------
John J. Meehan Director
</TABLE>
* The undersigned, by signing his name hereto, does sign and execute this Annual
Report on Form 10-K pursuant to a Power of Attorney executed on behalf of the
above named directors of Penton Media, Inc. and filed herewith as Exhibit 24
on behalf of Penton Media, Inc. and each such person.
March 31, 1999
By /s/ Joseph G. NeCastro
----------------------------------------
Joseph G. NeCastro
Attorney-in-Fact
<PAGE> 33
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT
- ----------- -----------------------
<S> <C>
2.1 Combination Agreement, dated May 21, 1998, by and
among Penton Media, Inc., D-M Acquisition Corp.,
Pittway Corporation, Donohue Meehan Publishing
Company, William C. Donohue, and John J. Meehan
(filed as Exhibit 2.1 to the Company's Registration
Statement No. 333-56877 and incorporated herein by
reference).
2.2 Agreement and Plan of Merger, dated as of October 7,
1998, by and among Penton Media, Inc., Internet
World Media, Inc., Mecklermedia Corporation and
Alan M. Meckler (filed as Exhibit 2.1 to the
Company's Form 8-K on October 15, 1998 and
incorporated herein by reference).
3.1 Restated Certificate of Incorporation of
the Company (filed as Exhibit 3.1 to the
Company's Registration Statement No. 333-56877
and incorporated herein by reference).
3.2 Amended and Restated Bylaws of the Company (filed
as Exhibit 3.2 to the Company's Registration
Statement No. 333-56877 and incorporated herein
by reference).
4. Penton Media, Inc. Retirement Savings Plan (filed as
Exhibit 4.3 to the Company's Form S-8 on August 27,
1998 and incorporated herein by reference).
10.1 Credit Facility, dated December 12, 1997, between
Penton Media Ltd. and Bank of America (filed as
Exhibit 10. to the Company's Registration Statement
No. 333-56877 and incorporated herein by reference).
10.2 Credit Agreement, dated August 7, 1998, among
Penton Media, Inc., Penton Media Ltd., as borrower,
the lenders from time to time party thereto, Key
Corporate Capital, Inc. as co-agent, and First
Union, as administrative agent (filed as Exhibit
10.1 to the Company's Form 10-Q on November 16,
1998 and incorporated herein by reference).
10.3 Credit Agreement, dated November 24, 1998, among
Penton Media, Inc. as borrower, the lenders listed
therein, as lenders, DLJ Capital Funding, Inc., as
syndication agent, The Bank of New York and Key
Corporate Capital, Inc., as co-documentation agents,
and First Union National Bank, as administrative
agent (filed as Exhibit 99.1 to the Company Form 8-K
on December 9, 1998 and incorporated herein by
reference).
10.4(a) Employment Agreement, dated July 25, 1996, between
Penton Media, Inc. and Thomas L. Kemp (filed as
Exhibit 10.2(a) to the Company's Registration
Statement No. 333-56877 and incorporated herein by
reference).
10.4(b) Waiver and Release, dated July 21, 1998, between
Penton Media, Inc. and Thomas L. Kemp (filed as
Exhibit 10.2(b) to the Company's Registration
Statement No. 333-56877 and incorporated herein by
reference).
10.5 Employment Agreement, dated January 1997, between
Penton Media, Inc. and Daniel J. Ramella (filed as
Exhibit 10.3 to the Company's Registration Statement
No. 333-56877 and incorporated herein by reference).
10.6 Employment Agreement, dated August 7, 1998, between
Penton Media, Inc. and William C. Donohue (filed as
Exhibit 10.2 to the Company's Form 10-Q on November
16, 1998 and incorporated herein by reference).
10.7 Employment Agreement, dated August 7, 1998, between
Penton Media, Inc. and John J. Meehan (filed as
Exhibit 10.3 to the Company's Form 10-Q on November
16, 1998 and incorporated herein by reference).
10.8 Employment Agreement, dated July 16, 1998 between
Penton Media, Inc. and David Nussbaum (filed as
Exhibit 10.4 to the Company's Form 10-Q on November
16, 1998 and incorporated herein by reference).
10.9 Penton Media, Inc. 1998 Equity and Performance
Incentive Plan (filed as Exhibit 10.6 to the
Company's Registration Statement No. 333-56877
and incorporated herein by reference).
10.10 Penton Media, Inc. Director Stock Option Plan (filed
as Exhibit 10.7 to the Company's Registration
Statement No. 333-56877 and incorporated herein by
reference).
10.11 Penton Media, Inc. Retirement Plan (filed as Exhibit
10.9 to the Company's Registration Statement
No. 333-58677 and incorporated herein by reference).
10.12 Penton Media, Inc. Supplemental Executive Retirement
Plan (filed as Exhibit 10.10 to the Company's
Registration Statement No. 333-58677 and
incorporated herein by reference).
10.13 Restated Employment Agreement, dated February 5,
1999, between Penton Media, Inc. and Thomas Kemp
filed herewith.
10.14 Restated Employment Agreement, dated February 10,
1999 between Penton Media, Inc. and Daniel J. Ramella
filed herewith.
10.15 Employment Agreement, dated February 12, 1999,
between Penton Media, Inc. and James D. Atherton
filed herewith.
10.16 Employment Agreement, dated February 14, 1999,
between Penton Media, Inc. and James W. Zaremba
filed herewith.
21. Subsidiaries of Penton Media, Inc. (filed as Exhibit
21.1 to the Company's Registration Statement
No. 333-56877 and incorporated herein by reference).
23. Consent of the Independent Accountants.
24. Powers of Attorney.
27. Financial Data Schedule filed herewith.
99. Tender, Voting and Option Agreement, dated
October 7, 1998, among Penton Media, Inc.
Internet World Media, Inc., Meklermedia
Corporation and Alan M. Meckler (filed as
Exhibit 99.1 to the Company's Form 8-K
on October 15, 1998 and incorporated herein
by reference).
</TABLE>
<PAGE> 1
Exhibit 10.13
RESTATED EMPLOYMENT AGREEMENT
-----------------------------
This RESTATED EMPLOYMENT AGREEMENT ("Agreement") effective as
of January 1, 1999, between Penton Media, Inc. (formerly known as Penton
Publishing, Inc.), a Delaware corporation (the "COMPANY"), and Thomas L. Kemp
("EXECUTIVE").
WITNESSETH:
WHEREAS, Executive is presently the Chief Executive Officer of
the Company and has made and is expected to continue to make major contributions
to the profitability, growth and financial strength of the Company;
WHEREAS, the Company recognizes that, as is the case with many
publicly held companies, the possibility of a Change of Control (as that term is
hereafter defined) exists;
WHEREAS, the Company wishes to assure itself of both present
and future continuity of management in the event of any Change of Control;
WHEREAS, the Company wishes to ensure that certain of its
executives are not practically disabled from discharging their duties upon a
Change of Control; and
WHEREAS, the Company and Executive currently are parties to an
Employment Agreement (the "PRIOR AGREEMENT") providing certain benefits, and the
Company and Executive desire to amend and restate the Prior Agreement;
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. EMPLOYMENT. The Company shall employ Executive, and
Executive accepts continued employment with the Company as of the date hereof,
upon the terms and conditions set forth in this Agreement for the period
beginning on the date hereof and ending as provided in paragraph 5 hereof (the
"EMPLOYMENT PERIOD").
2. POSITION AND DUTIES.
(a) During the Employment Period, Executive shall serve as the
chief executive officer of the Company and, subject to the management of the
business and affairs of the Company at the direction of the Board of Directors
of the Company (the "BOARD"), shall have the normal duties, responsibilities and
authority of an executive serving in such position, including without limitation
the development of short- and long-term operating plans, the development of
operating and capital budgets, the overseeing of Company personnel and the
development of compensation proposals and proposals for acquisitions and
dispositions. Executive shall have the title Chief Executive Officer of the
Company, subject to the power of the Board to change such title to President and
Chief Executive Officer or some combination thereof. During the Employment
Period, Executive shall also serve as a director of the Company for so long as
the Board (or a
<PAGE> 2
nominating committee of the Board) nominates him to that position and he is
elected to it and as a director of any affiliate of the Company designated by
the Board for so long as the Board causes him to be elected to such position.
(b) Executive shall report to the Board.
(c) During the Employment Period, Executive shall devote his
best efforts and his full business time and attention (except for permitted
vacation periods, reasonable periods of illness or other incapacity, and,
provided such activities do not have more than a DE MINIMIS effect on
Executive's performance of his duties under this Agreement, participation in
charitable and civic endeavors and management of Executive's personal
investments and business interests) to the business and affairs of the Company,
its subsidiaries and affiliates. Executive shall perform his duties and
responsibilities to the best of his abilities in a diligent, trustworthy,
businesslike and efficient manner.
(d) Executive shall perform his duties and responsibilities
principally in the Cleveland, Ohio metropolitan area, and shall not be required
to travel outside that area any more extensively than he has done in the past in
the ordinary course of the business of the Company.
3. COMPENSATION AND BENEFITS.
(a) SALARY. The Company agrees to pay Executive a salary
during the Employment Period in monthly installments. Executive's initial salary
shall be $470,000 per year. The Compensation Committee of the Board (or, if
there is no such Committee, the Board) shall review Executive's salary from time
to time and may, in its sole discretion, increase it.
(b) BONUS(ES). Effective January 1, 1999 and for subsequent
years, Executive will be eligible for an annual bonus (the "Target Bonus") based
on the achievement of specified Company goals (as determined by the Compensation
Committee of the Board (or, if there is no such Committee, the Board) with input
from Executive). Any bonus payable pursuant to this subparagraph (b) may, at the
discretion of the Compensation Committee of the Board (or, if there is no such
Committee, the Board), after considering any preference expressed by Executive,
be paid in the form of cash, in a Performance Shares Award related to shares of
the Company's Common Stock or in a combination of both.
(c) STOCK OPTIONS. The Company has adopted a plan (the "1998
STOCK OPTION PLAN") pursuant to which options to purchase shares of the
Company's Common Stock, and other equity-based incentive compensation awards,
may be granted to Executive and other officers of the Company. Executive shall
be eligible to receive grants of options and other awards under the 1998 Stock
Option Plan, at the discretion of the Compensation Committee of the Board (or,
if there is no such Committee, the Board). Under the terms of the 1998 Stock
Option Plan, the Compensation Committee of the Board (or, if there is no such
Committee, the Board) has the right to amend the 1998 Stock Option Plan. If, at
the time of the grant of any option pursuant to this paragraph (c), the issuance
of shares upon exercise thereof has not been registered under the Securities Act
of 1933, as amended, it shall be a condition to such grant that Executive
execute and deliver to the Company a certificate confirming that Executive is an
accredited investor (as such term is used in Regulation D under such Act) and
including transfer restrictions and other provisions customary in connection
with grants under such circumstances. Each option to be granted as set forth
above shall be substantially in the form of EXHIBIT 1 attached to this
Agreement, except that it is understood that
<PAGE> 3
reference to any then existing registration statement or related plan
information document in EXHIBIT 1, or its equivalent, shall be included if and
only if the same exists at the time of grant and is relevant to such option.
(d) EXPENSE REIMBURSEMENT. The Company shall reimburse
Executive for all reasonable expenses incurred by him during the Employment
Period in the course of performing his duties under this Agreement that are
consistent with the Company's policies in effect from time to time with respect
to travel, entertainment and other business expenses, subject to the Company's
requirements applicable generally with respect to reporting and documentation of
such expenses. Executive acknowledges that under the Company's current air
travel reimbursement policy, reimbursement is limited to coach fare (plus
Executive's cost of any upgrade certificates used to upgrade to first class) on
travel within the United States and is limited to business class fare on travel
to and from foreign cities.
(e) STANDARD EXECUTIVE BENEFITS PACKAGE. In addition to the
salary, bonus(es), stock options and expense reimbursements payable to Executive
pursuant to this paragraph 3, Executive shall be entitled during the Employment
Period to participate, on the same basis as other executives of the Company, in
the Company's Standard Executive Benefits Package. The Company's "STANDARD
EXECUTIVE BENEFITS PACKAGE" means those benefits (including insurance, vacation,
Company car or car allowance, equity-based benefits, and other benefits) for
which substantially all of the executives of the Company are from time to time
generally eligible, as determined from time to time by the Board. Without
limiting the generality of the foregoing, Executive and the Company acknowledge
and agree that, for purposes of vacation benefits included in the Standard
Executive Benefits Package, Executive has been credited with 22 years of service
in addition to his actual period of service with the Company.
(f) ADDITIONAL BENEFITS. In addition to participation in the
Company's Standard Executive Benefits Package pursuant to this paragraph,
Executive shall be entitled during the Employment Period to:
(i) additional term life insurance coverage in an amount
equal to Executive's salary, but only if and so long
as such additional coverage is available at standard
rates from the insurer providing term life insurance
coverage under the Standard Executive Benefits
Package or from a comparable insurer acceptable to
the Company;
(ii) supplementary long-term disability coverage in an
amount that will include maximum covered annual
compensation of $330,000 and maximum monthly payments
of $18,333, but only if and so long as such
supplementary coverage is available at standard rates
from the insurer providing long-term disability
coverage under the Standard Executive Benefits
Package or a comparable insurer acceptable to the
Company;
(iii) in the event the Employment Period ends at a time
when Executive is not entitled to all of the benefits
under the tax-qualified pension plan and
tax-qualified defined contribution plan (401(k) plan)
of the Company included in the Standard Executive
Benefits Package to which he would have been entitled
had he been fully vested under such plans at the
beginning of the Employment Period, a supplemental
payment (independent of any plan)
<PAGE> 4
promptly following the end of the Employment Period
equal to the sum of (A) the discounted present value
of his accrued but unvested future payments (on a
straight life basis) under such pension plan,
calculated using the discount rate and actuarial
methods and procedures then utilized under such plan
and (B) the unvested portion of his account under
such defined contribution plan; and
(iv) pursuant to authorization by the Compensation
Committee of the Board (or, if there is no such
Committee, the Board), participation in the Penton
Media, Inc. Supplemental Executive Retirement Plan
(the "SERP"), effective August 7, 1998, as currently
in effect, except that (A) the beginning date for
accrual of a benefit shall be the date on which
Executive's employment with the Company began and (B)
no benefit shall be payable thereunder unless the
Employment Period shall end five years or more after
the beginning thereof (or, if the Employment Period
ends early pursuant to paragraph 5 hereof, within
such five years on account of a Termination without
Cause, a Termination by Executive for Good Reason or
a Termination Following a Change of Control, provided
that the date on which (without any extension
thereof) the Employment Period is then scheduled to
end shall be five years or more after the beginning
of the Employment Period).
(g) INDEMNIFICATION. With respect to Executive's acts or
failures to act during the Employment Period in his capacity as a director,
officer, employee or agent of the Company, Executive shall be entitled to
indemnification from the Company, and to liability insurance coverage (if any),
on the same basis as other directors and officers of the Company.
4. ADJUSTMENTS. Notwithstanding any other provision of this
Agreement, it is expressly understood and agreed that if there is a significant
reduction in the level of the business to which Executive's duties under this
Agreement relate, the Compensation Committee of the Board (or, if there is no
such Committee, the Board) may make adjustments in "EXECUTIVE'S REFERENCE
SALARY" (i.e., Executive's initial salary or, in the event the Employment Period
has been extended pursuant to paragraph 5(b) hereof, Executive's salary on the
date on which the most recent such extension occurred) as the Compensation
Committee of the Board (or, if there is no such Committee, the Board) deems
appropriate to reflect such reduction.
5. EMPLOYMENT PERIOD.
(a) Except as hereinafter provided, the Employment Period
shall continue until, and shall end upon, the third anniversary of the date on
which the Employment Period begins.
(b) On each anniversary of the date on which the Employment
Period begins which precedes Executive's sixty-fifth birthday by more than two
years, unless the Employment Period shall have ended early pursuant to (c) below
or either party shall have given the other party written notice that the
extension provision in this sentence shall no longer apply, the Employment
Period shall be extended for an additional year (unless Executive's sixty-fifth
birthday occurs during such additional year, in which event the Employment
Period shall be extended only until such birthday). In no event shall the
Employment Period be extended beyond Executive's sixty-fifth birthday except by
mutual written agreement of the Company and Executive.
<PAGE> 5
(c) Notwithstanding (a) and (b) above, the Employment Period
shall end early upon the first to occur of any of the following events:
(i) Executive's death;
(ii) Executive's retirement upon or after reaching age 65
("RETIREMENT");
(iii) the Company's termination of Executive's employment
on account of Executive's having become unable (as
determined by the Board in good faith) to regularly
perform his duties hereunder by reason of illness or
incapacity for a period of more than six (6)
consecutive months ("TERMINATION FOR DISABILITY");
(iv) the Company's termination of Executive's employment
for Cause ("TERMINATION FOR CAUSE");
(v) the Company's termination of Executive's employment
other than a Termination for Disability or a
Termination for Cause ("TERMINATION WITHOUT CAUSE");
(vi) Executive's termination of Executive's employment for
Good Reason by means of advance written notice to the
Company at least thirty (30) days prior to the
effective date of such termination identifying such
termination as a Termination by Executive for Good
Reason and identifying the Good Reason ("TERMINATION
BY EXECUTIVE FOR GOOD REASON") (it being expressly
understood that Executive's giving notice that the
extension provision in the first sentence of
paragraph 5(b) hereof shall no longer apply shall not
constitute a Termination by Executive for Good
Reason);
(vii) Executive's termination of Executive's employment for
any reason other than Good Reason, by means of
advance written notice to the Company at least one
hundred twenty (120) days prior to the effective date
of such termination identifying such termination as a
Termination by Executive with Advance Notice
("TERMINATION BY EXECUTIVE WITH ADVANCE NOTICE") (it
being expressly understood that Executive's giving
notice that the extension provision in the first
sentence of paragraph 5(b) hereof shall no longer
apply shall not constitute a Termination by Executive
with Advance Notice); or
(viii) the termination of Executive's employment (A) on
account of a Termination without Cause before the
second anniversary of a Change of Control, (B) on
account of a Termination by Executive for Good Reason
before the second anniversary of a Change of Control
or (C) in connection with but prior to a Change of
Control and following the commencement of any
discussion with any third party that (i) requests or
suggests that Executive's employment be terminated,
and (ii) ultimately engages in a Change of Control
(collectively, "TERMINATION FOLLOWING A CHANGE OF
CONTROL").
(d) For purposes of this Agreement, "CAUSE" shall mean:
<PAGE> 6
(i) the commission by Executive of a felony or a crime
involving moral turpitude;
(ii) the commission by Executive of a fraud;
(iii) the commission by Executive of any act involving
dishonesty or disloyalty with respect to the Company
or any of its subsidiaries or affiliates that harms
or damages any of them to any extent;
(iv) conduct by Executive that brings the Company or any
of its subsidiaries or affiliates into substantial
public disgrace or disrepute;
(v) gross negligence or willful misconduct by Executive
with respect to the Company or any of its
subsidiaries or affiliates;
(vi) repudiation of this Agreement by Executive or
Executive's abandonment of his employment with the
Company (it being expressly understood that a
Termination by Executive for Good Reason or a
Termination by Executive with Advance Notice shall
not constitute such a repudiation or abandonment);
(vii) breach by Executive of any of the agreements in
paragraph 8 hereof prior to the end of the Employment
Period; or
(viii) any other breach by Executive of this Agreement which
is material and which is not cured within thirty (30)
days after written notice thereof to Executive from
the Company.
(ix) Notwithstanding the foregoing, Executive shall in no
event be deemed to have been terminated for "Cause"
hereunder unless prior to his termination there shall
have been delivered to Executive a copy of a
resolution duly adopted by the affirmative vote of
not less than a majority of the non- employee
Directors then in office at a meeting of the Board
called and held for such purpose, after reasonable
notice to Executive and an opportunity for Executive,
together with Executive's counsel (if Executive
chooses to have counsel present at such meeting), to
be heard before the Board, finding that, in the good
faith opinion of the Board, Executive had committed
an act constituting "Cause" as herein defined and
specifying the particulars thereof in detail. While
such a determination will be a condition precedent
for the existence of "Cause" for purposes of this
Agreement, such a determination will not be
determinative or create a presumption that "Cause" in
fact exists and nothing herein will limit the right
of Executive or his beneficiaries to contest the
validity or propriety of any such determination.
(e) For purposes of this Agreement, "GOOD REASON" shall
mean:
(i) any downward adjustment by the Board in Executive's
Reference Salary pursuant to paragraph 4 hereof or
any downward adjustment by the Board in Executive's
Target Bonus; or
<PAGE> 7
(ii) the Company's giving notice that the extension
provision in the first sentence of paragraph 5(b)
hereof shall no longer apply; or
(iii) any breach by the Company of this Agreement which is
material and which is not cured within thirty (30)
days after written notice thereof to the Company from
Executive.
(f) For purposes of this Agreement, "CHANGE OF CONTROL" shall
mean the occurrence of any of the following events during the Employment Period:
(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 40% or more of either: (A) the
then-outstanding shares of common stock of the Company (the "Company
Common Stock") or (B) the combined voting power of the then-outstanding
voting securities of the Company entitled to vote generally in the
election of directors ("Voting Stock"); PROVIDED, HOWEVER, that for
purposes of this subparagraph (i), the following acquisitions shall not
constitute a Change of Control: (A) any acquisition directly from the
Company, (B) any acquisition by the Company, a subsidiary of the
Company or the Harris Group, (C) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company
or any subsidiary of the Company, or (D) any acquisition by any Person
pursuant to a transaction which complies with clauses (A), (B) and (C)
of subparagraph (iii) of this paragraph 5(f); or
(ii) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason (other than death or
disability) to constitute at least a majority of the Board; PROVIDED,
HOWEVER, that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (either by a specific
vote or by approval of the proxy statement of the Company in which such
person is named as a nominee for director, without objection to such
nomination) shall be considered as though such individual were a member
of the Incumbent Board, but excluding for this purpose, any such
individual whose initial assumption of office occurs as a result of an
actual or threatened election contest (within the meaning of Rule
14a-11 of the Exchange Act) with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all
of the assets of the Company (a "Business Combination"), in each case,
unless, following such Business Combination, (A) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Company Common Stock and Voting Stock immediately
prior to such Business Combination beneficially own, directly or
indirectly, more than a majority of, respectively, the then-outstanding
shares of common stock and the combined voting power of the
then-outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the entity resulting from
such Business Combination (including, without limitation, an entity
which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through
one or more subsidiaries)
<PAGE> 8
in substantially the same proportions relative to each other as their
ownership, immediately prior to such Business Combination, of the
Company Common Stock and Voting Stock of the Company, as the case may
be, (B) no Person (excluding any entity resulting from such Business
Combination, the Harris Group or any employee benefit plan (or related
trust) sponsored or maintained by the Company, a subsidiary of the
Company or such entity resulting from such Business Combination)
beneficially owns, directly or indirectly, 40% or more of,
respectively, the then-outstanding shares of common stock of the entity
resulting from such Business Combination, or the combined voting power
of the then-outstanding voting securities of such corporation except to
the extent that such ownership existed prior to the Business
Combination and (C) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination
were members of the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board, providing for such
Business Combination; or
(iv) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
(v) For purposes of this paragraph 5(f), the "Harris Group"
shall mean Messrs. Irving B. Harris, Neison Harris, King Harris,
William W. Harris and June H. 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.
6. POST-EMPLOYMENT PERIOD PAYMENTS.
(a) If the Employment Period ends on the date on which
(without any extension thereof) it is then scheduled to end pursuant to
paragraph 5 hereof, or if the Employment Period ends early pursuant to paragraph
5 hereof for any reason, Executive shall cease to have any rights to salary,
bonus (if any), options, expense reimbursements or other benefits other than:
(i) any salary which has accrued but is unpaid, any reimbursable expenses which
have been incurred but are unpaid, and any unexpired vacation days which have
accrued under the Company's vacation policy but are unused, as of the end of the
Employment Period, (ii) any option rights or plan benefits which by their terms
extend beyond termination of Executive's employment (but only to the extent
provided in any option theretofore granted to Executive or in the SERP or any
other benefit plan in which Executive has participated as an employee of the
Company), (iii) any benefits to which Executive is entitled under Part 6 of
Subtitle B of Title I of the Employee Retirement Income Security Act of 1974, as
amended ("COBRA"), and (iv) any other amount(s) payable pursuant to the
succeeding provisions of this paragraph 6.
(b) If the Employment Period ends pursuant to paragraph 5
hereof on Executive's sixty-fifth birthday, or if the Employment Period ends
early pursuant to paragraph 5 hereof on account of Executive's death, Retirement
(provided such Retirement is not a Termination Following a Change of Control) or
Termination for Disability, the Company shall make no further payments to
Executive except as contemplated in (a) (i), (ii) and (iii) above.
<PAGE> 9
(c) If the Employment Period ends early pursuant to paragraph
5 hereof on account of Termination for Cause, the Company shall pay Executive an
amount equal to that amount Executive would have received as salary (based on
Executive's salary then in effect) had the Employment Period remained in effect
until the later of the effective date of the Company's termination of
Executive's employment or the date thirty days after the Company's notice to
Executive of such termination. The Company shall make no further payments to
Executive except as contemplated in (a) (i), (ii) and (iii) above.
(d) If the Employment Period ends early pursuant to paragraph
5 hereof on account of a Termination without Cause or a Termination by Executive
for Good Reason, and such termination does not constitute a Termination
Following a Change of Control, the Company shall pay to Executive a lump sum
payment equal to three times Executive's base salary at the time of such
termination (or, if higher, Executive's Reference Salary). In addition, the
Company shall reimburse Executive (net after taxes on the receipt of such
reimbursement) for any premiums paid by Executive for health insurance provided
to Executive (for Executive and his dependents) by the Company subsequent to the
end of the Employment Period pursuant to the requirements of COBRA as in effect
on the date of this Agreement. The Company shall make no further payments to
Executive except as contemplated in (a)(i), (ii) and (iii) above. It is
expressly understood that the Company's payment obligations under this
subparagraph (d) shall cease in the event Executive breaches any of his
agreements in paragraph 7 or 8 hereof.
(e) If the Employment Period ends early pursuant to paragraph
5 hereof on account of a Termination by Executive with Advance Notice, and such
termination does not constitute a Termination Following a Change of Control, the
Company shall make no further payments to Executive except as contemplated in
(a) (i), (ii) and (iii) above.
(f)(i) If the Employment Period ends early pursuant to
paragraph 5 hereof on account of a Termination
Following a Change of Control, Executive shall be
entitled to receive the following:
(A) For a period of three years following the
date of termination, Executive's base salary
at the time of such termination (or, if
higher, Executive's Reference Salary)
payable at the times such amounts would have
been paid; PROVIDED, HOWEVER, that if
Executive so chooses, in his sole
discretion, such payment under this
subparagraph (f)(i)(A) shall be made in a
lump sum;
(B) A lump sum payment equal to Executive's
Target Bonus for the year in which such
termination occurs (or, if higher,
Executive's Target Bonus for the preceding
year or the year in which the Change of
Control occurs);
(C) If Executive's employment is terminated
after July 1 of the then-current year, an
additional amount equal to the product of
(x) Executive's Target Bonus for the year in
which such termination occurs (or, if
higher, Executive's Target Bonus for the
preceding year or the year in which the
Change of Control occurs) multiplied by (y)
a fraction, the numerator of which shall be
the number of months that have elapsed, on
the day of termination, during the
then-current year
<PAGE> 10
(rounded up to the nearest full month) and
the denominator of which shall be 12; and
(D) For a period of one year following the date
of termination, Executive shall be entitled
to be a full participant in, and shall be
entitled to the benefits provided under, the
Company's Standard Executive Benefits
Package (but shall not be entitled to stock
option, performance share, performance unit,
stock purchase, stock appreciation or
similar equity-based compensatory benefit
awards) and the additional benefits set
forth in Section 3(f) hereof at the time of
such termination (or, if higher, for the
preceding year or the year in which the
Change of Control occurs). If, however,
Executive is not eligible to participate in
the benefits as set forth in the preceding
sentence, the Company shall reimburse
Executive, on a monthly basis (net after
taxes on the receipt of such reimbursement),
for any premiums or other fees paid by
Executive to obtain benefits (for Executive
and his dependents) equivalent to the
Standard Executive Benefits Package and the
additional benefits set forth in Section
3(f). Notwithstanding the foregoing or any
other provision of this Agreement, (A) for
the purpose of determining the period of
continuation coverage to which the Executive
or any of his dependents is entitled
pursuant to the requirements of COBRA, the
Executive's "qualifying event," subject to
the requirements of applicable plans, will
be the termination of the one-year period
set forth above in this subparagraph
(f)(i)(D) and the Executive will be
considered to have remained actively
employed on a full time basis through that
date and (B) the Company shall reimburse
Executive (net after taxes on the receipt of
such reimbursement) for any premiums paid by
Executive for health insurance provided to
Executive (for Executives and his
dependents) by the Company pursuant to the
requirements of COBRA as in effect on the
date of this Agreement.
(ii) LIMITATION ON PAYMENTS AND BENEFITS. Notwithstanding any
provision of this Agreement to the contrary, if any amount or
benefit to be paid or provided under this Agreement or
otherwise pursuant to or by reason of any other agreement,
policy, plan, program or arrangement, including without
limitation any bonus, stock option, performance share,
performance unit, stock appreciation right or similar right,
or the lapse or termination of any restriction on or the
vesting or exercisability of any of the foregoing would be an
"Excess Parachute Payment," within the meaning of Section 280G
of the Code, or any successor provision thereto, but for the
application of this sentence, then the payments and benefits
to be paid or provided under this Agreement shall be reduced
to the minimum extent necessary (but in no event to less than
zero) so that no portion of any such payment or benefit, as so
reduced, constitutes an Excess Parachute Payment; provided,
however, that the foregoing reduction shall be made only if
and to the extent that such reduction would result in an
increase in the aggregate payment and benefits to be provided
to Executive, determined on an after-tax basis (taking into
account the excise tax imposed pursuant to Section 4999 of the
Code, or any successor provision thereto, any tax imposed by
any comparable provision of state law, and any applicable
federal, state and local
<PAGE> 11
income taxes). The determination of whether any reduction in
such payments or benefits to be provided under this Agreement
is required pursuant to the preceding sentence shall be made
at the expense of the Company, if requested by the Executive
or the Company, by the Company's independent accountants. The
fact that the Executive's right to payments or benefits may be
reduced by reason of the limitations contained in this
paragraph 6(f) shall not of itself limit or otherwise affect
any other rights of the Executive other than pursuant to this
Agreement. In the event that any payment or benefit intended
to be provided under this Agreement is required to be reduced
pursuant to this paragraph 6(f), the Executive shall be
entitled to designate the payments and/or benefits to be so
reduced in order to give effect to this paragraph 6(f). The
Company shall provide the Executive with all information
reasonably requested by the Executive to permit the Executive
to make such designation. In the event that the Executive
fails to make such designation within 10 business days of the
Date of Termination, the Company may effect such reduction in
any manner it deems appropriate.
(g) Without limiting the rights of the Executive at law or in
equity, if the Company fails to make any payment or provide any benefit required
to be made or provided hereunder on a timely basis, the Company will pay
interest on the amount or value thereof at an annualized rate of interest equal
to the so-called composite "prime rate" as quoted from time to time during the
relevant period in the Midwest Edition of THE WALL STREET JOURNAL. Such interest
will be payable as it accrues on demand. Any change in such prime rate will be
effective on and as of the date of such change.
(h) Executive shall not be required to mitigate the amount of
any payment or benefit provided for in this Agreement by seeking other
employment or otherwise.
7. CONFIDENTIAL INFORMATION. Executive acknowledges that the
information, observations and data obtained by him while employed by the Company
pursuant to this Agreement, as well as those obtained by him while employed by
the Company or any of its subsidiaries or affiliates or any predecessor thereof
prior to the date of this Agreement, concerning the business or affairs of the
Company or any of its subsidiaries or affiliates or any predecessor thereof
(unless and except to the extent the foregoing become generally known to and
available for use by the public other than as a result of Executive's acts or
omissions to act, "CONFIDENTIAL INFORMATION") are the property of the Company or
such subsidiary or affiliate. Therefore, Executive agrees that during the
Employment Period and for three years thereafter he shall not disclose any
Confidential Information without the prior written consent of the Board unless
and except to the extent that such disclosure is (i) made in the ordinary course
of Executive's performance of his duties under this Agreement or (ii) required
by any subpoena or other legal process (in which event Executive will give the
Company prompt notice of such subpoena or other legal process in order to permit
the Company to seek appropriate protective orders), and that he shall not use
any Confidential Information for his own account without the prior written
consent of the Board. Executive shall deliver to the Company at the termination
of the Employment Period, or at any other time the Company may reasonably
request, all memoranda, notes, plans, records, reports, computer tapes and
software and other documents and data (and copies thereof) relating to the
Confidential Information, or to the work product or the business of the Company
or any of its subsidiaries or affiliates which he may then possess or have under
his control.
<PAGE> 12
8. NON-COMPETE, NON-SOLICITATION.
(a) Executive acknowledges that in the course of his
employment with the Company pursuant to this Agreement he will become familiar,
and during the course of his employment by the Company or any of its
subsidiaries or affiliates or any predecessor thereof prior to the date of this
Agreement he has become familiar, with trade secrets and customer lists of and
other confidential information concerning the Company and its subsidiaries and
affiliates and predecessors thereof and that his services have been and will be
of special, unique and extraordinary value to the Company.
(b) Executive agrees that during the Employment Period and for
a period of one year after termination of his employment with the Company, he
shall not in any manner, directly or indirectly, through any person, firm or
corporation, alone or as a member of a partnership or as an officer, director,
shareholder, investor or employee of or in any other corporation or enterprise
or otherwise, engage or be engaged in, or assist any other person, firm,
corporation or enterprise in engaging or being engaged in, any business then
actively being conducted by the Company or any of its subsidiaries or
affiliates.
(c) Executive further agrees that during the Employment Period
and for a period of two years after termination of his employment with the
Company, he shall not in any manner, directly or indirectly, induce or attempt
to induce any employee of the Company or of any of its subsidiaries or
affiliates to quit or abandon his employ.
(d) Nothing in this paragraph 8 shall prohibit Executive from
being: (i) a shareholder in a mutual fund or a diversified investment company or
(ii) a passive owner of not more than 5% of the outstanding equity securities of
any class of a corporation or other entity which is publicly traded, so long as
Executive has no active participation in the business of such corporation or
other entity.
(e) If, at the time of enforcement of this paragraph, a court
holds that the restrictions stated herein are unreasonable under circumstances
then existing, the parties hereto agree that the maximum period, scope or
geographical area reasonable under such circumstances shall be substituted for
the stated period, scope or area and that the court shall be allowed to revise
the restrictions contained herein to cover the maximum period, scope and area
permitted by law.
9. ENFORCEMENT. Because Executive's services are unique and
because Executive has access to Confidential Information and work product, the
parties hereto agree that the Company would be damaged irreparably in the event
any of the provisions of paragraph 8 hereof were not performed in accordance
with their specific terms or were otherwise breached and that money damages
would be an inadequate remedy for any such non-performance or breach. Therefore,
the Company or its successors or assigns shall be entitled, in addition to other
rights and remedies existing in their favor, to an injunction or injunctions to
prevent any breach or threatened breach of any of such provisions and to enforce
such provisions specifically (without posting a bond or other security).
10. EXECUTIVE REPRESENTATIONS. Executive represents and
warrants to the Company that (i) the execution, delivery and performance of this
Agreement by Executive does not and will not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgment or
decree to which Executive is a party or by which he is bound,
<PAGE> 13
(ii) Executive is not a party to or bound by any employment agreement,
noncompete agreement or confidentiality agreement with any other person or
entity and (iii) upon the execution and delivery of this Agreement by the
Company, this Agreement shall be the valid and binding obligation of Executive,
enforceable in accordance with its terms.
11. SURVIVAL. Subject to any limits on applicability contained
therein, paragraphs 7 and 8 hereof shall survive and continue in full force in
accordance with their terms notwithstanding any termination of the Employment
Period.
12. NOTICES. Any notice provided for in this Agreement shall
be in writing and shall be either personally delivered, sent by reputable
overnight carrier or mailed by first class mail, return receipt requested, to
the recipient at the address below indicated:
NOTICES TO EXECUTIVE:
---------------------
Mr. Thomas L. Kemp
7099 Gates Road
Gates Mills, Ohio 44040
NOTICES TO THE COMPANY:
-----------------------
c/o Mr. King Harris
Pittway Corporation
200 South Wacker Drive, Suite 700
Chicago, IL 60606-5802
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered,
sent or mailed.
13. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
14. PAYMENT OF CERTAIN COSTS AND EXPENSES.
(a) PREVAILING PARTY'S LITIGATION EXPENSES. In the event of
litigation between the Company and Executive related to this Agreement, the
non-prevailing party shall reimburse the prevailing party for any costs and
expenses (including without limitation attorneys' fees) reasonably incurred by
the prevailing party in connection therewith.
(b) CHANGE OF CONTROL OF THE COMPANY. Without limiting the
generality of (a) above, in the event that there is a Change of Control of the
Company, if it should appear to Executive that the Company has failed to comply
with any of its obligations under this Agreement or if it wrongfully withholds
from Executive any amount payable to Executive pursuant to the SERP,
<PAGE> 14
or in the event that the Company or any other person takes or threatens to take
any action to declare this Agreement void or unenforceable, or institutes any
litigation or other action or proceeding designed to deny, or to recover from,
Executive the benefits provided or intended to be provided to Executive
hereunder, the Company irrevocably authorizes Executive from time to time to
retain counsel of Executive's choice, at the expense of the Company as hereafter
provided, to advise and represent Executive in connection with any such
interpretation, enforcement or defense, including without limitation the
initiation or defense of any litigation or other legal action, whether by or
against the Company or any Director, officer, stockholder or other person
affiliated with the Company, in any jurisdiction. Notwithstanding any existing
or prior attorney-client relationship between the Company and such counsel, the
Company irrevocably consents to Executive's entering into an attorney-client
relationship with such counsel, and in that connection the Company and Executive
agree that a confidential relationship will exist between Executive and such
counsel. Without respect to whether Executive prevails, in whole or in part, in
connection with any of the foregoing, the Company will pay and be solely
financially responsible for any and all attorneys' and related fees and expenses
incurred by Executive in connection with any of the foregoing.
(c) SOURCE OF PAYMENTS. Except as otherwise specified herein,
in the event a Change of Control occurs, any payments to Executive pursuant to
this Agreement and the performance of the Company's obligations hereunder shall
be secured by amounts deposited or to be deposited in a trust established by the
Company for the benefit of Executive (and, at the Company's option, for the
benefit of other executives of the Company who are entitled to payments similar
to those provided in this Agreement) (the "Trust"). The Company shall transfer
to such Trust assets from which all or a portion of the payments provided under
this Agreement are to be paid, provided that such assets of the Trust shall at
all times be subject to the claims of general unsecured creditors of the Company
and that neither Executive nor any other person entitled to payments through the
Trust shall at any time have a prior claim to such assets. Any payments to
Executive under this Agreement that are not paid through the Trust shall be paid
from the Company's general assets, and Executive shall have the status of a
general unsecured creditor with respect to the Company's obligations to make
payments under this Agreement.
15. COMPLETE AGREEMENT. This Agreement embodies the complete
agreement and understanding between the parties with respect to the subject
matter hereof and effective as of its date supersedes and preempts any prior
understandings, agreements or representations by or between the parties, written
or oral, which may have related to the subject matter hereof in any way.
16. COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which shall be deemed to be an original and both of which
taken together shall constitute one and the same agreement.
17. SUCCESSORS AND ASSIGNS. This Agreement shall bind and
inure to the benefit of and be enforceable by Executive, the Company and their
respective heirs, executors, personal representatives, successors and assigns,
except that neither party may assign any of his or its rights or delegate any of
his or its obligations hereunder without the prior written consent of the other
party. Executive hereby consents to the assignment by the Company of all of its
rights and obligations hereunder to any successor to the Company by merger or
consolidation or purchase of all or substantially all of the Company's assets,
provided such transferee or successor assumes the liabilities of the Company
hereunder.
<PAGE> 15
18. CHOICE OF LAW. This Agreement shall be governed by the
internal law, and not the laws of conflicts, of the State of Ohio.
19. AMENDMENT AND WAIVER. The provisions of this Agreement may
be amended or waived only with the prior written consent of the Company and
Executive, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall affect the validity, binding effect or
enforceability of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date written below.
PENTON MEDIA, INC.
Date: January 31, 1999 By /S/ KING HARRIS
-----------------------------------
Its Chairman of the Board
Date: February 5, 1999 /S/ THOMAS L. KEMP
-----------------------------------
THOMAS L. KEMP
<PAGE> 1
Exhibit 10.14
RESTATED EMPLOYMENT AGREEMENT
This RESTATED EMPLOYMENT AGREEMENT ("Agreement") effective as
of January 1, 1999, between Penton Media, Inc. (formerly known as Penton
Publishing, Inc.), a Delaware corporation (the "COMPANY"), and Daniel J. Ramella
("EXECUTIVE")
WITNESSETH:
WHEREAS, Executive is presently the President and Chief
Operating Officer of the Company and has made and is expected to continue to
make major contributions to the profitability, growth and financial strength of
the Company;
WHEREAS, the Company recognizes that, as is the case with many
publicly held companies, the possibility of a Change of Control (as that term is
hereafter defined) exists;
WHEREAS, the Company wishes to assure itself of both present
and future continuity of management in the event of any Change of Control;
WHEREAS, the Company wishes to ensure that certain of its
executives are not practically disabled from discharging their duties upon a
Change of Control; and
WHEREAS, the Company and Executive currently are parties to an
Employment Agreement (the "PRIOR AGREEMENT") providing certain benefits, and the
Company and Executive desire to amend and restate the Prior Agreement;
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. EMPLOYMENT. The Company shall employ Executive, and
Executive accepts continued employment with the Company as of the date hereof,
upon the terms and conditions set forth in this Agreement for the period
beginning on the date hereof and ending as provided in paragraph 5 hereof (the
"EMPLOYMENT PERIOD").
2. POSITION AND DUTIES.
(a) During the Employment Period, Executive shall serve as the
chief operating officer of the Company and shall have the normal duties,
responsibilities and authority of an executive serving in such position, subject
to the power of the Board of Directors of the Company (the "BOARD") or the Chief
Executive Officer of the Company to expand or limit such duties,
responsibilities and authority, either generally or in specific instances.
Executive shall have the title President of the Company, subject to the power of
the Board to change such title from time to time. During the Employment Period,
Executive shall also serve as a director of the Company for so long as the Board
(or a nominating committee of the Board) nominates him to that position and he
is elected to it, and as a director of any affiliate of the Company designated
by the Board for so long as the Board causes him to be elected to such position.
<PAGE> 2
(b) Executive shall report to the Chief Executive Officer of
the Company.
(c) During the Employment Period, Executive shall devote his
best efforts and his full business time and attention (except for permitted
vacation periods, reasonable periods of illness or other incapacity, and,
provided such activities do not have more than a DE MINIMIS effect on
Executive's performance of his duties under this Agreement, participation in
charitable and civic endeavors and management of Executive's personal
investments and business interests) to the business and affairs of the Company,
its subsidiaries and affiliates. Executive shall perform his duties and
responsibilities to the best of his abilities in a diligent, trustworthy,
businesslike and efficient manner.
(d) Executive shall perform his duties and responsibilities
principally in the Cleveland, Ohio metropolitan area, and shall not be required
to travel outside that area any more extensively than he has done in the past in
the ordinary course of the business of the Company.
3. COMPENSATION AND BENEFITS.
(a) SALARY. The Company agrees to pay Executive a salary
during the Employment Period, in semi-monthly installments. Executive's initial
salary shall be $365,000 per year. The Compensation Committee of the Board (or,
if there is no such Committee, the Board) shall review Executive's salary from
time to time and may, in its sole discretion, increase it.
(b) BONUS(ES). Effective January 1, 1999 and for subsequent
years, Executive will be eligible for an annual bonus based on the achievement
of specified Company goals (the "Target Bonus") (as determined by the
Compensation Committee of the Board (or, if there is no such Committee, the
Board)). Any bonus payable pursuant to this subparagraph (b) may, at the
discretion of the Compensation Committee of the Board (or, if there is no such
Committee, the Board), after considering any preference expressed by Executive,
be paid in the form of cash, in a Performance Shares Award related to shares of
the Company's Common Stock or in a combination of both.
(c) STOCK OPTIONS. The Company has adopted a plan (the "1998
STOCK OPTION PLAN") pursuant to which options to purchase shares of the
Company's Common Stock, and other equity-based incentive compensation awards,
may be granted to Executive and other officers of the Company. Executive shall
be eligible to receive grants of options and other awards under the 1998 Stock
Option Plan, at the discretion of the Compensation Committee of the Board (or,
if there is no such Committee, the Board). Under the terms of the 1998 Stock
Option Plan, the Compensation Committee of the Board (or, if there is no such
Committee, the Board) has the right to amend the 1998 Stock Option Plan. If, at
the time of the grant of any option pursuant to this paragraph (c), the issuance
of shares upon exercise thereof has not been registered under the Securities Act
of 1933, as amended, it shall be a condition to such grant that Executive
execute and deliver to the Company a certificate confirming that Executive is an
accredited investor (as such term is used in Regulation D under such Act) and
including transfer restrictions and other provisions customary in connection
with grants under such circumstances. Each option to be granted as set forth
above shall be substantially in the form of EXHIBIT 1 attached to this
Agreement, except that it is understood that reference to any then existing
registration statement or related plan information document in EXHIBIT 1, or its
equivalent, shall be included if and only if the same exists at the time of
grant and is relevant to such option.
<PAGE> 3
(d) EXPENSE REIMBURSEMENT. The Company shall reimburse
Executive for all reasonable expenses incurred by him during the Employment
Period in the course of performing his duties under this Agreement that are
consistent with the Company's policies in effect from time to time with respect
to travel, entertainment and other business expenses, subject to the Company's
requirements applicable generally with respect to reporting and documentation of
such expenses. Executive acknowledges that under the Company's current air
travel reimbursement policy, reimbursement is limited to coach fare (plus
Executive's cost of any upgrade certificates used to upgrade to first class) on
travel within the United States and is limited to business class fare on travel
to and from foreign cities.
(e) STANDARD EXECUTIVE BENEFITS PACKAGE. In addition to the
salary, bonus(es), stock options and expense reimbursements payable to Executive
pursuant to this paragraph 3, Executive shall be entitled during the Employment
Period to participate, on the same basis as other executives of the Company, in
the Company's Standard Executive Benefits Package. The Company's "STANDARD
EXECUTIVE BENEFITS PACKAGE" means those benefits (including insurance, vacation,
Company car or car allowance, equity-based benefits, and other benefits) for
which substantially all of the executives of the Company are from time to time
generally eligible, as determined from time to time by the Board.
(f) ADDITIONAL BENEFITS. In addition to participation in the
Company's Standard Executive Benefits Package pursuant to this paragraph,
Executive shall be entitled during the Employment Period to:
(i) additional term life insurance coverage in an amount
equal to Executive's salary, but only if and so long
as such additional coverage is available at standard
rates from the insurer providing term life insurance
coverage under the Standard Executive Benefits
Package or from a comparable insurer acceptable to
the Company;
(ii) supplementary long-term disability coverage in an
amount that will include maximum covered annual
compensation of $330,000 and maximum monthly payments
of $18,333, but only if and so long as such
supplementary coverage is available at standard rates
from the insurer providing long-term disability
coverage under the Standard Executive Benefits
Package or a comparable insurer acceptable to the
Company; and
(iii) pursuant to authorization by the Compensation
Committee of the Board (or, if there is no such
Committee, the Board), participation in the Penton
Media, Inc. Supplemental Executive Retirement Plan
(the "SERP"), effective August 7, 1998, as currently
in effect, except that the beginning date for accrual
of a benefit shall be the date on which Executive's
employment with the Company began.
(g) INDEMNIFICATION. With respect to Executive's acts or
failures to act during the Employment Period in his capacity as a director,
officer, employee or agent of the Company, Executive shall be entitled to
indemnification from the Company, and to liability insurance coverage (if any),
on the same basis as other directors and officers of the Company.
<PAGE> 4
4. ADJUSTMENTS. Notwithstanding any other provision of this
Agreement, it is expressly understood and agreed that if there is a significant
reduction in the level of the business to which Executive's duties under this
Agreement relate, or if all or any significant part of such business is disposed
of by the Company and/or its subsidiaries or affiliates during the Employment
Period but Executive thereafter remains an employee of the Company, the
Compensation Committee of the Board (or, if there is no such Committee, the
Board) may make adjustments in Executive's duties, responsibility and authority,
and in Executive's compensation, as the Compensation Committee of the Board (or,
if there is no such Committee, the Board) deems appropriate to reflect such
reduction or disposition.
5. EMPLOYMENT PERIOD.
(a) Except as hereinafter provided, the Employment Period
shall continue until, and shall end upon, the third anniversary of the date on
which the Employment Period begins.
(b) On each anniversary of the date on which the Employment
Period begins which precedes Executive's sixty-fifth birthday by more than two
years, unless the Employment Period shall have ended early pursuant to (c) below
or either party shall have given the other party written notice that the
extension provision in this sentence shall no longer apply, the Employment
Period shall be extended for an additional year (unless Executive's sixty-fifth
birthday occurs during such additional year, in which event the Employment
Period shall be extended only until such birthday). In no event shall the
Employment Period be extended beyond Executive's sixty-fifth birthday except by
mutual written agreement of the Company and Executive.
(c) Notwithstanding (a) and (b) above, the Employment Period
shall end early upon the first to occur of any of the following events:
(i) Executive's death;
(ii) Executive's retirement upon or after reaching age 65
("RETIREMENT");
(iii) the Company's termination of Executive's employment
on account of Executive's having become unable (as
determined by the Board in good faith) to regularly
perform his duties hereunder by reason of illness or
incapacity for a period of more than six (6)
consecutive months ("TERMINATION FOR DISABILITY");
(iv) the Company's termination of Executive's employment
for Cause ("TERMINATION FOR CAUSE");
(v) the Company's termination of Executive's employment
other than a Termination for Disability or a
Termination for Cause ("TERMINATION WITHOUT CAUSE");
(vi) Executive's termination of Executive's employment for
Good Reason, by means of advance written notice to
the Company at least thirty (30) days prior to the
effective date of such termination identifying such
termination as a Termination by Executive for Good
Reason and identifying the Good Reason ("TERMINATION
BY EXECUTIVE FOR GOOD REASON") (it being expressly
<PAGE> 5
understood that Executive's giving notice that the
extension provision in the first sentence of
paragraph 5(b) hereof shall no longer apply shall not
constitute a Termination by Executive for Good
Reason);
(vii) Executive's termination of Executive's employment for
any reason other than Good Reason, by means of
advance written notice to the Company at least one
hundred twenty (120) days prior to the effective date
of such termination identifying such termination as a
Termination by Executive with Advance Notice
("TERMINATION BY EXECUTIVE WITH ADVANCE NOTICE") (it
being expressly understood that Executive's giving
notice that the extension provision in the first
sentence of paragraph 5(b) hereof shall no longer
apply shall not constitute a Termination by Executive
with Advance Notice); or
(viii) the termination of Executive's employment (A) on
account of a Termination without Cause before the
second anniversary of a Change of Control, (B) on
account of a Termination by Executive for Good Reason
before the second anniversary of a Change of Control
or (C) in connection with but prior to a Change of
Control and following the commencement of any
discussion with any third party that (i) requests or
suggests that Executive's employment be terminated
and (ii) ultimately engages in a Change of Control
(collectively, "TERMINATION FOLLOWING A CHANGE OF
CONTROL").
(d) For purposes of this Agreement, "CAUSE" shall mean:
(i) the commission by Executive of a felony or a crime
involving moral turpitude;
(ii) the commission by Executive of a fraud;
(iii) the commission by Executive of any act involving
dishonesty or disloyalty with respect to the Company
or any of its subsidiaries or affiliates that harms
or damages any of them to any extent;
(iv) conduct by Executive that brings the Company or any
of its subsidiaries or affiliates into substantial
public disgrace or disrepute;
(v) gross negligence or willful misconduct by Executive
with respect to the Company or any of its
subsidiaries or affiliates;
(vi) repudiation of this Agreement by Executive or
Executive's abandonment of his employment with the
Company (it being expressly understood that a
Termination by Executive for Good Reason or a
Termination by Executive with Advance Notice shall
not constitute such a repudiation or abandonment);
(vii) breach by Executive of any of the agreements in
paragraph 8 hereof prior to the end of the Employment
Period; or
<PAGE> 6
(viii) any other breach by Executive of this Agreement which
is material and which is not cured within thirty (30)
days after written notice thereof to Executive from
the Company.
(ix) Notwithstanding the foregoing, Executive shall in no
event be deemed to have been terminated for "Cause"
hereunder unless prior to his termination there shall
have been delivered to Executive a copy of a
resolution duly adopted by the affirmative vote of
not less than a majority of the non- employee
Directors then in office at a meeting of the Board
called and held for such purpose, after reasonable
notice to Executive and an opportunity for Executive,
together with Executive's counsel (if Executive
chooses to have counsel present at such meeting), to
be heard before the Board, finding that, in the good
faith opinion of the Board, Executive had committed
an act constituting "Cause" as herein defined and
specifying the particulars thereof in detail. While
such a determination will be a condition precedent
for the existence of "Cause" for purposes of this
Agreement, such a determination will not be
determinative or create a presumption that "Cause" in
fact exists and nothing herein will limit the right
of Executive or his beneficiaries to contest the
validity or propriety of any such determination.
(e) For purposes of this Agreement, "GOOD REASON" shall
mean:
(i) a reduction by the Company in Executive's salary to
an amount less than "EXECUTIVE'S REFERENCE SALARY"
(i.e., Executive's initial salary or, in the event
the Employment Period has been extended pursuant to
paragraph 5(b) hereof, Executive's salary on the date
on which the most recent such extension occurred) or
any downward adjustment in Executive's Target Bonus;
or
(ii) the Company's giving notice that the extension
provision in the first sentence of paragraph 5(b)
hereof shall no longer apply; or
(iii) any breach by the Company of this Agreement which is
material and which is not cured within thirty (30)
days after written notice thereof to the Company from
Executive.
(f) For purposes of this Agreement, "CHANGE OF CONTROL" shall
mean the occurrence of any of the following events during the Employment Period:
(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 40% or more of either: (A) the
then-outstanding shares of common stock of the Company (the "Company
Common Stock") or (B) the combined voting power of the then-outstanding
voting securities of the Company entitled to vote generally in the
election of directors ("Voting Stock"); PROVIDED, HOWEVER, that for
purposes of this subparagraph (i), the following acquisitions shall not
constitute a Change of Control: (A) any acquisition directly from the
Company, (B) any acquisition by the Company, a subsidiary of the
Company or the Harris Group, (C) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company
or any subsidiary of the Company,
<PAGE> 7
or (D) any acquisition by any Person pursuant to a transaction which
complies with clauses (A), (B) and (C) of subparagraph (iii) of this
paragraph 5(f); or
(ii) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason (other than death or
disability) to constitute at least a majority of the Board; PROVIDED,
HOWEVER, that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (either by a specific
vote or by approval of the proxy statement of the Company in which such
person is named as a nominee for director, without objection to such
nomination) shall be considered as though such individual were a member
of the Incumbent Board, but excluding for this purpose, any such
individual whose initial assumption of office occurs as a result of an
actual or threatened election contest (within the meaning of Rule
14a-11 of the Exchange Act) with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all
of the assets of the Company (a "Business Combination"), in each case,
unless, following such Business Combination, (A) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Company Common Stock and Voting Stock immediately
prior to such Business Combination beneficially own, directly or
indirectly, more than a majority of, respectively, the then-outstanding
shares of common stock and the combined voting power of the
then-outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the entity resulting from
such Business Combination (including, without limitation, an entity
which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through
one or more subsidiaries) in substantially the same proportions
relative to each other as their ownership, immediately prior to such
Business Combination, of the Company Common Stock and Voting Stock of
the Company, as the case may be, (B) no Person (excluding any entity
resulting from such Business Combination, the Harris Group or any
employee benefit plan (or related trust) sponsored or maintained by the
Company, a subsidiary of the Company or such entity resulting from such
Business Combination) beneficially owns, directly or indirectly, 40% or
more of, respectively, the then-outstanding shares of common stock of
the entity resulting from such Business Combination, or the combined
voting power of the then-outstanding voting securities of such
corporation except to the extent that such ownership existed prior to
the Business Combination and (C) at least a majority of the members of
the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(iv) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
(v) For purposes of this paragraph 5(f), the "Harris Group"
shall mean Messrs. Irving B. Harris, Neison Harris, King Harris,
William W. Harris and June H. 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),
<PAGE> 8
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.
6. POST-EMPLOYMENT PERIOD PAYMENTS.
(a) If the Employment Period ends on the date on which
(without any extension thereof) it is then scheduled to end pursuant to
paragraph 5 hereof, or if the Employment Period ends early pursuant to paragraph
5 hereof for any reason, Executive shall cease to have any rights to salary,
bonus (if any), options, expense reimbursements or other benefits other than:
(i) any salary which has accrued but is unpaid, any reimbursable expenses which
have been incurred but are unpaid, and any unexpired vacation days which have
accrued under the Company's vacation policy but are unused, as of the end of the
Employment Period, (ii) any option rights or plan benefits which by their terms
extend beyond termination of Executive's employment (but only to the extent
provided in any option theretofore granted to Executive or in the SERP or any
other benefit plan in which Executive has participated as an employee of the
Company), (iii) any benefits to which Executive is entitled under Part 6 of
Subtitle B of Title I of the Employee Retirement Income Security Act of 1974, as
amended ("COBRA"), and (iv) any other amount(s) payable pursuant to the
succeeding provisions of this paragraph 6.
(b) If the Employment Period ends pursuant to paragraph 5
hereof on Executive's sixty-fifth birthday, or if the Employment Period ends
early pursuant to paragraph 5 hereof on account of Executive's death, Retirement
(provided such Retirement is not a Termination Following a Change of Control) or
Termination for Disability, the Company shall make no further payments to
Executive except as contemplated in (a)(i), (ii) and (iii) above.
(c) If the Employment Period ends early pursuant to paragraph
5 hereof on account of Termination for Cause, the Company shall pay Executive an
amount equal to that amount Executive would have received as salary (based on
Executive's salary then in effect) had the Employment Period remained in effect
until the later of the effective date of the Company's termination of
Executive's employment or the date thirty days after the Company's notice to
Executive of such termination. The Company shall make no further payments to
Executive except as contemplated in (a)(i), (ii) and (iii) above.
(d) If the Employment Period ends early pursuant to paragraph
5 hereof on account of a Termination without Cause or a Termination by Executive
for Good Reason, and such termination does not constitute a Termination
Following a Change of Control, the Company shall pay to Executive a lump sum
payment equal to three times Executive's base salary at the time of such
termination (or, if higher, Executive's Reference Salary). In addition, the
Company shall reimburse Executive (net after taxes on the receipt of such
reimbursement) for any premiums paid by Executive for health insurance provided
to Executive (for Executive and his dependents) by the Company subsequent to the
end of the Employment Period pursuant to the requirements of COBRA as in effect
on the date of this Agreement. The Company shall make no further payments to
Executive except as contemplated in (a)(i), (ii) and (iii) above. It is
expressly understood that the Company's payment obligations under this
subparagraph (d) shall cease in the event Executive breaches any of his
agreements in paragraph 7 or 8 hereof.
<PAGE> 9
(e) If the Employment Period ends early pursuant to paragraph
5 hereof on account of a Termination by Executive with Advance Notice, and such
termination does not constitute a Termination Following a Change of Control, the
Company shall make no further payments to Executive except as contemplated in
(a)(i), (ii) and (iii) above.
(f)(i) If the Employment Period ends early pursuant to
paragraph 5 hereof on account of a Termination
Following a Change of Control, Executive shall be
entitled to receive the following:
(A) For a period of three years following the
date of termination, Executive's base salary
at the time of such termination (or, if
higher, Executive's Reference Salary)
payable at the times such amounts would have
been paid; PROVIDED, HOWEVER, that if
Executive so chooses, in his sole
discretion, such payment under this
subparagraph (f)(i)(A) shall be made in a
lump sum;
(B) A lump sum payment equal to Executive's
Target Bonus for the year in which such
termination occurs (or, if higher,
Executive's Target Bonus for the preceding
year or the year in which the Change of
Control occurs);
(C) If Executive's employment is terminated
after July 1 of the then- current year, an
additional amount equal to the product of
(x) Executive's Target Bonus for the year in
which such termination occurs (or, if
higher, Executive's Target Bonus for the
preceding year or the year in which the
Change of Control occurs) multiplied by (y)
a fraction, the numerator of which shall be
the number of months that have elapsed, on
the day of termination, during the
then-current year (rounded up to the nearest
full month) and the denominator of which
shall be 12; and
(D) For a period of one year following the date
of termination, Executive shall be entitled
to be a full participant in, and shall be
entitled to the benefits provided under, the
Company's Standard Executive Benefits
Package (but shall not be entitled to stock
option, performance share, performance unit,
stock purchase, stock appreciation or
similar equity-based compensatory benefit
awards) and the additional benefits set
forth in Section 3(f) hereof at the time of
such termination (or, if higher, for the
preceding year or the year in which the
Change of Control occurs). If, however,
Executive is not eligible to participate in
the benefits as set forth in the preceding
sentence, the Company shall reimburse
Executive, on a monthly basis (net after
taxes on the receipt of such reimbursement),
for any premiums or other fees paid by
Executive to obtain benefits (for Executive
and his dependents) equivalent to the
Standard Executive Benefits Package and the
additional benefits set forth in Section
3(f). Notwithstanding the foregoing or any
other provision of this Agreement, (A) for
the purpose of determining the period of
continuation coverage to which the Executive
or any of his dependents is entitled
pursuant to the
<PAGE> 10
requirements of COBRA, the Executive's
"qualifying event," subject to the
requirements of applicable plans, will be
the termination of the one-year period set
forth above in this subparagraph (f)(i)(D)
and the Executive will be considered to have
remained actively employed on a full time
basis through that date and (B) the Company
shall reimburse Executive (net after taxes
on the receipt of such reimbursement) for
any premiums paid by Executive for health
insurance provided to Executive (for
Executives and his dependents) by the
Company pursuant to the requirements of
COBRA as in effect on the date of this
Agreement.
(ii) LIMITATION ON PAYMENTS AND BENEFITS. Notwithstanding
any provision of this Agreement to the contrary, if
any amount or benefit to be paid or provided under
this Agreement or otherwise pursuant to or by reason
of any other agreement, policy, plan, program or
arrangement, including without limitation any bonus,
stock option, performance share, performance unit,
stock appreciation right or similar right, or the
lapse or termination of any restriction on or the
vesting or exercisability of any of the foregoing
would be an "Excess Parachute Payment," within the
meaning of Section 280G of the Code, or any successor
provision thereto, but for the application of this
sentence, then the payments and benefits to be paid
or provided under this Agreement shall be reduced to
the minimum extent necessary (but in no event to less
than zero) so that no portion of any such payment or
benefit, as so reduced, constitutes an Excess
Parachute Payment; provided, however, that the
foregoing reduction shall be made only if and to the
extent that such reduction would result in an
increase in the aggregate payment and benefits to be
provided to Executive, determined on an after-tax
basis (taking into account the excise tax imposed
pursuant to Section 4999 of the Code, or any
successor provision thereto, any tax imposed by any
comparable provision of state law, and any applicable
federal, state and local income taxes). The
determination of whether any reduction in such
payments or benefits to be provided under this
Agreement is required pursuant to the preceding
sentence shall be made at the expense of the Company,
if requested by the Executive or the Company, by the
Company's independent accountants. The fact that the
Executive's right to payments or benefits may be
reduced by reason of the limitations contained in
this paragraph 6(f) shall not of itself limit or
otherwise affect any other rights of the Executive
other than pursuant to this Agreement. In the event
that any payment or benefit intended to be provided
under this Agreement is required to be reduced
pursuant to this paragraph 6(f), the Executive shall
be entitled to designate the payments and/or benefits
to be so reduced in order to give effect to this
paragraph 6(f). The Company shall provide the
Executive with all information reasonably requested
by the Executive to permit the Executive to make such
designation. In the event that the Executive fails to
make such designation within 10 business days of the
Date of Termination, the Company may effect such
reduction in any manner it deems appropriate.
(g) Without limiting the rights of the Executive at law or in
equity, if the Company fails to make any payment or provide any benefit required
to be made or provided
<PAGE> 11
hereunder on a timely basis, the Company will pay interest on the amount or
value thereof at an annualized rate of interest equal to the so-called composite
"prime rate" as quoted from time to time during the relevant period in the
Midwest Edition of THE WALL STREET JOURNAL. Such interest will be payable as it
accrues on demand. Any change in such prime rate will be effective on and as of
the date of such change.
(h) Executive shall not be required to mitigate the amount of
any payment or benefit provided for in this Agreement by seeking other
employment or otherwise.
7. CONFIDENTIAL INFORMATION. Executive acknowledges that the
information, observations and data obtained by him while employed by the Company
pursuant to this Agreement, as well as those obtained by him while employed by
the Company or any of its subsidiaries or affiliates or any predecessor thereof
prior to the date of this Agreement, concerning the business or affairs of the
Company or any of its subsidiaries or affiliates or any predecessor thereof
(unless and except to the extent the foregoing become generally known to and
available for use by the public other than as a result of Executive's acts or
omissions to act, "CONFIDENTIAL INFORMATION") are the property of the Company or
such subsidiary or affiliate. Therefore, Executive agrees that during the
Employment Period and for three years thereafter he shall not disclose any
Confidential Information without the prior written consent of the Chief
Executive Officer of the Company unless and except to the extent that such
disclosure is (i) made in the ordinary course of Executive's performance of his
duties under this Agreement or (ii) required by any subpoena or other legal
process (in which event Executive will give the Company prompt notice of such
subpoena or other legal process in order to permit the Company to seek
appropriate protective orders), and that he shall not use any Confidential
Information for his own account without the prior written consent of the Chief
Executive Officer of the Company. Executive shall deliver to the Company at the
termination of the Employment Period, or at any other time the Company may
reasonably request, all memoranda, notes, plans, records, reports, computer
tapes and software and other documents and data (and copies thereof) relating to
the Confidential Information, or to the work product or the business of the
Company or any of its subsidiaries or affiliates which he may then possess or
have under his control.
8. NON-COMPETE, NON-SOLICITATION.
(a) Executive acknowledges that in the course of his
employment with the Company pursuant to this Agreement he will become familiar,
and during the course of his employment by the Company or any of its
subsidiaries or affiliates or any predecessor thereof prior to the date of this
Agreement he has become familiar, with trade secrets and customer lists of and
other confidential information concerning the Company and its subsidiaries and
affiliates and predecessors thereof and that his services have been and will be
of special, unique and extraordinary value to the Company.
(b) Executive agrees that during the Employment Period and for
a period of one year after termination of his employment with the Company, he
shall not in any manner, directly or indirectly, through any person, firm or
corporation, alone or as a member of a partnership or as an officer, director,
shareholder, investor or employee of or in any other corporation or enterprise
or otherwise, engage in or be engaged in, or assist any other person, firm,
corporation or enterprise in engaging or being engaged in, any business then
actively being conducted by the Company or any of its subsidiaries or
affiliates.
<PAGE> 12
(c) Executive further agrees that during the Employment Period
and for a period of two years after termination of his employment with the
Company, he shall not in any manner, directly or indirectly, induce or attempt
to induce any employee of the Company or of any of its subsidiaries or
affiliates to quit or abandon his employ.
(d) Nothing in this paragraph 8 shall prohibit Executive from
being: (i) a shareholder in a mutual fund or a diversified investment company or
(ii) a passive owner of not more than 5% of the outstanding equity securities of
any class of a corporation or other entity which is publicly traded, so long as
Executive has no active participation in the business of such corporation or
other entity.
(e) If, at the time of enforcement of this paragraph, a court
holds that the restrictions stated herein are unreasonable under circumstances
then existing, the parties hereto agree that the maximum period, scope or
geographical area reasonable under such circumstances shall be substituted for
the stated period, scope or area and that the court shall be allowed to revise
the restrictions contained herein to cover the maximum period, scope and area
permitted by law.
9. ENFORCEMENT. Because Executive's services are unique and
because Executive has access to Confidential Information and work product, the
parties hereto agree that the Company would be damaged irreparably in the event
any of the provisions of paragraph 8 hereof were not performed in accordance
with their specific terms or were otherwise breached and that money damages
would be an inadequate remedy for any such non-performance or breach. Therefore,
the Company or its successors or assigns shall be entitled, in addition to other
rights and remedies existing in their favor, to an injunction or injunctions to
prevent any breach or threatened breach of any of such provisions and to enforce
such provisions specifically (without posting a bond or other security).
10. EXECUTIVE REPRESENTATIONS. Executive represents and
warrants to the Company that (i) the execution, delivery and performance of this
Agreement by Executive does not and will not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgment or
decree to which Executive is a party or by which he is bound, (ii) Executive is
not a party to or bound by any employment agreement, noncompete agreement or
confidentiality agreement with any other person or entity and (iii) upon the
execution and delivery of this Agreement by the Company, this Agreement shall be
the valid and binding obligation of Executive, enforceable in accordance with
its terms.
11. SURVIVAL. Subject to any limits on applicability contained
therein, paragraphs 7 and 8 hereof shall survive and continue in full force in
accordance with their terms notwithstanding any termination of the Employment
Period.
12. NOTICES. Any notice provided for in this Agreement shall
be in writing and shall be either personally delivered, sent by reputable
overnight carrier or mailed by first class mail, return receipt requested, to
the recipient at the address below indicated:
NOTICES TO EXECUTIVE:
---------------------
Mr. Daniel J. Ramella
2204 Land's End Lane
Westlake, OH 44145
<PAGE> 13
NOTICES TO THE COMPANY:
-----------------------
Mr. Thomas L. Kemp
Chief Executive Officer
Penton Media, Inc.
1100 Superior Avenue
Cleveland, OH 44114
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered,
sent or mailed.
13. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
14. PAYMENT OF CERTAIN COSTS AND EXPENSES.
(a) PREVAILING PARTY'S LITIGATION EXPENSES. In the event of
litigation between the Company and Executive related to this Agreement, the
non-prevailing party shall reimburse the prevailing party for any costs and
expenses (including without limitation attorneys' fees) reasonably incurred by
the prevailing party in connection therewith.
(b) CHANGE OF CONTROL OF THE COMPANY. Without limiting the
generality of (a) above, in the event that there is a Change of Control of the
Company, if it should appear to Executive that the Company has failed to comply
with any of its obligations under this Agreement or if it wrongfully withholds
from Executive any amount payable to Executive pursuant to the SERP, or in the
event that the Company or any other person takes or threatens to take any action
to declare this Agreement void or unenforceable, or institutes any litigation or
other action or proceeding designed to deny, or to recover from, Executive the
benefits provided or intended to be provided to Executive hereunder, the Company
irrevocably authorizes Executive from time to time to retain counsel of
Executive's choice, at the expense of the Company as hereafter provided, to
advise and represent Executive in connection with any such interpretation,
enforcement or defense, including without limitation the initiation or defense
of any litigation or other legal action, whether by or against the Company or
any Director, officer, shareholder or other person affiliated with the Company,
in any jurisdiction. Notwithstanding any existing or prior attorney-client
relationship between the Company and such counsel, the Company irrevocably
consents to Executive's entering into an attorney-client relationship with such
counsel, and in that connection the Company and Executive agree that a
confidential relationship will exist between Executive and such counsel. Without
respect to whether Executive prevails, in whole or in part, in connection with
any of the foregoing, the Company will pay and be solely financially responsible
for any and all attorneys' and related fees and expenses incurred by Executive
in connection with any of the foregoing.
(c) SOURCE OF PAYMENTS. Except as otherwise specified herein,
in the event a Change of Control occurs, any payments to Executive pursuant to
this Agreement and the
<PAGE> 14
performance of the Company's obligations hereunder shall be secured by amounts
deposited or to be deposited in a trust established by the Company for the
benefit of Executive (and, at the Company's option, for the benefit of other
executives of the Company who are entitled to payments similar to those provided
in this Agreement) (the "Trust"). The Company shall transfer to such Trust
assets from which all or a portion of the payments provided under this Agreement
are to be paid, provided that such assets of the Trust shall at all times be
subject to the claims of general unsecured creditors of the Company and that
neither Executive nor any other person entitled to payments through the Trust
shall at any time have a prior claim to such assets. Any payments to Executive
under this Agreement that are not paid through the Trust shall be paid from the
Company's general assets, and Executive shall have the status of a general
unsecured creditor with respect to the Company's obligations to make payments
under this Agreement.
15. COMPLETE AGREEMENT. This Agreement embodies the complete
agreement and understanding between the parties with respect to the subject
matter hereof and effective as of its date supersedes and preempts any prior
understandings, agreements or representations by or between the parties, written
or oral, which may have related to the subject matter hereof in any way.
16. COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which shall be deemed to be an original and both of which
taken together shall constitute one and the same agreement.
17. SUCCESSORS AND ASSIGNS. This Agreement shall bind and
inure to the benefit of and be enforceable by Executive, the Company and their
respective heirs, executors, personal representatives, successors and assigns,
except that neither party may assign any of his or its rights or delegate any of
his or its obligations hereunder without the prior written consent of the other
party. Executive hereby consents to the assignment by the Company of all of its
rights and obligations hereunder to any successor to the Company by merger or
consolidation or purchase of all or substantially all of the Company's assets,
provided such transferee or successor assumes the liabilities of the Company
hereunder.
18. CHOICE OF LAW. This Agreement shall be governed by the
internal law, and not the laws of conflicts, of the State of Ohio.
19. AMENDMENT AND WAIVER. The provisions of this Agreement may
be amended or waived only with the prior written consent of the Company and
Executive, and no course of conduct or failure or delay in enforcing the
provisions of this Agreement shall affect the validity, binding effect or
enforceability of this Agreement.
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date written below.
PENTON MEDIA, INC.
Date: February 5, 1999 By /S/ THOMAS L. KEMP
------------------------------------
Thomas L. Kemp
Chief Executive Officer
Date: February 10, 1999 /S/ DANIEL J. RAMELLA
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DANIEL J. RAMELLA
<PAGE> 1
Exhibit 10.15
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT ("AGREEMENT") made as of January 1, 1999, between
Penton Media, Inc. (formerly known as Penton Publishing, Inc.), a Delaware
corporation (the "COMPANY"), and James D. Atherton ("EXECUTIVE")
In consideration of the mutual covenants contained herein and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT. The Company shall employ Executive, and Executive accepts
continued employment with the Company as of the date hereof, upon the terms and
conditions set forth in this Agreement for the period beginning on the date
hereof and ending as provided in paragraph 5 hereof (the "EMPLOYMENT PERIOD").
2. POSITION AND DUTIES.
(a) During the Employment Period, Executive shall serve as a Group
President of the Company, with initial responsibility for the Company's
Mechanical Systems/Construction, Government/Compliance, Management, Supply
Chain/Aviation, Industrial Shows of America, and Ancillary Product Sales and
Marketing Groups (the "Division"), and shall have the normal duties,
responsibilities and authority of an executive serving in such position, subject
to the power of the Board of Directors of the Company (the "BOARD") or the Chief
Executive Officer of the Company to expand or limit such duties,
responsibilities and authority, either generally or in specific instances.
(b) Executive shall report to the Chief Executive Officer or the President
and Chief Operating Officer of the Company.
(c) During the Employment Period, Executive shall devote his best efforts
and his full business time and attention (except for permitted vacation periods,
reasonable periods of illness or other incapacity, and, provided such activities
do not have more than a DE MINIMIS effect on Executive's performance of his
duties under this Agreement, participation in charitable and civic endeavors and
management of Executive's personal investments and business interests) to the
business and affairs of the Company and the Division. Executive shall perform
his duties and responsibilities to the best of his abilities in a diligent,
trustworthy, businesslike and efficient manner.
(d) Executive shall perform his duties and responsibilities principally in
the Cleveland, Ohio metropolitan area, and shall not be required to travel
outside that area any more extensively than he has done in the past in the
ordinary course of the business of the Company.
<PAGE> 2
3. COMPENSATION AND BENEFITS.
(a) SALARY. The Company agrees to pay Executive a salary during the
Employment Period, in semi-monthly installments. Executive's initial salary
shall be $265,000 per year. The Compensation Committee of the Board (or, if
there is no such Committee, the Board) shall review Executive's salary from time
to time and may, in its sole discretion, increase it.
(b) BONUS(ES). Effective January 1, 1999 and for subsequent years,
Executive will be eligible for an annual bonus based on the achievement of
specified Company goals (the "Target Bonus") (as determined by the Compensation
Committee of the Board (or, if there is no such Committee, the Board)). Any
bonus payable pursuant to this subparagraph (b) may, at the discretion of the
Compensation Committee of the Board (or, if there is no such Committee, the
Board), after considering any preference expressed by Executive, be paid in the
form of cash, in a Performance Shares Award related to shares of the Company's
Common Stock or in a combination of both.
(c) STOCK OPTIONS. The Company has adopted a plan (the "1998 STOCK OPTION
PLAN") pursuant to which options to purchase shares of the Company's Common
Stock, and other equity-based incentive compensation awards, may be granted to
Executive and other officers of the Company. Executive shall be eligible to
receive grants of options and other awards under the 1998 Stock Option Plan, at
the discretion of the Compensation Committee of the Board (or, if there is no
such Committee, the Board). Under the terms of the 1998 Stock Option Plan, the
Compensation Committee of the Board (or, if there is no such Committee, the
Board) has the right to amend the 1998 Stock Option Plan. If, at the time of the
grant of any option pursuant to this paragraph (c), the issuance of shares upon
exercise thereof has not been registered under the Securities Act of 1933, as
amended, it shall be a condition to such grant that Executive execute and
deliver to the Company a certificate confirming that Executive is an accredited
investor (as such term is used in Regulation D under such Act) and including
transfer restrictions and other provisions customary in connection with grants
under such circumstances. Each option to be granted as set forth above shall be
substantially in the form of EXHIBIT 1 attached to this Agreement, except that
it is understood that reference to any then existing registration statement or
related plan information document in EXHIBIT 1, or its equivalent, shall be
included if and only if the same exists at the time of grant and is relevant to
such option.
(d) EXPENSE REIMBURSEMENT. The Company shall reimburse Executive for all
reasonable expenses incurred by him during the Employment Period in the course
of performing his duties under this Agreement that are consistent with the
Company's policies in effect from time to time with respect to travel,
entertainment and other business expenses, subject to the Company's requirements
applicable generally with respect to reporting and documentation of such
expenses. Executive acknowledges that under the Company's current air travel
reimbursement policy, reimbursement is limited to coach fare (plus Executive's
cost of any upgrade certificates used to upgrade to first class) on travel
within the United States and is limited to business class fare on travel to and
from foreign cities.
(e) STANDARD EXECUTIVE BENEFITS PACKAGE. In addition to the salary,
bonus(es), stock options and expense reimbursements payable to Executive
pursuant to this paragraph, Executive shall be entitled during the Employment
Period to participate, on the same basis as other executives of the Company, in
the Company's Standard Executive Benefits Package. The Company's "STANDARD
EXECUTIVE BENEFITS PACKAGE" means those benefits (including insurance, vacation,
Company car or car allowance, equity-based benefits, and other benefits) for
which
<PAGE> 3
substantially all of the executives of the Company are from time to time
generally eligible, as determined from time to time by the Board.
(f) INDEMNIFICATION. With respect to Executive's acts or failures to act
during the Employment Period in his capacity as a director, officer, employee or
agent of the Company, Executive shall be entitled to indemnification from the
Company, and to liability insurance coverage (if any), on the same basis as
other directors and officers of the Company.
4. ADJUSTMENTS. Notwithstanding any other provision of this Agreement, it
is expressly understood and agreed that if there is a significant reduction in
the level of the business to which Executive's duties under this Agreement
relate, or if all or any significant part of such business is disposed of by the
Company and/or its subsidiaries or affiliates during the Employment Period but
Executive thereafter remains an employee of the Company, the Compensation
Committee of the Board (or, if there is no such Committee, the Board) may make
adjustments in Executive's duties, responsibility and authority, and in
Executive's compensation, as the Compensation Committee of the Board (or, if
there is no such Committee, the Board) deems appropriate to reflect such
reduction or disposition.
5. EMPLOYMENT PERIOD.
(a) Except as hereinafter provided, the Employment Period shall continue
until, and shall end upon, the second anniversary of the date on which the
Employment Period begins.
(b) On each anniversary of the date on which the Employment Period begins
which precedes Executive's sixty-fifth birthday by more than one year, unless
the Employment Period shall have ended early pursuant to (c) below or either
party shall have given the other party written notice that the extension
provision in this sentence shall no longer apply, the Employment Period shall be
extended for an additional year (unless Executive's sixty-fifth birthday occurs
during such additional year, in which event the Employment Period shall be
extended only until such birthday). In no event shall the Employment Period be
extended beyond Executive's sixty-fifth birthday except by mutual written
agreement of the Company and Executive.
(c) Notwithstanding (a) and (b) above, the Employment Period shall end
early upon the first to occur of any of the following events:
(i) Executive's death;
(ii) Executive's retirement upon or after reaching age 65 ("RETIREMENT");
(iii) the Company's termination of Executive's employment on account of
Executive's having become unable (as determined by the Board in good faith) to
regularly perform his duties hereunder by reason of illness or incapacity for a
period of more than six (6) consecutive months ("TERMINATION FOR DISABILITY");
(iv) the Company's termination of Executive's employment for Cause
("TERMINATION FOR CAUSE");
<PAGE> 4
(v) the Company's termination of Executive's employment other than a
Termination for Disability or a Termination for Cause ("TERMINATION
WITHOUT CAUSE");
(vi) Executive's termination of Executive's employment for Good Reason, by
means of advance written notice to the Company at least thirty (30)
days prior to the effective date of such termination identifying such
termination as a Termination by Executive for Good Reason and
identifying the Good Reason ("TERMINATION BY EXECUTIVE FOR GOOD
REASON") (it being expressly understood that Executive's giving notice
that the extension provision in the first sentence of paragraph 5(b)
hereof shall no longer apply shall not constitute a Termination by
Executive for Good Reason);
(vii) Executive's termination of Executive's employment for any reason
other than Good Reason, by means of advance written notice to the
Company at least one hundred twenty (120) days prior to the effective
date of such termination identifying such termination as a Termination
by Executive with Advance Notice ("TERMINATION BY EXECUTIVE WITH
ADVANCE NOTICE") (it being expressly understood that Executive's
giving notice that the extension provision in the first sentence of
paragraph 5(b) hereof shall no longer apply shall not constitute a
Termination by Executive with Advance Notice); or
(viii) the termination of Executive's employment (A) on account of a
Termination without Cause before the second anniversary of a Change of
Control, (B) on account of a Termination by Executive for Good Reason
before the second anniversary of a Change of Control or (C) in
connection with but prior to a Change of Control and following the
commencement of any discussion with any third party that (i) requests
or suggests that Executive's employment be terminated, and (ii)
ultimately engages in a Change of Control (collectively, "TERMINATION
FOLLOWING A CHANGE OF CONTROL").
(d) For purposes of this Agreement, "CAUSE" shall mean:
(i) the commission by Executive of a felony or a crime involving moral
turpitude;
(ii) the commission by Executive of a fraud;
(iii) the commission by Executive of any act involving dishonesty or
disloyalty with respect to the Company or any of its subsidiaries or
affiliates that harms or damages any of them to any extent;
(iv) conduct by Executive that brings the Company or any of its
subsidiaries or affiliates into substantial public disgrace or
disrepute;
(v) gross negligence or willful misconduct by Executive with respect to
the Company or any of its subsidiaries or affiliates;
<PAGE> 5
(vi) repudiation of this Agreement by Executive or Executive's abandonment
of his employment with the Company (it being expressly understood that
a Termination by Executive for Good Reason or a Termination by
Executive with Advance Notice shall not constitute such a repudiation
or abandonment);
(vii) breach by Executive of any of the agreements in paragraph 8 hereof
prior to the end of the Employment Period; or
(viii) any other breach by Executive of this Agreement which is material
and which is not cured within thirty (30) days after written notice
thereof to Executive from the Company.
(e) For purposes of this Agreement, "GOOD REASON" shall mean:
(i) a reduction by the Company in Executive's salary to an amount less
than "EXECUTIVE'S REFERENCE SALARY" (i.e., Executive's initial salary
or, in the event the Employment Period has been extended pursuant to
paragraph 5(b) hereof, Executive's salary on the date on which the
most recent such extension occurred) or any downward adjustment in
Executive's Target Bonus; or
(ii) the Company's giving notice that the extension provision in the first
sentence of paragraph 5(b) hereof shall no longer apply; or
(iii) any breach by the Company of this Agreement which is material and
which is not cured within thirty (30) days after written notice
thereof to the Company from Executive.
(f) For purposes of this Agreement, "CHANGE OF CONTROL" shall mean the
occurrence of any of the following events during the Employment
Period:
(i) The acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 40% or more of
either: (A) the then-outstanding shares of common stock of the Company (the
"Company Common Stock") or (B) the combined voting power of the then-outstanding
voting securities of the Company entitled to vote generally in the election of
directors ("Voting Stock"); PROVIDED, HOWEVER, that for purposes of this
subparagraph (i), the following acquisitions shall not constitute a Change of
Control: (A) any acquisition directly from the Company, (B) any acquisition by
the Company, a subsidiary of the Company or the Harris Group, (C) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any subsidiary of the Company, or (D) any
acquisition by any Person pursuant to a transaction which complies with clauses
(A), (B) and (C) of subparagraph (iii) of this paragraph 5(f); or
<PAGE> 6
(ii) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason (other than death or disability) to
constitute at least a majority of the Board; PROVIDED, HOWEVER, that any
individual becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board (either
by a specific vote or by approval of the proxy statement of the Company in which
such person is named as a nominee for director, without objection to such
nomination) shall be considered as though such individual were a member of the
Incumbent Board, but excluding for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or threatened
election contest (within the meaning of Rule 14a-11 of the Exchange Act) with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(iii) Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (A) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Company Common Stock and Voting
Stock immediately prior to such Business Combination beneficially own, directly
or indirectly, more than a majority of, respectively, the then-outstanding
shares of common stock and the combined voting power of the then-outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the entity resulting from such Business Combination
(including, without limitation, an entity which as a result of such transaction
owns the Company or all or substantially all of the Company's assets either
directly or through one or more subsidiaries) in substantially the same
proportions relative to each other as their ownership, immediately prior to such
Business Combination, of the Company Common Stock and Voting Stock of the
Company, as the case may be, (B) no Person (excluding any entity resulting from
such Business Combination, the Harris Group or any employee benefit plan (or
related trust) sponsored or maintained by the Company, a subsidiary of the
Company or such entity resulting from such Business Combination) beneficially
owns, directly or indirectly, 40% or more of, respectively, the then-outstanding
shares of common stock of the entity resulting from such Business Combination,
or the combined voting power of the then-outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (C) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
(iv) Approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.
(v) For purposes of this paragraph 5(f), the "Harris Group" shall mean
Messrs. Irving B. Harris, Neison Harris, King Harris, William W. Harris and June
H. 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
<PAGE> 7
representing more than fifty percent (50%) of the total value of the stock or
other interests of such person.
6. POST-EMPLOYMENT PERIOD PAYMENTS.
(a) If the Employment Period ends on the date on which (without any
extension thereof) it is then scheduled to end pursuant to paragraph 5 hereof,
or if the Employment Period ends early pursuant to paragraph 5 hereof for any
reason, Executive shall cease to have any rights to salary, bonus (if any),
options, expense reimbursements or other benefits other than: (i) any salary
which has accrued but is unpaid, any reimbursable expenses which have been
incurred but are unpaid, and any unexpired vacation days which have accrued
under the Company's vacation policy but are unused, as of the end of the
Employment Period, (ii) any option rights or plan benefits which by their terms
extend beyond termination of Executive's employment (but only to the extent
provided in any option theretofore granted to Executive or any benefit plan in
which Executive has participated as an employee of the Company), (iii) any
benefits to which Executive is entitled under Part 6 of Subtitle B of Title I of
the Employee Retirement Income Security Act of 1974, as amended ("COBRA") and
(iv) any other amount(s) payable pursuant to the succeeding provisions of this
paragraph 6.
(b) If the Employment Period ends pursuant to paragraph 5 hereof on
Executive's sixty-fifth birthday, or if the Employment Period ends early
pursuant to paragraph 5 hereof on account of Executive's death, Retirement
(provided such Retirement is not a Termination Following a Change of Control) or
Termination for Disability, the Company shall make no further payments to
Executive except as contemplated in (a)(i), (ii) and (iii) above.
(c) If the Employment Period ends early pursuant to paragraph 5 hereof on
account of Termination for Cause, the Company shall pay Executive an amount
equal to that amount Executive would have received as salary (based on
Executive's salary then in effect) had the Employment Period remained in effect
until the later of the effective date of the Company's termination of
Executive's employment or the date thirty days after the Company's notice to
Executive of such termination. The Company shall make no further payments to
Executive except as contemplated in (a)(i), (ii) and (iii) above.
(d) If the Employment Period ends early pursuant to paragraph 5 hereof on
account of a Termination without Cause or a Termination by Executive for Good
Reason, and such termination does not constitute a Termination Following a
Change of Control, the Company shall pay to Executive amounts equal to the
amounts Executive would have received as salary (based on Executive's salary
then in effect or, if greater, Executive's Reference Salary) had the Employment
Period remained in effect for a period of twenty-four (24) months after the last
day of the month in which the Employment Period ends (in the event Executive is
entitled during the payment period to any payments under any disability benefit
plan or the like in which Executive has participated as an employee of the
Company, less such payments), payable at the times such amounts would have been
paid; PROVIDED, HOWEVER, that if Executive so chooses, in his sole discretion,
such payment under this subparagraph (d) shall be made in a lump sum. In
addition, the Company shall reimburse Executive (net after taxes on the receipt
of such reimbursement) for any premiums paid by Executive for health insurance
provided to Executive (for Executive and his dependents) by the Company
subsequent to the end of the Employment Period pursuant to the requirements of
COBRA as in effect on the date of this Agreement. The Company shall make no
further payments to Executive except as contemplated in (a)(i), (ii) and (iii)
above. It is expressly understood that the Company's payment
<PAGE> 8
obligations under this subparagraph (d) shall cease in the event Executive
breaches any of his agreements in paragraph 7 or 8 hereof.
(e) If the Employment Period ends early pursuant to paragraph 5 hereof on
account of a Termination by Executive with Advance Notice, and such termination
does not constitute a Termination Following a Change of Control, the Company
shall make no further payments to Executive except as contemplated in (a)(i),
(ii) and (iii) above.
(f)(i) If the Employment Period ends early pursuant to paragraph 5 hereof
on account of a Termination Following a Change of Control, Executive
shall be entitled to receive an amount equal to two times the sum of
(A) Executive's base salary at the time of such termination (or, if
higher, Executive's Reference Salary) and (B) Executive's Target Bonus
for the year in which such termination occurs (or, if higher,
Executive's Target Bonus for the preceding year or the year in which
the Change of Control occurs), payable at the times such amounts would
have been paid; PROVIDED, HOWEVER, that if Executive so chooses, in
his sole discretion, such payment under this subparagraph (f)(i) shall
be made in a lump sum. In addition, the Company shall reimburse
Executive (net after taxes on the receipt of such reimbursement) for
any premiums paid by Executive for health insurance provided to
Executive (for Executive and his dependents) by the Company subsequent
to the end of the Employment Period pursuant to the requirements of
COBRA as in effect on the date of this Agreement.
(ii) Notwithstanding any provision of this Agreement to the contrary, if
any amount or benefit to be paid or provided under this Agreement or
otherwise pursuant to or by reason of any other agreement, policy,
plan, program or arrangement, including without limitation any bonus,
stock option, performance share, performance unit, stock appreciation
right or similar right, or the lapse or termination of any restriction
on or the vesting or exercisability of any of the foregoing would be
an "Excess Parachute Payment," within the meaning of Section 280G of
the Code, or any successor provision thereto, but for the application
of this sentence, then the payments and benefits to be paid or
provided under this Agreement shall be reduced to the minimum extent
necessary (but in no event to less than zero) so that no portion of
any such payment or benefit, as so reduced, constitutes an Excess
Parachute Payment; provided, however, that the foregoing reduction
shall be made only if and to the extent that such reduction would
result in an increase in the aggregate payment and benefits to be
provided to Executive, determined on an after-tax basis (taking into
account the excise tax imposed pursuant to Section 4999 of the Code,
or any successor provision thereto, any tax imposed by any comparable
provision of state law, and any applicable federal, state and local
income taxes). The determination of whether any reduction in such
payments or benefits to be provided under this Agreement is required
pursuant to the preceding sentence shall be made at the expense of the
Company, if requested by the Executive or the Company, by the
Company's independent accountants. The fact that the Executive's right
to payments or benefits may be reduced by reason of the limitations
contained in this paragraph 6(f) shall not of itself limit or
otherwise affect any other rights of the Executive other than pursuant
to this Agreement. In the event
<PAGE> 9
that any payment or benefit intended to be provided under
this Agreement is required to be reduced pursuant to this
paragraph 6(f), the Executive shall be entitled to designate
the payments and/or benefits to be so reduced in order to
give effect to this paragraph 6(f). The Company shall
provide the Executive with all information reasonably
requested by the Executive to permit the Executive to make
such designation. In the event that the Executive fails to
make such designation within 10 business days of the Date of
Termination, the Company may effect such reduction in any
manner it deems appropriate.
(g) Without limiting the rights of the Executive at law or in equity,
if the Company fails to make any payment or provide any benefit required to
be made or provided hereunder on a timely basis, the Company will pay
interest on the amount or value thereof at an annualized rate of interest
equal to the so-called composite "prime rate" as quoted from time to time
during the relevant period in the Midwest Edition of THE WALL STREET
JOURNAL. Such interest will be payable as it accrues on demand. Any change
in such prime rate will be effective on and as of the date of such change.
(h) Executive shall not be required to mitigate the amount of any
payment or benefit provided for in this Agreement by seeking other
employment or otherwise.
7. CONFIDENTIAL INFORMATION. Executive acknowledges that the
information, observations and data obtained by him while employed by the
Company pursuant to this Agreement, as well as those obtained by him while
employed by the Company or any of its subsidiaries or affiliates or any
predecessor thereof prior to the date of this Agreement, concerning the
business or affairs of the Company or any of its subsidiaries or affiliates
or any predecessor thereof (unless and except to the extent the foregoing
become generally known to and available for use by the public other than as
a result of Executive's acts or omissions to act, "CONFIDENTIAL
INFORMATION") are the property of the Company or such subsidiary or
affiliate. Therefore, Executive agrees that during the Employment Period
and for two years thereafter he shall not disclose any Confidential
Information without the prior written consent of the Chief Executive
Officer of the Company unless and except to the extent that such disclosure
is (i) made in the ordinary course of Executive's performance of his duties
under this Agreement or (ii) required by any subpoena or other legal
process (in which event Executive will give the Company prompt notice of
such subpoena or other legal process in order to permit the Company to seek
appropriate protective orders), and that he shall not use any Confidential
Information for his own account without the prior written consent of the
Chief Executive Officer of the Company. Executive shall deliver to the
Company at the termination of the Employment Period, or at any other time
the Company may reasonably request, all memoranda, notes, plans, records,
reports, computer tapes and software and other documents and data (and
copies thereof) relating to the Confidential Information, or to the work
product or the business of the Company or any of its subsidiaries or
affiliates which he may then possess or have under his control.
<PAGE> 10
8. NON-COMPETE, NON-SOLICITATION.
(a) Executive acknowledges that in the course of his employment with
the Company pursuant to this Agreement he will become familiar, and during
the course of his employment by the Company or any of its subsidiaries or
affiliates or any predecessor thereof prior to the date of this Agreement
he has become familiar, with trade secrets and customer lists of and other
confidential information concerning the Company and its subsidiaries and
affiliates and predecessors thereof and that his services have been and
will be of special, unique and extraordinary value to the Company.
(b) Executive agrees that during the Employment Period and for a
period of two years after termination of his employment with the Company,
he shall not in any manner, directly or indirectly, through any person,
firm or corporation, alone or as a member of a partnership or as an
officer, director, shareholder, investor or employee of or in any other
corporation or enterprise or otherwise, engage in or be engaged in, or
assist any other person, firm, corporation or enterprise in engaging or
being engaged in, any business then actively being conducted by the Company
or any of its subsidiaries or affiliates.
(c) Executive further agrees that during the Employment Period and for
a period of two years after termination of his employment with the Company,
he shall not in any manner, directly or indirectly, induce or attempt to
induce any employee of the Company or of any of its subsidiaries or
affiliates to quit or abandon his employ.
(d) Nothing in this paragraph 8 shall prohibit Executive from being:
(i) a shareholder in a mutual fund or a diversified investment company or
(ii) a passive owner of not more than 5% of the outstanding equity
securities of any class of a corporation or other entity which is publicly
traded, so long as Executive has no active participation in the business of
such corporation or other entity.
(e) If, at the time of enforcement of this paragraph, a court holds
that the restrictions stated herein are unreasonable under circumstances
then existing, the parties hereto agree that the maximum period, scope or
geographical area reasonable under such circumstances shall be substituted
for the stated period, scope or area and that the court shall be allowed to
revise the restrictions contained herein to cover the maximum period, scope
and area permitted by law.
9. ENFORCEMENT. Because Executive's services are unique and because
Executive has access to Confidential Information and work product, the
parties hereto agree that the Company would be damaged irreparably in the
event any of the provisions of paragraph 8 hereof were not performed in
accordance with their specific terms or were otherwise breached and that
money damages would be an inadequate remedy for any such non-performance or
breach. Therefore, the Company or its successors or assigns shall be
entitled, in addition to other rights and remedies existing in their favor,
to an injunction or injunctions to prevent any breach or threatened breach
of any of such provisions and to enforce such provisions specifically
(without posting a bond or other security).
10. EXECUTIVE REPRESENTATIONS. Executive represents and warrants to
the Company that (i) the execution, delivery and performance of this
Agreement by Executive does not and will not conflict with, breach, violate
or cause a default under any contract, agreement, instrument, order,
judgment or decree to which Executive is a party or by which he is bound,
(ii) Executive is not a party to or bound by any employment agreement,
noncompete agreement or
<PAGE> 11
confidentiality agreement with any other person or entity, and (iii) upon the
execution and delivery of this Agreement by the Company, this Agreement shall be
the valid and binding obligation of Executive, enforceable in accordance with
its terms.
11. SURVIVAL. Subject to any limits on applicability contained
therein, paragraphs 7 and 8 hereof shall survive and continue in full force
in accordance with their terms notwithstanding any termination of the
Employment Period.
12. NOTICES. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, sent by reputable
overnight carrier or mailed by first class mail, return receipt requested,
to the recipient at the address below indicated:
NOTICES TO EXECUTIVE:
---------------------
James D. Atherton
3097 Macintosh Drive
Westlake, OH 44145
NOTICES TO THE COMPANY:
-----------------------
Mr. Thomas L. Kemp
Chief Executive Officer
Penton Media, Inc.
1100 Superior Avenue
Cleveland, OH 44114
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered,
sent or mailed.
13. SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law
or rule in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision or any other
jurisdiction, but this Agreement shall be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision
had never been contained herein.
14. PAYMENT OF CERTAIN COSTS AND EXPENSES.
(a) PREVAILING PARTY'S LITIGATION EXPENSES. In the event of litigation
between the Company and Executive related to this Agreement, the
non-prevailing party shall reimburse the prevailing party for any costs and
expenses (including without limitation attorneys' fees) reasonably incurred
by the prevailing party in connection therewith.
(b) CHANGE OF CONTROL OF THE COMPANY. Without limiting the generality
of (a) above, in the event that there is a Change of Control of the
Company, if it should appear to Executive that the Company has failed to
comply with any of its obligations under this Agreement or in the event
that the Company or any other person takes or threatens to take any action
to declare this Agreement void or unenforceable, or institutes any
litigation or other action or proceeding
<PAGE> 12
designed to deny, or to recover from, Executive the benefits provided or
intended to be provided to Executive hereunder, the Company irrevocably
authorizes Executive from time to time to retain counsel of Executive's choice,
at the expense of the Company as hereafter provided, to advise and represent
Executive in connection with any such interpretation, enforcement or defense,
including without limitation the initiation or defense of any litigation or
other legal action, whether by or against the Company or any Director, officer,
shareholder or other person affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship between the
Company and such counsel, the Company irrevocably consents to Executive's
entering into an attorney-client relationship with such counsel, and in that
connection the Company and Executive agree that a confidential relationship will
exist between Executive and such counsel. Without respect to whether Executive
prevails, in whole or in part, in connection with any of the foregoing, the
Company will pay and be solely financially responsible for any and all
attorneys' and related fees and expenses incurred by Executive in connection
with any of the foregoing.
(c) SOURCE OF PAYMENTS. Except as otherwise specified herein, in the event
a Change of Control occurs, any payments to Executive pursuant to this Agreement
and the performance of the Company's obligations hereunder shall be secured by
amounts deposited or to be deposited in a trust established by the Company for
the benefit of Executive (and, at the Company's option, for the benefit of other
executives of the Company who are entitled to payments similar to those provided
in this Agreement) (the "Trust"). The Company shall transfer to such Trust
assets from which all or a portion of the payments provided under this Agreement
are to be paid, provided that such assets of the Trust shall at all times be
subject to the claims of general unsecured creditors of the Company and that
neither Executive nor any other person entitled to payments through the Trust
shall at any time have a prior claim to such assets. Any payments to Executive
under this Agreement that are not paid through the Trust shall be paid from the
Company's general assets, and Executive shall have the status of a general
unsecured creditor with respect to the Company's obligations to make payments
under this Agreement.
15. COMPLETE AGREEMENT. This Agreement embodies the complete agreement and
understanding between the parties with respect to the subject matter hereof and
effective as of its date supersedes and preempts any prior understandings,
agreements or representations by or between the parties, written or oral, which
may have related to the subject matter hereof in any way.
16. COUNTERPARTS. This Agreement may be executed in separate counterparts,
each of which shall be deemed to be an original and both of which taken together
shall constitute one and the same agreement.
17. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of and be enforceable by Executive, the Company and their respective
heirs, executors, personal representatives, successors and assigns, except that
neither party may assign any of his or its rights or delegate any of his or its
obligations hereunder without the prior written consent of the other party.
Executive hereby consents to the assignment by the Company of all of its rights
and obligations hereunder to any successor to the Company by merger or
consolidation or purchase of all or substantially all of the Company's assets,
provided such transferee or successor assumes the liabilities of the Company
hereunder.
18. CHOICE OF LAW. This Agreement shall be governed by the internal law,
and not the laws of conflicts, of the State of Ohio.
<PAGE> 13
19. AMENDMENT AND WAIVER. The provisions of this Agreement may be amended
or waived only with the prior written consent of the Company and Executive, and
no course of conduct or failure or delay in enforcing the provisions of this
Agreement shall affect the validity, binding effect or enforceability of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date written below.
PENTON MEDIA, INC.
Date: February 5, 1999 By /s/ THOMAS L. KEMP
---------------------
Thomas L. Kemp
Chief Executive Officer
Date: February 12, 1999 /s/ JAMES D. ATHERTON
---------------------
James D. Atherton
<PAGE> 1
Exhibit 10.16
EMPLOYMENT AGREEMENT
--------------------
This EMPLOYMENT AGREEMENT ("AGREEMENT") made as of January 1, 1999, between
Penton Media, Inc. (formerly known as Penton Publishing, Inc.), a Delaware
corporation (the "COMPANY"), and James W. Zaremba ("EXECUTIVE")
In consideration of the mutual covenants contained herein and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT. The Company shall employ Executive, and Executive accepts
continued employment with the Company as of the date hereof, upon the terms and
conditions set forth in this Agreement for the period beginning on the date
hereof and ending as provided in paragraph 5 hereof (the "EMPLOYMENT PERIOD").
2. POSITION AND DUTIES.
(a) During the Employment Period, Executive shall serve as a Group
President of the Company, with initial responsibility for the Company's
Design/Engineering, Foodservice/Hospitality, Manufacturing Groups, and
A/E/C/SYSTEMS (the "Division"), and shall have the normal duties,
responsibilities and authority of an executive serving in such position, subject
to the power of the Board of Directors of the Company (the "BOARD") or the Chief
Executive Officer of the Company to expand or limit such duties,
responsibilities and authority, either generally or in specific instances.
(b) Executive shall report to the Chief Executive Officer or the President
and Chief Operating Officer of the Company.
(c) During the Employment Period, Executive shall devote his best efforts
and his full business time and attention (except for permitted vacation periods,
reasonable periods of illness or other incapacity, and, provided such activities
do not have more than a DE MINIMIS effect on Executive's performance of his
duties under this Agreement, participation in charitable and civic endeavors and
management of Executive's personal investments and business interests) to the
business and affairs of the Company and the Division. Executive shall perform
his duties and responsibilities to the best of his abilities in a diligent,
trustworthy, businesslike and efficient manner.
(d) Executive shall perform his duties and responsibilities principally in
the Cleveland, Ohio metropolitan area, and shall not be required to travel
outside that area any more extensively than he has done in the past in the
ordinary course of the business of the Company.
<PAGE> 2
3. COMPENSATION AND BENEFITS.
(a) SALARY. The Company agrees to pay Executive a salary during the
Employment Period, in semi-monthly installments. Executive's initial salary
shall be $265,000 per year. The Compensation Committee of the Board (or, if
there is no such Committee, the Board) shall review Executive's salary from time
to time and may, in its sole discretion, increase it.
(b) BONUS(ES). Effective January 1, 1999 and for subsequent years,
Executive will be eligible for an annual bonus based on the achievement of
specified Company goals (the "Target Bonus") (as determined by the Compensation
Committee of the Board (or, if there is no such Committee, the Board)). Any
bonus payable pursuant to this subparagraph (b) may, at the discretion of the
Compensation Committee of the Board (or, if there is no such Committee, the
Board), after considering any preference expressed by Executive, be paid in the
form of cash, in a Performance Shares Award related to shares of the Company's
Common Stock or in a combination of both.
(c) STOCK OPTIONS. The Company has adopted a plan (the "1998 STOCK OPTION
PLAN") pursuant to which options to purchase shares of the Company's Common
Stock, and other equity-based incentive compensation awards, may be granted to
Executive and other officers of the Company. Executive shall be eligible to
receive grants of options and other awards under the 1998 Stock Option Plan, at
the discretion of the Compensation Committee of the Board (or, if there is no
such Committee, the Board). Under the terms of the 1998 Stock Option Plan, the
Compensation Committee of the Board (or, if there is no such Committee, the
Board) has the right to amend the 1998 Stock Option Plan. If, at the time of the
grant of any option pursuant to this paragraph (c), the issuance of shares upon
exercise thereof has not been registered under the Securities Act of 1933, as
amended, it shall be a condition to such grant that Executive execute and
deliver to the Company a certificate confirming that Executive is an accredited
investor (as such term is used in Regulation D under such Act) and including
transfer restrictions and other provisions customary in connection with grants
under such circumstances. Each option to be granted as set forth above shall be
substantially in the form of EXHIBIT 1 attached to this Agreement, except that
it is understood that reference to any then existing registration statement or
related plan information document in EXHIBIT 1, or its equivalent, shall be
included if and only if the same exists at the time of grant and is relevant to
such option.
(d) EXPENSE REIMBURSEMENT. The Company shall reimburse Executive for all
reasonable expenses incurred by him during the Employment Period in the course
of performing his duties under this Agreement that are consistent with the
Company's policies in effect from time to time with respect to travel,
entertainment and other business expenses, subject to the Company's requirements
applicable generally with respect to reporting and documentation of such
expenses. Executive acknowledges that under the Company's current air travel
reimbursement policy, reimbursement is limited to coach fare (plus Executive's
cost of any upgrade certificates used to upgrade to first class) on travel
within the United States and is limited to business class fare on travel to and
from foreign cities.
(e) STANDARD EXECUTIVE BENEFITS PACKAGE. In addition to the salary,
bonus(es), stock options and expense reimbursements payable to Executive
pursuant to this paragraph, Executive shall be entitled during the Employment
Period to participate, on the same basis as other
<PAGE> 3
executives of the Company, in the Company's Standard Executive Benefits Package.
The Company's "STANDARD EXECUTIVE BENEFITS PACKAGE" means those benefits
(including insurance, vacation, Company car or car allowance, equity-based
benefits, and other benefits) for which substantially all of the executives of
the Company are from time to time generally eligible, as determined from time to
time by the Board.
(f) INDEMNIFICATION. With respect to Executive's acts or failures to act
during the Employment Period in his capacity as a director, officer, employee or
agent of the Company, Executive shall be entitled to indemnification from the
Company, and to liability insurance coverage (if any), on the same basis as
other directors and officers of the Company.
4. ADJUSTMENTS. Notwithstanding any other provision of this Agreement, it
is expressly understood and agreed that if there is a significant reduction in
the level of the business to which Executive's duties under this Agreement
relate, or if all or any significant part of such business is disposed of by the
Company and/or its subsidiaries or affiliates during the Employment Period but
Executive thereafter remains an employee of the Company, the Compensation
Committee of the Board (or, if there is no such Committee, the Board) may make
adjustments in Executive's duties, responsibility and authority, and in
Executive's compensation, as the Compensation Committee of the Board (or, if
there is no such Committee, the Board) deems appropriate to reflect such
reduction or disposition.
5. EMPLOYMENT PERIOD.
(a) Except as hereinafter provided, the Employment Period shall continue
until, and shall end upon, the second anniversary of the date on which the
Employment Period begins.
(b) On each anniversary of the date on which the Employment Period begins
which precedes Executive's sixty-fifth birthday by more than one year, unless
the Employment Period shall have ended early pursuant to (c) below or either
party shall have given the other party written notice that the extension
provision in this sentence shall no longer apply, the Employment Period shall be
extended for an additional year (unless Executive's sixty-fifth birthday occurs
during such additional year, in which event the Employment Period shall be
extended only until such birthday). In no event shall the Employment Period be
extended beyond Executive's sixty-fifth birthday except by mutual written
agreement of the Company and Executive.
(c) Notwithstanding (a) and (b) above, the Employment Period shall end
early upon the first to occur of any of the following events:
(i) Executive's death;
(ii) Executive's retirement upon or after reaching age 65 ("RETIREMENT");
(iii) the Company's termination of Executive's employment on account of
Executive's having become unable (as determined by the Board in good faith) to
regularly perform his duties hereunder by reason of illness or incapacity
<PAGE> 4
for a period of more than six (6) consecutive months ("TERMINATION FOR
DISABILITY");
(iv) the Company's termination of Executive's employment for Cause
("TERMINATION FOR CAUSE");
(v) the Company's termination of Executive's employment other than a
Termination for Disability or a Termination for Cause ("TERMINATION
WITHOUT CAUSE");
(vi) Executive's termination of Executive's employment for Good Reason, by
means of advance written notice to the Company at least thirty (30)
days prior to the effective date of such termination identifying such
termination as a Termination by Executive for Good Reason and
identifying the Good Reason ("TERMINATION BY EXECUTIVE FOR GOOD
REASON") (it being expressly understood that Executive's giving notice
that the extension provision in the first sentence of paragraph 5(b)
hereof shall no longer apply shall not constitute a Termination by
Executive for Good Reason);
(vii)Executive's termination of Executive's employment for any reason
other than Good Reason, by means of advance written notice to the
Company at least one hundred twenty (120) days prior to the effective
date of such termination identifying such termination as a Termination
by Executive with Advance Notice ("TERMINATION BY EXECUTIVE WITH
ADVANCE NOTICE") (it being expressly understood that Executive's
giving notice that the extension provision in the first sentence of
paragraph 5(b) hereof shall no longer apply shall not constitute a
Termination by Executive with Advance Notice); or
(viii) the termination of Executive's employment (A) on account of a
Termination without Cause before the second anniversary of a Change of
Control, (B) on account of a Termination by Executive for Good Reason
before the second anniversary of a Change of Control or (C) in
connection with but prior to a Change of Control and following the
commencement of any discussion with any third party that (i) requests
or suggests that Executive's employment be terminated, and (ii)
ultimately engages in a Change of Control (collectively, "TERMINATION
FOLLOWING A CHANGE OF CONTROL").
(d) For purposes of this Agreement, "CAUSE" shall mean:
(i) the commission by Executive of a felony or a crime involving moral
turpitude;
(ii) the commission by Executive of a fraud;
<PAGE> 5
(iii)the commission by Executive of any act involving dishonesty or
disloyalty with respect to the Company or any of its subsidiaries or
affiliates that harms or damages any of them to any extent;
(iv) conduct by Executive that brings the Company or any of its
subsidiaries or affiliates into substantial public disgrace or
disrepute;
(v) gross negligence or willful misconduct by Executive with respect to
the Company or any of its subsidiaries or affiliates;
(vi) repudiation of this Agreement by Executive or Executive's abandonment
of his employment with the Company (it being expressly understood that
a Termination by Executive for Good Reason or a Termination by
Executive with Advance Notice shall not constitute such a repudiation
or abandonment);
(vii)breach by Executive of any of the agreements in paragraph 8 hereof
prior to the end of the Employment Period; or
(viii) any other breach by Executive of this Agreement which is material
and which is not cured within thirty (30) days after written notice
thereof to Executive from the Company.
(e) For purposes of this Agreement, "GOOD REASON" shall mean:
(i) a reduction by the Company in Executive's salary to an amount less
than "EXECUTIVE'S REFERENCE SALARY" (i.e., Executive's initial salary
or, in the event the Employment Period has been extended pursuant to
paragraph 5(b) hereof, Executive's salary on the date on which the
most recent such extension occurred) or any downward adjustment in
Executive's Target Bonus; or
(ii) the Company's giving notice that the extension provision in the first
sentence of paragraph 5(b) hereof shall no longer apply; or
(iii)any breach by the Company of this Agreement which is material and
which is not cured within thirty (30) days after written notice
thereof to the Company from Executive.
(f) For purposes of this Agreement, "CHANGE OF CONTROL" shall mean the
occurrence of any of the following events during the Employment
Period:
(i) The acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 40% or more of either: (A) the then-outstanding
shares of common stock of the Company (the "Company Common Stock") or
(B) the combined voting
<PAGE> 6
power of the then-outstanding voting securities of the Company
entitled to vote generally in the election of directors ("Voting
Stock"); PROVIDED, HOWEVER, that for purposes of this subparagraph
(i), the following acquisitions shall not constitute a Change of
Control: (A) any acquisition directly from the Company, (B) any
acquisition by the Company, a subsidiary of the Company or the Harris
Group, (C) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any subsidiary of the
Company, or (D) any acquisition by any Person pursuant to a
transaction which complies with clauses (A), (B) and (C) of
subparagraph (iii) of this paragraph 5(f); or
(ii) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason (other than death or
disability) to constitute at least a majority of the Board; PROVIDED,
HOWEVER, that any individual becoming a director subsequent to the
date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board (either by a
specific vote or by approval of the proxy statement of the Company in
which such person is named as a nominee for director, without
objection to such nomination) shall be considered as though such
individual were a member of the Incumbent Board, but excluding for
this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest (within
the meaning of Rule 14a-11 of the Exchange Act) with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board; or
(iii) Consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the assets
of the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (A) all or substantially all of
the individuals and entities who were the beneficial owners,
respectively, of the Company Common Stock and Voting Stock immediately
prior to such Business Combination beneficially own, directly or
indirectly, more than a majority of, respectively, the
then-outstanding shares of common stock and the combined voting power
of the then-outstanding voting securities entitled to vote generally
in the election of directors, as the case may be, of the entity
resulting from such Business Combination (including, without
limitation, an entity which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either
directly or through one or more subsidiaries) in substantially the
same proportions relative to each other as their ownership,
immediately prior to such Business Combination, of the Company Common
Stock and Voting Stock of the Company, as the case may be, (B) no
Person (excluding any entity resulting from such Business Combination,
the Harris Group or any employee benefit plan (or related trust)
sponsored or maintained by the Company, a subsidiary of the Company or
such entity resulting from such Business Combination) beneficially
owns, directly or indirectly, 40% or more of, respectively, the
then-outstanding shares of common stock of the entity resulting from
such Business Combination, or the combined voting power of the
then-outstanding voting securities of such corporation except to the
extent that such ownership existed prior to the Business Combination
and (C) at least a majority of the members of the board of directors
of the corporation resulting from such Business Combination were
members of the
<PAGE> 7
Incumbent Board at the time of the execution of the initial agreement,
or of the action of the Board, providing for such Business
Combination; or
(iv) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
(v) For purposes of this paragraph 5(f), the "Harris Group" shall
mean Messrs. Irving B. Harris, Neison Harris, King Harris, William W.
Harris and June H. 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.
6. POST-EMPLOYMENT PERIOD PAYMENTS.
--------------------------------
(a) If the Employment Period ends on the date on which (without
any extension thereof) it is then scheduled to end pursuant to
paragraph 5 hereof, or if the Employment Period ends early pursuant to
paragraph 5 hereof for any reason, Executive shall cease to have any
rights to salary, bonus (if any), options, expense reimbursements or
other benefits other than: (i) any salary which has accrued but is
unpaid, any reimbursable expenses which have been incurred but are
unpaid, and any unexpired vacation days which have accrued under the
Company's vacation policy but are unused, as of the end of the
Employment Period, (ii) any option rights or plan benefits which by
their terms extend beyond termination of Executive's employment (but
only to the extent provided in any option theretofore granted to
Executive or any benefit plan in which Executive has participated as
an employee of the Company), (iii) any benefits to which Executive is
entitled under Part 6 of Subtitle B of Title I of the Employee
Retirement Income Security Act of 1974, as amended ("COBRA") and (iv)
any other amount(s) payable pursuant to the succeeding provisions of
this paragraph 6.
(b) If the Employment Period ends pursuant to paragraph 5 hereof
on Executive's sixty-fifth birthday, or if the Employment Period ends
early pursuant to paragraph 5 hereof on account of Executive's death,
Retirement (provided such Retirement is not a Termination Following a
Change of Control) or Termination for Disability, the Company shall
make no further payments to Executive except as contemplated in
(a)(i), (ii) and (iii) above.
(c) If the Employment Period ends early pursuant to paragraph 5
hereof on account of Termination for Cause, the Company shall pay
Executive an amount equal to that amount Executive would have received
as salary (based on Executive's salary then in effect) had the
Employment Period remained in effect until the later of the effective
date of the Company's termination of Executive's employment or the
date thirty days after the Company's notice to Executive of such
termination. The Company shall make no further payments to Executive
except as contemplated in (a)(i), (ii) and (iii) above.
<PAGE> 8
(d) If the Employment Period ends early pursuant to paragraph 5
hereof on account of a Termination without Cause or a Termination by
Executive for Good Reason, and such termination does not constitute a
Termination Following a Change of Control, the Company shall pay to
Executive amounts equal to the amounts Executive would have received
as salary (based on Executive's salary then in effect or, if greater,
Executive's Reference Salary) had the Employment Period remained in
effect for a period of twenty-four (24) months after the last day of
the month in which the Employment Period ends (in the event Executive
is entitled during the payment period to any payments under any
disability benefit plan or the like in which Executive has
participated as an employee of the Company, less such payments),
payable at the times such amounts would have been paid; PROVIDED,
HOWEVER, that if Executive so chooses, in his sole discretion, such
payment under this subparagraph (d) shall be made in a lump sum. In
addition, the Company shall reimburse Executive (net after taxes on
the receipt of such reimbursement) for any premiums paid by Executive
for health insurance provided to Executive (for Executive and his
dependents) by the Company subsequent to the end of the Employment
Period pursuant to the requirements of COBRA as in effect on the date
of this Agreement. The Company shall make no further payments to
Executive except as contemplated in (a)(i), (ii) and (iii) above. It
is expressly understood that the Company's payment obligations under
this subparagraph (d) shall cease in the event Executive breaches any
of his agreements in paragraph 7 or 8 hereof.
(e) If the Employment Period ends early pursuant to paragraph 5
hereof on account of a Termination by Executive with Advance Notice,
and such termination does not constitute a Termination Following a
Change of Control, the Company shall make no further payments to
Executive except as contemplated in (a)(i), (ii) and (iii) above.
(f)(i) If the Employment Period ends early pursuant to paragraph
5 hereof on account of a Termination Following a Change
of Control, Executive shall be entitled to receive an
amount equal to two times the sum of (A) Executive's base
salary at the time of such termination (or, if higher,
Executive's Reference Salary) and (B) Executive's Target
Bonus for the year in which such termination occurs (or,
if higher, Executive's Target Bonus for the preceding
year or the year in which the Change of Control occurs),
payable at the times such amounts would have been paid;
PROVIDED, HOWEVER, that if Executive so chooses, in his
sole discretion, such payment under this subparagraph
(f)(i) shall be made in a lump sum. In addition, the
Company shall reimburse Executive (net after taxes on the
receipt of such reimbursement) for any premiums paid by
Executive for health insurance provided to Executive (for
Executive and his dependents) by the Company subsequent
to the end of the Employment Period pursuant to the
requirements of COBRA as in effect on the date of this
Agreement.
(ii) Notwithstanding any provision of this Agreement to the
contrary, if any amount or benefit to be paid or provided
under this Agreement or otherwise pursuant to or by
reason of any other agreement, policy, plan, program or
arrangement, including without limitation any bonus,
stock option, performance share, performance unit, stock
appreciation right or similar right, or the lapse or
termination of any restriction on or the vesting or
<PAGE> 9
exercisability of any of the foregoing would be an "Excess
Parachute Payment," within the meaning of Section 280G of
the Code, or any successor provision thereto, but for the
application of this sentence, then the payments and benefits
to be paid or provided under this Agreement shall be reduced
to the minimum extent necessary (but in no event to less
than zero) so that no portion of any such payment or
benefit, as so reduced, constitutes an Excess Parachute
Payment; provided, however, that the foregoing reduction
shall be made only if and to the extent that such reduction
would result in an increase in the aggregate payment and
benefits to be provided to Executive, determined on an
after-tax basis (taking into account the excise tax imposed
pursuant to Section 4999 of the Code, or any successor
provision thereto, any tax imposed by any comparable
provision of state law, and any applicable federal, state
and local income taxes). The determination of whether any
reduction in such payments or benefits to be provided under
this Agreement is required pursuant to the preceding
sentence shall be made at the expense of the Company, if
requested by the Executive or the Company, by the Company's
independent accountants. The fact that the Executive's right
to payments or benefits may be reduced by reason of the
limitations contained in this paragraph 6(f) shall not of
itself limit or otherwise affect any other rights of the
Executive other than pursuant to this Agreement. In the
event that any payment or benefit intended to be provided
under this Agreement is required to be reduced pursuant to
this paragraph 6(f), the Executive shall be entitled to
designate the payments and/or benefits to be so reduced in
order to give effect to this paragraph 6(f). The Company
shall provide the Executive with all information reasonably
requested by the Executive to permit the Executive to make
such designation. In the event that the Executive fails to
make such designation within 10 business days of the Date of
Termination, the Company may effect such reduction in any
manner it deems appropriate.
(g) Without limiting the rights of the Executive at law or in equity, if
the Company fails to make any payment or provide any benefit required to be made
or provided hereunder on a timely basis, the Company will pay interest on the
amount or value thereof at an annualized rate of interest equal to the so-called
composite "prime rate" as quoted from time to time during the relevant period in
the Midwest Edition of THE WALL STREET JOURNAL. Such interest will be payable as
it accrues on demand. Any change in such prime rate will be effective on and as
of the date of such change.
(h) Executive shall not be required to mitigate the amount of any payment
or benefit provided for in this Agreement by seeking other employment or
otherwise.
7. CONFIDENTIAL INFORMATION. Executive acknowledges that the information,
observations and data obtained by him while employed by the Company pursuant to
this Agreement, as well as those obtained by him while employed by the Company
or any of its subsidiaries or affiliates or any predecessor thereof prior to the
date of this Agreement, concerning the business or affairs of the Company or any
of its subsidiaries or affiliates or any predecessor thereof (unless and
<PAGE> 10
except to the extent the foregoing become generally known to and available for
use by the public other than as a result of Executive's acts or omissions to
act, "CONFIDENTIAL INFORMATION") are the property of the Company or such
subsidiary or affiliate. Therefore, Executive agrees that during the Employment
Period and for two years thereafter he shall not disclose any Confidential
Information without the prior written consent of the Chief Executive Officer of
the Company unless and except to the extent that such disclosure is (i) made in
the ordinary course of Executive's performance of his duties under this
Agreement or (ii) required by any subpoena or other legal process (in which
event Executive will give the Company prompt notice of such subpoena or other
legal process in order to permit the Company to seek appropriate protective
orders), and that he shall not use any Confidential Information for his own
account without the prior written consent of the Chief Executive Officer of the
Company. Executive shall deliver to the Company at the termination of the
Employment Period, or at any other time the Company may reasonably request, all
memoranda, notes, plans, records, reports, computer tapes and software and other
documents and data (and copies thereof) relating to the Confidential
Information, or to the work product or the business of the Company or any of its
subsidiaries or affiliates which he may then possess or have under his control.
8. NON-COMPETE, NON-SOLICITATION.
(a) Executive acknowledges that in the course of his employment with the
Company pursuant to this Agreement he will become familiar, and during the
course of his employment by the Company or any of its subsidiaries or affiliates
or any predecessor thereof prior to the date of this Agreement he has become
familiar, with trade secrets and customer lists of and other confidential
information concerning the Company and its subsidiaries and affiliates and
predecessors thereof and that his services have been and will be of special,
unique and extraordinary value to the Company.
(b) Executive agrees that during the Employment Period and for a period of
two years after termination of his employment with the Company, he shall not in
any manner, directly or indirectly, through any person, firm or corporation,
alone or as a member of a partnership or as an officer, director, shareholder,
investor or employee of or in any other corporation or enterprise or otherwise,
engage in or be engaged in, or assist any other person, firm, corporation or
enterprise in engaging or being engaged in, any business then actively being
conducted by the Company or any of its subsidiaries or affiliates.
(c) Executive further agrees that during the Employment Period and for a
period of two years after termination of his employment with the Company, he
shall not in any manner, directly or indirectly, induce or attempt to induce any
employee of the Company or of any of its subsidiaries or affiliates to quit or
abandon his employ.
(d) Nothing in this paragraph 8 shall prohibit Executive from being: (i) a
shareholder in a mutual fund or a diversified investment company or (ii) a
passive owner of not more than 5% of the outstanding equity securities of any
class of a corporation or other entity which is publicly traded, so long as
Executive has no active participation in the business of such corporation or
other entity.
<PAGE> 11
(e) If, at the time of enforcement of this paragraph, a court holds that
the restrictions stated herein are unreasonable under circumstances then
existing, the parties hereto agree that the maximum period, scope or
geographical area reasonable under such circumstances shall be substituted for
the stated period, scope or area and that the court shall be allowed to revise
the restrictions contained herein to cover the maximum period, scope and area
permitted by law.
9. ENFORCEMENT. Because Executive's services are unique and because
Executive has access to Confidential Information and work product, the parties
hereto agree that the Company would be damaged irreparably in the event any of
the provisions of paragraph 8 hereof were not performed in accordance with their
specific terms or were otherwise breached and that money damages would be an
inadequate remedy for any such non-performance or breach. Therefore, the Company
or its successors or assigns shall be entitled, in addition to other rights and
remedies existing in their favor, to an injunction or injunctions to prevent any
breach or threatened breach of any of such provisions and to enforce such
provisions specifically (without posting a bond or other security).
10. EXECUTIVE REPRESENTATIONS. Executive represents and warrants to the
Company that (i) the execution, delivery and performance of this Agreement by
Executive does not and will not conflict with, breach, violate or cause a
default under any contract, agreement, instrument, order, judgment or decree to
which Executive is a party or by which he is bound, (ii) Executive is not a
party to or bound by any employment agreement, noncompete agreement or
confidentiality agreement with any other person or entity, and (iii) upon the
execution and delivery of this Agreement by the Company, this Agreement shall be
the valid and binding obligation of Executive, enforceable in accordance with
its terms.
11. SURVIVAL. Subject to any limits on applicability contained therein,
paragraphs 7 and 8 hereof shall survive and continue in full force in accordance
with their terms notwithstanding any termination of the Employment Period.
12. NOTICES. Any notice provided for in this Agreement shall be in writing
and shall be either personally delivered, sent by reputable overnight carrier or
mailed by first class mail, return receipt requested, to the recipient at the
address below indicated:
NOTICES TO EXECUTIVE:
---------------------
James W. Zaremba
23214 Sheppard's Pt.
Bay Village, OH 44140
NOTICES TO THE COMPANY:
-----------------------
Mr. Thomas L. Kemp
Chief Executive Officer
Penton Media, Inc.
1100 Superior Avenue
Cleveland, OH 44114
<PAGE> 12
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered,
sent or mailed.
13. SEVERABILITY. Whenever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
14. PAYMENT OF CERTAIN COSTS AND EXPENSES.
(a) PREVAILING PARTY'S LITIGATION EXPENSES. In the event of litigation
between the Company and Executive related to this Agreement, the non-prevailing
party shall reimburse the prevailing party for any costs and expenses (including
without limitation attorneys' fees) reasonably incurred by the prevailing party
in connection therewith.
(b) CHANGE OF CONTROL OF THE COMPANY. Without limiting the generality of
(a) above, in the event that there is a Change of Control of the Company, if it
should appear to Executive that the Company has failed to comply with any of its
obligations under this Agreement or in the event that the Company or any other
person takes or threatens to take any action to declare this Agreement void or
unenforceable, or institutes any litigation or other action or proceeding
designed to deny, or to recover from, Executive the benefits provided or
intended to be provided to Executive hereunder, the Company irrevocably
authorizes Executive from time to time to retain counsel of Executive's choice,
at the expense of the Company as hereafter provided, to advise and represent
Executive in connection with any such interpretation, enforcement or defense,
including without limitation the initiation or defense of any litigation or
other legal action, whether by or against the Company or any Director, officer,
shareholder or other person affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship between the
Company and such counsel, the Company irrevocably consents to Executive's
entering into an attorney-client relationship with such counsel, and in that
connection the Company and Executive agree that a confidential relationship will
exist between Executive and such counsel. Without respect to whether Executive
prevails, in whole or in part, in connection with any of the foregoing, the
Company will pay and be solely financially responsible for any and all
attorneys' and related fees and expenses incurred by Executive in connection
with any of the foregoing.
(c) SOURCE OF PAYMENTS. Except as otherwise specified herein, in the event
a Change of Control occurs, any payments to Executive pursuant to this Agreement
and the performance of the Company's obligations hereunder shall be secured by
amounts deposited or to be deposited in a trust established by the Company for
the benefit of Executive (and, at the Company's option, for the benefit of other
executives of the Company who are entitled to payments similar to those provided
in this Agreement) (the "Trust"). The Company shall transfer to such Trust
assets from which all or a portion of the payments provided under this Agreement
are to be paid,
<PAGE> 13
provided that such assets of the Trust shall at all times be subject to the
claims of general unsecured creditors of the Company and that neither Executive
nor any other person entitled to payments through the Trust shall at any time
have a prior claim to such assets. Any payments to Executive under this
Agreement that are not paid through the Trust shall be paid from the Company's
general assets, and Executive shall have the status of a general unsecured
creditor with respect to the Company's obligations to make payments under this
Agreement.
15. COMPLETE AGREEMENT. This Agreement embodies the complete agreement and
understanding between the parties with respect to the subject matter hereof and
effective as of its date supersedes and preempts any prior understandings,
agreements or representations by or between the parties, written or oral, which
may have related to the subject matter hereof in any way.
16. COUNTERPARTS. This Agreement may be executed in separate counterparts,
each of which shall be deemed to be an original and both of which taken together
shall constitute one and the same agreement.
17. SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of and be enforceable by Executive, the Company and their respective
heirs, executors, personal representatives, successors and assigns, except that
neither party may assign any of his or its rights or delegate any of his or its
obligations hereunder without the prior written consent of the other party.
Executive hereby consents to the assignment by the Company of all of its rights
and obligations hereunder to any successor to the Company by merger or
consolidation or purchase of all or substantially all of the Company's assets,
provided such transferee or successor assumes the liabilities of the Company
hereunder.
18. CHOICE OF LAW. This Agreement shall be governed by the internal law,
and not the laws of conflicts, of the State of Ohio.
19. AMENDMENT AND WAIVER. The provisions of this Agreement may be amended
or waived only with the prior written consent of the Company and Executive, and
no course of conduct or failure or delay in enforcing the provisions of this
Agreement shall affect the validity, binding effect or enforceability of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date written below.
PENTON MEDIA, INC.
Date: February 5, 1999 By /s/ THOMAS L. KEMP
---------------------
Thomas L. Kemp
Chief Executive Officer
Date: February 14, 1999 /s/ JAMES W. ZAREMBA
---------------------
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 333-62385) of Penton Media Inc. of our report dated
February 10, 1999 appearing on page 32 of the Annual Report to Stockholders
which is included in this Annual Report on Form 10-K.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Cleveland, Ohio
March 31, 1998
<PAGE> 1
Exhibit 24
DIRECTOR AND/OR OFFICER OF
PENTON MEDIA, INC.
ANNUAL REPORT ON FORM 10-K
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors and
officers of Penton Media, Inc., a Delaware corporation, hereby constitutes and
appoints Thomas L. Kemp, Daniel J. Ramella, Joseph G. NeCastro and Preston L.
Vice, and each of them, as the true and lawful attorney-in-fact or
attorneys-in-fact, with full power of substitution and revocation, for each of
the undersigned and in the name, place and stead of each of the undersigned, to
sign on behalf of each of the undersigned an Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 pursuant to Section 13 of the Securities and
Exchange Act of 1934 and to sign any and all amendments to such Annual Report,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, including, without limitation, a Form 12b-25, with the
Securities and Exchange Commission, granting to said attorney-in-fact or
attorneys-in-fact, and each of them, full power and authority to do so and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as the undersigned
might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact or attorneys-in-fact or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
This Power of Attorney may be executed in multiple counterparts, each of
which shall be deemed an original with respect to the person executing it.
Executed as of this 27th day of March 1999.
/s/ THOMAS L. KEMP /s/ DANIEL J. RAMELLA
- ------------------ ---------------------
Thomas L. Kemp Daniel J. Ramella
Chief Executive Officer & Director Director
/s/ JOSEPH G. NECASTRO /s/ ANTHONY DOWNS
- ---------------------- -----------------
Joseph G. NeCastro Anthony Downs
Chief Financial Officer Director
/s/ CHARLES T. GRIESEMER /s/ WILLIAM J. FRIEND
- ------------------------ ---------------------
Charles T. Griesemer William J. Friend
Vice President / Controller Director
/s/ KING HARRIS /s/ JOAN W. HARRIS
- --------------- ------------------
King Harris Joan W. Harris
Director Director
<PAGE> 2
/s/ WILLIAM C. DONOHUE /s/ DON E. SCHULTZ
- ---------------------- -------------------
William C. Donohue Don E. Schultz
Director Director
/s/ JOHN J. MEEHAN /s/ RICHARD B. SWANK
- ------------------ --------------------
John J. Meehan Richard B. Swank
Director Director
/s/ EDWARD J. SCHWARTZ
- ----------------------
Edward J. Schwartz
Director
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